The tech war heats up Tapering without the tantrum CEO pay rackets Sourdough economics: need to knead

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Contents The Economist July 11th 2020 3

The world this week United States 5 A summary of political 17 The covid-19 bonus and business news 18 Kansas’s Senate race 19 Police unions Leaders 19 Reforming bail reform 7 Social reform The new ideology of race 20 Chaplains everywhere 21 Lexington Churches and 8 The world economy Tapering without the mark of Cain the tantrum The Americas 9 Nuclear proliferation A better way to contain 23 Preaching in the Amazon Iran 24 The Dominican Republic’s 9 Sino-American tensions president-elect On the cover Techtonic plates 26 Bello Spain and Latin A set of illiberal ideas about 10 Sourdough economics America how to tackle American racism The need to knead will only hinder progress: leader, page 7. The reforms Letters Asia that are needed: briefing, On the UN, foreign aid, 27 Covid-19 in India page 14. Enlightenment 12 Olof Palme, China, liberalism is losing ground in 28 South Korea’s new cities coronaspeak the debate about how to deal 29 Taiwan and Hong Kong with racism, page 47 29 A second wave in Australia Briefing • The tech war heats up 30 Lockdown in the 14 Race in America Sino-American tension is Philippines Staying apart splitting the technosphere: 31 Banyan Covid-beating leader, page 9. A Chinese South-East Asia chipmaker brushes off Uncle Sam’s semiconductor China sabre-rattling, page 52. Britain’s relationship with China is 32 Civil society on a leash deterioriating. That could hurt, 33 Hong Kong’s new order page 44 34 Chaguan Study in • Tapering without the America, losing allure tantrum A guide to when and how to pare back stimulus: leader, page 8 and analysis, page 56. America’s fiscal boost is Middle East & Africa having surprising effects on the 35 Jihad in the Sahel poor, page 17 37 Zimbabwe’s dollar crisis • CEO pay rackets American 37 Ethiopia’s unrest bosses claim that their firms’ Bagehot The British have 38 Iran and the bomb superior shareholder returns lost cachet among the justify their own fat pay Americans, but they still cheques. Really? Page 50 have something to teach them, page 46

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Europe Finance & economics 39 Converting the Hagia 56 The rich-world recovery Sophia 57 China’s market mania 40 A new PM in France 58 The race to lead the WTO 41 Sardinia’s last bandit 59 Europe’s trading hours... 41 Memory and war in Bosnia 59 ...and its ultra-safe bonds 42 Spain’s economic pain 60 Buttonwood Company 43 Charlemagne A Dutch defaults dilemma 61 Free exchange Jerome Powell Britain 44 Relations with China Science & technology 45 A Magnitsky list 62 AIDS: the latest news 46 Bagehot America’s fading 64 High-tech archaeology Anglophilia 65 Delayed cooling

International 47 Race and liberal Books & arts philosophy 66 Democracy after the cold war 67 Japan under the shogunate 68 Johnson Racist language 69 Home Entertainment Choirs and the pandemic Business 69 Fictional euthanasia 50 CEO-pay games 52 Sino-American tech Economic & financial indicators tussles 72 Statistics on 42 economies 53 China’s e-shopping frenzy 54 Bartleby Slackers and Graphic detail Stakhanovites 73 Money can buy happiness, but recessions can take it away 55 Schumpeter Elon, Masa and Boris in space Obituary 74 William Dement, pioneer of sleep

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Brian Kemp, the governor of President Emmanuel Macron Georgia, called up the National reshuffled his cabinet follow- Coronavirus briefs Guard to deploy to Atlanta, ing disappointing results in To 6am GMT July 9th 2020 where tensions are running local elections. Despite being Weekly confirmed cases by area, ’000 high over policing. Mr Kemp well-regarded, France’s prime 500 issued his order after a sharp minister, Edouard Philippe, Other increase in criminal shootings was replaced by a little-known 400 Latin America and homicides, including that technocrat, Jean Castex. 300 of an eight-year-old girl. US 200 Iran said a fire at a nuclear 100 Europe In a rare instance of unanimity, facility in Natanz caused sig- 0 the justices on America’s nificant damage. It did not say Mar Apr May Jun Jul Brazil’s president, Jair Supreme Court ruled that what caused the blaze, but Bolsonaro, who has down- members of the electoral spooks in the region believe it Confirmed deaths* played the threat of covid-19, college who vote against the was a bomb. Suspicion has Per 100k Total This week flouted social-distancing presidential candidate chosen fallen on Israel and America, Belgium 84 9,776 15 guidelines and said that his by the popular vote in their which have sabotaged Iran’s Britain 66 44,517 522 “athletic history” would state can be punished. nuclear programme in the Spain 61 28,396 28 protect him, tested positive for past. Other mysterious in- Italy 58 34,914 96 the coronavirus. China’s central government set cidents, including recent Sweden 54 5,482 71 France 46 29,846 52 up an office in Hong Kong to explosions at power plants and United States 40 132,139 3,500 Luis Abinader, a businessman oversee enforcement of a new factories, remain unexplained. Netherlands 36 6,135 22 from the centre-left Modern national-security law. Its staff Ireland 35 1,743 7 Revolutionary Party, won the includes secret police from the Hisham al-Hashimi, one of Chile 34 6,573 653 Dominican Republic’s presi- mainland. Hong Kong’s gov- Iraq’s most prominent security Sources: Johns Hopkins University; UN; WHO dential election. His victory ernment formed a committee analysts, was shot dead in The Economist *Definitions differ by country ends 16 years of rule by the on national-security policy Baghdad. An expert on armed Dominican Liberation Party. and gave the police sweeping groups, he had strongly sup- The who admitted that the The vote, originally scheduled new powers. A senior main- ported moves by Iraq’s prime risks from airborne transmis- for May, was delayed because land official is an “adviser” on minister, Mustafa Kadhimi, to sion of covid-19 may be higher of covid-19. the body. Australia suspended challenge Iranian-sponsored than it had thought. its extradition treaty with militia groups. Mr Hashimi Fabián Gutiérrez, who was a Hong Kong and urged its citi- had reportedly been threat- A senior health official re- secretary to Cristina Fernández zens there to consider leaving. ened by some of those militias, signed in Israel as the number de Kirchner, Argentina’s as well as Islamic State. of new daily cases passed president from 2007 to 2015 Police in Beijing detained a 1,000. The head of a panel of and now its vice-president, prominent law professor, Xu At least 180 men have been advisers said the government was murdered. Mr Gutiérrez Zhangrun. Mr Xu has long been murdered by security forces in had “lost control” of the virus. had agreed to co-operate with one of the Communist Party’s Burkina Faso, according to the prosecution in the “note- most outspoken critics. Human Rights Watch. India passed Russia to record books” scandal, centred on the third-highest cumulative bags of cash delivered to offi- Widespread flooding killed Gunmen killed eight construc- number of coronavirus in- cials during Ms Fernández’s dozens of people and displaced tion workers building Africa’s fections. A recent increase in presidency, and to her home. millions in several Chinese largest gas project in northern testing capacity may help She denies wrongdoing. Mr provinces. The city of Wuhan, Mozambique. A growing authorities get a better picture Gutiérrez’s murder is not where covid-19 first took hold, jihadist insurgency in the of the progress of the disease. thought to be politically issued a flood alert. country has claimed more than motivated. 1,000 lives since 2017. Melbourne, Australia’s sec- Koike Yuriko was re-elected ond-biggest city, went back A British judge ruled that the governor of Tokyo with Amadou Gon Coulibaly, the into lockdown. The border Venezuela’s de facto presi- 60% of the vote. Ms Koike, who prime minister of Ivory Coast, between the states of Victoria dent, Nicolás Maduro, cannot used to be a member of the died, casting a shadow over the and New South Wales was access $1.8bn-worth of gold ruling Liberal Democratic Party presidential election sched- closed. held in the Bank of England but now leads an opposition uled for October. Mr Coulibaly because Britain recognises the party, has won plaudits for her was the ruling party’s candi- There were riots outside leader of the opposition, Juan handling of the covid-19 crisis date to replace Alassane Ouat- Serbia’s National Assembly Guaidó, as the president. in the city, boosting her tara, who had said he would when lockdowns were reim- national profile. not run for a third term. posed and the government The Trump administration threatened a curfew. gave formal notice to the Rescue workers said there was High-altitude balloons started World Health Organisation little hope of finding any more providing internet services in that America will withdraw survivors from a landslide at a Kenya, offering a new way of For our latest coverage of the from the body on July 6th 2021. jade mine in northern Myan- allowing people in remote virus and its consequences Joe Biden said he will scrap that mar that killed at least 170 villages to get online. The please visit economist.com/ decision and “rejoin” the who people. Many of the dead were service is operated by Loon, coronavirus or download the if he is elected president in scouring the mine’s rubble for which is owned by Google’s Economist app. November. remnants of the gemstone. parent company, Alphabet. 6 The world this week Business The Economist July 11th 2020

which Uber had wanted to pattern of interfering in Russia’s environmental watch- acquire; Just Eat Takeaway markets, such as temporarily dog imposed a record penalty snapped it up instead for excluding three foreign banks on Nornickel (also known as $7.3bn. Postmates, which has a from trading in the lira earlier Norilsk Nickel) for a fuel spill strong presence in Los Angeles, this year. in May that released 21,000 Phoenix and San Diego, will tonnes of diesel into rivers and still operate as a separate app António Horta-Osório said he subsoil near the city of Norilsk, from Uber Eats. would step down as chief located above the Arctic Circle. executive of Lloyds Banking The fine, equivalent to $2.1bn, Rishi Sunak, Britain’s finance Group, one of Britain’s biggest represents a third of the nickel- minister, announced more banks, next June. Mr Horta- and-palladium producer’s net measures to help the pandem- Osório took up the job in 2011, profit last year. It “disputes the Google, Facebook, Microsoft ic-hit economy. Companies and has been praised for steer- amount of damage caused to and Twitter have all suspended that bring back furloughed ing Lloyds out of public the environment” resulting processing requests for user workers during the three ownership in the aftermath of from the incident. data from the government of months starting with Novem- the financial crisis. It returned Hong Kong while they consid- ber will be given a £1,000 fully to private ownership in Brooks Brothers, founded in er the implications of the ($1,260) bonus for each job 2017, when the government 1818 and the oldest retailer of draconian new national-secu- saved. Stamp duty, the main sold its remaining shares. men’s clothing in America, rity law imposed on the territo- tax on buying homes, will be filed for bankruptcy protec- ry by the government in main- suspended until March for Intesa Sanpaolo, Italy’s tion. Privately owned, Brooks land China. None has a big purchases of less than second-biggest bank, formally has outfitted American presi- business presence in China. £500,000, a boost to the hous- launched a takeover offer for dents and been a purveyor of ing market and its many asso- ubi Banca, the fifth-biggest, the finest sartorial elegance to ciated services. Help was also despite being rejected by ubi’s countless businessmen, and, A hostile environment dished out to restaurants and board. continuously from 1976, Sina, which in 2000 became eateries: during August the businesswomen. Even before the first Chinese internet government will subsidise Dominion Energy agreed to the pandemic its business had company to list on the Nasdaq, each diner to the tune of £10 sell its gas transmission and to contend with the fashion for received an offer from Charles from Mondays to Wednesdays. storage assets to an affiliate of more casual office attire Chao, its chairman and ceo, to Berkshire Hathaway for among executives. take it private. That prompted Turkey’s stock exchange $9.7bn. Dominion is investing speculation about the pos- banned six foreign banks, heavily in clean energy in order sibility of other Chinese tech including Barclays, Credit to reach a target of net zero Maybe if they made a onesie firms exiting American stock- Suisse and Goldman Sachs, carbon and methane emis- The popularity of loungewear markets to escape any forth- from betting against Turkish sions by 2050. For Warren and loose pants during the coming regulatory clampdown share prices. The country’s Buffett, Berkshire’s boss, it is lockdown is possibly one that targets Chinese firms. market regulator had only just another big bet on fossil fuels, reason why Levi Strauss suf- lifted short-selling restrictions following the $10bn funding he fered a 62% slump in quarterly United Airlines sent out on the biggest companies. put towards Occidental’s take- sales. The maker of tight jeans notices to 36,000 employees Turkey’s latest action fits a over of Anadarko last year. is slashing 15% of its staff. warning that their jobs could be at risk when federal support for the aviation industry stops. The list includes 2,250 pilots. The hopes of airlines for a small improvement in travel have been dashed by the new surge of covid-19 cases in America, which now top 3m.

A judge dismissed a lawsuit from General Motors which had accused Fiat Chrysler Automobiles of collaborating with union leaders to drive up wages at gm in order to force the company into a merger. The judge said gm had failed to prove it was a victim.

Uber struck a deal to buy Post- mates, America’s fourth- biggest food-delivery service. At $2.65bn, it is a bite-size transaction compared with the recent takeover of Grubhub, Leaders Leaders 7 The new ideology of race

A set of illiberal ideas about how to tackle American racism will only hinder progress merica’s problem with racism can be divided into two terminology into newsrooms and boardrooms invites in ideo- Aparts. One contains all the myriad injustices that still blight logues. Their approach is already taking a toll. In universities re- African-American lives a century and a half after the end of slav- search agendas are being warped. Outside them, public shaming ery. The other is the way that factions on the right exploit racial and intimidation have been curbing debate. division as a political tool. An example of the first occurred on The pity is that these ideas will not solve America’s problems May 25th on a shabby street corner in Minneapolis, when George with race. They will not eliminate inequality because they are a Floyd was killed by a white policeman. An example of the second poor way to bring about beneficial change. Unless you can freely occurred on July 3rd, at Mount Rushmore, against the monu- analyse causes and question orthodoxies you will not be able to mental backdrop of the country’s greatest presidents, when Do- solve problems. And unless you can criticise people and prac- nald Trump sought to inflame a culture war centred on race to tices without fear of being called out, you will not be able to de- boost his chances of a second term. To be successful, a campaign sign effective policies and then go on to refine them. for racial justice needs to deal with both. The new race theory blocks progress in another way, too. The Leaders like Frederick Douglass and Martin Luther King used barriers to racism can be dismantled only when they are ex- vigorous protest and relentless argument to push society to- posed—and so they must be, however painful. But the false idea wards their vision of equality of opportunity and equality before that ingrained racism will forever block African-Americans at the law. Most Americans still hew to that classical liberal ideal as every turn is a barrier in its own right. do many of those who marched with justified anger over the kill- And, by focusing on power and division, this ideology only ing of Mr Floyd. But a dangerous rival approach has emerged creates more space for some on the right to exploit race as a tool. from American universities (see International section). It rejects A fundamental belief in power above persuasion frustrates co- the liberal notion of progress. It defines everyone by their race, alition-building. Essential allies are not carried along, but forced and every action as racist or anti-racist. It is not yet dominant, along. When every transaction at work, at home, or at the school but it is dynamic and it is spreading out of the academy into gate is seen through a prism of racial power, no encounter be- everyday life. If it supplants liberal values, then intimidation tween different races can be innocent. will chill open debate and sow division to the The new ideology of race is not just wrong disadvantage of all, black and white. and dangerous, it is also unnecessary. Liberal- The premise underpinning this ideology is ism can offer a fairer, more promising route to correct: that racial inequality is shockingly per- reform. It asserts the dignity of the individual sistent. Even though attitudes to race have im- and the legal, civil and moral equality of all peo- proved, the quality of African-American lives ple, whatever the colour of their skin. It believes has not kept pace. A third of black boys born in in progress through argument and debate, in 2001 will probably spend time locked up, com- which reason and empathy lift truthful ideas pared with one in 17 white boys. In 1968 black and marginalise bigotry and falsehood. households earned around 60% as much as white households, Liberalism thrives on a marketplace of ideas, so diversity has and owned assets that were less than 10% of those of a typical a vital role. New voices and experiences enrich the debate. Liber- white family. They still do. alism does not fight power with power, which risks replacing This ideology also has some valid insights. Racism is sus- one abusive regime with another. Instead it uses facts and evi- tained by unjust institutions and practices. Sometimes, as in dence, tested in debate, to help the weak take on the strong. policing, this is overt. More often, in countless small put-downs Liberalism is all about progress, including about putting right and biases, it is subtle but widespread and harmful. its mistakes—and there have been many, especially over race, in- But then the ideology takes a wrong turn, by seeking to im- cluding finding reasons to accommodate imperialism and slav- pose itself through intimidation and power. Not the power that ery. That is one reason why, in the 250 years in which it has been comes from persuasion and elections, but from silencing your influential, humanity has seen unprecedented material, scien- critics, insisting that those who are not with you are against you, tific and political gains, as well as a vast extension of social and and shutting out those who are deemed privileged or disloyal to political rights. Progress on racial inequities has been part of their race. It is a worldview where everything and everyone is this—as in South Africa, where liberals joined forces with the seen through the prism of ideology—who is published, who gets trade unions and communists to sink apartheid. jobs, who can say what to whom; one in which in-groups obsess Liberals can help in America, too. Much of the material gulf over orthodoxy in education, culture and heritage; one that en- between African-Americans and whites can be bridged with eco- forces absolute equality of outcome, policy by policy, paragraph nomic policies that improve opportunity. You do not need to by paragraph, if society is to count as just. build a state based on identity. Nor do you need tools like repara- It is tempting to see such ideas as nothing more than over- tions, which come with practical difficulties and have unintend- heated campus radicalism. And, true enough, they have not yet ed consequences. Economic policies that are race-neutral, taken over a political party. When people speak of ending white which people qualify for because of poverty, not the colour of privilege, most of them have good things in mind like inclusion their skin, can make a big difference. They have a chance of un- and justice. But ideas are important, and the spread of campus iting Americans, not dividing them. If the mood now really is for 1 8 Leaders The Economist July 11th 2020

2 change, they would be politically sellable and socially cohesive. have been shown to boost graduation from college. A third tool is Our Briefing lays out what some of these policies might look the tax system. The earned-income tax credit tops up wages of like. Top of the list is tackling the housing segregation that is cen- working adults. A child allowance would cut poverty. A baby tral to America’s racial economic inequality. The reform of zon- bond would help shrink the wealth gap. ing laws and the grant of rent-assistance vouchers are the chief In the past liberals have helped bring about change when ingredients. That would bring many benefits, improving public society faced a challenge to the status quo, as when reforms lim- services and lessening violence. More integrated housing would ited child labour and won women the vote. If America has integrate schools too and, given America’s locally financed edu- reached such a moment today, it must not resort to identity poli- cation, mean that more would be spent on black children. Af- tics—and suffer intolerance, intimidation and division. Instead, fordable measures, including advice and modest cash grants, for reform on race that works, it must look to liberalism. 7

The world economy Tapering without the tantrum

A guide to when and how to pare back stimulus s they first battled the pandemic with lockdowns earlier lowed to elbow their way through crowds to order pints. Workers Athis year, governments in the rich world pumped cash into will have to leave their old jobs, and find new ones. In Europe a the economy almost indiscriminately. Output was collapsing fifth of furloughed workers have jobs in industries that seem and the speed and scale of support rightly trumped any worries likely to shrink over time, such as hospitality and leisure. about its cost, accuracy or side-effects. Now lockdowns are eas- As governments grapple with this, lots of bad ideas are creep- ing, there are tentative signs of economic recovery (even in ing in. In June the French government said it would extend its places where covid-19 is still raging) and political debate has furlough scheme to two years, in return for reductions in work- shifted to whether, when, and how far to pare back these daunt- ing hours. France also makes extra allowances for the tourism ingly expensive emergency fiscal policies. America’s unemploy- trade, even though Parisian guides and Club Med windsurfing ment top-up scheme expires on July 31st, Britain’s furlough instructors may face a permanent drop in demand. Meanwhile scheme at the end of October. What should governments do? on July 8th Britain’s chancellor, Rishi Sunak, said he would cut They should start by acknowledging that the largesse worked. value-added taxes for hospitality and leisure firms and intro- Massive fiscal support has proved remarkably effective. Nothing duce a scheme that cuts up to £10 ($12.60) off restaurant bills on could have prevented a sudden stop in activity as lockdowns Mondays to Wednesdays (soft drinks are included, but not the were imposed. But generous top-ups to unemployment benefits hard stuff). Some economists have called for wage subsidies for and direct cheques from Uncle Sam meant that in April house- the worst-hit industries. hold incomes in America were 12% above their level a year earli- Instead of giveaways and gimmicks, the right way to taper de- er, even as joblessness reached its highest level pends on the type of support already in place. since the Depression. Remarkably, the poverty Unemployment rates America has funnelled cash to people through rate has fallen since the start of this year (see Un- 2020, % unemployment insurance, extending the dura- January June or latest ited States section). In Britain and the euro area, 9630 12 tion of benefits, and topping up their amount by $600 a week. Letting the extension lapse when where governments have channelled stimulus US through furlough schemes, the share of people unemployment still exceeds 10% would be cru- Euro area in unemployment is no higher than in January. el, yet because the support is so generous, three- However, the recovery is fragile. Not only is Britain quarters of claimants are making more from the virus still spreading rapidly in much of benefits than they did from work. The solution, America’s south and west; localised outbreaks are also happen- as a group of former White House advisers has proposed, is to ing in countries where caseloads have fallen. And even without taper benefit payments as unemployment falls. Linking the gen- full lockdowns, rising infection rates will weaken the recovery. erosity of payments to states’ unemployment rates would steer The latest real-time mobility data from Australia and America stimulus to worst-hit areas—including those that experience suggest that supposedly gung-ho consumers get spooked fast fresh bouts of covid-19. In Europe the risk is that employers and when infection rates spike (see Finance section). workers are frozen in an unproductive relationship for too long. Why not just continue the stimulus? One reason is the stag- The best approach is to taper furlough payments which, for ex- gering cost. Rich-country governments have collectively ample, cover more than four-fifths of wages in France. They launched stimulus programmes worth 10% of gdp, with one- would then converge towards unemployment insurance, which third of that either subsidising work or compensating people does not shackle the claimant to an employer. That is how Ger- who lose it. Before the year is out, government deficits in these many’s Kurzarbeit scheme operates in normal times. countries will easily be in double digits. There will be repeated flare-ups of the virus, and it is hard to It also makes no sense to freeze the economy for too long. All predict how much that will scare consumers. Hence, even as gov- the signs are that life in the 2020s will be different from life in ernments trim stimulus, they must stand prepared to crank up 2019—think of the surge in e-commerce and remote working; or support again. Early on, their aim was simply to throw cash at the the expectation of a long-term dampening of demand for air tra- economy. Now it is to use finite resources to help workers and vel; or the reality that customers in pubs may no longer be al- firms through the pandemic and adjust to a brave new world. 7 The Economist July 11th 2020 Leaders 9

Nuclear proliferation A better way to contain Iran

Sabotage might set back Iran’s nuclear programme. A deal would limit it uch mystery still surrounds the fire that broke out at an Sabotage might set back the programme some months. But it Mimportant nuclear facility in Iran on July 2nd. Some of the is no match for a deal that constrained Iran for at least a decade. region’s spooks say the blaze was the result of a cyber-attack. Under the accord, Iran gave up 97% of its uranium fuel (enough Others insist it was a bomb. Suspicion has fallen on Israel and to make over a dozen bombs) and kept its stockpile well below America, which have a history of sabotaging Iran’s nuclear pro- the one-bomb threshold. It was subject to tough inspections. gramme. Other episodes have raised eyebrows in recent Even America said it was complying. Compare that with the re- months—explosions at power plants and near military sites, a sults of Mr Trump’s “maximum pressure”. Iran now has about gas leak at a chemical plant. Some of these may also have been eight times as much enriched uranium as allowed under the the work of saboteurs (see Middle East & Africa section). agreement. It is stonewalling inspectors. Every month it moves It is safe to say that America and Israel are pleased by the out- further from the deal, which other signatories have tried to save. come: Iran says that the latest incident caused “significant dam- Mr Trump’s policy has failed in other ways, too. He said he age”. But what looks like a tactical success is ac- wanted an accord that curbed Iran’s missile pro- tually evidence of strategic failure. Iran’s gramme and halted its support to proxy militias nuclear activity had been constrained by the in the region. Some in his administration agreement that it signed with world powers in seemed bent on regime change. Yet Iran says it 2015. President Donald Trump, with encourage- has built underground “missile cities”. From ment from Israel, yanked America out of the ac- Syria to Iraq, its adventurism continues. Maxi- cord and heaped sanctions on Iran, claiming mum pressure may produce a leadership that he would be able to negotiate something change—but not the kind America wants. Amer- better. Not only has Mr Trump failed to get a bet- ican sanctions have caused a backlash against ter deal, he has pushed Iran into dangerous new territory. Iranian politicians who engaged with the West, such as Presi- Iran is hardly blameless. It often threatens to destroy Israel, dent Hassan Rouhani. Hardliners now want to impeach him. while being coy about its nuclear programme. International in- Despite the calls for talks, Mr Trump and his administration spectors say Iran is hiding activity. It was developing new centri- have done all they can to poison relations. Iran is betting that he fuges at the facility that was damaged on July 2nd. The devices will be voted out of office in November. Its actions, though, are are needed to enrich uranium, which can be used to make pow- making it difficult for any future president to jump back into the er—or, if highly enriched, a bomb. Iran has enough of the stuff to nuclear deal or negotiate a new one. More rounds of dull, ardu- produce a single weapon. So there was a case for pre-emptive ac- ous negotiations, like those that took place in Vienna in 2015, tion, which has proved effective before. A bit of malware called will be needed. They would not grab headlines like a sabotage Stuxnet, believed to be an American-Israeli cyber-weapon, campaign, nor would they produce a perfect agreement. But it is wreaked havoc on Iran’s nuclear programme a decade ago. increasingly clear that the alternative is worse. 7

Sino-American tensions Techtonic plates

The tech cold war is hotting up ver the past few years countless predictions have been America’s secretary of state, said that the administration was Omade that the global technology industry will suffer a pain- considering banning TikTok, a Chinese-run app that is wildly ful rupture because of tensions between America and China. popular in the West. This followed India’s decision a week earlier Real damage has been surprisingly hard to spot. Last year Apple to prohibit it, and 58 other Chinese apps, after lethal brawls be- made over $100m of sales a day in China, while Huawei reported tween soldiers in the Himalayas. Britain and France are consid- record revenues despite America’s campaign to cripple it. Inves- ering sidelining Huawei from their 5g networks (see Britain sec- tors have piled into tech companies’ shares, buoyed by the pros- tion). Between July 6th and 7th Facebook, Google, Microsoft and pect of new technologies such as 5g and a pandemic that is forc- Twitter all said that they will stop co-operating with Hong Kong’s ing billions of customers to spend more time and money online. authorities for the time being, because of the introduction of Judged by sales, profits and shareholder returns, it has been a China’s brutal security law there. And smic, China’s aspiring golden era for American and Chinese tech. The industry now has semiconductor champion, has just said that it will raise $7bn in a a colossal market capitalisation of $20trn and accounts for a state-supported listing in Shanghai—it delisted from New York quarter of the world’s stockmarket value. last year (see Business section). The proceeds will be used to su- Yet if you examine the events of the past two weeks you can persize China’s home-grown chipmaking capacity. sense the split that is about to come. On July 6th Mike Pompeo, The split is happening at two velocities. The American and 1 10 Leaders The Economist July 11th 2020

2 Chinese software and internet universes are heading at light- plates are shifting. Because of a new set of American restrictions speed towards total separation. They were never particularly on the use of chipmaking tools put in place in May, Huawei may connected—American software firms made just 3% of their sales run out of stock of its specialist chips in early 2021 and will have in China last year, and China has long kept its internet users iso- to scramble to find an alternative. That will be cumbersome and lated from the world. The bill for shutting up shop and finding costly. The smic capital-raising shows that China intends to substitute products is usually low. TikTok creates few jobs and create a chip giant on a par with Intel or Taiwan’s tsmc, although pays little or no tax in America or India, so the main cost of ban- it will take years to do so. If Britain and France both eventually ning it is sullen teenagers. Likewise, Facebook and the other ditch Huawei, they will shift to using Nokia and Ericsson in their firms taking a stand in Hong Kong do little or no business in Chi- networks, which will be expensive and take several years. na. Two important exceptions have been Microsoft’s office soft- If the splintering now seems inevitable, there will be some ware and, especially, Google’s system of apps like gmail and surprises. One is how the two technospheres of influence are Maps, found on Chinese-made phones sold worldwide. Ameri- drawn. American policymakers tend to assume the world will ca’s blacklisting of Huawei has cut off the world’s second-biggest use Silicon Valley products, but plenty of countries may ally with phone seller from some of the world’s most popular apps. Chi- China’s tech system or hedge their bets. India is frosty towards nese handset firms are racing to develop an alternative. The both American and Chinese digital firms and hopes to build up American and Chinese software worlds are thus quickly becom- its own champions, although it cannot compete yet in hardware. ing entirely separate universes. Another surprise is how much the split could cost. The global Hardware is moving much more slowly. That is because it is listed hardware industry has annual expenses of $600bn, much more globally integrated and involves $1trn of physical plant and of which may need to be replicated. Plenty of key firms, includ- $400bn of inventories. Later this year Apple will launch a new 5g ing Apple and tsmc, are equally dependent on America and Chi- handset that will still rely on the same vast manufacturing clus- na and have no clear plan to cope with a deeper divide. The tech ter in China that it used five years ago. Even so, the techtonic split is under way. Do not assume it will happen safely. 7

Sourdough economics The need to knead

With lockdown easing in many parts of the world, the time has come to say no to dough uture archaeologists of the internet will unearth a fasci- able as an ill-structured deal. There’s a logic to the division of Fnating shift in digital content in early 2020. Before this turn- labour: people who have spent a lifetime developing a skill are ing-point, social media were cluttered with videos of cats doing better at it than those who have turned their hand to it for a few cute things. Now they are dominated by pictures of sourdough hours during the longueurs of lockdown. What, after all, would a loaves doing nothing. banker think of the work of a baker who dabbled in a bit of m&a This transformation is one of the ripple effects of covid-19. while the loaves were proofing? When the pandemic locked people into their homes, they had a Cool calculation would also reveal to professionals a second surplus of their own time and a dearth of others’ labour, so do- reason for hanging up their aprons: the cost of their product, mestic life reverted to pre-capitalist self-sufficiency, and profes- when their labour is properly valued. If an average New York law- sionals turned their hands to whatever was needed. Deprived of yer spent an hour lovingly stretching and folding the sourdough, fresh bread, bankers took up baking. When their shelves fell his loaf would cost around $400. No bread is worth so much down, consultants tried a bit of carpentry. Faced bread—certainly not his. A lawyer who argued with partners who began to look like yetis, bar- that time thus spent was a benefit not a cost, risters became barbers. since breadmaking had turned from work into The experience of working with their hands pleasure, might persuade a jury of economists. has been, for many, revelatory. Kneading dough But that argument would raise the third reason is more fun than manipulating figures. Erecting why professionals should abjure handiwork: for shelves is more satisfying than propping up fail- the sake of their friends and family. ing companies. Snipping hair is more enjoyable The pleasure which professionals take in than cutting budgets. Liberated from their nar- practising their new crafts may not be shared by row professional niches, these knowledge workers have found those condemned to consume their output. No doubt their near- satisfaction exploring new skills. Deprived by homeworking of est and dearest will assure them that the density of the bread the competitive arena that offices provide, they have discovered lends it gravitas and the tufts in the haircut originality; but such a new one: social media, where they show off their wonky cup- assurances should be taken as a measure not of the quality of the boards and lumpy loaves. product but of love for the producer. These caring kith and kin Now that the economy is coming back to life, these fledgling deserve the best, and professionals who persist in making sec- bakers, carpenters and barbers may be tempted to nurture those ond-rate stuff for their own satisfaction are not providing it. skills. They should resist, for three reasons. Bankers who want to be really good bakers can give up their First, if the bankers judged their output with the cold objec- day jobs and take it up full time, but as their loaves rise, so their tivity they apply to their own work, they would see that, com- incomes will fall. Which raises one of the great questions in life: pared with a skilled baker’s loaves, their sourdough is as unpalat- cash or craft? Dough or dough? 7

12 Letters The Economist July 11th 2020

actions that meet shared would like. Transparency denunciation of the Soviet The UN at 75 interests. Platforms of dip- International’s Corruption Union’s puppet states in Your special report on the un lomatic engagement do not Perceptions Index is14 points eastern Europe. (June 20th) outlined several evolve accidentally. We knew lower in countries in which aid stefan andreasson “great fractures” that could before covid-19 that the un is the highest proportion of Bangor, Down lead to worldwide bedlam. One needed to reform; the pandem- national income than in coun- scenario missing from the list ic has shown that diplomacy tries receiving no aid. is the possibility of China needs new options for con- In addition to enriching People as numbers annexing Taiwan. This would stant real-time interaction. senior politicians, foreign aid China’s casual approach to confirm the un’s impotence. paul hare also encourages a culture of casualties it may have suffered Just as America vetoes any Pardee School of Global Studies corruption at the grassroots. reminded me of a story about resolution condemning Israel, Boston University Where aid is most important, it the old communist regime China can veto any resolution increases the likelihood of (“Death valley”, June 20th). condemning its actions, even One cause of the un’s tragic individuals paying bribes for Perusing a mandarin’s feasibil- if those actions are condemned mistakes in peacekeeping and services, such as health care ity study of a dam project, Mao by every other un country. other missions is the fact that and education, by18%. Zedong underlined the report’s Your call for a summit of the it has immunity. This means professor richard rose sentence that “Such measures five permanent members of that it conducts its operations University of Strathclyde would benefit the citizens”, the Security Council is timely. without any accountability to Glasgow then scrawled a rhetorical But with at least four of those the people whose lives it is question in the margin, “What five showing little of the directly affecting. Immunity is a citizen?” Appropriate statesmanship that created the does give the un the necessary A Swedish prime minister demotion was swiftly meted un and much of the thuggery, space to carry out its tasks, but It is true that Olof Palme out to the study’s author. self-interest and bloody-mind- there is no justification for it considered himself a demo- bush gulati edness that could destroy it, not to be accountable to those cratic socialist and improved Toronto few could have any confidence who are harmed by its actions. diplomatic relations with the that such a gathering would The responsibility for correct- Soviet Union and Cuba (“Who resolve that, or any other, ing this lack of answerability killed Olof Palme?”, June 13th). Coronaspeak crisis. rests with the leadership of the He was also an opponent of the I was amused by Johnson’s Instead, it is time for “we un Secretariat and its special- South African apartheid survey of the pandemic the people” of the digital world ised agencies. They need to regime, his awareness of racial panglossary (June 27th). Yet it to harness our borderless tech- create an independent ac- oppression a result of his struck me that a calendar term nologies to prevent delusional countability mechanism with travels in the American South for this new epoch was miss- governments from pushing us the authority to investigate as the first Swedish leader to ing. How else am I to refer to into collective suicide through complaints, report its findings receive a university education the normal days of having a war, resource depletion or directly to the secretary-gen- in the United States. But Palme drink: bc (Before Corona)? I am climate change. In this regard, eral and to make the report was, like nearly all social aware that this may mask an the un High-level Panel on publicly available. democrats of his generation, a existing nomenclature, but we Digital Co-operation, led by This may be a big step for staunch anti-communist. He have to move with the times. Melinda Gates and Jack Ma, has the un but it is not unprece- publicly criticised Swedish ulrich atz a role in sorting out the new dented. Such independent student radicals and elements New York world disorder you speak of. accountability mechanisms in the labour movement in the david woollcombe have existed in many 1960s for their naive support of Though it may have become Founder and president multilateral development communism. Indeed, he pre- popular again during the pan- Peace Child International banks for decades. sided over an administration demic, the word “smizing” was Buntingford, Hertfordshire professor daniel bradlow that controversially registered coined in 2009 by Tyra Banks Centre for Human Rights communist sympathisers on an episode of “America’s The digital era has enabled University of Pretoria through a branch of Swedish Next Top Model”. Credit where governments to engage in military intelligence (the ib it is due. aggressive finger-pointing Affair). charles hawkings through social media, making Aid breeds corruption Palme did indeed oppose Washington, DC calmer, less-public efforts at I read your article about which America’s war in Vietnam, consensus-building more government department in referring rather bluntly to the Here in New York, people who difficult. Yet the wider benefits Britain should allocate aid Nixon government as “bloody refuse to wear masks or of digital connections have not money (“Will charity begin at murderers” in the wake of the practise social distancing are been fully explored by dip- home?”, June 20th). The more Christmas bombing campaign known as coronassholes. And lomats. A collective, virtual critical question is, what hap- of North Vietnam in 1972, but if quite rightly, too. telediplomacy would work pens to aid money when it anything his views on the john s. major away from the glare of trolls reaches a poor country? Down- North Vietnamese (and the New York and memes. If tele-education ing Street has proclaimed zero Cubans) were rooted in a and telemedicine can bring tolerance for corruption, and strong sense of the right of mutual benefits through en- aid contracts normally contain smaller nations to determine Letters are welcome and should be gagement, why not a perma- anti-corruption clauses. their own fate even in the addressed to the Editor at The Economist, The Adelphi Building, nent telediplomacy platform? Our statistical analysis shadow of superpowers, rather 1-11John Adam Street, London WC2N 6HT Leaders engage in diplo- shows that aid money does than any kind of pro-commu- Email: [email protected] macy because it is to their affect corruption, but not in nist sentiment. This is why More letters are available at: advantage, to produce shared the direction those donors Palme was so strong in his Economist.com/letters Executive focus 13

Chief Executive Offi cer – UK Finance London based. Remuneration competitive. The Organisation UK Finance is the collective voice of the banking and fi nance industry, representing more than 250 fi rms. The organisation has a critical mission to enhance competitiveness, support customers and facilitate innovation in this crucial sector of the economy. The 180-strong organisation includes leading experts on diverse critical issues from Brexit, capital markets, commercial fi nance, digital, tech and cyber, economic crime, fi nancial and risk policy, to mortgages, payments, personal fi nance and fi nancial literacy. The Role The role of CEO is a high profi le and challenging opportunity for an ambitious, accomplished and visionary individual, to lead from the front in helping to shape tomorrow’s banking and fi nance landscape, acting in the best interests of consumers, businesses and wider society. The CEO will report to the Chair, Bob Wigley, and the board, composed of the most senior leaders across the industry, representing organisations from the largest to the smallest, international and domestic, corporate and mutual, retail and wholesale, physical and virtual, banks and non-banks. Candidate Profi le Candidates will bring signifi cant knowledge of broad fi nancial services and the following credentials: • Track record in senior leadership roles, including P/L • Evidence of successfully building and maintaining organisational capability • Accomplished in building effective relationships with key stakeholders • Experienced working closely with the government and regulators • Commercially-minded and strategic • Proven people leadership capability and strong emotional intelligence Process For a copy of the role description, details of the requirements and application process, please email [email protected]. Candidates should submit their interest by 14 August 2020. Interviews will commence in late August/ early September. If you have any questions or would like a confi dential conversation, please contact: Kate Grussing ([email protected] - +44 (0) 207 292 9970) or Caroline Turner ([email protected] - +44 (0) 207 292 9976) UK Finance is a signatory to the UK’s Women in Finance Charter and is committed to diversity and providing equal opportunities for all. 14 Briefing Race in America The Economist July 11th 2020

spoke of. The economic disadvantage that Staying apart black America labours under is, in many ways, as stark now as it was 50 years ago. The household income gap is the same as it was in 1968. So is the wealth gap (see chart 1 on next page). Crime and the criminal jus- tice system are part of that story of stagna- WASHINGTON, DC tion, as is persistent, if lessened, racism. Black Americans have made too little progress since the 1960s. Realistic policies Changes in individual behaviour and in the to speed things up exist economy at large have also played a role. f something isn’t done, and done in a came president. Yet systemic prejudice The most important factor is the degree to “Ihurry, to bring the coloured peoples of persists. Unarmed citizens killed by Amer- which the concentrated poverty in largely the world out of their long years of poverty, ican police forces are disproportionately segregated black communities shuts their their long years of hurt and neglect, the black. That most brutal of injustices ex- members off from opportunity. whole world is doomed,” Martin Luther plains much of the power, the extent and “We got rid of ‘whites only’ signs and le- King Jr told striking workers the day before the focus of the protests spurred by the kill- gal segregation is no longer possible. But he was shot dead in Memphis, Tennessee. ing of George Floyd, protests that have why are we at this moment? There’s a lot of In 1968 black Americans had only just real- drawn a level of attention to race relations things that didn’t change and probably ised formal legal equality after two centu- unseen since the 1970s. won’t change with only focus on police ries of slavery and one of Jim Crow, inden- The criminal-justice system is a baleful brutality and reforming the police,” says tured servitude, lynchings and enforced presence in black lives. The incarceration Clayborne Carson, a historian at Stanford residential segregation. They had been de- rate for black men and women more than who edited Dr King’s letters and papers. liberately excluded from economic sup- tripled from 1960 to 2010. One in three Afri- “Yes, that should be done. But don’t expect ports such as Social Security, mortgage can-American men born in 2001can expect that to have any impact on the race pro- guarantees and subsidised college for vet- to be imprisoned at some point in his life, blem. It’s the tip of the iceberg. You can erans. As a result, black American house- compared with one in 17 white boys. The have polite police—that would be wonder- holds earned around 60% of what white sons of black families in the top 1% of ful. You can have social workers. But unless households did, and the typical black fam- America’s income distribution are as likely people have the ability to basically change ily had less than 10% of the assets of a typ- to go to prison as white sons from the bot- the opportunity structure, the changes are ical white family. tom third. If today’s protests achieve real not going to be apparent.” The past half century has seen visible reform in the criminal-justice system, it Children who grow up poor—as 32% of progress. The ceiling white society once will be welcome. African-American children do, a rate near- imposed on black opportunity and ambi- But those are not the only reforms need- ly three times that of white children—all tion has started to lift. Barack Obama be- ed to put right the hurt and neglect Dr King tend to do badly by various measures. But 1 The Economist July 11th 2020 Briefing Race in America 15

2 children who do so in communities where showed that in situations where a white that a degree adds to lifetime earnings has over 20% of the population is poor do very applicant secured a viewing 80% of the increased a lot, this disparity is a big eco- badly indeed. Whatever their race, such time a black applicant with identical finan- nomic disadvantage. children face increased risks of dropping cial credentials would get a viewing just There are aspects of black American out of school, getting pregnant while still 48% of the time. private life that exacerbate these gaps. teenagers, being incarcerated, experienc- In the absence of integrated neighbour- Well-intentioned, left-leaning commenta- ing poverty in adulthood and dying early. hoods, it might be possible at least to try to tors in America shy away from discussing And for black children in America, as integrate education—a cornerstone of the the role that the increasingly unstable fam- for Native American children, concentrat- civil-rights movement since racial segrega- ilies play in passing black disadvantage ed poverty has been the norm. Only 6% of tion in schools was deemed unconstitu- down the generations. Seven in 10 African- white children born between 1985 and tional in 1954. Attempts to reduce school American babies are born out of wedlock; 2000 spent part of their childhood in segregation by busing black students into their parents are overwhelmingly likely to neighbourhoods with at least a 20% pover- white neighbourhoods began in the 1960s have broken up five years after birth. Those ty rate. For black children the figure was and were extended in the early 1970s. By the rates are significantly higher than for other 66%, according to Patrick Sharkey, a sociol- mid-1970s, though, such efforts had fizzled ethnic groups, even after controlling for ogist at Princeton; experience of such in the face of massive resistance from education and income. neighbourhoods was normal for middle- white parents. School segregation has not class black families. Today’s generation is changed since the 1980s. Spreading out in a similar position. 26% of black children Rucker Johnson, an economist at the The rate of joblessness and the number of currently live in neighbourhoods where University of California, Berkeley, studied out-of-wedlock births in black communi- the poverty rate is higher than 30%. Only the outcomes of black children who at- ties both increased after the 1960s, notes 4% of white children do. tended integrated schools during the peak William Julius Wilson, a sociologist at Har- of efforts to end educational segregation. vard. The ravages urban deindustrialisa- Jammed in He found they had enormous effects on tion and mass incarceration inflicted on Poor neighbourhoods impose environ- adult life. Integrated schooling increased black men permanently reduced the pool mental costs, as well as social ones. Black wages by 30% and reduced the chance of of eligible partners for black women, he ar- families are 70% likelier than the rest of the incarceration by 22 percentage points. Oth- gues. Kathryn Edin, of Princeton, and population to live in substandard housing, er studies estimate a 68% increase in the Maria Kefalas, of St Joseph’s University in and black children are nearly three times as chance of attending a four-year college. Philadelphia, two sociologists, note the likely to have high levels of lead in their “There’s nothing magic about sitting next sense of self-worth poor women with little blood, which stunts intelligence and leads to white children,” says Francis Pearman, a social capital get from early child-rearing, to greater violence in adulthood. Com- professor of education at Stanford. “But whether in the presence of a father or not pared with white children they are almost one thing that’s consistent in the history of Behaviour, policy, present-day discrim- one and a half times as likely to have asth- American schooling is that resources fol- ination and the unfair initial conditions ma—and five times likelier to die from it. low white children.” seeded by centuries of historical discrimi- Greater exposure to fine particulate mat- The racial achievement gap on test nation are tied together in a complicated ter—the sort of pollution which most dam- scores between black and white students knot of pathology. Some of the tangled fac- ages lungs—and delays in treatment has narrowed in the past four decades, but tors—persistent racism, or family break- brought on by a lack of good health insur- remains at roughly two to four years of down—make it easy to develop a narrative ance may explain why covid-19 now seems learning. Mr Pearman’s research has docu- which apportions blame. Looking at it in to be killing African-Americans at twice the mented that poor neighbourhoods ad- the whole, though, the threads which will rate of it does white Americans. versely affect students’ maths scores even yield the most if tugged at are fairly obvi- This concentrated poverty is the legacy if their schools are good. Black students ous. The priorities are segregation, educa- of enforced segregation. When, in the who get to college are less likely than oth- tion and childhood poverty. Great Migration of the early and mid 20th ers to complete their courses; black men Addressing segregation is paramount. century, millions of African-Americans have an especially poor chance of making it Most of the other problems—exposure to moved to the cities of the north, a mixture to graduation. In 2016 only 29% of black violence, a paucity of public services, seg- of law and prejudice required that they live adults above the age of 25 had an associate regated schooling and the persistence of in neighbourhoods that became almost ex- degree or higher, compared with 44% of stereotyping—can be traced back to it. The clusively black. In 1970 American cities white adults. At a time when the premium most obvious starting-point is stripping 1 were almost completely segregated, in that 93% of black residents would have needed 1 to move to ensure complete integration. At That’s not right the time of the most recent census, in 2010, United States, median household income and wealth this number was 70%, an improvement By race, $’000, adjusted for inflation that is hardly worth cheering (see chart 2 Income Wealth on next page). 80 200 Zoning rules which keep the cost of White White housing high by restricting supply make it 60 150 very hard for poor black families to move to better neighbourhoods. As income in- 40 100 equality has risen, well-to-do families have bid up the price of homes near good Black 20 50 schools, further concentrating poverty. Black Public-housing programmes, which could 0 0 break up these patterns, do little. Continu- 16102000908070601953 16102000908070601953 ing discrimination makes matters worse. A Source: “Income and Wealth Inequality in America”, by Moritz Kuhn, Moritz Shularick and Ulrike I. Steins recent investigation into rentals in Boston 16 Briefing Race in America The Economist July 11th 2020

2 away the zoning rules that ban apartments duce child poverty by a third. 2 in high-cost cities. They deny opportunity Why so slow? A more radical idea is that all children to poor families of all colours even as they American cities*, black-white dissimilarity index should get government-funded trust ac- drag down economic productivity. Complete segregation=100 counts—“baby bonds”—with the funding Rental assistance from the federal gov- 100 for children born into poverty more gener- ernment could help more than it does. Cur- Chicago ous than for the rest. A scheme in which the US average rently it is, quite literally, a lottery. Winners bonds were worth $50,000 by the time a get most of their housing costs paid for; 80 child born into poverty turned 18 would re- losers whose claim may be equally sound— New York Atlanta duce the wealth disparity between young and who outnumber the winners three to white and black Americans from 16:1to 1.4:1 San Diego one—get nothing at all. And most of the 60 even if it were strictly race neutral, accord- poor households lucky enough to receive Phoenix ing to calculations by Naomi Zewde of the subsidised housing still live in places of More integration ↓ City University of New York. concentrated poverty; the typical recipient This proposal has a price tag close of lives in an area with a poverty rate of 26.3%. 40 about $80bn a year. This means that enact- A promising randomised experiment in ing a child tax credit, eitc expansion and Seattle recently showed how this might be 1020009080701960 baby-bond programme would still cost less changed, at least in some cases. A modest Source: “Moving Toward Integration”, by *60 largest than the $207bn the government will forgo R. Sander, Y. Kucheva and J. Zasloff, 2018 metro areas amount of help in terms of finding proper- this year by taxing dividends and long- ties and dealing with prospective landlords term capital gains at lower levels than in- increased the share of families with rental tem that gives students access to an advis- come. The idea of paying reparations to the vouchers living in high-opportunity areas er, subway tickets and modest cash grants descendants of slaves—a bill that might (those with a history of greater upwards has been shown to double graduation rates cost upwards of $4trn to settle—would be mobility for children born into poverty) from community college, and to have par- much costlier. Nor are they obvious cause from 15% to 53%. ticularly beneficial effects on black and for a white backlash, since unlike repara- Obviously not everyone can move to the Hispanic students. tions—or, for that matter, affirmative-ac- most promising places. But the Seattle ex- tion policies at universities and else- periment strongly suggests that today’s Investing early where—they would be based purely on government spending could get better re- Then there is child poverty. Expanding the economic criteria, not racial ones. sults, thus strengthening the case for more earned-income tax credit (eitc), which Unfortunately, the fact that the benefits tomorrow. Abolishing the mortgage-inter- tops up the wages of working low-income of such programmes would accrue dispro- est tax deduction, which subsidises the adults, and a universal child tax credit portionately to African-Americans might home-buying of the already wealthy and could drastically reduce child poverty— make it hard to build broad political sup- well-capitalised, would allow the federal and reduce the tremendous costs to be in- port. Safety-net programmes such as cash government to double the size of its hous- curred decades from now in lower tax rev- welfare or the expansion of health coverage ing-assistance programmes for the poor. enues and higher expenses on incarcera- for the poor, part of Mr Obama’s health-care Increasing integration of neighbour- tion, homelessness services and health reform, have been unpopular with some hoods will in time produce more integrat- care. A programme combining a $2,700 an- white Americans. That could make it polit- ed schools. Until that happens, however, nual child allowance and a 40% expansion ically expedient to concentrate on univer- there are more immediate solutions to pre- of the eitc would reduce child poverty by sal programmes. Social Security, which sent-day educational disparities. Higher half, and cost $110bn a year, according to a provides pensions, and Medicare, which spending helps performance. An influen- report by the National Academies. Cana- provides health insurance for the elderly, tial study by Kirabo Jackson, Rucker John- da’s implementation of a similar pro- have become close to politically untouch- son and Claudia Persico, three economists, gramme in 2016 took just two years to re- able in part because they are universal. found that boosting schools’ spending per Child tax allowances and baby bonds might pupil by 10% reduced poor children’s aspire to similar standing. chances of poverty in adulthood by 6.8 per- “My parents literally had to get a white centage points. couple to pose as us in order to buy a home Schools in poor neighbourhoods need in an affluent area of suburban New Jersey particularly good teachers. But the schools with great public schools,” remembers that require the greatest talent often re- Cory Booker, now a senator from that state. ceive the most inexperienced instructors, As well as promoting a bipartisan bill on in part because there is little financial en- criminal-justice reform, Mr Booker has couragement for the best to work in them. also pushed a programme to remove lead Care in recruitment and the pairing of new pipes in schools; baby bonds formed a ma- instructors with experienced ones goes jor plank in his run for the Democratic some way to explaining why charter nomination. schools often deliver enormous education- “[Dr King] eloquently said that we have al returns for poor black and brown chil- to repent in our day and age, not just for the dren stuck in otherwise-failing urban vitriolic words and violent actions of the schools. For all that teachers’ unions and bad people, but the appalling silence and many on the left dislike them, charter inaction of the good people,” Mr Booker schools that prove to be engines of oppor- says. “Well, I fear that we will have to repent tunity should be expanded. Those that do in our generation, if more of us who are not should have their charters revoked. good people—and that is the overwhelm- Keeping students in college is also an ing majority of Americans—let another area where a little money can do a lot if ap- generation go by where we don’t correct plied with good sense. In New York a sys- Integration was never easy these persistent injustices.” 7 United States The Economist July 11th 2020 17

Economic policy Why? The main reason is that fiscal policy is helping to push poverty down. The covid bonus The stimulus plan passed by Congress is twice the size of the one passed to fight the recession of a decade ago. Much of it, in- cluding cheques worth up to $1,200 for a single person and a $600-a-week increase in unemployment insurance (ui) for those out of work, is focused on helping house- America’s huge stimulus is having surprising effects on the poor holds through the lockdowns. At the same o one welcomes a recession, but falling. Many more people are typing time, unemployment now looks unlikely Ndownturns are especially difficult “bankrupt” into Google. to rise to 25% or higher, as some econo- when you are poor. Rising unemployment Yet these trends, bad as they are, do not mists had predicted in the early days of the means rising poverty: the recession of appear to be part of a generalised rise in pandemic, thereby exerting less upward 2007-09 prompted the share of Americans poverty. The official data will not be avail- pressure on poverty than had been feared. classified as poor, on a widely used mea- able for some time. A new paper from econ- The upshot is that the current down- sure, to jump from 12% to 17%. That eco- omists at the University of Chicago and the turn looks different from previous ones. nomic shock, as bad as it was, pales in com- University of Notre Dame, however, sug- Household income usually falls during a parison with what America is seeing today gests that poverty, as measured on an an- recession—as it did the last time, pushing during the coronavirus pandemic. The jobs nual basis, may actually have fallen a bit in up poverty. But a paper in mid-June from report for June, published on July 2nd, April and May, continuing a trend seen in Goldman Sachs, a bank, suggests that this showed that unemployment remained the months before the pandemic hit (see year nominal household disposable in- well above the peak of a decade ago. chart 1on next page). come will actually increase by about 4%, Severe deprivation is certainly on the pretty much in line with its growth rate be- rise. According to a new survey from the fore the pandemic (see chart 2). The extra Census Bureau, since the pandemic began Also in this section $600 in ui ensures, in theory, that three- the share of Americans who “sometimes” quarters of job losers will earn more on 18 Kansas’s Senate race or “often” do not have enough to eat has benefits than they did in work. grown by two percentage points, repre- 19 Police unions By international standards, America’s senting some 2m households. An astonish- unexpected success at reducing poverty 19 Reforming bail reform ing 20% of African-American households nonetheless remains modest. Practically with children are now in this position. 20 Chaplains everywhere every other rich country has a lower pover- Meanwhile, the proportion of Americans ty rate. It is also a fragile accomplishment. 21 Lexington: The mark of Cain saying that they are able to pay the rent is The extra $600-a-week payments are sup-1 18 United States The Economist July 11th 2020

Kansas’s Senate race tainty sent a message that Mitch McCon- 1 Flattening the curve nell, the Senate leader, does not trust the United States, poverty rate, % The 88-year itch local alternatives as a safe bet. 18 Most are nonentities. Easily the best- known is Mr Kobach, who may have a slight 15 lead over his rivals because of a strong base of conservative backers. He was previously Official close to Donald Trump, but lost favour once 12 CHICAGO Ms Kelly thumped him in the governor’s Democrats dream of the 1930s race. He has proved himself a poor fun- 9 talin ruled the Soviet Union. George V draiser and his focus on the evils of immi- Monthly CPS Three-month moving average Soccupied the British throne. America’s gration seems unsuited to the moment. 6 public was awed by a young Kansan, Ame- Mr Kobach retorts that Mr McConnell lia Earhart, who had become the first wom- and other “establishment voices” fear him 2005 10 15 20 an pilot to fly solo across the Atlantic. The as an outspoken conservative, so are “try- Sources: Census Bureau, Current Population Survey (CPS); year 1932 was memorable for many. But ing to foist a pliable Republican” on the “Income and Poverty in the COVID-19 Pandemic”, by Jeehoon Han, Bruce D. Meyer, and James X. Sullivan, 2020 Democrats in Kansas recall it for a special seat. Mr Trump has not endorsed anyone, reason: that was the last time their state but seems to be behind Roger “Doc” Mar- elected a Democratic senator. shall, an unexceptional congressman from 2 posed to expire at the end of July. The au- Could it happen again in November? rural western Kansas. thors of a recent paper from Columbia Uni- Kris Kobach, a Republican and former sec- Complicating things is a former plumb- versity show that poverty could rise retary of state in Kansas, scoffs at the idea. er, Bob Hamilton, who plunged into the sharply in the second half of the year, He campaigned this week in Topeka, the primary and is mostly devoting himself to which seems likely if unemployment has state capital, after a weekend of attending attacks on Mr Marshall. He is said to be not decisively fallen by then. Goldman’s Independence Day parades and picnics. “It spending $2m of his own cash on tv ads. paper assumes that Congress will extend won’t be 1932 again,” he said, predicting He pitches himself as an even more conser- the extra unemployment insurance, but that he, or whoever else emerges from a vative outsider. By attracting 15% support that the value of the payment will drop to crowded field of 11in the Republican prim- or more, he makes the result of the primary $300. Even then, household disposable in- ary on August 4th, will go on to win the hard to guess. come would probably fall next year. Senate race by ten percentage points. As for the November election, polls Whether extra stimulus would help Such confidence could be misplaced. show Ms Bollier as likely to win as any Re- those at the very bottom of America’s so- The Democrats will field an unusually publican. Her challenge is to sustain that cio-economic ladder—including people strong candidate. Barbara Bollier, a retired after August, once she faces a single oppo- not able to buy sufficient food—is another anaesthesiologist, has raised $3.7m this nent. If she really is to end the Democrats’ question. Six per cent of adults do not have quarter, a hefty sum that dwarfs efforts on 88-year losing streak in Kansas, she proba- a current (checking), savings or money- the Republican side. Democrats nationally bly needs Mr Trump’s popularity to dip market account, making it difficult for are shovelling money into Kansas, as a vic- more. Because voters seldom now split them to receive money from Uncle Sam. tory there could help win control of the their ballots between president and Senate, Some may have been caught up in the de- Senate—or the threat of one might at least she needs more Kansans to think again lays which have plagued the ui system, and distract Republicans from other battles. about the top of the ticket. That was the for- a small number may be undocumented im- Ms Bollier’s biography makes success mula in 1932, after all. Kansas last got a migrants not entitled to fiscal help at all. seem possible. Until two years ago she was Democratic senator when FDR won a na- Others report not being able to gain access a moderate Republican in the state Senate. tional landslide for his party. 7 to shops closed under lockdowns. The best She was dismayed by a dire tax-cutting ex- way to remedy this would be to get the virus periment under the previous Republican under control and the economy firing on governor, Sam Brownback, and by her (for- all cylinders once again. But that still looks mer) party’s rightward lurch on social is- some way off. 7 sues. She endorsed Laura Kelly, a Demo- crat, who won the race to be governor in 2018. Then she jumped party. 2 Uncle Sam’s fat wallet Having an ex-Republican doctor on the United States, disposable personal income (DPI) ticket should be an advantage as covid-19 Forecast, % change since Q4 2019 spreads. Ms Bollier is making health care Transfers* Market income her main issue. That is astute: Republicans 20 vow to repeal the Affordable Care Act, though polls suggest most Kansans want government-backed care expanded. If the 10 DPI pandemic worsens, voters may grow more concerned. Ms Bollier also has the advan- 0 tage of coming from Johnson County, which includes some suburbs of Kansas -10 City. Doing well there could be decisive. Democrats are also encouraged by con- niptions among Republicans after the in- Q4 -20 cumbent, Pat Roberts, said he would retire. 2019 2020 2021 For months the national party tried to press Sources: Goldman Sachs; *Includes further stimulus The Economist expected later this year Mike Pompeo, the secretary of state, to run. He eventually refused, but the long uncer- Barbara Bollier, 30s throwback The Economist July 11th 2020 United States 19

Policing The courts Bands of blue Reform squared

WASHINGTON, DC Cities and states are starting to rein in Cash bail is unpopular. But the police unions’ power replacements are not necessarily better he union forever defending our t might have been the most polite bank “Trights,” rhapsodises Billy Bragg, a Irobbery in New York’s history. At half past British singer and activist, in his song five in the afternoon on January 10th a man “There is Power in a Union”. And that, in- in a Chicago Bulls baseball cap walked into deed, is what unions do: they advance the a Chase Bank branch in Brooklyn and hand- interests of their members. That means ed a note to the teller. “This is a robbery,” pushing for better pay, benefits and work- the message said, in handwritten red ink. ing conditions. Unions representing police “Big bills only.” He walked out with $1,000. officers are no different: their efforts keep The man accused of the heist is Gerod police pensions and salaries generous, and Woodberry. Less than four hours before the provide their members with broad protec- Brooklyn incident, Mr Woodberry had tions against disciplining and oversight, to been released from police custody after be- keep them in work. That has long frustrat- ing charged with similar offences. “I can’t ed many criminal-justice reformers—but, believe they let me out,” he told a detective. buoyed by calls for change in the wake of Bragging rights His release was thanks to New York’s George Floyd’s death, some governments new bail-reform law, effective since Janu- have begun to rethink those protections. A forthcoming paper from Rob Gille- ary 1st, which eliminated pretrial detention Law enforcement is among the most zeau, an economist at the University of Vic- for misdemeanours and non-violent of- heavily unionised sectors in America, and toria, British Columbia, who studies police fences. Critics of the reform jumped on Mr police unions occupy a unique position. practices, found that the spread of police Woodberry’s case. In April the state legisla- They tend to be conservative, unlike much collective-bargaining in America between ture amended the new law to increase the of the labour movement. The International the 1950s and 1980s led to what he calls “a number of situations in which judges can Union of Police Associations, for instance, meaningful increase in civilians killed by impose cash bail, effective from July 1st. has endorsed Donald Trump, even though law enforcement, mostly among the non- The Centre for Court Innovation, a think- it is affiliated with the afl-cio, a staunchly white population.” He argues that, “it looks tank, estimates that this will increase New Democratic union federation. like the collective-bargaining process is York’s pretrial jail population by 16%. Politically, police unions are shielded being used to protect the ability of officers Before the reform was reformed, New on both sides. The right dislikes confront- to discriminate.” York had been the first state in the country ing the police—in Wisconsin Scott Walker, Some states have begun taking mea- to end pretrial detention for such a swathe a former Republican governor, specifically sures to boost police accountability and of charges, enough to account for 90% of exempted police unions from a measure rein in union power. In late June, Oregon’s arrests. Bail-reform advocates say that passed in 2011 that limited public unions’ legislature passed bills requiring officers to keeping unconvicted people detained be- collective bargaining rights—whereas the report or prevent misconduct by their col- fore trial violates the presumption of inno- left is loth to take on unions. Governments leagues and limiting the ability of arbitra- cence. The money-bail system, in which often find it easier to give in on disciplinary tors to overturn disciplinary actions. Con- defendants pay cash as a guarantee that and oversight matters, which incur no di- necticut’s legislature plans to pass they will show up in court, means that only rect or noticeable costs, than on pay and police-accountability legislation in a spe- those with spare dollars can wait for their pensions, which might require tax rises or cial session later this month that may in- trial at home. The poor must either turn to service cuts elsewhere. clude measures limiting officer indemnifi- the $2.3bn commercial-bondsmen indus- Union contracts for police forces in cation and unions’ ability to negotiate over try—companies, found only in America or most of America’s 100 largest cities have some disciplinary and oversight measures. the Philippines, which bail out defendants provisions reducing police accountability. Some prominent Democrats in California for a fee—or wait in pretrial detention. In In Chicago, for instance, officers have 24 have asked the party to stop accepting con- 2016 two-thirds of inmates in local jails hours after a shooting to make a statement, tributions from police unions—a move were defendants awaiting trial. which they can amend after watching vid- that would limit the unions’ influence in But if money bail is reformed, what re- eo footage of a disputed incident. Chicago what is, in effect, a one-party state. places it? California abolished it in 2018, re- also bans anonymous complaints of mis- Some unions are dug in for a long fight. placing it with risk assessments. But the conduct, which a Justice Department re- But others see that times are changing. Da- new law pleased few people. It replaces the port argues “creates a tremendous disin- ryl Turner, who heads Oregon’s police-ad- former system with “an overly broad pre- centive” to report it, since complainants vocacy organisation, recognises that “It’s sumption of preventative detention”, says fear they may be targeted. Other states and important to evolve in policing...with the the American Civil Liberties Union. The cities indemnify police against miscon- needs of your community and the nation.” American Bail Coalition has sponsored a duct by paying their legal fees and settle- Three large police unions in California $3.7m campaign to repeal it. Risk-assess- ment costs, allow officers access to infor- have called for reforms including a nation- ment tools “penalise people based on what mation that citizens do not get which they al use-of-force standard and database of of- they might do in future,” says Jeff Clayton can review before being interrogated, and ficers fired for gross misconduct—though of the bail-industry group. The law will be eventually erase disciplinary records from of course those reforms would not curb put to a referendum in November. officers’ files. their collective-bargaining power. 7 Debates about bail reform have forced 1 20 United States The Economist July 11th 2020

2 people to think about what bail is really for, Chaplains Most hospitals now have chaplains on says Taryn Merkl of the Brennan Centre, a their payroll. Though many are ordained, think-tank. Posting bail is no more of a Civil rites they differ from other ministers in signifi- guarantee than other incentives that some- cant ways. No matter what their tradition, one will show up in court. The Bronx Free- they are trained to tend to people of any dom Fund is one of several charities that faith or none, are familiar with hospital bail out poor defendants. Between 2013 and systems, and work closely with doctors and 2014 98% of the organisation’s clients WASHINGTON, DC nurses. Arif Kamal, a palliative-care expert As fewer Americans go to church, showed up for their court dates, despite the at Duke University and a hospital doctor, chaplains are finding work elsewhere lack of a personal financial incentive. Such says hospitals have seen that having a data have pushed the case for abolishing ne of the toughest things about co- chaplain can reduce staff turnover, espe- cash bail, says David Feige, the Fund’s Ovid-19 for Pamela Lazor, as for workers cially at stressful times. Currently, he says, chairman. So public safety is also in- in hospitals across the world, has been chaplains are operating as a “relief valve”, voked—though, among the people await- watching patients die without a loved one doing some of the jobs made necessary by a ing trial in local jails, 68% are accused of close by. As a chaplain at Cedars-Sinai Med- highly contagious virus that medical staff nonviolent offences. ical Centre in Los Angeles, part of her job is are too busy to attend to. This is where risk assessments come in. making sure dying patients have the com- As ppe supplies have improved, some Many states look to New Jersey as the ex- pany of a relative or a chaplain if they have hospitals, like Cedars-Sinai, allow one visi- ample of what abolishing cash bail would signalled a wish for it. As the virus spreads, tor when a patient is close to death. But look like. Money bail was severely restrict- hospital chaplains are playing a crucial most patients are still largely isolated from ed there in 2017. Instead, judges use an al- role in the care of patients, their families their families. Chaplains help organise on- gorithm to determine how dangerous or and the medical staff who treat them. This line meetings and serve as go-betweens, likely to flee a person is. It is far from per- reflects the expansion of chaplaincy in speaking to relatives who are unable to fect. Although New Jersey has reduced the America more broadly. As fewer people go reach a doctor or nurse. overall jail population, the algorithms used to church, more of those who would once Their particular speciality is death. A to determine who gets bailed and who does have become church ministers have be- majority of Americans die in hospital. Yet not are said to entrench the kind of racial come chaplains instead, says Wendy because few anticipate this, they and their discrimination that getting rid of cash bail Cadge, a professor of sociology at Brandeis families are often unprepared for what it was supposed to solve. University and founder of the Chaplaincy can involve. Dr Kamal says that people, es- In both 2012 and 2018, 54% of inmates Innovation Lab (chaplains are spiritual ad- pecially from conservative religious back- were black. One of the risk factors used in visers attached to secular institutions such grounds, worry about the ethics surround- the New Jersey algorithm is a person’s as hospitals or schools) ing end-of-life care; whether a ventilator criminal record. But in 2013 a black person In the process, chaplaincy has become should be switched off, for example. Inten- in New Jersey was three times more likely increasingly professionalised. In the past sive-care doctors may not have the time to than a white person to be arrested for mari- 20 years a quarter of theological colleges discuss such issues; outside ministers are juana possession, despite a similar rate of have started chaplaincy degree pro- unlikely to understand the way such deci- use among the two groups. The algorithm grammes. Though the only institutions le- sions are made in hospitals, and may even also factors in pending charges that have gally required to have chaplains are federal make them more difficult. yet to result in a conviction. prisons, the armed forces and the Veterans Covid-19 is also prompting chaplains “There is no doubt that risk assess- Administration, they are now found in vet- and medical staff to work together more ments are biased,” says Megan Stevenson erinary clinics, fire stations, shopping closely. Houston Methodist, a hospital in of the University of Virginia. “Anything malls and offices. A recent national survey Texas’s biggest city, is one of many in which that has data from a biased world will have found that 20% of Americans had engaged chaplains are still unable to visit covid-19 a biased output.” But this means that “there with a chaplain in the past two years. patients. Stacy Auld, the director of spiritu- is no way to test a risk assessment tool for al care, says the hospital tries to find ways fairness”, because any measures, such as if round that. When it became obvious re- a bailed person is rearrested, can also be af- cently that a patient, who had expressed a fected by racial bias in the justice system. desire to be baptised, would shortly die, a The challenge of bail reform is that “we chaplain guided a nurse from behind a haven’t been able to establish a baseline of glass screen as he performed the rite. best practice”, says Rashawn Ray of the A few have visited patients with co- Brookings Institution. But many jurisdic- vid-19 throughout the pandemic. At its tions are moving away from a cash-for- peak in Massachusetts, Brian Conley, a freedom system. Washington, dc has gone Catholic priest, administered the last rites furthest. The risk-assessment tool it uses is to between three and five Catholic patients opaque, but it releases 94% of defendants a day at Brigham and Women’s Hospital in before trial. “There is no perfect alterna- Boston, more than five times his usual rate. tive” to cash bail, observes Marie Ndiaye of He recited verses of the Koran and Jewish the Legal Aid Society, a law firm. Many prayers for the dying when an imam or rab- would like to see pretrial detention elimi- bi was not available. Being at the bedside of nated for all but a tiny minority of danger- a patient dying from covid-19 is different ous defendants. Still, despite the rollback from attending other deaths, he says, be- of the New York reforms, Mr Feige of the cause he has to keep a six-foot distance and Bronx Freedom Fund thinks things are wear a face shield. Patients often remain moving in the right direction. He is closing hooked up to ventilators even after they his organisation to focus on national bail- have been switched off to reduce the threat reform efforts. “We are realising”, he says, of infection. “It can feel strange and dis- “the dream of our own irrelevance.” 7 tant,” he says. “But the need is the same.” 7 The Economist July 11th 2020 United States 21 Lexington The mark of Cain

A Christian pollster argues that a reckoning is due in America’s churches South—characteristics that point to unreconstructed views on race independently of religion. Second, while people who simply identify as white evangelicals might hold such views, the most pi- ous do not. Mr Jones is unconvinced by either qualifier. He con- trols for age, partisanship and geography in his model—and finds the same pattern. And he finds that practising evangelicals score the highest on his index of racism. He concludes that white Chris- tian identity is “independently predictive” of racist attitudes. Such claims are sweeping and shocking. But, Mr Jones argues, the history of American Christianity makes this likelier than it might sound. The dominant southern strains of white evangelical- ism were formed amid and sometimes in response to slavery. The Southern Baptists, America’s biggest denomination, was launched to defend it biblically—which it did by representing black skin as the accursed “mark of Cain”. Many southern pastors were cheer- leaders for the Confederacy, then shaped the culture of nostalgia and lament (the “religion of the lost cause”) that precluded a reck- oning with Jim Crow’s legacy. The stained-glass windows of some southern churches still sparkle with Confederate flags. Almost 90% of white evangelicals consider the flag “more a symbol of southern pride than of racism”. Post-war pessimism also led evangelicals to adopt a premillen- ew things about Donald Trump’s rise are harder to explain nialist theology, which viewed the world as irredeemable by man. Fthan the fact that some of the most religious Americans were Instead of wasting their time on social justice, it urged them to fo- behind it. In 2016, 81% of white evangelicals voted for him. It seems cus on their individual spirituality. The perverse effect, argues Mr no one was more astonished by this than those who knew him Jones, was to imbue white evangelicals with “an unassailable best. “He has no principles. None!” marvelled his sister Maryanne sense of religious purity” that blinded them to their own behav- Trump Barry, according to a forthcoming family exposé by Mary L. iour. History records instances of white congregations pouring Trump, the president’s niece. out of church to a lynching. And such scenes were not restricted to The popular explanation for this strange nexus is that white evangelicals or the South. Christians overlooked the president’s failings because of his will- As African-Americans fled north, mainstream protestants and ingness to fight their corner, by nominating conservative judges Catholics increasingly adopted the mores of southern evangeli- and opposing abortion. This always seemed about as persuasive as cals. The moral majority of the 1970s and 80s, fuelled by a Catholic the comparisons between Mr Trump and the flawed biblical he- aversion to abortion and common fears of the civil-rights move- roes it gave rise to (…Cyrus, David, you name it). Mr Trump’s Re- ment, was the culmination of this fusion. Mr Jones’s model sug- publican opponents would have nominated similar judges; no gests the same racial attitudes are common to most white Chris- president can do much about abortion. Another explanation, ar- tian traditions. Evangelicals are merely the most extreme case. gues a new book by Robert P. Jones, an authority on American reli- This is a bleak analysis. Perhaps the least that can be said for it is gion and politics, and head of the Public Religion Research Insti- that Mr Trump, now tripling down on race-baiting, knows his base. tute, is that white Christians were especially receptive to Mr So long as he can keep his white Christian voters happy, he has a Trump’s race-baiting. Mr Jones also offers a grim theory for why chance, and harping on race looks like his likeliest means to do so. this was the case. Melding history, theology, statistical modelling and his own Mist on the water experience, as a Southern Baptist seminarian, Mr Jones suggests in If Mr Jones is right, a bigger question is whether churches can reck- “White Too Long” that America’s white Christian traditions are so on with the bigotry the Trump era has brought to the fore. This will steeped in historic racism that “the norms of white supremacy take more than a symbolic statement of guilt and desire for recon- have become deeply and broadly integrated into white Christian ciliation. Most churches, to their credit, have been doing that sort identity.” This is not something most white Christians (a group of thing for decades. Mr Jones quotes a Baptist pastor in Georgia that includes Lexington) are aware of. They probably condemn rac- who is trying to go further as saying that the word “reconciliation” ism. Mr Jones finds white evangelicals especially likely to express betrays a “desire to just kind of move through all the hard stuff.” goodwill to African-Americans. But dig into their unconscious bi- For him and his flock, the hard stuff involves trying to build a ases, he claims, and you see a different picture emerge. “In survey community with the black congregation next door, whose ances- after survey” white Christians are much likelier than non-reli- tors their ancestors owned. It might also mean revisiting the indi- gious whites to express negative attitudes towards minorities and vidualistic theology many traditions still adhere to. It could in- complacency about the rough treatment of African-Americans, volve restitution—as slave-built Virginia Theological College among other indicators of racism. Asked whether police killings of demonstrated, by launching a $1.7m fund for black seminarians. black men were isolated incidents, 71% of white evangelicals said This troubling past was always the real mark of Cain, Mr Jones they were, compared with 38% of non-religious whites. writes. And “today God’s anguished questions—‘Where is your This is a finding to which two qualifiers are often added. First, brother?’ and ‘What have you done?’—still hang in the air like white evangelicals are likely to be old, conservative and live in the morning mist on the Mississippi River.” 7 ADVERTISEMENT

GLOBAL BUSINESS BAROMETER Survive / Adapt / Recover

The second edition of the Global Business Barometer has shown improvements compared with April, but the readings remain deeply negative.

A majority of global executives still believe the fi rms they manage—and the economies where they operate—are in the survival phase. Even a marked improvement in sentiment about the three-month outlook for the global economy brought the barometer reading on that indicator to only -27.7, on a scale of -50 (much worse) to +50 (much better), a long way from optimism.

Adaptation will prove vital the longer the recovery takes. What actions are companies taking to adjust to the “new normal”? And how long do executives think it will take for their fi rms to recover?

NO CHANGE SOMEWHAT SOMEWHAT WORSE BETTER

MUCH MUCH WORSE BETTER

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Brazil From the start, it encountered resis- tance, chiefly from people who want to Christianity, covid, contact farm and mine on indigenous land. Now, for the first time, Brazil has a president, Jair Bolsonaro, who is a critic of the policy. An evangelical Christian, he shares the prose- lytising zeal of the missionaries whom Mr SÃO PAULO Mayoruna has encountered. He is also Missionaries are eager to convert isolated indigenous groups in the Amazon. sympathetic to businessmen who want to Brazil’s president is on their side develop the Amazon. Though still on the arcos mayoruna found Jesus 15 Brazil’s government in 1988. It discourages books, in practice the no-contact policy is Myears ago. The son of a cacique (chief) contact with isolated tribes, except to pre- being dismantled. from the Vale do Javari, an indigenous ter- vent medical emergencies, warfare be- One of Mr Bolsonaro’s first decrees ritory in the Brazilian Amazon larger than tween tribes or other catastrophes. The transferred power to demarcate indige- Austria, he was converted by a missionary policy’s father is Sydney Possuelo, a re- nous reserves from the indigenous agency from another ethnic group and became a vered sertanista, or explorer, who led con- (funai) to the agriculture ministry, which pastor himself. After seminary in Rio de Ja- tact missions for Brazil’s military govern- is friendlier to farmers. The Supreme Court neiro he went home to spread the word of ment in the 1970s and 1980s. Development annulled it. This year he nominated Ricar- God to the Mayoruna and other tribes. projects like the construction of the Trans- do Lopes Dias, a former missionary, to He sometimes worked with Brazilian Amazonian highway cleaved through for- oversee the part of funai that deals with its and American missionaries, swapping his est inhabited by scores of indigenous policy on isolated tribes. Mr Possuelo says local knowledge for donations to his hum- groups (see map on next page). In some, that Mr Bolsonaro poses the biggest threat ble seminary in Atalaia do Norte, a dusty 50-90% of their members died from dis- to those groups since the no-contact policy town in the northern part of the valley. But, eases like measles and flu. Horrified, Mr began. “Contact is a road of no return,” he he says, the missionaries seemed more in- Possuelo persuaded the government to says. The alarm is heightened by covid-19, terested in reaching isolated peoples, in- adopt the no-contact policy. It has become which could hurt indigenous people more digenous groups that, unlike the Mayo- a model for other countries in the region. than those with access to modern health runa, have little or no contact with the care. Mr Bolsonaro, who revealed this week societies that surround them. Worldwide, that he had tested positive for the coronavi- Also in this section 100 probably exist today, says Survival In- rus, has shown little interest in shielding ternational, an ngo. The largest concentra- 24 Change in the Dominican Republic Brazilians from it. tion, of perhaps 16, is in the Javari valley. Even before his presidency, the no-con- 26 Bello: Spain’s role in Latin America They owe their survival to a decision by tact policy was under threat. Between 1987 1 24 The Americas The Economist July 11th 2020

2 and 2013, funai contacted only five isolat- measure they would be better off: among Dominican Republic ed groups. But illegal logging, mining and the Ache of Paraguay, half of children living drug smuggling have pushed non-isolated isolated in the forest died before reaching A rare power shift groups towards isolated ones. Tensions be- adulthood. After contact in the 1970s, child tween them have drawn in the state. funai mortality rates spiked for a few years, but has led as many contact missions since are now 2-3%. 2014 as it did in those previous 26 years. In The Science article caused a furore. The 2015 it drew criticism for initially ignoring idea of controlled contact ignores native The Caribbean country comes out of pleas from the Matis in the Javari valley to peoples’ right to self-determination, say lockdown to elect a new government make contact with the isolated Korubo, defenders of no contact. Many groups re- whose members had killed two Matis lead- turned to isolation after traumatic encoun- or a while the Dominican Republic ers. funai contacted the Korubo only after ters, such as enslavement by rubber tap- Fseemed doomed to a year of electoral the Matis killed eight Korubo in revenge. pers in the early 1900s. Uncontacted groups chaos. Local elections in February were With Mr Bolsonaro in charge, religious “know there’s a world out there,” says Mr cancelled halfway through polling day be- pressures reinforce commercial ones. “I Marubo. “They are making a choice by iso- cause new voting machines malfunc- haven’t met an Indian who wants to be na- lating themselves.” Many people doubt tioned. (A manual re-run in March suc- ked, and it’s a crime to keep them that way,” that any contact could be controlled, and ceeded.) A general election was due in May says an American missionary who lives in that it would be accompanied by medical but covid-19 forced a two-month delay. To Atalaia do Norte. Edward Luz, the president follow-up. “Can you trust that a govern- postpone it further would have required a of the New Tribes Mission of Brazil (mntb), ment won’t think about what gold is there, constitutional change. When it went ahead whose 480 missionaries evangelise “un- what oil is there, what trees are there?” asks on July 5th, chaos gave way to clarity. More reached ethnic groups”, wrote in an email Glenn Shepard, an ethnobotanist. than half of voters picked Luis Abinader, a to The Economist that contact will improve Even if controlled contact were possi- businessman, to be president. That avoid- their health. Fear and worry “will be re- ble, now seems a bad time to initiate it. The ed a run-off. Early results suggest his Mod- placed by confidence and they will smile, prevalence of covid-19 among indigenous ern Revolutionary Party (prm) will have procreate, have their cultural practices and people in cities is five times that among majorities in both houses of Congress. grow in numbers again,” he prophesied. Mr Abinader’s victory unseats the Do- Mr Lopes was once an mntb mission- minican Liberation Party (pld), which has VENEZUELA ary. His appointment to funai is like “put- ATLANTIC ruled for 20 of the past 24 years. Although ting a fox in charge of the hen house”, says COLOMBIA Yanomami OCEAN power transfers in the country are rare, Beto Marubo, an indigenous activist. He Trans- they do not necessarily bring change. Do- fears that Mr Lopes will share secret infor- Amazonian minican politics is characterised by con- Javari highway mation about tribes’ locations with prose- valley sensus on business-friendly centrism, and Atalaia lytising friends. If contact is needed, it do Norte a propensity for corruption, clientelism should be done by the government, not and infighting that weakens, but does not missionaries, said Mr Lopes in an email. BRAZIL prevent, its implementation. Mr Abinader Missionaries deny that they are trying must fight those old plagues while tackling to contact isolated tribes. Their actions PERU the new one, which threatens to do lasting BOLIVIA suggest otherwise. Ethnos360, the Ameri- Brasília damage to the economy. can partner of mntb, raised more than $2m 1,000 km The outgoing president, Danilo Medi- to buy a helicopter to “open the door to Indigenous territories in the Brazilian Amazon, 2019 na, is unpopular but accomplished a lot. reach ten additional people groups living The murder rate fell from 22 per 100,000 Uncontacted tribes Confirmed Possible in extreme isolation” in the Javari valley. people in 2012, when he took office, to be- Sources: Instituto Socioambiental; Folha de S. Paulo Mr Luz says the helicopter, which arrived low ten in 2019. Mr Medina doubled educa- in January, will help mntb in areas where it tion spending to 4% of gdp, complying already works, like Vida Nova, a Marubo white Brazilians. Mr Hill agrees contact with a law passed in 1997. He made school village where it built a church in the 1950s. should not happen until there is a vaccine days longer and offered free school funai has reported Andrew Tonkin, an and Mr Bolsonaro is no longer president. lunches. Over the past decade the economy American, to the police for flying a sea- Yet evangelists see the disease as a rea- of the Dominican Republic, which has 11m plane into the Javari valley. Indigenous son to initiate it. Congress’s evangelical people, was the fastest-growing in Latin leaders say he was searching for isolated lobby tacked on to a law that allocates mon- America. At his first inauguration Mr Medi- groups. He denies this and denounces ey to protect indigenous people from co- na promised to cut the official poverty rate what he sees as funai’s paternalism. vid-19 an amendment that allows mission- in half to below 20%. He succeeded. “What about [indigenous peoples’] right to aries to remain on indigenous lands. After He stumbled in his second term. Ode- invite who they want to their community?” a court ordered the government to evict brecht, a Brazilian construction firm that he emailed. “To worship God freely?” 20,000 gold miners from the remote Yano- bribed officials across Latin America, It is not just missionaries and miners mami territory, the army dropped off face found eager takers in the Dominican Re- who challenge the no-contact policy. In an masks and hydroxychloroquine, an anti- public. The $92m it paid there between editorial in Science in 2015, two anthropol- malarial drug that Mr Bolsonaro thinks is 2001 and 2014 was exceeded only in Brazil ogists, Kim Hill and Robert Walker, sug- effective against covid-19. and Venezuela. Mr Medina’s government gested that, given governments’ inability Mr Mayoruna, who left the forest be- investigated predecessors’ misdeeds but to protect indigenous lands, isolated cause “I wanted to know who God was”, re- not its own. The two most recent attorneys- groups are “not viable in the long term”. cently broke ties with the missionaries. He general sat on the pld’s governing body. “Controlled contact” would be a better poli- thinks it is a matter of time before the re- Mr Medina tried and failed to change cy, they wrote. “If we can guarantee them maining isolated groups are confronted the constitution so he could run for a third protection from exploitation they would with modern Brazil, but says it is wrong for term. That worsened a decade-long spat all choose contact tomorrow,” says Mr Hill. pastors to push the pace. “You can’t force with Leonel Fernández, a former president His research shows that by at least one anyone to convert,” he says. 7 who belonged to the pld and hoped to be1

26 The Americas The Economist July 11th 2020

2 its candidate again. Mr Fernández ran this his government will create 150,000 formal and covid-19. A majority in Congress, if the month for a rival party, helping to doom the jobs a year. About that many jobs are prm wins one, might reduce the need for candidacy of Gonzalo Castillo, a business- created now, but just 30% are relatively grubby dealmaking with other parties. Mr man who is Mr Medina’s political heir. high-paying formal ones, says Roberto Ál- Abinader has promised to pick an indepen- Mr Abinader, who studied management varez, an adviser to Mr Abinader. Some of dent-minded attorney-general and provide in the United States, is “slightly boring”, the new jobs are to come from 15,000 hotel more money to the office. New covid-19 says Leiv Marsteintredet, a professor at the rooms that Mr Abinader hopes will appear cases are rising rapidly, in part because the University of Bergen in Norway. His cam- along the beaches. He has also promised to country loosened its lockdown in the ap- paign was low-profile, partly because he balance the budget, which had a deficit last proach to the election. The current govern- contracted covid-19 and self-isolated. year of 2.2% of gdp. With the economy ex- ment may tighten it again, even before Mr The pandemic will do more damage to pected to contract by 6.5% this year, he will Abinader takes office on August 16th. The the new president’s programme of govern- meet none of those goals soon. Dominican Republic overcame electoral ment. “Our first priority is formal employ- Mr Abinader will be in a stronger posi- chaos. Vanquishing the virus and the re- ment,” says his manifesto. It pledges that tion to fight the twin plagues of corruption cession will be harder. 7 Bello Promise and disappointment

Spain’s complicated relationship with Latin America hey have gained few headlines and to which countries contribute as they Americans privately cheered. Latin Thave barely been noticed even in wish. In a modest way, it works. American diplomats say that Spain tends Spain. But over recent weeks the Spanish For Latin America, where the United to take the region for granted. segib has government has organised six virtual States and China loom large, ties with sometimes seemed a vehicle through ministerial meetings with its counter- Spain are a way of diversifying friend- which to outsource policy towards the parts in Latin America to share experi- ships. The heart of Spain’s political offer to region, or not to have one. Once a big ences of dealing with the pandemic that Latin America is to portray itself as the donor to Latin America, Spain slashed has hit their countries so hard. These region’s advocate in Brussels, which in- development aid after its economic gatherings culminated in a video get- creases its own weight there. In fact, big slump of 2009-12. Some of its companies together on June 24th in which Pedro countries like Brazil and Argentina often are now retreating from Latin America. Sánchez, Spain’s prime minister, was have no need of an intermediary. But Spain Spain’s biggest diplomatic failure has joined by nine presidents. They agreed to was important in easing visa requirements been over Venezuela’s slide into dic- work together to try to ensure that inter- for the Schengen area for Latin Americans tatorship under Nicolás Maduro. It was national financial institutions have and in clinching a trade agreement be- left to Norway to try to broker an agree- more money to lend to Latin America as tween the European Union and Mercosur, ment last year between the government it struggles to support its economies. the bloc based on Brazil and Argentina. In and the opposition. Spain is hobbled by This is a new and useful chapter in a May Spain’s foreign minister, Arancha the antics of José Luis Rodríguez Zapa- relationship that has often promised González Laya, organised with Josep Bor- tero, a Socialist former prime minister, more than it has delivered. In many rell, her predecessor who is now the eu’s who claims to be a mediator in Venezue- ways, Spain and Latin America are close. foreign-policy chief, a successful confer- la. The country’s opposition considers They share ties of language, culture and ence of donors to support the needs of him a stooge for Mr Maduro. Because of history (though this does not apply to the Venezuelan migrants. Mr Zapatero, Spain “has lost a lot of same extent to Portuguese-speaking But the past casts a shadow. When last prestige”, says a Latin American former Brazil). But the political dialogue be- year Mexico’s populist president, Andrés foreign minister. Podemos, the far-left tween them has had ups and downs over Manuel López Obrador, demanded that member of Mr Sánchez’s coalition, is also the past 40 years. Spain’s transition to Spain apologise for its invasion of 1519, friendly towards Mr Maduro’s regime. So democracy in the late 1970s influenced Spaniards were angered while many Latin domestic politics undermines Spanish Latin America as it, too, shook off dic- diplomacy on one of the most important tatorship. Felipe González, Spain’s So- issues in a region it claims is a priority. cialist prime minister from 1982 to 1996, Rebeca Grynspan, segib’s boss, forged close ties with the region’s lead- points out that the Iberoamerican sum- ers. Together with Mexico, in 1991Spain mits are the only place where all the launched the first of what would become governments of Latin America sit down regular “Iberoamerican” summits, which together. That reflects a region that is include Portugal, too. Spanish compa- more divided than for decades, in which nies piled into Latin America, often by the presidents of Argentina and Brazil do buying privatised firms. In 2005 Spain not speak to each other and about which set up an Iberoamerican secretariat Mr López Obrador doesn’t care. It is a (known as segib) to implement initia- dereliction of duty that Latin America’s tives agreed upon at the summits. leaders have failed to come up with a It is a low-key outfit that does useful joint position on many of the region’s things, like arranging the portability of pressing issues, starting with how to get professional titles and social security, international support to rebuild their and acts as a vehicle for small-scale aid economies. To Spain’s credit, on that at projects worth some €23m ($26m) a year, least, it has stepped into the breach. Asia The Economist July 11th 2020 27

Also in this section 28 Seoul v the rest of South Korea 29 Taiwan and Hong Kong 29 Australia’s new outbreak of covid-19 30 Lockdown in the Philippines 31 Banyan: South-East Asia’s puzzling escape from covid-19

Covid-19 in India sponded quickly and forcefully to the pan- demic. Perhaps too quickly: two months of Flattening the wrong curve nationwide lockdown shattered the econ- omy, but only slowed the disease. “You flat- tened the wrong curve,” is how Rajiv Bajaj, a prominent businessman, puts it. One deadly error was to freeze all travel with no warning, trapping millions of migrant DELHI workers where they were no longer want- Infections are soaring, but increased testing may help ed, in big cities with the highest rates of in- andeep is anxious. A few days ago the penetrating ever further into the interior. It fection, and then later to let them go, carry- Sowner of the clinic where his wife works is this surge that is pushing India inexora- ing the infection with them. Local edicts as a receptionist came down with covid-19. bly upwards in the league of covid cases have caused similar spikes: the state gov- Authorities sealed the building and and which, given its population of 1.3bn, ernment in Tamil Nadu has declared sever- whisked her off to quarantine, then sent will probably see it rise to the top. The wave al sudden lockdowns, prompting crowding1 him to a different isolation centre. Stuck is moving beyond those parts of the coun- now in a hostel, he worries that even if he try that are best equipped to manage it, to tests negative, the families whose clothes places that may prove far more vulnerable. India rising he irons for a living will be afraid to let him With nearly 800,000 confirmed cases Covid-19, new confirmed cases, ’000 back. They won’t appreciate that he cov- so far, India ranks third after America and Seven-day moving average, to July 8th 2020 ered for them, lying when asked if he had Brazil in infections. The tally of covid 40 been visiting houses lately. “I didn’t want deaths, over 21,000, is relatively modest. It Brazil to inconvenience customers who might get works out at fewer than 15 per million, a 30 forced to be tested,” he explains. With the quarter of the world average and a fraction clinic also holding up his wife’s salary, the of the 651per million in Britain. But, for rea- couple will have to borrow to stay afloat. sons ranging from the relatively low level India 20 Sangli, the big country town where San- of testing to spotty medical record-keeping deep (not his real name) lives, is 300km to political interference, many experts be- 10 (190 miles) south-east of Mumbai. Until re- lieve India is undercounting deaths by a Russia cently the pandemic had spared such third or more. With cases rising by some 0 places. Now, even as the curve has flattened 25,000 a day (see chart), fatalities are any- June July or fallen in Delhi and Mumbai, it is arching way bound to soar. Source: Johns Hopkins University CSSE sharply upwards in satellite towns, and Unlike Brazil and America, India re- 28 Asia The Economist July 11th 2020

2 in markets that have proved dangerous more than100 doctors to the disease. thousands of jobs in a region with compar- vectors for covid. With the price of tests dropping and re- atively little industrial heritage and thus At Sulerikadu, south of the state capital strictions on their use lifted, the country encouraging internal migration. Chennai, fishermen complain that when should soon be conducting more than the Seoul, the neighbouring city of Incheon lockdown was lifted after eight weeks, a current 200,000 a day. Mylab, a company and the surrounding province of Gyeonggi seasonal ban on fishing kept the fleet based in the city of Pune, says it alone has are home to half of South Korea’s 52m peo- grounded. This was followed by a closure the capacity to process 2m samples a week. ple and produce half of its wealth. Vibrant of the market, so that when they could at This could be a big help, since testing al- and full of opportunity, the capital region last catch fish they had no place to sell it. lows a better understanding of the dis- is also congested, expensive and stressful Nearby farmers voice similar despair. A ease’s trajectory. Researchers at mit recent- to live in. The innovation cities, conceived transport ban at harvest time kept many ly suggested that India could have as many in the mid-2000s and modelled on earlier from selling their crops. Individuals are as 287,000 new infections a day by January, plans for “balanced development”, are one not the only ones hurt. In the last two based on the old level of testing. That pic- of a long series of policies aiming to help weeks of June, with shops everywhere ture should now improve. Yet Sandeep, for less buoyant places advance. mostly open for the first time since March, one, is not reassured. Even in a relative The same impulse led to the creation of nationwide sales remained a dismal 67% backwater like Sangli, 28 neighbourhoods Sejong, the new administrative capital, lower than in the same period last year, have been quarantined. “The number of 100km (60 miles) south of Seoul. A decade says the Retail Association of India. cases is increasing a lot,” he says. “People ago it was little more than a handful of Yet even as tales of economic woe mul- should take it seriously. Only when it hits building sites amid peach farms. Now wide tiply, and are compounded by the spread- you do you know how bad it is.” 7 streets and leafy paths surround ranks of ing tragedy of covid itself, lessons are being apartment buildings, through which learned. Some Indian states, such as Kerala snakes an enormous glass-panelled gov- in the far south and Punjab in the north, Regional development in South Korea ernment complex. More than half of South have ably contained the disease. Dharavi, a Korea’s ministries and dozens of govern- sprawling slum in Mumbai whose density Seoul v the rest ment agencies have been relocated there and poor sanitation seemed likely to create since 2012. Around 300,000 people live in conditions for covid to spin out of control, the area. Some are civil servants who have has instead proved a model of how moved from Seoul, but most are locals thoughtful, local interventions in co-oper- whose former communities have been ab- ation with residents can stem its spread. JINJU sorbed into the new city. The government is rethinking its From hundreds a day in May, new daily in- But for all the rapidity of its develop- efforts to spread the wealth fections among the slum’s 850,000 people ment, Sejong is a far cry from Seoul. Yoo are down to a handful. he road from Jinju’s high-speed train Kyung-weon, a young official from the cap- In India’s big cities, fears that hospitals Tstation towards the outskirts of town ital, moved to Sejong for her job but says a would be overwhelmed have for the most winds past row after row of brand-new lot of her colleagues did not. “It’s cheaper part failed to materialise, largely because high-rise apartment blocks decorated in than Seoul and I can cycle to work in a few medical protocols have been revised to dark grey and ochre. The buildings are sur- minutes, which is nice,” she says. “But keep all but those who are very ill from oc- rounded by half-finished strip malls with there’s nothing to do here, and every time I cupying beds. Hospitals, for example, can mock-European brick facades. Construc- go out I worry about bumping into some- now send covid patients home as soon as tion is frantic, though large posters adver- one I work with.” She frequently spends her they feel better, rather than having to wait tise steep discounts on flats in the finished weekends back in Seoul. for test results to prove they are free of the complexes. Urban planners doubt that new cities virus. One district of Delhi requisitioned The buildings are the beginnings of will dent the capital’s supremacy. “Over the more than 900 hotel rooms for use as isola- Jinju’s “innovation city”, one of 12 such pro- past 20 years, the economic disparity be- tion wards. In the end it has used just 25. jects dotted around South Korea that are tween Seoul and elsewhere has actually in- The change in rules has also meant a wel- meant to reduce the concentration of poli- creased, despite all of these policies,” says come drop in what had become a nation- tics, wealth and culture in the capital, Kang Myoung-gu of Seoul University. “Peo- wide rash of stories about patients being Seoul. Jinju is supposed to become a hub ple used to move to Seoul because they had turned away from one hospital after anoth- for biotech and aerospace, creating tens of to if they wanted to find work,” he says. er, for want of beds. “Now they come or stay because they want Another fear, that India would run out to. They like urban amenities, restaurants, of ventilators, turned out to be still more green spaces, texture. You’re not going to misplaced. Even as doctors were finding convince anyone to move across the coun- that few patients benefited from forced try if you can’t provide that.” He thinks the ventilation, Indian manufacturers boosted solution to Seoul’s problems is local. “We production from 300 a month to some need to expand infrastructure and make 30,000. Indian industry has proved so re- public space better for everyone.” sponsive to the crisis that it is now lobby- Back in Jinju, a young mother who used ing the government to drop restrictions on to live in the older part of town says she en- exports of medical equipment and protec- joys life closer to schools and green spaces. tive gear. Makers of covid tests complain Rather then enticing Seoulites, innovation that their production was far outstripping cities seem to attract people from the sur- the number of tests conducted, owing to rounding areas. Villages and towns in cautious government guidance. At the cen- poorer regions around innovation cities tre’s behest, local authorities in Mumbai have higher-than-usual vacancy rates, changed the rules no fewer than nine which suggests the cities may simply be times. Often, even medical staff could not sapping economic vitality in their hinter- get tested—one reason why India has lost Sejong is much less crowded land. As South Korea’s population declines,1 The Economist July 11th 2020 Asia 29

2 such trends will accelerate. amended its covid-related border closure As a result, the government has begun to make it easier for people from Hong to emphasise urban regeneration over Kong to enter. The day after the law took ef- building towns from scratch. Residents fect, it opened an office in the city to help have a say in what they feel needs doing to locals visit or emigrate to Taiwan. improve their environment. In Jochiwon, a But Ms Tsai is indeed cautious: her gov- town half an hour from the government ernment has not issued any sweeping offer complex in Sejong, locals have planted a of asylum. Instead, requests to resettle are public garden around the old train station, considered case by case, and residency is installed a co-working space and con- often granted for mundane reasons, at vinced the city to pedestrianise some near- least on paper. Mr Lam, for instance, is clas- by streets. sified as an investor, since he set up a busi- Planners such as Mr Kang dismiss this ness in Taiwan. approach as “planting flowers and painting Even this muted assistance has pro- walls”, but residents consider the place voked outrage from the Chinese Commu- much improved from a few years ago. “The nist Party. It considers Taiwan to be part of idea is to improve quality of life while pre- its territory and has threatened to take con- serving the fabric of a place,” says Lee Ji-hye trol by force, if necessary. Chinese officials of the Ministry of Land, which is now locat- rail about a “conspiracy between Hong ed in Sejong. 7 Kong independence activists and Taiwan independence activists”. Many Taiwanese, meanwhile, complain Asylum in Taiwan that the government’s help for activists Australia and covid-19 from Hong Kong is half-hearted. Chen Yu- A whispered jie of Academia Sinica, a research institu- Lock, unlock, tion, says the vague wording of immigra- welcome tion rules means asylum-seekers know repeat neither whether they meet the criteria nor how long they will have to wait to find out. TAIPEI They also cannot appeal against a rejec- SYDNEY Democracy activists fleeing Hong Kong Melbourne, the country’s second city, tion. Should a government that is friendli- present a dilemma for Taiwan battens down the hatches again er to China come to power, it could inter- am wing-kee runs a tiny bookshop on pret the law much less generously. Yet the t would be “the very worst thing” to have Lthe tenth floor of an unremarkable ruling Democratic People’s Party (dpp) has Ito impose a second lockdown, warned building in Taiwan’s capital, Taipei. He is sidelined a proposal from a small opposi- Daniel Andrews, the premier of Victoria, also the country’s most famous exile from tion party to clarify and enhance the rights when he started easing the state’s restric- Hong Kong. His shop is a replica of his for- of asylum-seekers from Hong Kong. tions in May. On July 8th he was forced to mer business in Hong Kong, Causeway Bay Ms Tsai’s hesitation probably stems in do just that to 5m residents of Melbourne, Books, which until 2015 sold material the part from a reluctance to provoke an al- the state’s capital, plus a district to its Chinese government considered subver- ready aggressive China. Taiwanese officials north, where a second wave of covid-19 has sive. That year Mr Lam was kidnapped by are also always worried about Chinese at- been rolling in. Active cases almost tripled Chinese agents and held without charge for tempts at infiltration. Wang Ting-yu, a dpp in the first nine days of the month, to more eight months. He fled to Taiwan early last mp, argues that it is helpful for the govern- than 930. Contact-tracers are over- year, fearing that an extradition bill under ment to have some discretion to park asy- whelmed, Mr Andrews conceded, as he consideration by Hong Kong’s legislature lum cases at moments of high tension with shut restaurants and bars for another six might see him sent back to the mainland— China. Were applications to be subject to weeks. “To do anything else”, he sighed, legally this time. appeal, moreover, the government might “would have deadly consequences.” Now Mr Lam sleeps in a bed in the shop. have to reveal details about the informal The new wave threatens to undo Austra- Above a pile of books criticising the Chi- intelligence networks in Hong Kong and lia’s good work containing the virus. Local- nese Communist Party hangs a banner call- elsewhere that it uses to help determine ly acquired cases were virtually stamped ing for Hong Kong’s liberation from China. applicants’ bona fides. out a month ago, largely because of stay-at- But when asked if Taiwan will be a haven Huang Chun-sheng, pastor of a church home rules and the quarantining in bleak for democracy activists from Hong Kong, that has orchestrated shipments of gas- hotels of the few people still allowed into he hums and haws. He himself wants to masks and helmets to protesters in Hong the country. Victoria’s problems started stay in a Chinese-speaking country, since Kong and has been helping those who wish with breaches of the mandatory two-week he sells Chinese books. Others, he says, to emigrate, approves of Ms Tsai’s discreet isolation for those arriving from abroad. may prefer to flee to Western countries, far- approach. “The government really has Blame has been levelled at poorly ther from the long arm of the Chinese au- goodwill,” he insists. Instituting a formal trained private security guards who were thorities. The Taiwanese government has system of asylum would draw unhelpful supposed to keep travellers in their rooms. treated him well, he adds. “They want to scrutiny, he says: better for an activist to They had not been using protective gear help Hong Kong but it is natural for them to come into Taiwan quietly, enroll in a uni- properly and have been accused of breach- be cautious,” he says. versity and switch to a student visa. ing social-distancing rules by sharing ciga- Like most of her compatriots, Taiwan’s Whatever the rules, a growing number rettes and car-pooling to work. Local pa- president, Tsai Ing-wen, is proud of her of people are moving from Hong Kong to pers report that some had sex with the country’s democracy and sympathetic to Taiwan. Residency permits were handed to people they were supposed to be keeping in Hong Kong’s activists. The day before Chi- 2,383 of them in the first four months of the strict isolation. Several of the guards con- na imposed a ferocious security law on year—up by 150% compared with the same tracted the virus and passed it on to friends Hong Kong last month, her government period last year. 7 and family just as Victoria’s first lockdown,1 30 Asia The Economist July 11th 2020

2 the toughest in Australia, was being lifted. Lockdown in the Philippines “This is what happens when you think you’ve got it under control,” says Peter Col- Four months and counting lignon, an expert on infectious diseases at the Australian National University: “apa- thy and complacency”. The seal would nev- er have been broken if the army or police had overseen the private guards, as they do in New South Wales, argues Michael A ferocious lockdown lingers on, despite uncertain benefits O’Brien, the leader of the opposition in the state. Businesses are dismayed. Victoria ac- ’m constantly afraid that we will get 130,000 people, including those pictured, counts for a quarter of Australia’s gdp. The “Iinfected,” frets Diverson Bloso, “We have been arrested or fined, often for small new restrictions will do “untold damage to don’t have money to bring us to the hospi- infractions such as failing to wear a mask. the economy and employment”, complains tal, in case that happened.” A messenger at Were the army and police to encounter any a business lobby group. a printing press in Quezon City, part of Ma- violent lockdown violators, instructed Ro- The state government has launched an nila’s sprawl, he prays he keeps his job. His drigo Duterte, the president, with charac- investigation into what went wrong in its boss told workers that the business might teristic compassion, they should “shoot quarantine hotels. A testing blitz is now have to close because of quarantine mea- them dead”. But the rules have also been under way. Nationwide, infections are well sures to stop the spread of covid-19. But at applied unevenly: Manila’s police chief below their peak in March, but in some least Mr Bloso still has regular income. A hosted himself a boozy birthday party in ways this spike looks more threatening. woman who lost her job at an online casino May despite the ecq’s stipulations and a Most of Australia’s early cases came from says the restrictions have prevented her ban on liquor sales. travellers who were intercepted on arrival from attending interviews for new jobs. In the meantime, more than 50,000 Fil- from abroad. This time the virus has moved With her husband in jail, she worries about ipinos have tested positive for covid-19. through the community, making carriers how she will pay the bills for her and her The University of the Philippines reckons harder to identify. Whereas the first pa- child. “It’s been terrible for me and my fam- there might have been 3.6m cases without tients were mostly wealthy, returning from ily,” she says. the lockdown, a figure the government holidays in places such as Italy, poor multi- The Philippines’ lockdown, among the likes to trumpet. The number of deaths ethnic suburbs in Melbourne’s north and fiercest and longest-lasting in the world, each day has dropped sharply since late west are the worst-affected now. has been terrible for millions of others too. March, and the ecq bought the government Many of the residents of these areas suf- On March 16th the government imposed time to ramp up laboratory capacity and to fer from the kind of ill health that makes “Enhanced Community Quarantine” (ecq) ready beds for patients. But the number of them especially vulnerable to coronavirus. across the island of Luzon, home to Manila cases detected each day has been rising Nine public-housing towers in the suburb and about half the country’s 107m people. fast, despite a relative dearth of testing. of Flemington were put on what authori- Schools and offices closed and public tran- The Department of Health’s response to ties call a “hard lockdown” on July 4th, sport shut down. People were only sup- the virus has been plagued by “irregular- meaning that tenants were banned from so posed to leave home to buy food and other ities and anomalies” that have attracted the much as setting foot outside their flats un- essentials. In many areas, even then, they attention of the government ombudsman. til they had all been tested. With crowded were required to obtain a special pass from An investigation is under way into con- lifts and airless lobbies, the government a local official to be able to move around. fused reporting of infections and delays in feared the buildings had become “vertical Other parts of the country adopted similar purchasing protective equipment for cruise ships” for contagion. On July 9th the rules. Some provinces sealed their borders. health-care workers, among other matters. government lifted the police cordon Manila’s residents were supposed to be free This bureaucratic fiasco and the uncer- around eight of the buildings after detect- again by April 13th. Instead, the lockdown tainty over case numbers may help to ex- ing 158 cases—although residents are still has been repeatedly extended. It was re- plain why the lockdowns have lasted so subject to the city’s new lockdown. laxed slightly on June 1st to make it easier to long. They have been lifted in some cities Allowing life to return to normal in oth- work, but will remain in place at least until outside Luzon, only to be reimposed when er parts of the country would be folly, July 15th. cases began rising wildly. Ronald Mendoza warns the national medical association. Enforcement has been ferocious. Some of Ateneo de Manila University argues for1 The whole of Australia should “rethink the pace of easing”, it advises. Other jurisdic- tions seem to agree. The Australian Capital Territory paused plans to unwind its re- strictions after it uncovered a handful of cases linked to the outbreak in Melbourne. Several more infections have trickled across the border from Victoria into New South Wales. It has now been shut for the first time since the flu pandemic of 1918-19. Soldiers and police have been called in to enforce the closure. They will use drones to hunt for scofflaws trying to sneak across via bush tracks or along rivers. All this is es- pecially galling given Victoria’s long- standing rivalry with New South Wales. No need to patrol the border, sniffs an mp from Victoria, the coffee in Melbourne is far bet- ter than anything on the other side. 7 At least no one shot them The Economist July 11th 2020 Asia 31

2 more targeted quarantines. Metaphorically bal financial crisis are fraying, too: remit- have beset other schemes, including one speaking the government has been using tances from Filipinos working abroad, as offering wage subsidies for employees at an axe, he reckons, when it really needs domestic helpers, nurses and the like, look small and medium-sized businesses. only a scalpel. set to fall by a fifth this year. Mr Duterte’s priority appears to be Relaxing restrictions should soothe the According to surveys carried out in May boosting his own authority. A temporary country’s pummelled economy: the World via mobile phone by Social Weather Sta- law, approved by Congress in March but al- Bank forecasts that it will shrink by almost tions (sws), a pollster, 83% of working-age lowed to expire in June, gave him special 2% this year. The coronavirus has brought Filipinos say their quality of life has de- powers to deal with the pandemic. On July to an end 84 quarters of uninterrupted clined versus a year ago. That is the worst 3rd he signed into law a sweeping anti-ter- growth in the Philippines. The quarantine result in the 37 years that sws has been con- rorism bill which, among other things, al- on Luzon alone may displace 11m workers ducting surveys. The government’s efforts lows suspects to be detained without a from their jobs, reckons ibon, a research to help have been as patchy as the lock- judge’s approval for up to 14 days. How this firm in Manila. And the lifelines that downs. It has distributed 200bn pesos will help the Philippines through its cur- helped Filipinos stay afloat during the glo- ($4bn) to 18m poor families. But delays rent trauma is anyone’s guess. 7 Banyan Wai-five

As far as the pandemic is concerned, South-East Asia’s Buddhist lands seem blessed ne of the bigger riddles of the global for medical tourism. Moreover, the gov- Medical Action Myanmar, a charity with Opandemic lies in South-East Asia. ernment was quick to set up a vigorous several clinics around the country, if Despite being close to the source of covid-fighting task-force. there had been large-scale transmission, covid-19, in China, and to one of the Thailand’s success comes despite close his organisation would have noticed. It is current hotspots of the outbreak, India, ties with China. Plenty of people-to-people not possible, he says, to hide a covid-19 the partly or largely Buddhist countries exchanges might have been expected to outbreak—especially in Myanmar, the of Cambodia, Laos, Myanmar, Thailand spread infection. But that has not hap- world’s “gossip country number one”. and Vietnam have scarcely sneezed. pened in Laos, which is too small to resist Experts in Cambodia, Thailand and Vietnam is the standout: with 97m China’s blandishments, Myanmar, which Vietnam see no evidence of widespread people, it claims no deaths from covid-19. is awash with Chinese traders and smug- transmission, such as people showing up Thailand, with 70m, has seen just 58 glers, or Cambodia, whose strongman, at hospitals. fatalities and no local transmission in Hun Sen, is the region’s biggest cheerlead- Even the poorest countries adopted over 40 days. Impoverished Myanmar er for China. Chinese construction is measures that must have helped check claims just six deaths from 317 cases, reshaping these countries, which all came the spread of the coronavirus. Thitinan while Cambodia (141 confirmed cases) under pressure not to close borders with Pongsudhirak of Chulalongkorn Univer- and tiny Laos (19 cases) also have no China even as the pandemic spread. Mr sity in Bangkok reports that migrant deaths apiece and no local transmission Hun Sen pointedly travelled to Beijing in workers returning from Thailand to their since April. Compare that with the near- February, at the height of the Chinese villages in Myanmar often had to quaran- by archipelagic nations of Indonesia epidemic. Thailand was welcoming Chi- tine for 14 days in a shack outside their (some 68,100 cases and 3,400 deaths) and nese visitors well into March. Myanmar’s village. Other factors that may have the Philippines (50,400 cases and 1,300 border with China is extremely porous. helped, say health experts, include high deaths), where the pandemic still rages. Why did visitors from China not seed more numbers of people living in the country- Set aside karmic grace as an explana- South-East Asian outbreaks? side rather than in crowded cities; people tion, especially given that Vietnam’s One widespread suspicion is that they more likely to live with fans and open communist dictatorship is atheist. Viet- did, but these were not reported. Testing is windows than air-conditioning; the nam’s success, indeed, is easiest to ex- severely limited in Cambodia, Laos and relative youth of the region; and a pre- plain. The country has a suspicion of its Myanmar. Yet, says Frank Smithuis of existing proclivity for masks. There may big northern neighbour, China, rooted in be a religious element, too. The wai, a millennia of historical interaction. At the Buddhist greeting of palms pressed start of the year it instinctively distrusted together, helps with social distancing. China’s reassurances about the disease The question now is whether South- and even launched cyber-attacks to get East Asia’s Buddhist successes can better information on the epidemic’s weather second or third waves. Perhaps, course. It closed its border and used Mr Thitinan suggests, low transmission authoritarian powers to lock down the from China was not the miracle some population and trace and isolate cases. divine—the giant neighbour, after all, That, in essence, is what China’s commu- quickly got on top of its epidemic. Now, nist authorities were also doing. transmission routes are changing. Few governments have both the Across Asia, infections are being import- overweening power and effective health ed from all round the world, seeding systems needed to emulate China and local transmission, most recently in Vietnam, but Thailand, a sham democra- Hong Kong. The crowds this week in cy overseen by generals, perhaps comes South-East Asian temples celebrating the closest. The quality of its health care start of Buddhist lent are a reminder of makes Thailand a popular destination how easy it is to let covid guards fall. 32 China The Economist July 11th 2020

Civil society trust is evident in the publicity the group receives, including for its work abroad Who you gonna call? (Blue Sky helped with relief efforts after an earthquake in Nepal in 2015). The group can provide an “excellent supplement” to the government’s relief efforts, Mr Zhang told China Daily, a newspaper. During the pandemic, other large ngos Non-governmental organisations have helped the state provide covid-related have helped, too. One is the Han Hong Love relief. That will not earn them more freedom Charity Foundation, named after a famous he chinese communist party winces and night to bring relief supplies to resi- singer who founded it in 2012. It raised mil- Tat the term “non-governmental organi- dents of the central city of Wuhan, the first lions of dollars to buy masks, sanitising sation”: to officials, it smacks of dissent. coronavirus hotspot. Others were well-- gear and other supplies, which it then dis- Search for news about ngos and their re- established ngos, like the Beijing-based tributed. The Ginkgo Fellows in Covid-19 sponse to covid-19 on Baidu, China’s equiv- Blue Sky Rescue Team. It sent hundreds of Relief Action is another. Set up by an exist- alent of Google, and almost all results re- volunteers to Wuhan to help deliver emer- ing network of philanthropists, its volun- late to other countries. But try the preferred gency medical supplies and disinfect pub- teers have helped patients connect with term, “social organisations”, and the re- lic places (see picture). medical services, provided transport and sults may seem surprising, given the For a country that prefers to keep its delivered medical kit to hospitals. They party’s relentless efforts to box in civil soci- ngos small, Blue Sky’s size is remarkable. have also offered counselling. ety. While endlessly extolling the party’s Founded in 2007, it is described by state Even the party’s main mouthpiece, the response to the pandemic, state media also media as the country’s biggest non-govern- People’s Daily, has praised the “strong sup- give credit to groups that are not under the mental humanitarian group, with some port” ngos have provided. But the lines are government’s direct control. This is not ev- 30,000 registered volunteers reporting to clear: any activity, whether organised or idence of a softer approach towards ngos. 31 branches nationwide. Its leader, Zhang not, that appears to challenge the party is It is a sign that the party believes it has suc- Yong, is a former member of China’s para- off limits. On July 6th police reportedly ceeded in keeping them tame. military police force. The government’s seized Xu Zhangrun, a law professor in Chinese ngos were quick to respond Beijing who has long been an outspoken after officials acknowledged the scale of critic of the government. In February he Also in this section the outbreak in late January. Some were and several other academics signed an newly formed groups of good Samaritans, 33 Fast change in Hong Kong open letter calling for a “national freedom- who organised themselves through social of-speech day” to be declared in commem- 34 Chaguan: A folly repeated media. Members drove their own cars day oration of a doctor who died of covid-19 1 The Economist July 11th 2020 China 33

2 after being reprimanded by police for Human rights drawing public attention to early cases. Since Xi Jinping became China’s leader The party’s grip in 2012, the party has stepped up its scruti- ny of ngos, mindful of the role they have played this century in “colour revolutions” against authoritarian regimes. In 2013 the party issued a secret directive, known as “Document Number Nine”. It said civil- HONG KONG Under a new national-security law, Hong Kong is already a changed city society activism was becoming “a serious form of political opposition” in China. In ong kongers had long worried that Safeguarding National Security. This 2016 a new law was passed, barring Chinese Hthe Communist Party would transform brings Mr Luo—hitherto a shadowy fig- ngos from receiving funds from abroad the territory by stealth into just another ure—into the heart of local policymaking. and requiring foreign ones to find an offi- Chinese city. In the past few days, armed The committee has already granted ex- cial sponsor and register with the police. with a new national-security law which it tensive new powers to Hong Kong’s police, The party accepts that it sometimes imposed on Hong Kong on June 30th, it has including the right in some situations to needs help from civic groups. China’s first been doing so brazenly. From the appoint- conduct searches without warrants and to charity law, also adopted in 2016, made it ment of a party commissar to work with the freeze the assets of people suspected of na- easier for domestic ngos to register and to chief executive, to the pulling of politically tional-security crimes. The police can now raise funds at home. Between 2013 and sensitive books from library shelves, Hong demand that any message posted on the in- 2019, the number of registered social orga- Kong is changing fast. The stockmarket has ternet that is deemed a threat to national nisations rose from 385,000 to 844,000. leapt, but many hearts have sunk. security be removed and that its author be But the party has been stepping up efforts On July 8th the central government banned from the host platform. Tech firms to ensure their obedience. This has in- opened a new outpost in Hong Kong called such as Facebook, Google, Microsoft and volved the same tactic that it has used the Office for Safeguarding National Secu- Twitter have said that they will not co-op- among private firms: setting up party cells rity. It occupies a luxury hotel, pending a erate (see Business section). TikTok, a Chi- within them, or if ngos do not have enough move to permanent quarters. The director nese-owned video-sharing service, has an- party members, making sure that any they is Zheng Yanxiong, a hardline official from nounced that, “in light of recent events”, it do have report to an outside party branch. the neighbouring province of Guangdong will stop providing its app in Hong Kong. Blue Sky Rescue has several party cells (in 2011 he helped to suppress an outbreak Mrs Lam has begun picking judges to try embedded within it. In February the Peo- of pro-democracy unrest in Wukan village national-security cases. The first one in- ple’s Daily website, in an article praising the that had grabbed global headlines). His two volving the new law relates to Tong Ying- ngo’s response to covid-19, described the deputies are from the mainland’s Ministry kit, who is accused of separatism and terro- organisation as “both blue and red”. Some of Public Security and secret police. In rism for allegedly riding a motorcycle on of the groups that have sprung up during “complex” or “serious” cases, the office will July 1st towards a group of policemen while the pandemic are not so well-enmeshed enjoy sweeping powers to investigate and flying a flag reading “Liberate Hong Kong, with the party. Guobin Yang of the Univer- detain people for crimes covered by the revolution of our times”. This has been a sity of Pennsylvania says early blunders by new law: subversion, sedition, secession popular slogan during recent anti-govern- Wuhan officials, including failings in the and collusion with foreign countries. ment unrest in the territory. The govern- distribution of medical supplies, “forced From his headquarters a few kilometres ment now says it “connotes” secession. citizens to self-organise and take things to the west, the mainland’s most senior of- Censorship is spreading. Public librar- into their own hands”. But, desperate for ficial in Hong Kong, Luo Huining, has been ies have removed books by politicians who help, officials welcomed them. wielding power more overtly than before. have called for greater autonomy for Hong This marked a step forward from 2008, He is now an “adviser” on a newly estab- Kong. Schools have been “recommended” when the government was startled by the lished body chaired by the chief executive, to do the same. The education bureau has scale and rapidity of the non-party re- Carrie Lam, known as the Committee for ordered pupils not to sing the protest an- sponse to an earthquake in Sichuan prov- them “Glory to Hong Kong” or otherwise ince that killed about 70,000 people. “Their “express their political stance”. Mrs Lam thinking then was, ‘Who are you and why has told foreign journalists that their free- are you doing this?’” says Zhang Xuemei of dom to report is conditional on a “100% the Sichuan Academy of Social Sciences. guarantee” that they abide by the new law. “But now they understand what kind of Among the hundreds of people who have role ngos and volunteers can play.” taken to the streets to demonstrate against Even in need, officials are twitchy. After it, some have used the first line of the na- the outbreak in Wuhan, the authorities tional anthem, “Arise ye who refuse to be there issued orders—later ignored—that slaves”, as a protest slogan. Cafés have been donations be disbursed only by a handful replacing pro-democracy Post-it notes of official organisations. According to Hol- with blank ones (see picture). ly Snape of the University of Glasgow, their Mrs Lam insists that, as such laws go, edicts initially caused “critical bottle- Hong Kong’s is “relatively mild”. She says necks”. The government may learn lessons, she has seen no sign of “widespread fears”. but it will keep ngos on a tight rein. Offi- The stockmarket’s rally, she says, shows an cials nationwide are striving for “complete “increasing appreciation of the positive ef- coverage” of local ngos by the party, mean- fect” of the new law. If it means fewer peo- ing all should have links with it. Hebei, the ple clogging streets and paralysing tran- province surrounding Beijing, says it plans sport with protests, as often happened last to achieve this by year-end. The pandemic year, then some companies may be happy. is unlikely to get in the way. 7 No words can describe it But many firms are deeply anxious. 7 34 China The Economist July 11th 2020 Chaguan American soft power, trashed

Millions of Chinese have studied in America over decades. That bond is in peril puses, such as New York University Shanghai. Cornell has an- nounced a “Study Away” scheme, allowing students in China to take a mix of American and local classes at prestigious universities in Beijing and other cities. Many wealthy, well-connected Chinese with places at top colleges are not ready to give up their American dreams. Talk to such students and their families, and what they are really describing is a larger plan to become world citizens, of which a degree is one part. Elite Chinese call America a place to learn critical thinking, build social networks, and secure creden- tials that will help land them jobs and perhaps green cards. Elle, 18, attends the international section of a top-ranked high school in Beijing, where fees run to 160,000 yuan ($22,800) a year. She has an offer from New York University and wants to accept it. Rival countries do not appeal. Australia is for “those with bad exam results,” she says over coffee in a smart Beijing suburb. In Canada, she adds: “There are so many Chinese students that you don’t even have a chance to speak English.” As for Britain, she attended sum- mer school there, but sensed coldness towards foreigners. “I like America more than the uk, I think I am accepted there.” Elle’s older brother is studying in New York and wanted to stay, even after rioters smashed windows in his building. “It’s one thing after the other,” sighs Elle’s mother. She remembers holidays in he first Chinese graduate from an American university, Yung America when the country seemed great “in every way”. But offi- TWing, deemed his college years the great adventure of his life. cials there have “failed quite badly on fighting covid”, she laments. Alas, his graduation from Yale in 1854, sponsored by missionaries She is shocked by ordinary Americans refusing to wear masks. who spotted his talents as a boy in rural Guangdong, was a high Still, she thinks America offers chances that a Chinese education point. Soon political mistrust and prejudice, both in America and cannot, starting with the different, thought-provoking ideas that China, filled his life with setbacks. These included the ending of her children may encounter. “It’s more of a globalised experience.” his scheme that involved bringing 30 Chinese youths to America Families are hedging bets. Half of this year’s 150 clients of Elite each year. Back in Beijing, imperial mandarins saw value in the sci- Scholars of China, an education counselling service focused on the ence that the youngsters studied in New England. These officials Ivy League and its ilk, also applied to non-American universities. were especially eager to take up a promise that the military acade- In the end, though, only four took up places outside America, says mies of West Point and Annapolis would admit Chinese cadets. Tomer Rothschild, the firm’s co-founder. Then, in a mark of disdain for the ailing Qing empire, America Another perspective comes from a larger group: middle-class broke that promise. Mandarins were further appalled by the irrev- students from provincial cities, heading to mid-ranked American erent, sports-loving, churchgoing Yankee ways picked up by colleges. To generalise, this group is less likely to enthuse about Yung’s charges. In 1881they summoned the boys home in disgrace. Western freedoms, from raucous debates to an uncensored inter- Yung lost his American citizenship to a xenophobic law passed a net. Their focus is on which degree will boost their earning power year later, the Chinese Exclusion Act. when they return to China to compete with local graduates. Yung would recognise the pressures his Chinese heirs face to- day. In the coming weeks many will have to decide how and wheth- Yes, Chinese teens know Donald Trump calls covid “kung flu” er to pursue studies in America. They are living through a moment Just now America is doing a remarkable job of making foreign stu- when campuses, borders and minds on both sides of the Pacific are dents feel unwelcome. Chinese state media happily reinforce the being closed by mutual suspicion (including overly sweeping message, with lavish reporting of American riots, anti-Chinese American fears about on-campus espionage) and a pandemic. racism, gun violence and covid infections. Any decoupling may There are currently 370,000 Chinese students and fresh gradu- take time to be visible. Francis Miller, a college counsellor based in ates in America without an easy route home, after China slashed Xi’an, a western city, notes that the Chinese students he helps have international flights as a covid precaution. Many who plan to stay to enroll in special international streams that prepare them for the face months of online study while campuses remain shut. On July sat or other foreign exams from the age of 15 or so. That amounts to 6th American immigration officials caused panic (and a lawsuit a commitment to study abroad, because they are abandoning the from Harvard University, among others) by declaring that unless fearsome, three-year gaokao curriculum that governs entry to Chi- foreign students in America attend some in-person classes next nese universities. Future trends are ominous. In the eastern city of term they risk deportation. Another 50,000 Chinese would nor- Nanjing, a college-entry coach says her employer’s new-client mally take up new places at American universities this autumn, numbers are down by two-thirds in a year. but visa offices at America’s missions in China are closed, with no Yung Wing wanted more Chinese to enjoy an American educa- word on when they will open. Parents will soon receive tuition tion to make his country “enlightened and powerful”. His dream bills for the next semester, often for tens of thousands of dollars, involved risks for both sides. America was being asked to help Chi- even if their child can only watch virtual lectures at home in China. na rise. Chinese rulers had to let youngsters taste new freedoms. This is a crisis with large effects, unevenly distributed. Some Soon afterwards, leaders in both countries rejected that bargain. American schools are offering classes on Chinese satellite cam- Over a century later, a folly repeated is still a mistake. 7 Middle East & Africa The Economist July 11th 2020 35

Jihad in the Sahel rapidly. Ten times more people were killed last year than in 2014 (excluding deaths in Fighting a spreading insurgency north-eastern Nigeria, which faces its own jihadist insurgents). Two main jihadist groups are behind most of the fighting: the Islamic State in the Greater Sahara (isgs); and Jama’at Nasr al-Islam wal Muslimin (jnim), which is linked to al-Qaeda. These OUAGADOUGOU AND PARIS groups have extended their reach, even Jihadists in the Sahel are gaining ground, threatening west Africa’s coastal states though thousands of international peace- ou may think you’re safe,” says a 57- Jihadists seized control of chunks of keepers and local and Western soldiers “Yyear-old resident of Doropo in north- Mali in 2012 and were stopped from over- have been deployed to stop them. France ern Ivory Coast. “But jihadists are like ants, running Bamako, its capital, only after has sent some 5,100 troops to the Sahel, they can come in without being noticed.” thousands of French troops were hurriedly while the United States has provided an- On June 11th, just three weeks after Ivory flown in. The insurgents have since pushed other 1,200. In addition, the un has 15,000 Coast’s army reassuringly declared that its across the border into Niger and Burkina blue helmets there, including about 350 northern frontier with war-torn Burkina Faso (see map on next page). In those three Germans, plus 250 British soldiers who are Faso was “under control”, a band of armed countries alone, 4,800 people lost their soon to arrive. With American forces leav- insurgents proved it wrong. Some 20 men lives in the conflict last year. Fully 1.7m ing Afghanistan, the Sahel will soon be the on motorbikes descended on an army-and- people have been forced to flee their West’s biggest combat zone. police outpost near the border at Kafolo. homes. Now the war is beginning to jump Progress is patchy. Emmanuel Macron, The attackers killed 14 soldiers before roar- borders again, putting at risk some of Afri- France’s president, claims that the co- ing away into the bush. ca’s fastest-growing economies, including alition forces are achieving “spectacular re- The attack was the worst since 2016, Benin, Ghana and Ivory Coast. sults”. In June they killed Abdemalek when gunmen killed 19 people in a beach This war in the Sahel has been growing Droukdel, a senior al-Qaeda commander. resort in Grand-Bassam, east of Abidjan, But such successes have not made civilians Ivory Coast’s commercial capital. It shows safer. In the first half of this year more than that even west Africa’s most populous Also in this section 4,200 people have been killed, two-thirds countries, along the Atlantic coast, have more than in the same period last year. 37 Zimbabwe’s dollar crisis become vulnerable to the predations of ji- Worse, the jihadists are expanding in hadists spilling out of failing states farther 37 Ethiopia’s unrest three directions at once. To the south they north in the Sahel, that vast swathe of land threaten Benin, Ghana, Ivory Coast and 38 Iran and the bomb on the rim of the Sahara desert. Togo. To the west there has been a spate of 1 36 Middle East & Africa The Economist July 11th 2020

2 attacks in Mali close to its border with Sen- ridor to link up with its allies in Nigeria. Is- to cables seen by The Economist, a diplomat egal; and to the east with Nigeria’s insur- lamic State’s propaganda now refers to the in Ouagadougou, Burkina Faso’s capital, re- gent groups. The jihadists already have a two Sahelian groups as one and the same. ported that the president, Roch Marc Chris- “de facto safe haven in northern Mali”, says As French forces have targeted isgs, tian Kaboré, privately admitted that some General Dagvin Anderson, in charge of some of its fighters have sought sanctuary of his citizens may feel safer living among America’s commandos in Africa. He frets across other borders. The group already re- terrorists than with their own country’s se- that as they expand they will have more cruits from Benin, Ivory Coast and Togo, curity forces. Mr Kaboré reportedly said scope to plan attacks on American soil. says Héni Nsaibia of Menastream, a re- that he could not ensure that his army’s The weakness of governments and the search consultancy. Internecine fighting abuses would stop altogether. feebleness of their public services are help- between isgs and al-Qaeda may be scatter- Governments in the region and some ing the jihadists. In the neglected hinter- ing fighters over borders, too. The French Western forces have made matters worse lands of the Sahel the rebels offer them- army insists it is weakening the jihadists, by supporting militias. In 2018 the French selves as an alternate state, serving up not just pushing them south. army allied itself with Tuareg militias from sharia and medical aid. Some 70% of peo- Though the jihadists stunned many by Mali to fight against isgs. They clobbered ple in the northern reaches of Ghana are the speed of their advance through Mali the jihadists but also killed scores of civil- classed as very poor, compared with a na- and Burkina Faso, they face a tougher fight ians, aggravating ethnic tensions and fuel- tional rate of 25%. Ghana and Ivory Coast in the coastal states. The security forces of ling recruitment by the insurgents. Coastal face divisive elections. So do Burkina Faso Ivory Coast, Ghana and Senegal are beefier countries will face similar dilemmas. Secu- and Niger. than those of their neighbours in the Sahel. rity forces in Ivory Coast also have a history Moreover, the jihadists have been adept But Togo and Benin offer the jihadists soft- of working with local armed groups. at exploiting ethnic faultlines, for instance er targets. And Ivory Coast’s army, made up It is sometimes hard to avoid ruining between largely Muslim and seminomadic of fighters who were on different sides in a livelihoods in the name of fighting terro- Fulani herders and more settled farming vicious civil war, may prove brittle. A re- rism. In northern Niger the authorities communities, which have their own armed cent raid was scuppered after an Ivorian of- have banned motorbikes, which are the ji- groups of traditional hunters known as Do- ficer leaked the plans. hadists’ favourite mode of travel. But locals zos. Tit-for-tat attacks on civilians have led like to ride them to work. The authorities to young men joining jihadist groups or Lessons for the new fronts have annoyed people by closing markets militias such as the Dozos. Similar ten- The coastal states must avoid the mistakes and border crossings, raising youth unem- sions threaten Ghana and Ivory Coast, of their Sahelian neighbours, whose secu- ployment. By contrast, the authorities in where farmers and herders have clashed in rity forces have often been brutal. This Niger’s south have subsidised the provi- the past. Many Fulani in Ivory Coast are not year, more civilians in the Sahel have been sion of motor tricycles, which get people to even recognised as citizens. killed by government soldiers than by jiha- work but which the jihadists consider too Trade and commerce also provide an in- dists, says José Luengo-Cabrera of the In- slow to use in hit-and-run raids. centive for the jihadists to expand their ternational Crisis Group (icg), a Brussels- Above all, governments need to regain reach. The migration corridor between based ngo. “When soldiers kill the head of legitimacy by providing services and hold- Burkina Faso and Ivory Coast is the busiest the family, they almost throw his sons and ing themselves to account. “It is not possi- in Africa. Jihadists cash in by taxing traders nephews into the arms of bearded men in ble to win the war if there is not trust from and smuggling stolen livestock, drugs and shorts hiding in the bush,” one villager told the population,” says Niagale Bagayoko of guns. The gold mines in Burkina Faso have Human Rights Watch, a global monitor. It the African Security Sector Network, an ac- become a target. Much of the gold is smug- says in the town of Djibo alone, in Burkina ademic group founded in Ghana. Mass pro- gled out through Togo, which officially ex- Faso, evidence suggests government forces tests in Bamako have called for Mali’s presi- ported seven tonnes of the metal to the Un- have murdered 180 men—many of them dent, Ibrahim Boubacar Keïta, to resign. ited Arab Emirates in 2018, despite mining were blindfolded and had their hands But good governance and decent ser- very little itself. Gold is also pulling jiha- bound before they were shot. vices in the region are scarce. At a meeting dists towards Senegal. Governments in the Sahel recognise the of Sahelian leaders with Mr Macron in Meanwhile isgs is trying to create a cor- problem but offer few solutions. According Mauritania on June 30th, there were con- gratulatory claims of military progress as well as talk of “a return of the state”. Yet the Violent incidents involving Jihadist groups Security in the Sahel, permanent bases state must offer more than the jihadists are 2019-20* Possible expansion G5 Sahel (joint force) Member country† United Nations 2017 offering, including justice and develop- Sources: Armed Conflict Location & Event Data Project; Operation Barkhane (France) Africa Centre for Strategic Studies *To July 4th †Includes Chad ment, says Rinaldo Depagne of the icg. For- eign donors should abandon their dog- June 2020 French troops killed ALGERIA matic insistence on building Abdemalek Droukdel, a senior al-Qaeda commander infrastructure in densely populated areas Nouakchott to maximise returns. Even so, restoring the MAURITANIA MALI NIGER state in the face of an insurgency is hard. In Burkina Faso alone, the jihadists have forced about 2,500 schools to close. Dakar As security worsens, calls are growing SENEGAL Nigeria, Niger and Chad suffer Niamey attacks by Boko Haram → for negotiations with the jihadists. Mali THE GAMBIA Djibo jnim Ouagadougou has offered to talk to , which has agreed to do so once foreign troops have Bamako BURKINA FASO NIGERIA GUINEA- left. Yet the jihadists have little incentive to BISSAU GUINEA BENIN make concessions while they are winning on the battlefield. Their fighters are “cut- Kafolo Doropo Abuja SIERRA TOGO ting off Bamako to the north and slowly en- LEONE Sahel ATLANTIC OCEAN IVORY COAST GHANA 250 km circling Ouagadougou”, says General An- derson. The outlook is bleak. 7 The Economist July 11th 2020 Middle East & Africa 37

Zimbabwe the spoils may become more vicious. Many in the army feel they have not received suf- For a few ficient rewards for the risks they took in toppling Mugabe. Some resent the role of dollars more Kudakwashe Tagwirei, a businessman close to the president, whose firms have won many government contracts. HARARE AND JOHANNESBURG Mr Mnangagwa has stuffed ministries Those in charge blame covid-19 for a and his office with allies, many of whom crisis. They should look in the mirror hail from his home region. Some have been eachers are starving,” says Tsitsi, accused of graft, including, most recently, “Twho works at a school in a township the health minister, Obediah Moyo, who al- in Harare, Zimbabwe’s capital. Like nurses, legedly agreed to a deal that included $28 soldiers and bureaucrats, teachers have face-masks. (Mr Mnangagwa’s son, Collins, seen their real incomes evaporate as annu- whom local journalists have linked to the alised inflation approaches 1,000%. Their deal, has denied any involvement.) monthly pay, which they receive in Zimba- In a sign of the heated atmosphere in bwe dollars, is worth about $30. Harare, on June 10th security officials held Covid-19 has hurt Zimbabwe. Trade is a press conference in which they assured Mourning Hachalu gummed up. Tourists are unable to go on reporters that there was no imminent ef- safari or feel the spray of Victoria Falls. But fort to depose Mr Mnangagwa. “For the popular Oromo musician and activist. Oro- contrary to the claims of those in charge, avoidance of doubt, there is no coup in the mos make up about a third of the country’s the pandemic is not why the economy is in making,” said Kazembe Kazembe, the population of 115m. They are the largest and its worst state since the hyperinflation of home-affairs minister. Since few people recently the most rebellious of Ethiopia’s 2008-9. The reason is the regime itself. had sensed one in the first place, the event many ethnic groups. This time there are no 100trn-dollar simply increased speculation. Violence escalated after a dispute with notes. But there is a familiar lack of faith in Zimbabwe has long proved adept at officials over where the singer’s body the currency, following years of printing finding new depths to plumb. But the diffi- should be buried. “We are dead twice,” said money and fiddling with multiple ex- culty for the regime is that, in the midst of a Gelana Abeba, a protester. “First we lost our change rates. Money is meant to be a store pandemic, ordinary Zimbabweans have hero, then his funeral was disrespected.” of value and a unit of account. Neither at- fewer ways to survive. An indefinite lock- The unrest that raged over the next few tribute applies to the Zimbabwe dollar. A down makes it hard to “engage in any side days highlighted the three main faultlines few years ago the government was claim- hustles”, like raising chickens, says Tsitsi, in Ethiopian life. The first is distrust of the ing that the value of its various forms of lo- the teacher. Then there is a bitter irony: state by many young Oromos. They argue it cal currency was equivalent to an Ameri- though schools will reopen on July 28th, has long been dominated by smaller can greenback. Today it is worth about one many teachers will not be able to afford the groups such as Tigrayans and Amharas. cent. Businesses want to be paid in Ameri- fees. “We will be teaching other people’s The second problem is a state that readi- can dollars. Nurses and teachers are de- kids while ours stay home,” she says. 7 ly turns to violence and repression in re- manding likewise. Zimbabwe is, in effect, sponse to protest. Although Abiy Ahmed, re-dollarising. the prime minister, has promised to open The authorities are trying to stop this. Ethiopia up politics, old habits die hard. When vio- On June 26th, in an effort to reduce demand lence started, the security forces cut off the for real dollars, the government said it The fragile internet and arrested some 1,200 people, would ban some mobile-money transac- including journalists accused of inciting tions and shut down the stock exchange. federation violence as well as leading opposition fig- The central bank has introduced a single ures. Among them was Jawar Mohammed, weekly auction for banks and firms to bid the most prominent Oromo leader. for its scarce supply of foreign exchange. The third fissure is along ethnic lines. How long that supply will last is un- ADDIS ABABA Groups of young Oromo men attacked A musician’s murder sparks mayhem clear. Zimbabwe seizes a portion of the for- members of other ethnicities, notably Am- eign earnings of exporters and in May it or two nights the sharp report of gun- haras, the second-largest group. “We all agreed to a $500m loan from Afreximbank, Ffire crackled through the pitter-patter of came out with sticks to protect ourselves,” a pan-African lender, using platinum pro- summer rain. Across the Ethiopian capital, says a resident whose housing estate was duction as collateral. But the economy re- Addis Ababa, cars and petrol stations were surrounded by a mob. The tensions also re- mains, in the words of one financier, “a burnt, shops and businesses looted. At flect a simmering dispute over the status of giant Ponzi scheme”. least ten people were killed in clashes be- Addis Ababa, which is surrounded by Oro- Under President Emmerson Mnan- tween rioters and the police in the city. mia. Oromo nationalists claim it forms gagwa, who took over from Robert Mugabe Similar confrontations took place in towns part of their “homeland” and demand a after a coup in 2017, there was supposed to throughout Oromia, the largest of Ethio- greater say in its governance. be “a new dispensation”. He has even sug- pia’s nine ethnically based regions and one Many Ethiopians started this year opti- gested that white farmers whose land was that has been the site of repeated bouts of mistic that, with elections scheduled for stolen by Mugabe would receive compen- violence in recent years. In the country as a August, the country would take a big step sation. But his regime has, like Mugabe’s whole at least 166 people were killed, mak- from authoritarianism towards democra- before it, killed, arrested and abused prot- ing this one of the deadliest episodes in cy. But with voting postponed indefinitely esters. Largely as a result of this, Western Ethiopia’s already bloody transition from because of covid-19, many now worry that governments have rejected its pleas for authoritarian rule. the transition is at risk of being derailed al- help from the imf and World Bank. The spark was the murder in Addis Aba- together. It will take an almighty heave to As the economy shrinks, fighting over ba on June 29th of Hachalu Hundessa, a put it back on track. 7 38 Middle East & Africa The Economist July 11th 2020

Iran and the bomb The deal that Iran signed with world powers in 2015, called the Joint Compre- Booms in the night hensive Plan of Action (jcpoa), was meant to replace these tactical bites with a durable arms-control regime. Mr Trump withdrew from it two years ago and restored eco- nomic sanctions. After a year of restraint, BEIRUT AND JERUSALEM Iran began to lash out last summer. It A series of odd explosions in Iran may augur a return to the shadow war over its downed an American drone and attacked nuclear programme Saudi oil facilities. The new year brought n the early hours of July 2nd a building Recent incidents the American assassination of Qassem Su- caught fire in the grounds of the nuclear Explosion Fire Gas leak leimani, Iran’s top commander, and a retal- I Caspian plant at Natanz in central Iran. Officials Sea iatory missile strike by Iran on airbases in downplayed it as an accident in an unfin- IRAN Iraq. Since then the conflict has gone quiet. Tehran ished shed. But photos showed a building June 30th June 26th Parchin Mr Netanyahu is anxious to draw atten- with machinery on the roof. Satellite im- Medical clinic military base tion back to Iran, which has begun to shirk ages added more doubt: scattered debris July 7th Factory its own obligations under the jcpoa. It has looked consistent with an explosion, not a July 2nd Natanz exceeded both the deal’s limit on its heavy- IRAQ nuclear site fire. The cover story was short-lived. A July 4th Ahvaz power plant water stockpiles and the cap on enriched spokesman for Iran’s nuclear agency soon July 4th Karoun petrochemical plant uranium. It has also boosted enrichment to AFGHANISTAN admitted it was a factory for centrifuges KUWAIT July 3rd Shiraz 4.5% purity, above the prescribed 3.67% used to enrich uranium. The damage, he power plant threshold, though far below the 90% level The said, could slow work on advanced models. SAUDI ARABIA at which it becomes weapons-grade. Gulf The apparent blast was one in a string of BAHRAIN Israel The Israeli prime minister is mindful of unusual incidents around Iran this sum- QATAR the changing mood in America. “Netanya- 300 km UAE mer (see map). On June 26th there was an hu has finally realised that Trump won’t be explosion near Parchin, a military base around for much longer, and it’s more im- south-east of Tehran that produces ballis- Officials settle for cryptic remarks like portant for him to use this time to push tic missiles. It was big enough to light the those made by Gabi Ashkenazi, the foreign Iran, rather than annex the West Bank,” night sky in the capital. There have also minister, on July 5th: “We take actions that says an Israeli intelligence official. been fires or explosions at power plants, are better left unsaid.” That same day Bin- He may also wager that Iran will find it clinics and other facilities. Some have in- yamin Netanyahu, the prime minister, ex- hard to retaliate, with its regional allies in a nocuous explanations, like gas leaks. tended the tenure of Yossi Cohen, the Mos- mess. Bashar al-Assad won the war in Syria But others look intentional. The blasts sad chief. Ten days before, the army had but is losing the peace: his regime can bare- at Parchin and Natanz raise suspicions of awarded medals to Unit 8200, which over- ly feed its people. Lebanon defaulted in an Israeli hand. For months the conflict sees high-tech warfare, for “secret opera- March and is struggling to keep the lights over Iran’s nuclear programme has been tional activity”; in May Iran’s main port was on. Iraq’s new prime minister, Mustafa al- overshadowed by covid-19. Now the virus paralysed by a cyber-attack. Kadhimi, is taking on pro-Iranian militias. may have helped resurrect it. President Do- Even without these sly jabs, the explo- Mr Trump’s opponent, Joe Biden, sup- nald Trump’s botched handling of Ameri- sions would have been ascribed to Israel, ports re-entering the jcpoa (if Iran starts ca’s outbreak has put his re-election in which has spent years fighting a low-inten- complying again). Though even if America doubt, and Israel may feel the clock is tick- sity war against Iran. Stuxnet, a computer elects Mr Biden, Iran may be heading in the ing on an administration committed to worm thought to be a joint effort by Ameri- other direction. President Hassan Rou- “maximum pressure” on Iran. can and Israeli spies, sent Iran’s centrifuges hani, a moderate by Iranian standards, will Not that anyone will confirm this. Save spinning out of control. Israel has allegedly leave office next summer. Voters are frus- for rare exceptions, Israel does not take re- assassinated Iranian nuclear scientists trated with his camp, because of a miser- sponsibility for covert operations in Iran. with “sticky bombs” planted on their cars. able economy and a sense that “reformists” are not actually allowed to reform much. That could augur well for Iran’s hard- liners, who have already taken control of two branches of government. Parliament’s new speaker is a former Revolutionary Guard commander, and the chief justice was Mr Rouhani’s opponent in the past election. In a speech to Iran’s new parlia- ment on July 5th, Muhammad Javad Zarif, the pragmatic foreign minister, was heck- led. Several mps chanted “death to a liar”. When Mr Trump left the jcpoa, critics feared he would fail to replace it. If he leaves office in six months they will proba- bly be proved right. He will have achieved little except raising tensions to their high- est level since the 1980s. Mr Biden may find Iran in little mood for concessions. And he will have other problems to occupy his time. That leaves a return to covert war— A shed-load of damage and more booms in the night. 7 Europe The Economist July 11th 2020 39

Turkey “very big mistake” to use the building as a museum. Last month, he suggested Mus- Converting Istanbul’s Hagia Sophia lim prayers could be held inside the Hagia Sophia on July 15th, the fourth anniversary of a failed coup against him. Built by the Byzantine Emperor Justin- ian I on the site of a church commissioned ISTANBUL by Constantine, founder of Constantino- The president is playing religious politics by threatening to turn Justinian’s great ple, the Hagia Sophia has hovered over the cathedral from museum back to mosque historical capital of the eastern Roman Em- t was born as a church, one of the icons now seems to await the most important of pire since 537. Early visitors were awe- Iof the Byzantine world, before being con- them, the sixth-century Hagia Sophia, the struck, especially by the basilica’s central verted into a mosque by the Ottoman Turks grand old lady of Eastern Christendom, and dome, covered with millions of shimmer- and into a museum by their secular-mind- Istanbul’s domed crown. ing gold tiles. “We did not know where we ed successors. But now it would be trans- Formally, the decision rests with Tur- were, in heaven or on Earth,” envoys from formed again. Workers squeezed a bland key’s top administrative court, which is ex- Kievan Rus reported in the tenth century. wooden minbar into a corner of the nave pected to decide this month whether to Crusaders plundered the cathedral in and a mihrab into a nearby portico, drew convert the monument into a mosque fol- 1204, making off with its gold, silver and panels and screens to obscure the dazzling lowing an appeal by an Islamic ngo. But as relics, many of which ended up in Venice. 13th-century Christian frescoes looking with most other things, the final word will Similar scenes ensued in 1453, when the Ot- down from the vaults and the dome, and belong to Turkey’s president, Recep Tayyip toman army captured the city—the “red ap- unfurled a red carpet over the marble floor. Erdogan. To the delight of his Islamist and ple” at the end of the world, they called it. A muezzin summoned the faithful to pray- nationalist base, Mr Erdogan seems deter- Mehmet, their 21-year-old sultan, marched ers. The Hagia Sophia was now a mosque. mined to go ahead with the conversion. into the cathedral, pouring dust over his That was in 2013, and not in Istanbul, Last year, the Turkish leader said it was a head as a sign of respect, and immediately home of the Hagia Sophia known to mil- ordered its transformation into a mosque. lions of tourists worldwide, but in Trabzon, Nearly five centuries later it was modern another Turkish city once populated by Also in this section Turkey’s secular founder, Kemal Ataturk, Greeks (and known in English as Trebi- who had the shrine converted into a muse- 40 A new prime minister in France zond), home to the ancient shrine’s much um. Christian mosaics covered up with smaller and younger namesake. There are 41 Sardinia’s last bandit plaster saw the light of day for the first time at least five former Byzantine churches since the Ottoman conquest. 41 Memory and war in Bosnia dedicated to the Hagia Sophia (“Holy Wis- Mr Erdogan, who resides in a 1,100- dom” in Greek) across Turkey. Over the past 42 Spain’s battered economy room palace, surrounds himself with decade, four, including the one in Trabzon, courtiers and appoints family members to 43 Charlemagne: A Dutch dilemma have reopened as mosques. The same fate senior positions, but resents being com-1 40 Europe The Economist July 11th 2020

2 pared to a sultan, wants to conquer Istan- France’s reshuffle bul and the Hagia Sophia all over again. He A bit too popular needs to deflect attention from the econ- L’inconnu France, approval rating, % omy, now bracing for a second recession in Monthly average of seven polls as many years, and to reverse his Justice 60 and Development (ak) party’s waning sup- port in the polls. “We are living with a gov- 50 ernment that is running on empty,” says PARIS An unknown prime minister Edouard Philippe Soli Ozel of Kadir Has University. “The only reinforces a centralised presidency 40 thing in their inventory is to appeal to reli- gion and nationalism.” Studies suggest t has long been a constitutional perk for 30 that a large majority of Turks would sup- a French president to treat the country’s I Emmanuel Macron port the Hagia Sophia’s conversion. But prime minister as a shock-absorber: useful 20 many also believe the government is using for cushioning damage, replaceable when the issue to distract from more pressing worn out. Under the Fifth Republic, only 2017 18 19 20 problems. Some suspect Mr Erdogan may one president, Nicolas Sarkozy, has gov- Source: Le Journal du Dimanche be preparing the ground for early elections, erned with the same prime minister for his barely two years after the last ones. entire term. It is more unusual, however, to That would also explain the rise in re- get rid of a prime minister who is popular— dignified exit. The pair had differences, pression following a hiatus while Turkey and swap him for another that nobody has most recently over the pace of déconfine- has been dealing with covid-19. In the past heard of. Yet that is what Emmanuel Mac- ment. But Mr Philippe, say friends, remains month three opposition mps and two jour- ron did on July 3rd, when he replaced Edou- loyal. “He will put all his energy into mak- nalists have been arrested on espionage ard Philippe with Jean Castex. ing sure the president is re-elected in and terrorism charges, and four human- For weeks Mr Macron had let it be 2022,” said Gilles Boyer, his close friend rights activists, including two from Am- known that he was working on a “new and a member of the European Parliament. nesty International, were sentenced to pri- course” for after lockdown. When his party Yet the appointment of the 55-year-old son terms ranging from two to six years. failed to win a single big city at recent local Mr Castex, who worked at the Elysée under The authorities also slapped a pair of oppo- elections, while the Greens scooped up Mr Sarkozy, does not look much like the sition tv channels with a temporary broad- town halls in places that once voted for “reinvention” that Mr Macron promised. It casting ban and closed a university linked him, many observers expected a left-lean- is neither a shift to the left or the Greens, to a former prime minister who is now one ing or greener government. So it was to nor to a new generation. The new govern- of Mr Erdogan’s political rivals. The lock- general surprise that Mr Macron replaced ment, unveiled on July 6th, is broadly the down is over. The crackdown is back. one centre-right figure (and graduate of the same as the outgoing one. Occupants of the Mr Erdogan also has a legacy to cement. elite Ecole Nationale d’Administration) top posts—Bruno Le Maire at finance, Jean- The government and its religious backers with another. A career civil servant, and Yves Le Drian at the foreign ministry, Flor- see the era ushered in by Ataturk in the mayor of a village in the Pyrenees, Mr Cas- ence Parly at defence—all kept their jobs. 1920s as a “parenthesis” in Turkish history, tex was until recently the official in charge Besides unexpected appointments to says Selim Koru of Tepav, a think-tank in of France’s exit from lockdown. the justice ministry (Eric Dupond-Moretti, Ankara. “Converting the Hagia Sophia Up to a point, it made sense for Mr Mac- an outspoken criminal lawyer) and culture would mark the closing of that parenthe- ron to seek a change. The next presidential (Roselyne Bachelot, a minister under Mr sis,” he says. “Ataturk unmosqued the Ha- election is in 2022. To wait another year Sarkozy), the main change is the arrival of gia Sophia to underline his commitment to would be to run into early campaigning. Mr Gérald Darmanin as interior minister. Yet secularism, taking religion out of public Philippe was elected mayor of Le Havre at another Sarkozy ally, he is Mr Macron’s out- space,” says Soner Cagaptay of the Wash- local elections on June 28th, offering him a going budget minister, and—to the con- ington Institute, another think-tank. “Er- sternation of feminist campaigners—has a dogan is doing nearly the opposite.” rape charge hanging over him, which he All this comes at a high cost to Turkey’s has denied. The chief nod to the Greens was reputation abroad as a relatively open Mus- the appointment of Barbara Pompili, an ex- lim society and to relations with its allies. Green converted to Mr Macron’s party, to Mike Pompeo, America’s secretary of state, the environment ministry. had already urged Mr Erdogan to preserve Those around Mr Macron insist that the the Hagia Sophia as a museum. Even the new team does represent renewal. Mr Cas- traditionally reserved Ecumenical Patri- tex, they say, blends knowledge of how to arch of Constantinople, Bartholomew I, operate the Paris administrative machine warned that changing its status “will turn with local links to la France profonde. He millions of Christians around the world has a reputation for efficiency at a time against Islam”. A senior official of the Rus- when Mr Macron is frustrated with France’s sian Orthodox Church said the move would bureaucracy. Mr Castex, with his south- signal “a return to the Middle Ages”. Rus- west twang, was re-elected mayor of the sians have always felt a deep connection to village of Prades (population 6,000), and Istanbul, the “second Rome”. Muscovites returns there often at the weekend. This used to call their city the “third Rome”. might help to shift the perception that Mr That may indeed be part of the plan. A Macron’s team is disconnected from the re- good dust-up with foreign powers general- gions. It could also be a nod towards more ly plays well in Turkey these days. But the decentralised decision-making, which the damage Mr Erdogan will do to his country’s president says he wants in the wake of co- image by pushing ahead with his idea may vid-19 and the gilets jaunes protests. well be irreparable. 7 Jean who? Yet it is hard to avoid the conclusion1 The Economist July 11th 2020 Europe 41

2 that, far from a change of direction, the re- Bosnia’s memory war cre, when the Bosnian Serb leadership ar- shuffle is an acknowledgment that Mr Mac- ranged the exhumation of the mass graves ron runs everything himself. “The real A genocide still in an attempt to hide the corpses in dozens prime minister”, says one Macronista, “is of smaller ones, “Srebrenica denial” has Macron.” Unlike Mr Philippe, Mr Castex has denied been one of the ugliest legacies of the war. no national political base. He is said to be Like Holocaust denial or Turkey’s denial no pushover, but nobody doubts where de- that its troops committed a genocide of Ar- cision-making will lie. “What emerges is a menians in 1915, it is damaging to the repu- Twenty-five years on, the massacre at president who has taken stock of what the tation of Serbs. Srebrenica remains dreadfully disputed constitution offers him and is saying, ‘well The un’s Yugoslav war-crimes tribunal in that case I might as well centre every- hey will pour 8,372 commemorative in The Hague convicted the leading perpe- thing on myself’,” says Chloé Morin, of the Tcups of coffee in Srebrenica on July 11th. trators of the Srebrenica crime and con- Fondation Jean-Jaurès, a think-tank. “Mac- A quarter of a century after the fall of the cluded that it was the single act of genocide ron locks down Matignon”, declared Libé- Bosniak (Bosnian Muslim) enclave at the committed in the Balkan wars that fol- ration, a left-leaning daily, referring to the end of the Bosnian war, when that number lowed the break-up of Yugoslavia. Chuck prime minister’s office. of men and boys are reckoned to have been Sudetic, an American former war-crimes If Mr Macron is now more in charge massacred by Bosnian Serb soldiers, this investigator, says it is incredible how much than ever, this suggests broad policy con- year’s ceremony will feature videos sent by information has been collected, perhaps in tinuity. That may not be bad news. Before princes, presidents and leaders from all greater detail than for any war crime ever covid-19, France was starting to see the over the world. But one prominent local committed. Every order has been recorded. benefits of early tax cuts and reforms to the figure will be conspicuously absent: Sre- We know what happened in virtually “ev- labour market and training, with new busi- brenica’s own mayor. ery minute” of those days, he says. nesses, jobs and apprenticeships. Despite Like most Bosnian Serbs, Mladen Gruj- In 2004 the Bosnian Serb president ac- his falling popularity, Mr Macron says he icic will ignore the event. He denies that an knowledged what had happened—and will not go back on these changes, and is act of genocide took place. Other theories apologised. But since then, Serb leaders in expected to revive his contested pension widely believed by Serbs and promoted by Serbia and Bosnia have back-pedalled. Mil- reform, albeit reworked. Yet the economy their politicians and media are that the orad Dodik, the Bosnian Serbs’ representa- could shrink by 11% this year, joblessness scale of the crime has been wildly exagger- tive in Bosnia’s current three-man presi- will rise, and covid-19 is still about. Getting ated, or that the cemetery, where more than dency, says the genocide was “a fabricated the right balance between the desire for a 6,600 of the victims are buried, contains myth”. In Serbia government officials ad- more caring, greener and safer France, and the remains of those who had no connec- mit that a crime took place, but fiercely the need for greater efficiency, will be peril- tion to Srebrenica, which was besieged for deny it was an act of genocide. ous. The autumn, as Mr Macron himself three years before it fell to the Serbs in 1995. Across the former Yugoslavia, says Ma- put it, will be “very tough”. 7 Ever since the months after the massa- rija Ristic of the Balkan Investigative Re- porting Network, a regional group of ngos that promotes freedom of speech and hu- Italy man rights, the bloody conflicts of the 1990s have given way to “memory wars”. The last bandit Serbs reject the label of genocide for Sre- brenica because “everyone in the Balkans ROME wants to be seen as the ultimate victim”. At 78, a Sardinian ex-kidnapper is on the run After the second world war Germans ome said Graziano Mesina had ab- Sardinia’s brigands than resentment gradually faced up to the horror of the Ho- Ssconded to the neighbouring French towards Italy’s sluggish judicial system. locaust, but a similar process is not yet1 island of Corsica; others that he had fled Meticulous in intent, the system is often to Tunisia. But what became increasingly cruelly slow in its application. Mr Me- clear on July 3rd was that the man known sina’s case had dragged on through the as the last balènte, or Sardinian bandit, courts for seven years. was yet again on the run—at the age of 78. These days, Orgosolo is better known His younger sister, Antonia Mesina, said for its street art (it has some150 murals) he had called by her house the previous than for its kidnappers, among whom Mr day, just before the supreme court in Mesina was the uncontested master. Rome turned down her brother’s appeal Grazianeddu, as he is half-affectionately against a 30-year sentence for a drug- known, has been the subject of books, trafficking offence. “I’ve not seen or films and songs. He had, and evidently heard from him since,” she said. retains, an extraordinary talent for evad- Police carried out house-to-house ing justice. Since his first arrest, aged14, searches in his home town of Orgosolo, he has escaped or absconded on ten but soon learnt that no one else occasions, including from a top-security could—or, perhaps, would—help them. prison. Strikingly handsome when youn- The town’s mayor said it was a coinci- ger and widely acknowledged as in- dence that a surveillance camera near Mr telligent and charming, Mr Mesina was Mesina’s house had twice been shot up reputed to have a string of lovers whom before he vanished. But if there was he visited in disguise while on the run. complicity in the reaction to his disap- Police are said to have visited the homes pearance, it may have had less to do with of several elderly ladies in their search the code of silence that once shielded for the missing pensioner-bandit. Remember 42 Europe The Economist July 11th 2020

2 happening in the Balkans. By the middle of nian Serbs commemorate their own dead. below normal by last month, according to the 1960s, says Eric Gordy, a sociologist, But most of those were soldiers who died in Rafael Doménech of bbva, a bank (some of most of those Germans who would be most combat, not civilians. Attempts to deny or the rebound may be thanks to purchases shamed by an open discussion of the past minimise the crime of Srebrenica fuels bit- postponed earlier). With borders closed were dead or retired. Yet in the Balkans the terness. Emir Suljagic, who runs Srebren- until June 21st, spending by non-residents same people are still in power or are com- ica’s memorial centre, says that “a culture fell by 85% between March and mid-June. peting for it. of denial…lays the groundwork for future Much of the tourist industry’s 12.3% contri- A common argument is that almost genocides.” He wants Bosniaks to remem- bution to gdp will be lost this year. Other everyone involved in the war committed ber “what our destiny is going to be if we sectors have suffered, too. Nissan is to crimes. In Bratunac, near Srebrenica, Bos- are ever as weak as we were in July1995”. 7 close its car factory in Barcelona, with the loss of 3,000 jobs, and Airbus is laying off hundreds from its Spanish plants. The government has tried to cushion these blows. It has spent more than 3% of gdp on furloughing workers, waiving so- cial-security payments and helping the self-employed, schemes which are likely to be extended to the end of the year. It has of- fered €100bn (8% of gdp) in credit guaran- tees for businesses. On July 3rd Mr Sánchez announced an additional €40bn plus a €10bn fund for equity stakes to support “strategic” companies. Although the headline amount of aid is less than in some other European econo- mies, officials insist that it has been effec- tive, with quick disbursement. The govern- ment was constrained by Spain’s prior fiscal weakness, with the deficit rising last year to 2.8% of gdp. It has high hopes of the proposed European reconstruction fund, which it helped to inspire. Spain could get up to $140bn over several years. This won’t directly plug the deficit hole. But it could help to raise productivity in the medium Spain’s economy term, through investments in it, green technology and worker training. A lopsided recovery The virus struck when the ruling co- alition between the Socialists and the far- left Podemos was just two months old. De- spite some mistakes in the handling of the epidemic, the prime minister’s position is stronger now than it was then. In a politi- MADRID cally fragmented country, his approval rat- The left-wing government may not be able to afford its promises ing is back to 50%, according to Metrosco- ast month, as Spain loosened its tight have seen the reimposition this month of pia, a pollster, up from 37% in early April. Llockdown, Carmen Olmos opened up some restrictions on movement in two ru- His next test is to get parliament to ap- her smart tapas bar in the Salamanca dis- ral areas with a total population of 270,000. prove a budget, something he has been un- trict of Madrid for the first time since early Nevertheless, the main concern of the left- able to do since he first came to power March. Little by little she brought all nine wing coalition government of Pedro Sán- through a censure motion in 2018. The co- of her staff out of the government’s fur- chez, the Socialist prime minister, is now alition’s programme included a pledge to lough scheme. She is allowed to use only to revive the economy. It has been the hard- raise corporate and income taxes to finance 60% of her tables, the office workers who est hit in Europe (along with Italy’s), be- additional social provision, and a promise used to drop by for breakfast or lunch are cause of the preponderance of tourism and to repeal a labour reform of 2012, which still teleworking and trade is a third below small, vulnerable businesses, plus the powered the recovery in jobs. Hated by the its pre-pandemic level. She had to close stringency of its lockdown. The govern- unions, the reform cut severance pay (still two other bars in the previous slump, in ment reckons gdp will shrink by 9.2% this high) and decentralised bargaining. 2009-12. This time she is optimistic. “I own year (the imf says 12.8%), provided second Mr Sánchez faces heavy pressure to the property, it’s an area with a lot of pur- waves of the virus can be contained locally, drop these pledges. Antonio Garamendi, chasing power so it’s viable even in these without a second general lockdown. Un- the head of the bosses’ association, points conditions,” she says. She is less sanguine employment could hit 21% by December, out that there is no mention of repealing about the Spanish economy as a whole. wiping out years of strong job-creation. the labour reform in the latest agreement Many other bars are opening with fewer The good news is that a recovery has that he and union leaders signed with the workers and for shorter hours, she adds. started. But it is lopsided. Of the 3.8m work- government. The coalition has said it will Many small shops in her neighbourhood ers furloughed in April, 1.5m are now back “modulate” its programme because of the are yet to come back at all. at work. Credit- and debit-card spending by harsh new circumstances. The budget will Spain is suffering small but potentially Spaniards fell by 60% in the tightest phase reveal whether modulation is a fancy word worrying new coronavirus outbreaks that of the lockdown, in April, but was only 4% for backtracking. 7 The Economist July 11th 2020 Europe 43 Charlemagne A Dutch dilemma

The art of compromise without capitulation Claude Juncker, the previous president of the commission, once declared that France would not be punished for breaking eu rules on deficits “because it is France”. Politicians in Italy and Spain may not like the idea of lawmakers in the Netherlands and other hawk- ish governments examining their spending, warn Dutch mps. These arguments were once common in Berlin. But this was be- fore Angela Merkel underwent a conversion to the merits of debt issued jointly by the eu. In some respects, Mr Rutte is in a similar position to his German counterpart. The duo are the two longest- serving euro-zone leaders. Both have seen their polling soar in re- cent months. Both lead countries that are historically wary of us- ing common debt to bail southern countries out. But they have re- sponded to the crisis in very different ways. Safe in the knowledge that she will not fight another election, Mrs Merkel spent political capital cajoling a reluctant German establishment into support for the radical step of joint debt. With a Dutch election due in March, Mr Rutte may feel there are better ways to use his popularity. A soft, flexible Euroscepticism has been one of Mr Rutte’s char- acteristics since coming to power in 2010. His People’s Party for Freedom and Democracy (vvd) has thrived by stemming the flow of voters to more right-wing rivals. It has done so with tough talk on things such as asylum policy and the eu, while taking care not ark rutte makes an unconvincing villain. In person, the to scare off more moderate voters. It is a crowded part of the spec- MDutch prime minister resembles an over-caffeinated vicar, trum. Christian Democratic Appeal, the centre-right coalition mixing manic good-cheer with sermons on the importance of liv- partners of Mr Rutte, have taken an even firmer line during talks ing within one’s means. The 53-year-old lives alone in a modest over eu spending. Polls give the parties of Geert Wilders, a peren- apartment, cycles to his poky office in The Hague and takes time nial populist, and Thierry Baudet, a new challenger, just under a off from running the country to teach social studies at a local fifth of seats combined. Both offer full-throated condemnation of school. Such do-goodery has not stopped Mr Rutte being cast as the eu. Capitulation in Brussels would be leapt on by opponents. the bad guy in Brussels as the eu argues over a €750bn ($845bn) fund aimed at pepping up the bloc’s lockdown-hit economies. Look before judging The Dutch government is leading opposition to the plan, which Dutch Euroscepticism is more subtle than the breathless coverage involves a mix of grants worth €500bn and loans of €250bn handed of its populists allows. About 70% of Dutch people would vote to to individual countries and paid for by the eu issuing debt collec- remain in the bloc if offered the choice, in line with the average fig- tively at scale for the first time. The scheme, or at least the outline ure across the eu. In comparison, only 53% of Italians would. This of it, is supported by France, Germany and every other big country. does not mean that Dutch voters want more of Brussels in their Mr Rutte is the unofficial head of a band of sceptics and refuseniks, life—barely a third do. Euroscepticism, however, rears its head consisting of Sweden, Denmark and Austria as well as the Nether- when money is involved. In such circumstances, the eu may re- lands, known as the “frugal four”. At a summit next week—the first quire some defending, points out Rob Jetten, the parliamentary in person since the start of the covid-19 crisis—these two sides will leader of d66, Mr Rutte’s Europhile liberal coalition partners. Brit- square off. Unanimity is required for the plan to go ahead. ain provides a cautionary tale of what can otherwise happen. A view exists among Dutch voters and politicians that coun- In public the Dutch line is firm. The Netherlands will agree only tries in southern Europe are in trouble because they spent too to loans, Mr Rutte told an Italian newspaper. When speaking in the much or failed to reform their economies. (That Italy has run a Netherlands, Mr Rutte has tended to focus on other matters, such primary budget surplus—spending less than it earns through tax- as whether the money should have strings attached and ensuring es, before interest—since the 1990s receives much less attention.) the Dutch keep their rebate—a kickback on the eu’s €1.1trn budget, The Netherlands (and its allies) are happy for the eu to give money which will be negotiated at the same time as the recovery fund. to countries in need, but only if such money is paid back. It is a These demands are more achievable than calling for the €500bn of popular position. Dutch voters oppose the eu’s proposal by a mar- grants to change to loans. Talks will be messy. But a good scrap in gin of two to one. Objections abound. Although designed for coun- Brussels works wonders with domestic voters. tries struggling with the pandemic, one of the biggest beneficia- Flexibility has always been one of Mr Rutte’s skills. If the prime ries of the fund would be Poland, which has been least affected minister does sometimes resemble a man of the cloth, it may be economically. Arguments that the fund is needed to stop the single because he has a touch of the famously adaptable Vicar of Bray. Un- market falling apart are dismissed as scaremongering. “And China der his leadership, the vvd has been more than happy to drift will invade,” adds one Dutch mp, sarcastically. around the political spectrum. He likes to keep his options open. Opposition is philosophical as well as fiscal. Across southern During one lecture on faith, he hedged his belief in God: 51% of him Europe, collective debt is seen as a path to freedom. Among law- did, 49% did not. It is a tactic that has served him well for a decade. makers in The Hague, it means tighter control: if Dutch taxpayers Compromise on the recovery fund is inevitable. When it arrives, must pay then they should have a say, the logic runs. Trust in the Mr Rutte’s depiction as the villain will be revoked in the eu at large. European Commission to do the job is low. In a fit of honesty, Jean- The trick will be to make sure it is not introduced at home. 7 44 Britain The Economist July 11th 2020

Also in this section 45 Britain’s Magnitsky list 46 Bagehot: Fading Anglophilia

Relations with China that it wants China as a partner on climate change and global health, but “this rela- About turn tionship does not come at any price.” Brit- ish business leaders are wearied by the hot- cold relationship, and wish the govern- ment would take a more consistent line. Several factors are behind the hardened stance. One is China’s own policy. Britain says that China is in breach of the Hong As the relationship deteriorates, China could make Britain squirm Kong handover treaty that guaranteed the n november 2010, addressing students help build Britain’s fifth-generation (5g) territory’s rights and freedoms, and the re- Iat Peking University, David Cameron was mobile networks. That follows new advice pression of Muslims in Xinjiang has ap- asked what advice he would give the Com- from gchq, Britain’s signals-intelligence palled many mps. Another is pressure to munist Party in an age of growing plural- agency, on the impact that American sanc- ditch Huawei from America and Australia, ism. “An amazing noise went around the tions will have on the supply of reliable who are Britain’s allies in the Five Eyes in- room, half admiration and half shock,” he components to the company. Britain will telligence pact and with whom Britain later recalled. “As I looked around the sea of change its immigration rules to allow up to hopes to seal speedy trade agreements. faces I thought: is this system really going 2.9m Hong Kongers to gain citizenship in In Parliament, a new caucus of Conser- to last? My conclusion was that, in its cur- Britain, following the Chinese authorities’ vative lawmakers who think China poses a rent form, it couldn’t.” decision to impose a draconian national- threat to global norms and free societies Mr Cameron hoped his premiership security law on the former British colony. has formed. The China Research Group’s would be the dawn of a “golden age” of An- Two mps have called for Dominic Raab, the appeal is broader than that of the European glo-Chinese relations. Behind this notion foreign secretary, to put Carrie Lam, Hong Research Group of Brexit hardliners. Tom lay the belief that Britain could shape Chi- Kong’s chief executive, on the new sanc- Tugendhat, its leader, is a former army offi- na’s approach to trade and human rights by tions list that Britain has published (see cer from the party’s liberal wing. “The uk doing business with it. That hope has not next article). Mr Johnson intends to push has been hopeful and ambitious, and sadly survived the decade. Trade and investment on with long-delayed plans for a tougher that hope and expectation has met the cold have increased, but China has become investment-screening regime, which reality of an authoritarian state,” he says. more repressive at home and more asser- would allow a broader range of foreign The Labour Party under Sir Keir Starmer has tive abroad. takeovers of British companies to be also become more hawkish. Lisa Nandy, British politicians have found that ten- blocked on national-security grounds. the shadow foreign secretary, says Britain sion increasingly hard to live with. Boris Mr Johnson declares himself to be a “si- must find “homegrown alternatives” to Johnson’s government is weighing a u- nophile”, and as Mayor of London was even Chinese telecoms and nuclear power. turn on the decision it made in January to more enthusiastic than Mr Cameron in Chinese officials have been telling for- let Huawei, a Chinese telecoms company, chasing trade and tourism. His office says eign visitors that they expected post-Brexit 1 The Economist July 11th 2020 Britain 45

2 Britain to be a biddable place because it ing-out with China would scotch new ini- Saudi Arabian officials involved in the kill- needed to increase non-eu trade and pre- tiatives designed to give Britain a competi- ing of Jamal Khashoggi, a journalist, in Is- serve the City as a financial centre. This tive advantage over its European peers. The tanbul in 2018. Two Burmese generals and rapid change of course may therefore be an spat may kill the tie-up between the Lon- two North Korean government depart- unpleasant surprise. The Chinese made don and Shanghai stock exchanges and ments round off the list. The government their displeasure known at a press confer- hinder emerging fields, such as the issuing has the right to freeze the assets of those on ence on July 6th at which Liu Xiaoming, the ofgreenbondsinLondonbyChinesefirms. the list and ban them from entering the ambassador to London, accused British Few mps would notice that. But many fret country. Those named will no longer, as Mr politicians of having a “colonial mindset”, that the lost advantages are stacking up. Raab put it in Parliament, “be free to waltz and said that ditching Huawei would send “We’ve had covid, we’re doing Brexit—do into this country to buy up property on the a “very bad message” to Chinese investors we need to pick a fight with China?” asks a King’s Road, or do their Christmas shop- about Britain’s economy. “We want to be former cabinet minister of the “golden era”. ping in Knightsbridge, or frankly to siphon your friend, we want to be your partner, but That will soon become clear. 7 dirty money through British banks or fi- if you want to make China a hostile coun- nancial institutions”. try, you have to bear the consequences.” Britain’s sanctions regime has until China routinely chastises states that say Human rights now worked through the un or eu. Brexit or do things that upset it. The first step is to allows the country to fashion its own rules. cancel meetings between politicians, as From red carpet to Indeed, the first piece of Brexit-related leg- happened when Mr Cameron’s govern- islation passed by Parliament was the ment was put in the freezer for a year after blacklist Sanctions and Anti-Money Laundering he met the Dalai Lama, Tibet’s spiritual Act, says Maya Lester, a sanctions lawyer at leader. Economic threats come next. China Brick Court Chambers. It gives Britain the is Britain’s third-largest trading partner power to impose, change or lift sanctions Britain imposes its own Magnitsky after America and the European Union, independently. A Magnitsky clause was sanctions with 5% of total trade, and its government added after Russian agents poisoned five is skilled at targeting symbolic and politi- n life, sergei magnitsky was a thorn in people in Salisbury in 2018. cally-sensitive exporters. Norwegian salm- Ithe side of Russia’s kleptocrats. The Rus- There is some debate about whether on exports were hit after the Nobel peace sian lawyer paid the heaviest price for un- Britain could have set up Magnitsky sanc- prize was awarded to a Chinese dissident. covering institutionalised tax fraud: he tions while in the eu. That the Baltic coun- Australia’s beef and barley exports were was tortured and died in prison. In death, tries have done so suggests it could. But choked after it called for an international he haunts them still. America already has a similar efforts at the European level, which probe into the coronavirus outbreak. “Magnitsky Act”, aimed at people responsi- would require unanimous support, have If China has an appetite to hurt Britain ble for gross human-rights violations. On foundered. It “demonstrates [Britain’s] de- then it has a range of brands and sectors to July 6th, the Foreign Office announced its sire to go out on their own”, says Adam M. choose from. A list of likely targets might own “Magnitsky” sanctions against 47 in- Smith, a lawyer and former sanctions offi- include Scotch whisky or Jaguar Land dividuals and two entities. They went into cial in the Obama administration. He char- Rover, the car maker which makes about a effect on the same day. acterises the move as “unilateral in style fifth of its sales in China. In general, the Among those named are 25 Russians and multilateral in approach and impact”. City of London is not badly exposed, but whom the government identifies as having Magnitsky legislation is a fulfilment of a two banks with roots in Britain’s colonial contributed to Magnitsky’s mistreatment, manifesto pledge and Mr Raab, who has past, hsbc and Standard Chartered, make including Alexander Bastrykin, head of been calling for such an act since 2012, has two thirds and a half of their profits, re- Russia’s domestic investigative agency and achieved a rare political feat: delivering spectively, in China and Hong Kong. An in- an ally of Vladimir Putin. Another 20 are something he genuinely believes in. surer, Prudential, is also heavily involved What impact the sanctions will have is there. “If China really wanted to pinch debatable. According to Andrew Wood, a us...by sanctioning British companies former British ambassador to Russia, the there is form there,” says George Magnus of measure does at least have an “emotive ef- Oxford University’s China Centre. hsbc fect”, in the sense that people who would and Standard Chartered have announced like to do business in Britain or have their their support for the new Hong Kong secu- children live there might feel more vulner- rity law, but Mr Magnus doubts that will in- able. But there is “astonishingly little evi- sulate them. dence” that their countries “will realise the Charles Parton, a veteran British dip- errors of their ways and somehow change lomat and senior associate fellow at the their own policies”, says Mark Galeotti, a Royal United Services Institute, a think Russia expert at the Royal United Services tank, argues that such measures may Institute, a security think-tank. spook leaders but are usually short-lived, A likelier effect is a further chilling of do not prevent overall exports from rising, relations between Britain and Russia, and should not deter politicians from chal- which finds Magnitsky sanctions particu- lenging Chinese policy when Britain’s in- larly irksome. (Lifting the American ones terests are threatened. Chinese investment was the focus of a pre-election meeting be- in Britain is linked to profit-seeking, not tween Russian lobbyists and Donald politics or charity. “The pain gets put on the Trump’s campaign team.) Russia has prom- politicians,” says Mr Parton. “The real ised to retaliate. But, as Jamison Firestone, world goes on. Students study. Tourists a London-based lawyer who was Magnit- tour. Business does its business.” sky’s boss in Russia, puts it, “at some point Yet the main cost may not be in present you have to stop worrying about how pain but in future benefits forgone. A fall- No Knightsbridge shopping for Bastrykin things go down in Moscow.” 7 46 Britain The Economist July 11th 2020 Bagehot Fading Anglophilia

The British have lost cachet in the United States, but they still have something to teach the Americans lowing America to claim that it was acting in something bigger than its own interests and Britain to believe that it still had a seat at the top table. But it also had some substance to it, particularly as globalisation gathered pace. Both countries embraced a distinc- tive model of finance-driven capitalism; indeed, London was ar- guably a bigger financial centre than New York. In recent years, Britain has lost some of its cachet in America. The press regularly—and the president occasionally—portrays the country as a poverty-stricken, crime-ridden dystopia. America’s population is becoming less Anglo-Saxon and more Hispanic and Asian. Students across the country are demanding the “decoloni- sation of the curriculum”, which means, among other things, less British history and English literature. Walter Lippmann, one of America’s greatest columnists, once described America’s relation- ship with Britain as one of “discordant intimacy”. Today the dis- cord sometimes drowns out the intimacy. The combination of Donald Trump’s election and Britain’s deci- sion to leave the European Union has also destroyed two of Brit- ain’s most important assets. Mr Trump used the Atlantic alliance as a way of beating up the eu rather than building an alliance of de- mocracies. Brexit simultaneously deprived Britain of its position as a bridge between America and the eu and destroyed its reputa- hen ghislaine maxwell arrived in New York in 1991her life tion as a well-run country capable of calming America’s frequent Wwas in pieces. Her father’s corpse was found floating near a temper tantrums. A New Yorker cover shortly after the Brexit vote yacht that bore her name; her family business had imploded; the displayed a group of bowler-hatted lemmings racing over a cliff. Maxwell name was mud. Yet within a few years she was back on And over the past four years the British have done their best to top: living in style on the Upper East Side and sitting at the very prove the magazine right, discarding two prime ministers, dis- heart of New York society. missing their Parliament briefly and—measured by deaths per Why was the newcomer such a hit? The dark pact that she head of the population—managing the covid-19 crisis even worse formed with Jeffrey Epstein, a paedophile for whom she is accused than America has. of procuring minors, provided her with access to lots of money. Britain clearly still needs America, especially now that Brexit Her wit and charm made her stand out. But being British also has divided Britain from Europe, and China’s clampdown in Hong helped. Ms Maxwell was invariably described as an “Oxford-edu- Kong limits Asian options. Aspiring Britons will still go there to try cated British socialite”. She dropped dinky British phrases into her to make their names. For all its recent travails America still offers conversation and traded on the smart British names in her address fabulous rewards and continent-sized opportunities. book, the most valuable of which was Prince Andrew’s. The more intriguing question is whether America needs Brit- Ms Maxwell was part of a generation of Britons who went to ain any longer. It still has an appetite for British talent, and not just America in the 1990s and 2000s in search of fame and fortune. The of the floppy-haired ersatz-upper-class Hugh Grant-style variety: invasion was driven by talent and ambition: with the advent of glo- it has taken to comedians with non-u accents such as James Cor- balisation many Britons decided that if they wanted to play in the den and John Oliver, as well as writers who chronicle the experi- premier league, they needed to move to the United States. Britons ence of minorities such as Zadie Smith. It will also have much rose to the top of a striking number of journalistic and cultural in- more use for the old Atlantic alliance if Mr Trump loses the elec- stitutions from the New Yorker through Vogue to the Metropolitan tion, as looks increasingly likely. Joe Biden’s America will be in the Museum. Christopher Hitchens and Andrew Sullivan became business of rebuilding relationships across the board; and despite America’s leading contrarians. Simon Schama and Niall Ferguson leaving the eu, Britain, with its deep military, diplomatic and secu- were among the academics who fled the low pay and heavy teach- rity relations with the United States, will be an important part of ing loads at British universities and won profitable stardom at Ivy that process. League institutions. Americans may also discover that they can profit from advice in Anglophilia greased the entry of the British into the American an area the British know all too well—decline and stagnation. establishment. Institutions such as the Council for Foreign Rela- America bears more than a passing resemblance to early-20th- tions fostered it. A British accent was regarded as proof of intelli- century Britain, which saw itself overtaken in one area after anoth- gence and wit. Some of the immigrants were genuinely talented, er by a rising and much more disciplined Germany. “The Coming but Anglophilia lifted plenty of flotsam and jetsam too, and al- Neo-Feudalism”, a new book by Joel Kotkin of Chapman Universi- lowed clever Brits to get away with things that Americans never ty, describes a world quite familiar to the British, in which a could. Hitchens even lit a cigarette on television, leaving his inter- hereditary ruling elite lords it over a compliant intelligentsia and viewer speechless. an impoverished middle class. Britons may not have solved the The British invasion was further eased by the Atlantic alliance, problems of economic decline and neo-feudalism in their own which was revived by Ronald Reagan and Margaret Thatcher, and country. But they have had plenty of time to reflect on them—and flourished through Tony Blair’s relationships with Bill Clinton and at the very least they can warn Americans what will happen if they George Bush. It was, in part, a convenient fiction for both sides, al- don’t change course. 7 International The Economist July 11th 2020 47

Race and liberal philosophy broadest terms has been transformed. Life expectancy, material wealth, poverty, liter- In the balance acy, civil rights and the rule of law have changed beyond recognition. Though that is not all thanks to Enlightenment liberals, obviously, liberalism has prospered as Marxism and fascism have failed. But its poor record on race, especially Enlightenment liberalism is losing ground in the debate about how to deal with with regard to African-Americans, stands racism. We report on the battle of ideas out. Income, wealth, education and incar- iberalism—the Enlightenment philos- question is especially important today. ceration remain correlated with ethnicity Lophy, not the American left—starts with Norms are shifting fast. The global protests to a staggering degree. True, great steps the assertion that all human beings have that sprang up after the killing of George have been taken against overt racial ani- equal moral worth. From that stem equal Floyd denounced racism throughout soci- mus. But the lack of progress means liber- rights for all. Libertarians see those princi- ety. Companies, often pressed by their own als must have either tried and failed to ples as paramount. For left-leaning liber- employees, are in a panic about their lack create a society in which people of all races als, equal moral worth also brings an enti- of diversity, particularly at the top. Televi- can flourish, or failed to try at all. tlement to the resources necessary for an sion stations and the press are rewriting America’s founding depended on two individual to flourish. the rules about how news should be cov- racist endeavours. One was slavery, which Yet when it comes to race many liberals ered and by whom. There is a fight over sta- lasted for almost 250 years and was fol- have failed to live up to their own values. tuary and heritage, just as there is over peo- lowed by nearly a century of institutional- “We hold these truths to be self-evident,” ple forced out of their jobs or publicly ised white supremacy. Of the seven most wrote Thomas Jefferson in America’s Dec- shamed for words or deeds deemed racist. important Founding Fathers, only John Ad- laration of Independence in 1776, “that all It is a defining moment. At Mr Floyd’s ams and Alexander Hamilton did not at men are created equal.” More than a decade funeral, the Rev Al Sharpton declared: “It’s some point own slaves. Nine early Ameri- later the Founding Fathers would write time to stand up in George’s name and say, can presidents were slaveholders. And al- into the country’s constitution that a slave ‘Get your knee off our necks.’” At Mount though slavery is a near-universal feature was in fact to be considered three-fifths of a Rushmore on July 3rd, President Donald of pre-Enlightenment societies, the Atlan- person. In Europe many liberals opposed Trump condemned “a new far-left fas- tic slave trade is notable for having been slavery but supported despotic imperial cism”. To understand all this, it is worth go- tied to notions of racial superiority. rule overseas. “Perhaps liberal theory and ing back to the battle of ideas. In one corner The other was imperialism, when Brit- liberal history are ships passing in the is liberalism, with its tarnished record, and ish colonialists violently displaced exist- night,” speculated Uday Singh Mehta of the in the other the anti-liberal theories ing people. Many 18th-century European City University of New York in 1999. emerging from the campus to challenge it. liberals criticised the search for empire. What lies behind this failure? That During the past two centuries life in the Adam Smith viewed colonies as expensive 1 48 International The Economist July 11th 2020

2 failures of monopoly and mercantilism place in the mid-1960s. To deal with the leg- which fused French post-modernism with that benefited neither side, calling Britain’s acy of slavery, liberals began to concede the insights of African-Americans like East India Company “plunderers”. Edmund that you need to treat the descendants of Frederick Douglass, an abolitionist and Burke (a liberal in the broadest sense) de- slaves as members of a group, not only as former slave, and W.E.B. Du Bois, a sociolo- cried the “outrageous” injustices in British individuals. Sandra Day O’Connor, the first gist, then emerged. colonies, including “systematick iniquity woman to serve on the Supreme Court, ar- Critical race theory first focused on the and oppression” in India, which resulted gued that affirmative action, though a material conditions of black Americans from power that was unaccountable to breach of liberal individualism that must and on developing tools to help them win a those over whom it was exercised. eventually be dispensed with, had to stay fair hearing in the courtroom. One is “in- But, argues Jennifer Pitts of the Univer- until there was reasonable equality of op- tersectionality”, set out in a defining paper sity of Chicago in her book “A Turn to Em- portunity between groups. in 1991 by Kimberlé Crenshaw, another le- pire”, in the 19th century the most famous Plenty of thinkers grappled with affir- gal scholar and civil-rights campaigner. A European liberals gravitated towards “im- mative action, including Daniel Patrick black woman could lose a case of discrim- perial liberalism”. The shift was grounded Moynihan, a politician, sociologist and ination against an employer who could in the growing triumphalism of France and diplomat, and Ronald Dworkin, a philoso- show that he did not discriminate against Britain, which saw themselves as qualified pher and jurist. However, the most famous black men or white women, she explains. by virtue of their economic and techno- left-liberal work of the 20th century, writ- The liberal, supposedly universalist, legal logical success to disseminate universal ten in 1971, was notably silent on race. The system failed to grasp the unique intersec- moral and cultural values. John Stuart Mill key idea of John Rawls’s “A Theory of Jus- tion of being both a woman and black. abhorred slavery, writing during the Amer- tice” is the “veil of ignorance”, behind In the three decades since that paper ican civil war in 1863 that “I cannot look for- was written, critical race theory has flour- ward with satisfaction to any settlement ished, spreading to education, political sci- but complete emancipation.” But of empire ence, gender studies, history and beyond. he wrote that “Despotism is a legitimate hr departments use its terminology. Allu- mode of government in dealing with bar- sions to “white privilege” and “uncon- barians, provided the end be their im- scious bias” are commonplace. Over 1,000 provement, and the means justified by ac- ceos, including those of firms such as tually effecting that end.” (Mill worked for JPMorgan Chase, Pfizer and Walmart, have the East India Company for 35 years.) Alexis joined an anti-racism coalition and prom- de Tocqueville championed the French em- ised that their staff will undertake uncon- pire, in particular the violent conquest and scious-bias training (the evidence on its ef- settlement of Algeria. ficacy is limited). Critical race theory A belief in the basic similarity of human informs the claim that the aim of journal- beings, and of their march towards pro- ism is not “objectivity” but “moral clarity”. gress, led these thinkers to the belief that it was possible to accelerate development at More than words can ever say the barrel of a gun. Even at the time, this pa- Yet as critical race theory has grown, a fo- ternalism should have been tempered by cus on discourse and power has tended to scepticism about whether it can be just for supersede the practicalities. That has made one people to impose government on an- it illiberal, even revolutionary. other. Although Mill criticised the British The philosophical mechanics that bolt empire’s atrocities, he did not see them, as together critical race theory can be obscure. Burke had, as the inevitable consequence But the approach is elegantly engineered of an unaccountable regime. which people are supposed to think about into bestselling books such as “How To Be The turn in liberal thought was reflect- the design of a fair society without know- An Antiracist” by Ibram X. Kendi and ed in the pages of The Economist. From its ing their own talents, class, sex or indeed “White Fragility” by Robin DiAngelo. founding in 1843 the newspaper opposed race. Detached from such arbitrary factors One thing that the popular synthesis slavery, and early in its existence it criti- people would discover principles of jus- preserves is its contempt for the liberal cised imperialism. But we later backed the tice. But what is the point, modern critics view of how to bring about social and moral Second Opium War against China, the bru- ask, of working out what a perfectly just progress. To understand why, you need to tal suppression of the 1857 Indian mutiny society looks like without considering how start with how ordinary words take on ex- and even the invasion of Mexico by France the actual world is ravaged by injustice? traordinary meanings. “Racism” is not big- in 1861. We wrote that Indians were “help- Liberalism as it is theorised “abstracts otry based on the colour of your skin. less...to restrain their own superstitions away from social oppression”, writes Races, Mr Kendi writes, “are fundamental- and their own passions”. Walter Bagehot, Charles Mills, also of the City University of ly power identities” and racism is the social editor from 1861 to 1877, wrote that the Brit- New York. The “Cambridge Companion to and institutional system that sustains ish were “the most enterprising, the most Rawls”, a roughly 600-page book published whites as the most powerful group. That is successful, and in most respects the best, in 2002, has no chapter, section or subsec- why “white supremacy” alludes not to colonists on the face of the earth”. Al- tion dealing with race. “The central debates skinheads and the Ku Klux Klan, but, as Ms though the newspaper never ceased to op- in the field as presented”, writes Mr Mills, DiAngelo explains, the centrality and supe- pose slavery, it claimed, bizarrely, that abo- “exclude any reference to the modern glo- riority of whites in society. lition would be more likely were the bal history of racism versus anti-racism.” Some acts also have an unfamiliar sig- Confederacy to win America’s civil war. It As the gains of the civil-rights era failed nificance. Talking to someone becomes a was not until the early 20th century that to translate into sustained progress for Af- question of power. The identity of the The Economist regained some of its scepti- rican-Americans, dissatisfaction with lib- speaker matters because speech is not neu- cism regarding empire, as liberalism at eralism set in. One of the first to respond tral. It is either bad (ie, asserting white su- home evolved into a force for social reform. was Derrick Bell, a legal scholar working at premacy, and thus shoring up today’s racist In America the big liberal shift took Harvard in the 1970s. “Critical race theory”, institutions), or it is good (ie, offering sol-1 The Economist July 11th 2020 International 49

2 idarity to victims of oppression or subvert- are incompatible. One reason is that the that the Rawlsian principle of “fair equality ing white power). The techniques of sub- constellation of postmodern thinking of opportunity” can mean taking great version, called criticism, unpack speech to dealing with race, gender, sexuality and strides towards a racially just society. That reveal how it is “problematic”—that is, the disability, which they call “Theory”, disem- includes not just making sure that formal ways in which it is racist. powers the individual in favour of group procedures, such as hiring practices, are Speech is unfamiliar in another way, identities, claiming that these alignments non-discriminatory. It also includes en- too. When you say something, what counts are necessary to end oppression. Another suring that people of equal talent who is not what you mean but how you are is Theorists’ belief that power is what make comparable efforts end up with simi- heard. A privileged person sees the world forces out entrenched interests. But this lar life prospects, eventually eradicating from their own viewpoint alone. Whites carries the risk that the weak will not pre- the legacy of past racial injustices. cannot fully understand the harm they vail, or that if they do, one dominant group This would be a huge programme that cause. By contrast, the standpoint of some- will be replaced by another. By contrast, might involve curbing housing segrega- one who is oppressed gives them insight liberals rely on evidence, argument and the tion, making schooling more equal and into both their own plight and the oppres- rule of law to arm the weak against the giving tax credits (see Briefing). That is not sor’s world-view, too. “To say that white- strong. A third reason is that Theory stalls enough for Mr Mills, another liberal and ness is a standpoint”, Ms DiAngelo writes, liberal progress. Without the machinery of critical race theorist. He wants liberal “is to say that a significant aspect of white individual equality fired up by continual thinkers to produce theories of “rectifica- identity is to see oneself as an individual, debate, the engine will not work. tory justice”—say, a version of the veil of ig- outside or innocent of race—‘just human’.” norance behind which people are aware of Black people can also find themselves No easy answers discrimination and the legacy of racial hi- in the wrong. What if two black people hear But what will? The appeal of critical race erarchy. Liberals might then be more will- a white person differently and disagree theory—or at least its manifestation in ing to tolerate compensation for past viola- over whether he was racist? Critical race popular writing—is partly that it confi- tions. They might also demand a reckoning theorists might point out that there are dently prescribes what should be done to with their past failures. many sorts of oppression. In 1990 Angela fight injustice. It provides a degree of abso- The problem is thorniest for libertar- Harris, a legal scholar, complained that lution for those who want to help. White ians who resist redistributive egalitarian feminism treated black and white women people may never be able to rid themselves schemes, regardless of the intention be- as if their experience were the same. By be- of their racism, but they can dedicate hind them. But even some of the most com- ing straight and male, say, the listener be- themselves to the cause of anti-racism. mitted, such as Robert Nozick, concede longs to groups that are dominant along Liberals have no such simple prescrip- that their elevation of property rights some axis other than race. The way out of tion. They have always struggled with the makes sense only if the initial conditions oppression is through the recognition and idea of power as a lens through which to under which property was acquired were empowerment of these group identities, view the world, notes Michael Freeden of just. Countries in which the legacy of racial not their neglect. Or one of them may have Oxford University. They often deny that oppression lives on in the distribution of failed to grasp the underlying truth of how groups (rather than individuals) can be le- wealth patently fail to meet that test. Put- racism is perpetuated by society. If so, that gitimate political entities. And so liberal ting right that failure, Mr Mills says, person needs to be educated out of their ig- responses to critical race theory can seem “should be supported in principle by liber- norance. “The heartbeat of racism is deni- like conservative apathy, or even denial. als across the spectrum”. al,” Mr Kendi writes, “the heartbeat of anti- Tommie Shelby of Harvard University, Plenty of people are trying to work out racism is confession.” who sees himself as both a critical race what that entails, but the practicalities are These ideas have revolutionary impli- theorist and a liberal, argues that scepti- formidable. Having failed adequately to cations. One result of seeing racism em- cism regarding liberalism’s power to re- grapple with racial issues, liberals find bedded all around you is a tendency to- dress racial inequality is “rooted in the themselves in a political moment that de- wards a pessimistic attitude to progress. mistaken idea that liberalism isn’t compat- mands an agenda which is both practically Bell concluded that reform happens only ible with an egalitarian commitment to and politically feasible. The risk is that they when it suits powerful white interests. In economic justice.” Mr Shelby has argued do not find one. 7 1991 he wrote: “Even those Herculean ef- forts we hail as successful will produce no more than temporary ‘peaks of progress’, short-lived victories that slide into irrele- vance as practical patterns adapt in ways that maintain white dominance.” The second implication is that well- meaning white people are often enemies. Colour-blind whites deny society’s struc- tural racism. Ms DiAngelo complains that “White people’s moral objection to racism increases their resistance to acknowledg- ing their complicity in it.” Integration- ists—Mr Kendi’s term for those who want black culture and society to integrate with white—rob black people of the identity they need to fight racism. He accuses them of “lynching black cultures”. Where does this leave liberalism? “Cyn- ical Theories”, a forthcoming book by Hel- en Pluckrose and James Lindsay, two writ- ers, argues that the two systems of thought 50 Business The Economist July 11th 2020

Also in this section 52 Sino-American tech tussles 53 China’s e-shopping frenzy 54 Bartleby: Parkinson’s law updated 55 Schumpeter: Elon and Boris in space

Executive compensation to Bloomberg, a research firm, the median ceo compensation at big American firms Pay guaranteed, performance optional in the s&p 500 share index reached $14m last year. America’s top earners made far more. Alphabet’s Sundar Pichai received a cool $281m and Viacom’s Bob Bakish got $134m. The sums are considerably smaller NEW YORK across the Atlantic, where pay practices American bosses say that their firms’ superior shareholder returns justify their have historically been more restrained (see own hefty pay cheques. Really? table on next page). The ten best-paid Brit- oo often, executive compensation ries of globalisation. The controversial co- ish bosses together did not make as much “Tin the us is ridiculously out of line rollary is that pay should be allowed to rise as Mr Pichai in 2019, for example, and con- with performance…The deck is stacked ever higher because superior ceo perfor- tinental Europe’s fattest cat, Soren Skou of against investors.” It was with these words mance is maximising shareholder returns. A.P. Moller-Maersk, a shipping giant from that in 2006 Warren Buffett, a legendary in- Rise it has—and then some. According Denmark, scraped by on $38m. vestor and red-blooded capitalist, chal- A forthcoming report by the Economic lenged the received wisdom in corporate Policy Institute (epi), a left-leaning think- America about ceo pay. This maintains Self-appraisal 1 tank, scrutinises how much bosses at the that bosses deserve generous rewards be- United States, 1978=100* 350 biggest American firms by revenue ac- cause these are tightly linked to their com- 1,400 tually made once stocks and options were panies’ financial performance. Fourteen 1,200 vested and exercised (as opposed to their years’ worth of evidence later the received CEO realised notional values at the time they were grant- compensation† 1,000 wisdom is still looking shaky. ed). Lawrence Mishel of epi calculates that “Pay for performance” has been the 800 from 1978 to 2019 the average “realised” mantra of America Inc over the past few de- 600 compensation swelled nearly thirteen-fold cades. A small circle of influential pay con- 400 in inflation-adjusted terms, outpacing the sultants, compensation analysts and aca- stockmarket (see chart 1). It shot up by 14% S&P 500 200 demics has argued that American firms index in 2019 alone. must pay top dollar for top candidates be- 0 Such numbers were setting off alarm cause they compete in a global market for 1915100520009590851978 bells before the covid-19 crisis. Now the talent. They argue that firms have grown Source: *Inflation-adjusted mass lay-offs and bleeding balance-sheets Economic †Salaries, bonuses and stock options. more complex and bosses must know how Policy Institute Average for top 350 firms by sales resulting from the recession have brought to manage new technologies and the vaga- it into stark relief. According to official fil-1 The Economist July 11th 2020 Business 51

2 ings, one in ten members of the Russell warding luck instead of skill. One is rent- 2 3000, a broad index of listed American Payload seeking by bosses, who can take advantage companies, has slashed bosses’ salaries in United States, ten-year returns and CEO of the opacity that tends to surround pay- response to covid-19. They include big air- compensation* setting. The process was long a dark art, ex- lines (like United and Delta), hotel chains Shareholder returns, 2006-15, % plains David Larcker of Stanford Universi- 1,000 (such as Marriott and Wyndham) and in- ty’s Graduate School of Business. Lucian dustrial conglomerates (for example, ge). 800 Bebchuk of Harvard Law School, another Many others plan to review their compen- 600 expert in the field, has argued that Ameri- sation plans. Todd Sirras of Semler Brossy, can ceos, who tend to tower over their a pay consultancy, predicts a busy autumn 400 boardrooms, have too much influence over for his industry. 200 this opaque process. Don Delves of Willis Though portraying this as a show of sol- Towers Watson, a consultancy with a big idarity with workers, a few have quietly 0 pay-advisory arm, points to “lots of posi- also handed bosses lucrative perquisites. A -200 tive changes” in pay-setting over the last week after Hyatt Hotels cut its chief execu- 5004003002001000 two decades, from greater independence tive’s salary in March, it awarded him Cumulative realised CEO compensation†, 2007-16, $m for compensation committees to more so- shares and options that could, if the com- *MSCI USA index constituents phisticated setting of performance targets. pany’s share price rebounds, be worth †Salaries, bonuses and stock options. However, he concedes that bosses retain Source: MSCI Outliers above $500m not shown much more than the forgone pay. Courtney “more influence over their own pay than Yu of Equilar, a research firm, observes that any other person”. bonuses, grants of stocks and options tied others underpaid successful ones. Pay-for- Compensation committees often rely to performance at big American firms have performance “may be broken”, msci con- on advice—and political cover—from pay risen from a small portion of executive cluded. A recent paper co-authored by Lu- consultants. A recent study of 2,347 firms, compensation two decades ago to more cas Davis of the Haas School of Business by Kevin Murphy of the Marshall School of than half today. finds “strong evidence” that bosses of ener- Business and colleagues, finds that compa- gy firms see clear pay gains when stock val- nies using consultants pay more. Indepen- Total recall uations rise as a result of an oil-price spike dently, those with higher pay and more The favoured measure of performance is a which they have no way to influence. complex pay plans are also likelier to hire company’s total returns, which combine A fresh analysis by Equilar, commis- advisers. Most problematic is their use of share-price moves with any dividend sioned by Calpers, a big Californian public pay benchmarking, which has led to the payouts. As a consequence of a record bull pension fund, identifies similar trends. It ratcheting-up of pay for all bosses. As Mr market in equities after the global financial looked at the past five years of realised ceo Nzima of Calpers observes, “Everyone is crisis of 2007-09, only brought to a halt by pay for most firms in the Russell 3000 and targeting either median or above-median the covid-19 pandemic, executive pay in compared this with the companies’ total pay, so median is always going higher re- America shot up into the stratosphere. To- returns. The bosses in the top pay quartile gardless of actual performance.” Gregg Pas- day, after a rollercoaster ride this year, the made twelve times what those in the bot- sin of Mercer, another consultancy which s&p 500 is nearly back to where it was be- tom quartile did, but produced financial advises clients on pay, accepts that the fore the coronavirus struck; compensation returns only twice as good. The bosses in ratchet effect is real. “I can’t deny it,” he may continue to rise. the second-lowest pay quartile made near- says. His firm recommends that some In 2017 msci, a research firm, published ly three times as much as those in the bot- bosses, such as first-time ceos, should be its analysis of realised chief-executive pay tom quartile, even though their firms’ total paid below the median. between 2007 and 2016 at more than 400 returns were actually worse. “There is no The good news, says Pamela Marco- big public American firms. At more than evidence that boards can tell in advance gliese of Freshfields, a law firm, is that in- three-fifths of the firms, it showed no cor- who is a talented ceo,” sums up Simiso stitutional investors are paying more at- relation with ten-year total returns (see Nzima of Calpers. tention to remuneration. She points to a chart 2). Some firms overpaid lousy bosses; Critics point to problems besides re- surge in attention among big activist in- vestment funds to “say on pay” proposals, which let investors express dissatisfaction Poor salarymen with excessive pay. Top CEOs by compensation, 2019 or latest, $m Salary Other Though these votes are non-binding, managements typically respond to nega- S&P 500 0 50 100 150 200 250 300 tive votes by paring back pay. Even main- Sundar Pichai Alphabet 0.7 280.0 stream investors like BlackRock, a giant Bob Bakish ViacomCBS 3.1 130.7 fund that rarely gainsays the management Jamie Iannone eBay 1.5 73.3 on pay, are increasingly voting against compensation-committee members pro- 1.2 65.7 Robert Swan Intel moting egregious pay schemes. Bill McDermott ServiceNow 1.0 61.1 America’s influential Council of Insti- tutional Investors, which represents big STOXX Europe 600 asset managers, last year called for simpli- Tim Steiner Ocado 0.9 75.1 fying pay structures. Calpers wants to re- Soren Skou AP Moller-Maersk 20.0 18.0 place common pay packages, such as those based on three-year performance, with 3.1 24.1 Christian Klein SAP plans reflecting rigorous five-year perfor- Steve Angel Linde 1.5 21.0 mance measures, or delay payouts from Douglas Pferdehirt TechnipFMC 1.2 14.1 equity grants for at least five years. It is also rebelling against using median pay as the Source: Bloomberg favoured benchmark. 1 52 Business The Economist July 11th 2020

2 In May Vanguard, a big American mutu- al fund, warned boards not to use the pan- demics as an excuse to “create ‘easier’ per- formance targets”, adding that “at-risk pay should remain at-risk.” Glass Lewis, a shareholder-advisory firm, has said that offsetting bosses’ pay cuts with options packages may lead to lawsuits. Institutional Shareholder Ser- vices, the other big proxy adviser, has dis- couraged sudden changes to long-term compensation, especially the repricing of options. Norges Bank Investment Manage- ment, which oversees $1trn in Norwegian pension assets, has criticised the short-ter- mism of current compensation schemes, arguing that “a substantial proportion” of pay should instead be shares that are locked in for five or ten years. Incentive packages that postpone payouts may, it is true, prompt bosses to demand higher pay to compensate them Rolling along, for now for the added wait. Martine Ferland, boss of Mercer, admits a tension exists between operation with Hong Kong police after the ing equipment to produce microproces- the short term and the long term. Even so, Chinese territory adopted a new security sors for Huawei, the Chinese telecoms she is convinced change is afoot. Execu- law giving Beijing greater control (of the giant at centre-stage in the technological tives “cannot prosper at the expense” of quartet only Microsoft has significant cold war. Bernstein, a research firm, says everyone else. Mr Larcker of Stanford sees business on the mainland that could be a that if smic were to lose Huawei’s custom the pandemic as “a wake-up call for target of Chinese retaliation). that would shave 20% from its existing rev- boards”. About time. 7 You might reasonably conclude that enue and, crucially, deprive it of “most” of limp revenues and American ire would be a its expected growth. smic’s already thin drag on smic’s share price. Not a bit of it. margins may turn negative when $1.7bn in Sino-American tech tussles The Hong Kong-listed company’s market capital spending since 2016 begins to incur capitalisation has quintupled in the past depreciation costs, according to Bernstein, What goes up, and year, to $29bn. smic is teeing up a new list- which recently said in a report that smic’s ing of shares worth 46.3bn yuan ($6.6bn) shares looked overvalued. up and up on the Shanghai Science and Technology smic and its investors will hope that the Innovation Board (better known as the firm can ride out these and future bumps to star Market). It has set a price for those reach the lucrative position as chipmaker- shares that values the company at 109 in-chief to the Chinese market. Being A Chinese chipmaker brushes off Uncle times its 2019 earnings, a ratio five times backed to the hilt by China’s government Sam’s semiconductor sabre-rattling greater than that of more advanced com- will help. The question hanging over smic, imes seem tough for China’s chipmak- petitors like the Taiwan Semiconductor and all of the country’s chip ambitions, is Ting champion, the Semiconductor Manufacturing Company. It could be one of whether a combination of stockpiling kit Manufacturing International Corporation the largest listings anywhere in 2020. and negotiating with partners can keep ex- (smic). Over the past year America has at- So what is going on? The answers lie in isting supply chains in place long enough, tacked its supply chains, cutting it off from smic’s status as China’s best hope of build- even in the face of American disruption, to essential high-tech tools. It has slapped ex- ing a domestic semiconductor industry. allow for the development of domestic re- port controls on smic’s customers and en- This is a long-standing strategic objective placements. If it can, smic may flourish. If acted new rules which threaten to desig- for the Chinese Communist Party, which is not, Beijing will miss its objective. 7 nate the firm as subservient to the People’s therefore happy to put the might of the Chi- Liberation Army. The company’s sales nese state behind smic. Although the com- slumped by 7% in 2019 to $3.1bn—not the pany lags behind global competitors at the When the chips are down kind of performance expected of a Chinese moment, it is in a strong position to sell Semiconductor Manufacturing International Corp high-tech titan. chips to the large and growing Chinese Revenues, $bn smic is one of many corporate casual- electronics market. 4 ties in the escalating conflict over access to Investors who put assumptions about a advanced technology that is playing out be- company’s long-term success over its 3 tween America and China. As the two geo- short-term performance may view the political rivals try to decouple their econo- American government’s attention as a sig- mies, they and their allies have enacted nal of smic’s potential. Many Chinese pa- 2 tit-for-tat restrictions on each other’s soft- triotic day-traders probably belong to that ware and hardware. On July 6th Mike Pom- group. But the immediate risk to their in- 1 peo, America’s secretary of state, said vestment from America’s actions is real. America might ban TikTok, a Chinese- The latest assault came on May 15th, 0 owned short-video app beloved of Western when the Department of Commerce intro- 19161412100806042002 teenagers. Facebook, Google, Microsoft duced new export-control rules that pre- Source: Bloomberg and Twitter have suspended habitual co- vent smic from using American chipmak- The Economist July 11th 2020 Business 53

Online business more lucrative offerings such as travel. Meituan’s operating margins on hotel res- E-shopping frenzy ervations hover between 20% and 35%. The pandemic briefly halted domestic book- ings but by late May they had recovered to 70% of pre-coronavirus levels. Pinduoduo has taken the opposite tack to Meituan. Rather than spread its bets, it has doubled down on e-commerce. Online Investors are besotted with digital China. Two booming internet firms show why retail is growing fast enough in China to hina’s bustling digital economy has justify not being “a jack of all trades”, says Cspawned thousands of startups. Yet in BAT hunting David Liu, in charge of strategy at the firm. the eyes of many it remains “bat or bust”, to Share prices Market capitalisation He has a point. Chinese e-commerce cite a saying among jobseekers from the Sep 20th 2018=100 Jul 8th 2020, $bn sales could expand by 16% this year, to country’s elite universities. The bat in 400 14.4trn yuan ($2trn), according to eMarke- question refers to the original trio of Chi- ter, a research firm, even as total retail sales 110.6 nese internet stars: Baidu, a search engine; Pinduoduo may dip by 4% to 35trn yuan as a conse- 300 Alibaba, an online emporium; and Ten- 150.9 quence of lockdowns’ toll on bricks-and- cent, a mobile-payments and video-game Meituan Dianping mortar shops. Alibaba will capture perhaps titan. The acronym is overdue an update. 669.5 200 half of this growth. Pinduoduo will slug it Alibaba and Tencent continue to lord it Alibaba out with jd.com for the rest. Shoppers hit Tencent over digital China. With market capitalisa- 691.3 100 by the coronavirus slowdown may lean to- tions of nearly $700bn apiece, they are the wards Pinduoduo’s bargains. world’s seventh- and eighth-biggest listed Baidu 45.0 0 Central to the firm’s ascent is the con- companies, respectively. Having struggled cept of social shopping, which it describes 2018 19 20 to adapt as consumers moved from desk- Source: Datastream from Refinitiv as a fusion of Costco and Disneyland. Pro- tops to smartphones, Baidu languishes in ducts are cheaper if you buy in bulk with 319th place; its erstwhile equals can gain or fellow bargain-hunters. Users can join ex- lose the equivalent of its entire market val- day Meituan can be thought of as “a search isting groups or invite pals using WeChat, a ue of $45bn in a day or two. engine for services”, says Elinor Leung of social-messaging app owned by Tencent The bat label also belies another devel- clsa, a broker. (which holds a 16% stake in Pinduoduo). opment. Newer arrivals have been busily Some of these, like food delivery or Merchants sacrifice margins in exchange remodelling the upper reaches of China’s bike-sharing, are low-margin, high-vol- for higher volumes. cyberscape. They include firms like ume businesses. In 2019 the firm earned a Colin Huang, Pinduoduo’s founder, jd.com, a $100bn e-merchant listed in New profit of less than three cents per delivery who once worked as an engineer at Google York, Didi Chuxing, a privately held ride- (chiefly from commissions it charges res- in America, did not invent group shopping; hailing giant valued at $60bn or so, and the taurants). But it makes an awful lot of Groupon has been doing a version of it $100bn-plus ByteDance, the world’s big- them. The platform has 700,000-800,000 since 2008. But he did develop the idea, for gest unlisted startup (which owns, among drivers at its disposal. Two in every three instance introducing games which reward other things, TikTok, a short-video app yuan that the Chinese spend on having players with credits on future purchases. popular with Western teenagers). grub dropped off at their doorstep goes Chinese shoppers love it. At the end of None has set investors’ pulses racing of through Meituan. March 628m of them had made at least one late more than Meituan Dianping and Pin- Like Mobike (which is capital-intensive purchase on the app in the preceding 12 duoduo. The duo have much in common. and still unprofitable), the food business months, 42% more than the year before Both began by matching shoppers with dis- lures users who can then be directed to and 60% more than shopped on jd.com; counts (on spa and cinema tickets in Mei- only Alibaba has more active users (726m). tuan’s case and products from apples to Ap- Their average annual spending also rose, ple iPads in Pinduoduo’s). Both went public from 1,250 yuan to over 1,800 yuan. So has in 2018—Meituan in Hong Kong and Pindu- Pinduoduo’s share of Chinese e-com- oduo in New York. And both have seen merce—from 2% in 2017 to 10% last year. their share prices soar since the start of the Bernstein, a research firm, expects it to be year (see chart). They are now worth more 18% by 2024, in line with jd.com. than $100bn each. But their routes to these The shopping frenzy has boosted Pin- highs look quite different. duoduo’s revenues by 44% year on year in Start with the bigger of the two, Mei- the first quarter, to 6.5bn yuan. The money tuan. It was founded in 2010 by Wang Xing, comes from transaction fees and adverts an engineering graduate from Beijing’s bought by merchants to have their offers Tsinghua University, selling those dis- promoted in the app. Similarly to eBay but count vouchers. Like Tencent and Alibaba, not many e-commerce giants, Pinduoduo it has expanded into other areas. In 2013 it does not hold inventory or operate its own launched a meal-delivery business and a logistics network, relying on merchants to travel arm that lets users book hotels and ferry products to buyers. Instead, it burns a flights. Two years later it merged with spectacular, and growing, amount of cash Dianping, a restaurant-review and booking on sales and marketing: 112% of revenues in platform similar to Yelp. In 2018 it paid the first quarter. $2.7bn for Mobike, a bike-sharing service, Mr Liu insists these costs can easily be and entered ride-hailing, which it expand- dialled back. Experience of other market- ed last year to dozens of Chinese cities. To- Hop, skip and shop places suggests otherwise. Uber, which 1 54 Business The Economist July 11th 2020

2 also matches sellers (drivers) with buyers Chinese consumers have turned to the firm chairman and holds 81% of voting rights). (riders), has been perpetually loss-making. for necessities and, sometimes, a dose of Meituan’s path to riches is clearer. It Like Uber, Pinduoduo enjoys some “net- retail therapy. With negligible business ended last year in the black for the first work effects”—the more buyers use its app, outside China, it is, like Meituan, shielded time. Its profitable food and travel arms the more sellers it draws, who in turn at- from the Sino-American tech war making have been gaining market share from rivals tract new buyers, and so on. But, again as in life difficult for TikTok, with its mostly (such as Ele.me, Alibaba’s food-delivery ride-hailing, buyers and sellers face few non-Chinese users, or Huawei, China’s te- app, and Ctrip, China’s biggest travel agen- costs in switching to another app that of- lecoms champion. White House threats to cy). That gives its loss-making divisions fi- fers a better deal. jd.com and Alibaba have expel Chinese firms from American ex- nancial breathing room. already launched Pinduoduo clones to changes have not dampened investors’ en- Ultimately, both firms embody the ex- their vast user base. thusiasm. Nor has the sudden departure of citement over digital China’s bright pros- The market is giving Pinduoduo the Mr Huang, who stepped down as its chief pects. But tamp will only become the new benefit of the doubt. The pandemic ap- executive on July 1st and cut his stake in the bat if both firms can match Tencent’s and pears to have done it no harm; cooped-up company from 43% to 29% (he remains Alibaba’s consistently fat profits. 7 Bartleby Parkinson’s law updated

How the lockdown has affected a classic dictum about work s laws go, the dictum devised by C. into two factions. The first group, the civil servants did not necessarily lead to ANorthcote Parkinson, a naval histori- slackers, has spent the lockdown working more effective work. an, was admirably succinct: “Work ex- out the minimum level of effort they can This tendency resulted from two pands so as to fill the time available for get away with. They have no need to drag factors. First, officials want to multiply its completion.” His essay, first pub- out each task; they do what is required and subordinates, not rivals. Second, offi- lished in The Economist in 1955, has stood spend the rest of the day at leisure, sub- cials tend to make work for each other. the test of time, in the sense that people mitting the work just before deadline. For Any official who feels overworked will still refer to “Parkinson’s law”. But the this group, Parkinson’s law can be amend- ask to be given two subordinates (asking experience of working life during the ed as follows: “For the unconcerned, when for just one would create a rival). The pandemic means that Bartleby would unobserved, work shrinks to fill the time senior official will then spend lots of now like to suggest three corollaries to required.” time checking their subordinates’ work. the theorem. The second group takes the opposite How does this process apply in the At the start of his essay, Parkinson approach. Consumed by guilt, anxiety lockdown? Like their staff, managers also cited the case of an elderly lady requiring about their job security or ambition, they want to appear useful. In the office, they a day to send a postcard to her niece. The work even harder than before. Being at can seem busy by walking around and process involved time spent searching home, they find no clear demarcation talking to their teams. At home, this is for spectacles, postcard and umbrella, as between work time and leisure time. This more difficult; a phone call is more in- well as composing the message. The group is the Stakhanovites (named after a trusive than a casual chat. The answer is details may be dated but the idea is still heroically productive miner in the Soviet to organise more Zoom meetings. resonant—faced with a task, people Union). They require their own amend- Bartleby has heard from a number of procrastinate. ment: “For anxious home workers, work contacts in recent weeks that they spend When it comes to office work, the expands to fill all their waking hours.” their day going from one Zoom meeting incentives to dawdle are pretty clear. But Parkinson was making a much to another. Just as Parkinson suggested, Finish an assignment quickly, and the broader point than people’s tendency to be managers are making more work for each employee will just be given another. That dilatory. The bulk of his essay was con- other. Hence the third amendment to his second task may be even more unpleas- cerned with the growth of bureaucracy in law: “In lockdown, Zoom expands to fill ant than the first. Workers may end up government. He warned that hiring more all of the manager’s available time.” like a hamster on a treadmill, stuck in an To the extent that these meetings are endless cycle of needless effort. voluntary, this creates another divide Office workers know, however, that between slackers and Stakhanovites. The the mission itself is not the only thing. It first group will avoid such meetings and is important to be seen to be working. the latter group will sign up for all of This leads to “presenteeism”—being at them. Furthermore, in the pre-lockdown your desk for long enough to impress the days, staff could earn brownie points by boss (and even turning up while sick). In turning up for such gatherings, provided the pre-internet era this would involve they caught the boss’s eye. Mere atten- endless redrafting of memos, long phone dance is insufficient for a Zoom meeting; calls, or staring meaningfully at docu- one must be seen and heard. In turn, that ments. Thanks to the pioneering work of makes Zoom meetings longer, further Tim Berners-Lee, presenteeism now using up the time of managers and their requires less effort: many hours can be Stakhanovite subordinates (many slack- wasted on the world wide web. ers have yet to learn how to use the “raise When working at home, the boss is hand” button). It is a digital version of out of sight but not out of mind. Broadly the paperwork shuffling described by speaking, the result is to divide workers Parkinson 65 years ago. The Economist July 11th 2020 Business 55 Schumpeter The battle for low-Earth orbit

Elon, Masa and Boris. What could possibly go wrong? The world has been here before. Iridium announced similar plans in the late 1990s with gales of hype: the first call on its net- work was between Al Gore, then America’s vice-president, and a distant descendant of Alexander Graham Bell. Nine months later the firm went bust, swamped by the upfront capital costs of launching satellites. LeoSat, a firm based in Luxembourg, was founded in 2013. It shut down last year for lack of investor interest. Starlink’s chief competitor is OneWeb, with 74 satellites in orbit and hundreds more planned. It, too, went bust in March, after fail- ing to persuade even Son Masayoshi (also known as Masa), a Japa- nese tech billionaire with a stake and a well-documented affection for risky startups, to pony up more cash. But it has new backers. On July 3rd Boris Johnson, Britain’s shaggy-dog prime minister, an- nounced that his government had stumped up $500m for a 45% stake in OneWeb, and a golden share giving it control over its fu- ture. Bharti Global, an Indian telecoms firm, also put in $500m. Mr Johnson’s decision drew general bafflement—and an in- stant flurry of speculation about its rationale. Could he be trying to safeguard a domestic high-tech gem? Britain has long tried to nur- ture its small but sophisticated space sector and OneWeb is no- tionally a British firm; its parent company is based in Jersey, an is- land in the English Channel. But many of its operations, including chumpeter is only an amateur stargazer. His equipment is no satellite manufacturing, are in America. Perhaps the reasons were Sfancier than a pair of eyes and a place in the countryside, away strategic? China was circling, claims one person close to the deal, from London’s light pollution. That is enough to make out Venus, and Britain pounced to frustrate its ambitions. Except that the Mars, Jupiter and Saturn—and, occasionally, the International American court administering the bankruptcy may be reluctant to Space Station crossing the firmament. In the past few years a new hand OneWeb over to a Chinese firm. Politics almost certainly spectacle has appeared, in the form of the Starlink satellites. played a part. Britain’s exit from the European Union has limited Launched in batches by SpaceX, an American rocketry firm found- its access to Galileo, the eu’s alternative to America’s gps satellites. ed by Elon Musk, the tech billionaire behind Tesla’s electric cars, A bombastic promise to build an all-British replacement, at a cost they resemble nothing else in the heavens, floating like a train of of £5bn ($6.3bn) or more, looks dubious. Bolting a less capable white dots in tight formation. Bad weather delayed the launch of navigation service onto OneWeb’s satellites may offer Mr Johnson the latest batch on July 8th. When they do go up, they will total a face-saving way to back down, while pushing back against the nearly 600, making SpaceX the world’s biggest satellite operator. perception that Brexit has made the country parochial. SpaceX is a remarkable firm. It was founded in 2002, to further Yet there are also hopes, according to insiders, that the bizarre Mr Musk’s dream of colonising Mars. It is a case study in disrup- acquisition may work on purely commercial grounds. OneWeb has tion—a startup with no track record has humbled incumbents like priority over SpaceX for the bits of the electromagnetic spectrum Boeing and Lockheed Martin. Its rockets cost half as much as its ri- needed to beam the internet from the heavens. Those satellite vals’ do, thanks in part to their ability to land their first stages for companies that survived bankruptcy—such as Iridium—have reuse rather than dumping them in the sea in line with standard come out on the other side as viable, if somewhat dull businesses. industry practice. The firm was last valued at $36bn, more than Like railways in the 19th century and subsequent infrastructure better-known tech darlings such as Airbnb, DoorDash or Palantir. projects, globe-spanning satellite broadband may become a viable SpaceX’s rocket business alone does not justify this rich valua- proposition once the initial investors, who often overpay exuber- tion. The market for launches is small and stagnant. Mr Musk him- antly, have been wiped out. self has said that the most his firm could hope to earn from them is And Mr Musk could use a rival in low-Earth orbit. Jeff Bezos, the around $3bn in revenue a year. If he is to make it to Mars—and if his biggest tech tycoon of all, is working on a similar project, but has investors are to see big returns—he needs another plan. This is yet to put any satellites into space. In the meantime, competition where Starlink comes in. Those satellites visible from Schumpe- from OneWeb would spur innovation and prevent SpaceX from ter’s garden are the vanguard of a planned constellation of over settling into a celestial monopoly. 1,000, designed to beam the internet to every corner of the globe. Satellite broadband is not a new idea. But existing options are A giant leap of faith expensive and slow. Starlink’s cheap, mass-produced, low-flying Can the British government be a source of competitive pressure? satellites would, SpaceX claims, offer a service comparable to The politest description of its entrepreneurial record is “spotty”— earthly broadband at competitive prices. It could serve poorly con- just ask owners of clunkers such as an Austin Allegro or Morris Ma- nected villages in rural Africa (or rural America for that matter), as rina, produced after the partial nationalisation in 1968 of British well as oil rigs or cargo ships at sea. Mr Musk has noted that the glo- Leyland. OneWeb may need a further injection of cash if it is to bal telecoms market is worth roughly $1trn. If SpaceX captured complete its constellation. British taxpayers may never see a fi- even a fraction of that, Morgan Stanley, a bank, recently opined, it nancial return on their investment. But if OneWeb keeps Mr Musk could be worth anywhere from $50bn to $120bn or more, making on his toes even for a little while, their loss may turn out to be glo- its present valuation look like a bargain. bal consumers’ gain. Stranger things have happened in space. 7 56 Finance & economics The Economist July 11th 2020

The global economy nomic activity in Germany suggest that it held up better between March and May How to feel better than it did in France, Italy or Spain. That may be because of its heavy reliance on manufacturing, where maintaining both output and a social distance is easier than, say, in retail or hospitality services. Capital ORFORD Economics, a consultancy, argues that Po- Some economies are recovering speedily—but our analysis shows just how fragile land will experience Europe’s smallest con- consumer confidence can be traction in gdp this year in part because it rford ness, on Britain’s east coast, like an l or a w. The Economist’s analysis of relies little on foreign tourists. Owas a site for military tests in the 20th real-time mobility data also shows how The stringency of official lockdowns, century. Large pagodas on the shoreline, easily economic recoveries can go wrong, and changes to people’s behaviour, has still standing today, were designed to pre- as consumers react to the possibility of clearly played a huge role. Research by vent blasts from doing damage to the sur- fresh outbreaks. Goldman Sachs, a bank, finds that lock- rounding wetlands. On July 4th the area Some countries have a tougher job on down stringency—in terms of both the braced itself for another sort of explosion. their hands because their output has fallen strength of official rules and how enthusi- “Super Saturday” marked the opening of more since February, when lockdowns astically people practised social distanc- pubs and restaurants for the first time started to be imposed. No one knows for ing—is strongly correlated with the hit to since lockdown began. But in Orford the sure yet who has fared well or badly. gdp economic activity, as measured by surveys. beery bomb never detonated. The Jolly Sail- data for the second quarter are not yet By this measure, Italy had the tightest lock- or, a pub near the quay, had only a handful available, and in any case will probably be down for the most time (see chart 1 on next of customers in the garden. Across Britain subject to large revisions over time, as is of- page). A back-of-the-envelope calculation it was the same story. Restaurant reserva- ten the case in downturns. But industrial suggests that its gdp for the first half of tions remained 90% lower than they were structure is one indication. Surveys of eco- 2020 is likely to come in about 10% lower the year before. than it would have been otherwise—a lot of The fate of the Jolly Sailor hints at the ground to make up for a country that strug- Also in this section difficulties that rich countries face as they gled to grow even before the pandemic. By lift lockdowns. Most forecasters reckon 57 Market mania returns to China contrast, South Korea’s gdp looks likely to that advanced-economy output, after fall by 5%. 58 The race to lead the WTO plunging in the first half of 2020, is likely to The lifting of lockdowns is now boost- regain its pre-crisis level some time after 59 Europe’s long trading hours... ing economic activity. By how much, how- 2021. But not all recoveries will be equal. ever, varies from country to country. Real- 59 ...and its ultra-safe bonds Some rich countries, such as Germany and time activity data suggest that America and South Korea, look best placed to bounce 60 Buttonwood: The default cycle Spain are laggards, not only in terms of vis- back—a “v-shaped recovery”, in the jargon. its to restaurants but also to workplaces 61 Free exchange: Jerome Powell The path of gdp elsewhere may look more and public-transport stations. Others are 1 The Economist July 11th 2020 Finance & economics 57

2 powering ahead. By the end of June, eco- China’s stockmarket 1 nomic life in Denmark and Norway had Not all lockdowns are equal pretty much returned to normal. Danish Daily lockdown-severity scores* A bull market retail sales actually rose by more than 6% February 1st-June 30th 2020 Daily score year-on-year in May (compared with a dou- returns ble-digit decline in Britain). Germany’s res- 020406010080 taurants were closed in May. But in recent Italy days they have returned to full capacity SHANGHAI France Market mania comes to China again. (see left-hand panel of chart 2). Can it last this time? A number of factors influence how fast Britain an economy can bounce back. The state of n chinese stockmarket mythology, households’ finances is one. Government United Ithe rarest of beasts is the slow bull. The support has shored these up: in places States past couple of decades have brought two where stimulus payments have been large Germany fast bulls: vertiginous surges in share and focused on families, people have built prices, neither lasting more than a year. South up large cash reserves, which they can now Korea Those soon led to fast bears when stocks spend. Take the case of South Korea. Strictest → crashed and, eventually, to slow bears as Households quickly spent over 80% of a Sweden the descent became more gradual. Most of 10trn-won (0.5% of gdp, or $8.4bn) emer- *Scores derived from official restrictions and social-distancing the time there have been what might be gency handout. As a result, its economy data. Data at July 6th 2020 termed long worms as the market moved Sources: Goldman Sachs; Blavatnik School of Government; csi might suffer less than other big advanced Google; The Economist sideways, such that the 300 index, a economies. Aggregate household income gauge of China’s biggest stocks, has aver- in Japan is forecast to rise this year, thanks aged the same level over the past five years in part to generous emergency payments halve the intensity of its lockdown from its that it first reached back in 2007. The slow from the state. By contrast, fiscal stimulus peak level. Many other European countries bull—a steady, almost dependable, rise in Italy, which had staggeringly high gov- took ten weeks, however. That perhaps ex- year after year, well known to investors in ernment debt going into the crisis, has plains why Britons and Spaniards are still America—has remained elusive. been less generous. so cautious. China’s indomitable punters now hope All this is nothing without consumer The latest mobility figures show pre- that a trundling taurus has at last arrived. confidence. Americans have oodles of cisely how fragile consumer confidence Stocks have jumped by 16% so far in July stimulus cash in their pockets (see United can be. People in American hotspot states, and they are up by nearly 40% from their States section). Even so, they are cautious. such as Arizona, Florida and Nevada, low in March. That might sound like anoth- A raft of evidence shows that if consumers where the virus is surging, seem to have be- er fast, doomed bull run. But some believe are fearful, then lifting lockdowns makes come more cautious (see right-hand panel this one will be more enduring than those little difference to economic outcomes. An of chart 2). A high-frequency measure of of the past. analysis of American counties by Austan American credit-card spending main- For starters, China appears to be in Goolsbee and Chad Syverson of the Univer- tained by JPMorgan Chase, a bank, stopped much better economic shape than other sity of Chicago, for instance, finds that a growing around June 21st—and a closely large economies. Because investors must higher number of deaths from covid-19 is watched measure of weekly retail sales has allocate their funds somewhere, there is al- associated with lower consumer activity. barely increased since May. More omi- ways a comparative element to stockmark- That seems to be the case at the country nously, high-frequency measures of the la- et performance. China is the only big econ- level too. Those with a smaller number of bour market suggest that employment in omy forecast to grow this year, and is also deaths from covid-19 per million people small businesses is once again declining. expected to record the strongest rebound have bounced back more decisively, ac- The risk of relapse is not confined to Amer- next year, according to projections pub- cording to an analysis by The Economist us- ica. A huge drop in Australian restaurant lished by the imf at the end of June. There ing data from Google on visits to retail out- diners in early July coincided with a large are grave concerns about the toll that the lets, workplaces and public-transport coronavirus outbreak in Victoria. Until the coronavirus might take in America during stations. Confidence today may also be virus is stamped out, only one thing can be the flu season in the autumn. By contrast, shaped by the length of time spent under said about the recovery with certainty: it China has shown every intention of smoth- lockdown. Norway took just ten days to will be shape-shifting. 7 ering renewed outbreaks. That has given people and businesses greater certainty about the path ahead. 2 Undercooked Market dynamics also seem to be help- Seated diners in restaurants on the OpenTable network ing. Even after the rally, valuations in Chi- 2020, % change on a year earlier na are reasonable. The csi 300 trades at 14 times the value of company earnings, far s p Selected countries United States, five-day moving average below the 27-times multiple of the & Australia 50 0 500, America’s most-watched share index (see chart on next page). Foreign investors Germany -25 0 have more ways to enter China’s previously Hotspot states† walled-off market; many are compelled to -50 do so, because its shares are now included -50 -75 in key indices tracked by institutions. Dur- United ing the first three trading days of July, 44bn States Other states‡ Britain -100 -100 yuan ($6bn) flowed into Chinese equities Feb Mar Apr May Jul*Jun Feb Mar Apr May Jul*Jun via accounts in Hong Kong, a record high Sources: OpenTable; CDC; BEA; The Economist *To July 6th †States that do not meet CDC guidelines for reopening ‡Where data available for any three-day period. Although more investors have started 1 58 Finance & economics The Economist July 11th 2020

2 buying shares with borrowed money, the outstanding balance of such margin trad- ing is just over half the peak it reached five years ago, during China’s most recent man- ic run. It is now easier for companies to list shares on the mainland, so new offerings should help absorb some of the cash rush- ing into the stockmarket. “This lays the foundation for a slow-bull market that could last for ten or 20 years,” says Chang Shishan of Kangzhuang, an asset-manage- ment firm. Nevertheless, it is hard to shake the feeling that the optimists might once again be getting ahead of themselves. The out- look for profitability, which ultimately should determine share prices, is still grim. Over the first five months of 2020, in- dustrial profits were down by 19% com- Global trade pared with a year earlier. Most worrying is the way that the Chi- Leading question nese media are swinging into cheerleading mode. If past episodes are anything to go by, this is one of the telltale signs of irratio- nal exuberance. “The clicking of the bull’s hooves is a beautiful sound for our post-vi- rus era,” declared a front-page editorial in WASHINGTON, DC The race to lead the World Trade Organisation begins—and could get messy the China Securities Journal, a state-run newspaper, on July 6th. The Shanghai Secu- nd they’re off! On July 8th the window negotiations will kick in. Just as the quest rities, its sister publication, was less poetic Afor members to nominate the next di- for consensus can sap ambition from trade but more direct in an article that was post- rector-general of the World Trade Organi- talks, the search for a new director-general ed online on July 3rd: “Hahahahaha! It sation (wto) closed. Over the next few could end with members plumping for looks more and more like a bull market!” months members will try to pick between whoever gives the least offence. Robert Healthy bulls need only a diet of grass. In- eight candidates, each hoping to rescue the Lighthizer, the United States Trade Repre- jecting them with steroids is an invitation institution from its present sorry state. The sentative, has already said that “any whiff” to trouble. 7 process will highlight some of the wto’s of anti-Americanism could lead him to use best features—but will also show why the his veto. organisation is in such a mess. The race will probably also highlight the Double bubble? Fans of the multilateral trading system tendency of the wto’s constituents to talk boast about its openness. In line with that past each other. A new survey of govern- Price-to-earnings ratio principle, the top job at the wto is not sewn ment officials, academics, ngos and busi- 30 up for a European or an American, unlike ness groups published by the European S&P 500 those at the imf or the World Bank. In fact, University Institute (eui) finds that many 25 there are no candidates from America, Chi- Geneva-based national representatives 20 na, the European Union, India or Japan. want a new chief to prioritise restoring the Nominations range from Egypt and Moldo- Appellate Body, a sort of supreme court for 15 va to Mexico and South Korea. trade disputes, which the Americans 10 Members have several credible candi- nixed. But they are less interested in re- CSI 300 dates to choose from. (Britain’s nominee, forming the dispute-settlement system, 5 Liam Fox, is not one of them.) Nigeria’s without which the Americans will not get candidate, Ngozi Okonjo-Iweala, is a politi- on board. 0 cal heavyweight: she is a former finance Expect the months ahead to reveal the 2010 2018161412 minister and has years of managing opera- disconnect between candidates’ ambitions tions at the World Bank under her belt. and what the institution can achieve. Ms China, outstanding balance of margin trading* Kenya’s pick, Amina Mohamed, is a trade Okonjo-Iweala has pledged to mediate be- Yuan trn heavyweight: she chaired the wto’s minis- tween America and China. Good luck with 2.5 terial conference in 2015. that. Egypt’s Abdel-Hamid Mamdouh has wto 2.0 From July 15th onwards, candidates will promised to “reboot” the ’s ability to receive a grilling from members. Then the negotiate new rules. But the director-gen- 1.5 wto’s consensus-building skills come into eral can only move as far as the members play: all 164 members will have to agree on want—and members do not want to make 1.0 the winner. The process will be a little like the concessions needed. therapy, says Hosuk Lee-Makiyama of the The victor would therefore inherit a dif- 0.5 European Centre for International Political ficult job—if, that is, one is eventually cho- 0 Economy, a think-tank. “They don’t really sen. In today’s fraught circumstances, con- 20181614122010 understand what they want until they’ve sensus may not be reachable. The bar is low Source: Wind *Amount borrowed to buy stocks sat and talked about it.” enough that the appointment of any direc- At this point, the messy reality of trade tor-general would count as a success. 7 The Economist July 11th 2020 Finance & economics 59

Stock exchanges even entice more activity. The European Union Starting an hour later and finishing a bit Down time earlier would certainly mean less stress for Seeking haven traders, who have to be at their desk at least an hour before markets open. That might attract more diverse staff, notably women, not just in trading but in all the finance jobs PARIS that surround it. The pulse of the financial Europeans quibble about working The revival of a vanishing financial day—when companies release results, for hours: the finance edition breed—the ultra-safe European bond example—is dictated in part by when mar- n the popular imagination, Americans kets open and close. he euro zone has not been a hospita- Itoil endlessly in the office while their By and large, though, the stock ex- Tble place for investors seeking safety in European counterparts arrive late, lunch at changes are not keen. In recent weeks they recent years. The currency area’s pool of su- leisure and depart punctually. If that were have either rejected the idea outright or per-safe, aaa-rated sovereign securities ever true equity traders were never let in on kicked it into the long grass. They argue shrank by 40% between 2007 and 2018. Rat- the scheme. Opening hours on stockmark- that retail investors would find it harder to ing agencies downgraded some of its mem- ets in Europe are some of the longest in the place their orders outside their own work- bers during the debt crisis of 2010-12. Two world, keeping financiers at their Bloom- ing hours. The overlap with Asia, though of its remaining top-rated issuers—Ger- berg terminals far longer than those fol- minimal, gives Europe special status in the many and the Netherlands—have energeti- lowing American or Asian bourses. Despite financial world, even as the old continent’s cally hacked away at their debt piles. that, a proposal to cut back trading hours is markets are dwindling in relative impor- The pandemic might help alleviate the making little headway. tance. And if the days are too long for trad- shortage. Germany, once fixated on its That European markets open early and ers, perhaps they could simply work in “black zero”, or balanced budget, will go close late is partly a function of geography. shifts instead. deeply into the red. It may run a fiscal def- Frankfurt, London and Paris (among oth- Surprisingly, the push for shorter hours icit of as much as 7.5% of gdp this year, ers) aspire to be a kind of bridge between is coming from the Anglo-Saxons of the reckons the Bundesbank. A raft of issuance Asia, where stock exchanges close as Eu- City. The London Stock Exchange is the may also come from an unusual source: the rope opens, and America, which gets going only bourse to have responded warmly to European Commission. If plans for it to fi- towards the end of its trading day. But that the pitch for shorter days. That could be be- nance the eu’s recovery spending go ahead, means eight-and-a-half hours of trading, cause London opens an hour earlier, at it could become a big influence in global from 9am to 5:30pm. That is two more than 8am, in order to synchronise with conti- capital markets. at the New York Stock Exchange, where nental exchanges. And hours will only be The commission already issues a mod- vastly more shares switch hands. Tokyo’s cut if everyone agrees to make the shift si- est amount of bonds on behalf of the Euro- market is open for just six hours, interrupt- multaneously. pean Union, which it mostly lends on to ed by lunch. Part of the reason for exchanges’ reluc- member states. Its debt stock amounts to Late last year trade groups representing tance is that they worry that banks are an- €52bn ($59bn, or 0.4% of eu gdp in 2019). investors that buy shares and bankers that gling to match buyers and sellers of shares Plans to fund the recovery from the pan- sell them had together suggested to opera- themselves, as they do outside trading demic will take this much higher. From tors of European stockmarkets that the hours. Plenty of investors may even be September it will raise €100bn, which it working day be shortened. Opening an wondering whether humans need to be in- will in turn lend to countries in order to fi- hour later and closing half an hour earlier, volved, given that most financial transac- nance temporary-employment schemes. say, would concentrate buying and selling tions these days are conducted by ma- The bigger prize, though, would be the in a shorter window. Far from cutting chines. Flesh-and-blood traders angling “recovery fund”, which is soon to be debat- traded volumes, they argued, the smaller for shorter hours may soon find they will ed by national leaders. This would raise and more liquid trading window might be working none at all. 7 €750bn on the markets in order to fund grants and loans to member states. Though it has the support of most countries, in- cluding that of Germany, a few northerners are yet to sign up to the idea (see Europe section). If it goes ahead, the commission’s stock of debt would be smaller only than those of the union’s four largest members, France, Germany, Italy and Spain. Despite the uncertainty, the wave of is- suance has piqued investors’ interest. Typ- ical holders of the commission’s bonds are European institutional investors, but Asian ones looking to diversify their port- folios away from dollar exposures hold some too. (Precisely how safe the bonds are deemed to be by the rating agencies, though, will depend on the small print on members’ guarantees, which is yet to be fi- nalised.) Another buyer of commission debt, albeit bought from other traders rath- er than directly, could be the European Central Bank. A tenth of its purchases made Counting down the hours through its quantitative-easing scheme are1 60 Finance & economics The Economist July 11th 2020

Buttonwood Default settings

The corporate-bond market has enjoyed a mini-boom. But defaults are on the way t was a company revered by business- overhang of debt rated bbb, a notch above ones, when they are trading at a price Ischool gurus and investors alike. Brit- junk. The fear was that a deluge of falling much below their par value. And there is ish consumers cherished it for its value- angels would overwhelm the speculative- still a sizeable rump of bonds that trade for-money clothing. Its own-brand grade market. That this didn’t happen is in at distressed prices—defined as yields biscuits were unrivalled. But the glory large part down to America’s Federal Re- that are ten percentage points above days of Marks & Spencer are long gone. serve, which has backstopped the cor- those of government bonds (see chart). As if to underscore this, it recently be- porate-bond market. Since March 23rd, This default cycle will be more in- came a “fallen angel”: its bonds were when the Fed first announced it stood dustry-specific than the one following demoted to speculative-grade (or “junk”) ready to buy corporate bonds, companies the recession in 2008-09, says Mark status by s&p, a rating agency. Many have issued more than $1trn-worth. Kiesel of pimco, a big bond house. One other once-admired companies have Yields on the best investment-grade lot of vulnerable firms had cloudy long- been similarly humbled. Ford, Renault credits—low-debt firms in defensive term prospects even before the pandem- and Kraft Heinz are among the bigger sectors like technology or health-care ic—think carmakers, oil firms and retail- angels to have fallen in recent months. products—have fallen ever closer to those ers. Another lot, including airlines and Companies are mercilessly sorted by on government bonds. These are far from hotels, may be permanently scarred by recessions. The strongest credits grow default. But not every issuer has been changing consumer behaviour. stronger. The weakest investment-grade saved. Corporate defaults have already A bounce-back in economic activity firms descend into junk territory. And picked up. s&p expects the trailing 12- seems assured. But there is still much the most frail speculative-grade firms go month default rate for junk bonds to rise to uncertainty about what comes after that. into default. Just a few months ago there 12.5% in America and 8.5% in Europe by Even a smooth recovery will leave some was a real concern that the sorting would March. Many debt-laden firms in America firms insolvent. And setbacks are likely. be too brutal. Good companies might go opt for the protection of Chapter 11bank- Investors seem willing to take a punt on under for a want of cash to see them ruptcy, which allows them to keep operat- risky credits all the same. In part this is a through the covid-19 shutdown. But ing as they settle their debts. In some desperate search for yield when the governments and central banks acted cases, the trigger for default is a “dis- safest bonds yield next to nothing. But decisively to support the economy. tressed exchange”, where a company buys there are other considerations. When the Stockmarkets fell, and then rallied. back its own bonds, or swaps them for new Fed buys corporate bonds, investors feel Corporate-bond issuance surged. invited to follow its lead. And if a firm Now you hear a different concern: not has access to cash, it has a chance to stay that some worthy firms might die, but Distress signals alive—and perhaps eventually to repay that too many unworthy firms will live Speculative-grade bonds trading at spreads greater its debts. “Liquidity allows companies to on in a zombie-like state. That is a tes- than ten percentage points*, % of market value extend their lives so you’ll have more pgim tament to the dramatic change in market 80 survivors,” says Robert Tipp of , an mood. This does not mean that the angel- asset manager. ic and diabolical are treated exactly the History says you get the rally first, and 60 same, though. This particular turning- then defaults peak: 2009 was a great year point in the business cycle has its own for corporate-bond returns even though peculiarities, but in some important 40 plenty of firms stopped paying their respects it mirrors the past. And the United creditors. Soon attention will move on. States Europe general pattern after recessions is for 20 The next phase of the cycle is one of corporate-bond markets to rally months balance-sheet repair, says Max Blass of before defaults reach a peak. 0 Morgan Stanley, a bank. Firms will pay Begin, though, with the peculiarities. 20001997 05 10 15 20 down debt to lower their cost of cred- Even before the recession struck there Sources: Morgan Stanley *Spreads on it—to avoid becoming a fallen angel, or was a widespread concern about an Research; ICE; IHS Markit government bonds perhaps even to become a rising star.

2 of “supranational” debt issued by Euro- act as a benchmark euro-denominated as- set would help to break the loop. pean institutions. set? The lack of one is often blamed for the For the bonds to become a benchmark Safe assets will continue to be in high single currency’s failure to make much of a asset, investors would need to trade them, demand after the pandemic, as economic dent in the dollar’s status as an interna- rather than hold them to maturity, as many uncertainty and an ageing population push tional reserve currency. A benchmark do now, says Lorenzo Bini Smaghi, the up the saving rate, says Agnès Belaisch of might also help better integrate banking chairman of Société Générale, a French the Barings Investment Institute, the re- systems across the eu. For years members bank, and a former member of the ecb’s ex- search arm of Barings, an investment firm. have been unable to agree on a common de- ecutive board. Enthusiasts point out that One sign of that, she points out, is inves- posit-insurance scheme because lenders the scale of the issuance might mean more tors’ keen interest in Austria’s 100-year tend to hold vast amounts of home-coun- secondary trading. The commission also bond issued in June. The sale was more try debt. That exposes them to trouble in plans to issue bonds across a range of ma- than ten times oversubscribed, and the government-bond markets, as the disas- turities up to 30 years, helping build a yield bond now trades at a yield of 0.7%. trous events of the sovereign-debt crisis curve. But for the moment, it all depends Could the commission’s bonds one day showed all too clearly. A common safe as- on the politics. 7 The Economist July 11th 2020 Finance & economics 61 Free exchange Which way, Jay?

Americans need more guidance from the Federal Reserve November, Mr Powell reckoned there was “still plenty of room for building on these gains”. When the pandemic struck, he moved quickly to limit its economic damage. The Fed launched an armada of lending programmes to keep financial markets functioning, swiftly slashed its main policy rate back to zero, and bought nearly $3trn in assets using newly created money. Congress acted too, passing legislation to help struggling firms and households. Amid America’s flailing institutions, however, Mr Powell’s Fed at times seemed uniquely competent. The nature of the covid-19 downturn is now changing. The first steps towards reopening helped the economy claw back some of the enormous output losses sustained between February and May. But the early rebound masks a grim long-run outlook. Although employment jumped by nearly 5m in June, an astounding rise, the level is still nearly 15m below that in February. The number of per- manent job losers rose by nearly 600,000. Forecasts have become gloomier. New projections by the Congressional Budget Office suggest that America’s economy will not return to operating at full capacity until 2028 at the earliest. Even by 2030, the unemploy- ment rate may be no lower than when Mr Powell took over. Mr Powell thus finds himself in a position uncomfortably simi- lar to that of Ms Yellen and Ben Bernanke, who served as chairman ou may think that central banking is a sort of macroeconomic in 2006-14: of having exhausted conventional monetary tools just Yengineering—tweaking an interest rate here or a financial reg- as a long period of economic weakness looms. Like them, Mr Pow- ulation there. But psychology enters into it, too. In order to achieve ell has emphasised that more fiscal stimulus is needed. But he strong growth, people need to spend today as if the health of to- seems in no rush to try unconventional policy tools, such as set- morrow’s economy were assured. That makes communication ting caps on long-term interest rates, cutting short-term rates be- critical. Early on Jerome Powell, the chairman of America’s Federal low zero or talking more explicitly about the path of future policy Reserve, showed signs of an aptitude for managing collective con- (known as forward guidance). Mr Powell seems to be reticent not fidence. He is plain-spoken, with a charm that often eludes eco- because he thinks the costs of such tools outweigh the benefits, nomic policymakers. But now he faces a truly forbidding environ- but because he believes he has done enough. “I would say that we ment. Both his legacy and the trajectory of America’s recovery think that monetary policy today is currently well positioned,” he depend on how he wields the credibility he has earned. noted in June. The reluctance may seem sensible. Further reduc- When Mr Powell took over as chairman in 2018, expectations of tions to already-low interest rates would provide a modest boost to him were modest. President Donald Trump chose him rather than demand at best. The logic of forward guidance is that the promise offering Janet Yellen—a respected economist—a second term, to tolerate above-target inflation tomorrow encourages spending even though she had done the job ably. Mr Powell had studied law today. But in the short run, the danger posed by covid-19 is quite not economics, and spent most of his career in finance. Though a clearly the greatest impediment to rapid recovery. The Fed can do Republican, he had been nominated to the Fed’s Board of Gover- nothing about that. nors by Barack Obama, Mr Trump’s predecessor, as a concession to Congressional Republicans, who habitually stonewalled his Talkin’ bout my expectations Democratic nominees. Inaction is riskier than it seems, however. The Fed cannot easily In fact the early Powell years proved surprisingly good. The eco- make things better for as long as the pandemic rages, but it can nomic expansion he had inherited stretched into the longest on make things worse. Without clear guidance from the central bank record. By early 2020 America’s unemployment rate had sunk to on the sorts of conditions that would justify a rise in interest rates, 3.5%, the lowest level in half a century. In 2018 the central bank expectations of rate rises and a slow recovery—like the last one— launched a review of its tools and communications, which includ- could become entrenched. Mr Powell has cultivated a reputation ed “Fed Listens”, a series of public events. These ran the risk of be- as a champion of full employment; this could allow him to make a ing little more than a public-relations exercise. Instead, they seem credible commitment to keeping policy accommodative even as a to have made a meaningful impression on Mr Powell. He credits rapid rebound unfolds. He could even borrow a trick from Mr Ber- them for the insight, frequently mentioned in his speeches, that nanke, for instance, who in retirement has argued that when inter- low-income workers are often the last to benefit from economic est rates fall to zero, central bankers should consider adopting a expansions. A single-minded focus on low inflation can thus sys- temporary price-level target, promising to make up for any short- tematically impose hardships on working-class households. falls in inflation that occur during a recession, and tolerating tem- It is difficult to be sure, but this lesson seems to have influenced porary periods of above-target inflation. policy. The Fed cut its benchmark interest rate by 0.75 percentage Too little communication on policy could mean more perma- points in the second half of 2019 despite warnings—some from nent job losses, entrenched pessimism and the erosion of Mr Pow- within—that doing so when unemployment was historically low ell’s credibility. Few would blame him if another devastating and asset prices high could fuel inflation or provoke financial in- downturn is followed by another anaemic recovery. But he may stability. Assessing America’s impressive employment figures in just be able to persuade Americans to expect something better. 7 62 Science & technology The Economist July 11th 2020

The 23rd International AIDS Conference newly infected in 2019 and 690,000 of those already infected died. At the end of Social distancing the year that left 38m people living with the virus, of whom 25.4m were taking antire- troviral (arv) drugs of one sort or another to keep their viraemia under control. But, though these numbers are huge, they are NOT SAN FRANCISCO AFTER ALL all heading in the right direction (see chart This year’s aids conference brought snippets of good news. But the hiv 1, on next page). pandemic is nowhere near over yet The world’s aids establishment is also ven in the days of the internet, confer- different viral pandemic, covid-19, is that coming closer to achieving its next self-im- Eences remain the lifeblood of science. the organisers of this year’s aids confer- posed target, known as 90:90:90. This is to Young thrusters can meet old fogeys and ence decided not to hold it in San Francisco identify 90% of those infected, treat 90% of lobby them for jobs. Ideas can be swapped after all. Instead, they transferred every- those so identified, and suppress to unde- in the knowledge that no electronic trail thing to cyberspace. tectability the viral load of 90% of those so will come back to haunt you. And journal- treated. The aim, set by the un in 2014, was ists can swoop, scoop up a bundle of inter- Drumming home the facts to do all that by the end of this year. It al- esting stories and, with luck, provide an A paradox of aids is that it has dropped off ways seemed ambitious, and is most un- update to their readers and viewers of de- many people’s radar screens precisely be- likely to happen. At the end of 2019 the cen- velopments in whatever field the confer- cause the response to it has been so suc- tral estimates of the numbers in question ence was about. cessful. That risks neglect of the problem, were 81%, 82% and 88% respectively. The International aids Conferences, which in turn risks a rebound of the dis- But again, things are moving in the right the first of which was held 35 years ago, in ease. unaids, the United Nations’ agency direction. Fourteen countries, including Atlanta, Georgia, have done all these jobs charged with combating the hiv pandem- Botswana, Cambodia, Rwanda, Zambia and well. But they have also had two others. ic, released its latest report on July 6th, the Zimbabwe, report that they have reached One is to bang a drum which reminds the day the conference began. On the face of the 90:90:90 goal. Two of them, Switzer- world that aids is still a curse on human- things, it makes grim reading. Though the land and Eswatini (formerly Swaziland) re- ity—hence the particular welcome offered error bars are wide, some 1.7m people were port 95:95:95—which is actually the target to journalists. The second is to mix experts for 2030. Though Eswatini is a small coun- and activists from rich countries and poor try, it has the highest prevalence of infec- Also in this section for the better exchange of problems and tion on the planet (27% among 15- to 49- solutions. Much of this mixing is ser- 64 Ancient luminescence year-olds), so that is a welcome success. endipitous face-to-face contact. It is there- There are still worries. As chart 2 shows, 65 Delayed cooling fore poignant that one consequence of a the cash available to deal with hiv in poor 1

The Economist July 11th 2020 Science & technology 63

2 and middle-income countries—the places The two established patients, who, 1 where it is most prevalent—has been fall- The right track though no longer anonymous, are still ing for the past couple of years. That is an Global number of new HIV infections widely known as the Berlin and London pa- especial problem in the case of this virus, and AIDS-related deaths, m tients, were recipients of carefully chosen for one of the costs involved, the supply of 3 bone-marrow transplants intended to treat arvs to those living with it, inevitably in- blood cancers that they were suffering creases with success, since each life saved from. With the recipients’ consent these must be sustained by drugs indefinitely. 2 were made from donors who had a rare ge- Another concern is the effect of co- netic mutation which confers immunity to vid-19. The economic downturn caused by Infections hiv infection. This is not a realistic route to the new coronavirus means hiv may not 1 a routine treatment, though, because it is keep its priority status among finance min- far too dangerous and expensive. What isters. And, more immediately, covid-19 Deaths happened to the São Paulo patient, as he poses a threat to the continued flow of 0 will no doubt come to be known, may be. Dr arv s. By July 1st 36 countries had made re- 1916141210080604022000 Diaz’s hope is that this man has been cured ports to the World Health Organisation of Source: UNAIDS using workaday drugs. disruptions to services which provide The method Dr Diaz employed is called these drugs. Together, these places are “kick and kill”. The “kick” part involves ac- home to 11.5m recipients of arvs—about Cabotegravir also seems to be more ef- tivating all cells with hiv genes integrated 45% of the world’s total. In 24 of them, fective than Truvada. A trial of 4,600 volun- into their chromosomes, in order to switch home to 8.3m users, stocks were reported teers (gay men and transgender women) those genes on and thus turn the cells into as “critically low”. unaids suggested in spread across Africa, Asia and North and virus factories. Cells with integrated hiv May that a six-month-long disruption to South America was so successful that it was genes are invisible to the immune system. arv treatments in sub-Saharan Africa stopped in May, 22 months before its Those where hiv is active are not. They will might cause around 500,000 deaths. scheduled end. A parallel trial on women be sought out and destroyed—the “kill” volunteers, which began more recently, is part of the treatment. Injections of hope now being watched closely to work out if it With luck, covid-19 will be a blip. In the lon- is having a similarly positive outcome. Kick, kill and cure ger term, though, the search continues for Periodic injections rather than daily The trick is to find a suitable combination better ways both to treat those currently in- pills may also be on the cards for the treat- of molecules to do the kicking without the fected with hiv and to stop others joining ment of those already infected. Once again, now-activated virus getting out of control. their numbers. cabotegravir is involved. Two trials which Dr Diaz’s mixture is a pair of potent arvs A vaccine seems as far away as ever, and reported last year, of a combination of it called dolutegravir and maraviroc, and a little news emerged at the conference to and another antiretroviral, rilpivirine, sug- derivative of vitamin b3 called nicotin- change that assessment. Another means of gest that this formula is just as effective, amide. He administered dolutegravir, ma- prevention has, however, been advancing when injected once a month, as are stan- raviroc and nicotinamide to a group of five with impressive speed. This is a technique dard oral drugs taken daily. volunteers, for 48 weeks, as part of a wider called pre-exposure prophylaxis (prep). It Advances in prevention and treatment, investigation into possible treatments for works by offering specially tailored formu- then, are clearly on the cards. One of the hiv. Results from one of these volunteers lations of arvs to people at high risk of con- conference’s most intriguing announce- suggested that the treatment might have tracting hiv. ments, though, concerned the tantalising worked and this patient stopped taking hiv The established version of prep uses a possibility of a cure. medicine altogether in March 2019. His combination of two drugs, emtricitabine Until now, only two people were blood is still virus-free. and tenofovir, known collectively as Tru- thought to have been cured of aids. In this Caution is needed here. Dr Diaz has not vada. According to unaids almost 600,000 case the term “cure” means a patient can sampled solid tissue such as lymph nodes people (mostly gay men) took Truvada at stop taking arvs without the virus emerg- where hiv tends to hide, nor has his claim least once in 2019. As is often the case with ing from the chromosomes in which it has that his patient’s blood is virus-free been new medicines, cost has dictated that a lot been hiding. Ricardo Diaz of the Federal independently verified. But if confirma- of these people live in rich countries. University of São Paulo, in Brazil, thinks tion comes, and the patient continues to do Truvada is now, however, being de- that there may now be a third example. well, then this would be an important re- ployed in poor countries, too. According to sult. A safe, permanent alternative to a life- prepWatch, a not-for-profit clearing house time on arvs would be a wonderful thing. 2 for prep-related information, as of April Up and down we go So, did the enforced transfer to cyber- this year about 56,000 people in Kenya Resources for HIV in low- and middle-income space work? As a one-off, certainly. More were taking the drug combination—just countries, by source, $bn, 2016 prices than 20,000 people registered, a number under half the target set for that country by Domestic* Global Fund similar to previous meetings, and the lec- pepfar , the body that disburses much of United States† Other international‡ tures themselves were well attended. As to America’s aids-related foreign aid. 20 those who came, Gopal Shrestha, a Nepa- p ep hiv And r is getting better. A drug called 15 lese who was the first -positive person cabotegravir is being tested for the pur- to climb Mount Everest, said he found the pose. Cabotegravir is an integrase inhibi- 10 meeting fruitful. And Mark Dybul, the hiv pepfar tor—meaning that it works by stopping 5 founding head of , while regretting copying its genome into the chromosomes the difficulty of remote networking, ob- of its host cells, an important stage in its 0 served that future conferences could have life cycle. Unlike Truvada, which must be 1916141210080604022000 the best of all worlds by permitting both taken daily, by mouth, prophylactic cab- *Public and private †Bilateral ‡Includes philanthropy and physical and virtual attendance. If that countries outside the OECD Development Assistance Committee otegravir is delivered as an injection once Source: UNAIDS happens, then some virtue may have come every two months. out of what was a necessary decision. 7 64 Science & technology The Economist July 11th 2020

suring the power in a rechargeable battery, explains Tim Kinnaird, who tested the samples from the shafts at his lab at the University of St Andrews. When quartz and feldspar are removed from sunlight and buried, electrons start to accumulate in de- fects in their crystal structures from expo- sure, in the ground, to low levels of envi- ronmental radiation. When the minerals are re-exposed to the outside world, the electrons are stimulated with enough en- ergy to escape their traps and they go on to release photons of light. As the intensity of this luminescence is directly proportional to the amount of environmental radiation absorbed by the minerals, this can be used to work out when they were last exposed to sunlight. As they report in Internet Archaeology, the osl analysis allowed the researchers to put the various radiocarbon dates and the different layers in their core samples into some context. The shells were considered Archaeology outliers, as they probably contained mate- rial from earlier times. The inverted dates How illuminating seemed to be caused by later earthworks, which might have exposed minerals to light and reset their timeclocks. One pit ap- pears to have been recut in the Bronze Age. But there was enough of a reliable sample to date the pits to around 2500bc, which means they would have been dug by the Luminescence helps to date a remarkable new discovery at Stonehenge same people who built Stonehenge. or more than 4,000 years Stonehenge some of the land is now covered by build- What purpose the pits served remains Fhas stood on Salisbury Plain in southern ings and roads. The archaeologists thought speculation. They would have required a Britain. The landscape surrounding the it was time to take a closer look with more massive effort to build, with tools made Neolithic monument contains many se- high-tech tools. from stone, wood and bone. They may have crets, with features dating back to much Vince Gaffney of the University of Brad- been boundary markers, possibly contain- earlier times. Having surveyed more than ford and a team of researchers from Britain, ing large totem-like poles. Henges have 18 square kilometres in the vicinity, archae- Austria, Sweden and Norway, drilled into cosmological significance and some think ologists continue to make surprising dis- three of the sites to extract core samples. Stonehenge was a site for the dead while coveries. The latest, a series of deep pits Fragments of shell and bone were found. Durrington Walls, which had wooden forming a vast circle more than two kilo- As these fragments are organic materials structures, was a site for the living. The ar- metres in diameter, shows how technology containing carbon, they could be subjected chaeologists hope to open up trenches makes it possible to peer even further back to radiocarbon dating. This measures the throughout the pits to discover more. into time. presence of carbon-14, a mildly radioactive Along with their shovels, trowels and isotope created naturally in the atmo- The ancient olive brushes, archaeologists have put together a sphere by cosmic rays. As this element de- Elsewhere, osl is proving successful in toolbox of new technologies. Using mag- cays, older samples have less carbon-14 in some surprising areas. Eren Sahiner of An- netometers, which can detect how differ- them than modern ones, and because the kara University in Turkey used the tech- ent materials in the ground cause slight rate of radioactive decay is predictable, a nique to date Ata Agac (Grand Tree), an an- changes in Earth’s magnetic field, they date for the sample can be calculated. cient olive tree in western Turkey. The age found a series of anomalies forming circu- The dates, though, varied widely; up to of a tree can normally be determined by lar disturbances in the ground on a broad 6000bc for some of the shells and around counting its growth rings, but the centres arch around Durrington Walls, the remains 1300bc for some bones. Moreover, if a pit of ancient trees have often rotted away, of another large henge three kilometres had been gradually filled in over the years, making estimates difficult. Dr Sahiner north-east of Stonehenge. These were older material would have appeared at the carefully dug six holes to collect mineral thought to be old filled-in ponds. bottom and younger material near the top. samples from around the tree’s roots. His But ground-penetrating radar, another But some of the dates were inverted, show- analysis, published in Journal of Quaternary archaeological tool, raised questions about ing older material near the top. Science, showed that quartz and feldspar in that notion. This technique, which reflects To work out what might have gone on, the soil were last exposed to sunlight up to radio waves off underground structures, the archaeologists reached for one of their around 3,000 years ago. That, reckons Dr showed that far from being shallow, as newest tools: optically stimulated lumi- Sahiner, means Ata Agac was probably ponds would have been, the anomalous nescence (osl). This measures when frag- planted during the Iron Age by early Greeks features had deep vertical sides. They were ments of rocks made of quartz or feldspar, who valued olive oil imported from other some ten metres across and five metres or two of the world’s most common groups of regions and were keen to plant trees to pro- more deep. Up to 20 shafts were identified, minerals, were last exposed to sunlight. duce their own. Which just goes to show but there may have been 30 or more as The osl process can be likened to mea- how illuminating a photon can be. 7 The Economist July 11th 2020 Science & technology 65

Climate change compounded by these kinds of natural ef- fects. As emissions begin to drop, natural Delayed cool variability will also mask any slowdown of global warming that results. Dr Samset’s modelling took this into account. In addition, more than 90% of the ener- gy trapped by the greenhouse-gas emis- sions produced in the past half-century has been stored in the ocean and released to the Emissions slashed today will be felt only in the middle of the century atmosphere as heat only slowly. Even if all uch of the international effort thus emissions were cut tomorrow, that process Mfar to combat climate change has fo- The long game would continue to warm the air above for cused on cutting emissions of greenhouse Pollutants, year in which there is a statistically many years to come. gases, chief among them carbon dioxide. significant deviation in global temperature The main reason for the delay, however, That is, of course, a rational approach. Glo- trends*, if emissions were reduced now is that carbon dioxide emitted today will bal average temperatures are roughly 1.1°C remain in the atmosphere for decades to Zero-emissions scenario 5% decrease per year warmer today than in pre-industrial times centuries before it is reabsorbed by vegeta- 2020 2040 2060 2080 and CO2 is the main culprit. It and other tion and the oceans. That is not true of oth- greenhouse gases are produced when fossil Carbon dioxide er industrial emissions. Each molecule of fuels are burned to generate energy or pow- methane warms the planet 84-87 times er engines, in steel and cement-making, by Black carbon more, averaged over 20 years, than carbon farming and deforestation. In the long dioxide, but it stays aloft for merely years term, eliminating these emissions is the Methane instead of decades or centuries. This has only sustainable solution for stopping the resulted in calls for immediate action to inexorable warming of the planet. Nitrous oxide slash methane emissions, for instance by But greenhouse-gas emissions do not *Compared to RCP4.5 plugging leaks in natural-gas infrastruc- cause an instantaneous rise in global tem- Source: “Delayed emergence of a global temperature response ture, and reducing emissions from farm- after emission mitigation”, by B. H. Samset et al. peratures, and neither does cutting them ing. But even then, Dr Samset’s work sug- result in instantaneous cooling. Instead, it gests that eliminating all sources of will take decades for today’s policy efforts downs. Before this, annual emissions were methane pollution in 2020 would not af- to result in measurable impacts on global creeping up. Without concerted efforts fect warming trends before 2039. temperature—as illustrated in a study pub- from governments, they are likely to rise lished this week in Nature Communications. again as economies reopen. Keep up the pressure Using climate models, Bjorn Samset One reason for the delayed effect of Tragically, the pollutant that could have the and his colleagues at Norway’s Centre for slashing emissions is natural variability in most immediate impact is one that cur- International Climate Research probed hy- the climate. Whether one year is warmer or rently keeps the world cooler. Sulphur ox- pothetical futures in which emissions of cooler than the previous is not simply ides are a by-product of burning some fos- nine different industrial pollutants, in- down to greenhouse gases. Large-scale nat- sil fuels, including coal and dirty bunker cluding carbon dioxide and methane, were ural climate effects also play a role (El Niño fuel, and are a target of policies to clean up either eliminated instantly or phased out and La Niña are perhaps the best-known maritime emissions and urban air pollu- at a rate of 5% each year, starting in 2020. In examples), warming and cooling the plan- tion. In the atmosphere, they bounce a por- order to isolate their respective effects, et in a cyclical fashion by fractions of a de- tion of solar radiation back out into space, each chemical was knocked out individ- gree. Depending on their phase, the warm- producing a cooling effect. Because they ually while the rest were allowed to keep ing of greenhouse gases is either masked or are dragged back to Earth by rain within evolving as they would broadly if govern- days of being emitted, cutting them out of ments stuck to current climate pledges. industrial activities could boost warming Thus, the experiment tested how quickly by the end of the decade. additional efforts, as required by the Paris In spite of all this, mitigating emissions Agreement, would be seen in the rate of remains crucial to the stability of the global global warming. climate and the only way of meeting the Running these simulations over and Paris Agreement targets of limiting global over again in order to get statistically reli- warming to 1.5-2°C. But Dr Samset argues able results suggests that cutting CO2 emis- that temperature may not be the best yard- sions could slow the rate of warming as ear- stick to measure the effectiveness of cli- ly as 2033, but only if they are ended mate mitigation, at least not until the worldwide in 2020. In effect, that would 2040s. Instead, direct measurements of mean eliminating 80% of the world’s ener- the concentrations of greenhouse gases in gy sources, including shutting down all the atmosphere may be better, as they will fossil-fuel power stations, overnight— remove the confounding effect of natural clearly not a realistic or desirable scenario. variability. And without clever messaging, Reducing CO2 by 5% per year, starting there could be a public backlash against this year, would produce a statistically sig- seemingly ineffectual policies. nificant deviation from what temperatures More fundamental, however, results would have otherwise been only in 2044. like these underline that even as econo- And yet, even that rate of CO2 reduction is mies begin to decarbonise, governments ambitious, on a par with the 4-7% drop es- and societies need to drastically step up ef- timated this year as a result of the covid-19 forts to adapt to the inevitable warming pandemic and widespread economic shut- Takes time to make a change that lies ahead. 7 66 Books & arts The Economist July 11th 2020

Also in this section 67 Japan under the shogunate 68 Johnson: Racist language 69 Choral singing and the pandemic 69 Fictional euthanasia

Populism and democracy a Pole who studied in Britain and hob- nobbed with its gilded Conservative youth, Party like it’s 1999 including Boris Johnson (now the prime minister). The book begins with an exuber- ant party which the couple threw at their manor house in Poland in 1999, gathering in foreign and Polish friends for stew, li- quor and a few celebratory pistol-shots. An insider recounts the collapse of the intellectual coalition that was Since then, both have flown high—she as a forged by the cold war prizewinning writer, he as Poland’s de- or at least a decade after the end of the fence and foreign minister. Fcold war, anti-communist intellectuals Twilight of Democracy. By Anne But in other ways, life has delivered rode the crest of a wave. The Soviet system Applebaum. Doubleday; 224 pages; $25. shocks. She no longer speaks to many of had imploded, miraculously, but there was Penguin; £16.99 the guests, because they succumbed to the work—important, exhilarating work—to authoritarian temptations of the Law and be done in eliminating its vestiges and un- betrayal as people she trusted turn against Justice party that has dominated Polish covering its misdeeds. As an American- her, quicker than she thought possible. Her politics since 2015. They have thus adopted born chronicler of communism, Anne Ap- personal story is a parable of what can hap- an outlook that sees imaginary enemies plebaum surfed that wave with aplomb. pen to alliances in the absence of a com- everywhere, plays on anti-immigrant and She wrote incisive books about the Soviet mon adversary, and when the hardships anti-gay sentiment and has no respect for penal system and the Western fools who such enemies inflicted fade from memory. independent judges or media. Ms Apple- failed to see its horrors; about Stalin’s cam- It has another implication, too. As she baum, a product of secular Jewish America, paign, after 1945, to crush democracy in shifts between ruminations over political has been singled out for opprobrium. half of Europe; and about the appalling science and anecdotes meant to expose the In various political case studies, she famine he inflicted on Ukraine in the 1930s. nastiness of the new political right, she finds a style that assuages a yearning for In “Twilight of Democracy”, her tone is sometimes brings home the complacency simple answers. In Poland, a master-narra- more personal and vulnerable. The infor- of her own tribe of liberal internationalists tive was provided by conspiracy theories mal transatlantic coalition of politicians, who thought that history, if not quite over, about the plane crash in Russia in 2010 that scholars and writers to which she belonged was bound to evolve benignly. killed President Lech Kaczynski. (He reck- has broken up, and the worst parts have, for lessly insisted on landing in fog.) In Hun- now, come out on top. From Brexit Britain Friends like these gary, the Jewish philanthropist George and Donald Trump’s America to the cynical The author, who in the late 1980s and early Soros has become a bogeyman. Ms Apple- politics of Poland and Hungary, she feels 1990s wrote for The Economist, is frank baum’s erstwhile British friends see leav- beset by a new chauvinist right that has no about herself: an insider with stratospheric ing the European Union as a panacea. Mr regard for rules, truth or institutions. links to the American and above all British Trump excoriates the liberal elite and even Ms Applebaum evokes an acute sense of commentariat, married to Radek Sikorski, the moderate Republicans who are Ms Ap-1 The Economist July 11th 2020 Books & arts 67

2 plebaum’s natural allies. self-awareness in her description of the ours, and of individual careers, that whole What interests her most is the phenom- liberal internationalist project. The effer- enterprise was always in danger of stalling enon described by a French writer in 1927 as vescent mood of 1999 reflected not just a as global power balances shifted. As a re- the treason of the intellectuals: the way moral victory over Soviet darkness but the sult, defending truth, law and liberty has many academics, editors and leaders of apparently unchallenged might of the Un- again become a hard job for principled civil society have been supine or collabora- ited States. Ronald Reagan and Thatcher characters prepared to put friendships, tive in the face of populist authoritarian- had helped bring down communism; Bill livelihoods and even lives on the line. Such ism. Her sharpest passages describe the Clinton and Tony Blair felt they could ex- people continue to exist; Ms Applebaum milieu of British Tory journalism in which port liberal democracy everywhere. But herself is one of them, albeit among the she once sat at the top table in every sense. even then, plenty of conservatives had less imperilled. Meanwhile, pandemics Few gain entry into this charmed circle doubts, including some of Ms Applebaum’s permitting, she and her husband will still only to break out of it. As deputy editor of Tory friends, brought up as they were on throw parties—the book features another the Spectator, a right-of-centre weekly, and Rudyard Kipling’s imperial pessimism. shindig, held 20 years after the first. But co-host of its networking lunches, the au- Given the finitude of all human endeav- now the guest list is shorter. 7 thor joined a scene where every conversa- tion was laced with multilayered irony—a baffling British subculture in which real Japan under the shogunate feelings are carefully hidden. She reveres Margaret Thatcher’s memo- A handmaid’s tale ry, but her account lays bare the inherent contradictions of Thatcherism—an appeal to preserve old mores and communities combined with economic change that The reconstructed life of an obscure woman illuminates Japanese history wrecked them. Once the eu was identified as the enemy, she suggests, the mawkish n these times of self-isolation, it is nostalgia felt by her former friends could Iworth remembering that for more than Stranger in the Shogun’s City. By Amy let rip. But newcomers like her had no place two and a half centuries, from 1603 to 1868, Stanley. Scribner; 352 pages; $28. Chatto & in that fiercely sentimental world. Japan cut itself off almost entirely from the Windus; £16.99 In the United States and Hungary, her outside world. The imperial line was clois- personal ties are weaker and her observa- tered in Kyoto, the capital. But real power to a flowering of art, theatre and craftsman- tions more abstract. But she mournfully was wielded by shoguns, or military chief- ship. These traits still echo beneath the anatomises the breakdown of America’s tains, from the Tokugawa dynasty, whose post-modern surface of Tokyo, in the form anti-communist coalition. She thought seat was Edo (modern-day Tokyo). of kabuki, noodle and eel bars, dolled-up she was part of a moral crusade to spread Their fear of Christianity induced them hostesses and manga comic books, which constitutional principles and the rule of to shut the country’s borders to most for- date back to the beautifully illustrated law. Now she realises that there were other eign traders. Their obsession with stability storybooks of the Edo era. agendas at work. Some American conser- led to a strictly hierarchical class system. Amy Stanley, an American historian, is vatives were most concerned with spread- They suppressed internal dissent by de- enchanted by this faintly remembered ing Christianity; for them, Vladimir Putin’s manding that every other year feudal lords world. And she has found a key to unlock Russia has (bizarrely) become an attractive leave their homelands and take up tempo- some of its most hidden secrets. It comes, alternative to the decadent West. Some saw rary residence near the shogun’s palace in she writes, in the form of an extraordinari- the defence of America’s narrow national Edo. It was an era of stifling political ortho- ly extensive archive, comprising letters, di- interests from all comers, including immi- doxy. Yet at the same time, self-reliance led aries, ledgers, tax bills, receipts, petitions grants, as paramount. Many never had that and other documents. These were compul- much interest in advancing democracy. sively filed away and preserved by a popu- lation in which both men and women Ghosts at the feast were, for their time, relatively well-educat- This is too short a book to probe deeply into ed and literate; village priests and farmers the roots of the conservative camp’s em- kept meticulous records, as did the elite brace of coarse populism. In any case, samurai. The result is a visit to the past that though, Ms Applebaum evinces relatively is a refreshing antidote to the histories of little interest in why ordinary voters are great men—and the occasional great wom- tempted by that option. She notes that nei- an—at times of flux. ther economic hardship nor migration It does not dwell on the feats of the sho- flows are correlated in any linear way with gunate; it barely mentions the shoguns’ rightward political lurches (Hungarians, women, drafting letters at their lacquered for instance, are obsessed with migrants desks. Instead, the book follows the rest- who do not actually exist). But those fac- less footsteps of a crotchety priest’s daugh- tors are surely not irrelevant either. ter, Tsuneno, born in 1804 in a snowy vil- Elites and would-be elites concern Ms lage far from Edo, through letters and other Applebaum far more—and these, she documents in the care of a brother (who knows and describes well. Her approach is would often tear out his hair at her behav- touchingly intimate; “Twilight of Democ- iour). It tells the story of her hapless love racy” ends with the onset of the pandemic, life, her failed marriages, the numerous which forced her and one of her sons to men who courted and abandoned her, her race back to Poland before the borders reckless decision to desert her birth family closed. But her fine book would have been and travel to Edo, and the excruciating dif- even better if there were clearer hints of It’s murder, she wrote ficulties she encountered there as it slowly 1 68 Books & arts The Economist July 11th 2020

2 became her home. there are flickers of rapture about Edo, a structing Tsuneno’s life from the fragmen- Tsuneno’s life was not a heroic one. The city she knew from its teeming streets to tary evidence that remains. Her task might heroism lies rather in Ms Stanley’s efforts the chambers of its elite; enough to per- also have been easier if her protagonist to decipher her story from scraps of paper suade her to defy the entreaties of her fam- were more lovable. written in archaic Japanese up to 200 years ily to return home and get married (again). To add to the poignancy of the tale, ago. Yet the paper trail Tsuneno left behind What her letters lack in lyricism, Ms though, Tsuneno lived in the decades just is remarkable; it makes clear the obstacles Stanley makes up for by painting a vivid before the arrival of Commodore Matthew a strong-willed woman faced in trying to portrait of village life and of the parts of Perry’s “black ships” from America in 1853, make a living in a man’s world. Tsuneno Edo where Tsuneno lived. For women, life which led to the opening of Japan and the was a defiant letter-writer, not a charming was often brutal. One of Tsuneno’s sisters downfall of the shogunate. As Tsuneno one. She tells of the hardship of maid’s was caged by her in-laws for her behaviour. struggles to make ends meet amid famine, work in a samurai household, her despera- A sister-in-law was sexually assaulted (as rice riots, inflation and failed efforts to mo- tion to retrieve the clothes she has pawned Tsuneno, too, probably was). Sometimes dernise the regime, her story becomes a to survive, her vexations with men. Yet the author overdoes her attempts at recon- portent of Edo’s doom. 7 Johnson Shock value

Newspapers should reproduce offensive language when it is crucial to a story his column comes with an unusual response in people who have experi- Twarning—the type that is sometimes enced violence of the same kind. called a trigger warning. It will mention a Consider, as an emblematic case word that was once in common usage in study, the appearance of gruesome pho- parts of the United States, but which tographs in print. A picture has more many people have come to regard as the direct power to arouse emotion than any foulest in the English language. reporter’s description. Newspapers do, On June 24th three policemen in and should, use caution when deciding, Wilmington, North Carolina, were for example, whether to run images of sacked because of conversations that had dead or injured bodies. But sometimes been accidentally recorded in a patrol- they do—and should. man’s car. In the most egregious of the In other words, the decision over taped exchanges, one of the cops, boast- whether to reproduce a vile slur is also a ing about plans to buy an assault rifle, judgment about what role emotion said: “We are just gonna go out and start should play in journalism. If humans slaughtering them”—proceeding to refer were perfectly rational, f------n------to black people with an expletive and a might be enough. Readers get what they racial slur. need to understand the story and will That is how the New York Times re- ing it. Black public figures have disagreed react accordingly. ported the story, in any case. What the on whether the “n-word” should even be But people are not entirely rational, as policeman actually said was: “We are just mentioned in its uncensored form. At an good editors, along with advertisers and gonna go out and start slaughtering them academic discussion of racism your col- politicians, know. The photograph of a fucking niggers.” Such vicious racism in umnist once attended, a black speaker single dead three-year-old washed up on police departments should cause shock sought the audience’s permission to do so. a Turkish beach in 2015 is often credited (though perhaps not surprise: some One black attendee did object, but after a with galvanising a response to the Euro- activists argued that the incident proved polite disagreement the speaker contin- pean refugee crisis in a way that accounts a point they had been making for ages). ued, and said the word. Barack Obama of thousands of faceless deaths had Yet the redacted account of the episode mentioned the term quite deliberately in a failed to do. Not without reason do jour- given in the Times conveyed very little podcast during his presidency, in the nalists often begin stories with heart- shock at all. course of arguing that the naked racism it rending vignettes before going into Other news outlets, including the represented was hardly the only kind left systemic injustices. One of the core tools Washington Post, replaced the slur with to fight against. of journalism is emotion, used jud- “f------n------”. This might seem a best- Hearing obscenities, including slurs, iciously to reach readers’ hearts as well as of-both-worlds policy, in which the facts causes a physical stress response—in- their minds. are clear, but the reader is spared the creased blood pressure, skin conductance No one thinks that papers should experience of the abhorrent terms in full. because of sweat, dilated pupils and the casually toss around hurtful words. But as with all halfway solutions, it can like. But the experience of racist attitudes (And, by the by, no one serious about the also be seen as the worst of both. Readers (even without slurs) causes the body to issue thinks that because some African- have the vocabulary clearly in their react similarly. Given that overlap in re- Americans have reclaimed the slur for minds, yet they have also been treated as sponses, the issue of whether to print themselves, outsiders are now free to use too delicate to handle it. insulting terms may be considered part of it, too.) But The Economist’s style book Philosophers of language distinguish a larger question: should newspapers says of obscenities that “if you do use between “mention” and “use” of words. include shocking material? They routinely them, spell them out in full.” Let the In this case, the cop used the word, but report on violent events, but such coverage shock, sadness and anger that readers those discussing the story are mention- might itself trigger a post-traumatic stress feel upon hearing them turn into action. The Economist July 11th 2020 Books & arts 69

Choral singing ly all respondents said their choirs had Thought-provoking fiction been affected by the virus. Some are able to Voices off rehearse online, but the social aspect—the Not going gently main appeal for many singers, which now makes the activity seem risky—is harder to replicate. “The joy of making music with others,” says Annie Sedley, who sings with the Royal Free Music Society Choir in north A quintessentially social art form is hit London, “the excitement of the perfor- hard by the pandemic Darke Matter. By Rick Gekoski. Constable; mance—all that has gone.” Her choir meets 336 pages; £16.99 few months ago Emilia Olsson, a so- for Zoom sessions while its members Acial worker in Sweden, received an “dream of getting together again”. “The he hero of Rick Gekoski’s debut novel email from her amateur choir informing choir plays an important role at our Tat first seemed to be a misanthropic her that, because of covid-19, there would church,” says Charles Olson, who sings at crank. James Darke, a retired English teach- be no rehearsals for a couple of weeks. North Park Covenant Church in Chicago, er, spent months at home wallowing in Then they were cancelled until the sum- “so this situation is devastating.” gloomy thoughts, replaying wistful memo- mer. She missed the music-making, Ms Like other artists, meanwhile, profes- ries and berating the cruel and idiotic ways Olsson says, but especially the sense of sional singers, most of whom are freelan- of the world and his fellow man. When it community, which had prompted her to cers, are struggling financially. “There’s emerged that Darke was broken by the loss join the choir in the first place. just no work,” laments Lawrence Walling- of his wife, the story and its protagonist ac- A quintessentially social art form, cho- ton, a British bass who has sung with the quired heft. A coming-of-old-age tale un- ral singing has been devastated by the pan- choir of Westminster Abbey, among others. folded into a poignant yet hard-hitting demic. Suddenly, groups of people exhal- Mr Wallington doesn’t know when he will meditation on grief, with a richly complex ing together in close proximity seem perform again; he is hoping that a concert character at its centre. dangerous. According to Sonja Greiner of scheduled for November will prove feasi- Three years on and Mr Gekoski has writ- the European Choral Association-Europa ble. By then he will have gone more than ten a supremely accomplished tragicomic Cantat (eca-ec), an umbrella group for half a year without choral singing—and sequel. If “Darke” depicted a painful jour- choirs, rumours of super-spreading at re- without an income. ney into the light, “Darke Matter” charts hearsals were unfounded. In any event, Westminster Abbey’s choir, which kept forward steps and glances back at the they were suspended en masse, along with singing through the second world war, is abyss, while exploring a murky moral is- concerts and church services. bound to survive the pandemic. Others will sue. It is more ambitious than its predeces- All this is causing financial hardship for adapt to a new, socially distanced reality. sor, and the author pulls it off in style. professional singers and heartbreak for Justin Doyle, conductor of the rias Cham- When the novel opens Darke is bracing amateurs. According to Chorus America, a ber Choir in Berlin, suggests the disruption himself for the first family Christmas with- networking group, 42.6m Americans regu- could be a spur to new formats. After the hi- out his wife, Suzy. He is no longer an “urban larly sing in choirs; the country has almost atus, his group’s live performances may in- hermit” and has reconnected with his 270,000 choruses, most of them religious. volve three teams of singers taking turns to daughter, Lucy. But he is still angry, jaded In Europe an estimated 37m people take deliver the same programme to small audi- and bereft, and reluctant to open his door. part. In many places, choirs bring together ences. “We can innovate more than foot- One day he gives in to insistent knocking individuals who have little in common be- ball can,” Mr Doyle reckons. and finds two police officers outside. Soon sides a love of music. Researchers at Oxford But without targeted financial support, he is taken in for questioning about the cir- University, and at the universities of Ol- many other ensembles may have to fold; cumstances of Suzy’s death. denburg and Vienna, have found that ama- the prospects of the highly regarded Vien- Darke, it transpires, relieved his be- teur choral singing helps establish bonds na Boys’ Choir, among others, look bleak. loved wife’s suffering by administering “a and boosts feelings of connectedness. For many enthusiasts, life after lockdown fatal draught”. He has no regrets. In his In a recent survey by the eca-ec, virtual- will be less melodious, and lonelier. 7 view the terminally ill should be allowed to die with dignity: to have, as he puts it (quot- ing John Keats), an “easeful death”. When he is charged with murder he is compelled to overcome his “people-phobic” instincts to rally support and argue his case. But does he have the stomach to fight for his beliefs? Once again, Mr Gekoski’s flawed and vividly drawn hero is the book’s driving force. Darke’s bilious temperament and no- nonsense attitude are a regular source of humour. His acerbic commentaries target Christmas trees, potted plants, parks, poli- ticians, trains, infants and “that flatulent haggis Walter Scott”. The bravura set pieces include a poetry evening with “a bunch of superannuated, sofa-bound littérateurs”. The only wrong note in Darke’s other- wise commanding voice is an occasional wordiness (“her liquacious, loquacious spirit”). But his heart is laid bare in his con- templation of the woman who still haunts Sing like no one is listening him. It is good to have him back. 7 70 Courses Tenders Legal notice 71

Courses 72 Economic & financial indicators The Economist July 11th 2020

Economic data

Gross domestic product Consumer prices Unemployment Current-account Budget Interest rates Currency units % change on year ago % change on year ago rate balance balance 10-yr gov't bonds change on per $ % change latest quarter* 2020† latest 2020† % % of GDP, 2020† % of GDP, 2020† latest,% year ago, bp Jul 8th on year ago United States 0.3 Q1 -5.0 -5.3 0.1 May 0.7 11.1 Jun -1.7 -15.9 0.7 -138 - China -6.8 Q1 -33.8 1.4 2.5 Jun 3.7 3.7 Q1§ 0.7 -6.0 2.8 §§ -21.0 7.02 -2.0 Japan -1.7 Q1 -2.2 -5.2 nil May -0.1 2.9 May 2.9 -11.3 nil -8.0 108 1.1 Britain -1.7 Q1 -8.5 -9.0 0.5 May 0.7 3.9 Mar†† -2.2 -15.9 0.2 -63.0 0.79 1.3 Canada -0.9 Q1 -8.2 -5.1 -0.4 May 0.5 13.7 May -3.4 -9.3 0.6 -100 1.35 -3.0 Euro area -3.1 Q1 -13.6 -8.3 0.3 Jun 0.3 7.4 May 2.0 -8.7 -0.4 -7.0 0.88 1.1 Austria -2.9 Q1 -11.6 -6.3 0.7 May 0.7 5.4 May 0.1 -7.6 -0.2 -11.0 0.88 1.1 Belgium -2.5 Q1 -13.6 -8.1 0.6 Jun 0.5 5.4 May -1.5 -8.7 -0.1 -14.0 0.88 1.1 France -5.0 Q1 -19.7 -9.9 0.1 Jun 0.4 8.1 May -1.1 -11.0 -0.1 -4.0 0.88 1.1 Germany -2.3 Q1 -8.6 -5.8 0.9 Jun 0.8 3.9 May 5.4 -6.1 -0.4 -7.0 0.88 1.1 Greece -1.2 Q1 -6.2 -7.0 -1.1 May -0.4 14.4 Mar -3.0 -6.1 1.1 -99.0 0.88 1.1 Italy -5.4 Q1 -19.6 -10.8 -0.2 Jun -0.2 7.8 May 2.0 -12.0 1.3 -52.0 0.88 1.1 Netherlands -0.2 Q1 -5.8 -6.0 1.6 Jun 0.9 3.8 Mar 4.0 -5.4 -0.3 -15.0 0.88 1.1 Spain -4.1 Q1 -19.3 -11.0 -0.3 Jun -0.3 14.5 May 1.4 -10.7 0.4 11.0 0.88 1.1 Czech Republic -1.7 Q1 -12.8 -7.5 2.9 May 2.4 2.5 May‡ -1.3 -7.0 0.8 -69.0 23.5 -3.2 Denmark -0.3 Q1 -7.7 -4.0 nil May 0.4 5.6 May 5.3 -6.3 -0.3 -5.0 6.58 1.1 Norway 1.1 Q1 -6.0 -5.5 1.3 May 0.2 4.2 Apr‡‡ 1.6 -0.9 0.7 -77.0 9.40 -8.1 Poland 1.7 Q1 -1.6 -4.0 3.3 Jun 3.1 6.0 May§ -0.5 -9.4 1.4 -88.0 3.96 -4.0 Russia 1.6 Q1 na -5.2 3.2 Jun 4.2 6.1 May§ 0.2 -4.2 6.0 -144 71.3 -10.8 Sweden 0.4 Q1 0.5 -5.1 nil May 0.5 9.0 May§ 2.9 -4.4 -0.1 -5.0 9.19 2.8 Switzerland -1.3 Q1 -10.0 -6.0 -1.3 Jun -1.0 3.3 Jun 7.1 -6.3 -0.4 20.0 0.94 5.3 Turkey 4.5 Q1 na -5.9 12.6 Jun 11.2 13.2 Mar§ -2.1 -6.3 12.3 -388 6.86 -16.5 Australia 1.4 Q1 -1.2 -4.1 2.2 Q1 1.7 7.1 May -1.9 -7.5 0.9 -45.0 1.44 -0.7 Hong Kong -8.9 Q1 -19.6 -3.3 1.5 May 1.4 5.9 May‡‡ 2.6 -5.3 0.7 -101 7.75 0.7 India 3.1 Q1 1.2 -5.8 5.8 Mar 3.4 11.0 Jun -0.4 -7.4 5.8 -78.0 75.0 -8.5 Indonesia 3.0 Q1 na 0.2 2.0 Jun 1.3 5.0 Q1§ -1.6 -6.6 7.1 -13.0 14,419 -2.1 Malaysia 0.7 Q1 na -5.1 -2.9 May -1.1 5.0 Apr§ 2.1 -7.6 2.8 -81.0 4.27 -3.0 Pakistan 0.5 2020** na -3.6 8.6 Jun 7.9 5.8 2018 -1.6 -10.2 8.7 ††† -524 167 -5.6 Philippines -0.2 Q1 -18.9 -1.3 2.5 Jun 1.6 17.7 Q2§ 1.1 -7.6 2.8 -222 49.5 3.7 Singapore -0.7 Q1 -4.7 -6.0 -0.8 May -0.2 2.4 Q1 19.1 -13.5 0.9 -106 1.39 -2.2 South Korea 1.4 Q1 -5.0 -2.1 nil Jun 0.4 4.5 May§ 2.5 -5.7 1.4 -16.0 1,196 -1.1 Taiwan 1.6 Q1 -3.6 -2.0 -0.8 Jun -0.8 4.2 May 11.9 -5.1 0.5 -19.0 29.5 5.9 Thailand -1.8 Q1 -8.5 -5.3 -1.6 Jun 0.2 1.0 Mar§ 3.4 -6.4 1.1 -64.0 31.2 -1.5 Argentina -5.4 Q1 -18.0 -12.0 43.4 May‡ 41.9 10.4 Q1§ 2.1 -8.4 na -464 70.9 -41.1 Brazil -0.3 Q1 -6.0 -7.5 1.9 May 2.6 12.9 May§‡‡ -2.4 -16.3 2.1 -356 5.37 -29.1 Chile 0.4 Q1 12.7 -6.1 2.6 Jun 2.4 11.2 May§‡‡ -2.6 -14.0 2.4 -92.0 786 -12.8 Colombia 0.4 Q1 -9.2 -7.7 2.2 Jun 1.9 21.4 May§ -5.2 -7.1 5.5 -30.0 3,630 -11.6 Mexico -1.4 Q1 -4.9 -9.7 2.8 May 3.0 3.3 Mar -2.0 -4.6 5.7 -163 22.8 -17.1 Peru -3.4 Q1 -19.5 -9.2 1.6 Jun 1.7 7.6 Mar§ -2.2 -13.2 3.9 -105 3.53 -6.8 Egypt 5.0 Q1 na 0.9 4.8 May 6.8 7.7 Q1§ -4.0 -11.0 na nil 16.0 3.7 Israel 0.4 Q1 -6.8 -4.0 -1.6 May -1.0 4.2 May 3.2 -11.3 0.6 -84.0 3.45 3.5 Saudi Arabia 0.3 2019 na -5.2 1.0 May 1.2 5.7 Q1 -6.4 -11.2 na nil 3.75 nil South Africa -0.1 Q1 -2.0 -7.0 2.9 Apr 3.6 30.1 Q1§ -2.6 -12.4 9.7 157 17.0 -16.8 Source: Haver Analytics. *% change on previous quarter, annual rate. †The 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.

Markets Commodities % change on: % change on: The Economist commodity-price index Index one Dec 31st index one Dec 31st % change on In local currency Jul 8th week 2019 Jul 8th week 2019 2015=100 Jun 30th Jul 7th* month year United States S&P 500 3,169.9 1.7 -1.9 Pakistan KSE 35,694.9 2.3 -12.4 Dollar Index United States NAScomp 10,492.5 3.3 16.9 Singapore STI 2,669.5 2.3 -17.2 All Items 107.0 111.2 0.2 -7.1 China Shanghai Comp 3,403.4 12.5 11.6 South Korea KOSPI 2,158.9 2.5 -1.8 Food 90.1 91.4 -1.5 -4.7 China Shenzhen Comp 2,198.6 10.4 27.6 Taiwan TWI 12,170.2 4.0 1.4 Industrials Japan Nikkei 225 22,438.7 1.4 -5.1 Thailand SET 1,362.5 1.0 -13.8 All 122.8 129.7 1.4 -8.6 Japan Topix 1,557.2 1.2 -9.5 Argentina MERV 42,747.6 7.3 2.6 Non-food agriculturals 90.7 92.8 3.1 -5.2 Britain FTSE 100 6,156.2 nil -18.4 Brazil BVSP 99,769.9 3.7 -13.7 Metals 132.3 140.7 1.1 -9.2 Canada S&P TSX 15,629.2 0.7 -8.4 Mexico IPC 37,483.9 -0.4 -13.9 Sterling Index Euro area EURO STOXX 50 3,286.1 1.8 -12.3 Egypt EGX 30 11,127.9 3.4 -20.3 All items 132.2 135.0 1.4 -7.9 France CAC 40 4,981.1 1.1 -16.7 Israel TA-125 1,341.2 -1.5 -17.0 Germany DAX* 12,494.8 1.9 -5.7 Saudi Arabia Tadawul 7,394.3 1.9 -11.9 Euro Index Italy FTSE/MIB 19,899.5 2.9 -15.3 South Africa JSE AS 55,870.7 3.9 -2.1 All items 105.6 109.3 0.8 -7.7 Netherlands AEX 572.2 1.7 -5.4 World, dev'd MSCI 2,252.6 1.9 -4.5 Gold Spain IBEX 35 7,326.4 1.4 -23.3 Emerging markets MSCI 1,070.1 6.9 -4.0 $ per oz 1,783.7 1,794.0 4.4 28.4 Poland WIG 50,726.2 1.2 -12.3 Brent Russia RTS, $ terms 1,245.5 2.7 -19.6 $ per barrel 41.3 43.2 4.7 -32.7 Switzerland SMI 10,178.4 0.9 -4.1 US corporate bonds, spread over Treasuries Turkey BIST 118,712.5 2.9 3.7 Dec 31st Sources: Bloomberg; CME Group; Cotlook; Datastream from Refinitiv; Australia All Ord. 6,034.3 -0.1 -11.3 Basis points latest 2019 Fastmarkets; FT; ICCO; ICO; ISO; Live Rice Index; LME; NZ Wool Services; Thompson Lloyd & Ewart; Urner Barry; WSJ. *Provisional. Hong Kong Hang Seng 26,129.2 7.0 -7.3 Investment grade 193 141 India BSE 36,329.0 2.6 -11.9 High-yield 667 449 Indonesia IDX 5,076.2 3.3 -19.4 Sources: Datastream from Refinitiv; Standard & Poor's Global Fixed For more countries and additional data, visit Malaysia KLSE 1,583.5 4.6 -0.3 Income Research. *Total return index. Economist.com/indicators Graphic detail GDP and life satisfaction The Economist July 11th 2020 73

→ Most measures of well-being are correlated with a country’s GDP per person Number of observations† Life-satisfaction measures v GDP per person*, polling in 145 countries, 2005-19 0 80

Some things money can buy Rich countries are different What is it good for? Rate your current life situation Corruption is not widespread Felt well-rested yesterday, Average score by country, 10=best possible life in government, % agreeing % agreeing 10.0 100 100 = Selected countries, 2018 = Number of observations† in this area, 2005-19 Finland 50 50 7.5

Brazil US ← Poorer Richer → Singapore 0 0 Nigeria 1 10 100 1 10 100 Japan 5.0 China Feel safe walking alone at night Helped a stranger in the where you live, % agreeing past month, % agreeing 100 100 Afghanistan 2.5

50 50

0

1510 50100 0 0 GDP per person*, $’000, log scale 1 10 100 1 10 100

Have enough money for food in Have relatives or friends you can Donated to a charity in the Good, affordable housing is the past year, % agreeing count on to help, % agreeing past month, % agreeing available nearby, % agreeing 100 100 100 100

50 50 50 50

0 ← Poorer Richer → 0 0 0

1 10 100 1 10 100 1 10 100 1 10 100 Sources: Gallup; World Bank; World Happiness Report *At purchasing-power parity †Each observation is a poll in a single country in a single year

tors also track gdp per person closely. Resi- testing if money buys happiness is to ana- Blessed are the dents in the top 10% of countries score lyse what happens when it goes away. their life situation as seven out of ten, com- Studies of the previous global recession rich in spirit pared with just four for those in the bottom in 2009 suggest that economic hardship 10%. They are also more likely to feel sup- does indeed lead to emotional woe. Aca- ported by their families, safe in their demics found dips in life satisfaction and neighbourhoods and be trusting of their other measures of well-being in the United Money really can buy happiness—and politicians—though they complain nearly States and several European countries, recessions can take it away as much as people in poor countries do though the effects were mainly limited to ross domestic product (gdp), the about a lack of rest and affordable housing. people who lost their jobs. Adam Mayer of Gmost common gauge of national pros- Scholars disagree over the extent to Colorado State University found that perity, has taken a lot of flak in recent years. which national wealth itself causes con- among Europeans of similar wealth and Critics say that counting a country’s spend- tentment. Some countries’ citizens have education, those who had recently become ing on goods, services and investment remained glum even as gdp per person has unemployed and struggled to buy staple misses the full value that citizens get from risen, a paradox noted by Richard Easter- foods had the worst outlook on life. products such as Google and Facebook. lin, an American economist. But one way of Covid-19 will allow economists to probe They also note that gdp ignores other as- this pattern further. The imf’s latest fore- pects of development, including personal gdp Correlation with life satisfaction* cast points to a fall in global , weighted health, leisure time and happiness. Survey of 36,000 people in 35 European countries, 2009-10 by purchasing-power parity, of 4.9% this These criticisms probably exaggerate -0.3 -0.2 -0.1 0 year. If past recessions are any guide, the gdp’s failure to capture the wealth of na- Less consumption of staple goods severe shock will have long-lasting effects. tions. Gallup, a pollster, has asked people Economies will eventually grow larger in 145 countries about various aspects of Head of household losing job than they were before the pandemic, but well-being. Many of these correlate strong- Reduction in economic growth will be less rich than they would have been gdp ly with per person. To take an obvious Member of household losing job otherwise. The virus’s human toll is there- example, nearly all residents in the top 10% fore vast in terms of deaths and dollars. But of countries by spending say they have Less consumption of luxury goods given the correlation between gdp per per- enough money for food, compared with Reduction in wages son and Gallup’s measures of well-being, it just two-fifths of those in the bottom 10%. Source: “Recession and life satisfaction *-1=perfect negative may have an enduring impact on the Strikingly, many non-financial indica- in 35 countries”, by A. Mayer, 2015 correlation world’s quality of life too. 7 74 Obituary William Dement The Economist July 11th 2020

mated 40m Americans suffering from sleep problems that were undiagnosed and thus untreated. In 1993 Congress set up a Nation- al Centre on Sleep Disorders Research, but progress was slow. Five years later, when he gave evidence to the health and environment subcommittee, he reckoned that almost half America’s adults had insomnia and as many as a quarter had obstructive sleep apnea, which stopped their breathing hundreds of times a night. That could prove fatal. Yet the lack of awareness in society, and the in- difference of doctors, remained “pervasive and complete”, as if al- most everyone apart from himself was still in Morpheus’s thrall. His pursuit of the sleeping self had long been fairly solitary. In the 1950s he began to study dreaming—that strange activity which, every night, allowed him to be quietly and safely insane—at the University of Chicago and then at Mount Sinai in New York. There his apartment was his laboratory, where volunteers, including Rockettes from Radio City Music Hall and a girl he was especially sweet on, were fitted with electrodes and regularly roused to see if they recalled their dreams. He discovered that in rem sleep, where eye movements were rapid and sleep shallower, the eyes followed what people were observing in their dreams, though all their limbs stayed still. This was intriguing; but since he had come no closer to unveiling the purpose of dreams, and never did, he arrived in Stan- ford with his focus already turned to sleep. It was a good moment. At a heady time of protest and upheaval he was nicely alternative, a shaggy-haired professional bass-play- er as well as a scientist, who had jammed with Quincy Jones and Stan Getz on his houseboat when he was at college in Seattle. In Perchance to dream 1970 he set up a sleep clinic in Stanford, probably the world’s first and now one of its biggest, where he tested insomniac volunteers. In summer he ran sleep camps, deploying more electrodes. To study narcolepsy, the uncontrollable urge to sleep most of the time, he brought in a dozy French poodle called Monique and, in a while, established a much-loved sleepy-dog colony. William Dement, pioneer in the science of sleep and His Sleep and Dreams class was phenomenally popular right dreams, died on June 17th, aged 91 from the start, in 1971. So many signed up for the first lecture that here seemed nothing much wrong with Stanford, as far as no space was big enough except Memorial Church. And the class, TWilliam Dement could see. To someone like him, who had left which he went on teaching past 90, became famous, a sort of true- New York in January 1963 with his car buried in snow, this universi- believers’ gathering, where heavy-eyed students would be sprayed ty—with its palms, its Spanish-colonial buildings and its skies of awake with his trusty squirt gun and made to shout “Drowsiness is unbroken blue—looked like paradise. He and his wife strolled red alert!”, the motto of the cause. He looked on his students as an about and ate ice creams, in January, in a state of wonder. army of proselytisers, and in the end word spread: by this year Yet all was not quite perfect. When he made a scientific study of there were more than 3,000 sleep clinics in America, and medical the students later, he found that 80% were dangerously sleep-de- schools increasingly took the subject seriously. Not least, his small prived. That did not surprise him. In America, the problem was home town of Walla Walla, Washington, which he had used as a general. Adults longed for the sweet, peaceful slumber of children; test case, had become the Healthy Sleep Capital of the world. but night after night they tossed and turned, lay awake for hours, So what did he advise himself to ensure blissful slumber? His contended with continually restless legs, and faced the new day several books and his website, “The Sleep Well”, offered all kinds of feeling horrible. Worse, they woke up in debt: a debt of sleep, tips. Most of them quickly became familiar: ergonomic pillows, a which like the financial kind was cumulative, making them more cool dark room, warm baths, no daytime naps, no alcohol or caf- and more unhealthy until, at worst, they could barely function. feine within four hours of bedtime. If sleep had not come in 20 The result was a national plague of drowsiness. People blamed minutes, it was best to sit quietly in the dark or read something warm rooms or boring lectures for the fact that they kept nodding dull, like the warranty on the refrigerator, until the eyelids closed. off in the daytime; but this was their sleep debt being called in. And The best response when caught napping in the office was: “And I the results, he warned them with increasing urgency, could be cat- especially thank you for my excellent boss. Amen.” astrophic. Someone who drowsed was mere seconds from sleep. He hoped, however, that people would determine their own The grounding of the Exxon Valdez, the near-meltdown at Three sleep requirement and best practice. His was relaxed. He loved to Mile Island, the loss of the space shuttle Challenger, had all been watch favourite films again, especially “Lilies of the Field”, even if caused totally or in part by sleepy people. A horrendous number of he already knew that the nuns would make Sidney Poitier build the fatal accidents on America’s roads, especially among the them that church; or read favourite books again, in his case the de- young, were caused by drivers falling asleep at the wheel. tective stories of Rex Stout, even if he already knew how every sin- More shocking to him was the fact that, well into the 1990s, gle one turned out. Re-runs of the sit-com “Everybody Loves Ray- America’s medical establishment barely noticed. It did not matter mond” sent him off with wonderful ease. So much for no screens that sleep made up a third of human life. It was such a profound before bed. He drifted away by 10pm or so and was up by 5am, state of disengagement from the sensory world that, once their pa- bright-eyed and bushy-tailed, with not a trace of sleep-debt. tients were in it, doctors lost interest, too. At the start of the de- Almost inevitably, he died in his sleep. What transformations cade, when he was appointed chairman of a federal commission he might have discovered then, after that first so-simple and daily that went through thousands of medical records, he found an esti- one, it would have been nice to know. 7 Property 75