The Economist February 14Th 2015 3

China’s Walt Disney Syriza hits the ground running, backwards Teachers can be a class act Arctic life comes out of the freezer

FEBRUARY 14TH–20TH 2015 Economist.com How to write a bestseller

Putin’s war on the West

Contents The Economist February 14th 2015 3

6 The world this week Asia 35 Indian politics Leaders A new opposition 9 View from the Kremlin 36 Politics in Australia Putin’s war on the West Abbott survives, just 10 Global imbalances 36 American forces in Japan American shopper Trouble at the bases 11 Greece and the euro 37 Vietnam’s migrant Hitting the ground labourers running—backwards Working abroad Venezuela Mismanagement, 11 Teacher recruitment 37 Animals in Vietnam corruption and the oil slump Those who can Pet soup are fraying Hugo Chavez’s 12 China’s army 38 Banyan Malaysia’s dark side regime, page 31 On the cover Lifting the veil It is time to recognise the gravity of the Russian threat, Letters China and to muster the resolve to 14 On meritocracy, Aquinas, 39 Military corruption counter it: leader, page 9. suicide, state pensions, Cleaning up Russia’s aggressions in cancer, Greece, hyenas, 40 Film Ukraine are part of a broader, cannabis Unusual talent and more dangerous, confrontation with the West, 40 China’s economy pages 19-22. Who backs Putin, Briefing The new-year effect and why, page 21. The film 19 What Russia wants that has outraged Russia, From cold war to hot war Middle East and Africa page 73. Britain’s strategic 41 Arab media ambition has fallen even 21 Russia’s European friends The People’s Liberation Army Flowering, then withering lower than its defence budget, In the Kremlin’s pocket Xi Jinping is bringing a corrupt page 49. How businesses 42 Israeli politics army to heel. Now he must linked to blacklisted oligarchs United States Battling in print make it behave responsibly: avoid Western sanctions, 23 Private schools 42 Palestine’s cuisine leader, page 12. Rooting out page 59. Europe worries Pro-choice Republicans The king of cauliflowers corruption is only the start of about warm Hungarian- 43 South African tourism attempts to modernise the Russian ties, page 47 24 Cigarette smuggling PLA, page 39 Nannies v Al Capone Killing the golden goose 24 The economy 43 Chad and Senegal The Economist online At last, a proper recovery A pan-African trial, at last Daily analysis and opinion to 26 Farm subsidies 44 Nigeria supplement the print edition, plus Milking taxpayers Counting votes before they are cast audio and video, and a daily chart 28 Presidential power Economist.com A law for limited war E-mail: newsletters and 29 Gay marriage Europe mobile edition Now in Alabama 45 The German economy Economist.com/email 29 Bondage at the box office Not enough investment Print edition: available online by All tied up in the Bible belt 46 Turkey and its Kurds 7pm London time each Thursday Dreams of self-rule Economist.com/print 30 Lexington David Axelrod meets reality 47 Hungary and Russia Teachers How to turn teaching Audio edition: available online Viktor and Vladimir into a job that attracts to download each Friday high-flyers: leader, page 11. Economist.com/audioedition The Americas 47 The DSK trial Bad days in Lille Programmes that place the 31 Venezuela best graduates in poor schools The revolution at bay 48 Charlemagne are spreading around the Frans Timmermans, world. They show what it takes 33 Bello Europe’s Dr No Whose oil in Brazil? to make a difference, page 53. Volume 414 Number 8925 34 Colombian flower growers Why are countries failing so Peso power badly at teaching English? Published since September 1843 Page 54. In America Republicans to take part in "a severe contest between 34 Electoral reform in Chile intelligence, which presses forward, and are resurgent, so school an unworthy, timid ignorance obstructing Tie breaker vouchers are back, page 23 our progress." Editorial offices in London and also: Atlanta, Beijing, Berlin, Brussels, Cairo, Chicago, Hong Kong, Johannesburg, Lima, Los Angeles, Mexico City, Moscow, New Delhi, New York, Paris, San Francisco, São Paulo, Singapore, Tokyo, Washington DC 1 Contents continues overleaf 4 Contents The Economist February 14th 2015

Britain Science and technology 49 Foreign policy 69 The Arctic Ocean Muscle memory Awakening 50 Tax evasion 70 Satellites Hiding Sir’s Black Cash Tough old birds 52 Bagehot 71 Oceanography The Milibandwagon Acid test for the high seas 71 The evolution of violins International Making sweet music 53 Teacher recruitment 72 Holographic movies China’s Walt Disney The Arctic Ocean Earth’s High-flyers in the The end of a tunnel The country’s biggest property northernmost sea is stirring. classroom tycoon wants to become an The consequences are both entertainment colossus, 54 Teaching English Books and arts good and bad, page 69. The page 55 The mute leading the mute 73 ”Leviathan” latest XPRIZE is for a better Russia’s Book of Job way of monitoring the ocean’s Business 74 The origins of money acidity, page 71 55 Dalian Wanda Means of exchange It’s a Wanda-ful life 74 T.S. Eliot Subscription service 58 Fashion designers Time present and time past For our latest subscription offers, visit Strutting their stuff 75 T.E. Lawrence Economist.com/offers For subscription service, please contact by 58 Crowdfunding Enigmatic mystery telephone, fax, web or mail at the details The stars are the limit 76 Love songs provided below: Telephone: 1 800 456 6086 (from outside 59 Sanctions against Russia My funny Valentine the US and Canada, 1 636 449 5702) Facsimile: 1 866 856 8075 (from outside Fancy footwork 76 Race in the theatre the US and Canada, 1 636 449 5703) 61 Schumpeter Grey area Web: Economistsubs.com Authorpreneurship E-mail: [email protected] Greece Unless Syriza changes Post: The Economist Subscription course, Greece is heading out 84 Economic and financial Services, P.O. Box 46978, indicators St. Louis, MO 63146-6978, USA of the euro: leader, page 11. Finance and economics Subscription for 1 year (51 issues) Statistics on 42 Greece’s government must 63 The Greek crisis United States US$160 economies, plus a closer satisfy its voters as well as its Smoking out firebrands Canada CN$165 creditors, page 63 look at defence spending Latin America US$338 64 Buttonwood Hot property Obituary 65 Private equity and energy Principal commercial offices: Refilling the pipeline 86 Richard von Weizsäcker 25 St James’s Street, London sw1a 1hg Germany’s liberator Tel: 020 7830 7000 66 India’s economy Rue de l’Athénée 32 On the dragon’s tail 1206 Geneva, Switzerland 66 Zimbabwe’s economy Tel: 4122 566 2470 Nothing for money 750 3rd Avenue, 5th Floor, New York, NY 10017 67 American wealth Tel: 1212 5410500 management 60/F Central Plaza 18 Harbour Road, Wanchai, Hong Kong Survival of the least fit Tel: 852 2585 3888 67 Inequality in Japan Other commercial offices: How to publish a bestseller The secure v the poor Chicago, Dubai, Frankfurt, Los Angeles, To succeed these days, authors 68 Free exchange Paris, San Francisco and Singapore must be more businesslike The problem with than ever: Schumpeter, page 61 price-match guarantees

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6 The world this week The Economist February 14th 2015

out sentences to 44 other mem- Martelly, has ruled by decree licences; others refused. The Politics bers ofthe group, which was since January, when parlia- US Supreme Court is expected called Sharia4Belgium. ment was dissolved. to issue a definitive ruling on gay marriage in June. An insecure democracy At least three people were Nigeria’s electoral commis- killed and ten wounded in a The new Republican governor sion, an independent body, gas explosion on a drilling rig ofIllinois, Bruce Rauner, postponed forsix weeks presi- operated by Petrobras, Brazil’s started to curb the power of dential elections that were due state-controlled oil giant. The public-sector unions. He to take place on February14th, disaster adds to Petrobras’s ordered the state to stop auto- throwing the country into a troubles. It recently lost its matically collecting union period ofuncertainty. The chiefexecutive, amid a rum- dues from public employees commission delayed the vote bling multi-billion-dollar who do not want to join after the police and army said bribery scandal. unions. The unions say they they could not secure polling are entitled to this cash A summit on Ukraine in stations in the north ofNigeria Venezuela’s government took because non-members benefit Minsk, the capital ofBelarus, while also battling Boko over a private supermarket from their collective-bargain- between the leaders ofFrance, Haram, a jihadist group that chain and arrested its boss. The ing efforts. But Mr Rauner Germany, Russia and Ukraine has overrun large parts ofthree president, Nicolás Maduro, described the arrangement, concluded with Vladimir states there. claimed that the retailer was which helps bankroll Demo- Putin, Russia’s president, an- “waging war against the pop- crats, as “corrupt”. nouncing a ceasefire. Fighting The war with Boko Haram ulation” by hoarding food. in south-eastern Ukraine has meanwhile widened to Shortages ofbasic consumer A bloody nose for Modi intensified in the run-up to the involve more neighbouring goods have created long meeting, raising doubts about countries. Niger declared a queues across Venezuela for the deal. BarackObama, who state ofemergency after months, which economists had earlier warned Mr Putin several attacks on Diffa, a blame on price controls and a that Russia’s military interven- border region abutting Nigeria. lackofforeign exchange to pay tion would be costly, reserved An attackby the militants in forimports. the right to send arms to Cameroon led to the Ukraine ifdiplomacy fails. kidnapping ofas many as 30 Back into the fray? people. BarackObama formally asked Greece’s problems mounted Congress to authorise Ameri- as the parliament voted strong- The United Nations backed out can military action against ly in favour ofending the ofsupporting a planned offen- Islamic State in Iraq and Syria. country’s current bail-out sive in the east ofthe The president’s decision last India’s ruling Bharatiya Janata agreement. A Eurogroup meet- Democratic Republic of summer to launch air strikes Party was trounced in an elec- ing offinance ministers broke Congo against the FDLR, a against IS without congressio- tion in Delhi, the capital, hand- up without even agreeing to rebel militia, because two nal approval was controver- ing Narendra Modi his first disagree. And the Greekprime generals assigned to lead the sial, though the administration serious political defeat since minister promised to reverse government’s forces are says it was legal. Mr Obama becoming prime minister in unpopular reforms and spend accused ofhuman-rights wants Congress to approve May 2014. The anti-corruption more public money. abuses. combat against IS forup to Aam Aadmi Party won 67 of three years. Doves fear that the 70 seats in the local assem- The United Nations said that Fuel-price protesters America will drift into another bly, while the opposition hundreds ofwould-be war. Hawks fret that putting an Congress party failed to pick migrants drowned trying to expiry date on military action up a single district. cross the Mediterranean from will encourage IS to wait for north Africa when their America to grow weary. Australia’s prime minister, dinghies overturned. The UN Tony Abbott, survived a lead- High Commissioner for Meanwhile it was confirmed ership challenge initiated by a Refugees condemned the EU’s that Kayla Mueller, an Ameri- backbencher in his Liberal search-and-rescue operation at can aid worker held by IS, had Party, although 39 ofhis MPs sea as “inadequate”. been killed. The circumstances voted against him. Mr Abbott’s ofher death were unclear, but approval rating has slumped to In Italy the captain ofthe the jihadists claim she died 24% amid a series ofgaffes, Costa Concordia, which when Jordanian jets attacked including giving a knighthood capsized offthe Italian coast in Protests erupted in Haiti one ofits bases. to Prince Philip. 2012, killing 32 people, was against the cost offuel. Al- found guilty ofmanslaughter though prices have been re- The first gay marriages in The president ofTimor-Leste and sentenced to 16 years in duced lately, the protesters Alabama were celebrated, accepted the resignation of prison. He will appeal against want more cuts in line with the amid confusion. A federal Xanana Gusmão as prime the verdict. plunge in oil prices. The trou- judge had struckdown the minister. The former“poet- ble followed demonstrations state’s ban on same-sex nup- warrior” led the struggle A court in Belgium jailed the earlier this year to demand tials, but Alabama’s chief against Indonesian rule and leader ofa group that sent that national and local elec- justice ordered officials to defy has been either president or jihadist fighters to Syria to 12 tions, which are long overdue, the ruling. Some towns went prime minister since indepen- years in prison. It also handed be held. The president, Michel ahead and issued marriage dence in 2002. 1 The Economist February 14th 2015 The world this week 7

to buy back$8 billion-worth of There was some evidence that in goods last year. It also im- Business shares. Mr Wilson is backed by OPEC’s decision to maintain ported more stuff, but still four hedge funds, in what is production levels in the face of posted a trade surplus of€217 the latest example ofactivist plummeting oil prices in order billion, the second-highest in investors pressing a company to retain market share may be the world after China’s. forhigher returns. working. The cartel raised the forecast fordemand forits oil American employers created China’s competition regulator this year slightly, to 29.2m 257,000 jobs in January, which fined Qualcomm $975m for barrels a day, and lowered its was much more than had been abusing its market power estimate ofoutput from non- expected. The unemployment when licensing patents for OPEC producers, as cheap oil rate rose slightly to 5.7%, but smartphone chips. It is the forces American and European this was reckoned to be biggest antitrust penalty to oil companies to curtail their because more people who date levied against a single capital spending. In a report have been out ofworkare company in China and comes the International Energy Agen- choosing to return to a HSBC was embarrassed by the after a 14-month investigation cy said it expects the market to buoyant labour market. The publication ofa trove ofdocu- that drew comments from “rebalance”, as the global labour-force participation rate ments purporting to show that observers on the hurdles faced demand foroil grows “slightly rose to 62.9% from 62.7%. its bankers in Switzerland by Western firms there. Chi- fasterthan supply capacity”. helped clients spirit away nese smartphone-makers will Lies, damn lies and… almost $120 billion in secret also pay lower royalties to Reaching for the sun Controversy continued to accounts, much ofit to evade Qualcomm. Its troubles may Apple became the first com- surround the revision to taxes. The allegations, pub- not be over; according to re- pany to notch up a stockmark- India’s GDP statistics, as lished by several media com- ports it faces an antitrust in- et valuation above $700 bil- figures showed the economy panies in a manner similar to vestigation in South Korea, too. lion at the close oftrading. It growing by 7.5% year on year in the WikiLeaks revelations, also was valued at $710 billion on the last three months of2014, a suggest HSBC Suisse marketed After a two-year takeover February10th, $300 billion slightly faster pace than China tax-avoidance strategies to its battle, Fosun, the largest pri- more than Exxon Mobil, had recorded. India’s number- customers. France, America, vately owned conglomerate in which has the second-highest crunchers recently updated Argentina and others are mainland China, won its bid market value. Meanwhile, the base year forcalculating investigating. for Club Méditerranée, a Apple announced that it is GDP to 2011-12, thus revising holiday-resort firm that was investing $850m in a solar- GDP growth for2013-14 up to Funny that wildly popular in the 1970s but energy plant in California that 6.9% from a previous estimate The number ofpeople revok- has struggled over the past will generate enough power of4.7%. Some analysts ques- ing their American citizen- decade. It is revamping its Club for its new campus-head- tion the data, pointing out that ship or residency rose to a new Med villages to appeal to the quarters as well as forlocal the evidence from small busi- record high of3,415 last year, high end ofthe holiday market shops and businesses. nesses suggests that the econ- according to a list published by and is expanding in China. omy is struggling to accelerate. the Treasury. No reason was Eighty per cent ofits new Boosted in part by a weaker given explaining why they customers in 2013 were either euro, Germany exported a Other economic data and news have renounced their Chinese or Brazilian. record €1.1trillion ($1.5 trillion) can be found on pages 84-85 citizenship, but the number has leapt since 2010, when Congress passed the Foreign Account TaxCompliance Act.

Sweden’s central banksur- prised markets by cutting its main interest rate to -0.1%, joining just a handful ofcoun- tries with negative rates. It also launched a programme of quantitative easing. Inﬂation has been below the Riksbank’s target rate of2% forthree years. However, Sweden’s economy is growing faster than that of the euro zone, which is also battling deﬂation.

General Motors said that Harry Wilson, a former member ofthe task-force that restructured the carmaker as it sought to emerge from bank- ruptcy protection in 2009, is seeking a seat on its board with the express intent ofgetting it DON’T GET STUCK WITH AN IMPRECISE INVESTMENT.

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As Ukraine suffers, it is time to recognise the gravity ofthe Russian threat—and to counterit E IS ridiculed for his men- and, at least on the West’s fragile periphery, supplant them Hdacity and ostracised by his with his own model of governance. In that model, nation- peers. He presides over a free- states trump alliances, states are dominated by elites, and falling currency and a rapidly those elites can be bought. Here, too, he has enjoyed some suc- shrinking economy. Interna- cess. From France to Greece to Hungaryhe iscultivating parties tional sanctions stop his klepto- on Europe’s farright and left: anyone who might lobby for Rus- cratic friends from holidaying in sian interests in the EU, or even help to prise the union apart their ill-gotten Mediterranean (see pages 19-22). The biggest target is NATO’s commitment to villas. Judged against the objectives Vladimir Putin purported mutual self-defence. Discredit that—by, for example, staging a to set on inheriting Russia’s presidency 15 years ago—prosper- pro-Russian uprising in Estonia or Latvia, which other NATO ity, the rule of law, westward integration—regarding him as a members decline to help quell—and the alliance crumbles. success might seem bleakly comical. Mr Putin’s stranglehold on his own country means he has But those are no longer his goals, if they ever really were. time and freedom for this campaign. As he has amply demon- Look at the world from his perspective, and Mr Putin is win- strated, he has no qualms about sacrificing Russians’ well- ning. For all his enemies’ machinations, he remains the Krem- being to satisfy his coterie’s greed or to further his geopolitical lin’s undisputed master. He has a throttlehold on Ukraine, a schemes. He persecutes those who protest. And in the echo grip this week’s brittle agreement in Minsk has not eased. Do- chamber his propaganda creates, the nationalism he peddles mesticating Ukraine through his routine tactics of threats and as a consolation fordomestic woes is flourishing. bribery was his first preference, but the invasion has had side benefits. It has demonstrated the costs of insubordination to What is to be done? Russians; and, since he thinks Ukraine’s government is merely The first task for the West is to recognise the problem. Barack a puppet of the West (the supposed will of its people being, to Obama has blithely regarded Russia as an awkward regional his ultracynical mind, merely a cover for Western intrigues), power, prone to post-imperial spasms but essentially declin- the conflict has usefully shown who is boss in Russia’s backing. Historians will be amazed that, with Ukraine aflame, the yard. Best of all, it has sown discord among Mr Putin’s adver- West was still debating whether to eject Russia from the G8. To saries: among Europeans, and between them and America. paraphrase Trotsky, Western leaders may not have been inter- His overarching aim is to divide and neuter that alliance, ested in Mr Putin, but Mr Putin was interested in them. fracture its collective approach to security, and resist and roll The next step is to craft a response as supple as the on- back its advances. From his tantrums over the Middle East to slaught. Part of the trouble is that Mr Putin plays by different his invasion of Georgia and multiple misadventures in Uk- rules; indeed, forhim, there are no inviolable rules, noruniver- raine, Mr Putin has sometimes seemed to stumble into acci- sal values, nor even cast-iron facts (such as who shot down dental disputes with the West, driven by a paranoid fear ofen- flight MH17). There are only interests. His Russia has graduated circlement. In hindsight it seems that, given his outlook, from harassing ambassadors and assassinating critics to inva- confrontation may have been inevitable. Either way, the con- sions. This is one of his assets: a readiness to stoop to methods test he insists on can no longer be dodged. It did not begin in the West cannot emulate without sullying itself. poor Ukraine and will not end there. Prevailing will require far The currentversion ofthisquandaryiswhether, if the latest more resolve than Western leaders have so far mustered. ceasefire fails, to arm Ukraine. Proponents think defensive weapons would inflict a cost on Mr Putin for fighting on. But What the Kremlin wants anyone who doubts his tolerance ofmass casualties should re- Last yearMrPutin lopped offCrimea, redrawingEurope’s map call his war in Chechnya. If arms really are to deter him, the by force. The war he hallucinated into reality in eastern Uk- West must be united and ready to match his inevitable escala- raine has killed thousands. Even if the ceasefire scheduled for tion with still more powerful weapons (along, eventually, February 15th holds (unlikely, on past form), he seems certain with personnel to operate them). Yet the alliance is split over to get what he wants there: a wretched little quasi-state in the the idea. Mr Putin portrays the war as a Western provocation: Donbas, which he can use to stall and warp Ukraine’sdevelop- arming Ukraine would turn that from fantasy to something ment. Yet these incursions are only his latest bid to bludgeon like fact, while letting him expose the limits of Western unity former Soviet states into submission, whether through energy and its lack of resolve—prizes he cherishes. If fresh Russian ag- blackmail, trade embargoes or war. For Mr Putin the only good gression galvanises the alliance, arming Ukraine will become neighbour is a weak one; vassals are better than allies. Only a more potent threat. Until that point, it would backfire. the wilfully blind would think his revanchism has been sated. Abetterstrategyisto eschewhismethodsand rely on an as- Sooner or later it may encompass the Baltic states—members set that he, in turn, cannot match: a way oflife that people cov- of both the European Union and NATO, and home to Russian et. If that seems wishy-washy beside his tanks, remember that minorities ofthe kind he pledges to “protect”. the crisis began with Ukrainians’ desire to tilt towards the EU— The EU and NATO are Mr Putin’s ultimate targets. To him, and Mr Putin’s determination to stop them. Better than arms, Western institutions and values are more threatening than ar- the West must urgently give Ukraine as much aid as it needs to mies. He wants to halt their spread, corrode them from within build a state and realise that dream (and as much advice as it 1 10 Leaders The Economist February 14th 2015

2 takes to ensure the cash is not misspent orstolen). The IMF deal nounce the West’s decadence but exploit its schools and stock- announced on February 12th should be only a start. Mr Putin markets. It is long past time for every Russian parliamentarian wants Ukraine to be a lesson in the perils of leaning West. It and senior oﬃcial to join the sanctions list. Far from being re- should instead be an exemplar ofthe rewards. laxed as, after Minsk, fellow-travellers may suggest, sanctions Just as urgently, those former Soviet countries that have must be tightened—and sanctions-busting curtailed (see page joined Western institutions must be buttressed and reassured. 59). In the end, they will prove a stronger lever than weapons. If the case for sending arms to the Donbas is doubtful, that for At the same time, the West should use every available basing NATO troops in the Baltics is overwhelming, however means to help ordinary Russians, including Russian-sympa- loudly Mr Putin squeals. Western leaders must make it clear, to thisers in the Baltics and Ukraine, learn the bloody, venal truth him and their own people, that they will defend their allies, about Mr Putin. It should let them know that Russia, a great na- and the alliance—even ifthe struggle is covert and murky. tion dragged down a terrible path, will be embraced when it And it isn’t only its allies who appreciate the West’s virtues. has rulers who treat the world, and their own people, with re- So do many Russians, including shameless Putinists who de- spect not contempt, however long that takes. 7

The unbalanced global economy American shopper

The world is once again relying too much on American consumers to powergrowth GLOBAL economy running America’s economy is warping as a result. Consumption’s US trade deficit as % of GDP Aon a single engine is better contribution to growth in the fourth quarter of 2014 was the Total of which: non-petroleum than one that needs jump leads. largest since 2006. The trade deficit is widening. Strip out oil, 0 GDP – The American economy is mo- and America’s trade deficit grew to more than 3% of in 2 toring again, to the relief of ex- 2014, and is approaching its pre-recession peakofabout 4%. 4 6 porters from Hamburg to The world’s reliance on America is likely to deepen. Ger- 8 Hangzhou. Firms added more mans are more interested in shipping savings abroad than in- 2005 07 09 11 13 14 than 1m net new jobs in the past vesting at home (see page 45). Households and firms in Eu- three months, the best showing since 1997 (see page 24). rope’s periphery are overburdened with debt, workers’ wages Buoyed up by cheap petrol, Americans are spending; in Janu- squeezed and banks in no mood to lend. Like Germany, Eu- ary consumer sentiment jumped to its highest in more than a rope as a whole is relying on exports. China is rebalancing, but decade. The IMF reckons that American growth will hit 3.6% in not fast enough: services have yet to account for more than 2015, faster than the world economy as a whole. All this is halfofannual Chinese output. good. But growing dependence on the American economy— Diverging monetary policies will exacerbate the problem. and on consumers in particular—has unwelcome echoes. The prospect of quantitative easing by the European Central A decade ago American consumers borrowed heavily and Bankhas sent the euro tumblingagainst the greenback, further recklessly. They filled their ever-larger houses with goods from helping European exporters. Central banks in Tokyo, Beijing China; they fuelled gas-guzzling cars with imported oil. Big ex- and Mumbai are all easing. The Federal Reserve appears ready porters recycled their earnings back to America, pushing to begin raising interest rates this summer. That is sending down interest rates which in turn helped to feed further bor- yield-hungry capital to America, and the dollar skyward. rowing. Europe was not that different. There, frugal Germans financed debt binges around the euro area’s periphery. Shop until you droop Afterthe financial crisis, the hope wasofan end to these im- Two dangers loom. The short-term worry is that weakexports, balances. Debt-addicted Americans and Spaniards would a rising dollar and a slowdown in energy investment (because chip away at their obligations; thrifty German and Chinese of falling oil prices) will stifle the American expansion. Rather consumers would start to enjoy life for once. At first, this than pull others along, America will be dragged down by their seemed to be happening. America’s trade deficit, which was weakness. That is why the Fed should be none too eager to about 6% ofGDP in 2006, had more than halved by 2009. raise interestrates. With inflation belowtargetithas no need to But now the world is slipping back into some nasty habits. rush to tighten. Hair grows faster than the euro zone, and what growth there is The longer-term fear is that growing imbalances will repeat depends heavily on exports. The countries of the single cur- the financial cycle ofthe 2000s, in which exporters to America rency are running a current-account surplus of about 2.6% of once again finance reckless consumer borrowing. The ratio of GDP, thanks largely to exports to America. At 7.4% ofGDP, Ger- Americans’ debt to income has fallen from a pre-crisis high of many’s trade surplus is as large as it has ever been. more than 120% to around 100%, but consumers still have too China’s growth, meanwhile, is slowing—and once again re- much incentive to load up on debt. Politicians would do well lying heavily on spending elsewhere. It notched up its own re- to get rid ofsubsidies like tax reliefon mortgage interest. cord trade surplus in January. China’s exports have actually But the burden to act does not lie just on America. Leaders begun to drop, but imports are down by more. And over the from Brussels to Beijing should not allow falling currencies to past year the renminbi, which rose by more than 10% against become a substitute forstructural reform, orforefforts to boost the dollar in 2010-13, has begun slipping again, to the annoy- spending at home. A strong American economy is a boon to ance ofAmerican politicians. the world. It should not be taken forgranted. 7 The Economist February 14th 2015 Leaders 11

Greece and the euro Hitting the ground running—backwards

Unless Syriza changes course, Greece is inexorably heading out ofthe euro HEN the far-left Syriza stead ofa bridgingloan thatwould create time fornegotiations Wparty won the Greek elec- to take place without monitoring by the hated “troika” of the tion last month, the hope was European Commission, the European Central Bank and the that the new prime minister, IMF. There is a case for removing the ECB, which is politicised Alexis Tsipras, would moderate by its involvement in the troika. But Mr Tsipras cannot expect his demands so as to compro- more loans without conditions, as the bad-tempered break-up mise with his country’s credi- of this week’s Eurogroup meeting demonstrated. Instead, he tors. After all, he (like the vast needs to extend the bail-out fast, and then enter talks. majority of Greeks) wants to stay in the single currency. But even as he prepared to meet fellow European Union leaders A doable debt deal forthe firsttime thisweek, he wasmakinga Greekexit from the In those talks there is scope fora deal. Greece’s total debt stock euro ever more likely. stands at an unpayable 175% of GDP (up from 109% before the Mr Tsipras has put forward some good arguments against euro crisis). Mr Tsipras has dropped his demands for an imme- the austerity that has been imposed on Greece as the price of diate debt write-down. The maturity and interest cost of the its bail-outs. He has sound ideas on attacking corruption, fight- debt, two-thirds of which is owed to official European credi- ing tax evasion and shaking up Greece’s cosy business elite. tors, are so generous that Greece pays a smallershare ofGDP in His ministers now talkofkeeping 70% ofthe old government’s debt service than Portugal and Italy. These terms could be reforms (see page 63). But his first moves in office included made more generous still. And the creditors should be pre- promises to raise the minimum wage to pre-crisis levels, re- pared to adopt a version of the IMF’s old highly indebted poor verse labour-market reforms, restore pension increases, rehire countries (HIPC) initiative for Africa: a promise to write down thousands of public servants and scrap privatisation projects. debt in stages at indeterminate future dates, but only in return These would not just breach Greece’s bail-out terms, but also fordefined progress on reforms. wreckthe country’s economic prospects. It should also be possible to give Greece more fiscal To reverse course in this way when Greece’s economy is at breathing-space. The government is now required to run a last growing and unemployment is falling is perverse. Greece primary (ie, pre-interest) budget surplus of3% ofGDP this year, needs more, not fewer reforms: despite progress in regaining risingto 4.5% from 2016 onwards. MrTsipraswantsto cutthat to lost competitiveness, its exports remain weak. In its business no more than 1.5%. A compromise ofaround 2.5% would allow climate it lags behind neighbouring Bulgaria, the poorest EU him to spend more on social programmes. country, in areas such as enforcing contracts, registering prop- Here, then, is a simple message forEuropean leaders to give erty and providing credit. MrTsipras. Theywill negotiate, butonlyonce the bail-out isex- Keeping Greece in the euro will require compromises. tended. They will help him on debt and the budget, but only if Greece’s creditors need to decide what to trade, and when. Mr he is prepared to make his economy more competitive. If an Tsipras foolishly refuses to prolong Greece’s bail-out pro- athlete insists on running backwards, even the most patient gramme when it expires at the end of the month, talking in- trainer cannot help him. 7

Teacher recruitment Those who can

How to turn teaching into a job that attracts high-flyers MAGINE a job where excel- lier. Each school-day a quarter of Indian teachers play truant. Ilence does nothing to improve In New York it is so hard to sack teachers that even those ac- your pay or chances of promo- cused of theft or assault may be parked away from pupils, do- tion, and failure carries little risk ing “administrative tasks” on full pay, sometimes foryears. of being sacked. Yourpay is low You can find outstanding individuals in the worst school for your qualifications—but at systems. But, as lazy and incompetent teachers get away with least the holidays are long, and slacking, the committed ones often lose motivation. In Ameri- the pension is gold-plated. ca and Britain surveys find plummeting morale. Jaded British Teachingought to be a profession forhard-workingaltruists teachers on online forums remind each other that it is just a who want to improve children’s life prospects. But all too often few months till the long summer break—and just a few years school systems seem designed to attract mediocre timeserv- till retirement. No wonder so many children struggle to learn: ers. ManyMexican teachershave inherited theirjobs; Brazilian no school can be better than those who workin it. ones earn less than other public servants, and retire much ear- Yet it is possible to persuade the hardworking and ambi-1 12 Leaders The Economist February 14th 2015

2 tious to teach. Finland pays teachers modestly but manages es for pupils who have fallen behind? Stiffer entry require- them well; ten graduates apply for each training place. South ments would raise the job’s status and attract better appli- Korea recruits teachers from the top 5% of school-leavers and cants. Pay rises should reward excellence, not long service. promises them fat pay cheques. In both countries teachers are Underperformers should be shown the door. revered—and results are among the world’s best. Standing in the way, almost everywhere, are the unions. Even where the profession isin disrepute, high-flyers can be Their willingness to back shirkers over strivers should not be lured into the classroom. Teach for America, which sends star underestimated: in Washington, DC, when the schools boss (a graduates from elite universities for two-year stints in rough Teach for America alumna) offered teachers much higher pay schools, is being copied around the globe (see page 53). Private in return forless job security, theirunion balked. employers snap up its alumni—but many stay in teaching. Teach First, Britain’sversion, hashelped raise standards in Lon- Class action don and is one of the country’s most prestigious graduate em- But against the unions is a growing coalition: the leaders in ployers. Such schemes are small, but show that when teaching public administration and private enterprise who have been is recast as tough and rewarding, the right sort clamour to join. through Teach forAmerica and its ilk. They know what it takes Spreading the revolution to the entire profession will mean to succeed in difficult schools, and what it would take for suc- dumping the perks cherished by slackers and setting terms cess to become the norm. They know that what good teachers that appeal to the hardworking. That may well mean higher want most of all is good colleagues. As they become more nu- pay—but also less generous pensions and holidays. Why not merous and influential, they need to argue for a new deal for encourage teachers to use the long vacation for catch-up class- teachers. The good ones deserve it—and pupils do, too. 7

China’s army Lifting the veil

Xi Jinping is bringing a corrupt army to heel. Now he must make it behave responsibly O SECRETIVE is China’s fighter planes. In November China and America inched in the Sarmy that it began admitting same direction. But the agreement between Mr Xi and Barack foreign journalists to its month- Obama is full of loopholes. China’s army does not accept the ly—and highly uninformative— kind of surveillance that the Americans and Russians routine- briefings only last year. But in ly carried out near each other’s territory during the cold war. the past few months extraordi- The scarcity of “mil-mil” contacts makes it harder for America nary revelations have appeared and China to communicate in times ofcrisis. in the Chinese media about cor- Secondly, the PLA fosters a paranoid fear within its ranks ruption in the highest ranks of the People’s Liberation Army that America is bent on China’s destruction. A new directive (PLA): a deputy chief of logistics built a mansion for himself published this month calls for tighter ideological background modelled on the Forbidden City (among his treasures was a checks on soldiers to prevent “sabotage by hostile forces”. Mr statue of Mao Zedong, in gold); the country’s most senior uni- Xi, like his predecessors, sees this as important for discipline. formed officer had a basement stacked high with cash; and in It is only natural for the PLA to be suspicious of the Ameri- January it emerged that no fewer than 15 generals, including a can army and vice versa. But if the two countries are to culti- formerdeputy chiefofthe nuclear arsenal, were being investi- vate a “new type of great-power relationship”, as Mr Xi often gated for graft (see page 39). Never before in China’s history says he wants and the world clearly needs, then their relations have so many high-ranking officers faced such charges at once. have to be built on stronger foundations. Mr Xi, it was an- The lifting of the veil that normally shrouds the world’s nounced this week, will travel to America in September forhis largest military force is evidence of the clout of Xi Jinping, the first state visit. It would help if he curbed his army’s tendency chiefofthe CommunistParty, state presidentand, most impor- to portray America as China’s arch-enemy. tantly, commander-in-chiefofwhat MrXi insists on reminding officers is the party’s army. No leader since Deng Xiaoping in Carrier diplomacy the 1980s has held such sway over the armed forces. His purge America, too, sometimes wears cold-war spectacles. This of its highest echelons may be partly aimed at crushing poten- month the Pentagon said it would not send an aircraft-carrier tial rivals. But it is also part ofMr Xi’s campaign against corrup- on a visit to China this year, an idea that both sides had been tion throughout the party and government and it has struck mulling. Pentagon officials, it seems, agree with John McCain, fear into the hearts of politicians and military officers, regard- a hawkish Republican senator, who said that sending “one of less oftheir loyalties. the most sophisticated and lethal military tools in world his- Mr Xi should now use his grip over the PLA to achieve more tory” would be a mistake at a time of anxiety in Asia about than just suppress the rampant practice of buying ranks and China’s “aggressive” behaviour in the region. In fact, it would doing dodgy business deals. The army remains largely un- be a biggermistake not to send the carrier. Such a gesture could changed in two important, and worrying, ways. First, it is still help to forge ties with a military establishment that America deeply wary ofcontacts with its Western counterparts. During needs to know better. And it would be a timely reminder to the cold war, America and the Soviet Union worked out codes Chinese generals—some of whom speak dismissively of Am- of conduct to prevent accidents between their warships or erican strength—that America still wields a very big stick. 7 COMPLEXITY HAS A MILLION IDEAS IT CAN’T MAKE HAPPEN. © 2015 SAP SE or an SAP affiliate company. All rights reserved. affiliate company. SE or an SAP SAP © 2015

SIMPLE FINISHES WHAT IT STARTS.

Simplicity can be the difference between a mission statement and a mission accomplished. Are you doing everything you can to help your business run simple? Find out more at sap.com/runsimple 14 Letters The Economist February 14th 2015

The inheritance of privilege Focused knowledge contributions to get a full state IfGreece now reverses its pension when they retire. own labour reforms it will America has a problem with Thomas Aquinas’s phrase There is a big distinction probably sinkbackinto reces- social mobility (“An hereditary “beware ofthe person ofone between the state pension and sion. But blame that on Alexis, meritocracy”, January 24th). book” was not an admonish- the various non-means-tested not Angela. So does Britain, where it is ment against “unscholarly giveaways that you men- HOLGER SCHMIEDING more intractable. There are types” (“Spotify forbooks”, tioned. The state pension is a Chief economist private schools on America’s January 24th). Rather, Aquinas part-contributory, part-tax- Berenberg east coast that cater to the elite, stood by St Augustine’s view funded system forensuring a London such as Groton, St Paul’s, that “the curious man is minimum income to the elder- Andover, Exeter and Hotch- always a fornicator: he ly. Free bus passes, winter Greece’s debt looks unpayable kiss, but they leave a pin prick perverts study and investiga- heating allowances and the only ifone looks at the wrong on American life. None is tion”, meaning that a man who like are indefensible ifthey are statistics, such as the debt stock associated with power in the concentrated his learning on a paid out regardless ofwealth. as a share ofGDP, which you way that Eton is in Britain. single book was to be feared. EDWARD VICKERS regrettably do. Greece’s debt is American commentators do MICHAEL BRACKEN Associate professor of at extremely concessional not see the need to run stories London comparative education terms, resulting in an effective similar to those in the British Kyushu University interest rate on public debt that media about how many busi- Trying to prevent suicide Fukuoka, Japan is lower than Germany’s, and a nessmen, judges, army officers, public debt-service burden GDP lawyers, journalists and actors Yourarticle on suicide in Cancer advice that, as a share of , is about come from the 7% who are America (“An awful hole”, the same as America’s. privately educated. January 31st) reminded me of Youadvised young women to HENRY KASPAR Rich Americans send their an incident I saw in Japan, of “have an anti-papilloma vacci- Washington, DC children to state schools in a the body ofa young woman nation” to reduce the chances way rich Britons do not. Grant- being removed from under a ofcervical cancer (“Chancing Scent by post ed, localised funding in Ameri- train. Japan has some ofthe your arm”, January10th). But ca provides wealthy areas with world’s strictest gun-control boys and young men should schools that achieve better laws. It also has the seventh- also get the jab as it reduces the academically, but these highest suicide rate. Jumping likelihood ofcontracting other schools are still part ofthe state in front ofa train is one of the types ofcancer caused by the system and its culture. Their most common ways to commit human papillomavirus. alumni do not stand out in the suicide. The bullet trains have DAVID BUCHANAN same way they often do in separate rail tracks that are Vancouver Britain. Walkdown a street in often fenced offat stations to St Andrews or Durham and prevent access by “leapers”. Southern comfort you will see what I mean. Suicide there also lacks the SIMON BARROW stigma it has in America. Re- May I askmy beloved Econo- London moving that stigma and con- mist to consult the facts first trolling access to guns would before being unkind to a lady Youcharted the rapidly rising not, as you suggest, lower (“Go ahead, Angela, make my One ofthe hyenas depicted on cost ofcollege tuition and fees America’s suicide rate. People day”, January 31st)? Farfrom the February 7th cover is cock- in America. However, what would resort to other means. remaining “stuckwith near- ing a leg while urinating. Hye- really matters is that the bur- Furthermore, cognitive behav- zero growth” those countries nas do not do that. A hyena den for paying those costs has ioural therapy is better at ofthe southern euro zone that may indeed pee on Wall Street, shifted greatly from the states treating depression and reduc- have followed Angela Merkel’s but it would do so discreetly. to students and their families. ing suicidal urges than drugs. prescription oflabour-market ALEXANDER BORBÉLY The anti-tax agenda has It is 20 years later and I still reform and fiscal repair started Zurich substantially diminished the remember the thin gold watch to recover nicely some four to ability ofstates to underwrite on her limp arm. six quarters ago. In the last two Missing u the cost ofhigher education. JAMES KIRWIN quarters forwhich we have One ofAmerica’s most Dobson, North Carolina data, annualised growth aver- “The disunited states ofcan- important innovations was the aged 2.4% forSpain, 2.2% for nabis” (January17th) on Amer- creation ofgreat public univer- Deserving pensioners Greece and 1.2% forPortugal. ica’s marijuana laws situated sities. What had been an For Spain and Portugal, Washington within the extraordinary public good and There is nothing “dubious” leading indicators project “District ofColombia”. Ifso, a remarkable vehicle for about Britain’s state pension stronger gains ahead while, one up to the cartels indeed. upward social mobility is being based on past contribu- sadly, Greekindicators have CLINTON LEEKS increasingly a private good, tions (“Golden oldies”, Janu- started to nosedive with the Houghton-le-Spring, available to students from ary 31st). Yes, it is paid out of rise ofthe Syriza threat. The Tyne and Wear 7 familieswho can afford it. To a the tax pot rather than a dis- medicine was bitter, and prob- distressing degree America has crete pension fund. But for ably dished out as an overdose broken faith with its commit- most recipients, the state pen- in the case ofGreece. But it is Letters are welcome and should be addressed to the Editor at ment to public higher educa- sion is related to national- working. Italy is the one coun- The Economist, 25 St James’s Street, tion, and with those forwhom insurance contributions. That try that sticks out. It has a mild London sw1A 1hg it represents a way up. is why thousands ofnon- recession precisely because it E-mail: [email protected] JEFFREY RIEDINGER resident British citizens, such has not yet swallowed the More letters are available at: Seattle as myself, opt to pay voluntary labour-reform pill. Economist.com/letters Digital highlights

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Academic publishing Hungary’s angry media baron Chocolate on Valentines day: why? Peer review—the process by which The invective that Hungary’s most powerful None of the popular hagiographies of St academics check the work of their businessman has unleashed over the past Valentine give any hint of him liking colleagues before it goes to print—is few days towards his country’s prime chocolate. It was not until the late 18th evolving. Various publishers are trying to minister is exceptional. Beyond the colourful century that the two became associated. get rid of bad reviewer behaviour. Some of language, the spat is the most serious break But the confection is good for the heart in their experiments might work yet in Viktor Orban’s governing Fidesz party more ways than one

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The Economist February 14th 2015 Executive Focus 17

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The Economist February 14th 2015 18 Executive Focus

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The Economist February 14th 2015 Brieﬁng What Russia wants The Economist February 14th 2015 19

From cold war to hot war Also in this section 21 Russia’s European supporters BRUSSELS, LONDON AND MOSCOW Russia’s aggression in Ukraine is part ofa broader, and more dangerous, confrontation with the West HE pens were on the table in Minsk, were constrained by the Politburo and Behind Russia’s confrontation with the TBelarus’s capital, for the leaders of memories of the second world war. Now, West lies a clash of ideas. On one side are France, Germany, Russia and Ukraine to according to Russia’s chief propagandist, human rights, an accountable bureaucracy sign a deal to end a year-long war fuelled Dmitry Kiselev, even a decision about the and democratic elections; on the other an by Russia and fought by its proxies. But on use of nuclear arms “will be taken perso- unconstrained state that can sacrifice its February 12th, after all-night talks, they nally by Mr Putin, who has the undoubted citizens’ interests to further its destiny or were put away. “No good news,” said Petro support of the Russian people”. Bluff or satisfy its rulers’ greed. Both under Poroshenko, Ukraine’s president. Instead not, this reflects the Russian elite’s percep- communism and before it, the Russian there will be a ceasefire from February 15th. tion of the West as a threat to the very exis- state acquired religious attributes. It is this A tentative agreement has been reached to tence ofthe Russian state. sacred state which is under threat. withdraw heavy weaponry. In this view Russia did not start the war Mr Putin sits at its apex. “No Putin—no But Russia looks sure to be able to keep in Ukraine, but responded to Western ag- Russia,” a deputy chief of staff said recent- open its border with Ukraine and sustain gression. The Maidan uprising and ousting ly. His former KGB colleagues—the Com- the flow of arms and people. The siege of of Viktor Yanukovych as Ukraine’s presi- mittee of State Security—are its guardians, Debaltseve, a strategic transport hub held dent were engineered by American special servants and priests, and entitled to its by Ukrainian forces, continues. Russia is services to move NATO closer to Russia’s riches. Theirs is not a job, but an elite and holding military exercises on its side of the borders. Once Mr Yanukovych had gone, hereditary calling. Expropriating a private border. Crimea was not even mentioned. American envoys offered Ukraine’s inter- firm’s assets to benefit a state firm is there- Meanwhile the IMF has said it will lend im government $25 billion to place missile fore not an act ofcorruption. Ukraine $17.5 billion to prop up its econ- defences on the Russian border, in order to When thousands of Ukrainians took to omy. But Mr Putin seems to be relying on a shift the balance ofnuclear power towards the streets demanding a Western-Euro- familiar Russian tactic of exhausting his America. Russia had no choice but to act. pean way of life, the Kremlin saw this as a negotiating counterparts and taking two Even without Ukraine, Mr Putin has threat to its model of governance. Alex- steps forward, one step back. He is count- said, America would have found some ander Prokhanov, a nationalist writer who ing on time and endurance to bring the col- other excuse to contain Russia. Ukraine, backs Russia’s war in Ukraine, compares lapse and division of Ukraine and a revi- therefore, was not the cause of Russia’s European civilisation to a magnet attract- sion ofthe post-cold war world order. conflictwith the West, butitsconsequence. ing Ukraine and Russia. Destabilising Uk- Nearly a quarter-century after the col- Mr Putin’s purpose is not to rebuild the So- raine is not enough to counter that force: lapse of the Soviet Union, the West faces a viet empire—he knows this is impossible— the magnet itselfmust be neutralised. greater threat from the East than at any but to protect Russia’s sovereignty. By this Russia feels threatened not by any indi- point during the cold war. Even during the he means its values, the most important of vidual European state, butbythe European Cuban missile crisis of1962, Soviet leaders which is a monopoly on state power. Union and NATO, which it regards as ex-1 20 Briefing What Russia wants The Economist February 14th 2015

2 pansionist. It sees them as “occupied” by it hard for multinational bodies such as America, which seeks to exploit Western NATO and the EU to craft a response. But values to gain influence over the rest of the without the ability to apply hard power, world. America “wants to freeze the order Russia’s version of soft power would established afterthe Sovietcollapse and re- achieve little. Russia “has invested heavily main an absolute leader, thinking it can do in defence,” says NATO’s new secretary- whatever it likes, while others can do only general, a former Norwegian prime minis- what is in that leader’s interests,” Mr Putin ter, Jens Stoltenberg. “It has shown it can said recently. “Maybe some want to live in deploy forces at very short notice…above a semi-occupied state, but we do not.” all, ithasshown a willingnessto use force.” Russia has taken to arguing that it is not Mr Putin drew two lessons from his fighting Ukraine, but America in Ukraine. brief war in Georgia in 2008. The first was The Ukrainian army is just a foreign legion that Russia could deploy hard power in ofNATO, and American soldiers are killing countries that had been in the Soviet Un- Russian proxies in the Donbas. Anti-Amer- ion and were outside NATO with little risk icanism is not only the reason for war and ofthe West responding with force. The sec- the main pillar of state power, but also an ond, after a slapdash campaign, was that ideology that Russia is trying to export to Russia’s armed forces needed to be re- Europe, as it once exported communism. formed. Military modernisation became a Anti-Westernism has been dressed not personal mission to redress “humilia- in communist clothes, but in imperial and tions” visited by an “overweening” West even clerical ones (see page 73). “We see on Russia since the cold war ended. how many Euro-Atlantic countries are in According to IHS Jane’s, a defence con- effect turning away from their roots, in- sultancy, by next year Russia’s defence cluding their Christian values,” said Mr Pu- spending will have tripled in nominal tin in 2013. Russia, by contrast, “has always terms since 2007, and it will be halfway been a state civilisation held together by through a ten-year, 20 trillion rouble ($300 the Russian people, the Russian language, the nationalist movement in Russia today. billion) programme to modernise its Russian culture and the Russian Orthodox Yet for a few years after Mr Putin came weapons. New types of missiles, bombers church.” The Donbas rebels are fighting to power he built close relations with and submarines are being readied for de- not only the Ukrainian army, but against a NATO. In his first two presidential terms, ployment over the next few years. Spend- corrupt Western way of life in order to de- rising living standards helped buy accep- ing on defence and security is expected to fend Russia’s distinct world view. tance of his monopoly on state power and climb by 30% this yearand swallow a more reliance on ex-KGB men; now that the than a third ofthe federal budget. Mistaken hopes economy is shrinking, the threat of war is As well as money for combat aircraft, Many in the West equate the end of needed to legitimise his rule. He forged his helicopters, armoured vehicles and air-de- communism with the end of the cold war. alliance with Orthodox nationalists only fence systems, about a third of the budget In fact, by the time the Soviet Union fell during mass street protests by Westernised has been earmarked to overhaul Russia’s apart, Marxism-Leninism was long dead. liberals in 2012, when he returned to the nuclear forces. A revised military doctrine Stalin replaced the ideals of international- Kremlin. Instead of tear gas, he has used signed by Mr Putin in December identified ism, equalityand social justice that the Bol- nationalist, imperialist ideas, culminating “reinforcement of NATO’s offensive capac- sheviks had proclaimed in 1917 with impe- in the annexation of Crimea and the slow ities directly on Russia’s borders, and mea- rialism and state dominance over all subjugation ofsouth-east Ukraine. sures taken to deploy a global anti-missile spheres of life. Mikhail Gorbachev’s revo- defence system” in central Europe as the lution consisted not in damping down Hard power and soft greatest threats Russia faces. Marxism but in proclaiming the suprema- Mr Putin’s preferred method is “hybrid In itself, thatmaynotbe cause for alarm cy of universal human values over the warfare”: a blend ofhard and softpower. A in the West. Russian nuclear doctrine has state, opening up Russia to the West. combination of instruments, some mili- changed little since 2010, when the bar for Nationalists, Stalinists, communists tary and some non-military, choreo- first use was slightly raised to situations in and monarchists united against Mr Gorb- graphed to surprise, confuse and wear which “the very existence ofthe state is un- achev. Anti-Americanism had brought Sta- down an opponent, hybrid warfare is am- der threat”. That may reflect growing confi- linists and nationalists within the Com- biguous in both source and intent, making dence in Russia’s conventional forces. But munist Party closer together. When Mr Putin is fond of saying that nobody communism collapsed they united against should try to shove Russia around when it Boris Yeltsin and his attempts to make Rus- Coming up from behind 1 has one ofthe world’s biggest nuclear arse- sia “normal”, by which he meant a West- Defence spending, 2007=100 nals. Mr Kiselev puts it even more bluntly: ern-style free-market democracy. “During the years of romanticism [ie, de- By 1993, when members of this co- 70 200 tente], the Soviet Union undertook not to alition were ejected by pro-Yeltsin forces 180 use nuclearweaponsfirst. Modern Russian from the parliament building they had oc- 160 doctrine does not. The illusions are gone.” Russia cupied in Moscow, they seemed defeated. Spending 140 Mr Putin still appears wedded to a strat- Yet nationalism has resurfaced. Those who 2014, $bn egy he conceived in 2000: threatening a 120 fought Yeltsin and his ideas were active in limited nuclear strike to force an opponent the annexation of Crimea and are in- 265 100 (ie, America and its NATO allies) to with- volved in the war in south-east Ukraine. 80 drawfrom a conflictin which Russia has an European NATO* Alexander Borodai, the first “prime minis- 60 important stake, such as in Georgia or Uk- ter” of the self-proclaimed Donetsk Peo- 2007 08 09 10 11 12 13 14 raine. Nearly all its large-scale military ex- ple’s Republic, who fought with anti-Yelt- Source: International Institute ercises in the past decade have featured sin forces, hails Mr Putin as the leader of for Strategic Studies *26 countries simulations of limited nuclear strikes, in-1 The Economist February 14th 2015 Briefing What Russia wants 21

2 cluding one on Warsaw. northern and eastern borders. Last year There have also been at least two near- Mr Putin has also been streamlining his NATO planes carried out more than 400 in- misses between Russian military aircraft armed forces, with the army recruiting tercepts of Russian aircraft. More than 150 and Swedish airliners. This is dangerous 60,000 contract soldiers each year. Profes- were by the alliance’s beefed-up Baltic air- stuff: Russian pilots do not file flight plans. sionals now make up 30% of the force. policing mission—four times as many as in They fly with transponders switched off, Conscripts may bulk up the numbers, but 2013. In the first nine months ofthe year, 68 which makes them invisible to civil radar. for the kind of complex, limited wars Mr “hot” identifications and interdictions oc- On January 28th two Russian, possibly nu- Putin wants to be able to win, they are curred along the Lithuanian border alone. clear-armed, strategic bombers flew down pretty useless. Ordinary contract soldiers Latvia recorded more than 150 incidents of the English Channel, causing havoc to are also still a long way behind special Russian planes entering its airspace. commercial aviation. Such behaviouris in-1 forces such as the GRU Spetsnaz (the “little green men” who went into Crimea with- Russia’s European supporters outmilitaryinsignia) and the elite airborne VDV troops, but they are catching up. In the Kremlin’s pocket Boots on the ground South-east Ukraine shows the new model Who backs Putin, and why army at work. Spetsnaz units first trained the Kremlin-backed separatist rebels in tac- OPULIST parties ofboth right and left, admires—at least as a political operator. tics and the handling of sophisticated Rus- Pmany pro-Russian, did well in last There is, however, scant evidence that sian weapons. But when the Ukrainian May’s European elections, taking be- Europe’s populist parties, FN apart, have government began to make headway in tween them a quarter ofthe seats. This accepted Russian money—though it is early summer, Russia had regular forces has raised fears ofa coherent pro-Russian hard to be sure, given their opaque fi- near the border to provide a calibrated blockforming in Strasbourg. nances. Anton Shekhotsov, an expert on (and still relatively covert) response. In Greece, the now-ruling radical-left fringe parties, thinks that the loan to the It is hard to tell how many Russian Syriza party leans towards Russia. On French party is the exception rather than troopshave seen action in Ukraine, as their February11th Nikos Kotzias, the new the rule. He points out that the Kremlin, vehicles and uniforms carry no identifiers. foreign minister, went to Moscow—his in the past at least, preferred to provide But around 4,000 were sent to relieve Lu- first visit to a foreign capital outside the “fees” to individual politicians than hansk and Donetsk while threatening the European Union. Syriza is cool on sanc- financial support to their parties. coastal city of Mariupol—enough to con- tions against Russia, and opposed to Russia has already found a use for its vince Mr Poroshenko to draw his troops expanding them. Another left-wing, European friends: to legitimise (to some) back. Since November a new build-up of broadly pro-Russian upstart is Podemos its dodgy elections. A motley crew of Russian forces has been under way. Ukrai- in Spain, which leads in the polls. Its populists were flown in to give ringing nian military intelligence reckons there leader has accused the West ofdouble endorsements ofthe Crimea referendum may be 9,000 in their country (NATO has standards in dealing with Russia. and the election in the Donbas, organised given no estimate). Another 50,000 are on France’s National Front, the foremost by separatists. Among them were Mr the Russian side ofthe border. right-nationalist party, openly admires Kovacs and Aymeric Chauprade, an Despite Mr Putin’s claim last year that Mr Putin. Its leader, Marine Le Pen, has adviser to Ms Le Pen. Russian media he could “take Kiev in two weeks” if he made several trips to Moscow. It recently falsely portrayed these lackeys as official, wanted, a full-scale invasion and subse- accepted a €9.4m ($10.6m) loan from First independent election observers. quent occupation is beyond Russia. But a Czech Russian Bank, a lender with in- Russian-controlled mini-state, Novoros- direct links to the Kremlin. It is said to be siya, similar to Abkhazia and Transdnies- the first tranche ofa €40m loan (a huge Unsuitable friends 2 tria, could be more or less economically sum forthe party, iftrue). Ms Le Pen says Russia’s relationship with Europe, February 2015 sustainable. And it would end Ukraine’s it was turned away by Western banks. Russian Selected populist parties hopes of ever regaining sovereignty over Hungary’s far-right Jobbik party, leadership’s relations with Russia: its territory other than on Russian terms, which won 20% ofthe vote in parliamen- approval Committed/Open or neutral/ which would undoubtedly include stay- tary elections last April, is avowedly Country *rating* Hostile ing out of the EU and NATO. Not a bad out- pro-Russian. In 2013 its leader described Bulgaria 40 Attack (Right) come for Mr Putin, and within reach with Russia as the guardian ofEurope’s heri- Greece 35 Golden Dawn (R) the hard power he controls. tage, contrasting it with the “treacherous” Syriza (Left) The big fear for NATO is that Mr Putin EU. Its most controversial figure, Bela Hungary 32 Jobbik (R) turns his hybrid warfare against a member Kovacs, a member ofthe European Parlia- Austria 16 Freedom Party (R) country. Particularly at risk are the Baltic ment, has lobbied on behalfofRussian states—Latvia, Estonia and Lithuania—two interests and supported the invasion of France 15 National Front (R) of which have large Russian-speaking mi- Crimea. But Fidesz, Hungary’s ruling Britain 14 BNP (R) norities. In January Anders Fogh Rasmus- party, once fiercely anti-communist, has UKIP (R) sen, NATO’s previous secretary-general, also been cultivating closer Russian ties. Spain 14 Podemos (L) said there was a “high probability” that Mr In July the prime minister, Viktor Orban, Italy 13 Northern League (R) Putin would test NATO’s Article 5, which said he was striving to build “an illiberal Forza Italia (R) EU regards an attack on any member as an at- state” within the . Germany 11 National Democratic Party (R) tack on all—though “he will be defeated” if There have also been rumours, less AfD (R) he does so. well substantiated, ofRussian support Belgium 10 Vlaams Belang (R) A pattern of provocation has been es- forBritish and Italian parties, including Finland 9 Finns Party (R) tablished that includes a big increase in the the anti-EU UK Independence Party. number ofclose encounters involving Rus- And UKIP’s leader, Nigel Farage, has Sources: Political Capital; Gallup sian aircraftand naval vessels, and snap ex- called Mr Putin the world leader he most Analytics; The Economist *2014, % of respondents ercises by Russian forces close to NATO’s 22 Briefing What Russia wants The Economist February 14th 2015

2 tended to test Western air defences, and ever, is to destabilise the EU through fringe was last seen in the cold war. Mr Stolten- political parties(see boxon previous page). berg calls it “risky and unjustified”. Russia’s approach to ideology is fluid: it Since 2013, when Russia restarted large- supports both far-left and far-right groups. scale snap military exercises, at least eight As Peter Pomerantsev and Michael Weiss have been held. In December the Kremlin put it in “The menace ofunreality”, a paper ordered one in Kaliningrad, an exclave that on Russian soft power: “The aim is to exac- borders Lithuania and Poland, both NATO erbate divides [in the West] and create an members. It mobilised 9,000 soldiers, echo-chamber ofKremlin support.” more than 55 navy ships and every type of military aircraft. “This pattern of behav- Disruptive politics iour can be used to hide intent,” says Gen- Far-right groups are seduced by the idea of eral Philip Breedlove, NATO’s most senior Moscow as a counterweight to the EU, and commander. “What is it masking? What is by its law-and-order policies. Its stance on it conditioning us for?” homosexuality and promotion of “tradi- A huge problem for NATO is that most tional” moral values appeal to religious of what Russia might attempt will be be- conservatives. The far left likes the talk of low the radar of traditional collective de- fighting American hegemony. Russia’s fence. According to Mr Stoltenberg, decid- most surprising allies, however, are proba- ing whether an Article 5 attack has taken bly Europe’s Greens. They are opposed to place means both recognising what is go- shale-gasfrackingand nuclearpower—as is ing on and knowing who is behind it. “We Moscow, because both promise to lessen need more intelligence and better situa- Europe’s dependence on Russian fossil fu- tional awareness,” he says; but adds that els. Mr Rasmussen has accused Russia of NATO alliesacceptthatifthe arrival oflittle “sophisticated” manipulation of informa- green men can be attributed “to an aggres- tion to hobble fracking in Europe, though sor nation, it is an Article 5 action and then without producing concrete evidence. all the assets ofNATO come to bear.” There is circumstantial evidence in Bul- For all the rhetoric of the cold war, the duit for the Kremlin’s world view is RT, a garia, which in 2012 cancelled a permit for Soviet Union and America had been allies TV channel set up in 2005 to promote a Chevron to explore for shale gas after anti- and winners in the second world war and positive view of Russia that now focuses fracking protests. Some saw Russia’s hand felt a certain respect for each other. The Po- on making the West look bad. It uses West- in these, possibly to punish the pro-Euro- litburo suffered from no feelings of inferi- ern voices: far-left anti-globalists, far-right pean government of the time, which ority. In contrast, Mr Putin and his KGB nationalists and disillusioned individuals. sought to reduce its reliance on Russian en- men came out of the cold war as losers. It broadcasts in English, Arabic and Span- ergy (Gazprom, Russia’s state-controlled What troubles Mr Stoltenberg greatly ish and is planning German- and French- gas giant, supplies 90% ofBulgaria’s gas). aboutMrPutin’snew, angryRussia isthat it language channels. It claims to reach 700m Previously, Bulgaria had been expected is harder to deal with than the old Soviet people worldwide and 2.7m hotel rooms. to transport Russian oil through its Union. As a Norwegian, used to sharing an Though it is not a complete farce, it has planned South Stream pipeline, and its Arctic border with Russia, he says that broadcast a string of false stories, such as parliament had approved a bill that would “even during the coldest period of the cold one speculating that America was behind have exempted the project from awkward war we were able to have a pragmatic con- the Ebola epidemic in west Africa. EU rules. Much of it had been written by versation with them on many security is- The Kremlin is also a sophisticated user Gazprom, and the construction contract sues”. Russia had “an interest in stability” of the internet and social media. It em- was to go to a firm owned by Gennady then, “but not now”. ploys hundreds of “trolls” to garrison the Timchenko, an oligarch now under West- comment sections and Twitter feeds of the ern sanctions. Gazprom offered to finance Meddling and perverting West. The point is not so much to promote the pipeline and to sponsor a Bulgarian Destabilisation is also being achieved in the Kremlin’sviews, butto denigrate oppo- football team. The energy minister at the less military ways. Wielding power or sition figures, and foreign governments time later claimed he had been offered gaining influence abroad—through anti- and institutions, and to sow fear and con- bribes by a Russian envoy to smooth the establishment political parties, disgrun- fusion. Vast sums have been thrown at project’s passage. Though European oppo- tled minority groups, media outlets, envi- public-relations and lobbying firms to im- sition means it has now been scrapped, the ronmental activists, supporters in prove Russia’s image abroad—amongthem episode shows the methods Moscow uses business, propagandist “think-tanks”, and Ketchum, based in New York, which to protect its economic interests. others—has become part of the Kremlin’s helped place an op-ed by Mr Putin in the In all this Mr Putin is evidently acting hybrid-war strategy. This perversion of New York Times. And it can rely on some of not only for Russia’s sake, but for his own. “soft power” is seen by Moscow as a vital its corporate partners to lobby against poli- Mr Borodai, the rebel ideologue in Do- complement to military engagement. cies that would hurt Russian business. netsk, says that if necessary the Russian Certainly Russia is not alone in abusing The West’s willingness to shelter Rus- volunteers who are fighting today in Don- soft power. The American government’s sian money, some of it gained corruptly, bas will tomorrow defend their president aid agency, USAID, has planted tweets in demoralises the Russian opposition while on the streets of Moscow. Yet, although Mr Cuba and the Middle East to foster dissent. making the West more dependent on the Putin may believe he is using nationalists, And Mr Putin has hinted that Russia needs Kremlin. Russian money has had a poison- the nationalists believe they are using him to fight this way because America and oth- ous effect closer to home, too. Russia to consolidate their power. What they as- ers are already doing so, through “pseudo- wields soft power in the Baltics partly pire to, with or without Mr Putin, is that NGOs”, CNN and human-rights groups. through its “compatriots policy”, which Russians rally behind the nationalist state At home Russian media, which are entails financial support for Russian- and their leader to take on Western liberal- mostly state-controlled, churn out lies and speaking minorities abroad. ism. This is not a conflict that could have conspiracytheories. Abroad, the main con- Mr Putin’s most devious strategy, how- been resolved in Minsk. 7 United States The Economist February 14th 2015 23

Also in this section 24 Taxes and cigarette-smuggling 24 At last, a real recovery 26 Tycoons and farm subsidies 28 Barack Obama’s war powers 29 Gay marriage in Alabama 29 Bondage in the Bible belt 30 Lexington: David Axelrod meets reality

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

Private schools most of the change is taking place lower down, thanks to vouchers aimed at poor Pro choice kids in awful public schools. If these programmes are expanded, America will look a bit more like Japan or the Netherlands, where private schoolsserve lotsofhard-up families (see chart) and children do better MILWAUKEE in exams than Americans. America’s current crop of private With Republicans resurgent, school vouchers are back schools were created in three waves. The N THE desk of Zeus Rodriguez, the have vouchers, lawmakers propose to first came in the late 19th century amid a OpresidentofStAnthonySchool in Mil- make more children eligible, says Robert panic about Catholic Europeans subvert- waukee, a mini Republican primary is un- Enlow ofthe Friedman Foundation, which ing the country’s Protestant identity. James derway. A signed photograph of Scott advocates for school choice. Illinois and Blaine, a former Speaker of the House of Walker, the governor of Wisconsin, com- Nevada, which do not have vouchers, are Representatives, proposed an amendment petes for space with snaps of Rand Paul considering them. George P. Bush (son of to the federal constitution banning public and Jeb Bush—all three of them presiden- Jeb), recently argued for their introduction funding forreligious schools. The proposal tial hopefuls. St Anthony’s is popular to Texas, where he is land commissioner. failed, but many states passed their own among conservatives because it has more All told, 10% of American children at- version of a Blaine amendment and cur- pupils taking advantage of government- tend some form ofprivate school. Pupils at rently three-quarters of states ban directly funded vouchers than any other private such schools are typically well off, but spending public money on religious insti- school in America. tutions. The ban on publicly-funded Cath- The local neighbourhood was once olic schools spurred the creation of lots of populated by German and Polish Catho- Going Dutch privately-funded ones. lics but is now home to the Hispanic sort. Students who attend private schools The second wave came after the deseg- Almost all pupils speak Spanish at home; By socio-economic quartile*, % of total regation of public schools in the South fol- most are also poor. Yet 95% of the first two Britain United Japan Netherlands lowing Brown v Board of Education, when classes ofhigh-school students from St An- Norway States recalcitrantwhitessetup private schools to thony’s have graduated and more than Top 16 22 37 63 keep their children apart from black ones. 90% have gone on to college. All this, for a 1 The third wave has been underway since cost to taxpayers of just $7,500 per pupil; 1990, when Milwaukee’s pioneering Milwaukee’s public schools, by contrast, 2nd 7 9 33 66 school-voucher programme began. spend a whopping $13,000. 1 No two voucher schemes are the same, After the Republicans’ success in state which makes comparing them hard. Ohio elections in November, several are push- 3rd 4 27 67 alone has five, all with different criteria for ing to increase the number and scope of 2 3 eligibility. Most began life as schemes to school voucher schemes. In a budget un- help families in predominantly black veiled on February 3rd, Governor Walker 4th 20 69 neighbourhoods with failing schools find called for the expansion of Wisconsin’s 2 1 1 something better, and were then extended three voucher schemes, though he left the Source: OECD, Public and *Based on parental education, to children in foster care and those with details fuzzy. In each of the 24 states that Private Schools (2012) occupation and possessions special needs. Only now are they being ex-1 24 United States The Economist February 14th 2015

2 tended to families wealthy enough that a need for an authority than can close the The economy they might have sent their children to low- bad schools down. cost private schools anyway. The good schools, howeverconstituted, At last, a proper Some states use tax credits to reimburse have good teachers, inspiring principals parents for private tuition. Others give tax and respond to their surroundings. Some recovery breaks to people who donate to charities ofthese things are easier to achieve in priv- which fund scholarships at private schools ate schools. One such is St Marcus Luther- WASHINGTON, DC (which gets around a Blaine amendment). an, a private school on the other side of All sorts ofAmericans are feeling more Florida has a scheme like this: though the town from St Anthony’s. Some 90% of the prosperous state has no personal income tax, tax-de- pupils at St Marcus are from black, low-in- ductible corporate donations fund 60,000 come families. The school opensitsgates at HE American economy has technically places forchildren at private schools. 6.30am for early arrivals. If parents can’t Tbeen out of recession for six years. It is Despite providing the inspiration for bring their children to school, the staff will finally starting to feel like it. Millions of this movement, Milwaukee’s experience go and pickthem up. newjobsare sprouting. Manywho had giv- with school vouchers has been mixed. As Some children come from chaotic en up looking for work are trying again— well as successes like St Anthony’s there homes, so the school stays open until and succeeding. Wage growth is picking have been some horror stories. One new 8.30pm and serves dinner. It has classes on up. But the economy is far from full private school was run by a convicted rap- Saturday too. “Some of the kids will only strength: the Federal Reserve may have to ist; another by a man who used school go home to sleep,” says Henry Tyson, the support it foryears to come. money to buy himself a pair of Mercedes- school’s superintendent. St Marcus tracks America is thriving for a few reasons. It Benzes. The outright frauds have since all its students for eight years after they is a relatively self-contained economy: for- been weeded out, but there remain a lot of leave: 93% graduate from high school. In a eign trade isonlyequivalentto 30% ofGDP. poorly performing private schools, just as state that sends a higher proportion of So America feelsothercountries’ pain only there are many bad public ones. black men to prison than any other, rates faintly. While many governments are tight- Wisconsin’s education department has of incarceration for St Marcus’s alumni are ening belts, America’s is not: for the first commissioned evaluationsoverthe past 25 below the national average forall races. time in five years, public spending as a pro- years which, controlling for race, income “No one has yet found the secret button portion of GDP rose in 2014. American and sex, found that the test scores of chil- to push that makes all the schools better,” shoppers are flush with cheap credit. Low- dren at private schools are no better than says Alan Borsuk of Marquette University, er oil prices also help, since America is still those who stayed in the public school sys- who has been following Milwaukee’s ex- a net importer ofthe stuff. tem. This is consistent with the federal gov- periment since 1990. In their first quarter- The labourmarket was ugly in the years ernment’s evaluation of the voucher century, voucher schemes have faced immediately after the crisis. But now it is scheme for poor parents in bad school dis- fierce opposition and coped despite much the star of the catwalk. Between 2011 and tricts in Washington, DC, which found no smaller budgets. For their fans, that is rea- 2014 only eight countries saw bigger falls in statistical difference between children son enough to pursue the idea further. 7 their unemployment rate, according to the1 who were given vouchers and those who were not in reading and maths. This is not the end of the story for Smuggled smokes vouchers, however. In both Milwaukee and Washington, voucher schemes get Last summer Eric Garner died after a New York cop put him in a chokehold. His crime similar results to the public schools but was selling “loosies”, or untaxed cigarettes. Smuggling is common in New York: 58% of with much less money. Under the DC cigarettes smoked in the state are contraband. The reason is that tobacco taxes are scheme, each voucher is worth $8,500 a high: a pack of 20 costs $13 in New York, compared with $5 in Missouri, the state with year, compared with $17,500 to educate a the cheapest gaspers. A recent report found that illicit smokes are more than 20% of child in the public school system. In Mil- total consumption in 15 states. There are sound public-health reasons for taxing tobac- waukee the difference is smaller but still co but as the map shows, the higher the taxes, the bigger the black market. amounts to several thousand dollars. An- other consistent finding from voucher Contraband flows as % of cigarettes smoked, 2013 Tax per pack, 3 schemes is that parents like being given a (net exporting states) OUTFLOWS INFLOWS (net importing states) <20 10-20 0-9.9 0-9.9 10-19.9 20-29.9 30-40 >40 na 2013, $ 1 choice, which explains why vouchers, once granted, are hard to take away. WA Though Milwaukee’s experience over- MT ND VT ME all has been mixed it still has lessons for OR MN NH elsewhere. If one includes private schools, ID WI NY MA charter schools and open enrolment at WY SD CA MI public schools (which means parents may NV RI NE IA enroll their children in a school that is not UT IL PA IN OH in the neighbourhood where they live), CO CT MO WV NJ around 40% of parents in Milwaukee exer- KS VA DE cise some kind of choice over their chil- AZ KY dren’s education, an unusually high share. NM OK NC MD TX AR TN With so much competition, it is hard for SC DC MS AL GA any school to grow complacent. There are good public, private and charter schools LA HI and bad ones, too. Some private schools do CANADA FL very well with poor black and Hispanic AK children, others fail them and yet manage to stay in business, which suggests that SSources: TFTax Foundation; di even with lots of parents choosing there is Mackinac Centre for Public Policy

26 United States The Economist February 14th 2015

already in work. Some 4m Americans who work part-time say they would rather work full-time but can’t get the hours thanks to the lousy economy. This group is about 60% of the size it was in 2009 (see chart). Average weeklyearningsin January were 2.8% higherthan theywere a yearear- lier, the biggest increase since mid-2011. That sounds great, but it is probably down to people working longer, rather than better. In the fourth quarterof2014 labourpro- ductivity fell by 1.8% on an annualised basis. Americans put in 5% more time at the office—the biggest jump in hours since 1998. An economy that squeezes its workers so hard may soon run out ofpuff. Ifwages do not take off, Janet Yellen, the Back at work, and liking it chair of the Federal Reserve, will not rush to increase interest rates from their current 2 IMF. At 5.7%, America’s is one ofthe lowest shrank, as disappointed jobseekers gave rock-bottom levels. There is no other rea- in the OECD, a club of (mostly) rich coun- up hope. In 2010 1.3m Americans were not son to do so. Americans would struggle to tries. Firms added more than 1m net new looking for work because, they said, there repay some of their record-beating credit- jobs in the three months to January, the was none available. Now there are card debt. The dollar would get even stron- best showing since 1997. And things may 680,000 such people—still high, but down ger. That would lead to big problems in an soon get even better. The Job Openings a fifth over the year (see chart). No wonder, economy where inflation will remain and Labour Turnover Survey, released on then, that the labour-force participation close to zero in 2015 and GDP growth is not February 10th, showed that by the end of rate is finally inching up. wild. Ms Yellen should enjoy the recovery Decemberthere were 5m job openings, the Things are also looking better for those while it lasts. 7 highest level since 2001. This boom is helping people who typically struggle to find good jobs. Tighter lim- Farm subsidies its on how long people may claim unemployment benefits, which took effect at the Milking taxpayers beginning of 2014, may have made low- skilled workers more appealingto employers. By encouraging the jobless to accept lower wages, it may have enticed companies to create more jobs. Indeed, half the jobs added in January were in low-wage WASHINGTON, DC industries like restaurants and shops. With As crop prices fall, farmers grow subsidies instead more work available, in the past year the HE fatherofMajorMajor, a character in ple commodities such as corn and soya- unemployment rate for Americans with- TCatch 22, a novel by Joseph Heller, beans in states such as Iowa. out a high-school diploma has fallen by makes a good living not growing alfalfa. Few politicians are inclined to vote one percentage point. Among 16-19-year- “The more alfalfa he did notgrow, the more against farm subsidies: though farmers old men, hit hard by the recession, unem- money the government gave him, and he make up only a small number of voters, ployment is now 11percentage points low- spent every penny he didn’t earn on new even in agricultural states, they are loud er than its 2009 peak. land to increase the amount of alfalfa he and organised enough to punish lawmak- As the prospects of those at the bottom did not produce.” Each day, Mr Major ers who vote against a farm bill. Opposi- have brightened, more and more Ameri- “sprang out of bed at the crack of noon... tion to spending is muted; few voters real- cans have got up offthe sofa and pulled on just to make certain that the chores would ise how much of their money is given to their work boots. For years the proportion not be done.” farmers and even fewer would change of the population in the labour force To this day, to be treated as a farmer in their vote because ofit. America doesn’t necessarily require you to The 2014 bill, which passed with 68 grow any crops. According to the Govern- votes in the Senate and comfortably in the Busier and better ment Accountability Office, between 2007 House, at least nodded to reform. Most im- Workers, m and 2011Uncle Sam paid some $3m in sub- portantly Congress abolished direct pay- sidies to 2,300 farms where no crop of any ments based on land ownership. Instead, 8 Working part-time for economic reasons* sort was grown. Between 2008 and 2012, farmers now get more subsidised insur- $10.6m was paid to farmers who had been ance, and new payments which are linked 6 dead for over a year. Such payments ex- to past crop prices and productivity. Those plain why Tom Vilsack, the agriculture sec- not “actively engaged” in farming are in 4 retary, is promoting a rule to attempt to theory banned from collecting subsidies— crack down on payments to non-farming though Congress delegated the task of de- 2 Have given up looking for work folk. But with crop prices now falling, tax- finingwho is really a farmerto MrVilsack’s payers are braced to be fleeced again. department. 0 American farm subsidies are egregious- This new system was meant to save 2006 07 08 09 10 11 12 13 14 15 ly expensive, harvesting $20 billion a year around $23 billion over a decade—partly Source: Bureau of *Because of slack work or from taxpayers’ pockets. Most of the mon- through cuts to food stamps for hard-up Labour Statistics business conditions ey goes to big, rich farmers producing sta- families, a welfare programme which, 1

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said John Boehner, the Republican Speaker Hand-outs for hard-up rural folk ofthe House ofRepresentatives. Notable farm-subsidy recipients since 1995 The request to Congress comes six months after America began air strikes against IS fighters, first in Iraq then in Syria. Mr Obama already claims legal authority fortoday’s strikes under a broad reading of the 2001 AUMF, which permits attacks on al-Qaeda and “associated” groups, as well as under his presidential powers ofnational self-defence. This new authorisation in- Bruce Henry Kravis Alice, Jim & Chuck Grassley Penny Pritzker Jon Bon Jovi Ted Turner vites the Republican-controlled Congress Private-equity Rob Walton Senator Commerce Rock star Springsteen Founder magnate Children of founder secretary Rock star of CNN to give explicit backing for a long-lasting of Walmart and billionaire campaign to “degrade and defeat” IS. Mr Obama pointedly urged Congress to seek a Sources: Environmental Working Group; Tom Coburn bipartisan agreement after “thoughtful and dignified debate”. 2 oddly, is administered by the US Depart- payer (since less valuable crops cost less to The draft AUMF rules out “enduring of- ment of Agriculture (USDA). But because insure). But those gains will be wiped out fensive ground combat operations”. In an payments are linked to commodity prices and more by the cost of compensating accompanying letter Mr Obama says it and output, the new system could cost farmers fortheir lower incomes. would allow “limited” ground missions much more, saysVincentSmith, an agricul- Any new rules designed to stop non- alongside local allies, including rescue op- tural economist at Montana State Universi- farmers from getting payments will be un- erations, attacks by special forces on IS ty. It could also get America into trouble likely to work, predicts Mr Smith. While it leaders, and the use of troops to “enable” with the World Trade Organisation if pay- may be possible to stop some landowners air strikes and render “advice and assis- ments exceed certain thresholds. from claiming payments, they will adapt: tance to partner forces”. The draft would Ominously, on February10th the USDA “You hire a good agricultural lawyer and repeal a 2002 AUMF under which Presi- predicted that net farm income would de- redefine the structure of the farm.” Many dent George W. Bush invaded Iraq. cline by 32% between 2014 and 2015. Com- landowners have already found their way Such Republican hawks as Senator modities such as corn (which in America is around similar rules introduced in the Lindsey Graham of South Carolina sig- used to produce everythingfrom biofuel to farm bill of 2008, nominating young chil- nalled that Senate hearings would become syrup) and soya have become less valu- dren as farmers, or claiming to be engaged a broader debate about Middle East strat- able of late thanks to soaring supply and in farming by providing management ad- egy and whether American firepower also weak demand. Falling prices reduce the vice. Alfalfa non-growers still have bump- needsto be used againstthe regime of Pres- costofsubsidised crop insurance to the tax- er times ahead. 7 ident Bashar Assad in Syria. The AUMF risks failing in the Senate if it does not “let us counter Assad’s air power”, Mr Graham Presidential power told reporters. Libertarian Republicans are more sceptical that American might can do A law for war much good in that region. Some Democrats, including members of Congress who drew up their own draft AUMFs last year, fret that the current language could allow Mr Obama or his successor to launch a fresh ground war in the WASHINGTON, DC Middle East. With 60 votes needed to en- BarackObama seeks the authority to fight new enemies sure passage in the Senate, a final text will POLITICAL eternity ago, back in May lamic State (IS) and its allies. need bipartisan support there. A2013, President Barack Obama felt able “I’m convinced that the United States There are already some 2,630 American to boast that the core of al-Qaeda in Paki- should not get dragged back into another troops in Iraq, advising Iraqi and Kurdish stan and Afghanistan was on a path to de- prolonged ground warin the Middle East, ” forcesand protectingAmerican facilities. A feat, allowing America to declare an end to Mr Obama assured Americans in a tele- programme to train vetted Syrian opposi- the global war on terror that began after vised statement. Local forces were best tion fighters in neighbouring countries re- the September11th 2001 attacks. “This war, placed to defeat the extremist group, he mains embryonic. Polls show that Ameri- like all wars, must end. That’s what history said, adding that the AUMF wording is in- cans consider IS a serious threat, notably advises. That’s what our democracy de- tended only to give him “flexibility”, forin- after the murder of Americans, most re- mands,” Mr Obama said two years ago. He stance to send special forces after targets in cently Kayla Mueller, a young aid worker. announced his intention to work with locations where local allies could not act. But most oppose sending ground troops to Congress on refining and ultimately re- Though reactions do not divide per- Iraq ifair strikes do not work. pealing the hastily drafted Authorisation fectly along party lines, some Democrats JackGoldsmith, a formerPentagon law- forUse ofMilitary Force (AUMF) granted in grumbled that the new AUMF, which yer who teaches national-security law at the first days after the 2001attacks. would need renewing after three years, is Harvard Law School, says the draft AUMF Alas for Mr Obama—whose political too vague, lacks geographic limits and sets amounts to a striking expansion of presi- rise was rocket-powered by his opposition no timetable for repealing the 2001 AUMF. dential authority. The 2001 AUMF is al- to the 2003 Iraq war—events have inter- Senior Republicans complained that the ready being interpreted broadly to allow vened. On February 11th the president draft is too restrictive. “If we are going to strikeson IS. Butratherthan supersede that asked Congress for a fresh AUMF endors- defeat this enemy, we need a comprehen- old authorisation or place time limits on its ing a limited use of America’s armed sive military strategy and a robust authori- validity, this new 2015 AUMF “builds on forces, including ground troops, against Is- sation, not one that limits our options,” and adds to it”, he says. 7 The Economist February 14th 2015 United States 29

Gay marriage Bondage at the box oﬃce Hearts of Dixie All tied up in the Bible belt

LITTLE ROCK The strange popularity of“FiftyShades ofGrey” in the South

BIRMINGHAM ’M TRYING to persuade my boy- more, says Erin Clare, who teaches cul- friend to go with me,” says Kylan, a ture and sexuality at Arkansas Tech As Alabama goes, so goes America “I waitress in Little Rock. “I don’t thinkhe University. Beth, a student at a Christian EMEMBER Sodom and Gomorrah!” will, though.” At midnight on Valentine’s university in Arkansas, worries that she “Rwarned a protest sign on a five-foot Day, American women (and their reluc- might run into people she knows at a wooden cross. “Keep marriage tradition- tant partners) will get their first chance to screening of“Fifty Shades”. That could be al!” demanded a lady in a dark quilted see “Fifty Shades ofGrey”, a film adapta- embarrassing. However, “they won’t say jacket, one ofseveral protesters outside Jef- tion ofE.L. James’s novel about bondage. anything because they [will be] in the ferson County courthouse in Birmingham. The bookwas a mega-hit, though critics same situation,” she predicts. But their protest was in vain. For inside this hated it. “IfJane Austen (another best- courthouse Alabama’s first same-sex mar- selling female British author) came back riages were solemnised on February 9th. to life and read this book, she would kill Campaigners forgay rights feel that his- herself,” wrote one. The film is shaping tory is on their side, so they are not shy up to do well, especially in the Bible belt. about invoking it. Pro-gay demonstrators Cinemas in Little Rocksay that almost outside the same courthouse likened their every ticket forthis weekend has already opponents to the white southerners who been sold. In Arkansas as a whole, tickets tried to preserve Jim Crow. “Looks famil- have sold 2.8 times as fast as Fandango, iar?” asked a rainbow-lettered sign show- an online ticket seller, expected. In Mis- ing whites rallying against desegregation sissippi, they are selling four times as fast. in Alabama halfa century ago. Moviegoers in West Virginia, Kentucky Now, as then, defending the status quo and Alabama are also gluttons forpun- means defying federal courts. Now, as ishment. Sex shops in Arkansas are cash- then, some Alabamians feel it is their God- ing in with discounts on domination gear given duty to do exactly that. Last month and classes on bondage. Callie Granade, a federal judge appointed This may seem odd. The South is by George W. Bush, struck down Ala- known forgreat literature and stern bama’s ban on gay marriage as unconstitu- religiosity. Why, then, are southern wom- tional. On February 8th, shortly before the en so keen on a story that tortures both first gay marriages were due to take place, the English language and Anastasia Roy Moore, the chief justice of the state Su- Steele, its shy, virginal protagonist? preme Court, ordered probate judges in Al- Southern sexuality scholars say that abama not to allow them. watching Miss Steele being tied up and What followed was confusing. Some flogged by a handsome billionaire gives judges obeyed Judge Moore. Others repressed women permission to delve obeyed Judge Granade. Alabama’s gover- into their inner naughtiness. “Repressed nor, Robert Bentley, a Republican, bravely women like stuffabout being further stayed out of the fray. According to the Hu- repressed,” says Rosemary Daniell, the man Rights Campaign, a gay advocacy author of“Fatal Flowers: On Sin, Sex and group, 14 of Alabama’s 67 counties agreed Suicide in the Deep South”. to process the necessary paperwork for Religious conservatism need not kill same-sex unions. passion. Sermons decrying non-marital “We never thought this day would sex make people thinkabout it even A grey area for Christians come in our lifetimes,” gushed a new husband in Birmingham. On the morning of February 9th more than 150 same-sex cou- question [of same-sex marriage].” It cer- small, religious communities. James Rob- ples tied the knot in the city, estimates Babs tainly will. Many expect gay marriages to inson ofFree2Be, a non-profit, worries that Buchanan of Equality Alabama, a civil- be allowed in all 50 states by this summer. “there are a lot of places that people can’t rights group, standing between stalls offer- Even in the South, opposition is fading come out because they will lose their ing flowers and cakes. fast. In 2006 about 81% ofvoters supported jobs.” An activist in Mobile agrees: “There Perhaps the most cheering thing, at an amendment to Alabama’s constitution are some folks who will wake up with an least for fans of marriage equality, was banning same-sex weddings. It is difficult eviction notice tomorrowbecause they got what the events of the past few days hint to know how many have changed their married today.” Gay couples in Mobile about the intentions of the United States minds, but the Pew Research Centre, a were not allowed to wed on February 9th, Supreme Court. Judge Moore begged it to think-tank, finds that half the people in but many gathered to celebrate anyway delay gay weddings in Alabama until it central Southern states such as Alabama, before one of the city’s Mardi Gras pa- makes its own nationwide ruling on gay Arkansas, Kentucky, Louisiana, Mississip- rades. Cari Searcy, a plaintiff in the case marriage. America’s highest court said no. pi, Tennessee, Texas and Oklahoma now that struck down Alabama’s gay-marriage Clarence Thomas, a conservative Su- oppose gay marriage and 41% favour it. ban, spoke of her pride in grasping her preme Court justice, grumbled that this (Overall, most Americans favour letting spouse’s arm in public. “For once I didn’t “may well be seen as a signal of the [Su- gay people marry.) find myself asking ‘What are the straight preme] Court’s intended resolution of that Life can still be tough for gay couples in people gonna think?’” she said. 7 30 United States The Economist February 14th 2015 Lexington A true believer meets reality

BarackObama’s campaign guru on disappointment—and Hillary the growing body of evidence that Mr Obama is quite an odd man. Though MrAxelrod is at pains to relate how his former boss is more human and anguished by tales ofwoe and suffering than many suppose, he does concede that Mr Obama is astonishingly self-assured, and self-aware. “I don’t need to be president. It turns out that being Barack Obama is a pretty good gig in and of itself,” he is quoted telling Mr Axelrod, shortly before announcing his candidacy. After a terrible first debate performance during the 2012 election, Mr Obama confides that he agrees with a pundit who suggests he lacks the “neediness” that drives most politicians to perform in pursuit of “validation”. And though Mr Axel- rod blames Republicans for wrecking Mr Obama’s plans to seek bipartisan deals, the strategist does say that the president has aggravated political opponents by lecturing them on why it is in their own political interests to agree with him. “Believer” is more than a workofhistory because ofthe name of the woman Mr Obama beat to the nomination in 2008. With the most successful Democratic strategist of his generation as the author, “Believer” raises pointed, still-valid questions about Hil- lary Clinton’s presumed ambition to represent her party in 2016. As a loyal Democrat, Mr Axelrod has suggested in interviews T DID not take long for David Axelrod, the rumpled campaign around the book’s launch that—in the light ofMr Obama’s “great, Igenius who steered Barack Obama’s rise from state senator to unfulfilled promise” to change Washington—Mrs Clinton’s years president, to detect that governing the country might prove less of Washington experience will be much more of an asset in this uplifting than getting his boss elected. In memoirs published on campaign than in 2008, allowing her to run as a candidate of February10th MrAxelrod recallsfretting, soon afterthe inaugura- change. Yet many of Mr Axelrod’s observations about voter disil- tion in 2009, that White House insiders were already talking lusion, and the importance ofmobilising great armies of enthusi- about breaking Mr Obama’s campaign commitments. This astic volunteers, will still apply in 2016. prompted Rahm Emanuel, the new president’s chief of staff to scream at MrAxelrod: “I’m god-damned sickofhearingabout the Meet Hillary, the candidate of change fucking campaign. The campaign is over. We’re trying to solve Mr Axelrod comes close to conceding that Mrs Clinton was cor- some problems here.” From this and other clues, Mr Axelrod de- rect in her pessimism about Washington. In the book he recalls duced that there was a “tension” between a campaign that had Team Obama’s shock when the president found it was facing promised to bringhope and change to America and the task ofac- “monolithic” Republican opposition to his agenda, rather than tually governing. the bipartisan support they had “naively” expected as the econ- Mr Axelrod’s autobiography, “Believer: My Forty Years in Poli- omy stood on the brink of a depression. “Maybe this was what tics”, is in part a story about a broken heart. The Chicago-based Hillary was talking about when she chided us during the cam- strategist was already a veteran when he met Mr Obama. By then paign forraising ‘false hopes’,” he writes. he had run (and won) enough campaigns to develop his “remedy Even ifno candidate can run on “Hope and Change” this time, not replica” theory of politics. This holds that voters almost al- that does not make “I Told YouSo” a winning slogan. At the core wayschoose change overthe statusquo, even when a popular in- ofthe 2008 Obama insurgency was a beliefthat being a “very ca- cumbent is stepping down, and moreover look for a candidate pable” Democrat was not enough to win the presidency. Mrs who seems to correct the perceived weaknesses of a departing Clinton, with whom Mr Axelrod had worked in the past, was leader. He watched Mr Obama deliver a soaring hymn to a post- skilled at serving up Republican-bashing red meat, boasting in racial, post-partisan America at the 2004 Democratic National one primary debate: “If you want a winner who knows how to Convention and helped him win election to the Senate in Wash- take them on, I’m your girl.” But many voters had decided that it ington, boosted by opposition to what he called a “dumb” war in was not just Republicans, but politics that was broken. Mr Axel- Iraq. Soon, Mr Axelrod concluded that the young lawyer might rod writes: “The change she was offering was not away from just be the cure for a country sickofGeorge W. Bush. Washington’s habit ofparsing words and passing on tough issues Mr Axelrod helped his improbable candidate win the 2008 (She habitually sought safe harbour).” Nor was she willing to presidential primaries, taking his youth and inexperience and break with a system full of lobbyists and deep-pocketed political turningthem into strengthsata time ofdeep alienation with poli- action committees, he adds. “The only real change she was offer- tics as usual. He coined the slogan “YesWe Can”, and helped craft ing was in political parties, and that simply wasn’t enough.” television ads and speeches in which Mr Obama vowed to tame Thistime MrsClinton facesno seriousrivalsforthe Democrat- Washington and restore frayed global alliances. ic crown, even before she announces her intentions. But ponder- If“Believer” were merely an account ofMr Axelrod’s bruising ing Mrs Clinton’s vulnerabilities in a 2006 memo, Mr Axelrod return to reality, as the 2008 agenda became bogged down by re- wrote: “For all her advantages, she is not a healing figure...After cession, partisanship and gridlock, it would be little more than a two decades of the Bush-Clinton saga, making herself the candi- historical footnote—even if, as one ofthe innermost circle, Mr Ax- date ofthe future will be a challenge.” Even ifthe country is more elrod has uncommon insights to offer. Notably, the book adds to resigned to partisanship than in 2008, that is still true. 7 The Americas The Economist February 14th 2015 31

Also in this section 33 Bello: Whose oil in Brazil? 34 Colombian ﬂower growers 34 Electoral reform in Chile

For daily analysis and debate on the Americas, visit Economist.com/americas

Venezuela haps the biggest slice was frittered away or simply stolen. Filling a 60-litre tank with The revolution at bay petrol costs less than a dollar at the strongest official exchange rate. Unsurprisingly, petrol worth $2.2 billion a year, according to an official estimate, is smuggled to Co- lombia and Brazil, with the complicity of CARACAS the armed forces. As well as rewarding supporters with Mismanagement, corruption and the oil slump are fraying Hugo Chávez’s regime state jobs (the public payroll has more than N A Wednesday evening around 30 cas died over the Christmas period be- doubled in 16 years), Chávez expropriated Opensioners have gathered for a meet- cause ofa shortage ofheart valves. or nationalised 1,200 companies, from ing in a long, brightly lit room in a largely Both debtdefaultand the measures that steelworks to a maker of cleaning pro- abandoned shoppinggallery in Santa Tere- would be required to avoid one pose risks ducts. Most now lose money and require sa, a rundown and overcrowded district in to the regime. It is on course to lose a parlia- government loans just to meet their pay- the centre of Caracas. After a video and mentary election later this year, which roll, according to Víctor Álvarez, Chávez’s some announcements, Alexis Rondón, an might then be followed by a referendum to industry minister in 2005-06. The state official of the Ministry of Social Move- recall Chávez’s inept and unloved succes- subjugates the still-large private sector ments and Communes, begins to speak. sor, Nicolás Maduro. That could bring Ven- through price controls, which discourage “Chávez lives,” he says. “Make no mistake: ezuela’s revolution to a peaceful and investment and production. The result is our revolution is stronger than ever.” democratic end as early as 2016. But there that Venezuela imports much of the food Mr Rondón’s rambling remarks over are darker possibilities. Caracas buzzes and consumer goods it used to produce, the next45 minutesbelie thatclaim. Saying with speculation that the armed forces though not enough to meet demand. Venezuela is faced with an “economic will oust the president. Under Mr Maduro the controls have be- war”, he calls on his audience to check Venezuela is suffering from the combi- come more draconian. Blaming retailers food queues for outsiders, who might be nation of years of mismanagement and for the queues outside their shops, this profiteers or troublemakers, and to draw corruption, and the collapse in the price of month the governmentarrested the bosses up a census of the district to identify oppo- oil, which accounts for almost all of its ex- of a big pharmacy chain and a supermar- sition activists and government suppor- ports. Chávez, an army officer, was the ket company, both of which it has com- ters. “We must impose harsh controls,” he beneficiary of the greatest oil boom in his- mandeered. Then there is the labyrinth of warns. “This will be a year ofstruggle”. tory. From 2000 to 2012, Venezuela re- exchange controls. Until it was modified About this, at least, Mr Rondón is cor- ceived around $800 billion in oil revenue, this month, there were three separate offi- rect. Sixteen years after Hugo Chávez took or two-and-a-half times as much in real cial exchange rates, ranging from 6.30 to powerin Venezuela, and two yearsafter he terms as in the previous 13 years. He spent the dollar for food and medicines to 50 for died, his “Bolivarian Revolution” faces the the money on “21st-century socialism”. many other imports. On the black market, gravest threats yet to its survival. The re- Some went on health care and low-cost a dollar will buy 180 bolívares. (Since the gime isrunningoutofmoneyto import ne- housing for the poor, who hailed Chávez largest denomination is only100 bolívares, cessities and pay its debts. There are short- as a secular saint. Some has gone on infra- currency transactions involve fat wads of ages of basic goods, from milk and flour to structure: a few new roads and metro lines banknotes.) shampoo and disposable nappies. were built, years behind schedule. Anoth- This system is an invitation to fraud: the Queues, often of several hundred people, er chunk was given away in the form of well-connected who are assigned cheap form each day outside supermarkets. Ten cheap oil to Cuba and to other Caribbean dollars send them abroad or cash them on patients ofthe University Hospital in Cara- countries, assuring Chávez loyal allies. Per- the black market. Some $20-25 billion was 1 32 The Americas The Economist February 14th 2015

2 swindled in this way in 2012 alone, accord- studied more than 45,000 rulings issued in ing to Jorge Giordani, who as Chávez’s eco- Bolivarian bleakness 2004-13 by the constitutional, administra- nomic guru was the architect of the sys- Venezuela’s: tive and electoral chambers of the su- tem. Chavismo’s biggest achievement has GDP consumer spending preme court and found that in no case did perhaps been the creation of a new elite of % change on a year earlier % change on a year earlier they rule against the government. oil rentiers, dubbed the “Bolibourgeoisie”. 8 8 Under Mr Maduro, what the govern- Even before the oil price collapsed, 4 4 mentcallsits“media hegemony” isnowall + + “21st-century socialism” had become unaf- 0 0 but complete. Regime insiders, acting fordable. Instead ofsaving windfall oil rev- – – through frontmen, have boughtup opposi- enues, as prudence would dictate, the gov- 4 4 tion media after these were financially ernment racked up debt. Between them, 8 8 weakened by officially promoted advertis- 2012 13 14* 15† 2012 13 14* 15† the government and PDVSA, the state oil ing boycotts and government refusal to ap- company, issued more debt than any other consumer prices‡ unemployment rate prove the import of newsprint. According emerging economy in 2007-11. The fiscal % increase on a year earlier % to Miguel Henrique Otero, the proprietor deficit is heading for 20% of GDP this year, 180 18 of El Nacional, his newspaper is one of according to independent economists. 150 15 only a handful of independent ones that 120 12 The economy probably contracted by 90 9 survive. In its case survival has meant 4% in 2014 and will shrink by more than 60 6 shrinking from 1,100 staff in 2008 to 350 that this year (see chart). In 2013 a third of 30 3 now, and cuttingthe printrun from 110,000 Venezuelans were living in poverty, up 0 0 copies to fewer than 50,000. 2012 13 14* 15† 2012 13 14* 15† from a quarterthe previous year, according *Estimate †Forecast Even as repression increases, the re- to the UN Economic Commission for Latin Source: Sintesis ‡Excludes price-controlled goods gime is being weakened by internal divi- America and the Caribbean. Inflation Financiera and seasonal fluctuations sions. Some reform-minded chavistas, like climbed to 64% in the year to November. Mr Álvarez, argue that the government Now Venezuela faces a brutal squeeze, tough measures required to stabilise the should scrap the petrol subsidy, unify the if the price of its oil (much of which is economy it is doubtless because he fears exchange rate and relyon the private sector heavy and sulphurous) stays at this week’s the anger of his own political base if subsi- to reactivate the economy. Others criticise level of around $50 a barrel. Even if the dies are withdrawn. His first priority is to Mr Maduro from the left. Socialist Tide, a government slashes imports further, to a shore up his support within the regime. university-based group, accuses the gov- bare-bones $35 billion (from $50 billion in Superficially, MrMaduro has been suc- ernment of being corrupt and bureaucrat- 2014), Venezuela will still face an external cessful. He sidelined several powerful ic, and Mr Maduro of betraying Chávez. It financing gap of $30.5 billion this year, ac- ministers and replaced them with military is preparing to leave the ruling United So- cordingto Tamara Herrera ofGlobalSource officers. He has built a loyal political tribe, cialist Party ofVenezuela (PSUV). Partners, an economic consultancy. centred on his own extended family and Another sign of decay came last month This includes debt payments by the that of Chávez, according to Margarita Ló- when Leamsy Salazar, a naval captain who government and PDVSA adding up to $10.3 pez Maya, a sociologist. Many relatives of forten years was in charge ofChávez’s per- billion in 2015. However the central bank’s Mr Maduro’s wife have jobs in the admin- sonal security, surfaced in the United international reserves total just $21.4 bil- istration. “This is a patrimonial govern- States. He is reported to have told prosecu- lion. The governmenthasvowed to make a ment,” says Ms López Maya. tors that Diosdado Cabello, the head of the €1 billion ($1.1 billion) debt payment due The authoritarian state he commands is National Assembly who is the regime’s on March 16th. sliding towards totalitarianism. On Janu- second-most powerful figure, leads a mili- Mr Maduro spent most of January trav- ary 27th the defence minister issued an un- tary drug-trafficking “cartel”. Mr Cabello elling abroad seeking emergency loans, constitutional decree allowing the armed denies the claim and says he will sue. without tangible success. In addition to its forces to use their weapons against prot- official reserves, the government may be ests if these turn violent. Cuban intelli- A rising opposition able to draw on another $20 billion held in gence agents police the armed forces and An hour out of Caracas, in green rolling opaque funds. On February 10th it an- the ministries, alert for any sign of dissent. countryknown asVallesdel Tuy, Santa Bar- nounced changes to the foreign-exchange Chávez seized control of the judiciary and bara de DosLagunasisa rural shantytown, regime that would charge some importers all the other constitutionally independent a self-built dormitory settlement of small, closer to the market rate fordollars. But the branches of the state. A group of lawyers roughly finished houses of brick or con- change falls short of what is needed to ad- crete. In fierce mid-morning sunshine, just the economy to the scarcity of hard some 200 residents, most ofthem women, currency. The government may be able to Falling through the Caracas gather around an awning. They have come stumble on until October, when debt pay- Venezuela’s external funding gap, $bn to meet Henrique Capriles, their state go- ments totalling $5 billion start falling due. Inflows: Outflows: vernor. Mr Capriles leads a centrist faction Barring an increase in the oil price, it will Oil revenue Imports Services of the opposition; he narrowly lost a presi- then face a painful choice: default on its Non-oil exports Debt balance dential election to Mr Maduro in 2013 (and debt, which might allow creditors to seize Borrowing payments Other claims that in fact he won it). assets, including PDVSA’s foreign refiner- 90 In that election the PSUV won in Dos ies, or impose a bigger devaluation and an Lagunas comfortably. Now Mr Capriles, a even tighter import squeeze. 60 lean 42-year-old with lively eyes and dark stubble, gets a warm welcome. He hands A patrimonial regime out vouchers for building materials, prom- Mr Maduro, a formerbus driver, lacks Chá- 30 ises to repairtwo sports pitches, and listens vez’s political cunning and popular ap- to complaints about overflowingsewerage peal. His approval rating has plunged to and poor housing. Money is short, he says, around 20% in opinion polls. He is by na- 0 and priority must go to the neediest. “The 2014* 2015† ture indecisive, says a source who knows government wants everyone to depend on Source: Moody’s *Estimate †Forecast him. But ifhe has refused to take any ofthe the state, in order to control them and 1 The Economist February 14th 2015 The Americas 33

2 blackmail them. That’s over.” tution allows in 2016. Deprived of media on both sides. Mr Maduro’s strongest card is the oppo- exposure Mr Capriles trusts in the retail The PSUV faithful in Santa Teresa repeat sition’s splits. It is divided amonga score of politics at which he excels. He says change the oﬃcial line that Venezuela is threat- parties and two main currents. The radi- can only come by winning over many dis- ened by “the empire” (ie, the United States) cals, led by Leopoldo López, a former illusioned chavistas, which he now sees as and by Colombian paramilitaries. Mr Ló- mayor of a wealthy Caracas district, want possible. “The country is very diﬀerent pez, the propaganda holds, is a fascist who to oust Mr Maduro through street demon- from a yearago,” he says. The two wings of would strip the poor of everything they strations. They led to months of protests a the opposition are drawing closer, with the have gained. Mr Maduro himself draws a yearago in which 43 people died. MrLópez help ofthe Catholic church. parallel between his government and that has been in jail for a year on trumped-up Even at the height ofChávez’s populari- of Chile’s Salvador Allende, an elected charges—a political prisoner, he says. ty, the opposition had the support of one Marxist toppled by General Pinochet’s Mr Capriles’s strategy is to win a parlia- Venezuelan in three. Now polls suggest CIA-supported coup in 1973. mentary election due by the end of this that twice as many identify themselves as The parallel is a false one. Allende may year, and then perhaps trigger a referen- opposition supporters than as chavistas. have governed badly, but he governed dum to recall MrMaduro, which the consti- But many feel alienated from the leaders democratically, unlike Chávez or Mr Ma-1 Bello Whose oil in Brazil?

One ofthe many casualties ofthe Petrobras scandal is a misguided industrial policy HE slogan underwhich Petrobras, Bra- ical complex. Thousands of workers are Tzil’s national oil company, was found- being laid off. ed in 1953 was o petróleo é nosso (“the oil is The PT’s expansive industrial policy ours”). Ours, not the foreigners’, was the was ruinously expensive for Brazil. implication. That, too, isthe sentiment be- Shielding Petrobras from competition just hind the oil policy of the Workers’ Party as the company embarked on the world’s (PT) governments that have ruled Brazil biggest corporate investment programme since 2003. But as Brazilians contemplate proved to be an open invitation to steal. the huge corruption scandal now engulf- Fixing the level of national content so ing Petrobras, they might ask themselves high was a recipe for delay and extra cost. just who “ours” refers to. Sharing out the work for political reasons The PT disliked a successful reform of deprived the shipyards of economies of Petrobrasin the 1990s, which stripped it of scale. its monopoly of production and distribu- The PT has placed Petrobras in serious tion while subjecting it to market disci- jeopardy, at least until the accountants pline and arm’s-length corporate gover- can agree on how to treat the losses nance. When the company and its new caused by corruption. The drop in the oil foreign partners made huge deep-sea oil of all his division’s contracts was diverted price adds to the company’s woes. The strikes in 2007 Luiz Inácio Lula da Silva, to the PT and its allies for personal gain or deep-sea oil is only viable at today’s price Brazil’s president, saw a chance partially campaign finance. The firm’s most recent “ifwe make an effortto reduce costs,” says to restore Petrobras’s monopoly. New oil quarterly results disclose a potential write- Eduardo Braga, the new energy minister. laws drawn up by Dilma Rousseff, his down of 88 billion reais in the value of its The shipbuilding industry needs “con- chief of staff and successor, gave the com- assets. This comes on top of the damage to solidation”; the national-content rule pany sole operating rights and a mini- its profits caused by Ms Rousseff’s freeze on should be “more flexible to guarantee mum 30% stake in the new fields. petrol prices, in a now-abandoned effort to competitiveness for our oil industry,” he Lula and Ms Rousseff saw oil as the offset her inflationary fiscal policy. Minor- says. The PT’s industrial policy is in full re- spearhead of an industrial policy that in- ity shareholders in Petrobras have seen the treat. volved fosteringfavoured sectorsand pre- value of their investment slashed by 80% What Brazil needs now is a policy that sumed national champions. Lula ordered since 2008. will align Petrobras with the national in- Petrobras to build four new refineries, But the ramifications of the scandal go terest, ratherthan thatofitsmanagers and three in the poor north-east. A new rule much further. Dozens of managers from the ruling party. This means cutting the required up to 85% ofequipment and sup- Brazil’s biggest construction companies, company down to size and exposing it to plies for the oil industry to be nationally which were Petrobras contractors and the competition. And it means using oil mon- produced. A dozen new shipyards stud- operators of the shipyards, are in jail. eyto upgrade skills, infrastructure and the ded the Brazilian coast, fed on cheap gov- Banks are reluctant to lend to these compa- research base, so that suppliers are en- ernment loans. They provided 74,000 nies until their future is clearer. A liquidity couraged to set up in the country. new jobs, boasted Ms Rousseffduring her squeeze is being felt along the supply In the inaugural speech of her second campaign last year for a second term. “We chain. Sete Brasil, a company set up by Pe- term on January 1st, Ms Rousseff pledged created an immense industry.” trobrasand itsbankersto build and lease to to defend Petrobras against “enemies Much of this vision now lies in tatters. it 28 drilling rigs, has run out of cash, ac- abroad” and insisted her policies “as- Prosecutors have identified at least 2.1 bil- cording to an industry source. Petrobras it- sured our people control over our oil lion reais ($730m) in “suspicious pay- self has scrapped two of the unbuilt refin- wealth.” Ordinary Brazilians now know ments” on Petrobras contracts; in a plea eries, after spending $1 billion on them; it exactly who “our people” are—and it isn’t bargain, the company’s former purchas- has abandoned work on doubling output them. Who extracts oil matters less than ing chief has revealed that 3% of the value at anotherand on revampinga petrochem- what is done with its benefits. 34 The Americas The Economist February 14th 2015

2 duro. It is Venezuela’s opposition who are Electoral reform in Chile the democrats, unlike some of those who plotted against Allende. And the United Tie breaker States, apart from a recent congressional initiative to impose sanctions on officials identified as having committed abuses during last year’s protests, has kept well awayfrom Venezuela. AsurveybyDataná- SANTIAGO lisis, a pollingcompany, finds that only 22% A new voting system should liven up politics of respondents still believe the government’s argument that it is the victim of an UGUSTO PINOCHET left the scene as Politics in Chile is about to get messier “economic war”. AChile’s dictator 25 years ago, but the and more interesting. After numerous If a coup comes it will be because the electoral system he bequeathed has gov- failed attempts, the ruling New Majority army decides that Mr Maduro is no longer erned politics ever since. Under the coun- has mustered the votes to scrap the bino- capable of defending its interests or be- try’sunique “binominal” system, each par- minal system; the measure passed both cause hardship prompts the social explo- liamentary constituency has two seats; the houses of parliament in January and sion that is the regime’s deepest fear. The winning candidate takes one and in most should become law soon. Under a new real threat to it may come in the parliamen- cases the runner-up takes the other. This system the numberoflower-house constit- tary election, which on present trends it is has reserved nearly all the seats in parlia- uencies will be cut from 60 to 28. Each will all but impossible for it to win. For the first ment for two big coalitions, the centre-left return between three and eightcandidates, time, chavismo faces the choice between New Majority (to which the president, Mi- depending on its population, to be chosen losingan election orresortingto wholesale chelle Bachelet, belongs) and the centre- by proportional representation. In some electoral fraud—oreven cancellingthe vote right Alliance. constituencies small parties will be sure of in an autogolpe (“self-coup”). The system has brought Chile stability winning a seat with just 13% of the vote. Even a clean election will not settle the at the expense of diversity. It kept small The system applies to the Senate, parlia- question of who will take responsibility parties out of parliament unless they ment’s upper house, as well. Some constit- for the painful economic adjustment that joined one of the two big coalitions, and uencies will now return five senators rath- the regime’s corrupt incompetence has ruled out landslide victories by either side. er than two. rendered inevitable. There is talk of a Moreover, it has tended to over-represent The new votingsystem promises to end church-brokered government of national the Alliance at the expense of New Major- what Ms Bachelet has called the “perma- unity after the parliamentary vote. That ity. Rural areas, which had supported Pino- nent draw” between left and right, which would at least increase the chances of a chet, were given more weight than their has bred complacency among politicians, peaceful transition from a failed regime. 7 populations warranted. produced weak majorities for governments and turned offvoters. Less than half ofthe electorate bothered to vote in the last election. The new system may cause political fragmentation, which in other countries has made coalition-building and governing difficult. Its backers reckon that makingthe legislature more representative is worth the risk. As well as adding ideological diversity to parliament the reform is also supposed to bringin more women: atleast40% ofthe candidates fielded by parties will have to be women. Now just 16% of deputies and senators are female. Ms Bachelet’s foes complain that when the permanent draw is broken the main winnerwill be herNewMajoritycoalition. It is also possible that it will break up as smaller groupings seek electoral success on their own. Cynics say that the candidate quota for women is unlikely to do much good; they expect parties to dispatch female candidates to their least winnable constituencies. Non-politicians have pounced on an- Colombian flower growers other aspect of the reform: it will increase Colombia is famous for coffee, less so for flowers. But the $1.3 billion a year it earns from the number of elected politicians. The sales of cut flowers is not far behind the $1.9 billion that comes from coffee. That makes number of lower-house deputies will rise Colombia the second-largest exporter (after the Netherlands). Cloudy skies took some of from 120 to 155; there will be 50 senators the bloom off this year’s crop, but growers are feeling festive about the Valentine’s Day rather than 38. Many Chileans, disgruntled season, which accounts for a tenth of their sales. That is because after years of coping with the ruling elite, want fewer politi- with a strong peso they stand to benefit from a sharp drop in the currency against the cians, not more. One online commentator American dollar (largely because of the fall in prices for Colombia’s oil exports). Growers grumbled that the reform will just mean are expecting bouquets to sell briskly in the United States, which buys three quarters of “more clowns for the circus.” Its authors Colombia’s flowers. Competitors in neighbouring Ecuador are not quite so cheery: their hope that Chile’s more vibrant politics will sales rely heavily on Russian romantics. prove him wrong. 7 Asia The Economist February 14th 2015 35

Also in this section 36 Abbott’s knightmare 36 Okinawa’s unpopular bases 37 Vietnamese working abroad 37 Pet soup in Vietnam 38 Banyan: Malaysia’s dark side

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

Indian politics is dubbed “mufflerman”. Many voters also disliked evidence of Mufflerman triumphs religious extremism. One BJP minister, in Delhi in December, called non-Hindus “bastards” and earned only a light repri- mand from Mr Modi. A fringe around the BJP seeks mass conversions to Hinduism, DELHI while stirring fears of “love jihad”, a supposed Muslim campaign to seduce Hindu As voters grow more demanding, an opposition partysweeps Delhi women. Mohan Bhagwat of the Hindu- OLITICAL cycles in India are speeding Modi, the prime minister. Capable on tele- nationalist Rashtriya Swayamsevak Sangh Pup. Just over a year ago the country fet- vision and keener than Mr Modi on public (RSS), an ally of Mr Modi, repeatedly says ed Arvind Kejriwal, of the Aam Aadmi debate, he could speak about national that all Indians are Hindus, offending mi- (“Common Man”) Party (AAP), as a politi- issues. If he is smart, however, he will norities. Recent attacks on churches in Del- cal hero. He had turned an anti-corruption hunker down and try to run Delhi well, so hi have also spread anxiety. movement into an electoral machine, win- voters might trust him later nationally. As for Congress, the election in Delhi ning voters from across religious, caste and After results were announced on February has left it “staring at the abyss of irrele- class lines. Storming assembly polls, his 10th he vowed not to be arrogant. vance”, says Jairam Ramesh, a formercabi- AAP took power in Delhi, the national AAP won for many reasons. If the elec- net minister, unless it reforms and finds a capital which is effectively a state. tion had been held in July, the earliest plau- new leader. The AAP’s main strategist, Yo- Mr Kejriwal (pictured above, on a sup- sible date, enthusiasm for Mr Modi might gendra Yadav, talksofhispartyfilling a vac- porter’s face) blew his opportunity. As Del- have swept in the BJP, which has recently uum in the national opposition. A test hi’s chief, he attacked venal police and bu- won four other state polls. Instead, AAP looms in assembly elections in poor but reaucrats, and gave the poor free water and had time to marshal voters, who liked Mr populous Bihar, where the BJP hopes to ex- cheap electricity. But his rule was Kejriwal’s humility and promise of honest pand. But other parties, as in Delhi, could chaotic, confrontational and short. He rule. The BJP candidate, Kiran Bedi, again unite against the BJP. resigned after 49 days. Worse, he launched charmed nobody. Most important, the All eyes are now on Mr Modi. He could an over-ambitious campaign in last year’s non-BJP voters united behind Mr Kejriwal: change his ruling style (and tailor), but general election. The AAP flopped, taking the BJP got 32% of the vote, about the same shutting up Hindu nationalists will be just four seats; none in Delhi. He apolo- as last time; AAP got 54%. trickier: they help to fire up the campaigns gised, both for quitting in Delhi and for This counts as Mr Modi’s first big elec- of many BJP MPs during elections. His big- fielding too many candidates nationally. toral loss. The campaign centred on him: gest challenge will be judging the public Eight months on, the cycle has turned he was at the forefront of BJP election pro- mood. Those anxious for change hope the again. Assembly polls in Delhi on Febru- paganda, billboardsand newspaperadver- budget on February 28th will signal his ary 7th gave Mr Kejriwal one of the biggest tisements, as well as fourrallies. Many vot- support for radical devolution of power to wins for any party, anywhere in India, ers, even some BJP MPs privately, states, changes in the tax system, a new since independence. AAP won 67 of 70 welcomed a check on what is widely seen land law and more. seats. Congress, which ran the city for 15 as his arrogance; he is known as high- But Mr Modi’s intentions are unclear. years until 2013, was obliterated. The Bha- handed and aloof in government. His ap- He may see such reforms as a boost to the ratiya Janata Party(BJP), in powernational- peal to ordinary voters has slipped: he re- economywhich would win him more sup- ly, suffered its worst ever result in Delhi. cently appeared in a lavish suit, its golden port; or he may back off, fearing the politi- The outcome is significant. Delhi, with pinstripes embroidered with his name. cal risks. He and Mr Kejriwal face similar 18m residents, is small but matters more “India’s electorate fundamentally doesn’t pressure: voters who provide huge elector- than many states. When Mr Kejriwal be- like hubris,” says Pratap Bhanu Mehta, the al mandates are often also the most impa- comes chief minister on February 14th he head of a think-tank in Delhi. Mr Kejriwal tient for results. That does not make deliv- will get a platform for opposing Narendra appears modest: he sports a tatty scarf and ering them easy. 7 36 Asia The Economist February 14th 2015

Politics in Australia backbench MPs. He angered colleagues by declaring that it was for the public to “hire US air bases Other US Hedo Knightmare and fire” leaders. Some felt Mr Abbott was military sites OKINAWA castinghimselfin a presidential role, ignor- Ie Jima (To Japan) disorder ing the conventions of Australia’s West- airfield minstersystem, in which parties elect their own leaders. East SYDNEY China Nago The drama has reflected a growing pat- PACIFIC Tony Abbott has survived a party Sea Camp Schwab tern among Australian politicians from rebellion, but has suffered a heavy blow Planned OCEAN both sides to move against leaders when Henoko base ONYABBOTT, Australia’sprime minis- poor polling seems to threaten electoral Ishikawa oblivion. Leadership upheavals have only Tter, reportedly called it a “near-death” CHINA MP experience. On February 9th s of his fed the cynicism of many Australians to- Kadena Okinawa Liberal Party voted against a motion to wards their politicians. It has also left busi- air base Tokyo open the party’s leadership to a ballot. But ness leaders dismayed. They fret about the Ginowan Futenma JAPAN the margin, 61 votes to 39, was hardly a turbulent political scene’s impact on busi- air base Naha AREA OF ringing endorsement of Mr Abbott’s lead- ness confidence and certainty. Ian Marsh ENLARGEMENT ership, just 17 months after he became of the Australian National University ar- prime minister. His struggle to keep his job gues that the country’s governments have 25 km is farfrom over. faced a “slow-burn crisis of legitimacy that Since he led the conservative Liberal- has been many years in the making”. National coalition to power in September Personality politics are only part of the election victory last November with a 2013, MrAbbott has spent much ofhis term problem. In a countrywhere votingis com- pledge to stop the project. That conserva- fighting to win voters’ confidence. But a pulsory, says Mr Marsh, about 40% of peo- tives are standing alongside left-wingers in Newspoll survey—published as his Liberal ple now vote for minor parties and inde- opposition to the base could spell trouble colleagues in Canberra, the capital, cast pendents, spoil their ballots or do not vote. for the Americans. Okinawa hosts about their votes on his future—showed just how Liberal and Labor, which once shared most half of all 53,000 American troops in Ja- much he has failed. It gave the opposition of the vote between them, now offer out- pan; their 32 military sites occupy nearly a Labor Party a 14-point lead, and gave its dated ideologies to an increasingly diverse fifth of the main island’s tiny area. That leader, Bill Shorten, an 18-point lead over Australia. outsized burden has long rankled Okina- Mr Abbott. More than two-thirds of those Mr Abbott declared the leadership mo- wan residents. The Americans do not want surveyed were dissatisfied with Mr Ab- tion a “very chastening experience”. Crit- to lose even more public support for their bott’s performance. icsnowwonderifhe will manage to soften presence, which they and Japan consider Mr Abbott was not hugely popular to his combative approach. He will need to in vital to regional security. begin with. Voters backed him at least order to win his party’s, and the public’s In 1996 American officials agreed to re- partlyoutofdespairwith the former Labor trust. The latter may be sorely tested again locate the most unpopular base, at Fu- government and its debilitating leadership in May, when Mr Abbott’s government tenma. Ten years later a site at Henoko, ad- wars. The public mood soured after his will present its second budget. 7 jacent to Camp Schwab (see map), was government announced its first budget last formally selected. Henoko is sparsely pop- May. Its aim to reduce Australia’s deficit ulated, in contrast to Futenma. But the new was worthy enough. But it contained cuts American forces in Japan base would ruin a coral-filled bay. Hiroshi in spending on health, education and wel- Ashitomi, a protestleader, saysthat accord- fare that Mr Abbott had once promised not Showdown ing to ancient Okinawan lore a paradise to make, and which seemed to fall most known as nirai kanai lies out to sea. heavily on poorer Australians. Mr Abbott In December 2013 the Japanese prime and Joe Hockey, Australia’s treasurer, did a minister, Shinzo Abe, broke the impasse by bad job of selling the budget to voters, ap- HENOKO persuading Mr Onaga’s predecessor, Hiro- pearing dismissive oftheir concerns. kazu Nakaima, to reverse the opposition A long-running struggle overa new The prime minister had promised a that had made him popular, and agree to military base is coming to a head fresh start to 2015 by “scraping one or two start landfill work. Mr Onaga, however, is barnacles off the ship”. Instead he got into HE protesters mounting an all-night sticking to his guns. On February 6th he a scrape of his own on January 26th when Tvigil outside Camp Schwab, an Ameri- launched a review of Mr Nakaima’s deci- he awarded a knighthood to Prince Philip, can military base on the main island of the sion, with a view to overturning it. One the husband ofAustralia’s (British) head of southern prefecture of Okinawa, are hard- question will be how a study commis- state, Queen Elizabeth. An ardent monar- ly wild-eyed radicals. Former civil ser- sioned by Mr Nakaima could have con- chist, MrAbbottreintroduced knighthoods vants, schoolteachers and professors are cluded that the planned base would have and dames to Australia’s honours system among those attempting to block trucks little effect on the dugong, an endangered last year, 40 years after they were abol- bringing supplies for the construction of a sea-cowthatgrazesoffthe coastatHenoko. ished. The “knightmare” brought ridicule vast new facility in and near the camp, to The central government has made clear on Mr Abbott, and further stoked concerns be used by American marines. Riot police its irritation with Mr Onaga. Mr Abe and that he was out oftouch with modern Aus- have been trying to disperse them. Some other senior LDP figures have refused to tralia. Its impact was felt in Queensland, ofthose attemptingto reach the base by ca- meet him. In January the government cut where a government allied to Mr Abbott’s noe have been stopped by coast-guard ves- by5% Okinawa’syearlysubsidy, the source coalition could lose power after a state sels and re-launched in rough waters. ofnearly halfofits budget. election on January 31st, the results of But opponents of the planned base are Both American officials and anti-base which were expected to be declared soon backed by Okinawa’s new governor, Ta- activists note that Mr Onaga may already after The Economist went to press. keshi Onaga, a conservative politician for- be softeninghisstance. One memberof his Grumbling about Mr Abbott’s leader- merly of the ruling Liberal Democratic review panel worries that the governor ship has recently extended to his own Party (LDP). Mr Onaga won a landslide may have appointed too many conserva-1 The Economist February 14th 2015 Asia 37

2 tive lawyers to it who are not especially Animal welfare in Vietnam worried about the Henoko project. By the time the panel releases its verdict this summer, construction may have proceeded so Pet soup far that even Mr Onaga would balk at the NAM DINH AND HANOI cost of stopping it and having to compen- Man’s best friends are underfire sate the central government for doing so. There are few other obvious options for ICTURES ofpets adorn the façades tons ofthem (see picture) as they were relocating it, however. No mainland pre- Pand menus ofrestaurants in Nam being smuggled from China to fill soup fecture would willingly accept a new base Dinh, a city in a part ofnorthern Vietnam pots in Hanoi, the Vietnamese capital. and its rowdy marines. One long-mooted where cats and dogs are commonly The authorities buried them, even possibility has been to fold Futenma into consumed. “Delicious,” says VuVan Thu, though some were still alive. Animal Kadena, a massive American air-force base a taxi driver, as he downs a plate of sau- lovers in Vietnam and abroad were horri- on Okinawa. But the Americans do not like téed feline in one eatery. Down the road, fied by the cats’ fate. “The anger is huge,” the idea. One American officer jokes that terrified puppy-eyes stare out from a says Trac Thuy Mieu, an animal-rights the base would be so crowded in the event metal cage beside a dog restaurant’s campaigner in Ho Chi Minh City. of conflict that helicopters would have to kitchen. A victim yelps as a butcher raises Foreign criticism, and the growth ofa parkon its golfcourse. For now, despite the his knife. The proprietor says his staff gets pet-owning middle-class at home, is bases, anti-American feeling does not run through scores ofkilograms ofdog meat putting pressure on the government. deep on Okinawa. But that could change if per day. Along with other South-East Asian coun- residents’ wishes are ignored, says Mr Ash- Vietnam, a one-party state, already tries, Vietnam pledged in 2013, albeit itomi, the protest leader. The demonstra- has many critics ofits repression of dis- non-bindingly, to stop the dog-meat tors, he says, could shift to demanding the sent, its corruption and a banking sector trade. A draft ofthe nation’s first veteri- removal of all American military sites on plagued by bad debt. Amid negotiations nary law is due fordebate in May in the Okinawa. That could put the Americans, forfree-trade agreements with America National Assembly, Vietnam’s legisla- and Mr Abe, in a bigger quandary. 7 and the European Union, the govern- ture. It is expected to require that animals ment wants to avoid even more bad be treated humanely. publicity that may damage its image; Vietnam’s migrant labourers even relating to the treatment ofanimals. Animal-cruelty scandals are myriad Going to debt in Vietnam. Gangs ofthieves steal dogs and sell them to restaurants. Tuan Ben- mountain dixsen ofAnimals Asia, an NGO in Hong Kong, reckons that dog thieving for this purpose has become even more wide- TAN LIEU spread in Vietnam since 2013. Neigh- bouring China cracked down on dog- Working abroad is no bargain eating in Beijing when it hosted the ROKERS’ billboards outside Tan Lieu, a Olympic games in 2008, but it remains B poor rural community in northern popular in some parts ofthe country, Vietnam, advertise “Labour Export”—jobs especially in winter when it is considered abroad. Vietnam’s youthful population of to help keep the body warm. 90m adds up to 1.5m each year to the grow- Cats in Vietnam are also on the back ingworkpool. Buteconomicgrowth, at 6%, paw. In January the police seized three Destined for the pot is not fast enough to keep all of them employed. Dreaming of fortune, young Viet- namese are pouring overseas as maids, nam’s northern border to China. Yet of the Vietnamese declines from 40% to 30%. builders and factory workers. many Vietnamese who migrate legally, Vietnamese authorities say they get the Than Thi Hang is a daughter ofTan Lieu more than a third of them women, some message. With support from international farmers. She flew to Taiwan when she was end up being exploited. A report on traf- aid donors, they have opened a handful of 18. Assembling mobile phones on 12- and ficking last year by America’s State Depart- offices where prospective migrants can 16-hour graveyard shifts was “easier than ment concluded that Vietnamese have learn about their rights. Vietnam’s press farming”, she says. Yet to finance the trip, among the highest debts of all Asian expa- also makes much of police busts of law- herfamily borrowed close to $5,000 to pay triate workers. As a consequence, they are breaking labour recruiters. Yet changes are a labour broker. Ms Hang spent more than “highly vulnerable” to debt bondage and mainly skin-deep. Futaba Ishizuka, a re- a year nervously working offher debts. forced labour. A survey in 2013 by CSAGA, searcher at the Institute of Developing Once, Vietnamese soughtto workin the a Vietnamese NGO, found that nearly a Economies in Japan, says the government Soviet Union and its satellites. Today the third ofover 350 interviewees felt they had lacks the political will to regulate the la- prime destinations are Taiwan, Japan, Ma- been cheated, deceived or exploited. bour agencies, which are often unlicensed laysia and South Korea. Since 2005 the Poor treatment encourages some work- affiliates ofstate-owned enterprises. numberofVietnamese workingabroad on ers to breaktheircontracts and look forbet- For all the tribulations, rural Vietnam- labour contracts has nearly doubled, to terwork, often illegal. Itbecame such a pro- ese, especially from northern and central about 500,000. The $1.6 billion that mi- blem in South Korea that in 2012 its provinces, are still eager to go abroad. The grants send home each year helps a bit to government cancelled its Employment fruits of migration are clear. In Tan Lieu, bridge a yawningwealth-gap between rich Permit System for Vietnam. Permits were 64km (40 miles) from Hanoi, slender con- and poor provinces. later issued again on a trial basis, but Viet- crete homes, financed by remittances, are Official migration channels are surely nam’s labour ministry said in January that rising next to the paddies. Ms Hang says safer than illegal ones that facilitate the South Korea would close the gates again she has already saved the $3,200 needed movement of sex workers across Viet- unless the share of illegal workers among forthe renovation ofthe family home. 7 38 Asia The Economist February 14th 2015 Banyan Malaysia’s dark side

The jailing ofAnwarIbrahim is a setbackforthe whole country, not just the opposition legal travails as politically motivated. After the verdict, he spoke to the judges: “In bowing to the dictates of your political masters, you have become partners in the murder of the judiciary…You chose to remain on the dark side.” They walked out, but Mr An- war’s supporters at home will thinkhe did no more than state the obvious. Even abroad, where Malaysia is often praised as a model ofMuslim-majority democratic moderation, many will be suspicious. Phil Robertson of Human Rights Watch (HRW), a monitoring group, called the verdict a “travesty ofjustice”. Critics point to many curious aspects ofthe case. According to research cited by HRW, the law under which Mr Anwar has been convicted has been invoked only seven times since 1938. Mr An- war was acquitted of this charge in 2012 because DNA evidence had been mishandled, only for the government’s prosecutor to appeal against the decision. So, unfairly or not, the case has harmed the image of Malaysia’s judiciary, and, to the extent that he is seen as implicated in its decisions, ofMr Najib himself. Already his reputation as a liberal and moderate has been dented by his government’s use of another archaic and draconian law, on sedition, to hound its critics. They include a political cartoonist known as Zunar who was arrested this week, appar- FTER taking an inexplicable fourmonths to make up its mind, ently for a tweet critical of the verdict on Mr Anwar. Having AMalaysia’s highest court on February 10th came up with the promised to repeal the sedition law, MrNajib in November said it verdict its critics said had been scripted for it all along. It rejected would actuallybe strengthened. Thatwasseen asa concession to an appeal by Anwar Ibrahim, the opposition leader, against his conservatives within UMNO. They present a far greater immedi- conviction on a charge of sodomy—of having sex in 2008 with a ate threat to Mr Najib than does the opposition, especially since young man who had worked for him. It upheld the five-year jail they have the support ofDr Mahathir. He vacated the prime min- sentence imposed last March. Since a prison term also entails a ister’s office in 2003 and is now 89, but remains a powerful politi- five-year ban after release from running for political office, this cal force. He has turned against MrNajib, as he did against his pre- would rule Mr Anwar out of the next two general elections. And decessor, Abdullah Badawi—and indeed Mr Anwar before that. since he is 67, it might markthe end ofhis political career. With Mr Anwar behind bars, UMNO hardliners will have less The three-party coalition he heads, Pakatan Rakyat, poses the reason to worry about the opposition, and can concentrate their most serious threat the United Malays National Organisation, fire on Mr Najib’s leadership. They have been handed a weapon UMNO, has faced in its nearly six decades ofcontinuous rule. But in the troubles surrounding 1MDB, a sovereign-wealth fund, the opposition depends heavily on Mr Anwar’s leadership, so his whose board of advisers Mr Najib chairs. It is behind on debt re- sentence sounds like good news for the prime minister, Najib Ra- payments and accused of a woeful lack of transparency. This zak. Celebration, however, would be short-sighted. week a group of Malaysian banks was reported to have threat- Having Mr Anwar out of the way certainly offers political ened it with being called into default if payment is not made this benefits to the government. In the general election in 2013, when month. Politicians from both the opposition and UMNO have he led the Pakatan campaign, it won more of the popular vote called for investigations into 1MBD. Its troubles might even have than the UMNO-dominated coalition, Barisan Nasional (BN), an impact on Malaysia’s standing as a sovereign borrower. Last though, thanks to gerrymandered constituencies, it won only month Fitch, a ratings agency, called it a “source ofuncertainty”. 40% of parliamentary seats. Yet Pakatan is an unlikely and frac- tious coalition. One of its members is a conservative Islamist Chameleon karma party, appealing to the ethnic-Malay, Muslim majority; another Under attackfrom his own right flank, Mr Najib has little room to represents mainly the ethnic-Chinese minority; Mr Anwar him- make good his promises of political liberalisation. Even eco- self heads a multiracial, secular party. An important factor in nomic reforms—where he has a respectable record of, for exam- keeping these elements together has been Mr Anwar himself. ple, widening the tax base and cutting fuel subsidies—may stall. A former deputy prime minister, he fell out with his mentor, The most difficult ones require the ending of Malaysia’s rules MahathirMohamad, duringthe Asian financial crisis in 1998, and mandating commercial discrimination in favour of the Malay emerged as the leading advocate of reformasi—fundamental re- majority, a system to which many in UMNO are wedded. form ofan ossified, corrupt political system. He is by farthe oppo- So the BN, whose ethnic-Chinese and ethnic-Indian composition’s best-known and most charismatic figure, despite—in- nents fared disastrously in 2013, risks becoming a mere shell for deed, in part because of—his six years in jail for alleged an UMNO ever more beholden to Malay-nationalist forces, thus corruption and on an earliercharge ofsodomy(lateroverturned). further sharpening a dangerous racial polarisation in Malaysian His latest conviction, however, is a mixed blessing for the gov- politics. Mr Anwar, a political chameleon whose real beliefs are ernment. It insists the judiciary is independent, and points out sometimes hard to pin down, has many critics, but he could at that, in this case, the charges were brought by the alleged sexual least credibly lead a coalition that bridges Malaysia’s ethnic di- partner. But conspiracy theorists—a category including virtually vides. That is why his incarceration is a dark day not just for Ma- every observer of Malaysian politics—will interpret Mr Anwar’s laysia’s opposition, but forMr Najib and the country itself. 7 China The Economist February 14th 2015 39

Also in this section 40 A ﬁlm’s unusual talent 40 The economy and the goat-year

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

Military corruption halt to most PLA commerce, but the armed forces never rid themselves of graft. The Rank and vile PLA remains subject to little supervision (its power to flout the law is evident on the streets, where cars with military plates pay little heed to rules). Military salaries have been rising in recent years: the pay of non- BEIJING commissioned officersincreased by40% in 2014 and that of officers by 20-30%. But Xi Jinping flexes his muscle against army corruption wages are still not high enough to reduce O EXTENSIVE was the stash of jade, officers are party members and each com- incentives for corruption. Senior officers Sgold and cash found in the basement of pany is commanded jointly by an officer in receive a pittance compared with the General Xu Caihou’s mansion in Beijing charge of military affairs and another bosses ofstate-owned enterprises. that at least ten lorries were needed to haul whose job it is to ensure troops toe the Corruption is worst in departments it away, according to the Chinese press last party line. Mr Xi has repeatedly stressed dealing with logistics, weapons procure- October. Given General Xu’s recent retire- the party’s “absolute leadership” over the ment and political matters (the latter is in ment as the highest ranking uniformed of- PLA. His definition of a “strong army” puts charge of maintaining party loyalty and of ficer in the armed forces, this was astonish- “obedience to the party’s commands” be- appointments). Housing is among the big- ing news. General Xu, the media said, had fore “capability ofwinning wars”. gest rackets. Many supposedly affordable accepted “extremely large” bribes, for Fighting military graft is intended to en- homes built forsoldiers since 1999 were in- which he now faces trial. It will be the first hance both of these qualities. Mr Xi wants stead constructed as luxury villas and sold of such an exalted military figure since the to develop a lean, rapidly deployable fight- offorenjoyed by military personnel. Some Communist Party came to power in 1949. ing force, which is better able to project generals reportedly erected ceilings twice The People’s Liberation Army (PLA)—as powerabroad and defend the nation’s bor- the standard height in order to add a floor the Chinese army, navy and air force are ders which China regards as encompass- later. Paying bribes for promotions is wide- collectively known—has not fought a war ing a vast maritime area as well as Taiwan spread: nine ofthe 16 senior officers recent- for 35 years. But the world’s largest fighting and Japanese-controlled islands in the East ly disgraced, including Mr Xu, were from force is now engaged in a fierce battle at China Sea. As Luo Yuan, a general, wrote in the PLA’s political wing. home against corrosion within its ranks. December: “Without eradicating corrup- Some of these problems are now being Xi Jinping, China’s president (pictured, tion, we would lose any war before fight- tackled. The PLA says it will scrutinise ap- pointing), has taken his sweeping anti-cor- ing it.” Many Western experts believe the pointments more closely and make secret ruption campaign into the heartofthe PLA, PLA is becoming increasingly able to assert inspections to stamp out the acceptance of seemingly unafraid to show that a hal- China’s territorial claims, despite the cor- bribes by recruitment officers. Officers are lowed institution is also deeply flawed. In ruption. But warnings such as those by being restricted to a single army-subsi- January the PLA took the unprecedented General Luo are taken seriously by Mr Xi. dised home. Luxury cars may not carry step of revealing that 15 generals and an- Military corruption, though seldom military license plates. To cut costs and other senior officer were under investiga- spoken ofso publiclybefore, haslong been break up (often corrupt) monopolies, priv- tion or awaiting trial. It said it would a problem. In the 1990sthe PLA, atfirstwith ate companies will be allowed to bid for launch a stringent review of recruitment, the party’s blessing, dived into commerce. most defence contracts. Military auditors promotions, procurements and all of its fi- “The result was PLA Inc,” says Tai Ming recently joined a national meeting of their nancial dealings in order to root out cor- Cheung of the University of California, civilian counterparts for the first time—a ruption. San Diego. The army set up 20,000-30,000 sign, perhaps, that the PLA is beginning to One reason MrXi iskeen to clean up the business across China, says MrCheung; in- air its problems more openly. army is to ensure that it remains a bulwark cluding hotels, financial services and Mr Xi’s military clout gives him a great- of party rule. The PLA is the party’s armed nightclubs. Many became the seeds of er chance of success than his predecessors wing—its soldiers swear allegiance to it rampant corruption. in curbing graft in the PLA. One of his first rather than the people or the country. All In 1998 President Jiang Zemin called a jobs aftergraduatingwas as a personal sec-1 40 China The Economist February 14th 2015

2 retary to the minister ofdefence. His father Economic data cially late this February (it begins on the was a guerrilla fighter who was close to 18th). That astronomical quirk should offer Mao Zedong (until Mao eventually turned Lunar eclipse a modicum of comfort to those fretting on him). Such connections can be used to about the latest Chinese economic data, powerful effect in Chinese politics. which, at first glance, portend doom. But even with his enormous authority The numbers made it look as if China Mr Xi will find it hard to change such a se- was on the brink of deflation. Consumer cretive and hidebound institution. The fall- prices rose just 0.8% from a year earlier, a Growth is slowing, but the calendar en generals can expect tough punishment, sharp decline from preceding months. overstates the problem but the PLA tends to deal with its own Trade was also weak, with exports falling wrongdoers with a light touch. The ill-de- HE Chinese calendar is often de- 3% and imports down 20% (see chart). fined quality of “political reliability” will Tscribed, incorrectly, as a lunar one. It is But the distortion of the variable-holi- remain a crucial factor in gaining promo- in fact a lunar-solar mix, with an extra lu- day effect was sizeable. Everything from tion—one wide open to abuse. nar month added every so often to stay in shipping to roadworks is completed in a It will be tougher still to make the PLA line with a wholly solar calendar. This an- rush before China shuts down for its New better at fighting. Most troops have no di- cient system, some 2,500 years old, is not Year. That burst was concentrated in Janu- rect combat experience, commanders are just an academic curiosity. It has a big im- ary last year. This year, with the later holi- ill-trained in the complexities of modern pact on economic data. The Chinese New day, it has spilled into February. As a result, warfare, and training for rank-and-file Year holiday, and with it a peak in con- Januaryappeared unusuallysluggish com- troops is not realistic enough. Annual dou- sumption and prices, scuttles back and pared with a year earlier. Consumer infla- ble-digit increases in defence spending— forth between January and February (in tion typically sheds about half a percent- the norm for the last two decades—have the Gregorian calendar), complicating the age point in Januaries when the New Year helped equip the PLA with some advanced annual comparisons. comes so late. As for trade, adjusted for the weaponry, but not necessarily the ability Every few years—2015 being one—the calendar, the declines in exports were still to use it effectively. Even if corruption is impact is bigger than most. Thanks to the big but not as severe as reported. rooted out, the PLA will struggle to moder- insertion of a lunar leap month last year, The calendar was not the only compli- nise. 7 the Chinese New Year holiday falls espe- cating factor. An unseasonably warm winter made for lower vegetable and fruit Film prices, weighing on inflation. And the collapse in global commodity prices eroded the value of imports. China’s oil demand, In wolves’ clothing for example, was about the same in volume terms as a year earlier. In value terms, BEIJING though, crude imports plunged 42%. A new state-sponsored film is the product ofunusual talent Because of the perennial calendar N FEBRUARY19th cinemas in China swift to spread, that back-footed censors headache, China’s statisticians wait until Owill begin showing “WolfTotem”, a decided to turn a blind eye to the author’s March to publish the full range of data for film based on a Chinese novel critiquing background and refrained from banning the economy, lumping January and Febru- man’s impulse to tame nature, in which a the book. ary together to assess the true state ofretail young man from Beijing attempts to Mr Annaud says he was surprised sales and industrial output. These are al- domesticate a wolf. The release itself when, in 2007, representatives ofthe most certain to show that the economy is marks a change in the natural order of Beijing Forbidden City Film Corporation slowing, though not as dramatically as im- things: forthe author ofthe novel, the visited him in Paris to askhim to make plied by the January numbers. director ofthe film and the state system the film. Chinese producers wanted a The central bankis being prudent. It has that produced it. foreign director forthe project. Mr An- started easing monetary policy, most re- The author, Lu Jiamin, was jailed for naud was an Academy Award winner cently by raisingthe proportion ofdeposits more than a year forhis role in the Tia- with successful experience ofworking that banks are free to lend. But this is as nanmen Square protests of1989. Worried with animals (in his film “The Bear”). much a response to capital outflows as it is his subsequent writings would be What about his Tibet film, he asked? They to the slowdown in growth. To get a better banned, he wrote the novel under a pen said the past was the past, he says. No reading on the latter, the government name, Jiang Rong. The French director, apology would be necessary. knows that it will have to wait for one Jean-Jacques Annaud, had been banned In late December 2009, however, more cycle ofthe moon. 7 from China formaking “Seven Years in months after his hiring had been an- Tibet”, a film released in 1997 that depicts nounced, Mr Annaud did apologise. In the Chinese army invading Tibet and an open letter circulated in Chinese Struggling portrays the Dalai Lama sympathetically. online (a liberal but generally fair transla- China’s: But China Film Group, a state-owned tion, he says), Mr Annaud declared he % change on a year earlier giant, and others made Mr Annaud a rare had “never supported Tibet’s indepen- 15 foreign director ofa Chinese feature film, dence” and had no “personal relation- GDP 12 with a budget ofmore than $40m. ship” with the Dalai Lama. The Communist Party has sensible There were some domestic critics 9 reasons to embrace both men. The novel, online who did not care forthe novel or 6 Mr Lu’s first, is a literary phenomenon: it its author, and who would have liked to has sold more than 5m copies in China, in derail the film project. Mr Annaud’s 3 + addition to many more pirated ones. In self-criticism helped protect against that, 0 2007 an English-language translation and the Chinese system in turn protected Consumer prices – won the inaugural Man Asia Literary him. The new natural order ofthings, 3 Prize. The acclaim was so great, and so perhaps. 2005 06 07 08 09 10 11 12 13 14 Source: Thomson Reuters Middle East and Africa The Economist February 14th 2015 41

Also in this section 42 Israel’s partisan newspapers 42 Palestine’s culinary delights 43 South African tourism 43 Justice in Chad and Senegal 44 Nigeria’s delayed vote

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

Arab media rain’s mainly Shia uprising. The most acute criticism surrounds al A guttering flame Jazeera’s kind treatment of Egypt’s Muslim Brotherhood, a line that corresponded closely with Qatar’s foreign policy. The station fawned over Muhammad Morsi, a Muslim Brotherhood member who was elected president of Egypt, and decried his CAIRO ousting by the army as “a coup against le- Aftera briefflickering, free speech is being snuffed out gitimacy”. Al Arabiya, meanwhile, fol- HIS month Al Arab, a new private video and audio tapes of Osama bin Lad- lowed Saudi hostility to the Brotherhood, TSaudi-funded satellite channel, en, the late head ofal-Qaeda. calling the event a “second revolution.” launched in Bahrain with shiny new stu- By 2011 it was playing a role in foment- And as Al Jazeera once provided a mod- dios and sparkling ideals. It would, said Ja- ing the Arab spring by streaming live foot- el offree speech, local regimesare now see- mal Khashoggi, the veteran Saudi journal- age ofprotesters from Tunis to Tripoli. Such ing in it a model for propagating their own ist appointed to head it, be the “voice ofthe was its clout that others tried emulating it, views across the region. Iran and Syria voiceless”. Not for long. Just six hours after not least Al Arabiya, a Saudi-based broad- backed the launch in 2012 ofAl-Mayadeen, Al Arab first went on air the Gulf statelet caster that came on air in 2003. But al Ja- a pan-Arab satellite channel based in Bei- gagged it; on February 9th authorities said zeera’s influence has since waned amid rut. They hope it will counter the Gulf it must close for good, claiming it was not perceptions that its journalism has turned channels that are inimical to Bashar Assad, properly licensed. Its real sin, it seems, was partisan. Even as it championed Syria’s Syria’s president. Ajournalist at Al Modon, to give airtime to Al Wefaq, Bahrain’s main mainly Sunni rebels, some of whom were a Qatar-funded news site, says it was opposition party. later financed by Qatar, it ignored Bah- launched partly to counter Saudi Arabia’s The short life of Al Arab is emblematic media influence in Lebanon. of a wider flowering of independent Arab A loss of trust in the impartiality of sat- media, and its subsequent withering. The All the news that’s fit to blog ellite TV is all the more worryingbecause it channel took shape during the heady days Internet penetration, %, 2013 had been seen as an alternative to local of the Arab spring, when autocratic re- media long cowed by authoritarian gov- gimes were falling and people yearned for 0 20 40 60 80 100 ernments. When Abdel-Fattah al-Sisi, free media. Appetites had been whetted UAE 42 Egypt’s army chief (and now president) since the early 1990s, with the advent of Qatar 34 came to power he quickly closed down Is- the internet and satellite TV. lamist television stations. Three Al Jazeera Lebanon 35 Some regard the mother of all indepen- journalists were imprisoned in Egypt for dent Arab media to be Al Jazeera, a pan- Saudi Arabia 18 more than a year on spurious allegations Arab television station that first broadcast Morocco 16 ofbelongingto a Muslim Brotherhood cell. in 1996. Although funded by the ambitious Egypt 16 In Syria Mazen Darwish, who headed the rulers of Qatar, it broke the mould of Arab Jordan 39 Centre for Freedom of Expression, is just journalism, which then consisted of little World 14 one of 12 journalists in Mr Assad’s jails; more than reheating official press releases. Arab World 15 others have their work stymied by rebel The station’s professional journalists, top- militias. In Saudi Arabia four journalists Algeria Facebook 12 class technology and feisty talkshows set a penetration* have been jailed after covering Shia prot- new standard for freedom of expression. Iraq %, 2013 9 ests in the eastern province. Audience figures rocketed to tens of mil- Sources: World Bank; Arab *Among population Little wonder that much news broad- lions as it won scoops that included airing Social Media Report aged 13 and up cast on local channels is mind-numbingly 1 42 Middle East and Africa The Economist February 14th 2015

2 dull. In Saudi Arabia television stations show. In 2013 ONTV, another private chan- clude social media and small independent mainly offer religious fodder and reports nel, lost Reem Maged, an Egyptian present- outfits. One such is Madr Masr, a newspa- of royal beneficence. In Jordan the front er known for hard-hitting interviews, per in Egypt that manages to push bound- pages feature glowing tales of the royal when she cited differences between her in- aries, perhaps because it is written in Eng- court. When not boring, state output is of- terest in free journalism and the channel’s lish. Networks in rebel-held Syria ten shockingly mendacious. Syrian state focus on “national security”. “Everyone is broadcast local news via YouTube chan- television once claimed Al Jazeera was taking their cues from the regime,” says nels or Facebook pages; a few including building sets of Syrian cities so as to stage Rasha Abdulla, a professor of journalism Aleppo Today broadcast on satellite. But fake protests. Private media is often little at the American University in Cairo. “The even new media fall into the habits of their better since it is owned by big business- situation is worse today than ever.” older brethren, such as uncritically airing men whose interests usually lie in butter- One ray of hope is that people increas- conspiracy theories, however outlandish. ing up regimes. CBC, a private Egyptian ingly seek news online, where resources Depending on which newspapers or web- channel founded in 2011 by Muhammad and wannabe journalists have proliferated sites you read in the region, you will be- al-Amin, offered airtime in November 2012 since the Arab spring. Internet access is lieve that the jihadists of the Islamic State to a hugely popular sketch show by Bas- surging across the region (see chart on pre- are either a creation ofwealthy Gulf states, sam Youssef, akin to America’s Jon Stew- vious page) and is used particularly by Iran, Israel’s Mossad, the CIA, or some be- art. But a year later, with Egypt under new youngpeople in places like Saudi Arabia to wildering combination ofthe three. management, the channel ended the find alternative sources of news. These in- Such silliness may not quite accord with the Jeffersonian ideal of a free press acting as a guardian of liberty. But better a Battling in print cacophony of dissenting voices— online or beamed from satelites—than the stifling The Bibi-ton bomb monotone of state-controlled or cowed media. “Today there is much less power concentrated in state-owned media and When newspapers take sides traditional gatekeepers,” saysHabib al-Bat- OR six years, Binyamin Netanyahu, among them is Noni Moses, the reclusive teh, a Lebanese investigative journalist FIsrael’s prime minister, has enjoyed an publisher ofYediot Ahronot, which had who runs the site Beirut Report. These advantage other politicians might give an previously been Israel’s largest circulat- days, says Mr Batteh, the region’s people arm for: a daily newspaper that offers ing paid newspaper. Mr Moses, the prime “are sophisticated consumers” who unstinting support and is distributed free. minister snapped on Twitter, was “using browse several news sources to distil the He has that in Israel HaYom (or Israel every possible means to topple the gov- truth. The genie offeisty and critical media Today), the country’s best-read paper, ernment, shut down Israel HaYom and may be stuffed back into the lamp, but not which not only glorifies him and his wife restore its aggressive hegemony over the the thirst forinformation. 7 but also damns their foes. print media”. Yediot’s attacks on his fam- Recently, however, its cheerleading ily, he bridled, were no longer taking seems to be causing Mr Netanyahu as place daily in print, but hourly on the Palestine’s culinary delights much harm as it does good. Opponents internet. facing him in an election on March 17th Even sceptical commentators now The king of accuse Mr Netanyahu ofbeing in hock to wonder who speaks forwhom. Mr Net- its publisher, an octogenarian American anyahu’s defence ofthe paper on Twitter cauliflowers casino mogul, Sheldon Adelson. has only increased suspicions that his Smarting from allegations that the precipitous call for early elections 13 paper infringes regulations on campaign months into his term was motivated less AL-RAM funding, Mr Netanyahu has used his by his desire to rid himselfofa quar- A humdrum food in gourmet form Twitter feed to attackits critics. Foremost relsome cabinet than by concern for the survival ofIsrael HaYom after a bill to TMAYchallenge the spiritto think ofcau- stop the free distribution ofnewspapers Iliflower as anything but an overrated, passed its first reading. Many who voted ungainly plant. But in the craggy land be- in favour came from his coalition. His tween Ramallah and Jerusalem, there is foreign minister, Avigdor Lieberman, one variety of that plain vegetable that in- who grew up in the Soviet Union, called variably attracts a crazed following at this it Pravda. Many Israelis just call it Bibi-ton, time ofyear. merging Mr Netanyahu’s nickname, Bibi, Every winter stands manned by farm- with iton, the Hebrew fornewspaper. ers pop up along most of the West Bank’s While Mr Moses has broadly sup- winding roads, with proud growers dis- ported a two-state settlement with the playing vivid yellow bouquets wreathed Palestinians, Mr Adelson ridicules the in green roughage. Forget the white veget- thought ofa negotiated compromise. For able that, when boiled, resembles a brain years he and his Israeli wife have brought and releases a gassy aroma redolent of tens ofthousands ofAmericans, in- cheap cafeterias. This is zahara baladi, an cluding congressmen, on partisan tours ancient local cultivar that takes a full year ofIsrael. The Republican congressmen he to grow and is in season for just a few funds are now inviting Mr Netanyahu to weeks. The plant has a nice, mustardy hue; talkto Congress shortly before the Israeli the flavour is well-rounded, sweet and elections, to the Democrats’ fury. His earthy and the texture irresistibly creamy. speech will, no doubt, get a favourable All this is enough to entice Palestinian And I asked for Pravda write-up in Mr Adelson’s newspaper. Jerusalemites to leave their homes in blus- tery weather. “It’s cauliflower madness,” 1 The Economist February 14th 2015 Middle East and Africa 43

South African tourism that the rules will come into effect come what may. A group of 20 airlines serving Killing the golden South Africa, including Virgin Atlantic, British Airways and Air France, declared goose the new visa regulations “a tourism, PR, economic and political disaster.” A leaked JOHANNESBURG report by Grant Thornton, a consultancy, for the Tourism Business Council of South Clumsy new rules could ruin badly Africa said the policy could cost more than needed tourist business 100,000 jobs. HE ARRIVALS hall of South Africa’s Diplomats from Asia and the Middle Tbiggest airport is a sea of safari green. East say the rules will deter investment Visitors turn up at O.R. Tambo Internation- and tourcompanies are reportingcancella- al dressed forthe bush, with cameras slung tions. Even South Africa’s tourism minister and wallets bulging, ready to splash out on has said the sector’s huge benefits could wine and adventure. melt away. “We have to make it as easy as Times are good for the tourist trade. A possible for a person to come to our coun- record 10.3m visitors arrived in 2014; the try,” Derek Hanekom told a parliamentary sector hauled in $10.9 billion (see chart) committee. “People have choices.” and employed 645,000 people. Itisa bright While South Africa makes life harder spot in an otherwise dismal economy; for visitors, nearby countries are doing the Get them while you can GDP growth has limped, at about 2% for very opposite. For example, Zambia and the past two years and unemployment is Zimbabwe are testing a single joint visa, 2 one customer agreed cheerfully as he bat- at 35% and rising. easing travel to Victoria Falls on their tled a vicious wind to get to a stall. All this makes the South African gov- shared border. If the six-month experi- Their craze reflects not just the brief ernment’s imposition of stringent new im- ment succeeds, other neighbouring coun- flowering of a delicacy, but also a gastro- migration laws rather baffling. Starting in tries are set to join. In contrast, a “uni-visa” nomic renaissance brought about by suc- June, just in time for school holidays, chil- system for the 15 countries of the Southern cessful Ramallah chefs, many of them dren under the age of18 will have to carry African Development Community, a bloc trained abroad, and a bumper crop of re- an unabridged birth certificate, with par- dominated by South Africa, is nowhere cent books highlighting local cooking. ents’ names listed, when arrivingand leav- near to being ready, despite having been Cauliflower has been mentioned by ing. Ifonly one parent is accompanying the mooted in 1998. One big sticking point has Arab botanists for more than a millenni- child, then sworn affidavits from the other been South Africa’s fear of a deluge of ille- um. It is the crucial ingredient in maqluba, parent are required. A death certificate will gal immigrants. The government’s phobias a gem of Palestinian cuisine in which fried also do. This is supposedly to stop child appear to have clouded its vision. 7 florets are cooked with chicken or lamb trafficking, but is far more heavy-handed (and sometimes eggplant) in a huge pot of than measures imposed elsewhere. spiced rice that is triumphantly turned up- Anotherregulation, also cominginto ef- Chad and Senegal side down before serving. fect on June 1st, will force visitors from Translated literally, zahara baladi places needing advance visas to apply in A pan-African means wild flower, and it usually makes its person at a South African embassy or con- appearance some time in February, just as sulate in their home country; the job can trial, at last the terraced hills erupt in a riot ofcolourful no longerbe done by post. In China and In- blooms. “This is the golden time of flower- dia, which are big, growing markets for ing plants,” exults Munir Nasser, a profes- South African tourism, thiscould mean fly- A fallen African dictatoris likely to face sor of biochemistry at Birzeit University ing to the nearest big city. Prospective visi- a new kind ofAfrican justice with a passion forlocal flora. tors may decide not to bother. Commercial vegetable growers some- The government has shown slight signs NE of Africa’s most bloodstained for- times try to engineer their plants so as to ofwobbling; ithastwice delayed the appli- Omer leaders, Hissène Habré, is likely produce saleable crops twice a year. But cation of the new rules, and set up a team to be formally charged in the next few days purists will always insist on the existing to discuss the issue. Buta defiantMalusi Gi- by a special African court with having variety ofzahara baladi. gaba, the home affairs minister, is adamant committed a string of atrocities when he Local lore ascribes amazing properties was president of Chad from 1982-1990. The to the plant. It is said to cure everything judges of the so-called Extraordinary Afri- from respiratory ailments to postnatal Bulging wallets can Chambers, set up in 2012 in Senegal, pain. In villages, chunks ofthe stuff are art- South Africa will decide what charges he must face. fully combined with onion and spices and Foreign-visitor spending Foreign-tourist arrivals Mr Habré, now aged 72, has been living blended into a light dough that is fried, pro- Constant 2013 rand bn m in Senegal since fleeing from Chad at the ducing an appetising fritter. In Jerusalem, 120 12 end of his reign. He is alleged to have com- families wait eagerly till winter to make 100 10 mitted crimes against humanity, war mtafayeh—a one-pot wonder consisting of 80 8 crimes and torture. Around 40,000 people lamb and zahara baladi cooked with goat are reckoned to have been killed and many yogurt, tahini, lemon and fresh minced 60 6 more tortured during his rule, according to garlic. 40 4 Chad’s truth commission. His trial is likely “The taste is just different, so good, so 20 2 to start in May or June. soft,” sighs a Jerusalem lawyer and new It has been a labyrinthine process. “The mother who has just dispatched her hus- 0 0 case has bounced around for the past 15 2004 06 08 10 12 14 band on a mission to the cauliflower ki- years,” says Reed Brody of Human Rights Source: World Travel and Tourism Council osks. Her name, appropriately, is Zahara. 7 Watch, a New York-based monitoring1 44 Middle East and Africa The Economist February 14th 2015

2 group, which has been working with vic- they oversaw the innovative creation of armed army officers to influence the out- tims of Mr Habré to bring him to justice. the Extraordinary African Chambers. come of a state election in Ekiti last June. They filed a case against him in 2000, By contrast, the AU has been increasing- The politicians deny this claim and say the whereupon he was indicted by a Senega- ly hostile to the International Criminal recordings are a hoax, yet some members lese court and arrested. But Mr Habré had Court in The Hague, which has sought to ofthe opposition fret that the generals may powerful friends in Senegal. Its govern- bring human-rights abusers to book since try to fix the coming presidential vote. ment interminably dragged its feet. its creation in 2002, on the ground that it Or they might consider a more forceful But in 2012 Belgium, where the victims has unfairly targeted Africans; all its indic- intervention. Olusegun Obasanjo, a for- had sought justice invoking an unusual tees have so far been African. Mr Habré mer president and stalwart of the ruling law that enables it to prosecute anyone for could not, in any case, be tried before it, party, recently sided with the opposition human-rights abuses wherever commit- since his alleged crimes were committed and expressed concern over the delay. “I ted, won a case against Senegal at the Inter- before the ICC was set up. sincerely hope that the president is not go- national Court ofJustice, the UN’s main ju- Is his trial likely to herald a new trend, ing forbroke and saying: ‘Lookdammit, it’s dicial organ for adjudicating disputes with African leaders brought before pan- either I have it or nobody has it’,” he said, between states. The court ordered Senegal African courts? Do not bet on it. Last year according to the Financial Times. “I hope to prosecute Mr Habré or extradite him. A the AU said it would promote its own con- that we will not have a coup.” new Senegalese president, Macky Sall, tinental human-rights court—but incum- In any event, the army’s call for a six- gave the case a fresh lease of life, with the bent leaders and their senior officials, it week delay seems a thin excuse. Boko Ha- eager backing of Aminata Touré, an anti- added, must be exempt. The court in Sene- ram, which wants to establish an Islamic corruption campaigner who served as his gal may well be a one-off, but it sets the state, has been waging war since 2009, and prime minister until last summer. With the right sort of precedent for the continent’s gaining ground steadily. It has also struck endorsement of the African Union (AU), abusive presidents. 7 across borders, most recently with attacks in Niger and Cameroon. Nigeria’s army promises a new assault Nigeria beginning on February 14th. Yet its troops are as under-resourced and demoralised Counting votes before they are cast as ever. Most Nigerians laugh at the army’s confident assertion that security can be restored in time for a poll in late March. “I find it ridiculous that they’re asking for six weeks to combat something that has exist- ed for this long,” says Leke Ayo-Ositelu, an e-commerce worker in Lagos. Democracy has been delayed, but hopefully not denied The recent involvement of Nigeria’s VEN in relatively quiet times Nigeria is a neighbours provides a slight hope. In Janu- Ehotbed of conspiracy and political in- ary Chad began moving up battle-hard- trigue—most of it imagined. Years of inept ened soldiers, who are now fighting mili- governance, military rule and corruption tants within Nigeria. Its men have have left citizens disillusioned. Many are reportedly liberated towns including unimpressed by their choices in the com- Gamborou, Malam Fatori and Baga. Sepa- ing presidential elections. rately, Nigeria, Niger, Cameroon, Chad and A darker cloud of uncertainty was cast Benin have agreed to send a multinational overAfrica’s biggest economy on February force of about 8,000 to battle the insur- 7th when electoral officials said they were gents. The parliament ofNiger, which has a delayingthe electionsscheduled forFebru- tiny standing army and has been loathe to ary14th by six weeks. get too involved, voted unanimously this The postponement comes at a febrile week to contribute 750 fighters. period: for the first time since the restora- Such a multi-pronged assault ought to tion of civilian rule in 1999, the ruling Peo- gain further ground against Boko Haram, ple’s Democratic Party (PDP) could well which is thought to field no more than lose the election. Public polls suggest it is 6,000 fighters, but getting it under way tied with the opposition All Progressives may take time. The regional force must still Congress (APC). Private polls conducted be financed and organised. Nigeria is only for both parties suggested that, had the accepting foreign help with “lukewarm ac- vote gone ahead as planned, President quiescence”, one Western diplomat ar- Goodluck Jonathan might well have been gues. It is unlikely that it will allow foreign clearing his desk. forces beyond its border towns. Electoral delays are not unusual in Ni- Better late than never In short, the security situation is unlike- geria—the 2011 presidential poll was post- ly to change in six weeks before the vote. If poned too—but this hold-up is particularly think-tank in Abuja, went so far as to call it goes ahead as planned at the end of controversial because it was forced by the the army’s action “direct blackmail” of the March—and a further delay would be un- army. The generals told electoral officials electoral commission. constitional—voters in large parts of the that they would not provide security for a In part that is a reflection ofhow deeply three north-eastern states most affected by vote in the north-east, where the jihadists suspicion of the army runs in Nigeria, Boko Haram are likely to be disenfran- of Boko Haram control an area of roughly which has suffered repeated coups. But it chised, much astheywould have been had 30,000 square kilometres. A postpone- also reflects more recent concerns stoked it taken place in February. The question ment would give the army time to secure by the widespread publication ofaudio re- many Nigerians are asking, however, is the region, they said. Jibrin Ibrahim of the cordings which purport to show that se- whether the enforced pause will swing the Centre forDemocracy and Development a nior members of the ruling party strong- outcome ofthe vote. 7 Europe The Economist February 14th 2015 45

Also in this section 46 Turkey and its Kurds 47 Hungary and Russia 47 The DSK trial 48 Charlemagne: Frans Timmermans

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

The German economy growth. But other German economists are scep- No new deal tical about claims of underinvestment. Christoph Schmidt, chairman of the Ger- man Council of Economic Experts, which advises the government, thinks published ratiosofinvestmentasa percentage of GDP can be misleading when compared both BERLIN across time and between countries. Germany is investing too little—hurting Europe, the world and itself France, for example, has a lot of public ROM Washington to Athens, politicians thinks that German strength is an “illu- housing. Germany does not, and this Fand economists who often have little in sion” given its large “investment gap”. Pub- skews the numbers. Reunification in 1990 common all agree that Germany under lic investment in Germany—shared by the caused a one-off investment boom in both Chancellor Angela Merkel is largely wrong federal, state and local governments—has parts of the country. And whereas other about economic policy. Germany’s appar- fallen from 6% of GDP in 1970 (in the West) countries had property crashes, Germany ent economic strengths—the lowest unem- to 2% now. Roads, bridges, broadband in- did not. In that case, at least, skimping on ployment in two decades; steady, if low, ternet and much else could do with more housebuilding was sensible. growth; a balanced federal budget—mask money. The German Marshall Fund has Yet the trend of declining public and weaknesses and policy errors, they say. said that 40% of bridges in Germany are in private investment remains clear. A recal- A first mistake is to insist that troubled “critical condition”. The Cologne Institute culation to fit European Union norms lifts euro-zone countries such as Greece not for Economic Research, another think- Germany’s investment ratio from 17% to only make structural reforms to their econ- tank, reckons that the capital stock of Ger- 19%, by including companies’ research and omies, but simultaneously cut spending man machines has not risen in real terms development spending. But that is still low. and borrowing(depressingdemand). But a since 2008. Markus Kerber, director of the Why is this? second is domestic. Given low interest German Federation of Industries, a trade Most investing is done by private firms. rates, now would be a golden opportunity association, says that a “long-term invest- But German ones have for years preferred to borrow and invest more at home, boost- ment-offensive is needed” to sustain to invest abroad, not at home. Mr1 ing the economy and providing a Keyne- sian stimulus to the entire sluggish euro zone. Instead, Germany is investing less Insufficient? than in the past and less than most other Investment,% of GDP countries (see chart). Germany 2014 estimate Current-account balance, % of GDP Raising investment could also deal 26 0 5 10 15 20 25 with another imbalance in the German 24 economy: its current-account surplus, the Canada -2.7 largest in the world, which has just set an- 22 France -1.4 other record in 2014 of €220 billion ($250 20 United States -2.5 billion), over 7% of GDP. By definition, this 18 Sweden 5.7 surplus measures the excess of savings 16 over investment. Invest more, and the sur- Netherlands 9.8 14 plus would shrinkor even disappear. Germany 6.2 Such thinking has fans even in Ger- 1991 95 2000 05 10 14 Britain -4.2 many. Marcel Fratzscher at the German In- Source: IMF stitute for Economic Research in Berlin 46 Europe The Economist February 14th 2015

2 Fratzscher regrets this: he reckons that Ger- Turkey and its Kurds rights is on the table as part of a package man investment abroad has yielded an an- that AK hopes would see the pro-Kurdish nual return of 10% over 20 years whereas Dreams of self-rule People’s Democracy Party (HDP) back a foreign investment in Germany has made new constitution, including an executive more like 15%. presidency, afterTurkey’s June 7th election. The main reason for low domestic in- Yet many Kurds believe the state is be- vestment, says Michael Hüther, the Co- CIZRE AND SURUC hind the violence that has recently gripped logne institute’s director, is uncertainty Cizre. At least six people have died, four of The dance ofKurds seeking autonomy and nervousness over the future. Continu- them children. One 12-year-old was shot, with a government wanting support ing anxiety over Greece and the euro has allegedly by security forces, on January been especially damaging. More recently N A recent evening in Cizre, an old 14th. One police officer has been arrested worries about Russia, which is more com- OKurdish settlement skirted by the Ti- so far. mercially entangled with Germany than gris river in south-east Turkey, a family The unrest began in October when Tur- with other big Western economies, have grieves. Muhammad, their 20-year-old key refused to let Kurdish fighters open a unsettled the business climate. But the big- son, died fighting jihadists of Islamic State corridor to Kobane. It escalated into street gest problem for many businessmen may (IS) across the border in the Syrian town of battles between PKK supporters and be benighted government policies. Kobane shortly after Kurdish forces de- Huda-Par, an IslamistKurdish party, whose These start with Germany’s “energy clared victory on January 26th. “Cizre gave precursor, Hizbullah (unrelated to the transition,” a plan to exit simultaneously 17 martyrs for Kobane,” says Mullah Qas- eponymous Lebanese militia), was used from fossil fuels and nuclear energy. The sem, an imam who hascome to paycondo- by the Turkish state to fight the PKK in the main policy is a huge subsidy to solar and lences. Pan-Kurdish sentiments have been 1990s. The PKK insists that Huda-Par has wind. The surcharge that many firms have sharpened by the battle against IS, in turn links to IS and that Turkey backs both. to pay on a unit of energy is larger than the stirringthe long-standingrebelliousness of Huda-par and Turkey deny these claims. entire cost of electricity paid by firms in Cizre, where a legendary Kurdish emir, In Cudi, a gritty part of Cizre, men and America. Half the firms polled by Mr Bedr Han, rose up against the Ottomans in women huddle round wood-burning Hüther’s institute claim that this makes the early 19th century. “Cizre is ours, Ko- stoves as they keep nightly vigil at “check- any new investment unattractive. bane is ours, we must fight for both,” says points” to keep Huda-par and Turkish Many also complain, in a country that Muhammad’s mother, Selma. forcesout. Earthen moundsservesasbarri- has an ageing, shrinkingpopulation, about The Kurdistan Workers’ Party (PKK) cades. PKK banners and portraits of Oca- a shortage of skilled workers despite Ger- started fightingforKurdish self-rule in 1984. lan are strung above the streets. “The state many’s admired apprenticeship system. Scores were killed in Cizre in 1992 when cannot come here, we are in charge.” Mrs Merkel’s government, under the influ- Turkish forces opened fire on civilians who boasts Sami, a 16-year-old. Like thousands ence of her Social Democratic coalition celebrated the Kurdish new year in de- of Kurds he ekes out a living harvesting partners, has made things worse by letting fiance of orders to stay home. Muhammad crops in western Turkey. “I began going to some workers retire at 63, rather than at 67, was imprisoned for a year for throwing the fields in my mother’s tummy,” he says. as previously envisaged. In the housing stones at a police vehicle. “He was only 14, Unemployment in Cizre runs at 70%, market, owners are put offinvestment by a he then vowed to join the PKK,” Selma re- against a national average of 10%, says cap on rents in many cities. A new federal calls. Leyla Imret, the 27-year-old HDP mayor. minimum wage is yet another measure The Justice and Development (AK) She insists the HDP will win the mini- that will add costs for business. party has made unprecedented overtures mum 10% of the national vote needed to The best way to boost investment is to to the Kurds, easing bans on the language win parliamentary seats in June’s election. fix these policy errors, argues Mr Schmidt. and talking to the imprisoned PKK leader, The party used to field independents to cir- On energy, even if the government insists Abdullah Ocalan. A two-year ceasefire is cumvent the 10% rule. But this time it plans on sticking to its emissions targets, it could holding. A deal giving the Kurds more to run as a party despite polls suggesting it leave the choice of technology to the mar- may not clear the hurdle. ket. The pension age could be raised again; In the regional capital, Diyarbakir, the minimum wage should be lower. And many Kurds don’t want to be part of the public investment should be raised. Gus- Turkish parliament anyway. “We should tav Horn, head ofthe Macroeconomic Poli- form our own parliament uniting all the cy Institute, part ofa foundation with links Kurdish parties,” argues Sitki Zilan, of to the trade unions, reckons that a 1% in- Azadi, an Islam-tinged group. Sahismail crease in euro-zone public investment Bedirhanoglu, a businessman, blames the would boost GDP by1.6%. government. “Their Kobane policy has Yet Germany led resistance to calls for deepened separatistimpulses. Ifthe HDP is more public money to be put into the Euro- not represented in parliament, tensions pean Commission’s planned investment could spiral out ofcontrol,” he warns. programme. At home it is constrained by Fartherwest, in Suruc, which stands op- the constitutional “debt brake”, adopted in posite Kobane, some 200,000 Syrian 2009, which requires state governments to Kurds who fled the war prefer to stay in balance their budgets by 2020 and the fed- rough camps run by the HDP-run munici- eral one to do so by 2016. Wolfgang Schäu- pality rather than a shiny refugee complex ble, the finance minister, has beaten the built by the government. “We feel free and timetable, balancing the budget in 2014. He at home here,” said Nejaha, a war widow. and Mrs Merkel are proud of the “black A section for “martyrs of Kobane” has zero”, which demonstrates that Germans been added to the local cemetery, where sticks by the rules, as others should. The this correspondent counted 66 fresh books may balance, but Germany is a long graves. But Muhammad was buried in Ko- way from rectifying its investment short- bane. “No need to bring him back. It’s all fall at home. 7 Where Kobane’s martyrs now lie Kurdistan,” says his mother. 7 The Economist February 14th 2015 Europe 47

Hungary and Russia The DSK trial The Viktor and Bad days in Lille

Vladimir show PARIS Whateverits outcome, the trial ofthe formerIMF boss breaks French taboos BUDAPEST HEN Dominique Strauss-Kahn was hearing. The case against Mr Strauss- Germany and otherEuropean countries hauled offa plane in New Yorkin Kahn hinges on whether he knew that worry about HungaryÕs ties with Russia W 2011and arrested on charges ofsexual the women who attended soirées liber- ATSZOTER” (playground) proclaims assault, there was indignation in France. tines, or group-sex parties, often organ- “JHVG, a magazine, above a graphic of At worst, it was seen as a set-up; at best, ised in his honour, were paid. In France Hungary as a seesaw. Angela Merkel, the result ofAmerican puritanical excess. prostitution is not illegal, but pimping the German chancellor, is at one end, Vlad- The spectacle ofa handcuffed IMF head and soliciting are. On February10th Mr imir Putin, the Russian president, at the doing the “perp walk” aroused special Strauss-Kahn admitted taking part in other. It is a fitting image, given that Mr Pu- outrage. “It’s not as ifanybody died,” such parties—but no more than “four tin is due in Budapest on February 17th, shrugged a senior French Socialist. times a year”, he said, because he was too two weeks after Mrs Merkel. His visit will Those charges were eventually busy “saving the world” after the global mostly be about renewing Hungary’s gas dropped, but France now has its own financial crisis. He had no idea, he added, contract which expires this year, says Vik- home-grown version in a courtroom in that he was having sex with prostitutes. tor Orban, the prime minister, who wants Lille. Mr Strauss-Kahn, along with 13 Up to a point, the French have reacted what he calls a “flexible” arrangement. For others, is accused of“aggravated pimp- with indifference. A man many once saw his part, Mr Putin wants to show the world ing”, an offence that carries up to ten as a Socialist front-runner forpresident is that he is not as isolated as some claim. years in jail. As details oforgies with no longer a public figure. There has been The Ukraine crisis, and Mr Orban’s prostitutes in Washington, Paris and Lille plenty ofnews coverage, but no editorial links with Russia, have put Hungary in the have emerged, the French are being torn outpouring ofmoral disapproval. The spotlight. Georgia’s prime ministerhas just between an instinctive respect forpri- day after Mr Strauss-Kahn testified, Le visited; Turkey’s president is expected vacy over sexual behaviour and a creep- Monde, a left-leaning newspaper, had no soon. Western fears of Mr Orban’s auto- ing moral disquiet. story about the trial on its front page. cratic drifthave intensified. He caused con- The presiding judge in the trial, which Yet as the prostitutes testify, this toler- siderable alarm around the European Un- opened on February 2nd, made it clear ance is being put to the test. One recount- ion in July 2014 when he declared that that this was a criminal, not a moral, ed tearfully enduring an act ofsodomy Hungary would remain a democracy but by Mr Strauss-Kahn. (He said he might become an “illiberal state”, citing the ex- have a “rougher” than average sexuality.) amples of Russia, Turkey and China. Mrs A group oftopless feminist protesters Merkel criticised the term on her visit, but tried to disrupt Mr Strauss-Kahn’s arrival was firmly rebuffed by her host. in court. Jean Quatremer, a journalist On Ukraine, Mr Orban is vacillating be- who raised questions about Mr Strauss- tween a desire for closer ties with Russia Kahn’s sexual behaviour in 2007, said it and his obligations as a member of the EU was time forthe media to examine their and NATO. Russia is Hungary’s biggest own silence. “Why does the press have trading partner outside the EU, and sup- such difficulty criticising the powerful plies most of its gas. Moreover, America’s over their private lives?” he asked. loss of interest and influence in central Eu- Never before has such a once-pow- rope points to a greater focus on Germany erful French figure had his bedroom and Russia, argues Mr Orban. activities exposed in public, semi-porno- The cancellation of Russia’s planned graphic detail. Most cases ofsexual as- South Stream gas pipeline was a blow. sault against French politicians are Cheap gas is a fundamental pillar of the dropped, including one by Tristane Ba- government’s populist policies, says Peter non, a French writer, against Mr Strauss- Kreko ofPolitical Capital, a Budapest think- Kahn. Mr Strauss-Kahn may yet be ac- tank. “The question is what kind of politi- quitted. But a taboo has been broken, and cal price President Putin will try and exact. traditional indifference to sexual excess He wants to exert pressure on the EU’s No longer a world saviour called, painfully, into question. weakest links to breakEuropean unity.” Many in the West think the cosying-up between Mr Orban and Mr Putin has gone tled government in Kiev, helping Moscow. Russia’s relations with Hungary are too far. Hungary has taken a €10 billion ($11 But Mr Orban has since come back into “isolated from the overall situation in the billion) loan from Russia to upgrade its age- line, supporting Ukraine’s sovereignty and world,” says Vladimir Sergeyev, Russia’s ing nuclear power plant. The contract was stressing Hungary’s commitment to NATO. ambassador to Hungary. Yet this seems im- negotiated in secret and not put out to He has courted Germany, on whose econ- plausible. Ukraine, which borders Hunga- tender. (Officials cite reasons of national omy and investment Hungary depends ry, casts a long and ever darkening shadow. security.) Last year Mr Orban also broke most heavily. European governments un- Doomsday scenarios include the break-up ranks over EU sanctions on Russia, derstand Hungary’s position on energy, of the country, which could push waves of claiming that they did more harm to says one Western diplomat, but dissent refugees across the border. Some 200,000 Europe than to Russia. Hungary has repeat- from the EU’s common position is not an ethnicHungarianslive in western Ukraine, edly called for autonomy for ethnic option: “EU member states agree a policy and many could seek sanctuary. MrOrban Hungarians in western Ukraine. Such calls and we all follow it, especially in a high- may yet have to seesaw back towards the were seen asfurtherweakeningthe embat- stakes environment like this one.” West. 7 48 Europe The Economist February 14th 2015 Charlemagne When less is more

Frans Timmermans takes on the Brussels blob Britain’s membership should he retain power after an election in May, before holding an in/out referendum. Some have suggested that Mr Timmermans should take charge of any talks with Brit- ain. That is just speculation, he says. As Dutch foreign minister, he also expressed scepticism about Mr Cameron’s motives in seeking a new deal. But his presence in the senior ranks of the commission will reassure pro-European Britons that their message will find receptive ears. The mandarins in Britain’s civil service were delighted by his appointment. European countries worried about Russian aggression were similarlycheered. LastJuly, when Russian-backed rebels in south- eastern Ukraine shotdown a civil airlinercarrying298 people, including almost 200 Dutch citizens, Mr Timmermans, as foreign minister, made an impassioned speech in the UN Security Coun- cil urging the return of the victims’ remains. One Brussels-based diplomat credits this intervention with unifying the EU behind a tougher line on Russia. Yet if the EU has held together on sanctions, it has floundered on a broader strategy. Mr Timmermans knows Russia well. In 1991, during a diplomatic stint in Moscow, he holed up in a government building during an attempted coup, talking to local MPs IRST VICE-PRESIDENT forBetter Regulation, Inter-Institution- and diligently dispatching reports back to The Hague. Today, he Fal Relations, the Rule of Law and the Charter of Fundamental suggests, ifEurope is struggling to workout how best to deal with Rights. FransTimmermans’ full title echoesGilbertand Sullivan’s VladimirPutin, itisbecause mostcountries stopped paying atten- parody figure Pooh-Bah in “The Mikado”. But forsome, including tion after the end ofthe cold war. “Rediscovering what’s happen- the pressin MrTimmermans’ native Netherlands, a simplermon- ing in Russia has come as a shockto many capitals,” he says. iker applies: Dr No. The bureaucratic ring ofMr Timmermans’ official description belies the formidable challenge of his role, The soothsayer of subsidiarity which is to get Europe to do less. Foryearsthe EU hasbeen in firefightingmode, battlingto hold the Since November Mr Timmermans, a former Dutch diplomat euro together or reacting to unrest in its neighbourhood. These and foreign minister, has served as number two to the most pow- emergencies have consumed energy and resources, but also erful player in the European bureaucracy: Jean-Claude Juncker, raised awkward questions about where the limits of European president of the European Commission (the European Union’s powershould be drawn. AcrossEurope grumpyvotershave been executive arm). Mr Timmermans, Mr Juncker said, would be his turning to populist parties that assail Brussels for its bureaucratic “right hand”. In fact he has been more ofa sponge, soaking up dif- excesses. The assignment granted to Mr Timmermans thus repre- ficult issues as they arise, from sustainable development to a con- sents a double gamble. First, that the EU can reform itself in the troversial article in a transatlantic trade deal. teeth of crisis. And second, that the forces behind greater integra- His trickiest taskis to ensure that Brussels’s legendary appetite tion, particularly in the economy, need not spill over into areas for rule-making is kept in check. In a series of“confessionals” last best left to national, or even local, governments. Euro-zone coun- year, Mr Timmermans asked each of his colleagues to make the tries may need more fiscal co-ordination, but the EU does not case for their legislative priorities. Those that failed to satisfy him have to have the same tax rates (or olive-oil rules). were axed. The resulting “work programme” for 2015 had just 23 Fluent and more-or-less accentless in six European languages, items, a fraction ofprevious years’ lists. Eighty pending proposals fiercely ambitious and the proud owner ofa formidable intellect, were withdrawn. AreviewofexistingEU lawisunderway, with a Mr Timmermans is well placed to take on Brussels’s bureaucratic view to cutting red tape. machine. But he can expect resistance. “He’s up for a rough ride,” This is an unfamiliar approach in an organisation where warns one sceptical MEP. A recent row with the European Parlia- “more Europe” often serves as a secular creed. Mr Timmermans ment over his decision to withdraw a “circular economy” (ie, re- insists his job is about getting Europe to work better, not acting as cycling) plan may portend more trouble ahead. deregulator-in-chief. But his approach has riled Eurocrats and If Mr Timmermans has a weakness, say observers, it is a members ofthe European Parliament. The biggest challenge, says scratchy vanity that can rub colleagues up the wrong way. He al- Mr Timmermans, has been tackling the “Brussels logic”, accord- ways thinks he knows best, says a former colleague, and, even ing to which policymakers do not obstruct projects they consider more troubling, he usually does. But if his ambition sometimes useless for fear of seeing their own ideas squashed. It will take tips into arrogance, that may not be the gravest sin in a place that time, he says, to change the culture of“an administration that has too often takes pride in consensus over conflict. In the original for generations believed that its purpose is to create legislation.” book, Dr No, who had grand plans of his own, saw them thwart- As an example of the overreach he wants to tackle, Mr Tim- ed when he was buried alive under a heap of bird guano. Eu- mermans ridicules a failed attempt by the EU to regulate the use rope’s bureaucrats and lawmakers may not be too fond of him, of olive-oil jugs in restaurants. His instincts play well in Britain, but Mr Timmermans should at least escape that fate. 7 which is preparing forits own debate on the role ofthe EU. David Cameron, the Tory prime minister, has pledged to renegotiate Economist.com/blogs/charlemagne Britain The Economist February 14th 2015 49

Also in this section 50 Banks and tax evasion 52 Bagehot: The Milibandwagon

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

Britain’s role in the world wanted their country to aspire to be a great power and not accept decline—the highest Muscle memory level since the first survey in 2010. To be fair, Britain is quietly pulling its weight as part ofNATO’s efforts to reassure members in eastern Europe who feel threatened by Vladimir Putin’s irredentist Russia. In 2017 it will be the lead nation for the alliance’s new 5,000-strong rapidly de- Britain’s strategic ambition has shrivelled even more than its defence budget ployable spearhead force. Another good RITAINhas long prided itselfon punch- bold declaration: “Our country has always sign is the growing number of joint pro- B ing above its weight diplomatically had global responsibilities and global am- jects stemming from the Anglo-French de- and militarily. Yet in its response to Russian bitions. We have a proud history of stand- fence treaty of 2010, which recognised a aggression in Ukraine, Europe’s most seri- ing up for the values we believe in and we shared interestin still wantingto play a glo- ous security crisis for a generation, it has should have no less ambition for our coun- bal role with reduced means. Money has been little more than a backseat driver. try in the decades to come.” been saved on testing nuclear weapons, When the fightingflared up, itwasFrançois Britain has slipped from fourth to sixth developing an unmanned combat aircraft Hollande of France and Angela Merkel of in the global defence spending league and producing a new anti-ship missile. Germany who flew to Moscow. Britain’s since 2012, according to SIPRI, a think- The Conservative-led coalition can also prime minister, David Cameron, was no- tank—putting it behind France, Saudi Ara- claim success in dealing with the Ministry where to be seen. bia, Russia, China and America. But in of Defence’s overheated equipment bud- Britain was also notably slow to react truth, its relative military decline has been get, closing a £45.6 billion ($69 billion) hole when Barack Obama announced he was less dramatic than the country’s dimin- leftbythe previous, Labour, government. It forming a coalition to defeat Islamic State ished appetite to be a leadingsecurity play- committed itself in 2012 to funding a ten- last September. In a House of Commons er on the world stage. The hangover from year £159 billion equipment programme vote held, languidly, a few weeks later, the whatare perceived to have been costly and that includes two aircraft-carriers, a mo- government only asked for authorisation unsuccessful campaigns in Iraq and Af- dernised air-transport fleet, more battle- to strike IS targets in Iraq. Even now, Brit- ghanistan and a sour, introspective nation- field helicopters, new attack submarines ain’s effort appears puny. In a report pub- al mood, reflected in a Commons defeat and destroyers. If the plan sticks, Britain lished last week, the Commons defence for the government in August 2013 over ac- will have smaller but still highly capable committee noted that the country had car- tion in Syria, has made the political estab- armed forces. ried outlessthan one airstrike a day. When lishment fearful of making the case for That, however, is a big “if”. The minis- the committee visited Iraq, it found a total what the chiefofthe defence staff, General try’s Future Force 2020, of which the British military contingent of just three Sir Nick Houghton, in a speech before equipment programme is part, requires people outside Kurdish areas. America, by Christmas, described as “a grander role, a spending increases of 1-2% a year in real contrast, had offered 3,100 troops. Even greater ambition, a place beyond the ordi- terms from 2015. A new Strategic Defence Spain and Italy have sent around 300 nary…a nation which has values as well and Security Review must be completed troopseach. In all, the MPssaid, Britain’sef- as interests, and which considers it has a by the next government later this year— forts are “strikingly modest”. leadership role in the world”. work on it has stopped because of the gen- Rhetorically, the government remains Sir Nick may be closer to public senti- eral election in May. If Mr Cameron is re- committed to the idea that Britain is a great ment than the politicians. Two weeks ago elected, defence will probably have to take power. The last Strategic Defence and Se- an annual poll on British attitudes towards at least some of the pain coming from the curity Review, in late 2010, paved the way international priorities conducted for second stage ofthe government’s austerity for a cut of 8% in the defence budget. (The Chatham House, another think-tank, programme. That requires departments damage ended up being close to a quarter found that nearly two-thirds of both the that are not protected (as health is, for ex- in real terms.) Yetthe reviewopened with a general public and “opinion-formers” ample) to cut day-to-day spending from 1 50 Britain The Economist February 14th 2015

2 £147 billion this year to £86 billion by 2020. one person has been prosecuted. British That would mean Britain fails to meet lawyers and regulators have taken no ac- its NATO commitment to spend at least 2% tion against HSBC (Sir Simon Robertson, a of GDP on defence, despite Mr Cameron non-executive director at the bank, is also again pledging to do so at the alliance sum- on the board ofThe Economist Group). mit he hosted in Walesonly in September. A broader Anglo-Swiss agreement on On a visit to Washington last month, Mr reclaimingtax-evadingmoneyhasalso dis- Cameron was leftin no doubt that Britain’s appointed by bringing in around £1 billion influence would wane significantly if de- in two years—about one-third of the fence spending fell further. Should Labour amount that had been expected. This al- win power, defence will rank even further lows formerly tax-shy Britons to pay over- down its list ofpriorities. due taxes and penalties anonymously Sir Nick worries that Britain no longer through their offshore banks via a with- has a clearidea ofwhat its armed forces are holding arrangement. for. That imperils their future. In the same The agency’s defenders say it took a speech last year, he said: “We need to move “pragmatic” approach to the HSBC files, on from viewing them with a mixture of concluding that the best way to maximise sympathy and adoration; we need better revenue was to offer tax evaders a brief understanding of their silent utility as the window during which they could come country’s risk managers of last resort.” clean and pay reduced, civil penalties. Amid the campaign cacophony ofcompet- Criminal prosecutions are costly and ingretail offeringsto voters, thatmessage is tricky, especially when the data is stolen, unlikely to be heard. 7 and mayhave netted even less. Butwith lu- rid details appearing daily in newspapers, the taxman seems timorous. Tax evasion Coming shortly before a general elec- Psst! tion, the revelations have kicked up a polit- Hiding SirÕs Black ical storm. Conservative MPs have gleeful- pliance with tax laws after governments ly pointed out that the misdeeds revealed started to investigate in 2010, and how Cash by the leak took place during the previous, much pain the scandal will cause. It has Labour, administration. Labour figures removed to put its house in order: its Swiss tort that they did not come to light until the business now has 70% fewer private-bank- coalition was in power, and that David ing customers than it did in 2007, and its The leaking ofold data creates fresh Cameron made Lord Green, HSBC’s boss at global head count in risk and compliance problems forHSBC the time, a minister some time after it has risen to 24,000—a tenth of the work- N 2008 Hervé Falciani left Switzerland should have been clear that the bank was force. Still, a whistle-blower (who was sub- Ifor France, armed with account informa- in HMRC’s sights. sequently sacked) identified poor controls tion on more than 100,000 customers of Labour was campaigning against tax at the private bankas recently as 2013. the Geneva branch of HSBC, where he had evasion and aggressive tax planning by HSBC is already under the cosh on both worked as a systems engineer. Much of the companies even before this debacle. Ed sides of the Atlantic for past sins, including data, stolen to expose alleged tax evasion, Miliband, the party’s leader, has taken aim facilitating sanctions evasion and the laun- was this week made public in a co-ordi- at Britain’s offshore dependencies, such as dering of drug money. To settle these, it nated splash by a group of media outlets, Jersey and Bermuda, threatening them paid $1.9 billion to the Americans, who are including the Guardian and the BBC. with blacklisting—even though they are now reportedly considering revoking the It is not the first leak of its kind, but it is more compliant with global anti-money- associated deferred-prosecution agree- among the biggest (see table). The haul, laundering standards than most OECD ment. In Belgium, whose diamond dealers dating from 2005 to 2007, includes hun- countries. Now they look even more like were big users of HSBC Geneva, prosecu- dredsofembarrassingdocuments, from in- the wrongtargets. MrCameron has made a tors talk darkly of issuing international ar- ternal e-mails breezily discussing unde- crusade out of stamping out banking and rest warrants for the current and former clared client funds to details of “bricks” of corporate secrecy. heads of the bank if it does not co-operate. cash being handed over to account-hold- The questions forthe bank are whether In Britain, too, calls for scalps will grow ers. The owner ofthe Ivy restaurant in Lon- it reacted quickly enough to tighten com- louder—at least until the election. 7 don withdrewSFr5m ($4m) in cash in a single day; his lawyer has said this involved no impropriety. The leak dents the image Wall of fame of the London-based bank and may give it Data leaks in tax cases No. of client a legal headache. It also shows Britain’s tax Name Data stolen from Date Leaker Fate of Leaker accounts authority to be a laggard. Julius Bär Julius Bär (Switzerland) 2005* Rudolf Elmer Handed suspended fine 2,000+ France began sharing the files with oth- for violating Swiss bank er governments in 2010. Criminal cases are secrecy. Appealing piling up there—and in Belgium, Spain and LGT LGT Bank (Liechtenstein) 2008 Heinrich Kieber In witness protection Unknown Argentina. France has concluded that more HSBC Geneva HSBC (Britain) 2009 Hervé Falciani Under French protection. 100,000+ than 99% ofits citizens on the list were like- Wanted by the Swiss ly to be evading tax. Despite saying in 2011 “Offshore Leaks” Portcullis TrustNet (Singapore) 2013 Unknown na 120,000+ that all 6,000 British-held accounts in the Commonwealth Trust (BVI) files were “ripe for investigation”, the au- “Luxembourg PwC (Global) 2014 Antoine Deltour‡ Facing charges for 548§ Leaks”† stealing data thorities have collected just £135m ($230m) in tax, interest and penalties—less than 1% *Documents handed to WikiLeaks in 2008 †Corporate/tax avoidance ‡And second, unidentified ex PwC employee §Corporate tax deals ofthe estimated total in the accounts. Only Source: The Economist The Art of Storytelling: From Parents to Professionals Taught by Professor Hannah B. Harvey PROFESSIONAL STORYTELLER TIME ED O LECTURE TITLES T FF I E IM R 1. Telling a Good Story L 2. The Storytelling Triangle 70% 3. Connecting with Your Story 4. Connecting with Your Audience off 2 O 5. Telling Family Stories R H D C 6. The Powerful Telling of Fairy Tales ER AR BY M 7. Myth and the Hero’s Journey 8. 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The LabourParty’s campaign is a patchworkofangryprotests, with no coherent theme sues as most important; this is partly true, but partly an acknowl- edgment of the weakness of the party’s main message—whose architect, Mr Miliband, few are depicting on their leaflets. Out canvassing with an otherwise impressive Labour candidate, Sa- rah Sackman, in the north London suburb of East Finchley, Bage- hot was depressed to witness how quickly, when challenged to explain how a Labour government would be different from the Tories, she resorted to the lie that her party would stop the “Tory privatisation” of the NHS. There is no such Toryscheme; most of the modest role for private health-care providers in the NHS was created under Labour. Yet she was following orders, Mr Miliband having instructed his lackeys to “weaponise” the NHS, on the basis that Britons love it, Labour invented it and it is creaking under the pressures ofan ageing population. That is not a vision forBrit- ain. Asked what message they would like to be able to sell on the doorstep, half a dozen Labour candidates gave your columnist the same reply. They would like to be able to say more about aspi- ration, getting on, hope for the future—the things New Labour used to talkabout, and on which Mr Miliband is silent. Yet his many critics have an awkward problem. Mr Miliband is still likely to be Britain’s next prime minister. Electoral history O ONE mentions One Nation Labour these days. Ed Mili- suggests the Tories should be streets ahead; in David Cameron Nband’s effort to rebrand the Labour Party by purloining a they have a relatively popular leader of a one-term government phrase from 19th-century Conservatism was always hard to fath- thathasoverseen an economicrecovery. Labourhasthe most dis- om, not least grammatically. Now it is little more than an awk- liked opposition leadersince records began and dismal ratings on ward memory, a piece of mid-term spin briefly trumpeted by a the election’s biggest issue, the economy. Yet the two parties are newbie leader keen to cut his own path—which turns out, on the level-pegging, on around 32%, which, given the advantage La- basis of Labour’s general-election campaign so far, not to be ter- bour enjoys from outdated constituency boundaries, in effect ribly one nation anything. Labour’s early showing in the cam- puts it ahead. To win a majority, the Toriesneed about a six-point paign has been more divisive than unifying, even as its appeal lead, which is hard to imagine. In the likelier event of a hung Par- appears less national, due to the party’s shrinking support in liament, Labour would also be better placed to find coalition Scotland and tin ear to the more affluent south, by the day. partners, among the left-leaning Scottish National Party (SNP), Senior figures in Labour are concerned. One excoriates his Lib Dems and Greens. WhateverMrMiliband is up to, his defend- party’s campaign as an “elongated rant on behalf of the disillu- ers say, it is working. sioned, disenamoured and disagreeable”. His objection is to the fact that, instead of trying to fix Labour’s big weaknesses—its A crazy kind of logic weak polling on the economy and on Mr Miliband’s fitness for Up to a point, they are right. In recent months Labour’s vote has command—the Labour leader has mainly been promising to been leaking to the protest parties it may end up in government spend oodles on the NHS, while launching blistering attacks on with. MrMiliband’s anti-establishment rant is intended to stanch business. With hardly a pause to acknowledge the jobs and that flow. It is also based on a calculation that, because the Tories wealth firms helpfully create, he promises to intervene in energy are at close to their core support, there are few Tory-Labour and banking markets; to raise corporate taxes; and to foist more switchersto be had, so lesscall forthe economicreassurance they apprentices, higher wages, more paternal leave and other traditionally look for. Yet Bagehot struggles to understand why gimmes onto company books. When the boss of one of Britain’s Mr Miliband cannot do both things at once. most trusted firms, Boots, dared squeal, the Labour leader de- Strip away the attention-grabbing rhetoric, and many of his nounced him as a Monaco-based tax avoider. prescriptions are sensible. Britain’s economy is growing but its One effectofMrMiliband’sprotestpoliticsisthateven Labour workers are unproductive, which is why the recovery has not Party candidates seem unsure what vision of Britain under La- been widely felt. Improving skills through apprenticeships is bour he is proposing. The party’s campaign messages appear therefore an excellentidea, which businessesshould applaud. In- fuzzy and disjointed. Mr Miliband wants a more productive priv- deed, had Mr Miliband couched even his more radical ideas in ate sector, which is good, yet appears to have given little thought terms ofthe need to improve markets, not his desire to bash pred- to the greater inefficiency ofpublic services, which is not, consid- atory capitalists, he might have won a few ofthe predators over. ering he promises to rescue most of them from Toryravages. This The problem with MrMiliband is not so much that he is a dan- wooliness is also reflected in an organisational problem. Com- gerousextremist; in GermanyorSweden he would be considered pared with the Conservatives, whose Australian campaign chief, solidly centrist. It is that he appears unable to couch, or even con- Lynton Crosby, ruleswith an iron bar, Labour’s campaign lacks a sider, his earnestly held beliefsin such a way as to build a consen- clear chain of command. No one knows whether Douglas Alex- sus of support for them. The impression is of a political autistic, ander, the campaign manager, LucyPowell, the deputycampaign with extraordinarily little awareness of how he comes across or chief, orMr Miliband is in charge. willingness to learn from his mistakes. That is a worrying trait in Labourcandidates find this frustrating. Many speakof local is- the man pitching to be Britain’s next leader. 7 International The Economist February 14th 2015 53

Also in this section 54 English-language teachers’ woes

Teacher recruitment But Teach First’s training has been rated “outstanding” in all 44 categoriesreviewed High-fliers in the classroom by Britain’s schools inspectorate. Like its counterparts elsewhere, Teach First provides the graduates it places in schools with support. Experienced colleagues help them with lesson planning and mentors visit their classrooms. Most enroll in a Programmes that place bright and ambitious graduates in poorschools are teacher-certification course (some coun- spreading around the world—and show what it takes to make a difference tries insist on this), meaning that universi- T’Snotenough to have a dream”, reads deadline, it has received 36,000 appli- ty tutors are on tap, too. Few new teachers “Ia banner over the whiteboard in Nan- cants—twice as many as a decade ago. And anywhere else get so much hand-holding. cy Sarmiento’s Baltimore classroom. Most thanks to its 25-year history and 40,000 That help is essential. New teachers, of her 12-year-old pupils qualify for a free alumni, Americansare no longersurprised whatever their route into the classroom, or cheap lunch. About 70% of the school’s that bright, ambitious graduates want the struggle most in their first two years, even new arrivals last September had reading most demanding teaching posts. in the easiest schools. Tomas Recart, who and mathematical skills below the mini- Now schemes modelled on TfA are co-founded Chile’s programme in 2009, mum expected for their grade. Americans spreading around the world. A quarter of learned that the hard way: after three call such schools “disadvantaged”. What- European and Latin American countries, months, a fifth of the first cohort had ever the label, most countries have schools as well as Australia, China and India, have dropped out. Now 90% return for a second where most children are from poor fam- something similar. Many of the schemes year—a higher share than for all novice ilies, expectations are low, and teachers are are new, with just two or three cohorts teachers, in all types of schools. The early hard to recruit. And in most, the falling placed in schools. Teach for Haiti, retention rate is similar for TfA itself. prestige of the teaching profession makes launched in January, became the 35th. Am- Some countries add weekend gather- matters worse. bitious youngsters are attracted by the lack ings and seminars for participants to swap But Ms Sarmiento, who graduated from of a requirement for a teaching qualifica- ideas and commiserate. Recruits may even a four-year biology degree course a year tion, the chance to make a difference—and be “overloaded with support”, says Dza- early, had to see off fierce competition to the high-energy approach. Lithuania’s pro- meer Dzulkifli, who runs Malaysia’s win her teaching spot. Teach for America gramme is called “I Choose to Teach!”; Lat- scheme—which could be a waste of more (TfA), the scheme that placed her, accepts via’s, “Mission Possible”. Many applicants than their time, since such support is ex- just one in six applicants. It looks for a stel- have degrees in mathematics and science, pensive in the rural areas where many are lar academic record and evidence of traits subjectswhere teachersare scarce. Typical- based. Indeed, the cost of the TfA model is that distinguish the best teachers in tough ly just one in ten is accepted. what may prevent it going mainstream. schools, including leadership, resilience Results seem positive, though so far Australia’s programme is best thought of and motivation to help the poor. Recruits there have been few rigorous evaluations. as a demonstration project, says Bill Loud- get five weeks’ training and pledge to work Pupils of TfA recruits do just as well in en of the University of Western Australia: fortwo years in a disadvantaged school. reading as those of other teachers; in “excellentand tiny” and showingwhatcan When TfA’s founder, Wendy Kopp, maths, their test scores are better. Britain’s be done with three times the usual came up with the idea while an undergrad- Teach First has been credited with helping spending per trainee. uate, her adviser told her she was “de- to improve standards in London. It now But such pilot programmes matter be- ranged”. She proved him wrong. After two provides nearly a quarter of new teachers cause they can drag standards up across decades of growth, the number of appli- in the country’s most difficult schools. the board. Several schemes, including cants is falling slightly as the graduate jobs Critics, including teachers’ unions, fret those in Bulgaria, India, Malaysia and Mex- market strengthens. But it is still popular: thata fewweeksoftrainingistoo little for a ico, are doing better than the state at track- with five weeks remaining till this year’s novice teacher, no matter how gung-ho. ing teaching quality and student out-1 54 International The Economist February 14th 2015

2 comes. Local and national governments move to social programmes or start-up Many speak a scripted English in class and are starting to take note. And most coun- ventures. Chaitra Murlidhar, an engineer prefer to focus on the pen-and-ink gram- tries’ programmes aim to turn out alumni and alumna of Teach for India, now works matical work on which their pupils are ex- who will lead more than a single class- for a non-profit foundation set up by Ther- amined. “They’ve been teaching for the room. Some, they hope, will become head max, a large manufacturer. A teacher-re- tests all their career,” she says. teachers. Several help participants find trainingscheme she designed isbeing used The problem is compounded by educa- private-sector jobs after their two-year in Pune, an industrial city in west India. tion systems that are out oftouch with par- stint. Ideally, leaders in any sector who Alumni in Australia and Spain have ents’ demands for more English instruc- have seen the battlefield will become pow- created online teaching resources for tion. “There’s a huge and increasing erful allies in the quest to improve the teachers and pupils, such as digital and demand for English, but the supply of worst schools. video lessons that can be personalised. teachers and ability to teach English have Around 50-70% of those who have One of the most useful things TfA and not kept up,” says Mr Knagg. In Japan, for been through the established programmes its many offshoots can do is what Brett instance, the government has said it will stay in education for the long haul. Many Wigdortz, the founder of Teach First, de- bolster the mandatory English require- take senior positions in public administra- scribes as “detoxifying the brand of teach- ment for children in primary school—but tion. Fifteen ofthe 115 who have completed ing”. Last year Teach First was runner-up in only from 2020 when the country hosts Peru’s programme now work in its educa- a national poll to find Britain’s most presti- the Olympic games. tion ministry. Ateam ofalumni from Lithu- giousemployerofgraduates. Justasimpor- In Latin America “there is a huge gap ania’s scheme recently helped draft its ten- tant, says Evgenia Peeva of Teach for Bul- between what the system provides and year education strategy. A fifth of school garia, is to demonstrate that poor children what the students actually need,” says principals in Washington, DC, are TfA from barely literate families can learn—if Rosangela Bando of the Inter-American alumni, as are its schools chancellor, Kaya they have excellent teachers. Back in Balti- Development Bank. The gap widens the Henderson, and several ofher senior staff. more, Ms Sarmiento says her main task is fartherfrom cities one goes, she notes. Bet- Many of those who leave teaching to ensure her pupils believe that, too. 7 ter-offcity-dwelling children are more likely to have private language lessons, internet access or the chance to travel abroad. English-language education Buteven in state systemswhere instruc- tion has long been poor, there are signs of The mute leading the mute change. Agustín’s colleague, Armando Ve- lázquez, a mid-career English teacher, refuses to speak a word of Spanish in the classroom and makes the whole of his lessons conversational. At the start of one of MEXICO CITY his first classes, a pupil mimes vomiting when asked whether he likes English. By Why are countries failing so badly at teaching English? the end, the youngster is merrily using it to GUSTÍN has spent 29 years teaching says Jing Zhao, a visiting researcher at the describe Lionel Messi, an Argentine foot- AEnglish in Mexico City. It has often Harvard Graduate School of Education. baller, as fast, rich and famous. been a thankless task; many pupils yawn Just over 1m English-language staff teach Ayearago MrVelázquezbenefited from their way through class. But their lack ofin- over 200m Chinese pupils, a heroic, if an English-language course that he says terest may be compounded by his lack of mind-boggling, teacher-pupil ratio. In changed not only his teaching, but his life. English. Ask him where his next lesson is, Guangdong, an affluent province that Ms Provided by the Inter-American Partner- and he replies, “nine o’clock”. Jing has studied, just 257 of 53,500 English- ship for Education, it taught him conversa- He is not unusual in Mexico, despite its language teachers had master’s degrees. tional and theatrical methods that he now proximity to America. A recent survey by passes on to his colleagues. Such on-the- Mexicanos Primero, an education NGO, job training has also produced results in found that four-fifths of secondary-school Chile and Malaysia, says Mr Knagg. graduates had “absolutely no knowledge” Uruguay takes a different, and more ofEnglish, despite havingspentatleast 360 novel, approach. It makes up for its dearth hours learning it in secondary school. Eng- of English-speaking teachers by contract- lish teachers were not much better: one in ing Filipinos who teach via videoconfe- seven had no English whatsoever. rencing from Manila to pupils’ laptops or Comparable global data are scarce, but tablets in Montevideo. In China, says Yuko experts say the situation is similar in much Goto Butlerofthe University ofPennsylva- of the non-Anglophone world. Common nia, good teachers are rotated among problems include bad teachers hired via schools, and young teachers offer free written tests rather than oral ones, and an weekend classes to pupils while earning outmoded approach that sees English as a credits that advance their careers. Interac- foreign language to be taught about, rather tive technology can help make lessons than a lingua franca to be taught in. Teach- more lively, asSouth Korea hasdiscovered. ers’ lack of fluency means too little English Ultimately, the goal should be to teach conversation in the classroom, says John other subjects in English, as Canada is Knagg of the British Council, so pupils do helping China to do, rather than just teach- not get used to using the language. It is as if ing English. But no one should expect mir- they were being taught to swim without acles. Even if the most promising innova- ever getting into the water. tions are widely copied, fluency will come China has made English compulsory in only gradually; today’s pupils must first school from a young age, but teachers are learn enough English to become tomor- overstretched and mostly underqualified, English spoken here row’s competent teachers. 7 Business The Economist February 14th 2015 55

Also in this section 58 Fashion shows’ changing role 58 A new star in crowdfunding 59 How Russian ﬁrms avoid sanctions 61 Schumpeter: Why authors need to be entrepreneurs

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Dalian Wanda erect bearing. He also insists on iron discipline at work. Employees are fined for vio- It’s a Wanda-ful life lating his conservative dress code. However, his charmed career and his free-spending ways raise several important questions about Dalian Wanda’s future. Could the cash cows funding his BEIJING AND WUHAN spending spree—those giant shopping centres—run dry as Chinese consumers switch China’s biggest property tycoon wants to become an entertainment colossus to buying online? Does his diversification ANG JIANLIN started life with a red holds some of the marketing rights to into ego-stroking industries make business Wspoon in his mouth. His father was a FIFA’s World Cup. The previous month he sense? And will the close ties with govern- Communist military hero who fought took a 20% stake in Atlético Madrid foot- ment that have served him well thus far alongside Mao. Thanks to his influence, ball club. Mr Wang is also on track to be- prove a liability in future? the youngster was able to join the People’s come the world’s biggest owneroffive-star Take the threatto hiscore property busi- Liberation Army at 15 and so avoid the hotels, with billion-dollar investments in ness first, where Wanda’s bricks-and-mor- worst deprivations of the Cultural Revolu- Sydney, London, Chicago and Los Angeles. tarempire facesthe twin dangersofa weak tion. After 17 years in the army, he decided Hollywood moguls were perplexed property market and rising online compe- thatthe future belonged notto generals but when some Asian guy they hadn’t heard tition. China is experiencing a tidal wave to businessmen. So in 1988, after a stint as a ofbought AMC, a big but struggling Ameri- of retail development. Jones Lang LaSalle, bureaucrat, he formed a property com- can cinema chain, for $2.6 billion in 2012. a property-management firm, estimates pany in the north-eastern city of Dalian, Some scoffed at his plans to spend $8 bil- that the total floorspace at shopping malls using $80,000 ofborrowed money. lion on the world’s largest studio complex in the biggest 20 cities will rise from 62m His firm, Dalian Wanda, is now China’s in Qingdao, China. But they certainly took square metres now to 87m in two years. biggest private property developer, with note when he gotLeonardo DiCaprio, John On top of the risk of oversupply, the value shopping centres opened, or coming soon, Travolta, Kate Beckinsale and othercelebri- of the land on which developers’ loans are in 100 cities. Last year its revenues rose to ties to fly there for the project’s launch in secured is falling. Both problems are worse 243 billion yuan ($40 billion), up by30% on 2013. He is now rumoured to have Lions- in the country’s secondary cities. a year earlier (see chart 1, next page). The gate, the studio behind “The Hunger Yet Wanda’s prospects look strong. One $3.7 billion flotation ofitsproperty division Games”, in his sights. analyst who studies the group thinks its in December sent his personal fortune strategy of building malls only in the heart soaring past $25 billion: he vies with Ali- Out-Disneying Disney of secondary cities, compared with that of baba’s Jack Ma for the title of the country’s Mr Wang wants to transform Dalian Wan- rivals who chose (or were stuck with) richest man. Now China’s land king is go- da into a global entertainment colossus ca- cheaper plots on the periphery, means that ing global and diversifying from property. pable of beating Disney, which plans to “the oversupply issue is less relevant to He is doing so in style. You do not ex- open Shanghai Disneyland next year. He is Wanda.” Oscar Choi, an analyst at Citi- pect blaring disco music and strobes, leggy dreaming up acquisitions that will in- group, has visited Wanda Plaza malls in cit- beauties and champagne first thing in the crease his group’s annual revenues by ies large and small; he was impressed by morning. But that is how Mr Wang—who 2020 to $100 billion, a fifth to come from how efficiently they were run, and their favours private jets and flashy yachts (he outside China. He insists it can become a pulling-power among local consumers. owns Sunseeker, the British maker of the global force like Google and Walmart. All this is helping the group with its de- sleek craft seen in James Bond films)—cele- MrWangisclearlya man ofNapoleonic fences against the spread of e-commerce, brated his latest deal on February 10th. In ambition. The influence of his years in the which is hitting many Chinese shops hard. the glittering ballroom of the Sofitel Wan- PLA, where he rose from border guard to In August it launched a 5 billion yuan ven- da hotel in Beijing, he toasted a $1.2 billion regimental commander, is evident. He is ture with Baidu and Tencent, two leading deal to buy InFront Sports & Media, which now 60 but maintains a trim figure and internet firms, to devise “online to offline” 1 56 Business The Economist February 14th 2015

2 services, in which consumers use their in the country. smartphones to choose products but are That leads to the most important ques- High-rise 2 then led to a physical shop, where they tion: what does Mr Wang’s close relation- Investment-property income, yuan bn buy them. It also recently bought 99 Bill, a ship with high officialdom mean forthe fu- Dalian Wanda Competitors, 2014 Commercial local online-payments firm. ture of Dalian Wanda? He is a long-stand- Properties 25 25 As part of this plan, Wanda is now wir- ing member of the Communist Party, and SHKP* ingup all ofits shoppingcentres with Wi-Fi has served as a deputy to its National Con- 20 20 and Bluetooth sensors so that shoppers gress. CCTV, the main state television net- 15 15 can be monitored intensely. Anew app, to work, has named him its “Economic Per- Wharf* be launched soon, will ping them with son ofthe Year” not once but twice. 10 Swire* 10 promotions and information as they step Given his firm’s operational know-how inside the malls, and will let them do such and its sensible diversification strategy, it 5 5 things as book parking spaces. Consumers would be wrong to dismiss him as just an- can peruse goods on the shelves but pay other Asian crony capitalist living off his 0 0 † on their mobile phones to save queuing, connections. Even so, these political ties 2011 13 14* 15 Source: Citigroup *Estimate †Forecast and have their goods delivered straight to warrant scrutiny. Do they in any way help their homes. to explain his business success? Citigroup predicts that net profits at the Ask Mr Wang about whether his PLA Though sceptics may exaggerate Dalian firm’s property division will keep soaring, links have been useful, and he laughs that Wanda’s dependence on links to official- rising by over half between 2014 and 2016, all he gets from his old army buddies is re- dom, the firm’s recent move into cultural to 22.8 billion yuan. Wanda’s malls have quests formoney. Press him on his associa- industries has clearly been made with gov- remarkably high occupancy rates. The firm tion with Bo Xilai, a powerful Communist ernment support. President Xi Jinping, also compares favourably to its rivals on figure and former mayor of Dalian, now now waging a fierce anti-corruption cam- the income generated by its investment jailed on corruption charges, and he insists paign, sees the promotion of traditional properties, which looks set to rise to 21 bil- that they did not get along. Mr Wang says Chinese culture (which the government lion yuan this year, up by a third on last his firm had already spread beyond Dalian describes as the “spirit and soul of the na- year (see chart 2). by the time Mr Bo secured power, so he did tion”) as vital to projecting China’s soft Studies show that the types of product not need his help to succeed. power abroad and maintaining the Com- most affected by e-commerce are those Bloomberg, a financial-information munist Party’s grip at home. Development that Mr Wang calls “shopping-basket firm, conducted a lengthy investigation of projects (like Wanda’s malls) that have a goods”: clothes, accessories, electronics Mr Wang’s ties to the political elite but in cultural element enjoy swifter approval. and the like. He acknowledges that sales of the end did notpublish the story. (It was ac- Asked about his firm’s involvement in these sorts ofthings are sufferingat his cen- cused ofstiflingthe article so as not to jeop- this campaign, Mr Wang boasts that AMC’s tres. To offset this, he is expanding his pla- ardise the firm’s business interests in Chi- cinemas showed no Chinese films before zas’ offerings in “experiential consump- na, a charge it firmly denies.) Dalian histakeoverbutnowshowup to ten a year. tion”: karaoke bars, cultural shows and Wanda insists that neither it nor Mr Wang The soft-power policy is “very beneficial” other things that cannot be enjoyed on Ali- have received any sort of undue benefit to his firm, he says. Public documents baba. Wanda has done more than its rivals from their connections to people in power. show that it received at least 7.9 billion to shift its malls’ mix of tenants in this di- yuan in subsidies between the start of 2011 rection. Now, tenants offering such ser- Flush with success and mid-2014. Investors also warm to busi- vices occupy about 40% of its floor space, It is fair to say that Mr Wang’s commercial nesses whose strategy is in tune with offi- which is to rise to 60% over time. acumen has played a large part in Dalian cial policy: “It is easier for cultural indus- His diversification into theme parks, Wanda’s success. Independent accounts tries to be publicly listed,” says Mr Wang. film-making and other entertainment ser- describe howhe gothisfirstbreakby doing In December his firm held a celebration vices follows a similar logic. As the coun- unpleasant tasks that cosseted, state-run in the interior city of Wuhan to mark the try’s investment-driven model of growth property firms spurned. For example, opening of a culturally-themed develop- gives way to one focused on consumption, when Dalian’s civic leaders wanted to re- ment. A 1.8 square km plot in the old city the services sector seems certain to rise. develop the city’s slums, he jumped at the has been rebuilt with a 1,700 metre canal, a The Chinese government is keen to en- chance. By adding a small toilet to each re- Wanda department store, two Wanda ho- courage the rise ofstrong domestic compa- furbished flat—a luxury enjoyed only by tels and several office buildings. The cen- nies in this area, and as it happens Mr members of the elite at that time—his firm trepiece is a spectacle called the Han Show Wang is the best-connected businessman built its reputation. (a sort ofcross between Chinese opera and Wanda was also ambitious in expand- Cirque de Soleil). When Mr Wang turned ing beyond its home base, something up, he was given a welcome befitting a se- Asset-heavy 1 made difficult at the time by a thicket of nior minister: streets were closed, bill- Wanda Group, yuan bn regulations and local favouritism. Doing boards everywhere sang Wanda’s praises, Revenue Assets so won it economies of scale, and forged a and local officials paid their respects. 600 national brand. Far from chasing politi- Designer suits, luxury yachts, extrava- cians, Mr Wang brags that these days they gant parties: Mr Wang risks coming across 500 are chasing him—and that he turns down as too much the playboy in an increasingly 400 most oftheir offers ofcheap land. Cromwellian China. He deserves credit for 300 Despite the country’s reputation for en- building a mighty business empire, and demic graft, “It is possible to get prime land certainly has much to celebrate. But as his 200 in China without being corrupt,” insists ambition grows, investorsmaycome to see 100 Yvonne Zhou of the Boston Consulting his enviable contacts as a growingvulnera- na Group. Especially in smaller cities, she bility. The son of a Communist guerrilla 0 says, local governments are falling over hero should know that from time to time 2008 09 10 11 12 13 14 themselves to modernise their centres by the party suddenly and unexpectedly Source: Wanda Group attracting a prestigious Wanda Plaza. devours its own. 7

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Fashion designers took magazines last year as the biggest in- CIG’s website, raised about $6m. But the fluence on consumers’ purchase decisions. donationskeptcoming. So farthe game has Strutting their Burberry has led the way: it was one of accumulated $72m; another few million the first to live-stream its displays, and last dollars rains down every month. That stuff September it became the first to use Twit- makes it the biggest crowdfunded project, ter’s “buy” function, allowing consumers of any sort, yet seen. Its nearest competition is Ethereum, a Bitcoin-inspired pub- MILAN to purchase items straight off the catwalk. Streaming also helps the fashion firms lishing platform, which raised $18m. The purpose offashion shows is gather information on fans: Marc Jacobs, Every cent has come from roughly changing. Now everyone can watch an American designer, has used it to cap- 750,000 ordinary fans. In return for OR fashion buyers and editors, New ture e-mail addresses, by getting devotees pledges—ranging from $36 to $18,000— FYork Fashion Week, which opens on to register in advance forlive-streams in re- they get virtual spacecraft to use in the February12th, marksthe beginningoftheir turn fora chance to win tickets to shows. game, early access to unfinished versions, twice-yearly, month-long tour of the The luxury industry in the 1990s was T-shirts and so on. What they do not get is world’s main shows. London, Milan and defined by the rise of global brands. The equity in the business or a cut of any pro- Pariscome next; and in the autumn they re- 2000s were all about those brands taking fits. As with other “reward crowdfunding” peat the circuit. control of the retail “experience” offered to campaigns, these modern-day patrons of Lots of aspiring fashion hubs in emerg- customers. The BCG report posits that in the arts are willing to pay because they like ing markets, from Shanghai to Mumbai, the coming decade, the industry will focus the idea of “Star Citizen” and want to see it are also staging lavish shows. With a 10- to on getting to know individual customers. produced. Video-game budgets are hard to 15-minute catwalk display costing up to a Fashion shows are part ofthat model. 7 pin down, but $72m puts it in the top flight, few million dollars, some industry com- alongside blockbuster franchises such as mentators wonder if there are better ways “Halo” and “Grand Theft Auto”. for fashion brands to spend their market- Crowdfunding Bigger, more conventionally financed ing budgets than parading their wares at games-makers try to appeal to as broad an more and more shows. Yet, fornowatleast, The stars are the audience as possible. However, there is a they remain central to the business of flog- chunk of the audience that “doesn’t want ging posh frocks. limit those compromises,” says CIG’s owner, Fashion houses take part in them for Chris Roberts. “Crowdfunding allows you two reasons. First, because buyers from de- to reach them directly.” His reputation has partment stores and other retailers are in made it easier to get them to part with their A video game smashes crowdfunding the audience, ready to sign contracts ifthey cash: he made his name in the 1990swith a records by raising $72m—and counting like what they see. Second, as a broader popular game called “Wing Commander”. brand-building exercise, to convince con- S STARSHIPS go, it’s cheap. For $180 you Even so, some fans fear Mr Roberts is sumers that a label is still at the cutting Acan buy a Constellation Taurus, a 59- taking on a bigger, more complex project edge. In recent years, the second of these metre, 80-tonne freighter that is perfect for than he can handle. In response, he notes motives has become more central. anyone looking to break into interstellar that one advantage of games is that they That is largely because luxury brands trading. Or at least it will be. Would-be can be released in stages to reassure back- have been cutting out the middlemen in space truckers who pay up now will have ers. CIG has already sent some of them a theirdistribution chains. More than 80% of to wait until 2016, when “Star Citizen”, a module that lets them take a tour of their the shoes, bags and other products bearing video game being developed by Cloud new spacecraft, and another that lets them the Prada label are now sold in its own Imperium Games (CIG), is ready forlift-off. stage dogfights with other craft. Their feed- shops, compared with about 50% a decade Crowdfunding—in which artists, au- backwill be used to improve the game. ago. For Burberry, the share has grown thors and designers raise money directly Mr Roberts, who has also worked in from less than 40% to more than 70% over from their fans—has been good to the mak- Hollywood, thinks crowdfunding could the same period. So the fashion shows ers of video games. Since the launch in work for big-budget films and television, have become less about selling the latest 2009 of Kickstarter, the best-known two other risky sorts of production that collection to other retailers’ buyers and crowdfunding website, dozens of design- can inspire rabid devotion in fans. They more about communicating the brand’s ers have been able to short-circuit the big would have to find ways to involve fans in image to a wider public. publishing firms. The most successful have the production process without giving Fashions change faster than they used raised several million dollars each. away the plot. “But if Joss Whedon [a pro- to: brands can no longer get by with just But “Star Citizen” stands above all the ducer of cult science-fiction shows] want- two collections a year. They launch new others. Its initial crowdfunding push, run ed to do another series of ‘Firefly’, I bet he ranges more frequently, often staging their simultaneously in 2012 on Kickstarter and could raise a hell ofa lot ofcash.” 7 own publicityevents. Butthe main fashion shows are still the image-burnishing flag- ships ofa more diffuse promotional effort. Franca Sozzani, the editor of Vogue Ita- lia, says little has changed in the staging of the main shows. But digital technology and social media are making them more accessible to the public. Most are now live- streamed online. As with book publishing (see Schumpeter), this means there are now legions of fashion “influencers”, with big followings on Twitter, Instagram and Pinterest. A recent survey of the luxury industry by the Boston Consulting Group (BCG) concluded that word ofmouth over- Boldly going where no fund-raising effort has gone before The Economist February 14th 2015 Business 59

Rossiya losingcontrol through a share transaction, but gives no reason for it. A Rus- sian newspaper quoted a source at Sogaz as saying the share-rejigging was part ofan “incentive programme for top management” that it had planned since late 2013 (before the Ukraine conflict erupted). The transaction let Sogaz avoid sanctions because of a gaping loophole: a firm controlled by several sanctioned entities was not itself subject to sanctions if none of them individually owned 50% of it. The Office of Foreign Assets Control (OFAC), the arm of the US Treasury that oversees sanctions, closed the loophole in August. Now, a firm is blacklisted if the stakes of sanctioned individuals add up to 50% or more. (The EU has a similar rule.) Under these new rules, Sogaz should have been subject to sanctions because of its links to both Bank Rossiya and Kordeks, a 12.5% shareholder reportedly controlled by Mr Timchenko, whom America had Sanctions against Russia blacklisted several months earlier. (Mr Timchenko declined to comment on this Fancy footwork or any other details of his affairs.) How- ever, in another exquisitely timed transaction, Rossiya cut its stake again—according to the paperwork, two days before the OFAC changes were announced—thus helping Sogaz avoid sanctions once more. A document published by Sogaz in late How businesses linked to blacklisted oligarchs avoid Western sanctions August states that Abros, the Rossiya sub- S THE West is loth to go to war against tions lists. The company reinsures its risks sidiary, now held only 32.3% of Sogaz. It ARussia overUkraine, its main levers for in Western markets. (It also sponsors Rus- said the transaction had taken place on Au- persuading Vladimir Putin to back down sia’s top football league.) Every member of gust6th and had been registered on August are economic. And the principal economic the Sogaz board, including Alexey Miller, 11th, justbefore the sanctionswere expand- tools at its disposal are sanctions, which the boss of Gazprom, is affiliated with a ed on August 13th. (The 16.2% stake was of- have tightened incrementally since last sanctioned entity. Mr Putin’s nephew is a floaded to a subsidiaryofGazprom, the gas March. Their importance as a policy was deputy chairman ofSogaz. giant confirmed; Gazprom and its subsid- underlined this week, when European Un- Until March 51% of Sogaz belonged to iaries are not subject to full sanctions, but ion foreign ministers adopted new mea- Bank Rossiya via a wholly owned subsid- to looser ones, such as restrictions on fi- sures against 19 individuals and nine enti- iary, called Abros. Rossiya is Russia’s 17th- nancing in Western markets.) This meant ties (implementation was delayed for a largest bank, and its owners have links to that the total shareholdings in Sogaz of weekto give diplomacy a chance). Mr Putin. The remainder of the shares in sanctioned parties had fallen to 44.8% In several cases, however, companies Sogaz were divided between Gazprom, its (Abros 32.3%, Kordeks 12.5%), again bring- that would have been subject to sanctions subsidiaries and other figures close to the ing it below the threshold. because of their links to “designated” Rus- president. This included a stake held indi- sian oligarchs have managed to wriggle rectly by Gennady Timchenko, a billion- You belong to yourself free of the restrictions with well-timed aire investor whom America assumes to In another curious development, Rossiya transactions. These have had the effect of be a member of Mr Putin’s inner circle (Mr later seems to have given away its remain- reducing the stakes held by parties subject Timchenko has denied this). ing stake in Sogaz, by transferring owner- to sanctions below thresholds that would Rossiya was put on the sanctions list on ship of Abros to Abros itself. The terms of trigger penalties against their businesses. March 20th 2014. Under the rules, Sogaz the transaction are unknown. Russian me- “The blatant manner in which [some Rus- should have been too, as an entity that is dia reported that in September, as part of a sian entities] have avoided sanctions 50%-or-more-owned by a sanctioned “restructuring”, it sold the stake to Abros’s raises questions about the effectiveness of party. But Rossiya transferred a 2.5% stake management as part of a “motivation pro- the existing system and the willingness of to Sogaz Realty, a subsidiary of Sogaz, the gramme”. This explanation is odd, as the West to enforce its own rules,” con- week before the sanctions were imposed, Abros appears to have only one employee. cludes an unpublished report by a cor- according to the insurer (see diagram, next As the investigators’ report puts it, Abros porate-investigations firm that has been page). Investigators who have seen the pa- “appears to be only a shell company with seen by The Economist. It was compiled for perwork note that the transaction was not nobody to incentivise”. one of the many Western companies that filed with the Russian authorities until Another striking feature is that a tiny fret about whom they can or cannot do March 24th, after sanctions took effect. sliver of Abros is not management-owned. business with under the sanctions regime. With Rossiya’s stake below 50%, Sogaz was According to corporate records, a stake of A striking example is Sogaz. Originally able to produce comfort letters showing 0.004% is held by a firm called Bolshoi set up by Gazprom, an energy giant, the Western counterparties that it was not sub- Dom 9 (Big House 9), whose six share- company provides insurance to Russian ject to sanctions. A note in Sogaz’s 2013 ac- holders (including its largest investor, Yuri firms, including numerous ones on sanc- counts, published in April 2014, mentions Kovalchuk) all own stakes in Rossiya or are 1 60 Business The Economist February 14th 2015

2 affiliated with the bank. Two of them are ue sale” and—contrary to any suggestion is hard or impossible to ascertain) to hold a linked to Sogaz. This stake is very small but that the stake was being parked temporar- majority stake in them. The timingof these attracted the private investigators’ atten- ily with Mr Tornqvist—is “irrevocable”. share shuffles is “lucky”, says another law- tion. Given the shareholders’ links, “the as- Another business linked to Mr Tim- yer. “I want to be with these guys at the sumption must be that they continue to ex- chenko is the Hartwall Arena, a venue in blackjack table.” ert influence over Abros and, therefore, Finland that has hosted concerts by the OFAC declined to comment on these Sogaz,” they conclude. Neither Rossiya nor likes of Miley Cyrus and Aerosmith. Until specificcasesoron whetheritmight broad- Sogaz responded to multiple e-mails seek- last year it was jointly owned with two en its sanctions so that businesses subject ing comment. brotherswho have longbeen friendlywith to this sort of share transfer remain black- Abros was and remains on America’s Mr Putin, Arkady and Boris Rotenberg, listed. It did say that it encourages Western sanctions list. So it is unclear why Rossiya, with Mr Timchenko and the Rotenbergs firms to watch out for purported changes also under sanctions, would want to dis- each owning50%. The Rotenbergsalso had in ownership, in which someone subject tance itself from its former subsidiary. It sanctions imposed on them on March to sanctions sells shares in a “sham” tran- could be that Rossiya hoped that if Abros 20th. Several big concerts were threatened saction—for instance, at below market val- were no longer a majority-owned subsid- with cancellation because of worries that ue or in a temporary arrangement. Even in iary of the bank, it would be taken off the the arena itselfwould be blacklisted. scenarios where a bona fide transferbrings list. But this has not happened. At some point around the time of sanc- sanctioned parties’ combined stakes to be- MrTimchenko is also a founderof Gun- tions—it is unclear when exactly—the low 50%, OFAC says it would continue to vor, a giant oil-trading firm, along with shareholding structure changed. Accord- urge Western counterparties to exercise Torbjorn Tornqvist, a Swede. Until March ing to Russian and Finnish media reports, caution, as “such entities may be con- 2014, 43.6% (and 50% ofthe votingrights) of Roman Rotenberg, a son of one of the trolled—even if not owned” by blacklisted Gunvor was owned by Fentex Properties, brothers, acquired 100% of the vehicle parties, forinstance through nominees. of which Mr Timchenko is the sole benefi- through which they held their stake, as cial owner. An identical stake was held by well as a small stake from the Timchenko- Feeling the pain Frefika Foundation, a vehicle owned by Mr controlled outfit, bringing Mr Timchenko’s Some lawyers think OFAC will not be too Tornqvist. The remaining 12.8% was stake in the arena down to 49.5%. Since the concerned about cases like that of Sogaz owned by a share plan for senior Gunvor son was not on the sanctions list, total because it is not those firms but their own- employees, with no voting rights. ownership of the venue by sanctioned ers who are the main targets. Even if some When Mr Timchenko was put on parties thus fell to 49.5%, meaning it could of their businesses dodge sanctions, the OFAC’s sanctions list on March 20th 2014, continue to be used for concerts by West- oligarchs who have had to loosen their America alleged that Mr Putin had an un- ern stars without repercussion. Roman Ro- grip on them are still feeling pain. “The disclosed economic interest in Gunvor. tenberg told a Finnish newspaper that a sanctions are broadly working,” says Je- The day before, Fentex Properties sold its deal forhim to take control had been in the remy Zucker of Dechert, a law firm. What stake in Gunvor to Mr Tornqvist, giving works since 2013, before the Ukraine con- matters more to OFAC than the timing of him 87.2% of the shares and 100% of the flict. The Economist sought comment from the divestments is that they are genuine votingpower. This allowed Gunvorto con- the Rotenbergs through SMP, a bank they transactions, not window-dressing—so tinue trading without restrictions. co-own, but was unable to reach them. that the blacklisted are forced to sell assets Gunvor denies that Mr Putin is a benefi- Western lawyers say other Russian they would rather keep. ciaryofGunvororitsactivitiesand saysMr companies have concluded similarly well- Moreover, even ifa holding manages to Timchenko “has absolutely no ongoing in- timed transactions, the effect of which has avoid blacklisting, it might still suffer if volvement” in the firm. It agrees that the been that they avoided sanctions. Two se- Western firms give it a wide berth, antici- transaction’s purpose was “to de-risk the nior sanctions lawyers told us they have patinga furthertighteningofthe sanctions. company from potential sanctions against seen evidence ofsuch transactions, though Indeed, much as they insist their rules are Mr Timchenko”. But it says Messrs Tim- neither was willing to provide names. In clear, Western governments design them chenko and Tornqvist “had been in talks several cases, says one, the European sub- with a degree ofambiguity, so asto encour- about a divestiture for a while prior to the sidiaries of Russian companies thought to age Western firms to play safe and shun actual sale”, in part because ofstrategic dif- be controlled by parties on sanctions lists any company that might conceivably be ferences. It says this process was speeded suddenly appear to be only indirectly connected with targeted people. up after the first round of sanctions on owned by them, thanks to the creation ofa But this approach increases uncertainty March 6th. Gunvor insists it was a “fair-val- new corporate layer (ownership of which for Western companies that do business (or are considering transactions) with such firms. Faced with this, many have felt ob- Changing hands liged to hire investigators like those who Subject to sanctions Limited sanctions* Not subject to sanctions looked into Sogaz’s affairs. This is costly, Before March 2014 After March 2014 After August 2014 and even seasoned sleuths are often unable to give firm assurances about owner- Bank Rossiya ship and control, given Russian business’s Bank Rossiya Bank Rossiya 100%† widespread use of offshore jurisdictions, 100% 100% points out Judith Lee of Gibson Dunn, another law firm. Abros Abros Abros The broader worry is that such cases Kordeks Sogaz make it look as if sanctions are too easy to Kordeks Kordeks Sogaz Realty dodge, undermining their credibility at a Realty 32.3% time when the West wants to appear 51% 48.5% Sogaz 2.5% strong. By lettingRussian-linked firms side- Sogaz Sogaz 2.5% 12.5% 12.5% 12.5% 16.2% Gazprom step them through well-timed share trans- subsidiary fers, the West may be weakening one of the most powerful tools it has in its deal- Source: The Economist *Restrictions on financing in Western capital markets †Later transferred to Abros ings with Russia. 7 The Economist February 14th 2015 Business 61 Schumpeter Authorpreneurship

To succeed these days, authors must be more businesslike than ever Hollywood film deals. Entrepreneurial authors find it more effective to devote themselves to a more achievable aim: getting onto the bestseller lists. The secret of such lists, the most prominent of which are those in the New York Times, is that they do not measure total sales, but their velocity. Books that fly off the shelves in their first weekmake the lists, and that in turn boosts their subsequent sales. Pre-orders of books all count toward the first week’s sales figures, so canny authors try to get people to buy copies in advance of publication. Eric Ries, a lecturer on entrepreneurship and innovation, went on a “pre-book” book tour to drum up interest before his work, “The Lean Startup”, even had a firm name, and started sellingit online more than a yearin advance of its publication. It worked. The book’s cover is now able to boast “the New York Times bestseller” above the title. Ruthless authors can go even further. The Times compiles its lists by tracking sales at a few thousand shops, wholesalers and online retailers. It is not hard for writers to find out which outlets feed their numbers into the rankings; indeed, there are firms that provide such information, for a fee. Wordsmiths can then route their book tours accordingly, and encourage buyers to place orders at those shops. Another way of working the system is to HE mystery is worth a book in itself. How could a hitherto release a bookin a quiet period—such as this month—when there Tunknown novel by Harper Lee, writer of “To Kill a Mocking- is less competition for a place on the bestseller lists. bird”, remain hidden for 60 years, and why was it not published It is easier than it used to be to get onto these lists. Last year the before? For all the swirling questions, there is one certainty. The Times added 12 new bestseller categories, including travel, hu- bookwill become a blockbuster without Ms Lee so much as sign- mour and spirituality. It has also expanded its main lists, to 20 ing a copy. Ifonly every author could be so lucky. books, which gives more authors a shot at making the charts. Standing out as a book writer today requires more than a Shrewd authors have realised that “bestseller” is a relative term: bright idea and limpid prose. Authors need to become business- in some months and some categories they can make the bottom people as well, thinking strategically about their brand, and mar- ofa list by selling merely a few thousand copies. keting themselves and their products. There is more competition Authors, like other entrepreneurs, should not let failure get to for readers’ and reviewers’ attention, and fewer bookshops to them. If they fail to make a Times bestseller list, they can always provide a showcase for new titles. In 2013 some 1.4m print books try for another one, such as Amazon’s. Cheap e-books can shoot were published in America, over five times as many as a decade up the website’s real-time lists, which is how many self-pub- earlier. Publishers are increasingly focusing their efforts on a few lished authorshave gained attention. Theirmomentofglory may titles they think will make a splash, neglecting less well-known have lasted a mere few seconds, but no one needs to know that. authors and less popular themes. Many authors dream of a happy ending in which, having Chapter and purse delivered their magnum opus, they sit back and enjoy an endless The open secret of publishing is that very few authors can live by stream of royalties. But these days, writing a book is just a pro- books alone. Even some of the most successful ones make most logue to more work. Even the most successful writers need to of their money from public speaking, consulting or teaching, and invest large amounts of time and resources in promoting them- use the publicity gained by their books to justify higher fees. Take selves. Authors mostly used to rely on public-relations staff pro- Chris Anderson, an author (and former journalist at The Econo- vided by the publishing house. Now, wise writers hire their own mist), who is paid tens of thousands of dollars foreach lecture; or publicists, whether they are unknowns just starting out in the Alain de Botton, a writer on philosophy, whose profile brings business or stars such as J.K. Rowling of“Harry Potter” fame. paying customers to his School of Life. Last month Simon & Authors must court an expanding variety of “influencers”— Schuster, a publisher, announced it would sell online video people whose opinions can determine a book’s success. Once a coursesled bysome ofitsauthors. Thingsare more difficult forfic- select group of newspaper reviewers were the principal arbiters tion writers: the organisers of conferences and other events pay of literary taste. Now, as the amount of newsprint devoted to good speaking fees to non-fiction writers with a bit of name rec- reviews keeps shrinking, a host of bloggers and social-media ognition, but not to the average novelist. pundits fill the gap. The most important are the celebrity endors- Authors are becoming more like pop stars, who used to make ers. Oprah Winfrey used to help books soar up the charts by dis- most of their money selling albums but who now use their cussing them on her television show. More recently Mark Zucker- recordings as promotional tools, earning a living mainly from berg of Facebook has become an important endorser. Steven concerts. The trouble with many budding writers is that they are Pinker, a psychologist, enjoyed a “Zuckerberg bump” in sales of not cut out for this new world. They are often introverts, prefer- his book, “The Better Angels of Our Nature”, after the social net- ring solitude to salesmanship. Readers these days want to get to work’s boss told his online followers he was reading it. know the creators of the books they buy. Diffident authors may Prizes like the Pulitzer and Man Booker may send sales as high feel uncomfortable with gettingso close to theirfans. But only the as a librarian’s neckline, but are notoriously hard to win. So are likes ofMs Lee can afford to stay mysterious. 7 NO BRANCHES GREAT RATES WHICH, MATHEMATICALLY SPEAKING, EQUALS HAPPY CUSTOMERS.

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Also in this section 64 Buttonwood: Hot property 65 Private equity and energy 66 India’s perky economy... 66 ...and Zimbabwe’s limping one 67 America’s hardy wealth managers 67 Inequality in Japan 68 Free exchange: The trouble with price-match guarantees

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

Debt and austerity in Greece but, despite losses imposed on some private-sector lenders, did little to lower them. Smoking out the firebrands At the end of 2009 Greece owed €301 billion, then around 127% of GDP, mainly to the private sector. Today it owes around €315 billion (175% of GDP), all but €70 billion of which comes from public lenders. IMF Athens The country’s new creditors are the (€25 billion), the ECB (€27 billion) and Can Greece’s new government satisfyvoters and compromise with its creditors? European governments (€195 billion). LEXIS TSIPRAS and his radical left Syr- Atitsroot, the problem issimple: Greece Greece’s new creditors are both gener- Aiza party worked for more than a year does not have enough income to pay its ous and demanding. The country’s interest while in opposition to prepare their policy bills. Since the financial crisis began, its rates have been slashed: its total interest platform. Over 80 committees were economy has shrunk by more than any paymentsin 2014 were just2.6% ofGDP, ac- charged with producing specific proposals other rich country’s. Between 2008 and cording to Zsolt Darvas of Bruegel, a think- for overhauling different sectors of the 2014 nominal GDP, a rough proxy for an tank. That is lower than several less indebt- Greek economy. Planning for power is one economy’s capacity to repay debts, fell by ed European countries (see chart). thing; exercising it quite another, especial- 22%, much more than any other European But the money comes with conditions ly when a country is in a hole as deep as invalid. The pain at an individual level has aimed at stabilising Greece’s finances. Greece’s. been just as sharp. House prices are down These include cuts to Greece’s minimum Syriza’sprogramme, iffullyimplement- by around 40% since 2008. Median in- wage and pensions, lay-offs of civil ser- ed, will result in a sharp fall in revenues comes fell by 22% between 2008 and 2013; vants and the privatisation of various as- and a large increase in social spending. Yet for 18- to 24-year-old Greeks they were sets, including ports and state-owned many Greeks stopped paying taxes before down by 38%. The economic collapse is buildings. Creditors like Mr Schäuble hope last month’s elections, anticipating cuts comparable to one on the other side of the the package will make Greece more com- and forbearance. Government revenues Mediterranean, in war-torn Libya. petitive and thusspureconomicgrowth, as fell by more than 20% in January on an an- The bail-outs Greece received in 2010 well as generating a budget surplus to be nual basis; the 2015 budget is now likely to and 2012 shifted its debts to new creditors used to pay down debt. The bail-out plan be derailed by the end ofMarch, says a for- foresees Greek debt falling to 120% of GDP mer finance minister. by 2020. None ofwhich playswell with Greece’s It could be worse The crunch has come because Greece creditors, whose €245 billion ($277 billion) Government debt, as % of GDP, 2014 wantsto keep the lowratesbutnotthe con- bail-out envisages austerity and reform, Interest spending, % ditions. Nadia Valavani, a deputy finance not splurges and backtracking. Wolfgang minister, plans to scrap a hated property 0 50 100 150 200 250 Schäuble, Germany’s finance minister, tax, enfia, a popular move that will cost the said on February10th that ifGreece did not Greece 2.6* state €2 billion in revenues. Ms Valavani seek an extension of its bail-out, which ex- Portugal 5.0 also says a tax on businesses offering ser- pires on February 28th, “Then it’s over.” As Italy 4.7 vices to tourists will stay at 13% and not be The Economist went to press, Mr Tsipras, hiked to the standard 23% as planned. The Spain 3.3 now prime minister, was about to meet Aegean islands, Greece’s most prosperous Angela Merkel, Germany’s chancellor, in Germany 1.9 region, will continue to enjoy lower rates what promised to be a fraught exchange. of value-added tax than the rest of the Unless some sort of agreement is found Japan 2.1 country. The threshold at which income soon, another Greek default looms when *Excluding deferred and tax bites will be restored this year to IMF debts mature in March. Source: Bruegel refundable interest €12,000, leaving around 3m low-income 1 64 Finance and economics The Economist February 14th 2015

2 Greeks paying no tax. The privatisation could yield €2.5 billion in 2015. But in the budget surplus to 1.5% of GDP, from a target programme, due to raise a total of €25 bil- unlikely event that all this money were col- of 3% this year and 4.5% in 2016. Third, it lion, including €3.5 billion this year, has lected, Greece would still be €4 billion would swap much of its existing debt for been halted. Altogether these giveaways short. two exotic types of bond: a “perpetual”, could cost around €8 billion. Many governments’ plans do not add meaningthat the principal would never be To balance the books Mr Tsipras is pin- up, of course, and Mr Tsipras has already repaid, and a “GDP-linked” bond, with ning his hopes, optimistically, on a tax signalled a willingness to compromise. On payments tied to the health of Greece’s crackdown. Smuggling cigarettes and fuel February 9th he outlined a four-part plan. economy. Finally, the government would costs the government around €1.5 billion a First, Greece would keep “70%” of previ- spend an extra €1.9 billion on “humanitar- year. Tax-dodging tycoons could furnish ously agreed reforms; those ditched would ian assistance” forstruggling Greeks. some extra income too. Panayotis Nikolou- be replaced by ten new measures agreed Greece’s creditors can give some dis, a former anti-money-laundering tsar with the OECD, rather than the despised ground. Despite the low interest rates the who headsa newanti-corruption ministry, “troika” of the ECB, the IMF and European country is being charged, the loans are says there are 3,500 cases of large-scale tax Commission. Second, it would reduce its proﬁtable, since most European govern- evasion amounting to €7 billion; they primary (ie, excluding interest payments) ments can borrow at even lower rates. Cut-1 Buttonwood The sky’s the limit

Commercial property has been delivering excellent returns EEP interest rates low for long enough were in the double digits over the same which investors are most enthusiastic Kand the property market will eventu- period (see chart). That compares with the about, managed to weather the 2008-09 ally boom. That has been a good rule of 8.1% annual return (including dividends) recession and so should be resilient to an- thumb for investors throughout history. It achieved by American equities over the other downturn. is even proving true in Europe, despite the same period and with the 6.8% annual re- In terms of supply, it is easy to be mis- continent’s sluggish economy. turn achieved on long-term Treasury led by the view from The Economist’s of- Accordingto Real Capital Analytics, an bonds. The equivalent rates for British eq- fices of the flocks of cranes perched over information provider, Europe saw €213 uities and long-term bonds were 8% and London. This is the exception. Globally billion ($241 billion) of commercial-prop- 6.8% respectively. there is yet to be the kind of development erty transactions last year, up by13% from So does this mean the market is now spree that usually marks the peak of the 2013 and the highest annual total since hideously overblown and due for another property cycle. Deals involving develop- 2007. The number of transactions more downturn? Not necessarily. Property is mentland fell by29% globallylastyear, in- than doubled in Spain last year and there vulnerable to three things: a rise in interest cluding a 3% decline in Europe. were big gains in Switzerland and the rates, a downturn in the economy that hits So it is possible that commercial prop- Netherlands, too. Three European mar- demand, and a burst of speculative build- erty’s streak could last a good deal longer. kets—Austria, Ireland and Switzerland— ing that leads to oversupply. On the first Lots ofinvestors need income and the ob- surpassed the transaction levels of 2007, point, central banks are still cutting rates in vious alternative to property—corporate the top ofthe last cycle. much of the world. There is the possibility bonds—has had a very good run. Inves- Europe’s rebound outpaced the 9% ofrate risesin America and Britain over the tors have even been willing to accept a rise in global property transactions, al- next year, but with inflation very low, cen- negative yield on bonds issued by Nestlé, though not a 15% rise in American deals. tral banks are likely to be cautious. a Swiss foods group, in effect paying for Office buildings and hotels were the most The world economy is not exactly rac- the privilege oflending it money. active sectors worldwide. ing, but forecasts (for what they are worth) Until the 1970s property was the asset It is hardly surprisingthat investors are predict GDP growth of more than 1% in the of choice for long-term investors such as enthusiasticforbricksand mortar. In both euro area and Japan and more than 3% in university endowments and pension the cash and government-bond markets, America. In any case, prime properties, funds. It has been replaced in recent de- yields are zero or even negative. By com- cades by government bonds, which are parison, yieldsof5% on American proper- much more liquid. Ifyields on bonds stay ty or even 4% on office blocks in central Safe as offices at Japan-like levels for a while, however, London lookattractive. Commercial property, average annual total the allure of property will only increase. Those yields have been falling, how- returns to September 2014, % And ifinflation returns, property will be a ever. Sabina Kalyan ofCBRE Global Inves- 3 year 5 year 10 year better hedge than conventional govern- tors says that prime offices (those in the 04812 16 ment bonds. best locations) in Madrid are now chang- Eventually, such logic will inflate a Canada ing hands at 4.5%, compared with around bubble, of course. Residential property in 8% at the bottom of the market. Prime New London (fuelled by a combination of low property yields in all Europe’s capitals are Zealand rates and international capital) has al- now at or below the level of2007. United ready reached that point. But the surge of Nonetheless, the long-term returns States interest in second-tier and more specula- from property look very respectable. In tive commercial-property projects that the ten years to end-September, Ameri- Britain marks the top of the cycle is only just be- can commercial property delivered a to- ginning, at least in Europe. The skyscrap- tal annualised return of 7.9%, according to Ireland ers will tell you when to worry. IPD, a property-information group; re- Source: IPD turns in both Canada and New Zealand Economist.com/blogs/buttonwood The Economist February 14th 2015 Finance and economics 65

2 ting them to a profit-neutral level and fur- at the port, and Denmark’s Maersk were oil companies themselves—a more ther extending the duration of Greece’s frontrunners among the shortlisted bid- straightforward bet on the oil price. debts could generate savings worth 17% of ders. But one of the left’s stalwarts, Theo- Carlyle’s earnings were dragged down GDP, according to Mr Darvas. In the spirit dore Dritsas, is shipping minister and has by its stake in SandRidge Energy, a debt- of not profiting from Greece’s depression, vowed to block the deal. Panayotis Lafaza- laden oil-and-gas exploration company, euro-zone officials could also release €1.9 nis, who heads a new ministry for “pro- which lost 58% ofits value over the quarter billion in profits from an earlier ECB bond- ductive reconstruction”, environment and and has just announced that it is mothball- buying programme. energy, has blocked two other deals aimed ing most of its drilling rigs. Shares in EP En- But Greece’s government will have to at bringing Greece fully in line with EU energy, an oil-and-gas company of which offer much more in return, and Mr Tsipras ergy directives. Apollo owns about a quarter, are down by will have two constituencies in mind if he The other group Mr Tsipras will have to 40%. And Samson, an American producer reverses course. One is the extreme left of keep happy is an electorate buoyed by the partly owned by KKR, has also fallen in val- Syriza. On privatisation, for example, both government’s feisty dealings with the rest ue. (One buy-out firm that got away rela- the finance minister, Yanis Varoufakis, and ofEurope. “Whatever happens next, Syriza tively unscathed was the last of the “big the development minister, George Statha- has given us back our dignity,” said Roula four”, Blackstone. Sceptical about $100 oil, kis, have voiced support for completing Zlatani, a 68-year-old Athenian pensioner. it started selling energy assets in 2013.) the sale of the state’s 67% stake in Piraeus “The government’s finally standing up to Despite such losses, private-equity in- Port Authority. China’s Cosco, which al- the foreign powers that have made our vestors are now more interested in the sec- ready runs a profitable container terminal lives so difficult.” 7 tor than ever, according to Antoon Schneider from the Boston Consulting Group. Buy-out funds love distressed assets. Many see the situation now as akin to the collapse in property prices in 2008, when investors who had borrowed too much (including many private-equity funds) were forced to sell as prices plum- meted. Blackstone’s chief executive, Ste- phen Schwarzman, said in December that the turmoil would be a “wonderful, wonderful opportunity forus”. The giddiness is not without reason: prices for energy-related assets have been slashed indiscriminately. Some oil- services firms that cater to ongoing operations—by providing maintenance for offshore rigs, for example—may have been hit unfairly hard and could well bounce back. Companies that specialise in more expensive ways of getting oil out of the ground, such as makers ofoffshore drilling rigs and construction vessels, were already suffering from the problem of overcapacity before the price fell and are now in even Private equity and energy worse shape. Private equity thrives on such price swings. Refilling the pipeline Anotherway to cash in is through credit provision. The volume of high-yield debt in the energy sector is now three times what it was in 2008, according to Credit Suisse. Cheap oil is imperilling borrowers, such as American shale producers, who need cash to stay afloat until prices (they The plunging oil price has pummelled private equity but may now help it hope) rebound. With banks unwilling to IL’S fall may be good for consumers, ever before, according to Preqin, a data pro- lend and many companies desperate not Obut it has hurt big private-equity vider. “All sorts of folks who would never to sell assets, private-equity firms can firms. Earlier this month Apollo Global have dreamed of oil and gas piled in, often name their terms when offering financing. Management announced that profits were loading companies with debt,” says Joel Such thoughts have sent the buy-out down by 79% year on year in the three Moser of Aquamarine Investment Part- titans into a fund-raising frenzy. Blackstone months to December 31st. This week KKR ners, a fund that has invested in the sector alone says it has a war chest of $9 billion and the Carlyle Group said they were fordecades. available for energy investments, not to smarting too, with KKR’s profits down by Private-equity firms mainly invested in mention the energy-related debts it might 94% and Carlyle’s by 68%. Energy-related oilfield-services companies, which sup- buy through credit funds. Warburg Pincus, assets, whose valuations have fallen with port the industry but do not own oil them- another private-equity firm, closed a $4 the oil price, are largely to blame. selves. Because such firmsare involved in a billion energy fund late last year. Apollo is Spurred on by the shale boom in Amer- variety of activities there is greater scope also raising a multi-billion-dollar fund. All ica, private-equity funds have invested for the type of restructuring private-equity of which holds out a ray of hope for those heavily in the energy sector. More money types specialise in, such as selling off less- private-equity funds that are currently sit- was raised for energy buy-outs in America profitable units or firing people. But the ting on devalued energy investments, in 2014, and more deals were made, than buy-out firms had also begun to invest in provided they can afford to wait it out. 7 66 Finance and economics The Economist February 14th 2015

India’s economy tion falls. The CSO reckons GDP will grow duringthe collapse of2008”. Anecdotal ev- by 7.4% in 2014-15 in real terms, half a per- idence bodes ill. One investor says beer On the dragon’s centage point faster than in the previous sales are plunging. Shopkeepers in down- year. However, the increase in nominal town Harare complain bitterly. “Corrupt tail GDP (ie, including inflation) is forecast to officials take what we pay in tax,” says a fall from 13.6% to 11.5%. In other words, fall- mobile-phone dealer. MUMBAI ing inflation makes it look like economic Meltdown is held off by remittances of activity is growing more slowly than it is. up to $500m a year from Zimbabwe’s dias- New figures show India’s GDP grew Prospects for India’s economy are pora, along with rising government defi- fasterthan China’s at the end of2014 brighter than for other emerging markets. cits and foreign aid. The American govern- N RECENT weeks economists at Gold- Aftera slowstart, MrModi’sgovernmentis ment bans all business dealings with Iman Sachs, the World Bank and the IMF pursuing reforms more urgently (though a certain Zimbabwean officials and compa- have forecast India’s economy will grow a big defeat in elections in Delhi this week nies, but it pays a quarter of the country’s bit fasterthan China’s within a yearortwo. may slow things again). Lowercommodity health-care costs. From their own govern- The day came sooner than they expected. prices, which have hurt raw-material ex- ment, Zimbabweans receive very little. Figures released on February 9th showed porters such as Brazil, Russia and South Af- Doctors, teachers and policemen frequent- that India’s GDP rose by 7.5% year on year rica, are a boon for India, which imports ly strike over unpaid wages. in the fourth quarter of 2014, a shade faster 80% of the oil it consumes and much else. Mining had spurred the economy for than China’s. The strength ofChina’s econ- The current-account deficit has shrunk. several years, but no more. The govern- omy is often disputed. Now it is India’s The rupee is firm. Last month the Reserve ment’s indigenisation policy, under which turn to have its numbers questioned. Bank of India reduced interest rates from foreign-owned assets are partially expro- The data were foreshadowed on Janu- 8% to 7.75%. The prospects for further rate priated, has scared off investors. The tim- ary 30th when India’s Central Statistics Of- cuts, and for the economy more generally, ing is awful: commodity prices are falling fice (CSO) released revised estimates of depend on what emerges when Mr Modi’s and surface deposits of gems and minerals GDP as part of an exercise known as “re- finance minister, Arun Jaitley, presents his are almost exhausted. Only sophisticated basing”. GDP is typically measured by ref- first full-year budget on February 28th. 7 foreign firms with billions to spend on pits erence to the prices and structure of the and drills can get at the stuffbelow. economy in a base year. Over time this Meanwhile, Zimbabwe has adopted snapshot becomes less relevant, and the Zimbabwe’s economy American monetary policy along with the GDP figures less accurate, so the base year dollar. The Federal Reserve’s talk of higher is updated every few years. The CSO Nothing for money rates is the opposite of what its economy changed India’s from 2004-05 to 2011-12. needs. One Zimbabwean economist says On the new reckoning, GDP growth for he envies the Greeks, whose “monetary 2013-14 was revised up from 4.7% to 6.9%. union with Germany at least comes with a That galloping rate, however, is surpris- HARARE minimum ofco-ordination and empathy”. ing. India was caught up in an emerging- Could dollarisation be reversed? Both The introduction ofnew coins triggers a market mini-crisis in 2013. Narendra locals and foreigners often ask but chances debate about what currency to use Modi’s victory in national elections last seem low. Zimbabweans have not forgot- May owed much to general dismay about S INFLATION climbed towards 80 bil- ten the misery of life with the Zim dollar, a floundering economy. Alion percentin 2008-09, Zimbabweans when shopswere emptyand petrol wasra- The estimatesforthe end oflast yearare abandoned the Zim dollar in favour of the tioned. They have little reason to believe less baffling. True, a real growth rate of7.5% American one. Since then, shopkeepers, officialswould manage the currencybetter looks a little too lively given sluggish car with no access to American coins, have in future.Without public trust, no govern- sales, feeble demand for credit, and the had to hand out pens, sweets and chewing ment can imbue paper with value. 7 soggy revenue growth reported by many gum instead of change. Just over a month big listed firms. Tax revenue has not been ago, however, the central bank began issu- notably buoyant. But the recent sharp fall ing “bond coins”, denominated in Ameri- in inflation explains some of the discrep- can cents, to be used only in Zimbabwe. ancy. Firms’ top-line growth has slowed in That has triggered a debate about whether part because prices are not rising as quick- the country needs its own currency again. ly. The tax take is also harmed when infla- The advantages ofthe switch to the dollar were many. Overnight, financial discipline was imposed on wayward officials. Indian summer Inflation stopped dead, boosting growth GDP, % increase on a year earlier and bringing about a general expectation ASIAN FINANCIAL GLOBAL FINANCIAL of macroeconomic stability. Once normal CRISIS CRISIS 15 commerce resumed, importers enjoyed re- China duced transaction costs and foreign inves- 12 torsdid notneed to worryaboutexchange- rate volatility. But now the economy is on 9 the skids again, thanks largely to mismanagement, and this time the lack of a local 6 currency is exacerbating its ailments. India* 3 Dodgy data make it hard to assess how bad things are. Officials talk of 3% growth 0 this year, revised down from 6%. Eddie 1991 95 2000 05 10 14 Cross, an opposition MP, claims that last Sources: IMF; *Fiscal years ending March, 2011-12 year GDP was down “by at least 10% and national statistics base year from 2012 onwards maybe 14%—the same rate of decline as A pile of change The Economist February 14th 2015 Finance and economics 67

Wealth management in America Inequality in Japan Survival of the The secure v the poor least fit TOKYO The problem is not the super-rich New York N THOMAS PIKETTY’S bestseller, precarious jobs, who account for a rising Reports ofthe death ofstockbroking in “Capital in the Twenty-First Century”, share ofthe workforce. The average America were exaggerated I Japan appears as another rich country in annual salary forpermanent employees N THE depths of the financial crisis in which wealth is becoming ever more is around ¥5m ($41,500), compared with I2009, when banks were sacking employ- concentrated. It is certainly another rich ¥2m forless secure workers. ees left and right and cutting all costs that country in which the bookis selling well. Many argue that what Japan really were not related to compliance, Morgan Mr Piketty visited Tokyo this month, to a needs is a lot more inequality, but ofa Stanleyturned headsbybuyinga bigstock- rapturous reception. Yet Japan may be the different kind. Its employment system broking unit from Citigroup. Jaundiced ob- place where his thesis holds up least well. still tends to reward seniority and status servers rolled their eyes. Stockbroking was The bursting ofJapan’s asset bubble rather than performance, in what Japa- seen as a dubious business, devoted less to in 1991is one reason why the rich have nese call aku byodo or “bad egalitari- working with the customer than to work- amassed less than in America or many anism”. Ifpeople were paid forwhat they ing the customer. Worse, the rapid rise of European countries. The share ofwealth accomplish, argues Robert Feldman of index funds and cheap online share-trad- held by the richest tenth ofJapanese is Morgan Stanley, the economy would ing platforms seemed to be rendering the lower than in famously egalitarian spots grow faster. And Japan’s chronically low whole industry redundant (see chart). such as Norway and Sweden. In fact, it is levels ofbusiness creation mean that After a wobbly start, Morgan Stanley’s the second-lowest ofthe 46 economies there is worryingly little wealth inequali- expanded stockbroking operation has put surveyed by Credit Suisse Research In- ty ofthe sort created by entrepreneurs paid to such sceptical assumptions. The stitute, above only Belgium. The share of who become billionaires by dreaming up unit’s pre-tax margins have risen steadily income going to the wealthiest has been exciting new products and services. and now exceed 20%, without much vola- fairly stable too. Levels ofexecutive pay None ofthat has stopped “Capital” tility (unlike other divisions, such as secu- are farless egregious than in America. selling over130,000 copies so farin Ja- rities trading) and without prompting the According to an analysis prepared for the pan. Idiots’ guides to the 700-page tome kind of concerns about systemic risk that Wall Street Journal by Mr Piketty’s collab- have also done well. Mr Piketty’s timing lead to newcapital chargesand regulations orators, the share ofnational income is ideal, forhe has tapped into growing (unlike almost everything else big banks taken by the top 1% in Japan, excluding doubts about Abenomics, the economic- do). Partly as a result, Morgan Stanley’s capital gains, fell from a high of9.5% in revival plan ofShinzo Abe, the prime share price appreciated more than any oth- 2008 to 9% in 2012. minister. By inflating asset prices, Mr er big American financial firm in 2014. Al- Other types ofinequality, however, Abe’s schemes could increase the gap most uniquely amongbankers, James Gor- are on the rise. The most important is not between haves and have nots, Mr Piketty man, its chief executive, has emerged from between the mega-rich and the rest, as warned during his visit. Ironically, how- the crisis with an enhanced reputation. “Capital” would have it, but between a ever, MrAbe’s main economic concern at Wealth-management units, as stock- privileged cadre ofworkers on perma- the moment is bullying big companies broking arms have been rebranded, are nent contracts and those with more into lifting workers’ pay. boosting returns at other American banks, too. Merrill Lynch, which collapsed during the crisis thanks to an ill-timed foray into tors are betteroffwith indexfunds. In prac- Merrill and Morgan Stanley, by offering proprietary trading, is now earning pre-tax tice, however, many individuals follow the more than bare-bones service. margins of 25% as a division of Bank of pack, and so sell when they should buy Earlierthismonth, forexample, in an ef- America. Industry-wide data collected by and buy when they should sell. Wealth fort to broaden its offerings, Fidelity an- Aite Group, a consultancy, indicates that managers, in contrast, draw up an invest- nounced the acquisition ofeMoney, which by 2013 big American wealth managers ment plan with clients and then stick to it. provides wealth-planning products to a had more than recovered from the pro- So the benefits may come more from large number of small advisory firms who nounced shrinkage ofassets during the cri- avoiding panicked shifts in strategy than use them to bring in and retain clients. The sis and have since continued to grow. Their from any special skill. At any rate, a study fittest, it seems, are mimicking the unfit. 7 profitability has also been bolstered by a on behalf of Merrill by Dalbar, a research shift from charging for individual transac- firm, concluded that returns to individuals tions to levying an annual fee of1-2% on all who invest on their own trail those who Men in the black the assets they manage. hire financial advisers by three percentage Number of registered stockbrokers in the In theory, wealth-management units points a year—a vast sum, ifaccurate. United States, ’000 are still redundant. There is plenty of aca- Wealth-management firms provide an- 700 demic evidence to suggest that retail inves- other benefit that Americans value very highly, in the form ofhandlingthe reams of 650 paperwork needed to file taxes or handle 600 Applications are invited for an internship in The Economist’s New York bureau, as part of the 2015 inheritance—something online brokers do 550 r ri n in rn hi h m h rd i Ma jo e Dea e te s p sc e e. T e awa s not do as well. That helps explain a dra- 500 designed to provide work experience for a promising matic reversal since 1999, when Merrill journalist or would-be journalist, who will spend three 450 to six months at The Economist writing about economics was stunned to find its market valuation and finance. Applicants are asked to write a letter had been surpassed by that of Charles 400 introducing themselves, and an original article of no Schwab, a discount broker. Now Schwab more than 500 words that they think would be suitable 1986 90 95 2000 05 10 14 f r ub i i n A i i n h u d b n and others like it, including Vanguard and o p l cat o . ppl cat o s s o l e se t to Source: FINRA [email protected] by March 6th. Fidelity, are trying to become more like 68 Finance and economics The Economist February 14th 2015 Free exchange Guaranteed profits

Price-match guarantees prevent ratherthan provoke price wars sible, it was deployed 94% of the time and as a result, prices rose by an average of 36%. Even when one player had much lower costs than the other, prices still rose, albeit by less. Price-matching need not always be a con: guarantees can be constructed in ways that work against tacit collusion. Most relate only to another store’s advertised prices, not to the sum that it would actually charge after applying its own price-matching offers. This creates a loophole which a clever upstart could exploit. Suppose an incumbent supermarket charges £4 fora steakand offers a price-match guarantee. The savvy entrant could advertise a higher price of £5, while promising not just to match any lower price, but to refund twice the difference. Net ofthe resulting £2 re- bate, the upstart’ssteakwould costjust£3. Yetthe advertised price of £5 would not trigger the incumbent’s own price-matching guarantee. Customers might still be tempted to switch by price cuts structured in this way. That may be too clever by half, but there are other reasons why guarantees might be harmless, or even welcome. One re- lates to their complexity. At British supermarkets, refunds usually come in the form of a discount on the next shop; to take advantage, a customer must return with the voucher. Remembering to OUR shopping would have been cheaper elsewhere, so do so takes effort, as anyone with a stack of unused gift vouchers “Yhere’s a voucher for the difference.” Anyone who has re- knows. This gives a price-cutting rival an opening. Although any cently visited a British supermarket will be familiar with such discounts it offers will be matched by the first supermarket in the seemingly generous deals, typically extended to shoppers after form ofvouchers, customers may value the straightforward price they pay. The four biggest British supermarket chains all offer cut more highly, since taking advantage of it is less of a hassle. If some form of price-match guarantee, promising that their cus- enough customers think this way, the result would be a genuine tomerscould notsave anymoneybyshoppingelsewhere. On the price war—although some might find switching stores more of a face of it, they seem like a good thing: a sign that fierce competi- chore than remembering to bring their vouchers with them. tion is loweringprices. But economists have longbeen suspicious ofsuch promises, which can leave consumers worse off. Match points The problem isthatprice-match guaranteescan bluntthe logic Another mooted justification for the guarantees is price discrim- of competition. Suppose a car dealership worries about a rival ination: selling to different types ofconsumers at different prices. undercutting its prices and stealing customers. Even if the dealer- For instance, if some customers are too busy to shop around, a ship can respond by cutting its prices too, it might lose sales in the firm can sell to them at a high price while using a guarantee to at- interim. A price-match guarantee offers a pre-emptive defence. tract more price-sensitive, hassle-tolerating customers. This is By promising to match any discounts, the dealership can per- great for profits, but sometimes benefits consumers too. suade its customers that they need not shop around: they will al- Finally, a price-guarantee may be an attempt to signal genu- ways pay the lowest price available. inely lower prices and thus stand out from the crowd. That is As a result, cutting prices no longer wins the competitor new probably how most consumers interpret them. This works only if business; buyers stay loyal and invoke the guarantee instead of there is a genuine difference in efficiency between rival stores, switching. All that price cuts achieve for the competitor is the ero- such that only one can afford to sell on the cheap. Then, the nim- sion of profits on existing sales. It will probably conclude that ble firm might want a price war in order to speed the lumbering prices—and margins—are better left high. The result is “tacit collu- one’s demise. In such circumstances, any attempt by the lumber- sion”: the maintenance of high prices, without any explicit coming firm to collude tacitly is futile; if it offers a guarantee, its bluff munication between firms. Consumers end up suffering due to a will be called. So when low-cost firms make such promises, con- guarantee that at first glance seems good forthem. sumers can take them as a sign ofa competitive offering. There is no evidence that Britain’s current crop of price-match This does not seem to be what is happening in Britain, how- guarantees has hurt consumers. However, researchers have ever. There, it is the more expensive supermarkets that are pro- linked similar promises elsewhere to sustained high prices for mising to match each others’ prices. Only one has pledged to groceries, tyres and even shares.* Wonks have confirmed the match the deals on offer at Aldi and Lidl, nimble low-cost rivals finding in the laboratory, too. In an experiment conducted in that are making inroads into the market. 2003, Shakun Datta of the University of Richmond and Jennifer One British supermarket proclaims to its customers that, Offenberg of Loyola Marymount University paired subjects at thanks to its guarantee, they “don’t have to shop around”. On random and asked them to play two versions of a computerised close examination, that sounds like an effort to abate a price war, price-setting game—one in which players could offer price-match not start one. 7 guarantees and another in which they could not. Participants got to keep any profits they made, and were repeatedly reshuffled to ...... preventanyotherprice-fixingtacticsfrom arisingduring multiple *Studies cited in this article can be found at www.economist.com/pricematching15 interactionswith the same partner. When the guarantee was pos- Economist.com/blogs/freeexchange Science and technology The Economist February 14th 2015 69

Also in this section 70 Replacing orbiting infrastructure 71 Measuring the sea’s acidity 71 How violins evolved 72 Making holographic movies

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

The Arctic Ocean The two have different properties. Multi- year ice is eroded by the wind and Awakening pounded from below by ocean currents, so its surface is pitted and ridged. First-year ice, in contrast, is unscarred by time. When multi-year ice thaws, the melt- watergathers on its surface, forming ponds between the ridges. That means a fair TROMSO, NORWAY amount of ice remains uncovered, and Earth’s northernmost sea is stirring. The consequences are both good and bad continues to reflect sunlight. Meltwater N NOVEMBER 2011 an American ice- the equator—from, say, 25°C to 26°C—will from first-year ice, though, spreads right Ibreaker, USCGC Healy, set off from Sew- have effects, but does not change much. A across the smooth surface, reducing reflec- ard, Alaska, to sail north through the Arctic rise from 0°C to 1°C melts the ice. That tivity far more. In 1985, 70% of Arctic ice Circle into the Chukchi Sea. It was the be- changes everything, from local biology to was multi-year and 30% first-year. By 2012, ginning of the winter-long polar night. Sea global meteorology. those proportions were reversed. And the ice was forming. The sun did not appear in And the Arctic is melting fast. Julienne biggest loss is of ice five years old or more. the northern Chukchi for weeks. Those on Stroeve, ofthe National Snow and Ice Data This sort is the crinkliest, and reflects most board expected creatures to be sparse in Centre in Boulder, Colorado, calculates light ofall. It has shrunkfrom 30% ofthe to- numberand enteringhibernation. Instead, that between 1953 and 2014 the average tal in 1980 to 5% now. they found a ferment ofactivity. area of the Arctic sea ice shrank by Robert Campbell of the University of 48,000km2 a year (a three-hundredth of its Let the sun shine in Rhode Island, one of Healey’s supercargo winter extent). Between 1979 and 2014 it For living things, this should be excellent of scientists, outlined the details at Arctic shrank by 87,000km2 a year. Between 1996 news. More open water means more light, Frontiers, a scientific conference held in and 2014, the rate rose to 148,000km2, even which means more photosynthesis. Prim- Tromso, Norway, last month. His research, though the past two seasons have seen an aryproduction, ascarbon compoundspro- and that of his colleagues, showed that increase in summer ice compared with the duced by this photosynthesis are known, planktonic animals such as copepods (pic- low point in 2012. is rising. Antje Boetius ofBremen Universi- tured above) and krill were abundant, ac- This accelerating rate involves two ty says the seabed at the North Pole is now tive and grazingon the still smaller algae of feedback loops—one well-known, the oth- green—or would be if you could see it—be- the phytoplankton, themselves adapted to er less so. The well-known one is that ice cause so much photosynthesis has taken manage with the tiniest sliver of winter reflects sunlight but water, which is darker, place at the surface and the algae have died light. Instead of hibernating, they were de- absorbs it. So as water replaces ice, more and sunk to the bottom. According to Mar veloping. Larvae were turning into adults heat is retained. In 1980 the Arctic Ocean Fernández-Méndez of the Alfred Wegener and a few species were even reproducing. absorbed 38% of incoming solar energy. By Institute in Bremerhaven, in the summer This revelation of life in the middle of the 2010 it absorbed 63%. This warms the wa- of1982 a column of Arctic seawater with a polar night is one of many surprises of re- ter, melting more ice from beneath. cross-sectional area ofa square metre fixed cent Arctic science. And that knowledge is That phenomenon triggers the second 26 milligrams of carbon a day. By 2012 that changing people’s understanding of the feedback loop. In the 1980s Arctic sea ice figure had risen to 34-53mg. world’s northernmost habitat. was about 3 metres thick. Some would With rising primary production, and The Arctic, sparselypopulated and rare- melt in summer and freeze again in winter, thus more food available, you might ex- ly visited by outsiders, is easily forgotten but most would remain throughout the pect the rest of the ecosystem to be flour- by those at lower latitudes. But it is where year. This is multi-year ice. Now, millions ishing, too. And some of it is. There has, for the impact of a warming climate is most ofsquare kilometres melt away in summer example, been a substantial increase in the vividly seen. A 1°C rise in temperatures at and refreeze in winter. This is first-year ice. number of cod—especially of sexually ac-1 70 Science and technology The Economist February 14th 2015

2 tive cod, more than seven years old. These swim northward in search of cooler water beneath to light. fish are also now found much closer to the ters. Garry Stenson of Fisheries and Jon Lawrence of Britain’s National pole than they used to be, at 79° or 80° Oceans Canada, a government agency, Oceanography Centre has looked at what north. Harbour seals are doing well, too. A reckons that the number of harp-seal mis- might happen to nutrient availability and colony on Svalbard is the species’s north- carriages has risen greatly in response. productivity in an ice-free Arctic. He con- ernmost outpost. Unlike some other seals, Harp seals exemplify the difficulty of cluded that, as the ice melted, primary pro- harbour seals do not depend on ice to give adapting to changing conditions. The obvi- duction would rise by only 11%, not 300%, birth or to moult, so the ice’s retreat is less ous response for an ice-dependent animal as a linear extrapolation would suggest. bothersome to them. And as a predomi- such as a harp seal would be to follow the The reason is the green seabed. The nantly temperate species, they benefit retreating ice—in its case, northward from dead algae have taken the nitrate with when waters warm up. its breeding grounds near Newfoundland. them. Something similar happens in other Other species, though, are being But that would bring the seals closer to oceans, of course, but in the Arctic the lost squeezed by competition from these new- their main predator, the polar bear (which surface nitrates do not seem to be being re- comers and by changing conditions in gen- eats seal pups). Dr Stenson says harp seals plenished—perhaps because of a lack of eral. In the waters where cod thrive, minke will swim north, but only if there is no ice the upwelling currents found elsewhere. whales and harp seals are struggling, at in March, as happened in 2010. In 2011 Mr Lawrence calculates that almost all the least to judge by the condition of their there was a little March ice and they stayed extra productivity the Arctic is likely to see blubber. A study by Bjarte Bogstad of Nor- put—onlyto be almostwiped outwhen the will thus take place at least 20 metres be- way’s Institute of Marine Research found ice melted later in the summer. low the surface, where it is pretty dark re- that the blubber of both species had de- This sort ofthing, ofcourse, is all part of gardless of ice. Productivity at the surface clined from being more than 40mm thick the cut and thrust of ecology. More worry- itself, by contrast, is flat. in the early1990sto less than 35mm now. ing to those who study the Arctic’s biologi- Another reason the Arctic’s creatures The whales may be suffering because cal awakening is that the rise in primary may not flourish in the extra sunlight is the Arctic zooplankton on which they feed production which sustains it might sud- that they have evolved to take advantage are being replaced by more temperate spe- denly be capped. of a short summer. This season is so com- cies that are harder to catch or less nutri- Lightisnotthe onlyrequirement forlife. pressed thatthe timingofplantgrowth, an- tious. Harp seals suffer directly because The phytoplankton that sit at the bottom imal births and feeding cycles has to be they depend on ice (they give birth on it, ofthe food chain need nutrients such as ni- closely synchronised. A few days makes a moult on it and use it for rest while hunt- trates (to make proteins) and silicates (to difference. Copepods, forexample, emerge ing). Ifthe ice is too thin, their pups fall into make protective shells). Dr Fernández- just before the peak bloom of algae. If the the waterand drown. Theyalso suffer indi- Méndez thinks a shortage of these may ice melts early, the algae will bloom early rectly, through the loss oftheir main prey, a limit the Arctic Ocean’s productivity even too and then die. The newly emerging fish called the capelin, which has begun to ifmost ofthe ice melts and exposes the wa- copepods will thus not have enough to eat. And since copepods are food for predators, the ecosystem as a whole will suffer. To capture the impact ofchanging envi- Tough old birds ronmental conditions on food webs as a Launch date and lifespan Expected life Replacement, actual or planned whole (rather than on individual species), Satellite 1990 1995 2000 2005 2010 2015 2020 2025 two recent studies built computer models (No. in array) Purpose to describe them. These looked at how ACE Space-weather warning many species are in a web, how many GRACE (2) Climate-change monitoring links there are between these species (ie, NOAA-16 Weather observation who eats whom), where the species live, NOAA-19 Weather observation and whetherthat is changing. Both models SNPP Weather forecasting suggested that the condition of some Arc- GOES (4) Weather forecasting GOES-12 * tic food webs is coming under strain. GOES-13 Building ecological models is, however, a tricky business. Even in well-studied GOES-14 habitats all the variables are rarely under- GOES-15 stood. And evolution can happen quickly GPS (31) Global BLOCK IIA if the pressure is great enough. For exam- Positioning System BLOCK IIR needs 24-27 active ple, copepods whose internal clocks better satellites BLOCK IIR(M) matched changed conditions would BLOCK IIF spread rapidly. QuikSCAT Rapid warnings of * meteorological events Winds of change Source: NASA; NOAA; USAF *Failed before replacement All of which is fascinating. From the human, rather than the copepod point of On Earth it is a fact of public life that politicians love to trumpet new infrastructure but view, though, the biggest question about take much less interest in maintaining what already exists. The same rule, it appears, the Arcticisthis: isitaffectingother partsof applies in outer space. Many satellites launched for important purposes such as monitor- the Earth’s climate—those regions where ing solar weather (bad solar storms can damage electrical equipment on Earth), tracking people live? Jennifer Francis of Rutgers the climate and just helping people navigate are limping along in need of replacement. University argues that it is. One that is about to be substituted is the Advanced Composition Explorer, a solar-weather Because the poles are cold, warm air satellite launched in 1997 with an intended lifetime of five years. After many postpone- flows from the equator north and south in ments its replacement, the Deep Space Climate Observatory, should have got off the orderto equalise temperatures. The Earth’s launch pad and into orbit on February 11th, as The Economist went to press. That still rotation disturbs these air currents, creat- leaves a lot of other elderly satellites in similar need of retirement. ing (in the northern hemisphere) the jet stream, which flows around the planet in a 1 The Economist February 14th 2015 Science and technology 71

2 wavy pattern, bringing up warm air and Technological evolution making north-west Europe hotter than other places at the same latitude. If the temperature gap between the Making sweet music north pole and the equator narrows (because the Arctic is warming faster), then Artefacts, as well as organisms, can evolve by natural selection the poleward flow of air might falter. And wind speeds have indeed been dropping. IOLOGICAL evolution happens by That could have two consequences. One is B random mutation and selection. The F factor that it may increase the so-called “Siberian Technological evolution involves selec- Sonic power output of Cremonese violins High”, a huge build-up of dry, freezing air tion, too. Products preferred by custom- % increase GUARNERI that is known to affect much of the north- ers are the ones that reproduce. But since 60 ern hemisphere’s weather—for there technology is the result ofconscious STRADIVARI 50 seems to be a link between the loss of sea design, the mutation part ofthe process AMATI ice in parts of the Arctic and lower tem- might reasonably be assumed to be 40 peratures in Siberia. The other is that, as deliberate rather than random. 30 the jet stream weakens, its waves become A study just published in the Proceed- exaggerated, creating pockets of air con- ings of the Royal Society suggests, how- 20 nected with extreme weather events, such ever, that this is not always the case. 10 as the exceptional cold that hit the Ameri- Nicholas Makris and his colleagues at the can Midwest in January 2014. Massachusetts Institute ofTechnology, in 0 1560 1600 25 50 75 1700 25 50 Both ideas are controversial. The links collaboration with Roman Barnas, a Source: Proceedings of the Royal Society between these weather patterns and the violin-maker at the North Bennet Street warmer Arctic are unproven. Some cli- School, in Boston, have been looking at mate scientistsdismiss them asstatistically the evolution ofthat instrument. One their peripheries. They showed how the irrelevant. Variation is so great, they argue, aspect ofthe process intrigued them in shape ofthe hole varied over the centu- that if there is some sort of signal from the particular—the changing shape, over the ries, and how that affected its power melting Arctic, it is being lost in the noise. years, ofthe holes in a violin’s body that output. The final Cremonese design had For the same reason, however, it is too ear- amplify the emerging sound. twice the sonic power ofthe circular ly to write off the signal altogether. Only The violin’s oldest European ances- holes ofthe fithele. time will allow it, if it exists, to be separat- tors date from the tenth century. They Except that Dr Makris doubts “design” ed from the noise. were called “fitheles”, a word derived is precisely the right word forwhat hap- One thing does seem certain, though. from vitula, the Latin forheifer, the source pened. Design implies intent. But his Whether the Arctic Ocean’s awakening is ofthe gut forthe strings. (The Latin word analysis of470 Cremonese instruments for good, or ill, or both, it is unstoppable. also eventually gave rise to “violin”. made between 1560 and 1750 suggests, as That makes understanding it, and antici- Fitheles, meanwhile, became “fiddle” in a the chart shows, that change was gra- pating its effects, essential. 7 process oflinguistic speciation also akin dual—and consistent, in Dr Makris’s view, to the biological sort.) The instrument with random variations in craftsmen’s arrived at its modern form between the techniques producing instruments of Oceanography 16th and the 18th centuries, in the work- different power. The market, presumably, shops ofCremona, a city in northern favoured those journeymen within a An acid test for the Italy that produced the Amati, Guarneri workshop who made more powerful and Stradivari dynasties ofluthiers. instruments. When they became masters high seas Dr Makris and his team noticed that, in their turn, they then passed their ways in the transition from tenth-century ofdoing things on to their own appren- Seattle fithele to 18th-century violin, the holes on tices. Only at the very end ofthe period top ofthe sound box evolved from sim- might a deliberate change have been The latest XPRIZE is fora betterway of ple circles to the complex, elongated made, as the holes get suddenly longer. monitoring the ocean’s pH f-shapes familiar in today’s instruments. Intriguingly, intentional attempts in N MANY ways, litmus paper is the per- They wondered why. the 19th century to fiddle furtherwith the Ifect scientific sensor. It is cheap, requires The answer, arrived at after several f-holes’ designs actually served to make no power or skill to use and yields instant pages ofadvanced mathematics, and things worse, and did not endure. As is results. Blue paper turns red in acids. Red confirmed by experiment, is that holes’ also the case with living organisms, paper turns blue in alkalis. And that is all sound-amplification properties depend mutation and selection seem to have you need to know. not on their areas but on the lengths of arrived at an optimal result. In the real world, though, things are a bit more complicated. Acidity is not a black and white (or even red and blue) affair. about by rising carbon-dioxide levels in reckoned to have absorbed about a third of Rather, itismeasured on the pH scale, rang- the air. The XPRIZE foundation, a charity the carbon dioxide emitted by the burning ing from strong acids (pH 1), through neu- that runs technology competitions, has of fossil fuels. That has reduced average tral, pure water (pH 7) to strong bases (pH therefore put up $2m in prize money, to be surface pH to 8.1—a fall that may sound tri- 14). Measuring pH precisely needs special awarded to those inventors who can come vial but, because the pH scale is logarith- equipment. And in the rough-and-tumble up with devices which will do that track- mic, equates to a 25% increase in acidity. of the sea rather than on the calm of the ing best. And on February 9th, in Seattle The long-term consequences of this laboratorybench, thatequipmentneeds to Aquarium, the competitors started going acidification are unknown. Many sea-crea- be robust, as well. mano a mano. tures, though, make their shells and skele- Such marine measurements are impor- At the industrial era’s dawn in the tons out of calcium carbonate or calcium tant, however, in order to track the acidifi- mid-18th century, the ocean’s surface wa- phosphate—materials that dissolve in ac- cation of the ocean that is being brought ters had a pH of 8.2. Since then, they are ids. Preliminary studies suggest that some 1 72 Science and technology The Economist February 14th 2015

2 of these animals are already finding it Holographic movies are costly because they need far smaller harder to survive than they used to. If that picture elements. Dr Smalley’s team, there- is true, and the problem of acidification Light at the end of fore, take a different approach, the latest it- gets worse, everything from tropical coral eration ofwhich they have just reported in reefs to temperate-water mussel farms a tunnel the Review of Scientific Instruments. may be affected. This will in turn have an Their story began when Dr Smalley impact, albeit indirectly, on organisms fur- was plain MrSmalley, a student at the Mas- ther up the food chain. sachusetts Institute of Technology. In 2013 Affordable moving holography may not At the moment, the machines used to he published the design ofa chip that costs be too faraway measure seawater’s pH cost $10,000- roughly $10 to produce and which is capa- 20,000 each, and cannot be deployed at OLOGRAMS are a staple ofscience fic- ble ofmaking a small, simple hologram. depth because the pressure there will dam- Htion. For many, the very word will The chip is a crystal of lithium niobate age them. The Wendy Schmidt Ocean conjure an image of Princess Leia from that has a light-carrying channel called a Health XPRIZE, as this particular contest is “Star Wars” (pictured), or of the holodeck waveguide carved into it. Lithium niobate called, hopesto correctboth flaws. Half the of the starship Enterprise. Making real is piezoelectric—meaning that when a vol- prize money is for low-cost contenders, moving holograms, though, remains tage is applied to it, it contracts or expands, aimed at the likes of oyster farmers and tricky. Every approach tried so far repre- becoming more or less dense as it does so. cash-strapped government officials who sents a trade-offbetween the quality ofthe If the voltage varies, this makes moving cannot, at the moment, measure sea- image, its size and the cost of the kit that patterns of more- and less-dense material. water’s acidity. The other half is for high- produces it—and making the first two ac- Changing the frequency with which the performance scientificmetersable to mon- ceptable meansthe third isexorbitant. That voltage varies changes the pattern. Since itor the deep ocean formonths at a time. could change, though, if Daniel Smalley of light takes different paths in material ofdif- Brigham YoungUniversity, in Utah, and his ferent densities, such patterns can form op- Getting pHysical colleagues have their way. They have tical gratings that change sufficiently fast to Among the front-runners in the first cate- made a gizmo which they hope will even- create moving holograms. gory is Smartphin. The brainchild ofan en- tually be able to project screen-sized mov- As light passes through such a grating it gineer called Benjamin Thompson, this is ing holograms for not much more than the isdiffracted into a horizontal fan, forming a designed to replace the stabilising fin un- cost ofa high-end television set. holographic line that is equivalent to one der a surfboard. Sensors within the fin re- Holography works by squashing all of line ofa television display. This can then, if cord the water’s temperature, salinity and the three-dimensional information in a desired, be run through a scanner that acidity, and then broadcast those data, to- scene into a structure called an optical grat- splits it up into multiple lines, one above gether with the fin’s location (as recorded ing. When this grating is illuminated, light another, generating a picture. Using this from global-positioning satellites), to base bounces off its bumps and troughs in such method, Dr Smalley was able, by employ- via the mobile-phone network. a way that the reflection reconstructs the ing red, green and blue light simultaneous- Contenders in the second category in- original scene. An unchanging grating ly, to create a coloured, holographic image. clude Chen Xuegang of Zhejiang Universi- yields a static hologram, such as is found Unfortunately, this single-waveguide ty in Hangzhou, China, who believes his on a bankcard. But gadget-makers and mil- image can be seen only by looking straight solid-state electrochemical meter should itary types would dearly like to use similar along the waveguide’s axis. The next task, work well at high pressures and low tem- trickery to create holo-videos, by continu- therefore, is to scale the design up by link- peratures, and ANB Sensors, a British team ously varying the grating’s geometry. ing many crystals together, to create an im- sponsored by Schlumberger, an oilfield- Most attempts to do so involve modi- age both bigger than a single crystal’s dis- services company. Dr Chen thinks his de- fied liquid-crystal displays (LCDs). But, al- play and capable ofbeing seen from lots of vice might be commercialised for as little though commercial LCDs are cheap, the directions. That means controlling precise- as $1,000. ANB’s is similarly frugal. To cut bespoke screens required for holography ly where the optical output ofa waveguide costs as much as possible it employs stan- goes—which is what Dr Smalley’s latest pa- dard D-cell batteries and cheap memory per is about. cards to record the data. To align the outputs of many devices, Another entrant is, to all intents and the team needed to know in exquisite de- purposes, a 21st-century reboot of the lit- tail how the colour and angle of light com- mustest. Optode, a team from GrazUniver- ing out of each one of them change as the sity of Technology, in Austria, has devel- voltage frequency is altered. That is no oped an optical sensor which contains a mean feat of measurement, but by using a dye molecule that changes its fluorescence bespoke system of detectors Dr Smalley with pH. and his collaborators have discovered the Between now and March 7th these de- crucial voltage frequencies that diffract dif- vices, which are among 17 entrants to the ferent colours independently of one an- contest, will measure the pH of water other but at angles which overlap nicely. pumped from Puget Sound, including all This will allow multicoloured images to be the micro-organisms, algae and plants created from numerous waveguides in a therein that might foul the instruments’ way that resembles Monet rather than sensors. Up to five finalists that survive the Jackson Pollock. ordeal, and prove theycan measure acidity In principle, such a display should be to within 0.02 pH units, will then be tested able to produce room-sized holograms. on a cruise this summer. Turning that principle into practice will According to Paul Bunje, who runs the take a while. Butifthe system doesscale up competition, only two firms make seawa- in the way Dr Smalley hopes it will, then ter pH meters at the moment. Once the living-room holography may be yet anoth- prizes have been awarded, they can expect er hoary prediction of the future that actu- a little competition themselves. 7 Indistinguishable from magic? ally does arrive in the present. 7 Books and arts The Economist February 14th 2015 73

Also in this section 74 Money and its origins 74 The making of T.S. Eliot 75 Lawrence before Arabia 76 Love songs, a history 76 Racism and the theatre

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Russian cinema of Culture and the priest a KGB general. It would have been an anti-Soviet picture; Portrait of a country today, it is an anticlerical one. The Soviet Union may have gone, but the reverence for the state as an almost sacred force in Russia remains. The role played by com- MOSCOW munist ideology has been largely replaced by that ofthe Orthodoxchurch, which, like The domestic response to Andrei Zvyagintsev’s award-winning film, “Leviathan”, the state itself, has turned into something says a lot about today’s Russia, and especially about the church ofa monster. O THOSE in the know, there are two porters of the state and the church, and This metamorphosis of religion into TRussian trailers for “Leviathan”, Andrei praised byliberalswho recognise its truths. ideology is one ofthe most strikingthemes Zvyagintsev’s new film, which opened in The film is set in Russia’s desolate both of “Leviathan” and of contemporary Moscow earlier this month. The official north. The main character, Nikolai, is a Russian life. The transformation should version nods at the praise that has already soulful car mechanic who lives in a wood- not be such a surprise. The Bolsheviks been showered on the film at the Cannes en house by the Barents Sea with his frus- destroyed churches and shot priests, but film festival and the Golden Globes, as trated wife and a depressed teenage son they also adopted Orthodox Christianity, well as its nomination for an Academy from an earlier marriage. His house and borrowing its imagery and language to Award. It intersperses scenes from the film land are being taken from him by the state, sanctify their rule. Josef Stalin, who with tributes and endorsements. “One of represented here by a drunken and corrupt trained as a cleric, appealed to the nation the few films that will stay in the history of mayor who is closely advised by an Ortho- when the Nazis invaded the Soviet Union cinema,” sang Kommersant, a Russian dox priest. Nikolai’s friend, a lawyer, using the biblical “brothers and sisters” daily. “Amasterpiece”, declared Le Figaro, a travels from Moscow to help him fight the and enlisted the church as an ally during French one. “Zvyagintsev is one of the mayor. But that only leads to more disas- the war. Many priests maintained a close great directors of our time,” opined the ters. In the end, Nikolai loses his wife, his relationship with the KGB. That interaction Irish Times. freedom and his house, which, in a final left its mark. The second trailer, posted on YouTube, twist, is bulldozed to make space for a new Like the KGB—the Committee for State is a spoof. The rolling credits state: “The church that is inaugurated by the mayor Security—the church has adopted the role Zionist Occupation Government, US State and the priest, who preaches about patrio- ofguardian ofthe state. Just as the commu- Department, CIA and the world anti- tism and love for the Russian state. nists’ ideology became a form of religion, Russian alliance present…” “A film made Laden with biblical metaphor, drawn religion has become an ideology, used by according to the principle of ‘shitsky- especially from the Book of Job, “Levia- the godless state to justify both its sacred rusky’,” says Vladimir Medinsky, the Rus- than” is a hyperrealistic portrayal of mod- status and its right to break its own laws. sian minister of culture. A “film made for ern Russia. One can almost feel the sweaty The priest in “Leviathan” tells the mayor the Western elites,” preaches Father Vsevo- mayor’s breath, with its reek of vodka and who faces elections that “all power is from lod Chaplin. “This film is dangerous to onion. To the film-makers, corruption is a God”. All the mayor needs to do, he says, is show to the Russians,” rules Irina Yaro- process of decay and erosion. Boats are to show authority and force, crushing an vaya, a deputy in the Russian parliament, shown rusting in the sea; a giant whale’s individual like Nikolai. the Duma. skeleton rots on the beach. Life, faith and A few days before the film was released “Leviathan” maynotbreaknewartistic the state are all steeped in corrosion. in Russia, Kirill, the patriarch of the Ortho- ground, but it has a lot to say about the Pu- Russia is as politicised as it was at the dox church, took to the floor of the Duma. tin era. Rarely since Soviet times has an art end of Soviet rule. Had “Leviathan” been He praised the Soviet era forbreeding “sol- film evoked such fierce debate. It has been made then, the mayor would have been a idarity” in people and lashed out at the de- denigrated as heresy and slander by sup- local party boss, the new church a Palace pravity of the West. Neither Western free-1 74 Books and arts The Economist February 14th 2015

2 doms nor laws, he argued, can bring good was that there was not enough money to prices were remarkably stable during this by themselves without the fundamental go round. The currency was too valuable period; over the short run, however, the values generated by the state—whether the for everyday trade; back in 13th-century discipline required by this standard re- Soviet Union or Russia. England, one farthing, or a quarter-penny, quired some short, sharp slumps which “Leviathan” shines a light on the entan- bought four cups of ale (those were the imposed considerable pain on the work- glement of church and state. Kirill was one days). The daily wage was a penny or two. ing classes. The advent of universal suf- of the first to call for Pussy Riot to be pun- Modern economists tend to think of frage after the first world war made it im- ished three years ago after the punk band money as a real, not a nominal, issue; possible for democratically elected staged an anticlerical performance in a expanding the money supply may raise governments to impose such costs on their Moscow cathedral, which is referred to in prices but not affect the volume of goods voters; commodity money disappeared the film. That same cathedral had once and services being traded. But Ms Desan and “fiat” money (ie, money that is what been blown up bythe Bolsheviks. Itwas re- argues that, in medieval times, this was not the government declares it to be) became built by the formermayorofMoscow, Yury the case. The lack of coins made it difficult the norm. Luzhkov, who also gave a flat to Kirill in the to trade. Coin shortages encouraged the In essence, history has seen a battle House on the Embankment, which was use of money from abroad, the author ar- between money’s role as a store of value originally built forthe Bolshevikleaders. gues. In addition, the coinage was debased (which requires a restricted supply) and its Thomas Hobbes himself could barely by the medieval practice of “clipping” of role as a means of exchange (which can imagine what a monster church and state coins, or shaving off the edges to save the require the creation of more money). This have become. One Russian liberal essayist silver. All this led to the frequent need to battle is still going on. Ms Desan displays wrote that “Leviathan” depicts a people reclassify or redenominate the coinage. exemplary scholarship in detailing mon- who have fallen from God. In today’s Rus- Sometimes it was the monarchs who were ey’s origins, albeit in an academic style sia it is not the people, but the church itself, pulling off this trick as a way of boosting that is hard workforthe general reader. But the film concludes, that has fallen. 7 their own finances. At other times rede- her study is worth the effort. 7 nomination also helped to boost activity; an early version ofQE. The origins of money Nevertheless, every change prompted T.S. Eliot howls ofcomplaint from the losingparties. Means of Redenominations also led to tricky legal Time present and disputes. When repaying a debt, was the exchange borrower obliged to repay a set number of time past coins? When creditors tried to argue that it should instead be a set amount of silver, the privy council of James I declared that Making Money: Coin, Currency and the Young Eliot: From St Louis to The Waste “the king by his prerogative may make Coming of Capitalism. By Christine Desan. Land. By Robert Crawford. Farrar, Straus and money of what matter and form he plea- Oxford University Press; 496 pages; $85 and Giroux; 512 pages; $35. Jonathan Cape; £25 seth, and establish the standard ofit.” £50 This attitude underwent a reversal after HEN Thomas Stearns Eliot died in ONEYmay feel as solid as the Bank of the Glorious Revolution, which brought W1965 few other poets could claim to MEngland, but it is an ever-shifting William III to power in 1689 with the help match his achievement. “The Waste Land”, phenomenon. People have gone from us- of Whig financiers who set up the Bank of a difficult and richly allusive workthat first inggold orsilvercoins through paper notes England. The king’s creditors naturally had came out in 1922, had been hailed as one of and plastic cards to the modern practice of an interest in sound money, and Britain the finest poems of his generation. A cot- “quantitative easing” (QE). adopted the gold standard, which was to tage industry of academic criticism had To some on the Republican right in last, in peacetime at least, for much of the sprungup around it. But since Eliot’s death, America, this evolution is a rake’s progress, next two centuries. Over the long run, little has been known ofthe life that led up in which QE is a debasement ofthe curren- to its creation. His widow (and executor), cy leading to hyperinflation and economic Valerie Eliot, refused to authorise any biog- ruin. They want a return to the gold stan- raphies; the poet’s reputation became tar- dard, whereby the amount of money nished with accusations of anti-Semitism. would be linked to a country’s gold Some 50 years on, a new biography sheds reserves. Politicians (and central bankers) light on a tricky, brilliant writer. would be unable to tamper with it. “Young Eliot” is the most carefully But in a new book, “Making Money”, researched life to date. Robert Crawford, a Christine Desan, a Harvard law professor, poet who teaches at the University of St challenges the view of money’s history as Andrew’s, traces Eliot’s life from his birth a fall from grace. She is part of the “cartal- in St Louis, Missouri, to the moment “The ist” school which argues that money did Waste Land” was published when the not develop spontaneously from below, author was 34 years old. (A second vol- but was imposed from above by the state ume, on his life after the publication, is in or ruler. A sovereign might offer tokens as the works.) In doing so Mr Crawford charts payments for goods and services, and the creation of one of the finest pieces of agree to accept those tokens back to meet literature in the 20th century. taxes or debts. In effect a guarantee from Few previous biographies have been the state, this made such tokens useful for able to delve into the early years of Eliot’s private trade. And governments were able life. Partly this is because so few docu- to charge for the service of turning gold ments exist: between 1905, when Eliot was and (more usually) silver bullion into coin. 16 years old, and 1910, all that survives from Despite thisincentive forthe creation of his correspondence is a single postcard. Mr money, the standard medieval complaint Crawford’s book, by contrast, is rich with 1 The Economist February 14th 2015 Books and arts 75

2 detail. He devotes the first chunk to Eliot’s ly idiosyncratic. He was short and had ice- childhood, evoking the bookish house- blue eyes. He was secretive as well as in- hold he grew up in: both of Eliot’s parents, quisitive, sceptical of received truths, easi- Lottie and Hal (a president of several brick ly bored but passionate about medieval companies) wrote poetry in their spare history, cathedrals and brass rubbings. time. In such an atmosphere, the young During his teenage years, he would hang poet thrived. Aged ten, Eliot astounded his about building sites in his home city and family by reading John Milton, a complex gather fragments ofpots and jugs which he 17th-century poet. When he was 14, a Har- reconstituted and delivered to grateful mu- vard professor jokingly asked the preco- seum curators. He knew how to acquire cious youngster if he was a “sub-sub- mentors—and to ignore their advice. Freshman”. Piecing together clues was something Mr Crawford is adept at tracing these he learned early. He knew there was some- early influences: how the young writer, thing odd about his parents’ relationship who would go on to be a great Francophile, butcould notdivine what; onlylater did he enthusiastically learnt French at an early learn that, scandalously for those times, age, or how his love of Arthur Conan they had never married. His father was an Doyle’s stories can be glimpsed in the Anglo-Irish baronet who had left his legal smog-filled lines ofhis early poetry. During wife for Lawrence’s mother, a governess his time at Harvard—where he also spent who was herselfborn out ofwedlock. time writingbawdy ballads with his drink- With her, Ned had an intense but ing companions, alcohol masking his shy- strained relationship; she wanted to know ness—he was introduced to modern more about him than he would tell. His let- French poetry which would profoundly ters from teenage cycling trips round change the way he wrote. As a young doc- France contained lots of information toral student, he studied Sanskrit and Pali. about castles, but only intermittent signs Thanks to all these influences, “The Waste T.E. Lawrence of real feelings. The same might be said of Land” reverberates with the sound of oth- the letters he wrote, to many recipients, er poems and differing languages. Mystery wrapped from the Levant. But it was Eliot’s unhappy personal life, As a result, posterity is still guessing as much as his literary background, which in an enigma about what was probably the most impor- inspired his great poem. At the age of 26, tant relationship in Lawrence’s life: with while studying at Oxford University and an Arab youth who was just 13 or14 when experiencing frequent “nervous sexual they met. The pale-skinned lad known The Young T.E. Lawrence. By Anthony attacks”, he met Vivien Haigh-Wood, a flir- ironically as “Dahoum”—dark one—was a Sattin. W.W. Norton; 336 pages; $28.95. tatious and emotionally unstable young local boy who carried water to Lawrence’s John Murray; £25 woman. They married after three months. excavating team at Carchemish, a site on As Eliot later wrote, their relationship ROM earliest childhood, Ned Lawrence today’s Turkish-Syrian border. “brought the state of mind out of which Fknew that his family was different, in Lawrence had the boy educated and came ‘The Waste Land’”. some unspoken way, from other families, they became inseparable. Dahoum is as- Mr Crawford describes the marriage in and that he was not at all like his four sumed to be the object of Lawrence’s post- painstaking detail. She flirts with old brothers. Such tough beginnings can either humous poem in which he declares: “I flames and with Bertrand Russell, the phi- inhibit a personality or stimulate its loved you…and wrote my will across the losopher, with whom she would have an growth. As is well explained in “The Young sky in stars to earn you Freedom.” In 1919, affair. They move between London, where T.E. Lawrence”, a quirky but rigorous as one of four motives for embracing the they live in faintly seedy neighbourhoods, biographical study by Anthony Sattin, a Arab cause, Lawrence said he had “liked a and the countryside, where they rent a cot- British travel-writer, the man best known particular Arab very much”; he had only tage with Russell. Both suffer breakdowns; as Lawrence of Arabia fell firmly in the just learned of Dahoum’s death from ty- these nervous attacks and bitter sexual second category. phus two years earlier. recriminations underpin Eliot’s poem. The Other books about Lawrence, and a Mr Sattin avoids adding to the specula- poet and his wife separated in 1933 and famous film, present him as a hero of the tion about the exact nature of this friend- Vivien entered an asylum five years later. first world war who rallied the Arabs to ship, but he is defensive about it. “There Yet she was also instrumental in encourag- rise against the Ottoman empire, guided was more than paternal care; there was ing Eliot to write poetry; she was an early them to great victories and lobbied for the love,” he writes. As the book notes, Law- reader of “The Waste Land”, inserting a Arab cause, with disappointing results, in rence recalled the relationship as one in line ofherown in itand scribblingpraise in post-war negotiations. Mr Sattin, whose which there was such mutual understand- the margins. book came out in Britain last October and ing that the pair could spend hours togeth- Mr Crawford does not flinch from is only now being published in America, er in silence. showing Eliot’s flaws: he made anti-Semit- looks instead at Lawrence’s life before that: If Lawrence ever wrote a fuller account icremarks, in hislettersaswell as in several growing up and studying in Oxford, then of his friendship with Dahoum, it may poems, despite having one or two Jewish excelling as an archaeologist in Syria and have been in the memoirs he burned in friends. On occasion he could be casually Palestine. Although every phase of Law- August 1914. Like their subject matter, biog- misogynistic, too. Rather, MrCrawford pre- rence’s life has mysteries, the early part is raphers such as Mr Sattin have to be sents Eliot as he finds him: a nervous, less shrouded by fantasy and legend, and diggers and restorers, sifting a mass of evi- unhappy individual who was also, for should therefore be slightly more accessi- dence and gluing the bits together. But most of the time, a brilliant poet. Few writ- ble, the author suggests. these bits never quite constitute a whole, ers offer such a richly complex subject Only slightly. As a middle-class boy comprehensible human being; much matter. Even fewerbiographiesoffersuch a growing up in Oxford at the turn of the about Lawrence remains an enigma fairassessment ofthe man. 7 20th century, youngLawrence was certain- because he wanted it that way. 7 76 Books and arts The Economist February 14th 2015

Romance in music Theatre My cherie amour Grey area

NEW YORK A new play considers race in the office ACLYN has an attitude problem. That, Tonya Pinkins, is black. She is hard-work- Love Songs: The Hidden History. By Ted at least, is the view ofher boss, Dr Wil- ing, but also, indeed, a bit snappish and Gioia. Oxford University Press; 336 pages; J liams. “I don’t thinkshe fits in,” he occasionally rude to patients. Ileen, $29.95 and £17.99 moans to Ileen, his office manager. But played with eagerness and fragility by ED GIOIA says that when he told firing people is so difficult nowadays. To Dianne Wiest, is white. Tpeople he was writing a history of love appease Human Resources and dodge The two had been friendly, but the songs, some responded “with a dismissive “those superficial laws about harass- doctor’s machinations inject something smile. In their opinion, this is wimpy ment”, he asks Ileen studiously to docu- toxic into their chemistry. Ileen takes her music.” In fact, Mr Gioia argues, love songs ment Jaclyn’s missteps. No, no, no, this notes; Jaclyn suspects foul play. The air are “radical and disruptive”. They have isn’t about race, the doctor hastily clari- between them grows thickwith resent- survived repression, expanded human fies—“That’s not what I’m about.” It’s just ment. Race, that detail that people like to freedom and proved uniquely hospitable that Jaclyn’s prickly demeanour disrupts pretend isn’t important, suddenly be- to the voices ofthe marginalised. the “teamworkatmosphere” he wants for comes inescapably central. Racism, He largely proves his thesis, with a his office. With a proper paper trail ofher plainly, is something that white people capacious definition of love that includes mistakes, he can send Jaclyn packing want to believe is behind them, whereas bizarre Sumerian fertility rites (a king without fear ofa lawsuit. blackpeople know it pervades their days. arouses a goddess’s votary to such heights So begins “Rasheeda Speaking”, a This is a subtle play and, it seems, a of passion that “then and there she com- powerful new play by Joel Drake John- timely one. Events over the past year, poses a song for her vulva”), chivalric trou- son, which opened at New York’s Persh- which saw two high-profile cases in badour songs and, alas, the dreary, repeti- ing Square Signature Centre on February which white police officers killed un- tive artlessness of Robert Palmer. Calling 11th. Set in a generic doctor’s office with armed blackmen and were not seriously Mr Gioia’s study “discursive” is an under- drab linoleum flooring, this play turns punished, have forced Americans to statement: readers learn that a lament sung latent prejudice into something palpable confront a darkand pernicious truth from outside a lover’s door is called a pa- and uncomfortable. Jaclyn, performed about the country’s racial inequities. The raklausithyron; that “Greensleeves” may with stage-dominating charisma by notion that a few decades ofcivil-rights have started out as a solicitation song, with laws and a bit ofaffirmative action (often the title referring to grass stains on the doled out grudgingly) have redressed clothing of prostitutes who entertained centuries ofslavery and subjugation has their clients outdoors; that among the 64 been exposed as hubris. But the idea that talents the Kama Sutra recommends for “Rasheeda Speaking” is part ofa wider elite lovers are singing, dancing, metallur- conversation that Americans are finally gy and teaching parrots how to talk; and having now is also a distorted view of that Gene Simmons, the lead singer of things. “We’ve been talking about this for KISS, has slept with 4,897 women. centuries,” said Amy Evans, a blackNew Mr Gioia proves as gifted at noticing Yorkplaywright, in a conversation after cross-cultural similarities as he does at un- the show. “The rest ofAmerica is just earthing trivia. Both Provençal trouba- now catching up.” dours and contemporary rockand roll owe Anyone seeking a prescription for tremendous debts to African and Middle racial harmony will not find it in this play. Eastern influences. Sentiments of courtly None ofthe characters is flawless, and love emerged in songs in Georgia and Pro- there are no heroes. There are plenty of vence at roughly the same time, apparent- opportunities to laugh, though some of ly independently. Songs in late-medieval the chuckles rise up from a grim place. Europe and regions today known as Bihar Ultimately the drama on stage asks some and West Bengal struggled with similar difficult questions. Should Jaclyn be questions of how to balance spiritual and fired? Is her boss a bigot? Is Ileen a stooge? carnal love. To judge from folk songs, peo- The answers, awkwardly, are hardly ple all over the world share two fixations: It’s for you-hoo blackand white. unrequited love and sex. To MrGioia, such similarities argue for a Darwinian view of love songs—that they are an evolutionary notes, play a prominent though rarely pos- something about the internet. Such a com- necessity, fulfilling a role similar in nature itive role in folk songs around the world. pulsion rarely produces observations of and intent to bird songs. Allan Bloom, a conservative American value, and Mr Gioia’s are no exception. He Objections to love songs sound similar philosopher and polemicist, grumbled channels Bloom in worrying that modern across cultures: that singing about sex and that “rock has the beat of sexual inter- love songs feature “sexual elements…so romance threatens to turn young listeners course”—a charge levelled against the heightened and the romantic trappings so away from a stable and virtuous life. The tango in the early 20th century, the waltz in noticeably absent” that they recall Meso- church thundered against “lewd and sen- the 19th and the sarabande in the 16th. potamian fertilityrites. But, ashe notes, the suous songs”, but this objection weakened Mr Gioia fares less well on modern ter- love song has outlasted religious, social and eventually faded over time; in 1667 it ritory. He is dismissive of punk and hostile and political objections for centuries; it canonised a pope who had previously toward hip-hop. Like many critics today, he will survive Miley Cyrus and Justin written libretti for opera. Parents, Mr Gioia is gripped by a regrettable need to say Bieber—and grumpy intellectuals. 7 Courses 77

The Economist February 14th 2015 78 Courses

The Economist February 14th 2015 Courses 79

The Economist February 14th 2015 80 Courses

The Economist February 14th 2015 Appointments 81

A multinational with major investments in Africa is currently seeking to hire 3 Managing Directors for its operations:

• one MD for its fuel retailing activity • one MD for its lubricants manufacturing and ASEAN + 3 MACROECONOMIC RESEARCH OFFICE (AMRO), located in distribution entity Singapore, is the surveillance unit of ASEAN +3 countries (www.amro-asia.org) to (a) conduct macroeconomic and f nancial surveillance of the members; (b) provide • one MD for running a world scale petrochemical the members with policy recommendations to mitigate economic and f nancial risks; complex. and (c) assist the members if they are utilizing f nancial resources of the Chiang Mai Initiative Multilateralization (CMIM). AMRO is in the transition period of becoming Applicants should be ﬂ uent in English with a sound track an international organization. record in oil & gas. African experience a plus. AMRO is currently looking for Principal Economist or Principal Level Senior Specialist, Economists or Economist Level Specialists, starting from early-2015 All applications shall be submitted online to (on a f xed term, renewable at the discretion of AMRO). AMRO offers competitive remuneration and expatriate benef t packages pursuant to the internal guidelines. iﬁ [email protected]. SENIOR SPECIALIST Only short-listed candidates will be contacted. (Principal/Senior Economist Level, Group Head) Senior Specialist will lead a group conducting sectorial based economic surveillance and research to produce AMRO’s key regional economic report and country surveillance reports of the ASEAN+3 members, providing policy Tenders recommendations on the sectorial related issues, and undertaking works for enhancing the overall effectiveness of the CMIM.

The candidate should possess: (i) Ph.D. in Macroeconomics, Finance, Public Finance, International Finance and Exchange Rate Policy, or related f elds from a reputable university, or master’s degree with outstanding experiences and knowledge; (ii) Excellent analytic skills in macroeconomics or sectorial issues; (iii) At least 10-15 years of relevant working experience (N.B. Background in setting benchmarks on key macroeconomic indicators and guidelines for policy recommendations for multilateral as well as bilateral surveillance is desirable); (iv) Deep understanding of the macroeconomic, f nancial, f scal policies in the ASEAN+3 members and advanced economies, and market situations and regulatory requirements of regional or global f nancial markets. SPECIALIST (Economist Level) Specialists will, conduct sectorial based economic surveillance and research on ASEAN+3 members and advanced economies, and work on CMIM related issues. Main duties include supporting country surveillance and make policy recommendations. The candidates should possess (i) An advanced degree in Economics, Finance, or related f elds from a reputable university; (ii) At least 5 years of relevant work experience; and (iii) Familiarity with the economic Business & Personal and f nancial markets, or f scal or f nancial industry situations in ASEAN+3 or advanced economies (N.B. Background in banking supervision and f nancial sector policy management, including analysis on macro-f nancial linkage, is desirable).

SPECIALIST (Economist Level) Specialists will, conduct sectorial based economic surveillance and research on ASEAN+3 members and advanced economies, and work on CMIM related issues. Main duties include supporting country surveillance and make policy recommendations. The candidates should possess (i) An advanced degree in Economics, Finance, or related f elds from a reputable university; (ii) At least 5 years of relevant work experience; and (iii) Familiarity with the economic and f nancial markets, or f scal or f nancial industry situations in ASEAN+3 or advanced economies (N.B. Background in f scal policy and public debt management is desirable).

SPECIALIST (Economist Level) Specialists will, conduct sectorial based economic surveillance and research on ASEAN+3 members and advanced economies, including works related to providing technical assistance to ASEAN+3 members in the area of macroeconomic and f nancial statistics, and work on CMIM related issues. Main To advertise within the classified section, contact: duties include supporting country surveillance and make policy recommendations. The candidates should possess (i) An advanced degree in Economics, Finance, United Kingdom United States Public Administration or related f elds from a reputable university; (ii) At least Martin Cheng - Tel: (44-20) 7576 8408 Sabrina Feldman - Tel: (212) 698-9754 5 years of relevant work experience; and (iii) Familiarity with the economic and [email protected] [email protected] f nancial markets, or f scal or f nancial industry situations in ASEAN+3 or advanced economies (N.B. Background in works related to providing technical assistance Europe Middle East & Africa to emerging market and developing countries in the area of macroeconomic and Sandra Huot - Tel: (33) 153 9366 14 Mirasol Galindo - Tel: (971) 4433 4202 f nancial statistics is desirable). [email protected] [email protected] We require candidates to possess excellent oral and written communication skills Asia in English. Qualif ed candidates should send (a) CV, (b) brief description on the David E. Smith - Tel: (852) 2585 3232 relevant working experiences, and (c) earliest possible start date of employment at [email protected] AMRO to futurestep.avature.net/AMRO by 1 March 2015 (GMT+8). The Economist February 14th 2015 82 Tenders

Appointments

The CGIAR Independent Science and Partnership Council (ISPC) is seeking to appoint three Council Members in July 2015: one with expertise in Crop science, one in Social Science and one in Water research and management. A fourth Council Member will be appointed in March 2016 with expertise in plant genetic resources and their management.

The Council’s primary mission is to enhance and promote the quality, relevance • Relevant experience in working in partnership with national agricultural and impact of science in the CGIAR. ISPC’s roles and responsibilities are further research institutions, universities, Civil Society Organisations, or the private described at: http://ispc.cgiar.org sector.

A Council member will be serving in his/her personal capacity. This would Speciﬁ cally: require devoting about 30 days per year, including time spent in two meetings with other interactions with members of the ISPC Secretariat, and other colleagues The crop scientist should possess extensive knowledge of agronomy, and the in the System, taking place in virtual mode. Initial appointments are for a two- physiology of crops and cropping systems relevant to developing countries. year term, which may be renewed. Experience of modern breeding approaches will be an asset.

The general criteria for selection are given below. Each candidate has to meet The social scientist will have research experience in policy, institutional, or at least two of these criteria, and all should have professional and personal household analyses, holding, (preferably) a disciplinary qualifi cation in the non- attributes and language skills appropriate to the workings of the ISPC. economic social sciences and with expertise in relation to the enhancement of • Eminence in a fi eld of biological, physical or social science, including gender research and equity. international recognition of research achievements; • Internationally recognized experience in agricultural science for The water research and management scientist will have research experience development; knowledge of smallholder agriculture and natural resources in agricultural projects in developing countries which focus on water use. management; and good understanding of policy dimensions in the context Experience emphasising integrative approaches to natural resource management of sustainable development: will be favoured over engineering approaches or the provision of water for other • Visionary with global perspective and strong ability to think strategically services. and analyze complex issues. • Experience in research management and partnership, and cross disciplinary The plant genetic resources scientist will have detailed international knowledge of approach to scientifi c agricultural and natural resources research for the conservation, management, and use of plant genetic resources for agriculture. international development; knowledge of evaluation, impact assessment, Experience of strategic planning approaches to agricultural research will be an and strategic planning approaches; asset.

The CGIAR is committed to achieving diversity in terms of gender, nationality, culture, and educational background. We welcome applications from everyone irrespective of gender and nationality but, as women are currently under-represented, we would particularly encourage applications from women, and applicants from Asia and Latin America at this time. All applications will be treated in the strictest conﬁ dence. Applications for all four positions will be considered simultaneously. Applications, including a covering letter stating interest in, and suitability for, one of the positions, a full c.v. with publication list (not the actual publications), the names and current contacts of three referees, should be sent by e-mail to [email protected] by March, 10th 2015. Nominations of candidates by third parties will be considered if contact with nominees and submission of all relevant documents can be completed in the same time frame. The Economist February 14th 2015 Tenders 83

Business & Personal

To advertise within the classified section, contact: United Kingdom Martin Cheng - Tel: (44-20) 7576 8408 United States Sabrina Feldman - Tel: (212) 698-9754 Readers are recommended Asia to make appropriate enquiries and take appropriate advice before sending money, incurring any expense or entering David E. Smith - Tel: (852) 2585 3232 into a binding commitment in relation to an advertisement. Middle East & Africa The Economist Newspaper Limited shall not be liable to any Mirasol Galindo - Tel: (971) 4433 4202 person for loss or damage incurred or suffered as a result Europe of his/her accepting or offering to accept an invitation Sandra Huot - Tel: (33) 153 9366 14 contained in any advertisement published in The Economist. The Economist February 14th 2015 84 Economic and ﬁnancial indicators The Economist February 14th 2015

Economic data % change on year ago Budget Interest Industrial Current-account balance balance rates, % Gross domestic product production Consumer prices Unemployment latest 12 % of GDP % of GDP 10-year gov't Currency units, per $ latest qtr* 2014† latest latest 2014† rate, % months, $bn 2014† 2014† bonds, latest Feb 11th year ago United States +2.5 Q4 +2.6 +2.4 +4.9 Dec +0.8 Dec +1.5 5.7 Jan -388.1 Q3 -2.3 -2.8 1.99 - - China +7.3 Q4 +6.1 +7.4 +7.9 Dec +0.8 Jan +2.1 4.1 Q4§ +213.8 Q4 +2.2 -2.4 3.34§§ 6.24 6.06 Japan -1.3 Q3 -1.9 +0.3 +0.3 Dec +2.4 Dec +2.7 3.4 Dec +24.3 Dec +0.4 -8.0 0.39 119 102 Britain +2.7 Q4 +2.0 +2.7 +0.5 Dec +0.5 Dec +1.4 5.8 Oct†† -163.0 Q3 -4.6 -5.5 1.67 0.66 0.61 Canada +2.6 Q3 +2.8 +2.4 +2.1 Nov +1.5 Dec +1.9 6.6 Jan -41.2 Q3 -2.3 -2.0 1.45 1.25 1.10 Euro area +0.8 Q3 +0.6 +0.8 -0.4 Nov -0.6 Jan +0.4 11.4 Dec +318.0 Nov +2.4 -2.5 0.36 0.88 0.73 Austria -0.1 Q4 +2.6 +0.7 -2.5 Nov +1.0 Dec +1.5 4.9 Dec +2.4 Q3 +2.0 -2.5 0.48 0.88 0.73 Belgium +0.9 Q4 +0.4 +1.0 -3.4 Nov -0.6 Jan +0.5 8.4 Dec +8.0 Sep -0.4 -3.0 0.65 0.88 0.73 France +0.4 Q3 +1.0 +0.4 -0.1 Dec +0.1 Dec +0.6 10.3 Dec -30.5 Dec‡ -1.4 -4.4 0.70 0.88 0.73 Germany +1.2 Q3 +0.3 +1.4 -0.4 Dec -0.3 Jan +0.8 6.5 Jan +284.5 Dec +7.1 +0.8 0.36 0.88 0.73 Greece +1.9 Q3 +3.0 +0.8 -3.9 Dec -2.6 Dec -1.3 25.8 Oct +3.0 Nov +1.4 -4.1 11.08 0.88 0.73 Italy -0.5 Q3 -0.6 -0.4 +0.1 Dec -0.6 Jan +0.2 12.9 Dec +36.7 Nov +1.5 -3.0 1.68 0.88 0.73 Netherlands +1.0 Q3 +0.5 +0.7 -2.8 Dec +0.7 Dec +0.6 8.1 Dec +91.5 Q3 +9.6 -2.6 0.46 0.88 0.73 Spain +2.0 Q4 +2.8 +1.3 +2.2 Dec -1.4 Jan -0.2 23.7 Dec -1.5 Nov +0.2 -5.6 1.67 0.88 0.73 Czech Republic +2.7 Q3 +1.7 +2.2 +7.3 Dec +0.1 Jan +0.4 7.7 Jan§ +0.2 Q3 -1.1 -1.6 0.58 24.4 20.2 Denmark +1.0 Q3 +1.6 +0.9 +4.7 Dec -0.1 Jan +0.5 5.0 Dec +21.2 Dec +6.6 +0.2 0.13 6.57 5.47 Hungary +3.2 Q3 +1.9 +3.0 +4.9 Dec -1.4 Jan nil 7.1 Dec§†† +5.7 Q3 +4.3 -2.9 3.23 273 228 Norway +3.2 Q4 +3.7 +2.3 +3.1 Dec +2.0 Jan +2.0 3.7 Nov‡‡ +49.2 Q3 +10.8 +12.0 1.40 7.56 6.13 Poland +3.4 Q3 +3.6 +3.3 +8.4 Dec -1.0 Dec +0.1 11.5 Dec§ -7.2 Nov -1.3 -3.5 2.33 3.71 3.06 Russia +0.7 Q3 na +0.6 +4.0 Dec +15.0 Jan +7.8 5.3 Dec§ +56.6 Q4 +2.7 -0.2 12.39 66.3 34.8 Sweden +2.1 Q3 +1.3 +1.9 -1.6 Dec -0.3 Dec -0.2 7.0 Dec§ +36.5 Q3 +5.8 -2.2 0.68 8.30 6.48 Switzerland +1.9 Q3 +2.6 +1.8 -0.4 Q3 -0.5 Jan nil 3.1 Jan +45.7 Q3 +10.6 +0.3 0.01 0.93 0.90 Turkey +1.7 Q3 na +3.0 +4.6 Dec +7.2 Jan +8.9 10.4 Oct§ -45.8 Dec -5.4 -1.4 7.90 2.50 2.22 Australia +2.7 Q3 +1.4 +2.8 +3.8 Q3 +1.7 Q4 +2.5 6.4 Jan -42.9 Q3 -3.0 -2.6 2.59 1.30 1.11 Hong Kong +2.7 Q3 +6.8 +2.4 -1.7 Q3 +4.8 Dec +4.4 3.3 Dec‡‡ +7.7 Q3 +1.9 +0.8 1.55 7.75 7.76 India +7.8 Q1 +7.4 +6.0 +3.8 Nov +5.0 Dec +7.2 8.8 2013 -23.4 Q3 -2.0 -4.3 7.73 62.1 62.4 Indonesia +5.0 Q4 na +5.0 +5.2 Dec +7.0 Jan +6.4 5.9 Q3§ -24.0 Q3 -2.8 -2.3 na 12,670 12,173 Malaysia +5.8 Q4 na +5.9 +7.4 Dec +2.7 Dec +3.1 2.7 Nov§ +15.2 Q4 +4.2 -3.6 3.85 3.58 3.34 Pakistan +5.4 2014** na +5.4 +4.9 Nov +3.9 Jan +7.2 6.2 2013 -3.5 Q4 -2.6 -5.5 10.00††† 101 105 Singapore +1.5 Q4 +1.6 +2.8 -1.9 Dec -0.2 Dec +1.1 1.9 Q4 +58.9 Q3 +21.6 +0.5 2.03 1.36 1.27 South Korea +2.8 Q4 +1.5 +3.6 +0.4 Dec +0.8 Jan +1.3 3.8 Jan§ +89.4 Dec +5.8 +0.6 2.35 1,090 1,071 Taiwan +3.2 Q4 +2.6 +3.6 +7.3 Dec -0.9 Jan +1.3 3.8 Dec +65.0 Q3 +11.7 -1.4 1.60 31.5 30.3 Thailand +0.6 Q3 +4.4 +0.7 -0.4 Dec -0.4 Jan +1.9 0.6 Dec§ +14.2 Q4 +2.6 -2.5 2.67 32.6 32.8 Argentina -0.8 Q3 -2.1 -0.4 -2.4 Dec — *** — 7.5 Q3§ -5.0 Q3 -1.1 -2.7 na 8.67 7.83 Brazil -0.2 Q3 +0.3 +0.1 -2.8 Dec +7.1 Jan +6.3 4.3 Dec§ -90.9 Dec -4.0 -5.5 12.82 2.83 2.40 Chile +0.8 Q3 +1.5 +1.8 +0.8 Dec +4.5 Jan +4.4 6.0 Dec§‡‡ -5.0 Q3 -1.7 -2.2 4.29 627 556 Colombia +4.2 Q3 +2.6 +4.8 -1.0 Nov +3.8 Jan +2.9 8.7 Dec§ -16.2 Q3 -4.4 -1.7 6.73 2,378 2,051 Mexico +2.2 Q3 +2.0 +2.3 +3.0 Dec +3.1 Jan +4.0 4.4 Dec -25.4 Q3 -1.9 -3.4 5.64 14.9 13.3 Venezuela -2.3 Q3 +10.0 -3.0 +0.8 Sep +63.6 Nov +62.1 5.5 Dec§ +10.3 Q3 +1.2 -13.0 16.76 12.0 6.29 Egypt +6.8 Q3 na +2.2 +1.2 Dec +9.7 Jan +10.1 13.1 Q3§ -4.4 Q3 -2.0 -12.0 na 7.63 6.96 Israel +2.6 Q3 +0.2 +2.5 -1.7 Nov -0.2 Dec +0.5 5.7 Dec +11.2 Q3 +3.6 -2.9 1.85 3.87 3.52 Saudi Arabia +3.6 2014 na +3.9 na +2.4 Dec +2.8 6.0 2014 +120.1 Q3 +13.1 +1.5 na 3.75 3.75 South Africa +1.4 Q3 +1.4 +1.6 +0.5 Dec +5.3 Dec +6.2 24.3 Q4§ -19.7 Q3 -5.4 -4.3 7.33 11.7 11.2 Source: Haver Analytics. *% change on previous quarter, annual rate. †The Economist poll or Economist Intelligence Unit estimate/forecast. §Not seasonally adjusted. ‡New series. **Year ending June. ††Latest 3 months. ‡‡3-month moving average. §§5-year yield. ***Official number not yet proven to be reliable; The State Street PriceStats Inflation Index, Nov 41.61%; year ago 19.95% †††Dollar-denominated bonds. The Economist February 14th 2015 Economic and ﬁnancial indicators 85

Markets % change on Global defence spending Biggest spenders, 2014 Dec 31st 2013 Global defence spending increased by % change on a year earlier Index one in local in $ 1.7% in 2014, following three years of – + Feb 11th week currency terms 50510152025 i decreases. More than half of this growth Un ted States (DJIA) 17,862.1 +1.1 +7.8 +7.8 came from three countries: Saudi Arabia, Saudi Arabia 81 China (SSEA) 3,308.4 -0.5 +49.4 +44.9 Japan (Nikkei 225) 17,652.7 -0.1 +8.4 -5.4 China and Russia. Saudi Arabia’s spend- China 129 Britain (FTSE 100) 6,818.2 -0.6 +1.0 -6.9 ing increase was the most striking, at Russia 70 Canada (S&P TSX) 15,151.5 +1.0 +11.2 -6.6 more than 21%. Chinese expenditure Euro area (FTSE Euro 100) 1,116.8 -1.1 +9.5 -10.2 continued to outﬂank that of regional India 45 Euro area (EURO STOXX 50) 3,374.1 -1.2 +8.5 -11.0 rivals, increasing by 9.7% in 2014. In Austria (ATX) 2,321.2 +3.0 -8.8 -25.2 contrast, spending in North America and South Korea 34 Belgium (Bel 20) 3,537.9 -0.8 +21.0 -0.7 Europe declined, despite concerns over Japan 48 France (CAC 40) 4,679.4 -0.4 +8.9 -10.6 Russian ambitions in Europe. Russia’s r Ge many (DAX)* 10,752.1 -1.5 +12.6 -7.7 own defence spending increased by 8.3% United States 581 Greece (Athex Comp) 793.1 -6.5 -31.8 -44.0 in 2014; it continues to spend more as a France 53 Italy (FTSE/MIB) 20,565.8 -1.8 +8.4 -11.0 GDP Netherlands (AEX) 458.3 +0.7 +14.1 -6.4 percentage of than America. While 62 i ri America remains the biggest military Britain Spa n (Mad d SE) 1,050.2 -1.9 +3.8 -14.9 2014 spending, Czech Republic (PX) 987.5 +0.7 -0.2 -19.0 spender, its share of the global total has Germany $bn 44 Denmark (OMXCB) 716.8 -1.3 +26.6 +4.1 fallen from 47% in 2010 to 38% in 2014. Source: International Institute for Strategic Studies Hungary (BUX) 17,744.9 +2.3 -4.4 -24.7 Norway (OSEAX) 647.4 -0.2 +7.4 -14.8 Poland (WIG) 51,893.8 -0.3 +1.2 -18.2 Other markets The Economist commodity-price index Russia (RTS, $ terms) 832.3 +8.0 +17.3 -42.3 2005=100 % change on % change on Sweden (OMXS30) 1,593.0 +0.9 +19.5 -8.6 Dec 31st 2013 one one Switzerland (SMI) 8,577.8 -0.4 +4.6 +0.4 Index one in local in $ Feb 3th* Feb 10th* month year r Tu key (BIST) 83,429.4 -2.9 +23.0 +5.5 Feb 11th week currency terms Dollar Index Australia (All Ord.) 5,731.7 nil +7.1 -7.3 i Un ted States (S&P 500) 2,068.5 +1.3 +11.9 +11.9 All Items 148.5 148.4 nil -10.0 Hong Kong (Hang Seng) 24,315.0 -1.5 +4.3 +4.3 United States (NAScomp) 4,801.2 +1.8 +15.0 +15.0 Food 163.8 164.2 -3.1 -11.4 India (BSE) 28,534.0 -1.2 +34.8 +33.9 China (SSEB, $ terms) 292.4 +0.7 +18.9 +15.3 Indonesia (JSX) 5,336.5 +0.4 +24.9 +19.5 Japan (Topix) 1,427.7 +0.8 +9.6 -4.3 Industrials Malaysia (KLSE) 1,799.0 -0.2 -3.6 -12.3 Europe (FTSEurofirst 300) 1,483.7 -0.2 +12.7 -7.5 All 132.7 132.0 +4.3 -8.0 Pakistan (KSE) 34,204.0 -1.4 +35.4 +40.4 World, dev'd (MSCI) 1,721.6 +0.4 +3.6 +3.6 Nfa† 139.9 143.1 +19.0 -7.0 Singapore (STI) 3,444.6 +0.8 +8.7 +0.8 Emerging markets (MSCI) 961.2 -2.0 -4.1 -4.1 Metals 129.7 127.3 -1.5 -8.5 South Korea (KOSPI) 1,945.7 -0.9 -3.3 -7.0 r Wo ld, all (MSCI) 419.9 +0.1 +2.8 +2.8 Sterling Index Taiwan (TWI) 9,462.2 -0.5 +9.9 +3.9 World bonds (Citigroup) 885.8 -1.6 -2.3 -2.3 All items 178.8 176.9 -0.5 -2.7 Thailand (SET) 1,605.1 +0.3 +23.6 +24.4 EMBI+ (JPMorgan) 691.2 -1.0 +6.1 +6.1 r Argentina (MERV) 9,118.5 +1.8 +69.1 +27.1 Hedge funds (HFRX) 1,222.8§ +0.4 -0.2 -0.2 Eu o Index Brazil (BVSP) 48,239.7 -2.2 -6.3 -22.9 Volatility, US (VIX) 17.0 +18.3 +13.7 (levels) All items 161.3 163.0 +4.1 +8.7 Chile (IGPA) 19,092.2 nil +4.7 -12.7 CDSs, Eur (iTRAXX)† 59.1 +4.9 -19.7 -34.1 Gold i Colomb a (IGBC) 10,555.1 -3.4 -19.3 -35.6 CDSs, N Am (CDX)† 66.8 -1.7 +8.8 +8.8 $ per oz 1,258.1 1,237.5 +0.1 -4.1 Mexico (IPC) 41,933.3 +0.5 -1.9 -14.9 r r i Ca bon t ad ng (EU ETS) € 7.3 +4.6 +40.5 +15.3 West Texas Intermediate Venezuela (IBC) 3,553.8 -1.2 +29.9 na Sources: Markit; Thomson Reuters. *Total return index. $ per barrel 52.7 50.3 +8.7 -49.6 Egypt (Case 30) 9,770.8 -2.7 +44.1 +31.2 †Credit-default-swap spreads, basis points. §Feb 10th Israel (TA-100) 1,285.5 +0.5 +6.4 -4.9 Sources: Bloomberg; CME Group; Cotlook; Darmenn & Curl; FT; ICCO; i r i Indicators for more countries and additional ICO; ISO; Live Rice Index; LME; NZ Wool Services; Thompson Lloyd & Saud A ab a (Tadawul) 9,133.7 -0.5 +7.0 +7.0 Ewart; Thomson Reuters; Urner Barry; WSJ. *Provisional South Africa (JSE AS) 52,069.3 +0.8 +12.6 -0.8 series, go to: Economist.com/indicators †Non-food agriculturals. 86 Obituary Richard von Weizsäcker The Economist February 14th 2015

ment to take no prisoners. Taken aback, he stammered that he had never heard of it. But two years earlier, in conversation, he had referred to “the countries we raped”. Many of the men who tried to assassi- nate Hitler on July 20th 1944 came from his regiment. He was close to them, and re- membered, in a billet on the eastern front, shooting holes in a portrait ofHitler. But he was not of or with them. After the war, when his fatherwas accused ofwarcrimes in the Nuremburg trials, he interrupted his law studies to defend him, arguing that he had tried to prevent even worse crimes. But Ernst had signed an order to deport 6,000 Jewsto Auschwitz, and hisson could not save him from prison. He remained defensive about his father’s role. Like his country, he struggled to accept his guilt. For a while he would not touch politics, going instead into business and becoming president of the lay assembly of the Lutheran church, whose teach- ingshe quietlylived by. He preached recon- ciliation among Christians in divided Germany, and was among the first to demand that the westward-shifted border of Poland, which he had once barged Germany’s liberator through, should be seen as permanent. Mr Kohl brought him into centre-right politics in 1969, as a member of the Chris- tian Democratic Union, but he was never a party apparatchik. His mind was too free- wheeling for that. In the 1970s he naturally Richard von Weizsäcker, first president ofhis reunited country, supported Ostpolitik, the policy of rap- died on January 31st, aged 94 prochement with all the eastern countries; ORTY years, as the Old Testament struggle over whether the Holocaust was it did not matter that the idea came from Fshows, marks a psychological thresh- unique. Not everybody was ready to take Willy Brandt’s rival Social Democrats. old. Richard von Weizsäcker observed this the laststep towardsfreedom through hon- on May 8th 1985, as he gave the speech of esty. But Mr von Weizsäcker demanded it. At the Berlin Wall his presidency and his life. In 40 years, a A relative few might have carried out the On Kristallnacht in 1938, when Jewish people could traverse the desert and reach crimes, he said in his speech, “but every shops were smashed, Mr von Weizsäcker the promised land; but they could also for- single German could witness what the had been in Berlin. In 1981 he became get old lessons and stray from the path. Jews had to suffer.” mayor of the city’s western side, now split And so, 40 yearsaftertheirsurrender in the He left unmentioned his own family by a wall as though in punishment. Con- war they had started, the Germans should history. But Germans knew that this ap- ventional wisdom viewed that division as face their crimes and their own destruc- peal came from a man as deeply implicat- permanent. But he insisted that the Ger- tion as honestly as they could. Only then— ed as any of them. His father, Ernst, had man question remained open as long as and this was his shocking twist—would been a senior official in Hitler’s foreign the Brandenburg Gate remained closed. they understand that the day of their de- ministry. His oldest brother, Carl Friedrich, In 1984 he was chosen as president, feat was the moment oftheir liberation. was a physicist who worked on nuclear fis- much to the chagrin ofMrKohl. Slim, ascet- Helmut Kohl, then chancellor, had mut- sion to give Hitler the bomb. Richard was ic and patrician, he made a telling contrast tered something similar a few weeks earli- the youngest brother. As a gangly, enthusi- with the fat, shabby chancellor. The CDU er, but the public had taken little notice. astic teenager he invaded Poland with the boss revelled in political combat; the head Now, however, the thought came from the Wehrmacht as part of the 9th Potsdam, an ofstate stood apart, a figure ofdecency, dig- ceremonial head of state, a white-haired elite Prussian infantry regiment. On the nity and goodness. When Germany was at and elegant aristocrat, the son of a dip- second day ofthe warHeinrich, his middle last reunited, he was the best spokesman lomat, and it was delivered in dialect-free brother, was shot through the throat not far the country could have wished for. German that resonated with gravitas. Sud- from him. Richard kept watch over Hein- Perhaps the sweetest moment occurred denly the sentiment struck with full force, rich’s dead body all night. He could not de- just after the Berlin Wall fell in November at home and abroad. A few months after scribe “the emotions ofthose hours”. 1989. The president rushed to Berlin and the speech, Mrvon Weizsäckerbecame the From then on, he did his brutal duty in approached the wall at Potsdamer Platz, in first German president to visit Israel. the eastern lands. With his regiment he no-man’s-land. East German soldiers were By then, Germans had made much pro- laid siege to Leningrad and advanced al- breaching the wall to make a border cross- gress in confronting their past. But mem- most to Moscow. He saw, and plausibly ing. As the West German president walked bers of the SS were still being honoured took part in, many atrocities. In 2009 jour- towards them, an East German officer among war dead, and Germany’s histori- nalists confronted him with a newly dis- snapped to attention and barked: “No un- ans were on the verge of a long academic covered order from 1941 that told his regi- usual developmentshere, MrPresident.”7

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