Does China Play Fair?

Corbyn prepares to govern Britain

How match-fixing poisons sport

Catalonia’s destructive referendum

If tech firms were sewage works SEPTEMBER 23RD–29TH 2017 Does China play fair?

Contents The Economist September 23rd 2017 5

8 The world this week Asia 33 Politics in Pakistan Leaders Dynast v gynaecologist 11 Global economy 34 Defining Hinduism The China challenge Sect drive 12 Online regulation 36 Gay marriage in Australia Limited liability Don’t call it a plebiscite 12 A crisis in Spain 36 Gay-bashing in Indonesia The Catalan question Looking for shelter 14 Corruption in sport 37 Tajikistan Corbyn in control The Labour Fixing the fixers Beardless and jobless Party is on track to rule 16 British politics 38 Banyan Pristine New Zealand Britain. But who rules Labour? The likely lad Leader, page16. Six months On the cover ago the opposition was in a Commercial competition Letters China battle for survival. Now it has from China will only get its sights set on Downing 19 On hurricanes, Brexit, 39 Fertility and migration fiercer. That calls for cool Street, page 50 Turkey, Richard Posner, Ups and downs heads and wise policies: Myanmar, diamonds leader, page11. A new generation of Chinese Middle East and Africa entrepreneurs will have a Briefing 41 The future of Kurdistan powerful worldwide impact, 20 Innovation in China In a terrible state page 20. The government The next wave 42 Saudi Arabia’s crackdown sets its sights on dominance The prickly prince in new industries, page 65 United States 42 Protests in Togo To go or not to go 23 The Democrats The Economist online Left, behind 44 North Korea and Africa Rocket Man’s rhino horn Daily analysis and opinion to 25 Obamacare repeal Not dead yet supplement the print edition, plus The Catalan question audio and video, and a daily chart 25 POTUS at the UN Europe Economist.com It requires a better answer Lupine 45 Spain than an unconstitutional E-mail: newsletters and 26 Newark’s rebound The clash in Catalonia independence referendum: mobile edition Baraka on a roll 46 Germany leader, page12. The Economist.com/email 26 Fixing homelessness Merkel aims for a fourth discontents and divisions Print edition: available online by Reno way 47 Sweden, NATO and Russia behind the vote, page 45 7pm London time each Thursday 28 Industrial farming A funny kind of neutrality Economist.com/print Jukes hazard 47 Honouring Kalashnikov Audio edition: available online 29 Lexington Arms and the man to download each Friday 48 The Czech Republic Economist.com/audioedition Roy Moore A scandal in Bohemia The Americas 49 Charlemagne Going postal over jobs 30 Mexico The shaking earth 31 Corruption in Brazil Volume 424 Number 9059 A prosecutor’s parting Published since September1843 shots to take part in "a severe contest between 32 Peru America’s Democrats intelligence, which presses forward, and an unworthy, timid ignorance obstructing Ministerial massacre They are ditching centrist our progress." 32 Venezuela triangulation in favour of Editorial offices in London and also: The war on cuteness economic populism, page 23. Beijing, Berlin, Brussels, Cairo, Chicago, Madrid, Alabama’s Senate primary Mexico City, Moscow, Mumbai, Nairobi, New Delhi, New York, Paris, San Francisco, São Paulo, Seoul, drives a wedge between Shanghai, Singapore, Tokyo, Washington DC Donald Trump and his closest supporters: Lexington, page 29

1 Contents continues overleaf 6 Contents The Economist September 23rd 2017

Britain Science and technology 50 The Labour Party 71 Carbon budgets One more heave Breathing space 53 Bagehot 72 Treating snake bites Tory songbirds and vipers The general and the specifics International 73 The asteroid belt E-sail away 54 Corruption in sport (1) Play up, play up 74 Dental health Brush with confidence 55 Corruption in sport (2) Match-fixing To make sports Carbon New estimates of how For the win 74 Academic sexism cleaner and more fun, legalise Purblind prejudice much carbon dioxide can be betting: leader, page14. emitted to meet climate Match-fixing is more common Business targets leave no room for Books and arts than ever. Regulators need to 57 Inside Saudi Aramco complacency, page 71 up their game, page 54 Behind the veil 75 The internationalists A radical plan 58 Platform regulation Subscription service America’s turn 76 Johnson Comma chameleon For our latest subscription offers, visit 59 Aircraft manufacturing Economist.com/offers 78 Latin American artists For subscription service, please contact by Boeing bombards telephone, fax, web or mail at the details Pacific Standard 59 Cancellations at Ryanair provided below: Time: LA/LA Pilot light North America 79 American capitalism The Economist Subscription Center 60 Toys “R” Us P.O. Box 46978, St. Louis, MO 63146-6978 A 400-year history Telephone: +1 800 456 6086 State of play Facsimile: +1 866 856 8075 61 The Latin music business E-mail: [email protected] Through the sound barrier 82 Economic and financial Latin America & Mexico indicators The Economist Subscription Center 61 Teaching enterprise P.O. Box 46979, St. Louis, MO 63146-6979 Statistics on 42 Telephone: +1 636 449 5702 Tech utilities What if large Mind over matter Facsimile: +1 636 449 5703 economies, plus a closer E-mail: [email protected] tech firms were regulated like 62 Indian marriage websites look at world GDP sewage companies? Click, meet and marry Subscription for 1 year (51 issues) Schumpeter, page 63. The 63 Schumpeter United States US $158.25 (plus tax) Obituary Canada CA $158.25 (plus tax) internet has grown up, and so Big tech, big trouble must its biggest companies: 84 Peter Hall Latin America US $289 (plus tax) leader, page12. Tech giants Fighting for the stage are in the political hot seat, Finance and economics Principal commercial offices: page 58 65 China’s economy The Adelphi Building,1-11John Adam Street, Industrial policy London WC2N 6HT 66 WTO under threat Tel: +44 (0) 20 7830 7000 Dispute unsettlement Rue de l’Athénée 32 1206 Geneva, Switzerland 67 Ethical investing Tel: +4122 566 2470 Not its own reward 750 3rd Avenue, 5th Floor, New York, NY10017 68 Real-time insurance Tel: +1212 5410500 Pay-per-risk 1301Cityplaza Four, 12 Taikoo Wan Road, Taikoo Shing, Hong Kong 68 Assortative mating Tel: +852 2585 3888 Matching theory Other commercial offices: 69 Ukraine’s bond issue Chicago, Dubai, Frankfurt, Los Angeles, Welcome back? Paris, San Francisco and Singapore Saudi Aramco The world’s 69 Norway’s wealth fund biggest oil company has a $1trn for a rainy day good story to tell—so long as 70 Free exchange it can unravel its image from A new way to teach that of the kingdom, page 57 economics

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sion forannouncing the the army forhis role as com- president, accused the govern- Politics result—a victory forthe mander-in-chief. Previous ment ofsuspending the incumbent, Uhuru Kenyatta, presidents did not receive such region’s autonomy and of over the main challenger, Raila payments. Thousands declaring a de facto state of Odinga—before the votes had marched in Guatemala City emergency. been properly counted. But the calling forMr Morales to resign court did not say there had and congress to clean house. The government ofIceland been widespread rigging or collapsed after the prime that the president was The army’s new front minister was accused oftrying culpable. Facing brickbats fornot to cover up a letter written by speaking out against the ethnic his father supporting the civil An Egyptian court sentenced cleansing ofMuslim rights ofa notorious pae- 43 people to life in prison after Rohingyas by Myanmar’s dophile. That prompted the a mass trial. Hundreds more army, Aung San Suu Kyi, the Bright Future party to leave the were sentenced to between country’s de facto leader, said coalition government. five and 15 years. Nearly 500 that human-rights violations Donald Trump’s first speech people were charged over would be punished, but sug- In Italy, Silvio Berlusconi, who to the UN General Assembly violence that erupted after the gested that the situation was was ousted as prime minister excoriated Iran and North military coup that toppled not so bad since many in 2011, made a formal return to Korea forthreatening world President Muhammad Morsi Rohingyas had decided not to the political stage. At a meeting peace. The American president in 2013. Only 52 were acquit- flee. Amnesty accused the ofhis party, Forza Italia, he promised to “totally destroy” ted. Amnesty International Nobel peace laureate of“bury- presented himselfas a pro- the regime ofKim Jong Un, called the trial a “sham”. ing her head in the sand”. European moderate who whom he called “Rocket Man”, could lead the centre-right ifit attacked America or one of Badly shaken In Pakistan, the wife ofNawaz backto power in an election, its allies. The North launched a Sharifwon a by-election for expected next March. missile on September15th that the parliamentary seat that he travelled 3,700km, flying over was forced to vacate when he A Russian helicopter taking Japan before falling into the stood down as prime minister. part in the Zapad 2017 war sea. Mr Trump also empha- Mr Sharifwas disqualified games close to the border with sised the right ofcountries to from office by the supreme Estonia reportedly fired a protect their national sover- court over allegations ofim- missile by mistake near a eignty, which went down well propriety, which he denies. group ofspectators. The Rus- with China and Russia. sian government bars foreign An election in Macau returned observers from such exercises. Republicans in the Senate the pro-Beijing government to geared up foranother attempt power, despite voter anger in Police in London arrested to disassemble Obamacare. the Chinese territory at the several men in their investiga- This time they want to pass a An earthquake ofmagnitude poor response to the strongest tion into a homemade bomb measure as part ofthe budget 7.1shookcentral Mexico, typhoon to hit the city in 50 that partially exploded on an process, thus avoiding a filibus- destroying buildings and years. Underground train heading ter. The legislation would killing at least 230 people, on into the centre ofthe city. There revoke Obamacare’s mandate the anniversary ofa devastat- Pouring oil on fire were no fatalities, but 30 peo- that people must have health ing earthquake in 1985. The ple were injured. The threat insurance. It would also cut rising death toll included from international terrorism spending on Medicaid, the dozens buried beneath a was briefly elevated to “criti- health-care programme forthe school in Mexico City. cal”, the highest level, forthe hard-up. second time this year. Hurricane Maria struckthe Seeking a reconciliation Caribbean, the second Britain’s foreign secretary, Hamas said it was ready to category-five storm in the Boris Johnson, was criticised dissolve a so-called shadow region within a month. forrepeating the bogus figure government that it had set up Around 90% ofthe buildings of£350m ($475m) that the in the Gaza Strip. It is keen to in Dominica were damaged; Leave campaign in last year’s hold the first elections in Pal- the Virgin Islands were badly referendum had claimed estine since 2006. Fatah, the hit by flooding. The power was Britain could save by departing party that runs the West Bank, knocked out across the entire The Spanish police arrested 14 the EU. Defending his position welcomed the announcement. island ofPuerto Rico. regional officials in Catalonia, after a cabinet colleague said But more talks are needed to part ofthe national govern- he was “back-seat driving” on end the decade-old dispute Guatemala’s congress back- ment’s effortto gather evi- Brexit, Mr Johnson gave a between the two groups. pedaled on its attempt to dence against a planned refer- bumbling interview amid change the law to make pun- endum forindependence. The speculation he could resign. In a detailed opinion, Kenya’s ishment forcorruption more ballot is due to take place on Ahead ofher big set-piece supreme court, which had lenient by replacing jail sen- October1st, though Madrid speech on Brexit, Theresa May, previously nullified the result tences with fines. President has declared it illegal. Thou- the prime minister, slapped Mr ofthe presidential election Jimmy Morales promised to sands protested in Barcelona Johnson down, saying that her held on August 8th, criticised return payments of$7,000 a against the arrests. Carles government was “driven from the country’s election commis- month he has received from Puigdemont, Catalonia’s the front”. 1 The Economist September 23rd 2017 The world this week 9

Portugal’s borrowing costs in The Saudis have accused Al cheap steel imports from Business the bond markets fell sharply Jazeera ofbroadcasting terro- China and elsewhere. To seal when it regained an invest- rist propaganda. Snap’s deci- the merger, Tata Steel had to The Federal Reserve con- ment-grade standing from one sion to restrict access to Al promise regulators in Britain firmed that it is to unwind the ofthe big credit-rating agencies Jazeera is the latest instance of that the pension rights ofits $4.2trn portfolio ofTreasury forthe first time since the a social-media firm censoring workers there were secure. bonds and mortgage-backed euro-zone crisis. Standard & content in a country to comply securities that it has accumu- Poor’s raised its rating for with repressive media laws. Admitting it was a “mess of lated since the financial crisis. Portuguese government bonds our own making”, Michael The Fed will reduce its hold- above junkstatus in part John Chambers decided to O’Leary apologised forthe ings very slowly, at first by because ofthe economy’s retire as chairman ofCisco. Mr abrupt cancellation of2,100 $10bn a month forthree improving prospects. Chambers was one ofSilicon Ryanair flights over the next months, and then by a further Valley’s trailblazers in the six weeks. The budget airline’s $10bn every quarter to a maxi- Toshiba’s board ofdirectors 1990s, building Cisco’s boss has belatedly tried to mum of$50bn a month. The approved the sale ofits memo- dominant position in the improve its image as the butt announcement had been long ry-chip business to a consor- market fornetworking equip- ofjokes about shoddy service. heralded; markets were not tium led by Bain Capital and ment during the internet’s The latest cancellations won’t that surprised. which includes Apple, for rapid expansion. For a brief help. They became necessary $18bn. The agreement could be time, Cisco surpassed Micro- in part because ofa new holi- A rate rise this year? challenged in the courts by soft to become the world’s day rota system that has left Western Digital, Toshiba’s most valuable company. the airline short ofpilots. The pound against the dollar American chipmaking partner, $ per £ which has sought to prevent This year’s run ofbig acquisi- Toys were us BREXIT VOTE 1.5 the sale. tions in the defence and aero- Toys “R” Us filed forbankrupt- space industry continued with cy protection. The company’s 1.4 Dial a friend Northrop Grumman’s deal to giant stores killed offmany

1.3 In a boost to its nascent smart- buy Orbital for$9.2bn. Orbital smaller toy retailers in the phone business, Google developed the Cygnus space- 1980s, but by the turn ofthe 1.2 strucka deal with HTC in craft that delivers cargo to the century it was under pressure which 2,000 people who work International Space Station. from Walmart and Amazon. It 2016 2017 on R&D at the Taiwanese was bought out by a private- Source: Thomson Reuters smartphone company will be Following lengthy negotia- equity consortium in 2005, The pound surged to its high- transferred to Google. Some tions, Tata Steel and Thyssen- and ran up debts that top $5bn. est level against the dollar years ago HTC briefly chal- krupp agreed to merge their Disappointed children will be since the vote in Britain last lenged Apple’s and Samsung’s European steelmaking busi- pleased to hear that Toys “R” year to leave the European dominance in the market, but nesses. The deal between the Us expects to keep nearly all its Union, after a member ofthe has since fallen way behind. Indian and German compa- stores open over the Christmas BankofEngland’s Monetary nies is the latest example of shopping season. Policy Committee said that the Snap removed Al Jazeera consolidation in the steel “moment was approaching” from its app in Saudi Arabia at industry, where profits have Other economic data and news when interest rates would the request ofthe government. waned because ofthe glut in can be found on pages 82-83 have to rise. The bankhas kept votes low since the financial crisis. But Gertjan Vlieghe, one ofthe most doveish members ofthe MPC, thinks record low unemployment, rising wages and robust household spending all indicate that the economy has strengthened. He also pointed out the risks from uncertainty about the Brexit negotiations.

Ukraine returned to the international sovereign-bond market forthe ﬁrst time since restructuring its debt in 2015. It issued a 15-year note that raised $3bn, which was said to be three times oversubscribed. Some observers worry that successfully tapping markets forcredit will weaken Ukraine’s resolve to follow through on the package of economic reforms it has agreed with the IMF. PURE TALENT

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michiganbusiness.org Leaders The Economist September 23rd 2017 11 Does China play fair?

Competition from China will only get fiercer. That calls forcool heads and wise policies F DONALD TRUMP had China joined the World Trade Organisation (WTO). China’s Islapped punitive tariffs on all share of global exports has risen to 14%, the highest any coun- Chinese exports to America, as try has reached since America in 1968. That may fall as China he promised, he would have loses its grip on low-value industries such as textiles. But it is started a trade war. Fortunately, gaining a new reputation in high tech. If data are the new oil, the president hesitated, partly China’s tech industry has vast reserves in the information gen- because he wants China’s help erated bythe hundredsofmillionsofitspeople online—unpro- in thwarting North Korea’s nuc- tected by privacy rules. Whether you make cars in Germany, lear ambitions. But that is not the end of the story. Tensions semiconductors in America or robots in Japan, the chances are over China’s industrial might now threaten the architecture of that in future some ofyour fiercest rivals will be Chinese. the global economy. America’s trade representative this week Last, and hardest to deal with, is unfair competition: sharp called China an “unprecedented” threat that cannot be tamed practice that breaks no global rules. The government demands by existing trade rules. The European Union, worried by a that firms give away technology as the cost of admission to spate of Chinese acquisitions, is drafting stricter rules on for- China’s vast market (see page 65). Foreign firms have been tar- eign investment. And, all the while, China’s strategy for mo- geted in the biggest of China’s anti-monopoly cases. The gov- dernising its economy is adding furtherstrain. ernment restricts access to lucrative sectors, while financing At the heart of these tensions is one simple, overwhelming assaults on those same industries abroad. Such behaviour is fact: firms around the world face ever more intense competi- dangerous precisely because today’s rules offerno redress. tion from their Chinese rivals. China is not the first country to industrialise, but none has ever made the leap so rapidly and Don’t get angry. Get even on such a monumental scale. Little more than a decade ago Sorting Chinese competition into these categories helps cali- Chinese boom towns churned out zips, socks and cigarette brate the response. Blatant illegality is the most straightfor- lighters. Today the country is at the global frontier ofnew tech- ward. Governmentsmustprosecute and seekredress, whether nology in everything from mobile payments to driverless cars. through the courts or the WTO. Firms can better protect them- Even as China’s achievements inspire awe, there is growing selves against cyber-thieves—from China and elsewhere. concern that the world will be dominated by an economy that Though it is politically hard, the best response to intense does not play fair. Businesses feel threatened. Governments competition is to welcome it. Consumers will gain from lower that have seen Brexit and the election of Mr Trump, worry costs and faster innovation. Misguided attempts to hold back about the effects of job losses and shrinking technological the tide would not only lose those potential gains but might leadership. Yet ifthe outcome is to be good, they must all think also blow up the world trading system, with catastrophic re- clearly about the real nature ofChina’s challenge. sults. Rather than try to stop the loss of jobs, governments should provide retraining and a decent safety net. Both com- Go, in three dimensions panies and governments need to spend more on education Undoubtedly, China has form. It kept its currency cheap for and research. Six years ago Barack Obama said America faced years, boosting exporters; it finances its state-owned giants a new “Sputnik moment” in China’s rise. Since then not much with cheap credit; and its cyber-spies steal secrets. Yet depic- extra hasbeen devoted to research, trainingand infrastructure. tions of corporate China as just an undemocratic, state-run The hardest category is competition that is unfair, but not il- monster, thieving and cheating to get ahead, are crude and out legal. One approach is to coax China into behaving better by of date. Home-grown innovation is flourishing (see page 20). acting collectively. America, Europe and big Asian countries The innovators are mainly private, not the many heads of a could jointly publish information about economic harm from single creature called China Inc. To separate hype from reality, China’s policies—as they did by sharing details about overca- thinkofChinese competition as having three dimensions: ille- pacity in the steel industry, nudging China into cutting its ex- gal, intense and unfair. Each needs a different response. cesses. They should demand reciprocity, requiring China to First, consider illegality. The best example is the blatant give foreign companies the same access that its own firms en- theft of intellectual property that makes for the most sensa- joy in their markets. Governments need to review their poli- tional headlines, such as the charges laid in 2014 against five cies for screening investments from China so that they can Chinese military officers for hacking into American nuclear, blockgenuine threats to national security (though only those). solar and metals firms. The good news is such crimes are de- And they should also require that investors with state backing clining. An agreement with America in 2015 seemingly led to a report this in full, and punish those hiding their true identity. marked drop in Chinese hacks of foreign companies and, as Much ofthe responsibility for putting this right falls on Chi- Chinese firms produce more of value, they are themselves de- na. It may askwhy it should hold itselfback. After all, 19th-cen- manding better intellectual-property protection at home. turyGermanyand America grewrich behind subsidiesand ta- The second dimension—intense but legal competition—is riff walls; Britain and Japan were bullies. Yet, having done so far more important. Chinese firms have proven that they can well out ofthe global commercial ecosystem, China should re- make good products for less. Consumer prices for televisions, cognise that it has become one of its custodians. Abuse it—ille- adjusted for quality, fell by more than 90% in the 15 years after gally or by overburdening it—and it will break. 7 12 Leaders The Economist September 23rd 2017

Online regulation Limited liability

The internet has grown up, and so must its biggest companies NCE the giants of the inter- users do or forthe harm that their services can cause. Onet could do no wrong. This made sense in the early days of the internet, when it Now they are a favourite target was still a sideshow. Ruinous lawsuits might have crushed of politicians everywhere. Eu- then-infant digital ventures. But today online firms have come rope’s finance ministers are dis- to dominate entire industries. They can also no longer be con- cussing ways to increase taxes sidered neutral conduits for information, like telecoms carri- on digital services. Theresa May, ers. Facebook’s algorithms, for instance, determine what Britain’s prime minister, this members see in their news feeds. The words and deeds of on- week demanded that social-media platforms be able to take line ghouls have consequences in the real world. down terrorist material within two hours. In America Face- SESTA has a worthy aim. Yet it is too broad. It greatly ex- book’s bosses must soon tell Congress what role users tied to pands the definition of enabling sex trafficking, including ten Russia played in last year’s presidential campaign. actions, from advertising to transporting. It would also let state Much of this is still political theatre. But not all. America’s attorneys-general and civil claimants sue online platforms. A Senate is contemplating the Stop Enabling Sex Traffickers Act deluge of lawsuits is likely. In general, big tech firms can afford (SESTA), a bipartisan bill that seeks to deter sex trafficking by such programmes, butstartupsmayface bankruptcy. Both will ensuring that the Communications Decency Act (CDA) does want to avoid trouble by erring on the side of safety, curbing not protect online services, such as Backpage.com, notorious free speech. for making money with sex-trafficking ads (see page 58). Should the bill pass, a wave of lawsuits against social-media Web-friendly platforms is likely to follow. Rather than attempt to define precisely what material is SESTA highlights a growingproblem with which many gov- banned—which invites arguments—the law should instead re- ernments are grappling: how online firms should be held lia- quire firms only to follow a reasonable, transparent process by ble for illegal content that is published on their platforms. which they decide what to take down. That would cover sites From October, Germany will require firms to take down hate like Backpage.com and limit potential lawsuits. It should take speech and fake news within 24 hours, or face fines of up to intoaccountdifferencesin size. Smallerfirmscould be held to a €50m ($60m). Yet the debate over SESTA is especially impor- different standard, depending on their resources and business tant. It could end up being the model for other areas, chilling models. Widely accessible sites could be more tightly regulat- free speech and innovation. ed than those with a restricted audience. If the internet and some of the firms it has spawned have The drawback is that this turns online firms, especially big taken over the world, this is the result not simply of entrepre- ones, into arbiters ofacceptable speech. But it would be prefer- neurial brilliance but also of an implicit subsidy. In America able to a series of all-controlling, SESTA-like laws, which could and Europe online platformshave until nowinhabited a paral- ultimately turn them into regulated utilities (see Schumpeter). lel legal universe. Broadly speaking, relevant media laws—in Toavoid that fate, they need to realise that, as the dominant ac- particular the CDA—exempt them from liability for what their tors of the digital age, they bear special responsibility. 7

A crisis in Spain The Catalan question

It requires a betteranswerthan an unconstitutional independence referendum

BASQUE COUNTRY FRANCE PAIN has known tumultuous gal, and the conservative government of Mariano Rajoy has Stimes: civil war in the 1930s, taken control of the region’s finances to try to block the ballot. CATALONIA dictatorship until 1975, a failed The Guardia Civil has raided Catalan government offices and L Madrid Barcelona A coup in 1981, a financial and eco- a private delivery firm to seize posters and ballot papers, and

U T SPAIN nomic crash in 2008-13, and ter- arrested atleast12 oﬃcials. The Catalan governmenthas called

R a Se O n rorism of the nationalist and ji- for “peaceful resistance”. P ea an rr hadist sorts. Now it faces a The crisis is snowballing into a serious threat to Spain’s de- ite Med 250 km constitutional crisis that threat- mocracy. Solving it sensitively matters to the rest of Europe. ens its unity. The Catalan government plans to hold a “bind- The precedentsetin Catalonia will aﬀectotherwould-be sepa- ing” referendum on independence on October1st. Ifa majority ratists, from Scotland to the Donbas region ofUkraine. votes yes—regardless of the turnout—then Carles Puigdemont, Catalonia enjoys a standard of living higher than the aver- the Catalan president, will unilaterally declare independence. age in both Spain and the European Union and more self-gov- The Spanish constitutional court has declared the vote ille- ernment than almost any other region in Europe, including 1 PUTTINGYOUATTHECENTEROFOURWORLD BUSINESS CLASS Relax with a Clarins beauty treatment* in our dedicated lounge. Once aboard, savor a menu crafted by leading French chefs, and all from the comfort of a fully horizontal seat-bed.**

AIRFRANCE.US *Departing from Paris-Charles de Gaulle - Terminal 2E - Halls K, L, M, from New York-JFK and from London-Heathrow. **Available on select long-haul Boeing 777 flights and Boeing 787 flights. 14 Leaders The Economist September 23rd 2017

2 powers to protect the Catalan language. It is, to outward ap- That said, by playing cat-and-mouse with ballot boxes Mr Ra- pearances, a lovely and successful place. Yet a majority of Cat- joy has needlessly given Mr Puigdemont a propaganda vic- alans are unhappy with their lot, feeling that Spain takes too tory. A big majority of Mr Rajoy’s voters in the rest of Spain much of their money and fails to accord respect to their identi- support him in part because he refuses to yield to Catalan na- ty (see page 45). Mr Rajoy has been wrong to assume that time tionalism. But something important is wrong in Spain, and it is and economic recovery would cure Catalans’ discontent. his duty to try to fix it. The Spanish constitution, adopted by referendum in 1978— Democracy requires consent as well as the rule oflaw. Con- and backed almost unanimously in Catalonia—proclaims the stitutional change, especially the right to break away, should country’s “indissoluble unity”. It vests sovereignty in the be difficult—but not impossible. In Scotland and Quebec, al- Spanish people as a whole, not in the inhabitants ofits constit- lowing people to have a say did not lead to breakaway. MrRa- uent parts. The Catalan government claims the right to self-de- joyshould be lessdefensive: he should nowseekto negotiate a termination. But international law recognises this only in new settlement with Catalonia, while also offering to rewrite cases of colonialism, foreign invasion or gross discrimination the constitution to allow referendums on secession, but only and abuse of human rights. These arguably do apply to the with a clear majority on a high turnout. Kurds, who are planning to hold a disputed referendum on secession from Iraq on September25th (see page 41). Damage to Catalonia Catalonia, however, hardly counts as colonised, occupied Many Catalans want the right to decide, but polls suggest that or oppressed. Many Spaniards worry that its secession could only around 40% want independence. Most would probably swiftly be followed by that ofthe Basque country.If the rule of be satisfied with a new deal that gave them clearer powers, let law is to mean anything, the constitution should be upheld. them keep more of their money and symbolically recognised Mr Puigdemont should thus step back from his reckless refer- their sense of nationhood. The tragedy is that neither Mr Puig- endum. Opponents are unlikely to turn out, so any yes vote he demont nor Mr Rajoy seems interested in putting such an offer obtains will be questionable, not just legally but politically. on the table. 7

Corruption in sport Fixing the ﬁxers

To make sports cleanerand more fun, legalise betting N267AD Nicantinous and De- ness allegations of bribery in the choices of hosts for the foot- Imetrius, two teenage wrest- ball World Cup and Olympic games. And many seem to fear lers, had reached the final bout that revealing the scale of match-fixing would provoke a crisis in a prestigious competition in of confidence. Little time or money is devoted to educating Egypt. Their fathers struck a athletes about fixers’ methods, orto monitoringwagers to spot deal. For the price of a donkey, the suspicious betting patterns. Some of the cases that have Demetrius would “fall three come to lightwere uncovered by police investigatingracketeer- times and yield”. The signed ing, not sports officials going after fixers. The governing body contract is the earliest surviving record of a sporting competi- for tennis, dogged by suspicions of match-fixing, does not em- tion being stitched up forfinancial gain. ploy enough officials to have one at every professional event. Today, match-fixing is a vast global enterprise (see page 54). As more games are televised, more is bet on minorcompeti- The pickings are rich. Around $2trn is wagered on sport each tions, where players earn less and are therefore easier to cor- year, mostly with online bookmakers who enable punters to rupt. And as new sports gain popularity, the fixers will move evade national anti-gambling laws. Around one game in 100 is in. Theyare alreadyactive in competitive video-gaming. Wom- thought to be manipulated across a range ofsports. en’s cricket and football are likely to become targets, too. Modern fixing is a more subtle affair than that of Nicanti- nous and Demetrius. It often involves manipulating the odds Say it ain’t so in live betting while a match is under way. Arranging for a To squeeze the fixers, governments need to do two things. The cricketer to score poorly, say, or a footballer to be sent off at a first is to legalise gambling, which is banned in many coun- certain point, or a tennis player to lose a particular game, al- tries. Fixers need deep, liquid betting markets to profit from lows bettors to predict how odds will move and lockin a profit their crooked bets. Ifhonest punters turn to legal bookmakers, much as insider traders beat the stockmarket. Athletes trou- fixers will follow, and authorities will find it easier to spot bled by conscience can always tell themselves that a few wild them at their work. The second is to pass laws against match- swipes ofa bat or a run ofdouble faults are victimless crimes. fixing which recognise that the evidence may consist of statis- Ifpunters willing to place illegal bets were the only victims, tical analysis. Many countries have no match-fixing laws at all. fixing might not matter so much. But they are not. Much of the When one corrupt player is caught and banned, the money- profits go to violent gangsters. Amongthose defrauded are cor- men simply move on to the next. rupt athletes’ innocent team-mates, legal bettors and ordinary Billions of people follow sport for the pleasure of seeing fans, who pay to see a real contest, not a sham. skilled athletes strive for victory and to share in the thrill of a Sports administrators cannot be relied on to lead a fair competition. If the fixers are allowed to run the show, it clean-up. Some are themselves suspected of corruption—wit- will cease to be worth watching. 7 Investors trust independent advisors with over $4 trillion of their money. That’s some serious trust.

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British politics The likely lad

Labouris on trackto rule Britain. But who rules the LabourParty? OT even Jeremy Corbyn ister, he would defend a NATO ally under attack from Russia. Ncould quite picture himself Labour’s manifesto says that another independence refer- as leader of the Labour Party endum in Scotland is “unwanted and unnecessary”; Mr Cor- when he ran for the job in 2015. byn has said it would be “fine”—which matters, because his After he became leader, few mostlikelyroute to DowningStreetwould be with the support could see him surviving a gen- of the Scottish National Party. On Brexit, Labour is as hazy as eral election. Now, with the the Tories. But its notional priority, access to the single market, Conservatives’ majority freshly is at odds with Mr Corbyn’s lifelong scepticism of globalisa- wiped out and the prime minister struggling to unite her party tion in general and ofthe EU in particular. around a single vision of Brexit (see Bagehot), the unthinkable All leadersmust compromise with theirparties. But it is rare image of a left-wing firebrand in 10 Downing Street is increas- fora leader’s personal views to contrast so strongly with those ingly plausible. Bookmakers have him as favourite to be Brit- in his manifesto. Rarer still is the company Mr Corbyn keeps. ain’s next prime minister. Labour need win only seven seats Andrew Fisher, the main author of the manifesto, has previ- from the Tories to give Mr Corbyn the chance to form a ruling ouslyargued forthe nationalisation ofall banks; Andrew Mur- coalition. He will be received at next week’s Labour Party con- ray, a former Communist Party official who advised Mr Cor- ference as a prime minister in waiting. byn during the election, has defended the regime in North There are two visions ofa future Corbyn government. One, Korea. You can imagine how, surrounded by such people, Mr outlined in Labour’s election manifesto earlier this year, is a Corbyn would instinctively line up against America in a geo- programme that feels dated and left-wing by recent British political emergency, and how he would see a financial crisis as standards but which would not raise eyebrows in much of Act One in the collapse ofcapitalism. western Europe, nor do the country catastrophic harm. The other, which can be pieced togetherfrom the recentstatements Paint the door red and lifelong beliefs of Mr Corbyn and his inner circle, is a rad- The constraints on such wild behaviour are loosening. The ical agenda that could cause grave and lasting damage to Brit- first of those is the party’s MPs. Eight out of ten supported a ain’s prosperity and security. The future of the Labour Party— motion of no confidence in their leader last year. Yet many and, quite probably, of the country—depends on which of wanted rid of Mr Corbyn mainly because they feared that he these visions becomes reality. would lose them their jobs. With their majorities newly increased and power in sight, they have quietened down. Trou- Good Corbyn, bad Corbyn blemakers can be threatened with deselection, and new par- The manifesto launched this spring was insipid and back- liamentary candidates vetted. Next week’s conference is ward-looking, dusting off tried and discarded ideas. But it expected to reduce the power ofLabour MPsand MEPs. would set Britain back years, not decades. The planned rise in The party’s bureaucratic straitjackets are also loosening. corporation tax—a bad idea ata time when BrexitBritain needs Corbynites are now just about in the majority on Labour’s Na- to cling on to what business it can—would take the rate back tional Executive Committee, where their numbers will be only to its level in 2011. A proposed minimum wage of £10 strengthened by plans to appoint more trade unionists and or- ($13.50) per hour would be among the steepest in Europe, but dinary members. The run-up to the conference has seen Cor- not drastically higherthan that planned by the Tories. Abolish- bynite candidates trouncing centrists in elections to commit- ing tuition feeswould damage universities and mainly benefit tee chairmanships. Just as Tony Blair sidelined left-wing the well-off, while nationalising the railways and some utili- activists during the 1990s, MrCorbyn is empowering them. ties would make them less efficient and starve them of invest- Labour’s half-million-odd members are fired up as never ment. These are bad ideas, but not the policies to turn a coun- before, campaigning on foot and online. Most favour a more try to rubble. If Labour combined them with an approach to radical programme. A recent survey found that their priority Brexit that was less self-harming than that of the Tories—some was to move the party further to the left. One snag for Mr Cor- of whom are still gunning for the kamikaze “no deal” out- byn is that they are overwhelmingly pro-EU; ifhe were sincere come—its prospectus could even be the less batty ofthe two. about the party being ruled by its members, not elites, he But there is another plan for government, scattered among might agree at next week’s conference to advocate continued Mr Corbyn’s own statements, which would do serious and full membership of the single market. In practice, it seems that lasting harm (see page 50). Since becoming leader, he has the views ofordinary members matterless than those of hard- called fora maximum wage as well as a minimum one. He has core activists, who share Mr Corbyn’s Euroscepticism. proposed “people’squantitative easing”, underwhich the gov- The most rapidly unravelling constraint on Mr Corbyn, ernment would order the independent Bank of England to however, is the opposition he faces. His cautious June manifes- print money to fund public investments. Labour is committed to was written as polls suggested that Labour could be wiped to preserving Britain’s nuclear weapons: Mr Corbyn is disarm- out. Now he stands with power in sight, facing a humiliated ingly clear about his desire to scrap them. Though the party’s Conservative government. His room for manoeuvre expands policy is to stay in NATO, Mr Corbyn has fordecades called for by the week. June’s experiment with diluted Corbynism was a it to disband; last yearhe refused to say whether, as prime min- success. Expect the next dose to be stronger. 7 Executive Focus 17

The Economist September 23rd 2017 18 Executive Focus

The Economist September 23rd 2017 Letters The Economist September 23rd 2017 19

The hurricane season Trade, which I chair, does not any public official found guilty tic migration had profound rely solely on unilateral free oftorture shall be dismissed influences on the Burmese There is no question that the trade. That is one ofthe routes from public service. The economy and on anti-subcon- British Virgin Islands are on the forgetting to free trade, but we Ministry ofJustice established tinent sentiment after Burmese front line ofclimate change, have also supported the route a specific unit to deal with independence in 1948, when alongside our neighbours in offree-trade agreements that is claims oftorture and ill-treat- Burma tried to reclaim its own the Caribbean (“Paradise lost”, likely to be chosen by Theresa ment. Moreover, we fully economy through socialism. September16th). Irma was May’s government wherever co-operate with the UN’s Although involuntary particularly ferocious, perhaps others will co-operate. Special Rapporteur on Torture servitude helped develop the a sign ofthe increased intensi- Non-tariffbarriers are a key and the European Committee world’s greatest rice bowl in ty ofsuch storms to come. element in our calculations forthe Prevention ofTortu- the Irrawaddy delta, strong Since Irma hit, the government and, no, we do not ignore re. Therefore, The Economist is ethno-nationalist sentiment ofthe BVI has worked tireless- quality.Rather, by using cherry-picking to distort prompted the expulsion of ly to provide food, shelter, detailed quality-adjusted Turkey’s international co- hundreds ofthousands of water and power. Our tourism OECD prices we reach roughly operation efforts on the issues Indians (and Chinese) in the infrastructure will take time to the same estimates ofnon- oftorture and ill treatment. early1960s. Such anti-Indian rebuild, but we have made tariffbarriers that the research- Furthermore, the Fethullah sentiments affect negative considerable strides towards ers at the London School of Gulen Terrorist Organisation attitudes towards the returning to business as usual Economics cite fortheir own threatens the integrity ofthe Rohingya today. in the financial-services sector. work. As forthe “gravity Turkish state. It works in150 DAVID STEINBERG Britain has pledged short- model”, we have examined countries behind a façade of Professor emeritus of Asian term aid, which is welcome, how well this fits data for tolerance, dialogue and chari- studies but a longer-term reconstruc- Britain compared with our ty,through schools, NGOs, Georgetown University tion package will be required “classical model” and there are lobbyists, media outlets and Washington, DC to rebuild the BVI in the wake two conclusions: it fits less companies. What happened in ofIrma, and now Maria, and well, and in fact rather similar Turkey more than a year ago is A gem of a story we will be looking to work policy conclusions about a darkreminder ofwhat this with Britain and other partners British free trade follow from it. organisation may be capable to achieve this as rapidly as Our suspicion is that the ofdoing. By publishing such possible. Patch and mend is many gravity modellers from an article you are contributing not enough. The safety ofour around the world evaluated a to its illegitimate endeavours. people and the sustainability nonsensical Brexit straw man ABDURRAHMAN BILGIC ofour economy demands during the referendum, in Ambassador of Turkey investment in better buildings order to oppose it. It would be London and more resilient critical instructive ifthey,including infrastructure. There is a the Treasury,were to redo their On the case collective responsibility for all calculations in the light of ofus to heed warnings about what we now know to be “Gavel down” (September 9th) the threat ofclimate change. Brexit policy. assessed the legal workof D. ORLANDO SMITH PATRICK MINFORD Richard Posner, but slightly Reading about diamonds Premier and finance minister Professor of applied economics misquoted his new book. You being readily available else- Road Town, British Virgin Islands Cardiff University said that when reaching a where in the cosmos (“Ahard judgment, Mr Posner assesses rain”, August 26th) brought to The Caribbean Community Claims of torture in Turkey whether a sensible solution is mind Arthur C. Clarke’s 2001 Climate Change Centre wishes blocked by some “case that sci-fi series. Europa is discov- to disassociate itselffrom the I totally reject your claims ofa judges must obey”. But he did ered to have a mountain comments attributed to Ottis “brutal crackdown” and allega- not use the word “case”. He entirely made ofdiamonds Joslyn in your article. His tions ofthe use oftorture in wrote “ukase”, a Russian term originally from Jupiter’s core statement that “Caribbean Turkey (“Bruised and that refers to edicts or and villains plot to mine it in governments speaka lot about battered”, September 9th). pronouncements. order to destroy South Africa’s climate change but their ac- Turkey is a party to the UN and VIKRANT REDDY economy backon Earth. By the tions leave a lot to be desired” Council ofEurope conventions Washington, DC year 3001, diamonds have in no way represents the posi- on the prevention oftorture become such a cheap building CCCCC tion ofthe and is the and ill-treatment. In 2003, we Myanmar’s colonial past material that they are used to personal opinion ofMr Joslyn. tooka stand ofzero tolerance construct giant skyscrapers KENRICK LESLIE against torture. Our success in Yourarticle on Indian labour that act as elevators between Executive director this policy has been acknowl- sent abroad in servitude forgot Earth and space. Caribbean Community Climate edged by dignitaries from one other region ofIndia JAMES FOSTER Change Centre international organisations where this applied: Burma Southampton 7 Belmopan, Belize and people working in the (“100 years since servitude”, field. All claims oftorture and September 2nd). Under the Patrick Minford responds ill-treatment are investigated. British, Burma was adminis- Letters are welcome and should be And Turkey has abolished the tered as a province ofIndia addressed to the Editor at The Economist, The Adelphi Building, Youdo the “Message from statute oflimitations forthe until 1937. Youromission is 1-11John Adam Street, Minfordland” some wrong, offence oftorture, one ofthe understandable as it could be London WC2N 6HT though thankyou fortransmit- few countries to do so. considered as an internal E-mail: [email protected] ting it (August 26th). The ap- Even afterlast year’s coup migration, but both involun- More letters are available at: proach ofEconomists for Free attempt, it was decreed that tary servitude and opportunis- Economist.com/letters 20 Briefing Innovation in China The Economist September 23rd 2017

tration rates for mobile phones and The next wave broadband internet are high, making it easy for startups to reach a vast market cheaply. And China is rapidly becoming cashless. The volume of mobile payments SHEKOU shotup almostfourfold lastyear, to $8.6trn, compared with just $112bn in America. A new generation ofChinese entrepreneurs will have a powerful impact on This is why China breeds financial-tech- industries and consumers worldwide nology startups so quickly and is home to EW era, new revolution. I am a one recent estimate, approaching the com- many of the world’s most valuable fintech “NMAKER, for the hearts of the bined valuation of America’s (see chart 2 firms. Ant Financial, spun out of Alibaba, dream.” So goes a rallying cry carved in on next page). And to victors go great may be worth more than $60bn. giant letters on the wall of a warehouse in spoils. There are 609 billionaires in China Third, state-dominated industries rang- Shekou, a seaside enclave near Hong Kong. compared with 552 in America. ingfrom telecommunicationsand banking Many of China’s most promising entrepre- “Innovation moves faster here,” insists to health care are woefully inefficient and neurs flocked there recently for a confer- Kai-Fu Lee, a former head of Google’s Chi- even hostile to consumers. This allows ag- ence organised by TechCrunch, a technol- nese operations who now runs Sinovation ile newcomers, with business models that ogy publisher from Silicon Valley. Yet Ventures, a VC fund and accelerator in Bei- put the customer first and deploy the latest Baidu, Alibaba and Tencent—established jing. Gone are the “C2C” (copy to China) technologies, to jump ahead of incum- Chinese internetgiantscollectivelyknown and “JGE” (just good enough) strategies of bentsmore easilyin China than their coun- as the BAT—were overshadowed by up- their parochial predecessors. China’s nim- terparts in developed markets. starts such as Didi Chuxing, a ride-hailing ble new innovators are using world-class firm that chased America’s Uber away technologies from supercomputing to Moving at China speed from China, and Ofo, a bike-sharing start- gene editing. Having established them- The government’s inability to run indus- up that is going global. selves in the cut-throat mainland market, tries well is counterbalanced by a willing- They are part of a new wave of inven- many are heading abroad. ness to support new ventures, which in tive young firms emerging from China. A There are three main reasons why Chi- turn hastens innovation in areas such as few years ago, Chinese innovation meant na’s determined entrepreneurs can ex- transport. David Frey of KPMG, a consul- copycats and counterfeits. The driving pand their businesses rapidly. First, the tancy, believes that it has played a useful force is now an audacious, talented and economy, the world’s second largest, is big role as a “market-maker”, one reason why globally minded generation of entrepre- enough to let firms attain huge scale just by China is farahead of America in both elec- neurs. Investors are placing big bets on succeeding at home. It helps that language tric-vehicle (EV) registrations and the num- them. Around $77bn of venture-capital and culture are more homogeneous than ber of charging facilities. A recent an- (VC) investmentpoured into Chinese firms in Europe and physical infrastructure (such nouncement of an eventual ban on petrol from 2014 to 2016, up from $12bn between as roads and wireless broadband) is new engines (probably after 2030) could help to 2011and 2013. LastyearChina led the world and excellent, unlike in America. secure a long-term lead in the global EV in financial-technology investments and is Second, Chinese shoppers are vora- market. But the most useful change was a closing on America, the global pacesetter, cious and venturesome, an advantage to decision to allow venture-backed startups in other sectors (see chart1on next page). innovators with clever products but unfa- without previous carmaking experience to China’s 89 unicorns (startups valued at miliar brands. They are also unusually ea- enter a field previously dominated by in- $1bn or more) are worth over $350bn, by ger to embrace technology. China’s pene- ept firms cranking out subpar EVs. 1 The Economist September 23rd 2017 Briefing Innovation in China 21

2 Consider Nio, a three-year-old automotive company. Its headquarters and re- A good place to startup search centre are tucked away in a huge Chinese venture-capital investment by technology, 2016, $bn complex of low-rise buildings in Shang- Fintech Virtual reality Robotics and drones hai’sJiadingdistrict, a clusterthat aspiresto 01234567 012 01 become the Detroit ofChina. It is the brain- China United States United States child of Li Bin, one of China’s most formi- United States China China dable serial entrepreneurs. He made a fortune through BitAuto, a pioneering online Britain Japan Japan platform for buying and selling cars. He Germany Britain Singapore also conceived and launched Mobike, Japan France Canada Ofo’s main rival in the booming bike-shar- Artificial intelligence Education technology Autonomous driving ing market, and is still its chairman. Nio, 01234567 012 01 backed by the country’s most astute early- stage investors, including China’s Hill- United States United States United States house Capital and America’s Sequoia Cap- Britain China China ital, is valued at around $3bn. China Japan Japan Leaping to a whiteboard, Mr Li calcu- Japan Britain Australia lates that the impact China’s cars have had Australia India Britain on the planet over the past decade equals that of all cars in the previous 100 years. Source: McKinsey Global Institute “From 2000 to 2017,” he adds, sketching a declining curve, “there was diminishing perfect. Deprived of consumer goods and clares Jean Liu, Didi’s president. Her firm happiness from owning a car.” Traffic, pol- luxuries for many years, they are eager to owns stakes in ride-hailing services world- lution and accidents were to blame. So too, experiment. Wealthy Chinese are younger wide, from India’s Ola and South-East he adds, is a car industry locked into “a 100- (typical Audi buyers in Germany are in Asia’s Grab to Brazil’s 99 and America’s year-old way ofdoing business”. their 50s; in China they are in their 30s), Lyft. In July Didi and SoftBank ploughed and hence more familiar with technology. $2bn into Grab. In August the Chinese up- Driven by innovation Because the car is not a cherished cultural start invested in two Uber clones, Estonia’s His solution has three pillars. The first is to icon as it is in America, locals are not ad- Taxify, which serves Europe and Africa, combine cloud computing, artificial intelli- dicted to driving and are open to alterna- and Dubai’sCareem, which operatesin the gence and sensingtechnologies to advance tive forms ofmobility such as ride-sharing. Middle East. It does not lack ambition: “In autonomousdriving. Thiswill notend traf- That has been a boon to Didi. With a re- the nextfive years, Didi will growbeyond a fic jams, he reckons, but it can bestow on ported valuation of $50bn, it is the world’s mobility service to become the world’s erstwhile drivers the gift of free time in most valuable startup after Uber. This is leading automotive network operator and their cars. Nio has unveiled Eve, a concept thanks to an injection earlier this year of a leader in new transportation technol- vehicle that is in effect an AI-powered liv- $5.5bn, the biggest-everfundinground for a ogies,” the firm claims. ing room on wheels. The second pillar is to young tech firm, by a group led by Japan’s Didi’s success shows how local compa- speed up electrification. To augment the SoftBank. Didi’s other investors include all nies can cause global disruptions with roll-out of conventional chargers, he will the BAT companies, as well as Apple. Didi sharing-economy services road-tested in offer rapid battery swapping in big cities. is farmore than a smartphone app for hail- China. The country’surbanitesalready use The third, and one in which he thinks start- ingcars, explainsConnie Chan ofAndrees- smartphones to rent umbrellas, mobile- ups have the edge, is to design cars specifi- sen Horowitz, an American VC firm. The phone chargers, basketballs and other ne- cally forthe digital era. willingness of local consumers to experi- cessities for a small fee. The firms behind The firm has developed much of its ment has helped shape its business model. such services are pioneering the use of mi- technology in-house. It employs people Didi runs car pools, minibuses and bus- cropayments and credit verification using from 40 countries, some poached from es- es in addition to taxis and luxury cars. It analysis ofsocial media. tablished carmakers including Ford and has services for the elderly and can send a Volkswagen. Last November, Nio present- driver to take you home in your own car. Accelerating the business cycle ed its first vehicle at a glitzy event at the The firm provides about 20m rides a day in The battle of the bikes is the most closely Saatchi Gallery in London. The EP9, which China, several times the number managed fought of China’s sharing-economy wars. holds the world speed record for EVs, is de- byUberworldwide. Didi hopesto use AI to Ofo and Mobike, rival bike-sharing uni- signed to wow critics and show offtechno- predict a customer’s transport needs, be corns worth about $3bn each, have rede- logical prowess, not for mass-market sales. thatforcars, publictransportorbicycles. Its signed the humble two-wheeler to be an That will come in time, says Mr Li. platform offers 200,000 EVs, a figure set to intelligent, cloud-connected device. Chi- Over the next decade, he sees sales ris- rise to 1m within a fewyears, and itplans to na’s big cities are awash with brightly col- ing to the millions, half outside China. Nio promote autonomous cars heavily. oured bikes from a rainbow of competi- has an affiliate in Silicon Valley headed by “We’re definitely going global,” de- tors. Because tracking technology removes Padmasree Warrior, a formerchieftechnol- the need for dedicated docks, they can be ogy officer of Cisco, which plans to raise picked up and dropped offanywhere. This funds as an independent entity this year. Believe in unicorns convenience creates new problems to “We considerourselvesa global startup be- Global startups valued at $1bn or more, % solve. Ofo is pioneering a credit-scoring cause we want to solve global problems,” China United States Rest of world system that rewards well-behaved users Mr Li reflects. As for rivals, he is confident Number of and punishes naughty ones, such as those that “Nio can do much better than Tesla.” unicorns who parkin the middle ofroads. Venturesome consumers also play a (Total 262) Dai Wei, Ofo’s boss, explains that his role in fostering innovation. The Chinese Valuation firm’s rapid rise builds on the explosive are keen to try new products and are more (Total $883bn) growth in smartphones, mobile payments forgiving than Westerners if they are not Source: McKinsey Global Institute and the internet of things in China. Just 1 22 Briefing Innovation in China The Economist September 23rd 2017

2 three years ago, Ofo’s founders were poor prove. Within sixmonths ofits founding in anywhere. As a result, he insists, China’s students in Beijing, frustrated that their 2015, Mr Wang had secured enough fund- winners “will inherit a decent portion of bikes were often stolen. They now control ing from Tencent and others to become a the world market.” 8m bikes and provide over 25m rides a day unicorn—makingiCarbonX the fastestfirm China’s new entrepreneurs are clearly in America, Singapore and Britain as well in the world to do so. on the ascendancy but there are plenty of as China, and expect to operate in 200 cit- To mine a deep seam of health data, ways in which they could yet stumble. ies in 20 countries by the end ofthe year. iCarbonX has invested $400m in building Outside factors such as a sharp recession Ofo is moving at China speed but the a global coalition of medical startups. or banking crisis could lead to a panicky trail ahead could be bumpy. The mainland SomaLogic will supply expertise in analys- venture-capital bust. The rule of law in has dozens ofbike-sharing startups. All are ing human proteins. PatientsLikeMe, China remainsuncertain. Manynewfirms, investing furiously. Almost all will be which curates an online network of some such as those in online finance and the crushed. The chance of failing in China is 500,000 people with chronic diseases, sharing economy, operate in grey areas far higher than in Silicon Valley, explains will share patient experiences. AOBiome that are vulnerable to regulatory whim. Xiang Bing, dean of Cheung Kong Gradu- will contribute its knowledge on the inter- Even the popular bike-sharing firms could ate School of Business in Beijing. But be- action ofbacteria and human health. one day find their business models under- cause so many well-funded firms are chas- mined by arbitrary new rules. ing so many novel ideas so quickly, he Fast-mover advantage The high-octane nature of innovation predicts that the battle-hardened winners Western rivals like IBM and Google have in China may also make for a bumpy ride. will become world-beaters. similar goals but Mr Wang is undaunted. The spectacularrise ofsome firmscould be The inefficiency of China’s state- “We’ll collect more and better data, and mirrored by the precipitous fall of others. dominated economy is another powerful we’ll do it more quickly,” he insists. He just Even so, there are good reasons to think force boosting entrepreneurs. Young firms might. With Tencentasa partner, he can ex- that the best of the bunch will overcome are using new technologies and novel pect access to data collected by WeChat, its such obstacles and in time enhance com- business models to push aside state-run messaging-and-payments app with about petition and provide better goods and ser- laggards. China’s health industry, for in- 1bn users. It helps that Chinese consumers vices everywhere. A Chinese startup stance, is antiquated and dysfunctional. are more relaxed than Westerners about might even give the world that most elu- Longqueues are common at state hospitals sharing personal data. The Chinese gov- sive ofinventions, the flying car. and access to drugs is complicated by an ernment’s supportive stance on “precision Kuang-Chi Science already makes mon- opaque system ofdispensation. AliHealth, medicine” is useful, too. ey by floating helium-filled blimps, chock- an arm of Alibaba, is now a leading online Other inefficient state-dominated in- full ofsensorsand communicationsequip- pill-peddler. WeDoctor helps patients dustries are being upended. China’s logis- ment, high above cities. Liu Ruopeng, its book medical appointments using smart- tics sector was roughly equal to 15% of GDP chairman, explains that this is an inexpen- phones. Venus Medtech has invented a rein 2016, costlier even than in Brazil or India. sive “satellite for smart cities” that can trievable heart valve intended for patients Many of the lorries owned by individuals monitortrafficand pollution while serving with high calcification in their arteries. miss out on jobs because they lack infor- as a hub for the internet of things. It is per- The best example of a local health-care mation about potential new loads. This is fecting advanced balloon technologies disrupter with global potential, however, changing fast. “Our target market is ten thatithopeswill bringtourists and cargo to is iCarbonX, a health-data analytics firm times as big as Didi’s,” calculates Richard near-space at a fraction of the cost of rock- from Shenzhen, a metropolis near Hong Zhang, the finance chief of Huochebang, a ets within a few years, and owns a major- Kong. It is the brainchild of Wang Jun, who logistics-technology unicorn. He estimates ity stake in Martin Jetpack, a New Zealand is a picture of the active health he wants to that the empty-load rate in China is 40%, firm that makes one-man flying machines. encourage with his startup. He formerly well above the American level. Huoche- “Every individual should be able to fly ran BGI, one of the world’s leading geno- bang’sonline marketplace matchesdrivers cheaply, easily and safely!” insists Mr Liu. mics-research firms. The Chinese com- with loads at no charge (though he expects China’s new wave ofentrepreneurs has al- pany was involved in the global race to de- this service to become the main earner ready taken flight. 7 code the first human genome and at one once the firm starts levying fees). It also oftime owned half the world’s gene-se- fers lorry sales and leasing, insurance and quencing equipment. financial services. Mr Zhang vows to go global in the future. Healthy competition Older firms often stuck with the famil- Asked why he left, Mr Wang confesses that iarhome market, but the best new ones are he grew frustrated by the limits ofacadem- born global and have the world in their ic research, even at privately run BGI. A sights. Many have founders educated breakthrough in genomics typically does abroad; others are backed by foreign ven- not carry real-world implications. A better ture capitalists. Edward Tse, an expert on approach, he reckoned, would be to marry Chinese innovation, argues that local start- genomics with data on lifestyle, diet, gut ups have world-class people and technol- bacteria, blood and so on to find stronger ogy at their disposal: “They know much correlations and better treatments. This re- more about what is going on in Silicon Val- quired entrepreneurship, he reasoned, be- ley or Israel than do Europeans.” cause “commercial firms are designed for Mr Lee reckons the country’s vast and efficiency.” growing market, its urban hyper-density At iCarbonX he aims to build a predic- and its legions of tech-hungry and free- tive digital avatar of each of its customers. spending young people provide a better The company will start with the goal of 1m proving ground for aspiring global entre- punters within a few years, he says, but ex- preneurs than do the stagnant markets of pects to grow in time to 10m or100m or be- the developed world. He is convinced that yond as its AI algorithms, supercomputing China has the most industrious entrepre- expertise and analytical methods im- neurs and the boldest venture capitalists United States The Economist September 23rd 2017 23

Also in this section 25 Repealing Obamacare, again 25 POTUS at the UN 26 Newark’s rebound 26 Fixing homelessness 28 Industrial farming 29 Lexington: Moore’s law

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

The Democrats “passive, old and not agile enough…We don’t want to take orders from them. We Left, behind have more power as outsiders.” For some, the bruises from last year’s Democratic primary remain sore. Jude-Laure Denis of POWER Northeast, a faith-based progres- DENVER, EMMAUS and WASHINGTON, DC sive group active in Pennsylvania, explains, “In 2016 the party decided it knew To rebuild from theirlowest point in a century, Democrats are ditching centrist better than the people. When you do that, triangulation in favourofeconomic populism you breakyour base.” EARLY four years ago Bernie Sanders, ism may prove a hard sell at the ballot box. This is a familiar complaint from back- Nthe crotchety, democratic-socialist Party leaders downplay fears of a split, ers of Mr Sanders (like Ms Denis). Some of senator from Vermont who came surpris- eagerly claiming progressive activists as them believe the contest was rigged in Mrs ingly close to winning the Democratic partners. A wave of demonstrations last Clinton’s favour. It was not—Mr Sanders presidential nomination last year, intro- spring helped block Republican efforts to lost because he received less support—but duced a bill to provide universal govern- repeal the Affordable Care Act (efforts that e-mails from the Democratic National ment-run health care. It attracted no co- have resumed, see next story). Mr Trump’s Committee (DNC) hacked by WikiLeaks re- sponsors. On September 13th he intro- ending of an Obama-era programme that vealed party insiders speaking of the up- duced a similar bill. Sixteen Democratic allowed undocumented immigrants to start candidate with contempt. One for- senators—one-third of the party’s Senate work if they were brought to America as mer state-party chairman calls him “a caucus—signed on as co-sponsors, includ- children also sparked demonstrations— uniquely destructive force”, more interest- ing Cory Booker, Elizabeth Warren, Kirsten less widespread and rowdy than those tar- ed in tearing the party down—he is, after Gillibrand and Kamala Harris, all potential geting health-care repeal, but only because all, not even a Democrat—than helping to presidential candidates. Mr Trump appears eager to find a legisla- build it. In the intervening four years Mr Sand- tive solution that lets those immigrants reers’s proposal has grown no more feasible. main. Emily’s List, a political-action com- The new New Deal In an interview with Vox, an online news mittee that helps pro-choice women Yet despite his loss and the snarls of the outlet, Hillary Clinton, who defeated Mr candidates, says that in the 2015-16 election party faithful, Mr Sanders’s influence may Sanders for the nomination, raised the cycle 920 women interested in running prove more lasting than Mrs Clinton’s. same objections she had last year: his plan contacted them. Since Mr Trump’selection Many Democrats now support a $15 mini- is too vague, expensive and politically na- more than 17,000 have, from all 50 states. mum wage, anotherpriorityofMrSanders ive. But Democrats today are in no mood Many of the activists themselves are that Mrs Clinton hesitated to embrace. Not for caution; enraged and energised in op- warming up fora fight. Ezra Levin, co-foun- all Democrats back free in-state university position, they have taken a maximalist derofIndivisible, an umbrella group forlo- education, as he does, but anyone who turn. Some single-payer supporters freely cal activists, believes “progressives should wants the base’s support will have to do concede that the bill has little chance of target Democrats and make sure they have something about rising university costs. passing soon, but believe it is better to take spine...It’simportantthatthere isa force ex- The “Better Deal” agenda released by a bold position and get pushed, by circum- ternal to the party making sure all of our Charles Schumer, the Senate minority stance or negotiation, back towards the elected officials are standing up for what’s leader, supports a higher minimum wage, centre than to start there. That is a sound right.” Activists in Pennsylvania’s rust a trillion-dollar infrastructure and job-cre- mobilisation strategy. But the goal of party belt—a bellwether region in a bellwether ation package, paid family and sick leave politics is not mobilisation; it is victory, state—express similar criticism. Jane Palm- and expanded regulatory power to break and the party’s centrist wing, quiet as it is er, who heads an Indivisible group in Berks up monopolies and block corporate merg- now, worries that full-throated progressiv- County, complains that the state party is ers deemed too big. The era of Democrats 1 24 United States The Economist September 23rd 2017

2 co-opting Republican attacks on “big gov- PCCC ran focus groups in Maine and South ernment” is over; Democrats today back Carolina. She laments: “Issue by issue, government activism on a scale unseen people would hear our candidates and since the New Deal. love them, but when they heard they were Those who worry, like Mrs Clinton, that Democrats they would just shut down.” As these policies might not pass a Republican- the Democrats have grown into a party dominated Congress miss the point, says dominated by urban professionals and Tom Steyer, an investor and liberal philan- ethnic minorities—two groups of people thropist. “It’s crucial for Democrats to whose futures look brighter than their stand up for ideals, even if they’re not pasts—the party’s ability to speakto people achievable…If there’s nothing you’re will- who are left behind has waned. In 2016, ac- ing to stand for, what’s the point?” Republi- cording to Nate Silver of FiveThirtyEight, a cans have long taken this approach, back- website providing quantitative analysis of ing policies such as outlawing all abortion, sport and politics, Mrs Clinton improved less as practical goals to worktowards than on Mr Obama’s strong performance in as ways to rally the faithful and frame de- America’s 50 most-educated counties, but bate. That approach has moved the centre collapsed in the 50 least. of American politics ever rightward; pro- In three special House elections held gressives see marking out similar positions this year to replace congressmen nominat- on the left as a way to push back and stake ed to Mr Trump’s cabinet, Democrats ran their own claim. candidates suited to their districts: a but- Boldness rallies people more than prag- toned-down striver in Atlanta’s richer sub- matism. “People want to be inspired,” says urbs, a quirky populist folk-singer in Mon- Naomi Winch, president of the East Penn tana and a pro-gun veteran in Kansas. They Democratic Club, an activist group. “Can- outperformed expectations in districts didates have to lift people up...They have to grammes are laudable; he sees them as long abandoned to Republicans, but still be brave.” It also shifts the debate away “the essence ofDemocraticpolicy, which is lost—largely because Republicans success- from social issues: a boon for Democrats in providing opportunity for everyone. fully tied them to reviled national figures Republican states. Stephanie Taylor, who That’s what we should be talking about.” such as Ms Pelosi, with whom they had lit- heads the Progressive Change Campaign PlentyofDemocratshave begun testing tle in common other than party identifica- Committee (PCCC), which supports pro- “opportunity” phrases. Tim Ryan, a con- tion. This suggests that detoxifying the gressive candidates and causes, says that if gressman from Ohio who challenged Nan- party will be hard. you have a Democrat running in such a cy Pelosi for the Democratic House leader- But Democrats disagree about how state as a “corporate-friendly Republican- ship, says that Democrats must be “the much they should compromise. John Bel lite, the only distinction becomes social is- party of growth and opportunity”. Matt Edwards, for instance, is a pro-life, pro-gun sues. Then it becomes a race entirely about Bennett of Third Way, a centrist think-tank, Democrat serving as governor of deeply abortion and guns…instead, if they’re pre- uses the phrase “opportunity to earn”— Republican Louisiana—the onlyDemocrat- senting an alternative vision about what meaning that Democrats should focus less ic governor in the Deep South. A candidate government should be doing for working on addressing inequality of outcomes who sounded and voted like a coastal lib- people, then you have a real choice.” through redistribution than on making eral would notwin there. The Republicans’ Democrats have long shied away from sure the playing field is as level as possible, rightward drift on abortion, pursuing poli- full-throated leftism, fearing it could scare not tilted in favour of big companies or cies that restrict access to birth control as away centrist voters, changing the calcula- people born lucky. well, leaves the centre wide open for tion. But political polarisation has made Democrats. And indeed, even some promi- such voters scarce. Research by Corwin Equal opportunists nent steadfast supporters of abortion say Smidt of Michigan State University shows This pitch could appeal to both populists privately that, while they would prefer that between 2000 and 2012 an average of and moderates. It offers a unifying, for- pro-choice candidates, winning a congres- just 6.2% ofvoters pulled the lever for a dif- ward-looking story, which Mr Obama also sional majorityismore important. Ben Ray ferent political party in two successive provided as a candidate, rather than Mrs Luján, a congressman from New Mexico presidential elections, with the lowest re- Clinton’s scores of targeted micro-policies who heads the Democratic Congressional corded share (5.2%) coming in 2012—less that never quite cohered into a whole. It Campaign Committee (DCCC), set off a than half the average rate (12%) between also offers cross-racial appeal. Non-whites, firestorm when he vowed not to withhold 1952 and 1980. Turning out the party faith- who comprise an increasing share of funding from candidates who oppose ful thus seems a surer road to victory than Americans, overwhelmingly vote Demo- abortion choice. Support for it has long appealing to the vanishing centre. cratic. Democrats want to keep it that way, been in the party’s platform. Some Demo- Such talk makes centrists nervous. Will so calls to abandon “identity politics”—to crats argue that such compromise betrays Marshall, a longtime advocate for pro- downplay immigration and racial-justice the party’s values and produces a weaker, business, conservative Democrats, has concerns, for instance—will fall on deaf less stable coalition. started an advocacy group that will even- ears. But equal opportunity is a malleable Democrats are so united in their loath- tually sprout political-action committees and forward-looking rubric that could ing of the president that they can afford aimed at supporting “a pragmatic wing [of have wider appeal, and it provides a tidy some divisions over policy. In fact, their the Democrats] that can be successful in contrast with the revanchist undertones of chances for victory in 2018 and 2020 may middle America.” Mr Marshall favourably “Make America Great Again”. well depend on whether they can reject cites John Hickenlooper, Denver’s former That only goes so far, however. In much the energising thrill of purity-seeking and mayor now serving as Colorado’s gover- of the country the party’s brand is toxic. appeal to the country as a whole. That is nor, as the sort of pro-business Democrat Democrats hold few congressional seats how Mr Obama won power. Mr Trump, of who can win centrist states while not outside big cities, and control no state- course, took another path. But it will do alienatingprogressives. MrHickenlooper’s houses in the South; they hold just three America no good if Democrats take the apprenticeship and job-training pro- away from the coasts. Ms Taylor of the wrong lesson from the wrong president. 7 The Economist September 23rd 2017 United States 25

Obamacare repeal conditions, further raising costs. States’ re- POTUS at the UN cord here is not good: before Obamacare, Not dead yet many ran “high-risk pools” to care for the Wolf hall sick, but they were badly underfunded. Second, the bill would concentrate risks. Were a state to face a fresh drug epi- WASHINGTON, DC demic or outbreak of disease, it would get NEW YORK no additional money.By contrast, Obama- Republicans seekto turn health reform In which the president threatens to care’s subsidies rise and fall automatically overto the states “totally destroy” anothercountry in proportion to local health costs. FTER Republicans failed to agree on a Mr Graham argues that the spread of T IS not known whether President Do- Areplacement for the Affordable Care money across states would nevertheless Inald Trump has seen “Wolf Warriors 2”, Act earlier this year, the cause of Obama- be fairer, because California, New York, the nationalist action film breaking Chi- care repeal looked dead. Yet a revival was Massachusetts and Maryland currently re- nese box-office records with its depiction always possible before September 30th, ceive 40% of all funding. This criticism ofa formerPeople’s Liberation Army (PLA) when a budget measure allowing a health makes little sense. California and New commando battling warlords and evil bill to pass the Senate with only 51 votes, Yorkgeta lotofmoneyin partbecause they American mercenaries in Africa. But in his rather than 60, expires. The ticking clock are large. For the same reason, Florida and first speech to the United Nations General has spurred four Republican senators, led Texas each get more cash than either Mas- Assembly, on September 19th, Mr Trump by Bill Cassidy of Louisiana and Lindsey sachusetts or Maryland, which Mr Gra- took a decidedly “Wolf Warrior” line on Graham ofSouth Carolina, to have onelast ham has picked for their Democratic poli- the UN’s proper role. stab at getting a bill passed. tics. The states which miss out on cash are To the usual action-flick staples—car Messrs Cassidy and Graham are not those that have not expanded Medicaid or chases, fist-fights, exploding tanks—that brimming with new policy ideas. Instead enrolled as many people in the individual Chinese movie adds a fortifyingdose of in- of reforming Obamacare themselves, they market. According to our calculations, ternational law, as lantern-jawed PLA offi- want to pass the baton to state govern- New Mexico, a state whose residents are in cers wait forthe UN Security Council to ap- ments. Like past Republican bills, their pro- relatively poor health, gets the most Oba- prove their use of force, after asserting a posal would limit the federal govern- macare funding per head (see chart). legal right to self-defence. The final scenes ment’s role in Medicaid (health insurance The final problem with the bill is that it show the hero delivering compatriots to for the poor) to providing a fixed grant to does too little to fix the immediate pro- Chinese peacekeepers in UN blue helmets the states for each person enrolled. The blems ailing Obamacare’s markets: rising (earlier, a Chinese-American doctor has new bill extends that approach to the indi- premiums and a lack of insurers. In fact, it tried summoning Marines from an Ameri- vidual market, in which 17m people who would probably make these problems can consulate but hears an answering- do not get health insurance from some oth- worse, by scrapping a requirement that machine, for the Yanks have fled). The film er source buy it forthemselves. From 2020, people buy health insurance or pay a fine, offers no opinions about African rulers the federal funds that currently subsidise thereby allowinghealthy people to flee the causing mayhem, let alone the human poorer buyers would instead be divvied market. States would have to deal with the rights of locals. “Wolf Warriors 2” is about up among states in proportion to the distri- fallout at the same time as constructing China looking after its own, with the UN bution ofAmericans earningbetween 50% their own systems in time for2020. there to offerlegal blessing. and 138% of the federal poverty line. States Senator Cassidy says his bill does not Echoingcountries such as China or Rus- could spend this cash on health care most- preclude a bipartisan attempt to shore up sia, with their talk of non-interference in lyastheysawfit. Theycould also opt outof the individual market. But an effort to find the affairs of sovereign nations, Mr Trump many of Obamacare’s regulations, such as such a compromise collapsed on Septem- said that America does not expect “diverse those preventing insurers from charging ber 20th. Insurers must sign contracts go- countries to share the same cultures, tradi- more to those who are unhealthy. verning premiums in the individual mar- tions or even systems of government”. In- Federalism of this kind is often desir- ket by September 27th. Unfortunately,that stead he praised the work of “responsible” able. Widespread experimentation with deadline seems to lack the power to moti- countries that fight terrorism or other men- health policy would surely lead to innova- vate Congress to act. 7 aces, recalling fruitful talks with Muslim tion, including in ways Democrats might rulers brought together by Saudi Arabia. like: states could decide to provide univer- MrTrump made headlinesbyusingbel- sal taxpayer-funded coverage, for example. Repeal-ent licose, action-hero language to send a rath- Yet there are three clear downsides to the Affordable Care Act funding per resident er conventional message of deterrence to Cassidy-Graham plan. Estimated, by state*, 2017, $ North Korea, brandingthat country’s dicta- First, states might not be up to the task. Highest 0 200 400 600 800 tor, Kim Jong Un, a “Rocket Man” bent on a Each would have two years to decide what “suicide mission”. Should America be New Mexico its health-care system should looklike, and forced to defend itself or its allies, he add- to find the money to top up the federal California ed, “we will have no choice but to totally grant if necessary. By 2026 almost every Oregon destroy North Korea.” state faces a cut compared with what it can Arkansas The president poured scorn on the deal expect under current law, according to the Kentucky brokered by Barack Obama’s government Centre for Budget and Policy Priorities, a Lowest and otherworld powers to freeze Iran’s nu- left-leaning think-tank. The more a state’s Utah clear-weapons programme in exchange for residents have enrolled in Obamacare’s easing international sanctions. The nuc- Oklahoma programmes, the harder it will be to main- lear deal was an “embarrassment to the tain the status quo, especially in places in Mississippi Tax credits United States”, and the world had not poor fiscal shape, such as Illinois or New South Dakota Cost sharing “heard the last ofit”, Mr Trump thundered. Jersey.Any state keeping Obamacare’s reg- Kansas Medicaid expansion Yet lookbehind the headlines about his ulations in place would risk acting as a Sources: CBO; Census Bureau; *Based on 2016 swaggeringrhetoric, and atothermoments magnet forAmericans with chronic health CMS; The Economist population estimates Mr Trump sounded like a conventional Re-1 26 United States The Economist September 23rd 2017

Newark’s rebound Baraka and roll

NEWARK A mayorwho alarmed business turns out to be its friend HEN Ras Baraka was elected New- North American headquarters to Newark Wark’s mayor in 2014, the business in 2013, donated $350,000 forpolice body world was worried. He had brokered cameras. Audible, a subsidiary ofAma- peace between the Crips and the Bloods, zon, is paying a year’s rent foremployees two fierce rival gangs, and is Newark living in the recently renovated Hayne royalty—his father, AmirBaraka, was a building. Local universities have sup- famous activist poet. But he was no fan of plied criminologists to improve policing. corporate America. Mr Baraka once About $2 billion-worth ofconstruc- compared the business community’s tion is under way, including in the city’s relationship to Newarkers to that of a long-neglected Wards (neighbourhoods). master and slave. In office he has proved The area destroyed in the rebellion, as more pragmatic than expected, and his Newarkers call the 1967 unrest, is being rhetoric might nowadays be mistaken for redeveloped. It is now home to part of a management consultant’s. “We can’t get Rutgers University’s campus, new apart- to where we want to be unless everyone ments and the first supermarket built in takes accountability and is at the table,” the area in decades. The city intends to says the formerschool principal. transform a boarded-up Victorian man- Eisenhower’s heir Large swathes ofthe 26-square-mile sion, once owned by the first black wom- city were wrecked during the 1967 unrest an in Newarkto become a millionaire, 2 publican. He left his options open when it sparked by the police beating ofa black into space forstartups. came to scrapping the Iran deal (though he cab driver. For years, Newarkwas one of Ofcourse not all this is Mr Baraka’s scolded the Iranians for locking up politi- the country’s most dangerous cities and doing. Low unemployment and low cal opponents). He called for cost-saving one ofits poorest. The former industrial violent crime are national phenomena. UN reforms, but did not threaten to leave powerhouse has endured decades of Newark’s proximity to New Yorkhelps. the world body. He rebuked the leftist re- disinvestment, but this is changing. The current mayor benefits from ground- gime in Venezuela, promising “further ac- Prudential, a Fortune 500 company workdone by his predecessor, Cory tion” if the government there headed fur- founded in Newarkin 1875, lent the city Booker. But Mr Baraka deserves the credit ther down the path to authoritarian rule. an expert to help it balance its books. Mr he is getting. Success is creating a new How all that squares with America First Baraka inherited a $93m deficit in 2014, problem forNewark: nowadays Mr nationalism and scrupulousrespectfor the but has piled up surpluses in the past two Baraka must spend time reassuring peo- sovereignty of such non-democracies as budgets. Prudential once walled itself off ple that redevelopment will not come at Saudi Arabia is less clear. from the city’s streets with skywalks. But Newarkers’ expense. To head offgentrifi- By way ofanswerMrTrump offered the it built a new downtown office tower in cation, the city may soon mandate that outlines of a Trump doctrine, in which na- 2015 and its staffnow buy lunch in local 20% oflarge housing be set aside for low- tionalism, orpatriotism as he prefers to call restaurants. Panasonic, which moved its and moderate-income households. it, is a benign organising principle for the world. Just as he won office by heeding “forgotten” Americans, so he urged others Fixing homelessness ‘No, no, I don’t go downtown.’” to build strong economies, societies and Although homelessness is hard to mea- families, not waiting for global bureaucra- Reno way sure, available statistics suggest that Reno’s cies to save them. “We are callingfora great homeless population is on the rise even as reawakening ofnations,” he said. America’s homeless population as a The tension between respectingnation- whole is declining. In 2011, 879 people lived al sovereignty and honouring universal RENO, NEVADA on Reno’s streets, in shelters and in transi- rightshasthrummed like an electric charge tional housing. By January 2017 that num- Anti-vagrancy laws are not the best way through the UN since its founding in 1945. ber had increased to 1,106, meaning about to reduce homelessness Mr Trump either does not sense that ten- 32 of every 10,000 residents is homeless sion, or does not want to. “America stands N A sunny morning, downtown Reno (the national rate is 18 per 10,000 people). with every person living under a brutal re- Ois mostly empty, save for a handful of To burnish downtown Reno’s reputation, gime,” he declared, adding: “Our respect tourists. Two women speaking Spanish the city council is considering several new for sovereignty is also a call for action. All ogle diamonds in one of many pawn ordinances, one of which would ban peo- people deserve a government that cares shops; a Chinese couple snaps photos un- ple from lying or sleeping on private or for their safety, their interests and their der the city’s archway with its inscription, public property without permission. Such well-being, including their prosperity.” He “The biggest little city in the world”. Resi- policies are increasingly common. Accord- left unexplained who should decide dents avoid the area for fear that it is un- ing to the National Law Centre on Home- which governments are brutal. Mr Trump safe, says Boyd Cox, an affable veteran lessness & Poverty, 18% ofthe 187 American further claimed that the UN was founded who owns a large antique shop down- cities it surveyed in 2016 imposed citywide as a forum for strong, proudly self-interest- town. Mr Cox sometimes finds homeless bans on sleeping in public, a significant in- ed nations. In fact America helped create people sleeping under the overhang at the crease since 2006. the world body to curb the horrors of na- entrance. “When I recently asked one In 2012 Apple announced that it would tionalism. But that is a history lesson. Ac- friend—a retired fireman—to stop by the open a data centre in Reno’s arid outskirts. tion-movie swagger is much more fun. 7 store for a visit, he shookhis head and said: Tesla and Google have since followed. The 1 Your trust, your future, our commitment

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2 infusion of wealth has transformed parts they have no space, the homeless living on tant bacteria in their gut. These drug-resis- of the city; the Midtown area south of the the street will be left alone. But if they do, tant bacteria can then spread into the envi- Truckee river now boasts trendy restau- anyone livingoutside who refusesto move ronment in the soil or the water, and can rants, artisanal chocolate makers, and a in after a warning might be arrested. even infect animals that are sold for hu- renovated art-deco post-office building. An arrest record makes it harder for a man consumption. Any resulting infec- As the city’s fortunes have risen, so too homeless person to find employment or tions are often far removed from the food have its rents, occupancy rates and house housing in the future. Many studies sug- that caused them, which is why it takes prices. Since 2012 the median price of a gest there are cheaper ways to tackle the some detective work to trace them back. home hasdoubled; the average rental price problem. The Central Florida Commission Each year salmonella causes around 1.2m jumped 17% between 2014 and 2016. In Jan- on Homelessness, a charity, found that the cases of food poisoning, of which 19,000 uary the Reno Area Alliance forthe Home- average costs associated with the incarcer- result in hospitalisation and 380 in death, less counted nearly 4,000 people living in ation and hospitalisation of a chronically according to the Centres for Disease Con- weekly motels, up from 2,560 in 2011. homeless person are about triple what it trol and Prevention. The death rate is high- Those who cannot afford motels have would cost to provide a chronically home- est among children under five. Most of moved into shelters or onto the street. less person with housing. Between 2007 these illnesses are caused by antibiotic-re- If the proposed ordinance to ban sleep- and 2015, New Orleans reduced its home- sistant bacteria, and most of that bacteria ing outside passes, Reno’s police officers lessness rate by 85%, primarily by provid- comesfrom industrially produced chicken. will be directed to try persuadingthose living housing. Reno’s city government One villain in Ms McKenna’s account is ing on the streets to move to shelters. If should take a look. 7 Thomas Jukes, a British biologist, who in 1948 tested different supplements, including one with antibiotics, in the diets of Industrial farming chickens. When he ended his experiment all the chickens that received supplements Jukes hazard had gained at least a little weight, but the ones ingesting antibiotic leftovers had gained by farthe most. This was the start of the use of antibiotics to promote growth. Mr Jukes realised the bacteria in the chick- CHICAGO en’s gut would develop resistance, but would not concede the harm this could do, How antibiotics changed the way America eats a view he stuck to until he died in 1999. ILL HARRIS is one of the heroes of day is twice what it was 70 years ago, and it Concern about antibiotic-resistant bacte- W“Big Chicken”, a new book by Maryn achieves such heft in halfthe time. ria in humans has grown since. McKenna that looks at the widespread use After the deprivations of the second After a particularly nasty outbreak of of antibiotics in poultry farming. After fin- world war, the new wonder drugs were food poisoning from salmonella in chick- ishinghis studies at the University of Geor- welcomed by farmers, who could sell big- en in 2013, regulators and consumers have gia’s School of Agriculture in 1976, Mr Har- gerbirdsmuch more cheaplyto consumers become more aware of the dangers of bin- ris deployed all the instruments in his new hungry for affordable protein. The down- geing on antibiotics-infused drumsticks. In toolkit to increase his farm’sprofits: chemi- sides were not immediately obvious. Even 2014 Jim Perdue, chairman ofPerdue farms, cal fertilisers, pesticides, land tillage, anti- so, some scientists warned about the prac- one of the largest poultry companies, an- biotics, hormones. They did wonders for tice right from the beginning. nounced that his company would not use cost-savings, he says, but made him in- Animalsreceive antibioticsin their feed antibiotics in its hatcheries any more. Wal- creasingly uncomfortable. White Oak Pas- and water, which creates antibiotic-resis- mart, the world’s biggest supermarket tures, his farm in western Georgia, has chain, McDonald’s, the world’s biggest come full circle over 150 years. Trans- fast-food chain, Kentucky Fried Chicken, formed into an industrialised, commodi- Chick-fil-A and many others are stopping tised and centralised agricultural opera- or phasing out. In January this year the tion, the farm has now reverted to ways Food and Drug Administration came into that his grandfather might recognise. With line with the EU, which had banned the its verdant 3,000 acres grazed by rabbits, use of antibiotics for growth promotion in sheep, pigs, goats, turkeys, ducks, geese, livestock farming 12 years ago. The drugs guinea hens, bees and chickens, it is now a are allowed formedicinal use, but only un- textbook example of multi-species, pas- der the supervision ofa veterinarian. ture-based organic farming. Mr Harris says he would have gone Few farmers in America dare to take broke had he started his farming experi- such a radical step away from industrial ment in the 1970s, but consumer demand farming methods. Ms McKenna shows has been shifting. His grass-fed beef costs how,fordecades, the demand for“meatfor 30% more than grain-fed beef at Whole the price of bread” has overridden other Foods, a posh supermarket; his pork costs concerns. Around 15,400 tonnes a year, a 40% more than the mainstream variety whopping 80% of all antibiotics sold, go to and the price ofhis chicken is 200% higher. farmers. Chicken farmers use even more He is not making any money with the than those who raise cattle or pigs. Only a chicken, which is subsidised by the cattle. small percentage of the drugs are used to But he is hopeful that chicken will again be cure illnesses. Their main function is to seen as a special Sunday treat. Last year makethebroilersfattenupmorequicklyor Americans ate more than 92lb of chicken to act as a prophylactic against the compared with 28lb in 1960. As prices are cramped conditions in which they are likely to rise thanks to the new regulations, raised. A chicken’s weight at slaughter to- Clucking hell less will be more. 7 The Economist September 23rd 2017 United States 29 Lexington Moore’s law

Alabama’s Senate primary drives a wedge between Donald Trump and his closest supporters who believes his interpretation of scripture takes precedence over any court or law, Mr Moore is known for his several losing clashes with federal authority. Thus his refusal, as a circuit judge and then as Alabama’s chiefjustice, to remove the inscriptions of the Ten Commandments he placed in his courthouses, even after federal judges found them to contravene the First Amendment. He was sacked as a result; then, after he returned as chief justice, again removed, for having ordered Alabama’s judges to ignore a Supreme Court ruling legalising gay marriage. In a state where almost a third ofthe population is white, evangelical and conservative, these rows have given him the support of around 150,000 voters, roughly his tally in a preliminary round of the primary, in which he bested nine other candidates. Normally, that would not be enough to win the Senate ticket, and Mr Moore’s peculiarities make it hard for him to expand his appeal. He is assisted by two other recent scandals: the convic- tion for corruption ofthe Republican Speaker ofAlabama’s state- house, and a sex scandal that did for the former Republican governor. This has left Alabaman conservatives even more fed up with politicians than they were before, depressing turnout, which helps MrMoore. It has probably also won him new voters, HE first time Roy Moore lost an election, for a seat on the Ala- on the basis that he is, even ifa bit wacko, a man ofprinciple. Tbama circuit bench, he quit the law to become a professional By aping Mr Trump, Mr Moore is meanwhile trying to cast his kickboxer. Now stumping for the Senate seat vacated by Jeff Ses- net wider. He presents himselfas a reluctant politician, forwhom sions, the attorney-general, the formerchiefjustice of Alabama is the pursuit ofpower is a sacrifice. He has not discouraged the rac- limbering up for a more ambitious fight. “Put on the whole ar- ists forwhom his perorations on antebellum America are appeal- mour of God that you may be able to stand against the wiles of ing (“Show me the place in the Bible where slavery is con- the devil!” he tells a crowd in Huntsville, northern Alabama, in demned!” one rally-goer said triumphantly). He also displays Mr the words of the apostle Paul. “For we wrestle not against flesh Trump’s pantomime contempt for journalists, apparently in ear- and blood but…against the rulers ofthe darkness ofthis world!” nest. After his speech, Lexington approached and asked Mr This takes Republican dissatisfaction with Mitch McConnell Moore to name three policies he hoped to pursue in Washington, to a new level. The party’s leader in the Senate is hated by Mr DC. In response, he leaned menacingly forwards, growled, “Get Moore forhaving put his wiles—and millions ofdollars from con- out ofmy face”, and had your columnist ejected from the rally. servative donors—behind his rival for the Republican Senate ticket, LutherStrange. It is easy to see why. MrStrange, who is keeping Pray forsomething better the Senate seat warm at the behest of Alabama’s former gover- The fact that Mr Trump has not returned the compliment is awk- nor, RobertBentley, isa formerlobbyistwith a reputation forflexi- ward forMrMoore. His team suggests the president was suckered bility. MrMoore is a religious zealot, with little grasp ofsecular is- into making a bad call by Mr McConnell. But Mr Trump’s en- sues besides his trademarkeagerness to be uncompromising. dorsementofMrStrange, which he announced ata time when he A supporter of Donald Trump, who won a huge majority in and Mr McConnell were barely speaking, is merely the latest evi- Alabama last year, Mr Moore duly rails against illegal immigra- dence of a growing preference for pragmatic functionaries over tion, though in a recent interview he failed to recognise the name the populist ideologues who helped get him elected, including of Barack Obama’s biggest immigration reform, the recently con- Stephen Bannon, Mr Trump’s former chief strategist. “Big Lu- demned Deferred Action for Childhood Arrivals programme. ther”, tweeted the president, in announcing his intention to Also prone to making racially insensitive and Islamophobic re- stump for Mr Strange in Huntsville, “gets things done.” (Mr marks, he makes the reactionary Mr Sessions seem moderate. He Moore, by contrast, says a fellow Alabaman evangelical, would is the favourite to win the primary vote, which will be held on be marginalised in the Senate “like Luciferavoids the cross.”) September 26th, ahead ofan election in December. The ideologues are not taking this lying down, with Mr Ban- As one of the first Senate races to be held since Mr Trump’s non, the right-wing nationalist Breitbart News outfit that he runs election, the contest is attracting a lot ofattention. It illustrates the and otherpopulist outfits backingMrMoore. Victory for the theo- widening gulf between Republican leaders and foot-soldiers, crat would be a fillip forthem, perhaps leadingto a string ofprim- which Mr Trump exploited in his populist campaign. It indicates, ary challenges to sitting Republicans next year. Even so, it is hard too, the dilemma this has presented the president with, now that to see this as a battle for the soul of the Republican Party, for that he needs the support of both sides: the base for validation and might imply an impending renewal. Whoever wins the primary, votes, the leaders to govern. It is also a test of the president’s au- Mr Moore or Mr Strange, will have won a bad-tempered contest thority—because, to the dismay of the Moore camp and his own in which both candidates offered a list of Trumpian pledges, to populist advisers, he has endorsed Mr Strange. curb immigration, cut spending and so forth, that already seem Even so, Mr Moore’s rise is mainly illustrative of two local unachievable. That will not inspire Alabama’s demoralised con- quirks: Alabamans’ unusual evangelical fervour and how badly servatives—even if, the exigencies of tribalism suggest, they will they have been served by one-party Republican rule. A theocrat probably send their candidate to the Senate anyhow. 7 30 The Americas The Economist September 23rd 2017

Also in this section 31 A Brazilian prosecutor’s ﬁery exit 32 A ministerial massacre in Peru 32 Venezuela’s war on cuteness Bello is away

Mexico said that 40% of Mexico City and 60% of Morelos lacked electricity immediately The shaking earth after the quake. The earthquake that struck southern Mexico on September 7th, killing at least 90 people in the statesofOaxaca and Chia- pas, was one ofthe strongest ever recorded MEXICO CITY in the country, with a magnitude of 8.1. But its epicentre was 120km (75 miles) out at Amid the tragedy ofanotherquake, Mexicans can find some small consolations sea. The latestone waslessstrong, at 7.1, but HE timing seemed supernatural. At a ten-storey building came down; the Cor- deadlier, centred on the border of Morelos T1.14pm on September 19th, just a couple tés Palace, one of the earliest Spanish colo- and Puebla states, only about120km south of hours after Mexicans had completed an nial buildings in Mexico, was damaged, ofthe capital. evacuation drill marking the 32nd anniver- and the murals by Diego Rivera it contains The first quake, which shook Mexico sary of an earthquake that devastated the were fractured. City but did little damage there, bred a cer- capital, the ground shook once again. The Several of the buildings that fell in the tain complacency. That has been brutally second big quake to hit the country in a capital were in Condesa and Roma, trendy dispelled. President Enrique Peña Nieto, fortnight killed at least 230 people, injured districts full of bars and restaurants where who had set out to visit areas damaged on several hundred and left many more with- many foreigners live. They are built on the September 7th, returned to the capital and out homes. friable dried-up bed of the lake that sur- declared an emergency. It is “a severe test In Mexico City, the site of around half rounded the Aztec capital of Tenochtitlan and very painful forour country”, he said. the deaths, it caused terror and heartbreak. and suffered damage in 1985. The earthquakes come with the nation- It was “the strongest that I can remember”, Tens of thousands of residents milled al mood at a low ebb. Mexicans are fed up said Susana Bustamante, an employee of a about in Mexico City’s streets, ordered not with corruption and violence, and the telecoms firm. “Some people really pan- to return to their homes or offices because economy is sluggish. Across the border, icked.” Around 40 buildings collapsed in of fears of further damage. Gas leaks Donald Trump regularly insults and threat- the capital. They included the Enrique Reb- caused some fires and much fear. Officials ens Mexico, though he has now offered samen primary school, where 21 children American help. MrPeña is deeply unpopu- and four adults were killed. At least one lar. Now nature has delivered a body blow. trapped child was alive on the following Treacherous ground There were two crumbs of comfort. Di- day, but otherpeople were still missing. Ac- Mexico, deadliest earthquakes sasters bring out the best in Mexicans. cording to Eduardo Corona of the govern- Within minutes, ordinarypeople clutching Date Epicentre Magnitude Deaths ment’scivil protection agency, the building buckets to collect rubble dashed to help. had collapsed on top of the children and Sep 19th 1985 Michoacán 8.1 6,500+ Thousands laboured alongside rescue was “very compact…like a pancake”. Jan 3rd 1920 Veracruz 7.8 648 workers. They directed traffic and donated Throughout the night rescue workers Aug 28th 1973 Veracruz 6.2 600 food and water. Though in smaller towns and volunteers combed the ruins of build- Jun 3rd 1932 Jalisco 8.1 400 there were fears of looting, Mexicans ings across the city in a search for survi- Oct 24th 1980 Oaxaca 6.4 300 showed that they are not the “bad hom- vors. At least 52 people were pulled alive Sep 19th 2017 Puebla 7.1 230* bres” ofMr Trump’simagination. from the rubble. Sep 7th 2017 Chiapas 8.1 98 The second consolation lay in the con- Towns and cities in four states near the trastwith the devastatingquake of1985. On Jul 6th 1964 Guerrero 7.4 78 capital were also hit. In Morelos 69 people that occasion some 400 buildings crum- were confirmed dead, 16 of them in the Jul 28th 1957 Guerrero 7.9 65 pled, including whole city blocks. Esti- town of Jojutla, which suffered much de- Source: Significant *At midnight local time, mates of the death toll range from 6,500 to struction. In Cuernavaca, the state capital, Earthquake Database, NOAA September 21st 2017 20,000. That the damage was far less ex-1 The Economist September 23rd 2017 The Americas 31

2 tensive this time owes much to stricter the house-cleaning: 85% want it to contin- building codes introduced in the decades ue, according to a recent poll. Sérgio Moro, since. In recent years giant, 50-storey-plus the judge who handles investigations and office towers have sprouted along Re- trials of most suspects who are not sitting forma, Mexico City’s grandest avenue. politicians, is a national hero. This week they swayed but did not buckle. Most Lava Jato prosecutions are based The damage was mainly confined to on careful detective work. Investigators pre-1985 buildings. That suggests there is traced Mr Cunha’s Swiss bank accounts. more to be done to promote the retrofitting Mr Moro, who convicted Lula, had a docu- with seismic protection of older buildings, ment attesting to the acquisition of an as Chile has done. In particular, questions apartment by his wife, who has since died. will be asked as to why the Rebsamen (Lula is appealing; his supporters say he is school gave way. the victim ofa witch hunt.) In 1985 the government’s reaction was Mr Janot’s salvoes against the president one ofheartless inaction and shameful de- have been controversial. His deal with the nial. This time there was no cover-up, as Batista brothers, who admitted to paying television channels offered rolling cover- $185m in bribes to hundreds of politicians, age of the destruction and the rescue ef- looked generous. They were given immu- forts. And this time police, troops and fire- nity from prosecution in exchange for con- fighters were quickly mobilised, working fessions that implicated Mr Temer. Embar- alongside citizens rather than trying to ob- rassingly, Mr Janot’s office withdrew the struct them. Regular drills mean Mexicans brothers’ immunity afterit became known know what to do; alarms give some warn- Janot, the fastest gun in the tropics that they had not made full confessions. ing of earthquakes, though not when they Their testimony incriminating Mr Temer is are centred as close as this week’s was. testimony from Joesley and Wesley Batista still valid, Mr Janot insists. The mishandled response to the 1985 and on tapes recorded by Joesley Batista. The latest set of charges relies heavily earthquake contributed to the fadingof the Their family controls JBS, the world’s larg- on plea-bargain testimony of people who authoritarian political system of the Insti- estmeatproducer. Brazil’scongressrefused had dealings with the mega-gang. Critics tutional Revolutionary Party (PRI), which to forward those accusations to the su- say it offers too little corroborating evi- ruled Mexico formore than seven decades preme court, the only one that can try the dence against Mr Temer in the form of in- until 2000. Mr Peña restored the PRI to president. It is unlikely to vote differently tercepted communications or bank re- power, but in a democracy with a vigorous on the second set of charges. Mr Temerbe- cords. Plea-bargain testimony should open civil society whose origins date to the came president in August 2016, when his lines of inquiry, not provide the main evi- grassroots response to the earlier earth- predecessor, Dilma Rousseff of the PT, was dence for their conclusions, they contend. quake. Amid the sadness and the destruc- impeached on unrelated charges. Most an- Mr Janot’s foes have pounced. Mr tion, Mexicans should also reflect on how alysts expect him to remain in office until Temer accuses him of bearing a grudge farthey have come in the past 32 years. 7 the end ofhis term in December 2018. against him and calls the latest allegations Mr Janot’s parting shots leave Brazil in “fantastical”. Gilmar Mendes, a supreme- an uncertain state. The allegations against court justice friendly to Mr Temer, calls Mr Corruption in Brazil Mr Temerare grave, but to some non-parti- Janot “the most incompetent” chief prose- san observers they do not look rock-solid. cutor in history. Some people hope to capi- Parting shots The prosecutor has deepened suspicions talise on such criticisms to undermine the about the president’s conduct while leav- broader Lava Jato process. ing room fordoubt. People who feel threat- The legislature, more than half of ened by the broader Lava Jato (Car Wash) whose 513 members are under investiga- SÃO PAULO corruption probes are seizingon what they tion, is looking for ways to tame it. A cross- claim are weaknesses in Mr Janot’s case to partycommittee led byan allyofMrTemer The chiefprosecutorleaves at a pivotal call into question the entire process. Now is considering measures to limit the use of moment forthe fight against corruption Brazilians wonder whether Mr Janot’s suc- plea bargaining, for example by setting a IKE a sheriff in one last gunfight, Rodrigo cessor, Raquel Dodge (pronounced minimum jail sentence forpeople who ad- LJanot hoped to end his career in a blaze “dodgy” in Brazil), will pursue it with the mit guilt in exchange for testimony against of glory. On September14th, three days be- same zeal. The anti-corruption crusade is others. Mr Mendes also favours restricting fore the end of his term as Brazil’s chief thus at a turning point. the use of plea bargaining. “The ethos of a prosecutor, he accused the country’s presi- Lava Jato began in 2014 by uncovering a country can’t be the fight against corrup- dent, Michel Temer, of obstructing justice bribery network made up of executives tion,” he told the Wall Street Journal. and of racketeering. In a 245-page docu- from Petrobras, the state-controlled oil A let-up in that fight would be political- ment, Mr Janot alleges that Mr Temer was company; the biggest construction compa- ly toxic. Brazilians’ support for democracy the ringleader of a “mega-gang” made up nies; and scores of officials and politicians. over other forms of government dropped ofpoliticiansfrom hisPartyofthe Brazilian It has been an immensely successful as- to a third last year from more than half in Democratic Movement (PMDB), the left- sault on Brazil’s culture of impunity. So far, 2015, according to a poll. A few want a re- wing Workers’ Party (PT) and others. It ex- 107 people have been convicted of 165 turn to military rule. This month a serving tracted bribes worth at least 587m reais crimes and sentenced to a total of 1,634 general, Antonio Hamilton Mourão, prom- ($188m) from companies in return for pub- years in prison. Among the most famous ised a “military intervention” should the lic contracts and favours. Mr Temeralso al- felons are Luiz Inácio Lula da Silva, a popu- judiciary fail to “solve the political pro- legedly paid to silence potential witnesses. lar former president from the PT, Eduardo blem”. The army’s commander contradict- This is the second volley Mr Janot has Cunha, the former PMDB speaker of the ed him, but he has not been disciplined. fired at the president. In June he accused lower house of congress, and Marcelo Ms Dodge must reassure Brazilians that Mr Temer of negotiating bribes and ob- Odebrecht, once head of the country’s big- the Lava Jato inquiries, including into Mr structing justice. The charge was based on gest construction firm. Brazilians applaud Temer’s activities, will continue unim1 32 The Americas The Economist September 23rd 2017

2 peded. Mr Temerchose her from a shortlist Venezuela over a candidate who is more popular with prosecutors. That prompted speculation that she might go easy on him. At her The war on cuteness swearing-in on September18th she tried to seem less confrontational than Mr Janot. The government thinks its hungry citizens should lap up lapin She promised to fightcrimesagainstthe en- vironment and indigenous people as well ENEZUELA has a hunger crisis, with The government has launched a as corruption, and called for“harmony be- V12% ofchildren sufferingfrom acute campaign to persuade them that the love tween institutions”. malnutrition. But the country’s socialist ofbunny is, ifnot the root ofall evil, at But Ms Dodge, unlike Mr Janot, is a spe- president, Nicolás Maduro, has a cunning least contrary to the spirit ofchavismo. cialist in criminal law. She has reportedly plan. Under Plan Conejo (Plan Rabbit), Government websites and social media appointed seasoned investigators to the poor settlements are to receive cages spread the word that rabbit meat is tasty Lava Jato team of the prosecutor’s office. containing baby rabbits which, when and nutritious. The opposition, as ever, is “There is nothingin herCV to suggest she is fattened up, will provide the protein and sceptical. “Do you thinkwe Venezuelans interested in putting the brakes on Lava calories many people lack. Freddy Ber- are stupid?” asked Henrique Capriles, the Jato,” says Thomaz Favaro ofControl Risks, nal, the urban agriculture minister, re- governor ofMiranda state, who narrowly a consultancy. The new prosecutor, Brazil- cently delivered the first consignment of lost the presidential election in 2013 to Mr ians hope, will turn out to be a sharpshoot- bunnies to15communities. Maduro. He was equally rude about an er rather than a gunslinger. 7 It makes more sense than some ofMr earlier plan to install vertical chicken Maduro’s other ideas. They “will breed coops in the cramped apartments ofpoor like rabbits”, he predicted. While shops city-dwellers. The failure ofthat plan to The politics of Peru run out ofbread, butter and other staples alleviate hunger suggests to many Vene- because ofprice controls and scarce zuelans that this one, too, is hare-brained. Ministerial foreign exchange, the rabbits will repro- duce, oblivious ofmarket forces. The massacre “imperialist” United States, which is waging “economic war” on Venezuela, LIMA will only be able to watch and fume. But the hutch-based solution that Mr The president has suffered a blow, but Maduro has hatched has run into a hitch, may recoverfrom it as Mr Bernal discovered when he visited EDRO PABLO KUCZYNSKI has been the beneficiaries. “People were naming PPeru’s president for little more than a the rabbits and taking them to bed,” he year, but already he has lost or reassigned told Mr Maduro in a cabinet meeting 15 ministers. The biggest cull came on Sep- broadcast on state television. Some had tember 15th, when his government lost a put bows on them, Mr Bernal com- vote of confidence in congress. That led to plained. “People must understand that a the resignation of the prime minister, Fer- rabbit is not a pet, but two-and-a-half nando Zavala, who was also finance min- kilos ofmeat with high protein and low ister, along with the rest of the 19-member cholesterol.” Re-educating them is not cabinet. Mr Kuczynski reappointed most easy.“We’ve been taught that rabbits are of them two days later. But Mr Zavala is cute,” Mr Bernal lamented. On second thought, hold the onion sauce gone, as are Marilú Martens, the education minister, whom the opposition accuses of mishandling a teachers’ strike, and three too gay-friendly and has paid too little at- mollified. The government still has “time others. To many Peruvians the president, tention to people outside Lima. It has to make things right”, she tweeted. who has four years to go in office, already blocked or slowed down economic legisla- Mr Kuczynski may benefit from divi- looks like a lame duck. tion and serially censured the govern- sions within Fuerza Popular. Ms Fujimori’s The source ofhisproblemsishis incom- ment’s technocratic ministers. brother, Kenji, a congressman, backed Mr plete victoryin last year’s presidential elec- The ministerial massacre leaves Mr Zavala in the confidence vote; some mem- tion. He narrowly won the popular vote in Kuczynski looking enfeebled. Just 22% of bers of the party have called for him to be the second round against Keiko Fujimori, Peruvians support him, a drop of 41 per- expelled. Ms Fujimori, who is only a little the daughterofa formerpresident, Alberto centage points since he took office, accord- more popular than the president, hopes to Fujimori, who is in jail for human-rights ing to a recent poll. Mr Zavala’s resignation run again in 2021. Her war against Mr Ku- crimes. But her party, Fuerza Popular (Pop- is only the fourth by a prime minister after czynski risks coming across as self-serving; ular Force), holds 71 of the 130 seats in con- a confidence vote in Peru’smodern history. she may now become less aggressive. gress. Ithasexploited to the full its powerto Yet Mr Kuczynski’s position may be The economy could also boost the pres- make life difficult forMr Kuczynski. stronger than it looks. The new prime min- ident. GDP expanded by 2.4% in the year to The quarrel is partly ideological. Mr ister, Mercedes Aráoz, is well-liked. She the end of June. The government predicts Kuczynski, a former banker and World was the top vote-getter among congress- growth of 4% next year, thanks partly to Bankofficial, is a socially liberal pragmatist ional candidates for Mr Kuczynski’s party, higher prices for copper, the biggest export. whose main goals are to bring more work- Peruanos por el Kambio (Peruvians for It plans to increase spending next year by ers into the formal labour market, improve Change), and briefly ran for president in 10% without increasing tax rates. Such lar- public services and infrastructure and en- 2011. Most opposition parties, including gesse tends to make voters happy. “Fresh courage economic growth. Ms Fujimori is Fuerza Popular, have welcomed Ms Aráoz air is blowing...through the world econ- aligned with conservative Catholic and and the new health and education minis- omy,” declared Mr Kuczynski in his first evangelical Christians. Her party com- ters, who are more conservative than their meeting with his new cabinet on Septem- plainsthatthe governmentispro-abortion, predecessors. Even Ms Fujimori sounded ber18th. He, too, needs a second wind. 7 Asia The Economist September 23rd 2017 33

Also in this section 34 Deﬁning Hinduism in India 36 Australia votes on gay marriage 36 Gay-bashing in Indonesia 37 Banning beards in Tajikistan 38 Banyan: Keeping New Zealand pristine

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Politics in Pakistan ready atrocious relations with India, Af- ghanistan and America. President Donald Dynast v gynaecologist Trump clearly has little patience for what he views as Pakistani double-dealing. “We have been paying Pakistan billions and billions of dollars. At the same time, they are housing the very terrorists that we are LAHORE fighting,” he said last month. To the alarm of Pakistan’s generals, he has promised to The country’s foremost political family is undersiege send extra troops to Afghanistan and beef T A pre-election rally, a procession of came a creditable second after roundly up America’s “strategic partnership” with Acars and pick-up trucks squeezed condemning the Sharif family for their India. His administration has suspended through the narrow streets of Lahore. The aloofness, their lackofrespect forthe army some military aid and is ponderingwheth- crowd sweated, cheered, trod on each oth- and their cronyism. “They believe that er to stop treating Pakistan as an ally. er’s feet and rained rose petals on the pa- rules are made for everybody else apart rade. All that was missing was the candi- from them,” she sneered. ISI shopped the Sharifs? date. Kulsoom Nawaz Sharif, the former People are beginning to see Mr Khan as As prime minister, Mr Sharif favoured bet- firstladyofPakistan, wasin London under- a plausible future prime minister. That is ter relations with America and India, not going cancer treatment. She did not cam- fairly new. Despite his fame and two de- least because isolation makes Pakistan paign at all, leaving that job to her more cades in politics, his influence was margin- poorer. He clashed furiously with Paki- charismatic daughter, Maryam Nawaz. al until 2013. That year his party, the Paki- stan’s military intelligence over its covert She won anyway, but in a manner that stan Movement for Justice (PTI), won the support for jihadist groups that kill Indi- augurs yet more political turmoil for her second-largest share of the national vote ans, Afghans and (occasionally) Ameri- country. Her husband, Nawaz Sharif, was and control of one of Pakistan’s four prov- cans. His supporters believe that the Pakistan’s prime minister until July, when inces, Khyber Pakhtunkhwa. Next year it army—the most powerful institution in the Supreme Court sacked him—hence the will pose the only serious threat to Mr Sha- Pakistan—is behind Mr Sharif’s recent mis- by-election for his parliamentary seat on rif’s Pakistan Muslim League-Nawaz fortunes, and that it has secretly been sup- September17th. MrSharif’s supporters dis- (PML-N). The party of two former prime porting Mr Khan. Maryam Nawaz calls Mr miss the ruling as politically motivated. ministers from the Bhutto family, the PPP, Khan a “pawn”. (She means “of the army”, (He was banned from office for failing to has become irrelevant outside their home butdaresnotsayso explicitly.) MrKhan de- declare a salaryto which he wasentitled as province ofSindh. nies this, but his strident rhetoric delights a director ofa family firm.) Mr Khan’s message is simple. He is an those who want to keep Pakistan on a per- Mr Sharif hoped that voters would honest, pious Muslim. He denounces the manent war footing and thereby preserve elect his wife to his old seat by a huge mar- ruling party as corrupt stooges of Uncle military budgets. gin, thus repudiating the Supreme Court’s Sam. He vows to clean up public life, to re- Despite its fractiousness, Pakistan is do- verdict. She won, but by a much smaller ject American aid that “enslaves” Pakistan, ing well in some ways. Its economy is ex- margin than Mr Sharif had managed in and to resist American pressure to fight pected to grow by 5% this year. Poverty has 2013. For Pakistan’s most prominent politi- against brother Muslims (ie, the Taliban). halved in the past 15 years. Members of a cal family, on its home turf, in a province He appeals to Islamists, nationalists and new middle class are rushing out to buy governed by Mr Sharif’s brother, that is a voters who are fed up ofbeing ruled by the their first fridges and motorbikes. But the bad omen, less than a year before the next same handful of families. “He’ll clean up near future looks dicey: the current-ac- national elections. corruption on his first day in office!” gush- count deficit is at a four-decade high and Imran Khan, a former cricket star es a rather optimistic supporter. the central bank is struggling to prevent a turned politician, is jubilant. His party’s Others view Mr Khan as a hothead devaluation of the currency. Some econo- candidate, Yasmin Rashid, a gynaecologist, who will further inflame Pakistan’s al- mists thinkPakistan will have to turn to the1 34 Asia The Economist September 23rd 2017

2 IMF for help next year. The government, make them less violent. Others fear it will lation of Karnataka, where Siddaganga is led for now by an ally of Mr Sharif, Shahid help them drum up money and support. located, and an election beckonsearly next Khaqan Abbasi, is anxious to avoid such a Mr Sharif’s party still has a huge major- year. The state is the last big one to be held humiliation before the election. ity in parliament, and is more likely than by Congress, after a series of BJP victories Political violence has ebbed on Mr Sha- not to win next year’s elections. But the around the country in recent years. rif’s watch. Deaths from Pakistan’s war Shariffamily’s legal woes are not over. The For decades most Lingayats have voted against domestic jihadists fell by two- National Accountability Bureau has sum- as a block for the BJP. In Karnataka the thirds, and are on track to be even lower moned Mr Sharif, his daughter and two of partyisled byB.S. Yeddyurappa, a Lingayat this year. Since the Pakistani Taliban his sons forquestioningabout theirforeign who presided over a scandal-prone gov- slaughtered 148 people, mostly children, at assets. They refused to show up for a hear- ernment from 2008 to 2011. But the com- an army school in 2014, the army has ing on September 19th. Saroop Ijaz of Hu- munity now seems divided, with some cracked down vigorously on domestic mil- man Rights Watch says there is a “real dan- mutts clamouring forminority-religion sta- itants. Yet it has barely tried to curb the ger” that if the Sharifs refuse to recognise tus and others content to be counted as a groups that attack Pakistan’s neighbours. the bureau’s authority,it will lead to a con- caste within Hinduism. In August a rally Instead, it has encouraged some ofthem to stitutional deadlock. He addsthatthis isex- for the cause of not-Hinduism attracted enter politics. Two new extremist parties, actly the sort of excuse that the army has nearly 200,000 marchers. one ofwhich haslinksto the terroristswho used in the past for overthrowing civilian Only a decree from Mr Modi’s govern- killed 166 people in Mumbai in 2008, won governments. Mr Sharif has failed three ment can officially elevate Lingayatism 11% of the vote in Lahore. The army argues times to complete a full term as prime min- from a mere sect into a religion. But the that “mainstreaming” such groups will ister; it is starting to looklike a pattern. 7 BJP’s ideology of Hindu nationalism ob- liges it to oppose any step that smacks of underminingHindu solidarity. The grubby Defining Hinduism electoral stakes are also important. The BJP is keen to win over sceptical, mostly lower- Sect drive caste Hindus from India’s southern states, who often accuse Hindi-speaking north- erners of cultural imperialism, to cement its grip on national politics. Congress, meanwhile, is the obvious beneficiary of BJP TUMKUR divisions among the ’s supporters in Karnataka. A medieval poet creates a headache forIndia’s most powerfulpolitical party Like many reformist movements with- ALLED to evening prayer, 8,500 in Hinduism, Lingayats bridle at the caste C schoolboys shuffle in very long lines system. Similar impulses have under- along a grand arcade built in the shadow pinned the evolution of several religions of a granite plateau. Barefoot, each wears a with Indian origins, including Buddhism, white lungi, a red shoulder-cloth and three Jainism and Sikhism. Basava implored fol- horizontal streaks of ash across his fore- lowers to renounce “all the ties born of head. Slogans painted on the boulders vanity and riches”. A scholar of the faith, above remind them that“Workisworship” S.M. Jaamdar, likens Basava to Martin Lu- and “One god has different names.” These ther, and his poetry to Luther’s 95 theses are quotes from Basava, a poet, philoso- calling for radical reforms to Catholicism, pher and administrator who lived in the “but written 200 years earlier”. Lingayats’ area in the12th century. near-heretical devotion to social justice is The holy men who teach at the Sidda- under constant threat, he says, paraphras- ganga mutt (monastery), 70km from the IT ing another scholar: “Hinduism is an hub of Bangalore, revere both the god Shi- ocean and Lingayatism is an island; the va and Basava, who was a monotheist. ocean will always erode the island.” That makes them Lingayats. But does it Such claims arouse violent passions. A make them Hindus too? like-minded colleague of Mr Jaamdar’s, The creed has plenty ofthe trappings of M.M. Kalburgi, was shot dead in 2015. So Hinduism, but an unusual fixation on so- was another crusading Lingayat, the jour- cial justice. Its most esteemed adherent, He has had 110 years to think about it nalist Gauri Lankesh, who in August pub- Shivakumara Swami (pictured), the head lished an essay arguing that Lingayatism ofthe mutt, is110 years old. He spends most evening an envoy from the Hindu- should be considered a distinct faith. She of his time lying quietly on a modern hos- nationalist Bharatiya Janata Party (BJP) of was assassinated less than a month later. pital bed in a granite temple at Siddaganga, India’s prime minister, Narendra Modi, Ms Lankesh was also an atheist and a but he is still known as “the walking god”, rushed to the mutt and persuaded its lead- staunch left-winger, whose views had after a lifetime spent travelling the sur- ers to refrain from any such judgment. A earned her enemies far and wide. There roundingcountryside, teachingand solicit- steady stream of politicians has since are any number of theories about the mo- ing alms on behalfofthe poor. made the pilgrimage. Delegates from both tive for her murder. But the debate about On September10th he and his designat- parties, all Lingayats, plead quietly for a Basava and the meaning ofHinduism is no ed successor received a minister from the moment ofthe swami’s dwindling time. longer just an academic one. The walking local state government, M.B. Patil, a fellow Hinduism is an amorphous religion, god of Siddaganga, already a middle-aged Lingayat and member of the Congress with manyschoolsand sects. The question holy man when India held its first election Party. MrPatil came away announcing that ofwhen an offshoot becomes its own faith after independence, might not mind how the greatseerhad agreed with him that Lin- keeps squads of anthropologists busy, but the current government categorises his be- gayatism should be declared its own reli- tends not to matter much to anyone else. liefs. But his young disciples have long ca- gion, distinct from Hinduism. The same But Lingayats account for 17% of the popu- reers as voters ahead ofthem. 7

36 Asia The Economist September 23rd 2017

Gay marriage in Australia the support of conservative MPs for his Bongiorno of the Australian National Uni- campaign to supplantMrAbbotttwo years versity, because its main political parties Just don’t call it a ago, he accepted the idea ofa plebiscite. have “failed to translate long-standing con- Other parties, naturally, have been re- sensus into change”. plebiscite luctant to help the Liberals paper over Several prominent business figures also these internal differences. The Senate, support a Yes vote. Many worry that the Sydney where Mr Turnbull’s government lacks a government has mishandled the issue by majority,rejected a bill to hold a plebiscite. drawing it out, allowing divisions within Todefusea row within his party,the MrTurnbull’sanswerinAugustwasto con- its ranks to overshadow pressing eco- prime ministersparks a national furore duct a postal “survey” instead—a step that nomic reforms. Mr Turnbull has promised HE question reads, “Should the law be did not require parliament’s approval. prompt legislation if the Yes vote wins; he Tchanged to allow same-sex couples to It is an unusual exercise. Voting is nor- predicts it will “sail through” parliament. marry?” Ballots asking it have been posted mally compulsory in Australia, and the re- Although public opinion seems strongly in to Australia’s 16m registered voters. They sults of referendums are binding. Neither favour, the unprecedented method of vot- have until early November to return them; condition applies to the “Australian Mar- ing makes turnout hard to predict. Some the result will be announced on Novem- riage Law Postal Survey”. It is being con- Yes campaigners worry that young voters ber 15th. Rallies for and against are being ducted by the Australian Bureau of Statis- have no idea how to use a letterbox. But if held around the country. Earlier this tics, not the body that oversees elections. the No vote prevails, the opposition Labor month 30,000 supporters of gay marriage Michael Kirby, a gay former High Court party says it will still legalise gay marriage gathered outside Sydney’s town hall, wav- judge who supports gay marriage, says it is ifit wins the next election, due in 2019. 7 ing placards with slogans like, “It’s a love “just something we’ve never done in our story baby,just say yes.” constitutionalarrangements”.Butthe High One of those saying yes is Malcolm Court dismissed legal challenges to the Gay-bashing in Indonesia Turnbull, the prime minister. But many vote earlier this month. Australians criticise him for calling the Mr Turnbull says the right to marry is a Looking for shelter vote at all. Opinion polls consistently “conservative ideal”. He lists 13 countries show that most Australians support gay where gay marriage is legal, including Aus- marriage. Proponents say a simple vote in tralia’s main English-speaking allies. Mr parliament, which also has a majority in Howard, who lost powerten years ago, has favour, would have saved money and re-emerged to lead the No campaign. Mr JAKARTA avoided a divisive campaign. Abbott has joined him. They are painting Anti-gay hysteria is on the rise But if there is relatively little debate gay marriage as merely the first item on a among Australians, there is a great deal radically permissive agenda. One ad for NTIL a year ago, Mama Yuli could within Mr Turnbull’s (conservative) Liber- the No campaign suggests that it is only a Ucount on a steady stream of reporters al Party and its coalition partner, the Na- matter of time before schools start encour- and television crews to make their way to tionals. In 2004 a Liberal government, led aging children to cross-dress. her small orange house in Jakarta’s sub- by John Howard, amended the previously Christine Forster, Mr Abbott’s gay sister urbs for a peek at what is thought to be In- ambiguous law on marriage to define it as and a Liberal member of Sydney’s city donesia’s only shelter for transgender “the union of a man and a woman to the council, accuses her brother of playing women. YulianusRettoblaut—Mama Yuli’s exclusion of all others”. Tony Abbott, a “Machiavellian games” with an issue that full name—had made a splash as the first more recent Liberal prime minister, tried to has been an “awful roller-coaster ride”. openly transgender woman to obtain a duckdemands that parliament reverse this Gladys Berejiklian, the Liberal premier of master’s degree in Indonesia. She had also change by proposing in 2015 that Austra- New South Wales, the most populous tried twice to become a member ofthe Hu- lians vote in a non-binding plebiscite in- state, calls gay marriage one of the most man Rights Commission. stead. Mr Turnbull, for his part, once sup- important human-rights issues “of our But the coverage came to an abrupt halt ported a parliamentary vote. But to win time”. Australia is a “laggard”, argues Frank last year. That is unfortunate, as Mama Yuli needs the donations that came with it. The shelter is home to six transgender women, though many more come and go. On a recent day there were nine. It is farfrom luxu- rious: a leaky roof had forced several of them to sleep on the floor,and a broken toilet added to their indignities. “We often in- vite television to come and now they say ‘No’,” Mama Yulilaments. In early 2016 the Indonesia Broadcast- ing Commission banned television stations from screeningimages of“effeminate men” or of anyone campaigning for rights for gay or transgender people, to protect children from “deviant” influences. The pressure on gay and transgender Indone- sians has only increased since. In May in Aceh province, which has used its special, semi-autonomous status to adopt some elements ofsharia (Islamic law), the authorities publicly caned two men caught having sex with one another. Indonesia does not A party prompted by a feud within a party have a national law against sodomy, but 1 The Economist September 23rd 2017 Asia 37

2 around the same time the police in Jakarta rounded up 140 or so men at a gay sauna, saying they may have broken the law on pornography. The police chief of the province of West Java, Anton Charliyan, has pledged to set up an anti-gay task force, charged with trawling through social media posts to detect gay events to raid. Indonesia has a long-standing, indigenous transgender tradition. Men who identify as women are labelled waria, a fu- sion of the words for men and women. During the 1960s the governor of Jakarta, Ali Sadikin, founded an advocacy group for waria. Waria dancers were among the attractions at the annual Jakarta Fair. Until recently gay venues and gay activism were grudgingly tolerated in big cities. A wave of anti-gay hysteria is now test- Tajikistan ingthis tolerance. In July Map Boga Adiper- kasa, a company that runs the local Beardless and jobless branches of Starbucks, disavowed the brand’s support for gay rights after a huge Muslim group called for a boycott. Several politicians have proposed criminalising homosexuality. There is much talk of the insidious threat to the fabric ofthe nation. A crackdown on observant Muslims intensifies The government of Joko Widodo, the reformist president, has joined in. Minis- HE young Tajik man does not want to country is prohibited. Almost 3,000 young ters have mused about banning gay stu- Tleave home, despite his mother’s assur- men attendingreligiousschoolsin Afghan- dent groups from universities, or attempt- ance that he looks fine. The day before he istan, Pakistan, Egypt and other countries ing to weed out gay civil servants. The had sported a curly black beard, just like have been coerced into coming home. attorney-general’s office has stated explic- his friends from the mosque. But the police There are about 3,700 mosques in the itly that it will not hire any gay or transgen- had frogmarched him and other bearded country. They are heavily regulated by the der staff. (Indonesia does not have a law young men to the barber shop, where their government, down to the subject of the protecting gay or transgender people from beards were shaved off. A few of the on- weekly sermon. Using loudspeakers to discrimination.) lookers laughed, but, once out of the po- broadcast the call to prayer is no longer al- Some see this moralising as bluster, de- lice’s sight, many more grumbled. lowed. Children younger than 18 and signed to burnish the government’s Islam- Such scenes have become increasingly women are not permitted to attend the ic credentials at a time when it is taking on common in Tajikistan, a landlocked coun- mosque. People under 40 are not allowed radical groups. In July Jokowi, as the presi- try of 9m bordering Afghanistan and Chi- to go on the haj. dent is known, issued a proclamation ban- na. In 2015 an official in one of the coun- Tajikistan was unique among the for- ning the Hizbut Tahrir Indonesia, which try’s four regions reported forcibly mer Soviet republics of Central Asia in al- wants to replace the government with a ca- removing the beards of 13,000 men. Con lowing an Islamist opposition party, the Is- liphate. The authorities are also seeking men have started selling certificates, com- lamic Renaissance Party of Tajikistan the arrest of the head of the Islam Defend- plete with photographs and official-look- (IRPT)—the result of a peace deal that end- ers Front, a vigilante group, on suspicion of ing stamps, permitting holders to grow a ed a civil war in 1997. But Emomali Rah- breaking the law on pornography by sext- beard. Initially, the Tajik government mon, the country’s leader since 1992, was ing a woman who is not his wife. blamed the crusade againstbeardson local on the opposingside in the conflictand has It is little consolation to gay and trans- police, but it now admits that it instigated gradually reneged on the deal. In 2015 he gender Indonesians that the government’s the practice to curb religious extremism. banned IRPT; since then, his campaign outrage may be feigned. Conservative Shaving beards is just one tool the gov- against the pious has intensified. Muslim activists have been emboldened ernment uses to suppress Islam, even The repression, inevitably, has helped by their success in ousting Jakarta’s gover- though more or less the entire population to radicalise devout Muslims. More than nor earlier this year over supposedly blas- is at least nominally Muslim. In 2015 it 2,000 Tajiks are reported to have joined Is- phemous comments he made during his closed more than 160 headscarfshops. Last lamic State. The former commander of an re-election campaign. The constitutional year it outlawed Arabic-sounding names. elite police force, Gulmurod Khalimov, is court is hearinga case that may result in so- Earlier this year it prohibited the produc- their most prominent recruit. In a YouTube domy becoming a crime. Governments in tion, import or export of religious books video he threatened to return to Tajikistan several provinces other than Aceh have al- without permission. Obtaining a permit to to establish sharia (Islamic law). (Earlier ready passed local laws to that effect. set up a religious organisation, publish a this month Russia claimed that he had Undeterred, Mama Yuli is pursuing a book on Islam or go on pilgrimage to Mec- been killed in an airstrike in Syria.) doctorate in part to inspire other waria to ca is an arduous process. A more effective means to curb radical- get an education. Many are renounced by In 2010 Tajikistan had 19 registered ma- ism might be to boost the economy. Unoffi- their families as teenagers, and end up as drassas and hundreds of unregistered cial estimates suggest unemployment is as beggars or sex workers. This, Mama Yuli ones. The last was closed in 2016. Anyone high as15%. In search ofwork, many young says, hands ammunition to conservatives: providing unofficial religious teaching can men travel abroad, where some become “The most important thing is that they be imprisoned for up to 12 years. Even radicalised. But Mr Rahmon seems more have to change their behaviour.” 7 studying in religious schools outside the concerned about beards than jobs. 7 38 Asia The Economist September 23rd 2017 Banyan A clean and pleasant land

New Zealanders are starting to have a problem with theirself-image sheer numbers of tourists themselves. Another comes from the back end of a cow. MrRoberts stresses that New Zealand sits way down the rankings of visitors relative to population and land area. But, he admits, some of the most popular tourist places are getting “hammered”. The Tongariro Alpine Crossing, a day-long trek through spec- tacular scenery in New Zealand’s oldest national park, gets 125,000 hikers a year. Especially when a spell of good weather follows bad, not only the trail but the roads up to it are heaving. It is hard to control such congestion, since free and unfettered ac- cessto national parks, which cover more than a tenth of the country, is enshrined in law. A NZ$25m government grant to help local councilswith such thingsasexpandingpacked carparksand public toilets will not go far.

A pall on the wild Meanwhile, for many New Zealanders, it is all a big adjustment. Localswho used to have theirfavourite wild placesto themselves increasingly feel jostled. A particular gripe is about visitors who hire camper vans without loos, leading to lots of what Indians would call “open defecation”. Traffic jams in resorts such as VER the rubbery chicken at your next tourism symposium, Queenstown, once unheard of, are another cause for grumbling. Ochallenge fellow delegates to name the world’s longest-run- Even havingto waitin a queue atyourlocal café isan unwelcome ning national tourism slogan. The answer—it was on the tip of novelty. One of the most open societies on earth still prides itself your tongue—is “100% pure New Zealand”, Tourism New Zea- on its welcome. But 20% of New Zealanders say there are too land’s catchphrase since 1999. Why mess with a good thing? The many visitors—up from 13% who said that in 2015. notion of a country blessed with pristine land, water and air ap- New Zealand’s pristine image has also boosted the dairy in- peals not only to visitors. It goes to the core of what the country dustry. Many Chinese consumers, in particular, choose Kiwi in- means to New Zealanders themselves. So the slogan has the “au- fant formula over domestic brands, which they fear will be con- thenticity” such gatherings always call for. taminated. Over the past 15 or so years, sheep farms have been New Zealand, wonderfully far from anywhere, really does converted to dairy, and family farms snapped up by corpora- seem to have it all: glaciers and jagged peaks, charismatic fauna, tions—the so-called Queen Street farmers, named after Auck- vineyards, lusty rivers for fly-fishing or rafting, dive sites and land’s main commercial drag. The boom has made fortunes. But thousands of miles of glorious coastline—not to mention the cos- itisalso alarmingNewZealanderswho worryaboutthe environ- mopolitan, foodie cities of Auckland and Wellington. Its genius, mental impact, which has shot up the national agenda before a and that ofits marketingcampaign, is to appeal to everyone, from general election on September 23rd. scruffy backpackers to silver-haired oenophiles and even the One objection is fragile landscapes ravaged to make way for superyacht set. cows, such as in the Mackenzie district, a dry upland rich in en- Chris Roberts of Tourism Industry Aotearoa, a lobby group, demic plant and animal species that has been completely says that the cliché is true: a visitorcomes forthe scenery but goes changed by irrigation. Conservationists are appalled that a rare home talkingaboutthe people. ThatincludesMaoris, whose hos- ecology has been destroyed. pitality is the flipside of their legendary warrior spirit. Many visi- Indeed, water gets to the heart of New Zealanders’ concerns. tors experience a Maori welcome up close—the biggest tourism Dairy cattle need a lot of it, and produce copious excrement and operator on the South Island is the Ngai Tahu tribe. urine in return. This pollutes watercourses and fills lakes with al- The number of tourists has shot up in the past five years, from gal blooms, despite new requirements to fence streams off from around 2.7m to 3.6m in the year ending in June. Tourism has livestock. Some rivers have become too polluted to swim in. pipped the dairy industry as the biggest export earner. Interna- Nitrates and microbes from faeces also seep into aquifers that tional visitors bring in NZ$14.5bn ($10.5bn) a year, the equivalent supply drinking water in some places. The city of Christchurch, of over NZ$3,000 foreach ofNew Zealand’s 4.7m people. ravaged by an earthquake in 2011, lies to the north of the Canter- In particular, the number of Chinese visitors has nearly dou- bury Plains, where dryland farms have given way to heavily wa- bled in the past five years, to more than 400,000. A growing pro- tered dairy operations. Christchurch draws its water untreated, portion are “free independent travellers”, as distinct from pack- which worries experts. Last year ago an outbreak of campylobac- age tourists who don’t leave as many dollars in locals’ pockets. ter in a suburb of Hastings on the North Island made 3,000 peo- For Chinese from cities where pollution obscures the sky, a big ple sick and killed two or three. Some fear something much lure is stargazing in the Aoraki/Mount Cook region on South Is- worse for Christchurch. land, part of the world’s biggest “international dark sky reserve”. It has all struck a chord amid the election campaign. A larger- The tourism board still sees huge potential, claiming that 80m than-life sculpture made ofmanure that depicts the hapless envi- people are “actively” thinking about holidaying in New Zealand. ronment minister, NickSmith, defecatinginto a glass of waterhas But there is a problem. New Zealanders are growing unsure been a hit. With imageslike that, itcan’tbe longbefore visitors no- about theircountry’s100% pure image. One issue comes from the tice there’s a problem in this pure, unsullied land. 7 China The Economist September 23rd 2017 39

Fertility and migration so have relatively few rural dwellers. This is the largest category, with 600m people. Ups and downs 3. Provinces with fertility rates between 1.3 and 1.49. Many, such as Henan, Hunan and Anhui, are just inland from the coast. They, too, are populous (460m in total) and mostly Han but have fewer city-dwellers: BEIJING more than half of the populations of Hu- nan and Anhui is rural. This group also in- In demographic terms, China’s provinces are becoming evermore disparate cludes several provinces with lots of mem- F DEMOGRAPHY is destiny, as Auguste higher than Beijing’s, which is a wider bers of minorities, such as Ningxia, in the IComte, a French philosopher, once said, spread than the one separating the states north-west, which is a third Muslim. then China has many destinies. As a result with the highest and lowest fertility in Bra- 4. Areas with rates above 1.5, which of 30 years of the now-relaxed one-child zil, and only a little less than the equivalent tend both to be more rural and to have big policy, the country has an exceptionally gap in India. minority populations, such as Guangxi. lowoverall fertilityrate: 1.2 accordingto the The main reason is that, in practice, the These have a total population of116m. census of 2010. (The fertility rate is the one-child policy was never uniform. Eth- Since the one-child policy was in force number of children an average woman nic minorities, such as Tibetans or Uighurs so long, differences in fertility have be- can expect to bear during her lifetime. If it (the largest group in the western province come entrenched and their impact pro- is less than 2.1 a population will shrink in of Xinjiang), were never subject to it. Mi- found. To take one example, provinces the longrun, unless immigration makes up norities, who account for8% ofthe popula- with relatively low fertility tend to have an for the dearth of babies.) What is almost tion nationwide, were usually allowed even bigger excess ofboys over girls than is never recognised, however, is that this is two children in urban areas and three or the norm. Nationally, the imbalance has not a uniform problem. Just as China has fourin rural ones. In addition, in most rural ebbed somewhat since 2000, with the sex richer and poorer regions, so it has areas of areas, everyone, including the majority ratio at birth falling from 121 boys for every higher and lower fertility—or, to be more Han group, was allowed two children. 100 girls in 2005 to 114 in 2015. But in the precise, oflow and lower fertility. north-east there has been little or no im- As a whole, China has too few young Degrees of dwindling provement—a worry considering the high adults relative to the size of older genera- As a result China has fourcategories of fer- levels of crime associated with large num- tions, meaning it will not have enough tility, notone (see map on next page): bers of unmarried men (called “bare workers to support its pensioners (or chil- 1. Areas of ultra-low fertility (rates of branches” in China). dren) properlyin the future. Butsome areas less than 1). These are three mega-cities, Fertility is not the only force pushing will hit demographic trouble earlier and Beijing, Shanghai and Tianjin, and three provincial demography in different direc- harder than others, with serious implica- provinces in the north-east, sometimes tions. The migration of more than 245m tions for economic growth and regional called Manchuria, where the one-child workers from poor, rural areas to booming stability. Wang Feng, of the University of policy was applied most strictly. They have cities amplifies the difference in fertility in California, Irvine, dubs the problem “the a total population of170m. some places and counteracts it in others. Balkanisation ofChinese demography”. 2. Areas where fertility is between 1and In the decade before 2010 the popula- The place with the lowest fertility is 1.29. These include provinces on China’s tion of Chongqing, a large urban province Beijing, where the rate was 0.71in 2010. The populous coastline, as well as the huge Si- in the west, fell by 2m (or 6%); in neigh- highest rate that year was in Guangxi, a chuan basin in western China. They are bouring Sichuan it fell by 3m. Births ex- province in the south bordering Vietnam, overwhelmingly Han areas, so had few exceeded deaths in both places over the per- where the fertility rate was 1.79. Both rates ceptions to the one-child policy. They were iod, so the population should have grown. are below the replacement level. But also the places where China’s growth and But this was offset by the outflow of mi- Guangxi’s fertility is two-and-a-half times urbanisation took off quickest after 1980, grants. Cai Yong ofthe University of North 1 40 China The Economist September 23rd 2017

2 Carolina calculates that more than 10m their dependency ratios remain relatively drawing a pension. In Liaoning, there was people left Sichuan and nearby Hubei. low. And since the cities are also rich, they only 1.8; in Jilin, 1.5; and in Heilongjiang, The combination of migration and va- have hospitals, social services and schools just1.3. The region’s share ofChina’s young rying fertility means that provinces are to cope with their demographic problems. workers (20 to 39 years ofage) fell from 10% ageing at different speeds. The median age Provinces with high fertility and out- in 1982 to 8% in 2010. Zhou Tianyong of the nationallyrose from 25 in 1990 to 35 in 2010; ward migration are the opposite. Take Hai- Central Party School in Beijing says the re- it had increased to 37 by 2016. But the three nan, a tropical island in the far south. It has gion’s lack of young workers is his biggest north-eastern provinces all aged by even high fertility (by Chinese standards) and worry. The national government has a more than average. In Liaoningthe median stable dependency. It ought to be doing grand policy to help the region called “the age reached 39.2 in 2010, about the same as well. Yet it is one of China’s poorest prov- north-east revitalisation plan”, but as one Russia. In contrast, the median age in Tibet, inces (23rd out of 31) and is ageing fast, of the articles noted, the region’s demo- the youngest province, is 27.8, about the mainly because hundreds of thousands of graphic crisis is never discussed. same as India. workers from the freezing north-east are Now compare that with Guangdong at Ageing matters because pension provi- spendingtheirretirementthere. Itsmedical the other end of the country, next to Hong sion is partly a provincial responsibility in services are collapsing under the strain. Kong. On the face ofit, China’slargestprov- China. The value ofthe basic state pension To see the convergence of all these ince, with a population of108m, also faces is fixed nationally, but provinces set their trends, compare two regions, the north- severe problems. Its fertility rate was re- own contribution rates, administer the eastand Guangdong. The north-eastis Chi- ported to be 1 in 2010, more than in the money collected and distribute the pen- na’s rust belt, a place of depleted coal north-east but still alarmingly low. Yet its sions. How heavy a burden this is depends mines and decayed steel mills. It has had population rose more quickly in 2000-10 on a province’s demography. As a rule, the low fertility for decades, falling below re- than any other province except the three lower the fertility rate, the faster the rise in placement levels as long ago as 1982, much huge cities. Its median age is five years be- the dependency ratio (the number of pen- earlierthan elsewhere (and before the one- lowthatin the north-east. Ithas9.7 workers sioners relative to the number of working child policy even began). It also imple- per pensioner, three times the national av- people). In relatively fecund Guizhou and mented the policy especially strictly be- erage, which has helped it to stash more Yunnan, the ratio is still falling. In Beijing cause it is dominated by state-owned in- money in its pension fund than any other and Shanghai, it rose by more than four dustries which decreed that people who province. percentage points between 2010 and 2015, had a second child would lose their jobs. Whereas Beijing and Shanghai are at- more than the national average. “Who would risk it?” asks a former steel tempting, misguidedly, to curb migration, Giant cities such as Beijing, Shanghai worker. The area’s high wages used to at- Guangdong is trying to attract new arriv- and Tianjin have ultra-low fertility and tract migrants from elsewhere in China. als. It has made it easierfortheirchildren to fast-rising dependency ratios yet are still But since 2000, when heavy industry ran enroll in local schools (elsewhere the able to attract young workers because Chi- into trouble, it has suffered a net outflow of household-registration, or hukou, system, na’s highest-paying jobs are clustered over 2m people. Hotels near the Harbin In- raises barriers to this). It also encourages there. Asa result, theirdemographic profile stitute of Technology (in the region’s larg- everyone, including migrants, to join local is healthier than you would expect. The est city) are packed around graduation day social-insurance schemes. In mid-July, the three cities, which have provincial-level with recruiters from southern firms. province’s capital, Guangzhou, said it status, are China’s fastest-growing prov- Last year a series of articles in China would allow the children of better-off mi- inces by population, increasing by around Business News, a state-run newspaper, re- grants who rent property the same access 3% a year in 2000-10, thanks largely to mi- vealed the extent of the region’s demo- to schools as local home-owners. This is gration. Since the migrants are mostly graphic problems. In China as a whole, it significant since almost all migrants rent, young, the cities’ median ages rose much said, there were 2.9 people paying into pro- not own, their houses. more slowly than the national average and vincial pension schemes for every person Unlike in Guangzhou, the national authorities have been slow to recognise the problems of demographic decline. As a re- Baby bust sult, low fertility, ageing, labour shortages China, fertility rate and population and dependency have all taken on a pro- By province 38 vincial aspect. The three great cities look HEILONGJIANG Provinces with a relatively healthy, as do Guangdong and decrease in population Harbin Zhejiang, a nearby province that shares 2010-15 25 JILIN some of its features. But provinces with 27 low fertility, declining or ageing popula- XINJIANG INNER MONGOLIA 44 24 LIAONING tions, and rising dependency are in deep 26 74 GANSU BEIJING 22 trouble. These include the north-east, Si- TIANJIN 15 chuan and Chongqing in the west and sev- 7 HEBEI SHANXI er QINGHAI NINGXIA al provinces in the third category in SHANDONG 98 6 37 terms offertility, such as Anhui. HENAN SHAANXI JIANGSU 80 The result is a big problem for the na- TIBET 61 38 95 tional government. Even now, it is having 3 ANHUI HUBEI SHANGHAI 24 SICHUAN to bail out some provincial pension funds. 30 59 ZHEJIANG 55 But the threat is also philosophical. The 82 CHONGQING JIANGXI HUNAN Communist Party has long sought to nar- Fertility rate, % 35 46 68 row economic differences and erase local 2010 GUIZHOU FUJIAN 38 Lower than 1 1.00-1.29 YUNNAN political distinctions because it is terrified 47 GUANGXI GUANGDONG of regional challenges. It thinks the only 1.30-1.49 1.50 and above 48 108 Hong Kong way to keep China together is to impose 00 Population Guangzhou strong central control. Ifit is right, its failure m, 2015 HAINAN 9 to deal with demographic problems is set- Source: National statistics ting back that cause. 7 Middle East and Africa The Economist September 23rd 2017 41

Also in this section 42 Saudi Arabia’s crackdown 42 To go or not to go in Togo 44 Rocket man and rhino horn

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

The future of Kurdistan ers are also threatening to withhold aid to Kurdistan if Mr Barzani rejects their pro- In a terrible state posals. They are offering Messrs Barzani and Abadi a room in the American embassy in Baghdad to negotiate a deal under their auspices. Mr Abadi might endorse a process that buys him time. Mr Barzani is ERBIL still hoping fora path to independence. Many Kurds, for now at least, would Western officials are trying to avert anotherwarin Iraq prefer that their leaders focus on improv- S THE jihadists of the so-called Islamic fervour. Rallies across Kurdistan have fea- ingKurdistan, ratherthan seceding. Even in AState (IS) retreat, the Arab and Kurdish tured fireworks and fiery rhetoric. “What- the Kurdish capital, Erbil, the referendum forces allied against it in Iraq are turning everittakes[to gain independence],” saysa has left many nonplussed. As the threat of their arms towards each other. Rather than normally cool-headed official at a rally. A a siege mounts—Kurdistan imports almost celebrate victory, Masoud Barzani, the toll of half a million dead, he suggests, everything—people are stockpiling basics. president of Iraqi Kurdistan, called a refer- could be acceptable. Flights out of Erbil are packed. But many endum on independence for September Neighbours all around the enclave are are feeling squeezed financially. The refer- 25th, not just in his constitutionally recog- uniting against the Kurds. Iraqi politicians endum is “a luxury only the rich like Bar- nised autonomous zone but in the vast speak of closing its airspace. Fearing that zani can afford”, complains a teacher, who tracts that his forces seized from IS. Protest- the referendum will stir separatist senti- moonlights as a taxi driver because of cuts ing against this threat to Iraq’s integrity, ments among their own Kurds, Turkey and to salaries. Beyond Mr Barzani’s strong- Haider al-Abadi, the country’s president, Iran have mulled closing their borders holds the campaign for independence has gathered his commanders at Makhmour, with Iraqi Kurdistan. Turkey is conducting begun belatedly, if at all. In a straw poll in opposite the Kurdish frontlines. Ifthe refer- military exercises on the frontier. It could the main market of Sulaymaniyah, in the endum went ahead, Kurdistan “might dis- turn off the tap of the territory’s only pipe- east, your correspondent could not find appear”, he warned. Hoping to prevent line, blocking its oil exports. Western pow- one Kurd who said he would vote. their allies from sparring, Western media- In the Nineveh Plains, where an earth- tors have stepped in. But as The Economist en wall splits the Arab- and Kurdish-ruled went to press, Mr Barzani remained com- TURKEY areas, other minorities view the referen- mitted to his referendum. dum as an impossible loyalty test. “Each Kurdistan is far from ready for state- SYRIA side is forcing us to choose when we Mosul Nineveh 100 km hood. The government is steeped in debt; dam Plains should just abstain,” says a priest at St Jo- its coffers are empty. The Peshmerga, its Erbil IRAQI seph’s, a towering Chaldean church that KURDISTAN vaunted fighting force, is split between Kurdish serves displaced Christians in Erbil. Mr control multiple family-led factions. Mr Barzani, Kirkuk Abadi is planning a conference for Chris- Sulaymaniyah forhis part, has made a mockery of the po- Hawija tiansto airtheirgrievancesatthe end ofthe litical system. He has twice extended his IRAQ KIRKUK month. Mr Barzani is urging priests not to rule. In 2015 he shut parliament afterit tried go. The tensionsare also affectingKurds be-

T i g yond Kurdistan. Under Saddam Hussein, to limit his powers and questioned how he Islamic r i spends oil revenues. Instead of dealing State s IRAN Baghdad was Iraq’s largest Kurdish city. Eu with the region’s ills ahead ofparliamenta- ph Many Kurds have since drifted north, but ra te s ry and presidential elections planned for hundredsstill hold positionsin the govern- Baghdad November, he has used the referendum to Source: Institute for ment and the army. Their loyalty has been distract the public and rouse nationalist the Study of War questioned and jobs put at risk. 1 42 Middle East and Africa The Economist September 23rd 2017

2 If violence does flare, Kirkuk may be infuriated religious conservatives. One of where it starts. Its Kurds, Turkomans and the men arrested this month, Essam al-Za- Arabs have largely avoided Iraq’s identity mil, had written critically about the wars. But battle-hardened Shia Arab mili- Aramco plan. tias have massed at the edge of the prov- For all his ambition, MBS has been no- ince. They will march in on September ticeably vague on one issue: politics. Politi- 23rd (two days ahead of the referendum) cal parties are banned in Saudi Arabia and says a commander, en route to attacking speech isrestricted. He hasshown no inter- Hawija, which is controlled by IS.The est in changing that. Mr Ouda is hardly the province’s Kurdish governor insists that a kingdom’s most traditional voice; dozens trench and three-metre-high earthen wall, of other clerics pose a bigger threat to the erected with Western assistance to keep IS crown prince’s cultural reforms. Yet they out, will serve to repel the militias. Never- remain free. “The onlydifference theyhave theless, he has summoned Peshmerga re- isthattheybelieve in total obedience to the inforcements. The fighting could quickly ruler, and see that as a religious duty,”says spread along the region’s ethnic faultlines Jamal Khashoggi, a veteran Saudi journal- into Syria, where Arab and Kurdish forces ist. Mr Ouda does not. He was a leader of are also competing to take land from IS. the Sahwa (awakening) in the 1990s, an Is- Even if the referendum passes, Mr Bar- lamist movement that pushed for political zani is not obligated to declare indepen- changes. Decades later, he wrote a book dence. A deal might better serve his inter- that praised the Arab revolutions of 2011(it ests. Right now, he risks ignominy if the was banned). exuberance of statehood that he has stok- Prince Muhammad spots a critic Some of the detainees will probably be ed should dissipate, and his people flee a released. And the crackdown may not be failed and besieged state. With an accord, The kingdom’s motives, as ever, are necessary: apart from some grousing on he could boast of at last bringing evasive opaque. The arrests came ahead of Sep- social media, there has been little dissent Iraqi officials to the table. He might yet win tember 15th, when a loose coalition of ac- over the crown prince’s policies. “Nobody their agreement to restore the old subsidy tivists had called for protests to demand is challenging him. The Saudi newspapers forthe Kurds that was cut when they began more political freedom. The appointed are full of praise for his efforts,” says Mr independently selling Kirkuk’s plentiful date came and went quietly—in part be- Khashoggi, who fears he too might be ar- oil. And he might add the Peshmerga to the cause of a heavy police presence on city rested if he returns from America. “It’s just Iraqi government’s payroll, as was done streets. Saudi officials hinted that it was a another impulsive action.” 7 for the Shia militias. He would thus allevi- foreign plot organised by the banned Mus- ate Kurdish fears of being marginalised, lim Brotherhood; one commentator called having served their purpose in fighting IS. the arrests a “campaign to cleanse state in- Protests in Togo Come the election in November, West- stitutions”. Social media were abuzz with ern powers are likely to turn a blind eye if rumours that King Salman, 81, was plan- To go or not to go the ballot is again postponed. If so, Mr Bar- ning to abdicate. zani could thus secure his position as Kur- Until this summer, the king’s designat- distan’s pre-eminent warlord, and prolong ed successor was Muhammad bin Nayef, a his one-man rule. 7 respected ex-interior minister. But in June the king upended the order of succession LOMÉ and installed his own son, Muhammad That is the question forthe president Politics in Saudi Arabia bin Salman (or MBS, as he is called), as heir. Just 32, he assumed his first big public role SSOUGEY,a technician from Lomé, the The prickly prince in 2015, when he became defence minister. Acapital of Togo, was arrested on Sep- Since then he has overseen a ruinous war tember 7th. His crime: participating in one in neighbouring Yemen and organised a of the anti-government protests that have boycott of Qatar, which Saudi Arabia ac- rocked the country in recent weeks. A po- CAIRO cuses of supporting terrorists and being liceman beat him with the butt of his gun, too cosy with Iran. The boycott has caused he says. His left leg is covered in bruises. Muhammad bin Salman cracks down economic pain across the Gulf, but so far Like many of his fellow protesters, Assou- on his perceived opponents has not forced the gas-rich emirate to make gey says he joined the demonstrations be- HESE are jittery times in Saudi Arabia, any concessions. Most of the detainees ei- cause the same corrupt people have been Tan absolute monarchy that prefers to ther opposed the effort or kept silent. The in power fortoo long. script its political changes many years in interiorministryhasurged Saudisto report Faure Gnassingbé, Togo’s president, has advance. Over the past two weeks, police fellow citizens who share such “extremist ruled the small west African country for 12 have arrested dozens ofpublic figures who ideas” online. years. In 2002 his late predecessor and fa- seem to have little in common. The most MBS has a wide-ranging agenda to re- ther, Gnassingbé Eyadéma, lowered the le- prominent is Salman al-Ouda, a popular form his country. He wants to reduce its de- gal age limitfora presidentto make wayfor cleric who dispenses religious advice to his pendence on oil, cut generous handouts his son. Eyadéma had seized power in a 14m followers on Twitter. But the list also and sell offpart ofSaudi Aramco, the state- military coup in 1967. Fifty years later, the reportedly includes writers, human-rights owned energy giant, to create a sovereign family has been in power longer than any activists and even officials from the justice wealth fund (see page 57). He also wants to other African regime. ministry. On September 11th Mr Ouda’s loosen the strictures on Saudi culture— Despite Mr Gnassingbé’s best efforts to brother, Khalid, criticised his arrest on opening cinemas, for example, in a king- quash the protests, they continue. Initially Twitter: “Ithasrevealed the size ofthe dem- dom where they are banned. These are centred around Lomé, they have spread to agoguery we enjoy.” The authorities soon controversial changes. They have forced other parts of the country, including So- rounded him up, too. pampered Saudis to tighten their belts and kodé, Togo’s second city and a traditional 1 % KTWWJFIJWXTK The Economist 15 quote code INXHTZSY ECONMAG Offer expires September 28th FINANCE DISRUPTED: +.39*(-(42*84+&,*

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2 stronghold of the Union for the Republic claimed that he pulled the trigger himself.) ty of West African States (ECOWAS), a 15- (UNIR), the ruling party. The government The political alignment may be chang- country regional group, was crucial to the cuts the internet to stifle criticism. At least ing, though. Tikpi Atchadam, the charis- Gambia’s success. It stationed troops on three people have been killed. The police matic leader of the Pan African National the Gambian border and threatened to in- in Lomé threw tear gas into people’s Party, has teamed up with Mr Fabre. Hail- vade unless Mr Jammeh gave up power. houses, “creating terror”, says one witness. ing from the north, Mr Atchadam has But ECOWAS has been slow to respond to Abill that would limit presidents to two stoked protests in the region, which suffers the crisis in Togo, which aspires to be a hub terms was drawn up to appease the oppo- from a lack of investment, but until now forbusinessin westAfrica. Marcel Alain de sition. When UNIR said it would rush this has remained loyal to Mr Gnassingbé. Souza, the president of ECOWAS, visited through the National Assembly, where it Some of the opposition look to the Lomé on September 13th to encourage Mr holds 62 of 91 seats, the protests stopped Gambia, which saw off attempts by Yahya Gnassingbé and the opposition to hold temporarily. But it was soon revealed that Jammeh, its longtime dictator, to cling to talks. Mrde Souza is married to the sister of the two-term restriction would not apply power after losing an election last year. Jeff Mr Gnassingbé, who currently holds the retroactively, allowing Mr Gnassingbé, Smith of Vanguard Africa, a consultancy rotating chairmanship ofthe group. who is already in his third term, to run that advised Adama Barrow,the Gambia’s Tensionsare mounting. The opposition, again in 2020 and 2025. The measure failed current president, says: “Behind the scenes at least, plans to keep the pressure on Mr to gain the necessary supermajority after many Togolese and Gambian activists are Gnassingbé. But Togo has a history of viol- theoppositionboycotted the vote, so UNIR collaborating, sharing lessons learned.” ent political repression. A nine-year-old has decided to put it to a referendum. Pressure from the Economic Communi- boy was killed during the latest protests. 7 Mr Gnassingbé’s opponents have long sought term limits and other reforms. Now North Korea and Africa they want him gone. But the opposition is divided. More than a dozen parties were behind the recent protests. Jean-Pierre Fa- Rhino horn for Rocket Man bre, the leader of the National Alliance for Change (ANC), the main opposition party, North Korean diplomats are finding that Africa is a smugglers’ paradise hasbeen complainingaboutthe regime for decades, to little effect. Mr Fabre, who HE face that stares from Kim Jong Su’s The report quotes a defector who came second in the election of2015, is from Tpassport shows a rather woebegone worked forBureau 38 as saying that while the south, whereas the ruling class has tra- man in suit and tie. In fact, Mr Kim is a he was posted to China, he often bro- ditionally come from the north. taekwondo master and, allegedly, a kered meetings between local organised Togolese politics hinge on tribal loyal- North Korean spy. In 2015 he was de- criminals and North Korean diplomats in ties. Mr Gnassingbé’s Kabyé tribe, from the tained in Maputo, the capital ofMozam- Africa. They arrived bringing gold, ivory north, are a minority, but they punch well bique, along with a counsellor in North and rhino horn forsale. A trade official in above their weight. After grabbing power, Korea’s embassy in South Africa after Zimbabwe was making so much that “in his father increased the size of the army their vehicle was stopped by police. 2013 and 2014, he paid loyalty money of and filled the top jobs with fellow Kabyé Inside was almost $100,000 in cash and $200,000,” said the defector. officers. His son has done the same and 4.5 kilos ofrhino horn. They were re- After decolonisation, many African packed state institutions, such as the con- leased after the North Korean ambassa- leaders saw Kim Il Sung, North Korea’s stitutional court, with cronies. The south- dor to South Africa intervened. In 2016, founding despot and the grandfather of ern Ewe and Mina tribes, taken together, Mr Kim slipped out ofSouth Africa. its current leader, Kim Jong Un (aka are farmore numerous than the Kabyé, but This and other such stories are con- “Rocket Man”), as a natural ally. Even they have been kept out ofpowersince Syl- tained in a new report published by the today, groups devoted to the study of his vanus Olympio, a formerpresident and an Global Initiative Against Transnational Juche ideology exist in at least seven Ewe, was murdered in 1963. (Eyadéma Organised Crime, a Geneva-based lobby. African countries. North Korea has em- The author, Julian Rademeyer, found that bassies in ten sub-Saharan countries. North Koreans were implicated in 18 of Keen to win votes at the UN, and perhaps the 29 rhino-horn- and ivory-smuggling to buy uranium for its nuclear pro- cases involving diplomats since 1986. gramme, the regime has funded the How much ofthis shadowy commerce is construction ofpower stations and the forpersonal gain, and how much is to training ofspecial forces in Africa, pro- meet the North Korean regime’s thirst for vided interest-free loans to governments hard currency, is impossible to say. The and sold them arms. two motives overlap. Mr Rademeyer, an expert on the trad- North Korean diplomats earn pitiful ing ofivory and rhino horn, acknowl- salaries: in the mid-1990s, embassy staff edges that diplomatic immunity can in Zambia went fishing in a nearby river stymie the police. But, he says, “few to catch food fortheir national-day recep- African countries with long-standing ties tion. Meanwhile, two departments in to Pyongyang have demonstrated a Pyongyang—Bureaus 38 and 39—exist to willingness to act pre-emptively and amass hard currency. Diplomats and decisively. Some routinely turn a blind other North Koreans abroad are expected eye to the activities ofthe diplomats and to pay most ofwhat they earn, licitly or embassies on their soil.” His report warns illicitly, to the regime as “loyalty money”. that things could get worse as America Estimates ofits annual income from cajoles China into tighter economic illegal trade in a wide range ofcommod- sanctions on North Korea. As legal rev- ities, from arms to counterfeit $100 bills, enue sources dry up, the Kim regime will range as high as $1bn. rely ever more on darkmoney, he says. They’re not flagging Europe The Economist September 23rd 2017 45

Also in this section 46 Germany votes 47 Sweden, NATO and Russia 47 Why Russia celebrates Kalashnikov 48 A conﬂicted Czech billionaire 49 Charlemagne: Going postal

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Spain dum. This was an “aggression”, said Mr Puigdemont, and a de facto supension of The clash in Catalonia Catalonia’s autonomy. Nevertheless, more than 700 mayors (out of 948 in the Catalonia region) say they will defy a legal warning not to assist the holding of the vote. “I’m not scared of BARCELONA being arrested,” Mr Puigdemont said recently. “We haven’t committed any crime.” The discontents and divisions behind an illegal referendum Indeed, he is visibly enjoying the battle he ACH year Sergi Rubió has joined the The situation is getting steadily nastier. has unleashed. He appears to want to pro- Ehuge demonstrations that Catalans Acting on a government petition, Spain’s voke Mr Rajoy into a heavy-handed over- have held since 2010 on September 11th, constitutional court has suspended Cata- reaction. “If there is penal action, that will their national day, to demand indepen- lonia’s referendum law. Madrid has taken prompt solidarity,” warns Miquel Iceta, dence from Spain. This year several hun- temporary charge of Catalonia’s finances, leader of the Catalan Socialist Party, which dred thousand people thronged the streets in an attempt to prevent spending on the does not support the referendum. of Barcelona in warm sunshine. It was a referendum. The attorney-general has be- Mr Puigdemont claims a mandate for festive, family affair with giant puppets gun proceedings against Mr Puigdemont pursuing independence, but it is a debata- and human castles. Butthere wasa change, and his cabinet for misappropriation of ble one. His coalition of nationalists and said Mr Rubió, a manager in his mid-30s public funds, a charge that carries a poten- republicans won only 39.5% in a regional from Vilafranca del Penedès, in cava coun- tial prison sentence. The police have seized election in 2015 that it had claimed was try: “Now we have politicians who are campaign materials, and have orders to do “plebiscitary”. His narrow majority in the standing up and fighting fortheir ideals.” the same with ballot boxes as they are de- parliamentcomesfrom an alliance with an Days before, the Generalitat, as the Cat- ployed. On September 20th, acting on the anti-capitalist outfit, which won 8.2% and alan government is known, had rammed orders of a judge, the Guardia Civil raided also supports independence. through the Catalan parliament a law offices of the Generalitat, arresting 14 offi- Surveys by the Generalitat’s own poll- mandating a “binding” referendum on in- cials involved in organising the referen- ster show that support for independence, dependence and another requiring a uni- while double that in 2008, has never lateral declaration of independence with- amounted to a majority and is drifting in 48 hoursin the eventofa “Yes” vote. “We Not yet sold 1 gently down (see chart 1). Some recent have a single objective: to be able to decide “Catalonia should be…”, % of Catalans polled polls, though (see chart 2), predict a major- on our future…and that prevails over A self-governing ity for independence on October 1st, everything else,” said Carles Puigdemont, region of Spain 50 though many No voters will stay away, the Catalan president. 40 making the size of the turnout crucial, as- With that, he set Catalonia, one of suming the poll goes ahead. Spain’s most populous and richest regions, 30 on a collision course with the conservative Generalitat dissatisfaction 20 government of Mariano Rajoy in Madrid. A state in a That so many Catalans want a referendum For months Mr Rajoy has been warning An independent federal Spain is the result of three main grievances. The 10 that the referendum cannot take place be- state first is the bad blood left by an attempt by cause it violates Spain’s constitution. The 0 Mr Iceta’s party to change Catalonia’s stat- prime minister has pledged to act “with 2006 07 08 09 10 11 12 13 14 15 16 17 ute of autonomy to give preferential status firmness and proportionality” to stop any Source: Government of Catalonia to the Catalan language, and to note for- vote happening. Centre of Opinion Studies mally that the Catalan parliament has de-1 46 Europe The Economist September 23rd 2017

2 fined the region as “a nation”. This rather indistinct Social Democrats (SPD), with modest reform was approved by referen- Choppy water 2 whom they have governed in a “grand co- dum in Catalonia, and by the Spanish par- Support for Catalan independence alition” since 2013. International turbu- liament in 2006. But Mr Rajoy’s People’s % of Catalans polled Yes No lence has only heightened Germans’ tem- Party (PP) campaigned against it, and in 50 peramental preference for stability and 2010 the constitutional court overturned predictability. Jobs, exports and confi- 40 these and other clauses. “For Catalan soci- dence are up. So much for Mrs Merkel’s ety, that was an insult,” says Ferran Masca- 30 prediction, when she announced her run rell, a formerSocialist who is now the Gen- for a fourth term as chancellor last Novem- 20 eralitat’s delegate in Madrid. ber, thatthiswould be herhardestelection. The second factor is the recession and 10 Yet bubbles of dissatisfaction have ap- the austerity that followed the bursting of 0 peared on the otherwise smooth German Spain’s property bubble in 2009. The (A) (B) (C)(A) (B) (D) (A) millpond. Immigration has soared to first Jun Jul Aug Sep mood was inflamed by the nationalists’ 2017 place in rankings of voters’ concerns (see claim that the Spanish state “robs” them. Sources: (A) Opinòmetre; (B) NC Report; (C) Government chart), despite the success of efforts to inte- of Catalonia Centre of Opinion Studies; (D) SocioMétrica The gap between what Catalans pay in tax- grate the new arrivals. Furious hecklers es and what they get back in services is pop up at Mrs Merkel’s rallies. Outside her €8bn-10bn a year. Ángel de la Fuente, a which it claimed1.86m people voted Yes.If event in Schwerin protesters chant “Get public-finance specialist, argues that it is it manages to get as many to vote on Octo- lost!” and brandish signs reading “Merkel normal for Catalonia, and other richer re- ber 1st it will claim victory. But the courts must go”. Such scenes are the work of a gions such as Madrid, to be net contribu- are likely to strip Mr Puigdemont and his small, noisy minority organised by the tors. But as part of a review begun earlier colleagues of their jobs nonetheless, possi- right-wing Alternative for Germany party, this year, the size of the gap may be re- bly even before the referendum takes AfD, but seem symbolic ofwider tensions. duced. Catalan governments, fortheir part, place. One way or another, at a minimum Headlines in Der Spiegel and Die Zeit, two have spent much on things like subsidised Catalonia is almost certainly headed for a liberal weeklies, declare: “It’s getting an- local media and foreign “embassies”. fresh regional election. “Whatever hap- gry!” and “Anger, Fear, Frustration”. Catalans also complain that they get pens, October 1st is the end of a chapter, Second place among voters’ concerns less than their due in public investment. In though not of the book,” says Mr Alberich. now goes to social inequality. Not all have that they are partly right, says Mr de la “The next chapter has to be to find a third benefited from the boom: in Mecklenburg- Fuente. Spanish governments have fol- way.” That is a job for politicians, not West Pomerania, for example, food-bank lowed an investment policy that, he says, courts, and in today’s poisonous atmo- use rose by a third last year. A rare wobble has “probably been too redistributive at sphere, it will be hard. 7 in Mrs Merkel’s campaign came at a live the expense of efficiency”, partly because discussion with voters when she was con- ofEU funding mechanisms. fronted by Petra Vogel, a low-paid cleaner The third, less tangible, gripe concerns Germany facing a hard-up retirement. To applause, identity. According to Mr Mascarell, society another audience member chipped in, is fed up with “permanent and stupid Merkel aims for a calling the chancellor’s waffling answer quarrels against the Catalan language”. “shameless”. In the less rich parts of Ger- Catalan governments have educated two fourth many—like Ms Vogel’s native Ruhr valley generations ofyoungsters in the historical- in the west and especially parts of the for- ly questionable notion that Catalonia is an SCHWERIN mer communist east like Schwerin—the ancient nation-state oppressed by Spain. AfD is expected to do well. A placid election campaign belies Behind the support for the referendum It might even come third overall, send- Germany’s tensions lies a sense of insecurity. Catalans like to ing to the Bundestag the best part of 100 see themselves as a highly advanced part N A muggy sports hall in Schwerin, in the MPs, out of 630. The election is also likely of a backward country. This is no longer as Inorth-eastern German state of Mecklen- to see the return of the pro-market Free true as it was. The rest of Spain has caught burg-West Pomerania, Angela Merkel is Democrats (FDP), who fell below the re- up. In 1962 income per person in Catalonia holding the 53rd ofher 59 election rallies. It quired 5% threshold last time. They have was 50% above the national average; now is a now-familiar routine. There is the been revived with a conservative edge un- Catalonia’s is only19% higher, according to thumping music as she arrives, the black- der a new leader, Christian Lindner. This Mr de la Fuente. red-yellow “Kanzlerin” (“chancelloress”) will both tip Germany’s federal legislature 1 In that sense, Catalan nationalism re- placardsand the folksychitchatwith digni- flects the fear of loss of relative status, also taries on the dais. She starts with bread- embodied by Italy’s Northern League and and-butter concerns like jobs and social Changing priorities otherright-wingpopulistmovements. This spending, then the usual joke about chil- Germany’s largest pre-election fear has been exacerbated by the way that dren not looking up from their phones at political concerns, %* governments in Madrid have washed their dinner, then a sweep through law and or- Immigration 100 hands of Catalonia. Barcelona hosts al- der(there “can, mustand will” be no repeat Social most no institutions of the Spanish state. of the immigrant influx of 2015) and some inequality 80 “Spain is more like [decentralised] Ger- reflections on global instability. The elec- Pensions 60 many, but it has tried to be like [centralised] tion is not yet decided, she concludes, be- Education Unemployment France,” says Jordi Alberich of the Cercle fore bustling out to a standing ovation. 40 d’Economia, a business think-tank. “Spain If the chancellor is going through the has to try to win over Catalans again,” ad- motions, that is because the election on Other 20 mits Xavier García Albiol, who heads the September 24th will almost certainly re- PP in the region. “Ifwe don’tgenerate a nar- turn her to power. Polls give Mrs Merkel’s 0 rative that seduces, Catalonia is lost.” CDU, together with the Christian Social 1998 2002 05 09 13 17 In 2014 the Generalitat supported an in- Union (CSU), its Bavarian sister, a double- Source: Infratest dimap/ *Percentage of answers based formal referendum on independence in digit lead over Martin Schulz’s unhappily Berliner Morgenpost on top 15 for 2017 The Economist September 23rd 2017 Europe 47

2 to the right and increase the number of groups there from fourto a record six, com- plicating coalition talks. Polls suggest the CDU/CSU will lackthe numbers to achieve a majority with the FDP, their traditional partner. Ifso, Mrs Merkel will have two options. The first is anotherdeal with the SPD. But if that party performs as badly as polls suggest, and especially if it falls below its record-lowvote share of23% in 2009, itslead- ers may struggle to persuade the base to endorse another round of government with her; all the more so if the AfD comes third, making it the largest opposition force in the event ofa new grand coalition. The second option would be a three- way coalition with the FDP and the Green Party (known as “Jamaica”, as the parties’ colours match that country’s flag). But these two smaller parties have big differ- Russia ences on subjects like refugees, the envi- ronment and Europe. Two days after the German election, Emmanuel Macron of Arms and the man France will present ambitious proposals MOSCOW for euro-zone reform, driving a wedge be- The capital unveils a monument to Mikhail Kalashnikov tween the federalist Greens and Mr Lindner, who has dismissed such ideas. Ja- HE streets ofMoscow feature many but its lightness and reliability made it maica is “barely conceivable”, insists Mr Tmonuments to great figures from the gun ofchoice forrebels, terrorists Lindner, while Cem Özdemir, his Green Russia’s past: Tolstoy,Pushkin and Tchai- and, especially, child soldiers. In his later counterpart, adds that the two parties are kovsky,to name but a few.This week, a years Kalashnikov was racked with guilt; “like cat and dog”. new national hero joined their ranks: he wrote to the Orthodox Patriarch of his Coalition talks could be fraught, and Mikhail Kalashnikov,eponymous inven- “unbearable spiritual pain”. At the un- last well into December. Meanwhile CDU tor ofthe rifle. His nine-metre-tall like- veiling, Russia’s culture minister, Vladi- minds will turn to the post-Merkel era; the ness, clad in a bomber jacket and cradling mir Medinsky, presented him as the chancellor is expected to stand down be- an AK-47, towers over the Garden Ring “manifestation ofthe best qualities ofthe fore the next election, in 2021. As soon as Road, one ofthe capital’s main through- Russian man”, and his rifle as a “true the polls close, the jockeying for position ways. “He’s so kind, he’s holding it care- cultural brand ofRussia”. will begin. Germany’s tranquil election fully,like a baby,”remarked Natalia The new monument embodies Rus- will have a scrappy aftermath. 7 Khrustaleva-Popova, a retired factory sia’s martial mood. As Vladimir Putin has worker who came to see the sculpture. At flexed his muscles on the world stage the opening ceremony,a lone protester since returning to the presidency in 2012, Sweden, NATO and Russia was promptly detained, while a priest he has promoted the adulation ofmen in sprinkled the bronze behemoth with uniform. Confidence in the army is at its A funny kind of holy water. highest level since Mr Putin came to The AK-47—“AK” for Avtomat Kalash- power17 years ago. While just 39% of neutrality nikova, or Kalashnikov’s automatic, and Russians fully trusted the army in 2012, “47” forthe year the prototypes were some 60% say they do today (trust in Mr completed—has become one ofthe Putin has risen over the same period, world’s most popular and lethal weap- from 51% to 74%). During Mr Putin’s first ons, believed to account forone-fifth of two terms in power, Russians saw eco- Should Sweden join NATO? all firearms. Kalashnikov,the son of nomic growth as his main achievement. WEDEN’S Aurora-17 drill, which contin- Siberian peasants, began sketching de- With oil prices low and belts tighter, they Sues until the end of September, is the signs while recovering from a shrapnel now point to the increased capabilities of biggest war game that the supposedly neu- wound in1941and hearing soldiers com- the armed forces. “Either you’re strong,” tral country has carried out for 23 years. plain about superior German rifles. He said Sergei Mikhailov,a lawyer, gazing up Not only does it involve 19,000 of Swe- called his invention a defensive weapon, at Kalashnikov,“or you’re nobody.” den’s armed forces (about halfofthem), including its Home Guard, but also more than 1,500 troops from Finland, Denmark, and attacked Ukraine, is flexing his mus- take, though the government denies this.) Estonia, Latvia, Lithuania, France, Norway cles near the Baltics and Scandinavia. Rus- There have been plenty of other causes and America. All except Finland are mem- sia’s massive Zapad-17 military exercise, for disquiet. In March 2013 Russia sent two bers ofNATO, the big western alliance. which finished this week, involved send- Tupolev Tu-22M3 bombers, escorted by The size of the exercise and its main fo- ing 100,000 troops to Belarus and the Bal- four Sukhoi Su-27 jet fighters, across the cus, the defence of Gotland, an island in tic to practise repelling the “Western Co- Gulf of Finland to within 40km of Got- the Baltic Sea some 350km (220 miles) alition”. Foreign observers were banned, land. The planes only veered off after car- from the Russian enclave of Kaliningrad, is as they never are from NATO exercises. rying out what NATO analysts believed a reflection of how insecure Sweden feels. (Perhaps luckily: a Russian helicopter re- was a dummy nuclear attack on targets in Vladimir Putin, having gobbled up Crimea portedly fired missiles at spectators by mis- Sweden. After many years of static or de-1 48 Europe The Economist September 23rd 2017

(who has promised to “eliminate the lowed from the dais before losing his im- threat” were Sweden to join NATO). Many munity by123 votes to just four. Y SWEDEN FINLAND A observersdoubtthatFinland, where popu- Meanwhile, audio recordings of him W Gulf of R Finland lar support for NATO is lower, would be speaking coarsely about how, for instance, O 200 km N Stockholm ready to make a joint decision in favour of he might use his newspapers to attack ri- ESTONIA membership—something Swedish NATO vals, have been posted anonymously on- a

GOTLAND e S boosters see as crucial. line. There is even a phone app to help c LATVIA i NATO l t Moscow There are good reasons why it- shoppers avoid foods produced by Agro- DENMARK a B LITHUANIA self might be keen for Sweden (and Fin- fert, Mr Babis’s conglomerate, which has KALININGRAD RUSSIA land) to join its fold. Defence of its Baltic 250 companies and 33,000 employees. (to RUSSIA) BELARUS members would be much harder without Rivals have taken more formal steps to GERMANY POLAND guaranteed access to Swedish ground and curb the tycoon’s influence. In January he CZECH REP. UKRAINE airspace. As a member, Sweden would be wasobliged to place Agrofertin a trust after SLOVAKIA far more integrated with NATO’s com- parliament banned cabinet officials (he Crimea mand-and-control systems. Inter- was finance minister at the time) from NATO members operabilityofitsforceswith those of the al- owning media or more than a quarter of liance would improve, making them more any firm bidding for state contracts or EU 2 clining defence spending, Sweden had to effective in a fight. subsidies. In May Bohuslav Sobotka, the rely on Danish F-16s, part of NATO’s Baltic Sweden’s NATO question is being Social Democratic prime minister whose air-policing operation, to respond. In 2014 fudged for now, but it will loom large in coalition includes Mr Babis’s ANO party, a Russian submarine penetrated the Stock- next year’s general election. If the Swedes forced him to quit his ministerial job, citing holm archipelago, departing without be- do eventually make the jump, Mr Putin separate claims of tax fraud. However, the ing found. Since then Russia has stepped will have only himselfto blame. 7 latest controversy, an alleged subsidy up the frequency of menacing, no-notice fraud, highlights more specific concerns military drills in the region. about how Mr Babis uses political power. Small wonder many Swedes thinkthey The Czech Republic At issue is a 50m koruna (€2m) EU sub- should end 200 years ofneutrality by join- sidy that helped develop a lakeside resort ing NATO. If they did, any Russian attack A scandal in outside Prague. Police allege that in 2007 on Sweden would be treated as an attack Mr Babis spun off a subsidiary from Agro- on America and its 28 NATO allies. All the Bohemia fert to gain access to funds earmarked for main Swedish opposition parties want to small businesses. That firm developed the join, apart from the ultra-nationalist Swe- PRAGUE Capi Hnizdo (Stork’s Nest) hotel while den Democrats, who like many European temporarily owned by Mr Babis’s two The probable next prime ministerfaces populists have a curious fondness for Mr adult children and his now brother-in-law, many critics Putin. Polls suggest that a plurality of before returning to the Agrofert fold in Swedes favour NATO membership. A Pew NDREJ BABIS says the political estab- 2013. Prosecutors have not so far filed char- survey earlier this year found 47% in sup- Alishment is conspiring to keep him ges. Mr Babis denies all wrongdoing and port of membership and 39% against. But from power. A billionaire agro-industrial- insists the case is an attempt to derail his for now the Social Democratic-Green co- ist and media mogul, Mr Babis is the front- campaign. In a country where frustration alition government, in office since 2014, runner to become the Czech Republic’s with the governing class is high, this has wants to get as close as possible to NATO prime minister after next month’s general worked. Polls show ANO far ahead of the without actually joining it. election. However, on September 6th par- Social Democrats. Peter Hultqvist, Sweden’s defence min- liament voted to strip him of immunity The Capi Hnizdo deal prompted the ister, is the author of a policy that tries to from prosecution as an MP, amid fraud al- European Commission to request an audit square the contradictions in the country’s legations from the police. “You won’t in 2016. In an example of Mr Babis’s many security policy. Part of the “Hultqvist doc- frighten me. You won’t stop me. You won’t potential conflicts of interest, such audit- trine”, as it is known, is to improve Swe- get rid of me,” the self-styled outsider bel- ing was the responsibility of the Czech fi- den’s neglected capacity for self-defence. nance ministry, which Mr Babis ran at the Military spending is rising—by about 5% time. LukasWagenknecht, a formerdeputy annually in real terms over the next three finance minister under Mr Babis, says the years—and conscription is being re- scandal fits a pattern. After leaving the introduced next year. The other part is ministry, Mr Wagenknecht became chair- building closer defence co-operation with man of an NGO that has been looking into its non-NATO neighbour, Finland, as well Agrofert. As well as the scale ofthe EU sub- as with America and Baltic littoral states in sidies received, the data also show that NATO. All of which Aurora-17 is meant to many Agrofert subsidiaries have been do- demonstrate. Both Sweden and Finland nors to Mr Babis’s ANO party. Between also entered into a “host country support 2012 and 2016 a group of14 firms under the agreement” with NATO, which allows alli- Agrofert umbrella that drew nearly 1.4bn ance forces to move through their territory koruna in EU subsidies donated about 31m and pre-position kit by invitation. koruna to ANO. Mr Hultqvist himself is suspected of This cycle of cash between public insti- hankeringafterNATO membership. Butfor tutions, EU programmes, a private agri- now the government has ruled it out. business and a political party means “the There is still a good deal of anti-American- eventual impact of European funds is to ism on the Swedish left (which Donald promote a single party,” Mr Wagenknecht Trump does little to dispel). There is also a concludes. But doing anything about all fear, expressed by the foreign minister, this is unlikely to get any easier if and Margot Wallstrom, of provoking Mr Putin Babis and his billionaire baggage when MrBabis becomes prime minister. 7 The Economist September 23rd 2017 Europe 49 Charlemagne Going postal

What an obscure battle overemployment law reveals about Europe’s neuroses his approach has made striking a compromise harder. (Some in Britain not yet reconciled to Brexit wonder if common cause can be made with MrMacron to limit immigration by EU workers. Fat chance: in 2015 Britain registered barely 50,000 posted workers, so little reliefwould be available that way.) Rows over social standards have a long history inside the EU, but were bound to intensify when the club expanded to ten poorer countries in the 2000s. Incomes in the east and west have not converged as quickly as some hoped, and the incentives for workers like Mr Miesikowski are no puzzle: France’s minimum wage is three times as high as Poland’s. Some sectors are highly exposed. By one estimate, posted workers account for one-third of the labour force on construction sites in Belgium (where labour taxes are eye-watering). Kris Peeters, the deputy prime minister, says that Belgian workers have been locked out of local jobs and that smaller firms, which cannot easily hire posted workers, struggle to compete. But legitimately employed posted workers are greatlyoutnumbered bythe unregistered orfraudulent sort. If social dumping is a problem, attacking posted workers does not looklike much ofa solution. So why all the fuss? Some argue that voters aghast at seeing S SUMMERS go, Marek Miesikowski’s wasn’t bad: a fortnight their legal protections supposedly undercut by foreigners will be Ain Aix-en-Provence, a hop across to Corsica, then winding tempted by political extremism. “Some parties are very anti- down in Marseille for a few weeks. Mr Miesikowski, a student European, and one reason is that so far we have no solution for from Poland, was hauling ventilation pipes across construction the posting of workers,” says Mr Peeters. Mr Macron shares this sites rather than sunning himself on the Riviera, but he is not view. He has pinned the blame for Britain’s vote to leave the EU complaining. Two months workingin France earned him enough on “workers from eastern Europe who came to take British jobs”. to support an entire year ofhis physiotherapy studies in Poznan. Rich countries that choose to erect barriers to cheaper workers Like almost half a million of his compatriots, Mr Miesikowski from foreign countries might simply end up importing more of was taking advantage of the European Union’s rules on “posted their goods or offshoring production, points out Bruegel, a Brus- workers”, designed to govern pay and benefits when a citizen sels-based think-tank. But a manufacturing plant in a faraway from one European country takes temporary work in another. country is less visible than foreign workers on local construction The Polish agency that employed him arranged his work with sites or meat-processing lines. French clients, covered his transport and housing costs and organised a three-weeklanguage course before he left. Posted work- Single market forme but not forthee ers pay social security at home rather than in their country of For the easterners, threats to the posted-worker regime get at a work. Their employers are obliged to pay them only the basic niggle that has worried them foryears. MrMacron’s tough line re- minimum wage in the host country, rather than the often higher minds some of the “Polish plumber” panic that helped turn “sectoral” wage. By most estimates they make up less than 1% of French voters against a proposed EU constitution in a referendum the EU labour force (far more Europeans choose to work abroad in 2005. Some accuse the president of making scapegoats of for- permanently). The rules covering their employment are com- eign workers to help smooth the passage of a contentious labour plex, arcane and tedious. Yet they have become the subject of a reform he is pushing at home. Why else would a newly minted bitter row among Europe’s leaders. head of state with a long to-do list devote so much energy to an To simplify a little, a coalition of wealthy EU countries, led by issue that should be the preserve ofmiddle-ranking ministers? France, believes the current rules encourage “social dumping” The EU’s governments are hoping to reach a compromise in (cheap foreign workers undercutting local ones), and wants to October. Two French proposals remain as sticking-points: to re- tighten the conditions ofposted work. “Equal pay forequal work duce the time limit for posting to 12 months, and to include lorry in the same place” istheirmantra. The poorercountriesof eastern drivers in the new legislation. Mr Macron has the backing ofGer- Europe retort that these pious words are a cover for old-fashioned many, Italy and others. Poland remains an implacable foe, but its protectionism. On joining the EU they had to open up to western irascible government has few friends in the EU; Mr Macron’s dip- European goods and capital; why should their service providers lomatic effortswith more conciliatory governments, like those of now be locked out ofhigh-wage markets? Slovakia and the Czech Republic, may bear fruit. On inspection, most “east-west” conflicts inside the EU turn Any changes to the law will be symbolic, not least because the out to be rather more variegated. But this one cleaves the conti- average posted workertoils forwell undera year. But having ded- nent more or less in two, and has been inflamed by the odd deci- icated himself to this obscure fight, Mr Macron needs a win as he sion of Emmanuel Macron, France’s new president, to place re- prepares for the bigger battle to come, over reform of the euro form of posted work at the heart of his EU policy. Last month, zone. His calls for a “Europe that protects” resonate with those during a tour of eastern Europe, he called the rules “a betrayal of who blame an excessofAnglo-American deregulatoryzeal forfu- the fundamental aspects ofthe spirit ofEuropean legislation”. He elling populism in the EU. But they risk alienating those Euro- scuppered a proposal to revise the law in June, and insiders say peans who consider themselves workers, not aggressors. 7 50 Britain The Economist September 23rd 2017

The Labour Party Also in this section One more heave 53 Bagehot: Songbirds and vipers

SHIPLEY Sixmonths ago the opposition was in a battle forsurvival. Now it has its sights set on Downing Street T IS standing room only in the Shipley & ning its biggest share of the vote since Mandela or Gandhi to dress smartly,” says IDistrict Social Club, a working men’s 2001—40%—a party that was braced for its one retired teacher. St John’s Avenue, club in a commuter town near Bradford. third consecutive summer of infighting is where houseschange handsfor£3m ($4m), Over 200 Labour activists have crammed instead plotting its path to Downing Street. is “not natural Labour territory”, admits into a backroom more used to 18th birth- It needs another 64 seats to win a majority, one of the canvassers. But by the next elec- day parties than political rallies. They have which is a tall order. But flipping just seven tion it might be. Once a fairly solid Tory gathered on a drizzly Sunday morning to Toryseats would be enough to bringdown seat, Putney came within 1,554 votes of plot the unseating of Philip Davies, the lo- the governmentand give MrCorbyn a shot turning Labour in June. cal Conservative MP, who sits on an un- at forming a ruling coalition. The acciden- In places like it—rich, educated, socially steady majority of 4,681. Against a back- tal leader who was expected to become an liberal, keen on the European Union—La- drop of red balloons, Owen Jones, a amusingfootnote in the LabourParty’shis- bour is on the march. But the forces behind left-wing activist and journalist, is pump- tory, if not the cause of its demise, is now Labour’s progress in these areas are pushing up the crowd. “Are we going to hear favourite to be the next prime minister. ingit into retreat elsewhere. Ifthe party has those magic words: ‘Shipley: Labour The next election campaign is already a soft underbelly, then Ashfield is its navel. gain’?” he asks. The cheers suggest the under way. Momentum, a left-wing grass- The former mining constituency has been crowd thinkthey will. roots organisation founded to support Mr held by Labour since its creation in 1955, No general election is due in Britain for Corbyn’sleadership, istouringseats where barring a two-year blip in the 1970s. Today five years. But the unexpected losses sus- Conservative MPs are vulnerable. Those Gloria de Piero, a plain-spoken former tele- tained by the Conservative Party in a snap attending its events, who range from mid- vision journalist, clings on with a majority election in June, which Theresa May had dle-aged veterans to political newbies, are of just 441. Seven out of ten voters in Ash- called hoping for a landslide, have left the given tips on how to canvass and then sent field opted for Brexit. “I’m not surprised prime minister leading a minority govern- out to spread the new—if rather retro—gos- people in myconstituencywantto turn the ment that could topple at any moment. pel ofthe Labour Party. clock back,” says Ms de Piero. People miss When asked how long it will last, one La- On St John’s Avenue in Putney, in what the area used to offer: “Secure jobs, bour front-bencher replies: “Who knows? south-west London, a Momentum battal- with high status and very well paid.” Ash- It’s a bit like having a frail, elderly relative ion is out on patrol. As in Shipley, half the field comes 604th out of Britain’s 650 con- who you know is going to die.” 200-odd people there have never cam- stituencies when it comes to sending peo- Energised by the result, Labour resem- paigned before. Participants bond by ple to university. In some townsin the area, bles a different party to the ragbag institu- moaning about media coverage of the La- you struggle to find a bus home after tion that had its last rites read many times bour leader, which they say focuses on tri- 5.30pm on a weekend. after electing its left-wing leader, Jeremy via such as his sometimes bedraggled ap- To have a chance of forming a govern- Corbyn, two years ago. Fresh from win- pearance. “You never expected Nelson ment, Labour has to win places like Putney 1 The Economist September 23rd 2017 Britain 51

2 while hanging on to seats such as Ashfield. out their house chanting ‘Oh, Ed Mili- This is not a new dilemma: Labour has band’,” says Mr Russell-Moyle, who ended Reds move ahead been gaining ground in cosmopolitan, ur- up winning the marginal south-coast seat Britain, net favourability rating, % ban areas since 2005, while the Conserva- from the Torieswith a 9,868 majority. May calls election Election held tives have done the same in declining Mr Corbyn has become an unlikely 20 Theresa May towns and rural areas, points out Will Jen- icon. His name rings out at music festivals, + nings of the University of Southampton. where his 68-year-old face appears on T- 0 But Brexit has made the equation trickier. shirts mocked up in the style of Barack – Of the seats on Labour’s hit list, the most Obama’s “Hope” posters. Last year 18 cou- 20 winnable 64—the number needed for the ples in England and Wales named their Jeremy Corbyn party to gain a majority—are a near-even baby boy Corbyn. A raucous online hit 40 mix ofthose that voted to leave the EU and squad of supporters spreads his message those that voted to remain (see map). on social media, revelling in the oddly lad- 60 Finding a position that satisfies both dish tone that surrounds a politician with ASONDJ FMAMJ JA camps is proving difficult. Labour’s policy an interest in municipal manhole covers. 2016 2017 amounts to hard Brexit with a human face: Since the election Mr Corbyn has zoomed Source: YouGov Britain would leave the single market and past Mrs May in popularity (see chart). The customs union but, the party insists, in a under-25s now backLabouroverthe Tories into a question of public spending on the way that limited damage to businesses, by nearly three to one. police, which has been cut under the To- and only after a generous transition per- AskMrCorbyn’sfanswhytheylike him ries. “It was ruthless,” says one Labour crit- iod. The free movement of people to and and the same word comes up repeatedly: ic, admiringly. from the EU would end, but what would principled. This has served him well as he Mr Corbyn has also overcome the awk- replace it is left unsaid, beyond a pledge engages in the ideological gymnastics reward contrast between some of his own not to “scapegoat migrants”. quired of any politician. This year Mr Cor- views and those ofhis party. He is a former byn and his team have become more vice-chairman of the Campaign for Nuc- Divide and conquer skilled in triangulation, as well as the more lear Disarmament who has long cam- There is a logic to this approach. As long as brutal side of politics. In the run-up to the paigned to scrap Britain’s Trident nuclear Labour offers a slightly milder form of election, terrorist attacks in Manchester weapons. Yet his manifesto promised to Brexit than the Conservatives, moderate and London, in which 30 people were mur- keep them. Six years ago Mr Corbyn la- voters have nowhere else to go. (Their un- dered, threatened to damage the chances belled NATO a “danger to world peace”, willingness to turn to the Liberal Demo- of Mr Corbyn, who is seen as weak on se- but his party is committed to staying in the crats was proved in the recent election.) curity. But he quickly affirmed his support alliance. (“Jeremy has been on a journey,” Some shudder at this argument, which re- for the police’s shoot-to-kill policy—on explained the shadow foreign secretary.) minds them of the party’s neglect under which he had previously sent mixed mes- Cries of hypocrisy do not stick. “He Tony Blair of its working-class core voters, sages—and Labour deftly turned the story compromised, like any other politi- who subsequently left the party in droves. cian—on free movement, on Trident, shoot- Between 1997 and 2010 the party lost 5m of to-kill—but he never looked compro- them, the bulk of whom simply stopped The battlefield mised,” says one Labour MP. Labour’s voting. If Labour does nothing to appeal to Britain, seats by policymaking process, in which the big de- Europhiles, they too could ditch the party. political party cisions are taken at the party’s annual con- This may be a price worth paying. ference, creates a firewall between the “Working-class abstention would be far leader and any controversial policies. The more dangerous than losing university promise to maintain Trident was passed by towns and London,” argues Matthew Labour members, allies of Mr Corbyn are quick to Conservative Goodwin of the University of Kent, whose Lib Dem point out. He is simply doing their bidding. research focuses on populism among SNP working-class voters. In June the Tories Plaid Cymru Preparing forgovernment won a plurality of working-class votes for Green Nor do voters seem much perturbed by Mr the first time since Margaret Thatcher was Speaker Corbyn’s exotic positions on foreign poli- in office, according to YouGov, a polling cy, an area which seems to be regarded by company. Pledging to deliver Brexit, albeit Labour MPs as a sandpit they are happy to 64 closest Labour with softened edges, placates these voters, target seats let Mr Corbyn play in as long as it does not who mainly backed Leave. They might (gain needed for Shipley become an issue of the doorstep. The La- prefer the full-fat Brexit offered by the To- Labour majority) bour leader’s passion for Latin Ameri- ries, but it would not be enough to tempt Ashfield ca—he speaks fluent Spanish and has a cat them away, believes John McTernan, a for- called el Gato—includes defending the leg- meradviserto MrBlairwho nowworks for acy of Hugo Chávez. But Venezuelan af- PSB Research, another pollster. “The north fairs come far down the list of British vot- hates the Tories more than it hates the EU,” ers’ priorities, as does Mr Corbyn’s close he says bullishly. relationship with Sinn Fein in the 1980s, If voters are split by Brexit, they are di- which seemsto have been forgiven, or sim- vided again over Labour’s leader. When Putney ply ignored, especially by young voters. Lloyd Russell-Moyle first went canvassing Voters’ acceptance of a far-left candi- in Brighton Kemptown this year, he found 64 Labour target seats by: EU referendum vote date is also due to an unspoken element of that the name Jeremy Corbyn elicited the Leave 35 Remain 29 Labour’s radicalism: its moderation. An- same amount of bile as that of Labour’s Region drew Fisher, the main author of Mr Cor- 18 13 13 10 6 4 previous leader. But it also provoked rare byn’s manifesto, wrote a pamphlet in 2014 Scotland North South Midlands London Wales excitement. He ran outofLabourposters in & east that suggested nationalising all banks and 30 minutes. “In 2015 no one came running Source: Electoral Commission introducing capital controls. By compari-1 52 Britain The Economist September 23rd 2017

2 son the manifesto itself was rather tepid. Mr Corbyn still repels a lot of voters: the “It contains a seed of radicalism,” says one party itself is more popular than its leader, Labour adviser, almost apologetically. “It’s according to YouGov. An unknown num- the first step.” berofpeople voted forLabourin June only Forthe firsttime in a generation, Labour because they were confident he would not proposed bringing utilities such as gas, wa- become prime minister. The Conserva- ter and electricity, as well as the railways, tives are holding their own, despite run- back under public ownership. University ning a dreadful election campaign and tuition fees would be scrapped. It pledged leadinga kneecapped government. All this to increase the number of workers’ co-op- means that plenty of Labour MPs retain eratives and set up a National Investment some scepticism about the Corbyn project. Bank to pump £250bn into small business- But Labour’s leadership is getting better es and research and development. Beyond at sidelining potential saboteurs. The that, Mr Corbyn’s published vision for Brit- threat ofdeselection, in which the local La- ain reads like that of his predecessor, Mr bour Party kicks out its MP, has been lev- Miliband, only with the handbrake taken elled at Corbyn-sceptic MPs. Momentum off. Aides from the Miliband era recall has nearly 30,000 members, an anorak’s painstakingly moving money around to understanding of the party rule-book and free up £2.5bn ofextra funding forthe NHS. a low opinion ofthe LabourMPs who tried Mr Corbyn promises an extra £30bn by, to oust Mr Corbyn in 2016. In return for de- among other things, raising income tax for liveringhundredsofpeople to campaign at the top 5% ofearners. Coming to the boil the weekend, it wants grassroots members Brexit, coupled with seven years of aus- to have a biggersay in how the party is run. terity, may have washed away voters’ history,” says Mr Russell-Moyle, the Brigh- Next week’s party conference, in Brigh- squeamishness about public spending by ton MP. “But it’s radical in the here and ton, is expected to approve a plan to add a Labour government. “If you are going to now ofBritish politics.” more local members to the party’s Nation- piss away £250bn by leaving the single Can Labour go the distance? It sits just al Executive Committee, along with more market, another £11bn on [abolishing] tu- above the Conservatives in most polls, trade unionists. Itisalso likelyto reduce the ition fees doesn’t matter,” says Tom Bald- which put the two parties on a little over number of MPs needed to approve leader- win, a former adviser to Mr Miliband. “It’s 40% each. A summer of bungling and bick- ship candidates, which will reduce the another round of drinks on the Titanic.” ering from the government has allowed a power of MPs to block a radical successor Considering that Mr Fisher, the man be- slight air of hubris to permeate the opposi- to Mr Corbyn. Local parties will be given a hind the manifesto, once labelled Mr Mili- tion. After two years of criticism from freer rein to select prospective MPsthan band’s cabinet “the most abject collection within the party, Mr Corbyn’s supporters they were in the previous election, provid- of absolute shite”, the overlap in policies— have been on a summer-long victory lap. ing the chance to place Corbyn-supporters from a crackdown on companies that are This attitude worries some observers. as candidates. Slowly but surely, Mr Cor- late to pay their suppliers, to a higher mini- “There is a dangerous internal narrative, byn is taking control ofthe party. If he does mum wage—is remarkable. that Labour’s qualified success at the elec- not lead Labour into government, the next Where Mr Corbyn’s policies do differ is tion was more down to its strengths than person to try to do so will probably be in their clarity. Duringits latest term in gov- the Conservatives’ weaknesses,” says An- someone like him. ernment, in 2005-10, Labour was addicted drew Harrop, general secretary of the Fabi- For now, peace has broken out as both to technocratic, targeted solutions. Policies an Society, a Labour-aligned think-tank. left and right of the party find themselves such as tax credits—wage top-ups for the closer to power than they had expected. low-paid—were effective but incompre- The last push “When you are on the up, and you can hensible. In contrast, Mr Corbyn proposes Winning the additional 64 seats required smell power—and decay on the other “bright, primary-colour policies”, says to form a majority government will be dif- side—it brings unity,” says Mr McTernan. Marcus Roberts of YouGov. Ideas such as ficult. Although Labour’s vote share in The MPs who tried to remove Mr Corbyn scrapping tuition fees and providing free June was 11 percentage points higher than last year did so in the beliefthat he was de- lunches forprimary school pupils are clear in 2010, this resulted in a mere four extra stroying the party, endangering their jobs and understandable, even if they make seats. The party is piling up votes where it and condemning Britain to a generation of wonks wail at the thought of spraying is already dominant, points out Stephen Toryrule. June’s election proved that view money at the middle class. The tactic is Kinnock, a Labour MP. wrong. One strident critic of the Labour working. Some 28% of Labour voters cite One route back to power goes through leadersaysthathe would nothave won his the party’s policies as the main reason for Scotland. It provided an electoral life- seat without distancing himself from Mr backing it, according to YouGov. For the jacket in 2010, when Labour won 41 of 59 Corbyn, but admits that he would have Conservatives, the number is just10%. seatsthere, even asitwashammered south lostwithoutthe extra votesthatMrCorbyn Critics argue that the programme is still of the border. The rise of the Scottish Na- brought in. For MPs on the party’s right, Mr dated, harking back to a 1970s Britain. Yet a tional Party changed all that. Labour now Corbyn resembles Homer Simpson’s de- planned hike in corporation tax, to 26%, has just seven Scottish seats, behind both scription of alcohol: the cause of, and sol- would put it back to near where it was at the SNP and the Tories. Rebuilding this ution to, all oflife’sproblems. the start of David Cameron’s tenure, in base will be a slog. But Labour made gains It is certainly hard to imagine that the 2010. Tuition fees were introduced only in in Scotland earlier this year, and now eyes backroom of the Shipley & District Social 1998. The privatisation of the railways be- 20 Scottish seats where it is fewer than Club would be ram-packed on a damp gan only in 1994. “People can be very ahis- 4,000 votes away from victory. Sunday morning without him. “This is big- torical about these things,” says Mr Mili- In England, some in the party fear that ger than anything during the campaign,” band. Most of Labour’s policies would not Mr Corbyn’s appeal is too narrow, particu- says Richard Dunbar, a local councillor, look out of place in the programme of a larly in the post-industrial towns across nodding to the packed room. “Even on typical centre-left party in northern Eu- the midlands and parts of the north where election day.” When the next election rope. “It’s unradical in the grand scheme of Labour is already struggling to hold seats. comes, Labour will be out to win. 7 The Economist September 23rd 2017 Britain 53 Bagehot Angry birds

The Conservatives are dangerously divided overBrexit ries could not reach. Part Bertie Wooster and part Jack the Lad, he wentdown well atboth Toryfetesand in cityboozers. Today he is reviled by liberals and distrusted by many party loyalists. As mayor, he was frequently hailed as a hero when cycling through the city. Now he is subject to abuse. A recent poll of Tory activists about who should be the next leader gave him less than 8% ofthe vote, well behind his fellow Woosterimitator, MrRees-Mogg. The result is an impasse. The leader of the government is too weak to impose her authority; the leader of the hard-Brexit faction of her party is too weakto depose her; and Jeremy Corbyn, the hard-left leader ofthe Labour Party, gets ever stronger. Even more worryingly, the Johnson affairreveals how poorly Britain’s preparations for Brexit are going. Mr Johnson’s critics such as Kenneth Clarke, a liberal Torygrandee, argue that the foreign secretary should have obeyed the rules of collective cabinet responsibility: ministers ought to air their views within the cabinet and then defend the collective line. But it turns out that Mrs May has never engaged in a big cabinet debate to determine the line. Instead she has limited discussion to various subcommit- tees, from which Mr Johnson was pointedly excluded. He was driven to write his article because he thought that the govern- N SEPTEMBER19th Toys “R” Us, one of the biggest players in ment was slouching towards a “softBrexit” on the basis ofsubter- OAmerica’s toy market, filed for bankruptcy. At about the fuge rather than open argument. same time Tories“R” Us, one ofthe biggest players in Britain’s po- The foreign secretary has highlighted the fissure at the heart of litical market, was doing everything possible to prove that it is Toryand British politics. Brexitinvolvesa trade-offbetween what heading in the same direction. Voters dislike nothing more than a technocrats call “control” (meaning sovereignty) and “access” party at war with itself. The Torieswent to war over the most im- (meaning freedom to trade with the EU). Soft Brexiteers such as portant problem facing the country—one that is largely of their Philip Hammond, the chancellor, and Ms Rudd favour access own making. over control and a long transition rather than a cliff-edge Brexit. Boris Johnson, the foreign secretary, ignited the conflict with a They want Britain to “shadow” the single market by obeying lengthyarticle on Brexitin the Daily Telegraph, a weekbefore The- most of its rules, including those against striking independent resa May was due to give a big speech on the same subject in Flor- trade deals, for as long as possible. They have the support ofmost ence. AmberRudd, the home secretary, accused him of“back-seat business leaders, who fear disruption more than anything else. driving”. Sir David Norgrove, Britain’s chief statistician, criticised Hard Brexiteers such as Mr Johnson think this would make a his “clear misuse of official statistics” in reviving the claim that mockery of Britain’s decision to leave the EU in the first place. Brexit would give Britain a windfall of £350m ($475m) a week to They want a relatively short transition—Mr Johnson has suggest- spend on the National Health Service. In Mr Johnson’s defence ed six to 12 months. They point to the fact that Canada has a com- Jacob Rees-Mogg, a backbench Tory, suggested that he should be prehensive trade deal with the EU withoutbeinga memberofthe given a knighthood. As The Economist went to press Mr Johnson single market and insist that “no deal would be better than a bad was preparing to demonstrate his loyalty to Mrs May by sitting in deal” on the ground that the worst that can happen is that Britain the front row for her speech, having proclaimed, poetically, that will revert to World Trade Organisation rules. The central argu- the cabinet was a “nest of singing birds”, as if voters cannot dis- ment in Mr Johnson’s magnum opus was that Brexit is an oppor- criminate between trilling nightingales and hissing vipers. tunityto be seized, butthatmostofthose in charge of implement- What does this soap opera tell us, other than that Britain is ing it see it as a bomb to be defused. ruled byan incestuousclique offrenemieswho delightin turning even the mostseriousissuesinto melodramas? The mostobvious The great betrayal thing is that Britain’s prime minister is as weak as it is possible to Mr Johnson’s talk of optimism betrayed also suggests the begin- be while still residing in Downing Street. Mr Johnson challenged ning of something darker: the stab-in-the-back theory of Brexit. her authority on the most fraught issue in British politics at a pe- Brexiteers are already hard at workexplaining why their glorious culiarly sensitive time but still kept his job. Sir Vince Cable, the idea has failed to bear fruit. Brexit was implemented by its ene- Liberal Democrats’ sharp-tongued leader, compared Mrs May to mies rather than its friends. Mrs May was too naive to take on EU a headmistress “barricaded in her own office” for fear of unruly officials whose only concern was to see Britain humiliated. Mr pupils. This does not bode well fornegotiations which, ifthey are Johnson’s intervention this week has positioned him to revive to succeed, will require Mrs May to persuade her party to sign off his leadership ambitions as the tribune of this stabbed-in-the- on all sorts ofconcessions and trade-offs. back faction. The Tories’ agonies over Brexit not only make it Still, in exposing Mrs May’s weakness, Mr Johnson has re- more likely that the next prime minister will be a hard-leftist who vealed his own. Not so long ago he was the Conservatives’ blames Britain’s problems on the machinations of international leader-in-waiting. His success in getting himself elected mayor of capital. Theyalso make itmore likelythatthe prime minister after London—a left-leaning and multicultural city—proved that he that will be a rightist who blames the country’s problems on the possessed “the Heineken factor”, refreshing parts that other To- machinations ofcloset Remoaners and Eurocrats. 7 54 International The Economist September 23rd 2017

Also in this section 55 Fixing in eSports

Corruption in sport (1) sport—around $2 trillion a year, according to the International Centre for Sport Secu- Play up, play up rity (ICSS), a think-tank. It estimates that criminal groups launder $140bn by match- fixing and illegal betting each year. Corruption is most common at the second-tierlevel: in small football leagues, domestic cricket tournaments and so on. This is the sweet spot where enough money is Match-fixing is more common than ever. Regulators need to up theirgame staked for corruptors to clean up—and N 2008 Lou Vincent, a former New Zea- national league. players earn little enough to be easily Iland international cricketer, was playing In a recent survey of more than 600 tempted. In tennis, for example, only the in a now-defunct Indian Twenty20 cricket European athletes in 13 sports by Vassilis top 160 men and 150 women make enough league. Aman claimingto representa crick- Barkoukis of Aristotle University in Thes- in prize money to cover their costs. “The et-bat manufacturer invited him to a hotel saloniki, a third said they believed that whole sport is structured in a way that room. But instead of being shown bats he they had played in fixed matches. A fifth begs corruption. There are too many tour- was offered a prostitute and a wad of cash. said they were aware of a fixed match in- naments and too many players,” says Mr He left, and now says he told his cap- volving their team in the previous year. Smith. The problem is so notorious that tain, Chris Cairns, what had happened— Sportradar, a firm that uses statistical tech- tennis players are routinely accused on so- and that, rather than encouraging him to niques to spot dodgy bets, identified 1,006 cial media ofthrowing matches. report what was clearly a match-fixer’s contests that it thinks were probably ma- Players are recruited by fixers in a man- opening gambit, Mr Cairns tried to recruit nipulated during 2015 and 2016, and 451 in ner that Ronnie Flanagan, the chairman of him to fix on his behalfinstead. (Mr Cairns the first eight months of 2017, the highest the International Cricket Council’s anti- denies this, and won £90,000, or $122,000, rate since it began trackingsports betting in corruption unit, describes as “grooming”. in libel damages after suing a cricket offi- 2008 (its database has also grown). Nchimunya Mweetwa, a Zambian foot- cial for accusing him of match-fixing.) In baller who was signed to a Finnish club in 2013 rumours and odd patterns of gam- Winning isn’t everything… 2007 and found guilty offixing in 2011, said bling made the authorities suspect Mr Vin- About four matches in 1,000 raise red flags that men who he thought were football cent, who had moved to England. The fol- in Sportradar’s system. But around one in agents befriended him, gave him gifts and lowing year he admitted to 18 charges of 100 are probably fixed, says Ian Smith, the only later threatened violence if he did not fixing and was banned from cricket for life. first integrity commissioner for “eSports”— fix for them. Another device is the “honey What makes Mr Vincent’s story unusu- competitive video-gaming (see box on trap”—a woman paid to strike up an ac- al is that he was caught. Those responsible next page). Regulatorsare slowlyturning to quaintance with a player and introduce for tackling match-fixing believe it is more analyses of betting patterns as evidence. him to fixers, or even to have an affair with prevalent than ever. Yet it mostly remains Sportradar’s reports have been used suc- him, meaning photographs can be taken undiscovered. Each new case makes big cessfully in just 24 prosecutions since 2013. and used as blackmail ifhe rebuffsthem. news, like that of Khalid Latif, a Pakistani But13 sports have signed up in recent years Even in team sports, fixers usually need cricketer who had played in international to receive its reports. In a landmark case to enlist just a single athlete. Betting activi- matches. On September 20th the Pakistani last year the Albanian football champions, tyiscentred on a fewoutcomes. In football, Cricket Board banned him from the game KS Skenderbeu, were banned from the forexample, 95% ofthe total staked goes on forfive yearsfor“spot-fixing”—takingmon- Champions League based solely on Sport- the match result, the margin ofvictory and ey to play to order for part of a match, rath- radar’s betting analyses. the number of goals. A fixer who knows er than determine the overall outcome— The growth in match-fixinghasbeen fu- that a player will be sent off, and approxi- after an investigation into corruption in a elled by the vast amount wagered on mately when, can use this knowledge to 1 The Economist September 23rd 2017 International 55

2 predict the way odds will move. Placing just one, Malta, which worries about the and 860% more than the previous final, in bets both before and after makes it possi- impact on its remote-gambling industry. 2013. More televised games and few play- ble to lockin a profit. Worldwide, only about 15% of sports ers earning big sums will make women Players can manipulate betting markets betting is legal, says the ICSS. It is illegal in cricketers a target, says Clare Connor, the in other ways. A bowler might agree to most American states, and in many Asian director ofEngland Women’sCricket. bowl no-balls at a particular point in a countries, including China (except for a Regulators will need to up their game. cricket match, or a tennis player to lose a state monopoly) and India (except for on One woman cricketer recalls an anti-fixing particular game. Such things often happen horse-racing). Illegality makes it harder to talk at the Women’s World Cup in 2014, by chance, making them easy to conceal reveal fixing by following the money. “If which had clearly been copied wholesale and allowing players to rationalise their you create a black market you make every- from one for male players. “He warned us actions as victimless crimes, rather than thing twice as hard—monitoring, regulat- that attractive men might approach us in frauds against fans, punters and their un- ing, licensing, customer protection,” says the hotel bar and ask for a drink, with the suspecting team-mates. A one-off fix of a Alex Inglot from Sportradar. aim of trying to inveigle an invitation to a single game within a tennis match can be Growing interest in women’s cricket player’s bedroom,” she says. “If that hap- “virtually impossible” to spot, says Mark and football will result in more match-fix- pened we were supposed to excuse our- Harrison ofthe Tennis Integrity Unit (TIU), ing, warns Mr Barkoukis. The Women’s selves, go to the toilet, look in the mirror the sport’s anti-corruption body. But a Cricket World Cup final, in July, had £78m and ask ourselves: ‘Am I really that good- player who has started fixing can be black- traded on Betfair, a record forany women’s looking?’” No fixer would have such a mailed to continue, and suspicious pat- event with the sports-betting exchange, poor grasp ofhuman nature. 7 terns may emerge. Making matters worse is a betting-in- Corruption in sport (2) dustry “arms race”, says Tom Mace from Sportradar, with bookmakers taking bets on ever more matches, including at semi- For the win professional, amateur and youth level. It is also hard to persuade players to be clean Match-fixing goes digital when there are so many questions about the probity ofsports administrators, for ex- OMPETITIVE video-gaming, collec- uncovered by a police investigation into ample over the choice of World Cup and C tively known as eSports, is surging in illegal gambling that stumbled across Olympics hosts. And teams’ financial in- popularity,packing out stadiums from eSports-fixing, rather than eSports organ- terestsare more enmeshed with bookmak- Germany to South Korea, and attracting a isers attempting to ensure clean play. ers than they used to be. Until 2002 no Pre- global audience ofalmost 400m. The Fixing in eSports is a mix ofold and mier League football club had a book- industry is worth $700m annually,ac- new.Players can be paid to under- maker as a shirt sponsor; now nine do. cording to Newzoo, a market-intelligence perform in time-honoured fashion. Or firm,afigureexpectedtoriseto$1.5bnby they can be paid in “skins”—decorative …It’s the only thing 2020. And where there is money in sport, frills that have no bearing on gameplay. Most sports spend a minuscule fraction of so there is corruption and betting—al- These can be cashed out, like casino revenue on anti-corruption measures such ready an estimated $40bn annually,90% chips. Gambling with skins happens on aseducatingplayersand officialsabout fix- ofit illegal. unregulated sites, making it easier for ers’ methods, oron monitoringbetting pat- The first eSports-fixing scandal was in fixers to avoid detection. In 2014 several terns and sending officials to tournaments. 2010, when South Korean players threw players on Counterstrike, a shooter game, The TIU had just five staffas recently as last professional matches for financial gain. used skins to bet against themselves and year; it now has 11—still not enough for a Last year Lee “Life” Seung-hyun, one of deliberately lost, making more than the presence at every professional event. Its the biggest names in eSports, was con- prize money.There are new ways to tilt budgetfor2017 is$3.2m. Itshould be atleast victed forhis part in a series offixes in the outcome, too, says David Forrest of $10m, Mr Smith believes. Tennis authori- Starcraft 2, a science-fiction strategy the University ofLiverpool, such as ties do not always realise how incriminat- game. He was banned forlife from strategically timed internet glitches. ing strange betting patterns can be, says eSports in South Korea. The case was ESports has no governing body.But in Dan Weston, a sports and betting analyst. 2015the biggest games formed the The TIU does not employ a full-time bet- eSports Integrity Coalition to crack down ting analyst. on fixing. Gambling firms have started to Many countries have no specific law certify hardware and software before against match-fixing. In 2012 three Swiss competitions, in the hope ofrooting out footballers were acquitted largely because technological malfeasance. Raising a national law against sporting fraud had awareness among players is also essen- yetto be passed. Atworsta perpetrator will tial—though hard, says Ian Smith, the be fined a few thousand dollars or, occa- coalition’s head. They can “go from play- sionally, sent to prison for a few months. ing in their parents’ basement to playing One notorious Singaporean match-fixer, in a $5m tournament in six months”. Wilson Raj Perumal, who has confessed to Traditional sports still offerhigher fixing dozens ofmatches, had contact with returns to fixers. But perhaps not for long. officials and players in at least 38 countries By 2020 the total bet on eSports is expect- (including Mr Mweetwa in Finland). He ed to exceed $150bn a year. “ESports was convicted several times, apparently betting is increasingly attractive to the without much deterrent effect. A proposed kind ofpeople that eSports does not Convention on the Manipulation ofSports want attracted to it,” says Mr Smith. Competitions would set anti-fixing stan- Regulators in football, cricket, tennis and dards across the 47 members of the Coun- the like know how that feels. cil of Europe. But it risks being blocked by Where startups start out.

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Also in this section 58 Regulating online platforms 59 Boeing v Bombardier 59 Cancellations at Ryanair 60 Toys “R” Us goes into Chapter 11 61 Streaming Latin music 61 Teaching entrepreneurship 62 Indian marriage websites 63 Schumpeter: Big tech, big trouble

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Inside Saudi Aramco ecutives dodge almost every attempt to wheedle out useful ways ofcomparing the Behind the veil firm with its listed peers (it has no peers, they dissemble). But despite the hermeticism, Aramco hasa good tale to tell. Even asitsrivals have DHAHRAN retrenched owingto low prices, it has stuck to long-term plans, investing heavily in The world’s biggest oil company has a good story to tell, ifit can disentangle its technology, training and the future of oil. image from that ofthe kingdom Its long-term approach may help explain F SAUDI ARAMCO is a state within a lot ofcomputer capacity—on such technol- one mystery. For decades, Saudi Arabia’s Istate in Saudi Arabia, then the blandly ogy, because it helps cut costs. “Exxon- declared oil reserves have confounded the named Oil Supply Planning and Schedul- Mobil operates in 40-plus countries. It just industry; since 1989 they have remained ing (OSPAS) is its deep state. To enter it, you can’t do that,” the executive adds, before suspiciously constant at around 260bn pass tight security at Aramco’s suburban- apologising lest he appear to bad-mouth a barrels—a dozen times those of Aramco’s style headquarters in Dhahran, in the east client and partner, one ofAramco’s Ameri- nearest listed rival (see chart). As if to rub it ofthe kingdom. The transition is eye-open- can founding formershareholders. in, Aramco says the kingdom has a whop- ing. Suddenly, English is the common ton- Such comparisons will become more ping 400bn further barrels of resources gue even among Saudi “Aramcons”, as its pertinent as Aramco opens itself up for an that could one day become reserves. workers are known. Female employees, initial publicoffering(IPO). Until recently it These reserves are under audit ahead their faces uncovered, lead meetings of was just as cloistered from outside scrutiny of the IPO, and executives are loth to dis- male colleagues. The crisp banter is com- as the kingdom itself, giving it more of a cuss the process. However, they argue that mon to engineers everywhere. A toilet mystique than a good reputation. This whereas other companies have to go far to breakis called a “pressure-relief” exercise. week it invited The Economist for a visit. It find new reserves, Aramco can keep them Deep within, OSPAS is even further re- only partially lifted its veil; its finances re- constant simply by better stewardship of moved from the kingdom outside. The few main off-limits to everyone except the gov- itsexistingfields. Amin Nasser, the chiefex- executiveswith clearance to entercall itthe ernment, its only shareholder. Affable executive, says the company’s recovery “nerve centre” of the world’s largest oil rates—the share of oil recouped from what company. Using 100,000 sensors and data is available in a field—average about 50%, points on wells, pipelines, plants and ter- Lock, stock and barrels but rise as high as 70%, compared with a minals, it directs every drop of oil and cu- Proven hydrocarbon reserves global average of about 33%. It does this by bic foot of gas that comes out of the king- Barrels of oil equivalent, bn maintaining the pressure of its wells over dom (10% of the world’s oil supply), 05101520 the long term through gas re-injection and monitors it on giant screens as it heads to other means. Raising recovery rates on av- ports and power stations, and tracks oil Saudi Aramco* 260 erage to 70% would add 80bn barrels to re- tankers as they load. Well managers in the ExxonMobil serves, an executive says. That is four times desert outback wait daily for OSPAS to tell ExxonMobil’s latest total. them what to do. “It’s not just pretty graph- BP Unlike big listed companies, which ics,” an executive says, purring apprecia- Shell scrapped growth plans when the price of tively over the 70-metre web of data flash- oil slumped in 2014-16, Aramco has also ing on the wall. Total been able to keep on investing because of Because Aramco has all its “upstream” Chevron its low costs, Mr Nasser says. Increasing oil-and-gas operations in one country, it natural-gas output is now the main focus, says it can justifyinvestingbigsums—and a Sources: Wood Mackenzie; company reports *Oil reserves but it has also raised oil production in 1 58 Business The Economist September 23rd 2017

2 some areas. This is visible at the vast Shay- has said he believes Aramco is worth bah field in Saudi Arabia’s blisteringly hot $2trn, though many analysts think that is Empty Quarter, where Aramco last year over-ambitious. To improve its chances, upped oil output by 250,000 barrels a day the kingdom is leaning toward a listing on (b/d) to 1m b/d, inaugurated a facility to the New York Stock Exchange rather than process natural-gas liquids (pictured on in London, because America has deeper previous page) and laid 650km of new pools of capital. However, that would ex- pipelines across a mountain range of red pose Aramco to legal risks it would prefer sand dunes. (Aramco also set out to repop- to avoid. In order to bring in Chinese inves- ulate the surrounding desert with oryx, ga- tors, the kingdom is also considering issu- zelle and ostrich hunted almost to extinc- ing some shares in Hong Kong. tion. They are now reproducing, although However strong Aramco may be up- the first ostrich eggs to fertilise sadly stream, its lower-margin refining and pet- cooked in the heat.) rochemicals divisions will drag down the Its second focus is technology.Whereas valuation. Aramco has some intriguing some of its peers admit that they squan- plans to mitigate this, hoping in the next dered the chance to invest in big data dur- few years to build a plant with new tech- ing the oil boom before 2014, Aramco has nology to turn crude oil directly into petro- no such regrets. Last year it inaugurated its chemicals—in essence, leap-frogging refin- home-grown “TeraPowers” technology, eries. But this is untested. which uses 1trn pixel-like computational In sum, the IPO is more for the king- cells to simulate the flow of hydrocarbons dom’s benefit than Aramco’s. It could have through 500m years ofgeological time, en- drawbacks—exposing the firm to investors abling it to model oilfields in granular de- with shorttime horizonsortoactivists hos- Jane Doe and friend tail. From Dhahran it can remotely direct tile to fossilfuels.But the Aramcons appear drilling of horizontal wells in Shaybah, determined to make the most of it. Execu- rant to get furtherdetails. Now the Senate’s steering a drill-bit through miles of rock to tives argue that oil’s future is bright, even if intelligence committee has asked Face- within a few feet of its target. (Royal Dutch electric cars and cleaner fuels emerge. Low book executives to testify at a public hear- Shell recently boasted of using similar re- costs mean there is no dangerSaudi oil will ing. Some in Washington want to force mote-drilling technology in Argentina.) To become a “sunset industry”, says Moham- Facebook to disclose who is behind politi- train young employees in understanding med al-Qahtani, head of its upstream divi- cal advertisements. the subsurface, Aramco has a 3D virtual-re- sion. A listing will make Aramco “the envy Another initiative reached the hearing ality “cave” in Dhahran, which shows the ofthe rest ofthe world”. 7 stage on September 19th. The Stop En- filigree ofwells1,500 metres below the sur- abling Sex Traffickers Act (SESTA) is aimed face ofShaybah, as iffrom a submarine. at stopping online services from hosting Third, as Saudi Arabia’s most attractive Platform regulation sex-trafficking advertisements—in particu- employer, Aramco has less difficulty than lar Backpage.com, a site notorious for such its Western peers in attracting millennial America’s turn ads. It was set in motion by an affecting recruits (born between around 1980 and documentary, “I am Jane Doe”, which 1996) who are turning away from the oil chronicles the legal battles waged by sex- and gas industry. It has kept up spending trafficking victims against Backpage.com. on international scholarships during the But SESTA is also bad news for Google, slump. It plans to raise the share of women which is still reeling from being made re- Big technology firms are newly in the in the workforce from 25% to 40%. Its chief sponsible for the firing in August of Barry hot seat at home engineer and head ofhuman resources are Lynn, a prominent critic ofbig tech compa- both female. Saudi labour laws still apply, NTITRUST, privacy, hate speech— nies, from the New America Foundation, a however: female Aramcons may not stay Awhenever the European Union tries to Washington think-tank which the firm overnight at an oilfield. rein in tech giants, Americans accuse it of supports. Google worries, as many experts Aramcons pride themselves on a West- protectionism. That argument has always do, that SESTA will undercut section 230 of ernised culture handed down from their been simplistic, but now it is harder to the Communications Decency Act, a stat- American forefathers before nationalisa- make; scarcely a week passes in Washing- ute that largely exempts online firms from tion in 1980. This makes them confident ton when companies like Apple and Goo- liability for their users’ actions and which they can handle the listing. “From the way gle are not in politicians’ crosshairs. is a big reason why the internet has been a [Aramco] was built, from the beginning I The latest target is Facebook. Earlier this fountain of innovation. Google cannot op- would sayitwasreadyforan IPO,” MrNas- month the firm revealed that 470 accounts pose the legislation openly because it ser says. The main change, he adds, will be that appeared to be controlled from Russia would be seen as defending sex traffickers. issuing quarterly results. had bought advertisements worth a total The bill also plays into the hands of But that underplays the challenges of $100,000 on the social network be- some of Google’s foes, who may be happy ahead. For one thing, Aramco is not master tween June 2015 and May 2017. Alex Sta- to see it weakened. Oracle, a software firm, of its destiny. The future of the IPO, such as mos, Facebook’s chief security officer, said has come out in support of SESTA. Google the decision on where and when to list, is they aimed at “amplifying divisive social has fallen out with its Silicon Valley neigh- in the hands of the government share- and political messages”. bour over Android, its mobile operating holder, represented by Muhammad bin This was the first time Facebookhad ac- system; the two are now involved in a bil- Salman, the crown prince. Domestic politi- knowledged that Russia may have used lion-dollar intellectual-property battle. cal tension and external frictions with Qa- the social network, leading the team of Media types and academics are again dis- tar risk delaying the IPO until 2019—and Robert Mueller, the special counsel investi- cussing ways of reining in big tech compa- further muddying the waters. gating possible links between Donald nies. The authors of two critical books— The potential valuation is also conten- Trump’s presidential campaign and the “Move Fast and Break Things” by Jonathan tious. MBS, as the crown prince is known, Russian government, to issue a search war- Taplin and “World Without Mind” by1 The Economist September 23rd 2017 Business 59

2 Franklin Foer—are a media scholar and a Cancellations at Ryanair former magazine editor, respectively. Luigi Zingales and Guy Rolnik, both of the Uni- versity of Chicago, have called for legisla- Pilot light tion to reallocate the ownership of data created on social media to users. Europe’s biggest, cheapest and most efficient airline stumbles badly The question is whether the tech back- lash will result in new laws, beyond (per- YANAIR, an Irish airline, is known for spend an extra €30m on hiring pilots. haps) SESTA. Big antitrust investigations Rthree things: low fares, the brash way The combined cost is a small fraction still appear far off. The nominee for anti- in which Michael O’Leary,its chiefexec- ofRyanair’s profits of€1.3bn in the year trust chief at the Department of Justice, utive, advertises them, and its record for to March. More serious was a less-no- Makan Delrahim, yet to be confirmed, sticking to its flight schedules. The last of ticed European Court ofJustice ruling on seems most interested in protectingAmeri- these is key to its appeal: many busi- September14th which decreed that can firms from “discriminatory antitrust nessmen chose Ryanair more forits low-cost airlines’ employment disputes enforcement” abroad, not in attacking mo- punctuality than its cheapness. And so with crew must go to local labour courts nopoly power at home. Much will depend the announcement on September15th in all the countries where airlines have on how the companies react. They need to that it is cancelling over 2,000 flights bases (Irish labour law is broadly more do more than invest heavily in lobbying. between now and the end ofOctober— flexible). Analysts say the firm’s costs Instead they should strengthen their infra- around 2% ofits capacity over the per- may rise by around 5% as a result. structure for policing their platforms and iod—is more serious than it may at first Lately Mr O’Leary has been warning be much more transparent, argues Nick Si- seem. Ryanair’s share price fell by more ofthe possible consequences ofa British nai, a lecturer at Harvard University and than 5% in the aftermath. exit from the European Common Avia- an investor at Insight Venture Partners. The problems began in early Septem- tion Area with no new aviation deal. EU The GAFA, as Google, Amazon, Face- ber when Ryanair’s on-time record carriers may serve any airport within the book and Apple are collectively called, plunged, owing to a pilot shortage. To bloc, but after Brexit flights between also have good arguments on their side. If restore punctuality,it cancelled many Britain and the remainder ofthe EU they are dominant, it is chiefly because flights at short notice; passengers were might have to cease. Headlines about consumers like their products. The four marooned around Europe. Up to stranded passengers could damage Brit- giants are an important engine of the 400,000 people booked on the 2,000 ish politicians, he claims. This week he American economy. That is why it would scrapped flights riskmissing business used Ryanair’s debacle to return to the come as a surprise if America is ever as ea- trips and holidays. theme. “Imagine the problems this week ger as the rest of the world to cut the giants Mr O’Leary says the problems were times one thousand,” he said. “That is down to size. 7 caused by a change in the way the airline what a no-deal Brexit will looklike.” calculates pilots’ leave. The holiday year used to run from April to March, but Aircraft manufacturing under pressure from the Irish Aviation Authority Ryanair is adopting the calen- Aerial dar year, as new EU rules require. Ryanair obliged its pilots to take their annual bombardment leave between April and December this year. So many are taking their holiday OTTAWA after the summer rush that not enough are available to maintain a full schedule. Boeing takes offon a flight ofhypocrisy Other airlines say Ryanair’s woes are against Bombardier also due to pilots leaving forbetter pay E WON’Tdo businesswith a com- and conditions. Norwegian, a rival low- “Wpany that is busy trying to sue us.” cost carrier with outsized ambitions, So said an uncharacteristically stern Justin claims to have recruited over140 Ryanair Trudeau, Canada’s prime minister, along- pilots this year (out ofaround 4,200 at the side his British counterpart, Theresa May, Irish carrier). Mr O’Leary denies that the in Ottawa on September18th. The two had airline has a shortage. But evidence teamed up to take on Boeing. The giant abounds that Ryanair’s crewing pro- American aeroplane-makeris pressingDo- blems will substantially lift costs per nald Trump’s administration to impose passenger kilometre. Compensation and duties on commercial jets made by Cana- lost fares forthe cancelled flights will cost da’s Bombardier. Boeing says its smaller ri- €25m ($30m). Ryanair will also need to Not his biggest cock-up said O’Leary val is using Canadian government subsidies to sell aircraft to Delta, an American carrier, at below cost price. that the aircraft’s future seemed assured, tion (WTO) about Bombardier. But Boeing Few in either country question that when Delta ordered 75 units. Boeing then is a particularly active litigant, not only Bombardier has had vital financial sup- accused Bombardier of dumping the jets against Bombardier but against Airbus, port from the Canadian and British gov- into America at “absurdly low” prices and which it says got billions of dollars of ernments since 2005 for its small jetliner, asked the Commerce Department to im- cheap loans from the EU. Naturally, Boeing the C-Series. As the plane’s development pose countervailing duties. A preliminary itself got billions of dollars of help (in the costs soared, to $5.4bn, Bombardier strug- ruling is due on September 25th. form of military contracts) to get off the gled to find buyers for it; financial trouble Aircraft-makers are no strangers to sub- ground back in the 1950s and 1960s. Nor followed. An estimated C$4bn ($3.4bn) in sidy disputes. Brazil, home to Embraer, doesithave a plane thatcompeteswith the state support, including C$2.8bn in 2015, which makes a rival to the C-Series, has C-Series. “Boeing says it wants a level play- stopped a nosedive. It was not until 2016 complained to the World Trade Organisa- ing field, but it is not even on the field,” 1 60 Business The Economist September 23rd 2017

2 spits Fred Cromer, president of Bombar- its future is hardly certain. dier Aerospace. The company’s tale in many ways typi- That may be problematic, as industries fies the ailments of American bricks-and- usually need to show “material injury” to mortar retailing. Its woes began in the gain protection from anti-subsidy duties. 1990s, as big-box stores grew both in num- Boeing has not made planes the size of the ber and in size. Walmart’s vast selection C-Series since 2006, notes Ed Bastian, Del- meant parents could buy a toy in the same ta’s chief executive, and has no plans to do place where they picked up milk. so. “Instead Boeing offered to lease us sec- Then came e-commerce. Toys are par- ond-hand planes built in Brazil,” he says. ticularly suitable for online shopping. Un- And when Boeing accused Bombardier of like a dress, they do not need to be tried on selling its planes to Delta for less than they for size, and unlike a peach they do not cost to build, it appeared to forget that it did need to be felt forripeness. Those of prime the same with over 300 of its 787 jets. Fur- toy-buying age, parents with young chil- thermore, its estimate of the cost of the C- dren, are busy. Women aged 25-44 spend al- Series was inflated by looking at only one most as much time shopping as they do year early in the production life cycle. eating and drinking. Given the choice of Even so, at the Commerce Department buying a train set online or in a store, par- Boeing may be pushing on an open door. ticularly when a toy shop can transform Wilbur Ross, the commerce secretary, has even the calmestchild into an insatiable lu- imposed countervailing duties on imports natic, many parents opt to buy online. Am- ranging from steel plate from South Korea azon makes that extraordinarily conve- to tool chests from China, and has angered nient. The result is that many former Toys Canada by placing a levy of up to 24% on fast,the party’s heartland. “R” Us kids have no interest in being Toys its softwood lumber. Canada has also threatened to cancel a “R” Us parents. Cowen, a financial-ser- Boeing has reasons to guard against likely $5bn order of military jets from Boe- vicesfirm, expects41% oftoysand games in Bombardier. First, it fears encirclement by ing if the American company prevails America to be purchased online this year, state-subsidised aircraft makers—not only against Bombardier; Britain could follow about twice the proportion sourced from Airbus and Bombardier, but ambitious its lead. Several airlines, fearing less com- the internet in 2009. state-supported Chinese and Russian pro- petition among planemakers, are unhap- Toys“R” Usalso suffersfrom othercom- ducers. Second, Bombardier might grow py with Boeing’s behaviour and privately mon ills. The first is a heavy burden of into another Airbus, a rival Boeing did not threaten to shun its jets if it continues to debt. Three private-equity firms bought take seriously until it was too late. Bombar- bully its smaller rival. This may be the Toys “R” Us in 2005 in a leveraged buyout, dier could stretch its fuel-efficient C-Series trade case that ends up costing Boeing adding substantially to its borrowings; it planes to challenge Boeing’s smallest air- much more than it has to gain. 7 pays around $400m a yearin interest costs, liner,a bigearnerforthe American firm but even as it tries to compete with Amazon. It based on an old design. “Strangling the also has $400m in secured and unsecured baby in the pram may prove rather conve- American retail debt maturing next year. Many expected a nient,” says an adviser close to Boeing. bankruptcy, but the filing, just ahead ofthe In the meantime, Mr Trudeau and Mrs State of play vital holiday selling season, underlines May are both lobbying Mr Trumpon Bom- how squeezed the firm has become. Two bardier’s behalf,and Canada is likely to ap- other retailers—Payless ShoeSource, a 61- peal in the courtsand atthe WTO. IfBoeing year-old discount shoe-seller from Kansas, gets its way,about 3,500 jobs will be threat- and Gymboree, which began selling chil- ened in Quebec, where Canadian politi- NEW YORK dren’s clothing in 1986—are among those cians are wary ofstirring up separatist sen- thatdeclared bankruptcythisyearafter be- Toys “R” Us files forbankruptcy timent, and a further 4,500 in Northern ing backed by private-equity firms that left Ireland, where Bombardier is the largest SK young American parents about Toys them similarly weighed down. private-sector employer. Mrs May’s Con- A“R” Us and they are likely to be able to Second, Toys “R” Us has not helped it- servative governmentispropped up by the sing a jingle from their childhood: “I don’t self. Like many department-store chains, ten MPs from the province’s Democratic wanna grow up, ’cause maybe if I did, I its inventory has been painfully slow to Unionist Party; Bombardier lies in east Bel- couldn’t be a Toys “R” Us kid”. For children adapt to changing trends. Sales of fidget ofthe 1980s, Toys “R” Us was a mecca at the spinners, a toy that has become ubiquitous strip mall, an awe-inspiring array of dolls, in the past year, for instance, got twirling On a wing and a prayer trucks, board games, bikes, art supplies online first. Nor is it clear whether its strat- Commercial-aircraft deliveries and much more. Many of them noticed egy of trying to lure families to its shops 800 when on September 18th, the chain filed with live events, such as music classes for Boeing forbankruptcy. children, will work. Dave Brandon, the company’s chief ex- Like so many other retailers, Toys “R” 600 ecutive, emphasised that shops would car- Us is striving to build its business online. Airbus ry on operating as usual and claimed that That has been bumpy work. In 2000, back 400 Toys “R” Us was at the start of a new, when Amazon was still trying to move be- brighter era. “These are the right steps to yond selling books, Toys “R” Us joined 200 ensure that the iconic Toys “R” Us and Ba- with the e-commerce giant to manage on- Bombardier bies “R” Us brands live on for many gener- line toy sales. Four years later it sued Ama- ations,” he declared. A Chapter 11 bank- zon, arguing that the e-tailer had broken 0 ruptcy, many analysts agree, is a sensible the terms of their agreement. In 2006 a 2000 02 04 06 08 10 12 14 17* way to deal with the chain’s $5bn of long- judge agreed, but 11 years on that victory Source: Company reports *Year-to-date annualised term debt. So Toys “R” Us is not dead. But gives scant solace. 7 The Economist September 23rd 2017 Business 61

Teaching entrepreneurship Mind over matter

Psychology beats business training among the businesspeople ofTogo ANAGEMENT gurus have chewed tell, with high confidence, which meth- Mover the topic endlessly: is a flair for od—ifany—is superior. entrepreneurship something that you are As they report in Science, the research- born with, or something that can be ers split the businesses into three groups taught? In a breakwith those gurus’ of500. One group served as the control. traditions, a group ofeconomists and Another received a conventional busi- researchers from the World Bank, the ness training in subjects such as account- National University ofSingapore and ing and financial management, market- Leuphana University in Germany decid- ing and human resources. They were also ed that rather than simply cookup a pet given tips on how to formalise a busi- theory oftheir own, they would conduct ness. The syllabus came from a course a controlled experiment. called Business Edge, developed by the Moreover, instead ofchoosing sub- International Finance Corporation. jects from the boardrooms ofpowerful The final group was given a course corporations or among the latest crop of inspired by psychological research, de- young entrepreneurs in Silicon Valley, signed to teach personal initiative— Francisco Campos and his fellow re- things like setting goals, dealing with The music business searchers chose to monitor1,500 people feedbackand persistence in the face of running small businesses in Togo in West setbacks, all ofwhich are thought to be Through the sound Africa. These are not the sorts ofbusiness useful traits in a business owner. The owners who give TED talks or negotiate researchers then followed their subjects’ barrier billion-dollar mergers. The typical firm fortunesforthe next two-and-a-half had three employees and profits of94,512 years (the experiment began in 2014). CFA francs ($173) a month. Only about a An earlier, smaller trial in Uganda had third kept books, and less than one in 20 suggested that the psychological training How streaming has pushed Latin music had a written budget. was likely to workwell. It did: monthly into the mainstream Studying lots ofsmall businesses sales rose by17% compared with the I GENTE” lures listeners with a instead ofa few big ones allowed the control group, while profits were up by “M mesmerising hook, a thumping academics to conduct a randomised 30%. It also boosted innovation: recipi- beat and lyrics about breaking down barri- controlled trial. Usually associated with ents came up with more new products ers. Acollaboration between J Balvin, a Co- medical research, these are considered than the control group. That suggests that lombian reggaeton star(pictured), and Wil- one ofthe most convincing types of entrepreneurship, or at least some mental ly William, a French producer, the latest evidence. Participants (in this case firms) habits useful for it, can indeed be taught. product of this summer’s Latin craze is are assigned, at random, either to receive More surprising was how poorly the crooned almost entirely in Spanish. (The ti- “treatment” (in this case, two different conventional training performed: as far tle means “My People”; reggaeton borrows sorts oftraining) or to the control arm, as the researchers could tell, it had no from hip hop, reggae and rap.) The song which receives nothing. Recruit enough effect at all. Budding entrepreneurs might topped the charts on Spotify, a streaming participants forgood and bad luckto want to avoid the business shelves and service, for weeks. “To be a crossover artist, even out across the sample, and you can make forthe psychology section. you used to have to sing in English,” said John Reilly, Mr Balvin’s publicist. Now six of YouTube’s top ten music videos are pre- Now Latin fans are listening to hour upon As streaming services have tracked and dominantly in Spanish. In August the Bill- hour of music. Mexico and Brazil are monetised, labels have noted Latin mu- board Hot 100, which tracks streams, sales among Spotify’s top four markets by vol- sic’s climb up the charts. The Spanish ver- and radio plays, sported seven Latin hits. ume of streams. Jesús López, chief execu- sion of “Despacito”, by Luis Fonsi and Just five graced the chart in all of2016. tive of Universal Music Latin America, has Daddy Yankee, a Puerto Rican duo, was al- Latin music is helping the music indus- said the streaming platform has “democra- ready ubiquitous in Latin America when try to arrest years of decline. Its growth is tised music consumption”. Fans have ac- Justin Bieber heard it in a club in Bogotá. faroutpacingthat ofothergenres. Last year cess to any music, anywhere. Mr Bieber asked if he could “jump on the Latin America yielded just $598m out ofto- Spotify’s curators are also makers of track”. The hybrid version released in April tal global recorded-music revenue of fortune, promoting Latin hits and rising became the most-streamed song yet, with $16bn, but sales increased by 12%, against stars by featuring them in playlists like nearly 5bn audio and video plays. 5.9% worldwide. Streaming revenue in the “Baila Reggaeton” (Dance Reggaeton), the Record labels are eager to tap a fan base region (including subscription services app’s third most popular. A spot in “Baila that includes Latin Americans, Latinos in such as Spotifyand Apple Music, as well as Reggaeton” guarantees tens of millions of America (one of the country’s fastest- YouTube and otherwebsites) leapt by 57%. streams from the list’s nearly 6m followers, growing ethnic groups) and millions of “The Latin audience is a lean-back audi- which can propel a song into Spotify’s glo- teenagers worldwide drawn to reggaeton ence,” explains Rocio Guerrero, Spotify’s bal charts. Danny Ocean, a Venezuelan un- by “Despacito” and “Mi Gente”. Latin mu- head of global cultures. For radio-loving known with a honey-smooth voice, re- sic captures 8% of streams in America, Latin Americans, who were less likely to leased “Me Rehúso” by himself on which translates into advertising revenues own CD players and iPods than music fans YouTube—and saw it soar when Spotify and performance sales for music labels. It elsewhere, streaming was a natural fit. added it to “Baila Reggaeton”. still accounts for just 2% of songs and al-1 62 Business The Economist September 23rd 2017

2 bums sold. “Would labels rather have a 1984. It hopes Latin music will be a ticket can yet identify what will make two million streams or a million albums sold? back to renown. “We have to prove we’re youngsters click. It’s a no-brainer,” says David Bakula of relevant and that ‘Mi Gente’ wasn’t a lucky Spouseup, a south Indian startup, is un- Nielsen Entertainment, a research firm. strike,” said Chiara Belolo, its head of inter- daunted. It trawls social media to deter- Universal MusicGroup, the world’sbig- national development. Mr Balvin has the mine a candidate’s personality and recom- gest music company, which co-manages same task. He is working on a remix of his mends matches by calculating a Mr Balvin and Mr Fonsi, first invested in hit track with a “huge” mainstream artist. “compatibility score”. Nine-tenths of its digital teams in Latin America a decade He owes much of his success to streaming, 50,000 users are non-resident Indians ago. That seems to be paying off. Scorpio he says, “but I’m the type of artist who who usually fly to India for a month or so, Music, the French indie label behind “Mi doesn’t like to talk about money.” Even so, scout for partners, settle on one, get Gente”, last celebrated a Billboard hit in he is now the kind who makes it. 7 hitched and fly back together. For these time-starved travellers, the machine-led scouring “provides an insight that would Indian marriage websites come from five coffee dates,” says Karthik Iyer, the firm’s founder. Banihal, which is Click, meet and marry based in Silicon Valley, relies on a long psy- chometric questionnaire of around 100 questions to match like-minded partners. Real-world complements to online efforts can help secure a match. Some ser- IITIIM MUMBAI vices, such as Shaadi.com, aimed at people graduatingfrom prestigious univer- Online matchmaking businesses in India have many ways to woo sities, also act as conventional wedding- T WAS 2012…I was number 37,” says gions. It has sites for divorcees, the dis- brokers, by meeting prospects on their cli- “IAshwini, referring to the badge that abled, the affluent (“Elite Matrimony”) and ents’ behalf. The job is no different from was pinned on her shirt pocket. Her task for those with unfavourable astrological that of a headhunter, says Taksh Gupta, its was to go onto the stage and introduce her- charts, which make it difficult to find a founder. He charges anywhere between self to around 70 eligible bachelors and match. All online firms run a “freemium” 50,000 and 200,000 rupeesforthe service. their parents. Families then conferred and, model: upload your profile at no charge His most recent catch, after a search lasting provided caste and religious background and let an algorithm match horoscope de- over two years, was a husband for a 45- proved no obstacle, would approach the tails with potential partners filtered by age, year-old woman from a prestigiousuniver- event’s moderator asking to meet number caste, education, income and sometimes sity who would settle for no less than an 37. At midday girls would wait for pros- (alas) complexion. Or you can pay for fea- Ivy League groom. Matrimony.com, too, pects to swing by,again with parents on ei- tures like instant chat or a colourful border has over 400 “relationship managers” and ther side. A brief exchange might establish around your profile to ensure the algo- 140 physical outlets. the potential bride’s cooking skills or her rithm returns you as a top search result. “The opportunity is huge”, enthuses intention to workafter marriage. Ifthe two Such a long list of options means that Murugavel Janakiraman, boss ofMatrimo- sides hit it off, they would exchange copies finding a match on the web can be time- ny.com. Around four-fifths of new custom- of their horoscopes. Nearly 50 men lined consuming and tedious. “It’s like looking ers now come via smartphones, lured by up to meet Ashwini that day,speed-dating for a needle in a haystack,” says one suitor. instant alerts about new potential matches style. No one made the cut. She later mar- Predictably, many also complain that on- and services that match up people in the ried a colleague. lineprofilesoften donotreflectreality.Out- same town. But the spread ofsmartphones Such gatherings forman important part right fakes remain a scourge. This month a also brings competition. Casual-dating of the wedding industry, worth around man was arrested in Delhi for extorting apps are spreading fast. Tinder, on which $50bn a year, in a country where arranged over 5m rupees ($77,700) from 15 women decisions about eligibility rarely benefit marriages continue to be the norm. India by luring them on matrimonial websites. from parental advice, now counts India as has 440m millennials—roughly, the gener- And no amount of artificial intelligence Asia’s largest, fastest-growing market. 7 ation born between 1980 and 1996—and a further 390m youngsters have been born since 2000, so there are plenty of anguished parents for marriage facilitators to pitch to. KPMG, a consultancy, estimates that out of 107m single men and women, 63m are “active seekers”. For now, only a tenth surf the internet to find a spouse. But the numberwho do is about to explode, argue executives in the marriage-portal business (India has 2,600 such sites). “After Fa- cebook [took off], people are more open about their lives than ever before, which has had a great knock-on effect,” says Gou- rav Rakshit of Shaadi.com, one of India’s oldest matrimonial sites. Take Matrimony.com, the country’s biggest online matchmaker, which raised $78m in its initial public offering on Sep- tember 13th. Its shares began trading this week. It runs 300-odd websites in 15 lan- guages, catering to different castes and reli- Arranged by algorithm The Economist September 23rd 2017 Business 63 Schumpeter Big tech, big trouble

What iflarge tech firms were regulated like sewage companies? costs low.Regulators review the frameworkevery few years. How might utility-style regulation work for Silicon Valley firms? Consider a thought experiment with Facebook. Its 1.3bn users pay nothing, but give it their data and control over the ad- verts they see. Facebook then sells advertisers targeted access to its users, pulling in $27bn last year. Imagine that the service were “unbundled”, giving users control. All would own their data and could choose whether to sell them to advertisers. They would also have to pay Facebook a fee to compensate it for the cost of creating and operating the network. The big question is how much compensation—profits—Face- book and other firms would deserve if they were treated as utilities. It is possible to get a rough idea. Assume a cost of capital of 12%—a high figure to reflect the riskinherent in tech firms’ models. Estimating their RABs is harder. They have some physical assets such as data centres, but unlike utilities their main resources are not pylons, pipes and property, but software and ideas that they create oracquire by buyingrivals. Only some ofthese intangibles appear on their balance-sheets; the vast sums spent on research and development(R&D) do not. Butyoucan reconfigure their balance-sheets as if all their R&D in the past had been recognised as HREE-QUARTERS of Americans admit that they search the an asset with a 20-yearlife. Alphabetand Facebookwould have a Tweb, send e-mails and check their social-media accounts in combined RAB of $160bn. If their returns were capped at12%, op- the bathroom. That is not the only connection between tech and erating profits would fall by 65% and 81% respectively. plumbing. The water and sewage industry offers clues to the If their services were unbundled, users would benefit. Using vexed question of how to regulate the Silicon Valley “platform” figures from 2016, the average Facebookuser would pay $15 a year firms, such asAlphabet, Amazon and Facebook. The implications to the firm for its return on its RAB, but they would pocket $23 are mildly terrifying forthe companies, so any tech tycoons read- from selling advertisers their data and the right to be advertised ing this column might want to secure a spare pair oftrousers. to. A Google user would pay $37 a year to Google, but collect $45 In America and in Europe a consensus is emerging that big from advertisers. Those are fairly small sums, but richer users tech firms must be tamed. Their dominance of services such as with particularly valuable data could make much more. search and social media gives them huge economic and political clout. The $3trn total market value of America’s five biggest tech Bog standard firms (Apple and Microsoft are the other two) suggests that inves- Regulating tech like water would cause an outcry among investors believe they are among the most powerful firms in history, tors and in Silicon Valley. Yet some of the objections do not stack up there with the East India Company and Standard Oil. up. Essential investment would still happen—a guaranteed 12% Trustbusters in need of instant gratification want to break up return is a handsome reward. The firms could invest in new tech- the companies, but this might make their services less useful nologies that would remain outside the regulated utility. It would (imagine having ten social-media accounts), and network effects be possible to workout which assets sit abroad and exclude them might mean that one ofthe tiddlers would grow dominant again. from the RAB, or to reach arrangements with foreign regulators. Others want tech firms to license their patents for nothing, as Thisapproach would have shortcomings, though. Tech moves AT&Twasrequired to do in 1956. Thismightcreate startupstomor- at the speed of light compared with conventional utilities. It was row, but will not stop firms exploiting monopolies today. only five years ago that investors worried that Facebook would An alternative is to regulate these companies like utilities— struggle with the shift to mobile phones. Regulators would be monopolies with high market shares that provide an essential clumsy at coping with rapid change. And a RAB methodology service from which it is expensive for consumers to switch. Here, would not resolve the incendiary issue of whether tech plat- the water industry is relevant, particularly the concept of a regu- forms should be responsible for what they publish. lated asset base (RAB). It emerged in the 1990s when Britain was Despite such problems, tech bosses should view regulation as privatising its water firms, borrowing elements from American utilities as a long-term risk. They have two defences. First, to bun- regulation. Itisan acronym thatfewin Silicon Valley are aware of. dle their services so tightly that it is impossible for outsiders to But from these obscure origins RAB frameworks are now com- isolate the products that are monopolies and work out their pro- mon in Europe and Latin America, used to regulate at least fits and assets. Amazon is a master here. It is unclear how much it $400bn-worth ofpower, airport, water and telecoms assets. makes or has invested in e-commerce (where it is dominant), vid- The idea is that the monopolist’s profits should not exceed the eos (where it is a challenger), or food (where it is a new entrant). level that a competitive market would allow. That means estimat- The second defence is to lobby Washington. The lesson from ingthe cost to an imaginary new entrant ofreplicating the incum- America’s veteran oligopolists—airline, telecoms and health-care bent’s assets (this is the RAB) and calculating the profits the new- companies—is that you can manipulate and dance around the comer would make if its returns matched its cost of capital. The regulatory system to ensure high profits. For tech firms, financial actual monopoly’searningsshould notexceed thisamount. Safe- obfuscation and cronyism are the most effective ways to ensure guards are added to ensure the utility is run efficiently, keeping their monopoly profits do not go down the drain. 7 Guidance starts with hearing you out.

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Also in this section 66 The World Trade Organisation 67 Ethical investment 68 Real-time insurance 68 Assortative mating 69 Ukraine’s sovereign-bond issue 69 Norway’s $1trn wealth fund 70 Free exchange: Rethinking Econ 101 Buttonwood is away

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China’s economy what it classified as nine traditional industries such as shipbuilding, steelmaking Biting the bullet and petrochemical production. In 2010 seven new strategic industries, from alternative energy to biotechnology, also became targets. And two years ago it announced its “Made in China 2025” scheme, SHANGHAI specifying ten sectors, including aerospace, new materials and agricultural The government sets its sights on building Chinese dominance in new industries equipment, which are now at the heart of N RECENT days China set the record for many have faith in the government’s abili- its planning. The various plans overlap; Ithe world’s fastest long-distance bullet ty to steer companies into industries they cars, for example, have appeared in every train, which hurtled between Beijing and might otherwise shun. In America and iteration. The result is a wide-ranging ap- Shanghai at 350kph (217mph). This was a Britain, faith tends to be supplanted by proach in which the government tries to triumph of industrial policy as much as of deep doubts. Governments, after all, have shape outcomes in important parts of the engineering. China’s first high-speed trains a lousy record in picking winners in fast- economy, new and old. started rolling only a decade ago; today the evolving markets. Yet most countries try to The “Made in China” plan, its latest in- country has 20,000km of high-speed supportsome industries, usuallythrough a dustrial-policy craze, is derived in part track, more than the rest of the world com- mixture of infrastructure, tax breaks and from Germany’s “Industry 4.0” model, bined. China could not have built this research funding. What differs is the stress which focuses on creating a helpful envi- without a strong government. The state they lay on such measures. ronment through training and policy sup- provided funds for research, land for China is unique in the breadth and heft port but leaves business decisions to com- tracks, aid for loss-making railways, subsi- of its industrial policy. For years the gov- panies. China’s version is much more dies for equipment-makers and, most con- ernment concentrated on modernising hands-on. By the start of this year, officials troversially, incentives for foreign compa- had established 1,013 “state-guided funds”, nies to share commercial secrets. endowed with 5.3trn yuan ($807bn), much High-speed rail is a prime example of Dominant ambitions of it for “Made in China” industries. In Au- the Chinese government’s prowess at Chinese companies’ domestic gust the Ministry of Industry and Informa- identifying priority industries and deploy- market-share target, % 2020 2025 tion Technology unveiled a manufacturing money and policy tools to nurture 0 20406080 ing-subsidy programme, spread across as them. It inspires awe of what it can accom- many as 62 separate initiatives. Most con- plish and fear that other countries stand lit- New-energy vehicles tentiously, the government has laid out lo- tle chance against such a formidable com- High-tech ship cal-content targets forthe various “Made in components petitor. Yet there have also been big New and renewable China” sectors (see chart). One plan fea- industrial-policy misses, notably the fail- energy equipment tures hundreds of market-share targets, ure to develop strong car manufacturers High-performance both at home and abroad. “Clearly, this is medical devices and semiconductor-makers. China is roll- no mere domestic exercise,” the EU Cham- ing out a new generation ofindustrial poli- Industrial robots ber of Commerce in China warned in a re- cies, directed at a range of advanced sec- Large tractors port this year. tors, raising worries that it will dominate and harvesters The targets also illustrate one of the fac- everything from robotics to artificial intel- Mobile-phone chips ets of Chinese industrial policy that has so ligence. That result is farfrom preordained. Wide-body aircraft angered foreign companies and govern- Industrial policy is a touchy topic. In ments: the disguising of state support. The continental Europe and, especially, Asia, Source: Mercator Institute for China Studies World Trade Organisation (WTO) strictly 1 66 Finance and economics The Economist September 23rd 2017

worth of robots over the next few years. En garde! According to the Mercator tally, local tar- Potential exposure to China’s high-tech “Made in China 2025” policy gets add up to roughly five times as much. 2015 or latest, five-year averages Increased exposure Yet when four factors—foreign technol- 35 ogy, domestic abilities, market demand South Korea 30 and government money—come together, Czech Republic Germany Chinese industrial policy can be ruthlessly 25 Japan effective. The boom in high-speed rail be- Bulgaria Romania Hungary Lithuania Slovenia gan in 2004 when the government offered Slovakia 20 Poland Sweden Ireland lucrative contracts to foreign engineering Finland Italy Austria Malta Estonia Croatia 15 Belgium companies such as Germany’s Siemens Portugal Spain Denmark and Japan’s Kawasaki so long as they Latvia Netherlands United States 10 Britain France shared their know-how. Some resisted at Greece Luxembourg first, but eventually the lure ofChina’s vast 5 Reduced Cyprus market won them over, especially when

Manufacturing, as % of GDP value-added exposure they saw competitors getting a slice of it. 0 0 10203040506070With their prodigious engineering skills, High-tech industries’ value-added as % of total for manufacturing born from years of trying to develop high- Source: Mercator Institute for China Studies speed rail themselves, Chinese companies soon absorbed the technology. After a de- 2 limits local-content rules. But China’s mar- gluts, like “old” industries where China is cade of laying tracks on an unprecedented ket-share targets are primarily contained in now cuttingovercapacity, such as steel and scale, they have improved on it. semi-official documents, such as a blue- coal. The Mercator Institute of China Stud- That success cannot be replicated in all print published by the Chinese Academy ies, a Berlin-based research group, counted ten of the “Made in China” sectors, not of Engineering. So the government can that, by late 2016, nearly 40 local govern- least because foreign companies are more claim that these are simply industry re- ments had opened or planned robotics guarded about sharing their secrets. But it ports, notofficial targets. Butin the Chinese parks. The central government estimates would be rash to bet against China’s suc- system the line between government- that China will need nearly 150bn yuan- ceeding in at least a few ofthem. 7 backed industry estimates and official guidelines is easily blurred. Similarly, foreigners have long com- The World Trade Organisation plained that China hides much ofits illegal state aid. Since 2011 America has formally Dispute unsettlement requested information about more than 400 unreported Chinese subsidies. “China learned howto game the system,” saysTim Stratford, a former American trade official responsible for dealings with China. “The WTO is not designed to deal effectively The Trump administration is holding the WTO hostage with a huge economy that has, as the core ofits development strategy, industrial poli- IGHT months into Donald Trump’s come what some call a “crisis”. cies across a wide range of sectors.” Frus- Epresidency, the rules-based system of This tension comes at a bad time. Over trations at the WTO’s inadequacy in re- global trade remains intact. Threats to im- recent years the number of disputes has straining China have led the American pose broad tariffs have come to nothing. risen both in number (see chart) and com- government to look at other mechanisms Some ominous investigations into wheth- plexity. The court is already dealing with a (see next story). er imports into America are a national-se- backlog of cases, which are supposed to Foreign competitors see China as a curity threat are on hold. Mr Trump looks take two months. One appeal from the EU, well-oiled machine and worry that they less a hard man than a boy crying wolf. All relating to Airbus, an aircraft manufactur- will lose business not just in China but the same, supporters of the World Trade er, is almost a year old. By the end of 2019 around the world. Export powerhouses Organisation (WTO), the guardian of that the terms of two more judges will expire, such as South Korea and Germany feel rules-based system, are worried. Other leaving only two. Three are needed to rule most exposed (see chart). But in fact the dangersare lurking. There ismore than one on any individual case. If the gaps are not1 Chinese government’s record in promot- way to undermine an institution. ing specific industries is patchy. Since the The WTO is meant to be a forum for 1970s it has tried to develop semiconduc- reaching deals and resolving disputes. But Trading blows tors. But ofthe $145bn-worth ofmicrochips all 164 members must agree to new rules, WTO, number of active disputes China consumed in 2015, only a tenth were and agreement has largely been elusive. So 50 truly domestic; foreign technology re- if members do not like today’s rules, as in- mains superior. The car industry, too, has terpreted by judges, they have little pros- 40 disappointed. To manufacture in China, pect of negotiating better ones. That puts foreign firms must take local partners. The pressure on the WTO’s judicial function, 30 government hoped this would lead to the bit that has been working fairly well. knowledge transfers. Instead, local firms, Trouble is brewing at the WTO’s court 20 insulated from head-on foreign competi- of appeals. It is meant to have seven serv- tion, have milked the joint ventures for ing judges, but has only five and by the end 10 profits and innovated little. of the year will have just four. The Ameri- Moreover, in their zeal, local govern- cans refuse to start the process of filling the 0 1995 2000 05 10 15 17* ments can go overboard. Some worry that spots, citing systemic concerns. What Source: World Trade Organisation *In August “Made in China” sectors will end up facing seemed an arcane procedural row has be- The Economist September 23rd 2017 Finance and economics 67

2 filled, the system risks collapse. Ethical investing is the question of what should be mea- Notionally, the Americansobjectto two sured. Neither is easy to answer. procedural irregularities, including the Not its own One attempt to answer the first looked way the most recently departed judges left. at the converse: were returns higher for But according to Brendan McGivern, a law- reward shares that would not qualify forinclusion yer in Geneva, neither is a “show-stop- in these efforts: in other words, is there a ping” problem. And on September 18th NEW YORK vice premium? Lists were compiled of “sin Robert Lighthizer, America’s usually tight- stocks”, usually involving tobacco, alcohol The mysteries underneath the hottest lipped trade representative, outlined a big- and gambling, butsometimesfirearmsand investment trend ger agenda. To a Washington room packed the like (a future one might add fossil-fuel with foreign-policy wonks, he complained AYBE weary of its role as a punchbag producers and defence companies). A pa- that decisions from WTO judges had “di- Mfor moralists, and certainly in search per published in 2009 called “The Price of minished” what America had bargained of products with widespread appeal, Wall Sin”, by Harrison Hong and Marcin Kac- for and imposed obligations it had not Street has taken to selling products linked perczyk, two academic economists, con- agreed to when it joined the WTO. to virtue. That is not easy: how does an included that there were indeed unusual re- These are long-standing and uniquely dustry focused on financial returns go turns in firms that sold tobacco, alcohol American concerns. Panels at the WTO about gauging goodness? and gambling. have repeatedly ruled that the way it calcu- The approach started years ago with However, a second paper published lates defensive duties on imports breaks funds that called themselves “socially re- this year (“Sin Stocks Revisited”, by David the rules. Mr Lighthizer sees this as under- sponsible”. More recently the terminology Blitz of Robeco Asset Management and mining America’s ability to protect itself has evolved, with many claiming to pur- Frank Fabozzi of EDHEC Business School) from unfairtrade. Many in Washington ac- sue “ESG” investing, standing for“environ- contests these results. It argues that added cuse the WTO’s lawyers of overstepping mental”, “social” and “governance”. risk factors such as low reinvestment rates their remit, filling in the gaps where the Morningstar, a data-tracking firm, mean that there is no evidence that sin original rules are silent. places any fund that uses terms such as stocks provide a premium for reputation So the American administration seems sustainable investing, ESG and so on in its risk. Robert Whitelaw, a professor at New in effect to be using the judicial appoint- prospectus into a category that now has York University’s Stern School ofBusiness, ments to hold the WTO hostage. Oddly, 204 members with $77bn in collective as- says that the conflictinganalyses reflect the though, it has been vague about what it sets. The oldest fund in the Morningstar broader results of more complex efforts wants. Mr Lighthizer’s past offers clues. Ac- group dates back to 1971. But nearly half aimed at tracking results from (“virtuous”) cording to the Wall Street Journal, when he have been launched in the pastthree years. companies that would qualify for these advised Bob Dole, a presidential candidate More quietly, the wealth-management of- funds. Results are mixed. in 1996, he recommended that a panel of fices of many American investment firms It would help if there were an easy an- American judges should review any find- constantly roll out investments touting swer to the second question: what really ings against America, which would threat- these sorts of characteristics and Morning- determines an ESG company? Of the three en to quit the WTO after three duds. This star counts in excess of 2,000 funds world- categories represented by the initials, the weekMrLighthizerspoke fondlyofthe sys- wide. Endowments and pension funds, clearest is the first. The environmental “E” tem that preceded the WTO, under which the big global money pools, are beginning means shunning companies that produce members could blockpanel rulings. to suggest they, too, want to invest along a large amount of externalities—costs not Bullying the appellate body into ruling these lines. captured in the manufacturing process— in favour of America would undermine its Two perennial questions have accom- like carbon or waste or other forms of pol- usefulness. If members no longer think panied the deluge of money. The first is lution. The “G” for governance encom- that they will get a fair hearing, they are whether the approach comes with special passes an evaluation of how the company more likely to take matters into their own costs: ie, is there a virtue discount? Second structures its board, disclosure, compensa- hands. Mr McGivern worries that an tion and so on. American fix to the perceived problem of Neither area is straightforward. But the judicial overreach could undermine the complexity of each pales in comparison rules-based system, by tampering with the with that involved in exploring what lies independence ofthe appellate body. behind the “S” for social. This often in- Some signs suggest that Mr Trump’sad- volves labour rights, such as working ministration is not planning to ditch the hours, wages and fatalities, and the ability WTO entirely. It is pursuing two disputes to pursue a grievance; and issues such as initiated by Barack Obama. And Mr Light- the breakdown of employees by gender. hizer has said that if he uncovers a breach Hundreds of different outside services an- of China’s commitments under WTO alyse how companies tackle “social” is- rules, he will file a dispute. But he ex- sues. A study by NYU’s Stern School (“Put- pressed doubt about the WTO’s ability ei- ting the ‘S’ in ESG”) looked at12 of the most ther to deal with Chinese mercantilism or popular approaches. It extracted from to reach any agreements at its next ministe- these more than 1,700 different measures. rial meeting in December. Companies seeking to respond to these Mr Trump’s tough-cop trade policy ap- evaluators faced a daunting task: answer- pears to be to threaten tariffs unless he gets ing 763 questions for companies involved his way. Mr Lighthizer’s is subtler but per- in food and beverages; 698 for companies haps more menacing. By combining indif- in extractive industries. ference with a ploy to starve the WTO of A consequence is that even companies judges, he is gambling that the WTO needs willing to complete surveys are over- America more than America needs it. In whelmed by the task. And the answer they both cases the risks are the same: that the provide is often incomplete anyway, be- rule bookwill become irrelevant. 7 cause it overlooks their supply chains. The 1 68 Finance and economics The Economist September 23rd 2017

2 NYU survey notes that many current ap- Assortative mating proaches ignore the full supply chain and thus often the hard end of manufacturing. Ortheyjudge companieson theirstated in- Matching theory tentions, such as promising to ask suppliers to treat labour well, without actually Marital choices are exacerbating household income inequality monitoring or reporting the results. That this category struggles to live up to ERE’S what nobody is telling you: children’s future now have to focus on its idealistic promises justifies some scepti- “HFind a husband on campus before raising the brightest youngsters possible, cism. But, at the very least, it is focusing at- you graduate,” wrote Susan Patton, a and one ofthe surest ways to have bright tention on the problems and hence apply- human-resources consultant, in 2013. In children is to marry a bright spouse. By ing pressure for a better approach. It is also an infamous letter to the editor of Prince- building an economic model which takes refining definitions of terms for investing ton’s student newspaper, Ms Patton into account these shifting preferences that may have value elsewhere, and help warned female students at the university and testing it against census data, the replace feel-good bromides with crunchier that they will “never again be sur- authors conclude that Americans born in measures. NYU is planning its own indica- rounded by this concentration ofmen 1972 do indeed have a stronger preference tors for“social” factors. It wants them to be who are worthy of[them]”. Critics re- forbetter-educated partners than those simple—a dozen factors. That it and others sponded harshly.Ms Patton recalls that born in1943. are exploring new approaches must, in it- she was branded “a traitor to feminism, a One implication ofassortative mating self, be a social good. 7 traitor to co-education and an elitist”. is that most estimates ofthe returns on Economists might offeryet another investment in a university education err critique ofMs Patton’s letter: it was large- on the low side, as they failto take Real-time insurance ly unnecessary.It is clear to academics spouses’ earnings into account. Research that people tend to marry spouses with from the Federal Reserve BankofNew Pay-per-risk similar levels ofeducation. They also Yorkfinds that the annualised return on know that “assortative mating”, as the investment fora four-year bachelor’s practice is called in the jargon, is exacer- degree in America rose sharply between bating income inequality.In America, 1980 and 2000 but has since stabilised at Britain, Denmark, Germany and Norway, around15%.Our calculations show that, they have found that household income ifa spouse’s income is added to a per- The availability ofhuge volumes of would be more evenly spread ifcouples son’s own, the returns to higher educa- data in real time is changing insurance were less keen to marry similar sorts. tion have increased steadily since 2000, VEN at weddings or whale watches, the Less clear, however, is whether or not now reaching18%. Similar patterns hold Ebuzz of a drone is no longer a surprise. assortative mating is on the rise. An- forboth men and women. Gender in- Drone photography is booming. Gartner, a swering this question is hard, because the equality in lecture halls has faded; house- consultancy, says some 174,000 drones ratio ofeducated men to educated wom- hold income inequality has widened. will be sold forcommercial use around the en has shifted over time. That university- world this year, and 2.8m to consumers. It educated men are now more likely to is easy to imagine a few might fall out of marry university-educated women may the sky, causing damage the pilot cannot not show a change in spousal prefer- hope to payfor: crushed weddingcakes, in- ences. It may simply reflect the increased jured spectators and so on. Amid scores of number ofwomen with degrees. near-misses, several incidents have al- The latest iteration ofthe debate ready occurred. In 2014, for example, a comes in a recent paper by Pierre-André drone filming a triathlon in Australia Chiappori and Bernard Salanié, ofCo- crashed on a competitor’s head. lumbia University,and Yoram Weiss, of Clearly, drone-users need insurance. TelAviv University,which argues that Typically, risks are insured through the assortative mating is indeed growing. payment of an annual premium. In- They note that in the mid-20th century sure4drones, a British specialist, charges households were primarily concerned £738.86 ($1,000) to cover a DJI Phantom, a with divvying up chores. Since then, bestselling drone, for a year. From October inventions like the washing machine and Flock, a London startup, will offer insur- frozen food have meant that people can ance on a flight-by-flight basis, at the push spend less time on housework. At the of a button in an app, to any commercial same time, computers have increased the drone-operator in Britain. Cover for ama- demand forskilled labour. The authors teur pilots will soon follow. Costs will be argue that parents worried about their It’s all a matter of degree about £5 per hour of flight, according to Al- lianz, an underwriter. Flock’s app relies on a wide range of cal topography, such as proximity to ven risk scores into a price. The attraction data. Weather forecasts come from IBM, a churches, hospitals and schools, as well as for Allianz is acquiring customers cheaply. computing giant which, having spent over roads and traffic levels. It also monitors the “Rather than humans sitting and writing $2bn on The Weather Company in 2015, drone itself, gathering data as it flies to business, the algorithm does it on the now offers forecasts to within a few hun- build a risk profile for that machine. All spot,” says Tom Chamberlain, who man- dred metres, and over a period of minutes. these numbers are crunched when a cus- ages its aviation underwriting. Live information about nearby aircraft is tomer requests insurance through the app. Conventional insurance works by provided by a software company called As well as offering a quote, the app tells pi- pooling individual risks and then setting a Snowflake, which tracks aeroplanes lots how to reduce their risks. price forthat group—new drivers under 30, around the planet. Flock also considers lo- Allianz then converts Flock’s data-dri- say. But that process can be much refined if 1 The Economist September 23rd 2017 Finance and economics 69

Ukraine’s sovereign-bond issue assessment ofreforms”. External factors have also helped. De- Welcome back? spite expectations of gradual monetary tightening in America and Europe, there is still a global shortage of bonds, especially higher-yielding ones, says Timothy Ash of KIEV BlueBay Asset Management. So emerging- market issues are in vogue: other countries A triumphant return to the debt markets recently selling bonds include Iraq and worries reformers even dirt-poor Tajikistan (to finance a dam UCH has changed since Ukraine last meant to export hydroelectricity to Af- Mtapped global debt markets in 2013. ghanistan and Pakistan). Claudia Calich of The next year the “Maidan revolution” M&G Investments, an asset manager, drove out the corrupt regime of Viktor points out that, compared with such coun- Yanukovych; and Russia annexed Crimea tries, Ukraine has a more diversified econ- and stoked a war in Ukraine’s east. The omy, ifa higher level ofdebt. economy languished, with GDP contract- The strong demand is welcome. But, as ing by 16% in 2014-15; only an IMF rescue part of a broader trend favouring riskier staved offcollapse. Unable to pay its debts, sovereign borrowers, it raises concerns Ukraine in 2015 submitted its creditors to a about what would happen ifsentiment to- 20% “haircut”, or debt reduction (an offer wards emerging markets were to worsen rejected by just one creditor, Russia, which sharply. Ukraine may be especially vulner- Mind your heads is pursuing Ukraine in British courts). This able to a sell-off because of recent signs weekthe governmentreturned to the inter- that important reforms—such as the fight 2 the objects and people being insured can national markets, issuing $3bn in dollar- against corruption—have stalled. The Na- report to the insurer automatically, and if denominated bonds. tional Anti-Corruption Bureau, for exam- there is a wealth ofdata on the external en- This testifies to the progress Ukraine ple, created recently as a condition of the vironment. As an ever-growing number of has made. As Oleksandr Danylyuk, the fi- IMF’s lending, has been unable to ring up sensors—in phones or watches, drones or nance minister, puts it: “We’re back; we convictions in courts filled with holdovers cars—gather ever-greater volumes of data, transformed the country.” The govern- from the old system. An anti-corruption more and more activities can be assessed ment has largely stabilised the economy, court favoured by civil-society activists, re- for real-time risk (though in the absence of bringinginflation down from a peakof 61% formist MPs and Western donors faces re- pooling, some risks may become prohibi- in April 2015 to a more manageable 13.5%. It sistance from entrenched interests, includ- tively expensive to insure). has also undertaken structural reforms: ing Mr Poroshenko himself. Flock is not alone. Verifly, a New York overhauling energy markets, shoring up Reformers in Kiev worry that, by weak- startup, competes with it in America. Root, banks and increasing transparency in pub- ening the IMF’s sway, the financial inde- a carinsurer,offersdriversinsurance based lic procurement. GDP growth resumed last pendence access to the bond markets has on their minute-to-minute behaviour be- year, albeit at the modest rate of 2.3%. The brought the government will further re- hind the wheel. It even offers a discount to bond, which includes $1.3bn of fresh mon- duce the pressure for change, especially Tesla drivers if their car spends plenty of ey and $1.7bn of rolled-over short-term ob- ahead of presidential elections in 2019. time in autonomous mode. Slice, a San ligations, carried an annual yield of 7.375% During a recent visit, the IMF’s deputy di- Francisco startup, lets its customers insure and was oversubscribed by about $7bn, rector, David Lipton, warned Ukraine of their houses and cars for the time they are says someone with knowledge ofthe deal. the “risks of going backwards”. Even for- used on services such as Uber and Airbnb. Ukraine’s president, Petro Poroshenko, giving markets may not be able to save Uk- Trov, also from San Francisco, insures per- hailed investors’ “unbelievably positive raine from its own worst instincts. 7 sonal possessions forshort periods. Flock’s chief executive, Ed Klinger, says that he eventually wants to insure all kinds Norway’s $1trn wealth fund of future autonomous activities, from taxi Selected sovereign-wealth funds rides to rolling delivery pods. He argues A year earlier than expected, Norway’s Total assets, $bn Norway China (CIC) Saudi Arabia that selling insurance through annual pre- sovereign-wealth fund, the world’s larg- (SAMA) miums is inflexible. It less easily takes ad- est, surpassed $1trn in assets on Septem- Singapore Australia New Zealand vantage of the large volume of live data ber 19th. It had gained over $100bn in the (GIC) (Future Fund) 1,000 that can now help estimate the risk posed past year, thanks in large measure to the by a given activity at a given time. For in- global stockmarket boom in 2017: around stance, a passenger in an autonomous taxi two-thirds of its assets are held as equi- may be at far lower risk if the trip takes ties (over 1% of shares globally). It helps 750 place outside rush hour, or in weather con- that Norwegians continue to earn fat ditions in which the car performs at its revenues from pumping North Sea oil and best. Firms that dispatch delivery drones gas, which go to the fund to be invested 500 might use Flock to calculate the risk for abroad. The fund is so big it is becoming a each flight automatically, depending on tool for 5m-odd Norwegians to shape cargo and address. values abroad. It is an increasingly activ- 250 The business model is in its infancy, but ist shareholder, speaking out on exec- on-demand insurance seems bound to utive pay, ethical behaviour, companies’ grow. In a world where consumers expect use of water, child labour and more. Both 0 push-button convenience from their ser- its size and influence are likely to keep on 1996 2000 05 10 15 17* vices, they will demand the same ofthe in- growing. Sources: Sovereign Wealth Fund Institute; Norges Bank surance those services rely on. 7 *To September 70 Finance and economics The Economist September 23rd 2017 Free exchange Think again

The teaching ofeconomics gets an overdue overhaul producing an additional unit, and unsurprisingly regurgitate the expected answers. A study of 170 economics modules taught at seven universitiesfound thatmarksin examsfavoured the ability to “operate a model” over proofsofindependent judgment. The CORE project (for Curriculum Open-access Resources in Economics) seeks to change all this. It sprang from student protests in Chile in 2011over the perceived shortcomings of their lessons. A Chilean professor, Oscar Landerretche, worked with other economists to design a new curriculum. He, Sam Bowles, of the Santa Fe Institute, Wendy Carlin, of University College Lon- don (UCL), and Margaret Stevens, of Oxford University, painstakingly knitted contributions from economists around the world into a text that is free, online and offers interactive charts and videos of star economists. That text is the basis of economics modules taught by a small but growing number ofinstructors. “The Economy”, as the book is economically titled, covers the usual subjects, but in a very different way. It begins with the biggest of big pictures, explaining how capitalism and industrialisation transformed the world, inviting students to contemplate how it arrived at where it is today. Messy complications, from environmental damage to inequality, are placed firmly in the fore- CONOMISTS can be a haughty bunch. But a decade of trauma ground. It explains cost curves, as other introductory texts do, but Ehas had a chastening effect. They are rethinking old ideas, ask- in the context of the Industrial Revolution, thus exposing stu- ing new questions and occasionally welcoming heretics back dents to debates about why industrialisation kicked off when into the fold. Change, however, has been slow to reach the uni- and where it did. Thomas Malthus’s ideas are used to teach stu- versity economics curriculum. Many institutions still pump students the uses and limitations of economic models, combining dents through introductory courses untainted by recent eco- technical instruction with a valuable lesson from the history of nomic history or the market shortcomings it illuminates. A few economic thought. “The Economy” does not dumb down eco- pluckyreformersare workingto correctthat:agrand and overdue nomics; it uses maths readily, keeping students engaged through idea. Overhauling the way economics is taught ought to produce the topicality of the material. Quite early on, students have les- studentsmore able to understand the modern world. Even better, sons in the weirdness in economics—from game theory to power it should improve economics itself. dynamics within firms—that makes the subject fascinating and The dismal science it may be, but economics is popular on useful but are skimmed over in most introductory courses. campus. It accounts formore than10% ofdegrees awarded at elite Teaching the CORE curriculum feels like doing honest work, universities each year, by one estimate, and many more students saysRajivSethi, ofBarnard College, who contributed to the CORE take an introductory class as part of their general-education re- textbook. Academic economists do not hide from students the quirements. Teachers ofsuch courses aim to grab the attention of complications they grapple with in their own research. Homa their glassy-eyed audience, to acquaint students with the basics Zarghamee, also at Barnard, appreciates having to spend less of the subject and, ideally, to equip them to apply economic rea- time “unteaching”, ie, explaining to students why the perfect- soning to the real world. Economics teaches that incentives mat- competition result they learned does not actually hold in most ter and trade-offs are unavoidable. It shows how naive attempts cases. A student who does not finish the course will not be left to fix social problems, from poverty to climate change, can have with a misleading idea ofeconomics, she notes. unintended consequences. Introductory economics, at its best, enables people to see the unstated assumptions and hidden costs Esprit de CORE behind the rosy promises ofpoliticians and businessmen. Early results are promising. Assessments at UCL found that CORE Yet the standard curriculum is hardly calibrated to impart students performed better in subsequent intermediate courses these lessons. Most introductory texts begin with the simplest of than non-CORE counterparts. Anecdotally, at least, students models. Workers are paid according to their productivity; trade seem more engaged in CORE courses and graduate assistants less never makes anyone worse off; and government interventions in pained by the prospect ofteaching them. the market always generate a “deadweight loss”. Practising econ- The hopes for CORE are much more ambitious than simply omists know that these statements are more true at some times providing non-economists exposed to the material with a clearer than others. But the all-important exceptions are taught quite late idea of what economics is all about. The new curriculum may inthecurriculum—or,often,onlyinmoreadvancedcoursestaken also help departments retain students drawn to economics as a by those pursuing an economics degree. Other disciplines are way to understand the world’s great challenges, and not simply also taught simply at first. New physics students learn mechanics as a place to play with elegant models. That could mean, eventu- through models stripped of all but the simplest elements. The ally, a broader array of perspectives within economics depart- risk is low, however, that a student who drops a physics course ments, bigger and bolder research questions—and fewer profes- will thinkhe lives in a frictionless vacuum. sion-shaking traumas in future. 7 Students pay $300 or more for textbooks explaining that in competitive markets the price of a good should fall to the cost of Economist.com/blogs/freeexchange Science and technology The Economist September 23rd 2017 71

Also in this section 72 Treating snake bites 73 Exploring the asteroid belt 74 Dental health 74 Academic sexism

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

Carbon budgets fect, innerworkings and reset them all. The result was a sizeable increase in the budget. Breathing space The world could emit about 750bn tonnes of carbon dioxide from 2015 onwards and still be “likely”—IPCC jargon for a two- thirds chance—to keep further warming below 0.6°C. Given that warming by 2015 was 0.9°C, this therefore defines the budget Changed estimates ofhow much carbon dioxide can still be emitted to meet forstaying below1.5°C. climate targets leave no room forcomplacency To confirm this, the researchers used a N JUNE Christiana Figueres, the UN’s for- ted by the time ofthe Paris agreement were differenttype ofcomputermodel to look at Imer climate chiefwho helped broker the a smidgen over 2trn tonnes, and annual futures in which emissions are reduced Paris agreement in 2015, warned that the emissions at the moment are almost 40bn sharplyfrom nowon, the climate responds world has “three years to safeguard our cli- tonnes. This suggested that the total car- in the way it seems to have done in the mate”. It was a hyperbolic claim, even bon budget would be spent by about 2020. past, and the overall temperature rise is then. New research makes it seem even Hence Ms Figueres’ alarm. limited to 1.5°C or less. They found it likely more of one today. An analysis published The calculations on which that IPCC that this could be done with 920bn tonnes in Nature Geoscience on September18th, by budgetwasbased—which were carried out of post-2015 carbon-dioxide emissions. Richard Millar of Oxford University and in part by some of Dr Millar’s co-authors— Given the uncertainties involved, that is a his colleagues, suggests that climate re- depended on the use of a set of complex pretty close match to their other figure. searchers have been underestimating the climate models called CMIP5 to replicate Again, the carbon budget lasts a few de- carbon “budget” compatible with the am- what had happened in the climate since cades, not just a few years. bitions expressed in Paris. It may be possi- 1870 and assess what might happen in the ble forthe world to emit significantly more century to come. In the average of these Under budget? carbon dioxide in the next few decades models, which were run in the early 2010s, These results are controversial. Those who than waspreviouslythought, and still keep cumulative emissions took until a little have been sceptical about the case for global warming “well below” a 2°C rise after 2020 to top 2trn tonnes (ie, several strong action on climate change have fall- above pre-industrial levels, which is what years after they actually did so). Also, the en on them as evidence that models such the agreement requires. temperature they predicted would prevail as those used in CMIP5 have fundamental It is the total amount of carbon dioxide at that time was about 1.2°C above that of flaws. It is true that, as Dr Millar and his emitted, rather than the rate at which it is 1870 when, in actual fact, the temperature team point out, those models may have emitted, which determines how much after 2trn tonnes had been emitted was overestimated the cooling effects of some greenhouse warming the world will un- only 0.9°C higher. In other words, the real pollutants, and thus of the warming that dergo. This allows scientists to draw up world had seen slightly more carbon emit- would be “unmasked” when those cooling budgets that quantify the total emissions ted, and less warming, than the models pollutants, such as sulphur from Chinese associated with a given temperature rise. had suggested it should have. coal-fired power stations, were reduced. In the most recent report of the Intergov- The discrepancy caused Dr Millar to At the same time, certain climate scien- ernmental Panel on Climate Change wonder what would happen if the CMIP5 tists have raised questions about the Ox- (IPCC) the carbon budgetfora good chance results were shifted so that they centred on ford work. Some have doubts about the of keeping global warming to 1.5°C—the the known temperature and cumulative “resetting” ofthe CMIP5 results to the mea- preferred target of the Paris agreement— carbon-dioxide emissions for 2015 rather sured data for2015. Anotherworry is that a was 2.25trn tonnes of carbon dioxide since than 1870—if, in otherwords, you took a set number of different data sets claim to trace 1870. Estimates of the amount in fact emit- of clocks with well-understood, if imper- global temperature from the 1870s to now. 1 72 Science and technology The Economist September 23rd 2017

dioxide. But to suck up enough would be a mette, a student of Louis Pasteur, involves Under budget huge undertaking, requiring vast planta- extracting venom from snakes and inject-

Global temperature and CO2 emissions forecasts tions. Alternative technologies that might ing it into animals, such as horses, that can,

CO2 emissions, gigatonnes per year do the same with a smaller footprint are at thanks to their size, survive large doses of extremely early stages ofdevelopment. the stuff. The injected animals’ immune 100 Paris agreement No action All this said, big cuts in emissions seem systems produce antibodies that neutral- commitments in this range 80 more plausible now than they did in Paris, ise the venom. These can be extracted and as the technology ofrenewable energy im- stored for later use on human victims. 60 Actual Idealised linear proves. Scarcely a day goes by without Nowadays, rather than producing a single emissions reduction 40 some low-carbon milestone being passed. antivenom for each type of snake, the ani- Permissible At a British auction on September 11th off- mals employed to make the stuffare inject- Emissions reduction curve budget for 1.5°C 20 shore-wind power came in at a record low ed with several different toxins, in the 920 gigatonnes + price of £57.50 ($76) per megawatt hour hope of creating an antivenom effective 0 (though it still enjoys a subsidy). China has against them all. This makes sense. Most Negative emissions - 10 recently announced that it will stop build- victims of snake bites will not know exact- 2000 20 40 60 80 2100 ing petrol-driven cars. Solar energy is al- lywhatbitthem. Butthe underlyingprinci- ready competitive with fossil fuels in ple is the same as Calmette’s. Warming relative to 1870,°C sunny places and the Potsdam Institute for The antivenom approach does, though, 4 No action Climate Impact Research reckons it could depend on the venom injected into a vic- make up 30-50% of the world’s electricity tim being among those used to make the 3 Permissible by 2050, up from 2% now—and do so with- treatment. Dr Fry, observing the huge reduction curve 2 out government handouts. The recent his- ranges of some of the species involved, 1.5°C target tory of solar power has seen it routinely and the tendency of evolution to result in 1 surpass the estimates ofsuch experts. local adaptations even within such spe- 66% probability range Actual warming Annual carbon emissions, which have cies, wondered whether that was always 0 been climbing steeply for decades, have true for existing snake-bite remedies. 2000 20 40 60 80 2100 reached a plateau in the past couple of To find out, he obtained venom from Source: Nature Geoscience years. This year may see that happy lull saw-scaled vipers in Ghana, India, Kenya, continue. But that is a long way from the two regions of Mali, Nigeria, Pakistan, Sen- 2 The one Dr Millar and his colleagues used cuts of 4-6%, year on year, that the models egal, Saudi Arabia and the United Arab is that with the smallest increase. The set require. If countries are to meet the global Emirates. He and his colleagues measured which shows the largest increase calcu- target they set themselves in Paris while the rate atwhich venom from each ofthese lates the current temperature as being less minimising their reliance on untested and caused human blood to clot. They then re- than 0.4°C short of the 1.5°C target, rather possibly damaging approaches such as ran the experiment in the presence of each than 0.6°C. Use this, and the new budget negative emissions—in effect, deficit of four different commercial antivenoms, would be significantly smaller. spending for the carbon budget—they still to see if these slowed the process down. There are uncertainties, then, in both have to up their game considerably. 7 Two of the antivenoms in question, Echi- models and data, and no single study Tab-Plus-ICP and SAIMR Echis, were made should be expected, of itself, to reset the usingvenom from African snakes. The oth- world’s plans. Even if the Oxford paper’s Treating snake bites er two, Sii Polyvalent Anti-snake Venom new budgets were copper-bottomed Serum and Snake Venom Antiserum I.P., truths, though, they would hardly provide The general and were from Indian snake venoms. the respite they might seem to. No one ex- The best of the antivenoms, EchiTab- pected the constraints of the previous1.5°C the specifics Plus-ICP, did well against toxins used by budget to be met, and meeting the new the vipers of Ghana, Nigeria, one of the constraints would still be challenging. Malian regions and Senegal. But it did little The pathways with happy outcomes against all other saw-scaled vipers, despite Many antidotes to snake venom do not that Dr Millar and his colleagues describe being listed as a treatment in Kenya and in workas well as they might in their paper had net emissions falling to the region of Mali for which the experi- zero shortly afterthe middle ofthe century. O GENUS of snakes kills more people ment suggested it did not work. SAIMR That requires steep emissions cuts to be Nand causes more economic damage Echis was similar. It performed well maintained for decades. If the process than Echis. Saw-scaled vipers, to give the against snakes from Saudi Arabia, Kenya were to start today, emissions would have group’s common name, are found in Afri- and one region ofMali, moderately against to be cut by 1.1bn tonnes of carbon dioxide ca, the Middle East and Asia. Their venom snakes from Ghana, Nigeria and the other every year. If cuts started later, they would makes blood clot, bringing agonising part of Mali, and poorly elsewhere. This have to be steeper at some point. Even death. Victims are often farm workers who antivenom is listed as effective against a then, by the middle ofthe century the bud- support entire households, so an attack species called Echis carinatus (pictured get might be overspent in a way that re- can plunge a family into poverty. overleaf). But Dr Fry’s results suggest that quired the deployment of technologies Antivenoms—chemicals that reverse or protection does not extend to populations which can suckCO2 outofthe atmosphere, blunt the effects of a snake’s toxin—are ofthis species living in India. thus producing “negative emissions” to standard medicines in areas where bites The makers of both of these anti- balance the books (see chart). are common. But a study led by Bryan Fry venoms have been receptive to the find- One wayofdoingthiswould be to burn of the University of Queensland, in Aus- ings. Megan Saffer of SAVP, in Johannes- plants instead of fossil fuels in power sta- tralia, which has just been published in burg, the firm responsible for the SAIMR tions, and then store the resulting carbon Toxicology Letters, has found a problem: Echis antivenom, says that an effort is now dioxide underground. Disposing in this against many snake populations, these under way to re-label this antivenom so way of carbon that those plants had taken medicines do not work. that it will be used only in regions where it from the atmosphere as they grew would Antivenom production, which waspio- is truly effective. Alberto Alape-Girón, the reduce the amount of atmospheric carbon neered in the 19th century by Albert Cal- head of Instituto Clodomiro Picado, in 1 The Economist September 23rd 2017 Science and technology 73

2 Costa Rica, where EchiTab-Plus-ICP is Exploring the asteroid belt the positive tether reflects the positive hy- made, noted that his team was responding drogen and helium nuclei backwhere they to the situation by “developing a new anti- E-sail away came from. And since to every action there venom ofwider neutralisation efficacy”. is an equal and opposite reaction (New- The results were worse for Sii Polyva- ton’s third law of motion), that reflection lent Anti-snake Venom Serum, which drives the spacecraft forward. worked well only against venom from If the tether were stationary with re- populations ofE. carinatus in Pakistan, and spect to the craft, the result would be a lop- for Snake Venom Antiserum I.P., which sided force. Butbecause itrotates, that force A new method ofpropelling spacecraft had only a mild effect against even that evens out after an entire circuit, propelling venom. Both are listed as being effective PACE travel is expensive. Missions such the craft ahead. Varying the output of the against Indian populations of E. carinatus, Sas Cassini, a recently ended exploration electron gun, however, can create a lopsid- but Dr Fry’s results call this into question. of Saturn and its moons, and New Hori- ed force deliberately, permitting the craft to Rajendra Prabhu, chief scientist at Vins- zons, a trip to Pluto and one or two more be steered. And, though the acceleration Bio, in Hyderabad, the firm that makes distant objects in the far reaches of the so- produced issmall (1mm persecond persec- Snake Venom Antiserum I.P., says that the lar system, have involved launching craft ond), there is little in the vacuum of space “antiserum is geospecific to neutralise our weighing hundreds or thousands of kilo- to slow the craft down. It can therefore Indian region species only”, yet the new grams. For big, essentially unique targets reach a speed of tens of kilometres per sec- findings do not support this claim. Dr such as these, that expense has proved ond after a year of travel, making its rapid Prabhu also argues that “it is not appropri- worthwhile. But as exploration moves on jaunt to the asteroid belt possible. ate to compare potency against other ven- to smaller and more numerous objects, In addition to the E-sail, the craft Dr Jan- oms of African or Asian countries”. But Dr like asteroids, individual visits at costs of hunen envisages would have a small tele- Fry says that both it and Sii Polyvalent hundreds of millions, or even billions of scope on board, and also an infra-red spec- Anti-snake Venom Serum are routinely dollars are no longer a feasible idea. Some trometer. These would analyse the surface found on the shelves of African clinics, system of mass robotic space travel needs of every asteroid encountered. Each probe even though they grant no benefit against to be devised. And Pekka Janhunen of the would be able to fly to within 1,000km or native vipers. Finnish Meteorological Institute in Helsin- so of six or seven asteroids, snapping pho- What seems clear from Dr Fry’s work is ki thinks he has invented one. tos and collecting data. Probes would not that makers of antivenoms—including, In 2004 Dr Janhunen put forward the have the power to broadcast these data all presumably, antivenoms against snakes idea ofa sail that harnesses the solar wind, the way back to Earth from the asteroid otherthan saw-scaled vipers—need to look a stream of charged particles emanating belt. But they would, instead, be able to more closely at how snake venom varies from the sun which manifests itself on store them in flash-memorychips, for relay from place to place, even within what ap- Earth in the dramatic displays of the auro- to Earth on their return home. pear to be single species. Antivenoms are rae. He and his colleagues have since re- In some ways an E-sail resembles a so- wonderful things, and have saved many fined the idea. In a paper they presented to lar sail, a rival idea for powering craft lives. But this study suggests they could, the European Planetary Science Congress, cheaply through space. A solar sail pro- with a little effort, be made better still. 7 in Riga, Latvia on September19th, they provides propulsion because the sunlight it re- posed that spacecraft equipped with their flects exerts pressure on the sail, pushing it new propulsion system could make a forward. But E-sails have an important ad- round trip to the asteroid belt in little more vantage over solar sails. Once unfurled, than three years. A fleet of 50 such craft, there is no easy way to stop a craft with a weighing about 5kg each and thus capable solar sail gathering speed. An E-sail-pow- of being launched by a single rocket, could ered craft can be prevented from accelerat- visit 300 asteroids, survey them and return ingsimplybyswitchingoffitselectron gun. to Earth fora thrifty €60m ($72m) or so, in- This means it can return to Earth under the cluding the cost oflaunch. influence ofthe sun’s gravity. The electric solar wind sail (E-sail), as E-sails have, however, not been tested. Dr Janhunen dubs his invention, consists A solar sail has. Ikaros, a craft launched in of four wires, each 20km long but just 25 2010 by JAXA, Japan’s space agency, suc- microns (millionths of a metre) thick. cessfully deployed such a sail with an area These are braided together into a tether. of196 square metres. DrJanhunen hopes to For launch, this tether is wound tightly make a start on proving his technology by around a small motorised reel inside the unwinding a tether 100 metres long in craft. Once in space, the wires are un- space later this year. wound by the motor, assisted by the cen- For those of a romantic disposition, tripetal force of the spinning craft. Once E-sails may come to be seen as the technol- fully deployed, the tether thus sweeps out ogy that will unlock the asteroid belt for a circle with a diameter of40km. commercial exploitation. There is reason The craft’s propulsion comes from the to believe that some asteroids are rich in interaction between this tether and the hy- valuable metals, such as platinum and irid- drogen and helium nuclei that form most ium. Craft equipped with many tethers of the mass ofthe solar wind. These nuclei could carry heavy payloads—perhaps up are positively charged. And so is the tether, to a tonne—that would permit mining because the craft also carries a solar-pow- equipment to be deployed and cargoes of ered electron gun that shoots out into metal to be brought backto Earth. space a stream ofelectronsscavenged from One day, perhaps. But, in the meantime, the wires. Since electrons are negatively E-sails do sound a plausible way ofextend- charged, ejecting them in this way keeps ing humanity’s understanding of the near- The serpent’s tale the tether positive. Since like charges repel, by cosmic neighbourhood. 7 74 Science and technology The Economist September 23rd 2017

Dental health Academic sexism Brush with Purblind prejudice confidence Students are biased against female lecturers EXISM is among the prime suspects for teachers. On average, the students taught A child’s genes do not assist the scarcity offemale professors. Yet by women achieved the same course decay-causing bacteria S proving that bias against women is wide- grades as those taught by men, and spent HATchildren should be taughtto brush spread in academia—or even exists at a similar amount oftime studying for the Ttheir teeth regularly is a sine qua non of all—is tricky.But a forthcoming paper in course on their own. Neither did an bringing them up. But the suspicion re- the Journal of the European Economic instructor’s sex affect how much stu- mains among some people, dentists in- Association rises to the task. dents’ overall grades improved—which cluded, that even so, certain children are This paper’s authors, Friederike Men- suggests that female instructors added doomedtodevelopdental cavities.Thehy- gel ofthe University ofEssex, in Britain, the same amount ofvalue to students’ pothesis behind this fear is that some com- Jan Sauermann ofStockholm University, learning as did male instructors. And binations of genes may give succour to the in Sweden, and UlfZölitz ofthe Institute when the researchers stripped out the sorts oforal bacteria which are responsible on Behaviour and Inequality,in Bonn, estimated gender bias from the evalua- for cavities. If true, that would be sad for Germany,used data from nearly 20,000 tion scores, the difference in ranking the youngsters concerned. But a study just student evaluations ofinstructors. These between male and female instructors published in Cell Host and Microbe, by An- were made between 2009 and 2013 at the shrankfrom 37 rungs to five on the zero- dres Gomez and Karen Nelson of the J. School ofBusiness and Economics at to-100 ladder. That difference is statistical- Craig Venter Institute, in San Diego, sug- Maastricht University,in the Nether- ly insignificant. gests it isn’t true. lands. The students on each course had Both male and female students gave The mouth is home to many species of been assigned, randomly,either a male or worse ratings to female instructors, microbes. Most are benign. Some, though, a female instructor, and filled out end-of- though the men were much more preju- are well known to secrete acidic waste pro- course evaluations before they knew diced. Most worryingly,the bias was ducts when fed sugar. This acidity weak- their grades. Halfofthe students in- particularly pronounced in the case of ens teeth, causing them to decay. To try to volved were German, a third were Dutch junior instructors, forwhom student find out whether a child’s genes play any and the rest mostly from other European evaluations are much more crucial for role in encouraging such acid-secreting and some Asian countries. teaching awards, tenure decisions and bugs, Dr Gomez and Dr Nelson set up an The results are both striking and even salary negotiations. experiment with twins. disturbing. Ranked on a scale from zero to There is a broader lesson in all of this. Their “volunteers” (actually volun- 100, the evaluations place female in- The study was conducted at one ofEu- teered by their parents, ofcourse) were 280 structors an average of37 slots below rope’s top business schools. Its graduates, pairs of fraternal twins and 205 pairs of male ones. Students taught by women presumably,are destined for great things identical twins, all aged between five and gave lower ratings even to teaching mate- in the fields ofcommerce and industry.If 11, who had not taken antibiotics during rials that were the same forall course the biases they hold against the compe- the previous six months. The children instructors, such as the textbooks and the tence oftheir female teachers stick with were asked to refrain from brushing their online learning platform. them at the office, equality ofthe sexes in teeth the evening and the morning before Womendid not appear to be worse the workplace has a steep hill to climb. the crucial moment ofdata collection. This was when the researchers swabbed the children’s gingival sulci (the clefts between ous cavities affecting the enamel (a tooth’s by fraternal twins, none of these was a teeth and gums, in which bacteria collect) hard, outer layer); or having signs of cavi- type responsible for cavities. Moreover, to find out what was there. The children ties that penetrated the enamel and affect- similarities in bacterial flora were greatest also had their teeth scored by dentists as ed the underlying dentine as well. among five- to seven-year-olds, weaker belonging to one of three categories: hav- Dr Gomez and Dr Nelson found that, among seven- to nine-year-olds and weak- ing no signs of current or previous dental though identical twins shared many est among nine- to 11-year-olds. This sug- cavities; having signs of current or previ- groups of bacteria which were not shared gests that any role genes do play in regulating the mouth’s ecology fades with time. Far from supporting the idea that some children are fated to sufferfrom cavities no matter how well they brush their teeth, these results make it clearthat the power to control the growth of the relevant bacteria is very much within reach of children and their parents. Brushing, however, may not be the only approach. Avoiding sugary foods is obviously de rigueur. It seems likely, though, that which other foods a child eats may help shape his oral ecosystem, too. This is an area of ongoing research. But, as in the intestines, so in the mouth, scientific medicine is at last coming to grips with the fact that the mixture of microbes present is both important and capable of The hole story manipulation, to the benefit ofthe host. 7 Books and arts The Economist September 23rd 2017 75

Also in this section 76 Johnson: Comma chameleon 78 Latin American art in LA 79 American economic history

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Outlawing war what they call the New World Order (to distinguish it from the Old World Order, Blessed are the peacemongers codified by a 17th-century Dutch scholar, Hugo Grotius, in which might was nearly always right) was an extraordinary diplomatic event in Paris in 1928. The General Treatyforthe Renunciation ofWaras an In- strument ofNational Policy, orthe Kellogg- The post-warliberal orderwas underpinned by a movement to make the waging of Briand pact (named afterthe foreign minis- aggressive warillegal. That principle is now seriously underthreat ters of the United States and France who HE rules-based international order had sponsored it, pictured seated right and The Internationalists: How a Radical that emerged from the wreckage of the left), wassigned bymore than 50 countries, T Plan to Outlaw War Remade the World. second world war was a huge improve- including all the great powers. ment on any preceding era. It stimulated By Oona Hathaway and Scott Shapiro. The pact was a direct consequence of trade on an unprecedented scale and Simon & Schuster; 608 pages; $30. Allen the “Great War” of1914-18—a truly Grotian allowed even relatively small and weak Lane; £30 conflict that had left 11m combatants dead. countries to develop their potential with- Its purpose was to outlaw aggressive war out fear of predatory interference. At the this forum unmatched military, political, and territorial conquest. But there was a heart ofthat order was an underlying prin- economic, cultural and moral strength. problem ofenforcement. Japan’sseizure of ciple that perpetrators of aggressive war Rather than deny this elemental nature of Manchuria in 1931 was never legitimised, should not be rewarded. In particular, any international affairs, we embrace it.” as it would have been underthe Old World territorial gains which derived from their Apart from the bit about cultural and Order, but a new system had not yet come aggression would not be recognised by the moral strength, neither Vladimir Putin nor into effect which could make Japan surren- international community as being legiti- Xi Jinping, who both challenge the liberal der its prize. Neither the signatories of the mate. Instead, aggressors should be sub- international order by seeking to create pact nor the League ofNations was willing jected to punishment—usually economic spheres of influence through intimidation orable to stem the rise ofmilitarism during sanctions. Occasionally, concerted mili- and military bullying, would find any- the decade that followed and its apotheo- tary action approved by the United thingto disagree with in that statement. Mr sis in the second world war. Nations (UN) forced them to relinquish Putin annexed Crimea in 2014 (the first The ideas underpinning the pact did, what they had illegally seized. time that the borders of post-war Europe however, have a profound influence on the Yet liberal internationalism is now had been changed by force) and launched way in which the allies saw both their fight under attack from many sides. Donald a covert invasion of eastern Ukraine in against the Axis powers and the organisa- Trump’s America First doctrine explicitly support of a separatist insurrection. Mr Xi tion of the peace that followed. When the repudiates it. Even two of the so-called is attempting to make the South China Sea, war ended, with the partial exception of “adultsin the room”, who supposedlytem- through which over half the world’s com- the Soviet Union, the victors handed back per Mr Trump’s nativist excesses, seem mercial shipping passes, into a Chinese the land they had conquered. The Nurem- happy to join him. In a Wall Street Journal lake by creating artificial islands in de- berg trials re-established the principle that article in May H.R. McMaster and Gary fiance ofinternational law. waging aggressive war was a criminal act Cohn, respectivelythe president’snational “The Internationalists” by Oona Hatha- and punished at least some of Hitler’s security adviser and economic adviser, way and Scott Shapiro, both law profes- henchmen accordingly. The founding of wrote: “The world is not a ‘global commu- sors at Yale, is an impassioned history of the UN and the establishment of the Inter- nity’ but an arena where nations, non-gov- how the liberal international order came national Court of Justice in The Hague, al- ernmental actors and businesses engage into being and why it must be defended as though farfrom perfect, have had very pos- and compete for advantage. We bring to never before. They believe that the basis of itive effects. Gunboat diplomacy imposed 1 76 Books and arts The Economist September 23rd 2017

2 by major powers on weaker countries be- mer), can take and hold, at least fora while, defined and fought for the principles that came an anachronism. So too did inter- territory from dysfunctional governments. brought it into being. They include Salmon state war between them. Well-meaning but ill-conceived wars to Levinson, a Chicago lawyer whose ideas Of course there are still plenty of wars. change odious regimes have sometimes led directly to the Kellogg-Briand pact; In some waysthe NewWorld Order,which gone badly wrong. Foreign-policy realists Sumner Welles, an American diplomat has helped make international wars so will also, with justification, point out that who envisaged the creation of a world much less imaginable, has inadvertently the main reason why great powers no lon- organisation with the military clout to made possible more “intranational” wars. ger fight each other is because the destruc- bring future warmongers to book; Hersch Fragile and fractious countries that would tive force ofnuclearweapons has removed Lauterpacht, a great Polish-British jurist previously have feared being conquered any incentive to do so. who helped create a body of international by more powerful neighbours can now fall Yet the authors argue persuasively that law based on universal values and human prey to civil wars or brutal insurgencies the liberal order of the past 70 years has decency; and James Shotwell, a Canadian without bad actors fearing loss of the na- been better than any of the alternatives academic who worked with Aristide Bri- tional territory they seek to control. Non- and is well worth striving to preserve. The and to bring the pact into being and later state groups, such asIslamicState (a misno- authors pay proper tribute to those who contributed to the design ofthe UN. 1 Johnson Comma chameleon

The punctuation markmost likely to start fights between grammargurus LAW in Maine excluded from over- Lynne” on social media; Americans Atime pay “the canning, processing, preferred “Happy Birthday, Lynne”. And preserving, freezing, drying, marketing, of course British and American rules dif- storing, packing for shipment or distribu- fer on where commas are placed relative tion of” certain products. But is the end of to other punctuation marks, like inverted that list—“packing for shipment or distri- commas. bution”—one activity? Or are they distinct No wonder novice writers are often at things, (1) packing for shipment and (2) a loss, and put commas where they do not distribution? The company argued that belong. The title of the punctuation- they were distinct, and that although lor- promoting bestseller “Eats, Shoots and ry drivers do not pack, they do distribute, Leaves” comes from a joke about a poorly and are hence exempt from overtime pay. punctuated wildlife guide describing the A lot of money was at stake. But the com- diet of panda bears. But putting a comma pany lost and the drivers got another between a verb and its direct object is not chance to sue formillions in backpay. a common mistake. A much more fre- It was not just the lorry drivers claim- quent foible in the writing of inexperi- ingvictory. Fans ofthe serial (or “Oxford”) enced students, is the habit of putting a comma exulted. Had “distribution” been comma between a long subject and a set off by an extra comma, there would predicate (as here). Others join two sen- have been no ambiguity at all, and no dis- tences with only a comma, which makes pute. The serial comma appears before editors furious. the last item in a list: “red, white, and With all this potential confusion, it is blue” has it; “red, white and blue” does So the comma in this sentence is not no wonder that style-book authors prefer not. Some style guides require it; others grammatical, but stylistic. Some writers to leave little wiggle-room, requiring or (including The Economist’s) do not. would omit it, and they would not have banning wherever possible. Serial- Children are taught that getting punc- broken any rules. Others might insist that it comma fans say that it can never intro- tuation wrong risks messing up the mes- simply has to be there. One reader might duce ambiguity, and can often remove it. sage they are trying to get across, and the look at a passage and find it woefully short Theylike to cite an article in the Times that Maine case seemed to prove it. But how of commas; another might find it over- described “encounters with Nelson Man- can it be that there is disagreement on stuffed with them. dela, an 800-year-old demigod and a such a major bit of punctuation? Those In general, British writers seem to omit dildo collector.” But as Stan Carey, a who like hard rules must accept that the optional commas more often than Ameri- language blogger and editor, points out, comma is an oddball amongthe punctua- can writers do. Lynne Murphy, an Ameri- adding a serial comma here would still tion marks, in two ways. First, it does a lot can linguist at Sussex University, recently leave the possibility that Mandela was a of different jobs. One usage book lists 11 looked at large collections of British and demigod, ifnot a dildo aficionado. functions, and it is typically the longest American text for sentences beginning “In As much as people want the rules for section in a description of punctuation. 19**”, for any year, as in “In 1914”. In the commas to be ironclad, no mechanistic Second, it is frequently optional. American texts, the yearwas followed by a rules can substitute for slow proofreading People do not like the idea of optional comma about twice as often as not. In Brit- and redrafting, or even better, a good edi- punctuation. Much other punctuation is ain those proportions were reversed. And tor. And having some flexibility in punc- mandatory, includingthat statements end whereas it is harder to research, it seems tuation is one of the things that gives an in full stops, and questions in question- that Americans (though perhaps not in author a style. Finally, writers may be marks. The comma, however, was not Maine) are bigger fans ofthe serial comma. mild-mannered, but everyone likes to get originally intended as a grammatical Ms Murphy also found that British fighting mad once in a while. Sometimes mark, but a place to pause forbreath. friends wished her “Happy Birthday little thingsare bigger than they seem. on the early- save bird rate quote code £100 ECONMAG THE ENERGY Offer expires October 13th SUMMIT

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2 Ms Hathaway and Mr Shapiro are right attempts to rein in its nuclear programme. nities of Bahia in Brazil. Acting as enabler to sound the alarm that the post-second- But perhaps the greatest danger at present ratherthan overseer, the Gettyhasensured world-war consensus on the illegality of is the incumbency of an American presi- a remarkable collaboration between insti- war is under siege. Among those threats dent who despises international norms, tutions. Its only stipulation was that each are militant jihadism; an angry Russia and who disparages free trade and who contin- show be underpinned by serious art-his- an ambitious China determined to chal- ually flirts with abandoning America’s torical research to ensure that the effects of lenge an international system they believe essential role in maintaining the global PST: LA/LA are far-reaching. fails to reflect their interests; Iranian sup- legal order. The “internationalists”—the Despite the broad range of ideas and port forterrorist groups; and North Korea’s heroes of this important book—must be artistic practice, home emerges as an over- contemptuous dismissal of diplomatic spinning in their graves. 7 archingtheme. “Home: So Different, So Ap- pealing” at LACMA is one obvious example. Another is “Found in Translation— Latin American art Design in California and Mexico: 1915-85”, which traces the stylistic exchanges of ver- Waking up to a new world nacular architecture between the two regions. The artists who make up the magnif- icent collection put together by Patricia Phelps de Cisneros, a Venezuelan- American, show how European modern- LOS ANGELES ism gained a new home in South America in the 1930s and 1940s and made it its own. The endless ripples ofputting on America’s biggest Latin American artfest And the exhibition at the Los Angeles T IS night and you are barefoot, stum- grants, often the hardest to secure, helped Municipal Art Gallery, “Learning from Ibling across cold desert sand. A ragbag of 50 institutions start developing shows that Latin America: Art, Architecture and humans almost crashes into you. They are cover photography, film, dance, music, Visions of Modernism”, asks uncomfort- so close you can see that the child who has performance, architecture, sculpture and able questions about the home-grown losta shoe iscurlingherlittle toes inward to visual art from 45 countries, as well as the taste for brutalist architecture in Latin avoid the thorns. A man drags her by the Japanese and Chinese diasporas of Peru America and what happened when the arm, doubling himself over to escape the and the Caribbean and the black commu- promised modern future turned into dicta-1 helicopter searchlights scissoring the land- scape. Too late. A snapping mastiff dives off the chopper. Two border guards lift their automatic weapons and take aim at you, yelling: “Geddown! GEDDOWN!” “Carne y Arena” (Flesh and sand) is a virtual-reality (VR) installation by Alejan- dro Iñárritu, a Mexican artist and film director, at the Los Angeles County Muse- um of Art (LACMA). Each visitor dons the VR mask and earphones for six and a half minutes, but the sense of terror lingers for hours. Mr Iñárritu wants you to feel the trauma of the migrant who abandons home and braves danger, all in the hope of a better life across the border. The show is part of “Pacific Standard Time: LA/LA”(PST: LA/LA), the biggest exploration of art from Latin America ever put on in the United States. It is no surprise that it is centred on Los Angeles, where it opened on September14th. California was once part of Mexico. Los Angeles is the biggest Latin American city outside the region and it is permeated by the language, culture, food and music of the south. This is a city “that exists and thrives on diversity”, says Ann Philbin ofthe Hammer Museum. It is hard not to see PST: LA/LA as an antidote to the divisiveness of American political debate about immigration. More than1,100 Latin American artists are taking part in shows in 70 cultural institutions throughout southern California. “We are tearing down walls,” said Michael Govan, the director ofLACMA, at the opening. PST: LA/LA follows “PST: Art in LA, 1945-80”, which took place five years ago. The Getty Foundation provided $16m of seed money for the project. Those early Higgledy-piggledy home The Economist September 23rd 2017 Books and arts 79

2 torship and economic stagnation. Commerce played a decisive part in Buthome isalso where the heartis. And setting the course ofAmerican history. The for many 20th-century Latin American first settlers struggled but eventually a women who were determined to be art- lucrative business was found; growing and ists, choosing between home-making and exporting tobacco in the southern states. making art was often a struggle. To see the But the early planters developed a taste for dozens of artists who travelled to Los An- luxuries, placing them in debt to English geles and whose work makes up “Radical creditors. That proved to be one source of Women: Latin American Art, 1960-85” was resentment towards the colonial power; to see a group of women—most now in another irritation was British efforts to their60sand 70s—who knewofeach other earn some revenue afterthe expense of the but had rarely met, and had never expect- Seven Years’ War (1756-63), which ended ed to be exhibited together in America. French attempts to control the continent. A highly academic show, as befits the The result, inevitably perhaps, was the Hammer’s position as part ofUniversity of American war ofindependence. California, Los Angeles, “Radical Women” The plantation economy developed in is no walkin the park. Common themes in- the southern states, and the initial political clude silence, loneliness and the many suf- dominance of Virginia (which provided ferings of the female body, from childbirth four of America’s first five presidents) en- to rape. For a more personal narrative, sured the continued survival of slavery in head instead for the retrospective of Anna the newly independent country. By 1860 Maria Maiolino, a Calabria-born Brazilian auction prices suggested that the collective artist, at the Museum ofContemporary Art value of American slaves was $4bn at a (MoCA LA). A collaborator of Lygia Clark, American economic history time when the federal government’s annu- Lygia Pape and Hélio Oiticica, three of Bra- al budget was around $69m. That explains zil’s best-known artists, she was long over- A dance to the both why southern slaveowners, many of shadowed by her more famous former whom had borrowed against their slaves husband, Rubens Gerchman. Undaunted, markets of time as collateral, would never give up the prac- she carried on working, drawing, sculpting tice, and why a financial settlement of the and making installations. Having raised issue was out ofthe question. her daughters, she took a new artistic turn The resulting civil war hastened the Americana: A 400-Year History of working with clay. At 75, Ms Maiolino is industrialisation of the northern states, American Capitalism. By Bhu Srinivasan. now one ofBrazil’s most important artists. which owed their victory, in part, to their Penguin Press; 576 pages; $30 The Maiolino retrospective is one of greater economic strength. In the late 19th many exhibitions that will be shown else- HU SRINIVASAN’S new book, “Ameri- century American companies were able to where. The Getty’s own landmark show, B cana”, is a delightful tour through the exploit the economies of scale that came “Golden Kingdoms: Luxury and Legacy in businesses and industries that turned from trading over a continent-wide coun- the Ancient Americas”, will open next America into the biggest economy in the try. This allowed them to overtake their year at the Metropolitican Museum of Art world. Not only is the book written in a British and German rivals. in New York. “Radical Women” will travel light and informative style, it is cleverly In time, the growth of these industrial to the Brooklyn Museum and then to São constructed. Each chapter has a theme— giants, or trusts as they were known, led to Paulo, and LACMA’s “Home: So Different, tobacco, cotton, steam, oil, bootlegging, another political spat, as a Republican So Appealing” will open in 2018 at the Mu- mobile telephones and so on—and these president, Theodore Roosevelt, tried to seum ofFine Arts in Houston. James Cuno, themes are organised to lead the reader challenge monopoly power. It was under president of the J. Paul Getty Trust, points through a chronological history of the the first Roosevelt that America pulled de- out that much of the research the Getty in- American economy. cisively away from a laissez-faire ap- sisted on will form the basis of an array of Along the way, there is plenty of sur- proach, setting up the Pure Food and Drug courses on Latin American art throughout prising detail. Until the first world war, for Act and the Federal Meat Inspection Act to American universities, testimony to the example, the Busch family (who produced protect consumers. A much bigger shift oc- ripple effect ofPST: LA/LA. Budweiser beer) held a big annual celebra- curred under his relative, Franklin Roose- But the most important long-term out- tion forthe Kaiser’s birthday. Bill Levitt, the velt, who pursued aggressive policy inter- come may turn out to be a shift in perspec- builder who pioneered the post-1945 shift vention and established a welfare system tive. A small show at the Craft & Folk Art to suburban living, was one of many who in the course ofthe Great Depression. Museum shows the Mexican-American refused to sell homes to African-Ameri- As Mr Srinivasan observes, American border not as a wall but as a place of imagi- cans. To finance their new company, Apple capitalism has always had a strong input nation and possibility, and the artists who Computer, Steve Jobs and Steve Wozniak from the state: the tariffs that shielded in- inhabit it as makers of “cross-border art”: respectively sold a VW minibus and a dustry in the 19th century; the military artists like Raquel Bessudo, who makes Hewlett-Packard calculator. expenditure thathelped develop radio, sat- polyester jewellery based on the route fol- But Mr Srinivasan, himself an immi- ellites and the internet; farm subsidies; the lowed by the deadly immigrant train, La grant who became an entrepreneur, never federal guarantees for bank deposits and Bestia, or Ana Serrano with her village lets the detail interfere with the bigger pic- home loans; and so on. “It was an endless- “Cartonlandia” (pictured, previous page) ture. As he notes, European settlement in ly calibrated balance between state subsi- and Ronald Rael, who playfully reima- America wasoriginallydriven bycommer- dies, social programmes, government con- gines the border wall as a cycling track, a cial imperative. In 1606 the British char- tracts, regulation, free will, entrepreneur- xylophone or a place to hang a seesaw. No tered the Virginia Company ofLondon as a ship and free markets,” he writes. In short, longer the home only of snapping mastiffs profit-seeking operation; an early version American economic history is more com- and armed guards, Donald Trump’s wall of “venture capital”. The pilgrims on the plex than some ideologues seek to portray could become an inspiration to creativity, Mayflower (pictured) were backed by Eng- it; this excellent book gives readers a fully proofofa common humanity. 7 lish financiers. rounded picture. 7 80 Courses

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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* 2017† latest latest 2017† rate, % months, $bn 2017† 2017† bonds, latest Sep 20th year ago United States +2.2 Q2 +3.0 +2.1 +1.5 Aug +1.9 Aug +1.9 4.4 Aug -460.9 Q2 -2.4 -3.4 2.24 - - China +6.9 Q2 +7.0 +6.8 +6.0 Aug +1.8 Aug +1.8 4.0 Q2§ +157.3 Q2 +1.5 -3.9 3.63§§ 6.57 6.67 Japan +1.4 Q2 +2.5 +1.6 +4.7 Jul +0.5 Jul +0.5 2.8 Jul +189.8 Jul +3.6 -4.5 0.02 111 102 Britain +1.7 Q2 +1.2 +1.5 +0.4 Jul +2.9 Aug +2.7 4.3 Jun†† -99.8 Q1 -3.4 -3.6 1.33 0.74 0.77 Canada +3.7 Q2 +4.5 +2.6 +10.0 Jun +1.2 Jul +1.7 6.2 Aug -45.0 Q2 -2.6 -2.1 2.11 1.23 1.32 Euro area +2.3 Q2 +2.6 +2.0 +3.2 Jul +1.5 Aug +1.5 9.1 Jul +370.8 Jul +3.2 -1.3 0.45 0.83 0.90 Austria +2.2 Q2 -1.0 +2.2 +4.5 Jun +2.1 Aug +1.9 5.4 Jul +6.4 Q1 +2.1 -1.0 0.62 0.83 0.90 Belgium +1.5 Q2 +1.7 +1.7 +4.0 Jun +1.9 Aug +2.1 7.6 Mar -4.2 Mar +0.7 -2.1 0.74 0.83 0.90 France +1.7 Q2 +1.9 +1.6 +3.7 Jul +0.9 Aug +1.2 9.8 Jul -27.9 Jul -1.2 -3.1 0.73 0.83 0.90 Germany +2.1 Q2 +2.5 +2.1 +4.0 Jul +1.8 Aug +1.6 3.7 Jul‡ +274.1 Jul +8.0 +0.7 0.45 0.83 0.90 Greece +0.7 Q2 +2.2 +1.0 +1.7 Jul +0.9 Aug +1.3 21.2 Jun -0.7 Jul -1.3 -1.4 5.51 0.83 0.90 Italy +1.5 Q2 +1.5 +1.3 +4.4 Jul +1.2 Aug +1.3 11.3 Jul +51.0 Jul +2.4 -2.3 2.12 0.83 0.90 Netherlands +3.3 Q2 +6.2 +2.6 +3.0 Jul +1.4 Aug +1.2 5.9 Aug +68.4 Q1 +9.9 +0.6 0.57 0.83 0.90 Spain +3.1 Q2 +3.5 +3.1 +2.0 Jul +1.6 Aug +1.9 17.1 Jul +21.2 Jun +1.5 -3.3 1.56 0.83 0.90 Czech Republic +3.4 Q2 +10.3 +4.5 +3.2 Jul +2.5 Aug +2.4 2.9 Jul‡ +1.7 Q2 +0.9 -0.1 1.07 21.8 24.2 Denmark +1.9 Q2 +2.5 +2.0 -2.4 Jul +1.5 Aug +0.9 4.5 Jul +26.0 Jul +8.2 -0.6 0.53 6.20 6.67 Norway +0.2 Q2 +4.7 +1.9 -1.6 Jul +1.3 Aug +2.0 4.3 Jun‡‡ +16.6 Q2 +5.4 +4.2 1.60 7.80 8.29 Poland +4.6 Q2 +4.5 +3.7 +8.7 Aug +1.8 Aug +1.8 7.1 Aug§ -3.0 Jul -0.4 -2.2 3.32 3.56 3.85 Russia +2.5 Q2 na +1.7 +1.5 Aug +3.3 Aug +4.2 4.9 Aug§ +33.6 Q2 +2.7 -2.1 8.13 57.9 64.7 Sweden +3.0 Q2 +5.2 +3.1 +5.3 Jul +2.1 Aug +1.7 6.0 Aug§ +22.5 Q2 +4.5 +0.9 0.64 7.95 8.58 Switzerland +0.3 Q2 +1.1 +1.3 +2.9 Q2 +0.5 Aug +0.5 3.2 Aug +73.6 Q1 +9.6 +0.7 -0.01 0.96 0.98 Turkey +5.1 Q2 na +4.0 +25.6 Jul +10.7 Aug +10.3 10.2 Jun§ -37.1 Jul -4.4 -2.0 10.84 3.47 2.97 Australia +1.8 Q2 +3.3 +2.3 +0.8 Q2 +1.9 Q2 +2.1 5.6 Aug -21.8 Q2 -1.4 -1.8 2.83 1.24 1.32 Hong Kong +3.8 Q2 +4.1 +3.1 +0.4 Q2 +1.9 Jul +1.6 3.1 Aug‡‡ +14.9 Q1 +4.1 +1.0 1.62 7.80 7.76 India +5.7 Q2 +4.1 +7.0 +1.2 Jul +3.4 Aug +3.6 5.0 2015 -29.2 Q2 -1.2 -3.2 6.58 64.3 67.0 Indonesia +5.0 Q2 na +5.2 +1.4 Jul +3.8 Aug +4.2 5.3 Q1§ -14.2 Q2 -1.7 -2.4 6.64 13,284 13,153 Malaysia +5.8 Q2 na +5.4 +6.0 Jul +3.7 Aug +3.9 3.5 Jul§ +8.1 Q2 +2.3 -3.0 3.89 4.19 4.14 Pakistan +5.7 2017** na +5.7 +3.5 Jun +3.4 Aug +3.9 5.9 2015 -12.1 Q2 -4.5 -5.9 8.25††† 105 105 Philippines +6.5 Q2 +7.0 +6.5 -1.1 Jul +3.1 Aug +3.0 5.6 Q3§ -0.8 Jun +0.3 -2.8 4.64 51.0 47.9 Singapore +2.9 Q2 +2.2 +2.9 +21.0 Jul +0.6 Jul +0.9 2.2 Q2 +59.0 Q2 +18.4 -1.0 2.07 1.34 1.36 South Korea +2.7 Q2 +2.4 +2.9 +0.1 Jul +2.6 Aug +1.9 3.6 Aug§ +82.1 Jul +5.6 +0.9 2.28 1,128 1,121 Taiwan +2.1 Q2 +0.5 +2.3 +2.4 Jul +1.0 Aug +0.5 3.8 Jul +70.7 Q2 +12.7 +0.2 1.03 30.1 31.4 Thailand +3.7 Q2 +5.4 +3.5 +3.7 Jul +0.3 Aug +0.7 1.2 Jul§ +44.9 Q2 +11.4 -2.5 2.15 33.1 34.8 Argentina +0.3 Q1 +4.3 +2.6 -2.5 Oct +23.1 Aug‡ +24.6 8.7 Q2§ -16.8 Q1 -3.3 -6.1 5.96 17.1 15.2 Brazil +0.3 Q2 +1.0 +0.6 +2.5 Jul +2.5 Aug +3.7 12.8 Jul§ -13.8 Jul -0.8 -8.1 8.67 3.13 3.25 Chile +0.9 Q2 +3.0 +1.2 +3.3 Jul +1.9 Aug +2.4 6.9 Jul§‡‡ -5.6 Q2 -1.9 -3.0 4.33 621 672 Colombia +1.3 Q2 +3.0 +1.7 +6.2 Jul +3.9 Aug +4.0 9.7 Jul§ -12.4 Q2 -3.7 -3.3 6.52 2,896 2,906 Mexico +1.8 Q2 +2.3 +2.1 -1.6 Jul +6.7 Aug +5.8 3.2 Jul -17.6 Q2 -1.9 -1.9 6.83 17.7 19.7 Venezuela -8.8 Q4~ -6.2 -9.3 +0.8 Sep na +720 7.3 Apr§ -17.8 Q3~ -1.2 -19.5 10.08 10.2 9.99 Egypt +4.9 Q2 na +3.8 +33.0 Jun +31.9 Aug +26.9 12.0 Q2§ -15.6 Q2 -6.0 -10.8 na 17.6 8.88 Israel +3.9 Q2 +2.4 +3.5 +2.6 Jul -0.1 Aug +0.4 4.1 Aug +10.7 Q2 +4.1 -2.6 1.72 3.50 3.78 Saudi Arabia +1.7 2016 na -0.5 na -0.1 Aug +1.1 5.6 2016 -1.0 Q1 +0.5 -8.2 3.68 3.75 3.75 South Africa +1.1 Q2 +2.5 +0.6 -0.5 Jul +4.8 Aug +5.3 27.7 Q2§ -7.9 Q2 -3.2 -3.2 8.41 13.3 13.9 Source: Haver Analytics. *% change on previous quarter, annual rate. †The Economist poll or Economist Intelligence Unit estimate/forecast. §Not seasonally adjusted. ‡New series. ~2014 **Year ending June. ††Latest 3 months. ‡‡3-month moving average. §§5-year yield. †††Dollar-denominated bonds. The Economist September 23rd 2017 Economic and ﬁnancial indicators 83

Markets % change on GDP forecasts GDP % increase on a year earlier Dec 30th 2016 Global is projected to grow by 3.7% in September 2017 forecasts Index one in local in $ 2018, slightly more than in 2017, accord- 2017 2018 June 2017 forecasts Sep 20th week currency terms ing to the OECD, a club of mostly rich United States (DJIA) 22,412.6 +1.1 +13.4 +13.4 countries. Since their previous forecasts 02468 China (SSEA) 3,524.7 -0.5 +8.5 +14.7 OECD Japan (Nikkei 225) 20,310.5 +2.2 +6.3 +11.2 in June the ’s economists have raised China expected growth rates for both years for Britain (FTSE 100) 7,272.0 -1.5 +1.8 +11.8 India* Canada (S&P TSX) 15,389.6 +1.7 +0.7 +10.2 most countries. In the euro area, fore- Euro area (FTSE Euro 100) 1,207.2 nil +8.6 +23.5 casts for 2017 have increased by 0.3 Canada Euro area (EURO STOXX 50) 3,525.5 +0.1 +7.1 +21.9 percentage points. Economic expansion Austria (ATX) 3,289.1 +0.3 +25.6 +42.9 exceeded expectations in the ﬁrst half of United States Belgium (Bel 20) 3,965.5 -0.6 +10.0 +25.1 this year; consumption and exports have Euro area France (CAC 40) 5,241.7 +0.5 +7.8 +22.6 been robust, and growth is more evenly Germany (DAX)* 12,569.2 +0.1 +9.5 +24.5 spread across the zone’s member coun- Russia Greece (Athex Comp) 758.0 -6.4 +17.8 +33.9 Italy (FTSE/MIB) 22,355.6 +0.5 +16.2 +32.2 tries. In India, the eﬀects of demonetisa- Japan tion and the new goods-and-services tax Netherlands (AEX) 528.7 nil +9.4 +24.4 Britain Spain (Madrid SE) 1,037.3 -0.7 +9.9 +25.0 have caused this year’s growth forecast to Czech Republic (PX) 1,047.3 +0.3 +13.6 +33.8 be trimmed by 0.6 points, to 6.7%. The Brazil Denmark (OMXCB) 922.0 -0.5 +15.5 +31.2 forecast for 2018 has also been cut. Source: OECD *Fiscal years starting in April Hungary (BUX) 38,108.0 nil +19.1 +35.5 Norway (OSEAX) 842.1 +0.6 +10.1 +21.5 Poland (WIG) 64,749.5 nil +25.1 +46.7 Other markets The Economist commodity-price index Russia (RTS, $ terms) 1,122.4 +0.4 -2.6 -2.6 2005=100 % change on % change on Sweden (OMXS30) 1,585.4 +0.3 +4.5 +19.4 Dec 30th 2016 one one Switzerland (SMI) 9,095.7 +0.5 +10.7 +16.9 Index one in local in $ Sep 12th Sep 19th* month year Turkey (BIST) 105,323.6 -2.6 +34.8 +36.6 Sep 20th week currency terms Dollar Index Australia (All Ord.) 5,769.7 -0.6 +0.9 +12.0 United States (S&P 500) 2,508.2 +0.4 +12.0 +12.0 All Items 145.8 146.3 +1.5 +6.4 Hong Kong (Hang Seng) 28,127.8 +0.8 +27.9 +27.1 United States (NAScomp) 6,456.0 -0.1 +19.9 +19.9 Food 147.9 150.5 +3.0 -5.0 India (BSE) 32,400.5 +0.7 +21.7 +28.5 China (SSEB, $ terms) 359.1 -0.1 +5.1 +5.1 Indonesia (JSX) 5,906.6 +1.0 +11.5 +13.1 Japan (Topix) 1,667.9 +1.9 +9.8 +15.0 Industrials Malaysia (KLSE) 1,773.6 -0.7 +8.0 +15.7 Europe (FTSEurofirst 300) 1,499.7 nil +5.0 +19.4 All 143.6 141.8 -0.1 +22.5 Pakistan (KSE) 43,347.0 +2.5 -9.3 -10.2 World, dev'd (MSCI) 1,996.1 +0.5 +14.0 +14.0 Nfa† 137.5 132.0 +1.3 +4.2 Singapore (STI) 3,218.1 -0.4 +11.7 +20.1 Emerging markets (MSCI) 1,109.6 +0.9 +28.7 +28.7 Metals 146.2 146.1 -0.7 +31.5 South Korea (KOSPI) 2,412.2 +2.2 +19.0 +27.4 World, all (MSCI) 487.4 +0.5 +15.5 +15.5 Sterling Index Taiwan (TWI) 10,519.2 -0.1 +13.7 +21.8 World bonds (Citigroup) 949.8 -0.1 +7.4 +7.4 All items 199.9 196.8 -3.7 +1.9 Thailand (SET) 1,670.7 +1.7 +8.3 +17.2 EMBI+ (JPMorgan) 841.3 -0.3 +9.0 +9.0 Argentina (MERV) 24,358.0 +2.2 +44.0 +32.9 Hedge funds (HFRX) 1,254.3§ +0.2 +4.2 +4.2 Euro Index Brazil (BVSP) 76,004.1 +1.6 +26.2 +31.3 Volatility, US (VIX) 10.2 +10.5 +14.0 (levels) All items 151.7 151.8 -0.3 -0.8 Chile (IGPA) 26,147.3 +1.3 +26.1 +36.0 CDSs, Eur (iTRAXX)† 56.9 +10.7 -21.1 -10.3 Gold Colombia (IGBC) 11,078.9 -0.9 +9.6 +13.7 CDSs, N Am (CDX)† 55.2 -1.7 -18.6 -18.6 $ per oz 1,326.6 1,308.6 +1.7 -0.5 Mexico (IPC) 50,364.0 +0.4 +10.3 +28.4 Carbon trading (EU ETS) € 6.9 -2.8 +4.9 +19.3 West Texas Intermediate Venezuela (IBC) 425,758.3 +21.0 1,243 na Sources: IHS Markit; Thomson Reuters. *Total return index. $ per barrel 48.2 49.5 +3.9 +13.9 Egypt (EGX 30) 13,695.3 +1.9 +10.9 +14.0 †Credit-default-swap spreads, basis points. §Sep 18th. Israel (TA-125) 1,295.3 +0.8 +1.4 +11.6 Sources: Bloomberg; CME Group; Cotlook; Darmenn & Curl; FT; ICCO; Indicators for more countries and additional ICO; ISO; Live Rice Index; LME; NZ Wool Services; Thompson Lloyd & Saudi Arabia (Tadawul) 7,319.8 -0.8 +1.1 +1.2 Ewart; Thomson Reuters; Urner Barry; WSJ. *Provisional South Africa (JSE AS) 55,867.5 -0.5 +10.3 +13.7 series, go to: Economist.com/indicators †Non-food agriculturals. 84 Obituary Peter Hall The Economist September 23rd 2017

gether over the long term like a tribe, learning from each other as much as from him. (Autocracy was not his style. His style was “Let’s ﬁnd out.”) He tried to do the same at the National when he took over in 1973; times were more troubled then. But when everyone in a company was inspired together, he felt ecstatic. The RSC in the mid-1960s—personiﬁed by David Warner’s gangling dreamy-student Hamlet, and underpinned by subsidy—was “hot” in a way British theatre has never been since.

Politics v art Such a company needed a permanent home. A decent building conferred identity and drew in money. Without them, the British public seemed not to notice theatre. To the RSC’s natural home in Stratford he added London bases at the Aldwych and, later, the Barbican, and also oversaw the National’s move from the cramped Old Vic to a sprawling new concrete venue on the South Bank. His switch from the RSC to the National was rocky; he was seen as a traitor by one, as an interloper by the other. And he was now plunged deep into political rows over whether the National’s rep- Fighting for the stage ertoire was too left-wing or too elitist, over censorship and, continually, over public funding. He found himself hotly defending not only the cost of the new buildings, but also theatre itself—and whether, in a recession, it should be subsidised at all. SirPeterHall, founder-directorofthe Royal Shakespeare Company and director of No question, he shot back. Theatre was the National Theatre, died on September11th, aged 86 society’s sharpest way to observe itself HEN he was preparing a Shake- teia” of 1981, or the bravery of his English- and provoke authority. It was awkward. It Wspeare play—always with love and language premiere of “Waiting for Godot” was dangerous. So it was often not com- awe, though it might be for the 20th time— in 1955, at 25, imagined him brimming with mercial, and needed help. Sometimes, too, Peter Hall would mutter it to himself in confidence, even arrogance. Yet behind the its sheerbeauty made it necessary to a civi- Elizabethan. It sounded like a cross be- loud affability, the flights on Concorde, the lised society. This was the spirit in which, tween Devon and Belfast, but it revealed Jaguars and Rolls Royces and the glamor- from 1984 to 1990, he was artistic director of the colours and made the words wittier. ous wives, was a stationmaster’s son from Glyndebourne Festival Opera—pumping American, he thought, might be just the ac- Suffolk. Despite precocious success from too much adrenalin, as usual, in an even cent for it. But in his decades as the domi- Cambridge onwards, he neverfeltcomfort- more elitist enterprise than spoken theatre. nant figure in British theatre, his most fam- able at the pinnacle of British theatre— He homed in on Mozart, whom he had ous American hire was a disaster: the especially not at the National, a dizzying loved a little earlier than Shakespeare, venerable Charles Laughton, as Lear, public role where, like Nelson on his col- banging out his sonatas on the piano at the stressing every word that was capitalised umn, pigeons got him from every side. age of nine. Though he had great success in the First Folio, to ludicrous effect. In this maelstrom, he clung to his core with other composers (a ravishing produc- Authenticity in Shakespeare was not beliefs. If fashion failed to follow him, he tion of Britten’s “A Midsummer Night’s one of his causes. Too much had changed, didn’t care. Shakespeare’s iambic penta Dream”, a startlingly sexy rendition of and would change. In 200 years the plays meters were sacred, precise as a page of Strauss’s “Salome”), he was there for would probably need translating. And music, never to be broken mid-line, even at “Così” and “Figaro”, as many times as any- theatre itself was so ephemeral, like any a full stop. The rhythm of action and inac- one wanted. He stayed close for35 years. living thing. A group of people combined tion in Samuel Beckett’s plays, and the Recounting his life, he tended to men- for a spell to put on performances that pauses and silences in Harold Pinter’s (12 tion Mozart and Shakespeare in the same were never the same twice, a bubble that of whose works he premiered, from “The breath. For many privileged years, he lived had to burst as soon as they left the stage. Homecoming” onwards) had to be rigor- inside their heads. The frustrations of The job ofa directorwas therefore high- ously observed. His reverence for text in- Whitehall and Westminster, the backstage ly risky. Though he always knew what he duced Tennessee Williams, among others, bitching, onslaughts by the critics, his mis- wanted to do—as firmly as he knew, after to send him their plays unasked. erable divorces, all occurred against that seeing “Love’s Labours Lost” at 16, that he Next, he needed settled players. Rather background ofgenius: a sublime regularity had to be the man who made the magic on than assembling a cast from scratch for of form in words or music which, even that stage—he was still scared to death that each production, he insisted when he when crisscrossed by anguished irregular- he might not pull it off. Those who saw the founded the Royal Shakespeare Company ities, still held each work in shape. His job, blood-soaked violence of“The Wars ofthe in 1960 that the 30-40 actors should be on on every possible stage, with every ounce Roses” in 1963, his daring masked “Ores- three-year contracts. They would work to- ofenergy, was to make it heard. 7

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