JANUARY 2012

The view from davos

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Art: 85731_Reuter_P4C_01_v6_400dpi.tif (CMYK; 381 ppi; Up to Date), TOM- Thomson Reuters-4C.ai (Up to Date), small circles.ai (Up to Date), Knowledge effect.ai (Up to Date) editor’s letter Page .06 CONTENTS Framing the Global Economy Page .26 Page .44 folio produced by Alexia Singh and Russell The Top Business Boyce in Framing the Global Economy. Pictures of 2011 Warning: some of the photos are not for WHAT’S GOING WIKILEAKS’ the faint of heart—then again, 2011 was that kind of year. Page .16 RIGHT 16TH MINUTE Are drones a silver bullet? Pulitzer Prize-winning reporter David Rohde, The elephants Searching for signs of life in the His organization is in disarray, his sources have who spent seven months as a prisoner in the global economy dried up, and Julian Assange is desperate of the Taliban, offers a unique personal ski lodge for a second act. His leaks over the past perspective—he can vividly recall the The four issues that could five years have told us plenty, but have they incongruous buzz the pilotless fighters ruin the view from Davos made as they hovered in the sky—and changed anything? suggests the United States is paying a Page .32 steep if hidden price for its reliance on Reuters and the World Economic this high-tech weaponry. Page .18 Forum have much in common. We’re both In What’s Going Right, Reuters SPRINGTIME FOR THE HASHTAG global in outlook, dedicated to generating Chief Economics Correspondent Alan Page .48 insights that drive better, smarter deci- Wheatley interrupts our gloom-fest and EUROPE? sions and committed to bringing together shows that despite the debt crisis in A return to the 1930s is not REVOLUTION the world’s most interesting people. As a Europe and sundry other financial prob- inevitable, provided leaders and the THE haves vs. middle class don’t waste the crisis As politics and Twitter grow more intertwined news organization, Reuters has a further lems, parts of the world economy, from there’s a lot riding on a business model that is yet mission: to deliver trustworthy, timely and Brazil to Zambia, are thriving. The have lots What do the Tea Party and Occupy Wall to be discovered inspired journalism that powers markets Millionaires of the world, unite! and media. We do this as a proudly elec- Street have in common? To Nick Carey, Page .21 tronic news agency that whisks text, pho- both movements represent a return to tos, and videos to financial, professional, old-school activism—as well as a threat to hell no, and media customers around the world. their professional counterparts: the often i won’t go! That is not to say, however, that we are well-heeled NGOs of the world. Even with Glock-packing Page .38 averse to print, particularly on special So shut off your gadgets for a few security, an armada of private Page .52 helicopters and $20,000-a-night occasions like the annual meeting of the minutes, turn away from your screen suites, talk is cheap. One man’s World Economic Forum in Davos. The (after setting your home page to Reuters. problem with Davos THE DRONE WARS magazine you are holding was created to com) and dig in. RETURN OF THE coincide with the 2012 session. Stepped-up strikes by America’s pilotless Among the highlights: Warm regards, fighters have been cost-efficient, ACTIVIST Page .22 Each day Reuters produces roughly though not without cost. I lived in their menacing A new generation of protesters struggles to 1,500 picture images, so coming up with faith-based the top pictures illustrating the harrowing shadow for seven months avoid the fate of its elders year in economic and financial news was economic no easy task. Check out the stunning port- Stephen Adler, Editor in Chief theory America’s Republican presidential candidates all agree on the root cause of the financial Page .58 davos by the numbers crisis, and they are all wrong Editor in Chief Stephen Adler REUTERS Executive Editor Chrystia Freeland ThE viEw Managing Editor Jim Impoco from Cover d a v o S Page .60 The Devil In The Cds Creative Directors Priest+Grace Illustration by SignS of Assistant Managing Editors Roger D. Hodge, Bob Roe F riedma n y Page .24 Economic LifE ThE ha v ES Zohar Lazar vs. Senior Editors James Ledbetter, Paul Smalera ThE ha v E LoTS ThE 2011 monEy ShoTS Associate Editors Atossa Abrahamian, Peter Rudegeair THE global Page .62 confessions of a davos spouse Picture Editors Russell Boyce, Alexia Singh

n: An d n: stratio MIDDLE Info Graphics Maryanne Murray A surprising shift in income Copy Editors Lauren Casper, Charles Petersen Illu levels worldwide Page .64 The fight over Russia’s soul portrait

�o. �o. reuters 2 Jan.2012 reuters 3 Jan.2012 trapped inarelationship withthetradi- war between the“haves” andthe“have Digital Editor Freeland. InThe Per One - In Wikileaks’ 16th Minute, Reuters col- Assange’s secrets clearinghouse went from feared to fanglesss, andwhy the to worry about those surly members of to surly worry aboutthose membersof mercurial Assange hasfound himself the 99 percent, says percent, the 99 Reuters Thomson their allegiance to thebillionaire class. cent War cent lots,” asmillionaires everywhere shed tional mediaheprofesses to despise. umnist andmediacritic Shafer takes The world’s plutocrats don’t have just on the task of explainingon thetask of how Julian Chrystia F , she surveys thecoming class Jack Shafer reeland Wheatley has reported for Reuters from Rohde inThe Drone Wars, which draws on his stellar reporting in Afghanistan, on hisstellarinAfghanistan, reporting cism aboutthecurrent despair over the and chilling—perspective delivered by about themoral andmilitaryjustifica- 31 years,31 andthat wealth experience of There are many withopinions people more than40countries over the past overhead. That’s theilluminating— has given him a hard-earned skeptihas given himahard-earned - tions for drones, butfew have been including theseven monthshewas on theground when oneisbuzzing global economic forecast, which he Global Economics correspondent Co lays outinWhat’s Going Right . held captive bytheTaliban. Alan Wheatley reuters D ntributors avid R �o. 4 ohde Jan.2012

Tripoli, whereTripoli, hewas called aCIAspy changing how we allget ournews, and for Reuters, shows how theseemingly by thethen-tottering Gaddafi regime. by Twitter. InThe Hashtag Revolution , vised, it will be covered itwillbe vised, exhaustively Weber, theWest CoastBureau Chief Both those battlegroundsBoth those his inform The reporting Carey hasdone inthe The reporting The revolution tele- willnotonlybe the Tea Partyrevolt to thestreets of past coupleyears of for Reuters has endless torrent tweets of israpidly taken himfrom thefront-lines of piece here, Return of the Activist. even how we selectourleaders. Jonathan W Nick C arey eber

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The Top Business THe Pictures of 2011 Global

germany economy TRIPLE-A BOMB A trader couldn’t hide his dismay in August as the Frankfurt Exchange took a big plunge as markets worldwide reacted to Standard & Poor’s downgrade of U.S. debt.

P hotograph by K a i P f a f f e n b a c h Ordinarily, business news isn’t much to look at. are horrifying. Amid Greece’s spiraling crisis, In Libya, Arab Spring met petrodollars, as reb- bench in any major city might show that most ci- A behemoth hedge fund implodes, sucking bil- a middle-aged man set himself ablaze after his els put a bullet in the forehead of the tyrant who’d vilians don’t know what IMF stands for, but they lions into the ether, but even the Oliver Stone ver- bank refused to renegotiate his home and busi- been sitting on the world’s eighth-biggest oil re- sure know who DSK is. sion of that scene would feature colorless quants ness loans. On the northeastern coast of Japan, serves. The blood and oil flowed. The following portfolio, culled by Reuters’ Portfolio in starched white shirts, pacing the trading floor a 33-foot-high tsunami—a Mothra from Mother As if the eurozone crisis, popular uprisings Alexia Singh and Russell Boyce, shows a world in or nervously staring at screens. Nature—unleashed its fury on the world’s third- across the Middle East, and Occupy Wall Street turmoil, and with each image reminds us that— Last year, the money shot was different. largest economy, disrupting the global industrial and its offshoots weren’t enough, business also for good or bad—we live in extraordinary eco- Many images of the big financial stories of 2011 supply chain. had its R-rated moments. A spot quiz on a park nomic times. Framing the global economy

japan SEA CHANGE The 8.9 earthquake and tsunami that hit Japan in March P hotograph by N o d a s S t yl i a n i d i s destroyed roads, houses, and lives and temporarily stunned the nation’s economy, which was already shaky. The quake also spawned a horrific man-made catastrophe: the largest nuclear disaster since Chernobyl, followed by the government’s inept and dangerous coverup.

greece RE-FI MADNESS A man in Thessaloniki was behind on his loans, so he P hotograph by Mainichi Shimbun asked his bank for help. They refused to renegotiate, so he stepped outside, doused himself with gasoline, and set himself ablaze. An alert cop saved his life, but who will save Greece? Its debts, along with those of the euro zone’s other peripheral states, could yet sink the common currency.

�o. �o. REUTERS 8 Jan.2012 REUTERS 9 Jan.2012 Framing the global economy

libya THE NEW FACE OF FREEDOM As Arab Spring revolts spread in March, a Libyan rebel celebrated Mohammar Gaddafi’s expulsion from Benghazi; Gaddafi was killed seven months later, and Libyans finally had some hope for prosperity. Oil production is now at 50% of the pre-conflict 1.6 million barrels per day and is rapidly rising.

england TAPPED OUT Neither Rupert Murdoch nor his beloved editrix Rebekah Brooks broke into an abducted child’s voicemail, but they were pilloried for fostering the scandalous excesses of British tabloid culture at the hastily shuttered News of the World.

P hotograph by Ol i v i a H a r r i s P hotograph by Brian Nuygen

usa ASSAULT AND PEPPER SPRAY The Occupy Wall Street movement spread across the country—and led to some ugly clashes. When a University of California Davis police officer pepper-sprayed students, the pundit class reacted with outrage (see P hotograph by G o r a n To m a s e v i c

Rachel Maddow’s condemnation on MSNBC), but also provided some creative �o. justifications—Fox News’s Megyn Kelly said, “It’s a food product, essentially.” REUTERS 11 Jan.2012 Framing the global economy

afghanistan STICKER-SHOCK AND AWE As the conflict in Afghanistan dragged into its 10th year, a howitzer in Kandahar sent a shell toward an elusive enemy. With the U.S. withdrawal in Iraq complete, President Obama vowed to draw down forces in Afghanistan, where the military campaign is costing the U.S. Treasury an estimated $300 million a day.

USA ZUCKING UP Mark Zuckerberg went to Harvard in November to recruit for Facebook, which leads a still-burgeoning U.S. tech boom, despite a recent string of mediocre IPOs. Top engineering talent is so scarce that even billionaire CEOs have to work the crowd to keep ahead of the competition.

P hotograph by Brian Snyder

P hotograph by L u c a s Ja c k s o n

USA END OF THE RAJ Galleon hedge fund founder Raj Rajaratnam was swarmed in May as he left Manhattan Federal Court, where he’d just P hotograph by B a z R a t n e r been found guilty of 14 counts of insider trading. Prosecutors also

�o. ensnared Goldman Sachs board member Rajat Gupta, who had leaked word of Warren Buffett’s pending investment in the firm to Rajaratnam. REUTERS 12 Jan.2012 Framing the global economy

france france BLOODIED AND BOWED U.S. Treasury Secretary Timothy Geithner went low DIRECTIONALLY CHALLENGED Angela Merkel and Nicolas Sarkozy, who lead the two at a meeting of the G20 in Paris. Geithner has tried to steer his counterparts in strongest economies in the euro zone, have found it hard to orchestrate a euro bailout. Europe toward a bailout, but the U.S.’s economic crisis—and lack of political will They often agree in public, but regularly undercut each other off-stage, leaving the to orchestrate any sovereign bailouts—has diminished his Continental appeal. markets grasping to understand how, when, and whether the euro zone can be saved.

P hotograph by B e n o i t Te s s i e r P hotograph by C h r i s t i a n H a r t m a n n

P hotograph by D e n i s S i n y a k o v P hotograph by Richard Drew

russia usa JOBS ONE Steve Jobs, who founded and a decade later re-birthed Apple TSK, TSK, DSK On a Sunday in May, IMF head Dominique Strauss-Kahn was (now the world’s most valuable company), died from complications of preparing to check out of his Manhattan hotel when a maid entered his room. pancreatic cancer in October. As this Moscow tribute suggests, rarely has a Three days later DSK resigned from the IMF, and was under house arrest business leader stirred so much devotion in customers, envy from competi- while he contested rape charges that were dropped in August. L’affaire tors, and contempt from the legions he lashed with his acerbic tongue. changed the course of the IMF and the next French presidential election. illustration by kagan mcleod

ments doing diligence on their global expo- paranoid schizophrenics have enemies. based prosperity; they are making reforms sures, acknowledging this new reality is an Add to the very real perils arising from to secure greater competitiveness and in- essential starting point. Forget stability and deeply divergent interests of Arabs, Turks, vestment. Down this road lies a messier, predictability. Abandon the notion of global Persians, and Israelis heightened paranoia more populist, more contingent phase of solutions to global problems. Instead, de- about Iran’s nuclear program. Gulf coun- globalization with beggar-thy-neighbor velop deep, granular understanding of the tries are as concerned about Iran’s med- policies—a spiral of currency wars, capital distinct political and economic context of dling in their internal affairs as they are controls, and tariffs that could accelerate new markets. Seek cooperation and allianc- about its nuclear ambitions. Combine this the current contraction through a wave of es of interest, beginning with the discreet with Israel’s growing fear of Iran reaching worldwide protectionism. interests of these states and their econo- a point of no return in its nuclear weapons mies. Embrace complexity, and understand program and the stage is set for a confron- that the successful management of political tation—whether planned or accidental— Cyber-attack on a Global Institution and economic discontinuities will be the es- in 2012. Non-military options for halting Despite a dramatic increase in the capi- sence of stability in the 21st century. Iran’s nuclear weapons program have not tal and technology devoted to cyber-de- Four themes are likely to dominate the yet succeeded, nor have they failed. How- fense in the West, the threats from new environment in which global investors, ever exasperating the diplomatic track may sources of cyber-war are multiplying. The companies and institutions will seek to seem, growing talk of a military option risks West reveled in the success of its Stuxnet limit the downside to risk and capture the creating a logic all its own. and other forms of cyber-sabotage against upside to volatility in 2012. the Iranian nuclear program, but it will soon have to face the consequences of the Nationalism, Populism, and proliferation of these technologies. Gov- A Global Reset Protectionism ernments, terrorists, and even solitary A new strategic landscape will take form A fragmenting map of the world pro- hackers are increasingly amassing the amid a global reset marked by leadership vides, in even the best of times, an opening ability to launch a cyber-attack against a change in China and national elections for the forces of populism and nationalism, Western government or multinational. in the United States, Russia, and a half- and those movements are coalescing now The real test of an effective cyber-defense Portents dozen other pivotal powers. The systemic banking crisis in the euro zone will force Berlin and the European Central Bank to pick their poison—and either become The elephants in the ski lodge a sovereign lender of last resort or see Forget stability and predictability. the 27-member ECB’s dreams of fiscal Abandon the notion of global union evaporate. For the Middle East, the second year of the Arab Awakening will solutions to global problems. The four issues that could ruin the view from Davos begin under a cloud of increasing peril and paranoia. The movement for more legitimate and accountable governments by Nader Mousavizadeh The epic global shifts of 2011 trans- preneurship of rising powers and corpora- in the Arab world will be tested by the —from China to the United States to South will not be “Can you prevent an attack?” It formed the political, economic, and social tions remaking the map of the world. still-powerful forces of tyranny, corrup- Africa. Factor in the cyclical deleveraging will be, “Can you survive one?” landscape from Shanghai to Sao Paolo, A 20-year period of one-world, one-way tion, and fundamentalism—a scenario and austerity in the West, and it is only a Washington to Cairo. No leader (not even globalization is being replaced by an era of that will further draw in Israel, Iran and matter of time before isolationist politics Vladimir Putin) is safe from the vagaries competitive sovereignty. The walls are going Turkey as strategic arbiters of the region. gain traction. 2012: The World of the State of social unrest; no economy (not even back up. Developed and developing states For the global economy, 2012 will likely The best antidote to this lies not in an- The burgeoning role of the state in an China’s) is unaffected by contagion from alike are vertically integrating political and see continued disarray, with the gap be- other vacuous appeal to “global aware- age of sovereign crises and solutions will be an over-leveraged, under-managed euro economic interests across public and private tween the debtor and creditor nations of ness,” but rather in setting out the case a defining feature of the strategic landscape. zone. No country (not even the United sectors in a global race for growth, employ- the world likely widening. for why the national interest is best served The locus of political legitimacy has re- States) is immune from the threat of asym- ment and security. Having previously em- through a mosaic of regional and global turned to the nation-state, and as economic metric attacks—anything from a terrorist braced interdependence as the motivation alliances. The countries and leaders now and political power shifts to emerging mar- bomb to cyber-warfare. for horizontal integration across markets War over a Nuclear Iran gaining stature on the national stages— kets, no solution that isn’t both global and friedma n Volatility will be the rule, not the ex- and regions, states as diverse as Canada, y The Middle East, more than any other re- from Turkey to Brazil—are those that national will be successful or sustainable. ception in 2012. What I call the emerging Finland, Saudi Arabia, Japan, Brazil, Turkey a n d gion, gives validity to the old joke that even understand that a sustainable economic A new kind of Great Game will be played Archipelago World of fragmenting power, and the United Kingdom are now pursuing strategy begins with delivering growth for in 2012—winners will be those states and

capital, and ideas is inherently unstable— more national strategies for economic and n: stratio the citizens of their own nation first. They corporations seeking success irrespective Nader Mousavizadeh is CEO of Oxford Analytica, i llu as vulnerable to old conflicts and new political security. the global analysis and advisory firm. Previously, he see open markets and free trade not as of the traditional boundaries of geography, threats as it is open to the dynamic entre- For investors, corporations, and govern- was an investment banker at Goldman Sachs. ends in themselves, but as means to broad- ideology, interest, or alliances. portrait

�o. �o. REUTERS 16 Jan.2012 REUTERS 17 Jan.2012 Euro Zone SPRINGTIME FOR EUROPE?

A return to the 1930s is not inevitable, provided leaders and the middle class don’t waste the crisis

by hugo Dixon politically. Populist parties in northern austerity and loss of sovereignty. The best Europe—such as the True Finns and Hol- bet is probably for the southern countries land’s PVV—could gain traction by arguing to emphasize structural reforms to boost that their citizens shouldn’t have to bail long-term growth—such as pushing up out the Greeks, the Italians, and the Portu- pension ages, freeing up labor markets, guese. Meanwhile, pretty much everybody and fighting corruption—rather than pass- could grow unhappy with the Germans for ing yet more short-term spending cuts and dictating how to run their countries. Anti- tax hikes that will drive their economies foreigner sentiment could rise across the deeper into recession. For this strategy to board. In a nightmare scenario, protection- be possible, the northern countries will ism would return while border checks and have to cut the southerners some slack, capital controls would be reimposed. which would require a significant change The conventional view is that economic of mindset, especially from Angela Merkel, crises are the breeding grounds of extrem- Germany’s chancellor. ists, particularly right-wing ones. Such Whatever is done on the policy front, worries are legitimate, but the economic there will be political upheavals. In some and political strains of the present do not respects—the defenestration of incum- Political convulsions in the euro have to play out like a repeat of the 1930s. bent prime ministers or presidents—the zone have only just begun. Six prime min- Everything depends on the actions of po- politics will be “normal.” This year may isters have been kicked out of office, pro- litical elites and the general population. testers have occupied public spaces, na- For politicians, the most important chal- Right-wing demonstrators in Madrid Riot police in Venice fight with tionalist parties have grown in popularity, lenge will be to contain the crisis without wearing Falange uniforms from the Franco demonstrators during a protest against the and two countries have appointed tech- getting too far ahead of what the people era give a fascist salute right-wing Northern League party The most important challenge will nocratic leaders. And that was just 2011. are prepared to tolerate—both in terms of be to contain the crisis without The coming year is likely to prove even getting too far ahead of what the tougher on the economic front as the crisis not be quite as dramatic as 2011, when half continues to rage, austerity bites, and un- a dozen leaders, including Italy’s Silvio people are prepared to tolerate. employment mounts. Euro zone countries Berlusconi, Greece’s George Papandreou, are being forced to choose between fiscal and Spain’s José Luis Rodríguez Zapatero, discipline or the disintegration of their medi n a bit the dust. But we will probably witness n a n j u

shared currency. Under pressure from / the biggest fall yet: that of France’s Nicho- have for decades fed off the state rather apart. That might open the way for a stron- Germany, governments have agreed to las Sarkozy, who is fighting off a stiff chal- than serving the public interest. Disaffec- ger centrist group to emerge around the

sign up for treaty changes that will require re u ters lenge from François Hollande, the social- tion with traditional politics in both coun- so-called Terzo Polo (or Third Pole) led : : them to balance their budgets, pay down ist candidate. Some countries could also tries is high. When Berlusconi and Papan- by Pier Ferdinando Casini. There’s even their debts, and give the European Com- see big shifts in the political landscape dreou fell, it was telling that the opposition a possibility that the new technocrats will

mission in Brussels more power to inter- photograph as old parties collapse and new ones take parties were not in a position to replace develop a taste and aptitude for politics fere with national budgets. Such loss of their place. This outcome is most likely in them. Instead, both countries turned to and create a new centrist political force of

sovereignty could provoke a backlash from estri si lv Italy and Greece, where corrupt political technocrats—Mario Monti, an economist their own. In Greece, both Papandreou’s n; friedma n; the people—and boost the support of right- y elites, known in each country as “castes,” and former European Commissioner, and left-wing Pasok party and the right-wing a n d l ma nu e l wing euro-skeptic parties such as France’s / Lucas Papademos, formerly vice president New Democracy party are beset with inter-

National Front. It’s possible that the treaty Hugo Dixon is the founder and editor of Reuters of the European Central Bank. nal rivalries. In each party, there are tradi- re u ters n: n: stratio Breakingviews. Before founding Breakingviews in tionalists, who tend to be euro-skeptics, as changes may not even get ratified. : The crisis has created an opportunity for 1999, Hugo spent 13 years at the Financial Times, i llu The euro zone could start coming apart the last five as Head of Lex. He was named Business a break with the past. In Italy, Berlusconi’s well as more centrist, pro-European mod- at the seams, not just economically but Journalist of the Year 2000 in the British Press Awards. center-right PDL party could easily fall ernizers. In one scenario, the modernizers photograph portrait

�o. �o. REUTERS 18 Jan.2012 REUTERS 19 Jan.2012 Travel hell no, i won’t go!

Even with Glock-packing security, an armada of private helicopters, and $20,000-a-night suites, talk is cheap. One man’s problem with Davos

I’ve never been to Davos, despite at- by Mohamed El-Erian To be more productive, more useful, they tempts by many over the years to per- need to be much less inclusive at some key suade me to go. Don’t get me wrong. I moments. Very difficult (and highly deli- understand that it is a special event for cate) decisions have to be made about who many people, and for many reasons. It is to involve in certain meetings and who to anchored by wide-ranging and engaging exclude. This would require additional agendas, and participants get to mingle (and closely monitored) status levels for with a global cornucopia of important participants, which could only be imple- people. It is also the place to see and be mented by changing the World Economic seen for heads of state, politicians, aca- Forum’s current role of convener/facilita- demics, thought-leaders, media pundits, tor into a much stronger one of super-con- CEOs, and movie stars. ductor/enforcer. The annual meeting of the World Eco- Second, key participants must truly nomic Forum in that intimate setting re- collaborate—something that has not hap- mains one of the year’s hottest tickets, pened. This lack of collaboration has been but its organizers want their event to be particularly costly at a time when the world on left and right could break away from wealth, but they have been largely pas- much more than what it currently is—a teeters on the brink of an economic abyss. Police arrest an Occupy London protester on their current colleagues and join with each the roof of Panton House, a building used by the mining sive. Admittedly, there have been a few big, prestigious talk-shop. They want it to Shared interests must come with a great- other as well as some small center parties company Xstrata, in central London attempts by this demographic to organize influence policy at the national, regional, er sense of shared responsibilities. Narrow- to create a new force. themselves. In Milan, for example, citizens and global levels. ly focused national agendas must develop But it won’t just be the politicians who campaigned via social media for Giuliano Yet, over the years, and in the context greater peripheral vision, and mutual assur- determine how the political landscape programs. Their name gives it away: they Pisapia, a non-traditional politician. He of an increasingly unsettled and uncertain ances must be supported by credible peer changes. How the people behave will also are indignant about what is happening but went on to defeat Berlusconi’s candidate, world, Davos has not had much impact. reviews. The probability of these things be- be critical. Last year saw the birth of a new tend not to have constructive ideas about Letizia Moratti, in the mayoral race in May. I get a range of responses when I ask at- time is devoted to what lies around the ing done is small, if not de minimis. phenomenon: the Indignados. Hundreds what can be done better. In some cases, And in Greece a group mainly composed of tendees why so few, if any, of the interesting next corner, and the one after that. I am not happy about this. Given the of thousands of mostly young, largely apo- moreover, their protests were also hi- intellectuals set up an organization called discussions that have taken place in those But most of the Davos devotees I talk to global changes in play today, there is an litical nonviolent Spaniards occupied city jacked by violent extremists. Such violence Koinonikos Syndesmos, a pro-European beautiful Swiss Alps have led to change that say the problem is more fundamental. They enormous need for better coordination centers in Madrid and Barcelona. They was mostly avoided in Spain, but in Ath- pressure group campaigning for a new improves the lives of most people. say that many of the attendees who truly and understanding among those who in- were objecting to austerity, greedy bank- ens protesters threw Molotov cocktails at type of politics to serve the national inter- Some say the strength of the typical Da- matter are not interested in the organiz- fluence developments in critical areas. harris ers, and incompetent politicians. the police, and in Rome the Black Bloc, an est rather than vested interests. vos agenda is also a weakness. The topics ers’ higher ambitions, and some are even This world has lost many of its economic o l i v ia

The Indignados were copied in Greece anarchist group, attacked banks, smashed What euro zone countries now need is / are overly ambitious. In trying to cover too suspicious of them. In either case, these and socio-political anchors, and leaders and in Italy, where they were called the windows, and set cars on fire. Although the the engagement of their liberal-minded much for too many, breadth trumps depth. key players do not want to give up control are finding it impossible to keep up with re u ters

Aganaktismenoi and the Indignati re- Aganaktismenoi and the Indignati were middle classes on a much wider scale. : Others cite the inherent difficulty of dis- of their narratives, and they certainly do developments on the ground. Suspicion spectively. They were partly inspired by not responsible, their cause suffered. These groups need to slough off their nat- tilling the opinions of such a varied group not wish to delegate any meaningful part of too often displaces mutual trust, which is the mass rallies in Egypt during the Arab The slightly older educated middle ural passivity and organize themselves as of people into specific action points. This their personal agenda to Davos. why this prestigious gathering will contin-

Spring, and they shared some ideas with classes, meanwhile, were largely silent in a counterweight to the potential growth of photograph is never an easy endeavor, and it becomes It will be difficult to overcome these ob- ue to fall short of its vast potential. the Occupy movements in the United these southern countries. Sure, they were extremism in the years ahead. However y; a virtually impossible one when it involves stacles unless Davos organizers make ma- Even if nothing really consequential

States and Britain. But despite creating a indignant, too, but they didn’t take to the the financial side of the crisis plays out, Mu rra so much wealth and so many egos. jor changes. Specifically, they need to do gets done there, Davos will remain a hot friedma n lot of noise, the Indignados have not co- streets in large numbers. Instead, they the active involvement of constructive y Then there are those who believe that two things that no one who puts on such ticket, but I will not be going. a n d

alesced into a political force. That’s partly fumed in the privacy of their homes. They citizens could be an important element in n e Christi too much time is spent arguing about what events has seemed willing or able to do. y y b because they are diffuse, and partly be- blamed their politicians for mismanag- stopping European politics from taking a has happened—especially when things First, they must revise how Davos’s Mohamed El-Erian is CEO and co-CIO of PIMCO, ing their economies and destroying their very nasty turn. c h have gone horribly wrong—and too little and author of “When Markets Collide” (2008). cause they haven’t developed positive n: stratio agendas and discussions are structured. R esear i llu

�o. �o. REUTERS 20 Jan.2012 REUTERS 21 Jan.2012 Politics wasn’t that Fannie and Freddie were mak- overstated the number of risky loans, and as business not to meet their goals, but rather ing housing too affordable. It was that their David Min, the associate director for finan- to recapture market share—and they be- faith-based government-subsidized profits were accru- cial markets policy at the Center for Ameri- gan to do so aggressively in 2006, when economic theory ing to private shareholders (correct), that can Progress, has noted, Pinto’s number is the market was already peaking. So while they had far too much leverage (correct), far bigger than that of others—the nonpar- the GSEs played a huge role in blowing the that they posed a risk to taxpayers (correct), tisan Government Accountability Office es- bubble bigger than it otherwise would have and what they did to make housing afford- timated that from 2000 to 2007, there were been—and the numbers in the SEC com- America’s Republican able didn’t justify the massive benefits they only 14.5 million total nonprime loans origi- plaint are huge—they followed, rather than got from the government (also correct!). nated; by the end of 2009, there were just led, the private market. presidential candidates Indeed, in a 2004 book that recommended 4.59 million such loans outstanding. It’s also very hard to look at what hap- privatizing Fannie and Freddie, one of its The disparity stems from the fact that pened in the crisis and conclude that noth- all agree on the root cause authors, Peter Wallison, wrote, “Study af- Pinto defines risky loans far more broadly ing went wrong in the private sector. Note ter study has shown that Fannie Mae and than most experts do. Min points out that that the other Republican members of the of the financial crisis, and Freddie Mac, despite full-throated claims the delinquency rates on what Pinto calls FCIC refused to sign on to Wallison’s dis- about trillion-dollar commitments and the subprime are actually closer to prime loans sent. Instead, they issued their own dis- they are all wrong like, have failed to lead the private market than to real subprime loans. For instance, sent. “Single-source explanations,” they in assisting the development and financing Pinto assumes that all loans made to people said, were “too simplistic.” of affordable housing.” with credit scores below 660 were risky. Yet despite all that, the one-note Republi- by bethany mclean When the bubble burst in the fall of But Fannie- and Freddie-backed loans in can refrain hasn’t changed. The explanation 2008, Republicans immediately pinned this category performed far better than the is obvious: The “government sucks” rant the blame on Fannie and Freddie. John loans securitized by Wall Street. Data com- polls well with conservatives. Mix in an urge The Republican candidates McCain, then running for president, called piled by the FCIC for a subset of borrowers to counter the equally simplistic story from for president have some major the companies “the match that started this with scores below 660 shows that by the the left—that the crisis was entirely the fault

differences in their policies and o un g forest fire.” This narrative picked up mo- end of 2008, 6.2 percent of those GSE mort- of greedy, unscrupulous bankers—and you y

jim mentum when Wallison joined forces with gages were seriously delinquent, versus 28.3 get a strong resistance to the facts. Maybe their personal lives. But they / have one striking thing in com- Ed Pinto, Fannie’s chief credit officer un- mon—they all say the federal til the late 1980s. According to Pinto’s re- government is responsible for R e u ters y) search, at the time the market cratered, 27 perr

the financial crisis. Even Newt ( ; million loans—half of all U.S. mortgages— Gingrich (pilloried for having were subprime. Of these, Pinto calculated the “government sucks” rant polls been a Freddie Mac lobbyist) k ea n e that over 70 percent were touched by Fan- well. mix in an urge to counter the says: “The fix was put in by the hris /c nie and Freddie—which took on that risk in simplistic story from the left and you federal government.” order to satisfy their government-imposed The notion that the federal affordable housing goals—or by some oth- get a strong resistance to facts. y) R e u ters y) government, via the Community Reinvestment Act (CRA) and by er government agency, or had been made pushing housing finance giants Fannie Mae and Freddie Mac to meet n e rom by a large bank that was subject to the ; ( ; affordable housing goals, was responsible for the financial crisis has CRA. “Thus it is clear where the demand h un ger become Republican orthodoxy. This contention got a boost from a for these deficient mortgages came from,” percent of non-GSE securitized mortgages. there’s a deeper reason, too. For many, be- recent lawsuit the Securities and Exchange Commission (SEC) filed Wallison wrote in a recent op-ed in The To recap: If private-sector loans per- lief in the all-knowing market was (and is) adam / against six former executives at Fannie and Freddie, including two Wall Street Journal, which has enthusiasti- formed far worse than loans touched by almost a religion. This financial crisis chal- former CEOs. “Today’s announcement by the SEC proves what I cally pushed this point of view in its edito- the government, how could the GSEs have lenged that faith by showing the market re u ters have been saying all along—Fannie Mae and Freddie Mac played a ) rial section since the crisis erupted. led the race to the bottom? would indeed allow loans to be made that leading role in the 2008 financial collapse that wreaked havoc on But Pinto’s numbers don’t hold up. Another problematic aspect to Pinto’s re- could never be paid back, and by showing gi n gri c h the U.S. economy,” said Congressman Scott Garrett, the New Jersey ( : The Financial Crisis Inquiry Commission search is that he assumes the GSEs guaran- that highly paid financial services execu- Republican who is chairman of the financial services subcommittee (FCIC)—Wallison was one of its 10 commis- teed risky loans solely to satisfy affordable tives aren’t gods, and that many of them are on capital markets and government-sponsored enterprises (GSEs). sioners—met with Pinto and analyzed his housing goals. But many of the guaranteed stupid and venal and all too human.

But the SEC’s case doesn’t prove anything of the sort, and in fact, photographs numbers, and concluded that while Fannie loans didn’t qualify for affordable housing So maybe the Republican orthodoxy is the theory that the GSEs are to blame for the crisis has been thor- and Freddie played a role in the crisis and credits. The GSEs did all this business be- understandable, but that doesn’t mean it oughly discredited, again and again. The roots of this canard lie in an were deeply problematic institutions, they cause they were losing market share to Wall isn’t scary. Of course, there’s the great line n; friedma n; opposition—one that festered over decades—to the growing power y “were not a primary cause.” (Wallison is- Street—their share went from 57 percent in from Edmund Burke: “Those who do not of Fannie Mae, in particular, and its smaller sibling, Freddie Mac. a n d sued a dissent.) The FCIC argued that Pinto 2003 to 37 percent by 2006. As the housing know history are destined to repeat it.” Our This stance was both right and brave, and was mostly taken by a few bubble grew larger, they wanted to recap- housing market is a mess that threatens to

Republicans and free-market economists—although even President All the Republican candidates for president, including Gingrich (top), n: stratio Bethany McLean is a Reuters columnist, ture their share and boost their profits. drag down the entire economy, and whoev- Mitt Romney (middle), and Rick Perry, blame the financial crisis i llu Clinton’s Treasury Department took on Fannie and Freddie in the contributing editor at Vanity Fair, and co-author Indeed, the SEC lawsuit specifically says er is president in 2013 needs to have a plan. on the aggressive lending policies of Fannie Mae and Freddie Mac, despite with Joe Nocera of “All the Devils are Here: late 1990s. The funny thing, though, is that the complaint back then overwhelming evidence that the story is much more complicated than that. The Hidden History of the Financial Crisis.” Fannie and Freddie began to do more risky Denying the facts is not a good start. portrait

�o. �o. REUTERS 22 Jan.2012 REUTERS 23 Jan.2012 infographics by maryanne murray Infographic World Middle Class Percentage by Region the For the first time in history, a truly global middle class is emerging. By 2030, it will more than double in size, from 2 billion today to 4.9 billion. Brookings Institution schol- ar Homi Kharas estimates that the European and American middle classes will shrink SWELLING from 50 percent of the total to just 22 percent. Rapid growth in China, India, Indonesia, Vietnam, Thailand, and Malaysia will cause Asia’s share of the new middle to more than double from its current 30%. By 2030, Asia will host 64% of the global middle class and middle account for over 40% of global middle-class consumption. —David Rohde

2030 World Population by Income Level 8,011,521,525 PEOPLE 1965 TOP MIDDLE BOTTOM 28% 4% 11% 1% 1% 56% 24% 9% 8% 6% 10% 1% The ranks of the world’s The biggest surge in new The percentage of poor NORTH CENTRAL ASIA SUB- MIDDLE EUROPE U.S. GERMANY JAPAN U.K. U.S.S.R BRAZIL wealthy will continue to members of the middle people in the world has TOP AMERICA AND SOUTH PACIFIC SAHARAN EAST AND get bigger as the emerging class over the next 20 years been on the rise for 357,936,395 AMERICA AFRICA NORTH AFRICA market nations create more will come from hundreds decades, but it will start millionaires. The number of millions of Chinese and to shrink as millions of MIDDLE of wealthy individuals will Indians—the percentage of Chinese and Indian citizens 4,871,161,044 grow from 130 million today people in India and China rise out of poverty. They to 360 million in 2030, below the middle will drop will increase the demand BOTTOM according to Kharas. Their by 70 percent by 2030. for natural resources from 2,782,424,086 percentage of the popula- Africa, spurring economic tion will grow as well, jump- growth in Ethiopia, Kenya, ing from 2% to 4%. Tanzania and Ghana.

1965 3,267,422,420 PEOPLE 2012 16% 10% 34% 2% 6% 33% 11% 4% 6% 3% 5% 12% 5% 4% NORTH CENTRAL ASIA SUB- MIDDLE EUROPE U.S. GERMANY JAPAN U.K. RUSSIA CHINA INDIA BRAZIL AMERICA AND SOUTH PACIFIC SAHARAN EAST AND AMERICA AFRICA NORTH TOP AFRICA 5,558,825

MIDDLE 736,853,742

BOTTOM 2,525,009,853

2030 7% 7% 64% 2% 5% 15% 4% 1% 2% 1% 3% 20% 29% 3% NORTH CENTRAL ASIA SUB- MIDDLE EUROPE U.S. GERMANY JAPAN U.K. RUSSIA CHINA INDIA BRAZIL AMERICA AND SOUTH PACIFIC SAHARAN EAST AND AMERICA AFRICA NORTH AFRICA

Top: Annual per capita expenditure over US$36,500 in 2005 prices Middle: Annual per capita expenditure between US$3,650 and US$36,500 Note: In the 2012 and 2030 maps, some former Soviet republics 2012 SOURCE: DR. HOMI KHARAS, The Brookings Institution Bottom: Annual per capita expenditure below US$3,650 6,820,730,223 PEOPLE are represented in the Middle East and North Africa region.

�o. �o. REUTERS 24 Jan.2012 REUTERS 25 Jan.2012 Economics W H A T ‘ S G O I N G R I G H T

Searching photograph by reuters for signs of life in the global economy

Giant Steps Construction by Alan Wheatley workers at a commercial complex in the eastern Indian city of Bhubaneswar markable resilience. While advanced economies are many people in the biggest cities al- John Whalley of the University of Western Ontario. likely to expand just 1.6 percent this year, emerging ready own a computer, Yang said, but “what In the case of Zambia, which drew more Chinese and developing countries should notch up growth of the penetration rate in smaller cities investment relative to the size of its economy than 6.4 percent, according to the International Monetary and townships remains very low. His matters any other country the researchers studied, the extra Fund. For the past five years, developing countries confidence is broadly shared by the is not growth came to 1.9 percentage points in the years have contributed as much as 65 percent of world man in the street in China even if 2003 to 2009. growth and 70 percent of the growth in global im- there is resentment towards officials whether Research by IMF economists corroborates the ports, the World Bank estimates. Nor is this growth suspected of having acquired their notion that the BRICs are acting as a locomotive for WITH THE BRITISH ECONOMY purely a function of final demand in the West. South- wealth through connections or cor- other poorer nations such as Zambia. Issouf Samake and flat on its back, the Jaguar Land Rover (JLR) factory in Birmingham, the sec- South trade—for instance between China and India ruption. Zhu Lijun, a postgraduate Yongzheng Yang estimate that a 1 percentage point ond largest city in England, is doing something unusual: hiring. The company or Brazil and Africa—now makes up 45 percent of de- student in Beijing, said he was satis- people get increase in BRIC demand and productivity leads to is doing well. With exports to China and other big emerging economies rising veloping country imports, up from about 23 percent fied with his standard of living. “As a cumulative 0.7 percentage point increase in low- strongly, Britain’s largest automotive manufacturer recently said it would hire in the early 1990s. a college student, I feel optimistic wealthy income countries’ output over three years. And that another thousand workers and build a new engine plant, creating a further about my future,” Zhu said. “What has translated, they argue, into a surprising eco- 750 fifty jobs. The BRIC countries are in matters is not whether other people faster nomic resilience in the face of the worst recession The Jaguar plant, which the vanguard of this reordering get wealthy faster than me, but the for developed nations since World War II. manufactured Spitfire fighter of the world economy. Brazil, way they get wealthy.” than me, Not everyone in Zambia is prospering, of course. aircraft and Lancaster bomb- Russia, India, and China ac- Economic growth in China is slow- “It’s just hand to mouth,” said Gertrude Tembo, a 38 ers during World War II, is an counted for just 8.5 percent of ing but incomes are still rising fast; the but the year old mother of five who sells vegetables on the amalgam of state-of-the-art ro- global GDP at market exchange government is committed to boost- streets of Lusaka. “I’ve been selling on this street for bots and old-fashioned crafts- rates in the period between ing household consumption’s share way they get the past 10 years and I am still here the way I start- men intent on their work. Elec- 2000 and 2004, according to of the economy so that growth relies ed.” What is enthusing Africa optimists, though, tric carts laden with parts buzz the IMF. Between 2005 and less on investment and exports. HSBC wealthy” is that governance is generally improving too. The across the factory floor, passing 2009 that share rose to 13.1 per- reckons 40 percent of China’s urban number of conflicts has fallen and power is increas- beneath big screens that flash cent, and by 2015 it will have households now fall into the middle- ingly changing hands peacefully through the ballot the number of cars completed overtaken that of the euro zone class category, with annual income box, as it did in Zambia in September. “Since the that shift. It takes 48 hours to to reach 20.7 percent, just shy of 60,000 yuan to 500,000 yuan new government has introduced pro-poor policies, process the top-of-the-line XJ of the United States at 21.1 per- ($9,450 to $78,600). Five years ago such as the decision to reduce taxes for thousands model. As sedans roll off the cent. “We’re in the early days the proportion was just 10 percent. “This group has both the capacity and the of workers, a lot of people should feel the ben-efit assembly line, each customer’s of the rise of the BRICs,” said desire to buy branded products and more expensive consumer durables as well of Zambia’s positive economic growth,” said Gervas specifications are given a final It’s Raining Cats Jaguars outside a dealer in Bejing (top); Jim O’Neill, the Goldman Sachs as spend money on travel and culture,” said HSBC’s chief China economist, Qu Malibata, a rural development worker. the interior of a texile mill in China’s eastern Anhui province (below) check, and the cars are driven economist who coined the con- Hongbin. That’s good news not only for Jaguar Land Rover, Lenovo, and the The picture is roughly the same in Peru. A com- away to be shipped everywhere cept a decade ago. Trade tells thousands of other companies currently flogging their wares in China, it also modity boom fueled by demand from Asia has laid from Australia and Azerbaijan a similar story. Over the past bodes well for other companies, and entire countries, that would like to feed the foundations for a surge in domestic consump- to the United States and China. two decades, the share of world China’s voracious demand for components, energy, and minerals. tion. Per capita income more than doubled from The company, bought by India’s exports among the BRIC coun- Australia owes much of its long economic expansion to sound policy-making, $2,000 in 2000 to $5,000 in 2010 and it is set to Tata Motors from Ford Motor in tries has nearly tripled, while but credit is due as well to China’s hunger for iron ore, coal, and other natural reach $6,700 in 2015, the IMF says. Peru has come 2008, exports 75 percent of its their share of global imports resources. China accounted for 27 percent of Australia’s exports in the first nine a long way from the hyper-inflation and violence output. Britain and the United has nearly doubled. At the same months of 2011, up from just 5 percent in 2000. Because the price of natural re- of leftist Shining Path insurgents that scarred the States remain JLR’s biggest mar- time, the gulf in productivity sources has soared while the cost of manufactured goods has fallen, a shipload 1990s. “There are job opportunities now and, kets, but China has sped into the between industrial and devel- of iron ore from Australia in 2010 could buy about 22,000 flat-screen television above all, there is stability,” said Magra Trujillo, third spot and now accounts for oping economies—what econ- sets, 10 times more than just five years earlier. a fifty year old nurse outside a middle-class shop- 14 percent of the company’s omists call the “convergence The commodity boom is also helping Africa. Excluding countries with few- ping mall in Lima, the capital. “I know there will be ly dai sales, which reached 232,704 ve- gap”—remains very large. Hun- er than 10 million people, six of the 10 fastest growing economies in the world opportunities for my children and grandchildren.”

hicles last year. dreds of millions of people have hi n a /c between 2001 and 2010 were in Africa. Between 2010 and 2015, seven of the Many poor Peruvi-ans who propelled the leftist That the luxury tastes of newly been lifted out of dire poverty top 10 countries, the IMF reckons, will be African. One of them will be Zambia, former army officer Ollanta Humala to victory in re u ters rich Chinese are generating em- thanks to the 10 percent annual ) the continent’s largest producer of copper. The $13 billion economy has grown elections last June are still waiting for growth to ployment in the birthplace of the industrial revolution is a powerful expression growth China has enjoyed since the late 1970s, but at more than six percent annually over the last five years, and the benefits are trickle down from the construction, shopping, and of Asia’s rising clout and a reminder that the West’s protracted debt crisis has not an estimated 300 million Chinese still do not have bottom slowly starting to trickle down. Kemmy Chaande, a reserved, soft-spoken man in real estate bonanza under way in Lima. Still, opti- ; ( ; sucked all life out of the global economy. JLR’s sales to China have risen by more access to clean water. Measured at purchasing pow- his forties, has received a 3.2 billion kwacha ($625,000) government loan to ex- mism prevails. “It’s an incredible turnaround from than 750 percent in the past five years. “Nearly everybody’s cutting back because er parity, annual income per head in China is just pand his roofing sheet plant in Kabwe, about 140 kilometers north of the capital, 10 years ago, and lots of Peruvians are moving back n l ee n jaso of the recession, but China is still an expanding market,” said Jim Kearns, an ex- 16 percent of that in the United States. In India, the / Lusaka. With the government planning to spend more on construction in 2012, home,” said Javier Ugarte, a restaurant owner who perienced assembly-line worker at JLR’s Castle Bromwich plant in Birmingham. figure is just 7 percent. It’s this catch-up potential Chaande is eyeing a bigger market and hopes gradually to increase his workforce was visiting his native Lima from San Diego. “The re u ters “They’ve got their heads screwed on over there.” that has businesses salivating. ) to 150 from 28 today. “The future looks very bright,” he said. “It is companies like American dream actually seems to be more real in top

Europe’s debt malaise is prompting talk of a lost decade for the economy, like “I’m still optimistic. We will continue to see hy- ( : this one which employ people, and if we can be supported then even poverty lev- Peru now.” Japan in the 1990s. In the United States, deadlocked debt reduction talks, high per growth in these markets,” said Yang Yuanqing, els will come down.” Foreign direct investment, especially from China, has also unemployment, and long-stagnant incomes are sapping confidence. But many the chairman of Lenovo, the world’s number two been a powerful driver of Africa’s growth, contributing an additional one half of This rosy picture of demand from China and

less affluent countries, though not immune to the West’s woes, have displayed re- personal computer maker. In China, for example, photographs a percentage point or more to GDP growth, according to Aaron Weisbrod and other emerging powerhouses extending across the

�o. �o. reuters 28 Jan.2012 reuters 29 Jan.2012 globe invites an obvious question: ernst & young How long can these countries’ strong demand last? Maria Pinelli, global expects vice chair of strategic growth mar- the global kets at consultants Ernst & Young, expects that the global middle middle class—people with daily per capita incomes between $10 and $100, class to expressed at purchasing power par- ity—will expand from around two expand billion now to five billion by 2030. Annual spending in this group will from leap to $56 trillion from $21 tril- lion, offering juicy opportunities to around multinational companies if they can outrace fast-moving local rivals on two billion their home turf. “Speed to market will be absolutely essential because now to people in those countries are too en- trepreneurial to let an opportunity five billion pass. They’ll figure it out before the multinationals do,” she said. “That’s by 2030 a fundamental change.” Not everyone is so optimistic. Dani Rodrik, a professor of international political economy at Harvard Uni- versity, is skeptical of assumptions that developing countries will main- tain very high growth rates as they catch up with the West. Widespread convergence is a relatively recent phenomenon, he argues. “It would be nice if govern- ments simply had to stabilize, liberalize and open up

a l and markets would do the rest,” Rodrik wrote in a

ny sa paper. “Alas, that is not how sustained convergence

was achieved in the past.” Continued rapid expan- parth sion will require the kind of policies that advanced economies harnessed on the way to becoming rich, such as keeping currencies undervalued, control- uk; demia nc h uk; ling the financial sector, and favoring selected in-

a n der dustries—in short, the Chinese recipe for growth. A

a l e x All Aboard Western backlash against the Beijing model, sparked ; ; (Clockwise from perhaps by austerity fatigue, is a real risk. For now, n g so top left) Subway commuters in though, people inside and outside China are making ly a ly ; ; downtown São the most of the country’s economic rise. Paulo; a subway D o c e tunnel under “In China there are plenty of opportunities for c ho construction everyone to increase their standard of living,” said Na

/ between the Jangpura and David Zhang, who was born into a farming fam- Lajpat Nagar ily and is now chief financial officer of a company re u ters stations in New ) ) Delhi; models listed in Hong Kong. “The Chinese will have cars

l eft pose next to and luxuries they haven’t dared to dream about for

top a Russian Lada Niva vehicle in centuries,” said Zhang, who owns two BMWs.

from St. Petersburg; Back in Birmingham, taxi driver Mohammed Ik- customers entering the new tias said the news that JLR’s profits were up and the ise o ckw Apple Store at firm was taking on more workers had put a smile Pudong Lujiazui : (cl : in Shanghai on his face. “When I heard that, it made me genu- inely feel happy. It was good news for a change,” Iktias said. “It didn’t bring a tear to my eye, but it photographs was close.” �o. �o. reuters 30 Jan.2012 reuters 31 Jan.2012 Tech the hashtag revolution

As Politics and Twitter there’s a lot riding grow more intertwined, on a business model that is yet to be discovered

in just five years , Twitter has evolved from a 140-character punch line into a universal, all-purpose newswire, free and open to almost anyone, throbbing with the pulse of the planet in real time. It’s where Newt Gingrich announced his presidential run, Prince William an- nounced his engagement, and where the killing of Osama bin Laden was old news by the time President Obama announced it on television. If you’re watching or tak- ing part in a political protest—be it in Tahrir Square or downtown Manhattan— Twitter is where you have to be: faster than CNN, more credible than Fox News, and uniquely able to invite you to both follow the news and report it too. Twitter is, of course, much more than a headline news wire. For many of its 100 million users around the world, it is primarily a source of diversion and occa- sional amusement. Nor is it alone as the

tweet revenge Celebrants gather in Tahrir Square after the resignation of Mubarak, who had tried to choke off the by Jonathan Weber Arab Spring protests by shutting down the internet. �o. reuters 33 Jan.2012 creator of a new kind of global electronic conversation: Google has something to say. Twitter doesn’t report the news; rather, day. Is a given message or picture protected free speech, or does and Facebook, Tumblr and Wordpress, and much of the rest of people report or retransmit the news on it. it fall into a category—defamation, for example, or copyright in- the global communications industry are among those reinventing As the reach of Twitter and the other Internet media compa- The December Twitter messages from the Bahraini activist fringement, or shouting fire in a crowded theater—that enjoys no the way the world communicates about its daily intrigues, be they nies extends across the globe, though, it’s becoming apparent @Nezrad, translated by the website Global Voices, are painful to constitutional protection, or violates another country’s laws? prosaic or horrific. that they are not just enablers of communication, they are pub- read: “because of some words# I wrote on Twitter, I was arrested, Yet social media services are far from being unregulated fo- But if the basic purpose (or “use case,” as techies like to say) lishers, wrestling with classic publishing problems. They make shackled, blindfolded, and interrogated for five hours. I suffered a rums for free speech. Most ban many types of expression that are for Facebook is sharing a picture of your kid or “friending” the decisions about what types of words and pictures are suitable, lot from being shackled, from thirst, insults and standing without legally protected in the United States—pornography, hate speech, cute girl in your chemistry class, the use case for Twitter is to get they determine how to respond to would-be government cen- getting to sit down.” In a series of 20 messages, he tweeted details of and various forms of advertising, for example—and generally re- the word out: I have a new job! The police are pepper-spraying us! sors, they struggle with how to organize information in a useful his imprisonment and the mistreatment of his fellow prisoners. serve the right to block or delete a user’s account. The big rally is happening downtown at 10:00! Beyoncé is pregnant! fashion, and they even worry about how to handle advertising In Bahrain, as in many other countries, you tweet at your own These companies do, however, have very different policies Steve Jobs is dead! in a way that doesn’t alienate customers. risk—and hope that if the government wants your name so that it for how they handle different types of information. Facebook And you don’t even need a computer; just about any cell phone While Google seems a bit New York Times-ian (smart, thor- can kick down your door, Twitter will protect your identity and requires real names on its accounts, prohibits hate speech, ha- will do. ough, reliable, and a little arrogant) and Facebook tends toward make sure your words get out to the world uncensored. Just as tra- rassment, and pornography, and often works with governments Like many Internet media companies, Twitter positions itself People magazine or USA Today (something for everyone, clean ditional Western journalism organizations defend their reporters that want to block information that’s illegal locally. In Turkey, for as a platform—a utility-like entity that provides a set of tools for and generic, more concerned with the softer side of life), Twit- and fight restrictions on press freedom, so Twitter finds itself on example, it’s against the law to insult Ataturk, the founder of the people to use as they see fit. ter is their tabloid cousin: loud and freewheeling, light on rules, the front lines of a global battle over free speech on the Internet. country. Therefore, on Facebook in Turkey, you will not find any Unlike Time Warner or The New York Times or Reuters, Twit- heavy on sensational hard news, encouraging risk and experi- By positioning themselves as open platforms and, at least in the insults of Ataturk. The company employs hundreds of people to ter is not a “content creator,” to use the vernacular. Rather it mentation. United States, not responsible for what people post on their ser- review terms of service violations, field complaints, and block or is a proud democratizer of content creation, neutral as to the In spite of that—or perhaps because of it—Twitter has become vices, Internet media companies have tried to avoid many of the remove information deemed objectionable. substance of digital bits of information but open to anyone who one of the most important news purveyors of the 21st century. knotty issues old-media editors and their lawyers deal with every Twitter takes a more hands-off approach. Alex Macgillivray, the

In many countries, One executive recalls hearing French you Tweet at your own risk— President Nicolas Sarkozy and hope that if the government insist that online conversations wants your name so that had to be reined in. “He was mainly it can kick down your door, concerned with gossip Twitter will protect your identity. about his wife.”

a test of 140-characters Protests around the globe, includ- ing recent ones in Russia (left) and Egypt, were fueled by tweets. company’s general counsel, declared last year that the company was @The Arab Spring requirements of different countries, Twitter seems to understand the service’s utility—behind-the-scenes math wizardry that an- “from the free speech wing of the free speech party,” a stance that Reuters Social Media editor that if you’re not willing to publish without fear or favor, you’re not ticipates, based on a range of factors, what sorts of things an indi- Anthony De Rosa flags seminal tweets vidual might find most relevant. has been affirmed by the company’s CEO, Dick Costolo. Real names from the Middle East uprisings: going to be much of a news service. are not required on Twitter, and even hate speech and pornography Instead of the old news structure of categories and subcatego- are not banned outright. (A U.S. judge ruled recently that a stream of ries, Twitter might have user-driven search and customized, real- hateful and threatening anonymous tweets did not constitute illegal Tunisian street vendor turned protester turned time sorting of the information stream. For example, I signal that self-immolator Mohamed Bouazizi dies cyber-stalking.) Partly because tweets are so brief (it’s hard to violate @monaeltahawy Mona Eltahawy Preserving its ability to do what it does—allow anyone, any- I’m interested in California politics. Based on my behavior and a copyright in 140 characters) and partly because the company is so Family of Mohamed Bouazizi, 26, of where, to say just about anything to everyone—is one part of Twit- network connections, Twitter divines what sorts of things relating young and relatively small (no employees on the ground in countries #Sidibouzid say he died on Tuesday night. ter’s news challenge. The other# part, probably more difficult but to California politics I might find most relevant. where they could get arrested), Twitter is still able to flit over an inter- His self-immolation inspired popular decidedly less glamorous, has to do with categorization, naviga- Is a tweet a piece of news, a comment, an endorsement, or a call national media landscape mined with onerous restrictions on elec- uprising in #Tunisia. tion, and the reliability of information on the service. to action? Eventually Twitter will know, and attempt to treat it ac- January 5th, 2011 tronic communication. In the old days of media—up till 10 years ago, say—anyone cordingly. In principle, it should be able to take its fire hose of tweets That’s one reason Twitter has played such a prominent role as an Zine El Abidine Ben Ali resigns Tunisian building a general-interest news service spent a lot of time divid- and filter it into a customizable, coherent news service. Sometimes, organizing tool and source of information in recent political protests Presidency ing the world into categories. Politics, business, sports, lifestyle, that news will be live reports from “citizen” journalists. More often, around the world. Repressive governments, caught off-guard by a @jrug Jonathan Rugman and entertainment would be typical categories, and within those reports will come from traditional news organizations. Still other free-form news channel they can’t control, have been reduced to us- Ben Ali is gone. An extraordinary victory for categories there would be subcategories. Interested in news about times they will come directly from the news subjects themselves. people power in the Arab world. ing blunt force. Egypt shut down its Internet almost entirely at the January 14, 2011 the San Francisco 49ers? Click on sports, then click on football, People who don’t give a fig about politics but love movies should height of the Arab Spring protests (and Twitter, working with Google, then click on pro football, and then find the 49ers. be able to have their own movie wire. The same will be true for responded by creating a system in which people could phone-in Complete Internet blackout in Egypt Twitter, though, has no such hierarchy for organizing topics, and fans of sports, music, or food. Like a great newspaper, though, tweets). China has its “great firewall,” which blocks Facebook, Twit- @HuffingtonPost Huffington Post is only in the earliest stages of creating one. Its Twitter might also show the show-biz ma- ter, and Google, among others. In December, Russian agents appar- New analysis: #Egypt’s Internet blackout river of information is structured not around ven the occasional crime story, or high- “unprecedented in Internet history” http:// ently flooded Twitter with “junk tweets” to drown out news and in- huff.to/gXfGjQ topics but around people: you see news posted light the political event so big that every- terfere with online organizing during that country’s recent protests. January 27, 2011 by people you “follow,” and send your news to one should know about it. Those who just Industry officials (and their lawyers) say democratic governments people who follow you. Big news gets passed want to hear the roar of the global crowd can be as big a threat to online press freedom as iron-gloved dicta- President Ali Abdullah Saleh declares around—or retweeted—incredibly quickly, so could listen to that too. tors. One executive recalls hearing French President Nicolas Sarkozy he’s staying, security forces open fire on if you are active on Twitter, it won’t be long protesters in Yemen insist that online conversations had to be reined in. “He was mainly @SultanAlQassemi Sultan Al Qassemi before someone you follow tweets about the concerned with gossip about his wife,” said the official, who declined Ali Abdallah Saleh loses it. | Al Jazeera: 750 death of bin Laden. The fact that you might to be identified due to the sensitive nature of the issue. people injured after gunfire shots & teargas see dozens of tweets about that can be infor- The technical challenges in all of this In India, which prides itself on its democratic ways, the govern- was used against protesters in Taiz, #Yemen. mation in itself, what Costolo calls “the roar of are daunting, and until recently, the compa- ment summoned Internet executives in December and demanded April 3rd, 2011 the crowd.” ny could barely keep# its core service work- they implement a censorship regime (they declined). The U.K. gov- Egypt’s “Day of Rage” But the shortcomings of this structure are ing reliably, let alone solve giant computer ernment toyed with shutting Twitter down during the London riots @jrug Jonathan Rugman obvious, and often maddening. Most of the science problems. Twitter’s commercial last year, though a recent analysis by the Guardian newspaper showed Something changed today. This became a full time, you’re interested in some of the things an challenges are massive too. It is not a public that other users quickly corrected inflammatory tweets during that blown uprising against Mubarak rule cutting individual or organization is tweeting, but not company, and says it has no intention of be- tumult, and the service was an important channel for sharing safety across social divides #Cairo #Egypt #jan25 all of them. Also, it can be hard to tell what the coming one soon, but with a private market January 28, 2011 and clean-up information. provenance of a bit of news is, and thus hard to the tweet hereafter Costolo insists that Twitter valuation of $8 billion, it’s under pressure The ugly truth is that no government—even that of the United Pearl Roundabout in Manama, Bahrain judge its reliability—context is almost always be an ardent defender of free speech, to show that it can make money. (Investors States—likes a free speech free-for-all. Federal prosecutors frequently destroyed by government forces absent, since a tweet is so brief. Nor is there and is resisting Big Brothers all over the world. include Saudi prince Al-Waleed bin Talal, seek court orders demanding information on social media users, or in- @martinchulov Martin Chulov a good way to access news your network does who bought a $300 million stake, and Rus- sist that a specific bit of content be removed from the services. In many The hub of #Bahrain’s uprising has been de- not happen to be tweeting about, or to delve deeper into a topic. sian internet mogul Yuri Milner, who put in $400 million.) Advertis- stroyed. Pearl Roundabout now a mess of soil cases these court orders are secret, and the companies quietly turn over & debri. Flags, tents—& maybe legacy—gone. Twitter users took a stab at solving this problem with the ing is the obvious solution, but too many ads could be a turn-off for the information. Oftentimes, prosecutors are focused on cyber-crimes March 18, 2011 hashtag, or # sign. If you mark your tweet with a # and a topic, any- users. As Twitter looks harder at the bottom line, it will be tempting such as credit card theft, movie piracy or child pornography, but in the one can find it—and others on the same topic—by searching for for the company to avoid troublesome political activists and focus post-9/11 era, they increasingly deal with politics and national security. Egyptian President Hosni Mubarak steps down that hashtag. It’s still a crude system, though. Search #moscow, on, say, the many ad-friendly TV stars and sports celebrities who Twitter, to the delight of free speech advocates, shed a bright light @Reuters Reuters Top News and you’ll get activists talking about demonstrations and news or- have become big users of the service. FLASH: Egypt’s President Mubarak to transfer on these secret court orders last year when the government came hunt- power as army chief to military—CNN ganizations talking about demonstration politics—as well as help- Fortunately for Twitter, solving the relevance problem will also ing for information on people associated with WikilLeaks. Twitter got February 10, 2011 wanted ads, weather reports, and bad jokes. Twitter’s search func- solve the advertising problem. As Internet media guru John Battelle court permission to inform the subjects of the request and thus allow tion is improving, but if you want only the latest substantive and wrote recently: “If Twitter can assign a rank, a bit of context, a ‘place them to mount their own legal challenges. (The litigation is ongoing.) Col. Muammar Gaddafi killed authoritative updates on the political situation in Moscow, there in the world’ for every tweet as it relates to every other tweet and ev- “This is a very important example of willingness to stand up to pow- @Reuters Reuters Top News isn’t an easy way to find them. ery account on Twitter, well, it can do the same for every possible ad- FLASH: Libya’s Gaddafi dies of wounds erful interests when many others were willing to do the government’s suffered in capture near Sirte—senior NTC Numerous companies hope to have a hand in making Twitter’s vertiser on the planet, as they relate to those tweets, those accounts, bidding” said David Ardia, a law professor at the University of North military official millions of daily messages more useful—think of the third-party and whatever messaging the advertiser might have to offer.” Carolina and a former attorney at the Washington Post. “That was a cou- October 20, 2011 “apps” on Facebook or the iPhone—but Twitter is determined to And fortunately for the world, solving the relevance problem rageous stance.” address the core navigation and category issues itself. A recent re- could also reinforce Twitter’s commitment to deliver real news. To see an archive of Reuters’ real-time Arab Spring Defending free speech on a global service subject to the laws of every tweets, visit: reuters.com/ArabSpringTimeline design has made it much easier to get started, presenting a more Virtually every study of what people are looking for on the Inter- country in which people use it is a daunting task. But even as it explores Facebook-like home page and suggesting subjects you might be net puts news at the top of the list. And nobody is better positioned new ways of customizing and possibly filtering the service to meet the interested in. This latter concept could ultimately hold the key to to seize that opportunity than Twitter.

�o. �o. Reuters 36 Jan.2012 reuters 37 Jan.2012 there’s something in the air tonight THE Military

Stepped up strikes by America’s pilotless fighters have been cost-efficient, though not without cost. I lived in their menacing shadow for dro ne seven months

photograph by reuters/christopher griffin

by David Rohde

 BUZZ KILLER An MQ-1B drone gets a pre-flight inspection in the rugged mountains of western Pakistan. Although that country’s government gives tactical support to the U.S. drone program, it pretends to be outraged by WARS the strikes for political reasons. been no strikes in Pakistan for six weeks, the lon- gest pause since 2008, and a glaring example of the limitations of drone warfare. My perspective on drones is an unusual one. In November 2008, the Afghan Taliban kidnapped two Afghan colleagues and me outside Kabul and ferried us to the tribal areas of Pakistan. For the next seven months, we were held captive in North and South Waziristan, the focus of the vast majority of Ameri- can drone strikes during that period. In June 2009, we escaped. Several months later, I wrote about the experience in a series of articles for the New York Times, my employer at the time. Throughout our captivity, American drones were a frequent presence in the skies above North and They kill South Waziristan. Unmanned, propeller-driven air- craft, they sounded like a small plane—a Piper Cub or Cessna—circling overhead. Dark specks in a blue sky, they could be spotted and tracked with the naked eye. Our guards studied their flight patterns for indi- cations of when they might strike. When two drones appeared overhead they thought an attack was immi- nent. Sometimes it was, sometimes it was not. without The drones were terrifying. From the ground, it is impossible to determine who or what they are track- ing as they circle overhead. The buzz of a distant propeller is a constant reminder of imminent death. Drones fire missiles that travel faster than the speed of sound. A drone’s victim never hears the missile that kills him. Our Afghan and Pakistani Taliban guards de- spised the drones and disparaged them as a cow- warning, ardly way for America to wage war. The 2009 surge in drone attacks in Pakistan prompted our guards to hate Obama even more than they hated Bush. are comparatively cheap, risk no American lives, and produce triumphant The most difficult day of our captivity was March headlines. Over the last three years, drone strikes have quietly become the Obama Ad- 25, 2009. Late that afternoon, a drone attack occurred ministration’s weapon of choice against terrorists. just outside our house in Makeen, South Waziristan. Since taking office, President Barack Obama has unleashed five times as many drone Missiles fired by an American drone had struck doz- strikes as George W. Bush authorized in his second term in the White House. He has ens of yards away. After chunks of mud and bits of ing rounded up, accused of working as American spies JOYSTICK WAR The Air Force is developing transformed drone attacks from a rarely used tactic that killed dozens each year to a shrapnel landed in our courtyard. Our guards hustled and hung in local markets. Immediately after that at- drones as small as birds twice-weekly onslaught that killed more than 1,000 people in Pakistan in 2010. Last year, me down a hillside and ordered me to get inside a sta- tack in South Waziristan, a feverish hunt began for a and insects, which is bad news for protesters American drone strikes spread to Somalia and Libya as well. tion wagon. They told me to lie down, place a scarf local spy who the Taliban were convinced had some- in Peshawar, who charge In the wake of the troubled, trillion-dollar American invasions of over my face, and say nothing. We all knew that if lo- how secretly guided the Americans to the two cars. that U.S. drones are Iraq and Afghanistan, drone strikes are a talisman in Washington. To cal militants enraged by the attack learned an Ameri- Several days after the strike, our guards told us indiscriminately killing From the ground, it is impossible civilians. cash-strapped officials, drones eliminate the United States’ enemies can prisoner was in the area, I would be killed. As I lay foreign militants had arrested a local man and ac- to determine who or what they at little human, political, or financial cost. in the car, I heard militants shout with fury as they cused him of guiding the drones. After the jihadists

are tracking as they circle over- The sweeping use of drone strikes in Pakistan, though, has creat- v ez collected their dead. A woman wailed somewhere disemboweled the villager and chopped off his leg, head hour after hour. The buzz of ed unprecedented anti-American sentiment in that country. While per in the distance. I silently recited the Lord’s Prayer. he “confessed” to being an American spy, they said. U.S. intelligence officials claim that only a handful of civilians have After 15 minutes, the guards took me back to our Then the militants decapitated the man and hung a distant propeller is a constant died in drone attacks, the vast majority of Pakistanis believe thou- house and explained what had happened. Missiles his corpse in the local bazaar as a warning. n; k. k. n; peterso reminder of imminent death. sands have perished. Last year, the Pakistani government apparent- from American drones had struck two cars, they

s k ip ly blocked American drone strikes after tensions escalated between / said, killing seven Arab militants and local Taliban the two governments. fighters. Later, I learned that one of our guards sug- My time in captivity filled me with enormous sym- re u ters

After a CIA contractor killed two Pakistanis in January and American commandos : gested I be taken to the site of the attack and ritually pathy for the Pakistani civilians trapped between the killed Osama bin Laden in March, there were no drone strikes there for weeks at a beheaded. The chief guard overruled him. deranged Taliban and ruthless American technology. time. In November, drone strikes stopped again after an American airstrike killed 26 The strikes fueled a vicious paranoia among the They inhabit a hell on earth in the tribal areas. Both

Pakistani soldiers near the border with Afghanistan. As of late December, there had photographs Taliban. For months, our guards told us of civilians be- sides abuse them. I am convinced Taliban claims

�o. �o. reuters 40 Jan.2012 reuters 41 Jan.2012 that only civilians die in drone strikes are false, as are strike. They also showed my Afghan colleagues the American claims that only militants do. Drone strikes graves of children they said died in strikes. are not a silver bullet against militancy, nor are they a It is impossible for journalists, human rights groups, iRAQ Afghanistan U.S.DRONE U.S. declines to U.S. declines to wanton practice that fells only civilians. They weaken or outside investigators to definitively determine disclose; likely disclose; likely militant groups without eliminating them. the ratio of civilians to militants killed by American * dozens dozens During my time in the tribal areas, it was clear that drones. The United States refuses to release details STRIKE TARGETS PAKISTAN drone strikes disrupted militant operations. Tali- or publicly acknowledge the attacks, which they insist LIBYA 283 ban commanders frequently changed vehicles and are classified. Militants, meanwhile, refuse to allow attacks, according to local moved with few bodyguards to mask their identi- unfettered access to the area. 146 press reports attacks, during ties. Afghan, Pakistani, and foreign Taliban avoided The strikes kill senior leaders and weaken Al Qae- seven-month NATO bombing YEMEN gathering in large numbers. The training of suicide da, the Pakistani Taliban, and the Afghan Taliban, but campaign U.S. declines bombers and roadside bomb makers was carried out militants use exaggerated reports of civilian deaths to to disclose; SMASH LANDING Two dozens, accord- missiles thought to be in small groups to avoid detection. recruit volunteers and stoke anti-Americanism. I be- ing to local press fired by a U.S. drone killed reports 18 people, including Altogether, 22 drone strikes killed at least 76 mili- lieve the drones create a stalemate between militant S T RI k e S I N P A K IS TA N foreign militants, in this tants and 41 civilians in North and South Waziristan groups and U.S. intelligence agencies. U N d e R E A c h house near the SOMALIA border of Pakistan and during our seven months in captivity, according to While drones are seen as a triumph of American ADMINISTRATION U.S. declines to disclose; at Afghanistan in 2008. news reports. Some strikes clearly succeeded. Our technology in the United States, they provoke in- least one attack That same year, a drone in 2011 washed up on an island in guards reacted with fury, for example, when Uz- tense public anger in Pakistan. Exaggerated Taliban BUSH the Outer Hebrides. bek bomb makers they knew were killed in a drone claims of civilian deaths are widely believed by the 44 Pakistanis, who see the strikes as a flagrant violation E S T I M At e d d e At h S F RO M U . S . D RON E S T RI k e S of the United States’ purported support for human IN PAKISTAN 2004-2011* rights. Analysts believe that killing a senior militant

in a drone strike is a tactical victory but a loss over HIGH ESTIMATE: 2,680 the long term because it weakens public support LOW ESTIMATE: 1,717 for an American-backed crackdown on militancy in Pakistan, which many analysts think is essential. OBAMA “In the short term, it puts [the militants] on the 239 MILITANT DEATHS CIVILIAN DEATHS back foot,” a former United Nations official in the SOURCE: New American Foundation; news reports region who spoke on condition of anonymity told * Through Nov. 16 me. “In the overall community, it’s devastating.” Worsening the problem, the U.S. has allowed the matic preaching inspired terrorist attacks around the Tufts University professor and former senior Obama Pakistani military to falsely claim that it has no con- world, including the 2009 killing of thirteen soldiers Administration adviser on Pakistan, told me. “We trol over the drone strikes. American drones operate in Fort Hood, Texas. Civil liberties groups argued have resisted that, but the benefit is that you give the out of Pakistani air force bases with the permission of that a dangerous new threshold had been crossed. local government ownership.” Pakistani forces, yet the Pakistani public is told that a For the first time in American history, the United For all their shortcomings, drones do present a foreign power is carrying out unilateral attacks inside States had executed two of its citizens without trial. tempting though far from perfect martial option. their country and violating their sovereignty. The Obama Administration cited a secret Justice Drones can reach jihadists in remote mountains and Pakistan is not the only country experiencing drone Department memorandum as justification for the deserts inaccessible to American and local troops. attacks. Since 2001, the United States has carried out attack. Its authors contended that Awlaki’s killing They have taken out top militants, such as the Paki- drone strikes in five other countries—Afghanistan, was legal due to his role in attacks on the United stani Taliban commander Baitullah Mehsud, who was Yemen, Iraq, Libya and Somalia. In Libya, the Ameri- States and his presence in an area where American responsible for the killing of thousands of Pakistani can military carried out 146 drone strikes during forces could not easily capture him. The administra- NATO’s seven-month bombing campaign against tion declined to publicly release the full document. the Gaddafi regime. In Afghanistan and Iraq, the CIA

and the American military do not disclose the num- Missiles from American drones had ber of attacks but a senior American military official Many experts insist a new approach to drones is struck two cars. One of our guards put the number at “dozens” since 2001. desperately needed. Strikes should continue, they say, obe suggested I be taken to the site of the g l The most alarming pattern has emerged in Yemen but in a vastly different manner. Among the changes

and Somalia. The exact number of strikes in both be k a they suggest: The U.S. must end its absurd practice of attack and ritually beheaded. ; ; countries is unknown. Local media in Yemen report refusing to publicly acknowledge attacks. Many ana- aheed strikes as often as once a week, but American officials y lysts also believe Washington should accede to long- w decline to confirm that. standing demands from the Pakistani, Afghan, and civilians in suicide bombings. And they have slowed m u rra

ammad On September 30, 2011, a drone flying over Ye- / other local governments for more control over the use the training of suicide bombers and roadside bomb a nn e men set a new precedent. Without a trial or any pub- y of drones. Their reasoning is simple: Along with the makers, most of whose victims are innocent Afghan re u ters : M ar : lic court proceeding, the United States government : United States, local officials will then bear the burden and Pakistani bystanders, not American troops. killed two American citizens, Anwar Al Awlaki and of building local public support for drone strikes. But drones alone are not the answer. Over the Samir Khan. The target of the attack was Awlaki, a “They have asked for sharing the responsibility, long term, it will be moderate Muslims who defeat

New Mexico-born Yemeni-American whose charis- photographs c s i n fographi but also means sharing the technology,” Vali Nasr, a militancy, not technology.

�o. �o. topline 42 Jan.2012 reuters 43 Jan.2012 photograph by reuters/paul hackett

Media

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His organization is in disarray, his sources have dried up, and Julian Assange is desperate for a second act. His leaks over the 16past five years have told . us plenty, but have they Minute changed anything?

What Have You Leaked For Me Lately? by As Assange scrambles to save WikiLeaks, he is shackled with several problems: he’s fighting extradition to Sweden, has alienated Jack Shafer supporters with his imperious manner, and his best source is in a military jail.

�o. �o. reuters 44 Jan.2012 reuters 45 Jan.2012 auteur was shackled with a security brace- based on WikiLeaks material puts the lie to ward Pakistan. These lone wolves under- way of official government investigations, between governments of the sort that let, fighting extradition to Sweden, where Assange’s sweeping condemnation. stood they had booked one-way trips—that open-government legislation, or even suc- WikiLeaks exposed “safeguard global se- authorities want to question him regard- I mean no disrespect to Assange by call- having unloaded their stash of secrets, their cessful imitators. Governments and corpo- curity and advance economic prosperity” ing charges of sexual assault; WikiLeaks ing him a wildcatter—or by calling him a next stops were jail, exile, or obscurity. rations have proved how good they are at reads like a hack passage out of a civics members and allies, alienated by the dic- journalist! (If digging up state secrets and Assange’s self-defined role as go-be- stifling leakers and their depositories. The textbook. The reason governments, totali- tatorial Assange, had abandoned him; and revealing them to the public isn’t an act of tween rather than leaker, and his ambition most direct effect, Aftergood notes, is a tarian and democratic, labor to keep their leakers were no longer making their sub- journalism, what is?) The wildcatter label to build a perpetual secret-exposing ma- tightening of U.S. government computer se- diplomatic works—trivial and important— stantial deposits in WikiLeaks computers. captures the entrepreneurial qualities he chine, further differentiates him from the curity: Security had been loosened after 9/11 wrapped in secrecy has less to do with en- You can date the beginning of this decline brought to his work. Charlie Beckett, of the all-stars. Steven Aftergood, who runs the to make dot-connecting easier in the hope suring world peace and prosperity than to mid-2010, when Assange’s alleged super- London School of Economics and Political Federation of American Scientist’s Proj- of preventing another attack. Aftergood with avoiding scrutiny by their citizens. If source, U.S. Army Pfc. Bradley Manning— Science, notes that Assange drew on his ect on Government Secrecy, says, “The also notes that the diplomatic cable leaks international diplomacy can be redefined as suspected of having leaked the Afghani- skills as a programmer and hacker to spot WikiLeaks disclosures were presented— caused the U.S. to transfer some personnel politics by other means, what governments stan, Iraq, Gitmo, and diplomatic cable “a new business model and a novel kind above all—as a challenge to official secrecy and curtail diplomacy, and that the revela- most object to is not the leak of cables but a files—was jailed. Assange was still boasting of platform.” As Beckett points out, there rather than as a focused revelation of any tions strained U.S. diplomatic relations with full public discussion of what governments late October, a deflated Julian As- to Forbes in November 2010 that WikiLeaks are plenty of programmers and hackers particular scandal or misdeed or an effort some nations. In this case, WikiLeaks may do in private in the public’s name. sange called a press conference in Lon- was receiving so many leaks that it had to out there, so “what made WikiLeaks work to redirect U.S. foreign policy.” have shaken the earth, but Assange’s orga- Setting aside for a moment Assange’s don to announce he may have to mothball turn off the submission form on its site and was Assange’s ideological drive and his nization did not really change it. bad manners, his megalomania, and his WikiLeaks. The reason, he said, was mon- that “about 50 percent” of the documents all-consuming desire to use digital com- despite his many troubles, Assange Or maybe it did. Gideon Rachman gave supreme skills as a bridge-burner, we ey. Visa, MasterCard, Western Union, and in its hoard were from the private sector munications as a political weapon.” is still swinging. In December, he gave a wonderfully perverse reading of the im- are in his debt for reigniting debate over Paypal were preventing supporters from (banking, oil, pharmaceuticals). But despite Although it’s difficult to think of Assange The Washington Post sales brochures from pact of the publication of the diplomatic ca- the prosecution of the wars in Iraq and donating to the organization, Assange ex- those boasts, he never delivered those cor- without imagining gigabytes of classified which the paper fashioned a page-one sto- bles last December in the Financial Times, Afghanistan. Better than any leaker—or plained. He warned that unless the bank- porate exposés. The Manning trove was his data coursing around the Web, this cyber- ry about the worldwide market for inva- declaring that Assange and WikiLeaks had broker of leaks—before him, Assange fig- ers’ blockade was lifted at once, the cash- last big data dump, a reminder that journal- centric view denies him his proper status in sive surveillance technology. (Not exactly done America “a massive favour” by “in- ured out a new mechanism for the many strapped organization would soon die. ists are only as good as their sources. Last the pantheon of secrecy hackers. He’s never groundbreaking, but worthy enough.) advertently debunking decades-old con- to monitor the powerful few. By then, however, the biggest problem year, after teasing 60 Minutes about explo- been a leaker; instead, he positioned him- Whatever WikiLeaks’ current status, it’s WikiLeaks faced wasn’t financial. After all, sive documents he hinted could take down self as a broker of leaks. At first, he believed fair to ask what it has accomplished. Can the group had always operated on a shoe- a bank (Bank of America?) he reportedly WikiLeaks could be a passive platform, dis- we identify any significant changes in poli- string, its leader famously sleeping some- backpedaled in private. Was he oversell- persing anonymous leaks to an interested tics or policy prompted by its revelations? He’s never been a leaker; where other than at home or in a hotel most ing his material or was he holding back the world. Assange had moderate success early (To be fair, that’s a tough question to ask of nights. The main concern was productivi- bank documents for maximum impact lat- on interesting journalists in his files—main- any news organization.) Its most tangible Instead, he positioned ty: WikiLeaks and Assange, its 40-year-old er? Only Julian Assange, international man stream outlets generated numerous stories accomplishment must be that it has given provocateur, were out of scoops. of mystery, knew for sure. from WikiLeaks documents that outraged the world a better look at how the United himself as a broker of leaks. And oh, what a string of scoops it had run governments (the Chinese and the British), States prosecutes its wars and conducts off in the previous 18 months. WikiLeaks’ The WikiLeaks fade-out demonstrates religions (Scientologists and Mormons), its diplomacy. “The [WikiLeak] releases spiracy theories about its foreign policy… “The dominant message conveyed by 2010 posting of a classified video showing the advantage established news institu- banks, and other power centers. But it included quite a few records of enduring Where WikiLeaks does reveal a gap be- WikiLeaks was, ‘You cannot keep your civilian casualties during an Apache heli- tions have over wildcatters like Assange. He wasn’t until Assange started working with interest, but many others of only passing tween America’s public statements and pri- secrets from us,’” says Aftergood. “But copter attack in Baghdad, which Assange may have found the oil but he had no way the mainstream media on the Afghanistan curiosity, and perhaps a majority that are vate discussions, it tends to be because U.S. the gathering official response is, ‘Oh, yes titled “Collateral Murder,” drew debate of making it useful to the masses. The es- and Iraq files—aping the traditional source- of no particular significance at all,” says representatives are being diplomatic rather we can.’” Aftergood is right. The careers and viewers around the world. Then came tablished press—love them or hate them— journalist relationship—that he started Aftergood. “We probably need more time than duplicitous.” Although the candor of leakers are traditionally short-lived. its distribution of classified documents had the means to quickly figure out what maximizing the “yield” from his files. and perspective to reach a final judgment in many of those cables embarrassed the Even if they aren’t caught and prosecuted, from the wars in Afghanistan and Iraq, the the Manning files meant and the skill to Assange’s current intimacy with editors on WikiLeaks’ lasting impact... The Penta- United States, the complete dump flattered the Ellsbergs and Mannings who leak get Guantánamo Bay prison camp files, and present them in readable form, something and reporters places him closer to the tra- gon Papers were a phenomenon, but what it because it showed the public positions of evicted from the secrets trove. The depen- the classified U.S. State Department diplo- Assange appears to be incapable of doing. dition of the all-star leakers of the 1970s— was their impact, really? Did anyone actu- the United States are nearly identical to the dency of the press and other institutions, matic cables to the Guardian, the New York The pressies also had lawyers who knew Daniel Ellsberg (the Pentagon Papers), ally read them? Or did their significance private positions expressed in the cables. including governments, on leakers is well Times, Der Spiegel, and other news outlets. how to beat back the legal threats of gov- Philip Agee (outing CIA officers), Navy arise from the over-reaction of the Nixon This consistency, Rachman argues, dispels documented. Journalists, of course, need But after the diplomatic cable stories ernments, namely the United States, that Yeoman Charles Radford (the Indo-Paki- Administration?” the “idea that something sinister is going leaks to perform their watchdog function. petered out in September, so too did did not want the files published. Of course, stan conflict)—who teamed with journal- But who can deny the impact of the on behind the walls of the U.S. embassy.” But governments depend on them, too, to WikiLeaks. Its slide into irrelevance af- Assange mocked attempts by the Times and ists or publishers to get their secrets out. leakers of the 1970s? A new breed of na- Rachman’s formulation sounds flip, but check and balance the bureaucracy that ter months of dominating the headlines the Guardian to discuss the leaks with the Like them, Assange was (and is) on a sui- tional security reporter, inspired by the it isn’t. Obviously, some of those cables has grown unaccountable. should have been enough to humble even governments involved prior to publication cide mission to destabilize the system. revelations of those whistleblowers, be- and action reports embarrassed the U.S. What WikiLeaks demonstrated in its Assange. His five-year-old supranational as selling out. In a new documentary, True But unlike Assange, the aforementioned gan filing tough dispatches. The Freedom government or did damage to its coveted 16th minute of fame is the extreme depen- group, with its hardened computer infra- Stories: WikiLeaks, Assange snarls that the focused their outrage on a single issue: of Information Act, established in the late “sources and methods” of information col- dency of leakers on strong institutions. It structure and sophisticated encryption mainstream media “cannot be trusted” be- Ellsberg exposed the lies at the heart of the 1960s, was strengthened, giving reporters lection and diplomacy. But when Secretary may be too late to rescue WikiLeaks by algorithms, was supposedly immune to cause they are “part of the social network United States’ Vietnam policy; Agee, a born- additional leverage in their investigations. of State Hillary Rodham Clinton ripped the sending Assange to the Emily Post Insti- government crackdowns and corporate of the elite.” Even if he’s right, that elite is again Marxist, opposed what he considered And Senate hearings exposed the multi- leak of the diplomatic cables as “an attack tute for remedial studies in good manners. retaliation. But instead of flourishing, as not a static entity with a single set of inter- to be U.S. imperialism; Radford (who served decade excesses of the CIA, the FBI, and on the international community,” she gave But his example stands for any news orga- Assange had predicted, WikiLeaks all but ests. That governments around the globe his Mormon mission in India) objected to the military intelligence agencies. hyperbole a bad name. Secretary Clinton’s nization or pirate outfit bold enough to fol- vaporized in its 16th minute of fame: Its recoiled at the Times and Guardian stories the Nixon Administration’s favoritism to- WikiLeaks hasn’t inspired much in the claim that the confidential conversations low his lead.

�o. �o. reuters 46 Jan.2012 reuters 47 Jan.2012 Class The ONE PERCENT WAR

A conflict is brewing between the ultra-wealthy and the merely rich

illustration by raymond biesinger

by Chrystia Freeland

�o. Reuters 49 Jan.2012 within the one percent. That is partly because it can set up lives for themselves they can’t afford. They The gap between the one percent and the 0.1 be a little stomach-churning to consider the grada- are broke and maxed out on their credit cards in percent could have serious political consequences. tions of wealth at the very top at a time when unem- December, just like middle class couples living on Even in the United States, there are just 412 billion- ployment is close to nine percent and middle-class one hundred thousand dollars. I don’t think they aires, and 134,888 taxpayers fall in the 0.1 percent. families are being hammered. Nor is this queasi- feel that rich. They are trying to play with the high The one percent is bigger, containing 749,375 tax- ness about studying what’s happening on Olympus rollers, and there are things they can’t do, and they payers. With an annual income of $486,395, the one confined to liberal do-gooders. Branko Milanovic, feel deprived, which is completely sick and absurd, percent is also not that far away from the 7.5 million Within a World Bank economist who is one of the leading but that’s the truth of the matter.” taxpayers who occupy the wider 10 percent and students of global income distribution, writes in his Although the insecurities and petty jealousies of earn an average $128,560. These people at the bot- When Anders Aslund, a Swedish economist who the one latest book, The Haves and the Have-Nots, that it is the rich are revealing, the best way to understand tom of the top income distribution are financially has studied and advised most of the leaders in the far easier to secure funding for research about pov- what’s happening at the top of the income distribu- essential to the country and politically vital to those former Soviet Union, visited Kiev in late 2004, at p ercent, erty than about income inequality. The reason for tion is simply to look at the numbers. Brian Bell and The split at the very top. If the super-elite loses their loyalty, the height of the Orange Revolution, he returned to that is “rather simple even if often wisely ignored,” John van Reenan, two economists at the Centre for it could become very isolated indeed. his office in Washington, DC, with a surprising ob- the awareness Milanovic says. “Inequality studies are not particu- Economic Performance at the London School of be tween Historically in America the merely rich have servation. Most reports depicted the Orange Revo- larly appreciated by the rich.” Indeed, Milanovic Economics, have done a careful study of Britain’s strongly identified with the very rich. The strivers lutionaries, with their determined, sub-zero en- says he was “once told by the head of a prestigious super-rich. Peering inside the top one percent, they at the bottom of the one percent were just one big campment of the capital city’s central square, either o f the think tank in Washington, DC, that the institution’s found a distribution almost as skewed as that within idea or one big job away from the summit. But there as western Ukrainians rebelling against the govern- board was very unlikely to fund any work that had the economy as a whole—the top two percent of the pro - are a few indications that the sub-millionaires are ment’s pro-Russian stance, or as idealistic students different income or wealth inequality in its title. Yes, they one percent captured 11 percent of the wage share beginning to suspect that the billionaires are get- who were unwilling to stomach political repression. would finance anything to do with poverty allevia- of this top slice overall in 1998 and thirteen percent busi ness ting an unfair deal. One sign is how “crony capital- Both characterizations were true, but Aslund saw a tion, but inequality was an altogether different mat- in 2008. Among financiers, who are disproportion- ism” has become the battle cry not only of Occupy third dynamic at play. The Orange Revolution, he tiers ter. Why? Because ‘my’ concern with the poverty ately represented within the British and American Americans Wall Street, but also of Tea Party darling Sarah Pa- told me, was the rebellion of the millionaires against of some people actually projects me in a very nice, one percent, the tilt towards the very top is even lin and conservative intellectual Paul Ryan. This the billionaires. Ukraine’s crony capitalism worked warm glow: I am ready to use my money to help more pronounced. and the emerging split between pro-business, pro-money extremely well for the small, well-connected group of wealth them… But inequality is different. Every mention of Jeffrey Winters, an American political scientist, Americans and the 0.1 percent is potentially much of oligarchs at the very top, but it was stifling the is as keen it raises in fact the issue of the appropriateness or has devised another way to appreciate the differ- more important than the patchouli-scented, anti- emerging business class. This ambitious haute legitimacy of my income.” ence between the merely rich and the super-rich. establishment idealism of Occupy Wall Street. We bourgeoisie was finally fed up and it was fighting for as an Indian Within the one percent, awareness of the differ- His “Material Power Index” (MPI) measures the always knew the left was suspicious of high finance. more equitable rules of the game. ent tiers of wealth is as keen as an Indian match- income of the top 10 percent of Americans as a What is surprising is that Wall Street’s yeomen have A version of that battle of the millionaires versus m atcH- maker’s sensitivity to the finer divisions of caste. multiple of the average income of the bottom nine- become suspicious of their bosses. the billionaires has been playing out around the And thanks to the wire-tapping authority of the ty percent. The index shows that, like a mountain Here’s how Joshua Brown, a self-described New world over the past twelve months. It was a decisive m aker’s Manhattan federal prosecutor, the hoi polloi were whose slopes become steeper as you ascend to the 0.1 York–based investment advisor to high net worth factor in the Tahrir Square uprising, whose most recently able to eavesdrop on one conversation peak, income polarization in America gets sharper p ercent is individuals, charitable foundations, and retirement visible organizer was Wael Ghonim, a Google exec- sensitivity within the one percent that revealed some of these the richer you are: the top 10 percent have a MPI of plans responded to complaints by a number of Wall potentially Street chiefs that they were being unjustly vilified. utive based in Dubai with an MBA degree; the pro- to the finer internal distinctions. The dialogue was between four (meaning their average income is four times tests also quickly won the support of the country’s Raj Rajaratnam, the hedge fund investor convicted that of the bottom 90 percent), the top one percent mu ch more Brown’s tirade, which he posted on his blog, The well-heeled military elite. The same class struggle of insider trading last summer, and Anil Kumar, have an MPI of 15. But when you get to the top 0.1 Reformed Broker, quickly went viral: “Not only do was on display in India, where veteran social ac- divisi ons who was at the time a partner at McKinsey, the percent, the MPI jumps to 124. That is the line, in we not ‘hate the rich’ as you and other em-bubbled tivist Anna Hazare’s anti-corruption hunger strike management consultant. The two were discussing Winters’ view, which separates the affluent from important plutocrats have postulated, in point of fact, we love was hailed as the political awakening of the pros- their mutual friend, Rajat Gupta, the former man- the plutocrats. “There were about 150,000 Ameri- them,” Brown wrote. “We love the success stories pering Indian urban middle class. And it could be of caste. aging director of McKinsey. At the time of the con- cans whose average annual incomes were $4 mil- than the in our midst and it is a distinctly American trait to seen last month in Moscow, where the unexpected versation—August 2008—Gupta was considering a lion and above in 2007,” Winters writes of the 0.1 believe that we can all follow in the footsteps of revolt against Vladimir Putin’s “party of crooks and move from the blue-chip board of Goldman Sachs percent. “This is the threshold at which oligarchs the elite, even though so few of us ever actually thieves” was catalyzed by a blogging lawyer and to serve as an advisor to KKR, the legendary private dominate the landscape.” anti- do. So, no, we don’t hate the rich. What we hate drew fur-clad professionals into the streets—it is equity group. “I think he wants to be in that circle,” Winters has more bad news for the merely rich. are the predators. America hates unjustified privi- being called the “Mink Revolution.” In the United Mr. Rajaratnam says to Mr. Kumar. “That’s a bil- In a study of US tax policy over the past century establishment lege, it hates an unfair playing field and crony capi- States, Occupy Wall Street has drawn the politi- lionaire circle, right? Goldman is like the hundreds he concludes that the ultra-wealthy have outfoxed talism without the threat of bankruptcy, it hates cal battle lines somewhat differently—between of millions circle, right?” their less affluent neighbors in the top percentile. privatized gains and socialized losses, it hates rule the 99 percent and the one percent. But when you Holly Peterson, the daughter of private equity bil- When a federal income tax was first levied in the idealism changes that benefit the few at the expense of the drill down into the data, you can see another, even lionaire Pete Peterson—and herself a rather sly and United States in 1913 it was targeted solely above many and it hates people who have been bailed out steeper division inside the one percent itself. The eloquent chronicler of the one percent in her essays Winters’ oligarch threshold, at the 0.1 percent. o f Occupy and don’t display even the slightest bit of remorse ultra-rich of the 0.1 percent have pulled far ahead of and fiction—tells a similar story of the tension at the Over the next hundred years that burden has shift- or humbleness in the presence of so much suffering the merely rich who make up the other 0.9 percent very top. “I think people making five million dollars ed down the income ladder. Within the one per- Wall Street. in the aftermath.” at the tip of the income pyramid. The divide is cul- to ten million dollars definitely don’t think they are cent, the richer you are, the lower your effective tax In a populist age, the super-elite can survive if tural and it is economic—and if it becomes political making enough money,” she told me. “Wouldn’t rate: in 2009, the top one percent paid more than 23 every millionaire is convinced he has a billionaire’s it could transform the national debate. it be nice to fly private? There are so many things percent of their income in tax; the top 0.1 percent baton in his knapsack. If that conviction breaks The wider public discussion about income in- you can aspire to, even making five million dollars a paid about 21 percent; and the top 400 taxpayers down, the battle of the millionaires versus the bil- equality hasn’t much touched on the divisions year. For the lower rung of this crowd, these people paid less than 17 percent. lionaires could move west.

�o. �o. Reuters 50 Jan.2012 Reuters 51 Jan.2012 Signs Matter Tea Party protesters in Flagstaff, Arizona, demonstrate against President Obama, Congress, and the corruption of by Nick Carey Washington politics.

photograph by reuters/joshua lott R e t ur n

of the

Protest

activist

A new generation of protesters struggles to avoid the fate of its elders

�o. reuters 52 Jan.2012

undreds of miles and a vast ideological divide separate Cecily Friday from Tim Dake. But what they share is a passionate dis- like and distrust of the American political elite. I caught up with Friday on a bitterly cold, rainy

October night in Nashville. That same night state troopers had arrested twenty-nine members Add It Up Tea Party protesters in of Occupy Nashville for violating a new curfew designed to end the occupation of Legislative Florida (top right) and Iowa (bottom right); Occupy Berlin protesters Plaza. They were there, the occupiers said, to protest income inequality, bank bailouts, and in front of the Reichstag. corporate involvement in American politics. “I have been waiting and waiting for years for people to come out onto the streets,” said Friday, a former left-wing blogger, now a stay-at-home mom who has become a spokeswoman for the local Occu- py movement. Slender, brown-haired, and efficient, is the big one yet, but if the system doesn’t provide good jobs for Friday did not waste many words—she was needed America’s left-wing Occupy movement and right-wing Tea the middle class, there will be others.” elsewhere. “Now we’re doing something and we’re Party are just two examples of the world’s new wave of activists, a not going to stop.” diverse and dispersed collection of movements that also includes a lot of groups go to washington When I asked why protestors felt compelled to oc- Spain’s Indignados (the “Indignant”) and the rebellious youth of with good ideas, but over Over the past decade or so there have been protests and demon- cupy this public space instead of relying on civil society the Arab Spring. What these disparate groups have in common is strations against globalization and the institutions that represent and nongovernmental organizations to make their case, a desire to challenge a system that favors a wealthy and powerful time it all becomes about raising it, though nothing on the scale seen since 2009. Thomas Ratliff, z yn s k i c

Friday paused to warm her bright red fingers on a polysty- elite, often at their expense, whether that takes the form of op- op an assistant professor of sociology at Tennessee Tech University, rene cup of hot liquid that looked, but didn’t taste, like cof- posing bailouts for the banking giants or attempting to take down has been studying protest movements going back to the 1970s.

l k w e l money. a

fee. “They have been around for a while, but apparently they longtime despots like Libya’s Muammar Gaddafi. Many in this new P ; He argues that the world has been in a “new cycle of mobiliza- haven’t done enough,” she said matter-of-factly. “Otherwise wave of activists feel left behind by globalization. Coming of age tion” since the “Battle of Seattle” in 1999, when anti-globaliza- o un g we wouldn’t be here.” in the Great Recession era of rising inequality and high unemploy- y tion protesters clashed with police outside a World Trade Organi- jim Two weeks later and some 500 miles north of Nashville ment, they seem determined to remain outside the system—or in ; zation meeting. Subsequently, thousands of protesters made the in the Milwaukee suburb of Franklin, Tim Dake and Larry the case of the Tea Party activists, to take over the system but re- of Minnesota, see the Occupiers and others like them eventually trip to Prague in September 2000 for the annual meeting of the s k ipper

Gamble of the Wisconsin Grandsons of Liberty described main as unpaid outsiders. Many look upon mainstream NGOs as succumbing to the enticements of professional activism. “A small International Monetary Fund and the World Bank. These includ- oe /J a visit from a national conservative nonprofit group seek- part of the establishment and therefore part of the problem. They number of people will see a career opportunity, the rest will fade ed a cheerful bunch of Italian anarchists who donned homemade

ing to open an office in the state. Dake, an engineer, said the have a point. Over the past few decades, NGOs founded by the re u ters back into the scenery,” he told me. “To sustain something like this body armor (consisting of foam pads, varied sports helmets, and preliminary $7.5 million budget proposed by the nonprofit, activists of decades past have become increasingly domesticated. ) you need money and organization.” trash-can lids as shields) and battled riot police on the city’s Nu- right which he declined to name, included a six-figure salary for The chief executives of these highly respectable groups receive in- But Mark Thoma, an economist at the University of Oregon, selsky Bridge, taking turns sitting in the warm autumnal sun with top the state director, plus $3.5 million for a new building. “I vitations to attend the World Economic Forum’s annual meeting says this is just the beginning. The middle class in the developed their eyes streaming when the tear gas became too much. But this from looked at that budget and I thought about how much havoc in Davos alongside the world’s powerful and wealthy elite, and the world and the young everywhere have borne the brunt of the remained a largely fringe movement. I could wreak with that money,” he said, slapping his fore- hefty salaries of some top nonprofit executives put them in the top 1 global slowdown, he argued, and will suffer more from high long- The United States saw protests against the Iraq War in 2003 and

head as he spoke. “A lot of groups go to Washington with percent of American earners targeted by the Occupy movement. ise o ckw term unemployment. “What we’re seeing now may just be the immigration reform demonstrations in more than 100 cities in good ideas, but over time it all becomes about raising mon- But can this new generation of activists avoid the lure of insti- (cl : first wave of protests,” Thoma said. “The middle class has aspira- 2006, but these soon petered out. By contrast, the protests since ey from donors,” said Gamble, a former Air Force colonel. tutionalization that has apparently befallen the large mainstream tions and taught their children that if they studied for a degree 2009 have been more frequent, in more places, and attended by “After a while all they’re doing is feeding the beast and try- NGOs? And will these new activists have any staying power? Some they would get a job. Suddenly that’s not happening and we’re growing numbers of people. In 2010, students in the United King-

ing to justify their budgets.” academics like Larry Jacobs, a politics professor at the University photographs seeing anger and protests as a result. I don’t know if this first wave dom took to the streets to protest against rising university fees;

�o. �o. reuters 54 Jan.2012 reuters 55 Jan.2012 over the past few decades, ngos founded by the activists of years past have become increasingly domesticated.

just enough for recognition, but not enough to make a difference.” goal is to make a lot of money and then pursue their passion by Grassroots Tea Party activists often criticize FreedomWorks and working for an NGO. “While that is great and noble, they don’t its chairman, Dick Armey, a former Republican Majority Leader have the same background in activism and have little in common in the U.S. House of Representatives who makes a combined with the activists they end up working with,” King said. A perfect annual salary of $500,000 from both FreedomWorks Inc. and illustration of his point can be seen at Davos, where leading exec- FreedomWorks Foundation Inc. But this is nothing compared to utives of mainstream NGOs have become fixtures. Last year, for the criticism reserved for the Republican Party’s old guard estab- instance, executives from Mercy Corps, Greenpeace, and World lishment. Although the Tea Party is occasionally portrayed as an Vision International—a Christian humanitarian organization—

Take Back the Streets adjunct of the Republican Party, almost all of the activists in this were all in attendance. After being evicted from middle-class grassroots movement are unpaid and they often pick And like their Ivy League classmates who entered the financial their encampment in lower Manhattan, Occupy fights with the establishment. Tea Party groups in Georgia, for ex- sector, such well-meaning executives pull down excellent salaries. Wall Street protesters must ample, are also working with the liberal group Common Cause According to tax filings, Mercy Corps CEO Neal Keny-Guyer re- find their way through an uncertain political on ethics reform. “Our ethics reform proposal has not been well ceived $303,419 in compensation in 2010. Richard Stearns, presi- landscape. received in the state legislature,” said Debbie Dooley, co-organiz- dent of World Vision International, received $439,155. The most re- er of the Atlanta Tea Party. “But politicians on both sides need to cent data available from the Internal Revenue Service show that the understand we are here to clean house.” top 1 percent of U.S. taxpayers earned a minimum of $343,927. Data provided by Guidestar, which collects information on nonprofit or- they were followed in May by the predominantly young Indigna- feared militia, and indeed all the protesters were arrested. “We ganizations, shows that the median compensation for the CEO or dos of Spain. Along with the Arab Spring, these vigorous protests just wanted the things a normal country should have,” he told me Unlike the Tea Party, the Occupy movement has only been executive director of nonprofits—which includes museums, some have served as the inspiration for the Occupy movement. “The is- when I visited Misrata in July. This wave of new activists also in- around since September, and it is still working out what to do af- universities, and hospitals—with budgets of more than $50 million sues raised by these movements are not new issues,” Ratliff said. cludes Julianne Thompson, a mother of two and a co-organizer of ter being ejected from the public spaces that it occupied early on. rose 60 percent to $422,000 between 2000 and 2009. “But they do involve people who are new to protesting.” the Atlanta Tea Party. “For years conservatives in America were Beyond a dislike of corporate bailouts and a sense that a moneyed Fifty-six-year-old Dorsey Malina is just such a newcomer. She disappointed by the leaders we elected because they did not fix ev- elite dominates American politics, the Tea Party and the Occupy was laid off two years ago from her job as a counselor at an alcohol erything we wanted them to,” she said. “But then we realized we movement are poles apart politically. So far Occupy Wall Street Are these new movements destined to go the same way as the and drug abuse center. I met her in late October in the crowd at had to look no further than ourselves if we wanted to fix it.” has resisted the urge to become involved in the political process. activists of yesteryear? Some argue that it’s inevitable, especially Occupy Nashville. “This movement is full of people like me who “It is hard to say where the Occupy movement will go from here,” for Tea Party members, many of whom have worked hard to take feel like they have a boot across their necks,” she said. “Many of said Robert Liebman, an associate sociology professor at Port- over the Republican Party from the ground up. In many cases that On November 8, 2011, in a special ballot, voters in Ohio heav- land State University. “But even if they fade away their contribu- means learning how to raise money for campaigns. “The system ily rejected a bill passed by the state’s Republican-controlled leg- tion to history thus far is they have changed the political debate is rigged and unless you learn the rules and how to get around islature to limit collective bargaining by public sector unions. In in America from being about deficit reduction to being about in- them, you’re never going to win the game,” said Dawn Wildman, the same special ballot, Ohio residents backed the Healthcare come inequality and jobs.” president of the SoCal Tax Revolt Coalition in San Diego. “We are what the protest groups Freedom Amendment, a challenge to President Barack Obama’s learning how to play the game.” have in common is a desire to signature healthcare reform law. Backed by Tea Party activists But whether or not groups like Occupy, the Tea Party, or the In- who went door-to-door statewide, the amendment is intended to Many of today’s large mainstream NGOs started out as scrap- dignados falter or become indistinguishable from the establish- challenge be part of the case against “Obamacare” that the U.S. Supreme py, confrontational groups of activists. Greenpeace, to take just ment may be irrelevant; the underlying problems these groups are a system that favors a wealthy Court will hear in 2012. On the same day, FreedomWorks, a one example, rose out of antinuclear protests in 1971. Today the targeting will persist and are expected to fuel further activism. In conservative nonprofit that has frequently associated itself with group maintains offices in 40 countries. “If you look at any protest Spain, for instance, unemployment among those age 25 and un- and powerful elite. the Tea Party movement, touted its role in the campaign for the movement in the last 50 years, they have started off as challeng- der stands at more than 45 percent. In America, the rates for those amendment, which included producing more than 18,000 yard ers,” said Brayden King, an assistant professor of management age 16 to 19 and 20 to 24 were 23.7 percent and 14.2 percent re- segar signs and 145,000 door hangers. and organizations at Northwestern University’s Kellogg School of spectively. Robert Liebman warns that what we have seen so far is mi k e

Yet Chris Littleton of the Ohio Liberty Council was dismissive / Management. “But with success they have all become more insti- “just the beginning” and that it would be unwise of the elite who us are working people who have done all the right things but are of the nonprofit’s role. “FreedomWorks needs to show its donors tutionalized,” he added. “Now they are no longer really a move- turn up at Davos—which he described as an “old people’s club”— re u ters

still stuck.” The same might be said of Jamal Sibai, age 25, an art that it’s doing something substantive when it’s not really doing : ment anymore, but professional advocacy groups.” to ignore the developed world’s disenfranchised youth. “There is student who was among the 75 attendees at the first protest for anything at all,” said Littleton, whose background is in healthcare That institutionalization entails compromise and inevitably re- no certainty as to whether the democratic institutions of the past greater freedoms in the Libyan city of Misrata on February 17. management. “It’s nice of them to help, but if real people are not quires professional staff, many of whom come from the private few decades are going to hold,” Liebman said. “This is potentially

Sibai had come despite the risk of arrest by the Gaddafi regime’s out there doing it, it’s not going to happen. FreedomWorks does photograph sector. King says that students in his MBA classes often say their a very dangerous time.”

�o. �o. reuters 56 Jan.2012 reuters 57 Jan.2012 Leading Indicators R e p o r t e d Number of M i n i m u m c o s t o f o n e attacks global economic non-VIP invitation t o t h e o n t h e w e F recessions World Economic Forum: since 1971: since the Wo r l d $15,973 davos Economic Forum was Estimated cost of the wine served at one first held at Davos: $71,000 by the 4 World Economic Forum party in 2011. Cost of one ticket at the numb3rs “Industry Associate” level of recessions in the membership, which guarantees United States access to private sessions: water cannons 1 i n t h e l a s t 750 loaned by Germany in 2003 forty years T h e n u m b e r to use on protesters: $156,000 of people Revenue of the World Economic 6 e m p l oye d Forum in 2010-2011: full-time by Year in t h e w e F. which the 6 Number of M i n u t e s , S w i s s “Strategic Partners,” such as references to d u r i n g t h e defense Goldman Sachs and Bank of America, pay $157 million Davos in U.S. 2005 WEF, m i n i s t e r w a s d i p l o m a t i c in which People who showed up at last year’s E x p e n s e s t h a t ye a r : g i v e n $527,000 f o r m e m b e r s h i p , c a b l e s p u b l i s h e d anti-hegemonic World Social Forum in Dakar, p e r m i s s i o n — plus — by Wikileaks: where all badges were created equal: t o s h o o t Sharon $19,000 p e r i n v i t a t i o n d o w n ( up to a maximum of 5) $156 million unauthorized Stone 70,000 a i r c r a f t 571 r a i s e d That’s 0.3% of Warren Buffett’s net worth f l y i n g o v e r $1 million D a v o s : to help Global public debt in 2000: James Quigley, 2003 prevent $18 trillion C e o o f D e l o i t t e , malaria: Number of Year in which claims the WEF saves The projected figure for 2012: him o f t r a v e l igloos the T h o m a s M a n n 50 days

n a k ao $47 trillion time each year. Socialist described Davos’s o Yo u t h G r o u p “d eluxe /yu ri k o f S w i t z e r l a n d tuberculosis p l a n s t o What the economist sanatoriums” R e u ters ) I t c o s t s $ 6 8 9 t o b u i l d i n D a v o s 866 4,712 Nouriel Roubini, a.k.a. in The Magic Mountain: take a limousine n e sto this year: Av e r a g e n u m b e r Tr o o p s 2,488 Dr. Doom, dubbed the ; ( ; : o f S w i s s t r o o p s d e p l oye d d u r i n g “white badge” G-ZERO G-20 at Davos last year. from Zurich to Davos. holders, who receive

deployed each the World R i n a l di a full access to 1924 day in 2010. E c o n o m i c Fo r u m c o n f e r e n c e s a n d c jessi Price of a return trip 5 / p a r t i e s , a t t e n d e d by helicopter: Year in which t h e w e F i n $9,000 ) R e u ters ) 2 0 1 1 . G i u l i o Tr e m o n t i , M i n i m u m r a t i o o f P e r c e n t a g e I t a l y ’s F i n a n c e women to men p r e s c r i b e d o f Fo r t u n e 5 0 0 gre n ffet (Bu : M i n i s t e r, ye l l e d Ye a r s a f t e r he l b y t h e w e F f o r S t r a t e g i c C e o s w h o at Roubini to Partner attendees: 1:5 are women: 2.4 Saif al Islam Chris 15 / Gaddafi “go back to Turkey” ; P hotographs ; 69 following his dire w a s n a m e d a M i n i m u m n u m b e r

) R e u ters ) billionaires w e F G l o b a l A r kl e e c o n o m i c o f o n e t i m e D a v o s Cost, in Swiss Francs, of an annual Year-round population of Davos w e r e a m o n g t h e m , o r Yo u n g L e a d e r attendees who have

addafi predictions: pass to the Eau-là-là Davos Wellness P eter : 5.7 percent of the world’s t h a t h e w a s s e r v e d t i m e : (G : and Pleasure Pool Centre: 750 billionaire population. 2006 suspended: 6 in prison: 3

11,254 n s stratio i llu photograph

�o. �o. reuters 58 Jan.2012 reuters 59 Jan.2012 Books sentially allowed banks to turn credit risk, by “Models Behaving,” a love letter to which required lots of capital, into coun- physics and physicists. (Like many quants, The Devil In The Cds terparty risk, which didn’t. Derman is a physicist by training—as is Dunbar, curiously enough.) This section Dunbar provides old-fashioned shoe- shows the awesome power of what can be leather reporting here, too, especially in done with a model when it gets things ab- by Felix Salmon fingers and assigning blame. We wanted to Street banks. But getting people to talk to the portions covering the New York Fed solutely right. know why the crisis happened, how it hap- you honestly after the world has blown up and the way it treated banks like Citi- By the time we come to the properly fi- pened, and whose fault it was. Inevitably, is pretty much impossible. To know what group (regulated with a feather touch) nancial portion of the book, we’ve learned these books took on a political tinge—none people were thinking in the years when the and Goldman Sachs (which officials in- what models are good for and the ways in more so than the final report of the Finan- sector was booming, when the seeds of di- sisted should get back one hundred cents which they can fail, and Derman makes it cial Crisis Inquiry Commission, which was saster were being planted, you needed to on the dollar in the contracts it took out easy to see just how stretched past their disowned by all the Republicans on the be talking to them at the time. And that’s with AIG). Supine regulation was a huge breaking point models tend to become commission for reasons that were intel- exactly what Dunbar was doing. part of the reason why the crisis was so when they’re used on Wall Street. There’s lectually dishonest but politically expedi- Dunbar’s also special in that he wasn’t bad in the United States and much less no real specificity here: Derman goes ent. As the FCIC concluded, the crisis was just talking to the senior Wall Street execu- severe in places like India and Canada. into no detail at all about the models that avoidable. But the problem with assigning tives who tend to get wheeled out in front Dunbar names names. And he ends with caused the crisis. For that kind of analysis, blame is that everybody tends to exoner- of the press on a regular basis. That’s lucky, a perfect epigram, from The Master and you’re better off with Dunbar. At times, ate themselves and their friends: it’s much because those executives, as we now know, Margarita, by Mikhail Bulgakov: Derman can be a bit too enamored with easier to just blame others. As a result, no didn’t really have a clue about what was go- “During your act you made bank notes the elegance of pure physics, which has a one ever learns any lessons. What we really ing on. Instead, Dunbar was talking to mid- float down from the ceiling… Today, when tendency to take anything it can’t calcu- need, in the wake of the Great Recession, level traders and brokers and investors and I came to check the till, there was nothing The Devil’s Derivatives: late with accuracy and simply define it as is less finger-pointing and more insight. regulators—the full apparatus of market in it but a lot of strips of paper.” The Untold Story of the Slick not-physics, and thus as something fun- The world of international finance is Happily, there is a surplus of insight in two participants who collectively managed to “Oh dear, dear, dear!” exclaimed the Traders and Hapless Regulators damentally uninteresting, like chemistry, Who Almost Blew Up Wall Street . . . largely incomprehensible, even to its prac- recent books on subjects that have left the get everything so spectacularly wrong. professor. “Don’t tell me people thought and Are Ready to Do It Again perhaps, or engineering. But Derman, a titioners. Consequently, a whole industry, smartest people in the room looking dumb. Dunbar’s great at taking the long view of those notes were real?” by Nicholas Dunbar quant himself, understands only too well of which I am personally part, has sprung things, and you won’t find a better expla- Harvard Business Press how finance types think, and when he de- up to “explain finance” to the public. This Nicholas Dunbar, author of The Devil’s nation, anywhere, of why banks shouldn’t If Dunbar’s focus is on highly complex scribes the beautiful discoveries of New- makes the public think that understanding Derivatives, is that rarest of animals: a genu- mark their assets to market. This isn’t an financial inventions, Emanuel Derman’s ton or Maxwell or Feynman, you can begin finance is something that is possible. Models.Behaving.Badly. is more concerned to see the attraction of the super-precise On top of that, finance is particularly with the nature of reality, and how the quantitative mindset that is so very dan- susceptible to the kind of hubris that one question of what is real, and what isn’t, re- gerous on Wall Street. finds in people who think that if they’ve lates to the financial crisis. Derman used Human complexity is always best ap- made millions of dollars, they must be we wanted to know why the to be a “quant,” one of the nerdy rocket proached modestly, without the kind of the “smart money,” with an edge not only crisis happened, how it happened, scientists who built models of how mar- photo tk certainty that is common to financiers over the public but even over their fellow kets work and how they can be arbitraged. and scientists. The lesson of these books bankers and financiers. That, in turn, sets and whose fault it was. Today, however, Derman is more of a phi- is that we got too cocky, too sure of our- up some very easy morality plays. When losopher, and though this book was writ- selves, and paid a terrible price for doing the inevitable nemesis arrives, the weak- ten to explain what went wrong during the so. But cockiness, too, is a fundamental nesses of the erstwhile Masters of the Uni- financial crisis, it’s actually quite different: human trait, which is why I’m deeply pes- verse are exposed for all to see, and those ine expert on the structured products at the easy book to read, but it’s a necessary book a heartfelt philosophical volume about simistic that anything will really change of us whose job it is to Explain Finance heart of the crisis who is not afraid to tell to read, because it reveals the deep struc- models, their uses, and their misuses. in the future. Just as a long history of take every opportunity to spell out exactly the truth about just how harmful they were. ture of the crisis as no one else has man- Derman’s book opens with a memoir rogue traders never seems to prevent an- what these prideful men got wrong. They Dunbar has spent his career in the struc- aged to do, using real-world examples to of his youth in apartheid South Africa, a other one from popping up somewhere, weren’t smart, they were stupid! tured-finance trade journals, which sets explain, for instance, how ultra-safe credit touching passage that immediately puts it’s equally certain that our long history If very intelligent, successful, and aggres- him apart from all the authors who had to ratings and massive yet unpredictable you on notice that you’re not reading a of financial crises won’t be slowed down sive men like Robert Rubin, John Thain, or try to work out what on earth was going on market volatility were two sides of the dry tome about mathematics. Apartheid or stopped by the magnitude of the one Jon Corzine could be so stupid, then, real- only after the world started falling apart. same coin. And if you want to understand was, of course, a model of the world, and that began in 2007-8. There will be more istically speaking, everybody was stupid. More importantly, Dunbar was one of the credit default swaps (CDS), this is the first it’s easy to see how Derman ended up with such crises, and they will probably be Models.Behaving.Badly. And if everybody was stupid, then, in real- best-sourced journalists in the field long and last book you should read. Dunbar F riedma n y a lifelong mistrust of models after being Why Confusing Illusion even worse than the one we just lived ity, nobody was quite as stupid as we now before the financial crisis hit. explains with ease how the CDS became a n d forced to live with that particular one for with Reality Can Lead to Disaster, through. And although they might not be think they were. Lots of big-name journalists tried to un- the perfect instrument for banks looking so long. The rest of the first section of the on Wall Street and in Life caused by credit default swaps or models

derstand structured finance after the fact to engage in regulatory arbitrage: they es- n: stratio book is a fascinating explanation of the by Emanuel Derman designed by physicists, they will certainly Free Press i llu In the immediate aftermath of the finan- and many of them had long acquaintances many different types of models there are be caused by people who are very sure in- cial crisis, a lot of books came out pointing with very important executives at big Wall Felix Salmon is the Reuters finance blogger. and how they can be used. It is followed deed of what they’re doing. portrait

�o. �o. REUTERS 60 Jan.2012 REUTERS 61 Jan.2012 illustration by istvan banyai Society confessions of a davos spouse

by Anya Schiffrin so there will doubtless be many panels role as trailing spice. They don’t join Davos about the global protests, the euro crisis, Wives in their traditional activities. I sus- the Arab Spring, and Occupy Wall Street. pect they are on the ski slopes or watching How Davos Man will respond I don’t know. panels. I hope to meet one this year. My favorite comment during a panel on global warming a few years ago came from a businessman who reminded his audience What do people talk about at the that one upside to global warming is the dinner parties? ease of drilling for oil under glaciers. This The men discuss economics and the wom- year there will be more security, plenty of en discuss how they feel about being Da- gloomy observations about the state of the vos Wives. Some swear they won’t come world economy, questions about whether back but they usually do. We trade stories China can maintain its expansion, and so of snubs and panels we couldn’t get into. on. We’ll also see a lot more conservative Davos is a competitive place; there is al- heads of state at Davos this year, since so ways much comparing of notes so people few social democratic governments sur- can learn which events they didn’t get in- vived the elections and turmoil of 2011. vited to. Gossip is a valuable currency—as What is the pre-Davos season like in it is everywhere—so any juicy examples of your household? drunken midnight misdeeds are passed Planning for Davos starts quite early in How do Davos Wives occupy around pretty quickly. A lot of untoward the year. Months before it actually begins themselves while Davos Man works? groping goes on after hours and that is dis- there is the inevitable jockeying for spots We go to any panels we can actually get cussed quietly rather than openly. on desirable panels with important peo- into. Usually that means the ones about ple, a frantic glance every day at the email art and science, which Davos Man tends to see if any interesting dinner invitations to skip. Last year’s panel on the pollution How’s the nightlife? have come in, and a hunt for a hotel room of the world’s seas was packed with wives. Davos encourages bad behavior. It comes in a location not too far from the confer- When we can’t get into a panel we may re- from the hot-house atmosphere of high- ence venue. Wives like me don’t have to pair to a local café for hot chocolate or sign powered egos, the high altitudes com- do any work at Davos so I just think about up for the perennial horse-drawn carriage bined with too much drink. All sorts of packing. Moisturizer is crucial, since the mountain air is so dry, and I will try to rustle up a couple of respectable outfits that I can wear by day and at the evening You can carbon date Davos dinners as well. Then there is footwear. Wives by their shoes. You can carbon date Davos Wives by their shoes. Newcomers tend to wear attrac- tively dainty heels. Veterans like me have given up. I don sturdy shoes and try not to ride to a fondue restaurant up in the hills. people who would never stay up late can slip on the ice. If all else fails, we can always prowl the be found—cocktail in hand—at the Google halls of the conference center, hoping for party, the Time Warner reception, and the a sighting of Bono or Tony Blair. gala dinner on Saturday night. It’s usu- What are likely to be the main themes ally too loud to have a conversation but at Davos this year? they try. Last year one businessman held friedma n

Davos tends to be more interesting during Are there any Davos Husbands forth about his travails in Russia and kept y periods of social upheaval. Confronted with lurking about? the crowd entertained with a lengthy de- facts that threaten his worldview, Davos Every now and then one spots a Davos scription of how he lost his company to the tax authorities. That passes for a grip- nerdiest expert in anti-malarial bed nets men can be found eyeing the local talent,

Man loses some of his smugness and be- Husband, gay or straight, but he’s a rare d An n: stratio ping evening at Davos. There are always or obscure financial instruments fancies and there are rumors of at least one baby Anya Schiffrin is the author of Bad News: How i llu comes a bit more confused. Founder Klaus species. They are often mistaken for Davos America’s Business Press Missed the Story of the a lot of men who become “geographically himself a player the moment he steps foot being born nine months after a night of Schwab is always interested in the zeitgeist, Man and tend to be good sports about their Century. She is married to the economist Joseph Stiglitz. single” when they arrive, and even the in the Zurich airport. Late at night, these passion at Davos. portrait

�o. �o. REUTERS 62 Jan.2012 REUTERS 63 Jan.2012 CODE: TOM-11-16D PUB/POST: The Davos Issue, Due Date: PRODUCTION: Don Hanson LIVE: 8” x 10.375” DESCRIPTION: 2011 Thomson Reuters Print WORKORDER #: 003336 TRIM: 8.5” x 10.875” Delivery Support: 212.237.7000 FILE: 05A-003613-01A-TOM-11-16D.indd SAP #: TOM.TOMBRA.10017.K.011 BLEED: 8.75” x 11.125” ©2012 Thomson Reuters. Thomson Reuters, the Kinesis logo, and The Knowledge Effect are the trademarks of Thomson Reuters.

Q&A The fight over Russia’s soul

A conversation between Sir Harold Evans and Condoleezza Rice

Let’s go back to that first encounter war showed that the Russians can’t simply with Putin in 2001 when President Bush behave like the Soviet Union. They’re too said, “I looked the man in the eye. I was integrated into the international system to able to get a sense of his soul.” What do that. But it wouldn’t surprise me if the shall we make of Mr. Putin’s soul now? disturbances in Moscow make them try to Because a Thomson Reuters I don’t know what his soul is, but his be- be more aggressive against the neighbors. scientifi c database links over havior is appalling. Things were different I just don’t think they can pull it off. at the time of Slovenia. It was a different 40 million records, one engineer Russia, he was a less confident figure, and Are bloggers like Alexei Navalny, who frankly they were very helpful to us im- has just been jailed, influential through- made a breakthrough that led to mediately after 9/11. But this is a regime out Russia? Is it really a Moscow/Peters- a new way to protect our oceans— that has gotten more authoritarian in the burg thing? last 10 years, that has trampled on inde- Oh, I don’t think it’s just Moscow and pollution-detecting robotic fi sh. pendent institutions and freedoms, and I Petersburg. There was a very interest- think it’s coming back to haunt them. ing development, which many people didn’t notice: when the Russian Ortho- Historian Niall Ferguson argues that dox Church—through its most prominent Russia has been horribly and perhaps spokesman, Archpriest Vsevolod Chaplin— incurably deformed by 70 years of Com- in tweeted,“Vlad, the Arab spring is com- said people were clearly upset, and there munist rule. Twenty years after the end ing soon to a neighborhood near you.” had to be answers about the election. of the Soviet Union, he says it’s headed I hesitate to say that it’s an Arab Spring be- It’s the first time the Church been so to global irrelevance with a declining cause the regime in Moscow is more resil- critical. It has tentacles all over Russia population and per capita GDP ten times ient, but Putinism won’t ever be the same. and I suspect they’re hearing from priests smaller than the US. Now that people are not so fearful, I think throughout the country that there is con- Post-Soviet Russia is a mixed picture. People it’s going to be very difficult for Putin to rule siderable unhappiness. have more personal freedom than at any Russia. The Russians are rising up against And remember, while the action may be other time in their history; prosperity is more what, I think from their point of view, was a in the cities, poverty in the rural areas is still widespread than ever. There is a viable mid- tremendous affront in the way that he tried quite dire. So you have several elements to dle class, which is one of the explanations to simply trade jobs with Medvedev. It was the revolt, not one. Yes, in the cities de- for the reaction to Putin’s attempt to come a terrible miscalculation on his part. mands for civil liberties come from young back. All that is for the better. But the under- people who don’t have a memory, really, of lying power structures are not really trans- Was Secretary Clinton wise to feed the the repression of communism, and there- formed. It is still an oil and gas economy that Kremlin paranoia by criticizing fraud fore are not fearful. But it’s not clear to me THE RIGHT INFORMATION IN THE RIGHT HANDS LEADS TO AMAZING THINGS. does not take advantage of its tremendous and ballot-rigging? that liberal forces would be popular in the Our comprehensive research platform, Web of Science®, connects over 20 million researchers in 90 countries by giving human potential. So it is absolutely true that She was absolutely right to speak up for our rural areas. We have to be a little careful not their influence is waning, but I wouldn’t say values. I’ve many times criticized them, to assume that this revolution is all a liberal them access to the world’s leading citation databases. So they can fi nd hidden patterns, gain insights faster and identify it’s irrelevant. It’s a permanent member of and they don’t like it. I think the anti-west- revolution. In fact, the discontent in the ru- other top scientists to work with. That can lead to amazing innovations, like artifi cially intelligent, self-sustaining robotic fi sh. the Security Council with a veto; it has tens ern rhetoric is part desperation on Putin’s ral areas could take the form of more sup- By measuring pollution levels and transmitting data to experts, they can help protect our most fragile ecosystems. It’s just of thousands of nuclear weapons, a large part; but also I do believe that suspicion of port for Mother Russia nationalism—and one of the many ways we empower the professionals of the world with the knowledge they need to do what they do best. army still, a network of world relationships the west is deeply ingrained in him. remember the Communist party still has and important regional influence in Central significant support there and could gain R eed n aso THAT’S THE KNOWLEDGE EFFECT. SEE HOW WE’RE PROVING IT AT THOMSONREUTERS.COM Asia. It’s still a powerful state, but it’s no lon- Do the disturbances make the former from a kind of anti-Putin revolt.

ger one of the two most powerful states. parts of the Soviet Union—the Ukraine RE U TERS/J : and Georgia—more vulnerable or less? Evans’s full interview with Secretary Rice is at Is Putin on Mubarak’s track? John McCa- Less vulnerable, because the Georgian Reuters.com/Condoleezza. photograph

�o. REUTERS 64 Jan.2012

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