The War the World Ignores

Ireland, Brexit and borders

Rise of the corner-office campaigners

Let Beijing grow bigger

Cheesonomics: curd your enthusiasm DECEMBER 2ND–8TH 2017

TheYemen war the world ignores

Always one step ahead of the game.

Predictions prove a bright future for you. Our autonomous vehicle will be safer, smarter and instinctively more brilliant than anything on the road.

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8 The world this week 34 Burmese schools No questions asked 35 Assisted dying in Leaders Australia 11 Yemen’s misery A sombre success The war the world ignores 36 Banyan 12 Brexit and Ireland India’s cowardly politicians Time to answer it 12 Business and society China Chief activist officer 37 Rural migrants 13 Internal migrants A furore in Beijing Brexit The Irish border Expelling Chinese people dilemma shows the trade-offs from Chinese cities 38 Private propaganda Happy bunny that Brexit requires: leader, 14 European banks page 12. The government’s On the cover A job half-done concessions have not killed off A pointless conflict has Middle East and Africa the dangerous idea that caused the world’s worst Letters 39 American foreign policy Britain could walk away, page humanitarian crisis: leader, Trump’s Muddled East 48. Two new books suggest 16 On the TPP, airports, plea page11. The devastation of that Britain faces some bargaining, Protestantism, 40 Jordan’s water crisis the poorest country in the singularly unappetising manure Diplomatic drought Middle East, page19.Neglect 40 Angolan politics choices: Bagehot, page 50 and confusion aggravate the Lourenço takes the wheel problems of the Arab world, Briefing page 39 41 Zimbabwe’s new order 19 Yemen The time of the crocodile From bad to worse 42 Why Nigeria wins at The Economist online Scrabble United States Six letters: profit Daily analysis and opinion to 23 The Trump administration supplement the print edition, plus audio and video, and a daily chart Dr Carson’s operation Europe Economist.com 24 The CFPB 43 Public finances in France E-mail: newsletters and One bureau, two guvnors Transformers? mobile edition 25 Presidential tweeting 44 Turkey Economist.com/email A row with Britain Misguided missiles Migrants in Beijing Officials Print edition: available online by 25 Digital privacy 45 Irish property are using brutal tactics to limit 7pm London time each Thursday Phoning it in In short supply the city’s population. They are Economist.com/print 26 America and Russia 45 Berlin wrong even to try: leader, page Audio edition: available online Red mist Poor and sexy 13. In the capital, scandals to download each Friday 28 Lexington bridge a social divide, page 37 Economist.com/audioedition 46 EU aid to Italy Enough already, Nancy You can keep your money 47 Charlemagne The Americas Investment with Chinese 29 Mexico characteristics The democratic dedazo Volume 425 Number 9069 30 Bello Britain

Published since September1843 Despotism in Venezuela 48 The Brexit negotiations to take part in "a severe contest between 31 Honduras votes The siren song of no deal intelligence, which presses forward, and an unworthy, timid ignorance obstructing Who will win the count? 49 Trade our progress." 31 Argentina v the army Wobbling into the WTO Editorial offices in London and also: New thinking 50 Bagehot Beijing, Berlin, Brussels, Cairo, Chicago, Madrid, Mexico City, Moscow, Mumbai, Nairobi, New Delhi, Britain’s menu of misery CEOs and politics Chief New York, Paris, San Francisco, São Paulo, Seoul, executives are under increasing Asia Shanghai, Singapore, Tokyo, Washington DC pressure to take a stance on 32 Politics in Pakistan social issues. How should they Armed and obstreperous respond? Leader, page 12. 33 North Korea’s missiles Employees are leaving bosses Rocket man extends with little choice but to mount a hand the barricades, page 53. What 33 Volcanoes in Indonesia if the unwashed masses got to Smoke and tremors vote on companies’ strategies? Schumpeter, page 59

1 Contents continues overleaf 6 Contents The Economist December 2nd 2017

International Science and technology 51 Woodlands 69 Commercial aviation The foresting of the West The electric-flight plan 70 Volcanology Business Less ice, more fire 53 CEOs and society 71 Synthetic biology America Inc gets woke Life is a six-letter word 55 Japanese scandals 71 The war on malaria Kaizen crisis Biting back 56 China Literature 72 Medical diagnosis Forests The steady expansion Green aircraft Electrifying Bibliofiled Follow your nose of tree-covered land in rich planes is tricky. But companies 56 Digital news 72 Repairing roads countries is not always A hole in one are serious about trying, popular. It will continue all the Buzz kill page 69 same, page 51 57 The Vegetarian Butcher Plant-based meat Books and arts Subscription service 58 The audio industry 73 Islamic State For our latest subscription offers, visit Sound and software Captive of the caliphate Economist.com/offers 59 Schumpeter 74 Women and Boko Haram For subscription service, please contact by telephone, fax, web or mail at the details Capitalism for the people Both sides of the coin provided below: 74 German fiction North America The Economist Subscription Center Finance and economics A year in the madhouse P.O. Box 46978, St. Louis, MO 63146-6978 75 America’s economy Telephone: +1 800 456 6086 61 European banks Facsimile: +1 866 856 8075 Think of a number How to get it back E-mail: [email protected] 75 American music Latin America & Mexico 62 Buttonwood The Economist Subscription Center Bitcoin’s many zeros Railway therapy P.O. Box 46979, St. Louis, MO 63146-6979 76 Johnson Telephone: +1 636 449 5702 European banks Much has 63 Chinese finance Facsimile: +1 636 449 5703 Buzzy and effervescent been done to strengthen Stormy weather E-mail: [email protected] Europe’s banking system. But 63 Bankruptcy in India Subscription for 1 year (51 issues) not enough: leader, page14. Afterlife 80 Economic and financial United States US $158.25 (plus tax) Ten years after the crisis, 64 Brazil’s development indicators Canada CA $158.25 (plus tax) Latin America US $289 (plus tax) banks face a glut of new rules, bank Stastistcs on 42 economies, page 61. Europe’s economic A new year’s resolution plus a closer look at boom will not last; it had commodity prices 64 American interest rates Principal commercial offices: better make the most of it: Yielding insight The Adelphi Building,1-11John Adam Street, Free exchange, page 66 London WC2N 6HT 65 Cheesonomics Obituary Tel: +44 (0) 20 7830 7000 Trading Caerphilly 82 Antonio Carluccio Rue de l’Athénée 32 66 Free exchange The mushroom man 1206 Geneva, Switzerland Tel: +4122 566 2470 Europe’s boom 750 3rd Avenue, 5th Floor, New York, NY10017 Tel: +1212 5410500 1301Cityplaza Four, 12 Taikoo Wan Road, Taikoo Shing, Hong Kong Tel: +852 2585 3888 Other commercial offices: Chicago, Dubai, Frankfurt, Los Angeles, Paris, San Francisco and Singapore

Cheesonomics When it comes to trade barriers, cheese takes the biscuit, page 65

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8 The world this week The Economist December 2nd 2017

by a British far-right activist to opportunity to leave the island same period in the previous Politics stir up hatred against Muslims. when flights resumed. year. Since the Brexit vote Mr Trump is the first modern immigration from European American president to circu- Victoria became the first state Union countries has dropped late material from extremists. in Australia to pass an act consistently, while emigration allowing doctors to help peo- to the EU has increased. Net MickMulvaney started work ple with terminal illnesses to migration from the EU fell from as the interim director of commit suicide. The law 189,000 to 107,000. America’s Consumer comes into force in 2019. Financial Protection Bureau, Slobodan Praljak, a former after President Trump appoint- Nguyen Van Hoa, a Vietnam- Bosnian Croat militia com- ed him. A longstanding critic ese blogger, was sentenced to mander, died after swallowing ofthe watchdog he now runs, seven years in prison forpub- what he said was poison in a he promptly imposed a freeze licising protests about a chemi- UN courtroom in The Hague on any new regulations. There cal spill offthe coast ofcentral after losing an appeal against had been some confusion Vietnam last year. his 20-year prison sentence. More than 300 people were about who was running the slain by jihadists who attacked agency when the outgoing A court in southern China Office plans a mosque attended by Sufi director tried to appoint a sentenced a Taiwanese activ- Mexico’s president, Enrique Muslims in Egypt’s Sinai different successor. A judge ist, Lee Ming-che, to five years Peña Nieto, chose his finance peninsula. Up to 30 terrorists scotched that idea. in prison for“subverting state secretary, José Antonio Meade, armed with automatic rifles power”. He was accused of to be the candidate ofthe and flying an Islamic State In New Yorkthe trial began of helping the familiesofjailed ruling Institutional Revolu- banner mounted the assault in a Turkish banker linked to the dissidents in China and circu- tionary Party in next year’s a region that is more used to alleged purchase ofIranian oil lating critical comments about presidential election, ending attacks on Coptic Christian and gas in violation ofAmeri- the Chinese government months ofspeculation. Mr churches. An IS-affiliated can sanctions in a case that online. Taiwan’s presidential Peña cannot run because group in Sinai has a record of stretches to the upper echelons office issued a statement say- Mexican presidents are limited persecuting Sufis, beheading a ofthe Turkish government. ing the case had “seriously to a single six-year term. 100-year-old cleric late last Recep Tayyip Erdogan, the damaged” relations between year. Abdel-Fattah al-Sisi, Turkish president, has de- the island and China. Egypt’s president, ordered his nounced the trial as an attack armed forces to use any means on his country, a furtherblow A Chinese general, Zhang necessary to restore order. to relations between Washing- Yang, killed himselfat his ton and Ankara. One ofthe home in Beijing while under Uhuru Kenyatta was sworn in original key defendants plead- investigation forcorruption. fora second term as Kenya’s ed guilty and has agreed to He had served as a director of president. Two people were spill the beans to prosecutors. the army’s political depart- killed in opposition protests ment, a powerful body respon- against his inauguration. Raila Another poke in the eye sible forensuring the loyalty of Odinga, who lost to Mr Kenyat- North Korea tested a missile the armed forces to the ta in the recent disputed elec- apparently capable ofhitting Communist Party. tion and does not recognise the anywhere in America. It In a controversial ruling, result, upped the ante by say- claimed that this fulfilled its Seeking friends Bolivia’s constitutional court ing he would take an oath of goal ofdeveloping a working The German chancellor, scrapped term limits for office on December12th, nuclear deterrent, and Angela Merkel, was due to presidents, paving the way for Kenya’s independence day. promised to be a responsible meet leaders ofthe Social Evo Morales, the socialist nuclear power. Democrats in the hope of president, to seeka fourth term A jury in Washington, DC, opening talks on a new “grand in 2019. Only last year 51% of convicted Ahmed Abu coalition” that could give Bolivian voters rejected this Khattala ofabetting the attack Germany a new government idea in a referendum. Thou- on the American consulate in following elections on Septem- sands ofMr Morales’s Benghazi in 2012, but found ber 24th. Her earlier attempts supporters marched in favour him not guilty offourmurders, at coalition-making with the ofthe constitutional change; including that ofthe American Greens and the Free Demo- and thousands ofpeople ambassador to Libya. Mr Khat- crats recently fell apart. demonstrated against it. tala had organised the attack, but did not personally carry Ireland’s deputy prime A civil court found El out any ofthe killings. minister, Frances Fitzgerald, Salvador’s formerpresident, resigned rather than see her Mauricio Funes, guilty ofillicit A spat between allies minority government collapse enrichment and ordered him Donald Trump tweeted that Mount Agung, a volcano on over a scandal involving a and his son to return $420,000 Theresa May, the British prime the Indonesian island ofBali, police whistleblower. to the government. The two minister, should focus on started erupting, forcing the fled to Nicaragua when Islamic terrorism in Britain, evacuation ofmore than New figures showed that net prosecutors started investigat- after her spokesman criticised 100,000 people and the clo- migration in Britain dropped ing them last year. Daniel the president forretweeting sure ofthe local airport. Thou- to 230,000 in the year to June. Ortega, Nicaragua’s president, inflammatory videos posted sands oftourists tookthe That is106,000 lower than the granted them asylum. 1 The Economist December 2nd 2017 The world this week 9

raise £250m ($335m) through Meredith stressed that the Business Bitcoin price the issue ofa 100-year note. Kochs will have “no influence” $ Oxford has not been immune on editorial operations. Xavier Rolet stepped down 10,000 from the squeeze on govern- with immediate effectas chief 8,000 ment funding foreducation. Johnson & Johnson an- executive ofthe London Stock 6,000 Some ofits peers have already nounced the details ofa study Exchange. The LSE had turned to the bond markets to to find out whether a new announced that Mr Rolet was 4,000 supplement funding. experimental global vaccine to stand down at the end of 2,000 for HIV works. The large-scale next year, but the resulting row 0 It’s just not been Uber’s year study, known as “Imbokodo”, between the board and The 2016 2017 A judge delayed the start of a will evaluate whether the Source: Thomson Reuters Children’s Investment Fund, trial in which Uber is accused exploratory vaccine is able to an activist investor that want- Thepriceofabitcoin passed ofpoaching technology from reduce HIV infection in a test ed him to stay, generated what $10,000 forthe first time (and Waymo, the self-driving car on 2,600 sexually active wom- Mr Rolet described as “a great then $11,000 before slumping unit owned by Google’s parent en across southern Africa. deal ofunwelcome publicity”. by 20% in a matter ofhours). company, Alphabet, after a Scientists have recently re- Donald Brydon, the LSE’s Undeterred by warnings that letter emerged alleging that doubled their efforts to find a chairman and the target of the electronic currency is a Uber operated a clandestine vaccine for HIV. TCI’s ire, is also to leave his job, bubble waiting to burst, main- office dedicated to stealing in 2019. stream investors have piled trade secrets. The letter is Angry investors into bitcoin in the hope ofever based on claims made by the Rovio Entertainment’s share All seven ofBritain’s biggest greater returns. firm’s formerhead ofglobal price struggled to recover after banks passed the annual intelligence and was sent to plunging by more than 20% round ofstress tests forthe America stepped up the pres- management earlier this year. following a surprise quarterly first time since the system’s sure on China over trade, The judge lambasted Uber for loss. It was the first earnings inception in 2014. The tests submitting a formal document not bringing it to his attention. report from the Finnish maker assess how the banks would to the World Trade Organisa- Uber said the claims came of“Angry Birds”, a mobile fare in an adverse situation tion setting out its reasons why from an unhappy employee. game, since floating on the under a range offactors, such China should be denied stockmarket in September. as British house prices falling “market economy” status, a Meredith, a publisher of by a third. MarkCarney, the designation it has long sought. domestic-lifestyle magazines, A new record was set on governor ofthe BankofEng- Without that tag China can be such as Better Homes & Cyber Monday fordaily sales land, said the banks could subjected to higher duties on Gardens, agreed to buy Time from shopping in America. cope with a “disorderly Brexit”. its exports. Earlier, America Inc for$2.8bn. As well as its Consumers spent $6.6bn, the opened another investigation signature news weekly, Time most on any day over the Not too hot, not too cold into China’s trade practices, counts People and Sports Thanksgiving break. Almost Jerome Powell gave an this time over aluminium. Illustrated among its titles. $1.6bn ofthe orders came over assured performance in the Meredith’s deal is backed in mobile phones. Senate at a hearing to confirm The University of Oxford part by the Koch brothers, his appointment as chairman launched the first bond in its whose largesse funds a raft of Other economic data and news ofthe Federal Reserve. He said 900-year history, aimingto conservative organisations. can be found on pages 80-81 that he would provide con- tinuity at the central bank and supports its current regulatory regime and the gradual raising ofinterest rates.

South Korea’s central bank raised its benchmarkinterest rate forthe first time in six years, by a quarter ofa percent- age point, to 1.5%. It is the first big Asian country to raise rates since 2014. South Korea’s growth forecast has been revised up forthe year, thanks in part to a booming semi- conductor industry; so has the outlookforinflation.

Siemens chose the Frankfurt stockexchange over New York to list its health-care business next year. The German engi- neering giant is expected to sell up to 25% ofthe business, which would make it Ger- many’s biggest IPO since 1996. PURE MOBILITY

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A pointless conflict has caused the world’s worst humanitarian crisis EMEN lost the title of Arabia power-struggle between Saudi Arabia and Iran. Alarmed by YFelix, or “Fortunate Arabia”, Iran’s spreading influence, the Saudis have begun to speak of long ago. It has suffered civil the Houthis rather as Israelis refer to the Lebanese militia, Hiz- wars, tribalism, jihadist vio- bullah: a dangerous Iranian proxy army on their border. In- lence and appalling poverty. But deed, the Saudis have much to learn from Israel’s experience. none of this compares with the Even with the most sophisticated weapons, it is all but impos- misery being inflicted on the sible to defeata militia thatiswell entrenched in a civilian pop- country today by the war be- ulation. The stronger side is blamed for the pain of those civil- tween a Saudi-led coalition and the Houthis, a Shia militia ians. For the weaker lot, survival is victory. backed by Iran. So, even though the Houthis are primarily responsible for The UN reckons three-quarters of Yemen’s 28m people starting the war and capable of great cruelty, it is the Saudis need some kind of humanitarian aid. Mounting rubbish, fail- who are accused of war crimes. Often the accusation is justi- ing sewerage and wrecked water supplies have led to the fied. In their air campaign, they have been careless and incom- worst cholera outbreak in recent history. The country is on the petent at best, and probably cynical. Human-rights groups say brink of famine. The economy has crumbled, leaving people bombs have been aimed at schools, markets, mosques and with impossible choices. Each day the al-Thawra hospital in hospitals. And the blockade raises suspicion that the Saudis Hodeida must decide which of the life-saving equipment to are using food as a tool ofwar. run with what little fuel it has. The longer the war goes on, the more Saudi Arabia’s West- Perhaps the worst of it is that much of the world seems un- ern allies are complicit in its actions. President Donald Trump perturbed (see Briefing), calloused by the years of bloodshed has given Saudi Arabia carte blanche to act recklessly (see page in Syria and other parts of the Middle East, and despairing of 39). He may think it is all part of confronting Iran; or he may its ability to effect change. To be cynical, Yemen is fartheraway want to support the liberalising reforms of the Saudi crown from Europe than Syria is; its wretched people do not, on the prince, Muhammad bin Salman; or he may hope to profit by whole, wash up in the West seeking asylum. selling the Saudis “lots of beautiful military equipment”. Yet the world ignores Yemen at its peril. Set aside for a mo- Whateverthe case, he isdamagingAmerica’sinterests. Precise- ment the obligation to relieve suffering and protect civilians. ly because ofthe importance ofSaudi Arabia—the world’s big- Hard securityinterestsare also atstake. The world can ill afford gest oil exporter and home to Islam’s two holiest places—the another failed state—a new Afghanistan or Somalia—that be- West should urge restraint on the impetuous prince and help comes a breeding-ground for global terrorism. Yemen, more- disentangle him from an unwinnable war. over, dominates the Bab al-Mandab strait, a choke-point for How? Peace talks led by the UN have begun with the de- ships using the Suez canal. Like it or not, the West is involved. mand that the Houthis surrender. That is unrealistic. Better to The Saudi-led coalition is fighting with Western warplanes freeze the conflict and find another mediator, such as Oman or and munitions. Western satellites guide its bombs. Kuwait. A deal should involve a phased withdrawal of Houthi fighters from Sana’a and the Saudi border, and the end of the Slippery Saleh Saudi blockade. Yemen needs an inclusive government, elec- Like so much else in the Arab world, Yemen’s agony can be tions and a new structure for the state. Saudi Arabia will need traced to the Arab-spring uprisings of 2011. Mass protests, a guaranteesthatIranian armsare notflowinginto Yemen. Then near-assassination of the then president, Ali Abdullah Saleh, it will have to cough up the cash to rebuild the country. and a shove from neighbouring petro-states forced him to step None of this will be easy. But a reasonable peace offer is down in 2012 in favour of his vice-president, Abd Rabbo Man- more likely to crack the Houthis than more bombing. Without sour Hadi. A draft constitution in 2015 proposed a federal sys- the cover of fighting Saudi aggression, the Houthis will have to tem and a parliament split between northerners and south- answer for their failures. The public is increasingly turning erners. But the Houthi rebels, who had fought Mr Saleh, against them, the alliance with Mr Saleh is fraying and the rejected it. The Houthis, who follow the Zaydi branch of Shi- Houthis themselves are divided. ism (as do perhaps 40% of Yemenis), complained that, among other things, the constitution stuck them in a region with few Stop the war resources and without access to the sea. Right now, far from halting the spread of Iran’s influence, the Now allied with Mr Saleh, who spotted an opportunity for war has deepened the Houthis’ reliance on Iran, which has an a comeback, the Houthis ousted MrHadi from Sana’a, the cap- easy and cheap means of tormenting the Saudis. And because ital, and chased him all the way to Aden. Saudi Arabia gath- Saudi Arabia is bogged down in Yemen, Iran has a freer hand ered a coalition of Arab states and local militias—among them to set the terms of a settlement in Syria. The war is a drain on Islamists, Salafists and southern separatists—and forced the the Saudis at a time of austerity and wrenching economic re- Houthis to retreat partway. For the past year, the battle-lines forms at home. They should therefore learn another lesson have barely moved. The Houthis are too weak to rule over Ye- from Israel’s experience of fighting Hizbullah. If wars are to be men but too powerful for Saudi Arabia to defeat. fought at all, they should be short, and have limited aims. De- As a result, Yemenis have become the pawns in the regional terrence is better than debilitating entanglement. 7 12 Leaders The Economist December 2nd 2017

Brexit and the Irish question Borderline solution

The fate ofthe Irish frontiershows the compromises that Brexit will force Britain to make ORTHERN IRELAND bare- with which the EU already has arrangements. Nly featured in last year’s Brexiteers will hear none of this. But abandoning the other Brexit referendum campaign, in red line, the commitment to an invisible border, would be which Britons were more inter- worse. Todo so would make both sides poorer. More seriously, ested in matters of migration itwould breakthe termsofthe Good FridayAgreement, which and money.Yet the future of the has ended a conflict in which 3,600 people were killed and set 500km borderthat separates the the island ofIreland on a long journey towards peace. North from the Irish Republic— Rather than choose between its red lines, Britain seems pre- and which will soon separate the United Kingdom from the pared to blur them. It has reportedly suggested that Northern European Union—has become one ofthe trickiest issues ofthe Ireland could be given new powers allowing it to follow the exit talks. same regulatory regime as the EU in areas such as agriculture The winding border has revealed a tangle in the “red lines” and energy,where there is most cross-bordertrade. The hope is laid down by Theresa May.After leaving the EU, Britain wants that this would allow the Irish border to remain pretty invisi- to do its own trade deals with the rest of the world, which ble, even as Britain pursued a customs regime ofits own. means leaving the EU’s customs union. And, like Ireland, it wants to maintain the open, invisible border that was en- Give and take hanced by the Good Friday Agreement of 1998, ending three Such a plan would require all sides to compromise. Even with decades of violence. This presents a problem: having a differ- harmonised rules on agriculture, the border would probably ent customs regime to the EU means imposing customs con- have to be harder than Ireland would like. Other EU countries trols, which in turn implies that the border cannot be quite so would have to put up with a frontier through which it would seamless as today.Ireland, backed by the EU, has threatened to be relatively easy to smuggle untaxed goods. In a part of the block any outcome involving a harder border, raising the risk world that has a history of organised crime, that is no small that Britain could end up with no deal at all (see page 48). risk. Perhaps the biggest compromise would be needed from The best way out of the mess would be to redraw the red Northern Irish unionists, who resist any attempt to divide the line on customs. It would be in Britain’s interests to stay in a province from the British mainland. Northern Ireland may customs union with the EU regardless of the Irish question. soon be closer in regulatory terms to the Irish Republic than to Britain does half its trade in goods with Europe. Customs con- Britain. It does not take much imagination to see where that trols would cause delays and mountains of bureaucracy. For- precedent could eventually lead. goingthe abilityto sign trade dealswith othercountries would The fudge may be just enough to get Britain through to the hurt. But their promise is overestimated. A deal with, say, next round of Brexit talks. But keeping all parties happy with America would mean imposing American standards—think the details ofthe final deal will not be easy. The episode shows chlorine-washed chicken—on a public that has just voted to how Brexit will require Britain to make painful choices—and “take back control”. In a customs union with Europe, Britain impose them on its closest allies. In the year ahead there will would continue to enjoytrade dealswith the 60-odd countries be plenty more ofthat. 7

Business and society Chief activist officer

Bosses are underincreasing pressure to take a stance on social issues. How should they respond? T OUGHT to be a love-in. Some ofthese spatsbetween the Oval Office and the corner Confidence in CEOs IAmerican companies support office reflect Mr Trump’s peculiar style of governing. But they Decrease 2016-17, % points tax cuts and deregulation. As point to something bigger, too (see page 53). Executives who -12 Britain The Economist went to press, would rather concentrate on commerce are finding it ever -10 Germany President Donald Trump was harder to avoid politics, in America and beyond. -9 France pushing the Senate to pass a One reason lies in the forces that propelled Mr Trump to of-

-5 United States sweeping, business-friendly tax fice. In a recent survey ofpeople in 28 countries, 62% ofrespon- reform. Instead, CEOs have rea- dents worried about globalisation; 55% thought an influx of son to feel uneasy.In the first year ofhis presidency, executives foreigners was harming their economy and culture. These have found themselves embroiled in public disputes with Mr trends are marked in the United States. Two-thirds of Ameri- Trump on everything from immigration to climate change. His cans are concerned about immigration. Three-quarters think advisory councils of business leaders have disbanded. The the government should protect local jobs and industry, even if second yearofhispresidencyisunlikelyto be much smoother. that slows growth. Furthermore, trust in CEOs is dropping. In 1 The Economist December 2nd 2017 Leaders 13

2 the survey just 38% thought they were very credible, down by Not every company faces the same pressures: a consumer- five points from 2016. What was once standard business prac- facing firm needs to be more attuned than a corporate-facing tice, whether minimising tax bills or investing abroad, exposes one. Nor is there a simple recipe for how a business should CEOs to suspicion and the intrusion ofpolitics. best balance purely commercial goals with the competing in- Consumers can now express their opinions dramatically terpretations ofits social responsibilities from employees, cus- online. Keurig Green Mountain, a maker of coffee machines, tomers and shareholders. But to help them navigate the era of recently tweeted that it had halted advertising on a Fox News activism, CEOs should bear two rules ofthumb in mind. programme whose host had appeared to defend Roy Moore, a Senate candidate accused of dating and assaulting teenagers. The profitable is political Afterwards consumers posted videos of themselves bashing The first is to be consistent. Firms can no longer spout plati- Keurig machines. As one commenter pointed out, everyone tudes about corporate “values”; independent watchdogs and might feel less cranky if they stopped boycotting coffee firms. staff stand ready to brand discrepancies as hypocrisy. Google But that wouldn’t save bosses from controversy. recently became a model of what to avoid. An employee Employees, many of them in the big, Democrat-leaning wrote a memo on women and tech firms; Google fired him, metropolitan areas where large companies are often based, in- saying the memo violated its code of conduct and created a creasingly demand that their firms take positions on issues hostile environment for women. That undermined free rangingfrom gay rights to climate change. Nearly half ofyoung speech (which Google vows to defend online) and called at- American employees say they would be more loyal if their tention to how the firm fails the group it was claiming to pro- boss took a public position on a social issue. A big test came in tect (it is under scrutiny forpaying men more than women). 2015, when Indiana was considering a “religious freedom” bill The second is to adopt an old Goldman Sachs mantra, ofbe- that would have let firms and non-profit organisations dis- ing “long-term greedy”. CEOs have to watch quarterly results. criminate against gay and transgender people; Apple and Sa- But to maximise the long-run value of their firms, they must lesforce.com were among those to oppose it, saying it would anticipate the shifting preferences of various constituencies, harm their customers and staff. from staff and customers to regulators and investors. Mark And shareholdersare judgingfirmson broadercriteria than Zuckerberg, Facebook’s boss, warned last month that heavier financial ones. Investments that considered environmental, investments in online policing would squeeze short-term social and governance factors accounted for $13.3trn of assets earnings, but said that this would protect the firm’s long-term under management in 2012; that sum was $22.9trn in 2016. health. He might have done well to reach that conclusion Over a fifth of the funds under professional management in sooner. Anticipating changes to political and social norms is America fallinto this category,up from a ninth in 2012. hard. But it is a vital part ofthe CEO’s job description. 7

Internal migrants in China Expelling Chinese people from Chinese cities

Officials in Beijing are using brutal tactics to limit the city’s population. They are wrong even to try N ALL countries, a big influx of of them can afford. They cannot buy a home without being Imigrants tends to provoke formallyemployed (which mostare not) and havingresidency grumbles among the natives. In papers (which are almost impossible for them to obtain). China, however, the migrants The government wants to restrict the growth of megacities most frequently grumbled such as Beijing. It says their large populations put too much about, and treated with the strain on water supplies, roads, hospitals and so on. Efforts to greatest hostility, are not foreign- ease such pressures on the capital have been dramatic. They ers but other Chinese: rural folk have included spending tens of billions of dollars on piping who move to the cities in search of a better life. This has been and channelling more water into the city from hundreds of on showin the pastfewdaysin the capital, Beijing. On Novem- miles away—a project touted as the biggest of its kind in the ber 18th a blaze in a ramshackle warehouse-cum-apartment- world. Even more dramatically, in April the government an- block killed 19 people believed to be migrants from elsewhere nounced plans to build a whole new city from scratch, about in China. The authorities are now using “fire safety” as a pre- 100km (60 miles) from Beijing, where some businesses and text to drive thousands ofothermigrants out ofthe basements, universities will be relocated. That will cost another few hun- air-raid shelters and shanties where they live (see page 37)— dred billion dollars. Beijingaimsto have no more than 23m res- often by cutting offtheir electricity and water. It has amounted idents by 2020, compared with nearly 22m today—an implau- to a mass expulsion from the capital. sible goal, without yet more abuse ofmigrants. It is clear that officials are not simply aiming to prevent fu- ture fires. Afewvolunteerswho have tried to setup sheltersfor A better Beijing people who have found themselves suddenly homeless in Officials have an extra reason to curb the population in Bei- sub-zero temperatures have been ordered by police to close jing—one that is especially important to the ruling Communist them. The capital has a long record of trying to limit the popu- Party: as the capital, the city must look its best and avoid any lation ofmigrantsfrom the countryside bymakingitharder for hint of instability. The leadership views any unrest in Beijing, them to rentcrummyaccommodation, the onlykind that most however minor, as a potential threat to the party’s grip on 1 14 Leaders The Economist December 2nd 2017

2 power. Hence the thuggish treatment of shanty-dwellers and about overcrowded schools and hospitals. But if the migrants the routine shakedowns by police ofany shabbilydressed per- were allowed to have proper jobs, they would pay more taxes son heading towards Tiananmen Square. Who knows what and support more public services. Discriminating against chaos might be unleashed by a protest there about unpaid them can be deadly. When they are, in effect, barred from for- wages, abusive bosses or other migrant grievances? mal, regulated housing, they end up in firetraps. There are ways of easing the capital’s growth pains that It would be better to give all Chinese citizens the same would be both more humane and more efficient. Water is rights to live where they please and obtain public services scarce largely because it is too cheap. Pricing it properly—so where theylive. Ideallythatwould mean abolishingthe hukou that it reflects supply and demand—would spur households system, which ties Chinese to the place their family came and businesses to use less ofit. This would no doubt upset Bei- from. Failing that, the government should at least stop putting jingers, who have grown used to cheap water. But it would be arbitrary caps on the populations of megacities. Such caps lessdisruptive than buildingan entire newcitydown the road. make no economic sense. The more people a city attracts, the Above all, Beijing and other megacities should stop treating more productive it becomes, as people forge millions of valu- settlers from elsewhere in the country as second-class citizens. able connections with each other. Also, Beijing’s and Shang- Refreshingly,some public intellectuals in Beijing signed a peti- hai’s non-migrant populations are set to age and shrink as a re- tion deploring the recent evictions as a violation of human sultofdecliningbirth rates. Theywill soon need migrants even rights. But all too often residents of the capital ignore the mis- more urgently than they do today. Out of self-interest, if noth- treatment of migrants. Many share the government’s worries ing else, they should treat them decently. 7

European banks A job half-finished

Much has been done to strengthen Europe’s banking system. But not enough HE permanent revolution Onebigmissingpiece isa common European deposit-insur- Trumbles on. Ten years after ance scheme. Germans and other northerners have balked at the financial crisis, Europe’s the thought ofbailing out supposedly feckless southerners. To bankers must wonder whether allay such fears, the commission wants to go gradually: at first, the regulatory upheaval will should depositors have to be made good, a European insur- ever cease (see page 61). Next ance fund would merely lend money to national schemes, month two European Union di- which would then be recovered from other banks. rectives start to bite. MiFID2 will Northerners will remain suspicious. That makes two other make trading more transparent and oblige banks to charge cli- elements of the commission’s plan essential complements to ents separately for research; PSD2 will expose banks to more deposit insurance. One is to bulk up banks’ shock absorbers, competition from technology companies, and each other, in most likely with convertible debt, so that they can withstand everything from payment services to budgeting advice. A new heavy losses. The otheris to tackle the piles ofnon-performing accounting rule, IFRS 9, also kicks in, demanding timelier pro- loans that, though shrinking, still weigh down lenders in Italy visions forcredit losses. The global capital standards drawn up and other southern countries. That requires speeding up and after the crisis, Basel 3, may at last be on the verge of comple- harmonising procedures for insolvency and recovering collat- tion—implying yet another uptick in equity requirements for eral. The commission and the ECB are also working on rules some European lenders. forprompter recognition ofduffloans in future. Amid this blizzard of letters and digits, the European Com- All that makes sense but, to sever the doom loop, the com- mission is pushing ahead on yet another front. It is urging gov- mission wants to go further. It is looking at an ingenious ernments and the European Parliament to complete the EU’s scheme, first proposed by a team of European economists, to banking union by 2019 and thus cut the “doom loop”, in which create securities backed by a pool of sovereign bonds. The saf- weak banks and sovereigns drag each other down. Because est tranches would be the riskless asset, free ofnationality, that regulators treat all euro-area government bonds, regardless of the euro area currently lacks. origin, as risk-free, banks have an incentive to load up on them in order to economise on equity; and they favour their home Cut the cord governments’ bonds. Should the sovereign-bond prices fall, as Though worth pursuing, the transition to the safe asset would they did in Greece, local banks take a big hit; if governments be tortuous. After purchases to back the asset, the markets for have to prop up lenders, the spiral goes on down. some government bonds will end up being rather thin. Ger- Much has already been done to weaken this link. A single mans may suspect that they will remain the ultimate guaran- supervisor, housed in the European Central Bank (ECB), tor. Other means ofstrengthening Europe’s banks therefore re- watches over the euro zone’s biggest lenders. A single resolu- main vital. Consolidation, both within and across borders, tion board, backed by a central fund, deals with failing banks. would help. Europe has too many small banks; even its biggest Yet the banking union is only half-built. The zone’s economic lack scale. And many academics believe that banks every- bounceback might well make its completion seem less urgent where should add still more equity to their balance-sheets. (see Free exchange). But waiting for the next financial crisis to Completing the banking union is necessary for financial sta- strike would be the greater folly. bility. It is not sufficient. 7 MAKE SURE YOU’RE GETTING #9 A SATISFACTION GUARANTEE.

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The TPPing point Jet, Wizz Air, Air Asia, Hong are over100. Courts in Canada, cism in those same regions. Kong Express, GOL, IndiGo including my own, have come FATHER ANDREW LIAUGMINAS The rebirth ofthe Trans-Pacific and Jetstar. None ofthese flew to view a lot ofthese as Catholic Chaplain of the Partnership trade deal without before1995. And it is not a imposing cruel or unusual University of Chicago the participation ofAmerica stitch-up by a committee of punishments, which create the (“Repair job”, November18th) legacy airlines. Official riskofpressuring charged It is not quite true that “Britain, will have large consequences co-ordinators (independent persons into pleading guilty with its established Protestant forthe country.America is from airlines), airports and when they might be legally or church, did more than any now excluded from a vital governments follow transpar- factually innocent. other country” to build up the process forrenewing the rules ent rules to match market DEL ATWOOD slave trade. Figures from ofinternational trade. For demand with available capaci- Judge of the Provincial Court Emory University’s Trans- example, the new Comprehen- ty.Consumers enjoy ever and Family Court of Nova Scotia atlantic Slave Trade Database sive and Progressive Agree- cheaper fares, a growing num- Pictou, Canada show that ofthe 12.5m slaves ment forthe TPP has suspend- ber ofroutes and more choice. brought to the Americas, the ed several measures that were The system is not perfect. Protestants and Catholics Catholic powers ofSpain and a priority forAmerica. Airlines and airports are work- Portugal were responsible for It has left a pact that is ing together to fix it. But let’s 7m. The British transported bound to grow.Weestimate, in not make the problem bigger 3.5m. This does not excuse the paper referenced in your by retrying auctions. We’ve their role, but evangelical article and published by the already seen that fail.The Protestant abolitionists such as Peterson Institute, that adding conclusion The Economist William Wilberforce played an the five countries that have missed is the urgent need to integral role in bringing about expressed interest in joining build enough runways to the abolition ofthe slave trade would triple benefits and satisfy demand. in 1807 and the emancipation produce larger gains than the ALEXANDRE DE JUNIAC ofslaves throughout the Brit- old TPP did. America’s exit Director-general ish empire in the 1830s. It was leaves a leadership void that International Air Transport the British navy that enforced China is already beginning to Association the abolition ofthe interna- fill through the Regional Geneva tional trade, despite the efforts Comprehensive Economic “The stand”, your essay on ofCatholic Spanish and Portu- Partnership, the Belt and Road Let judges decide the penalty Martin Luther’s Reformation guese traders to smuggle Initiative and the Asian Infra- (November 4th), attributed to human cargo across the ocean. structure Investment Bank. Power imbalances favouring Protestantism a wide variety G. PATRICK O’BRIEN The United States is paying the state often lead to improvi- ofchanges to society, politics Columbia, South Carolina a high price forits illusory dent plea-bargain deals in the and the economy. Yet, you pursuit of“wins” in bilateral courts (“The shadow justice routinely implied causation Covered in glory negotiations. system”, November11th). An while only demonstrating PROFESSOR PETER PETRI article by Stephanos Bibas in correlation, and opted for Youdeclare in “Cows and International Business School the Harvard Law Review iden- broad generalisations where seep” (November18th) that Brandeis University tified mandatory minimum fine distinctions are required. NickSmith, New Zealand’s Waltham, Massachusetts prison sentences set out in For example, you suggested environment minister, “may PROFESSOR MICHAEL PLUMMER statutes as contributing signifi- that “Protestant toleration was be the first politician to be SAIS Europe cantly to these unjust results. good for business”, pointing to immortalised in horse Johns Hopkins University Mandatory minimum the Calvinist Netherlands in manure”. A hard point to Bologna, Italy sentences date backto Britain’s the late 16th century as a prime argue, though your “may” BlackAct of1723, when the example. What about the does leave an open door for The airport-slot machine filching ofone farthing too toleration that the Warsaw furtherinquiry. However, he is, many meant the difference Confederation enshrined into I am quite sure, by no means Auctioning landing and take- between gaol and the gibbet. law in the Polish-Lithuanian the first politician to produce offslots will do nothing to Harsh outcomes in sympathet- Commonwealth, a Catholic horse manure, however mod- alleviate the shortage ofair- ic cases, and advances in state many times larger than estly or abundantly. The real port capacity (“Winning the penology and criminology, the United Provinces? And villains ofyour piece were, the slottery”, November18th). In gradually led legislatures away again, saying that “Protestant cows, or really, the bulls. So let fact, auctions would create the from mandatory sentences, education provided opportu- me ask: should they be immor- absolute wrong incentive for giving courts considerable nities forsocial mobility” does talised in man manure? You governments—the scarcer the discretion in the imposition of not do justice to the many know, sauce forthe cow is slots the higher the price. It is proportionate penalties upon initiatives that the Catholic sauce…oh, never mind. true that slots are allocated offenders. But the pendulum church promoted throughout BUDD WHITEBOOK free, but you are incorrect to then began swinging backthe 17th-century France to raise the Washington, DC 7 assume that this is a free ride. other way as tough-on-crime level ofeducation among the Airlines pay each time they policies became the norm. poor, such as in the petites land or take off. Last year the Canadian criminal law has écoles throughout pre-revolu- Letters are welcome and should be airport bill in Europe alone been affected by this trend. In tionary France. addressed to the Editor at The Economist, The Adelphi Building, exceeded $31bn, and it is 1982 there were only six Moreover, your narrative 1-11John Adam Street, rapidly rising. mandatory minimum on the growth ofProtestantism London WC2N 6HT The current system facili- sentences prescribed in our in developing countries did E-mail: [email protected] tates new entrants. Lookat the criminal statutes. By 2006 not compare that trend with More letters are available at: phenomenal growth ofeasy- there were 40. At present, there the parallel growth ofCatholi- Economist.com/letters Executive Focus 17

The World Health Organization (WHO), Geneva, seeks a Chief Information Offi cer (CIO) (Vacancy reference: 1703360)

Chief Information Offi cer (CIO)/Director, The Chief Information Offi cer ensures that IT is a strategic enabler for WHO, Information and Communications Technology delivering global services and best practice solutions for WHO to achieve its (ICT) - D1 Level public health mission. The International Organization for Migration is inviting applications for the post of Chief Information Offi cer (CIO)/Director, Information and Communications More specifi cally, the CIO will: Technology (ICT) at Headquarters in Geneva, Switzerland. The Director’s • Innovate: Be an innovator for the Organization’s information technology responsibility is to assess the substantive and operational needs for developing, maintaining and monitoring an effective information and communications needs, adopting new approaches and technologies as appropriate. technology functions for the Organization. This includes responsibility for • Transform: Lead the digital transformation of the global Organization, strategies, policies and guidelines, information systems, communication for IT modernization, cost effi ciencies, enhanced governance, and architecture and ICT infrastructure in line with the Organization’s strategic and business objectives. S/he will be responsible for providing leadership and increased staff productivity. management of the Organization’s global information systems, staff and ICT • Communicate: Analyze information and trends, and communicate infrastructure. with the senior management team to ensure a unifi ed understanding and Qualifi cations and Core Competencies: Master’s degree in Computer Science coherent approaches, aligned to business needs. or Engineering, Information Systems, Mathematics, Business Administration, Management or a related fi eld from an accredited academic institution with fi fteen • Lead and manage: Direct the organization, management, operation, years of relevant professional experience. Programme Management Institute and performance of the Information Management and Technology Scheduling Professional, Prince2 Foundation, or an equivalent license is desirable. Department in areas of relevant services, quality of service delivery, and More than fi fteen years of progressively responsible experience in planning, customer satisfaction. development, implementation and maintenance of information systems, including large-scale ERP systems, or related areas, in public, business, and/or international environment, is required. Experience in the area of strategic management concepts, Salary: This position is a classifi ed at the “D2” level in the United Nations change management, enterprise architecture framework, relevant technology common system. WHO offers an attractive expatriate package including health platforms, and project management framework and methodologies. Experience in insurance, fi nancial support for schooling of children and relocation. For more the application of implementation methodology framework is desirable. Proven experience in implementing an information security programme is highly desirable. information and to apply online please go to: http://goo.gl/MmoZgw Experience in directing and managing business process improvement and re- engineering techniques is desirable. Proven experience in the management of staff, Deadline for applications is 19 December 2017. budgets and fi nancial resources. http://www.who.int/careers/en/ Salary: IOM offers an attractive salary package based on the United Nations system at the D1 level. “Together for a healthier world” A full term of reference is available at the IOM website: www.iom.int. Dr Tedros Adhanom Ghebreyesus, Candidates may apply before 15 December 2017 using the IOM online e-recruitment Director General facility: http://www.iom.int/how-apply. The Economist December 2nd 2017

Briefing Yemen The Economist December 2nd 2017 19

well as the airport in Sana’a. The road from From bad to worse the capital to Hodeida is pockmarked with craters. At the port, the cranes used to un- load ships have been put out of action. Once the lifeline of the north, it now oper- ADEN, HODEIDA AND SANA’A ates at well under its former capacity. For months America tried to supply new A humanitarian crisis brought on by waris devastating the poorest country in the cranes, but they were turned back by Gulf Middle East members ofthe coalition. LONG the road from the port city of Ho- hold the entire country together, making Ships and planes carrying food, fuel Adeida to Sana’a, Yemen’s capital, rug- the prospects forpeace dim. and medicine are monitored by the UN to ged mountains rise sharply from a coastal Yemen’s infrastructure has been crum- ensure that arms are not entering the plain, then level off, giving way to a raised bling for years, so it is difficult for a visitor north. But the coalition still holds up ship- plateau. Old stone farmhouses overlook to tell between buildings that are falling ments. In November it cut off northern terraced fields, fed by mountain rains. To down through neglect and those half-lev- ports completely for over two weeks. Even the south are lush forests, where baboons elled by explosions. But locals point out the more limited blockade hascreated a cy- and wildcats live. Yemen’s vast deserts the damage wrought by a bombing cam- cle of suffering. A lack of fuel has crippled spread to the east. The diversityofthe land- paign led by Saudi Arabia, part of an inter- water-pumping stations, so locals have re- scape is breathtaking. But amid all this nat- national coalition that supports the gov- sorted to drinking from dirty sources. ural beauty, there is misery. ernment. Although American and British Cholera is often the result. The medicine to Yemen was the poorest country in the military advisers have helped the Saudis treat it is also held up by the coalition. Middle East even before the outbreak of to choose targets, and their governments war in 2014 between Houthi rebels and have provided them with precision-guid- Nowhere is safe government forces. The conflict has ed munitions, or “smart bombs”, the air Nothing seems out of bounds for the bom- heaped devastation upon poverty. Since strikes often seem to miss their mark. bers. About 40 health centres were struck fighting began Yemen has suffered the big- The Houthis, a group of Shia rebels, are by the coalition over the first six months of gest cholera outbreak in modern history the main target. Unhappy with reforms to the war. Amnesty International, a pressure and is on the brink of the harshest famine the state and their share of power, they group, has accused it of deliberately target- the world has seen for decades. The con- swept out of their northern stronghold in ing civilians, hospitals, schools, markets flict has shattered the water, education and 2014 and overran Sana’a. With the support and mosques; and of using imprecise health systems. The UN says that it is the of Iran and the forces of a former dictator, weapons, such as cluster bombs, which world’s worst current humanitarian crisis. Ali Abdullah Saleh, the Houthis then most countries have outlawed. A spokes- Three-quarters of the population of 28m moved south, taking control of most of the man forthe coalition once declared the en- need help. rest of Yemen. The president, Abd Rabbo tire city of Saada, home to about 50,000 The war in Yemen, and looming hu- Mansour Hadi, fled—first to Aden, a south- people, a military target. manitarian catastrophe, has gone largely ern port, then to Saudi Arabia, where he re- That is where Ali Marhad (see picture unnoticed beyond its borders. The fighting mains. Athisrequest, the Saudisstepped in on next page) lived before fighting about a is rooted in old conflicts and now involves and, with local forces, pushed back the decade ago forced him to flee. He moved many groups, sucking in Yemen’s neigh- Houthis to the north ofthe country. into a camp for displaced people in Maz- bours. But no single force has emerged that Coalition air strikes have targeted fac- raq. But it was bombed in 2015 by the co- is strong enough or competent enough to tories and food-storage warehouses, as alition, killing 40 people, including his two 1 20 Briefing Yemen The Economist December 2nd 2017

2 sons, he says. He then moved to a camp in 500 km Hajjah. Earlier this year another bomb fell near his home, a collection of sticks and S AUDI ARABIA tarpaulin. It is exceedingly difficult for or- Areas where al-Qaeda Sparsely dinary Yemenis to escape the fighting. operates populated At least 10,000 people, most of them ci- Saada Former north- vilians, have been killed by bullets and south Yemen bombs. Around 40 times more people Mazraq border Cholera cases Jan 2017 - current, ’000 have died in Syria’s war, which also sent a YEMEN wave of refugees to Europe. Perhaps that is Red Hajjah <10 20 <50 Sea why it has gained international attention, Sana’a while the conflict in Yemen is overlooked. Hodeida Less than half of the British public is aware Mukalla Bayda of it. The death toll is anyway misleading. ERITREA Taiz Food security Many more Yemenis have died from a lack Feb-May 2018 (forecast) of food and medicine than from the fight- Stressed Crisis Emergency ing, of which the shortages are a direct re- Aden ETHIOPIA Gulf of Aden sult. The war continues, though the front DJIBOUTI line has hardly budged in the past year. Fighting is not unusual in Yemen. Sit- Areas of control, November 2017 tingat the south-western tip ofthe Arabian Houthi Saudi-led coalition Sources: WHO; FEWS NET peninsula, on important trade routes, the Source: Risk Intelligence SOMALIA land has long been coveted by foreign powers. In the past century it has seen Moneybrieflyflowed in and oil out. But frustration was shared by Mr Saleh, who about a dozen conflicts, involving over simmeringill-feelingerupted into civil war sought to undermine the transition in the halfa dozen countries. in1994 in which MrSaleh’s northern forces hope of regaining the presidency or, at Some seeds of today’s fighting were were victorious. In the aftermath his Gen- least, handing it to his son. sown in battles in the 1960s—a civil war in eral People’s Congress (GPC) dominated Resentment towards Mr Hadi and dis- the north and an insurgencyagainstBritish parliament, then set about consolidating quiet over the growing power of Islah, an colonial forces in the south. Two distinct power. Parliamentary elections in 2003 Islamist party affiliated to the Muslim Yemeni states arose. Leaders in the north were postponed and critics detained. Mr Brotherhood, Egypt’s main Islamist group, turned to religiousauthorityfortheir legiti- Saleh and his henchmen are thought to brought the Houthis and Mr Saleh into an macy,enlisting the support of Islamic cler- have stolen billions of dollars of state unlikely alliance in 2014. In September of ics. The more secular south adopted Marx- funds, while most Yemenis got by on less that year their forces entered Sana’a—and ism and aligned itself with the Soviet than $3 a day.Resentment ofhis rule grew. were welcomed by many Yemenis who Union. Political feuding led to further wars The Zaydis, a Shia sect, who make up had become disenchanted with Mr Hadi’s in 1972 and 1979, but economic hardship perhaps 40% of the population, felt partic- ineffective leadership. A power-sharing and the end of the cold war brought the ularly marginalised by Mr Saleh (though deal between the Houthis and the govern- sides together. After a series offailedagree- he is one of them). The Houthis emerged ment was brokered by the UN—and then ments in the 1970s and 1980s, north and from this group in the1990s, bristling at the ignored. In early 2015 the rebels seized full south at last agreed on a new constitution growth of the Saudis’ conservative reli- control of the capital. By March they had in 1990, in the hope that a show of unity gious influence and Yemen’salliance with made it to Aden. would attract foreign investment and in- America in its war on terror. Mr Saleh, in crease the extraction ofYemen’soil. turn, accused the group ofwantingto over- Muhammad fears a Houthi throw his government. Hundreds of peo- But it was also becoming clear that the ple died in fighting between the Houthis Houthis, motivated by grievances, did not and pro-government forces between 2004 have a plan for ruling Yemen. In areas un- and 2010—including Hussein Badruddin der their control, rubbish is piling up, cash al-Houthi, the group’s leader, from whom is hard to get hold of and the lights have it takes its name. gone out. “My sense of it is that they never Opposition to Mr Saleh’s rule came to a really had a clear political agenda, both head during the Arab spring of 2011, when during the wars with Saleh and after,” says tens of thousands of Yemenis took to the April Longley Alley of the International streets. With a push from the Gulfstates, he Crisis Group, a think-tank. stepped down in 2012 and was succeeded The incompetence of the Houthis has by Mr Hadi, his vice-president. Thus began been compounded by the involvement of a short-lived period of hope. Talks over- Saudi Arabia. Saudi meddling in Yemen is seen by the UN ledtoaplanin2014fora nothing new. In 1934 Saudi soldiers retook new constitution enshrining a federal sys- towns seized by the Zaydis. Prince Saud, tem and a parliament split between north- their leader, would later become king. To- erners and southerners. day Prince Muhammad bin Salman is first The Houthis, however, continued to in line to the throne. But his adventure in distrust the government. They boycotted Yemen, which seemed designed to build an election won byMrHadi in 2012 and op- him a reputation as a strong leader, has led posed the agreement of 2014, on the Saudi Arabia into a quagmire. grounds that it stuck most of them in a re- Responding to Mr Hadi’s call for help, gion with few resources and no access to Prince Muhammad organised a coalition the sea. Nor had they received positions in that included Egypt, Morocco, Jordan, Su- This is home for Ali Marhad the government that they wanted. Their dan, Kuwait, the United Arab Emirates, Qa-1 The Economist December 2nd 2017 Briefing Yemen 21

2 tar and Bahrain. They began striking Ye- gion told the New York Times in September the only group that UN resolutions ask to men from the airand the sea in March 2015. thatIran isprovidinganti-ship and ballistic give ground. In May a convoy led by Ismail A month later the Saudis declared the air missiles, mines and exploding boats that Ould Cheikh Ahmed, the UN envoy to Ye- campaign over. It had “achieved its mili- the rebels have used to attack coalition men, was attacked by demonstrators in tary goals”, officials said. A new operation ships in the Red Sea. When the Saudis shot Sana’a. “There will be no more contact would supposedly focus on findinga polit- down a missile fired from Yemen on its with [him] and he is not welcome here,” ical solution in Yemen. way to Riyadh on November 4th, they said Saleh al-Samad, a Houthi leader, a In reality, the war was just beginning. called it an “act ofwar” by Iran. month later. Over the next months, local forces backed The possibility that the war might end As the war drags on, both sides appear by coalition air strikes (and later soldiers) soon is slender. The Saudis have powerful unsteady. In the south the Saudis along pushed the Houthis back. However, they backing to continue their fight. President with the Emiratis, who are the largest for- have not been able to drive them out of ter- Donald Trump has nothing but praise for eign force on the ground, have built an un- ritoryseized in the north, including Sana’a. them. When he visited Riyadh in May he wieldy alliance of Salafists, southern se- So instead the coalition seems intent on applauded their“strongaction” against the cessionists and other militias. “Whatever starving the north. Houthis and agreed to sell them $110bn Gulf money can buy,” says an observer. The Saudis have created much of the worth of “beautiful” arms. The war has Some ofthese groups are accused ofwork- misery that blights Yemen, but blame falls also been a blessing for Britain’s defence ing with jihadists, such as al-Qaeda in the on others, too. The Houthis and Mr Saleh’s industry, which has hugely increased sales Arabian Peninsula, though the Emiratis forces have also carried out indiscriminate of missiles and bombs to Saudi Arabia have pushed backal-Qaeda. No one thinks attacks in cities such as Taiz and Aden. since the start of the war. As the European Mr Hadi has a long-term future. They have held up aid and are accused of Parliament approved a non-binding arms war profiteering. Mr Hadi says the Houthis embargo against the Saudis in 2016, David North-south divides looted around $4bn from the central bank Cameron, then the prime minister, In the north the Houthis accuse Mr Saleh to pay for the war (the Houthis say the sounded almost Trumpian, praising the of negotiating secretly with the coalition money was used for food and medicine). “brilliant” weapons that Britain was sell- (though they have done the same). Mr Sa- So he moved the bankfrom Sana’a to Aden ing to the kingdom. His successor, Theresa leh, who is the weaker partner, fears being in 2016 and stopped paying the salaries of May, at least expressed her concerns over left out ofany settlement. Things came to a public servants in the north. Schools and the war. head in August, when clashes between hospitals have closed and many northern- America and Britain not only support Houthis and supporters of Mr Saleh led to ers face destitution. Saudi Arabia but have blocked other coun- deaths on both sides. They have since For Saudi Arabia, the region’s Sunni tries from putting pressure on it. Along made up but tension remains high. And champion, the failure ofitscampaign in Ye- with France, which also sells weapons to there is a split within the Houthis, between men istwofold. Notonlywasitdesigned to the Saudis, they undercut a UN resolution hardliners and moderates. The group’s reinstate Mr Hadi’s government—it was in 2015 thatwould have setup a panel to ex- leader, Abdel-Malik al-Houthi, is seen as also supposed to send a signal to Iran’s amine abuses in the war. When urging the willing to negotiate. However, analysts say Shia regime. The two powers are locked in creation of a new panel earlier this year, that, the longer the war goes on, the stron- a struggle for regional dominance that has Zeid Ra’ad al-Hussein, the UN high com- ger the hardliners become. spilled over into Syria, Lebanon and Iraq. missioner for human rights, condemned Some spy an opening. Ms Alley reckons The Saudis fear that, in the Houthis, Iran is “the reticence ofthe international commu- thatthe divisions, aslongastheydo notde- nurturing a Shia proxy, akin to Hizbullah, nity in demandingjustice forthe victims of velop into open conflict, are an opportuni- the Lebanese militia that it backs. Yet again the conflict”. The panel was approved—but ty for some kind of deal. “Carrots have to Yemen isthe playground ofbigger powers. only after America, Britain and France had be offered to those willing to compro- America has concluded that Iran does watered it down. mise—right now it is all sticks,” she says. Yet not exert “command and control” over the The UN has organised three rounds of the Saudis, under little pressure from Houthis. But there is little doubt that it is peace talks. But Mr Hadi’s government in- abroad, do not looklike backing down and arming the group. It appears to have sup- sists that the Houthis lay down their arms seem to hope that the population in the plied missiles the Houthis have fired. and withdraw from the areas they have north will rise up againstthe Houthis. Frus- America’s most senior admiral in the re- seized. The Houthis complain that they are tration with Houthi rule is growing, some- thing Mr Saleh seems keen to exploit, but so farthe streets are mostly quiet. A historhistoryy of violenceviollencel Others may not want peace. Warlords Yemen, GDP per person, $’000* 2004 Fighting between the Aug 2016 profit from extortion or by selling looted SSelected events 1972 and 1979 Houthis and the army. Sporadic Peace talks in aid on the black market. Mr Hadi’s govern- 1918 The Ottoman North and South Yemen clashes continue for six years Kuwait break down empire crumbles. clash along their border ment and other combatants are accused of Northern 2000 Al-Qaeda 2015 Saudi creating shortages so that they can sell Yemen gains 1967 British troops 1990 North bombs the USS Cole, Arabia begins independence. withdraw from and South an American warship, bombing Yemen items, such as fuel, at a big mark-up. Even if southern Yemen. Yemen unite. docked in Aden Britain controls 2014 Houthi the Saudis were to withdraw, many an- the south The state of South Ali Abdullah Yemen is born Saleh is made 1994 Northern rebels take alysts think that the fighting within Yemen 1962 Army officers president forces put down control of Sana’a seize power in the a secession attempt 5 would continue—between northerners north, declaring the in the south and southerners, the Houthis and Mr Sa- Yemen Arab Republic 4 (often called North leh or Islah and any number ofparties. Yemen) and sparking 3 Ordinary Yemenis are less interested in a civil war such divisions. Acrowd gathers around Ali 2 Marhad’s tent as he dispassionately re- 1 counts his hardship. They come from 0 Houthi territory, but they say they have no 1960 65 70 75 80 85 90 95 2000 05 10 15 17 tribe, no money, no home, “just Allah”. Do they care who wins the war? “No!” they Source: Conference Board *2016 prices with updated 2011 purchasing-power parity cry. Theyjust want it to end. 7 SICK OF PHONY HEALTH EXPER ?

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Also in this section 24 One bureau, two guvnors 25 A row with Britain 25 Digital privacy and SCOTUS 26 The view from Moscow 28 Lexington: Enough already, Nancy

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

The Trump administration poorly suited to cities. In New YorkCity, for example, the FMR fora one-bedroom flat is Dr Carson’s operation a measly $1,357. When recipients settle in poorer areas, where market rents are actu- ally below the FMR, landlords who spe- cialise in low-income housing reap the benefits of a guaranteed, possibly inflated, BALTIMORE AND WASHINGTON, DC government cheque each month. Low rent ceilings, the tendency of poor families to The federal housing agency embodies the pathologies afflicting the White House stay in their neighbourhoods and the abili- EN CARSON, a celebrated neurosur- federal programmes with HUD funds, pri- ty of landlords in nicer parts to refuse ten- B geon and unsuccessful presidential vately complain of uncertainty. Dr Car- ants with rental assistance all mean that candidate, had no experience in political son’s most significant policy decision to the programme concentrates many recipi- office or housing policy before Donald date has been a two-year delay of the ents in racially segregated and impover- Trump nominated him to lead the Depart- “small-area fair market rents” (SAFMR) ished areas—the opposite ofwhat it was in- ment of Housing and Urban Development rule, finalised by the Obama administra- tended to do. Depressingly, the median (HUD). ItwasunclearwhatDrCarson, long tion, which aimed to help voucher-holders neighbourhood poverty rate is identical sceptical aboutgovernmentassistance and move to better neighbourhoods. This is es- for poor children, whether their families social engineering more generally, would pecially perplexing because five years of hold a voucher or not. do with an agency that funds rental-assis- testing showed that the rule has achieved HUD has long been aware of this pro- tance schemes for the poor, only half of its goals while reducing expenses, which blem. An interim fix was to boost payment whom actually live in cities (despite what conservatives should cheer. standards in problem areas to the 50th per- the department’s name suggests). The ad- The rule affected the most important centile rent, rather than the 40th. This did ministration proposed a 13% cut in HUD programme run by HUD, known formally not improve matters. Despite the extra funding in its first budget. Dr Carson as the Housing Choice Voucher pro- spending, neighbourhood poverty rates seemed not to know how individual pro- gramme and colloquially as Section 8. This and housing quality were unchanged. The grammes would be affected when testify- helps 2.2m poor households with an aver- SAFMR rule, which would have taken ef- ing before Congress. HUD, with its annual age income of $13,500. Lack of funding fect on October 1st, took a different ap- budget of $46bn, is a tiddler compared means that only a quarter of those eligible proach, requiring cities to calculate rents at with other federal departments, but in sev- for such assistance receive it. Los Angeles the zip-code level, ratherthan across an en- eral ways it is a sort ofminiature version of recently reopened its waiting list after a 13- tire metro area. The evidence for changing the Trump administration. year hiatus. Those lucky enough to obtain the rules is powerful. Raj Chetty, Nathaniel In the nine months since he took the vouchers need pay only 30% of their in- Hendren and Lawrence Katz, all econo- post, Dr Carson has stayed inconspicuous come towards rent. The government cov- mists, found big benefits for poor children and inscrutable. The agency seems direc- ers the rest, but only up to what is known when their families were randomly as- tionless. Only four of the 13 top positions, as the “fair market rent” (FMR)—generally signed vouchers allowing them to live in which must be confirmed by the Senate, the 40th percentile rent in the surrounding better neighbourhoods. Adult earnings have been filled. No nominee has been an- area. Enthusiasm for housing benefits has shot up by 31%, rates of college attendance nounced to be either the inspector-general long been half-hearted. The federal gov- rose 32% and the incidence of single par- or head of the policy development and re- ernment forgoes twice as much revenue enthood dropped by 30%. search office. Eric Trump’s wedding plan- because of the mortgage-interest deduc- Though HUD insists that more time is ner runs the agency’s largest regional of- tion as it spends on subsidising rent. needed to study the rule, some cities have fice, in New York. Local public-housing Because rates are calculated across an already tried it out, with promising re- agencies, which actually administer the entire metropolitan area, the algorithm is sults. In Dallas, which implemented a sim-1 24 United States The Economist December 2nd 2017

2 ilar rule after a court settlement, the effects The CFPB have been encouraging. Research by Rob- ert Collinson and PeterGanongshows that One bureau, two voucher-holders moved to areas with less crime, poverty and unemployment. Test- guvnors ing in five other areas by HUD has shown that determining rents on a zip-code basis NEW YORK actually decreases costs, because fewer A federal agency born in controversy overpayments in poor areas more than becomes a farce compensated for higher rents elsewhere. The resultshave been similarlycompel- OR anyone concerned that American ling in Baltimore, where the Baltimore Re- Fconsumers have suffered from not hav- gional Housing Partnership has imple- ing enough financial regulators on the mented a programme to move some beat, there is now clear evidence of too residents to better neighbourhoods. (Balti- many. The post-Thanksgiving working more calls them “opportunity areas”; see week began at the Consumer Financial map.) Usually that means moving people Protection Bureau (CFPB) with two people out of the city, where decrepit terrace claiming to hold the temporary leadership houses sag into the street, and into the sur- mantle, after the abrupt resignation of the rounding counties. Residents benefiting previous director, Richard Cordray. Mick from Baltimore’s programme moved from Mulvaney, who heads the Office of Man- areas with a 33% poverty rate to places agement and Budget, was given a second Taking the Mulvaney where it was 8%. Their children attend job by the president, operating under the schools where 79% of students are profi- authority of a commonly used statute. He widely expected to run for governor of cient in reading, compared with 47% in Bal- arrived at the agency with a bag full of Ohio, the result is publicity for being part timore city schools before the move. doughnuts and an open invitation for em- of the resistance. That is also true for Ms All of which makes HUD’s delay even ployees to come by and grab one. As they English, who had been just another cog in more mystifying. Housingadvocatesfear a munched away, they could read an e-mail a bureaucracy. Republicans have much to permanentreversal. The agency, which did signed by “Leandra English, Acting Direc- gain as well. They have long argued that not make any officials available for inter- tor”, a relatively young staff member the CFPB is overtly political, misuses the view, said through a spokesman that they whom Mr Cordray promoted to deputy di- law and is not accountable for its actions. were “hardly retreating” from the policy, rector on his way out, with the intention of Those who agree will probably see all noting that public housing agencies could putting her in charge under the authority these elements in the current drama. voluntarily implement the rule if they ofa clause in the Dodd-FrankAct. The substance of the fight will take wanted to. Most will not, because they are America’sfavourite form ofwarfare fol- place over dry material. On one side is the cash-strapped and generally detest any lowed—a deluge of conflicting legal opin- Federal Vacancies Reform Act, which al- change to business as usual. The agency ions followed by a petition to the bench. lows presidents to fill temporary positions has also cited the need formore research, a Ms English requested an emergency re- of this sort. On the other is a clause in the lack of technical guidance (for which HUD straining order from the Washington, DC, Dodd-Frank Act which says the deputy di- is itselfto blame) and the general deregula- District Court; it was denied. Her suppor- rector “shall…serve as acting Director in tory mood of the Trump administration. ters attributed the cause to the judge hav- the absence or unavailability of the Direc- None of these reasons is convincing. And ing been appointed by Mr Trump. They tor.” Whether this covers the resignation of since there is no consolidated lobby of were not helped by a rulingin favour ofMr a director is blissfully unclear. slumlords bending the agency’s ear Mulvaney from the CFPB’s own legal Beyond the squabble are deeper reser- (though the National Association ofHome department. vations. The CFPB was created with truly Builderswasopposed), itishard notto con- These are, however, still early innings. unusual characteristics. It is funded by the clude that the governing principle at HUD Because the dispute goes beyond conflicts Federal Reserve, whose profits are a by- is to take whatever the Obama administra- in statutes to a constitutional issue, the product of conducting monetary policy. tion was doing, and do the opposite. 7 “Appointments Clause” in Article Two, This odd arrangement is designed to cir- which covers the relative authority of the cumvent Article One of the Constitution, various branches in forming a govern- which puts spending decisions before Suburban dreams ment, there is the possibility that this is the Congress. The lack of financial oversight is rare sort of dispute that is quickly brought compounded by its leadership structure. Baltimore before the Supreme Court. If they take the The bureau has just one director, unlike case, the justices may end up weighing in most agencies which are led by commis- on simmering debates over the power and sions that have bipartisan characteristics. autonomy of administrative agencies. In Forsupporters, the design ensures inde-

y the meantime, there will be no shortage of pendence; to critics, it meant excessive a B

e political theatre, if only because many of power. Mr Cordray did little to resolve dif- k

a e the participants find it useful. Mr Mulva- ferences. His tenure included disputed set- p

a

s e ney tweeted pictures of himself hard at tlements, notably in car finance, that

h C work, and sent e-mails instructing employ- strayed far from the specified mission of MARYLAND ees to ignore Ms English. Unable to estab- the bureau, and heated debates over the DC 15 km lish her authority in the office, Ms English regulation of high-interest “payday” lend- settled for a photo-op with two Democrat- ers. Shockingly, though obscured by all Housing programme Poverty rate Location, 2016 2010-15, % ic senators fond of cameras and of oppor- this, there are areas of agreement. Many Pre-move 0 5 10 20 30 40 tunities to bash the administration, Republicans say they support a financial Post-move Charles Schumer and Elizabeth Warren. consumer protection agency, though one Sources: Baltimore Regional Housing Partnership; US Census For Mr Cordray, an Obama appointee with a more conventional structure. 7 The Economist December 2nd 2017 United States 25

Presidential tweeting white-supremacist march in Charlottes- SCOTUS and tech ville (“many sides” were to blame). A very British row Mrs May, whose government badly Phoningitin wants a trade deal with America after Brit- ain leaves the European Union, was taking a calculated risk. Most foreign leaders have already worked out that the president re- NEW YORK sponds well to big parades and badly to Donald Trump’s rebuke to Theresa May The justices want to enhance privacy well-intentioned criticism. In Mrs May’s was not just anothertweet protections forthe digital age case, though, the rebuke was worth it. Mr ARLY morning fusillades of gibberish Trump has, amazingly, managed to unite HE nine justices of the Supreme Court Eare nothingnew in the Trumppresiden- MPs who can agree on little else right now, Tare used to applying 18th-century prin- cy. Nor is a tendency to attack allies, or to as well as to promote interfaith dialogue. ciples to an America that would bewilder give encouragement to racist groups. On Prominent British Muslims were joined in the constitution’s framers. Yet sometimes November 29th, though, the president condemnation by the Archbishop of Can- this is really hard. On November 29th the achieved a rare triple. On waking he seems terbury,Justin Welby.Britain’s ChiefRabbi, court considered how a 226-year-old rule, to have grabbed his phone to attack CNN, Ephraim Mirvis, has previously said he the Fourth Amendment’s ban on unrea- give air to an old conspiracy theory and thinks Mr Trump is a racist. After his elec- sonable searches and seizures, bears on broadcast propaganda from a hitherto ob- tion win last year, discussions about a state one arrow in the government’s investiga- scure band of British xenophobes to his visit to Britain began. One sticking point tive quiver: tracking people’s movements 43.6m Twitterfollowers. Laterin the day he was that Mr Trumpwished the occasion to via their mobile-phone signals. At least six had a go at Britain’s prime minister, There- be optimised for pomp: gilded horse- justices seemed keen to widen the Fourth sa May, whose office had earlier criticised drawn carriages and all. It was thought Amendment umbrella for the digital age, him for thinking with his thumb. One more prudent, if he came, to helicopter but no single way to do so emerged. “This sound strategy for staying sane in 2017 has him in to the queen’s garden, avoiding is an open box”, a forlorn Justice Stephen been to ignore Mr Trump’s tweets. Yet this crowds of protesters. If the state visit hap- Breyer said. “We know not where we go.” morning barrage revealed traits that go to pened tomorrow,there might be a riot. The matter dates to 2011, when Timothy the core ofthe man in the Oval Office. The good news, for transatlantic rela- Carpenterwas arrested formasterminding One is an astonishing lack of curiosity tions at least, is that Mr Trump’s tendency a string of armed robberies in Michigan aboutwhere information comesfrom. Brit- to go after steadfast allies can be put right, and Ohio. The FBI built their case against ain First, whose nonsense the president with a little stroking. Malcolm Turnbull, Mr Carpenter on 127 days of mobile-tower retweeted, was until this weekat the fringe Australia’s prime minister, was an early data placing him near the scenes of the of the fringe of far-right English politics. Its victim, but America’s policy towards it has crimes. Under the Stored Communica- members are a hapless bunch, too bone- barely changed. British prime ministers are tions Act of 1986, investigators who have headed to conceal their animus against obsequiously paranoid about maintaining “reasonable grounds to believe” a sus- brown people. The group’s leader, Paul what they see as the special relationship pect’s electronic data include “specific and Golding, was expelled from the slightly with America’s presidents. Moreover, the articulable facts” that are “relevant and more mainstream British National Party foundation ofthe relationship is shared in- material” to their investigation can secure (BNP), which itself is marginal (it gained telligence and diplomacy, which is rela- an order compelling providers to hand it more than 1% of the vote in only three of tively tweet-resistant. In fact, for Mrs May, over. That’s a far easier bar to reach than Britain’s 650 parliamentary constituencies who is trying to negotiate the world’s most reasonable suspicion—the threshold for a in the general election earlier this year). Mr complicated divorce while hampered by search warrant. In Carpenter v United Golding was deemed too racist forthe BNP unpopularity and a self-sabotaging cabi- States, the justices are considering whether when he picked a fight with its only non- net, a spat with Mr Trump could be just this higher standard, known as “probable white council member. Mr Golding has a what she needs. 7 cause”, should apply when the govern- taste for actual fights, too: he has admitted ment seeks to trackdigital footprints. a charge of assault. As hardly anyone in According to Nathan Wessler, Mr Car- Britain had heard of Britain First, neither penter’s lawyer from the American Civil presumably had Mr Trump. But the group Liberties Union (ACLU), collecting location sounded like America First, which must information without a warrant defies a have been flattering and therefore good. “long-standing, practical expectation” that And it seemed to share Mr Trump’s views Americans’ “longer-term movements in on Muslims, which was good, too. That public and private spaces will remain priv- was all the information the president ate”. Government collection of location needed before giving his endorsement. data “is a categorically new power that is A second characteristic is a thin skin. made possible by these perfect tracking de- Despite the power of his office, Mr Trump vices that 95% of Americans carry in their often feels picked-upon. When Mrs May’s pockets”. And with an explosion of newly staff rebuked him for the Britain First stuff, built cell towers, providers can now esti- he could not resist: “Theresa, don’t focus mate their users’ positions within “a on me, focus on the destructive Radical Is- broadcast radius as small as ten metres”, or lamic Terrorism that is taking place within “halfthe size ofthis courtroom”. the United Kingdom. We are doing just Justices Samuel Alito and Anthony fine!” When Mr Trump was rebuked for Kennedy pushed Mr Wessler to explain criticisingLondon’s(Muslim) mayorafter a whyan individual would be more worried lethal terrorist attack, his tweets on the about keeping his tracks out of spooks’ file subject became more frenzied. Mr Trump drawers than safeguarding his bankor lan- felt similarly aggrieved when he was de- dline phone records—data Supreme Court nounced for his equivocal response to a In happier times precedentsaysthe governmentmayaccess1 26 United States The Economist December 2nd 2017

2 without a warrant. As sensitive as that in- Americans have a “property interest” in fender of the Fourth Amendment right to formation may be, Mr Wessler replied, it their own data. Citing John Adams, he not- be free from unreasonable searches of our does not compare to “a minute-by-minute ed that one impetus for the revolutionary digital effects.” Ian Samuel ofHarvard Law account of a person’s movements and as- war was the government’s use of“snitches School agreed. The colonial-era reference sociations” over weeks or months. and snoops” to spy on Americans. Open- caught the government’s lawyer “entirely Justice Sonia Sotomayor agreed—and ended “writs of assistance” gave authori- off-guard”, he says. Now the justices must then some. Carpenter may concern only ties licence to search anything they liked, reckon with how to find for Mr Carpen- cell-tower data, but “a cell phone can be infuriating the colonists and inspiring the ter—no mean feat in light of the competing pinged in your bedroom”, she said. “It can Fourth Amendment. interests of privacy and policing. As he of- ping you in the most intimate details of For Jeffrey Rosen, president of the non- ten does, Justice Breyer turned to the law- your life. Presumably at some point even partisan National Constitution Centre in yers for help. “So where are we going? Is in a dressing room as you’re undressing.” Philadelphia, Justice Gorsuch’s approach this the right line?” A solid majority of the One day soon, she mused, “a provider was somewhat surprising, if reassuring. “It justices know what decision they want, could turn on my cell phone and listen to suggests that he, like his predecessor Jus- but “how do we, in fact, write it?” An an- my conversations.” Given these imminent tice Antonin Scalia, may be a vigorous de- swer should appear by the end ofJune. 7 risks to Americans’ privacy, Justice Soto- mayor gestured towards a more robust ap- plication of the Fourth Amendment than America and Russia Mr Wessler was requesting. Chief Justice John Roberts, a conserva- Red mist tive, was an unlikely ally in this line of questioning. When Mr Wessler said that police should be able to see no more than 24 hours of cell-location data without a warrant, the chief suggested that warrant- MOSCOW AND WASHINGTON, DC less access to even a smidgen of data may How the Russia investigation looks from Russia violate an individual’s privacy, outflank- ing the ACLU lawyer from the left. He UZZFEED recently broke an explosive and repression. Leonid Volkov, the cam- asked Michael Dreeben, the government’s B storyaboutRussia’smeddlingin Amer- paign manager for Russia’s foremost oppo- lawyer, howthe claim thatpeople volunta- ica’s elections. On August 3rd 2016, it re- sition politician, Alexei Navalny, who—like rily share location data when they wander ported, just as the presidential race was en- his boss—has been in jail more than once, about with their phones squares with Ril- tering its final phase, the Russian foreign wrote recently, only half in jest: “I can’t be ey v California, a ruling of 2014 that police ministry wired nearly $30,000 through a silent any longer…I understand that need a warrant to search a mobile phone. Kremlin-backed bank to its embassy in American society and the liberal media, Riley, the chief said, “emphasised that you Washington, DC, with a remarkable de- stuck somewhere between denial and an- really don’t have a choice these days if you scription attached: “To finance election ger, still cannot reflect upon and accept Hil- want to have a cell phone.” campaign of 2016”. Worse still, this was lary Clinton’s defeat in the election a year With only Justices Alito and Kennedy only one of 60 transfers that were being ago. But the investigation of Russian inter- seeming to buy the government’s argu- scrutinised by the FBI. Similar transfers vention is not just a disgrace, it’s a collec- ment, the newest justice, Neil Gorsuch, were made to other countries. The story tive eclipse ofreason, it’s lunacy.” voiced his own take on why Mr Carpenter created a buzz, but not of the kind its au- Russians who think like Mr Volkov should win. Justice Gorsuch doubted that thors hoped for. “Idiots. The Russian elec- have long looked to America as the model “the original understanding of the consti- tion of2016, not the US one, you exception- ofhowa free pressshould be. Forthem, itis tution” sanctioned easy access to individ- alist morons,” tweeted a prominent maddening to watch the news organisa- uals’ location information—especially if Russian journalist, pointing out that Russia tions they so admire buildingMrPutin into too held parliamentary elections in 2016 an all-powerful Bond villain, thereby ele- and that the money was most probably vating his stature among the many Rus- sent to the embassies to organise the poll- sians who credit him with making Russia a ing for expatriates. This was confirmed by geopolitical player again. “If they fear us, the Russian foreign ministry. BuzzFeed up- they respect us,” runs a Russian saying. The dated its story, but did not take it down. aim of Mr Navalny’s campaign, by con- The author of that tweet was not a trast, is to show that the king is naked, not Kremlin agent but Leonid Bershidsky, a to dress him up in armour. sharp-tongued writer forBloomberg News and co-founder of Vedomosti, Russia’s Active measures leading business newspaper. “The Trump- In September Morgan Freeman recorded a Russia story is becomingsurreal,” he wrote video promotingthe launch ofa non-profit in a follow-up column while also offering a organisation called the Committee to In- disclaimer: “I grew up and lived most of vestigate Russia. The Academy award-win- my life in Moscow. My perspective is that ning actor spoke in a deep, deliberate tone ofa guy from Russia, who hates the current as alarming music played in the back- government there but loves the country it- ground: “We have been attacked. We are at self.” For Russian liberals, the spectacle of war.” The committee includes actors and American commentators imitating the former spooks, including James Clapper, a Kremlin, which has long blamed every former director of National Intelligence, problem on America, is dispiriting. and Leon Panetta, a former director of the Such people have no illusions about CIA and White House chief of staff. “Imag- the Kremlin, and most of them have been ine thismovie script,” intonesMrFreeman. Pinpointing Justice Kennedy on the receiving end of its disinformation “Aformer KGB spy, angry at the collapse of1 The Economist December 2nd 2017 United States 27

2 his motherland, plots a course for reven- argues, reinforces the Kremlin’s line and of the classroom”. Few things infuriate Mr ge…he sets his sights on his sworn enemy, amplifies its efforts to show that America Putin more than being ignored. He has the United States. And like the true KGB works in the same way as Russia. been trying to get America’s attention ever spy he is, he secretly uses cyber-warfare to During the cold war, the Soviet Union since, and appears to have succeeded. attack democracies around the world aimed to infect America and the West with But this recognition carries a hefty …And he wins…Vladimir Putin is that spy. its Communist ideology (or quasi-religion) price-tag for the Kremlin. As a result of Mr And this is no movie script.” and capture as many minds on the left as Trump’s election and Mr Putin’s attention- Mr Putin almost certainly did not ex- possible. Those Westerners who opposed seeking, Russia has emerged as one of the pect Mr Trump to win. His government’s capitalism played the part of useful idiots few bipartisan issues in American politics. cyber-activity was more a haphazard and for the Soviet regime. Today’s Russia has This has allowed both parties to come to- petty response to what the Kremlin per- the opposite goal. It projects no coherent getherto pass the bill on Russian sanctions. ceived to be Hillary Clinton’s intervention ideology or religion beyond a mixture of “It is like Christmas-time for us—there is no in Mr Putin’s election of2012. In contrast to authoritarianism and nationalism, but waywe could have passed thisbill through the cold war, when all “active measures” aims to portray its adversaries as being as the Congress under Obama,” says one Re- were designed and conducted through a cynical, corrupt and conspiratorial as Rus- publican staffer in the Senate. specially designated department of the sia’s own leaders. Those who mimic the The result is that American policy to- KGB, some of the hacking and social-me- style of the Kremlin’s anti-Americanism wards Russia is sounder now than it was dia disinformation was outsourced to mer- play the role ofuseful idiots now. under the two previous administrations. cenaries and “patriotic hackers”, as Mr Pu- George W. Bush looked into Mr Putin’s tin described them. As a result, says Radio Moscow eyes; Barack Obama followed Russia’s ag- Maxim Kashulinsky,the founder and pub- “Neither Russia Today (RT) nor trolls are in- gression against Georgia in 2008 with a lisher ofRepublic, a liberal news site, many terested in really influencing US audi- “reset”. Mr Trump has an unexplained af- Russians have been genuinely surprised ences,” says Vasily Gatov, a Russian media fection forMrPutin, buthisroom to change by America’s heavy-handed response to analyst and visiting fellow at the Universi- policy is limited by the toxic cloud around what are seen inside the country as pranks. ty of Southern California, referring to the Russia’s election interference. But Mr Putin underestimated the shock Kremlin-financed news outlet. “Their goal Though Mr Trump enjoys long calls this reckless behaviour would cause in is to make the Western system as such react with Mr Putin, day-to-day policy has been America. For many Americans, the history to theirwork.” Theireffectivenessisjudged left in the hands of professionals with few of Russia’s stand-off with the West ended (and rewarded accordingly) not by what illusions about Mr Putin’s intentions. in1991. “By the grace of God, America won they actually achieve, but by the level of Fiona Hill, the author of one of the most the cold war,” George H. W.Bush told Con- noise they create in the American media. perceptive books about Mr Putin, oversees gress a few weeks after the collapse of the Russian propagandists regularly and glee- Russia at the National Security Council. Soviet Union. For Russians, by contrast, fully recite articles about “Russia’s men- Her boss, General H.R. McMaster, closely after a briefhiatus in the1990s, state propa- ace”. RT is already capitalising on its image. studied Russia’s invasion of Ukraine and ganda returned to depicting America as Its advertisement in Lonon reads: “The CIA its use of disinformation. The defence sec- the arch-enemy. calls us a ‘propaganda machine’. Find out retary, General Jim Mattis, leaned towards The Kremlin has long argued that it is what we call the CIA.” Branding RT a for- supplying Ukraine with “lethal defensive under an “information attack” from the eign agent, as America has just done, may weapons”. “We need to manage tensions West. “In this frame there is no space for be accurate—butitalso playsinto the Krem- and avoid accidental clashes,” one senior any idea of ‘truth’ or universal values,” ar- lin’s hands. government official says. “But we are not guesPeterPomerantsev,an experton disin- From the Kremlin’s point ofview,this is looking for any positive agenda.” You are formation at the London School of Eco- a welcome departure from the cool realism not going to reach out if you get repeatedly nomics, in an article in the American displayed by Barack Obama, who dis- punched in the face, the official says. “It is Interest. “Allinformation iswar.” Byaccept- missed Russia as a regional power and de- all about managing expectations. The low- ingRussia’sframe ofreference, the West, he scribed MrPutin asa “bored kid in the back er the expectations, the easier they are to manage,” argues a formerofficial. The policy of no positive agenda, says Kirill Rogov, a Russian political analyst, de- prives Mr Putin of his favoured blackmail- ing tactic. “His threats and aggression are only worth something if the West steps back and offers concessions and resets in exchange for him not escalating further.” This has repeatedly allowed Mr Putin to pocket his gains and present himself as a victor. If his counterparts refuse to negoti- ate, these threats lose their potency. After two and a half decades of inflated hopes and expectations for peaceful coex- istence, America is back to its old cold-war policy of containment and deterrence. One of the authors of that policy, George Kennan, concluded in his long telegram of 1946 that “the greatest danger that can be- fall us in coping with this problem of Sovi- et Communism, is that we shall allow our- selvesto become like those with whom we are coping.” This is worth bearing in mind Bananas in pyjamas as the Russia investigation rumbles on. 7 28 United States The Economist December 2nd 2017 Lexington Enough already, Nancy

The Democratic leaderin the House ofRepresentatives causes more problems than she solves her party is as unpopular as Donald Trump, and that she is the prime beneficiary ofone ofits main structural weaknesses, she is probably doing the Democrats less good than harm. The offending system is itself testament to the cost of ducking difficult decisions. For while power has become increasingly cen- tralised in both parties in recent decades, the Democrats have muddled that transition by maintaining some of the architecture ofa more fragmented past. Where House Republicanshave aban- doned seniority rules and imposed term-limits on the chairing of congressional committees and subcommittees, for example, the Democratshave refrained. Those plumshave dulybeen captured by a minority of increasingly aged Democrats in safe seats, an ar- rangement the well-organised black caucus has fiercely guarded. Most other Democratic House members, meanwhile, face in- creasingly arduous fights for survival, in a toxic political environ- ment, with little prospect of leadership any time soon. Had Ba- rack Obama won and hung onto the Illinois House district he once sought to represent, he might still be waiting to advance be- yond the House energy committee, where his vanquisher in that primary contest, Bobby Rush, plies his trade. No wonder many talented Democrats, recently including SANillustration ofwhatailscongressional Democrats, Nancy Rahm Emanuel, Kirsten Gillibrand and Chris Van Hollen, have APelosi’s recent attempt to defend an 88-year-old party gran- quit the House at the first good opportunity. “At the end of each dee who was alleged to have shown up to work in his pyjamas, cycle, you askyourself, ‘Is what I can achieve worth the personal, fondled generations of female employees and to have asked at financial and emotional cost?’” asks a former Democratic mem- least one of them to “touch it”, is hard to beat. The Democrats’ ber of Congress, who concluded it was not. House Republicans long-serving House leader, who is merely 77, had been asked on have serious problems of their own, but at least a churn of con- NBC about the allegations against Representative John Conyers gressional talent; the Democrats are by contrast a stagnant pool. of Michigan, the House’s longest-serving member. She respond- The result is that one ofthe best reasons forretaining Mrs Pelosi is ed by calling him an “icon”. Asked whether she believed his ac- that there is no one obvious to replace her. This is insane. cusers, Mrs Pelosi blustered: “I don’t know who they are. Do you? Dissatisfaction with Mrs Pelosi within her caucus runs deep. They have not really come forward.” At least five former staffers On the basis of the unprecedentedly stiff leadership challenge ofMrConyers, who was until this weekthe rankingDemocrat on she faced after the general election from Tim Ryan, a burly Ohio- the House judiciary committee and a force in the Congressional an, at least a third of House Democrats want her out. Yet few of Black Caucus, had at that time accused him of inappropriate be- the dissidents dare say publicly why she should go. Most blame haviour. One had received a pay-offfrom his office funds. the Republicans—as Mr Ryan did—by arguing that she has be- That Mrs Pelosi should be tarred by the culture of impunity come so demonised bythe rightasto be repellentto swing voters. sex pests have been enjoying on Capitol Hill is, in a sense, cruelly Yet while that is true, and a source of Republican glee, there is no unfortunate. As a successful Speaker of the House between 2007 proofit hurts the Democrats electorally. Only three people matter and 2011, and the firstwoman to fill thatrole, she hasdone a lotfor in House races, the candidates and the president. Given the Re- women’s empowerment. She was also quick to realise her error. publicans’ appetite for personal destruction, moreover, Mrs Pe- Her office put out a corrective statement shortly afterwards and losi’s successor would in no time be similarly traduced. So here Mrs Pelosi has since said she believes at least one ofMr Conyers’s are fourbetter reasons forMrs Pelosi to move on. accusers, while in private she has urged the octogenarian con- gressman to resign, as he probably soon will. Yet her instinctive Quit while you’re ahead refusal to condemn him also reflected another sort of impunity, First, no Democratic leader has been held accountable for nearly for too long enjoyed by the House Democrats’ aged and compla- a decade of withering defeats for the party, including the reduc- cent leaders, even as their party has become increasingly dimin- tion of its House representation to the lowest level since the ished and resentful oftheir command. 1920s. IfMrsPelosi wasseriousin arguing, afterherConyers blun- Even ifthe Democrats did not urgently need to attract younger der, that politicians should be held to the same standard of ac- voters to compensate for the meltdown in their working-class countability as the rest of us, she should belatedly take the hit. base, the fact that the average age of their House leadership is Second, her patronage nexus and controlling leadership style are over 70 would seem problematic. Consider why this is, and it obstacles to the reform and infusion oftalent and ideas her party looks far worse. Mrs Pelosi and her fellow leaders are sustained needs. Third, on a related note, much of that effort should be di- by a sclerotic patronage system, of which her pandering to Mr rected to reconnecting with working-class voters, at which Mrs Conyers was indicative, which has banished accountability and Pelosi, who appearsto thinkthe minimum wage a boon for them, fresh talent from the upper reaches of the party. For her part, Mrs rather than a policy to help the lowest paid, is ill-suited. Fourth, Pelosi remains in many ways an impressive leader—she is a re- her contribution to the Democratic Party has been immense. It lentless fundraiser and adept caucus manager, at once pragmatic would be a shame to sully it by overstaying her usefulness more and acceptable to the Democrats’ ascendant left. Yet given that than she already has. 7 The Americas The Economist December 2nd 2017 29

Also in this section 30 Bello: Venezuela’s plight 31 Turmoil in Honduras 31 After Argentina’s submarine tragedy

Mexico ie survey after his nomination by GCE, a pollster, 23% of voters back him, putting The democratic dedazo him six percentage points behind Mr Ló- pez Obrador. That is not a bad start, consid- ering that a third of voters have never heard ofMr Meade. Yet to win he will need to perform a MEXICO CITY horribly tricky political balancing-act. He must attract voters from the PAN, the PRI’s A crucial election campaign begins long-time foe. Without them, “he is toast,” NE custom in Mexico’s era of one- is the least popular on record, with an ap- says Luis Rubio of CIDAC, a think-tank. At Oparty rule was the dedazo (big finger), proval rating of 26% (though that is more the same time, he must fire up the PRI’s the president’s choice of his successor, than double what it was earlier this year). supporters and make use ofthe party’s for- who would inevitably be elected to a sin- Voters think he has done too little to fight midable electoral machine. Yet just 11% of gle six-year term. The authoritarian rule of crime and corruption and, after a conflict- PRI members named Mr Meade as their the Institutional Revolutionary Party (PRI) of-interest scandal, they doubt his honesty. first choice to be the party’s presidential ended in 2000, but the dedazo returned on Five out of six voters say corrupt leaders candidate. November 27th this year, when Enrique are a “very big problem”. In October 2,371 If Mr Meade has his way, the election Peña Nieto, the president, chose hisfinance people were murdered in Mexico, the high- will be a referendum not on Mr Peña’s re- secretary, José Antonio Meade, as the PRI’s est number on record for a single month. cord but on Mr López Obrador, whom op- candidate in the presidential election to be That makes a mockery of Mr Peña’s pledge ponents portray as a Mexican version of held in July. This time, though, the dedazo in 2012 to halve the murder rate. Venezuela’s Nicolás Maduro (see Bello). that counts belongs to the voters. The economy shrank in the third quar- AMLO, as Mr López Obrador is often Mr Meade’s selection begins a seven- terofthis yearaftera pairofearthquakes in known, mixesjustified angeratthe corrupt month race for a tough job. The next presi- September killed more than 450 people. A political establishment with populist dent will have to deal with a soaring crime collapse of NAFTA would do further dam- ideas, such as making Mexico self-suffi- rate, anger about corruption, a weak econ- age. Only one in eight Mexicans thinks the cient in energy and food. omy and Donald Trump, who may by then country is on the right trackand nearly half He appeals mostly to the half of Mexi- have decided to tear up or drastically say they would never vote for the PRI. A cans deemed poor; ie, who make less than change the North American Free-Trade few months ago some observers speculat- $79 a month if urban (or $56 if rural). Mr Agreement (NAFTA) between Mexico, the ed that the party might not even bother to Trump’shabitofinsultingMexico helps Mr United States and Canada. Mr Peña’s suc- field a seriouscandidate forthe presidency. LópezObrador, since he isthe mostvocifer- cessor will also have to decide whether to ous nationalist among the main candi- carry on with reforms of the economy, en- Technocrat on a tightrope dates. Mr Meade’s cross-party background ergy and education that he began. But Mr Meade is certainly that. In choosing buttresses Mr López Obrador’s claim that MrMeade isbyno meansguaranteed to him, Mr Peña went for somebody with lit- there is no difference between the big par- win. On the contrary, Andrés Manuel Ló- tle political baggage and lots of intellectual ties, and that only he can rescue Mexico pez Obrador, a left-wing populist who has heft. Mr Meade is the first candidate for a from the “mafia ofpower”. twice run for president, is ahead in most major political party who does not belong Lately, MrLópezObradorhasall but dis- polls. Ifhis lead holds, he will win the one- to any party. An economist with a doctor- carded populist policies. On November round election. A third contender is Ricar- ate from Yale University, he has held more 22nd his party, Morena, published a 415- do Anaya, the head of the centre-right Na- jobs in the cabinet than any living politi- page manifesto that promises nothing tional Action Party (PAN), who is expected cian, includingin the government ofFelipe scarier than more spending on infrastruc- to be named as its candidate in December. Calderón, who was president from 2006 to ture and social programmes (and no tax Mr Meade will find Mr Peña’s endorse- 2012 and belongs to the PAN. Mr Meade is rises to pay for it). His team has released a ment to be a mixed blessing. The president thought to be honest. According to a quick- slickly produced biopic called “This is Me”, 1 30 The Americas The Economist December 2nd 2017

2 in which he visits his hometown in Tabas- peal to Mr López Obrador’s voters. It could lose votes to Margarita Zavala, Mr co and tells his life story over evocative pi- Mr Anaya’s allies insist he is better Calderón’s wife, who quit the PAN in Octo- ano melodies. placed than Mr Meade to defeat AMLO. Mr ber to run forpresident as an independent. Mr Meade’s main rival for the anti- Meade will be seen as an “accomplice” in Ms Zavala criticises the Front’s candidate- AMLO vote will probably be Mr Anaya, corruption for failing to denounce it in Mr selection process as “undemocratic” (the whose party has formed an alliance with Peña’s government, they say. His soft-spo- Front says it has not yet agreed on a pro- the left-wingPartyofthe Democratic Revo- ken style will fail to mobilise voters. cess). She has a good relationship with Mr lution, Mr López Obrador’s former party, “Meade is a good technician, but he is not a Meade dating from his service in her hus- and the smaller Citizens’ Movement. Mr politician,” says an adviser to Mr Anaya. band’s cabinet; some analysts think she Anaya hopes this Citizens’ Front will cut But Mr Anaya has handicaps at least as may eventually drop out and endorse him. into Mr López Obrador’s support while severe. He is less of a policy heavyweight If that happens, the race may be be- continuing to appeal to the PAN’s core of than Mr Meade and less of a protest candi- tween Mr Meade, a non-political member pro-business voters. Last week the PAN an- date than Mr López Obrador. Many Mexi- of the establishment, and Mr López Obra- nounced that it favours a basic income for cans see the Citizens’ Front as a marriage of dor, an anti-establishment politician. Mr every Mexican, a measure designed to ap- convenience ratherthan one ofconviction. Peña will be keeping his fingers crossed. 7 Bello Despotism and default in Venezuela

The government has crushed the opposition. Dealing with its creditors will be harder ACK in July, Nicolás Maduro’s big pro- PDVSA. The new boss of PDVSA, Manuel B blem wasan opposition-backed rebel- Quevedo, is a general of the national lion against his plan to replace Venezue- guard, the paramilitary police who beat la’s elected parliament with a down the protests. His appointment hand-picked constituent assembly. More comes after the arrest, allegedly for cor- than 120 people died in mass protests and ruption, of more than 50 oil-industry the armed forces briefly seemed to waver managers close to Rafael Ramírez, Chá- in their support for the government. Now vez’s oil supremo, who was himself re- Venezuela’s dictator-president has his portedly sacked as Venezuela’s ambassa- new assembly in place and the opposi- dor to the UN on November 29th. Mr tion where he wants it—divided and de- Quevedo knows nothing of oil—but he is bilitated. But he has another problem: he close to Diosdado Cabello, a former army is running out ofcash. officer who is Mr Maduro’s chief rival in After years of mismanagement, Vene- the regime. Analysts say Mr Cabello has zuela’s all-important oil industry is listing long wanted to control the oil industry, like a shipwrecked tanker. According to the main source of money in Venezuela, data provided by the government to since money is power. OPEC, oil production in October averaged nezuelan payments,” Mr Maduro said. He One prospect glimmers through this 1.96m barrels per day (b/d), down 130,000 is fond of issuing decrees; he may be sur- murk. Mr Maduro is buoyed by the gov- b/d from September (and 361,000 b/d prised to learn thatcreditorscannot simply ernment’s success in state elections in Oc- from October 2016). Subtract oil supplied be bossed around. He entrusted negotia- tober. Demoralised opposition voters for almost nothing to Venezuelans and to tions to his vice-president, Tareck El Ais- stayed away, and the regime managed to Cuba, and shipments to repay loans from sami—a man financiers in New York can- persuade many poor Venezuelans that if China and Russia, and only around not do business with because the United they did not vote forthe government they 750,000 b/d are sold forcash, according to States says he is a drug trafficker (which he might not receive rations of subsidised Francisco Monaldi, a Venezuelan energy denies). Recent US sanctions also mean food. Fraud may have helped. By jailing economist at Rice University in Texas. that Americans cannot accept new bonds uncompromising opponents, Mr Maduro And although the oil price is up from its from Venezuela, as a debt restructuring has tamed others. Although part of the low of2015, it is still a little more than half would require. opposition is holding talks with the gov- its level of2012. Some bondholders are now consulting ernment in the Dominican Republic on Because the regime’s policies have all theirlawyers, accordingto Francisco Rodrí- December1st, there is no sign that Mr Ma- but crushed other businesses, oil now ac- guez of Torino Capital, a broker. One of duro will allow the presidential election counts for96% ofexports. Despite a brutal their contractual options is to “accelerate” due by December 2018 to be free or fair. squeeze on imports, the government is defaulted bonds, requiring their immedi- Rather, the talk in Caracas is that he struggling to service the debts piled up by ate full repayment—and then to seek a will bring the vote forward, perhaps to Hugo Chávez, Mr Maduro’s late predeces- court order to seize oil cargoes and other March. Having squared Mr Cabello, Mr sor and mentor. In October Standard & assets. They may hesitate if they think the Maduro would run again. And he would Poor’s, a rating agency, declared Venezue- government will try to carry on paying— spend a few billion that might have gone la in “selective default”. By October 27th some ofthe delays are because bankers are towards debt payments to boost imports the country was behind on payments to- now subjecting Venezuelan payments to temporarily. Stringing along bondholders talling $1.5bn, of which more than half close scrutiny. But “the ball is in the bond- while intending to default may be a win- was unpaid formore than 30 days. holders’ court”, says Mr Rodríguez. ning political strategy in the short term. Latin America has seen plenty of debt All this means it was a funny time for And then? “They are clearly expecting the defaults, butthis one is different. “I decree MrMaduro to choose to fire his oil minister oil price to save them,” says Mr Monaldi. a refinancingand restructuringofall…Ve- and the head of the state oil company, “But it may be too late.” The Economist December 2nd 2017 The Americas 31

Honduras he continued presenting his weekly sports tingorcorruption contributed to the lossof show during the campaign to stay visible. the San Juan. The navy insists she was in Twist after twist Yethe attracted votersangryaboutMr Her- “perfect condition” when she set out, but nández’s bid for re-election, which was there is evidence to the contrary. In 2011, waved through by a pliant supreme court after an overhaul, Cristina Fernández de in 2015. Mr Nasralla’s anti-corruption mes- Kirchner, who was then president, de- TEGUCIGALPA sage also resonated with voters. clared the submarine fit for “another 30 He has long insisted that the vote years’ service”. But an investigation by the A crisis looms aftera weird and would be rigged. “What we have in Hon- defence ministry, reported on November disputed election duras is a dictatorship,” he said before the 26th this year by La Nación, a newspaper, UAN ORLANDO HERNÁNDEZ, Hondu- election. He added to the confusion on No- suggests that the bidding process for the Jras’s president, boasts that he has vember 29th by agreeing with Mr Hernán- contract to replace batteries contained “ir- brought stability and security, but his run dez that both would accept the results of regularities” to favour certain suppliers. for re-election has caused turmoil. As The the TSE’s count, then reneging hours later. Argentines now think that the armed Economist went to press on November If the TSE does declare Mr Hernández the forces need reform, but they do not agree 30th it was unclear who had won the elec- winner, Mr Nasralla will have three weeks on whatform itshould take. First, the coun- tion held four days before. After Mr Her- to appeal to a court that he says “belongs” try needs to decide what its foreign-policy nández’s rival, Salvador Nasralla, posted to the president. More twists await. 7 goals are, argues Santiago Rivas of IHS an early lead, vote-counting slowed to a Jane’s, a defence consultancy. crawl and the incumbent closed the gap. Argentina’s cold-war-era weaponry is With 89% of the vote counted, Mr Hernán- Argentina designed to counter conventional threats dez led by 0.8 percentage points. that no longer exist. Despite sabre-rattling, If the electoral tribunal (TSE) proclaims At sea MsFernándezpursued itsclaim to the Falk- him the winner, that will not settle the land Islands through diplomacy. Argentina matter. Mr Nasralla told The Economist is on good terms with its neighbours. In there will be protests. The tension evokes 1985 Raúl Alfonsín, then Argentina’s presi- the mood aftera coup in 2009 againstthen- BUENOS AIRES dent, concluded a “treaty of peace and president Manuel Zelaya, after he tried to friendship” with Chile, ending a long-run- A tragedy prompts new thinking on the scrap presidential term limits. He now ning border dispute. The risk of conflict armed forces backs Mr Nasralla. University classes have with Brazil was reduced by the creation of been cancelled, probably to keep Mr Nas- RGENTINES have given up hope of Mercosur, a regional trade bloc, in 1991. ralla’s young supporters at home. On the Afinding alive the 44 crew aboard the Most defence experts agree that Argen- night of November 29th police fired tear ARA San Juan, the most modern of the tina, the world’s eighth-largest country by gas at rock-throwing protesters near a navy’s three submarines, which disap- area, needs fighter jets, ships and subma- building where ballots were stored, and it peared on November 15th. On November rines to deter potential enemies. Some say was evacuated; the TSE suspended count- 23rd the navy said an explosion had been the armed forces should also deal with ing after it said its system had crashed. detected in the area where the submarine drug-trafficking, terrorism and illegal fish- Those who believe that Mr Hernán- is thought to have been. ing. Thatwould require a change in the law. dez’s National Party is trying to steal the The apparent tragedy has started a de- In 2006 Néstor Kirchner, Ms Fernández’s election have grounds for suspicion. Be- bate about the role of Argentina’s105,000- husband and predecessor, decreed that the fore the vote, The Economist obtained a strong armed forces and the money spent armed forcescould onlyconfront“external tape of what appears to be a training ses- on them. Since the end of the military dic- aggressions”. The aim was to prevent an- sion for party members who would man tatorship in 1983, a year after Argentina’s other coup. The current president, Mauri- polling stations. In it, the trainer instructs failed attempt to wrest the Falkland Is- cio Macri, argues the rule is too restrictive. the workers how to carry out “Plan B”, a set lands from Britain by force, successive gov- Expanding the armed forces’ role might of apparently fraudulent “strategies” that ernments have reduced military spending. require spending more than the govern- includes filling in leftover ballots, spoiling It has dropped from 3.5% of GDP in 1978 to ment can afford. It is trying to cut the bud- ballots and damaging barcodes on tally less than 1% last year. Argentina spends a get deficit, which was 4.6% ofGDP last year sheets if they record a majority for opposi- lower share of GDP than any of its neigh- before debt-service payments. The search tion parties. The purpose ofthis technique, bours on its armed forces (see chart). forthe San Juan goes on. The hunt fora mil- saysthe governmentemployee leadingthe Little of the money goes towards arms itary strategy and armed forces to match it session, is to delay inclusion of tally sheets and equipment. The defence ministry will take longer. 7 favouring the opposition in the prelimi- spends about 70% of its budget on salaries nary count. As Mr Hernández pulled into and pensions (about a third of the United the lead on November 29th, opposition States’ defence spending is on personnel). Short rations supporters consulting the TSE’s website Argentina compounds stinginess with in- Military spending, % of GDP 2016 claimed that nearly all tally sheets exclud- efficiency: the army, navy and air force run 01234 ed from the count favoured Mr Nasralla. separate bases in Antarctica. Plan B could determine the outcome of Austerity has often caused embarrass- Colombia the election, though it is not certain it will. ment. In 2013 the destroyer Santísima Trini- Ecuador After a test of the vote-counting system dad keeled over in harbour; the navy took Uruguay two weeks before the election the boss of three years to refloat her. In 2014 the sub- Chile the TSE declared that “the system has marine fleet spent just 19 hours under wa- worked very well”. But no good explana- ter. In 2015 Mirage fighter jets could not fly Bolivia tion exists for the delay in results, nor the on cloudy days because of problems with Paraguay sudden reversal ofMr Nasralla’s lead. their instruments. Next year, when Argen- Brazil G Few expected Mr Nasralla, a telegenic tina will host the 20 summit, the govern- Argentina sports broadcaster, to come as close to vic- ment may rent fighter jets from Brazil. tory as he has. He was so short of cash that Argentines speculate that corner-cut- Source: SIPRI 32 Asia The Economist December 2nd 2017

Also in this section 33 North Korea tests another missile 33 A volcano erupts in Indonesia 34 Myanmar’s dreadful schools 35 Assisted dying in Australia 36 Banyan: India’s cowardly politicians

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Politics in Pakistan esters may have claimed. In the wake of the surrender, a cartoonist depicted the Armed and obstreperous prime minister, Shahid Khaqan Abbasi, as himselfwheelchair-bound. Yet the fiercest criticism was reserved for the armed forces. A High Court judge said that the army had no business acting Islamabad as mediator, and should simply have fol- lowed orders. He also ordered an inquiry The army’s refusal to disperse protesters is a sign ofits broaderpolitical ambitions into how the protesters obtained weapons IS protest camp had been blocking a trinaire Muslims. The government swiftly that helped them fight off the police. An Hbusy motorway for more than three reversed the change, saying it had arisen editorial in Dawn, a liberal newspaper, ar- weeks. He had been giving speeches to the from a clerical error. gued that the armed forces indulged the protesters denouncing politicians as But the protesters were not satisfied. protest because of an “ongoing power “pigs”, “pimps” and “dogs”. Yet Khadim They demanded the resignation of Zahid struggle” with the government. Asma Ja- Rizvi, a Muslim cleric, was not worried Hamid, the law minister. The courts, mean- hangir, a human-rights lawyer, lamented about being forcibly evicted by the army. while, ordered the government to disperse “the death warrant ofdemocracy”. “Why would they take action against us,” the protest. So, on November 25th around In recent weeks the army has admitted he asked, “when we are fulfilling their 8,500 riot police began firing tear gas and to encouraging radical Islamists to run for goals?” He meant that they all wanted to rubber bullets at the crowd. Hundreds political office; been revealed by one of its defend Islam, but he might just as well more Islamists raced to the scene to fight political proxies as the driving force be- have been referring to humiliating and un- back, throwing stones and wielding sticks. hind a merger between two parties; and dermining the ruling party, the Pakistan Six people were killed. With the battle at a seen Pervez Musharraf, a former coup Muslim League-Nawaz (PML-N). stalemate, the government called on the leader, try (and fail) to launch a new party. On October 30th the wheelchair- army to help. The army, despite supposed- Most believe the army’s goal in all this is to bound Mr Rizvi and around 5,000 suppor- ly being under civilian control, refused. In- sap the support of the PML-N and elimi- ters gathered at Faizabad interchange, an stead it offered to “mediate” between the nate the political influence of Nawaz Sha- important junction on the road between protesters and the government. rif, its eponymous leader and Pakistan’s Islamabad, the capital, and the nearby city prime minister until July. of Rawalpindi. They brought in tents and A hard bargain Mr Sharif, the darling of Punjab, the water-tankers. Clerics riled up the crowd. Two days later, the results of the army’s most populous province, was ousted by Protesters vowed not to leave “even if they mediation were revealed: Mr Hamid re- the Supreme Court for failing to declare a behead us”—which was hardly likely. signed, all the protesters who had been ar- salary to which he was entitled but which The fervour was prompted by a change rested were released without charge, and he never received. The army had no obvi- the government approved on October 2nd the government promised an inquiry into ous part in that decision, though many to the oath administered to MPs and other the redrafting of the oath. The protesters speculate about its role behind the scenes.1 senior officials. Instead of confirming that duly dispersed. A general was spotted Muhammad was the last of the prophets handingoutcashtodepartingparticipants. Corrections: In an article on poverty in the Philippines with the phrase “I solemnly swear”, oath- Observers criticised the government last week (“Fruit and ruts”, November 25th 2017) we takers would now only have to say, “I be- for stumbling into the controversy. Its fail- said that the average annual increase in GDP in 1980-2005 was 0.63%. This figure is in fact the average lieve”. Angry clerics declared this to be a ure to explain or defend the redrafting of annual increase in GDP per person. And in an article veiled concession to the 4m-odd Pakistanis the oath was “cowardly”, says Mosharraf about Donald Trump’s visit to Asia a few weeks ago who belong to the Ahmadi sect and so be- Zaidi, a columnist. Most lawyers find it (“Fore!”, November 4th 2017), we said that President Xi Jinping would represent China at the East Asia summit lieve that another prophet followed Mu- hard to detect any concession to Ahmadis in Manila. In fact, the prime minister, Li Keqiang, led hammad—a view seen as heretical by doc- in the revised wording, whatever the prot- the Chinese delegation. Sorry. The Economist December 2nd 2017 Asia 33

2 The army did, however, force Mr Sharif from office twice in the1990s. Najam Sethi, Target audience a former Economist correspondent who is Range estimates* of North Korea’s latest missile test close to Mr Sharif, says the army has of- November 28th 2017 fered to end his family’s legal troubles if he goes into exile. Politicians report receiving NORTH phone calls warning them not to vote for a KOREA recent bill that removed the ban on con- Lower limit victed politicians from running parties, 8,000km paving the way for Mr Sharif to resume his formerpost as head ofthe PML-N. Mr Sharif’s main political rival, Imran Khan, a former cricket star, stoutly defends Upper limit 13,000km the military and the mullahs. Many sus- pect him of hoping to follow a familiar, army-cleared path to office. If so, he might succeed. Mr Sharif is still barred from serv- *Approximate ingas prime minister. He might be in jail by the nextelection, in 2018, dependingon the upon”. It sounded like a plea for North Ko- said the drill “shows our resolve and abili- result of his ongoing trial on charges of rea to be respected as a nuclear state, not ty to strike the origin ofprovocation”. money-laundering. vilified as a pariah. Donald Trump contented himself with ButMrKhan and hisfriendsin the army Like the two earlier launches, the mis- telling reporters: “We’ll take care of it.” Rex may find it hard to break the PML-N’s hold sile was fired on a highly elevated trajec- Tillerson, America’s secretary of state, said on Punjab, and thus on power. The army tory,reachinga heightof4,475km duringits that “diplomatic options remain viable might be content, reckons Ayesha Siddiqa, 53-minute flight. On a normal trajectory, and open, for now…The United States re- a defence analyst, to settle for a weakened experts reckon, its range would be around mains committed to finding a peaceful government led by the PML-N. 13,000km—enough to strike almost any- path to denuclearisation and to ending Whatever the army’s goal, it will find it where in the world (see map). The govern- belligerent actions by North Korea.” hard to stage-manage politics in the long ment news agency, KCNA, claimed that the Nobody really believes that there is a run. Every time it has intervened in poli- missile carried a “super-large heavy war- diplomatic path that will lead Mr Kim to tics, popular support for democracy has head”, implying that it could deliver a hy- give up his nuclear weapons. But diplo- grown. And even proxies can develop a drogen bomb of the kind the North deto- macy may yet play a role in crisis manage- will of their own. Mr Sharif may now be nated in an underground test on Sept- ment and thus reduce the risks of a disas- the army’s biggest foe, but he began his ca- ember 3rd. trousmiscalculation. Thatmaybe what Mr reer as an ally ofthe generals. 7 There is no way of knowing whether Kim is now angling for. 7 the claim is true. If the payload was actual- ly lighter than KCNA says, the missile’s North Korea’s missile programme range could drop to 8,000km when fitted Volcanoes in Indonesia with a real warhead, according to Michael Rocket man Elleman of the International Institute for Smoke and Strategic Studies. Most analysts believe extendsahand thatNorth Korea hasmanaged to miniatur- tremors ise a crude nuclear device. But it may not H yet be able to make a more destructive - RENDANG, BALI bomb small enough to fit on a missile. A successfullaunch and a plea for Keeping tabs on all the archipelago’s There are also still doubts as to whether respect from Kim Jong Un rumbling craters is no easy task North Korea has mastered the technology OLLOWING a brief hiatus in its testing needed to protect a warhead during an HE hardest bit of the job is having Fprogramme, North Korea launched a ICBM’s descent. In the previous ICBM test “Tenough sleep,” admits Martanto, a missile in the small hours of November in July, the re-entry vehicle seemed to burn 29-year-old geophysicist at the monitoring 29th that, unlike any previous missile, ap- and disappear. centre for Agung, a volcano in Bali which peared to be able to strike anycityin Amer- It would, however, be rash to assume started eruptingon November25th. Forthe ica. It was the third test ofan intercontinen- that North Korea’s engineers will not soon past two weeks he and half a dozen others tal ballistic missile (ICBM) since July, and be able to pack a miniaturised H-bomb have relocated from Bandung, in West the 20th missile test this year. After watch- into a robust re-entry vehicle. An indica- Java, to keep watch on Agung every hour ing the launch, the country’s leader, Kim tion of the speed with which they are of the day, occasionally in continuous 32- Jong Un, who had spent the previous day learning is that the latest missile was hour shifts. Their base is rudimentary: a visiting a catfish farm, announced: “We launched with less warning than previous room plastered with maps, graphs and lists have finally realised the great historic ones, suggesting that the lengthy process of telephone numbers. In one corner sits a cause ofcompleting the state nuclear force, offuelling it may have been carried out be- seismometer, a cylindrical machine which the cause ofbuilding a rocket power.” fore it was transported to its launch pad, measures earthquakes; in another corner a Mr Kim eschewed the extravagantly thus shortening the time of its vulnerabili- radio is on standby, in case of an emergen- bellicose rhetoric he normally indulges in ty to pre-emptive attack. cy. Outside, a huge plume of ash spews after a successful missile launch. His “sol- Nonetheless, within six minutes of the from the crater at Agung’s peak. The smell emn declaration” emphasised that North launch South Korean forces fired missiles ofsulphur hangs thickly in the air. Korea would be a “responsible nuclear from a ground-based unit, an Aegis de- Indonesia is the most volcano-pocked power” that “would not pose any threat to stroyer and a KF-16 fighter, in an apparent country in the world, with 127 active ones. any country and region” as long as the in- simulation of a pre-emptive strike on a It was home to both the biggest eruption of terests of North Korea “are not infringed missile launch. A military spokesperson modern times, that of Tambora in 1815, and 1 34 Asia The Economist December 2nd 2017

2 the second-biggest, of Krakatoa in 1883. get some 350,000 people to safety before Agung’s previous eruption, in1963, was the the eruption actually occurred, on the eve- most explosive ofthe 20th century in Indo- ning of the 25th. Such a short interval be- nesia. Gas, rock and ash were ejected to a tweenissuingan alertand an eruption was height of25km above the crater. More than ideal, he says proudly, as it minimised the 1,000 people died. Previous eruptions, in time evacuees spent away from their 1843 and 1710-11, were similarly destructive, homes. Many people refused to leave, says Devy Kamil Syahbana of the Volca- however, and more than 350 died. nology and Geological Disaster Mitigation Indonesia’s budget for responding to Centre (PVMBG) in Bandung. natural disasters, including eruptions, is Mr Syahbana’s colleagues have divided just 4trn rupiah ($296m). With so many the archipelago’s volcanoes into three cat- volcanoes to monitor, and with such limit- egories. The first, of which there are 69, are ed resources, the “agency is spread pretty active volcanoes which have erupted at thin acrossthe archipelago,” saysClive Op- leastonce since1600(see map). The second penheimer of the University of Cam- are active but have not erupted since 1600. bridge. Even as Agung rumbles away, Sina- The third are potentially active openings in bung is erupting again at the far end of the the earth’s crust, such as fumaroles. The country. The harried Mr Syahbana seems first type, of which Agung is one, are mon- to spend much ofhis time travelling. itored 24 hours a day by an observer in a The spread of smartphones does at station nearby, from which they can see least mean that locals, who in the past the summit. They then feed back informa- might have been more likely to listen to vil- tion to the main centre in Bandung, where lage elders or shamans than scientists, can 200 people pore over the data under large Hard to see coming receive expert advice directly. Technology screens showing seismographs. helps with the monitoring too: drones can The volcanologists study the earth- Eruptions, in short, are hard to predict continue to inspect craters long after they quakes that occur beneath a volcano; the with precision. Sinabung, on the island of have become too dangerous forhumans to bulgesand otherchangesto itssurface; and Sumatra, erupted suddenly in 2010 and visit. Indonesia’s volcanologists are getting the type and volume of gas and ash it then again in 2013 and 2016. But before that help from abroad as well. The monitoring emits. Once unusual activity is spotted, it had not erupted formore than 400 years. centre makes use of satellite images and such as a sudden increase in earthquakes, As a result, PVMBG had not been monitor- other research provided by colleagues in a team with extra instruments is sent out ingit, and those livingnearbywere not pre- America, France and Japan, for example. from Bandung. pared to evacuate. It is still puffing away; Even so, a lotisrestingon the judgment ofa “Volcanoes warn,” insists Surono, a for- thousands of people have had to be per- handful of sleep-deprived scientists holed mer head of PVMBG. The most important manently relocated. up at Agung’s feet. 7 thing to do, he says, is to listen to them. In Even when volcanoes are known to be September it was clear that new magma active, and monitoring data abound, it is was rising in Agung, says David Pyle, a vol- not easy to judge how imminent or cata- Education in Myanmar canologist at the University of Oxford. The clysmic an eruption might be. Such deci- government issued the highest level of sions, says Matthew Watson ofthe Univer- No questions alert and thousands of people were evacu- sity of Bristol, require a “good deal of ated—prematurely, it turned out. The deci- expert judgment under great uncertainty”. asked sion was based on the eruption of 1963, Call for an evacuation too early, and peo- which was preceded by two days of earth- ple might decide the risk is overblown and YANGON quakes and produced calamitous flows of return to their homes. Awful schools are a drag on the lava and ash within four weeks. This time Mr Surono describes how he moni- economy—and politics around, it is as if the rock plug inside the tored Merapi, another active volcano on volcano had become “harder” after 50 the island of Sumatra, for years, conduct- N THE first floor of a crumbling colo- years of dormancy, says Mr Martanto. Fi- ing long discussions about how to evacu- Onial buildingin Yangon, a teacher taps nally, on November 21st, a phreatic (steam- ate those living nearby from their homes if the words written on the board with a driven) eruption seemed to suggest that need be. Late on October 24th 2010 he de- bamboo rod. “Repeat after me so you will magma was heating water at the top of the cided that an eruption was at hand and rememberthis by heart,” she instructs. The volcano. On November 25th the magma it- called for an evacuation. The National Di- whole class chants back in unison. The selfbegan to flow. saster-Management Authority managed to children have been regurgitatingsentences all morning. No hands are raised, no ques- PHILIPPINES tions asked. To earn promotion to the next A Y BRUNEI Active Indonesian L S volcanoes*, Nov 30th 2017 form, there is no need to gain a proper un- A I derstanding of the subject; memorising M Celebes Normal A (No unusual activity) Sinabung Sea textbooks is all that is required. For the 40 Caution pupils, rote learningwill continue for years Merapi (Increased volcanic activity) S On standby to come, until they complete high school. u (Eruption likely) m Warning (Great potential Only one in ten students remains in a for eruption, evacuation t INDONESIA school that long and passes the final ex- r is required) a J a ams. Although the vast majority of chil- v a S e a Banda *That have erupted since 1600 Jakarta Source: MAGMA Indonesia dren in Myanmarenroll in primary school, INDIAN Bali Sea Krakatoa Rinjani halfofthem drop out by the second year of OCEAN J a v a Arafura secondary school. Some do so because Semeru TIMOR- LESTE Sea Agung Tambora their families need the income they could 500 km earn by working. But most cite boredom, 1 The Economist December 2nd 2017 Asia 35

2 not poverty,as the main reason. Assisted dying in Australia Myanmar’s schools were not always so bad. A centuries-old tradition of monastic education gave Myanmar one of the high- A sombre success est literacy rates in South-East Asia at the SYDNEY time ofindependence, in1948. The Univer- The state ofVictoria allows doctors to help the terminally ill commit suicide sity of Rangoon (as Yangon was then known) was one of the most respected in HE quest has failedmany times. The the state government proposed this one. the region. Under British rule, knowledge Tpast 20 years have seen around 50 Brian Owler, a neurosurgeon advising of English spread widely. attempts to pass laws in different Austra- the government, believes this was crucial All this changed after the army seized lian states to allow doctors to help termi- to its success. Daniel Andrews, Victoria’s power in 1962. It blew up the university’s nally ill people end their lives. All have premier, and Jill Hennessy, its health student union building and launched a suffered defeat. But on November 29th minister, both said that seeing a parent campaign against foreign influence. Victoria finally made history,when its sufferfrom a debilitating illness had led Schools were nationalised and spending parliament passed Australia’s first state them to support the law. on them plummeted. In 2007-10 the gov- law to legalise doctor-assisted dying. Assisted dying is legal only in Colom- ernment spent less than1% of GDP on edu- The law,which will take effect in 2019, bia, Canada, a few European countries cation,notevenathirdoftheregionalaver- allows people with an advanced, incur- and some American states. Mr Andrews age. A World Bankstudy conducted in 2014 able illness to request “assisted dying” if says the new law is the most conservative found that young pupils in Yangon, a rela- their suffering cannot be relieved “in a in the world. Yet it has rankled some tively rich and privileged part of the coun- manner that the person considers toler- other members ofhis party, Labor. Paul try, were less good at reading than their able”. Patients must make three succes- Keating, a formerLabor prime minister, counterparts not only in Indonesia, the sive requests forsuch help; doctors are says it “stands foreverything a truly civil Philippines and Vietnam, but also in Gua- banned from initiating discussion of it as society should stand against”. temala and Nicaragua. an option. The original bill had proposed It has divided doctors, too. Michael The military regime saw textbooks as a limiting eligibility to those who were Gannon, head ofthe Australian Medical tool of indoctrination more than instruc- expected to live no more than a year. Association, a lobby group, says Victo- tion. In class, children were taught never to Victoria’s lawmakers reduced that to six ria’s parliament has “changed one ofthe question authority. Fear, says Ma Thida, a months, with a few exceptions. fundamentals ofmedical ethics”. Doc- Burmese writer, is rooted in Burmese Most earlier attempts to legalise assist- tors are “concerned about where it might minds from a very young age. She believes ed dying were private members’ bills, but lead”. Mr Owler retorts: “It’s not about the atrocious education system has led to a doctors. It’s about people who are suf- society that is “intellectually blind”. fering and dying.” Andrew McGee, a The curriculum is a source of irritation health-law specialist at Queensland to minorities. Although the country has University ofTechnology, thinks Victo- been racked by insurgencies since inde- ria’s law prevailed because the govern- pendence, history books describe its135 of- ment had embarked earlier on a “thor- ficial ethnic groups as living in peace and ough” public inquiry that reassured harmony.“This is not the real history,”says people “this type ofregime can succeed.” Nang Lun Kham Synt, an ethnic Shan who Australia has six states and two self- has just graduated from a government governing territories. The Northern school. In fact, ethnic militias run their Territorylegalised assisted dying 21years own schools and print their own text- ago. But the national government can books, which often look like photographic overturn territorial legislation, and did so negatives ofthe government’s. on that occasion within a year. It has no Businessmen, meanwhile, complain such power over state laws, however. that rote learning does not give students Malcolm Turnbull, Australia’s prime the skills they need in the workplace. As minister, who leads the right-wing Liberal one puts it, the more educated you are, the Party, says he would not have voted for less employable you become. He retrains Victoria’s law. But Mr Owler is confident his employees with tutorials and online it will become a “blueprint” forchange classes. The moment the bill passed elsewhere in Australia. Aung San Suu Kyi, the country’s de fac- to leader, whose National League for De- mocracy (NLD) took over from an army- But the process is chaotic and disjoint- rect stake in the system. Over noodle and backed government last year, says things ed. At least nine foreign organisations are fish soup, a group of teachers lament that will change. Education is one of the NLD’s involved in fixing different parts of the sys- they are never consulted about changes in priorities. A glossy booklet produced by tem. Only kindergarten and first grade are the classroom. The National Network for the Ministry of Education promises to give using the new curriculum, with four con- Education Reform, an organisation of stu- Burmese children “21st-century skills”. The flicting schedules for when it will be intro- dents, teachers and civil-society organisa- National Education Strategic Plan aims to duced in other years. The final exams—the tions, says the Ministry of Education does develop vocational training and inject a only thing students and parents really care not listen. Thein Lwin, who is a member of dose ofcritical thinkinginto the classroom. about—are still untouched. “As it is, the cur- the network, used to advise Ms Suu Kyi, To turn this vision into a reality, the gov- riculum seems like a bridge to nowhere,” but was sacked after helping students air ernment is continuing with a vast increase says Rosalie Metro of the University of their grievances during the passage of the in spending on education. This year it will Missouri-Columbia. education law. The new government may stump up nearly four times more than in According to Ms Metro, bureaucrats and want more critical thinking in the class- 2012. A new curriculum is being rolled out foreign consultants have devised the re- room, but it does not seem to welcome it in and teachers are being sent backto school. formswith little inputfrom those with a di- public life. 7 36 Asia The Economist December 2nd 2017 Banyan Stage fright

A film about heroism brings out the worst in India’s politicians another film production. But as the premiere of “Padmavati” ap- proached and extremists threatened to riot, politicians could not resist the temptation to wade in. One afteranother, the chiefmin- istersoffourstateswith lotsofRajputvotersannounced thatthey would ban this film that insulted the honour of the imaginary princess. Upping the ante, the senior spokesman in the state of Haryana forthe Bharatiya Janata Party (BJP), which runs both the state government and the national one, said he would pay a re- ward of ten crore rupees (around $1.5m) to anyone who brought him the severed head ofMs Padukone. Ms Padukone’s head is probably safe, and “Padmavati” will, in all likelihood, still be released afteritsmakersagree to some small changes with government censors. Indeed, the publicity may well win it big audiences. Moreover, after a prolonged and un- seemly silence from the leaders of the BJP, including Narendra Modi, the prime minister, the party is exercising some restraint: the bloodthirsty spokesman has resigned. But the lesson of the controversy is not that sanity prevailed. It is that India’s politi- cians are all too happy to pander to extremist sentiment, how- ever silly it may be, so long as it flows in a useful direction. With another election always around the corner—Mr Modi’s HE plot was made forBollywood: a princess so beautiful that home state ofGujarat goes to the polls next week—why challenge Ta lustful prince besiegesa spectacularfortressto catch her, and a myth that echoes one of the BJP’s vote-winning warnings, that so virtuous that she hurls herselfinto a fire rather than surrender. Muslim seducers are waging a “love jihad” against vulnerable Movie producers were not the first to be inspired by the story of Hindu women? Perhaps not surprisingly, in Gujarat itself it was Padmini, the loyal wife of the Rana of Chittor. The French com- another film that briefly stirred more controversy. The anony- poser Albert Roussel’s “Padmavati”, an opera about this paragon mously produced clip, which was widely shared, shows a Hindu of princesses, debuted in Paris in 1923. A century before that schoolgirl fearfully walking down a darkened street, with the James Tod, a British officer and amateur historian, incorporated Muslim call to prayer reverberating in the background. When she the tale in his “Annals and Antiquities of Rajasthan”, a work finally reaches home and falls tearfully into the arms of her par- widely translated and reprinted in India. His romantic version ents, a voice explains that in the past “we” were fearful, but now appealed especially to Rajputs, the Hindu warrior caste that sup- Mr Modi is here to protect us. plied the rulers ofnumerous princely states in western India. The Even India’s Supreme Court appears vulnerable to the trope image of the radiant Padmini foiling a Muslim invader fitted a of a lurking Muslim menace. In late November it produced a bi- narrative of heroic resistance that was far more enchanting than zarre fudge in the case of Hadiya, a 25-year-old convert to Islam the messy truth, which was that Rajput rulers generally fought whose Hindu parents had persuaded a lower court to separate each other as much as they did Muslim or European invaders. her forcibly from her Muslim husband and return her to the fam- The story appears to be the invention of a sixteenth-century ily, on the ground that she was a victim of love jihad. Ms Hadiya Sufi poet by the name of Malik Muhammad Jayasi. His epic hasrepeatedlyand loudlydeclared thatshe wishesto be with her poem, “Padmavat”, concludes with the frank statement: “I have husband. But instead ofruling that as an adult citizen of a secular made up thisstoryand related it.” There are contemporarychron- republic, she had a right to choose, they ordered her to go back to icles of the fighting Jayasi alludes to, which took place two centu- college and be placed under the “guardianship” ofits dean. ries before he was born. These describe in some detail the siege There are many countries where, with questions ofbelief and and capture of Chittor castle in 1303 by Alauddin Khalji, the sul- communal identity, many people seem keen to suspend judg- tan of Delhi. They note the death in battle of the Rana of Chittor, ment, quash doubts or simply to ignore bright, plain facts. Myths but make no mention of his wife, nor of any motive for the siege are so much more energising, and those who insist on dreary evi- other than territorial conquest. dence riskbeingcharged with sins that range from killjoy pedant- ry all the way to high treason. This is very much the case forIndia Screen test and its immediate neighbours, but with an added pinch of spice, The latest version of the tale, a high-budget film called “Padma- which is that people in power often show unusual glee in posing vati”, was due to be released on December1st. It stars Deepika Pa- as defenders of tradition, however that may be defined to suit dukone, one of India’s highest-paid actresses. During production their purposes and whatever the consequences. More than oth- last year, rumours leaked that the director, Sanjay Leela Bhansali, ers, Indians should know that such play-acting heroism is a dan- had included a steamy dream sequence that hinted at carnal rela- gerous game; all too often it is just such seemingly silly things as a tions between the Muslim warrior and the Hindu princess. rumour about a film, or a suspicion of profanity, that spark run- The rumourwas enough to prompt Rajput extremists to attack away destruction. Commenting on the “Padmavati” controversy, the set during filming in Rajasthan earlier this year. Some dis- Pratap Bhanu Mehta, one of India’s most insightful commenta- missed the rumpus as a publicity stunt, an impression reinforced tors, lamented the failure of its politicians to stand up for free- when a sting operation by Indian journalists revealed that, in ex- dom. “The usurperofpeoples’ liberties”, he warned, “will always change for money, the Rajput group cheerfully offered to attack speakin the name oftheir sentiments.” 7 China The Economist December 2nd 2017 37

Society Also in this section Life imitates nightmares 38 Help for the propagandists

BEIJING In the capital, scandals bridge a social divide N 2016 a short novel by Hao Jingfang, a end children. Beijing is not for people like us,” said one. Iyoung Chinese writer, won a Hugo As in the fictional “Folding Beijing”, the Volunteers who provided shelters to pro- award, an international prize for science real city government has a maximum tar- tect the newly homeless from freezing tem- fiction. In her story, “Folding Beijing”, the get size for the capital’s population: 23m in peratures were told to stop doing so. population ofthe capital has been separat- 2020, only 1m more than in 2016. To Meanwhile, the wealthier population ed into three groups who not only live in achieve this, the authorities have been of Second Space was dealing with its own different areas but are not even awake at booting out vulnerable people: migrants scandal. On November 22nd eight parents the same times. The 5m members of First from the countryside. Their places of work of toddlers at a costly kindergarten in Bei- Space—the rulers—are allowed to work, eat are being closed down. Substandard hous- jing filed a report to the local police saying and go outside between 6am one morning ing, the only sort they can afford, is being they had found needle marks on their chil- and 6am the next. The 25m middle-class condemned as unsafe. Activists say 3m mi- dren. They claimed—albeit without cor- occupants of Second Space are up and grants have been evicted from Beijing and roboration—that the toddlers had been aboutfrom 6am on the second dayto 10pm other big cities in the past five years. forced to swallow tablets without explana- that same night. The downtrodden deni- tion and had been told to strip naked and zens of Third Space are awake only be- Unsafe spaces endure “health checks” by “grandpa doc- tween 10pm and 6am on the third morn- The day after the disaster Cai Qi, the Com- tor” and “uncle doctor”. ing, when the rulers wake and start the munist Party chief of Beijing municipality, Allegations of inexplicable cruelty cycle again. Drugs keep everyone asleep, announced a citywide fire-safety inspec- have a familiar ring. In October security except during their hours ofwakefulness. tion. This quickly morphed into mass evic- cameras at a nursery in Shanghai had Ms Hao has just announced that her tions, starting in the shantytown. The po- caught staffforce-feeding toddlers mustard story ofa divided capital is to be made into lice went round nearby buildings that had and sterilisers. In Mayin Zhejiangprovince a film. But in the past two weeks, real life in been slated for demolition, handing out a teacher had jabbed a syringe of blue Beijing has been telling it in tragic form. On eviction notices and giving people a few paint into the buttocks of children who the evening of November 18th a fire broke hours to leave. Water and electricity sup- were refusingto take a nap. As after the fire, out at a warehouse-cum-apartment block plies were cut off. State media were in- censors went into overdrive to suppress in a shantytown in southern Beijing popu- structed to use official bulletins “without news about the kindergarten in Beijing. lated by migrants—poor workers from ru- exception”. (Such reports have not dwelled “Do not report or comment on the matter,” ral areas of China whom district officials on the misery of those evicted.) The line of they said, as they blocked mentions of the sometimes call “low-end people”. Nine- the dispossessed snaked into the night, name of the Chinese firm that owns the teen migrants died, including seven low- lookingforsomewhere to rest. “Itlookslike nursery in Beijing, RYB Education, which is 1 38 China The Economist December 2nd 2017

2 listed in New York. The company said it Propaganda stood and applauded. Some broke into the had suspended staff who were allegedly national anthem. involved, and that it was investigating the Happy bunny The movie has grossed almost 5.7bn matter. The city’s education commission yuan ($870m), ten times as much as its promised that henceforth every kindergar- (also big-hitting) “Wolf Warrior” predeces- ten would be inspected regularly. sor, released in 2015. It is by far the biggest Hitherto in the capital, middle-class SHANGHAI box-office hit ever in China and just shy of scandals and the travails of poverty have the top 50 of all time globally. The extraor- The private sectoris helping the state to usually unfolded as if on different planets, dinary success of “Wolf Warrior 2” has modernise its message like in “Folding Beijing”. Those concerned grabbed headlines in China, although on about posh schools or house prices rarely HE Communist Party’s publicists, November 25th it did not win a prize at the worried about the problems of migrants Tthough powerful and feared, are not annual Golden Horse awards in Taiwan, and vice versa. Butin the story,the protago- known for their skill in winning audi- the Chinese-language movie industry’s nist inadvertently brings the separate ences. Their output for cinema and televi- equivalent of the Oscars. Chinese media spaces together when he tries to earn sion is often ridiculed (albeit discreetly) as speculated that its pro-party message— enough money to send his adopted daugh- wooden, out of touch and simply not be- hardly popular on the island—may have ter to a school where she can learn to lievable. They have tried to up their game, ruled it out as a candidate. dance. Similarly,in real-life Beijing, a fierce rollingout cute animations and rap videos, The director and lead actor, Wu Jing online reaction has broken through the di- but with limited success. Their attempts (pictured in character atop a military vehi- visions that usually separate middle-class are like those of an unfashionable adult cle), was using a tried and trusted formula. scandals from those affecting the poor. trying to look hip by wearing teenagers’ In 2016 “Operation Mekong”, about Chi- Online commentators were quick to clothing: embarrassing and off-putting. nese soldiers battling an Asian drug-traf- link the two. A pseudonymous article on Last year the party’s own disciplinary ficking gang, grossed 1.2bn yuan and was WeChat, a Chinese messaging app, com- body accused official propagandists of fail- the sixth-biggest earner at the Chinese box pared the scandals to the Second and Third ing to meet the demands ofthe digital era. office that year. Production and distribu- Spaces of Ms Hao’s tale. It argued that “de- The private sector has had better luck. tion ofthat film were privately led. lusions” in the capital were being “folded In recent years non-state firms have been State media have praised “WolfWarrior away”. The article was promptly deleted. churning out works that have the kind of 2” and “Operation Mekong” for launching Despite censorship, angrycommentary impact the party craves. The goal of such a new era in the development of what are still appeared. On WeChat, legal scholars businesses is to make money, not to create officially known as “main melody films”, doubted the legality of the migrant evic- propaganda for its own sake. But to survive that is, ones that promote the party line. tions. “When you need construction work- theyneed to stayin the party’sgood books. The party itself had been trying to achieve ers,” wrote a user of Weibo, a microblog- So they have found ways ofproducingpro- such a breakthrough since the 1990s, when ging site, “you call them fellow workers. party entertainment that is popular. A it began encouraging state-employed When you don’t have enough for them to common technique is appealing to youth- screenplay writers and directors to mimic do, you call them migrant workers. When ful patriotism. the storytelling techniques of their com- you are through with them, you call them A good example of the genre is “Wolf mercial counterparts. Itachieved occasion- ‘low-end people’ and send them packing.” Warrior 2”, a film released in July about a al successes, such as with “The Founding Unusually, some of the criticism has Chinese soldier in Africa who saves hun- of a Republic” in 2009, but nothing on the been overtly political. More than 100 peo- dreds of his compatriots and locals from scale of“WolfWarrior2”. ple, including public intellectuals, signed a wicked American mercenaries. It closes Online, too, the private sector has taken petition saying the evictions were illegal, with an on-screen message: “Citizens of the lead. One example is “The Chronicle of an abuse of human rights and “clearly the the People’s Republic of China. When you the Rabbits”, a series of animations about government’s responsibility”. With heavy encounter danger in a foreign land, do not China’s modern history. Since it began cir- irony, another commentator wrote that give up! Please remember, at your back culating online two years ago, it has been just one month after a five-yearly party stands a strong motherland.” Audiences watched more than 500m times. The car- congress in Beijing, the city government toons depict the party as a rabbit that is was providing a taste of the “splendid fu- weakand small at first but ultimately over- ture” promised at the gathering. comes countless hurdles to become strong. At the congress Mr Xi argued that social As a result, netizens often use the term “our inequality and the gap between rich and rabbit” to refer to China. State media have poor were the biggest problems facingChi- extolled the series, even though Lin Chao, na. In particular, party officials fear, youn- its creator, has insisted that he has no links ger migrants, born in cities to parents who with the government. themselves migrated in the 1980s, could The party can take some credit for the prove a threat to social stability because success of such entertainment. It cultivates theyhave had little orno education in their the nationalism that feeds it; for example, urban homes, no longer have connections by promoting “patriotic education” in to the countryside as their parents did schools. Censors tilt the playing field by and—forsome ofthe men—will not be able blocking Hollywood films when their re- to marry because of a skewed sex ratio. lease might tempt audiences away from fa- These are the people who are being evict- voured home-grown ones. They also ban ed from Beijing. If the government’s main anything that they deem to be unpatriot- response to their problems is repression, ic—including anything critical of the party. one would be tempted to agree with the No matterwhataccountsforthe recent suc- character in “Folding Beijing” who tells the cess of main melody works, official propa- protagonist: “The current government is gandists can take it easy. The private sector too inefficient and ossified. I don’t see is helping them do their work, and making much hope forsystematic reform.” 7 Wu’s dunnit big money from it. 7 Middle East and Africa The Economist December 2nd 2017 39

Also in this section 40 The water crisis in Jordan 40 Angola’s new political order 41 The task ahead in Zimbabwe 42 Nigeria’s Scrabble craze

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

American foreign policy Democratic Forces, a Kurdish-led militia that paid a heavy price fighting the jiha- Donald Trump’s Muddled East dists of Islamic State. Asked whether America would name a special envoy to mediate a dispute between Iraq’s Kurds and the central government in Baghdad, the State Department demurred. “They CAIRO can probably work it out on their own,” a spokeswoman said. Even Binyamin Netan- Neglect and confusion aggravate the problems ofthe Arab world yahu, the Israeli prime minister, has been HEN it is finished, America’s impos- mad. Mr Trump has not evinced any con- disappointed. He is unhappy with the lat- Wing new embassy in Lebanon will be cern about the Saudi-led war in Yemen est “de-escalation” agreement in southern its second-biggest in the world. Yet it was that has, with American support, laid Syria, negotiated by America and Russia, France, not America, that stepped in to re- waste to the region’s poorest country (see which allows Iranian-backed militias solve Lebanon’s latest political crisis. Briefing). He has enthusiastically praised a within 5km ofhisnorthern border. Despite Speaking from the Saudi capital, Riyadh, Saudi-led blockade of Qatar, and a recent warm contacts with the Trump adminis- on November 4th, Saad Hariri, the Leba- wave ofanti-corruption arrests in the king- tration, Jordan, too, feels left in the lurch by nese prime minister, abruptly announced dom, even though American diplomats American plans to halt financial aid to his resignation. What followed was a bi- have deep doubts about both policies. Arab rebels in southern Syria next month. zarre two-week saga in which he seemed Many Syrians cheered in April when Abdel-Fattah al-Sisi, the Egyptian presi- to be under house arrest in the kingdom. America bombed a Syrian air base in re- dent, met Mr Trump during the campaign, Though America’s State Department criti- sponse to a chemical attack in Idlib prov- and was the first foreign leader to congrat- cised the move, it fell to France to negotiate ince. Since then Mr Trump seems to have ulate him on his victory. But he was Mr Hariri’s return to Beirut. He has since lost interest. Russia and Iran have filled the stunned in August when America slashed suspended his resignation. vacuum, helping Syria’s president, Bashar $100m in aid to Egypt, and withheld an- Nearly a year into his presidency, Do- al-Assad, to reconquer lost territories. other $195m until it saw “progress on de- nald Trump’sMiddle Eastpolicycould best Vladimir Putin, Russia’s president, gave Mr mocracy”. The move also astonished be characterised as one ofneglect and con- Assad a warm welcome in Sochi last American diplomats in Cairo. “I had to ex- fusion. His term coincides with a period of month, and then hosted the presidents of plain this to my Egyptian counterparts the radical change in Saudi Arabia. King Sal- Iran and Turkey, both ofwhom support Mr next morning, and I had no guidance from man and his son, Muhammad, the all- Assad’s continued rule. Washington on why we did it,” says one. powerful crown prince, have abandoned As The Economist went to press, Syrians the Al Sauds’ plodding caution in favour of were gathered in Geneva for another Spread the blame around a more aggressive foreign policy. Their ac- round ofUN-backed peace talks. The oppo- Mr Trump does not deserve all the blame tions have unsettled friends and neigh- sition delegation is now stacked with fig- for meek and muddled American policy. bours. Even Israeli diplomats, no fans of ures willing to leave Mr Assad in power, a BarackObama, though he called forMr As- Mr Hariri, use words like “reckless” to de- shift engineered by the Saudis. Under Sau- sad’s removal, did little to support the Syri- scribe the Saudis’ pressure tactics in Leba- di pressure Riyad Hijab, a former Syrian an opposition. The war in Yemen started non, which risked upsetting its delicate prime minister and a resolute critic of the on his watch, too. And, to be fair, Mr Trump sectarian balance. regime, has resigned as head of an opposi- is engaged in one area: the Israeli-Palestin- Yet the Saudis have found a receptive tion umbrella group. The Saudis may be ian conflict. After much shuttle diplomacy audience in the White House, particularly hoping, implausibly, to split Russia from by Jason Greenblatt, his special envoy, the in Jared Kushner, the president’s son-in- Iran. America, which has long demanded president is preparing to unveil a peace law. Team Trump thinks that it has helped Mr Assad’s departure, said nothing. plan in early 2018. to kindle the liberalising economic, social Other allies feel similarly confused. Mr This is a rite of passage for American and religious reforms of Prince Muham- Trump is cutting military aid to the Syrian presidents. The last three tried, and failed. 1 40 Middle East and Africa The Economist December 2nd 2017

2 There is no reason to think Mr Trump will and Israel. In return for its share, Israel Angolan politics succeed, either. Israel is still led by a far- agreed to pump an equal amount to right coalition loth to make concessions, parched northern Jordan, where most of Taking the wheel and the divided Palestinians by a govern- the population lives. ment that lost its legitimacy years ago. But But the project is now on hold. On July the Saudis have egged him on, knowing 23rd a Jordanian teenager delivering furni- that the president is eager to strike what he ture to the Israeli embassy stabbed a secu- LUANDA calls “the ultimate deal”. By supporting Mr rity guard. The guard opened fire, killing The new president drives out his Trump’s efforts in Jerusalem, they hope to both his assailant and an innocent by- predecessor’s powerful clan win a free hand in Yemenand elsewhere. stander. Jordan allowed the guard (and the Mr Trumpnever misses a chance to crit- rest ofthe embassy staff) to leave the coun- HEN João Lourenço said on the eve icise his predecessor. Yet he is repeating try. Hours later Binyamin Netanyahu, the Wof Angola’s election in August that, some of his mistakes. Mr Obama was ac- Israeli prime minister, invited the guard to as president, he would have “all the pow- cused of pursuing a nuclear agreement his office and embraced him. Jordan was er”, few took him seriously. The former de- with Iran at all costs, and ignoring Iran’s furious and barred Israeli diplomats from fence minister had been hand-picked by meddling in Syria and Iraq. Now Mr returning until the guard is prosecuted. José Eduardo dos Santos, Angola’s presi- Trump seems obsessed with reneging on High-level talks on water projects—and dent for 38 years, seemingly as part of a the deal, which would weaken the curbs other schemes, including an ambitious so- deal to protect his interests. The opposition on Iran’s ability to make a nuclear bomb, lar-energy farm—are now suspended. dubbed him “the chauffeur”, since Mr dos and is doing little (apart from a few more Instead Jordan might, as one official Santos would tell him where to go. sanctions) to contain Iranian influence. puts it, “go it alone” on the Red-Dead pro- Two months into his presidency, He is enabling autocrats in Egypt, and ject. This would be costly. The pipeline to though, the chauffeur seems not to be tak- losing the confidence of close allies, such the Dead Sea will need constant repairs be- ing directions. On November 15th he sud- asIsrael and Jordan. Meanwhile the Saudis cause of the corrosive brine it carries. Mr denly sacked Mr dos Santos’s flamboyant are free to pursue destabilising policies, Mehyar reckons it could cost up to $1bn to and ultra-wealthy elder daughter, Isabel and the future of Syria is largely in Russian build and maintain for a decade. And a dos Santos, from her job at the head of So- and Iranian hands. “This is not a time for unilateral scheme would do nothing to nangol, the national oil company. That was the US to be absent,” says another Western ease water shortages around Amman, be- followed by the cancellation of a lucrative diplomat. “Weneed some supervision.” 7 cause it would be prohibitively expensive contract between the state television com- to ship fresh water 300km from Aqaba. panyand a media companyowned bytwo There are better ways forJordan to help ofMr dos Santos’s younger children. Jordan’s water crisis itself. Farms account for more than half of Then, on November20th, in defiance of its annual consumption, but just 4% of a law introduced by his predecessor, Mr Diplomatic GDP; the kingdom importsmostofits food. Lourenço fired the police chief and the Water is heavily subsidised—it is cheaper head of the intelligence agency. In Luanda, drought than in Israel or Saudi Arabia—encourag- the fabulously expensive coastal capital, ing farmers to plant thirsty crops like ba- rumours fly that another of the ex-presi- AMMAN nanas. Though the governmenthastaken a dent’s children, José Filomeno dos Santos, few modest steps to reduce demand, in- the head of the $5bn sovereign-wealth A feud with Israel halts plans to quench cluding a small price rise, it fears broader fund, will be next for the chop. One of Ms a thirsty kingdom reforms would cause public anger. dos Santos’s other interests, Unitel, a mo- HE Dead Sea is dying. Half a century Jordan is already one of the world’s bile-phone company with a near-monop- Tago its hyper-salty, super-pungent wa- most arid countries. Climate change will oly, could face more competition. ters stretched 80km from north to south. make matters worse. By the end ofthe cen- Some even wonder if José Eduardo That has shrunk to just 48km at its longest tury, say scientists from Stanford Universi- himself, who is still chairman of the Peo- point. The water level is falling by more ty,Jordan could be 4°C hotter, with about a ple’s Movement for the Liberation of An- than a metre per year. All but a trickle from third less rain. It needs to rationalise water gola (known as the MPLA from its Portu- its source, the Jordan River, is now used up consumption. And Israel, which wants a guese initials), the country’s ruling party, before it reaches the sea. “It will never dis- stable neighbour to its east, has an interest might be under threat. The new president appear, because it has underground sup- in getting water projects back on track. has not been discreet about his ambitions, plies, but it will be like a small pond in a “The Israelis need to think more regional- says Paula Roque, a researcher at Oxford very big hole,” says Munqeth Mehyar of ly,”says Mr Mehyar. “The leadership is not University. By sacking Ms dos Santos and EcoPeace, an NGO. taking things as seriously as it should.” 7 takingoverthe security apparatus, Mr Lou- Until this summer Israel and Jordan, renço has seized control oftwo ofthe three which share the sea, were trying to slow main sources ofpower in Angola. the decline. The “Red-Dead project”, as it is River Jordan SYRIA The third is the MPLA. And behind the called, would desalinate seawater at the scenes, party veterans are trying to per- Mediterranean Sea WEST Jordanian port of Aqaba and pump 200m BANK Amman suade the former president, who has not cubic metres of leftover brine into the Jerusalem been seen in public since the end of Octo- Dead Sea each year. That would not be GAZA Dead Sea ber, to step down as party leader early next enough to stabilise the sea, which needs at ISRAEL year. “It’s become clear just how sick and least 800m cubic metres to stay at current JORDAN tired the country was with how things levels. Still, it would help—and the project were,” says Paulo Faria, a professor of poli- has a much more important benefit. Red-Dead project tics at Agostinho Neto University in Luan- The World Bank defines water scarcity EGYPT da. “Successful resistance from within the as less than 1,000 cubic metres per person party seems unlikely.” SAUDI annually. Jordan can provide less than 15% Gulf of Aqaba Aqaba ARABIA Mr Lourenço’s assault on the former of that. The Aqaba plant would send fresh Red Sea president’s gilded empire is winning over water to southern towns in both Jordan 100 km at least some Angolans. On social media 1 The Economist December 2nd 2017 Middle East and Africa 41

2 many have shared an image from “The Terminator”, a film, with Mr Lourenço’s face replacing that of the he-man star, Ar- nold Schwarzenegger. Two guns held aloft, the caption reads: “The Relentless Remov- er”. The presidential motorcade is said to stop now at red lights. Mr Lourenço was seen queuing for a meal at KFC, a fast-food chain. In a country where the rich and powerful have been above the law for years, such small gestures have carried weight. Even the previous government’s loudest critics have come out in support. Luaty Beirao, an Angolan rapper and activ- ist who was jailed by the old administra- tion, said he was stunned by Mr Louren- ço’s actions, calling it a “revolution”. Will Mr Lourenço’s revolution really transform Angola? The country is in a terri- ble state. After the end of the civil war in 2002, oil wealth started to flow, bringing new roads and fancy skyscrapers to Luan- da. Thanks to epic corruption, little has fil- Zimbabwe’s new politics tered down. Most Angolans live in penury. Life expectancy is barely 60 years. So dire The time of the crocodile are health facilities that last year Angola suffered the world’s worst outbreak of yel- low fever in decades. These days there is less money to go around. Economic growth has slowed HARARE since 2014, when the price of oil, which Emmerson Mnangagwa must act fast to prove he is betterthan Robert Mugabe makesup over90% ofexports(the restis al- most all diamonds), collapsed. Despite AVING promised at his inauguration IMF, such as thinning the public sector and tight monetary policy the currency, the Hon November 24th to “hit the ground abolishing corrupt parastatal outfits, as the kwanza, trades on the black market at just running”, Emmerson Mnangagwa has no price ofunlocking the loans urgently need- 40% of the official rate. Reliable data are al- time to lose. Somehow, he must persuade ed to rescue an economy that is once again most non-existent, so it is unclear exactly Zimbabweans that he can improve their in rapid decline. how much the government owes interna- lives after 37 years of despotism and de- A clutch of members of the previous tional creditors. But the amount has cer- cline under Robert Mugabe. Already peo- cabinet are in hiding, or under arrest, or tainly soared. Much of it is owed to China, ple have been chuffed by one striking have fled abroad. Most notably Ignatius on terms that are farfrom generous. change: the police are almost nowhere to Chombo, Mr Mugabe’s last finance minis- Rafael Marques de Morais, a journalist be seen on the streets ofHarare, the capital, ter, appeared in court in leg-irons the day and anti-corruption activist, fears that not whereas previously they were ubiquitous, after the inauguration, charged with cor- much will change. He thinks Mr Lourenço shaking down drivers for minor or ficti- ruption, which he denies. By contrast, had little choice but to go after the presi- tious traffic offences. That is no small mat- Chris Mutsvangwa, the influential head of dent’s children. “Isabel was strangling So- ter. It used to cost $10-20 to make a cop go the liberation war veterans’ association, nangol with her incompetence,” he says. away, when a blue-collar urban wage is who turned against the Mugabes, may get But, he adds, more junior members of the perhaps $250 a month. a top job. A former ambassador to China, dos Santos family are still “everywhere in When the chief of police, Augustine he hails Mr Mnangagwa as Zimbabwe’s government, in economic and social af- Chihuri, swore allegiance to the new presi- Deng Xiaoping: an economic reformer fairs”. And there is little hint that Mr Lou- dent at the inauguration ceremony, a roar who will keep the lid on political dissent. renço’s government intends to go after cor- of boos erupted across the stadium. Mr Mr Mnangagwa has intimated that he ruption or try to build solid institutions to Mnangagwa would earn easy plaudits if will junk some of Mr Mugabe’s more ruin- replace the dos Santos’s system of patron- he sacked a man who failed utterly to curb ous policies in an effort to woo back for- age. “He’s not even trying to find figures corruption within the police. Mr Chihuri is eign investment. First on his list must be a who have a better reputation,” says Mr also reviled for his ties to Mr Mugabe’s un- repeal of the “indigenisation” law that re- Marques de Morais of the new president’s popular wife, Grace, who had Mr Mnan- quires most firms to be majority-owned by appointees. gagwa chased out of the vice-presidency black Zimbabweans. (In practice, this has That said, by weakening the dos Santos and into exile barely three weeks ago. often meant Zanu-PF bigwigs.) Several of clan, and so quickly after taking office, Mr The new president’s broader intentions the ministers keenest on this law were in Lourenço has made a strong start. For as will be shown by the cabinet he is expect- Mrs Mugabe’s camp. As an early gesture to long as Mr dos Santos held the reins, “you ed to appoint imminently. He has already embattled business people, Mr Mnan- could not conceive of genuine reform,” reinstated Patrick Chinamasa, whom Mr gagwa offered a three-month amnesty to says Ricardo Soares de Oliveira, also ofOx- Mugabe sacked in October, as acting fi- those who have illegally siphoned dollars ford University. The elderly ex-president nance minister. By the abysmal standards out ofthe country, ifthey bring them back. warped his country’s post-independence ofthe rulingparty,Zanu-PF, MrChinamasa One ofthe newpresident’sbiggesttasks history. With him removed from the pic- is quite competent. His downfall had been will be to deal with the vexed question of ture, perhaps things can start to change for precipitated by Mr Mugabe’s repeated re- land. Nearly all of Zimbabwe’s 4,000-plus the better. 7 fusal to let him meet the demands of the commercial farmers (who were mostly1 42 Middle East and Africa The Economist December 2nd 2017

2 white) had their lands confiscated by Mr reversingsome ofMrMugabe’s most disas- ditionsasthe price ofcrucial economic aid. Mugabe since 2000, prompting the col- trous economic policies, few expect him to Among other things, this would include a lapse of the country’s entire agriculture- soften Zimbabwe’s brutal politics. A few revamped election commission; the re- driven economy. Farmers’ representatives non-party technocrats and even members moval ofthe coup-making army from poli- expect Mr Mnangagwa to undo some of ofthe opposition may make it into his cabi- tics; proper international election observ- the damage. “There’s a real opportunity to net. “He may slightly widen the political ers; voting rights for Zimbabwe’s vast change this country’s direction,” says space,” says Sam Monroe of Magamba diaspora; proper protection for the media; Charles Taffs, a former head of the Com- Network, a civic-rights organisation. He and the repeal ofa host ofrepressive laws. mercial Farmers’ Union, who sits on a notes that one of his colleagues, an Ameri- compensation steering committee that has can woman, who was remanded in jail for The test of the ballot previously had discussions with people a week just before Mr Mnangagwa’s flight But would Mr Mnangagwa ever permit an close to Mr Mnangagwa. “He’s a strong, in- abroad, still faces a criminal charge of in- election he might lose? Unless he under- telligent pragmatist who knows what sulting the president—ie, Mr Mugabe. goes a Damascene conversion (he is said to needs to be done to put this country on the Afterall, the newman wasthe old one’s be a born-again Christian), few would ex- road to recovery.” most forceful security minister and elec- pect it. But the opposition is weak and frac- Compensation for land previously con- tion-rigger. At his inauguration he prom- tious. MostZimbabweans, howeverscepti- fiscated, says Mr Taffs, a coffee farmer who ised a fairelection by the middle of 2018, as cal, want to give the Crocodile, as Mr has had land nabbed, “is the elephant in the constitution requires. International Mnangagwa is known, a chance. If he real- the room”. The figures have already been lenders and Western governments will ly began to rescue the economy, he might nailed down, he says. The Valuation Con- press him to meet a string of political con- even win an election without rigging it. 7 sortium, formed of eight local companies, has made detailed assessments in 153 Six letters: profit zones across the country, valuing the grabbed land at $3bn-3.5bn and improve- ments (including equipment and so forth) Why Nigeria wins at Scrabble at $5bn-5.5bn. ABUJA Beyond compensation, the key is to re- The best players earn government salaries establish security of land tenure for com- mercial farmers ofany colour—and to reas- N THE hot, golden light ofan Abuja of118 competitors. sure business people that property rights Iafternoon two men spin a rotating Scrabble found fans in Nigeria in the in general will be respected under a post- Scrabble board, oblivious to the flies 1980s. It was made an official sport in the Mugabe regime. Otherwise the banks will buzzing around them. The opening early1990s. Prince Anthony Ikolo, the not lend. But this will be politically tricky. moves in the word-building game are coach ofthe Nigerian national team, Even the supposed pragmatists in Zanu-PF relatively low-scoring: “writer” for26 reckons there are now around 4,000 have argued that land should be owned by points, followed by “pool”, “ow”, “or” players in more than100 clubs around the state and leased out. Yet if land is to re- and “li”. But the scores soon stackup, the country (compared with about 2,000- acquire real value and be tradable on the including two 50-point bonuses for 2,500 members in152 clubs in America open market, farmers must be granted free- getting rid ofall seven letters for “medi- and Canada combined). He wants to hold. “Land needs to be bankable,” says ant” (the third note ofa diatonic musical ensure that “all nooks and crannies in John Robertson, a veteran economist in scale) and “deracine” (from déraciné,a this country have a Scrabble board.” For Harare. “Youshould be able to go to an es- French noun and adjective forsomeone now,the game’s best players hail from tate agent, not to a minister, to sell to any- who has been uprooted). In less than 20 the better-educated south, particularly one.” Leasehold, he says, will always be minutes, the time allowed for a profes- Lagos and the oil-producing states. vulnerable to the interference of corrupt sional game, Eta Karo beats Ben Quick- It helps that some states hire Scrabble ministers. In the past, Mr Mnangagwa has pen by 461points to 410. players as civil servants. Mr Quickpen promoted a so-called “command agricul- Both men are members ofthe tri- gets 70,000 naira ($195) a month from ture model”. The very name suggests state umphant Nigerian team that last month Bayelsa state for coaching younger play- control. won the World English-language Scrab- ers. He still finds time to play forfour Only 50 or so white farmers are reck- ble Players Association championship hours every day,six days a week. Gods- oned to have remained unscathed as ac- forthe second time running. Four of the will Akpabio, a formergovernor and tive owners. Another200-odd maystill op- team’s eight players made the top ten, out now senator forthe southern state of erate on diminished acreages, often in Akwa-Ibom, puts on a yearly tourna- co-operation with blackfarmers who have ment. This year the first prize was worth been dished out chunks of their land. But $10,000. Not fornothing is he known as in the past year or so, several hundred the “Pillar ofScrabble in Africa”. more whites have returned to the land, Good Nigerian players tend to have says Mr Taffs, often as managers or lease- an encyclopedic knowledge ofshort holders, sometimes overseeing the acqui- words, which they often deploy instead sitions ofwell-connected blacks. oflonger ones in order to blocktheir Ifcompensation is settled and property opponents and conserve useful letters rights respected anew, Zimbabwe’s agri- such as S, E and R. Money seems to be culture could recover fast. For sure, the de- their main motivation. Top players can struction will take years to reverse. For in- make more than $4,000 a year, a useful stance, the national dairy herd is down to a income boost in a country where more third of its previous capacity. And no one than halfthe population makes less than expects very many of the white farmers to $1.90 a day.“As a people we believe in come back. Still, enough could do so in va- profits,” says Mr Ikolo. “Ifthere is no prize rious guises to make a vital difference. money it won’t be competitive.” If there is a chance of Mr Mnangagwa Europe The Economist December 2nd 2017 43

Also in this section 44 Turkey’s Russian missiles 45 Ireland’s property crisis 45 Berlin: poor and sexy 46 EU aid to Italy 47 Charlemagne: China and Europe

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

Public finances in France score, consider how officials responded to a €10bn hole that appeared in the budget Transformers? after the constitutional court ruled that a surcharge on dividends that companies previously had to pay was illegal. Rather than let the 3% markbe breached, as earlier administrations might have, officials in- PARIS stead dreamed up a one-off levy on France’s 320 biggest firms. That shoves up The annual budget is less bold than it sounds corporation tax, temporarily, despite Mr OR those seeking evidence that Em- their de facto power to set some national Macron’s promise to bring the rate down Fmanuel Macron is set on a radical over- terms on pay and conditions, limiting from 33.3% to 25% in five years. Better a ca- haul of the economy, France’s new budget, firms’ flexibility no matter what the laws pricious tax, it seems, than missing the def- now being debated in the Senate, offers may say. Economists will be scratching icit target. Yet Mr Macron took a knock last mixed evidence. For all his bold talk of their heads over this foryears. week when the European Commission in- “transforming” France, some measures— The budget is easier to assess. Two mea- cluded France on a list of (only six) coun- notably on public spending—so far look sures stand out. The president talks of a tries that it worries may breach the 3% rule tentative. France that encourages wealth creation next year. It is also concerned about the Undoubtedly there has been much to rather than envy of the rich. Scrapping the high level ofpublic debt in France. cheer. Mr Macron had already signed off wealth tax, introduced in 1982 and in force Other steps are modest and welcome. on reforms to boost flexibility in the labour (mostly) since then, is bold. It is partly re- Some pensioners will pay higher social-se- market earlier this autumn. Assessing the placed by a levy on pricey properties. Rev- curity charges, even as firms pay lower im- full impact of these is tricky, because im- enues will drop from a modest €5bn in posts for employing people. A flat tax of plementation takes time and an upturn in 2016 to just €1.8bn next year. The benefit 30% on investment earnings, a markedly the economic cycle means unemployment should be that fewer wealth-creators will lighter burden than before, is designed to should drift down from 9.7% in any case. A emigrate (by one estimate, France has seen cheer entrepreneurs. Gradually exempting big unknown is whether unions will keep a net loss of 60,000 millionaires since 80% of households from a property tax 1 2000). More might invest in France, per- haps in tech startups. But Mr Macron has The fightback been dubbed “president ofthe rich”. Bonjour, big spender France, budget balance, as % of GDP The second notable measure is to keep Public spending, as % of GDP the projected budget deficit below 3% of 2016 total* Wages Pensions 2 GDP, as required underEU law. It is likely to Health Education Other + be 2.9% in 2018. This is a matter of totemic 0 0 102030405060 importance to Mr Macron. He wants to be – 2016 2 the first French leader in a decade to get it France below 3%. “The pressure on the adminis- 2013

4 tration to deliver such an outcome is very, 2016 very strong,” notes Bruno Cavalier, of Germany 2013 6 Oddo Securities. Mr Macron seeks fiscal credibility, partly to convince future Ger- * 2016 8 man governmentsto paymore attention to Sweden 1970 80 90 2000 10 18 2013 his plans foreuro-zone reform. Sources: INSEE; French finance ministry *Forecast For a measure of his resolve on this Source: OECD *Breakdown not available 44 Europe The Economist December 2nd 2017

2 (separate from the one levied on the rich- one talks of more radical change, such as in Russia. Analysts point out that the S-400 est) is popular, but means €3bn of lost rev- swiftly injectingcompetition into the state- would not be interoperable with NATO’s enues in 2018, and more later. run, hugely subsidised railways, where air-defence system. The chairman of Those who dared hope for a one-off debt amounts to more than €40bn. NATO’s military committee, Petr Pavel, re- radical change in the first year of Mr Mac- Mr Macron is in a strong position for cently warned of unspecified “conse- ron’s presidency, followed by years of sta- now, without serious opposition in parlia- quences” if Turkey were to go ahead with bility, are disappointed. “I was expecting ment or on the street. He might use this the purchase. The presence ofRussian mis- more and quicker. I’m not sure they are time to push on with more change, for ex- siles on Turkish soil, he said on October buildinga situation offreedom that will re- ample with a second round ofpromised la- 25th, would create “challenges for allied launch growth,” says Marc Ivaldi of the bour and unemployment reforms, poten- [aircraft] potentially deployed onto the ter- Toulouse School of Economics. He sees no tially weakening the entrenched power of ritory of that country”. Nonetheless, Tur- overriding “strong idea or strategy” to the unions, or cutting pension costs. The key’s defence minister announced on No- guide policy. chance to bring about structural shifts is vember11th that the sale had been agreed. Mr Cavalier also laments the lack of fleeting—it would pay to grab it early. 7 It risks running foul of American sanc- “big bang” changes. He is most disappoint- tions against Russia. In October the State ed by the lack of a strong signal that “com- Department said it reserved the right to pe- pletelycrazy” publicspendingwill soon be nalise governments that buy military cut. The state spends some 56.4% of GDP, equipment from Moscow. (The Russian far above the European average of 46.3%. arms companies blacklisted on its website Mr Macron has talked this year ofreducing now include the makers of the S-400.) Al- spending to Nordic levels (Sweden was at though countries can apply for exemp- about 50% in 2016). Mr Cavalier calls that tions, Turkey’s sorry human-rights record, goal “very ambitious”, given the lack of a as well as unprecedented tensions with big, early push. The IMF thinks this is ur- the US, do not help its cause. Outraged by gent, too. In September it said swift and the arrests of two local consular staffers by comprehensive spending reforms would Mr Erdogan’s police, America suspended be needed if Mr Macron is to keep his pro- visa services across Turkey in October. The mise to save €60bn overhis five-yearterm. ban has since been relaxed. But the bad If growth exceeds official projections of blood remains. 1.7% next year, and central government Relations with NATO are also increas- spending is kept steady as planned at ingly fraught. In November Turkey with- roughly €385bn, then the ratio ofspending drew its troops from a NATO exercise in to GDP could improve. But there is little Norway after an “enemy chart” prepared sign of the structural change that Mr Mac- for the occasion by a contractor was found ron previously said he would deliver, such to include Mr Erdogan’s name and a pic- as when he spoke of cutting 120,000 pub- ture of Turkey’s founding father, Kemal lic-sector jobs over five years. No plan for Ataturk. Turkey’s government accepted an trimming such posts has been announced apology from NATO’s highest official, but (though failing to replace those who retire insisted on a thorough investigation. The could help). Meanwhile spending by local Turkey ultranationalist and Islamist media seized and regional governments, which soared on the occasion and called on Turkey to in recent years, is to fall modestly next year. Misguided missiles withdraw from the alliance. Another big challenge is pensions. A American officials have long suggested comparison with Swedish public spend- that the best way to defend Turkish air- ing is instructive, given talk of a Nordic ap- space would be to buy the US-made Patriot OECD proach. The compares the two and ISTANBUL system, the kind already sold to Germany, finds that more generous pension provi- the Netherlands, Greece and Saudi Arabia, Turkey’s $2bn arms deal with Russia sion in France explains most of the gap be- among others. Their counterparts in Tur- faces hurdles, and possible sanctions tween the two countries: 10% of Swedish key agree that the Patriot system is the bet- GDP goes on paying them, whereas France O NATO officials, it must have seemed ter option, but balk at the price tag and fear devotes a much heftier 14.3% of GDP to its Tlike a bad joke. Earlier this autumn, Tur- that the Americans will transfer less tech- ones. Thatsuggestsa priorityshould be, for key’s state-run news agency published an nology to Turkey as part of a missile deal example, to raise the retirement age in infographic on the S-400 missile-defence than the Russians might. Also, Mr Erdo- France, something Mr Macron has shied system, which President Recep Tayyip Er- gan’s reputation in Washington is so bad away from doing. dogan’s government is buyingfrom Russia. that any deal could be torpedoed by Con- Is there other evidence that France will After praising the system’s prowess, in- gress. “If they don’t give us visas, they shrink its overbearing state? The finance cluding its ability to intercept enemy fight- probably won’t sell us Patriots,” quips one minister, Bruno Le Maire, talked in the er jets and incoming missiles at a range of Turkish official. summer of trying to sell roughly one-tenth up to 400km, the graphic cited examples Fornow, MrErdogan’s ministers say, the of the country’s vast public holdings. An of planes the S-400 could knock down. Ev- S-400 is the best system Turkey can afford. audit of these early this year described ery single one was an American aircraft. Under the deal, Turkey says it will receive public investments worth almost €100bn Turkey’s allies have learned to ignore four missile batteries, for around $2bn. But in nearly1,800 firms. Firms part-owned by such needling, examples of which often because the S -400 cannot be plugged into the state employ some 800,000 people— pop up in the pro-government press. But NATO’s radar network, and Turkey would far more than in any other big European they are following the missile deal itself have only fourbatteries, the system would country. However, the pace of privatisa- with increasing unease. NATO officials say be able to defend only a fraction of Tur- tion so far only matches the rate managed Mr Erdogan’s government is free to shop key’s airspace. (Turkish officials acknowl- (to little fanfare) late in the term of François for military hardware wherever it pleases, edge that the S-400 is a stop-gap measure, Hollande, Mr Macron’s predecessor. No but take a dim view of its decision to do so and say that their country remains in the 1 The Economist December 2nd 2017 Europe 45

2 market for a NATO-compatible system.) even reasonably well-paid working peo- tle incentive to drive down their margins Some analysts suspect that Mr Erdogan’s ple are being priced out of Ireland’s urban by increasing supply. enthusiasm for the deal has less to do with markets. Homelessness is soaring; in Dub- Stung by mounting criticism of its lack national defence and more with his fear of lin the numberofregistered homeless peo- of an emergency plan to build more a repeat of last summer’s failed coup, ple has increased at least fourfold in the houses, Ireland’s centre-right government when F-16 fighter jets manned by rogue pi- past three years, and two rough-sleepers seems tempted to try to bluster it out. Leo lotsstruckhispalace compound in Ankara. have died in the past week. Many more are Varadkar, the prime minister, recently stat- “If Turkey buys the S-400, putting one of couch-surfing, commuting huge distances ed that Ireland’s homeless figures were the batteries in Ankara makes sense,” says or moving backin with their parents. quite good by international standards, cit- Aaron Stein of the Atlantic Council, a This new housing crisis is embarrassing ing numbers which fact-checkers quickly think-tank. “Its primary mission could be at a time when Ireland is touting for jobs called into question as incomplete and out [to protect] the palace.” and businesses fleeing Brexit Britain. of date. There is another snag looming. Mr Er- Threshold, a housing-support charity,says But playing down the scale of the pro- dogan’s government is still insisting that it is being contacted by desperate foreign blem isa riskystrategyforMrVaradkar. His Russia must allow it to produce some of firms seeking help with finding homes for minority government depends on a deal the S-400 batteries at home. Yet Mr Putin is would-be immigrant employees. with the opposition, and he only narrowly not in the habit of handing over sensitive Whereas the 2008 bubble was caused averted its collapse over a police scandal defence technology to anyone. He no by a credit-fuelled glut of new housing, the by sacrificing his deputy this week. Polls doubt hopes that a missile deal would current crisis stems from a famine. Starting suggest that the housing crisis, together deepen Turkey’s rift with the West, but he in the 1980s, successive centre-right gov- with a tottering health service, will be at must also be wary of sharing Russian se- ernments encouraged local authorities to the heart of the next election campaign. crets with a NATO member. So despite all sell off social housing, which has not been And an election now looks as though it the posturing, the deal could yetunravel. 7 replaced. The private construction sector will come sooner rather than later. 7 has so far failed to increase supply in re- sponse to soaring demand. Experts esti- Ireland property mate that around 50,000 new units are Berlin needed each year to ease the shortage. But In short supply a recent report from Goodbody, a stock- Poor and sexy broker, showed that only 5,377 new pri- vately built units were completed in 2016. The reasons behind this market failure are various. One of them is more cautious BERLIN banks. Developers also complain that Irish DUBLIN Why is Germany’s capital so construction costs are mysteriously High prices and homelessness dysfunctional? high—“40% higher than Amsterdam”, esti- UBLIN has long been a popular desti- mates Ronan Lyons, an economist at Trin- T A crossroads in the middle of Tegeler Dnation for foreign tourists, who enjoy ityCollege Dublin. Red tape, suspected car- AForst, a wooded part of north-west its warm pubs, silky beer, Georgian street- tels among materials suppliers and the Berlin, visitors can admire the city’s lon- scapes and leisurely approach to life. But high fees extracted by closed-shop Irish gest-serving provisional traffic light. Erect- lately it seems that longer-term visitors professionals could be partly to blame. Un- ed in 2013 aftera burningcarhad destroyed have been falling out oflove with Ireland’s wise tax breaks have encouraged land the pillar on which the lights were mount- lively capital. hoarding, and private developers have lit- ed, it was meant to be replaced by a more Last month a survey of 13,000 expatri- permanent structure within a few weeks. ates put Dublin fifth from bottom of a list When a city lawmaker asked the govern- of 51 global cities, ranked by quality of life. ment why, four years later, the lights still Their main gripe (as with Paris, which fin- had not been fixed, he received an interest- ished two places lower, sandwiched be- ing response: owing to changed regula- tween Riyadh and Jeddah) was not a sud- tions, calculating whether or not the new den collapse in the city’s charm, safety or structure would fall down had become amenity but its high cost of living, and in “very laborious and difficult”. The govern- particular the difficulty of finding some- ment would not specify how much longer where to stay. it would take. According to a recent report by World- The traffic-light saga illuminates a wid- First, an international-payments firm, Lux- er problem. Berlin, the capital of Europe’s embourg is now the only European coun- most successful economy, is surprisingly trywhere rentinga home ispricierthan itis badly governed. The new airport, the city’s in Ireland. Daft.ie, an Irish property web- biggest flagship project, missed its seventh site, reported last month that the average opening date earlier this year and may not monthly rent in central Dublin is now open until 2021, ten years after it was origi- €1,819 ($2,155)—more than 60% of Ireland’s nally supposed to. The jobless rate is average pre-tax private-sector income. among the highest in the country. Schools Citywide, rents rose by 12.3% in the year to are dismal. Courts and police are so over- September, and are now 23% higherthan at worked that hundreds of millions of euros the peakofthe “Celtic Tiger” property bub- in fines and taxes have not been collected; ble in 2008, which spectacularly burst. and the city failed to keep tabs on Anis Since then Ireland’sheadline economicfig- Amri, the jihadist who killed 11 people ures have steadily recovered, bringing with a lorry last Christmas, despite warn- rents and house prices with them. ings about him three weeks earlier. With the cost of housing shooting up, Dublin down and out Astonishingly for a capital city, Berlin 1 46 Europe The Economist December 2nd 2017

Italy You can keep your money

ROME Italy failsto take up EU largesse S ITALY’S budget for 2018 wends its The bulkofthat money would have Away through parliament, the Euro- gone to the south, where investment is pean Union and the Italian government most needed. According to Svimez, a have been trading barbs in what has government body, income per head in become an annual ritual. The Commis- the Mezzogiorno, comprising the south- sion’s vice-president, Jyrki Katainen, ern mainland, Sicily and Sardinia, is 11.3% recently in effect accused Prime Minister lower than in 2007. Paolo Gentiloni’s coalition oflying about There are several reasons forthe low the true state ofthe economy; its finance figures; for a start, the commission’s minister, Pier Carlo Padoan, called that schemes tend to be highly back-loaded, “intolerable”. with payments spread over a long per- True, Italy’s new budget is mildly iod. But much ofthe blame forthe low expansionary: it aims fora deficit of1.6% take-up offunds should also be laid at the ofGDP whereas the government had door ofinefficient southern Italian re- estimated that, ifnothing were changed, gional administrations. Also, most of the German inefficiency it would shrinkto1.0%. But Italian min- programmes require additional funds isters stress that the revised figure is still from a country’s central government. 2 makes Germany poorer. Without it, Ger- well below the EU’s ceiling of3%. The Combining all the funding on offerfrom many’s GDP per person would be 0.2% Commission, though, worries that Italy is Brussels with the top-up money Rome higher. By comparison, if Britain lost Lon- not doing enough to cut its huge public has to provide, the Mezzogiorno is due don, its GDP perperson would be 11.1% low- debt (133% ofGDP at the end oflast year). around €50bn from the EU’s current er; France without Paris would be 14.8% Curiously,while protesting at Brus- seven-year budget. A study published last poorer. “Berlin’seconomicweaknessisun- sels’ refusal to let them spend more of month by Vision, an Italian think-tank, ique among European capitals”, says Mat- their taxpayers’ money,the Italian au- calculated that ifthe money were just thiasDiermeierofthe Cologne Institute for thorities persistently failto claim billions handed over to the inhabitants ofthe Economic Research. ofeuros from the Commission. Excluding south, their incomes would currently be The city’s dysfunction makes everyday the cash Brussels had paid up front, by growing by1.7 percentage points more life more irksome. In some boroughs the November15th,more than halfway than those oftheir fellow Italians. streets are constantly clogged by piles of through the period ofthe EU’s current rubbish, not to mention inexplicable road- budget (2014-20), Italy had received bare- worksthatmake little orno progress. Regis- ly1.2% ofwhat was due to it from the tering a new car can take weeks, depriving Commission’s regional development new owners of a means of transport and funds. Apart from Austria and the Neth- car showrooms of space for new stock. erlands, rich members that get very little This summer desperate couples travelled aid, Italy had the worst take-up rate of out of town to get married because short- any country bar Croatia, which is new to staffed town halls could only offer wed- the EU’s mechanisms. Italy’s rate was ding dates months in the future. “It is hard below the EU average of5.3%, but even to escape the impression that Berlin’s gov- furtherbelow that ofpoorer southern ernment has a certain contempt for its citi- European states including Greece (6.0%) zens”, says Lorenz Maroldt, editor ofthe lo- and Portugal (10.6%). IfItalian bureau- cal daily Tagesspiegel, who writes a crats had been as efficient as the Portu- newsletter chronicling the city’s adminis- guese in devising suitable projects, they trative hiccups. could have pumped an extra €2.2bn Berlin’s woes are partly a consequence ($2.6bn) into the economy over the past of structural changes. Before the second fouryears. world war the city was an industrial hub. When it was divided by the victorious al- lies, many firms moved their offices and scribed Berlin as “poor but sexy”. forth without doing anything about them. factoriesto WestGermany. Asan anti-com- The city’s economic fortunes are im- (By contrast, cities such as Hamburg or Mu- munist bulwark, West Berlin was heavily proving. A heavy dose of austerity in the nich have centralised their administra- subsidised, but not an attractive place to early 2000s averted bankruptcy. Startups tions to improve accountability.) That the set up a business. After unification, firms have moved into the artists’ warehouses, austerity measures were implemented in a that had re-established themselves in Ger- making Berlin the second-biggest Euro- slapdash fashion probably did not help ei- many’s southern industrial clusters had lit- pean tech hub after London. Its rough-and- ther. But the main reason, Mr Maroldt be- tle reason to move back. Instead the city at- colourful image has attracted tourists. The lieves, is cultural, going backto Berlin’s his- tracted bohemians, lured by low rents and city’s population is growing. toric anti-capitalist and anti-technocratic large numbers of abandoned factories and Yet the bureaucratic dysfunction con- streak: “We have a deeply held suspicion warehouses that made ideal artists’ stu- tinues. One culprit is the complex division of anything that smacks of efficiency and dios or rave venues. These new, hip resi- of responsibilities between the city and its competence.” Abandoning that attitude dents earned little and paid little tax. In boroughs. This makes it easy forofficials to may make life in Berlin easier. Forsome, no 2003 Klaus Wowereit, a former mayor, de- pass the blame for problems back and doubt, it will also make it less sexy. 7 The Economist December 2nd 2017 Europe 47 Charlemagne More than yuan Europe

Some Europeans feara surge ofChinese investment. Others can’t get enough ofit EU statement after an international court had condemned Chi- na’s mischief-making in the South China Sea. Balkan countries like Serbia, their accession to the EU years away, may be tempted to see China as a geopolitical hedge against Europe, even though most have little to offer beyond their position on the “Balkan Silk Road” between Piraeus and Europe’s rich heartlands. This reflects less an unscrupulous strategy to cook up com- mon positions with China than a straightforward desire to curry its favour. Call it “pre-emptive obedience”, an old East German term recalled by Thorsten Benner, director of the Berlin-based Global Public Policy Institute. That is worrying, and govern- ments that subordinate European foreign policy to their own in- vestment needs will win few friends. But it is no reason to panic. Chinese investments in eastern Europe are dwarfed by those from the west, notes Tomas Valasek of Carnegie Europe, a for- eign-policy think-tank. For China, central Europe is at best a mi- nor element of a larger Eurasian strategy linked to its “One Belt, One Road” infrastructure wheeze. Europe’s second fear is of a wealthy, calculating China acquir- ing critical infrastructure and nabbing its secrets. This is another familiarconcern, but the scale and manifest ambition of Chinese O THIS day the trained eye can still spot the occasional boxy investmentsharpen itsedge. Beijing’s“Made in China 2025” strat- TChinese tractor lumbering around rural Albania, a reminder egy, explicitly modelled on Germany’s “Industry 4.0” policy, of the time when this Balkan backwater was China’s biggest aims to transform the country into a high-tech manufacturing champion in Europe. In the 1960s Chinese aid and capital powerhouse in industries like aviation and robotics. Snapping propped up Enver Hoxha’s dire regime in return forits support at up innovative European firms, and theirpatented technologies, is the UN, where Taiwan still held the Chinese seat. Now some fear an obvious shortcut. that what comes around goes around. Chinese money is pouring into Europe’s heart and its periphery. It sometimes seems to have Investment with Chinese characteristics a political edge. In parts of Europe the ground is shifting, especially in Germany, Public investment in the European Union is at its lowest for20 where old concerns over a French-led protectionist push are years. Little wonder some are looking east. The stock of Chinese yielding to fears of Chinese intentions. The acquisition last year investment in Europe is low compared with America’s orJapan’s, by Midea, a Chinese appliance maker, ofKuka, a leading German but it is shooting up. According to one study, in 2016 its new FDI in robotics firm, was a turning-point. Sigmar Gabriel, the then econ- the EU was over 77% above that the year before, at €35bn ($41bn). omy minister, had unsuccessfully sought a European buyer in the These days China’s attention is on the innovation hubs of north- hope of keeping Kuka’s technology out of Chinese hands. There ern Europe as much as on infrastructure, but crisis-hit southern is also dismay at the mounting difficulties European companies economies have also lapped up its lucre, especially those that face inside China. The EU Chamber of Commerce there says its have had to divest state assets under euro-zone bail-outs. Last members are “suffering from accumulated promise fatigue”. Ger- yearCosco, a Chinese state-owned shippingfirm, acquired a con- many has tightened its investment-screening rules, and Mr Ga- trolling stake in the main Greek port of Piraeus, providing Chi- briel has warned China against playing European governments nese maritime exporters with a European foothold. Portugal is offagainst one another. rolling in Chinese loot. As it happens, they are perfectly capable of doing that them- But the latest front is further east. This week Li Keqiang, Chi- selves. Next to America’s or Japan’s, Europe’s toolbox for block- na’s prime minister, swooped into Budapest for the annual meet- ing foreign investment is limited. Leaders like Emmanuel Mac- ing of the snappily titled Co-operation Between China and Cen- ron, France’s president, think that naive. Earlier this year a joint tral and Eastern European Countries (colloquially known as the Franco-German-Italian statementurged centralisingsuch powers 16+1 format), bringing promises worth €3bn. There is talk of in- in Brussels for “strategic” sectors. But the big three faced resis- vestment in Estonian dairy, Slovakian freight and a high-speed tance from a coalition of northern European free-traders, central rail linkfrom Serbia to Hungary (which may violate EU tendering European chancers and southern European beneficiaries, all of rules). Beata Szydlo, Poland’s prime minister, grumbled about whom see more to cheer than jeer in the prospect of Chinese in- Chinese red tape, but Viktor Orban, her Hungarian counterpart, vestment. The European Commission has now proposed a limp was more effusive, celebrating China’s economic heft and its draft law that allows co-ordination ofnational screening efforts. agreeable habit ofnot talking about democracy or human rights. There will be manymore opportunitiesforthisdispute to play Forsome western Europeans all this revives old concerns, and out. The surge in China’s investment, and the shift in its targets, sparks new ones. The first is that in their rush for renminbi some represent a serious challenge. It is perhaps harder than ever to European governments will become proxies for Chinese inter- balance openness to trade with caution against its abuse. But in ests. The fear is hardly groundless. In June Greece vetoed a com- the age ofTrump and Brexit, it falls to Europe to bang the drum for mon EU position at the UN on human rights in China. Earlier, open borders and a rules-based order. Its governments are not pressure from Hungary, Greece and others had watered down an powerless. Vigilance is wise; confidence a useful adjunct. 7 48 Britain The Economist December 2nd 2017

Also in this section 49 Trade under WTO rules 50 Bagehot: A menu of misery

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

The Brexit negotiations ain could revert to trading on World Trade Organisation terms (never mind that this The siren song of no deal would not be simple—see box overleaf). David Davis, the Brexit secretary, says no deal actually means a “bare-bones” deal. On this basis, there is no serious risk that aircraft stop flying or nuclear materials are no longer imported. Rational people on The government’s slow and painful concessions have not killed offthe idea that it both sides can see how damaging this would be betterjust to walkout. That is a dangerous delusion would be to all, so they will prevent it. LL the signs are that Britain is caving in walk away to get a good deal. Many Brexi- Yet this idea of a “soft” no deal is not Aon the three issues in the first phase of teers fault David Cameron, Mrs May’s pre- persuasive. A no-deal Brexit would dam- the Brexit talks. Theresa May was told she decessor, for making clear in his renegotia- age otherEU countries, but hit Britain hard- had to yield by next week to persuade the tion ofBritain’s EU membership before the er. And it defies political logic to think that European Union summit on December referendum that he would campaign to a decision to walk out with no deal can be 14th-15th to agree that there had been suffi- stay no matter what. Mrs May still says no harmonious. It would mean not paying cient progress to begin talks on transition deal is better than a bad deal. Brexiteers the exit bill. It would jeopardise the posi- and a future trade framework. The prime were cock-a-hoop when the chancellor, tion of EU citizens in Britain. And it would minister has duly made big concessions on Philip Hammond, set aside £3bn ($3.6bn) dash hopes of the deep new partnership the rights of EU citizens in Britain and on for Brexit preparations, including for no that Mrs May says she wants. Amid the re- the exit bill, perhaps enough to pass the deal, in his November budget. criminations and bad blood, the EU would test. There even seems to be some move- The second guise is the assertion that surely lookto its own interests first. ment on the trickiest issue of all, how to no deal would not really be so bad. Instead Brexiteers often forget that the EU is a le- avoid a hard border between Northern Ire- ofpursuing the chimera ofa generous free- gal as much as a political construct. If Brit- land and the Republic, makinga December trade deal with a curmudgeonly EU, Brit- ain left with no deal and no transition, it deal more likely—but still not certain. would fall out ofall EU organisations, from Yet behind the good new lurks a persis- Euratom to the European Medicines Agen- tent and dangerous threat. The more that Who suffers most? cy (EMA). The European Court of Justice Mrs May yields, the more some Brexiteers Cumulative short-term impact (ECJ) would lose jurisdiction. Even if all argue that Britain should leave on March on GDP* of no-deal Brexit, % sides wanted Britain to stay in such bodies, 29th 2019 without any deal at all. Even if 2.0 1.5 1.0 0.5– 0 it might not be legally possible. she wins agreement to move to phase two Britain of the talks, the lure of no deal will not dis- Ireland Losers and losers appear. Brexiteers hate the concessions Denmark Oxford Economics has modelled the ef- that are being made in phase one, especial- Poland fects of Brexit with no deal and says that it ly over money. And trade buffs are united Netherlands would lop a cumulative 2% off Britain’s GDP in predicting that the phase two could Sweden by the end of 2020, equivalent to prove even more painful, with the EU stick- some £40bn. That is far bigger than the im- Germany ing to a rigid line on trade terms. pact on other EU countries (see chart). Be- Even so, most people see Brexit with no Spain fore the referendum, the Treasury forecast deal as a disaster to be avoided at almost France even bigger losses of output. Such num- any cost. Yet the idea keeps returning, in Italy bers are especially daunting when annual two guises. The first is tactical. In any nego- *Relative to baseline growth forecasts for the next few years tiation, it is said, one must be willing to Source: Oxford Economics GDP by Q4 2020 have just been trimmed to as little as 1.3% 1 The Economist December 2nd 2017 Britain 49

2 by Britain’s fiscal watchdog. Trade after no deal The main hit would come through low- er trade. Brexit with no deal would imply tariffs on 90% of British goods exports by Wobbling into the WTO value, according to the Confederation of British Industry. It reckons average tariffs Brexiteers claim that trade on WTO terms alone would be just fine. Wrong would be 4.3% on exports and 5.7% on im- ports, with some industries like agricul- T HAS long been an article offaith for all big countries have bilateral agree- ture, cars and clothing hit much harder. Ihard Brexiteers: there is nothing to fear ments on such trade-facilitating measures And it says additional non-tariff barriers from the World Trade Organisation. as customs co-operation, data exchange would cost the equivalent of 6.5% on ex- Many are suspicious ofthe compromises and standards. HosukLee-Makiyama of ports. Food prices would also rise: by some that a free-trade deal with the EU may ECIPE, a Brussels-based think-tank, says 2.7% for affected goods, says a study by the entail, such as accepting its rules or even that only seven countries trade with the Resolution Foundation, a think-tank, and its courts. So why not just walkout and EU on WTO terms alone—and they are Sussex University—and the poor would trade with the EU as other countries do, small fry like Cuba and Venezuela. suffer the most. A falling pound after a no- on WTO terms? In any case, reverting to WTO rules is deal Brexit could push inflation up more. One answer is that Britain’s relation- not simple. Britain was a founder of the Customs would create huge problems. ship with the EU is far more intimate than organisation but now belongs as an EU A new computer system is unlikely to be most countries’. The EU accounts for43% member. Toresume WTO membership ready before early 2019 and could anyway ofBritain’s goods exports and halfits independently will require a division of not cope with a quintupling of customs imports. In services, which make up 80% EU import quotas, notably forbeef, lamb declarations to 250m a year. An extra two ofBritish GDP and almost halfofexports, and butter. A first effortwas roundly minutes’ delay for lorries at Dover, a con- the EU market is crucial. Theresa May has rejected by big food exporters like Brazil, servative guess, would mean long queues. dismissed a Canada-style free-trade deal Argentina and America. The WTO pro- Even if the British were prepared, others because it would mean “restriction on ceeds by consensus among its164 mem- might not be. Tailbacks on motorways in our mutual market access”. Shifting to bers. Were Britain to leave the EU on Kent in 2015 were caused by problems in WTO terms would be worse still. acrimonious terms, negotiating its re- Calais, not Dover. Brexit with no deal It is also misleading to claim that the sumption offull WTO membership would also necessarily impose a hard cus- rest ofthe world trades with the EU on could be difficult. toms border in Ireland, causing much grief. WTO terms. The Institute forGovern- Brexiteers say trade with third coun- ment, a think-tankin London, notes that tries would be easier. Perhaps, but the EU Emergency stop has free-trade deals with some 60 coun- Certain industries could suffergravely. Brit- tries, including South Korea and Mexico, ain exports 80% of the cars it makes, over and is negotiating one with Japan. It will half of them to the EU. They could lose not be easy forBritain to “grandfather” their EU certification as well as facing 10% these deals, especially ifit has walked out tariffs, plus 2.5-4.5% tariffs on car compo- with no deal, ifonly because doing so nents, which move a lot in both directions. would need EU agreement, too. Honda has said that it maintains only half Then there is the WTO’s “most-fa- a day’s supply ofEU-made components, so voured-nation” rule, which bars dis- any delays would be highly costly. Aston crimination unless it is allowed by a fully Martin has said that losing EU certification registered free-trade deal. Ifafter no deal could mean it might have to stop produc- Britain and the EU wanted bilateral trade tion altogether. to stay tariff-free, both sides would have The pharmaceutical and chemicals in- to offerthe same privileges to all WTO dustries are also vulnerable. Between members. Services are barely covered by them they account for 10% of value added WTO rules. But even here, were Britain to in British manufacturing. Falling out of the seekto keep trade in services, the same EMA and the REACH chemicals directive termswouldhavetobegiventoseveral could make it impossible for firms in these countries with which the EU has free- industries to export to the EU. The CBI cites trade deals, including Canada. Subjection a cosmetics-maker which would have to to WTO rules might yet prove more irk- relocate to the continent. Outside Euratom, some than Brexiteers realise. not only would nuclear power stations be unable to import plutonium, but imports of radioactive isotopes that are vital for over the status of many derivatives con- quickly turn Britain into the preferred ha- cancer treatment and are not made in Brit- tracts. The Bank of England has at least de- ven for any EU criminal, rather like Spain ain might have to cease. clared that no British bankwould go under in the 1960sand 1970s. British-based airlines are subject to EU after a no-deal Brexit. What all these examples suggest is that rules through the European Aviation Safe- And then there is security co-operation. a no-deal Brexit would be risky and costly. ty Agency, which like all such agencies A no-deal Brexit would knock Britain out And that undermines the credibility of a comes under the ECJ. A no-deal Brexit of both Europol and the European Arrest no-deal threat. Yet it could still happen by would mean that they could no longer fly Warrant (EAW), and also deprive it of ac- accident or poor timing. Brexiteers may legally between Britain and the EU. Britain cess to many EU databases of suspected claim that, like forecasts before the referen- would also fall out of the EU’s bilateral air- criminals and terrorists, including the pas- dum, the risks are exaggerated. They services agreement with America. Banks senger-names record that Britain did much should heed Anand Menon, director ofUK would lose the passport that entitles them to promote. Intelligence-sharing might in a Changing Europe, an academic net- to do business within the EU out of Lon- continue bilaterally. But being outside the work: “This time, Project Fearwould not be don. There would be long legal arguments EAW, even if only temporarily, could scaremongering.” 7 50 Britain The Economist December 2nd 2017 Bagehot A menu of misery

Two new books suggest that Britain faces some singularly unappetising choices The second illustration of the iron law is that, however dys- functional the Downing Street machine seems, the reality is still more chaotic. Britain has had a problem for some time with un- elected aides who wield enormous power: think of Alastair Campbell’s relationship with Tony Blair. But the problem reached new levels with Mrs May’s government because of the combination of her personal fragility and the concentration of power in Downing Street after the Brexit vote. Insiders quoted in both books argue that Mrs May was almost “taken prisoner” by her co-chiefs of staff, Nick Timothy and Fiona Hill. Mr Timothy, a bearded intellectual, used her as a vehicle for his One Nation brand of Conservatism, which saw Brexit as a chance to refocus the party on people ofmodest means and conservative instincts. The “chiefs” exercised ruthless control over access to Mrs May and had a special office, called “the bollocking room”, for dress- ing down officials and even ministers. Mr Shipman provides an astonishing series of quotes about life under the chiefs. One insider confided that Downing Street was “literally a shag-fest, with people drunk on power and living on the edge”. Another veteran said that he had not seen “worse behaviour from a senior aide in 25 years”. The chiefs publicly re- N IRON law of British life these days is that, however bad ferred to Philip Hammond, the chancellor of the exchequer, as Athings seem, the reality is worse. The recent budget sharply “the cunt”. They are thankfully gone, sacked (and, in Mr Timo- downgraded already-weak forecasts of economic growth. Real thy’s case, shorn) afterthe disastrous election. But the problem of wages may not recover to pre-crisis levels until 2030. Now two MrsMay’sweakleadership remains. The cabinetisdominated by new political books—“Betting The House: The Inside Story of the colourful personalities with passionate views on Brexit, while 2017 Election” by Tim Ross and Tom McTague, and “Fall Out: A Downing Street is devoid ofideas. Year of Political Mayhem” by Tim Shipman—demonstrate that The third illustration is that however feeble Britain’s defences the country’s politics are even more messed up than its econom- against a hard-left government led by Labour’s Jeremy Corbyn ics. The books have slightly different focuses, the first limiting it- seem, the reality is weaker. The most worrying thing about Mrs self to the election while the second studies the wider aftermath May is not that she is an aberration, but that she is the embodi- ofthe Brexit vote. But they are both equally depressing. ment of today’s Conservative Party. Campaign managers calcu- The first illustration ofthe iron law is that however bad a poli- lated that the number of active Tory party members was about tician Theresa May seems to be, the reality is worse. She is devoid 50,000. In Brighton Kemptown, the local association consisted of of intellectual hinterland. Asked by aides who were preparing little more than the candidate and his family. By contrast Labour her for an interview to list her hobbies, she replied after some has halfa million active members, mostly young and fired up. thought: “I do really like Sudoku.” She has little emotional intelli- With its grassroots withering, the Torieshave relied on highly gence. Confronted with a succession of national emergencies— paid advisers such as Lynton Crosby, an Australian, and Jim Mes- the Manchester bombing, the London Bridge terrorist attack and sina, an American. But these hired guns have become out of the Grenfell Tower fire—she failed to show any human warmth. touch. Mr Messina predicted that the Torieswould win 470 seats, giving them a majority of 290. Mr Crosby relied on robotic mes- And that’s just forstarters sages (“Strong and stable”) and relentless micro-targeting (the To- MrShipman notes that she has no “second gear”. Despite his laid- ries delivered 4,000 different messages to Facebook users). By backstyle David Cameron, her predecessor, was capable of shift- contrast, Labour understood that weariness with the status quo ing up a gear under pressure. Mrs May is more likely to apply the and the empowerment of activists through social media had brakes. Mr Shipman notes that “unexpected questions created a changed the rules ofpolitics. Momentum, a pro-Corbyn pressure brief flicker in her eyes that combined fury and fear, something group, used ride-sharing apps to get activists to marginal seats. Its her aides called ‘the flash’.” Messrs Ross and McTague report that, shareable videos were spread atalmost no cost: one in three Face- when the election campaign started falling apart, Mrs May book users saw Momentum ads, despite the fact that the group turned up at Conservative headquarters only to deliver a stump spent only £2,000 ($2,700) buying ads on the social network. The speech. “I couldn’t believe it,” one activist said. “This was the Torieswill not have caught them up by the next election. prime minister ofthe United Kingdom talkingin the middle ofan There are a few encouraging words in these two excellent election to her own campaign staff and she couldn’t even hold books. The Conservative Party has some talented younger politi- the room. People were checking their phones.” Walter Bagehot, a cians, who combine political star power with an ability to relate 19th-century editor of The Economist, described Robert Peel, who to a changing nation. Mr Corbyn fell 60 seats short of winning a repealed the Corn Laws and introduced an era of free trade, as a majority, despite the Tories’ disastrous campaign. But the mes- man of ordinary opinions and extraordinary abilities. Mrs May, sage is glum. The next election is not only likely to put Mr Corbyn who is leading negotiations which could be just as consequential in Downing Street. It is also likely to put hard-left advisers such as for Britain’s future, is a woman of ordinary opinions and ordin- Seumas Milne and Karie Murphy in the seats that were once oc- ary abilities, ifthat. cupied by Mrs May’s powerful, unaccountable “chiefs”. 7 International The Economist December 2nd 2017 51

Woodlands changes to food markets. As the best farm- ing areas have become more productive, The foresting of the West and as rich countries have imported more of their food, marginal land has become unusable for ordinary agriculture. Some of the most dramatic forest growth in Europe ESLIN has been in high, dry places where farmers once scratched a living from goats, sheep The steady expansion oftree-covered land in rich countries is not always popular. It or olives. Forests now cover two-thirds of will continue all the same Catalonia, in Spain, up enormously from a OLM STENSON drives around County about 6,000 hectares of new forest ought century ago. In America, the fastest expan- C Leitrim, pointing out new tree planta- to be planted this year, while almost none sion over the past ten years has been in tions. In this corner of Ireland, close to the will be lost. It is part of a broad trend: the states such as Oklahoma and Texas, which border with Northern Ireland, conifers foresting ofthe West. have indifferentsoils. “Good cropland isal- seem to be springingup all around. The en- Trees are spreading in almost every ways going to be good cropland,” says croachment is not just visual. Mr Stenson, European country (see map on next page). ThomasStraka, who followsAmerican for- who is a police officer as well as a cattle Because many of these forests are young, estry at Clemson University. But “a lot of farmer, recently received a bill from his the quantity of wood in them is growing land should never have been planted.” feed supplier. It came with a brochure ad- faster than their extent. Europe’s planted Forests are also growing because gov- vertising easy returns from converting forests put on a little more than 1.1m cubic ernments have favoured them through farmland into woods. Forestry companies metres of wood per day. For comparison, laws and subsidies. Forest-boosting has a tout forbusiness in the local livestock mar- the iron in the Eiffel Tower is about 930 cu- long history, beginning with a French for- ket. The forest is “closing in”, he says. bic metres. Russia’s forests spread more est ordinance in 1669. In Europe, war drove In the 1920s, when Ireland became in- slowly in percentage terms between 2005 policy: countries needed wood for war- dependent, it was thought to have just and 2015, but, because Russia is so big, ships and then, after the first and second 220,000 acres (90,000 hectares) of woods, more than in the entire European Union in world wars, sought to become self-suffi- covering about1% of the land. Once-exten- absolute terms. Forests now occupy a third cient in a bulky commodity. In America, a sive forests had been shrinking for centu- of America’s land, having grown by 2% in ready supply of cheap home-grown wood ries. Farmershad cuttreesforfirewood and the past decade. They are even expanding was seen as essential for the creation of a to clear space for animals and crops since in Australia, following a long decline. suburban, home-owning democracy. at least the fourth millennium BC; some Since the 1990s environmental consid- tree species were wiped out by disease. Be- Trunk routes erations have weighed more heavily. For- ginning in the 17th century, most of the Deforestation in South America and Africa ests are increasingly valued as sponges for trees that remained were felled to build rightly gets most ofconservationists’ atten- heavy rain, as wildlife habitats and as car- shipsorfed into charcoal kilnsto fire the In- tion. That loss is huge—equivalent to about bon sinks. Governments point out that dustrial Revolution. 4.8m hectares a year, which far outweighs their countries used to be thickly forested— Today, though, almost 11% of Ireland is gains elsewhere. Yet the foresting of rich even if the large forests disappeared many covered with forest, and an unknown ad- countries is still one of the world’s great centuries ago, as is the case in a country ditional amount by small woods and scat- land-use changes. It seems just as unstop- such as Iceland. Some feel inadequate: tered trees. The government’s target is to pable as the deforestation ofpoorerplaces. European countries with scant forest cover cover 18% of the land area with forests by It has plenty ofcritics, too. sometimes lament how far behind the EU 2046. Ireland is behind schedule. Still, The growth offorestsispartlya resultof average they have fallen. 1 52 International The Economist December 2nd 2017

2 Whatever their reasons, governments The second accusation, that trees push point to a forested past. But rural people have treated forests generously. In Britain, out other kinds of agriculture, is only have become used to the landscape as it is, forests are not liable for capital-gains tax partly true. Forestry subsidies and regula- and often do not want it to change. What (though the land underthem might be). Ifa tions have indeed distorted Ireland’s land worries Mr Stenson, in County Leitrim, is forest is bought with the proceeds of a market. Farmers who plant trees get gener- not just that the ever-spreading trees will business sale, the tax that would be pay- ous payments for 15 years, while continu- displace farmers and make it hard for him able is deferred. Timber sales incur neither ing to receive ordinary farming subsidies. to acquire more land, but also that they corporation tax nor income tax. Forests At that point, with perhaps 20 years to go will prevent him from seeing his neigh- can be transferred to heirs free from inheri- before conifers are harvested, they often bours’ lights at night. tance tax. And, whereas many farm pay- sell to pension funds and other investors. In America and Germany, people have mentsin the EU have been decoupled from Forested land in Ireland hardly ever re- been conditioned to see forested land- production, forest subsidies reward plant- turns to farming. To help speed national af- scapes as sublime by painters like Caspar ing. The rate in England is £1.28 ($1.72) per forestation, the government requires that David Friedrich and Albert Bierstadt. Irish tree, plus grants for fences and gates. Mon- land cleared of trees must be planted with painting and poetry, by contrast, usually ey does not grow on trees, goes one quip— new trees (which are not subsidised). Ire- celebrates hills, bogs and farms. In “The trees grow on money. land also bars commercial planting on the Deserted Village”, published in 1770 and Planted forests are far from universally poorest soils, where young trees would probably inspired by scenes from his birth- popular, though. Between June and Octo- struggle. Partly as a result, forests have place in Ireland, Oliver Goldsmith lament- berthis year, forest fires in Spain and Portu- spread from the hills to the lowlands, says ed the transformation of a lively land- gal killed more than 100 people and dark- Steven Meyen of Teagasc, Ireland’s agricul- scape, studded with cultivated farms and ened Europe’s skies. The fires were partly ture authority. Macra na Feirme, which busy mills, into a silent one dominated by blamed on the spread of non-native trees, lobbies foryoungIrish farmers, argues that “glades forlorn” and “tangling walks”. especially eucalyptus. That Australian im- forest payments are now preventing good port, which was planted with support land from coming onto the market. Safe arbours from the World Bank, amongothers, grows That said, trees are sprouting in rural Ireland and other countries will nonethe- so quickly that trees can be harvested for Ireland because farmers want them to. less have to get used to the green invaders. pulp when less than ten years old. It also Many own at least one indifferent, boggy The EU’s Common Agricultural Policy is burns readily, scattering embers far afield. cornerofland where animalsgetstuck and set to change in 2020. Nobody yet knows Portugal’s government has begun to re- only rushes grow well. Stephen Strong, a how, but it is a safe bet that subsidies will strict planting, in an effort to prevent the farmer in County Meath, has planted 80 tilt towards greenhouse-gas mitigation, country from turning into what one green acres of his 500-acre farm with sitka which will probably mean more money group calls “Eucalyptugal”. spruce, Norway spruce, oak and ash. The for carbon-absorbing forests and less for The eucalyptus tree is a scapegoat for a trees require much less attention than the methane-belching livestock. John O’Reilly, bigger problem, argues Marc Castellnou, a sheep that grazed there before—“where the boss of Green Belt, a forest-manage- fire analyst in Spain. The real trouble is that you have sheep, you have trouble,” he ment company, worries that Ireland’s af- forests in Portugal and Spain have expand- says. Forestry appeals especially to ageing forestation rate might dip below 6,000 ed quickly, with little thoughtforthe conse- farmerswho are lookingfora gentle exit. In hectares a year in the next few years—a lev- quences. Well-managed eucalyptus plan- 2015, 45% of newly planted land in Ireland el that he views as necessary for sustaining tations are not the biggest danger—much was owned by people aged 60 or older. business. He also worries about Brexit, be- worse are ill-managed ones with lots of The final accusation, that forests are cause Britain is a crucial market for Irish underbrush and fallen wood, and the im- drastically changing the appearance of the timber. He is not at all worried about the promptu forests that grow on abandoned countryside, is spot-on. Advocates may long-term future ofhis industry. 7 farms. The fires that get going in such for- ests jump to the treetops and burn so ener- getically that they cannot be stopped. Branching out ICELAND FINLAND In Ireland, the criticisms are different. Forest area NORWAY The country’s default tree is the sitka 2015, % of SWEDEN total land area spruce, a fast-growing, damp-tolerant coni- ESTONIA fer from America’s Pacific Northwest. 80 RUSSIA Spruce plantations are said to be devoid of 60 LATVIA life—vertical deserts of dark green. They DENMARK are accused of wrecking rural communi- 40 LITHUANIA ties and driving farmers off the land. And 20 they are said to be out of place in a mostly IRELAND 10 NETH. BELARUS pastoral setting. Gerry McGovern, another BRITAIN POLAND farmer in County Leitrim, puts it bluntly: 0 GERMANY coniferforests are “not landscape”. BELGIUM* LUX.† UKRAINE The first charge is false. Mark Wilson of Change in forest area CZECH REP. 1990-2015, % points the British Trust for Ornithology says that AUSTRIA MOLDOVA Increase Decrease FRANCE conifer plantations support more bird life HUNGARY per hectare than farmland, largely because 10 ROMANIA 5 they harbour more insects. Inevitably, 1 BOSNIA some birds benefit more than others. The ITALY ‡ BULGARIA march of conifers across Britain and Ire- SPAIN land has increased the numbers of pine- ALBANIA loving birds such as siskins and crossbills. PORTUGAL Conifers are also loved by crows—which is GREECE less obviously good, because crows raid *2000-15 †Nil ‡ the nests ofrare birds such as curlews. Source: FAO, World Bank Insufficient data Business The Economist December 2nd 2017 53

Also in this section 55 More fake news from Japan 56 China Literature floats 56 The woes of digital news outlets 57 Plant-based meat 58 Sound and software 59 Schumpeter: Shareholder plebiscites

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

Business and society returns for shareholders, not to meddle in politics. “The social responsibility of busi- America Inc gets woke ness is to increase its profits,” wrote Milton Friedman, an economist, in 1970. Lobbyists became increasingly adept at pushing policymakers towards lower taxes and fewer regulations; they said little or noth- NEW YORK ing about social issues. No longer. The reactions to Mr Trump Employees are leaving bosses with little choice but to mount the barricades are reinforcinga longer-term trend for busi- T THE start of Donald Trump’s presi- individuals. Tim Cook, chief executive of ness to become more outspoken. Multina- Adencybossesrushed onto hisbusiness Apple, a technology firm, criticised the law tional companies in particular are more councils, hoping to influence policies in even though Apple itselfhas little presence likely to combine their support for globali- their favour. Their ardour has cooled. in the state. Salesforce.com, another tech sation with the espousal of wider societal When Mr Trump banned travel from Mus- firm, applied sterner pressure, threatening goals such as protecting the environment, lim-majoritycountries, withdrewfrom the to withdrawjobs. State billsdiscriminating ethnic diversity and gay rights. A small but Paris agreement on climate change and against transgender and gay people have rising number of firms have committed to equivocated on racist protesters in Char- attracted strong opposition from firms a new corporate purpose altogether, de- lottesville, to name but a few occasions, headquartered across America, not just in claring their objectives to be broader than chiefexecutives roared their protest. left-leaning California—from Bank of mere profits. The past decade has seen the “Un-American,” declared Reed Has- America (North Carolina) to Dow Chemi- launch of “benefit corporations” which tings, Netflix’s chiefexecutive, ofthe immi- cal (Michigan) and ExxonMobil (Texas). work to meet specific goals for society as gration ban. Sergey Brin, a co-founder of well as for their investors; there are more Google, told a reporter, “I am here because Come halo or high water than 2,300 ofthese around the world, with I am a refugee” as he joined protesters The Trump era has made it even harder for the greatest number in America. against the ban at San Francisco’s airport. executives to stay above the political fray. Such trends are not confined to Ameri- “I feel a responsibility to take a stand More than 1,400 companies and investors ca. Companies in Europe have long had an against intolerance and extremism,” wrote have signed a pledge to uphold the Paris expansive view of their social responsibil- Kenneth Frazier, boss of Merck, a pharma climate agreement, in defiance of Mr ities; now worries about inequality and giant, after Charlottesville. “Isolate those Trump. Visa, a credit-card giant, and 3M, a the resulting populism are strengthening who try to separate us,” added Lloyd manufacturing firm, are among those to that stance. Unilever, a giant Anglo-Dutch Blankfein ofGoldman Sachs. Other execu- have cut advertising from Breitbart News, a seller of consumer goods, for example, tives have joined lawsuits to overturn Mr right-wing news site founded by Stephen prides itself on treating staff well and sup- Trump’s policies and condemned his ac- Bannon, Mr Trump’s former adviser. One porting environmental sustainability. But tions in memos to staff. serial investor and director of a tech giant the phenomenon is particularly marked in Firms have been sucked into social and says that fired-up employees have made it America, due to the number of giant firms political debates before. Anti-apartheid extremely difficult to be seen to co-operate headquartered there and because Mr campaigners mounted boycotts against with the administration in any way at all. Trump is so uniquely hard to ignore. firms that did business with the South Afri- That is a big shift. In the past companies The controversies of Mr Trump’s presi- can regime, for example. But it is happen- did their best to remain apolitical. The dency aside, there are two big structural ing more and more often. In 2015 came the commercial rationale for caution was best reasons for firms’ newfound sense of pur- news that Indiana was considering a “reli- expressed by Michael Jordan, a basketball pose. First, many bosses feel they have lit- gious freedom” bill that would allow com- star, when he quipped that “Republicans tle choice but to respond to their staff, who panies and non-profit organisations to dis- buy sneakers too”. Companies believed are increasingly vocal on political and on criminate against gay and transgender that their main purpose was to maximise cultural issues. Second, companies’ main 1 54 Business The Economist December 2nd 2017

2 shareholders—institutions such as pension wider agenda. On November 21st Doug $22.9trn last year, from $13.3trn in 2012. funds and asset managers—are themselves McMillon, the boss of Walmart, a ubiqui- Whatdoesthisall mean forcompanies? paying more attention to social objectives. tous retailer, described the expanding ex- One danger lies in doing too little. Hollow Start with the staff. According to a re- pectations from various quarters for his posturing about corporate social responsi- port from Weber Shandwick, a public-rela- company, such as advancing education. In bility is easy enough to expose. Employees tions firm, “CEO Activism in 2017: High 2015 Walmart moved to oppose a “reli- and shareholders can hold companies to Noon in the C-Suite”, 44% of millennial gious freedom” bill like that in Indiana in account using data or by consulting inde- American employees say they would be its home state of Arkansas, stopped selling pendent monitors such as the Human more loyal to their company if their boss products carrying the Confederate flag Rights Campaign, which scrutinises how took a public position on a societal issue, after a mass shooting at Charleston and firms treat gay and transgenderemployees, compared with 19% who would be less loy- also stopped selling assault-style rifles. or the World Wildlife Fund, which tracks al. Weber Shandwick found that, globally, Some firms are wholeheartedly conser- firms’ environmental work. 63% of executives of prominent firms feel vative in their views. Charles Koch of Koch A second danger lies in alienating peo- the need to have a position on issues such Industries, the second-largest private firm ple on the other side of an issue, the presi- as immigration and climate change. in America, for example, has spent hun- dent among them. Companies that have dreds of millions backing right-wing opposed Mr Trump risk being singled out The real office politics causes. And smaller conservative-leaning by him. In August a single tweet from Mr That position usually, but not always, businesses have not held back from fight- Trump complaining about Amazon’s im- breaks to the left. Large companies still ing cultural battles. In 2014 the Supreme pact on conventional retailers (and jobs) tend to line up with the Republican party Court ruled that “closely-held businesses” wiped out $6bn ofits market value. on policies that have a direct impact on such as Hobby Lobby, a chain of crafts Firms may also displease customers, their business—a specific regulation, for in- stores, could have religious beliefs and who can more easily complain about com- stance, or a tax provision. But many of thus be exempt from laws that flouted panies and organise boycotts using social America’s biggest companies have their them. Asa Christian firm, ithad objected to media. In 2015 Starbucks, a coffee chain, headquarters (and most of their senior having to pay for insurance coverage for urged staff to begin conversations about staff) in states and in metropolitan areas emergency contraception under the Af- race with customers; the attempt was that voted for Hillary Clinton. Employees fordable Care Act. Another case now be- widely ridiculed. More recently Keurig of large firms examined by The Economist fore the Supreme Court—that of a baker Green Mountain, a coffee-machine maker, usually gave more to Democratic candi- who refused to make a wedding cake for a withdrew advertising from a show on Fox dates than to Republican ones (see chart gay couple—might end up exempting busi- News after its host failed to condemn Roy forselected examples). nesses from anti-discrimination laws if Moore, a Senate candidate accused of dat- So it should come as little surprise that they violate owners’ spiritual beliefs. ing and assaulting teenagers. Mr Moore’s companies increasingly support causes Institutional investors add to the pres- supporters then posted online videos of that are traditionally associated with sure on firms to get involved in political themselves smashing their devices. Democrats, including gay rights and envi- and social issues. In 2006 the United Na- ronmental sustainability. More than 80% tions issued principles for responsible in- Rage against the Keurig machine of the firms that opposed Mr Trump’s ban vesting, urging shareholders to consider These risks are not always as extreme as on travel from Muslim countries are based environmental, social and governance fac- they might seem, however. Despite the oc- in states that voted for Mrs Clinton, as are tors. By 2015, institutions managing about casional misstep Starbucks has thrived; its the majority ofthe firms and investors that $59trn had endorsed these principles. As chairman, Howard Schultz, champions the signed the pledge to uphold the Paris cli- pension-fund trustees and mutual-fund in- idea that firms should serve both their mate agreement. Staying neutral is espe- vestorstake social objectives more serious- shareholders and a broader set ofinterests, ciallyhard forfirmsin Silicon Valley, where ly, asset managers such as BlackRock and including staff and civil society. Angering staffare often liberal. Vanguard have tried to woo them by Mr Trump, ostensibly the world’s most “Heartland” companies, far from the launching new funds and indices focused powerful man, may not have lasting ef- liberal coasts, also face pressure to react to on well-behaving firms. The assets man- fects, either. Amazon’s stockhas more than specific political events or to advance a aged under such criteria jumped to recovered since his tweet in the summer. When Mr Trump criticised Nordstrom, a department store, its share price rose. Lefty techies, bankers to the right From employees It seems unlikely that companies’ new United States, share of campaign contributions going to Democrats,% Company spending via PAC activism will fade. Ignoring the issues that helped propel Mr Trump into office in the Alphabet Amazon AT&T Facebook first place is becoming a less plausible op- 100 100 100 100 tion for many bosses. After the global fi- 75 75 75 75 nancial crisis it was bankers who attracted 50 50 50 50 most populist ire. Chief executives are still 25 25 25 25 + + + + more trusted than politicians, according to 0 0 0 0 – – – – a recent survey by Edelman, a public-rela- 25 25 25 25 2000 10 18 2000 10 18 2000 10 18 2000 10 18 tions firm—but that trust is eroding quickly. Big multinationals such as Apple are Goldman Sachs Salesforce Walmart Wells Fargo under increasing pressure to eschew com- 100 100 100 100 plexmanoeuvresthatreduce theirtax bills. 75 75 75 75 Sky-high executive pay is another focus of 50 50 50 50 populist discontent. Firms are also having 25 25 25 25 + + + + to grapple, often unconvincingly, with the 0 0 0 0 – – – – question of how to help workers threat- 25 25 25 25 * ened by the spread of technology. Mark 2000 10 18 2000 10 18 2000 10 18 2000 10 18 Zuckerberg, chief executive of Facebook, is Source: OpenSecrets *Campaign refund among those to have suggested the idea of1 The Economist December 2nd 2017 Business 55

2 a “universal basic income”—an uncondi- tional payment to all citizens—to deal with Qualitative failings stagnating wages and automation; critics Share prices, September 28th 2017=100 Japanese corporate rule-breakers say that could further disenfranchise the When news emerged Affected less-skilled. 120 Mitsubishi Sep 29th Nissan Allowed uncertified 1.2 million As companies make their voices heard Materials Nikkei 225 technicians to carry out final inspections vehicles on social issues, they may start to do so in 110 on vehicles sold in Japan recalled differentways. Corporate bosseshave long Toray Oct 8th Kobe Steel Falsified quality data 20,000 100 on its aluminium and copper products, tonnes of given to candidates—Cornelius Vanderbilt, used globally in aircraft, rockets, cars, metal a 19th-century tycoon, for example, show- Subaru Nissan trains and nuclear plants ered Ulysses Grant with cash. Firms them- 90 Oct 27th Subaru Allowed trainees to 400,000 selves can now take a more active part in conduct final inspections on vehicles vehicles politics, thanks to the Supreme Court’s de- 80 destined for the domestic market recalled cision in Citizens United v Federal Election Nov 23rd Mitsubishi Materials 270 million Kobe Steel Subsidiaries falsified quality data on units Commission that businesses can spend 70 aircraft, electricity-generation equipment unlimited amounts in elections (as long as and car parts shipped worldwide they do not donate directly to a candidate). 60 Nov 28th Toray Subsidiary falsified 149 cases, 13 They could also change how they lob- Sep Oct Nov quality data of car parts between customers 2017 2008 and 2016 by. Apple, Google and Amazon, some of affected the most politically vocal companies of Sources: Thomson Reuters; press reports the past year,have each more than quadru- pled their annual lobbying spending since cals giant, is the latest pillar ofcorporate Ja- employees to speak out, says Toshiaki 2007. But most ofthe cash has gone on nar- pan to admit to quality problems. This Oguchi of Governance for Owners Japan, row business issues such as net neutrality, week a subsidiary said it had faked inspec- a governance lobby group (Toray disclosed intellectual property and privacy. Aaron tions on reinforcement cords used to its cheating only after an anonymous on- Chatterji of Duke University thinks there strengthen car tyres. Sadayuki Sakakibara, line post). Privately, people at car firms will be rising pressure, from staff and con- a former president of Toray, said he was complain that the problems in their indus- sumers, for firms in many industries to “ashamed” and apologised on behalf of try relate to excessively stringent govern- match their rhetoric with lobbying on spe- Keidanren, the powerful businesslobby he ment standards introduced in the early cific societal issues in Washington, DC. now heads. On November 23rd, Mitsub- 1950s. Some workers consider them primi- Mr Zuckerberg has taken a more direct ishi Materials sheepishly confessed (dur- tive and unnecessary. approach. He has just concluded a tour of ing a public holiday) that its subsidiaries It is also possible that manufacturers set 30 states to try and connect with Ameri- had falsified data, on aluminium and other standards too high. Many have stayed cans of all backgrounds. Alexis de Tocque- products used in aircraft and cars, given to ahead of competitors by promising to de- ville, in his own journey through America customers in Japan, America, China and liver products that go far beyond mini- in the 19th century, observed what he Taiwan. Those customers include Japan’s mum standards ofquality or performance, called the country’s “self-interest, properly air force, earning a rebuke from Itsunori says Alberto Moel, a specialist in industrial understood”—the idea that an individual’s Onodera, the defence minister. robotics. Conflict occurs when pressure attention to the common good served him- Kobe Steel, which was founded in 1905, flows down to the factory floor to meet self as well. Companies keen to protect recentlyrevealed thatithad sold “non-con- those promises, he says. “Then you get cor- their interests are increasingly taking that forming products” to Boeing, Ford, Toyota ner-cutting, misrepresentations and some- observation to heart. 7 and other household names. The firm had times unethical or even criminal behav- faked data on the tensile strength—the abil- iour.” Nissan’s woes have been blamed by ity to withstand loads without break- some on Carlos Ghosn, its former chair- Japan’s product-quality scandals ing—ofaluminium sheets, copperproducts man (nicknamed “Le Cost Cutter”), who and other items shipped to over 500 com- sacked thousands ofworkers. Kaizen crisis panies. Nissan and Subaru, both car firms, Itistoo earlyto predictpermanent dam- have admitted to similar fakery. age to Japanese manufacturing, says Koji The welter of revelations is bad for Jap- Endo ofSBI Securities in Tokyo. Most of the anese business as a whole. Its main de- recent cases relate to paperwork rather TOKYO fence against low-cost competitors from than actual quality standards, he argues. China, Taiwan and South Korea is its repu- They have thus far resulted in no foreign Two more illustrious Japanese firms tation for quality, says Takeshi Miyao, a product recalls. True, Takata, a maker ofde- admit to falsifying inspection data consultant to the local car industry. Hiro- fective airbags, was forced out of business KIO MORITA, co-founder of Sony,liked shige Seko, the economy minister, said the this year by a blizzard of lawsuits linked to Ato recall his first trip to Germany in falsifications had “shaken the foundations at least18 fatalities, but other firms have re- 1953, when a waiter stuck a small paper of fairtrade” and demanded to know why bounded. Toyota is again the world’s top parasol in his ice-cream and sneered: “This it had taken Mitsubishi over six months to carmaker, despite a recall of 9m vehicles is from your country.” Like many of his admit misconduct. That is timely com- with faulty accelerator pedals. post-war compatriots, Mr Morita was pared with Nissan. Its use of uncertified That followed years of restructuring. ashamed that Japan was known for shod- technicians on final vehicle checks goes Most Japanese companies now have at dy goods. The fierce drive to reverse that back 40 years. The technicians reportedly least two independent directors on their reputation resulted in the Deming Prize, a borrowed hanko— Japan’s all-important boards; until recently, they usually had quality-control award named after an signature seals—from qualified inspectors. none. The result is closer scrutiny of American business guru so revered in Ja- Ironically, a corporate-governance code wrongdoing, along with greater pressure pan that he received a medal from the em- introduced in 2015 to rev up competitive- to perform well financially. The battle be- peror for contributing to its industrial re- ness may explain why such facts are com- tween quality and cost-cutting will surely birth. All that hard workis under threat. ing to light. The code, which includes a intensify, says Mr Oguchi. “The key is get- Toray Industries, a textiles and chemi- whistleblowing clause, has encouraged ting the balance right.” 7 56 Business The Economist December 2nd 2017

China Literature Many of the authors are amateurs, corporate sibling to Marvel Studios. Ten- though two-fifths write full-time, and they cent is the “perfect incubator” for those Bibliofiled are young, with an average age of28. China ambitions, says Wang Chen of TF Securi- Literature’s repository—close to10m works ties,abrokerage:ChinaLiteratureisal- in genres from fantasy to sci-fi, mystery to ready co-operating with Tencent Penguin romance—attracts close to 200m readers a Pictures, a newish film-making arm, and HONG KONG month across its web and mobile plat- Tencent Games, the largest gaming com- forms, and half of China’s total daily on- pany in the world by revenue. In 2016,15 of China’s largest online publisher line-literature fans. China Literature is the 20 most popular TV dramas and video enchants investors and readers alike home to 72% of all original online works; games adapted from online works were li- HENEVER Xu Jie goes to the cinema Alibaba Literature and Baidu Literature, censed from China Literature. Wto watch mystery and detective films, owned by China’s two other tech giants, Twists are possible. Copyright protec- she leaves disappointed: to help stamp out came later to the field and have just 5% of tions are weak. China Literature reported superstition, China’s censors excise ghosts the virtual library between them. in its filing document that pirated online and zombies from the screens. So for her About four-fifths of China Literature’s content led to a loss in revenue of 11bn fill of phantoms, she turns to the flourish- revenues come from charging, on some yuan for the market in 2016. Tighter regula- ing online-literature scene. There, authors books, a small fee to read on after sample tion or new censorship rules could upset are allowed to take liberties from which chapters (proceeds are shared with au- the narrative. Drafts are reviewed before most of China’s state-owned publishing thors). Most are serialised. Readers are en- publication by editors at China Literature, houses would recoil. Homophones stand ticed to pay per 1,000 Chinese characters but the firm knows the value ofthe relative in for forbidden words. Danmei,anewon- or subscribe for 18 yuan ($2.70) a month. creative freedom that its online realm al- line class of homoerotic story,is especially For now, only 5% of its customers are pay- lows. Its own story is testament to that. 7 popular among young women. Readers ingreaders. But Morgan Stanley,a bank, ex- can choose from over 200 established pects that share to grow to 8% within the genres such as xianxia, a fantasy world of next two years. As their incomes rise, Digital news organisations deities and martial arts. youngChinese are spendingmore on high- The corporate prince of this virtual er-qualityentertainment. There isroom for Buzz kill realm is China Literature, a spin-off from growth: Ms Xu says she is still spending far Tencent, a gaming and social-media giant. less on online books than on mobile The four-year-old online publisher listed games, for example. Mobile wallets, in- on HongKong’sstockexchange on Novem- cluding WeChat Pay, which is owned by NEW YORK ber 8th, raising just over $1bn. The offering Tencent, have made paying a cinch. The last in ourseries on the future of was a huge success; at the end of its first The remaining share of the company’s journalism looks at digital news outlets day oftrading, China Literature reached al- revenue isfrom owningthe rightsto stories most $12bn in market capitalisation, nearly that are adapted for film, television, games REAT expectations attended digital 2,700 times its earnings of $4.5m in 2016 (it and so on, and from licensing them to oth- Gjournalism outfits. Firms such as Buzz- lost money in 2015). er producers. Investors expect that this in- Feed and Mashable were the hip kids des- Investors are spellbound chiefly by its come stream will grow quickly, says Nel- tined to conquer the internet with their link to Tencent, which on November 20th son Cheung of Formula Growth, a younger, advertiser-friendly audience, became Asia’s first firm to be valued at Canadian investment firm that owns smart manipulation of social media and over $500bn and which still owns just shares in China Literature. affinity for technology. They seemed able over 50% of China Literature. Retail inves- Wu Wenhui, one of China Literature’s to generate massive web trafficand, with it, tors—particularlythose who missed out on bosses, says he aspires to be “China’s ver- ad revenues. They saw the promise of vid- the giant’s own IPO in 2004—may be hop- sion of Marvel Comics”, the American eo, predicting that advertising dollars ing China Literature is the next Tencent. As creator of Spider-Man and the X-Men, and spent on television would migrate online. the latter expands its entertainment em- Theirinvestors, includingComcast, Disney pire into films and TV dramas, China Liter- and General Atlantic, an investment firm, ature’s library offers a trove of intellectual saw the same, pouring hundreds of mil- property; local analysts have nicknamed it lions of dollars each into Vice Media, Buzz- “Tencent’s natural son”. Feed and Vox (giving them valuations of China’s book market (fiction and non- $5.7bn, $1.7bn and over $1bn, respectively). fiction) is the biggest in the world by num- They have had successes. Some be- ber of new publications. Of total written came ninjas in “SEO” long before most fictional output, online storytelling, which print journalists knew it stood for “search is mainly read on smartphones, is thought engine optimisation”. They introduced to make up 11%. Within the next three years “clickbait” to the lexicon. Some, like Buzz- that share is expected to double. To capture Feed and Vice, worked out that fortunes more bookworms, Tencent combines ten- were to be made in brand-supported viral tacular reach—over 960m monthly users hits—or “native advertising” that looks alone on WeChat, its mobile-messaging similar to the sites’ own snazzy editorial app—with a host of algorithms that push content. They gave the internet “listicles” appealing content to customers. China Lit- like BuzzFeed’s “19 Mindblowing Histori- erature’sdominance hashelped itto attract cal Doppelgangers” (sponsored by Virgin 6m authors to its platform, representing Mobile) and uplifting stories, like those 88% of all those writing online books, ac- from Upworthy, where “you won’t believe cording to a study by Frost & Sullivan, a what happened next”. consultancy. Hit writers are among them. But a brutal winter is setting in. Buzz- Of the country’s ten bestselling authors in Feed will probably miss its revenue target, 2016, six were online-literature writers. WeChat, we read of $350m this year, by 15-20%, and is to lay 1 The Economist December 2nd 2017 Business 57

2 off100 of its 1,700 staff. Vice is also expect- The Vegetarian Butcher ed to fall short of its revenue target, of $800m. Mashable, a once-trendy site val- ued in 2016 at $250m, in November agreed I can’t believe it’s not meat to be sold for $50m to Ziff Davis, a print- THE HAGUE turned-digital publisher. Other news sites Plant-based “meat” is prompting others to bite back are up for sale, cutting their staff or closing shop, sending ink-free scribes in search of HE “kapsalon” is a healthy mix of ofthem are in Dutch supermarkets) and work. Digital media are, in otherwords, en- Tchips, melted Gouda cheese, sha- has annual revenues of€12m ($14.2m). during similar woes to their print peers. warma, lettuce and garlic sauce and is a One in five sausage rolls sold in Albert “There was this hype bubble that con- tried and tested hangover cure in the Heijn, the Netherlands’ largest super- vinced everybody that these digitally na- Netherlands. So naturally,a butcher’s market chain, comes from the veggie tive companies are different but they are shop on the Spui, in The Hague, put it on butcher. Mr Korteweg says he wants to not,” says an executive at one such previ- its takeaway menu, alongside burgers make factory farming obsolete by “seduc- ously overvalued firm. “People need to re- and sausage rolls. As two young women ing meat-lovers” without inflicting suf- adjust their expectations.” walkout, tucking into their steaming fering on animals and damage to the The natives have run into much the kapsalons, an elderly gentleman asks environment by feeding livestock. same problem as print newspapers have how to prepare the steakhe has just Not everyone welcomes this vision. encountered: the duopoly of Alphabet bought. The scene would have most Earlier this year two Dutch politicians (owner of Google and YouTube) and Face- carnivores fooled. For this butcher deals from the Liberal VVD party called fora book. The tech giants rule digital advertis- only in meatless “meat”. ban on meat names forproducts that ing in two ways. First, by dominating the “Wewant to become the biggest contained no animal protein. In October business of selling and servicing ads, they butcher in the world without ever slaugh- the country’s food authority asked The take a healthy cut of those sold by publish- tering an animal,” says Jaap Korteweg, a Vegetarian Butcher to rename misleading ers themselves. Second, they get advertis- ninth-generation farmerand founder of products, such as its “speck” (very similar ers to bypass publishers and spend directly The Vegetarian Butcher. Since opening its to “spek”, the Dutch forbacon) because it on theirplatforms. Such isthe demand that first shop in The Hague in 2010 the com- might confuse consumers. The topic AdStage reckons ad prices on Facebook pany has been developing plant-based trended on Twitter fordays; sales soared. nearly tripled in only eight months this products that look, smell and taste like Dutch media termed the episode year, to $11.17 per1,000 impressions. That is meat. “This shouldn’t just taste like real “Schnitzelgate” after a similar situation in still a lot cheaper than native advertising— chorizo, it should leave the same red Germany,whose minister for agriculture the bespoke ads made by firms such as stains on your fingers,” says Maarten said that “meaty names” such as “schnit- BuzzFeed and Vice. Google’s and Face- Kleizen, an employee, as he serves a slice. zel” and “wurst” should only be legal for book’stoolsfortargetingusersstrike adver- The firm sells a variety offoods, rang- animal-based products. That was seen as tisers as a more efficient, scalable way to ing from minced meat to prawns, through the meat lobby reacting to a country reach specific audiences. 3,500 sales points in15countries (the bulk rapidly going veggie; a tenth ofGermans The duopoly are expected to get a ma- are now vegetarians, up from 0.6% in jority of digital ad sales in America this 1983. In Brussels lobbyists want meat to year, and almost all ofthe growth. The me- get the same protection as milkdid this dia firms that supply Google and Face- summer (when the European Court of book’s users with content are mere “vas- Justice ruled that soy-drinkproducers, for sals”, including digital news sites, says one example, could not call their products executive. Digital publishers often act as milk). In October New Zealand’s Poultry such, attuning their strategies to the plat- Industry Association said packaging by forms in the chase for clicks. After Face- Sunfed Meats, a meat-substitute firm, book prioritised video content last year, so was misleading because its “chicken-free many sites made a “pivot to video” that it chicken” pictures a chicken and the became an industryjoke. Ithasnotworked phrase “wild meaty chunks”. out well, as short videos are difficult to Mr Korteweg says that while his firm make and monetise at volume. threatens chicken and pig farmers, meat Publishers would be wiser to get users companies and butchers are customers to stay on their own sites, so that they can and partners. He co-operates with a profit from the relationship. Some are try- Unilever sausage and soup brand, Unox; ing to do so with their journalism. Giz- conventional butchers sell his products modo Media Group, a group of tech and alongside animal-sourced meat. The culture sites, has an investigative team. Vox arguments are likely to intensify as the makes in-depth explainer videos on cur- Carroticide market foralternative meat takes root. rent events. BuzzFeed regularly breaks big stories. The site holds its audience: the “bounce rate” of BuzzFeed’s visitors—the (owned by Univision) get about one-quar- than 10,000 subscribers paying$399 a year share that leave after visiting one page—is ter of their revenue from e-commerce; for its technology news. At VTDigger, a 34%, which compares pretty well with 54% BuzzFeed has started doing the same. non-profit site started by a laid-off journal- forthe New York Times (the numbers come Membership feesmay be another option. ist, dogged coverage of politics and corrup- from SimilarWeb, an analytics firm). Smaller digital operations are also us- tion in Vermont has attracted strong read- Advertising still provides the bulk of ing a variety of strategies. The Ringer, a ership and a mix of donations, grants and revenue. But publishers are also selling sports and culture site in Los Angeles, has sponsorships from local businesses. There things to visitors, both their own merchan- established a niche in podcasts, on which are several clear paths to long-term surviv- dise and other companies’ products, on it generates millions in sponsorship. The al, but not to billion-dollar valuations. Ex- which they take a cut. The Gizmodo sites Information, in San Francisco, has more pectations have indeed been readjusted. 7 58 Business The Economist December 2nd 2017

The audio industry products. But if the history of the smart- phone is any guide, such platforms will Sound and software turn the hardware into a commodity, with most ofthe profits goingto the providers of software and services. Having sold 75% of all smartspeakers (at low prices that are thought to be close to the cost of making PARIS them), Amazon is now the world’s biggest speaker brand. Incumbents will also have Speakers and headphones may also come to be dominated by technology giants to contend with Apple, despite the delay of USIC lovers do not typically go to the its smartspeaker until early next year. Mopera to buy a speaker. But at the Pa- Pump up the volume The dominance of a few platforms is lais Garnier in Paris they now can: Devia- Sales worldwide, $bn not a forgone conclusion, says Mr Bryant let, a local maker of high-end speakers, on ofFuturesource. More specialised ones are 30 November 29th opened a store in the 19th- Internet-connected likely to thrive, too—like Microsoft’s Cor- smartspeakers century music venue to sell its most so- 25 tana, which is good at understanding busi- phisticated product, called Phantom. Look- ness jargon. But some audio firms feel the ing like a dinosaur egg, this supercomputer 20 need to branch out. Sonos, which pioneer- for sound (priced at $3,000) is considered Non-smart 15 ed wireless speakers a decade ago, now wireless speakers one ofthe best wireless speakers available. wants to become an über-platform, inte- It also comes with a dedicated streaming 10 grating all voice assistants and streaming service for live performances, including Headphones 5 services, so consumers who like Sonos some at the Palais Garnier. speakers have a choice. Harman, which in This Phantom at the opera is the latest 0 March was bought by Samsung Electron- 2009 10 11 12 13 14 15 16 17 example of how digital technology is ics, has similar plans for entertainment Source: Futuresource transforming speakers, headsets and other systems in cars. audio devices. Once mostly tethered to And then there are companies which hi-fi systems, they are now wireless, in- Smartspeakers are pushing the audio- do not build their own speakers, but offer creasingly intelligent and capable of sup- device industry to become “horizontal”. technology to enhance other products. porting other services. As a result, the in- The voice that emanates from Amazon’s Dolbyand DTS, forinstance, are busy creat- dustry’s economics are changing. Echo or Google’s Home is not just a digital ing software for what is called “immersive Onlya fewyearsago the audio industry assistant, but a “platform” for all kinds of audio”. Combining several speakers, was highly fragmented, says Simon Bryant services, of which most are developed by Dolby’s Atmos technology—first intro- of Futuresource, a market-research firm. other firms. Alexa, as Amazon’s version is duced in cinemas, but now available for Hundreds of brands offered their wares, called, already boasts more than 25,000 home use—already “places” sounds in both premium and basic, often with identi- “skills”, as the firm calls such services. space. The next step is separate personal cal components. Aswith otherdevice busi- These range from ordering goods and find- sound zones for each listener in a room, in nesses, the industry was a “vertical” one: if ing a mobile phone to turning up the heat- effect creating invisible speakers. speakers used any software at all, it was ing and (early next year) asking The Econo- So why does Devialet, which last year specific to the product. mist for the latest on any given topic. got €100m ($106m) in fresh capital, think it All this started to change with the ad- Similarly, wireless earbuds, such as Ap- can succeed by selling expensive high-end vent of smartphones, which made music ple’s AirPods and The Dash by Bragi, a speakers? The answer is that it wants to be more portable by connecting music- startup, may become so clever that more a platform, too. The speakers are mostly streaming services such as Spotify with and more people will leave them in all day, meant to demonstrate its technology, in wireless speakers. Smartphones have also for instance to monitor their health or for the hope that other companies will inte- given a boost to headphones, which are constant access to a digital assistant. grate it into their products. The first exam- becoming ever more versatile, with fea- Conventional speaker firms are trying ple, launched last month, is a soundbar (a tures now ranging from cancelling out am- to catch up. In September at IFA, a trade slim loudspeaker) it has developed togeth- bient noise to real-time translation. show in Berlin, booths of various makers er with Sky, a broadcaster. “Ifyou see your- These new possibilities have proved were adorned with logos of Amazon or self just as an audio company,” says Quen- hugely popular: the global market for au- Google, signalling that they already have tin Sannié, Devialet’s chief executive, dio devices has rocketed in recent years or will integrate a digital assistant in their “your days are numbered.” 7 (see chart). According to Futuresource, only about 200,000 wireless speakers were sold in 2009; this year the number is expected to be 70m. Headphones have been on a similar tear. Smartspeakers, which were pioneered in 2015 by Amazon with the Echo, will be even more disruptive. Nearly 24m of these devices, essentially voice-controlled re- mote controls foreverything from music to lights, will be sold worldwide in 2017, esti- mates Strategy Analytics, another market researcher—a number it expects to quadru- ple by 2022. Once households have one, they buy more to spread them throughout their homes (apparently nearly a tenth now live in bathrooms). The Economist December 2nd 2017 Business 59 Schumpeter Capitalism for the people

What ifthe unwashed masses got to vote on companies’ strategies? omist, made the case that a firm’s only duty is to its bottom line. That is not as callous as it sounds. Most shareholders have a mix of financial goals and ethical beliefs. The profit-hungry firm can be part of a system that satisfies both their desires. The company creates profits which can then pay forthe “ethical” objectives that a shareholder has: for example, charity donations to help the poor, ortaxes to pay fora government-provided safety net. Unfortunately, asMessrsHartand Zingalespointout, thisdivi- sion of responsibilities does not always work. If a supermarket profits from selling machine guns to the mentally unhinged, for example, there is no action that shareholders can undertake with those profits that can mitigate the ensuing deaths. And if the gov- ernment is too dysfunctional to produce coherent policies, there may be no way to offsetthe externalities—massive job cuts in one town, say—that profit-seeking firms create. So sometimes the only way to maximise shareholders’ over- all welfare maybe forthe firm to lookbeyond profits. The authors argue that some interpretations of American law give boards of directors more room for manoeuvre here than is commonly un- derstood. The next stage is to find out what shareholders want. Technology could help, allowing individuals to vote the shares NGLO-SAXON capitalism has had a bad decade. It is accused held on their behalfby pension trustees and investment funds. Aof stoking inequality and financial instability. A relentless The authors envision shareholders guiding the broad direc- pursuit of shareholder value has led big firms to act in ways that tion of company strategy. They do not elaborate on the details, often seem to make the world a worse place. Aeroplane seats get but imagine 100m Americans pressing a “shareholder democra- smaller, energy firms pollute the air, multinationals outsource cy” app on their phones. Grannies from Grand Rapids and cow- jobs and Silicon Valley firms avoid tax. Some people think that boys from Colorado might vote for Delta Air Lines to provide governments should exert more control over private enterprise. more legroom, Exxon to assume a higher carbon price when it But what if the answer to a deficit of corporate legitimacy was to drills foroil, IBM to move some jobs from Delhi to Detroit and Ap- give shareholders even more—not less—power? ple to paya highertaxrate than itscurrent18%. Itwould be a plebi- That is the intriguing possibility raised by a new paper by Oli- scitary shareholder democracy, more in tune with what many verHartofHarvard Universityand Luigi Zingalesofthe Universi- Americans think, but more dangerous, too. ty of Chicago. Their argument has two parts. First, the concept of There are two big risks. One is that the combined voice oftens shareholder capitalism should be expanded, so that firms seekto of millions of shareholders becomes a meaningless cacophony maximise shareholders’ welfare, not just their wealth. Second, that no board can deal with. As Andrew Carnegie, the 19th-cen- technology might allow firms to make a deeper effort to discover tury Scottish-American tycoon, put it: “Where stock is held by a what their true owners want. Over100m Americans invest in the great number, what is anybody’s business is nobody’s business.” stockmarket, either directly or through funds. It is their money at The other pitfall is that shareholders manage to produce a clear stake, but their views and values are often ignored. enough voice, but that this voice is stupid, fickle or sinister. This is Not long ago mass participation in the stockmarket was held clearly possible, too. Most individuals have little idea about the to be an essential partofa healthymarketeconomy—for ordinary technicalities ofrunning big companies. In the investment world people to backcapitalism, the argument went, lots ofthem had to retail shareholders are often known as “dumb money” because have a direct stake. In the 1960s, individuals directly owned over oftheir tendency to buy high and sell low. 80% of American shares and over 50% of British ones. Margaret Thatcher privatised British firms in the 1980s and used TV cam- Shareholders’ values paigns to sell shares to the public. Her aim was to bring “owner- Just as political democracy only works with checks and balances, ship, capital and independence” to millions ofworkers. the same is true forshareholder democracy. Messrs Hart and Zin- Somewhere along the way this dream has been lost. Most gales suggest that for a proposal to be put to a digital vote by all peoples’ investments are now funnelled through investment shareholders, it would need the support of at least 5% to start managers (individuals directly own only about two-fifths of all with. Another safety mechanism would be to make the votes of shares in America and less than a fifth in Britain). A few giant ordinary shareholders non-binding. Boards would have to note money managers have a dominant voice. America Inc still has them, but would not need to obey. Or people could invest “proxy” votes, where crazy proposals can be made—but these re- through single-issue funds, which are identical to normal funds semble a Potemkin shareholder democracy which is really con- except that they guarantee to pursue a well-defined goal—for trolled by technocrats. Asset managers have defined their mis- firms to pay higher wages, forinstance, or to cut pollution levels. sion as maximising the market value of their clients’ portfolios, Plebiscitary capitalism may seem far-fetched. But the com- and in turn demand that firms maximise profits. pany has evolved continually to deal with pressures that boil up Ever since companies were granted the privilege of limited li- from society over time. More participation by ordinary, individ- ability in the 1850s a debate has raged about their obligations to ual shareholders might be exactly what capitalism now needs to society. In an article published in 1970, Milton Friedman, an econ- restore its reputation. 7 Built for today’s busy professional

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Also in this section 62 Buttonwood: Bitcoin’s many zeros 63 China’s regulatory storm 63 Bankruptcy in India 64 Brazil’s development bank 64 American interest rates 65 Cheesonomics 66 Free exchange: Europe’s boom

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

Regulating European banks restricttradingin securitieson banks’ inter- nal venues and force more derivatives Think of a number hitherto traded “over the counter” onto centralised exchanges. Italso obliges banks to charge clients separately for research, rather than bundle it in with other ser- vices. Some are swallowing the cost; some are cutting analysts. One way or another, the other three Ten years afterthe crisis, Europe’s banks face a glut ofnew rules changes are all about safety. From January OR those oddballs whose hearts sing at may expose customers to fraud and them- banks in Europe (and many other places, Fthe thought of bank regulation, Europe selves to lawsuits. On November 27th the but not America) must apply a new ac- is a pretty good place to be. No fewer than European Commission adopted technical counting standard, IFRS 9, obliging them to five lots of rules are about to come into standards intended to balance competi- make provisions for expected loan losses, force, are near completion or are due for tion and security. Although the directive rather than wait until losses are incurred. overhaul. They will open up European applies from next month, the standards That is likely to knock earnings next year. bankingto more competition, tighten rules may not take effect until September 2019. Most banks surveyed by the European on trading, dent reported profits and boost Banks and their rivals will meanwhile Banking Authority, a supervisor, said they capital requirements. Although they have to rub along. expected profits to become more volatile. should also make Europe’s financial sys- The standards demand that customers The same could happen to lending. tem healthier, bankers—after a decade of supply two out of three types of proof of ever-tightening regulation since the crisis identity before transactions are approved: Floor polished? of2007-08—may be less enthused. something they know (a password or Next, it seems that the last big bit of Basel 3, Start with the extra competition. On code); something they own (a card or a a set of global capital standards revised January 13th the European Union’s updat- phone); and something they are (eg, a fin- after the financial crisis, may finally be ed Payment Services Directive, PSD2, takes gerprint). This approach is already com- complete. Officials had hoped for agree- effect. It sets terms ofengagement between mon, though not universal, online. ment a year ago, but haggling continued. banks, which have had a monopoly on To communicate with payment-ser- The central-bank governors and supervi- customers’ account data and a tight grip on vices providers and account aggregators, sors who approve the standards are due to payments, and others—financial-technol- banks have two options. They may allow hold a press conference in Frankfurton De- ogy companies and rival banks—that are them access through their online customer cember 7th. Surely, they would not bother already muscling in. Payment providers al- interfaces. Or they can build dedicated in- ifthey had nothing to say? low people to pay merchants by direct terfaces into which the newcomers can At issue have been the internal models transferfrom their bank accounts. Account plug their applications. Almost all banks big banks use to calculate risk-weighted as- aggregators pull together data from ac- are expected to choose the latter. To guar- sets (RWAs). The lower the answer, the counts at several banks, so that Europeans antee fairplay, theymusthave a fallback, in higher the ratio of equity to RWAs, a key can see a broad view of their finances in case the dedicated interface fails. gauge of capital strength, and the less equ- one place—and maybe find better deals for While retail banks grapple with PSD2, ity banks need. To limit the discount from insurance, mortgages and so forth. investment banks and asset managers these models, Basel standard-setters pro- The new entrants need not only their have been bracing themselves for MiFID2, poseda floorforthe ratio ofbanks’ RWA es- customers’ permission to take money and the refreshed Markets in Financial Instru- timates to those yielded by a standard ap- data from their accounts but also co-opera- ments Directive, which takes effect on Jan- proach, at first between 60% and 90%. tion from their banks. They worry that uary 3rd. Intended to make financial mar- American negotiators, though their banks banks won’t play fair. Banks, for their part, kets more transparent—and thus, in theory, are little affected, favoured a high floor and have fretted that opening up their systems safer and more competitive—MiFID2 will Europeans a low one or none; the French 1 62 Finance and economics The Economist December 2nd 2017

2 were the most vocal. In October Bloom- European Central Bank (ECB), and a single creation ofnew securities, backed by pools berg reported that negotiators were set- body to deal with insolvent banks, it still of sovereign debt from all euro-area coun- tling on a ratio of72.5%. lacks a single deposit-insurance scheme, tries, to weaken the link between Euro- Assuming the floor is agreed on, it will, chiefly because German taxpayers do not pean banks and national governments. like other Basel rules, be phased in over want to be on the hook for the failings of With all this to worry about—oh, and several years. The fifth and last change to lenders farther south. The commission Brexit—Europe’s bankers may look envi- Europe’s regulatory framework could take hopes that the Germans can be won over, ously westward. American banks and su- every bit as long. On December 6th the by introducing the scheme gradually and pervisors were faster to get their houses in European Commission is due to propose a by tackling the bad loans that still burden order after the crisis, and under President fortification of economic and monetary banks in Italy and elsewhere. Both it and Donald Trump the regulatory tide is turn- union. As part of that effort, in October it the ECB also wantto be firmeron bad loans ing. This week Jerome Powell, Mr Trump’s exhorted governments to complete the in future: the ECB has suggested that banks choice to lead the Federal Reserve, told sen- EU’s half-finished banking union. make full provision for unsecured duds ators that regulation was “tough enough”. Although the euro area now has—belat- after two years and secured ones after sev- By now, Europe’s bankers know better edly—a single supervisor, housed in the en. The commission is also exploring the than to expect much sympathy. 7 Buttonwood A lot of zeros

Investors are piling into an illiquid asset. What can possibly go wrong? OST money these days is electron- and a lot of energy: 275kWh for every Mic—a series of ones and zeros on a Gone up a bit transaction, according to Digiconomist, a computer. So it is rather neat that bitcoin, Bitcoin price, $ website. In total, bitcoin uses as much INTRADAY a privately created electronic currency, PEAK, $11,434 electricitya yearasMorocco, or enough to has lurched from $1,000 to above $10,000 10,000 power 2.8m American households. All this year (see chart), an epic journey to 8,000 this costs much than processing credit- add an extra zero. card transactions via Visa or MasterCard. On the way, the currency has been 6,000 The miners are rewarded for their ef- controversial. Jamie Dimon, the boss of forts by being paid in bitcoin; they are de- JPMorgan Chase, has called it a fraud. 4,000 lighted by the rise in the currency’s price. Nouriel Roubini, an economist, plumped 2,000 But some are finding ingenious ways to for “gigantic speculative bubble”. Ordin- cut back on their energy costs; one even ary investors are being tempted into bit- 0 put computers in his Tesla car so he could coin by its rapid rise—a phenomenon JFMAMJJASON mine bitcoins using its free charging sta- dubbed FOMO (fear of missing out). Both 2017 tions. Much mining is done in parts of the Chicago Mercantile Exchange, Ameri- Source: Thomson Reuters China where electricity is cheap. ca’s largest futures market, and the NAS- There are two ways of thinking about DAQ stockexchange have seemingly add- you had financed your house with a bit- this. One is that the eventual price of bit- ed their imprimaturs by planning to offer coin mortgage.” This year your debt would coin will equal the marginal cost of min- bitcoin-futures contracts. have risen tenfold. Yoursalary,paid in dol- ing, which may be risingbut is well below It is easy to muddle two separate is- lars, euros or whatever, would not have the current price. The second is that insti- sues. One is whether the “blockchain” kept pace. Put another way, had bitcoin tutions will not want to use the technol- technology that underpins bitcoin be- been widely used, the last year might have ogy if it relies on such a “Wild West” pro- comes more widely adopted. Block- been massively deflationary. cess; banks are already looking at cheaper chains, distributed ledgers that record Such issues will be of minor concern to forms ofblockchain technology. transactions securely, may prove very those who managed to buy bitcoin earlier Whether the investors driving the useful in some areas of finance, and be- in the year. They will just be delighted with price higher are pondering all this is open yond. The second is whether bitcoin will the profits. But why has the price risen so to doubt. It looks like a re-run of the dot- become a widely adopted currency in fast? One justification for the existence of com craze. Adverts for trading digital cur- everyday life. Here the evidence is weak. bitcoin is that central banks, via quantita- rencies are appearing on the London tube Bitcoin can be used to buy a few tive easing (QE), are debasing fiat money and celebrities have piled onto the band- things. But a currency has three main and laying the path to hyperinflation. But wagon. As seen many times before, when functions: store of value; means of ex- this seems a very odd moment for that lots of investors buy an illiquid asset, the change; and unit of account. Bitcoin’s vo- view to gain adherents. Inflation remains price can rise exponentially. latility, seen when it fell 20% within min- low and the Federal Reserve is pushing up The top is hard to call. At some point, utes on November 29th before rebound- interest rates and unwinding QE. the urge to turn all those digital zeros into ing, makes it both a nerve-racking store of Amore likely explanation is that as new carsand iPhoneswill prove too great. Get- value and a poor means of exchange. and easier ways to trade in bitcoin become ting out of an illiquid asset—as this week, Imagine buying an iPhone X with bitcoin available, more investors are willing to when exchanges struggled to cope with in January.Youwould by now be cursing take the plunge. As the supply of bitcoin is trading volumes—can be harder than get- as the same coin could buy ten phones— limited by design, that drives up the price. ting into it. Some remember Nathan Roth- Christmas gifts forthe whole family. But it is worth remembering that the schild’s remark about the secret of his A currency is also a unit of account for cost ofusing bitcoin is going up. Each trans- wealth: “I always sold too soon.” debt. Paul Mortimer-Lee of BNP Paribas, a action has to be verified by “miners” who French bank, tartly remarks: “Imagine if need a lot of computing power to do so, Economist.com/blogs/buttonwood The Economist December 2nd 2017 Finance and economics 63

Chinese finance banks. New rules would mean banks Bankruptcy in India could no longer guarantee investors Stormy weather against losses. They would also need to Afterlife price WMPs accordingto theircurrent mar- ket value and do a better job of matching the duration oftheir liabilities and assets. WMP SHANGHAI The market was worth nearly 30trn yuan ($4.5trn) at its peak, or more A regulatory clean-up dents China’s MUMBAI than a third ofChina’s GDP. The draft rules markets, but not yet its economy Grim times fordefaulting tycoons are likely to cause it to shrink and, in so do- T IS is the kind of company that for years ing, to leave banks with less free cash to in- SMOOTH bankruptcy process is akin Iwas a safe bet for investors. China City vest in bonds. Zhang YuofMinsheng Secu- Ato reincarnation: a company at death’s Construction is big, government-owned rities, a local brokerage, notes that banks door gets to shuffle off its old debts, often and focused on building basic infrastruc- have until mid-2019before the rules are en- gain new owners, and start a new life. ture such assewers. Butthe bet, itturns out, forced. But investors are not waiting. They Might the idea catch on in India? A first was not so safe after all. In November Chi- have already started trimming their bond wave of cadaverous firms are seeking re- na City missed interest payments on three holdings, pushing yields higher. birth under a bankruptcy code adopted in separate bonds, after failingto refinance its Another focus for the government has December2016. In a hopeful development, hefty debts. It is one of a growing number been internet microlenders, lightly regulat- tycoons once able to hold on to “their” of victims of the government’s clean-up of ed institutions that often charge exorbitant businesses even as banks got stiffed seem the financial system, or what is known in interest rates. On November 21st officials likely to be forced to cede control. China as the “regulatory storm”. ordered a halt in licence approvals for new India badly needs a fresh approach to The storm has been gathering strength online lenders. They have also sounded insolvent businesses. Its banks’ balance- for the better part of a year but its intensity the alarm about the property market, vow- sheets sag under 8.4trn rupees ($130bn) of over the past couple of weeks has caught ing to stop homebuyers from borrowing loans that will probably not be repaid— many off-guard. The government wasted funds illegally. over 10% of their outstanding loans. But little time after an important Communist The question is how far the govern- foreclosure is fiddly: it currently takes over party meeting in October before taking on ment will go. With the battle against riskso fouryears to process an insolvency, and re- some of the riskier parts of the financial high on the political agenda, few think it covery rates are a lousy 26%. Partly as a re- system. As a result, China’s risk-free inter- will ease. Afinancial-stabilitycommittee, a sult, bankers have often turned a blind eye est rate—ie, the yield on government powerful new body tasked with closing to firms they ought to have foreclosed on. bonds— has shot up. Overall, it has risen by regulatory loopholes, held its inaugural This is bad for the banks and worse for a percentage point since the start of 2017. meeting on November 8th. Zhou Xiao- the economy, which has slowed markedly, For firms, even those closely tied to the chuan, China’sveteran central-bankgover- in part as credit to companies has dried up. state, the rise in borrowing costs has been nor, has spoken on fourseparate occasions The problem festered for years, not least even steeper. The yield on ten-year bonds in the past two months about rising finan- because banks’ reserves of capital were in- issued by China Development Bank, a cial dangers. adequate to cover the losses that would “policybank” thatfinancesstate projects at Yet there are signs of a pushback. Banks have resulted if they had acknowledged home and abroad, has soared to nearly 5%, are said to be lobbying against the most dud loans. And bosses at state-owned the highest in three years (see chart). stringent ofthe proposed WMP rules, argu- banks, where most of the problems lie, Rising interest rates are partly a sign of ing that forced asset sales will only cause feared even sensible agreements to lower strength. An industrial recovery has fu- more serious financial stress. The value of an ailingcompany’sdebtburdenscould be elled a return of inflation after years of bonds in default in November was 9bn painted as cosying up to cronies. sluggish growth, and investors are pricing yuan, a single-month record forChina. The Indian authorities have, in stages, in rate rises from the central bank. But the Officials can afford to allow their regu- removed roadblocks to resolving all this. jump in yields also reflects a bout of ner- latory storm to rage on for now. China is From 2015, banks were forced to acknowl- vousness. The CSI 300 index, which com- still enjoying sunshine: its campaign to edge which loans were “non-performing”, prises shares in the biggest companies list- curb indebtedness is in its early days and having spent years expertly sweeping pro- ed in China, fell by 3% on November 23rd, yet to have much negative impact on eco- blems underthe carpet. Bank-capital levels its largest drop in17months. nomic growth. But the market ructions of are being bolstered (albeit with money The fear—or the hope, depending on the past couple of weeks point to rougher borrowed from the banks themselves). your perspective—is that the government weather ahead. 7 And the infrastructure for the new bank- means business when it talks of cutting ruptcy code, which requires administra- debt. Going into this year, China’s leaders tors to run firms in limbo and a new courts said their economic priority was to control Storm-tossed system, is being created from scratch. financial risks. Debt is the biggest of all, Ten-year bond yields, % Lenders loth to foreclose on welshing having climbed from 160% of GDP to tycoons are being left with no choice; a roughly 260% over the past decade. Much 5 dozen deeply distressed firms were shunt- China Development Bank of it is held off-balance-sheet by banks. So 4 ed into insolvency proceedings by the au- the government’s efforts have had two thorities in June. These account for under aims: to slow the rise in debt and to clarify 3 3% of all loans, but over a quarter of those the full extent ofexisting liabilities. Chinese government in arrears, reckons Ashish Gupta of Credit Its actions, though welcomed by ratings 2 Suisse. All told, nearly 400 companies big agencies, are causing market indigestion. and small are going through the process, The latest worry for investors is the central 1 establishing a first batch ofprecedents. bank’s proposal on November 17th for an To ensure that no side delays proceed- overhaul ofwealth-management products 0 ings, the new code says that ifcreditors and 2015 16 17 (WMPs), deposit-like instruments with rel- borrowers cannot agree on how to revive Source: Wind Info atively high interest rates that are sold by the company within 270 days, its assets 1 64 Finance and economics The Economist December 2nd 2017

2 will be sold for scrap. But the assumption terest rate is also likely to reduce BNDES’s had been that the companies’ “promot- market share and so squeeze its profits, ers”, as India dubs founding shareholders, warns Moody’s, a ratings agency. But the would find a way to stay on. Many were reform has been welcomed by small and planning to bid for their old assets in auc- medium-sized firms. Brazil’s central bank tions few thought they would lose, given is currently forced to set Selic at an artifi- the mass ofinside information they hold. cially high level to offset the impact of The government has now banned any BNDES’ssubsidised rate on the widerecon- defaulting promoters from bidding, which omy. By “making all credit in the economy means they will lose “their” companies to sensitive to the central bank”, monetary new owners. This is a startling reversal of policy will become more effective, argues fortunes for a clique of businessmen who Arthur Carvalho of Morgan Stanley. So have held on to companies through multi- borrowing costs should come down for plepastrestructurings, and whose number companies too small to tap BNDES (the includes some of corporate India’s gran- bank does not currently offer loans of less dest names. An appeal seems inevitable; than 20m reais). or a workaround, such as getting a friendly The reform is an important advance in third party to bid on behalfofthe old own- Brazil’s government’s efforts to bring pub- ers (though this is specifically banned). lic spending and the fiscal deficit under Critics fret that excluding promoters control. But it does not go nearly far will mean banks will get less money for enough in reducing the deficit. The coun- the foreclosed assets, and so increase the try’s overgenerous, unaffordable pension bail-out burden that will ultimately fall on system costs 13% of GDP. Without reform, the public purse. Some entrepreneurs fail Lula spots an Anglo-Saxon public spending on pensions could reach a for forgivable reasons—in industries such fifth of GDP by 2060, when the number of as steel, commodity-price swings can up- economy rebounded with GDP growth of over-65s is projected to increase from 17m end even well-managed firms. But often 7.5% in 2010. But the stimulus outlived the now to 58m. Hopes that a pension reform promoters regard loan repayment as op- recovery, at an increasing cost to the tax- could pass Congress were high until May, tional. The blanket ban on all of them may payer. Between 2009 and 2016 subsidies when Michel Temer, Brazil’s president, be- seem blunt. But it is a price worth paying to from the Treasury to BNDES totalled 116bn came embroiled in a corruption scandal. level a pitch that has long been queered in reais ($48bn). Brazil’s big firms became Efforts to revive it have so far come to the tycoons’ favour. No longer, says a bank- hooked on cheap credit. Some have faced naught. ReformingBNDES is overdue. But it er: “I have never seen anything like it. All allegations that they obtained the loans will take even more belt-tightening to put the promoters are scared to death.” 7 fraudulently. One, a meatpacking firm the country on a firm financial footing. 7 called JBS, borrowed 8.1bn reais from BNDES; it went on a spending spree, buy- Brazil’s development bank ing meat producers in America, Australia American interest rates and Europe, and became the world’s larg- A new year’s est meatpacker. BNDES ballooned, too. It Yielding insight now accounts for15% oftotal lending to the resolution private sector; its balance-sheet is as big as the World Bank’s. But times have changed. Brazil is emerg- SÃO PAULO WASHINGTON, DC ing only slowly from its worst-ever reces- A supersized state development bankis sion, having lost its status as an invest- A flattening yield curve weakens the put on a diet ment-grade sovereign borrower in 2015. Its case forhigherinterest rates N 2009, as Brazil was buffeted by the glo- public finances are enfeebled: last year it ENTRAL bankers may control short- Ibal financial crisis, its president, Luiz Iná- recorded a gross fiscal deficit (ie, including C term interest rates, but long-term ones cio Lula da Silva, was seething. The mess, debt service) of 8.9% of GDP. Government are mostly free to wander. They do not al- he complained, was the fault of“blue-eyed subsidies are on the chopping block. ways behave. When Alan Greenspan, then white people, who previously seemed to BNDES currently lends at a small margin chairman of the Federal Reserve, was rais- know everything, and now demonstrate over the cost of its funds from the Trea- ing short rates in 2005, he described a si- they know nothing at all”. For him the cri- sury—a rate called the TJLP, which is set multaneous decline in long rates as a “co- sis was a repudiation ofAnglo-Saxon liber- low by the National Monetary Council, a nundrum”. His successor-to-be, Ben alism and a vindication ofstate capitalism. body composed of the central-bank gover- Bernanke, blamed foreign investments in Like many countries, Brazil cut interest nor and the finance and planning minis- American assets because of a “global sav- rates and increased spending. Unlike ters. In September Brazil’s Congress decid- ing glut”. many other governments, however, Bra- ed to replace this rate with a new one, Janet Yellen, today’s (outgoing) Fed zil’s used its state development bank, known as the TLP, which will be set chair,faces a similarpuzzle. Ms Yellen’s Fed BNDES, to funnel subsidised credit to Bra- monthly by the central bank and indexed has raised rates twice this year, and will zil’s largest companies. Thanks to cheap to five-year government bonds. The new probably make it three times in December. loans from the Treasury, the bank doubled rate will be introduced on January 1st and In Octoberthe Fed began to reverse quanti- its lending, which reached a peakof4.3% of will be phased in over five years. This tative easing (QE), purchases of financial GDP in 2010. For most loans the interest could save Brazil’s Treasury 0.25% of GDP a assets with newly created money. Despite rates were halfthe level ofSelic, the central year, predicts Neil Shearing of Capital Eco- all this monetary tightening, yields on ten- bank’s benchmark. nomics, a research firm. year Treasury bonds have fallen from The plan worked, for a while. Brazil Not everyone is cheering. BNDES’s cus- around 2.5% at the start of 2017 to about emerged from the crisis relatively un- tomers complain that their cost of capital 2.3% today. As a result, the “yield curve” is scathed: after a short recession in 2009 the will go up, threatening jobs. Raising the in- flattening. The difference between ten-1 The Economist December 2nd 2017 Finance and economics 65

Cheesonomics Flirting with inverting United States, government-bond spreads, Curd your enthusiasm ten-year over two-year Percentage points 3 When it comes to trade barriers, cheese takes the biscuit 2 EN SKAILES, a British cheesemaker, is World Cheese Awards, held in London 1 busy as Christmas ripens demand for on November17th (MrSkailes’s Stilton + B 0 his Stilton. Foreigners make up a third of won a gold medal), needed special li- – demand for his dairy, Cropwell Bishop cences forsome non-EU cheeses, which 1 Creamery. This exporting achievement is had to be burnt after the prize-giving. 2 not to be sniffed atwhen one considers In theory, standards encourage trade, RECESSIONS the barriers to the cheese trade. by building trust forforeign products. In 3 197680 85 90 95 2000 05 10 17 Some are natural. Perishable food practice, they often do not. A recent study Source: Federal Reserve Bank of St. Louis goes better with wine than long jour- forthe Vienna Institute forInternational neys. At least Mr Skailes’s Stilton can Economic Studies estimated that where survive the three-weektrip to America. they applied to cheese, technical barriers, flation is unexpectedly high, long-term (His is best eaten within16 weeks.) Softer such as labelling requirements, lowered bondholders’ returns are reduced, and cheeses struggle, giving American pro- trade volumes by 6.7%. Sanitary and they cannot profit from the rising short- ducers an advantage. phytosanitary measures, imposed on term rates that an inflation surprise typi- Other hurdles are man-made. Tariffs health grounds, lowered them by 7.3%. cally provokes. So part of the term pre- and quotas are supposed to support Some rules are designed to stop im- mium is compensation for inflation risk. domestic dairy industries, and are more itation cheeses. Tryto export Brie to Falling inflation risk might explain to- onerous than in other sectors. The Euro- France, or Gorgonzola to Italy,and you day’s droopy yield curve, according to a re- pean Union protects its dairy industry will meet more lawyers than cheese- centnote byMichael Bauerofthe San Fran- with a 34% average duty,compared with mongers. Stilton has this protection. cisco Fed. Price rises have been oddly an overall average of5%. In America it is Under European law,only six dairies in subdued thisyear. Despite unemployment 17%,compared with 3.5%. Stilton escapes Derbyshire, Leicestershire and Notting- fallingto just4.1%, inflation (excluding food American quotas, but full “loaves” are hamshire produce officially recognised and energy prices) is only 1.3% by the Fed’s taxed at a12.8% rate, or17%ifthey arrive Blue Stilton. That is one rule that protects preferred measure. Inflation expectations, sliced. (Unprocessed foods tend to enjoy Mr Skailes’ slice ofthe market. as measured by surveys of forecasters, lower tariffs, to lure in jobs.) The high have not fallen. But investors may increas- level ofprotection means that dairy inglysee the main riskastoo little inflation, disputes often loom large in trade deals, rather than too much. If so, the inflation- as governments scrabble for more access. risk premium should have fallen, and Then come technical barriers to trade. could even turn negative. Rules vary everywhere, with different Ms Yellen seems sympathetic to such paperworkand labelling requirements. arguments. But they are not all that com- South African labels must have a larger forting. The Fed’s justification for tighter typeface. In America, best-before dates monetary policy, in spite of low inflation, put month and day in a different order is the risk of a sudden surge in wages and from the British norm. Somerdale Inter- prices. This risk should increase as unem- national, an export agent, helps Cropwell ployment falls. If bond markets are signal- Bishop navigate the maze. ling that the risk is in fact declining, that Some rules are justified on safety seems to contradict rate-setters’ thinking. grounds. Ifsomeone gets sick, the au- Other than inflation risk, the term pre- thorities want to know where to lay the mium is a catch-all foranything that affects blame. America, forone, requires wads yields. It is poorly understood. QE, for ex- ofpaperworkshowing where each ingre- ample, is supposed to have worked by dient comes from. Fall foul oflocal rules compressing the term premium. Mr Ber- and a cheese can be barred altogether. nanke’ssavingglutmayhave had the same Earlier this year China forweeks blocked effect. Both factors may still pertain. The all imports ofStilton, Roquefort, Brie and Fed’s balance-sheet has not shrunk much Camembert on health grounds. The Slicely does it yet. And in recent months, Asian countries have been accumulating large holdings of foreign-exchange reserves. American 2 year and two-year interest rates is at its his counterpart at the Philadelphia Fed, yields are low, but above those in Europe, lowest since November 2007 (see chart). warned in November that inverting the Japan and Britain, and maybe a magnet for The yield curve matters. It has invert- yield curve would “not be a good thing”. the world’s savings. (That said, the dollar ed—ie, long-term rates have dipped below As the Fed watches the market, so trad- has fallen by about 6.5% this year on a short-term ones—just before each of the ers study the Fed. The yield curve reflects trade-weighted basis.) past seven American recessions. Such an where markets expect its policy to head— The likeliest explanation fora flattening inversion remains a longway off, but some which they might be better able to predict yield curve, however, is the simplest: mar- rate-setters seem wary of the risk. In Octo- than central bankers themselves. But long- kets are losing confidence in the Fed’s abili- ber, Robert Kaplan, president of the Dallas term rates also include the “term pre- ty to raise rates without inflation sagging. Fed, said he did not want the federal-funds mium”—the reward investors require for Given how often the markets have been rate to nudge up against the ten-year Trea- locking their money away, and for taking right and the central bank wrong, rate-set- sury-bond yield. Likewise, Patrick Harker, the risk that their forecasts are wrong. If in- ters would be wise to tread carefully. 7 66 Finance and economics The Economist December 2nd 2017 Free exchange The second chance

Europe’s boom will not last; it had bettermake the most ofit HAT does not kill me makes me stronger,” wrote Nietz- threatened to liberate euro-area economies from the discipline “Wsche in “Götzen-Dämmerung”, or “Twilight ofthe Idols”. imposed by markets. European leaders, and Germany in particu- Alternatively, it leaves the body dangerously weakened, as did lar, sought to enforce sobriety through other means. The emer- the illnessesthatplagued the German philosopherall his life. The gency-lending programmes negotiated with the most belea- euro area survived a hellish decade, and is now enjoying an un- guered economies exacted hefty budget cuts as the price. All likely boom. The OECD, a club of mostly rich countries, reckons members were bound by a “fiscal compact” that euro-zone lead- that the euro zone will have grown faster in 2017 than America, ers signed up to in 2012. It urged member states to keep deficits Britain or Japan. But, sadly, although the currency bloc has un- within set limits, balance budgets over the long run, and adopt doubtedly proven more resilient than many economists expect- plans to reduce government debt to no more than 60% of GDP. ed, it is only a little better equipped to survive its next recession Adherence has been incomplete, but the short-term impact was than it was the previous one. that public borrowing fell sharply across the euro area between Europe’s crisis was brutal. Euro-area GDP is roughly €1.4trn 2012 and 2016, prolonging the pain ofthe crisis. ($1.7trn)—an Italy, give or take—below the level it would have European leaders still argue over how to meet the currency reached had it grown at 2% per year since 2007. Parts of the peri- zone’s macroeconomic needs. Emmanuel Macron, the French phery have yet to regain the output levels they enjoyed a decade president, favours reforms that would allow for a euro-area bud- ago (see chart). The damage was exacerbated by deep flaws with- get large enough to cushion the economy against shocks, and a in Europe’s monetary union. Three shortcomings loomed partic- finance minister to oversee it. Realistically, such mechanisms are ularly large. First, the union centralised money-creation but left years away from agreement, let alone implementation. national governments responsible for their own fiscal solvency. So markets came to understand that governments could no lon- Euro-Dämmerung ger bail themselves out by printing money to pay off creditors. Happily,Europe’s recovery did not wait forsuch reforms, but that The risk of default made markets panic in response to bad news, makes them no less essential. The euro-area rebound, in its early pushing up government borrowing costs and adding to financial years, relied on exports. Crisis and austerity gutted domestic strains. In 2012 the European Central Bank (ECB) stepped in, de- spending, and led to wage-depressing levels of unemployment. claring that to keep control of its monetary policy it was willing, So troubled euro-area economies began selling much more as a last resort, to buy government bonds. Panic subsided, bond abroad than they were buying; foreign consumers, in effect, yields dropped and the most acute phase ofthe crisis ended. threw the desperate periphery a lifeline. Strong global growth But the euro-area economy continued to languish in or near still helps European exporters, but other factors add to economic recession through 2014 because of the second flaw. During seri- momentum. The severest budget-cutting is over. And falling un- ous economic downturns, central banks usually cut interest rates employmentisbuoyingconsumerspending—particularlyin Ger- to encourage new borrowing and investing, and governments many,where the boom has been longest and strongest. swing into action by running larger budget deficits to make up for Growth workswonders.Abiggertaxtake makesdeficit-reduc- falls in private spending. When the financial crisis first hit, the tion easier; hiring and consumer spending feed on each other. So ECB, like other rich-world central banks, cut its rates to near zero; long as moderate oil prices and strong global growth continue, governments cut taxes and spent freely. Yet the euro area was to Europe’s economic health will improve. Unfortunately, such tail- face unique difficulties. The ECB was constrained by its man- winds cannot last forever. The third and gravestthreat to the long- date—a 2% inflation ceiling (as opposed to the 2% target common run survival ofthe euro area endures: the mismatch between the elsewhere)—and the influence of the inflation-averse German scope ofits economic institutions and its political ones. Bundesbank. Not until deflation threatened could the ECB begin No European institution enjoysthe democraticlegitimacy ofa stimulative asset purchases, long after other central banks. national government. Crisis drove European institutional reform Governments were unable to compensate for this monetary- in areassuch asbanksupervision, butalso concentrated powerin policy inertia. The ECB’s promise to buy government bonds unelected institutions like the ECB—even though the fiscal com- pact was negotiated by heads ofgovernment. Without new polit- ical institutions (which, in fairness, he also wants in the form of a A hole as big as Italy If GDP had grown euro-zone parliament), Mr Macron’s euro-area budget and fi- GDP, % change 2007-16 at 2% a year nance ministry would seem like more ofthe same. The euro area is in a political bind. Among the legacies of its 30 20 10– 0+ 10 20 crisis are nationalist parties across the continent, rooted in anger United States Germany at pain seemingly inflicted by unaccountable European politi- Belgium cians. Any move towards greater European integration lends cre- Austria dence to their warnings oflost sovereignty. But failure to agree on Netherlands such measures raises the odds that the next downturn will be a Euro area bad one, which would also play into nationalists’ hands. France A decade of pain cost Europe its ability to sell integration as a Spain force forprosperity.Ifit does not use its current good fortune to re- Finland model itself, the interlude will come to be seen in retrospect not Portugal as a moment of triumph, but as a last, missed opportunity to Italy build a euro zone that can survive. 7 Greece Sources: Bureau of Economic Analysis; Eurostat Economist.com/blogs/freeexchange Property 67

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Commercial aviation Also in this section The electric-flight plan 70 Glaciers and volcanoes 71 Six-base DNA 71 The war on malaria 72 Breathalysing disease 72 Smarter pothole-fixing Electrifying aircraftis tricky. But companies are getting serious about trying LECTRIC cars are clean, quiet and, it cently abandoned the project. unlike a jet directly propelling a plane, it Eseems, the way of the future. Tesla, an The reason forthat became clear on No- would be highly fuel-efficient. American firm that has done much to help vember 28th, when Airbus announced Flight tests are due to begin in 2020. If electric cars shed their museli-munching something more ambitious. It has teamed they are successful, a second engine on the image, is struggling to meet demand for its up with Rolls-Royce, a British jet-engine aircraft will be replaced. The results, the mid-market Model 3 (though that has not producer, and Siemens, a German electri- team hope, will provide enough data to de- stopped it announcing plans to build elec- cals group, to convert a small airliner into a sign a full-on hybrid-electric airliner with tric lorries as well). Volvo, a Swedish car- “flying test bed” to prove the feasibility of 50-100 seats from scratch. Such a plane maker, has said that, from 2019, all its cars hybrid-electric propulsion. “We are enter- might enter service in 2030 or so. will be at least part-electric. Volkswagen ing a new world of aviation,” said Frank Other planes could be in the air before has plans to offerbattery options across all Anton, head of Siemens eAircraft. Electric then. Zunum Aero, a startup based near Se- of its brands; General Motors has made power, he predicted, would prove to be as attle, hopes to have its 12-seat hybrid-elec- similar noises. Some countries, including significant to commercial aviation as the tric airliner ready to fly its first passengers China, Britain and France, are mooting invention ofthe jet engine. by 2022, helped along by investment from bans on internal-combustion vehicles, to Boeing, an American aerospace giant, and take effect within a couple ofdecades. Insufficient, currently JetBlue, a successful airline. Not all forms of transport are so easy to The general viewin the industryisthat bat- Such aircraft will, their designers hope, electrify. One of the hardest is aviation, tery technology is not yet up to building serve as bridges to fully electric planes in where battery power runs up against a se- fully-electric airliners. But just as hybrid ar- the future. Overcoming the weight pro- rious problem: weight. Kilo-for-kilo, fossil rangements help to extend the range of blem will be tricky. For big planes flying fuels contain roughly 100 times as much some electric cars, so hybrid systems will long-haul routes, full electrification may energy as a lithium-ion battery. On the bring electric aircraft closer to take-off. never happen, although hybrid systems road, that is a problem which can be de- The Airbus team plans to modify a BAE would reduce their fuel consumption. But signed around. For a machine that must lift 146, which is a 100-seat regional airliner design changes can help. Airbus, for in- itselfinto the sky, it is much harder to solve. powered by four conventional jet engines stance, thinks it can blend its electric mo- But it is not impossible. Dozens of firms (see illustration above). The first step will tors into the aircraft’s fuselage to reduce are working on electrically powered be to replace one of those engines with a drag. And electric power offers some ad- planesofall shapesand sizes. Some resem- 2MW electric unit, consisting of a fan con- vantages that offset its big drawback. One ble flying cars, such as those which Larry tained in a shroud. Aswith a hybrid car, the is that combustion engines are not very ef- Page, one of Google’s founders, is backing. fan will be powered by a combination of a ficient at turning the energy in their fuel Others are hovering, drone-like machines battery and a range-extender, in the form into motion. Instead, a great deal of it ends that could operate as autonomous aerial ofa small jet engine mounted in the rear of up wasted as heat. A jet engine might man- taxis (Uber is keen on these). Pipistrel, a the fuselage and hooked up to a generator. age around 55% efficiency during a steady Slovenian company, already makes a two- This range extender can be switched on cruise atthe ideal altitude. Butthat number seaterelectric trainingplane. Another two- during parts of the flight to power the fans could fall by half or more when taking off, seater, the E-fan, hasbeen flown by Airbus, or to top up the battery. Because it can be climbing, landing and taxiing on the a European aviation giant, although it re- run at its most efficient speed all the time, ground, which iswhataircraftthatfly short1 70 Science and technology The Economist December 2nd 2017

550kph (340mph) and have a range of Volcanology and glaciology about 1,130km (700 miles). Like the Airbus machine, it would use a single small jet en- Less ice, more fire gine in the rear fuselage to run a generator that could power the plane’s two 500kW fansand top up the batteries, which will be Why shrinking glaciers could mean more volcanic eruptions mounted in the wings and designed to be T THE end ofthe last ice age, around volcanoes found its way to Europe, and swapped in for fresh ones after landing. A11,700 years ago, Earth’s climate when the sediment record from Iceland This way, at some airports, the turnaround began warming rapidly.As the planet suggests that no major eruptions took time could be as low as ten minutes. heated up, its vast glaciers fell back. Al- place. When Dr Swindles compared the The aircraft’s range, says Dr Kumar, most immediately afterwards (in geologi- volcanic record with the climate liter- should increase over time. For batteries cal terms, at least) volcanic activity ature, he found that the absence of erup- have another advantage over fossil fuels: surged. That was nothing new.The geo- tions was preceded by a big change in as a relatively underdeveloped technol- logical record has plenty ofevidence of atmospheric circulation patterns about ogy, they still have plenty of room left for big glacial retreats that are followed by 6,100 years ago. That would have encour- improvement. As production ramps up, more frequent volcanic eruptions. Gla- aged Iceland’s glaciers to advance. When led by the car and electronics industries, ciers, in other words, seem to suppress conditions changed again a thousand battery capacities are increasingand prices volcanoes, which, by the same token, years later, this time to favour glacial are falling. flourish in their absence. retreat, volcanic activity picked up after a This week, for instance, Samsung Elec- This, at least, is the case for really big few hundred years. tronics, a big South Korean firm, said that climatic swings. What has been less clear Based upon these findings, Dr Swin- by incorporating graphene—an ultra-thin is whether more modest changes in ice dles argues that even minor increases form ofcarbon—into a lithium-ion battery, cover might also affect the rate of erup- and decreases in glacier cover probably ithad managed to boostitsenergycapacity tions. Given that humans are busy warm- do affect volcanic activity,albeit with a by 45% and greatly decrease the time need- ing the planet, and therefore shrinking time lag ofperhaps five or six hundred ed for a recharge. Many other new battery the few,relatively puny glaciers that still years. The modern world is already chemistries are being developed. One pro- exist, this question matters. It would be recovering from its own miniature glacia- mising idea is a solid-state lithium battery, good to know ifmore volcanic eruptions tion, the “Little Ice Age”, which lasted which replaces the liquid electrolyte of might be another consequence ofglobal from about1500to1850. Combine that current cells with a solid substitute. Be- warming. In a paper just published in with yet more glacial melt, caused this sides offering much higher energy densi- Geology, Graeme Swindles, a geographer time by human-driven warming, and the ties, such batteries should also be cheap to at the University ofLeeds, suggests that it centuries ahead may be noticeably fierier mass produce. Those trends, thinks Dr Ku- will—eventually. than those ofthe recent past. mar, would allow his aircraft to increase its The fine details ofhow glaciers are range to around 2,400km by 2035, and per- linked to volcanic eruptions are un- haps even ditch the on-board generator. known. But volcanologists theorise that Combining all these benefits and draw- pressure is key.The idea is that the weight backs into a single figure is tricky. Paul Ere- oflarge ice sheets compresses the crust menko, Airbus’s chief technology officer, and mantle below.That closes up chan- says a single-aisle hybrid electric airliner nels within the rockthrough which mag- would be “safe, efficient and cost-effec- ma travels towards the surface. It also tive”. Zunum’s Dr Kumar is prepared to go leaves less room forsurface water to further and talk numbers. For airlines, the make its way down into the rocks, where, important figure is the CASM—cost per as steam, it can increase the pressure available seat mile. This is obtained by di- within magma chambers. Remove the viding operating costs by capacity, mea- ice, by contrast, and those processes go sured as the number of seats in an aircraft into reverse. multiplied by miles flown. Zunum claims Dr Swindles and his colleagues stud- that its plane will have a CASM of 8 cents. ied layers ofash from Icelandic volca- Oliver Wyman, a firm of aviation analysts, noes that were deposited over Iceland reckons that the average for American air- and northern Europe during the relative- lines in 2016 was11cents. ly mild period since the end ofthe ice age, And like electric cars, electric aircraft as well as volcanic sediments from Ice- would offer other benefits that are worth land itself.Their analysis revealed an having, but harder to quantify. They would unusual period between 5,500 and 4,500 be quieter than jet-powered planes, which years ago when no ash from Icelandic Hot to trot may be attractive for airports near big cit- ies. They would be cleaner too, and be- come more so as more electricity is pro- 2 routes spend much oftheir time doing. in aviation. duced from low-carbon sources. Sceptics An electric motor can do much better. Those are all reasons why Zunum plans doubt the weight problem can ever be The latest models are more than 95% effi- to focus, at least at first, on relatively short properly overcome; cynics suspect that cient, so the batteries that power them routes, where the efficiency gains from these projects are motivated by PR. But few would not need to match the energy densi- electric motors are most significant. The people predictedthe pace of electrification ty ofjet fuel. Electric motors are also lighter idea, saysAshish Kumar, the firm’schiefex- in other areas. If electric aircraft can offer than jet engines, which helps offset some ecutive, is to serve the hundreds of small faster door-to-door journeys avoiding of the weight disadvantage. And they con- American airports that have been left be- crowded hub airports and provide cheap- tain far fewer parts, which means they re- hind as flights have shifted to bigger hubs. er fares at the same time, then air travellers quire less maintenance, which is a big cost The firm’s aircraft will cruise at around will be happy forthe sparks to fly. 7 The Economist December 2nd 2017 Science and technology 71

Synthetic biology method could be used to make new drugs, polymers or catalysts. Life is a six-letter To make their bug, the researchers had to find molecules that could serve as their word artificial bases. The four natural bases in DNA pair up in a specific way: guanine binds to cytosine and adenine to thymine. Double-stranded DNA is held together by A lab-grown bacterium features two the interactions between thousands of new letters in its genetic alphabet bases pairing up with their partners on the LL life on Earth uses the same four opposite strand. The binding rules mean Achemical letters, known as bases, to that when the strands separate during cell store genetic information in the form of division it is possible to construct new DNA. Three bases form a codon, a genetic copies of the DNA using the existing “word” that represents one of 20 natural strands as templates. The team screened amino acids. Astringofcodonscan be read thousands of molecules to find two that by the machinery inside cells and turned would pair up and be copied as faithfully into long chains of amino acids. These as natural ones. chains fold up into proteins, which carry They then inserted into their bacterium out many of the innumerable jobs neces- a gene (made from the fourstandard bases) sary forlife. that encodes a transport protein (found in Earlier this year Floyd Romesberg ofthe Phaeodactylum tricornutum, an alga), Scripps Research Institute in La Jolla, Cali- which allows the bacterium to ship the fornia, and his colleagues unveiled an en- new bases across its cell wall. In earlier Four become six gineered organism that does things rather work, the scientists showed that their engi- differently. Their bacterium stores infor- neered bug can incorporate the two artifi- bosome and attach it in the correct place. mation using a six-letter genetic alphabet cial bases into its genome, and will happily At one end of this molecule is a triplet of comprising the four usual bases (A, G, C copy DNA strandscontainingthem when it bases that allow it to recognise a particular and T, or adenine, guanine, cytosine and reproduces. codon. Its cargo is attached to the other. thymine) plus two artificial ones called Three more steps were necessary,how- The cell’s tRNAs had to be modified to re- NaM and TPT3. ever, before the bacterium could actually cognise the novel codons. And the en- In a paper published this week in Na- produce the new proteins encoded by its zymes that load amino acids onto pieces of ture, Dr Romesberg and his colleagues go a novel bases. To make proteins, cells first tRNA also needed tweaking, to be able to step further, by describing how they have transcribe a piece ofDNA into anotherlong cope with the unnatural amino acids that coaxed their bacterium into making pro- polymer called messenger RNA (mRNA). are the ultimate point ofthe exercise. teins containing amino acids that are not As its name suggests, this is the stuff that To demonstrate that all this had worked found in nature. Each unnatural amino carries production instructions to the ribo- as planned, the team instructed their bac- acid to be inserted is represented by a nov- somes, the cellular factories where pro- terium to make a modified version of el codon that includes one of the team’s teins are assembled. The team thus needed green fluorescent protein (GFP). That is a synthetic bases. In other words, their bac- to make mRNA versions of the two syn- molecule found naturally in jellyfish, but terium can quite happily read an entirely thetic DNA bases. which isnowwidelyused to tagother mol- new, human-created extension to the stan- Once messenger RNA arrives at the ri- ecules for study since, as its name suggests, dard genetic code, and use the instructions bosome, yet another chemical, called it fluoresces under the right sort of light. In to produce proteins that no organism natu- transferRNA (tRNA), gets involved. Its job is their first experiment, they showed that an rally makes. The hope is that one day this to carry the required amino acid to the ri- unnatural codon (specifically A-NaM-C) could be used to insert a single molecule of serine, a natural amino acid, into GFP. In two further experiments they tried insert- The war on malaria ing first one, and then another, artificial MALARIA has been a scourge for most of the insecticides used for IRS. This helps amino acid into GFP. The artificial amino history. In recent years, a good deal of suppress the evolution of insecticide-resis- acids they used resembled natural ones progress has been made against the dis- tance in mosquitoes. But it often means but carried an additional chemical group, ease. But, as the World Malaria Report replacing conventional pyrethroid insecti- which allowed the researchers to identify 2017,published on November 29th by the cides with more expensive alternatives, them. In both cases, they found that more World Health Organisation, explains, that which some people cannot afford. than 95% of the protein produced by the progress seems to be tailing off. The rea- bacteria contained the synthetic building son is unclear. Fingers are, however, being Global malaria deaths*, ’000 blockin question. pointed at a decline in a technique known 800 As a next step Dr Romesberg hopes to as indoor residual spraying (IRS). This extend the bacterium’sgeneticvocabulary. involves coating the interior walls of 600 The two new bases mean 152 more codons buildings in malaria-prone areas with are available to represent non-natural ami- insecticide, to kill mosquitoes that land on 400 no acids. Proteins made with synthetic in- them. The report says that the proportion gredients should be more easily tailored to Number of cases* of people at risk of malaria who are pro- 200 have desirable therapeutic properties (to tected by IRS has fallen from 5.8% in 2010 231m 216m be longer lasting, for example, or more to 2.9% in 2016. Again, it is unclear why. It 0 powerful) than the natural sort. Synthorx, may be an unintended consequence of the 2000 05 10 15 16 a biotech firm based in La Jolla which Dr sensible policy of rotating, over the years, Source: WHO *Estimated Romesberg founded in 2014, was set up to explore exactly such possibilities. 7 72 Science and technology The Economist December 2nd 2017

Medical diagnosis Repairing roads Follow your nose A hole in one

Potholes are the latest problem to be felledby sensors and algorithms N THE grand scheme ofthings, pot- innovation officer, describes, the city is A new gadget that sniffs a patient’s holes may seem like a trivial problem. using a mix ofsensors and computer breath fordiseases I But tell that to the many mayors and local algorithms to workout where potholes IPPOCRATES, the father of medicine, politicians whose success is judged by are most likely to form. Mr Bennett reck- Hwas known to have used smell as an their ability to keep roads free of them. ons his new system can anticipate pot- aid to his work. Generations ofdoctors fol- One such, Alfonse D’Amato, an Ameri- holes with a success rate ofabout 85%. lowed suit. Syphilis, for instance, is can politician, was nicknamed “Senator Having a list oflikely trouble spots means thought to have a characteristic odour; the Pothole” by his grateful constituents. less need to spend money on surveil- smell of rotting apples suggests diabetes. Most potholes start as small cracks in lance, which allows the city’s road-main- Today, things are more sophisticated. All a road’s surface, which allow water to tenance budget to stretch about 30% sortsofvolatile organiccompounds(gases, seep in. In winter, when the water furtherthan before. known asVOCs, thatare given offby living freezes, it expands, widening the crack. If Kansas City’s innovation was borne organisms) have been identified, in labora- the water repeatedly thaws and refreezes, ofnecessity,says Mr Bennett. Like many tories, as markers of specific diseases from the hole can grow quickly,especially cities, it is strapped forcash. Its road- breast cancer to cholera. A paper reported since cars will worsen the damage as maintenance budget is enough to repair on a “breathprint” formalaria earlierin the they drive over it. Small potholes are a about 4% ofthe city’s 6,400 miles of month. But despite all this knowledge, a nuisance; big ones can damage cars, and roads each year, but that is farshort ofthe “breathalyser for disease” has stubbornly even cause fatal accidents. roughly10% that actually need fixing. So, failed to materialise. Better, then, to fix them while they are in collaboration with Xaqt, a small firm The barrier, as so often with new diag- still small. In practice, that is tricky.In based in Chicago, Mr Bennett put cam- nostic tools, is not whether such things are America, forinstance, both state and eras onto traffic-light poles and buried technically possible, but whether they can federal governments find potholes by pressure sensors into the road across the be proven to work reliably and usefully manuallyexamining video footage ofthe 51city blocks with the heaviest volume of when used by doctors. Owlstone Medical, country’s 4.12m miles ofroads. That is traffic. Xaqt combines data from those based in Cambridge, thinks it has devel- both expensive and laborious. Officials sensors with meteorological information oped just such a gadget. Its breath analyser in Kansas City have come up with a such as temperature, precipitation and is the subject of several big trials. One, better idea. As Bob Bennett, its chief the like. That stew ofdata is seasoned called LuCID, is recruiting 4,000 patients furtherwith information such as the date across Europe to develop a test forthe early on which the road was last repaired, the detection of lung cancer—a disease that is type ofasphalt used, whether the road often diagnosed too late to treat. Another, lies on a bus route, and whether it has in collaboration with the Warwickshire proved prone to potholes in the past. The NHS Trust, is attempting the detection of scheme has been so successful that Mr early-stage colorectal cancer in 1,400 peo- Bennett hopes to extend the sensors and ple (existing screening methods are suc- the statistical model to the entire city. cessful only 9% of the time). Cancer Re- The next step is to combine such search UK, a charity, is evaluating the systems with data provided by cars breathalyser for early detection of a laun- themselves. A number offirms, including dry list of other cancers (specifically blad- Ford and Jaguar Land Rover, are devel- der, breast, head and neck, kidney, oesoph- oping ways ofusing forward-facing ageal, pancreatic, prostate and brain). cameras (which are increasingly com- Noris it just cancer. Owlstone has sever- mon on new cars) to detect potholes, in al deals with drug firms. One, signed on order to adjust the car’s suspension be- November 27th with GlaxoSmithKline, fore it hits them. Given that such cars will aims to use the breathalyser to see which also be connected to the internet, they patients are responding to treatment for could pass such data on to local highway- chronic obstructive pulmonary disease. A maintenance departments. Senator smaller firm called 4D Pharma is using the Pothole retired in1999. Automation may device to find out more about a patient’s Holey grail do his successors out ofa job. microbiome—the legions of bacterial hangers-on which every person carries—in order to match drugs to diseases. oscillating electric field. The result is a many diseases whose symptoms take time One reason Owlstone’s device has gen- chemical fingerprint, or “breath biopsy”, to develop. Doctors in Britain are experi- erated such interest is that it has a docu- with no chemicals, needles or reagents menting with offering CT scans to super- mented record. The basic technology has necessary. market shoppers with a history of smok- been in use for many years, detecting The details are, inevitably, trickier. For ing, who are therefore likelier than most to chemical warfare agents for military cus- one thing, everyone’s breath is different, so be harbouring undetected lung cancer. But tomers. In the medical version, breath is the device must weed out such natural va- CT scans are expensive, and deliver a sub- exhaled across a sensor which ionises the riation if it is to reliably identify the tell- stantial slug of radiation. Breath biopsies VOCs, causing them to gain an electric tales of sickness. But if the trials are suc- are cheap, and free ofrisk. Ifthey can prove charge. The molecules are then sorted ac- cessful, the benefits could be big. their worth, they will be a breath of fresh cording to how fast they move through an Widespread screening could help spot air fordiagnostics. 7 Books and arts The Economist December 2nd 2017 73

Also in this section 74 Women and Boko Haram 74 German fiction 75 America’s economy 75 Gabriel Kahane’s music 76 Johnson: The BuzzFeed generation

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Islamic State had better luck. After dark, she ran into a poorneighbourhood ofMosul and banged Captive of the caliphate on a door more or less at random. The Sun- ni Arab family inside made a split-second decision to help her, despite knowing that it might cost them their lives. They bought a fake identity card for her and smuggled her out of Mosul in a taxi, with Ms Murad Nadia Murad’s courageous account ofhertime as a sexslave ofIslamic State is posing as the wife of one of their sons. At horrific and essential reading one roadblock, she saw her picture hang- HIS is a disturbing book. Many readers ingthere—a “wanted” posterfora runaway The Last Girl: My Story of Captivity, and will find parts ofit hard to stomach. But slave. However, she was wearing a niqab, T My Fight against the Islamic State. By anyone who wants to understand the so- and the jihadists at the checkpoint were re- Nadia Murad and Jenna Krajeski. Tim called Islamic State (IS) should read it. The luctant to insult a fellow Sunni Arab by Duggan Books; 306 pages; $27. Virago; £18.99 jihadists who until recently controlled making his wife expose her face, so she much of Iraq and Syria hit on a recruiting was not recognised. technique that was as crude as it was inge- nority that the jihadists particularly de- She escaped to Kirkuk, and thereafter to nious. They urged their fighters to capture spised. They thought it their duty to exter- Germany. She now tours the world bear- and keep sex slaves—and convinced them minate this ancient faith through murder ing witness to IS’s barbarity, and urging the to feel virtuous about it. and forced conversion. International Criminal Court to prosecute Nadia Murad was one of those slaves. its leaders for the attempted genocide of Jihadists came to her village in Iraq and “You’re my fourth sabiyya [slave],” [the her people. slaughtered all the adult men and the judge told Ms Murad]. “The other three are There is hope in Ms Murad’s story. The Muslim now. I did that for them. Yazidis are caliphate has failed. In recent months its women they deemed too old to rape. The infidels—that’s why we are doing this. It’s to victims included Ms Murad’s brothers and help you.” After he finished talking, he or- fighters have been driven from most of the probably her mother—she is still not sure. dered me to undress. territory and all the major population cen- Ms Murad, then 21years old, was taken to a tres they once controlled. Their vision and slave market in Mosul. (“When the first Readerswill find the jihadists’ reasoningas methods were so ghastly that many of man entered the room, all the girls started baffling as it is odious. On the one hand, those they expected to support them de- screaming.”) the judge said he was allowed to enslave cided not to. In one telling example, Ms She was sold to a judge, a thin, soft-spo- Ms Murad because she was not a Muslim. Murad says her sister-in-law escaped from ken man whose job was to have people ex- On the other hand, he forced her to “con- slaverybecause hercaptor’swife waswea- ecuted for trifling offences. He raped her vert” to Islam—ie, he ordered her to recite ry of his abuse of Yazidi girls and called an every day, and beat her when he was dis- the shahada, the Muslim profession of American air strike down on him. pleased with the way she cleaned the faith, ordie—and then he continued to treat Yet it is hard to be cheerful. Ms Murad is house, or when he had had a hard day at her as a slave anyway. He told her that it alive, but many of her family are not. Her work, or when she kept her eyes closed was pointless to escape, because her male young nephew, who was captured and while he was raping her. relatives would kill her forno longer being brainwashed by IS, used to call and threat- Even as he inflicted grotesque cruelties a virgin, and forhaving converted. en her. The Yazidis have set aside their own on her, he explained that what he was do- Ms Murad tried to escape anyway. The traditions and welcomed back thousands ing was just and righteous. IS had pub- first time, she was immediately caught. of young women who are no longer vir- lished rules explicitly stating that captured The judge punished her by letting his gins. But the jihadists have set a horrifying infidels were property and could be raped guards gang-rape her. Then he sold her to precedent: that zealots can raise an army with a clear conscience. Ms Murad was a another jihadist. by telling young men that their most sav- Yazidi, a member of a small religious mi- She escaped again, and this time she age impulses are holy. 7 74 Books and arts The Economist December 2nd 2017

Women and Boko Haram have been female, many of them girls co- German fiction erced or brainwashed into their missions. Both sides of the Hilary Matfess, a doctoral candidate at Ayearinthe YaleUniversity,adeptly dismantles stereo- coin types and myths in her new book, “Wom- madhouse en and the Waron Boko Haram”. That war has displaced up to 2.1m people and killed more than 30,000 since 2011. Not all the Women and the War on Boko Haram: Wives, Insane. By Rainald Goetz. Translated by women involved are victims. Many decid- Weapons, Witnesses. By Hilary Matfess. Zed Adrian Nathan West. Fitzcarraldo Editions; ed to marry into the group, often against Books; 288 pages; $24.95 and £14.99 352 pages; £12.99. To be published in their parents’ wishes. In a region where America in May 2018; $20 N APRIL 14th 2014, militants from just 4% ofgirls finish secondary school and OBoko Haram, a group of Islamic ex- many women do back-breaking farm EFORE Rainald Goetz became a writer, tremists, snatched 276 schoolgirls from work, life as a stay-at-home Boko Haram B he trained as a doctor and worked in a theirdormitoriesin north-eastNigeria. The wife receiving Quranic education can ap- mental hospital. His first novel, “Insane”, taking of the “Chibok Girls”, as they be- peal. “There was100% better treatment un- published in Germany in 1983 but only came known, was unplanned (the insur- der Boko Haram,” a commander’s wife now translated into English, draws on this gents had reportedly meant to grab food who had been “rescued” by the army told experience. Raspe, the novel’s hero, is Mr and a brickmaking machine). But the heist Ms Matfess. “There were more gifts, better Goetz’s alter ego—an idealistic, ambitious catapulted a little-known conflict to inter- food and a lotofsexthatI alwaysenjoyed.” young doctor starting his career on a psy- national attention. The #BringBackOur- Uncommonly for an armed group, chiatric ward in Munich. Soon disgusted Girls campaign led by the girls’ parents and Boko Haram’s leaders purportedly forbid by his failure to help his patients and by his activists had the resonance needed to go their soldiers to commit rape, outside of inability, in his hunger for success, to with- viral: young, innocent and mostly Chris- marriage at least, so many women have stand the dehumanising logic of the place, tian girls forced to convert to Islam by viol- been forced to wed their captors. But here Raspe himself descends into madness. He ent jihadists. Boko Haram knew the girls’ Ms Matfess provides valuable context: escapes, idealism shattered, by taking an propaganda power too. A video it released more than half of women in northern Ni- unspecified job in “culture” and throwing in 2014 showed more than 100 swathed in geria marry by the age of 16, and marital himselfinto Munich’s punk-era nightlife. gloomy hijabs, chanting prayers. rape is not illegal. The novel is split into three parts: a col- The Chibok Girls became symbols in Meanwhile, women escaping the jiha- lage of the rambling voices of the book’s other ways. Some escaped, others were let dists have often fared no better. Nigerian characters; an account of Raspe’s year in go after negotiations and more than 100 soldiers burn villages cleared of Boko Ha- the “madhouse”; and a section on his life are still captives. Those escapees given ram (ostensibly to stop looting), and have after psychiatry. The second, with its un- scholarships to study in America were been accused of killing men and forcing sparing depiction of the grim conditions made by their benefactors to talkendlessly women to become their wives. Camps for and inhumane treatment of patients on about their abduction for fundraising ap- those displaced by the war are rife with the ward, is the strongest. Raspe walks into peals. The kidnap also allowed Nigeria’s abuse, with repeated reports ofrape. work to find “WallsFloorsWindowsTables incompetent army to strut as heroes on a Ms Matfess is best when weaving the …smeared blackwith shit” bya patient. He rescue mission (though the army has not stories of women with analysis of Boko agrees to “lend” a colleague one of his pa- directly rescued any ofthe girls). Haram and Nigeria’s gender politics. But tients fora lecture. Raspe ends up watching Italso obscured a much biggerproblem. her argument for “gender-sensitive pro- in horror as the man, reduced to “nothing More than 2,000 women were abducted gramming” in the humanitarian response more than a pair ofhouse shoes” by his de- by Boko Haram between the beginning of feels less than equal to the enormous task. pression, is subjected to the “merciless 2014 and spring 2015, according to Amnes- Nonetheless, hers is a welcome contribu- booming penetrating word thunder” of ty International, and many more since. A tion to a narrative that has been domin- the professor and the “silently flashing majority of Boko Haram suicide-bombers ated by oversimplified symbolism. 7 gazes” ofhis students. Adrian Nathan West has managed an impressive translation of Mr Goetz’s voice—a relentless staccato that can border on the manic, such as when a patient ob- sessed with counting goes through endless thought-loops: “argument, then counter, then counter-counter, counter, counter- counter, counter-counter-counter”. This language accounts for a lot of what makesthe bookstickin the mind. The story loses momentum as Raspe quits his job to driftaround the cultural scene ofthe 1980s. The digs at German intellectuals, which made Mr Goetz notorious at the time, now lookparochial. But his eloquent depictions of human misery, and his frustration with the seemingly impossible task of helping those who appear beyond help, continue to resonate. After all, mental-health provi- sion is still inadequate everywhere, and nobody has yet found an answer to the question that drives Raspe to madness: Some of the luckier ones got away “Who even knows how to live?” 7 The Economist December 2nd 2017 Books and arts 75

created by rent-seeking. To an economist, a American music rent is excess, undeserved income result- ing from barriers to competition. All too of- Railway therapy ten rents are the result of successful at- tempts by firms to rig the rules of the marketplace in their favour. Rent-seeking seems to have grown worse in recent de- cades. America’s economy is not just Gabriel Kahane’s post-election travels weaker and less equal than it used to be; it around America inspired a song series is also less dynamic. Profits have grown and become more concentrated, indicat- LANES are practical, buses are cheap ing a lack of competitive vibrancy. Of the Pand cars grant freedom. But trains are firms that enjoyed returns on invested cap- forromance. AcenturyafterAmerica’srail- ital of 25% or more in 2003, 85% were still way heyday, the country’s ageing trains earning returns that high a decade later. still enjoy an anachronistic glamour. Few The authors put forward fourcase stud- people are immune to the charms ofa slug- ies to illustrate the choking spread of rent- gish, traffic-free chug across states, with the seeking behaviour. Implicit and explicit countryside unfurling panoramically. At a government subsidies to the financial in- dark or uncertain time for the country, a dustry enrich bankers and sow the seeds long rail journey from one coast to the oth- ofcrisis, forexample, buthave done little to er may even inspire some patriotism. America’s economy boost growth. Increasingly strong intellec- Such thoughts helped spur Gabriel Ka- tual-property protections have not un- hane, a 36-year-old singer-songwriter, to How to get it back leashed a torrent ofnew ideas, but have in- take to the rails the morning after the presi- stead swelled the earnings of top firms, dential election last November. Feeling which wield their patents and copyrights “increasingly imprisoned by my own digi- menacingly at would-be innovators. The tally curated liberal silo”, he was eager to cost to negotiate reams of licence agree- leave behind his mobile phone and spend ments, and the risk of lawsuits, can stymie time with the kinds ofAmericans he never The Captured Economy: How the Powerful the mostdetermined ofentrepreneurs. An- meets while shopping for quinoa in his Enrich Themselves, Slow Down Growth, and alyses of occupational licensing and land- Brooklyn enclave. Mr Kahane ultimately Increase Inequality. By Brink Lindsey and use rules turn up similarly skewed poli- spoke with between 80 and 90 people Steven Teles. Oxford University Press; 232 cies: they benefit those already on top at over the course of his two-week, 8,980- pages; $24.95. To be published in Britain in the expense ofsociety as a whole. mile trip , during which he slept and ate on December; £16.99 To loosen the grip ofthe rent-seekers re- the train. The effect, he says, was therapeu- ITY the Washington wonk at this mo- quires a more deliberative politics. Narrow tic, “a kind ofsalve”. It also made possible a Pment. America’s political dysfunction interests triumph in part because the kind of cross-cultural engagement that he looks forbiddingly irreparable, its govern- windfall they enjoy from their politicking is sure he will never have again. ment implacably hostile to expertise. gives them ever more incentive to organise When Mr Kahane began his journey, he Amid the gloom, some scholarsstill look to and to press theircase publicly. The costs of had already written 15 or16 songs for a fol- chart a course towards a healthier politics. bad policy are, in contrast, spread across low-up to his critically acclaimed album “The Captured Economy”, by Brink Lind- the public at large, making it harder for from 2014, “The Ambassador”. But he sey and Steven Teles, sketches a plausible them to organise. As a result, leaders often found himself casting these tracks aside in route out of the wilderness, albeit one that hear only one side ofthe policy story. favour of new songs about his trip and the may struggle to find an audience in the cor- Philanthropy could help fix this, Messrs people he had met. “I’m glad that I did the ridors ofpower. Lindsey and Teles argue, as efforts to re- dumb career thing and kept writing,” he Their book is in part a blueprint for po- form environmental and educational poli- says. These works now make up “8980: litical realignment. For roughly a decade cy show: in these cases passionate cam- BookofTravelers”, a series Mr Kahane will 1 now Mr Lindsey, who is vice-president of paigners made headway in the face of the Niskanen Centre, a think-tank, and Mr powerful political interests. But even bet- Teles, a professor of political science at ter would be to “give government back its Johns Hopkins University, have sought to brain”. Since 1980, cost-cutting has shrunk nurture understanding between conserva- congressional staffsand government infor- tives of a free-market orientation and pro- mation agencies like the Congressional Re- gressives. Their book is a guide for mem- search Service. As a result, legislators have bers of this “liberaltarian” tribe. Co- come to rely ever more heavily on research operation between Republicans and and analysis produced by interest groups. Democrats is frustrated by their quite dif- America’s government should invest in a ferentviewsofthe role ofgovernment. The well-paid, qualified civil-research bu- leftsees the state as a means to reduce mar- reaucracy, which could provide a neutral ket inequities, while the right sees govern- benchmark against which industry claims ment redistribution as a growth-sapping could be judged. anchor. Yet America’s economy is now im- It is an attractive, pragmatic proposal. paired by policies which both reduce Sadly, America’s current leadership has lit- growth and increase inequality. There is tle regard for government experts, and has scope to satisfy left and right alike, if only indeed worked to undermine bastions of politicians could see beyond the battle independent analysis. There is a risk that lines ofpartisan conflict. America’s institutional rot is too far The authors focus on policy failures advanced formere deliberation to help. 7 He’s come to look for America 76 Books and arts The Economist December 2nd 2017

2 perform in a premiere at the Brooklyn hane, his piano and some video hood or a cross or a tree”). “Model Trains Academy ofMusic from November30th to projections ofhis route as seen from a train (Shannon & Michael)” is about a man who December 2nd. His one-man show will window. Offering observations and recol- becomesremote and unfamiliarto hiswife then travel to Los Angeles, Michigan and lections between songs, Mr Kahane and children after a sudden and incapaci- Paris in 2018, and he will release an accom- shapes this series into a larger narrative tating accident. What might sound sche- panying album in the spring. about travel and discovery—“about cross- matic instead feels poetic. Mr Kahane’s Mr Kahane’s work is hard to classify. A ing over into the unknown”. mosaic of stories reveals a country that is charismatic performer, he is equally at One song, “Baltimore (Jason)”, is about far more complex than the binary catego- ease in hipster bars and Carnegie Hall. His a soldier who returns home to pay his re- ries ofthe Twittersphere let on. classical training (his father, Jeffrey Ka- spects to an old friend who has just died. “The failure on both sides feels like a hane, is a pianist and conductor) lends an Another, “The Dining Car (Monica)”, is failure to listen,” he says. The new project is inventive lushness to his compositions, about a black woman who is taking the meant as a corrective. “My hope is that au- which he layers with writerly lyrics deliv- train to Tupelo because her two sons did diences will empathise with these charac- ered with a disarming emotional authen- not want her to drive overnight through ters, particularly with those they don’t ticity. For this performance it is just Mr Ka- Mississippi (“Cause they don’t need a thinkthey should be empathisingwith.” 7 Johnson Buzzy and effervescent

Young people online may lookas though they write without rules. They don’t MG, the kids and the internet are you might think. On figurative “literally”, Oruining the English language, ami- 39% vote “nooooo”, 40% vote “a little rite? The sentiment is so common that it overused, but…not a disaster or any- hardly bears a reply, except maybe “meh”. thing” and just 21% “no problem!” There is certainly plenty of terrible writ- To some traditionalists this may be ing on the internet, plagued by indifferent surprising. Doesn’t the modern era mean spelling, punctuation and grammar and a no rules at all? Hardly. Language still has lack of any attention to clarity. There is rules, and Buzzfeed’s writers, editors and also lot of brilliant writing online. It is dif- readers care about them. It is simply that ficult to prove that digital technologies are the rules are more variable, and changing actually making people into worse writ- faster, than many people realise. The kids ers. It is likely that the world is just seeing hardly capitalise or punctuate in their text more unfiltered thoughts written down messages, but when they write forschool than at any other time in history. People (or for publication) they know without a are not writing worse so much as writing rap on the knucklesthatdifferentrules ap- and publishing far more. ply. And Ms Favilla is there to enforce But the internet is changing language. those rules for BuzzFeed, alongside how Words, phrases and new ways of playing to spell, punctuate and capitalise with grammar are coming and going fast- “yaaass”, “cray-cray” and “Bernie Bros” er than ever before. Older generations (lookthem up, ifyou must). have been complaining about the state of Curmudgeons would dismiss these as young people’s writing since a teacher of hardly real words, much less deserving of Sumerian complained about his charges make traditionalists cringe: “A world… a style entry. But the point is that the lan- 4,000 years ago. (“A junior scribe...does without whom is the place I’d like to spend guage of the young is not random or care- not pay attention to the scribal art.”) But my golden years, baskingin the sun, nary a less. (Ms Favilla is particularly obsessive language really is changing at a dizzying subjunctive mood in sight, figurative liter- about hyphens and dashes; being called rate today, thanks to the speed with allys and comma splices frolicking about.” Emmy, she even has a tattoo of the proof- which innovations spread online. (The Economist disagrees on all counts.) reader’s mark for an em-dash behind her This makes a book about language in The book goes on in this vein, ranking the ear.) Young people want to be clear and the internet age a dicey proposition. It standard punctuation marks from 13 to 1, entertaining, just like anyone else. Ms Fa- risks becoming dated in the lag between BuzzFeed-style. (The apostrophe, “just villa knows that readers can abandon writing and the time the book hits the kinda basic”, is in last place and the excla- BuzzFeed any time they like if the writing shelves. It also probably makes for a short mation mark at number 1.) The pages are is no good. It is just that what they find shelf-life. But Emmy Favilla has nonethe- peppered with “lol” and emoji. good will often perplex their elders. less written “A World Without ‘Whom’” This may be all the proof some people Take “Latinx”—a replacement for the about her experiences as copy-chief of need to conclude that the internet and the masculine “Latino”, and purportedly an BuzzFeed. Famous for celebrity news, youth are going to be the death of English. improvement on the earlier “Latin@”, quizzes and listicles (“39 Pretty Gross And yet through the bulk of the book, Ms which cleverly combined “Latino” and Things All Couples Feel *Slightly* Guilty Favilla does something surprising: she of- “Latina”, but which reinforced the notion About”), BuzzFeed has also got into seri- fers guidance, opinions and very often, that there are only two genders. Writers ous news, hiring its editor-in-chief from hard and fast rules about language. She fre- aiming for a classic style can reject this— Politico and breaking political stories. But quently cites Buzzfeed’s own language like so many other BuzzFeed-era neolo- cleverly distracting clickbait remains its polls, in which tens of thousands of read- gisms—as ugly or unnecessary. But they stock-in-trade. ers enjoy expressing their linguistic views. cannot say that the young people simply Ms Favilla’s opening paragraph will Those readers are more conservative than don’t care. Courses 77

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The Economist December 2nd 2017 79

The Economist December 2nd 2017 80 Economic and financial indicators The Economist December 2nd 2017

Economic data % change on year ago Budget Interest Industrial Current-account balance balance rates, % Gross domestic product production Consumer prices Unemployment latest 12 % of GDP % of GDP 10-year gov't Currency units, per $ latest qtr* 2017† latest latest 2017† rate, % months, $bn 2017† 2017† bonds, latest Nov 29th year ago United States +2.3 Q3 +3.3 +2.2 +2.9 Oct +2.0 Oct +2.0 4.1 Oct -460.9 Q2 -2.5 -3.5 2.33 - - China +6.8 Q3 +7.0 +6.8 +6.2 Oct +1.9 Oct +1.6 4.0 Q3§ +118.2 Q3 +1.4 -4.3 3.90§§ 6.60 6.89 Japan +1.7 Q3 +1.4 +1.5 +5.9 Oct +0.7 Sep +0.5 2.8 Sep +194.4 Sep +3.6 -4.5 0.04 112 113 Britain +1.5 Q3 +1.6 +1.5 +2.6 Sep +3.0 Oct +2.7 4.3 Aug†† -128.9 Q2 -3.8 -3.3 1.31 0.75 0.80 Canada +3.7 Q2 +4.5 +2.9 +5.6 Aug +1.4 Oct +1.6 6.3 Oct -45.0 Q2 -2.9 -1.7 1.88 1.29 1.34 Euro area +2.5 Q3 +2.5 +2.2 +3.3 Sep +1.4 Oct +1.5 8.9 Sep +386.9 Sep +3.1 -1.3 0.38 0.84 0.94 Austria +2.6 Q2 +0.4 +2.5 +3.7 Sep +2.2 Oct +2.0 5.6 Sep +6.1 Q2 +2.2 -1.0 0.48 0.84 0.94 Belgium +1.7 Q3 +1.2 +1.7 +5.9 Sep +2.1 Nov +2.2 7.1 Sep -5.3 Jun -0.4 -2.0 0.62 0.84 0.94 France +2.2 Q3 +2.2 +1.7 +3.2 Sep +1.1 Oct +1.1 9.7 Sep -26.0 Sep -1.2 -2.9 0.67 0.84 0.94 Germany +2.8 Q3 +3.3 +2.2 +3.5 Sep +1.8 Nov +1.7 3.6 Sep‡ +278.1 Sep +7.1 +0.6 0.38 0.84 0.94 Greece +0.7 Q2 +2.2 +1.0 +2.4 Sep +0.7 Oct +1.1 20.6 Aug -0.8 Sep -0.6 -0.8 5.38 0.84 0.94 Italy +1.8 Q3 +1.9 +1.5 +2.4 Sep +1.0 Oct +1.3 11.1 Sep +52.1 Sep +2.3 -2.3 1.80 0.84 0.94 Netherlands +3.0 Q3 +1.8 +2.9 +5.2 Sep +1.3 Oct +1.3 5.4 Oct +76.0 Q2 +9.6 +0.6 0.45 0.84 0.94 Spain +3.1 Q3 +3.2 +3.1 +0.3 Sep +1.6 Nov +2.0 16.7 Sep +23.1 Aug +1.3 -3.3 1.45 0.84 0.94 Czech Republic +3.4 Q2 +2.0 +4.5 +4.4 Sep +2.9 Oct +2.5 2.7 Sep‡ +1.7 Q2 +0.7 -0.1 1.76 21.5 25.5 Denmark +1.9 Q2 -1.2 +2.4 +1.2 Sep +1.5 Oct +1.2 4.4 Sep +27.0 Sep +8.1 -0.6 0.45 6.28 7.01 Norway +3.2 Q3 +3.0 +2.1 +10.5 Sep +1.2 Oct +2.0 4.0 Sep‡‡ +16.6 Q2 +5.3 +5.2 1.55 8.23 8.55 Poland +4.6 Q2 +4.5 +4.6 +12.3 Oct +2.1 Oct +1.9 6.6 Oct§ -0.4 Sep -0.3 -3.3 3.34 3.55 4.18 Russia +1.8 Q3 na +1.8 -0.1 Oct +2.7 Oct +3.9 5.1 Oct§ +36.9 Q3 +2.4 -2.1 8.13 58.5 65.4 Sweden +2.9 Q3 +3.1 +3.1 +4.5 Sep +1.7 Oct +1.8 6.3 Oct§ +22.5 Q2 +4.6 +0.9 0.70 8.36 9.20 Switzerland +0.3 Q2 +1.1 +0.8 +8.7 Q3 +0.7 Oct +0.5 3.1 Oct +68.9 Q2 +9.9 +0.7 -0.07 0.98 1.01 Turkey +5.1 Q2 na +5.0 +13.4 Sep +11.9 Oct +10.8 10.6 Aug§ -39.3 Sep -4.7 -2.1 12.66 3.96 3.41 Australia +1.8 Q2 +3.3 +2.4 +0.8 Q2 +1.8 Q3 +2.0 5.4 Oct -21.8 Q2 -1.3 -1.7 2.47 1.32 1.34 Hong Kong +3.6 Q3 +2.0 +3.1 +0.4 Q2 +1.5 Oct +1.6 3.0 Oct‡‡ +15.2 Q2 +5.6 +1.7 1.83 7.81 7.76 India +5.7 Q2 +4.1 +6.6 +3.8 Sep +3.6 Oct +3.5 5.0 2015 -29.2 Q2 -1.4 -3.1 7.03 64.4 68.7 Indonesia +5.1 Q3 na +5.1 +7.8 Sep +3.6 Oct +3.9 5.5 Q3§ -13.3 Q3 -1.6 -2.8 6.55 13,503 13,573 Malaysia +6.2 Q3 na +5.5 +4.7 Sep +3.7 Oct +3.9 3.4 Sep§ +9.2 Q3 +2.5 -3.0 3.96 4.08 4.47 Pakistan +5.7 2017** na +5.7 +2.6 Sep +3.8 Oct +3.9 5.9 2015 -14.5 Q3 -4.5 -5.9 7.93††† 105 105 Philippines +6.9 Q3 +5.3 +6.6 -3.8 Sep +3.5 Oct +3.2 5.6 Q3§ -0.8 Jun -0.2 -2.7 5.56 50.3 49.7 Singapore +5.2 Q3 +8.8 +2.9 +14.6 Oct +0.4 Oct +0.6 2.1 Q3 +57.4 Q3 +19.6 -1.0 2.12 1.35 1.43 South Korea +3.6 Q3 +5.8 +2.9 -5.9 Oct +1.8 Oct +2.0 3.2 Oct§ +87.3 Sep +4.3 +0.8 2.48 1,077 1,169 Taiwan +3.1 Q3 +6.8 +2.5 +2.8 Oct -0.3 Oct +0.6 3.7 Oct +74.1 Q3 +13.5 -0.1 0.99 30.0 31.8 Thailand +4.3 Q3 +4.0 +3.5 +4.2 Sep +0.9 Oct +0.5 1.2 Sep§ +46.9 Q3 +11.3 -2.5 2.35 32.5 35.7 Argentina +2.7 Q2 +2.8 +2.7 -2.5 Oct +22.9 Oct +25.1 8.7 Q2§ -19.7 Q2 -3.7 -6.3 5.38 17.4 15.6 Brazil +0.3 Q2 +1.0 +0.7 +2.5 Sep +2.7 Oct +3.4 12.4 Sep§ -9.6 Oct -1.0 -8.0 9.11 3.21 3.41 Chile +2.2 Q3 +6.0 +1.4 +5.0 Oct +1.9 Oct +2.1 6.7 Sep§‡‡ -4.6 Q3 -1.7 -2.8 4.60 643 674 Colombia +2.0 Q3 +3.2 +1.7 -1.9 Sep +4.0 Oct +4.3 9.2 Sep§ -12.4 Q2 -3.7 -3.3 6.45 3,004 3,166 Mexico +1.5 Q3 -1.2 +2.1 -1.2 Sep +6.4 Oct +5.9 3.4 Oct -16.1 Q3 -1.9 -1.9 7.26 18.5 20.6 Venezuela -8.8 Q4~ -6.2 -9.5 +0.8 Sep na +886 7.3 Apr§ -17.8 Q3~ -0.8 -19.4 8.24 10.3 10.0 Egypt +4.9 Q2 na +4.2 +15.6 Sep +30.8 Oct +26.8 11.9 Q3§ -15.6 Q2 -6.4 -10.8 na 17.7 18.0 Israel +2.1 Q3 +4.1 +3.6 +3.2 Sep +0.2 Oct +0.3 4.2 Oct +10.7 Q2 +3.1 -1.3 1.78 3.51 3.84 Saudi Arabia +1.7 2016 na -0.7 na -0.2 Oct -0.3 5.6 2016 +7.0 Q2 +2.5 -7.2 3.68 3.75 3.75 South Africa +1.1 Q2 +2.5 +1.1 -0.6 Sep +4.8 Oct +4.7 27.7 Q3§ -7.9 Q2 -0.5 -3.9 9.31 13.7 14.0 Source: Haver Analytics. *% change on previous quarter, annual rate. †The Economist poll or Economist Intelligence Unit estimate/forecast. §Not seasonally adjusted. ‡New series. ~2014 **Year ending June. ††Latest 3 months. ‡‡3-month moving average. §§5-year yield. †††Dollar-denominated bonds. The Economist December 2nd 2017 Economic and financial indicators 81

Markets % change on Commodity prices $ terms, January 12th 2016=100 Dec 30th 2016 The Economist’s commodity-price index 160 Index one in local in $ has risen by 20% from an almost seven- Nov 29th week currency terms Metals United States (DJIA) year low in January 2016. Soaring metal 23,940.7 +1.8 +21.1 +21.1 prices have pushed up the index, despite 150 China (SSEA) 3,495.7 -2.7 +7.6 +13.3 Non-food agriculturals Japan (Nikkei 225) 22,597.2 +0.3 +18.2 +23.2 an oversupply of nickel earlier this year. 140 Britain (FTSE 100) 7,393.6 -0.3 +3.5 +12.3 Policy changes in China explain much of Canada (S&P TSX) 15,967.7 -0.7 +4.4 +9.0 the rise. In an attempt to curb pollution, Euro area (FTSE Euro 100) 1,230.8 +0.7 +10.7 +24.4 Chinese authorities have imposed pro- 130 Euro area (EURO STOXX 50) 3,589.9 +0.8 +9.1 +22.6 duction cuts which have helped increase Austria (ATX) 3,330.9 +0.4 +27.2 +42.9 the price of aluminium (the largest single 120 Belgium (Bel 20) 3,999.4 +0.8 +10.9 +24.6 weight in our index). The price of copper All items France (CAC 40) 5,398.1 +0.8 +11.0 +24.7 has also risen this year in response to Germany (DAX)* 110 13,061.9 +0.4 +13.8 +27.8 supply disruptions in Indonesia and Greece (Athex Comp) 738.3 +2.5 +14.7 +28.9 Chile. Food prices have stagnated, how- Food Italy (FTSE/MIB) 22,325.9 nil +16.1 +30.4 100 Netherlands (AEX) 541.4 +0.3 +12.1 +25.9 ever, owing to a glut of wheat and oil- Spain (Madrid SE) 1,038.5 +2.5 +10.1 +23.7 seeds. The stock-to-use ratio for wheat, a 90 Czech Republic (PX) 1,053.0 +0.6 +14.3 +36.1 measure of inventories, is forecast to 2016 2017 Denmark (OMXCB) 905.5 -0.6 +13.4 +27.3 exceed 36% this season, a 30-year high. Source: The Economist Hungary (BUX) 38,819.3 -3.3 +21.3 +35.0 Norway (OSEAX) 884.5 -1.1 +15.7 +21.0 Poland (WIG) 62,962.3 -1.6 +21.7 +43.3 Other markets The Economist commodity-price index Russia (RTS, $ terms) 2005=100 1,144.7 -1.2 -0.7 -0.7 % change on % change on Sweden (OMXS30) 1,618.7 +0.1 +6.7 +15.9 Dec 30th 2016 one one Switzerland (SMI) 9,304.4 +0.1 +13.2 +16.9 Nov 21st Nov 28th* Index one in local in $ month year Turkey (BIST) 102,341.8 -3.4 +31.0 +16.3 Nov 29th week currency terms Dollar Index Australia (All Ord.) 6,096.1 +0.5 +6.6 +12.2 United States (S&P 500) 2,626.1 +1.1 +17.3 +17.3 All Items 147.1 146.8 -0.6 +0.7 Hong Kong (Hang Seng) 29,623.8 -1.3 +34.7 +33.7 United States (NAScomp) 6,824.4 -0.6 +26.8 +26.8 Food 150.6 149.9 -0.2 -4.8 India (BSE) 33,602.8 +0.1 +26.2 +33.1 China (SSEB, $ terms) 341.5 -0.8 -0.1 -0.1 Indonesia (JSX) 6,061.4 -0.1 +14.4 +14.2 Japan (Topix) 1,786.2 +0.5 +17.6 +22.6 Industrials Malaysia (KLSE) 1,720.4 -0.2 +4.8 +15.2 Europe (FTSEurofirst 300) 1,526.1 +0.3 +6.8 +20.0 All 143.4 143.6 -0.9 +7.4 Pakistan (KSE) 39,672.9 -2.3 -17.0 -17.9 World, dev'd (MSCI) 2,066.6 +0.8 +18.0 +18.0 Nfa† 131.2 131.2 -0.1 -2.9 Singapore (STI) 3,439.0 +0.3 +19.4 +28.0 Emerging markets (MSCI) 1,146.5 -0.9 +33.0 +33.0 Metals 148.7 149.0 -1.2 +11.9 South Korea (KOSPI) 2,512.9 -1.1 +24.0 +39.1 World, all (MSCI) 504.5 +0.6 +19.6 +19.6 Sterling Index Taiwan (TWI) 10,713.6 -1.0 +15.8 +24.4 World bonds (Citigroup) 948.7 +0.2 +7.3 +7.3 All items 202.2 201.8 -0.2 -5.5 Thailand (SET) 1,705.3 -0.5 +10.5 +21.7 EMBI+ (JPMorgan) 833.7 +0.4 +8.0 +8.0 Euro Index Argentina (MERV) 26,902.9 -1.6 +59.0 +44.5 Hedge funds (HFRX) 1,264.3§ -0.1 +5.1 +5.1 Brazil (BVSP) 72,700.5 -2.4 +20.7 +22.2 Volatility, US (VIX) 10.4 +9.9 +14.0 (levels) All items 156.0 153.8 -2.4 -10.2 Chile (IGPA) 25,216.6 -2.3 +21.6 +26.7 CDSs, Eur (iTRAXX)† 49.0 -0.1 -32.1 -23.7 Gold Colombia (IGBC) † 10,806.6 -0.7 +6.9 +6.8 CDSs, N Am (CDX) 52.5 nil -22.6 -22.6 $ per oz 1,282.5 1,294.4 +2.0 +9.1 Mexico (IPC) 47,646.5 -1.1 +4.4 +16.2 Carbon trading (EU ETS) € 7.7 +4.6 +17.2 +31.6 West Texas Intermediate Venezuela (IBC) 1,167.2 +67.6 -96.3 na Sources: IHS Markit; Thomson Reuters. *Total return index. $ per barrel 56.8 58.0 +6.6 +28.2 Egypt (EGX 30) 14,582.2 +5.4 +18.1 +20.8 †Credit-default-swap spreads, basis points. §Nov 27th. Israel (TA-125) 1,324.2 +1.7 +3.7 +13.7 Sources: Bloomberg; CME Group; Cotlook; Darmenn & Curl; FT; ICCO; Saudi Arabia (Tadawul) Indicators for more countries and additional ICO; ISO; Live Rice Index; LME; NZ Wool Services; Thompson Lloyd & 6,972.0 +2.2 -3.7 -3.6 Ewart; Thomson Reuters; Urner Barry; WSJ. *Provisional South Africa (JSE AS) 60,418.4 -0.5 +19.3 +19.4 series, go to: Economist.com/indicators †Non-food agriculturals. 82 Obituary Antonio Carluccio The Economist December 2nd 2017

vey the scene. When he wrote his books he would do so in pencil, crafting them. He was a countryman; though his fatherwas a stationmaster, the family kept pigs and a goat, and grew vegetables whose fresh, in- tense flavour he never forgot. His mother made bread, preserves and sausages, and was his only cookery teacher. No chef’s dainty training for him. On television he manhandled slabsofspeckand cheese like a true peasant, flicking aside with impa- tience the frilly paper caps on Carluccio’s sauces to get at the good stuffinside. So when he took full charge of his res- taurant in Neal Street in the late 1980s, his mission was mushrooms in all their glori- ous variety. Gradually, they crept into his menus: turbot with honey fungus, su- preme of pheasant with truffles. (He would happily shave truffle over almost anything.) At first he had to pick every mushroom himself, dashing out between services to his secret places near enough to London; later he found Poles to help him. Boxes of the season’s delights would ap- pear outside the restaurant and he would stand beside them, drawing on a fat cigar. He used fungi to teach British diners to The mushroom man be more daring generally: to eat a stew made of lamb pluck, for example. Mush- rooms also showed that the best things were transitory, seasonal, and had to be eaten as fresh as possible. The same ap- plied to fish and vegetables: pick them fresh, cook them simply but wonderfully, Antonio Carluccio, ambassadorforItalian food, died on November8th, aged 80 as farmers’ wives did. A dish of fried ceps HEN Antonio Carluccio arrived in It was Priscilla, though, who built up the and potatoes was perfection, summing up WBritain in 1975, nervous and tongue- Carluccio brand, after 1999, on the basis of his slogan mof mof: minimum of fuss, tied, he found Italian food restricted most- his single restaurant in Neal Street in Co- maximum of flavour. “Abundant wine to ly to London’s Soho. There a few trattorie vent Garden. She was the business brain; drink!” was all that needed adding. made their own pasta, and knew that olive he was the front man, happy to do nothing Mushrooming gave him solace, too. His oil was not merely for unblocking ears. At but seek out perfect foods. And his notion life, which seemed so jolly to outsiders, Lina Stores he could buy olives, panforte of success was very different. It meant, contained much sadness. The worst was and dry spaghetti. Otherwise and else- after a slow stroll with his dog through the death by drowning, at 13, of his youn- where, what he called “Britalian” food bare woods on a misty November morn- gest brother Enrico. He could not begin to held sway: ragù that was just flavoured ing, uncovering a mushroom from the leaf- deal with the heaviness left in his heart ex- mince, avocado served with a gloop made litter, cutting it off, weighing and savouring cept by foraging for wild things and pains- of ketchup and mayonnaise and, to finish, it and placing it, with reverence, in his bas- takinglyshapingthem into somethingelse. oranges in a sickly syrup masquerading as ket. This “quiet hunt” had been his passion And he could not stay in his technician’s caramelata. All very depressing. since the age of seven, and walks with his job orin Italy, though he had no idea where Three decades later, when Carluccio’s father in the Val d’Aosta. For him the fun of his future lay. He roamed Europe homesick was listed on the stock exchange and he living in England was not so much celebri- for his mother’s cooking. His efforts to rep- and his then-wife, Priscilla Conran, had ty, as the fact that people knew almost licate it drew in many girls, but none gave sold their stake for around £10m, his name nothing of fungi and were even afraid of him the family and children he wanted was on the dark blue blinds of 130 outlets them. The woods were full of untouched more than anything. His three marriages across the land. His 23 books and multiple treasure: stout boletes, high-capped mo- all foundered. He loved the buzz and chal- TV series had made his curly white cap of rels, oyster mushrooms, tiny yellow chan- lenge of running his restaurant, but it hair and ample girth synonymous with terelles. In Hyde Park he found a puffball closed in 2007 when developers moved real Italian food, the sort that made you as big as a football, right beside the path. into Neal Street. Behind the jovial smile, he sigh and cry “Fantastic!”, like him, when attempted suicide several times. you tasted it. In Carluccio’s Caffès, Britons Whittling thumb-sticks The real problem, he knew, was that could not only eat in proper Italian style Mushrooming reminded him that what he Carluccio the brand had come to obscure but could also buy chilli oil, fennel salami, most enjoyed was the feel ofthings. When the man. The glossy stores were too far re- wild-boar sauce, squid-ink linguine. he walked in the woods he would also moved from handling and making things. Though many chefs, writers and restaura- seek out good straight sticks, hazel for pref- They were too far from the woods and the teurs helped promote the cause in Britain, erence, to whittle and slowly carve into joys of gathering, but that was the life that his name was in the vanguard. proper thumb-sticks for uncovering fungi was true to him. The motto he chose was in This looked like success to most people. orsimplyleaningon, handscrossed, to sur- natura veritas. 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