The Surveillance State

Italy’s threat to the euro

Silicon Valley’s kill-zone

What investors can learn from poker

How humans got bigger brains JUNE 2ND–8TH 2018 The surveillance state

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7 The world this week Asia 33 Korean summitry Leaders Trump-Kim, on again 11 The surveillance state 34 Thai culture Perfected in China, a The politics of dressing up threat in the West 35 Singapore’s architecture 12 America and immigrants So long, Brutalism A cruel and unusual 36 Banyan border policy Why despair of Indian 12 Drug testing democracy? Just say know Curbing illegal immgration Separating migrant families is 13 Speed limits China un-American and bound to Live fast, die fast 37 Regional development fail: leader, page 12. Putting a On the cover 14 Italy and the euro The power of big data horrific practice in historical The state can gather more Handle with care 38 The digital Silk Road and international context, information, more easily, An inland city’s dreams page 27 than ever before. Do not Letters underestimate the risks: 16 On plasma donations, Britain leader, page 11. Totalitarian languages, unemployment, determination and modern 39 Universal credit offshore finance, technology have turned The new safety net education, men Xinjiang into a police state, 40 Abortion in Ireland page 19. Unparalleled Non-identical twins surveillance capacity and Briefing 42 Bagehot vast amounts of data are 19 Inside Xinjiang Politics and drink radically transforming Apartheid with Chinese criminal-justice systems: characteristics Technology Quarterly, after Technology Quarterly page 42 Surveillance, data and United States criminal justice Italy and the euro Italy can 23 Running San Francisco After page 42 find a way out of its immediate The Economist online Reach for the sky crisis. The long-term outlook is more worrying: leader, page 14. Daily analysis and opinion to 24 California’s homeless Middle East and Africa A fine balance The right-wing Northern supplement the print edition, plus 43 Climate change in the League is on a roll, page 47. audio and video, and a daily chart 26 Puerto Rico Arab world A political crisis in southern Economist.com Counting the dead Too hot to handle Europe and fears for the future E-mail: newsletters and 26 The opioid epidemic 44 Russia in the Middle East of the euro zone roil financial mobile edition Seeking the right The balancing bear markets once more, page 63 Economist.com/email prescription 44 A Ramadan viewing guide Print edition: available online by 27 Immigration policy Cairo Five-0 7pm London time each Thursday Suffer the children Economist.com/printedition 45 Social security in Africa 27 Culture wars Extending the safety-net Audio edition: available online Roseanne’s 46 Fighting talk in Cameroon to download each Friday self-immolation Economist.com/audioedition A potential war over words 28 Lexington 46 Fast funerals in Guinea John Bolton, the world’s Do not go gently hope

The Americas Volume 427 Number 9094 29 Education in Mexico Published since September1843 Korea summitry Detente to take part in "a severe contest between An object lesson intelligence, which presses forward, and between America and North an unworthy, timid ignorance obstructing 30 North American Korea seems back on track, for our progress." diplomacy now, page 33. Donald Trump’s Editorial oﬃces in London and also: A river runs through it belligerent national security Beijing, Berlin, Brussels, Cairo, Chicago, Madrid, Mexico City, Moscow, Mumbai, Nairobi, New Delhi, 30 Barbadian politics adviser: Lexington, page 28 New York, Paris, San Francisco, São Paulo, Seoul, A clean sweep Shanghai, Singapore, Tokyo, Washington DC 32 Brazilian lorries Strike against the system

1 Contents continues overleaf 4 Contents The Economist June 2nd 2018

Europe 65 Trade negotiations Puzzle pieces 47 Italy’s political chaos Matteo Salvini’s quest 66 New banks in America for power Small is beautiful 48 French country roads 68 Buttonwood Taking it easy Lessons from Las Vegas 48 Strikes in France 69 The trade in used clothes Neap tide Worn out 50 Ireland votes to allow 70 Free exchange abortion Power is money Silicon Valley’s kill-zone A modern country Brain size Genes crucial to the Big, rich and paranoid, today’s 51 Turkey’s opposition Science and technology evolutionary expansion of the tech giants are making life Wind in their sails 71 Evolution human brain have been complicated for startups, 52 Charlemagne The history of discovered, page 71 page 55 Germany under the 1968 big-headedness generation 72 Conservation Subscription service A great survivor For our latest subscription offers, visit 73 The sunk-cost fallacy Economist.com/offers International For subscription service, please contact by 53 Effective altruism Ball-game theory telephone, fax, web or mail at the details provided below: Faith, hope and clarity 73 AIDS Parthian shots North America 54 Career choices The Economist Subscription Center Put money in thy purse 74 Space flight P.O. Box 46978, St. Louis, MO 63146-6978 Telephone: +1 800 456 6086 Munching into orbit Facsimile: +1 866 856 8075 E-mail: [email protected] Business Latin America & Mexico 55 The future of tech Books and arts The Economist Subscription Center P.O. Box 46979, St. Louis, MO 63146-6979 startups 75 A dystopian prophecy Telephone: +1 636 449 5702 Lessons from poker For all Into the danger zone We and us Facsimile: +1 636 449 5703 but the most talented, a E-mail: [email protected] 56 Bartleby 76 Michael Ondaatje’s rules-based approach works Subscription for 1 year (51 issues) Not working properly new novel best—in poker and investing: In the shadows of war United States US $158.25 (plus tax) Buttonwood, page 68 57 Vedanta Resources Canada CA $158.25 (plus tax) Copper bottom 77 Retro photography Latin America US $289 (plus tax) 58 ThyssenKrupp Ghosts in the machine Steeling itself 77 A startup’s rise and fall Blood money Principal commercial offices: 59 European low-cost The Adelphi Building, 1-11John Adam Street, carriers 78 Madness and desire London WC2N 6HT Wizz on the up Better to have loved Tel: +44 (0) 20 7830 7000 Rue de l’Athénée 32 59 Media mergers 1206 Geneva, Switzerland There can be only one 80 Economic and financial Tel: +4122 566 2470 60 Chinese tea chains indicators 750 3rd Avenue, 5th Floor, New York, NY 10017 A new leaf Statistics on 42 economies, Tel: +1212 5410500 1301Cityplaza Four, 61 Schumpeter plus a closer look at central banks 12 Taikoo Wan Road, Taikoo Shing, Hong Kong Six muddles about share Tel: +852 2585 3888 Effective altruism A growing buy-backs Other commercial offices: movement is trying to bring Obituary Chicago, Dubai, Frankfurt, Los Angeles, scientific rigour to Paris, San Francisco and Singapore Finance and economics 82 Lini Puthussery philanthropy, page 53. Why Treating a mystery job-hunting do-gooders should 63 Italy and financial ponder the counterfactual, markets page 54 Tragedy or farce? 64 Greek banks’ bad loans Rebuilding the ruins 65 Monetary policy and inflation Turkish baroque PEFC certified This copy of The Economist is printed on paper sourced from sustainably managed forests certified to PEFC PEFC/29-31-58 www.pefc.org

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The world this week The Economist June 2nd 2018 7

saying that the hoax had been peace deal with FARC guerril- highlighted the treatment of Politics planned to catch Russian las. Mr Petro used to belong to hundreds ofthousands of agents. He apologised to his a separate armed group. Uighur Muslims in China wife forthe distress he caused. who have been sent to re-education camps, and criti- Murdered in Mozambique cised Saudi Arabia for its At least ten people, including non-tolerance ofreligions several children, were behead- other than Sunni Islam. ed in northern Mozambique. The attackwas blamed on a Burkina Faso became the latest group ofjihadists. The group country to breakdiplomatic has conducted sporadic attacks ties with Ta iwa n . After a cam- in the country since 2015. paign by China to lure away Taiwan’s allies, only a handful Zimbabwe will hold national ofcountries still recognise it. elections on July 30th, the first Italy’s president, Sergio since Robert Mugabe was A strike by lorry drivers in The latest effort to find the Mattarella, vetoed a proposed deposed in a military coup last Brazil continued to affect fuel wreckage ofMalaysia Airlines finance minister put forward year. Members ofthe opposi- supplies across the country, Flight MH370, which vanished by the Five Star Movement and tion say they have been pre- bringing businesses to a stand- from radar screens in 2014, the Northern League, populist vented from campaigning in still. The strike began as a came to an end. An American movements ofrespectively the some areas and complain that protest against rising petrol privately funded firm had left and the right, who are Zimbabweans abroad, who prices, but thousands ofBrazil- deployed eight autonomous trying to form a government. are thought mainly to support ians have supported the driv- submarines scouring 86,000 After a day ofconsternation on the opposition, will not be ers by taking to the streets and square kilometres ofthe Indi- the markets, alternatives were allowed to vote. blocking motorways to air a an Ocean’s floor. There are no being considered, including a wide range ofgrievances. more private or official search- technocratic government that Palestinian militants in Gaza Brazil’s president, Michel es planned, so there may never will run Italy until a fresh fired dozens ofmortar shells at Temer, warned that the army be an answer to what hap- election is held. Israel. Israeli aircraft struck would be used to clear the pened to the doomed plane. back, hitting facilities belong- highways ifnecessary. Mariano Rajoy, Spain’s prime ing to militant groups, before a Stand by your man minister, faced a censure tenuous ceasefire tookhold. It Venezuela released an One ofDonald Trump’slaw- motion that might trigger early was the worst flare-up ofcross- American Mormon mission- yers, Rudy Giuliani, said the elections in the country. border fighting since 2014. ary and his wife from prison president was ready to be following talks with an Ameri- interviewed by Robert Voters in Ireland backed a Russia’s foreign minister, can delegation led by Bob Mueller, the special counsel change to the constitution to Sergei Lavrov, called forthe Corker, a senator from Ten- leading the investigation into make abortion legal, by 66% to withdrawal ofall non-Syrian nessee. Joshua Holt was held Russian influence. But stepping 34% in a referendum. After forces along Syria’s southern without trial fortwo years for up criticism ofthe investiga- Ireland’s decision, the British border. Russia appeared to allegedly concealing weapons. tion, Mr Giuliani later said that government came under reach an agreement with before any interview was held, pressure to hold a referendum Israel, which shares the border The on-off switch Team Trump would need to in Northern Ireland, where and has carried out attacks on Preparations continued fora review documents relating to abortion remains illegal. A Iranian-backed forces in Syria. summit in Singapore between the FBI’s secretive use ofan spokesman forTheresa May, Donald Trump and Kim Jong operative to gather informa- whose majority in Parliament The leaders ofLibya’s various Un, North Korea’s dictator. Mr tion from Trump aides. depends on support from factions met in Paris and Trump, who had called offthe Northern Ireland’s anti-abor- agreed to hold presidential and meeting because ofthe North’s tion Unionists, said it was a parliamentary elections in “hostility”, tweeted that “we “devolved matter”. December. But they were in have put a great team together” disagreement about big consti- forthe talks. A senior North London’s transport commis- tutional issues, such as the role Korean official met Mike Pom- sioner admitted that “super ofthe armed forces, which peo, America’s secretary of highways” for cyclists had they ambitiously hope to state, in New York. Mr Kim expanded too rapidly, causing resolve by September. held a meeting with Moon more congestion forcars and Jae-in, South Korea’s president. buses. But he also supported The final two the safe spaces on roads, Iván Duque, a conservative The annual report on religious which have led to a big drop in formersenator, took39% ofthe freedom issued by America’s cycling deaths in the city. vote in the first round ofCo- State Department said that Eric Greitens resigned as the lombia’s presidential election Myanmar’s bloody campaign governor ofMissouri. He was In a bizarre and opaque tale of and will face Gustavo Petro, against Rohingya Muslims still ensnared in a corruption deception and intrigue, a the left’s candidate, who got persists, and that the country’s scandal and faced lurid allega- Russian journalist detested 25%, in the second round on government had also tions from a formerlover. He by the Kremlin faked his own June 17th. MrDuque is aligned launched an offensive against denies claims ofwrongdoing, murder in Ukraine. He later with Álvaro Uribe, a former Christian rebels in Kachin believing himselfto be the appeared at a press conference president and critic ofthe state. Separately, the report victim ofa political vendetta. 1 8 The world this week The Economist June 2nd 2018

The Canadian government fell foul ofthe authorities for Weinstein, who has denied Business stepped in to buy the Trans highlighting corruption. Mr claims that he forced himself Mountain pipeline from Browder lobbied Congress to on women, was bailed for$1m. Kinder Morgan, the American pass a class ofsanctions The Weinstein Company filed Italy, two-year operator ofone ofthe main named afterSergei Magnitsky, forbankruptcy earlier this government-bond yield, % conduits ofoil from Alberta’s a lawyer who uncovered a year. A judge recently 3 tar sands. Kinder Morgan had massive fraud but was sent to approved the sale ofthe film sought assurances about the prison, where he died. The studio’s assets to Lantern 2 project when the provincial Spanish police said Russia’s Capital, a private-equity firm government in British Colum- arrest warrant was not valid. in Dallas, for $310m. 1 bia and environmental groups put up stiffopposition to the Sberbank, Russia’s big state- Indian authorities started an 0 28th 29th 30th 31st planned expansion ofthe owned lender, reported a 27% investigation into claims that May 2018 pipeline to terminals on the rise in first-quarter profit com- AirAsia and its boss, Tony Source: Bloomberg Pacific coast, which will triple pared with the same three Fernandes, tried to bribe offi- Italy’s political turmoil its capacity. The federal gov- months last year, to 212bn cials to change a rule that unnerved markets. Share ernment says it bought Trans roubles ($3.7bn). restricted its operations in prices ofEuropean banks fell Mountain to protect jobs. India. The Malaysian airline sharply, and American stock- America’s Justice Department strongly rejected the claims. markets also quivered as the Good cop, bad cop approved Bayer’s takeover of chill spread to American Piling the pressure on China Monsanto, clearing the way One on every corner banks. The yield on Italian amid negotiations to avoid a for one ofthe biggest hookups Pret A Manger, a rival in Brit- sovereign bonds rose at a pace trade war, the Trump admin- in the agricultural seeds and ain to Starbucks, but with a not seen since the euro-zone istration said it was moving chemicals industry. The de- wider range offood products, debt crisis. Yields on the two- ahead with plans to impose partment blessed the deal after was sold to JAB Holdings, an year bond surged and on the tariffson $50bn-worth of ordering the German buyer to ambitious coffee and café firm, ten-year bond rose to 3%, the Chinese imports, contradicting sell $9bn in assets in areas for$2bn. Pret was founded in highest level since 2014. Igna- recent remarks by Steven where it competes with Mon- London in 1986, sandwiched zio Visco, the governor ofthe Mnuchin, the treasury secre- santo, the largest-ever divest- between office buildings on BankofItaly, warned the tary, that the penalties had ment demanded by America Victoria Street. It now has 530 quarrelling politicians about been put on hold. The White forconsenting to a merger. stores, a fifth ofwhich are in the danger of“losing the House plans to announce a America. JAB, which counts irreplaceable asset oftrust”. formal list ofgoods subject to Harvey Weinstein was the Panera Bread and Peet’s the tariffsby mid-June. charged with rape and sexual Coffee chains among its assets, Taking back control abuse in a court in New York. is reportedly planning to ex- Facing a currency crisis, Bill Browder was briefly The two cases are the first tend Pret’s reach in America, Turkey’s central banksimpli- detained by Spanish police at criminal charges to be brought especially among young urban fied its system ofmultiple the request ofRussia. Mr Brow- against the formerHollywood office workers. interest rates. The one-week der’s Hermitage Capital Man- mogul, following a wave of repo rate became its new agement was one ofthe big- sexual-misconduct allegations For other economic data and benchmark, which it also gest investors in Russia until he that surfaced last October. Mr news see Indicators section doubled to 16.5%. The central bank’s governor met investors to offer reassurances that monetary policy would tighten furtherifinflation remains stubbornly high. The lira, which has taken a battering over concerns that the central bank’s independence is under threat from politicians in Tur- key agitating for lower interest rates, rallied in response.

America’s banking regulators proposed sweeping changes to the Volcker rule, brought in after the ﬁnancial crisis and which stops big banks from making certain kinds ofrisky bets. One ofthe biggest changes would ease the burden on banks having to prove that each trade has a purpose beyond a speculative bet. The proposals are open to comment, but banks have lobbied hard forthe modiﬁcations. PURE BENCHMARK

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Enter our video contest on Answer any one of ﬁve essay “A minute to change the world” questions in no more than 1,500 words What is the one thing you would change • What is the best way to improve to build a more open world—and how competition in modern capitalism? would you go about it? • Does immigration strengthen or Tell us your answer in a 60-second undermine tolerance? video. You can get creative or keep it • What should a commitment to free simple—just be persuasive. speech on campus entail? • Has political correctness gone too far? • Do the bene ts of arti cial intelligence outweigh the risks? find out more at: find out more at: economist.com/openfuture/ economist.com/openfuture/ video-contest essay-contest Open to people aged 16 years or older. Open to people aged 16 to 25 years. Deadline August 1st. Deadline July 15th.

Winners will have their videos and essays appear on The Economist’s Open Future site, and can attend the Open Future Festival on September 15th in New York, London or Hong Kong, with air fare and hotel paid for by The Economist Leaders The Economist June 2nd 2018 11 Perfected in China, a threat in the West

The state can gathermore information, more easily, than everbefore. Do not underestimate the risks HEY’RE watching you. tention record and “reliability status”. All this and more is fed TWhen you walk to work, into the Integrated Joint Operations Platform (IJOP), an AI- CCTV cameras film you and, in- powered system, to generate lists ofsuspects for detention. creasingly, recognise your face. Totalitarianism on Xinjiang’sscale may be hard to replicate, Drive out of town, and number- even across most of China. Repressing an easily identified mi- plate-reading cameras capture nority is easier than ensuring absolute control over entire pop- your journey. The smartphone ulations. But elements of China’s model of surveillance will in your pocket leaves a constant surelyinspire otherautocracies—from Russia to Rwanda to Tur- digital trail. Browse the web in the privacy of your home, and key—to which the necessary hardware will happily be sold. your actions are logged and analysed. The resulting data can Liberal states have an obligation to expose and chastise this ex- be crunched to create a minute-by-minute record ofyour life. port ofoppression, however limited their tools ofsuasion. Underan authoritarian governmentsuch asChina’s, digital The West must lookat itself, too. These days its police forces monitoring is turning a nasty police state into a terrifying, all- can also have access to a Stasi’s worth of data. Officers can set knowing one. Especially in the western region of Xinjiang, up bogus phone towers to trackpeople’s movements and con- China is applying artificial intelligence (AI) and mass surveil- tacts. Data from numberplate-readers can track a person’s lance to create a 21st-century panopticon and impose total con- movements for years. Some American cities have predictive- trol overmillionsofUighurs, a Turkic-language Muslim minor- policing programs akin to IJOP that analyse past crimes to ity (see Briefing). In Western democracies, police and predict future ones. All this allows the monitoring of possible intelligence agencies are using the same surveillance tools to attackers, but the potential for abuse is great. Hundreds of solve and deter crimes and prevent terrorism (see Technology American police officers are known to have used confidential Quarterly). The results are effective, yet deeply worrying. databases to dig dirt on journalists, ex-girlfriends and others. Between freedom and oppression stands a system to seek the consent of citizens, maintain checks and balances on gov- Watching the detectives ernments and, when it comes to surveillance, set rules to re- How to balance freedom and safety? Start by ensuring that the strain those who collect and process information. But with digital world, like the real one, has places where law-abiding data so plentiful and easy to gather, these protections are being people can enjoy privacy. Citizens of liberal democracies do eroded. Privacy rules designed for the landline phone, post- not expect to be frisked without good cause, or have their box and filing cabinet urgently need to be strengthened forthe homes searched without a warrant. Similarly, a mobile phone age ofthe smartphone, e-mail and cloud computing. in a person’s pocket should be treated like a filing cabinet at home. Just as filing cabinets can be locked, encryption should I spy with my many eyes not be curtailed. A second priority is to limit how long infor- When East Germany collapsed in 1989, people marvelled at mation on citizens is kept, constrain who has access to it and the store ofinformation the Stasi securityservice had garnered penalise its misuse fittingly. In 2006 the European Union is- on them, and the vast networkofinformants it tookto compile sued a directive requiring mobile-phone firms to keep custom- it. Since then the digital revolution has transformed surveil- ers’ metadata forup to two years. Thatlawwasstruck down by lance, as it has so much else, by making it possible to collect the European Court of Justice in 2014. Misuse of police data and analyse data on an unprecedented scale. Smartphones, should be a criminal offence for which people are punished, web browsers and sensors provide huge quantities of infor- not a “mistake” absolved by a collective apology. mation that governments can hack or collect; data centres al- A third priority is to monitor the use of AI. Predictive-polic- low them to store it indefinitely; AI helps them find needles in ingsystemsare imperfect, betteratfindingpatterns ofburglary the digital haystacks thus assembled. Technologies that once than of, say, murder. Face-recognition may produce lots of seemed a friend of freedom, allowing dissidents in dictator- “false positive” results. AI trained with biased data—eg, pat- ships to communicate and organise more easily, now look terns of arrest that feature a disproportionate number of black more Orwellian, letting autocrats watch people even more people—may reproduce those biases. Some sentencing algo- closely than the Stasi did. rithms are more likely to label black defendants than white Xinjiang is the nightmarish extreme that the new technol- ones as being at high riskofreoffending. Such algorithms must ogy makes possible: a racist police state. Fearing insurrection be open to scrutiny, notprotected as trade secrets. and separatism, China’s rulers have reinforced techniques of Vigilance and transparency must be the watchwords. They totalitarian control—including the mass detention of Uighurs mayenhance the technology’seffectiveness: the routine wear- for re-education—with digital technology. In parts of the prov- ingofbodycams by police, forinstance, appears to reduce pub- ince streets have poles bristling with CCTV cameras every100- lic complaints. Consultation matters, too. A bill recently pro- 200 metres. Theyrecord each passingdriver’sface and the car’s posed in California would compel police agencies to disclose numberplate. Uighurs’ mobile phones must run government- what surveillance gear they have, publish data on its use and issued spyware. The data associated with their ID cards in- seek public input before buying any more. If that makes pro- clude not just name, sex and occupation, but can contain rela- gress slower so be it. Police rightly watch citizens to keep them tives’ details, fingerprints, blood type, DNA information, de- safe. Citizens must watch the police to remain free. 7 12 Leaders The Economist June 2nd 2018

America and immigrants A cruel and unusual border policy

Separating migrant families is un-American and bound to fail AMILY values do not stop care system—which is only one of the ways Mr Sessions’s “Fat the Rio Grande,” said tough line is likely to be futile. There is little reason to think it George W. Bush. But that may will lead to a bigdrop in illegal immigration. Most migrants are depend on which bank of the motivated more by their miserable circumstances back home river you have in mind. Even by than the prospect of an easy life in America. Moreover, how the standards of President Do- countries treat migrants is an important advertisement oftheir nald Trump’s administration, characterand values, which Americansunderrate to their cost. the way America has begun sep- America’s reputation for being fair and decent attracts highly aratingmigrant children from theirparents is horrific. The poli- skilled people. It is also among the reasons foreigners trust cy, part ofan effortby the attorney-general JeffSessions to curb American diplomacy and admire its culture—despite the ero- a seasonal rise in illegal immigration, is repugnant and self-de- sion ofits reputation that has followed Mr Trump’selection. feating. It is a disgrace to America and should be stopped. The Obama and Bush administrations both increased de- It’s greater to be good portations of illegal migrants, yet avoided separating migrant Mr Sessions’s cruelty will also widen the partisan gulf. It pro- families. Mr Trump’s, by contrast, appears to view its right to vides more ammunition to those on the left who accuse his deprive migrant parents oftheir children, when pitching them party of racism. And that, paradoxically, entrenches Republi- into the criminal-justice system, as a useful deterrent against can support. When accused by Democrats of racism, even future immigration. There are reports ofmigrants having been moderate Republican voters are liable to defend the policy out deported while their children remain in the United States’ fos- ofpartisan pique. There is little danger ofthe conscience ofthe ter-care system. Some were nottold where theirchildren are or right being awakened by the scandal in the way that European whether they would see them again—and they may not (see attitudes to migrants from Syria were softened by images of a United States section). drowned refugee child. Apparently unnerved by the controversy, Mr Trump A wiser government would reassure Americans that to- blamed it on a “horrible law”, which in turn he pinned on the day’s levels of illegal immigration are modest by historical Democrats. It is in fact based on Mr Sessions’s effort to prose- standards, far lower than a decade ago. But even ifthe goal is to cute a lot more illegal entrants. “If you don’t want your child cut the number of illegal migrants, there are better ways Mr separated, then don’t bring them across the border illegally,” Sessions might go about it. By recruiting more immigration he said. The policy has so far mainly been applied to immi- judges, he could cut the vast backlog of cases that his draco- grants charged with a crime, such as crossing illegally more nian methods also threaten to make worse. By building more than once. ButMrSessionsalso wantsto lockup first offenders, family detention centres he could uphold America’s tradition who can be detained for up to six months by immigration au- of decency as well as the law. By handling more asylum cases thorities. In the absence ofan increase in family detention cen- in Central America, where over half the immigrants originate, tres, that would lead to the break-up ofmany more families. he might reduce the flow. Such steps would not only be more Itwould also puthuge pressure on the overburdened foster- humane than terrorising migrants. They might even work. 7

Drug testing Just say know

Letting users test theirnarcotics is a simple and eﬀective way to reduce harm S THOUSANDS of young Many of these tragedies are avoidable—as another British Deaths from ecstasy/MDMA Apeople danced in the sun at festival last weekend showed. At a bash in Bristol, festivalgoers England and Wales Britain’s Mutiny Festival on Sat- queued to have their illegal drugs tested by volunteer chem- 60 urday, two partygoers lay dying. ists, with the consent ofthe police. The checks revealed ecstasy 40 Another dozen or so were sent pills that were four times stronger than average, pentylone 20 to hospital. All are thought to masquerading as MDMA powder, unexpected cocktails of 0 have reacted badly to illegal cocaine and ketamine, and other potentially deadly surprises. 1993 2000 05 10 16 drugs—and they will not be the Such tests, growing in popularity around the world, oﬀer a last such casualties of the year. The death rate in Britain from way to introduce basic safety checks to the chaos of the unreg- ecstasy, a popular festival drug, is at its highest-ever level. ulated illegal-drugs market. Governments must encourage Meanwhile deaths from opioids are on the rise across the rich them ifthey are to turn the rising tide ofneedless deaths. world, particularly in America, where overdoses now kill The prohibition of drugs means that people selling poten- more people than either cars or guns. tially lethal substances face fewer health-and-safety checks1 The Economist June 2nd 2018 Leaders 13

2 than people selling hot dogs. What is more, the secrecy under the drug war when they could be tackling real criminals, in- which the market necessarily operates inhibits the flow of increasingly favour testing. But some politicians still worry that formation among consumers. Drug users have little chance of by making it safer to take drugs, they may be seen to condone getting information on the quality of the mind-altering sub- or even encourage such behaviour. The same case is some- stances they are taking. Nowhere is that truer than at summer times made against other forms of “harm reduction”, such as festivals, where customers buy from unfamiliar dealers who providing clean needles to heroin users, or giving them safe have little incentive to retain their loyalty. places to shoot up under supervision. This is upside-down logic. The reason fordiscouraging drug The fog ofwar use is that drugs are harmful, so it is perverse to argue that they Testing allows consumers to make a more informed choice. should be kept harmful in order to discourage their use. In any And it is catching on beyond the festival circuit. The Loop, the case, the evidence so far suggests that, far from encouraging charity that carried out the Bristol tests, has begun to offer drug-taking, testing services seem to make people think twice. drug-checks in city centres. In America, some opioid users are The Loop reports that 10-15% ofthe drug users it deals with de- beinggiven stripsto checkforthe presence offentanyl, a highly cide to ditch their stash on learning what is really in it (which potent drug responsible for many overdoses (see United States has included everything from concrete to anti-malaria medi- section). In Spain, an organisation called Energy Control ana- cine). A further 40-50% take less than they had planned. Gov- lyses samples from anywhere in the world for a fee of €70 ernments, police forces and events-organisers should take ($80), sending the results by e-mail with no questions asked. note: to help people avoid the most harmful drugs, let them Police officers, tired ofscoopingup limp youngcasualties of checkwhat they are taking. 7

Speed limits Live fast, die fast

France’s contentious speed-limit reduction is a model forothers HILE Emmanuel Mac- formers, America would have avoided 20,000 deaths a year. Road deaths Wron’s conflict with the That is partly because speed limits have been going up in Per million population strikers may be the hottest topic America, offsetting the gains from safer cars. In 1974, in re- 150 United States France of conversation in French cities, sponse to the oil crisis, the federal government took control of 100 la France profonde is exercised speed limitsand setthem at55mph; the lawwasrelaxed in 1987 50 Sweden about another aspect of presi- and repealed in 1995, with power to set speed limits being re- 0 dential authority. From July 1st, turned to the states. Since then they have, by and large, been 1994 2000 05 10 16 the limit on single-carriageway rising. Six states now have maximums of 80mph; in Texas, the rural roads will be reduced from 90kph (55mph) to 80kph (see maximum is 85mph. Europe section). The government maintains that this will save No doubt America’s size, self-image and love offreedom lie 300-400 lives a year. But opinion amid the pastis and the behind those increases, but they have also been encouraged boules is solidly against the reduction. by the way speed limits are set. The main factorwhich state au- This decision is no Jupiterian decree, imposed arbitrarily by thorities lookat is how fast people drive. Speed limits are set at the powers in Paris on resentful rurals. Humanity’s love of the 85th percentile of prevailing speeds. That has the advan- speed needs to be tempered by considerations of safety and tage ofkeepingthe lawin line with the behaviourof the major- pollution. So the government set the costs of reducing the ity of drivers. But, as the National Transportation Safety Board speed limit on various sorts of roads against the benefits, and pointed out in a report last year, it can lead to an “undesirable found that the sums came out in favour of a lower limit. Such cycle” whereby the speed limit goes up, so people drive faster, cost-benefit analyses may seem cold-hearted. They involve so the speed limit is raised. A cost-benefit analysis of increases putting a price on life and balancing it against time gained. But from 1987 to 1996 carried out by an academic suggests that they France is right to make a decision involving such trade-offs. should not have been allowed. It seems likely that current lim- Would that other countries were so rational. its on many roads are too high. Of course, down is not always the right direction for speed Getting theirkicks limits. In the end, the only really safe speed fora car is zero, but Because road deathshave neithermuch annual variation nora people are prepared to take risks to get about, and speed limits politically interesting cause, they get little attention. Yet they need to take that into account. “Vision Zero”, an initiative are still the world’s eighth-biggest cause of death. Even in rich which started in Sweden and is spreading, envisages the aboli- countries, where they are in long-term decline, they remain tion of road deaths, which is implausible: even self-driving significant. That is particularly true in America, where 40,327 cars, which are likely to be far safer than fallible (especially people died on the roads in 2016, around the same number as when drunk) humans, are sometimes going to kill people. were killed by breast cancer. Road deaths have fallen more Countries value lives differently. Britain sets the price be- slowly in America than in the rest of the rich world—by less in low the French level of€3m ($3.5m), America’s federal govern- percentage terms between 1972 and 2011than in any ofthe oth- ment above. Whatever its level, that number needs to be fed er 25 countries studied in a paper in the American Journal of into a reckoning of the costs and benefits of speed. Only then Public Health. Had they fallen as fast as in the top seven per- should people be allowed to step on it. 7 14 Leaders The Economist June 2nd 2018

Italy and the euro Handle with care

Italy can find a way out ofits immediate crisis. The long-term outlookis more worrying URING the worst days of Italy’s real problem is the debilitating combination of Dthe euro-zone debt crisis, chronically low growth and high public debt. Low growth the fear was that bond-market means living standards are stagnant and Italy cannot work off turmoil in places such as Greece its debt easily; high debt means it cannot use fiscal stimulus to and Spain would spread to Italy. boost the economy, especially if there is another downturn. The biggest debtor in Europe Even with the global upswing of recent years, Italy remains would be too big to bail out, so one ofEurope’s worst-performing economies. Grexit might lead to Italexit and Though populists rail against austerity, years of budgetary the break-up of the euro. Now the attention is focused directly restraint give them a bit ofroom to introduce their policies. But on Italy itself. doing so at any scale requires them to shift the burden oftaxes In March half of Italian voters plumped for two populist and expenditure, not add to it. Italy already spends more on parties that until recently favoured leaving the euro: the mav- cash transfers, 20% of GDP, than any other rich country. If it erick Five Star Movement, which triumphed in the poorer wants to introduce a universal basic income, it needs to cut south; and the xenophobic Northern League, which scored pensions, not increase them. Its tax wedge, the gap between well in the richer north. Neither had fought the election cam- what employers pay and what employees take home, is one of paign on a promise to leave the euro (the opposite, in fact). And the highest in the OECD. This contributes to joblessness. Just as the two tried to form an all-populist cabinet, investors 69% of Italian 25- to 54-year-olds are in work, compared with hoped that the sobering prospect of power, together with EU 74% in Spain and 81% in France. Cuttingtaxeson income and la- deficit rules and the behind-the-scenes influence of the Italian bour, though, will require Italy to raise them elsewhere, ideally president, would allow Italy to keep muddling along. on property and consumption. Such hopes took a nasty jolt on May 27th. The populists named as finance minister Paolo Savona, an economist who Quitaly does indeed thinkthat Italy should quit the euro. President Ser- A bigger problem is that the populists have little idea how to gio Mattarella vetoed Mr Savona (see Europe section). The deal with the myriad causes of Italy’s stagnant productivity: a populists threatened for a moment to impeach him and even rigid, dual labour market; uncompetitive product markets; the hinted at a march on Rome—an allusion to Benito Mussolini’s proliferation of family-owned firms that do not grow; a bank- blackshirts in 1922. Amid talk of a political, constitutional and ing system hobbled by bad loans; an underperforming educa- economic crisis, bond yields spiked and global stockmarkets tion system; and, more recently, a brain-drain. London isnowa shuddered (see Finance section). sizeable Italian city. In the short term such fears are overblown. Italy is less vul- Fixing all this requires years of difficult structural reforms, nerable to panicky investors than many realise. Its economy, now all the more difficult after successive governments have let alone its democracy, is nowhere near collapse. But deep- wasted the time and opportunity provided by the global re- rooted weaknesses are worsening and becoming harder to fix. covery and the ECB’s ultra-low interest rates. To avoid an eventual explosion, Italy needs careful handling The same is true of the euro zone as a whole. Its “banking and a change in mindset—of its and Europe’s politicians alike. union” is incomplete; its capital markets are underdeveloped. The worry is that neither seems likely. And all ideas for a substantial budget to help countries in the straitjacket of the euro adjust to shocks have been rejected. Panic, but not yet Creditor countries, led by Germany, have said that they will Whatever the outcome of closed-door scheming in Rome this not accept greater risk-sharing without greater risk-reduction. week, Italy is likely to get its first all-populist government—if Italian populists’ call to do away with budgetary restraint only not now, then soon, after another election. That could lead to deepens Germany’s beliefthat Italy cannot be trusted. spendthrift policies. The populists’ plans include a flat tax that A founder of the EU, Italy was long one of the most Euro- would lower revenues and a universal basic income that phile members; it is now among the most Eurosceptic. But the would raise expenditure; both parties want to wind back pre- populists know that most Italians, even those who voted for vious pension reforms. This could cost as much as 6% of GDP them, do not want to see their savings slashed and their jobs annually—largesse that Italy cannot afford with its public debt destroyed byleavingthe single currency. Thatiswhy theyhave at132% ofGDP, the highest in the world afterJapan and Greece. toned down their anti-euro rhetoric. But they do not under- Yet Italy is not Greece. In 2017 the government ran a budget stand that living in a single currency requires a flexible econ- surplus before interest payments of 1.7% of GDP. The average omy. Similarly, Germany has yet to accept that, if it is to thrive, maturityofitsdebtisaboutseven years. Given that much ofits the euro zone must have more risk-sharing. borrowing is from its own residents, and that the current ac- Inadequate reform and incompatible visions of the euro’s count is in surplus, Italy is not particularly vulnerable to a run future are a poisonous and unsustainable combination. If the on its bonds by foreign investors. The ECB is still buying its turmoil in Italy and the markets’ fright have served as a re- bonds underthe quantitative-easingprogramme, albeit at a re- minder of such dangers, and spur reform both in Rome and duced rate. Short of a large and prolonged risk premium on its Brussels, then some good may come of the mess. The risk is bonds, Italy’s debts are serviceable. that it will make any reform harder, ifnot impossible. 7 Noisy attacks aren’t hard VQƓPFų

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Obtaining plasma plasma supply by correcting Public registers are wrong ingly it is fathers who question the unintended consequences the value ofa single-sex educa- Youare right that something ofits “blood directive”, which Public registers ofcompany tion, citing the need to func- needs to be done about the created an open market for owners in offshore financial tion in “the real world”. They global dependency on Ameri- blood products in 2003 but centres are not the answer to miss the point. The highly can blood plasma, but you are allows some plasma firms to problems surrounding tax sexualised online environ- wrong to claim that the issue sue national governments. evasion and the lackof ment that teens are growing up can be resolved by paying PHILIPPE VANDEKERCKHOVE financial transparency (“The in today is relentless and far blood donors (“Blood money”, Chief executive Salisbury effect”, May 5th). removed from parents’ own May12th). Youcite Belgium as Belgian Red Cross-Flanders Such registers are the brain- school experiences. Our chil- a big importer ofplasma, but Mechelen, Belgium child ofa group ofunelected dren inhabit a radically differ- actually we mostly collect our NGOs and lobbyists. There is ent world. Single-sex estab- own and without having to Parlez vous? no evidence to show that lishments provide space and pay donors. We will be self- registers are effective, which is time forgirls in particular to sufficient by 2026 (the Dutch Johnson’s column on the hardly surprising. Criminals hold on to their childhood a are doing even better). importance ofteaching foreign intent on laundering money little longer, to find their voice The free-donor base for languages to young people through a company are unlike- and be comfortable in their plasma cannot be readily was spot-on (May12th). In the ly to add their true identity and own skin. So when they leave switched on or off. This is why 16th century, Michel de address to a public register. school at18, they will be ready a long-term perspective to- Montaigne advocated learning There is a better way of not only to hold their place in wards plasma is essential. Paid a language while young. ensuring that global standards the world but to shake it up. donations will probably lead Otherwise, those languages oftransparency are upheld JANE LUNNON to a dependence forlife-saving “most differing from our own, and criminals rooted out. In Head drugs on international firms in and that which, ifit not formed Jersey,we ensure that licensed Wimbledon High School terms ofsupply and pricing. betimes, the tongue will grow service providers verify own- London Where payment forplasma is too stiffto bend.” A lifetime of ership ofthe companies they introduced, the pool ofpeople teaching experience corrob- administer. These regulated Fashion forthe over-50s willing to donate freely evap- orates that observation. providers, who must follow orates fast. Even the Red Cross DAVID STEINBERG tried and tested know-your- ends up paying its plasma Professor emeritus at customer procedures, have an donors. This is a one-way Georgetown University incentive to make sure records street. Once people regard Bethesda, Maryland are accurate, because false plasma donation as an eco- records may lead to a loss of nomic transaction rather than On the job their licence. Ownership data a civic duty, they are no longer is freely available to the people willing to donate without Regarding a workable method that need it, the regulators and being paid. The question is for abolishing long-term law enforcement officials, and whether this crowding-out unemployment (“Make work, is now automatically effect also spills over into other can’t work”, May12th), Sir exchanged under the common donations, such as blood. In Nicholas Soames and I are reporting standard. Hungary, forinstance, the drafting a bill which would There is also a wider issue I was amazed at Buttonwood’s government had to force bestow upon the British gov- about the right to privacy.The disparaging ofmen over 50, plasma donors to also become ernment a duty to guarantee exposure to cyber-risk, identity who can “go shirtless on blood donors because of six months’ paid workin either theft and misuse ofdata have sunny days or wear flip-flops. shortages. the private, voluntary or public been forgotten in the clamour But that does not mean it is Besides the ethics ofusing sector, forpeople who either for public registers. Moreover, wise forthem to do so” (April poorer people as donors, have joined, or are at risk of there are many,perfectly legiti- 28th). Many ofyour readers are collecting more frequent high- joining, the ranks ofthe long- mate individuals residing in men over 50. Are we to button volume donations forpay- term unemployed. unstable countries who, rea- down and boot up? There is an ment is not without risks. People who are enrolled sonably,may not want the editorial penchant forshirtless Plasma donation is in essence would regain self-confidence details ofthe companies they male leaders in your pages. a protein (and not a water while they simultaneously own to be publicly available to Maybe your male readers also donation). It takes time to maintain good habits, make everyone, including corrupt dream ofbeing shirtless and replenish protein stores. The new connections and contrib- governments and various powerful. As for flip-flops, why effect ofvery frequent ute to their local community. unscrupulous people. not liberate stuffy self-impor- donations on donor safety has Crucially they would also be GEOFF COOK tance with a little beach look? not been studied thoroughly. earning a wage to spend in that Chief executive Flip-flop fetish forlorn. With regards to patient safety, community. Employers signing Jersey Finance JEAN-PIERRE BRIND’AMOUR it should be noted that Ameri- up forthe scheme would be St Helier, Jersey Calgary, Canada 7 ca still does not accept Euro- required to show that the jobs pean plasma because ofthe being created are additional Girls only perceived riskofmad-cow roles, rather than substitutes. Letters are welcome and should be disease. Taxpayers, meanwhile, would The notion that single-sex addressed to the Editor at The Economist, The Adelphi Building, American plasma is consid- see their money spent on jobs, schools are “struggling” (“Sex 1-11John Adam Street, ered a “strategic” resource and not benefits. change”, April 28th) sits at odds London WC2N 6HT can be prioritised fordomestic FRANK FIELD, MP with the 30% increase in appli- E-mail: [email protected] use by the president. Europe House of Commons cations to girls’ day schools, More letters are available at: needs to take backcontrol of its London such as my own. Overwhelm- Economist.com/letters Executive Focus 17

El Banco Centroamericano de Integración Económica (BCIE) invita a participar en el concurso para seleccionar a su: PRESIDENTE EJECUTIVO El Presidente Ejecutivo, quien reside en la Oficina Sede ubicada en Tegucigalpa, Honduras; es el funcionario de mayor jerarquía en la conducción administrativa del Banco, es su representante legal y durará en sus funciones cinco (5) años, pudiendo ser reelecto por una sola vez. Bajo la dirección del Directorio, le corresponde conducir la Administración del Banco mediante el seguimiento de las resoluciones y de los acuerdos de la Asamblea de Gobernadores y del Directorio, así como las demás disposiciones que regulan la actividad del Banco, a fin de cumplir y hacer cumplir el Convenio Constitutivo, los reglamentos, las resoluciones, los acuerdos y las decisiones de la Asamblea de Gobernadores y del Directorio. Son requisitos para optar al cargo de Presidente Ejecutivo los siguientes: 1. Ser nacional de uno de los países miembros fundadores del BCIE: Guatemala, El Salvador, Honduras, Nicaragua o Costa Rica. 2. Ser persona de reconocida capacidad profesional, honradez y con experiencia de al menos 10 años en puestos gerenciales y ejecutivos en asuntos económicos, financieros, bancarios y en políticas de desarrollo. 3. Estar en el goce y ejercicio de sus derechos civiles. 4. Adecuarse al perfil del cargo de Presidente Ejecutivo. En este perfil se prevé, entre otros, que deberá tener grado académico de maestría o grado a nivel de licenciatura o ingeniería; dominio del idioma inglés; conocimiento profundo sobre la situación económica, social y política y el entorno de los países en los cuales desarrolla sus operaciones el Banco y conocimiento de los actores y de las personalidades que manejan las políticas relacionadas con la actividad del Banco. El perfil completo de este cargo, que incluye un detalle de sus funciones y atribuciones, puede ser consultado en la página Web del Banco www.bcie.org, bajo la sección “Concurso Presidente Ejecutivo”. Candidatos interesados pueden enviar hoja de vida al correo electrónico: [email protected]. Favor no enviar hojas de vida por otros medios. La información, así como el análisis y evaluación curricular de los candidatos será manejado por una firma de reconocido prestigio internacional. Solo los candidatos con el mejor ajuste al perfil serán contactados por la firma encargada del proceso de selección. Cierre de recepción de aplicaciones: 18 de julio de 2018 a las 23:59 horas (hora de la República de Honduras). Banco Centroamericano de Integración Económica “El BCIE invita a aplicar a candidatos de ambos Oficina de Recursos Humanos géneros y de todas las nacionalidades elegibles Teléfono (504) 2240-2177 que reúnan los requisitos expuestos.” www.bcie.org The Economist June 2nd 2018 18 Executive Focus

EXECUTIVE DIRECTOR – based in Oslo The Extractive Industries Transparency Initiative (EITI) is the global standard for the governance of oil, gas and mining sectors. This is an outstanding opportunity to lead the EITI to drive efforts to ensure that natural resource wealth becomes a key KOSOVO PENSION SAVINGS TRUST engine for sustainable economic development and poverty reduction. Kosovo Pension Savings Trust (KPST) is an independent not-for- The Executive Director is responsible for the day-to-day running of the EITI and proi t institution in the Republic of Kosovo; it is governed by a Board its International Secretariat in Oslo, Norway. The Secretariat’s staff of 25 supports EITI implementation in 51 countries, working together with a global network of of Governors; and is solely responsible for the prudent investment of governments, industry and civil society supporters. mandatory pension contributions and the administration of pension The Executive Director should ensure that the EITI Board and Members’ Meeting savings accounts of employees and employers in Kosovo. are supported by the Secretariat in realising the EITI Principles. The Executive Director is responsible for overseeing the EITI’s work globally, ensuring that KPST, on behalf of the Selection Committee, is advertising for four (4) appropriate support is available for EITI implementation, and working to improve vacant positions in the Governing Board of KPST of: the EITI’s credibility and effectiveness. Key responsibilities PROFESSIONAL BOARD MEMBERS Specifi cally, the Executive Director should: Persons aiming to become Governing Board members must be • Support EITI implementation in the 51-member countries, including to all of recognised integrity and must have professional expertise and stakeholder groups in their efforts to realise the EITI Principles. • Support the EITI Chair and EITI Board to ensure that the EITI is governed to experience in pension, i nancial, investment and/or insurance matters. the highest standards, in a spirit of openness, collaboration and trust. • Ensure effective fi nancial management of the EITI International Secretariat The candidates must have at least ten (10) years of professional and promote fi nancial and technical support for EITI implementation in the pension expertise as an: 51 countries. • Ensure that the EITI’s staff are appropriately selected, supported and • Employee, owner, trustee or professional advisor of an asset managed. management company, insurance company or a pension fund with Required qualifi cations at least i fty million euros (€50,000,000) under management; • Extensive experience in fi nancial management and governance of a complex • Economist or i nancial analyst with a major international i nancial organisation, ideally with a considerable multi-stakeholder component. institution; • Demonstrated success in building relationships with interlocutors at senior • Expert in the i elds of economics or i nance with a record of levels within governments, industry and civil society organisations. extensive internationally recognized academic research and • Demonstrated leadership skills. • Strong commitment to the broader global pursuit for transparency and good writing relevant to private pension investment; and governance. • Persons appointed as Governing Board members may be • Excellent command of both written and spoken English and ideally French, international experts in their i eld. with Arabic, Spanish and Russian being an advantage. A link to the detailed list of requirements, duties and responsibilities, How to apply and how to apply, is available via the KPST website www.trusti.org. Please send your cover letter and CV no later than Monday 25 June 2018 to Brynjar Wiersholm ([email protected]), HR Director at the International Secretariat. Deadline for receiving applications is June 8th, 2018 at 16:00 CET.

The Economist June 2nd 2018 Brieﬁng Inside Xinjiang The Economist June 2nd 2018 19

nic violence in Urumqi in 2009 that fol- Apartheid with Chinese characteristics lowed the murder of Uighurs elsewhere in China—and subsequent terrorism have sent the government’s repressive tenden- cies into overdrive. Under a new party boss, Chen Quanguo, appointed in 2016, HOTAN, XINJIANG PROVINCE the provincial government has vastly in- Totalitarian determination and modern technology have turned Xinjiang into a creased the money and effort it puts into police state unlike any other. It is a vast abuse ofhuman rights controlling the activities and patrolling the HE prophet Sulayman approached san’s wife and daughter were killed. He beliefsofthe Uighurpopulation. Its regime “This son and said to him, ‘I have re- was hospitalised. “It was the will ofAllah,” is racist, uncaring and totalitarian, in the ceived a message from God. I want you to he said. sense of aiming to affect every aspect of circle the Earth and see if there are more Hasan hoped the authorities would al- people’s lives. It has created a fully-fledged people who are alive in spirit or more peo- low him to return to Urumqi because of police state. And it is committing some of ple who are dead in spirit.’ After a period his injuries. No chance. Having lost wife, the most extensive, and neglected, human- the son returned and said, ‘Father I went to child and livelihood, Hasan lost his liberty, rights violations in the world. many places and everywhere I went I saw too. A fortnight after his accident, he was more people who were dead than those sent to a re-education camp for an indefi- The not-quite-Gulag archipelago who were alive.’” nite period. There, for all his relatives The government is building hundreds or Hasan shared that message on a We- know, he remains. thousands of unacknowledged re-educa- Chat social-messaginggroup in 2015, when Hasan is one of hundreds of thousands tion camps to which Uighurs can be sent he was 23. Born in Yarkand, a town in of Uighurs, a Turkic-language people, who foranyreason orfornone. In some of them southern Xinjiang, Hasan had moved to have disappeared in Xinjiang, China’s day-to-day conditions do not appear to be the provincial capital, Urumqi, to sell jade north-western province. It is an empty, far- physically abusive as much as creepy. One and shoes and to learn more about Islam. flung place; Hasan’s home town of Yar- released prisoner has said he was not per- He described himself to Darren Byler, an kand is as close to Baghdad as it is to Bei- mitted to eat until he had thanked Xi Jinp- anthropologist from the University of jing. It is also a crucial one. The region is ing, the Chinese president, and the Com- Washington, as a Sufi wanderer, a pious China’s biggest domestic producer of oil munist Party. But there have been reports man with a wife and small daughter, who and gas, and much of the fuel imported of torture at others. In January, 82-year-old prayed five timesa dayand disapproved of from Central Asia and Russia passes Muhammad Salih Hajim, a respected reli- dancing and immodesty. through on its way to the industries of the gious scholar, died in detention in Urumqi. But in January 2015 the provincial gov- east coast. It is now a vital link in the Belt Kashgar, the largest Uighur city, hasfour ernment was demanding that everyone in and Road Initiative, a foreign policy which camps, of which the largest is in Number 5 Urumqi return to theirnative home to get a aims to bind the Middle East and Europe to Middle School. A local security chief said new identity card. “I am being forced to go China with ties of infrastructure, invest- in 2017 that “approximately 120,000” peo- back,” Hasan complained to MrByler. “The ment and trade. ple were being held in the city. In Korla, in Yarkand police are calling me every day. But on top of that it is the home of the the middle of the province, a security offi- They are making my parents call me and Uighurs, the largest Muslim group in the cial recently said the camps are so full that tell me the same thing.” Eventually, he and country, and ethnically quite distinct from officials in them are begging the police to his family boarded a bus for the 20-hour the Han Chinese. A recent history of Ui- stop bringing people. journey home. It was hit by a truck. Ha- ghurunrest—in particularbloodyinter-eth- As a result, more and more camps are 1 20 Briefing Inside Xinjiang The Economist June 2nd 2018

2 being built: the re-education archipelago is car into pedestrians in Tiananmen Square adding islands even faster than the South Help wanted in Beijing. In 2014 a knife-wielding Uighur China Sea. Adrian Zenz of the European China, Xinjiang Uighur autonomous region, gang slaughtered 31 travellers at a train sta- School of Culture and Theology in Kortal, security-related public job adverts tion in Kunming, Yunnan province, an inci- Germany, has looked at procurement con- ’000 dent some in China compared to the Sep- tracts for 73 re-education camps. He found 70 tember 11th 2001 attacks on America. Formal police their total cost to have been 682m yuan 60 Unrest in Yarkand later that year led to a ($108m), almost all spent since April 2017. Sub-station police hundred deaths; an attackat a coal mine in and surveillance staff 50 Records from Akto, a county near the bor- Aksukilled 50 people. Kyrgyzstani authori- Assistant police 40 der with Kyrgyzstan, say it spent 9.6% of its ties blamed Uighur terrorists for an at- 30 budget on security (including camps) in tempt to blow up the Chinese embassy in 2017. In 2016 spending on security in the 20 Bishkek; Uighurs have been blamed for a province wasfive timeswhatithad been in 10 bombing which killed 20 at a shrine in 2007. By the end of 2017 it was ten times 0 Bangkokpopular with Chinese tourists. that: 59bn yuan. 2006 08 10 12 14 16 17 There are worrying links, as the Chi- For all this activity, the government has Source: The Jamestown Foundation nese authorities are keen to point out, be- not officially confirmed that the camps ex- tween Uighur separatism and global jihad, ist. They are not governed by any judicial agency ofthe American government, cold- especially in the Uighur diaspora, which is process; detentions are on the orders ofthe called 11families at random in Araltobe, in based in Turkey. Chinese and Syrian offi- police or party officials, not the verdict of a the north of the province, far from the Ui- cials say1,500 Uighurs have fought with Is- court. A woman working as an undertaker ghurs’ heartland. Six said family members lamic State (IS) or Jabhat al-Nusra (part of was imprisoned for washing bodies ac- had been sent to camps. In a village later al-Qaeda) in Syria. A group called the Tur- cording to Islamic custom. Thirty residents visited by Agence France Presse in Qara- kestan IslamicParty, which demandsinde- of Ili, a town near the Kazakh border, were qash county, near Hotan, a fifth of adults pendence for Xinjiang, is banned under detained “because they were suspected of had been detained over fourmonths. anti-terrorist laws in America and Europe. wanting to travel abroad,” according to the Maya WangofHuman Rights Watch, an In 2016 a defector from IS provided a list of local security chief. Otheroffences have in- advocacy group, reckons the overall num- foreign recruits; 114 came from Xinjiang. cluded holding strong religious views, al- ber detained may be 800,000. Timothy lowing others to preach religion, asking Grose, a professor at Rose-Hulman Univer- In the grid where one’s relatives are and failing to re- sity in Indiana, puts the total between But the system of repression in the prov- cite the national anthem in Chinese. 500,000 and 1m, which would imply that ince goes far beyond anything that would A significant chunk of the total Uighur something like a sixth to a third of young be justified by such proclivities and affili- population is interned in this way. If the and middle-aged Uighur men are being de- ations. In Hotan there is a new police sta- rate of detention in Kashgar applied to the tained, or have been at some point in the tion every300 metresorso. Theyare called province as a whole, 5% of the Uighur pop- past year. “convenience police stations”, as if they ulation of 10m would be detained. Other The Chinese government argues that were shops—and in fact they do offersome evidence suggests that this is quite possi- harsh measures are needed to prevent vio- consumer services, such as bottled water ble. In February Radio Free Asia (RFA), a lence associated with Uighur separatism. and phone recharging. The windowless broadcaster financed by an independent In 2013 a Uighur suicide-driver crashed his stations, gunmetal grey, with forbidding grilles on their doors, are part of a “grid-

250 km management system” like that which Mr Chen pioneered when he was party boss Beijing in Tibet from 2011 to 2016. The authorities MONGOLIA divide each city into squares, with about Kunming 500 people. Every square has a police sta- Araltobe tion that keeps tabs on the inhabitants. So, in rural areas, does every village. KAZAKHSTAN At a large checkpoint on the edge ofHo- tan a policeman orders everyone off a bus. The passengers (all Uighur) take turns in a booth. Their identity cards are scanned, Ghulja Shihezi Urumqi Ili photographs and fingerprints of them are taken, newly installed iris-recognition technology peers into their eyes. Women KYRGYZSTAN must take off their headscarves. Three Korla young Uighurs are told to turn on their Aksu Gansu smartphones and punch in the passwords. Xinjiang They give the phones to a policeman who Kashgar puts the devices into a cradle that down- loads their contents for later analysis. One AKTO QARAQASH woman shoutsata policeman thathe is Ui- CHINA ghur, why is he looking at her phone? Yarkand There can be four or five checkpoints Hotan every kilometre. Uighurs go through them Qinghai many times a day. Uighur population in Xinjiang Shops and restaurants in Hotan have By county, 2016 10,000 100,000 800,000 panic buttons with which to summon the Tibet police. The response time is one minute. Source: Xinjiang Statistical Yearbook 2017 Apparently because of the Kunming knife 1 The Economist June 2nd 2018 Briefing Inside Xinjiang 21

2 attack, knives and scissors are as hard to To complete the panorama of human buy as a gun in Japan. In butchers and res- surveillance, the government has a pro- taurants all over Xinjiang you will see gramme called “becoming kin” in which kitchen knives chained to the wall, lest local families (mostly Uighur) “adopt” offi- they be snatched up and used as weapons. cials (mostly Han). The official visits his or In Aksu QR codes containing the owner’s her adoptive family regularly, lives with it identity-card information have to be en- for short periods, gives the children pre- graved on every blade. sents and teaches the household Manda- Remarkably, all shops and restaurants rin. He also verifies information collected in Hotan must have a part-time policeman by fanghuiju teams. The programme ap- on duty. Thousands of shop assistants and pears to be immense. According to an offi- waiters have been enrolled in the police to cial report in 2018, 1.1m officials have been this end. Each is issued with a helmet, flak paired with 1.6m families. That means jacket and three-foot baton. They train in roughly half of Uighur households have the afternoon. In the textile market these had a Han-Chinese spy/indoctrinator as- police officers sit in every booth and stall, signed to them. selling things; their helmets and flak jack- Such efforts map the province’s ideo- ets, which are uncomfortable, are often logical territory family by family; technol- doffed. A squad of full-time police walks ogy maps the population’s activities street through the market making sure security by street and phone by phone. In Hotan camerasare workingand orderingshop as- and Kashgar there are poles bearing per- sistants to put their helmets backon. Asked hapseightorten video camerasatintervals why they wear them, the assistants reply of 100-200 metres along every street; a far tersely “security”. The watchful and the watched finer-grained surveillance net than in most At the city’s railway station, travellers Chinese cities. As well as watching pedes- go through three rounds of bag checks be- work as “eradicating tumours”. The trians the cameras can read car number fore buying a ticket. On board, police walk teams—over 10,000 in rural areas in 2017— plates and correlate them with the face of up and down ordering Uighurs to open report on “extremist” behaviour such as the person driving. Onlyregistered owners their luggage again. As the train pulls into not drinking alcohol, fasting during Rama- may drive cars; anyone else will be arrest- Kashgar, it passes metal goods wagons. A dan and sporting long beards. They report ed, according to a public security official toddler points at them shouting excitedly back on the presence of “undesirable” who accompanied this correspondent in “Armoured car! Armoured car!” Paramili- items, such as Korans, or attitudes—such as Hotan. The cameras are equipped to work tary vehicles are more familiar to him than an “ideological situation” that is not in at night as well as by day. rolling stock. wholehearted support ofthe party. Because the government sees what it Uniformed shop assistants, knife con- Since the springof2017, the information calls “web cleansing” as necessary to pre- trols and “convenience police stations” are has been used to rank citizens’ “trustwor- vent access to terrorist information, every- only the most visible elements of the po- thiness” using various criteria. People are one in Xinjiang is supposed to have a spy- lice state. The province has an equally ex- deemed trustworthy, average or untrust- wear app on their mobile phone. Failing to tensive if less visible regime that uses yet worthy depending on how they fit into the install the app, which can identify people more manpower and a great deal of tech- following categories: 15 to 55 years old (ie, called, track online activity and record so- nology to create total surveillance. ofmilitaryage); Uighur(the catalogue isex- cial-media use, is an offence. “Wi-Fi sniff- plicitly racist: people are suspected merely ers” in public places keep an eye, or nose, Improving lives, winning hearts on account of their ethnicity); unem- on all networked devices in range. Under a system called fanghuiju, teams of ployed; have religious knowledge; pray Next, the records associated with iden- half a dozen—composed of policemen or five times a day (freedom of worship is tity cards can contain biometric data in- local officials and always including one Ui- guaranteed by China’s constitution); have cluding fingerprints, blood type and DNA ghur speaker, which almost always means a passport; have visited one of 26 coun- information as well as the subject’s deten- a Uighur—go from house to house compil- tries; have ever overstayed a visa; have tion record and “reliability status”. The ing dossiers ofpersonal information. Fang- family members in a foreign country (there government collects a lot of this biometric huiju is short for“researchingpeople’s con- are at least 10,000 Uighurs in Turkey); and material by stealth, under the guise of a ditions, improving people’s lives, winning home school their children. Being labelled public-health programme called “Physi- people’s hearts”. But the party refers to the “untrustworthy” can lead to a camp. cals for All”, which requires people to give blood samples. Local officials “demanded [we] participate in the physicals,” one resi- February 16th 2017 March 16th 2018 Shule county, Xinjiang Shule county, Xinjiang dent of Kashgar told Human Rights Watch, Area identified as new an NGO. “Not participating would have re-education camp been seen as a problem…” A system called the Integrated Joint Op- erations Platform (IJOP), first revealed by Human Rights Watch, uses machine-learning systems, information from cameras, smartphones, financial and family-planning records and even unusual electricity use to generate lists of suspects for detention. One official WeChat report said that verifying IJOP’s lists was one of the main responsibilities of the local security committee. Even without high-tech surveil- Source: Google Earth lance, Xinjiang’s police state is formidable. 1 22 Briefing Inside Xinjiang The Economist June 2nd 2018

2 With it, it becomes terrifying. stand and support the policy.” bold of La Trobe University in Melbourne, In theory, the security system in Xin- Not all Han Chinese in Xinjiang are 90% of the security jobs advertised in 2017 jiang applies to everyone equally. In prac- quite as enthusiastic. Tens of thousands were “third tier” jobs for low-level police tice it is as race-based as apartheid in South came to the province fairly recently, mostly assistants: cheap, informal contracts Africa was. The security apparatus is de- in the 1990s, to seek their fortunes as inde- which mainly go to Uighurs (see chart on ployed in greatest force in the south-west, pendent traders and business people, rath- previous page). But at the same time as where around 80% of Uighurs live (see er than being transferred there by state- needing more Uighurs, the authorities map on previous page). In a city like Shi- owned companies or the army. They ap- have made it clear that they do not trust hezi, which is 95% Han, there are far fewer prove of better security but dislike the them. Part of the repression has been street checkpoints, ifany, and a normal lev- damage being done to the economy—for aimed at “two-faced officials” who (the el of policing. Where there are check- example, the way movement controls party says) are publicly supporting the se- points, Han Chinese are routinely waved make it harder to employ Uighurs. So far, curity system while secretly helping vic- through. Uighurs are always stopped. this ambivalence is not seriously weaken- tims. Simultaneously recruiting more Ui- ingthe supportamongthe Han and, for the ghurs and distrusting them more creates The minarets torn down government in Beijing, that is all that mat- an ever larger pool that might one day turn Islam is a special target. In Hotan, the ters. It sees Xinjiang mainly as a frontier. against the system from within. neighbourhood mosques have been The Han are the principal guarantors of A Han businessman who travels fre- closed, leaving a handful of large places of border security. Ifthey are happy, so is the quently between Urumqi and Kashgar worship. Worshippers must register with government. says he used to feel welcome in the south. the police before attending. At the entrance The Uighur reaction is harder to judge; “Now it has all changed. They are not to the largest mosque in Kashgar, the Idh open criticism or talking to outsiders can afraid. But they are resentful. They look at Kha—a famous place of pilgrimage—two land you in jail. The crackdown has been me as if they are wondering what I am do- policemen sit underneath a banner saying effective inasmuch as there have been no ingin theircountry.” One ofthe fewdetain- “Love the party, love the country”. Inside, a (known) Uighur protests or attacks since ees released from the camps, Omurbek Eli, member of the mosque’s staff holds class- early 2017. It seems likely that many people told RFA that the authorities “are planting es for local traders on how to be a good are bowing before the storm. As Sultan, a the seeds ofhatred and turning [detainees] communist. In Urumqi the remaining student in Kashgar, says with a shrug: into enemies. This is not just my view—the mosques have had their minarets knocked “There’s nothing we can do about it.” majority of people in the camp feel the down and their Islamic crescents torn off. But there are reasons for thinking re- same way.” Some 29 Islamic names may no longer sentment is building up below the surface. be given to children. In schools, Uighur- According to anthropological work by Mr Hasan’s warning language instruction is vanishing—anoth- Byler and Joanne Smith Finley of Newcas- China’s Communist rulers believe their er of the trends which have markedly ac- tle University in Britain, a religious revival police state limits separatism and reduces celerated under Mr Chen. Dancing after had been underway before the imposition violence. But by separating the Uighur and prayers and specific Uighur wedding cere- oftoday’sharsh control. Mosqueswere be- Han further, and by imposing huge costs monies and funerary rites are prohibited. coming more crowded, religious schools on one side that the other side, forthe most Unlike those of South Africa, the two attracting more pupils. Now the schools part, blithely ignores, they are ratcheting main racial groups are well matched in and mosques are largely empty, even for up tension. The result is that both groups size. According to the 2010 census, Uighurs Friday prayers. It is hard to believe that reli- are drifting towards violence. account for 46% of the province’s popula- gious feeling has vanished. More likely a Before he disappeared, Hasan, the self- tion and Han Chinese 40% (the rest are fairbit has gone underground. styled Sufi wanderer, expressed Xinjiang’s smaller minorities such as Kazakhs and And the position ofUighurs who co-op- plight. “To be Uighur is hard,” he wrote on Kirgiz). But they live apart and see the land erate with the Han authorities is becoming WeChat in 2015. “I don’t even know what I in distinctways. Uighursregard Xinjiang as untenable. The provincial government am accused of, butI must accept their judg- theirs because they have lived in it for needs the Uighur elite because its mem- ment. I have no choice. Where there is no thousands of years. The Han Chinese re- bers have good relations with both sides. freedom, there is tension. Where there is gard it as theirs because they have built a The expansion of the police state has add- tension there are incidents. Where there modern economy in its deserts and moun- ed to the number of Uighurs it needs to co- are incidents there are police. Where there tains. They talk of bringing “modern cul- opt. According to Mr Zenz and James Lei- are police there is no freedom.” 7 ture” and “modern lifestyle” to the locals—by which they mean the culture and lifestyle ofmodern Han China. So how have the Han and Uighur reacted to the imposition of a police state? Yang Jiehun and Xiao Junduo are Han Chinese veterans of the trade in Hotan jade (which the Chinese hold to be the best in the world, notably in its very pale “mutton- fat” form). Asked about security, they give big smiles, a thumbs-up and say the past year’s crackdown has been “really well received”. “In terms of public security, Urumqi is the safest it has ever been,” says Mr Xiao, whose family came to the province in the 1950s, when the People’s Libera- tion Army and state-owned enterprises were reinforcing the border with the Sovi- et Union. “The Uighurs are being helped out of poverty,” he avers. “They under- Separate; unequal United States The Economist June 2nd 2018 23

Also in this section 24 California’s chronically homeless 26 Hurricane Maria’s toll 26 The opioid epidemic 27 Immigration policy 27 Roseanne’s self-immolation 28 Lexington: John Bolton, good guy?

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

Running San Francisco quagmire, made worse by NIMBYism and nonsensical neighbour complaints. A 75- Reach for the sky unit complex in the Mission district is be- ingheld up by an investigation into whether a laundromat qualifies as a historic site. A 150-unit housing project for pensioners, SAN FRANCISCO with 20% of flats set aside for the formerly homeless, was nixed after fierce opposi- A mayoral election forces a hard lookat the housing and homelessness crises in one tion from locals in the prosperous Forest ofAmerica’s richest cities Hill neighbourhood. City councillors use HE cliché of luxury penthouses and woman and Mr Leno the first openly gay the process as a negotiating tactic to extract TGucci stores cheek-by-jowl with filth man. On housing, though, they take differ- fees and taxes from developers. “There’s and poverty is usually reserved for poor- ent stances. Whereas Ms Breed has regulatorycapture and artificial scarcity all world entrepôts. But the contrasts in San pledged to liberalise the city’s housing reg- across the city,” says Laura Clark of YIMBY Francisco—the richest city in America by ulations to rein in the city’s runaway rents, Action, a local pressure group. median household income—could in Ms Kim and Mr Leno have taken a cooler places rival those in Mumbai. Fresh hu- approach. Flood the zone man excrement and discarded needles lie San Francisco is an extreme example of Changing the system will be difficult. One scattered on the streets of the Tenderloin a national trend among big cities: demand bill, called SB 827, put forward in the Cali- district just a few blocks from the five-star for housing far exceeds supply. Since 2010 fornia state legislature this year, died in hotels of Union Square in the city’s down- new jobs in San Francisco have outpaced committee but may be resuscitated. It pro- town. Complaints about shit in the street additional homesbya ratio of eightto one. posed overriding local zoning restrictions more than tripled, to 21,000, in the eight Critics tend to blame the most visible side to spur building in areas near public tran- years to 2017; for needles the number shot of the equation. Anti-gentrification activ- sport. It would have applied to 96% of San up from 290 in 2009 to nearly 6,400 in 2017. ists have shot at tech-workers’ commuter Francisco’s plots of land. But the proposal The city’s sanitation department spends buses with pellet guns and vandalised the has had a frosty reception from the mayor- half its $60m street-cleaning budget on the whizzy electric scooters dotting the pave- al candidates. Mr Leno does not believe stuff. Meanwhile, a typical one-bedroom ments. But they pay too little attention to that “one-size-fits-all state zoning laws” flat now rents for $3,440 per month, ac- the supply side. work. Ms Kim sees SB 827 as too generous cording to Zumper, a rental website—the The city’s zoning laws are among the to developers: “If I’m going to give you ten highest figure in the country. The median most restrictive in the country. They limit additional storeys, I’m goingto wantyou to house price has nearly doubled in the past the height and density of new buildings increase your middle-income housing pro- five years, to $1.6m. and give local residents, often property gramme,” she says. On June 5th San Franciscans will elect a owners, the ability to severely delay new Ms Breed, who supported SB 827, is new mayor. The special election, called development. Most of the city’s land area, more realistic. “At the end of the day peo- after the previous mayor died suddenly of particularly the posh western bits, is zoned ple lose,” she says. “Housing still isn’t built a heart attack, has been defined by the for single-family homes, which now com- because of these obstructionists.” She twin topics of housing and homelessness. prise one-third of its housing stock. Al- would also like to cut bureaucratic delays There are three leading candidates, all lib- most all the city’s land faces height limits and slash building times in half. Though eral: London Breed, Jane Kim and Mark of 40 feet, oraboutthree storeys. The result she grew up in public housing and until re- Leno. Each would represent a first as is a city where rents are sky-high but build- cently lived with a flatmate, Ms Breed has mayor of the city. Ms Breed would be the ings are not. come under attack for being too cosy with first black woman, Ms Kim the first Asian The planning process is a bureaucratic developers (or “real-estate speculators” as1 24 United States The Economist June 2nd 2018

2 leftish critics vilify them)—and with the homeless have increased. Use of more po- California’s homeless right. When her campaign wooed Republi- tent mind-bending drugs, like fentanyl and can voters by circulating an endorsement methamphetamine, has risen, too. Nearly A fine balance letter from George Shultz, a former secre- 70% of psychiatric emergency-room visits tary of state under Ronald Reagan, many by the homeless are the result of metham- left-wing activists were outraged. phetamine-induced psychosis. “There’s A further constraint on the city’s hous- not more homelessness than before. It’s SAN FRANCISCO ing supply is its wide-ranging rent-control just a lot more visible,” says Mr Kositsky. A state bill proposes taking custody of scheme, which now applies to around All the candidates favour additional some street people 45% of units. All three leading candidates, spending to house the homeless, funded including Ms Breed, would like to see it ex- bylevyinga taxon large corporations orby N 1967 Ronald Reagan, then governor of panded. “Housing is one of those goods issuing bonds. ICalifornia, signed into law the Lanter- that the market can never take care of all The mayoralty of San Francisco has man-Petris-Short Act, an ambitious reform people for,” says Ms Kim. Noris housing af- proved a launching pad forambitious poli- of the state’s mental-health laws. It was fordability “merely a market problem that ticians, boosting Dianne Feinstein to the part of a wave of changes that closed asy- can be solved by the market”, according to Senate and Gavin Newsom to favourite in lums in the state and around the country. Mr Leno. For residents, it is an appealing the governor’s race. But the new mayor Half a century later, the state legislature is solution in a city increasingly populated will have little overa yearto showprogress reviewing those decisions. by the obscenely well-paid. Yet rent-con- on the city’s housing and homelessness In February Scott Wiener, a state sena- trol policies make housing shortages before the next election rolls round. Given tor who represents San Francisco, intro- worse. A recent paper by Rebecca Dia- the stubborn persistence of these produced Senate Bill 1045. The bill aims to mond, Tim McQuade and Frank Qian, all blems, the winner’s tenancy in the make it easier for his home city, as well as of Stanford University, found that such mayor’s office may be rather short-term. 7 Los Angeles, to oblige chronically home- policies had driven up rents by 5% city- less people who suffer from mental illness wide because they restricted supply. Awk- or addiction to accept the appointment by wardly, other west-coast cities, like Por- Excremental growth a judge of a person or institution to look tland, Oregon, are increasingly United States, complaints about human waste after them (a concept called “conservator- considering San Francisco’s rental restric- on the streets of San Francisco ship”). London Breed, who is running for tions as a solution to their own woes. =one complaint mayor of San Francisco, has backed the The candidates must also deal with 2011 proposal. homelessness. Here theyhave fewerdiffer- The bill would affect between 40 and ences than over housing, although Mr 60 homeless people in San Francisco, reck- Leno has pledged, rather unrealistically, ons Barbara Garcia of the city’s Public to eliminate street sleeping by 2020. At the Health Department. That is less than 1% of last count, in 2017, San Francisco had a its official homeless population. Along homeless population of 7,500, 58% of SAN FRANCISCO with a number of similar bills aimed at whom live on the streets orwithout formal looseningthe legislation of1967—including shelter. Despite the uptick in complaints two that would expand the “gravely dis- about street cleanliness (see map), those abled” standard for involuntary treat- numbers have barely budged since 2013. ment—it represents a shift in ideas about That compares favourably with the rest of how to care for addicted or mentally ill the state, which saw a 14% increase in homeless people. But it raises the knotty homelessness from 2016 to 2017. In Oak- 2014 problem ofbalancingan individual’s men- land, across the bay from downtown San tal health against their civil liberties. Francisco, the homeless population surged Current law in California allows au- 25% from 2015 to 2017. In one large home- thorities to confine those who are gravely less encampment in Oakland, hidden un- disabled or present a danger to themselves der the interstate, makeshift tents cluster for, at first, 72 hours, then an additional 14 together beneath flimsily tied tarps. San days and then a further 30 days. But if pa- Francisco, on the other hand, has nearly tients show a minimal degree of compe- eliminated such encampments in recent tence—findingfood and clothing, forexam- years. ple—at the end of any of those periods, San Francisco’s programmes, which they must be released. Many relapse, and cost $250m per year, are praised by many some end up in the arms of the law. “Men- campaigners against homelessness. Still, tally ill people are still being institutional- the city could spend its money more effi- 2017 ised,” says Dominic Sisti of the University ciently. About two-thirds of its homeless- of Pennsylvania and the lead author of a ness budget goes on rent subsidies and paper arguing for the return of asylums. “permanent supportive housing”. Early in- “They are just in jails.” tervention is often much cheaper. Jeff Ko- The fate of the bill may eventually be sitsky, the city’s director of homelessness determined by public opinion. Califor- services, cites the example of a driver for nia’s homeless population has become Lyft, a ride-hailing service, who nearly fell both more visible and, with the presence into homelessness after his car was dam- of drugs like fentanyl, more violently un- aged. The city kept him off the streets by predictable. That may be moving legisla- simply paying offthe cost ofhis car. tors to embrace what Mr Sisti terms a “pa- To voters, though, the problem seems to rentalist” mode of care: Mr Wiener’s bill be getting worse. This is because rates of passed its first three committees by 6-1, 7-0 mental illness and addiction among the Source: City and County of San Francisco and 5-2 votes. 7 A FORTUNE 50 CEO USES DOMO 15 TIMES A DAY TO RUN THE BUSINESS. ON HIS PHONE.

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tainly cause and effect” between prescrip- Natural disasters tion rates and deaths. But there may be unintended conse- Counting Puerto Rico’s dead quences if alternatives to painkillers are not made available to addicts. One study assessed the impact of reformulating Oxy- Hurricane Maria killed more people than was officially reported Contin, a prescription opioid, to prevent it ARIA was a briefvisitor to Puerto beingcrushed and snorted to extract its po- MRico. The category-4 hurricane Finger in the wind tent active ingredient. It found that the re- made landfall at 6am on September 20th Puerto Rico, estimated number of deaths formulation simply led to a one-for-one re- last year and 11hours later she was gone. attributed to Hurricane Maria, 2017 placement ofdeaths by heroin. She left a trail ofdestruction. Some Lower* Mid-range Upper* The increased use of naloxone, a drug 300,000 people were displaced; and the which reverses the effects of an overdose, death toll? No one knows forsure. 0 2,500 5,000 7,500 10,000 appears to have helped reduce death rates. The official estimate of64 deaths Official† Emergency-room visits caused by drug seemed measly by contrast. That number overdosesrose 30% in the 12 monthsto Sep- New York Times‡ includes only those directly killed by the tember 2017, while deaths rose by a more hurricane, from flying debris and the like. The Economist§ modest 17%. The drug is becoming “as im- Importantly, it excludes indirect deaths: portant as having a defibrillator” says Mi- Kishore et al.† disruptions to medical care or hurricane- (first estimate) chael Barnett, a professor of health policy induced suicides, forexample. A back-of- Kishore et al.† at Harvard University. the envelope calculation by The Econo- (second estimate) The emergence of new synthetic drugs, mist ofexcess mortality above that ex- such as carfentanil, which is 100 times Sources: “Mortality in Puerto *95% confidence interval pected by deaths in previous years puts Rico after Hurricane Maria”, †Sep 1st–Dec 31st stronger than fentanyl, shows how hard it the toll at about1,200. by Nishant Kishore et al., ‡Sep 1st–Oct 31st is to get ahead of the epidemic. Forewarn- The Economist § A paper published this weekin the May 2018; Sep 1st–Nov 30th ing users before they take deadly doses New England Journal of Medicine pro- will help. Fentanyl testing strips, which vides perhaps the best estimate to date, likely to be an underestimate: single- cost just $1, allow addicts to test for the albeit an uncertain one. Using clever occupancy households that were in- presence of deadly opioids before they sampling techniques ofsome 3,000 terviewed, by definition, survived the take them. In time, such kits might save the Puerto Rican households, on a door-by- hurricane. De-biasing those households lives ofother drug users too. Deaths from a door basis, the researchers attribute some forimplicit survivorship provides a final mix of cocaine and synthetics opioids— 26 deaths to Maria in 2017. Applying that estimate ofsome 1,506 to 9,889 deaths. which suggests that the two were unex- number to the population as a whole That is a large range indeed. But count- pectedly and mistakenly laced together— gives an estimate of793 to 8,498 deaths. ing deaths in the wake ofdisasters is not a more than doubled to 4,500 in 2016. (The confidence intervals are large to problem unique to Puerto Rico. The Experts agree that the most effective account forthe tiny number ofactual death toll from Hurricane Katrina in 2005 way to fight addiction is with medication- deaths reported.) That range, however, is is still disputed. based treatment, such as methadone. But justone-third ofAmericanslive in counties with treatment centres providing these The opioid epidemic Two trends emerge from the numbers. kinds of drugs. For real progress it is neces- The first gives cause for cheer: deaths from sary to look north. Vancouver has pioneer- Seeking the right heroin and prescription opioids are falling. ed the use of safe-injection sites. Seattle Combined, the two drugs were responsi- and other progressive enclaves of America prescription ble for 29,600 deaths in the 12 months to would like to follow their lead but they October 2017, 4% below their peak in fig- face stern opposition. America’s attorney- ures released five months earlier. The sec- general, Jeff Sessions, has threatened to ond trend provides less reason for opti- prosecute such sites under the “crack mism. Deaths from synthetic opioids such house statute”. Such sites, claims the De- As one crisis abates, anothergrows as fentanyl—a drug up to 50 times stronger partment of Justice, will only “encourage OME 382,000 Americans have over- than heroin—rose 12% between May and and normalise heroin use”. 7 Sdosed on opioids—a group of drugs that October last year, to 26,760. Assuming the includes prescription painkillers, heroin two trends have continued, deaths from and synthetics—since the year 2000. That synthetic opioids probably surpassed Vein hopes is greater than the number of American those from heroin and prescription drugs United States, opioid deaths, by drug type, ’000 combat deaths in the second world war in February this year. 12-month moving total and the Korean and Vietnam wars com- The precise workingsofthe epidemic in 50 Synthetic bined. Despite this epic toll, there are early recent months are not well understood, Total Heroin signsthatatleastone battle maybe ending. but a few elements stand out. The first is 40 Prescription The Centres for Disease Control and that deaths from prescription medication Methadone Prevention (CDC) provide the best data for are likely to have been pushed down by 30 tracking the opioid epidemic. Its latest lower availability of those drugs. Official data, which cover the 12 months to the end data from the CDC show that prescription 20 ofOctober 2017, show that opioids were re- rates were nearly 20% lower in 2016 than at sponsible for some 46,041 deaths (see their 2012 peak. IQVIA, a health consultan- 10 chart) in that period. While provisional cy, reckons that prescriptions fell by anoth- and subject to revision, that number was at er 10% in 2017. Donald Burke, dean of the 0 least not dissimilar to the previous University of Pittsburgh’s graduate school 2005 07 09 11 13 15 17 month’s figure of46,202. ofpublichealth, thinksthere is“almostcer- Source: CDC The Economist June 2nd 2018 United States 27

Immigration policy Culture wars Suﬀer the children Roseanne’s self-immolation

CHICAGO Racist tweets from the starspurABC to cancel its hit show WASHINGTON, DC NE ofthe defining features oflife Association, a pro-gun lobby. Putting a horrific practice in historical under Donald Trumpis that even as It is not the first time Ms Barr’s politi- and international context O his presidency reassures Islamophobes, cal views have caused consternation. IRIAN and her 18-month-old son fled xenophobes, misogynists, bigots and Now a fervent Trumpsupporter, she once MHonduras after soldiers threw tear racists, it simultaneously stiffens the ran forthe presidency on a Green Party gas into their home. They requested asy- resolve ofAmericans who value toler- ticket and championed liberal views on lum at the American border with Mexico ance and inclusion. Take the reaction to a gay rights and abortion. But she has five weeks later. Mirian surrendered her tweet by Roseanne Barr, the eponymous increasingly taken to retweeting conspir- Honduran ID card and her son’s birth cer- star ofthe smash-hit reboot ofa 20-year- acy theories from the fringes ofthe in- tificate, which listed her as his mother, old sitcom. On May 29th Ms Barr ternet. On the same day as posting her whereupon immigration officers took her tweeted, in response to a thread dis- missive about Ms Jarrett, Ms Barr also son. “My son was crying as I put him in the cussing a loony conspiracy theory about tweeted that Chelsea Clinton, daughter seat,” Mirian told a court. “I did not even the CIA spying on French presidential ofBill and Hillary,was married to a neph- have the chance to comfort my son, be- candidates in BarackObama’s time, that ew ofGeorge Soros, a philanthropist. She cause the officers slammed the door shut “Muslim brotherhood & planet ofthe called Mr Soros “a Nazi who turned in his as soon as he was in his seat. I was crying apes had a baby=vj”. She was referring to fellow Jews 2 be murdered in German too. I cry even now when I thinkabout that ValerieJarrett. Ms Jarrett, who was born concentration camps & stole their moment.” in Iran but is not Muslim, is the daughter wealth”. In late March she accused David Since October, hundreds of children ofa distinguished blackpathologist and Hogg, a teenager who survived the Flori- have been taken from their parents at the served as an aide to Mr Obama. da shootings, ofgiving a Nazi salute. border and put in separate facilities. In Ms Barr later deleted her tweets and Last year Ms Barr’s children took March 2017, John Kelly, then secretary of apologised to Ms Jarrett. The response control ofher Twitter account, deleted homeland security, suggested his depart- was nonetheless swift. Within hours of her past tweets and changed her pass- ment would do that “to deter more move- the tweet, ABC, the television network word. Shortly before the premiere of the ment along this terribly dangerous net- that airs “Roseanne”, cancelled a planned “Roseanne” reboot, she was backon work”. The administration has since second season. “Roseanne’s Twitter Twitter. ABC tooka riskwhen it commis- backed away from the rationale of deter- statement is abhorrent, repugnant and sioned the revival ofa show about the rence. inconsistent with our values, and we lives ofan unremarkable working-class ButthisApril JeffSessions, the attorney- have decided to cancel her show,”Chan- family in the Midwest. The main danger, general, announced a “zero tolerance” ning Dungey,head ofABC entertainment, it turns out, was the star ofthe show. policy towards illegal immigration, vow- said in a statement on May 29th. Bob Iger, ing to prosecute unlawful border crossings the boss ofDisney,which owns ABC, and to separate parents and children “as re- tweeted that “there was only one thing to quired by law”. Entering America illegally do here, and that was the right thing”. is a criminal misdemeanour, punishable The end ofthe “Roseanne” reboot is a by up to six months in jail. loss for ABC—more than 27m viewers America is not just imprisoning people tuned in to the first episode. The network who are in the country illegally. According had just started to promote the show’s to the American Civil Liberties Union next season to advertisers. ABC’s motiva- (ACLU), they are imprisoningasylum-seek- tion in cancelling the show was mainly ers who present themselves at the bor- economic: advertisers would have boy- der—in violation of international law, the cotted it, says Clint Wilson, the author of Homeland Security Department’s stated a bookon racism and the media. It is a policies and the Fifth Amendment’s due- reflection ofthe growing willingness of process guarantee. And once they release corporations to take a political stand; border-crossers, the government appears after a recent massacre at a high school in to make little effort to reunite them with Florida, Delta, an airline, Enterprise, a their children. Lee Gelernt, the lead lawyer car-rental company,and other big corpo- in the ACLU’s case against the Trump ad- rations cut ties with the National Rifle Appraising the Barr ministration over the separations, calls it “the worst thing I’ve seen in 25-plus years ofdoing this work”. One near-parallel to America’s current Amnesty International, an advocacy Separations also happened under pre- immigration practices came in 2005, when group, has urged America to end the prac- vious administrations, but generally they George W. Bush’s administration ramped tice of separating asylum-seeking fam- were inadvertent. Under the Obama ad- up criminal prosecutions for border cross- ilies—something done by few if any other ministration, says John Sandweg, a former ing, rather than just sending people back rich countries. In the Netherlands, asylum- acting director of America’s immigration voluntarily or removing them through the seeking familiesare detained together, and police, “the overarching goal was family civil immigration system. As a result, feder- the children can attend school. Even Aus- unity…even if we were enforcing the law al courts along the border found their re- tralia, which detains asylum-seekers arriv- against them.” Families were detained to- sources strained. Prosecutions for people- ingby boat in miserable conditions in Nau- gether while the government adjudicated and drug-smuggling declined as those for ru and Papua New Guinea, does not take their status. petty immigration violations rose. children from their parents. 7 28 United States The Economist June 2nd 2018 Lexington John Bolton, the world’s hope

The belligerent national security adviserhas a historic opportunity to stickit to his critics the absence ofmany other moderating influences on Mr Trump— whose confidence in his ability to direct global affairs appears to be growingby the day—this suggests MrBolton could play a more positive role than his many critics have countenanced. They fear he may lead Mr Trump into a catastrophic conflict, a valid concern. YetitseemslikelierMrBolton’sscepticism aboutdiplomacy, apparent good standing with the president and willingness to speak truth to power could mitigate a more pressing risk: that the president will expend a rare moment of American leverage with Mr Kim on a hasty, ill-considered deal that could leave East Asia even more insecure than it is now. “There’s a synergy between Trump’s desire for a deal and Bolton’s ideological prejudices,” notes Jeffrey Bader, an East Asia guru and formerdiplomat. This apparent turnaround in Mr Bolton’s role reflects a more dramatic change in Mr Trump. The president spent much of last year threatening Mr Kim with “fire and fury”. By demanding an array of military options against North Korea, he also suggested he was in earnest. His appointment of the bellicose Mr Bolton, to replace H.R. McMaster, reinforced that impression. And if this scared the Washington crowd, itappearsto have terrified MrKim, aswell asChina and South Korea, both ofwhich feara war on the OHN BOLTON is not well-liked in Washington. A warmonger peninsula more than they fear North Korea’s nuclear arsenal. Jand bully, the national security adviser is disdainful of the bi- With theirsupport, MrTrump imposed the toughest sanctions re- partisan foreign-policy world and the governing institutions its gime on North Korea in overa decade, a substantial achievement. members cycle in and out of. That he oversees one ofthem is typ- Yet the alacrity with which he has since melted in the face of Mr ical of the plate-smashing Trump administration. Yet few doubt Kim’s request for talks has made his war talk seem less credible. that Mr Bolton is a wily operator. As President Donald Trump’s Arguably, it has exposed Mr Trump asthe actor-politician—with a third national security adviser—and the first with previous expe- penchant for talking tough, a lifelong aversion to costly wars and rience of civilian bureaucracy—he has already demonstrated his no fixed purpose beyond concern for his own interests—that he mastery of the inter-agency policy process. His role in derailing, always was. It is hard to see the sanctions regime surviving that at least temporarily, MrTrump’splanned meeting with Kim Jong realisation intact; China and South Korea are alreadyitching to re- Un in Singapore therefore demands scrutiny. store their economic ties to North Korea. This may help explain Mr Bolton suggested the “Libya model” was what America why Mr Trump, notwithstanding the Bolton-instigated hiatus, wanted from North Korea. That was not illogical. Mr Trump had seems keener fora deal with Mr Kim than ever. demanded Mr Kim take the same step as Muammar Qaddafi in It also underlines another misconception about Mr Trump’s 2003: denuclearisation in return for sanctions relief. Yet the fact foreign policy. Relentless media attention to his team, including that Qaddafi was later bombed from power by a NATO interven- MrBolton, is based on an assumption that he would be more eas- tion, dragged from his hiding place by insurgents, sodomised ily influenced than he has turned out to be. The president likes to with a bayonet and shot dead, made Mr Bolton’s choice of prece- heardiverse opinions—hence hisdesire fora fire-eater like MrBol- dent complicated. The Libya model is what Mr Kim fears most. It ton, a type of adviser he lacked. But he has made the big foreign- is prime evidence for the theory that has underpinned his re- policy calls himself, often, as in his swift acceptance of Mr Kim’s gime’s nuclear programme, to the North Korean people’s cost, for invitation, on his own initiative and in the high-rolling way he five decades: possession of nuclear weapons equals regime sur- ran his business. This is why it seems likely that the summit with vival; disarmament equals regime endangerment. Mr Kim will be revived and that some sort of deal, or semblance The North Korean smackdown to Mr Bolton (“We do not hide ofa deal, will result: Mr Trump wants that. In turn, this is why Mr our feelings of repugnance towards him”) was predictable. But Bolton’s ideological obduracy looks less risky than welcome. then Mr Trump blundered in. Wrongly assuming Mr Bolton had referred to the American-led bombing of Libya, not to the disar- Bolton braces mament that preceded it, he said it didn’t sound like what he had The deal, ifitcomes, isunlikelyto contain much detail. The taskof in mind forMrKim. But then he added that, yes, now you come to filling in the gaps—on how Mr Kim’s commitment to a phased de- mention it, if the North Korean despot wouldn’t make a deal in nuclearisation might be verified, for example, or on whether his Singapore, his regime would “most likely” have to be “decimat- short-range missiles could be included in it—would fall to Mike ed”. When Mike Pence parroted that threat, the North Koreans Pompeo, the secretary ofstate, and Mr Bolton. It would be a peril- called the vice-president “ignorant and stupid” and threatened a ous undertaking, requiring them to deal not only with North Ko- nuclear war. Mr Bolton went to see Mr Trump about that. The rea, but also with Mr Trump’sdesire to be seen to have delivered president called off the summit soon after. Mr Bolton, who world peace. And a suspicion that Mr Pompeo is unduly keen to doubts it is worth negotiating with Mr Kim and has long advocat- stay tight with the president suggests only Mr Bolton might be up ed topplinghis regime, may not be displeased with that outcome. to it. For such a Washington bogeyman to play that heroic role At the least, he clearly intended to add a harder edge to Mr would be extraordinary. Then again, who could have predicted Trump’s newfound enthusiasm for the “honourable” Mr Kim. In Mr Trump negotiating with Mr Kim? 7 The Americas The Economist June 2nd 2018 29

Also in this section 30 Canadian-American relations 30 An electoral sweep in Barbados 32 Brazil’s striking lorry drivers Bello is away

Education in Mexico that candidates the SNTE backed received a 2% boost in polling stations that were An object lesson schools. The SNTE’s support for Mr López Obrador’s victorious rival in the presidential race of2006 may have been decisive. Mr Peña, however, has turned the ta- OAXACA bles. In 2013 prosecutors arrested Elba Es- ther Gordillo, the head of the SNTE, on em- The outgoing president’s most important reform risks being unwound just as it bezzlement charges. Although she denies begins to reveal its promise wrongdoing and is awaiting trial under N 1918 Mexico became one of the first Mexico may venerate its teachers, but house arrest, the show of force may have Icountries in the world to declare an an- that seems not to have translated into encouraged the SNTE to backhis reform. nual Teachers’ Day holiday. The 100th an- learning. By global standards the country’s The law instructed the federal govern- niversary, on May15th, was a politicised af- education system isan underperformer. Its ment to pay teachers directly, which fair. Enrique Peña Nieto, the lame-duck 15-year-olds’ scores on the PISA test, which stopped unions from handling their pay president, gave a speech at an official cele- measures proficiency in science, reading cheques. It also required candidates for bration. Meanwhile, members of the Na- and maths, lag far behind those of Euro- jobs and promotions to undergo a written tional Co-ordinator of Education Workers pean countries like Bulgaria and Romania, test about teachingmethods and academic (CNTE), a strident teachers’ union, took to which spend similar amounts per student subject matter. Some states, like Puebla, the streets. They were protesting against on education. Even within Latin America, now hold public events to announce the education reform Mr Peña signed in its scores are only slightly better than those which candidates scored the best. It has al- 2013—whose effectsare nowbeingfelt both of Colombia, whose per-student budget is ready promoted 2,000 people to the role of by the students he hoped to aid and by the 45% lower. principal on this basis. Mr Peña wants to unions he tried to weaken. launch a similar platform nationwide. Campaigning for Mexico’s presidential Learning the hard way It is too early to evaluate the effective- election, due on July 1st, has concentrated Given the SNTE’s historical stranglehold ness of the reform. The next PISA results on crime and corruption. But the biggest is- on Mexican schools, it is surprisingthat the are not due until 2019. And even ifthe poli- sue on the ballot is arguably the fate ofthe country does not fare even worse. Before cies are working, test scores may not im- structural reforms that MrPeña and his leg- 2013 the union held a majority of seats on prove. It will be a decade before students islative allies passed in 11policy areas. The “hiring commissions”, enabling it to con- taking the exam will have been taught president’s aides tout his education law as trol who entered the profession. Teachers mainly by instructors hired on merit. the most popular ofthem all. faced no performance reviews and could At this stage, the only credible bench- Yet it could well be the first to go. Even not be fired. They could transfer their posi- mark is the rate at which the reforms are though the national teachers’ union, the tion to anyone they chose: classified ads in being implemented. It has been relatively SNTE, formally backs the reform, the CNTE, newspapers often offered teaching jobs for slow. In part, that is because ofthe compro- a militant branch strong in four poor, sale. The government did not even have mises Mr Peña made to win the SNTE’s southern states, is intent on getting it re- data on how many instructors it paid. In support. For example, teachers hired be- versed. Its members are planning an “in- 2014 a census of teachers found that fore 2013 still enjoy lifetime employment, definite” strike for June 4th, which would 300,000 recipients—whose estimated sal- though they can be moved to administra- affect13,000 schools. The final presidential aries made up 10% ofthe federal education tive roles. No one has yet been fired forfail- debate, on June 12th, will focus on educa- budget—had left, died or never existed. ing an evaluation, or for skipping work tion. Andrés Manuel López Obrador, a left- For decades the SNTE used its clout to three days in a row. Phantom teachers re- wing populist who is the heavy favourite preserve this system. Its 1.5m members main on the payroll, in smaller numbers. to win, is sure to reiterate his oft-expressed tended to vote in unison, and persuaded Only a third of new teachers participate in wish to do away with the law. parents to do the same. One study found a mentoring scheme. 1 30 The Americas The Economist June 2nd 2018

2 The reforms have also been stymied by 200 km Columbia River tomsare exposed. “We neverknowwheth- fierce opposition. CNTE members are boy- CANADA Treaty region erwe’ll have a swimmingarea,” saysKaren cotting their evaluations and refusing to BRITISH Selected dams Hamling, the mayor of the village of Na- COLUMBIA Mica dam administer tests to their students—some- ALBERTA kusp, who wants hertown’s reservoirlevel times under threat from menacing union fixed and compensation paid to its 1,600 Upper Arrow Lake residents. The formula used to calculate thugs. Strikes have interrupted every Nakusp Duncan dam school year in Oaxaca at least once since Hugh Keenleyside dam the entitlement does not take account of 1994; the cohort entering in 2012 lost nearly Grand these effects. As for migrating fish, Canada Coulee Libby dam a year’s worth of classes over six years of dam argues that America had already blocked PACIFIC WASHINGTON primary school. Despite rulings by the Su- OCEAN MONTANA them with a dam built in 1942, and should preme Court that a teacher’s right to strike Columbia thus have to pay fortheir reintroduction. does not trump a child’s right to learn, offi- Vanport City The floodgates will not open if the talks cialshave notdared to fire them. They have OREGON IDAHO fail. Ifno changesare made, Canada’sauto- reason to fear the consequences: in 2016 UNITED STATES matic flood-management duties would eight CNTE protesters died when police end in 2024. Afterwards, it would only tried to clear a road they were blocking. have to act to prevent flooding if America The greatest threat to the reforms, how- CALIFORNIA NEVADA requests aid, proves that its own storage fa- ever, comes from Mr López Obrador. Lead- cilities are full and provides compensa- ing the polls by up to 25 percentage points, bia river treaty, signed in 1961 and ratified tion. If either party does pull out, the with- on May 13th he vowed that “the so-called three years later. The pact required Canada drawal could not take effect before 2028. educational reform will be cancelled”. He to construct three dams on the 1,954km Nonetheless, if Canada and the United also demanded justice for “political pris- (1,214-mile) long river. It also allowed the States can no longer worktogether on river oners”—asunion officialslocked up forcor- reservoirbehind a dam thatwould be built management, the prospects for collabora- ruption call themselves. He argues that the in Montana in 1975 to extend into Canada. tion on more contentious subjects look law is a gateway to school privatisation, In exchange, the United States agreed to dim. Just as talks on the original Columbia and that poor states like Oaxaca should pay $64.4m to Canada for improved flood river treaty, which began in 1944, marked not be held to nationwide standards. control—in 1948 a flood had wiped out Van- the beginning of a warm era in their rela- The reformists’ best cause for hope is port City, Oregon—and to return halfof the tions, so too might those on a successor the split between the unions. The SNTE, additional electricity made possible by the deal indicate the end ofone. 7 the farbiggerofthe two, hascastits lotwith smoother flow of the river. From 1973 to the new policies, and may be loth to 2003, American utility companies bought change course. The best-case scenario for back that power, called the “Canadian En- Barbadian politics supporters of the law is that Mr López titlement”. Since that deal expired, they Obrador is only promising repeal to shore have sent the electricity instead, worth A clean sweep up votes, and will merely tinker with the anywhere from $120m-335m a year. reform once in office. That would unleash Not everyone benefited: the creation of a new wave of fury from the CNTE. But it one reservoir in Canada forced an estimat- might also give the law enough time to ed 2,500 people to move. On the whole, PORT OF SPAIN work, and become politically sacrosanct however, both sides have been pleased As sewers overflow, voters hand every by the presidential election of2024. 7 with the treaty. Whether it will remain in seat in Parliament to the opposition effect is up to Mr Trump—who in the past year has withdrawn from the Paris climate HE tallylooked like a parodyofa rigged North American diplomacy agreement and the nuclear deal with Iran. Telection. On May 24th the Barbados La- The river treaty’s current rules extend bour Party (BLP) won three-quarters of the A river runs only until 2024. And in 2014, both sides vote forthe country’sHouse ofAssembly— gained the ability to terminate it outright and every one of the chamber’s 30 seats. through it with a ten-year notice period. As a result, Yet no one alleged fraud when the results following years of preparation, discus- came out. Instead, the new prime minister, OTTAWA sions began on May 29th to revise it. Mia Mottley, faced an unprecedented poli- Even before Mr Trump took office, the cy dilemma: how the opposition’s consti- New treaty negotiations will test the United States planned to seek a reduction tutional duties can be performed ifthere is health ofCanadian-American relations of the Canadian Entitlement. The Ameri- no opposition in Parliament. HE last time Canada and the United can side saysthatCanada hasalready been When voters rebuke a sitting govern- TStates sat down to hammer out a deal paid enough for building the dams, and ment with so lopsided a vote, it is usually over controlling the flow of the Columbia that the deal raises electricity costs in amid a dire national crisis. In Barbados, river, Dwight Eisenhower was president north-western states. In 2013 America also however, the electorate simply seemed to and John Diefenbaker prime minister. In said it wanted the treaty to have ecosystem have tired of a mucky status quo—though those days, the two governments were ea- protection as a third aim, alongside power an election-eve endorsement on Insta- ger to work together: they built the St Law- generation and flood management. That gram from Rihanna, a pop singer and the rence Seaway and set up the joint North could force Canada to do costly workon its world’s best-known Barbadian, may well American Aerospace Defence Command dams to allow fish to pass. have put extra wind in Ms Mottley’s sails. around the same time. Public acrimony The Canadians politely disagree. They The sugar industry, once the Caribbean like the insultsDonald Trump hashurled at note that the treaty delivers myriad bene- country’s main source of livelihood, has Canadian negotiators—he has called them fits to America, such as more predictable shrivelled, leaving Barbados almost entire- “very difficult to deal with” and “spoiled” river navigation and supply of fresh water, ly dependent on tourism. And as compet- for refusing his demands for changes to the and inflicts costs on Canada. Frequent ad- ing destinations have pulled ahead, the North American Free-Trade Agreement— justments of water levels reduce fish and economy has slumped: GDP fell by 0.7% in would have been unthinkable. bird populations, erode waterfront land the year to April. Following years of heavy The result of their talks was the Colum- and cause dust storms when reservoir bot- borrowing, the government now spends1 “First Republic provides stability and clarity in an unpredictable world – trusted relationships matter.” IAN BREMMER Founder and President, Eurasia Group and GZERO Media

(855) 886-4824 | ŔTUVTGRWDNKEEQO | 0GY ;QTM 5VQEM 'ZEJCPIG U[ODQN (4% /'/$'4 (&+% #0& '37#. *175+0) .'0&'4 32 The Americas The Economist June 2nd 2018

2 more on interest payments than it does on proclaimed wicker”—the Bajan street- kets, 87% of Brazilians told pollsters that its workers’ salaries, which have not risen word forlesbian. The Caribbean is famous they supported the drivers. Another sur- in a decade. Trade unions, which histori- for homophobia. However, Ms Mottley’s vey found that 95% disapproved of Mr cally joined a “social partnership” with the margin of victory suggests such prejudices Temer’s response to the strike. These ma- government and businesses to set eco- may be fading fast. In April a court in Trini- jorities reflect a broader disgust with Mr nomic policies, accused the ruling Demo- dad and Tobago overturned laws crimina- Temer—and with government in general. cratic Labour Party (DLP) of failingto listen lising gay sex as unconstitutional, and Ja- Mr Temer took office in 2016, after his and walked out oftheir talks. maica’s prime minister, Andrew Holness, predecessor, Dilma Rousseff, was im- The economy suffered another blow in said he would not ban homosexuals from peached for breaking Brazil’s budgetary late 2016, when local media began report- his cabinet, as one ofhis predecessors did. laws. Following14 years ofrule by the free- ing regularly on raw sewage spouting out Ms Mottley has proposed novel plans spending Workers’ Party, he has imple- ofmanholes along the southern coast, Bar- to restructure the Barbadian public sector mented conservative fiscal, monetary and bados’s main tourist area. In 2003 the gov- and attract foreign investment. Her first or- labour policies, reducing inflation and ad- ernment built a new sewage system there, der of business, however, is sorting out the vocating reform of the insolvent pension which in theory should have improved consequences ofthe BLP’s electoral sweep. system. The economy has fared reason- sanitation. However, residents often use The public-accounts committee, which ablywell on hiswatch: followingthe worst their drains as rubbish bins, depositing scrutinises government spending, must be recession in Brazilian history, the IMF ex- waste and grease that block the channels. chaired by the opposition leader—a posi- pected it to grow by 2.3% this year (though The state waterauthority has not managed tion that cannot exist in a one-party Parlia- the strike should lower that estimate). to clear them. Many ofthe system’s pumps ment. The leader of the opposition is also The president, however, gets little cred- have stopped working, and sections of the tasked with nominating two ofthe 21sena- it. Unemployment remains stubbornly main sewer have collapsed. tors in the upper house, and must be con- high. Moreover, the “Lava Jato” investiga- In a vain effort to maintain its majority, sulted on judicial appointments. Ms Mot- tion, which has unveiled a giant network the DLP, which has held power forthe past tley says she will seek a constitutional of bribes paid by Petrobras and the con- decade, has resorted to mudslinging. At amendment to resolve some of these struction firm Odebrecht, has inflicted po- one rally, Denis Lowe, the former environ- quandaries. With a 30-0 majority, she litical damage on Mr Temer as well. Last ment minister, called Ms Mottley a “self- should have no trouble getting it passed. 7 year prosecutors accused him of accepting bribes, although he denies wrongdoing and Congress voted to reject the charges. Brazilian lorries The public’sperplexingsupportofstrik- ers wreaking havoc on the economy Strike against the system shows just how long a shadow Brazil’s en- demic scandals have cast. Outright graft makesup onlya sliverofthe inefficiency in government spending, the ultimate cause of the country’s combination of high taxes SÃO PAULO and poor public services. The lion’s share comes instead from unusually generous A disruptive workstoppage forces the president to reinstate costly fuel subsidies pensions, corporate subsidies and salaries T RUSH hour, driving across São Paulo Michel Temer, to slim down Brazil’s public for civil servants. But with fresh news of Acan take two hours. This week, how- sector. Once the drivers began setting up kickbacksdayafterday, saysChrisGarman ever, taxis zipped from one district to an- roadblocks on highways and burning tyres of Eurasia Group, a consultancy, “Brazil- other on eerily empty streets in just a few in protest, however, he backed down. On ians are starting to associate corruption minutes—those that still had fuel to burn. the ninth day of the strike, he agreed to re- with the government’s inability to provide On May 21st hundreds ofthousands ofBra- duce fuel prices by 0.46 reais per litre, public services”. The risk is that when zilian lorry drivers started a strike, halting freeze them for 60 days and eliminate sev- crooked politicians offer such a tempting deliveries of food and petrol, grounding eral taxeson lorriesforgood, ata cost to the scapegoat, it becomes harder to convince flights and costing as much as 50bn reais government of9.5bn reais. voters of the need to reform a system that ($13.5bn), or 0.8% of GDP. Poultry produc- The president’s about-face was a con- lets much larger vested interests take regu- ers said that 64m birds have starved as a recession to political reality. Despite the shut- lar helpings of taxpayers’ money in ways sult, and the stockmarket has fallen by tered petrol stations and empty supermar- that are perfectly legal. 7 6.2%. One distribution centre for farm products that usually registers 1,500-2,000 shipments a day reported only 115. A vege- table vendor hired cabs to deliver lettuce; onions fetched five times the normal price. The strike was organised not by a union but by self-employed drivers using Whats- App. With slim profits and cumbersome taxes, the drivers’ finances were already precarious; the near-doubling of fuel prices since 2016 has pushed them towards ruin. That increase was caused partly by a declining currency, but also by the government’s decision last year to scrap the subsidies that Petrobras, the state-controlled oil firm, had lavished on domestic fuel sales. Investors had cheered the reform, one of the biggest steps taken by the president, An apple a day keeps high fuel prices away Asia The Economist June 2nd 2018 33

Also in this section 34 Dressing up in Thailand 35 Singapore’s Brutalist heritage 36 Banyan: India’s rickety democracy

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

The Korean peninsula other, said Mr Moon. Since he became president a year ago, All aboard the peace train, again Mr Moon has staked much political capital on the pursuit of detente on the peninsula. So Mr Trump’s volte-face, just after the somewhat subdued reception he had given his Korean ally in Washington, was em- SEOUL barrassing. Most South Koreans strongly support Mr Moon’s efforts. They are Detente between America and North Korea seems backon track, fornow alarmed by options for military action HE contrast could not have been they made arrangements to meet in the against the North that have been floated in Tstarker. In a picture released by his of- northern part ofthe demilitarised zone be- Washington over the past year. In a poll fice on May 25th, Moon Jae-in, South Ko- tween theircountries, and did so within 24 thisweek, two-thirdssaid theyfeltoptimis- rea’s president, looked a decade older than hours. The two leaders agreed their senior tic about prospects for peace. Nearly his 65 years. All facial features pointing officials would hold talks on June 1st—a 200,000 people have signed a petition en- downwards, he might have been about to previously arranged encounter having couragingMrMoon to “cheerup” and keep cry. Only a day later, a fresh crop of images been cancelled by the North only a week tryingto secure it. On the same day that Mr showed Mr Moon (on the right of the pic- earlier. They also made plans for military Trump cancelled the Singapore summit, ture above) in a decidedly more upbeat talks and reunions of families divided by Mr Moon’s other big political project—con- mood. Smiling broadly, he shared a warm the Korean war of1950-53. stitutional reform aimed at reducing the embrace with Kim Jong Un, the leader of power of the presidency—was derailed by North Korea, at their second meeting in Whoever mentioned a sea offire? the opposition in the National Assembly. less than a month. Both leaders were keen to stress their good That defeat may have given him all the MrMoon’schangingexpression reflects relationship. “It was a meeting between more impetus to achieve success by bring- the back-and-forth of diplomacy on the friends,” Mr Moon told reporters in the ing Mr Trump and Mr Kim together. Korean peninsula over the past week. On South. Rodong Sinmun, the North’s main As The Economist went to press, it May 24th Donald Trump, America’s presi- newspaper, published an upbeat report of looked as though Mr Moon’s efforts were dent, abruptly cancelled a meeting with the encounter. But the chief aim of the paying off. On May 26th, after news broke Mr Kim that had been scheduled to take meeting appears to have been to persuade of the second inter-Korean summit, Mr place in Singapore on June 12th, citing the Mr Trump to renew his efforts to meet Mr. Trump sounded as if he had never called North’s “tremendous anger and open hos- Kim. North Korea’s leader was still com- off his meeting with Mr Kim. “It’s moving tility” towards America in its recent official mitted to the goal of “denuclearisation”, along very nicely. So we’re looking at June language. The announcement caught both claimed Mr Moon (without specifying 12th in Singapore. That hasn’t changed,” he America’s allies and Mr Kim by surprise. what that meant), but was worried about said. On the following day, an American After the initial shock, to which Mr Moon’s how America would guarantee his re- delegation including Sung Kim, a former ashen-faced expression attested, the lead- gime’s security should he give up his nuclear negotiator and ambassador to ers of the two Koreas took matters into weapons. It was therefore vital that Ameri- South Korea, travelled to the demilitarised their own hands. At Mr Kim’s initiative, ca and North Korea keep talking to each zone for talks. Another American delega-1 34 Asia The Economist June 2nd 2018

2 tion went to Singapore to discuss logistics if America sends credible signals that it is royal temple, Wat Chaiwatthanaram, half for a Trump-Kim meeting. And on May serious about changing its hostile stance a dozen women dressed in the protago- 30th Kim Yong Chol, a vice chairman of towards North Korea. Even that would be nist’s iconic pink chut thai wait their turn North Korea’s ruling party, arrived in New fraught with difficulty ifit means the North for a professional photo shoot. The tem- York for talks with Mike Pompeo, Ameri- giving up long-range nukes but not the ple’s periphery is plastered with posters ca’s secretary ofstate, despite being techni- onesthatthreaten South Korea and Japan— depicting scenes from the soap. cally banned from travelling to America. all the more so ifitresultsin America’sscal- These days the park receives18,000 vis- The diplomatic flurry suggests that Mr ing down its military presence in the itors daily, up from just a thousand when Trump is once again as keen on the summit South. But unless America makes clear the series began in February (it finished in as are the leaders ofthe two Koreas. what it is, or is not, prepared to give Mr April, but is being re-run). Most visitors are Yet the process remains fraught with Kim, says Robert Kelly ofPusan University, Thai, but there also many foreigners—the risk. Mr Trump’s flip-flopping has cost the “the best we can hope for from Singapore soap is also being screened elsewhere in Americans a fair amount of leverage. is some vague declaration of intent that the region, including Vietnam, Laos, China America’s threat to impose “maximum further kicks the can down the road.” Giv- and Russia. Some ruins have been dam- pressure” on North Korea if things go awry en the alternatives, there may be value in aged by the sudden surge of visitors. Suka- is looking less credible given Mr Trump’s just keeping up a conversation. 7 nya Baonoed, the site’s director, says visi- renewed enthusiasm for a summit despite tors have been climbing on ancient things having, in his view, gone awry once structures and taking “inappropriate pho- already. On May 28th, in order to smooth tos”. In March a picture ofa woman (not in the way fora summit, America delayed the chut thai) sittingon the lap ofa Buddha stat- implementation of a fresh round of sanc- ue caused fury among social-media users. tions against the North. Were it to push for Mania for the show is widespread. an even tougher batch of them, America Ayutthaya-era dishes have been added to may have difficulty persuading China to the menus of Thai eateries. Hair salons of- agree. In recent months China has gone fer styles seen on the show. It is a distrac- much furtherthan before in its willingness tion fora country that has been plagued by to implement UN-imposed ones. It may divisive politics for more than a decade. worry that squeezing Mr Kim even harder “The show serves as escapism for Thais could cause his regime to collapse. who imagine a kingdom that is united against foreigners instead of fighting Still worth a try amongst themselves,” says Waranya Mr Trump’svacillation is likely to have giv- Primsi, who studied anthropology. en Mr Moon even more pause for thought It also happens to suit the agenda ofthe about the durability of any deal that may army, which took control in Thailand just be reached between Mr Trump and Mr over four years ago. Prayuth Chan-Ocha, Kim. There is no clear outline ofthe kind of the coup’s leader who is now prime minis- agreement Mr Trump is hoping to get. ter, has complained that television dramas America still seems to be insisting that the make people “fight and create divisions”. North give up its nuclear weapons before He says scripts must be written “on recon- America makes any concessions. Mr Kim ciliation, on tourism and on Thai culture”. has explicitly rejected this approach. Most He has praised “Love Destiny”. analysts say it will lead nowhere, and that Thai culture Since 2015 junta leaders have been en- a verifiable dismantlingofthe North’s nuc- couraging officials and students to wear lear arsenal and its numerous related facil- A trip down traditional dress, perhaps believing that ities could take years. Mr Trump has not this will help to inculcate a spirit of patriot- given details of what he is willing to offer fantasy lane ic conservatism and thereby boost support Mr Kim in return, beyond promises of for the army, a bastion of such sentiment. “economic co-operation”, a good relation- AYUTTHAYA Until now they have had little success. ship with America and “protections that Yukti Mukdawijitra ofThammasat Univer- What a historical soap reveals about will be very strong”. sity says that before the show, people rare- modern Thai politics The capriciousness of Mr Trump’s ap- ly wore chut thai except at weddings. He proach and the uncertainty surrounding N SWELTERING heat at Ayutthaya His- says Western dress has long been regarded his strategy, ifindeed there is one, risk giv- Itorical Park north of Bangkok, Thailand’s by Thais as a symbol ofmodernity. ing Mr Kim a moral advantage in the eyes capital, a bevy of beautifully clad ladies The monarchy, another stronghold of of officials in South Korea and China, strut ostentatiously in their silky tradition- conservatism, has been encouraging the where misgivings about Mr Trump run al costumes, known as chut thai. They are wearing of period costume. In February high. Many South Koreans worry that Mr among thousands who visit daily to have King Vajiralongkorn, who in 2016 succeed- Trump is too fixated on appearing the win- their pictures taken amid the scenic ruins ed his late and long-reigningfather, Bhumi- ner in his dealings with North Korea. One of the old city of Ayutthaya, destroyed by bol Adulyadej, revived a traditional “Win- example of this was a tweet in which Mr Burmese invaders in 1767. ter Festival” associated with one of his Trump appeared to boast that Kim Yong Many of the tourists are not really there ancestors. Citizens were encouraged to at- Chol’s decision to visit America was the re- for the remains. Ayutthaya is the setting of tend in traditional wear and take part in result of the now-rescinded decision to can- a television seriescalled Buppesannivas or tro-themed activities such as garland-mak- cel the America North Korea summit. “Love Destiny”, which has broken audi- ing. The culture minister declared that Mr There is a chance ofprogress ifthe sum- ence recordsin Thailand and stirred the na- Prayuth and his wife were the “best mit does now happen. Mr Kim does not tion into a frenzy of sartorial nostalgia. It is dressed” at the event. want to give up all his nuclear weapons, a time-travel love story about a woman in Mr Prayuth’s efforts to harness Thai cul- says John Delury of Yonsei University, but contemporary Thailand who is reincarnat- ture to his own political ends are some- he may be willing to give up some of them ed in ancient Ayutthaya. In front of an old times more blatant. Earlier this year, the 1 The Economist June 2nd 2018 Asia 35

2 junta launched a campaign called Thai Ni- in selfies with the cast in traditional wear ways been cramped for space. Although it yom or “Sustainable Thainess”—a project (see picture, previous page). Authorities has grown in recent years, through exten- sounding like one that aims to appeal to have deemed the show so culturally en- sive land reclamation, land values remain people’s cultural pride but in reality is riching that it is now screened in Thai pri- eye-wateringly high. According to govern- aimed at their pockets. It involves sending sons. In March the interior ministry an- ment data, residential property prices out 7,800 teams to help “local develop- nounced that people could have their were 44% higher in the first quarter of this ment”. This week, the junta approved a national ID cards replaced with ones year compared with the same period in Sustainable Thainess project that involves showing them in traditional wear. 2009. The result is that many buildings dolingout 200,000 baht ($6,240) to each of Those with an interest in history may have been torn down to pack more people 82,371villages across the country by July to find all this disturbing. Chris Baker, the au- into the same amount of land. Lee Kuan “improve the quality of life”. It is unlikely thor of “A History of Ayutthaya”, writes Yew, Singapore’s late prime minister who to be a coincidence that national elections that in the city’s heyday “paternal king- led the country for three decades, took a are planned fornext February. ship” gave way to “royal absolutism” and pragmatic approach to conservation. (A The junta may well have little to do freedoms were “buried by slavery and mo- political spat between his descendants last with the show’s success, but it has decided nopoly”. Those who cannot remember the year centred on Mr Lee’s charming 19th- to ride the wave. Mr Prayuth has appeared past may be at riskofrepeating it. 7 century house in Oxley Road, which he said should be demolished afterhisdeath.) In 2005, despite a large public outcry, the Singapore’s architecture government tore down the much-loved National LibraryofSingapore to make way Brutal love fora tunnel. In post-independence Singapore, many people understood that such sacrifices needed to be made for the public good, says Joshua Comaroff, an architect. But at- SINGAPORE titudes are beginning to change. In 1989 the government’s urban redevelopment au- The city-state’s nostalgia forgarish concrete thority started conserving buildings, par- IME has stopped in the Golden Mile all having a stake—have started to prepare ticularly pretty colonial-era shophouses TComplex. Inside the sprawling 1970s forsales, too. and areas such as Little India. But Jerome buildingrowsupon rowsoftravel agencies In a place where public protest is Lim, who writes a blog about Singapore’s sit mostly empty, their employees staring frowned on by officials, anxious Singapor- architecture, says the 50th anniversary of into space. Stalls selling shoes, handbags, eans have been setting up protest groups independence in 2015 was a turning point. toothpaste and half-price stereo systems on Facebookto tryand stop the demolition He says that is when people started to are illuminated in the gloom, while the ofPearl Bankand otherBrutaliststructures, thinkmore about the city’s heritage, and to smell of soap mixed with cheap perfume orhave been writingimpassioned opinion speakout more about conserving it. Before fills the air. From the second floor, the pieces in the state-owned media to try and the managers of People’s Park closed the strains of a solo karaoke singer can be influence CapitaLand, which is partly Brutalist building off entirely, couples heard, defiantly off-key, from one of sever- owned by the government. Their well- would sneak onto the roof to take pictures al dimly lit Thai bars which are full ofpunt- mannered outcry shows how attitudes to- with the Lego-like yellow and green resi- ers even in the middle of a weekday afterwards Singapore’s past are shifting. dential units as a backdrop, to post on so- noon. The place does not just feel like it is The tiny city-state of 6m people has al- cial media. from the past, but from another South-East Although millennials were born long Asian country entirely. after these buildings were erected, they are The building, which was once called a especially fond of them. At the top of the “vertical slum” by a Singaporean legislator, Golden Mile Tower is the Projector, an in- is a densely packed mix of residential and dependent cinema which opened in 2014. commercial units. Along with People’s It shows films that would once have been Park in Chinatown (pictured), which has banned in Singapore such as gay and lesbi- been praised by the Dutch architect Rem an flicks or the back catalogue of Ingmar Koolhaas, it is among a handful ofBrutalist Bergman. Brutalist buildings appeal to Sin- buildingsthatwere builtin a surge of archi- gaporean youngsters partly because they tectural confidence after the country be- are so different from the rest of the steel- came independent in 1965. They are partic- and-glass city-state, which is constantly ularly adored by those who love concrete, undergoing change. The structures can feel as well as bold and wacky colours. subversive just because they still stub- Modernist buffs have started to fret that bornly exist. But millennials also like the manyofthese Brutalistbuildingswill soon “can-do spirit” of those who built them, be gone. In February one of them, Pearl thinks Weng Hin Ho, an architect. They Bank, once the highest residential tower in represent a time when there was “much Singapore, was sold for S$728m ($544m) to more belief and conviction in doing things CapitaLand, one of Asia’s largest real-es- on our own,” he says, rather than relying tate developers. The company plans to de- on foreign multinationals to come in and molish the yellowhorseshoe structure and build an identikit city. build a “high-rise residential develop- Mr Lee would not have liked such nos- ment” of 800 flats in its place. Since then talgia—just as he would have disapproved several of the other buildings—most of ofthe decision, forthe moment, to keep his which are privately owned in a co-opera- house intact. But a love of Brutalism may tive-like system with hundreds of owners A precious sight for S’pore eyes be the flipside ofeconomic success. 7 36 Asia The Economist June 2nd 2018 Banyan Not cricket

Indians often despairoftheirdemocracy. They should lookat the big picture rupees(around $15m) had been offered aslures, the opposition allies corralled their legislators into three hotels to shield them from outside influence. Only after India’s Supreme Court inter- vened were the two parties allowed to form a majority coalition, which the governor shamefacedly accepted. This was hardly the first occasion when a party had locked its politicians in purdah to preserve their chastity from a predatory rival. What was disturbing this time was the abject failure of the governor—a centrally appointed official with few powers—to act impartially, as well as the scale of the bidding war which the BJP appeared prepared to mount. Given the party’s hold in Delhi as well as in 20 other Indian states, and the fact that, by official reckoning, it has far more money than all its rivals put together, this grab for power in Karnataka looked unsporting even by the standard ofIndian politics. The BJP is not alone in such games. When voters in the state of WestBengal castballotsin Mayto choose membersofvillage and regional councils, they found that more than a third of the thousands of seats had already been claimed by the All-India Trina- mool Congress (TMC). More accurately, they found that no other candidates had dared run against the TMC, supporters of which N THE spring of1947 the leaders ofIndia’s independence move- have a reputation for thuggish tactics. Not surprisingly, the TMC Iment reached a fateful decision. The right to vote in the soon-to- waltzed home with three-quarters ofthe seats. be-born Indian republic, they agreed, would no longerbe restrict- Again, using street muscle to squash opponents is nothing ed as under the British Raj, but open to every adult citizen. The new in Indian politics, just as the BJP’s thinly disguised efforts, in move created the world’slargestdemocracy, and also burdened it recent elections across the country, to whip up prejudice against with a colossal challenge. As Ornit Shani, an Israeli historian, the Muslim minority have a pedigree. What is new is that tradi- deftly explains in a new book, the logistics alone were daunting. tional checksagainstsuch tactics, such asexposure in the press, or With more than 170m eligible voters to register—some 85% of intervention from the courts or election bodies, seem to have them illiterate back then—it took tens of thousands of workers grown less effective. Some of India’s media have venal inclina- two full years just to compile the rolls forIndia’s first general elections, making them prone to bribery by those who want to use tion, conducted in 1951. At the time Rajendra Prasad, a politician them to get their message across. who was to become the country’s first president, made a back-of- Even those most unsullied ofIndia’s institutions, the Supreme envelope calculation. Bound in one volume, he reckoned, the Court and the Election Commission, have lately come in for voter lists would be 200 metres thick. knocks. In January four Supreme Court judges took the unprece- Today that “phone book” is five times thicker. At India’s next dented step of holding a press conference to question the impar- general election, to be held sometime in the coming year, more tiality oftheir own boss, India’s chiefjustice. This added to wide- than 900m people will be eligible to vote. Butafterseven decades spread perceptions that he may be too beholden to the party in of practice, the toughest challenge for Indian democracy is no power. As for the Election Commission, its reputation for staying longer logistical. It is that players have grown increasingly skilled above politics has been dented by, among other puzzling moves, at gamingthe system. Just as Indians habitually vote at local, state a decision last October to delay voting in the state of Gujarat for and national elections, they also habitually moan at the skuldug- several weeks. Thisallowed the incumbentBJP, faced with an un- gery of Indian politics, which can seem a constant parade of expected surge in backing for the rival Congress party, to shower horse-trading and bald-faced influence-peddling. Suffice it to the state with a pre-election windfall of government spending. note that about a third of MPs in recent Indian parliaments have The result: a slim victory forthe BJP. had pending criminal cases against them. Even for a public inured to garish politics, events of late have Don’t despair proved worrying. Take the election held in May forthe legislature Given the dismaying accumulation of such embarrassments, it is of Karnataka, a southern state with a population the size of Brit- notsurprisingthatPewGlobal, a pollinggroup, lastyear found In- ain’s. As many had predicted, the vote split three ways, leaving a dians to be less enthusiastic about democracy, and more drawn hungparliament. Blithely ignoringan agreement between two of to having a strong leader or even military rule, than citizens of the parties to form a majority coalition, the state’s governor in- any other democracy surveyed. But India did try dictatorship, stead tapped the third party to rule, granting it an unseemly two briefly, under Indira Gandhi in the 1970s, and did not like it. Much weeks to cobble together a majority. like India’s crowded and creaky railways, its democracy may Unseemly, because in practice this decision gave the anointed sorely need an overhaul—but not because it has actually stopped party, which happens to be the governor’s own Bharatiya Janata working. Messy as it may be, India’s political system may be cred- Party (BJP)—also the party in power in Delhi—a full 15 days in ited with some great achievements. It has helped hold a huge and which to bribe, threaten or otherwise cajole enough newly elect- almost impossibly diverse country together. It has kept the army ed opposition legislators to switch sides and join it in govern- out of power. And it has upheld civic freedoms that, for all their ment. Amid stories that ministerial posts, and sums of up to 1bn fragility, remain the envy ofmany ofIndia’s neighbours. 7 China The Economist June 2nd 2018 37

Also in this section 38 Belting along the digital Silk Road

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

Regional development around Guiyang, a verdant city of 3m people surrounded by tree-covered karst. A Bootstrapping a backwater guide displays a map of the area, pointing to its data centres. As well as those of Ten- cent and Apple, they include facilities for Foxconn of Taiwan, South Korea’s Hyun- GUIYANG dai and China’s three state-owned telecoms firms. A new complex being built by The biggest centres oftech industryin China are on the coast. Two stories lookat Huawei, a telecoms equipment-maker, how inland provinces are trying to change that will resemble a Swiss lakeside town. ROBOTtallerthan the Arc de Triomphe 1960s Mao began moving much of China’s Guizhou is a reasonable enough place Atowers over a new theme park on the weapons production and other manufac- to house large servers. Land is cheaper edge of Guiyang, the capital of the south- turing away from coastal areas that were than on the coast. Electricity costs less, ern province of Guizhou. Attendants at easy to attack. Now the country wants to thanks to local hydropower and the prov- Oriental Science Fiction Valley dress in lead the world in big data, artificial intelli- ince’s position on the route ofbigtransmis- blue-and-silver space suits. They greet visi- gence and other cutting-edge pursuits. The sion lines that bring power from China’s tors with salutes used by the Vulcans in coast would make sense: that is where the sparsely populated west. It has a milder cli- “Star Trek”. The main attraction is an in- techies mainly congregate. China, how- mate than southern coastal cities, making door rollercoaster. It simulates an air battle ever, is encouraging some of this business it easier to keep servers cool. It is not prone over a futuristic city with the help of virtu- to move beyond the wealthy boom towns to natural disasters. al-reality headsets that are handed out to ofthe seaboard. Tech executives also have political mo- every rider. Outside, a troop of black-clad tives for investing in Guizhou. They want security guards armed with big sticks adds The digital solution to be seen to support the government’s pet a genuine air ofmenace. Security is only one, minor, reason. In 2015, projects. Investing in Guizhou has been a Such space-age fantasy appears incon- when the central government declared chance to curry favour with the party’s ris- gruous in Guizhou. The mountainous re- that Guizhou would be a “National-level ingstars, who are sometimes dispatched to gion is one of China’s poorest provinces Pilot Zone” for big-data development, it the province as a sort of trial by fire. As (see map, next page). More than 4m of its had two main motives. The first was to ful- party chief of Guiyang from 2013 to 2017, 35m inhabitants live on less than $1.90 a fil a promise to stimulate regions that have Chen Gang was one ofthe tech cluster’s ar- day, according to the government. In 2016 benefited least from China’s rapid devel- chitects. He is now in charge of one of Mr less than 45% of them used the internet. opment (last year the country’s leader, Xi Xi’s big schemes—the building of Xiong’an Five years ago, however, Guizhou started Jinping, showed his support for backward New Area, a whole new city near China’s selling itself as a good place for big compa- Guizhou by attending a Communist Party capital. Chen Min’er, Guizhou’s boss until nies to store vast reservoirs of data. Now it congress as a delegate ofthe province). The last summer when he took over as party is experiencing a tech boom. Beneath a hill second was to show that China’s less in- chief of Chongqing, is another person not far away from the amusements, Ten- dustrialised regions can modernise with- whom companies have wanted to butter cent, an internet giant, has finished exca- out the dirty factories that have left urban up. In October he gained an additional ti- vating a bomb-proofcavern with five mas- areas elsewhere in China choking in smog. tle: member ofthe ruling Politburo. sive entrances. It will house one of the The number of tourists visiting Guizhou But will Guizhou’s data-hosting indus- company’s largest server centres. Last year jumped by40% lastyear—manyofthem at- try transform its economy? Warehouses Apple said it would invest $1bn in the re- tracted by its beautiful landscapes. filled with servers require huge upfront in- gion. On April 25th it broke ground there Officials say there are more than 8,500 vestments but few staff. The bigger spoils on its first data centre in China. big-data firms in Guizhou, more than eight flow from sprightlierbusinesses that know China has a history oftrying to develop times as many as in 2013. Much of the ac- how to crunch data. Guizhou also wants to important industries deep inland. In the tion in the province is taking place in and attract those. One ofthe perks ofbecoming1 38 China The Economist June 2nd 2018

2 a big-data pilot zone was being allowed to liam Li of Esgyn, a database firm with of- tists. Xi’an has a long history, stretching supply such firms with reams of govern- fices in Guiyang and two other Chinese cit- back to the Mao era, of supplying techni- ment-held data to process for profit. ies. Yu Yueqing, who owns a business that cians needed by defence industries. Between May26th and 29th manycom- crunches educational data, agrees. He left Officials expect Xi’an Software Park, pany bosses flew in from their coastal Guiyang after graduating in 2009, but depart of the city’s main tech centre, to em- headquarters for a “Big Data Expo” held in cided to move his eight-year-old company ploy 250,000 tech experts by 2021, com- Guiyang. Billboards filled the city with back to the city last year. However, he still pared with 165,000 in 2016. They predict such pithy slogans as: “Acutely grasp the struggles to find enough qualified staff. For that over the same period its revenue will historical opportunity of informatisation the foreseeable future, his research team rise by more than 150% to 500bn yuan development.” But getting firms to stay will continue working in Beijing. ($78bn). Hardly a tech convention goes by will be tricky. A few years ago officials en- It is unclear whether Guizhou’s politi- in Xi’an without talk of the digital Silk ticed Huochebang—a startup that helps cal fortunewill change now that the pilot’s Road. Earlierthismonth cityofficials held a find loads for lorry-drivers and which was early proponents—the two Mr Chens— conference about civil-military co-opera- recently valued at more than $6bn—to have moved to other provinces with their tion in buildingone. Ata programmers’ fes- move to Guiyang from Chengdu, a much own tech dreams. When a routine letter of tival in November, animations on huge bigger and trendier city. But many of its congratulation from Mr Xi was read aloud screens showed data crackling westward best-paid staff continue to work at offices at Guiyang’s recent expo, the province’s from Xi’an to Istanbul. Speakers were in coastal cities, notes Dan Wang of Gave- current boss, Sun Zhigang, described it as greeted like rock stars by throngs of aspir- kal Dragonomics, a research outfit. “historic” and “a milestone”. Such sucking ing young programmers. The government of Guizhou is an en- up is common among officials across Chi- Xi’an’s efforts to attract tech firms, such thusiastic champion of companies that na. Given the competition, Mr Sun may as offering housing subsidies to their staff, make the province their home, says Wil- have good reason to indulge in it. 7 are paying off. Huawei, a maker of telecoms equipment, has built its largest pro- gramming research-facility there. HSBC, a Digital infrastructure bank, uses developers in Xi’an to produce a variety of software, including versions A web of silk for cyber-security and market analysis. What is happening in Xi’an, says Frank Tong, HSBC’s head of innovation, “is for real.” Unlike Guiyang, the city has considerable pull foryoung techies. It is only a bit XI’AN less cosmopolitan than Beijing or Shang- hai. Yet its housing is farcheaper. China talks ofbuilding a “digital SilkRoad”. A cityon the ancient one is cashing in The central government has been HINA’S vague but much-vaunted Belt val ofSilicon Valley or Bangalore. cheering Xi’an’s efforts. In April China’s of- C and Road Initiative (BRI) has been pro- Compared with Guiyang in the south, ficial news agency said the city was in the viding buzzword fodder for government another inland city with such aspirations “fast lane” to becoming a “Silicon Valley in leaders and official sloganeers since 2013, (see previous article) but a shortage of the west” of the country. That may be an when the country launched the scheme to skilled people, Xi’an has a lot going for it. exaggeration. The toll ofChina’s heavy on- extend itspolitical and economicinfluence The city of 8m is home to 63 colleges and line censorship may not hinder the code- abroad by investing in infrastructure and universities, as well as hundreds of re- crunching of programmers. But for the other big projects. The “belt” refers to an search institutes. They produce 300,000 kind of world-class nerds that Xi’an wants overland push across Eurasia and the graduates each year, most of them scien- to attract, it must be a deterrent. 7 “road” to a maritime route to South Asia and beyond. But in recent months some RUSSIA A new rhetoric (consistent in its challenging KAZAKHSTAN I HEILONGJIANG S use of metaphor) has been promoting a S 48.1 U virtual dimension: a “digital SilkRoad”. R Urumqi Xi Jinping, China’s president, has re- MONGOLIA JILIN vealed few details, beyond that it will en- 50.9 XINJIANG 77.8 compass quantum computing, nanotech- LIAONING N. KOREA 54.9 Beijing nology, artificial intelligence, big data and INNER 62.6 JAPAN GANSU 52.2 MONGOLIA cloud storage. In April he said it would in- 42.4 TIANJIN 64.6 S. KOREA volve helping other countries to build digi- 53.3 54.5 50.7 SHANXI HEBEI tal infrastructure and develop internet se- GDP per QINGHAI NINGXIA 55.5 SHANDONG 52.9 person curity. The digital Silk Road will help to Xi’an 2016, yuan ’000 CHINA HENAN JIANGSU 56.6 create “a community of common destiny SHAANXI 43.4 44.3 in cyberspace”, suggests Chen Zhaoxiong, TIBET 52.4 100 ANHUI SHANGHAI 74.1 a vice-minister ofinformation technology. 46.1 Chengdu 80 51.6 HUBEI 51.4 ZHEJIANG 65.6 Whatever that means, the western city NE SICHUAN 60 PA CHONGQING JIANGXI of Xi’an is eager to cash in. The city was L 43.6 HUNAN 40 BHUTAN 44.6 44.4 once China’s imperial capital (its army of INDIA Guiyang FUJIAN 69.7 20 terracotta warriors lures millions of tour- BANGLA- GUIZHOU Internet ists). It was also a hub on the ancient Eur- DESH YUNNAN 43.2 TAIWAN 39.9 GUANGXI GUANGDONG penetration asian Silk Road, which China cites as its in- 46.1 74.0 Shenzhen 2016, % spiration for the BRI. That connection has VIET- Hong Kong 00.0 Bay of MYANMAR NAM South encouraged Xi’an’s government to claim a Bengal LAOS China Sources: role for the city in the building of a digital HAINAN 51.6 National Bureau of 500 km Sea road. Its officials speakofit as a potential ri- Statistics; CNNIC Britain The Economist June 2nd 2018 39

Also in this section 40 Abortion in Ireland 42 Bagehot: Political drinking

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

Universal credit mimics the way that most employees are paid. But over a tenth of employees are The new safety net paid weekly, and the share ishigheramong low earners, who are most likely to receive universal credit. Reams of research show that people on low incomes struggle to budget over long periods. A recent official BRADFORD memo points out that “[f]or some claimants this change of payment frequency on The government is shaking up Britain’s welfare system. It is not going well transition to UC has been challenging and REXIT may get all the headlines, but for stand why everyone is so anxious, consid- [has] led to rent arrears.” B millions of Britons another change is er how universal credit is designed, and Claimants also appear to be struggling looming which could have an even bigger how it works in practice. with the conditions attached to receiving impact on their lives. By 2022 the govern- Universal credit was conceived in the benefits, which have been tightened for ment hopes to have fully implemented late 2000s as a fairly generous scheme that many people under universal credit. As of “universal credit”, the biggest shake-up of would establish the Tories as champions early 2018 about 4% of universal-credit the welfare system in decades. One in four of the deserving poor, rather than the mi- claimants were being “sanctioned” for households will receive payments under sers many working-class voters believed breaking their commitments, resulting in a the new regime. Many aims of the scheme them to be. Yet over time, the government lower payment. David Webster of Glas- are laudable. But it is plagued with pro- came to see the new system as a way to gow University suggests that the sanction blems that could spell trouble for its recipi- save money. George Osborne, the chancel- rate for unemployed universal-credit ents—and forthe government. lor in 2010-16, reduced the amount that claimants is about twice that under the old Recent administrations of left and right claimants had to earn before their benefits unemployment benefit. have reformed welfare to make work pay. were withdrawn. The upshot is that uni- However, the biggest problem facing Today Britain has one of the rich world’s versal credit is expected to end up being universal credit has been poor implemen- highest working-age employment rates, at about £2bn ($2.7bn) less generous overall tation. Claimants generally must wait for around 75%. In America, whose rate is than the previous (already hard-nosed) five weeks before receiving their first pay- more like 70%, those on the political right system, shavingaround 3% offthe total bill. ment, as employees often do when they often say that Britain has shown the way. One of its appeals is its apparent sim- start a new job. Plenty of those moving The Conservative government claims that plicity. Rather than having to supply perso- onto universal credit have practically no fi- universal credit, which merges six existing nal information again and again to differ- nancial assets, making this a painful wait. benefits—from working tax credit to hous- ent government bodies, in theory And IT glitches mean that five weeks is of- ing benefit—into one, will nudge another claimants need do so only once, points out ten a minimum. Towards the end of last 250,000 people into work. David Finch of the Resolution Foundation, year the government revealed that 4% of Yetasitisgraduallyrolled out, universal a think-tank. By merging six payments into claimants had not been paid in full even credit is proving deeply unpopular. Brad- one, claimants are less likely to miss bene- after ten weeks. Food banks report higher 1 ford, a relatively poor city in northern Eng- fits to which they are entitled. Simplifica- land, will introduce it this month. At a tion also removes some of the perverse in- benefits “summit” organised by communi- centives of the old system, under which ty groups in a hall on the outskirts of the some claimants faced marginal tax rates of As part of our Open Future initiative on city, there is a palpable nervousness. Over up to 100%. the future of liberalism, we discuss onion bhajis, locals air their fears. One has Yet this simplicity also has downsides. another big idea among those interested heard that evictions have risen in areas Take the way that universal credit is paid. in welfare policy: universal basic income. where universal credit has been imple- Claimants generally receive a single pay- Nicola Sturgeon, Scotland’s first minister, mented. Another exhorts the assembled ment once a month. That arrangement ra- and Frank Field, MP for Birkenhead, offer throng to “arm ourselves” with informa- tionalises what was a mish-mash of dis- their thoughts on whether UBI is smart tion to cope with the change. To under- bursements under the old system. It also policy at economist.com/openfuture/ubi 40 Britain The Economist June 2nd 2018

2 demand in areas where universal credit November, Philip Hammond, the current risk losing the support of the DUP? She has been rolled out. chancellor, bumped up the transitional would not be foolish enough to do that.” The upside to a tougher benefits system loans to which claimants are entitled as The British government argues that the could be higher employment. Yet Paul they await their first payment. It is getting abortion question is, in the first instance, a Johnson ofthe Institute forFiscal Studies, a easier for claimants to have their money matter for the Northern Ireland Assembly. think-tank, has said that the impact on em- paid directly to landlords, so that they do That is true, but ignores the fact that the As- ployment is “highly uncertain”. Evidence not fallinto rent arrears. sembly has been suspended since January so far suggests that it may be less impres- It is odd, though, that a government 2017, after an almighty falling out between sive than the government hopes. Our anal- which is courting votes from the “just the DUP and Sinn Fein, the biggest ysis finds that the employment rate in ar- about managing” classes is not more sensi- nationalist party, with which it is obliged eas where universal credit has been tive to the upset its policy seems to be caus- to share power. The Assembly can be re- introduced has grown no faster than in ar- ing. Reducing the waiting period to a fort- vived only if the two parties agree to work eas where it has not. Joblessness is already night, say, would not cost much. Pausing together again, and there is no sign of that very low; the minority that cannot find the scheme to fix its administrative pro- on the horizon. work probably require intensive training blems would be easy.Yetdespite evidence This has led to calls in Westminster for rather than changes to the way that bene- suggesting it should change course or risk the British government to step in. Dawn fits are administered. doing real damage, the government seems Butler, the shadow minister for women, With universal credit being rolled out determined to plough ahead with a giant, decried the “injustice” of Northern Irish bit by bit, the government can adjust the increasingly unpopularproject that will re- women being denied access to safe and le- scheme as it goes along. In the budget in shape the country.Sound familiar? 7 gal abortion. “We should not be relying on a Victorian law. It is time for change,” said Lord Duncan, a Conservative peer who Abortion in Ireland serves as parliamentary undersecretary forNorthern Ireland. Non-identical twins Would Northern Irish voters embrace such a change? Attitudes have been getting increasingly liberal. Polls find that they strongly support extending the right to abortion to cover cases of rape, incest or fe- BELFAST tal abnormality. But an official survey in 2016 found a majority against the right to Reform in the south sparks calls forchange in the north abortion on demand, of the sort that Ire- LTHOUGH the people of Ireland voted has what amounts to a veto in the Assem- land has just endorsed. Ato overturn the country’s ban on abor- bly, it has no such control in the Commons. Even without reform in the north, the tion on May 25th, in one part of the island Its fundamentalist Protestant base would DUP and other pro-life campaigners worry the restrictions continue. In Northern Ire- be angered if it failed to stop abortion in that Ireland’s decision will increase the land, unlike the rest of the United King- Northern Ireland. number of abortions sought by Northern dom, abortion has never been legal except Never a party noted for subtlety, it has Irish women. Leo Varadkar, the Irish taoi- in the rarest ofcircumstances. already issued a blunt warning that Mrs seach, has indicated that they may well be Within daysofthe Irish referendum, Ar- May “would regret” allowing Tory MPsa allowed to cross the border to have abor- lene Foster, the leader of the Democratic free vote. The DUP’s pact with the Tories tions in the south. For many years Irish Unionist Party (DUP), Northern Ireland’s does not mention abortion. But the DUP women went to Britain to terminate their largestparty, declared thatthe result would hasmade itknown thatitseesthe issue asa pregnancies. It may not be long before Brit- have no impact on the law in her part of deal-breaker. The party’s chairman, Lord ish citizens are travelling from Northern the world. But it quickly became clear that Morrow, declared: “Why would [Mrs May] Ireland to the south forthe same reason. 7 although she was legally correct, she could be politically mistaken. Campaigners in Dublin jubilantly brandished signs promising “the north is next”. In Belfast, activists predicted a “seismic wave” of support forthe north to follow suit. The issue goes well beyond medical and moral matters. In Westminster, the DUP made a pact last year with the ruling Conservative Party, lending it the votes of its ten MPs in return for £1bn ($1.3bn) of extra money for Northern Ireland. Those votes are the only thing keeping Theresa May’s government in office. Following the Irish referendum, senior figures in the Tory party, as well as the opposition, are pushing for abortion reform in Northern Ire- land. Yet the DUP, a socially conservative Protestant outfit, is vehemently against. The prospect of a vote on the matter in the House of Commons has alarmed the DUP. For years it has successfully defeated motions in the Northern Ireland Assembly proposing abortion reform. But whereas it Irish ayes are smiling Influence: Mastering Life’s Most Powerful Skill

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British politics is being transformed by the decline in drinking much more vigorously forBritain to stay in the European Union. That said, today’s Westminster looks like a temperance meeting compared with the Westminster ofold. Ben Wright’s lovingly researched “Order, Order! The Rise and Fall ofPolitical Drinking” demonstrates that British politics was once sodden with drink from the top downwards. Winston Churchill started on the whis- ky shortly after breakfast and later added formidable quantities of wine, brandy and his particular favourite, champagne. Ernest Bevin had the same relationship with alcohol as a car has with petrol. Nye Bevan was nicknamed the “Bollinger Bolshevik” and Roy Jenkins “Old Beaujolais”. By contrast, Mr Corbyn is a virtual teetotaller and Mrs May boasted, in her bid for the Tory leadership, that she doesn’t hang around the Commons bars. Drinking was more than an after-work indulgence. MPs needed to drinkin the House ofCommons’ numerous bars in order to build up a networkofsupporters (or to spread poison about their rivals) and to be able to match journalists drink-for-drink in order to burnish their public image. During the glory days of political drinking it was routine for journalists to share a bottle of wine or more with their sources over a long lunch and then stagger back to their offices in order to hit their deadlines. Today lunches are OR political journalists of a certain age it is impossible to read usually short and dry, though still ridiculously expensive. Fabout the imminent closure of the Gay Hussar, due on June Why has the great tradition of political drinking gone into de- 21st, without a flood of nostalgia. The restaurant is a purveyor of cline? The most popular answer—that everybody is too busy memories as much as Hungarian food. The walls are lined with these days—is nonsense. Mr Corbyn and Mrs May are no doubt cartoons of leading politicians and journalists. A couple of im- working hard to construct their dubious legacies, but it is difficult ages on the stairwell capture their subjects perfectly: a cartoon of to imagine that they work harder than Bevin, who ensured that Michael Foot beaming at his 90th birthday party and a photo- Britain sided with America in the cold war, or Jenkins, who liber- graph ofGordon Brown storming out after a dinner with editors. alised the country’s social legislation, let alone Churchill. Politi- There are all sorts ofreasons forthe closure. The rise in proper- cal journalists are no doubt also very busy tweeting. But it is hard ty prices in Soho is forcing all sorts oflandmarks to close. The res- to think that they are busier than legendary drinkers-cum-work- taurant is too far from Parliament for MPs to get back in time to horses such as Henry Fairlie and Christopher Hitchens. vote. The most remarkable thing about the Gay Hussar is that it Used judiciously, alcohol can be a stimulant to the sort of has survived for so long in a volatile industry. Opened in 1953, it work that makes a difference in politics. It can promote creativity started as a meeting place for Jewish immigrants from eastern Eu- and problem-solving. (William James once said that alcohol rope, many of them communists, became a favourite of Labour “brings its votary from the chill periphery ofthings to the radiant MPs and trade unionists in the 1960s, and then conquered the core”.) It can dissolve hierarchies and create bonds. And it can whole political world in the 1980s. Tory “wets” plotted against promote truth-telling—a dangerous thing for politicians, but a Margaret Thatcher there and Tory“bastards” against John Major. wonderful one for journalists and society in general. There are But the restaurant’s imminent death surely has something to more scoops in a bottle ofwine than a bottle ofPerrier. do with the decline in political drinking. Few people went to the Gay Hussar forthe food. Hungary’s is not one ofthe world’s great One forthe road cuisines and the Gay Hussar’s rendering of it was more faithful The real reasons are more depressing than “pressure of work”. than inspired. Nor did they go for the comfort. The tables are One is that the government is becoming the nation’s nanny. It is cramped, particularly upstairs, and the corridors are higgledy- impossible to tell ordinary people to limit themselves to 14 units piggledy. They went for the booze—or, more precisely, for the in- of alcohol a week if you consume 14 units with your lunch every toxicating mixture of drink and gossip, alcohol and plotting, that day. Another is that people are increasingly aware that, however once made British politics such a joy. good alcohol is as a servant, it is an evil master. Charles Kennedy, Drink has certainly not disappeared from public life. The a former leader of the Liberal Democrats, is one of several MPs Westminster village is about to embark on a long cycle of sum- who drankhimselfto death. mer parties (last July David Lidington, a Tory MP, blamed plots The saddest reason is the rise of a professional political class. against Theresa May on “too much sun and too much warm pro- Drink provided a link between politics and society. The Labour secco”). The summerseason will be followed by the even boozier Party recruited MPs and activists from working men’s clubs that party conference season. Drink still has the power to change the existed in large part to provide workers with cheap drink. Minis- course of political history. Ed Miliband introduced the current ters routinely let their guard down when they demolished the system for electing the Labour leader because a drunken Labour ministerial drinks cabinet with their civil servants and advisers. MP, Eric Joyce, assaulted four other fellow drinkers and the Today, both Labour and the Tories recruit their MPs from think- party’s attempt to replace him produced fears of vote-rigging by tanks and ministers keep up their guard at all times. The decline unions. If Mr Joyce hadn’t got so sloshed, Jeremy Corbyn might of political drinking has snapped yet another link between the still be on the backbenches, and Labour might have campaigned political elite and the people that they are supposed to serve. 7

TECHNOLOGY QUARTERLY Justice

Data for detectives I know what you’ll do next summer

Unparalleled surveillance capacity and vast amounts of data are radically transforming criminal-justice systems, says Jon Fasman N WHATdoes the administration ofjustice which are then filed forfuture consultation. depend? Devotees of the Old Testament Historically, gatheringinformation was an arduous might say wisdom, as displayed in King process, requiring innumerable conversations, many ALSO IN THIS TQ Solomon’s judgment. Others might say a of which later proved to be irrelevant; hours staking dispassionate objectivity. It also requires out a subject; researching documents and testimony; SURVEILLANCE the threat of punishment—the basis of the and reams oftedious paperwork. In illiberal countries, Police have many new ways to monitor people Omodern state’s coercive power to enforce laws. But where governments do not care about their citizens’ civil rights, police could easily tap phones and open John Fielding knew that, before administrators of jus- ENCRYPTION tice could mete out punishment or exercise wisdom, letters. Liberal countries make that harder; police who The law is not keeping they needed something else: information. want to listen to someone’s phone calls can do so only up with technology Together with his half-brother Henry (a magistrate for limited periods and specific purposes, and then better remembered as the author of “Tom Jones”), in only with judicial approval. ELECTRONIC 1749 Fielding founded the Bow Street Runners, Lon- MONITORING don’s—and the world’s—first professional police force, It’s not Cagney and Lacey You don’t have to go to paid for largely with public funds. Information was at Now the relationship between information and crime prison to go to prison the centre of everything Fielding did. He retained de- has changed in two ways, one absolute, one relative. scriptions of suspected criminals, for instance, as well In absolute terms, people generate more searchable in- PREDICTIVE POLICING as a “watch book”, which contained details of expen- formation than they used to. Smartphones passively Big-data justice holds promise and peril sive timepieces to help prevent their resale if stolen. trackand record where people go, who theytalk to and for how long; their apps reveal subtler personal infor- The world’s most famous detective shared Field- ACCOUNTABILITY ing’s view; Sherlock Holmes retained an extensive in- mation, such as their political views, what they like to Rigorous oversight is dexed library of criminals and their crimes. The de- read and watch and how they spend their money. As essential light readers took in following him—a delight that more appliances and accoutrements become net- makes crime fiction one of the great literary genres— worked, so the amount of information people inad- also had information at its heart. What is a clue? What vertently create will continue to grow. is a red herring? How does justice work? We pay hom- To track a suspect’s movements and conversations, age to that tradition with the graphic story that illus- police chiefs no longer need to allocate dozens of offi- trates these pages. cers for round-the-clock stakeouts. They just need to In fact as in fiction, the trend has continued. The seize the suspect’s phone and bypass its encryption. If Metropolitan police department, which has patrolled he drives, police cars, streetlights and car parks Washington, DC, since 1861, retains annual reports de- equipped with automatic number-plate readers tailingcrimes in each precinct. American homicide de- (ANPRs, known in America as automatic licence-plate tectivesrecord detailsoftheircasesin “murderbooks”, readers or ALPRs) can trackall his movements. 1 The Economist June 2nd 2018 3 TECHNOLOGY QUARTERLY Justice

2 In relative terms, the gap between information technology and ernments generally respect citizens’ civil liberties. Activists in Chi- policy gapes ever wider. Most privacy laws were written for the na or Russia have far more to fear. age of postal services and fixed-line telephones. Courts give citi- Some people argue that those who have done nothing wrong zens protection from governments entering their homes or rifling need not worry. But that justifies limitless state surveillance, and through their personal papers. The law on people’s digital pres- risks a chilling effect on citizens’ fundamental civil liberties. After ence is less clear. In most liberal countries, police still must con- all, ifyouare notplanningcrimeswhile talkingon the phone, why vince a judge to let them eavesdrop on phone calls. not just let police officers listen to every call? Police need oversight But mobile-phone “metadata”—not the actual conversations, not because they are bad people but because maintaining the ap- but data about who was called and when—enjoy less stringent propriate balance between liberty and security requires constant protections. In 2006 the European Union issued a directive requir- vigilance by engaged citizens. This is doubly true fornew technol- ing telecom firms to retain customer metadata for up to two years ogiesthatmake police betterattheirjobswhen policy, due process for use in potential crime investigations. The European Court of and public opinion have not caught up. Justice invalidated that law in 2014, afternumerous countries chal- This report will examine the promise and the dangers of those lenged it in court, saying that it interfered with “the fundamental technologies. It explores several arenas in which technology is rights to respect for private life”. Today data-retention laws vary radically changing how the justice system operates—in street-level widely in Europe. Laws, and their interpretation, are changing in surveillance, the ease with which lawenforcementcan bypass en- America, too. A case before the Supreme Court will determine cryption, the use of electronic monitoring as an alternative to pri- whether police need a warrant to obtain metadata. son, and the introduction ofalgorithms by police and courts. It examines technology’s effects on crime and criminals, and Less shoe leather on innocent people caught up in a tech-dominated approach to Ifyou drive in a city anywhere in the developed world, ANPRsare policing. The report does not demand the wholesale rejection of almost certainly tracking you. This is not illegal. Police do not gen- these technologies. Instead it calls for rigorous oversight, which erally need a warrant to follow someone in public. However, peo- hasbeen shown to benefitboth citizensand lawenforcement, and ple not suspected of committing a crime do not usually expect au- which is the only way to ensure that, in their quest for security, thorities to amass terabytes ofdata on every person they have met societies do not inadvertently surrender too much liberty. 7 and every business visited. ANPRs offera lot ofthat. To some people, this may not matter. Toplines, an Israeli ANPR firm, wants to add voice- and facial-recognition to its Bluetooth- enabled cameras, and install them on private vehicles, turning ev- Street-level surveillance ery car on the road into a “mobile broadcast system” that collects and transmits data to a control centre that security forces can access. Its founder posits that insurance-rate discounts could incen- Walls have eyes tivise drivers to become, in effect, freelance roving crime-detec- tion units for the police, subjecting unwitting citizens to constant surveillance. In answer to a question about the implications of such data for privacy, a Toplines employee shrugs: Facebook and WhatsApp are spyingon us anyway, he says. Ifthe stream ofinformation keeps people safer, who could object? “Privacy is dead.” Police have many new ways of monitoring people It is not. But this dangerously complacent attitude brings its de- mise evercloser. One ofthe effects technology has on law enforce- N AUGUST 25th 2017 Johnnie Rush was walking home ment is to render its actions less visible. You would notice if a po- after a 13-hour shift washing dishes at Cracker Barrel, a liceman took photos of every parked car and pedestrian on your restaurant in Asheville, North Carolina. Police street. But ANPRs and body-worn cameras (“bodycams”) let offi- watched Mr Rush cross a street without using a zebra cers do that as an unnoticed matter of course. That makes speak- Ocrossing. They waited for him to buy beer and then ing up about privacy concerns more important, not less. confronted him about the jaywalking, an offence in Technology used responsibly and benignly by one country or that state. When he argued and ran away, they knocked him to the agency can be used for sinister purposes by another. Activists in, ground, used a Taser and punched him in the head. say, Sweden or New Zealand may have few concerns that police Eight months later, following a lawsuit, officials in Asheville re- will use their technological prowess to arrest them on leased nine videosfrom the officers’ bodycams. These camerasare trumped-up charges, because rule of law is strong and those gov- usually clipped to the front of an officer’s uniform or used as a1

4 The Economist June 2nd 2018 TECHNOLOGY QUARTERLY Justice

2 headset. They record audio and video, often with date and time It should give Westerners no comfort that China—a one-party stamps as well as GPS co-ordinates. They can also be Bluetooth- state obsessed with social order—is at the forefront of developing enabled and set to stream in real time. Some have to be turned on bodycams. One Beijing company says it has invented a shoulder- manually, others can be triggered automatically by, for instance, worn, networked model that can recognise faces. Another Chi- an officer unholstering his weapon. nese firm has equipped police with facial-recognition cameras Bodycams are just one way that what officers on the street can embedded in glasses that are meant to let officers know in real see, store and search is changing. These new technologies help in time ifthey are looking at someone on a police blacklist. One esti- investigations and also offer benefits such as accountability. They mate values China’s surveillance-tech market in 2018 at $120bn. make it more difficult forpolice and citizens to lie about contested Human-rights campaigners fear that such technology has already encounters, orwhethera person orcarwasatthe scene ofa specif- been used to monitor activists, enabling arbitrary detention. ic incident. Yet they are still controversial. Evidence of whether Cameras do not have to be worn by policemen. London has bodycams reduce bad behaviour by police officers is ambiguous. one fixed camera for every 20 people. Washington, DC, has about And the potential for abuse of facial-recognition technology is one for every 22. But the data they provide are not always usable. vast, allowing, as it does, real-time deep surveillance. Sometimes their images are poor quality, theirformats are not always uniform, and there is often too much to sort through quickly. Bodycam bodyslam After the terrorist bombing ofa concert hall in Manchester in 2017, The videos of the assault on Mr Rush are sickening. The officer British police had to wade through more than 16,000 hours of who punched him resigned in January, reportedly just before the CCTV footage. department could fire him. Another officer was reassigned, a third According to Mick Neville, who spent 28 years with London’s disciplined, and Asheville released a statement condemning their Metropolitan Police before leaving to found his own forensic fa- behaviour. In a narrow sense, this represented a victory for body- cial-recognition firm, police find usable CCTV imagesin only2% of cam advocates. But that does little for Mr Rush’s battered head. reported crimes in London. “That’s because they don’t have sys- Bodycams are not just supposed to record bad behaviour. The tems in place,” says Mr Neville. “There are too many cameras, too threat of recording is supposed to impel good behaviour, from many formats, maybe they’re working; maybe not.” Don’t blow both officers and citizens. money on gear without systems to extract the data, he advises. The first large randomised study of the issues was in 2012. It Entrepreneurs have noticed the new market: startups that can found that police use offorce and citizen complaints in Rialto, Cal- analyse CCTV footage in nearly any format are now offering their ifornia, dropped markedly when officers wore bodycams. A study wares to video-addled forces around the world. The ideal, says conducted in Britain and California by Cambridge University two one facial-recognition startup founder, is “one to many in the years later found similar results: wearing bodycams was associat- wild”, meaning that a successful platform will be one that can ed with a 93% drop in complaints about police behaviour. compare a single face to its full database of faces, all with non- But these effects appeared only when cameras recorded entire posed images, looking up or down, or halfin shadow. encounters. Another study of eight British and American police forces conducted by Cambridge criminologists found that rates of Round up the usual suspects assault against police were 15% higher when an officer turned his Machine learning and neural networks—software modelled on bodycam on in the middle of an encounter compared with offi- the human brain that learns from observational data and infer- cers who wore no cameras—suggestingthat turningon a bodycam ence as humans do—power today’s facial-recognition products. may represent an escalation. And a randomised study of officers They could make tomorrow’s even more powerful as they incor- in Washington, DC, found that wearing bodycams had no statisti- porate data on body mass, gait and gestures, rather than just the cally significant effect on police use offorce or citizen complaints. standard metrics such as distance between the eyes and width of Not everyone has embraced bodycams. City officials often nose. These platforms can also be trained to recognise objects, balkatthe cost: camerascostasmuch as$1,000 each, with an addi- such as bags or a wristwatch, and to linkthem to people. tional $100 permonth percamera forvideo-storage fees. Police un- Roughly half of all American adults—the vast majority non- ions have expressed privacy concerns. Some civil libertarians fear criminal—have images of their faces stored in FBI-accessible data- they will be used to surveil already heavily policed communities. bases, according to Georgetown University Law Centre. Other Policies governing public access to, and retention of, bodycam countries are expanding biometric storage. This raises questions footage vary widely. Still, usage is growing. One in five American of racial bias. People from minority groups with disproportion- police departments uses them, and nearly all others plan to do so. ately high arrest rates are more likely to be in such databases, and By some estimates the market for bodycams and data manage- so disproportionately likely to be targeted bydragnetsurveillance. ment is $1bn a year in America alone. But citizens are also staring back at police. The American Civil1 The Economist June 2nd 2018 5 TECHNOLOGY QUARTERLY Justice

2 Liberties Union, a watchdog, has released an app through which tered and searched. citizenscan automaticallysend itrecordingsofpolice interactions. Police officers can also carry with them a tablet-sized device Mobile-phone cameras have recorded the deaths of a number of that does a basic device search—a sort of digital triage that lets African-Americans killed by police. Footage of the death of one, them decide quickly whether a fuller investigation and extraction Walter Scott, led to the indictment ofthe officer who shot him. is merited. “Crime scenes in the past were about fingerprints and ANPRs raise concerns similar to those about facial-recognition footsteps,” says Mr Ben-Peretz. “Today it’s digital: mobile devices, databases. Police drive around, collecting and storing images of connected cars and tablets. Our digital footprint: this is the strong- number plates registered to people not suspected of any crime. est indicator forwhat really happened.” Vigilant Solutions, an ANPR firm, has a database of at least 7bn The spread of such technology—more than 10,000 law-en- data points from number plates, most of which presumably be- forcement agencies in 150 countries use Cellebrite’s services— long to the innocent. If they become suspects, police can then raises profound privacy concerns. Most countries have laws offer- trawl through ANPR data to create detailed portraits oftheir lives. ing people’s homes protection from intrusive searches. But laws Supporters also say that they do nothing more than collect governingdevices are not nearly so clear. Cloud computing makes publicly available information, and that it is securely stored. Yet thingsevermore complex. AsAdam Ghetti, a cyber-security entre- even that is not always true because rules governing storage and preneur, points out, “The law and the constructs that it was built information-sharing vary.In 2015 a journalist in Boston found the on were written at a time when everything you had was near you city’s entire number-plate database online, including the address- and could be touched.” That is no longerthe case, he says. “The av- es of everyone with a city parking permit, and the names of thou- erage human in a developed country has more data that they sands ofpeople suspected ofbeing terrorists or gang members. created in a faraway place than in a tactile place at home.” Such data can be abused personally as well as constitutionally. A policeman in Washington, DC, was convicted of extortion for Cracking the code blackmailingthe owners ofcars parked neara gay bar. ANPR firms One response is encryption, which has grown from a niche mar- insist what they do is constitutional—in America the First Amend- ket to a standard feature ofdigital life. As one veteran European in- ment protects public photography. But not everything constitu- telligence analyst puts it: “Encryption was dodgy when I joined. tional is desirable. Even the International Association ofChiefsof Now the modern economy runs on it.” WhatsApp, Signal, Tele- Police has admitted that ANPRs could have an impact on freedom gram and Facebook Messenger offer end-to-end encryption, by recordingvehicles goingto political gatherings, abortion clinics meaning that messages can be read only by the sender and the re- or other sensitive venues. ceiver; they cannot be intercepted in transit, nor can the compa- The argument is that ANPRsandCCTV with facial recognition nies themselves read them. The easiest way for law enforcement give the state a time machine. If they connect a suspect (or a car) to read encrypted messages is to gain access to the phone of the with a crime, they can simply track him through footage recorded sender or receiver. before he became a suspect. Police argue that they try to do that Users can protect mobile phones by setting passcodes that re- anyway by digging into a suspect’s history; the new technology strict access. And not all phones are created equal. “Yourbest bet just makes it easier to do it better, and sometimes deeper. But you fordefault privacy is, hands down, gettinga modern iPhone,” says can be sure that, ifpolice had real time machines—based, perhaps, Mr Ghetti. “There’s no close second.” What sets Apple apart is not in old-fashioned blue phone boxes—regulators would be all over just the quality of its encryption but also its commitment to user them. With virtual time machines, not so much. 7 security. After a mass shooting in San Bernardino, California in 2015, the FBI asked Apple to build an operating system to install on a recovered iPhone in orderto bypassitsencryption. Fearful ofset- ting a precedent that, as Tim Cook, Apple’s chief executive, wrote, Encryption and analysis “would hurt only the well-meaning and law-abiding citizens who rely on companies like Apple to protect their data”, the company fought the order in court. A six-week battle ended when the FBI Read my phone found another way to extract the data. What that method was and who did it (a source outside government, according to the FBI) remains a mystery. But bypassing encryption appears to involve tricking a phone’s co-processor— the part that limits the number of times a user can guess a pass- Police can bypass encryption and monitor almost anything. code—into allowing unlimited guesses without triggering the The law is not keeping up phone’s security measures. Those measures may involve destruc- tion of its encryption keys, which makes accessing the phone’s OU can tell me who you are,” says Leeor Ben-Peretz, an data impossible, or exponential increase in the time required be- executive at Cellebrite, an Israeli security-tech com- tween each guess, making brute-force guessing not worth the “ pany, “But give me 15 minutes with your phone and I time. can tell you who you really are.” Mr Ben-Peretz’s office The method required for physical extraction varies with each Y windows have a lovely vista of the low-slung skyline phone. Cellebrite has a large research department and a laborato- of PetahTikva and the burnished mountains beyond, ry filled with thousands of different mobile-phone models but the real view is on a large monitor in front ofhim. stacked in drawers, floor to ceiling. Some are easier to crack than A young engineer connects a smartphone to what looks like a others. Over the past few years iPhone models have included an desktop computer with several ports on the front. After a quick upgraded co-processor with an additional level of encryption. login and a few clicks, the computeridentifies the phone type. The Cellebrite may have found a way to bypass it but, if so, Apple will usercan then bypassthe locked phone’spasscode and continue to no doubt patch the weakness, and encryption-bypassers will use one of several extraction methods. “Logical extraction” re- hunt foranother. veals immediately accessible data: stored text messages, e-mails, Pulling metadata from a phone is much easier. Police can use pictures and instant messages. With more time, Cellebrite’s ma- fake mobile-phone towers (colloquially known as “Stingrays”), chinescan also perform a “physical extraction”, revealingmore in- which trick mobile phones into connecting to them rather than to formation, including data that may have been deleted. The neatly a real tower. Police can then learn which websites a user visited, organised, labelled data can then be viewed, saved, shared, fil- and whom he texted and called, as well as the International Mo-1 6 The Economist June 2nd 2018 TECHNOLOGY QUARTERLY Justice

2 bile Subscriber Identity, a unique number associated with the way to monitor “overt threats” such as unions and activist groups. phone. It can also give the police a precise user location. Shortly after they bought it, police in San Jose, California, used the According to the American Civil Liberties Union (ACLU), a service to surveil Sikh and Muslim protesters. watchdog, at least 73 agencies in 25 states in America use Stingrays, Some argue that because social-media posts are public, police though the true number is probably much higher. Police rarely monitoring of them does not have the same privacy implications seek approval or admit to using them, and indeed agencies that as, say, tracking your phone’s metadata, or using a GPS tracker to buy them generally keep them secret, on the basis that public follow all your movements. But, says Matt Cagle of the ACLU of knowledge oftheir use will render them ineffective. Northern California, users do not expect or desire law enforcement to conduct surveillance oftheir social-media posts. Sting in the tail Mr Cagle’s statement hints at a broader confusion over privacy Privacy advocates cite two problems with Stingrays. First, they in the digital age. To whatextentdo—orshould—people expect that suckup information aboutall phonesin a certain location, notjust privacy norms and laws written for the landline and newspaper that of a suspect; and second, they can pinpoint phones in homes age protect their digital data? Laws are changing. The European and pockets that privacy laws often protect from warrantless Court ofJustice ruled in 2016 that blanket metadata collection and searches. Though governments claim they need Stingrays to catch retention violates privacy laws, and America’s Supreme Court suspected terrorists and drug kingpins, they are more often used ruled in 2014 that police need a warrant to search an individual’s in routine police work, without warrants or oversight. mobile phone. But they are not changing as quickly as human Police also monitor what people do on their mobile phone habits. As people move more of their lives online, they will de- through social-media analytics. Most users expect their postings mand the same level of protection fortheir data as for theirperso- and preferencesto be tracked and analysed. Butin 2016 Geofeedia, nal papers at home. Mobile phones, after all, are not simply com- an analytics firm, had its access to Facebook and Twitter removed munication devices; they are also personal filing cabinets. They after revelations that it marketed itself to law enforcement as a are just not kept behind locked doors. 7

The Economist June 2nd 2018 7 TECHNOLOGY QUARTERLY Justice

Electronic monitoring ists or murderers. One probation officer explains, “The system knows them. They have good behaviour[in prison]…They understand schedules. And theyhave a goal: ‘I wantto go home with my Home, home within family and go to work’.” Sweden is not the only place to use EM. At least 27 countries in Europe do so, as well as all 50 American states. Frequency of use range varies. Scandinavian countries use it as Sweden does, to reduce imprisonment forthe many short sentences their judicial systems impose. Britain uses it to impose curfews on probationers, to let You don’t have to go to prison to go to prison prisoners serve the last parts of their sentences at home, and as a condition ofbail. Parts ofBritain have also used EM with transder- ARL’S troubles began, as troubles often do, in a pub. He mal drug and alcohol monitors, as opposed to the Swedish in- and his daughters, both in their early 20s, went out person drug-testing model. Germany, by contrast, remains rela- drinking near their home in Stockholm. His daughters tively resistant. Prosecutors there see EM as too lenient, while got into a scrap with some other young people. He many in the probation service see house arrest and the conditions K stepped in. “I was dragged down to the ground and it all imposed by monitoring with RFID as too punitive. happened so quick,” he explains. “My side of the story is I was defending my two girls. But the other girls reported me for Get out of jail free assaulting them.” The other girls prevailed in court; Karl was sen- Across Europe, however, the judicious use of EM is associated tenced to six months’ imprisonment for assault. with long-term reductions in prison populations and imprison- Under Swedish law, anyone sentenced to six months or less ment rates. In America, it remains relatively rare, accounting for can apply to the Prison and Probation Service to serve that sen- only 2% of all of those under correctional control. It is used there tence at home, under electronic monitoring (EM). Karl’s applica- not as a substitute for imprisonment but to monitor those on pro- tion was successful. He is 45, runs a painting firm with 23 employ- bation and on parole, as well as for pre-trial monitoring. Yet, in ees, and has no previous convictions—all factors in his favour. “It 2005-15, its use in America grew by 140%, driven mainly by the would have been a disaster if they had put me into jail,” Karl says. growth in GPS-enabled monitoring. Much ofEurope might balk at “Financially, economically, and I don’t know what would have placing under state supervision people who have not been con- happened to my marriage…This works pretty good forme.” victed. But in America it happens all the time. Jails are full of pre- EM works well forSweden, too, savingthe taxpayermoney. Ac- trial detainees (“jail” being where people are held before trial or cording to Helena Lundberg, a criminologist who works for the forshort periods, while “prison” is forpost-conviction sentences). justice ministry, prison costs SKr3,000 ($365) per prisoner per day, EM’s use in America looks set to rise further. Despite Donald compared with just SKr450 under EM. Also, gainfully employed Trump’s law-and-order bombast, America’s prison population is people such asKarl continue to work, contributingto the economy falling, even in Republican-controlled states, as the system realises rather than draining it. It also helps keep staff costs down in low- that jailing people is an expensive way to turn them into better security prisons, where EM replaces guards: an alarm sounds if a criminals. Monitoring them remotely is much cheaper and avoids prisoner crosses the facility’s boundary. the criminogenic effects ofprison. EM’s success in Sweden shows how technology, combined Yet Mats Johanssen, a senior officer with Sweden’s PPS, cau- with enlightened publicpolicy, can cutpublicspending while also tions, “If you want to change someone, EM alone won’t do it.” It is benefiting society. Some worry that its ease and cost efficiency impressive that just17% ofSwedes sentenced to EM reoffend with- might lower barriers to putting more people under state supervi- in a year, compared to overhalfofthose who do sixmonths orless sion. But it remains preferable to sending lots of nonviolent crimi- in prison. That reflects not just the sort of criminals who get the nals to prison. two types of sentence, but also the host of interventions such as The wherewithal to get an offender to wear a rubber anklet counselling and job training that come along with EM in Sweden. with a radio-frequency identification (RFID) transmitter that These are in keeping with the country’s overall attitude that pri- sends a signal to fixed units in his home and workplace is not new. son should rehabilitate rather than just punish, and its overarch- The technology was already a decade old when Sweden intro- ing goal that people who go to prison do not return there. 1 duced it in 1994. There have been innovations, though. Some offenders are now given GPS trackers which tell police precisely where a subject is, log and store a person’s movements and can also be used to “geofence” restricted areas, alerting police when, say, a sex offender gets too close to a school, or a domestic abuser to his victim’s home or office. EM sentences in Sweden come with strict schedules. Except for agreed-upon free hours forerrands or family, the offender mustei- therbe at home orat work. Karl, forinstance, has designated working hours of 6am to 5pm, so must leave his house at 5.45 every morning. The service also has a mobile RFID unit. Officers drive or walk randomly past offenders’ homes and places of work to ensure that they are where they should be. They also make unan- nounced visits to test offenders for drugs and alcohol, both of which are forbidden. In addition to offering EM as a replacement for prison time, Sweden also allows long-term prisoners (those who have served at least six years) to use it to complete the last six months of their sentence at home. Although few violent criminals get “front-end” EM—in 2016 most ofthose who successfully applied had been sentenced for drunk driving or drug crimes—no such limits apply to those serving the end of long sentences at home. They can be rap- 8 The Economist June 2nd 2018 TECHNOLOGY QUARTERLY Justice

2 IfEM can help keep people out ofjails while awaiting trial, that area that PredPol, a crime-prediction software used by the LAPD could also have long-term benefits: a study from Harris County, and at least 50 other law-enforcement agencies around the world, Texas, found that defendants jailed before their trials are more hasflagged asbeingatriskoffuture criminal activity. MrMalinow- likely to plead guilty, serve longer sentences and reoffend than ski says that, if he were still in charge of policing in Foothill, he those who are released. Thatcould justmean thatpolice are jailing would ask his officers to drive through those areas frequently, “so the right people. But defence lawyers say that people jailed before we’re there randomly—it throws the criminals off.” The idea is not their trial cannot participate effectively in their own defence, and to nab people red-handed, but to deter them through increased often plead guilty just to avoid a long pre-trial wait in jail. EM has police presence. also shown benefits on the other end. A study from Florida found PredPol is just one of a number of firms offering crime-predic- that it reduced the risk of released felons failing to meet their pa- tion software to police forces. While the precise components of role terms by 31%. Another analysis in Washington, DC, reached each firm’s algorithms probably differ, the broad idea is the same. similar conclusions. They aim to help police allocate resources efficiently by using But an intriguing study from Argentina suggests Mr Johanssen large amounts ofdata to predict (and therefore prevent) crime. may be overstating the need for supplemental programmes and The use of algorithms to tackle complex problems such as ur- judiciousselection ofEM recipients. Itlooked atdetaineesaccused ban crime, or to try to forecast whether someone is likely to com- of serious offences who received EM more or less at random, and mit another crime, is not inherently alarming. An algorithm, after found that it cuts the risk of reoffending nearly in half, compared all, is just a set of rules designed to produce a result. Criminal- with a prison sentence. Moreover, the offenders received no coun- justice algorithms organise and sort through reams of data faster selling, education, training or other programmes—suggesting that and more efficiently than people can. But fears abound: that they the easiest way to keep people out of prison may be not to send remove decisions from humans and hand them to machines; that them there in the first place. 7 they function without transparency because their creators will not reveal their precise composition; that they punish people for potential, not actual, crimes; and that they entrench racial bias. Defenders of such programmes argue, correctly, that police Predictive policing and sentencing have always relied on prediction in some form. Officers line parade routes, for instance, because experience has shown that the combination of crowds, alcohol and high spirits create an in- Algorithm blues creased public-safety risk. Eliminating prediction from policing would produce an entirely reactive force. All these programs do, defenders say, is harness more data from more sources to help police make better decisions. But the algorithms on which police base their decisions are, as far as the public is concerned, black boxes. The companies that Big-data justice holds promise and peril create and market them consider their precise composition trade secrets. “Algorithms only do what we tell them to do,” says Phillip IGHT storeys above downtown Los Angeles, Sean Mal- Atiba GoffofJohn Jay College ofCriminal Justice in Manhattan. If inowski, deputy chief of the Los Angeles Police Depart- their creators feed them biased data they will produce results in- ment (LAPD), focuses intently on a computer map of his fected with bias. And predictive policing is just one way in which old stomping ground. Nestled between Burbank and the criminal-justice system is using algorithms to help them make E Santa Clarita, the Foothill district is a hotch-potch of in- decisions. dustrial and residential districts riven by highways. Mr New Jersey uses an algorithm based on past criminal history, Malinowski ran its police station before his promotion moved age, past failure to appear at trial and the violence of the current ofhim downtown. fence to determine whether someone is suitable for bail—that is, Colourful dots representing reported crimes freckle the map whetherhe presentstoo greata riskofflightorofcommitting more like psychedelic pimples. Adjacent to some of the dots are red crimes while awaiting trial. Several states use algorithms to pro- squares. Each one represents a 250,000-square-foot (2.3-hectare) vide sentencing recommendations. At least13 American cities use them to identify people likely to become perpetrators or victims ofgun violence.

NYPD, too The first time such approaches came to public notice was in the 1990s, when William Bratton introduced CompStat, a statistically driven managementsystem, into the NewYorkPolice Department (NYPD), which he ran. CompStat involved regular meetings of commanding officers discussing prevention strategies and recent crime data from their precincts. As one former NYPD deputy commissioner says, CompStat encouraged police to ask, “What is the problem? What is the plan? What are the results to date?” and to use data to answer all ofthose questions. ButCompStatwaslargelyreactive ratherthan predictive. Italso used precinct-wide data, while software such asPredPol can target enforcement to specific blocks. Crime does not occur randomly across cities; it tends to cluster. In Seattle, forinstance, police found that half of the city’s crime over a 14-year period occurred on less than 5% of the city’s streets. The red squares in Foothill cluster around streets near junctions to main roads—the better to burgle and run while homeowners are at work—as well as around businesses with car parks (lots of inventory, empty at night) and rail-1 The Economist June 2nd 2018 9 TECHNOLOGY QUARTERLY Justice

2 way stations. Burglars who hit one house on a quiet street often re- ic predictions: a small numberofpeople are responsible fora large turn the next day to hit another, hence the red squares. share of violent crime. The department touts its accuracy. In the And, unlike CompStat, which used arrests as a measure ofoffi- first half of 2016, it says, 74% of gun-violence victims and 80% of cers’ productivity, PredPol aims to prevent rather than punish those arrested forgun violence were on the list. crimes. “I’m more concerned about the absence of crime” than ci- Police say they update the list frequently. When someone new tations and arrests, says Mr Malinowski. “We don’t want mass in- shows up on it, officers will sometimes visit that person’s home, carceration for little crimes.” As for measuring productivity, that, thus promoting contact with police before a person has commit- too, has grown easier. LAPD patrol cars are geotagged, and the red ted a crime. Nobody knows precisely how you end up on the list, boxes geofenced, so senior officers know precisely how long each nor is it clear how (short ofbeing shot dead) you can get offit. One car spends there. 22-year-old man, Robert McDaniel, told the Chicago Tribune that Exactly what data get fed into the algorithms varies by com- police came to his home and told him to straighten up—even pany. Some use “risk-terrain modelling” (RTM), which tries to though he had just a single misdemeanour conviction (he may quantify what makes some areas crime-prone. One RTM algo- have been earmarked because a childhood friend with whom he rithm uses five factors: prevalence ofpast burglaries, the residence was once arrested was shot dead). of people arrested for past property crimes, proximity to main In a study of the first version of the list from 2013, RAND, a roads, geographic concentration of young men, and the location think-tank, found that people on it were no more likely to be vic- of apartment buildings and hotels. Some include requests for po- timsofa shootingthan those in a random control group. Police say lice help, weather patterns and the proximity of bars or transport the current list is farmore accurate, but have still refused to reveal stations. PredPol uses reported, serious crimes such as murder, ag- the algorithmic components behind it. And both Chicago’s mur- gravated assault and various forms of theft, as well as the crime’s der rate and its total number of homicides are higher today than date, time and location. Most of these algorithms use machine they were when police started using the list in 2013. learning, so theyare designed to growmore accurate the more pre- Meanwhile, algorithmsused in sentencinghave faced criticism dictions they make and the more data they take in. forracial bias. ProPublica, an investigative-journalism NGO, stud- Some analytic programmes suck in and link up more data. A ied riskscores assigned to 7,000 people over two years in Broward joint venture between Microsoft and the NYPD called Domain County, Florida, and found black defendants twice as likely as Awareness System pulls data from the city’s thousands ofpublicly whites to be falsely labelled at high risk of committing future owned CCTV cameras, hundreds of fixed and car-mounted crimes. Italso found the questionspredicted violence poorly: only ANPRs, and otherdata sources. The NYPD says its system can track around 20% of those forecast to commit violent crimes actually where a car associated with a suspect has been for months past, did so. Northpointe, the firm behind the algorithm, disputed Pro- and can immediately alert police to any criminal history linked Publica’s findings. with a flagged number plate. But the questions on Northpointe’s risk-assessment form illus- trate how racial bias can infect an algorithm even without any di- You have the right to remain silent rect questions about race. It asked how often a defendant, his fam- So do these algorithms work? Do they accurately forecast where ily members and friends have been arrested. Those numbers will crime will occur and who will go on to commit future crimes? presumably be higher in poor, overpoliced, non-white districts Here the evidence is ambiguous. PredPol touts its 21-month-long than rich ones. It also asked whether friends were in gangs, how trials in Kent, an English county, and Los Angeles, which found often the defendant has “barely enough money to get by” and that the programme predicted and helped to prevent some types whether it is “easy to get drugs in your neighbourhood”—all ques- of crime (such as burglary and car theft) more accurately than hu- tions that ethnic minority defendants will, on average, answer aff- man analysts did. A trial in Louisiana of a different data-driven irmatively more often than white ones. More broadly, a propri- predictive-policing model, however, found no statistically signifi- etary algorithm that recommends a judge punish two people cant reduction in property crimes compared with control districts. differently based on what they might do offends a traditional But even if such approaches proved effective beyond a doubt, sense ofjustice, which demands that punishment fit the crime not concerns over their potential to trample civil liberties and repli- the potential crime. cate racial bias would remain. These concerns are most acute for Another analytical system, called Beware, assigns “threat algorithms that implicate people rather than places. The Chicago scores” in real time to addresses as police respond to calls. It uses police department has compiled a “strategic subject list” ofpeople commercial and publicly available data, and it has a feature called it deems likely to be perpetrators or victims of gun violence (both Beware Nearby, which generates information about potential groups tend to comprise young African-Americans from the city’s threats to police near a specific address, meaning officers can ass- south and west sides). Its central insight parallels that ofgeograph- ess the riskwhen a neighbour calls the emergency services. 1 10 The Economist June 2nd 2018 TECHNOLOGY QUARTERLY Justice

2 This raises privacy concerns, but it could cause other problems, too. For instance a veteran who has visited a doctor and taken medicine prescribed forPTSD, who also receivesgun catalogues in the post, could be deemed high risk. Police might then approach his house with guns drawn, and it is not hard to imagine that kind of encounter ending badly. Such threat scores also risk infection with bad data. If they use social-media postings, they also raise free-expression concerns. Will police treat people differently because oftheir political opinions? Questions of bias also surround place-based policing. Using arrests or drug convictions will almost certainly produce racially biased results. Arrests reflect police presence more than crime. Us- ing drug convictions is suspect, too. Black and white Americans use marijuana at roughly similar rates, with the rate for 18- to 25- year-olds higher forwhites than blacks. But blacks are arrested for marijuana possession at nearly three times the rate of whites across America—and even more often than that in some districts. Black people in Washington, DC, and Iowa are eight times likelier than whites to face arrest for marijuana. Charges forpossession of consent in the justice system essential. that one drug comprise half of all drug arrests. Small wonder that There is no reason for the police to eschew the best available a study by Kristian Lum ofthe Human Rights Data Analysis Group technology just because it can be used invasively. If criminals and William Isaac found that when a predictive algorithm was store information on their phones, police should be able to see it. trained on historical drug-crime data in Oakland, California,it tar- If data can help police prevent crime, they should use them. But geted black areas at twice the rate of white ones, and low-income this needs to be done without impinging on people’s civil liber- neighbourhoods at twice the rate ofhigh-income ones. ties. Police and politicians cannot let the allure ofnew technology Place-based prediction also raises questions about reasonable lead them to overlookhowitwill affectthe people they serve. And suspicion. If police are on a residential block algorithmically pre- citizens must hold them to account. dicted to be at risk of theft, and they drive past a man carrying a Such vigilance must extend to the sellers of these systems as heavy satchel, does that justify stopping and searching him, espe- well as their users. Some regimes have embraced emerging tech- cially when they might not do the same on another block? nologies the better to control and surveil people: China, for in- Some accept that algorithms may replicate racial biases, but stance, has blanketed its restive regions ofXinjiang and Tibet with say they at least do not aggravate them. “It’s not a perfect world,” facial-recognition cameras, iris scanners and other such kit. In Jan- says one advocate of algorithm-based bail reform. You need to uary the European Parliament, following popular concern, im- compare risk-based assessments with the status quo, he says. If a posed export controls on surveillance technology that regimes black and a white defendant came before a judge with the exact can use to spy on citizens. same record today, the judge might treat the black defendant In liberal countries, big-data policing is not about police chiefs worse. “At least with the risk assessment they’ll get the same sitting around strategising, says Andrew Ferguson, author of a score.” But that is a depressingly low bar to set. 7 book on the subject. “It’s tech companies selling them cool stuff, charging police departments for storage and data…[and] telling them, ‘We can help you solve more crimes with our cool tech’.” The companies give technology free to help police solve their pro- Justice and the public blems, he says. Mr Ferguson suggests five questions that departments should answer before buying new technology. Can you identify the risks Watching the that the technology addresses? Can you ensure accurate data in- puts? How will the technology affect community relations and policing practice? Can it be tested to ensure transparency and ac- detectives countability? And will police use the technology in a manner that respects the autonomy ofthe people it will affect? Rigorous oversight and an engaged citizenry will be Some places have begun to create institutions to answer those essential to keep a check on police activity sorts of questions. Just like many tech firms, the cities of Seattle and Oakland have chiefprivacy officers, charged with vetting and COUSTIC sensors trained to recognise the sound of managing the privacy implications of their cities’ policies. Oak- gunfire and send alerts to officers’ mobile phones tell- land’s grew out ofits privacy commission, a nine-member adviso- ing them when and where the shots were fired. Glass- ry body to the city council formally established in 2016, after cities that recognise faces and record everything. Drones zens resisted its plan to introduce a domain-awareness system A equipped with high-definition video cameras. GPS similar to the one Microsoft and the NYPD built in New York. readers and ANPRs, allowing for constant surveil- “We just started showing up and educating the council on the lance ofentire swathes ofa city. CCTV systems with embedded fa- risks of this equipment,” says Brian Hofer, a member of the com- cial recognition that lets authorities trackpeople in real time. mission. The Oakland PD and the commission meet once a month All of these new technological possibilities are upending a to discuss surveillance and the data of Oakland residents. They wide range of activities and the customs associated with them. write tech-use policies together, and the department submits pub- Law enforcement is no different. But if citizens do not like how lic annual reports on how often and for what purpose its surveil- their doctor or hairdresser, ora social-media site, uses their data or lance tech wasused. On May1stOakland’scitycouncil proposed a tracks their purchases, they can go somewhere else. The state bill requiring that any new police technology be approved by the wields a monopoly on punishment through law enforcement. Po- city council and privacy commission. lice can arrest, and even kill, their fellow citizens. Judges have the One might imagine that background—successfully stopping a power to imprison people. That makes transparency and public planned surveillance programme in one ofAmerica’s most liberal1 The Economist June 2nd 2018 11 TECHNOLOGY QUARTERLY Justice

2 cities—would augur an oppositional relationship between the pri- reflect local standards.” vacy commission and the police department. But the opposite is There are also benefits in sharing results of number-crunching true, say both Mr Hofer and Tim Birch, who heads the Oakland with other arms of government and civil society.A map of crime PD’s research and planning division. is also a map of need. “What you’re modelling is a host of factors, Working with the commission “encourages us to think about and you’re only giving it to one publicly available resource, which what technology is really needed,” and to ask whether the bene- is the punitive resource,” says Mr Goff of John Jay College. “Why fits are worth the costs, says Mr Birch. Or as Mr Hofer puts it, “The would you not also give this to social-service providers?” police are aware that they have to behave differently because Similarly, Andrew Papachristos, a sociologist whose research someone is watching.” He notes that the commission has never helped the Chicago PD create its strategic subject list, urged the po- recommended the city council bar police from obtaining new lice to share data, and wrote, “The real promise of using data ana- technology that they want. “Technology itselfisn’t good or bad, as lytics to identify those at risk of gunshot victimisation lies not long as they tighten up their [usage] policies.” with policing, but within a broader public-health approach.” The Several other municipalities in California have passed surveil- young men at risk of being shot may also need job training and lance-transparency requirements similar to Oakland’s. Last Feb- counselling. Trained mediators could calm conflicts before they ruary a state senatorin California introduced legislation requiring flare into violence. that municipalities create and publicise policies for the use of sur- Any number ofinterventions might benefit them and the com- veillance technology, and restricting the sale or transfer of infor- munitybetterthan contactwith the police. AsMrFerguson writes, mation gathered through surveillance. “Police may be the primary actors in the system to solve crime, but they do not have to be the primary actors in the system to reduce Accidents will happen risk.” And if police can measure their success at driving down Concerns over data-sharing have led cities in California to rethink crime rates, surely citiescan measure providers’ success at offering contracts with Vigilant, an ANPR firm that recently signed up Im- social services. migration and Customs Enforcement (ICE), America’s federal im- But they have to want to do it, migration police, as a client. Civil-liberties groups worry that ICE and this, too, is a question of citi- could tap into local law-enforcement ANPR data stored on Vigi- zen involvement—not of over- OFFER TO READERS lant’s servers to target undocumented immigrants. Vigilant insists sight, but of political will. “Law Reprints of Technology Quarterly that would be impossible unless a local law-enforcement agency and order” candidates win elec- are available at US$7.00 each, with a minimum of 5 copies, plus explicitly allowed it, which California’s would not. But, according tions more often than “efficiently PD ICE 10% postage in the United to Mr Birch of Oakland , the contract “terrifies people”. The targeted social-services” candi- States, 15% postage in Mexico prospect that the government could find a back door into Vigi- dates. New technology helps jus- and Canada. Add tax CA, DC, IL, lant’s massive database, or that a rogue officer who disagrees with tice systems collect and organise NY, VA; GST in Canada. California’s liberal policies could share information from the da- data more efficiently. They can For orders to NY, please add tax tabase with federal police, was enough to make co-operation po- use it to punish. Orthey can use it based on cost of reprints plus litically impossible for California’sliberal cities. for the unglamorous, less politi- postage.For classroom use or New Orleans recently ended its relationship with Palantir, a cally rewarding work of dealing quantities over 50, please company that built predictive-policingsoftware forthe city entire- with the causes ofcrime. telephone for discount ly outside public view. (Its founder, Alex Karp, is a non-executive Ultimately, citizens in open information. director on the board of The Economist Group.) Palantir donated societies must decide for them- Please send your order with the product to the city,but civil-rights activists feared the firm was selves what they are willing to payment by cheque or money using New Orleans as a testing ground. Had the city acquired the tolerate. Technological change is order to: services through the usual procurement process, it may not have inevitable, but does not have to caused a fuss. But a secretive deal for a predictive-policing pro- happen without being ques- Jill Kaletha of Foster Printing Service gram run with proprietary algorithms proved too much. tioned. Perhaps people want Local politicians upholding their communities’ values is cause their neighbours to drive around Telephone: 866 879 9144, to cheer, particularly when it happens in the usually grey area of in cars topped with facial-recog- extension 168, or e-mail: law-enforcement surveillance. This does not mean that the sort of nition cameras that report every- [email protected] strict oversight favoured by liberal, multi-ethnic northern Califor- thing to police. If they do not, (American Express, Visa and nia will fly everywhere. “It has to be local,” says Mr Birch. “That’s they need to speakup—forcefully, MasterCard accepted) the only way these privacy commissions can work. They have to and now. 7 12 The Economist June 2nd 2018 Middle East and Africa The Economist June 2nd 2018 43

Also in this section 44 Russia’s balancing act in Syria 44 A Ramadan viewing guide 45 Social security in Africa 46 Cameroon’s war over words 46 Fast funerals in Guinea

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

Climate change in the Arab world caused by the pumping of groundwater to make up forreduced rainfall. Too hot to handle Climate change is making the region even more volatile politically. When eastern Syria was ravaged by drought from 2007 to 2010, 1.5m people fled to cities, where many struggled. In Iran, a cycle of BEIRUT extreme droughts since the 1990s caused thousands of frustrated farmers to aban- As the region warms, it will probably grow more miserable don the countryside. Exactly how much IXyears ago Nabil Musa, a Kurdish envi- (115°F) or more will be about five times these events fuelled the war that broke out Sronmentalist, returned from over a de- more likely by 2050 than they were at the in Syria in 2011and recent unrest in Iran is a cade abroad to find Iraq transformed. Riv- beginning of the century, when similar topic of considerable debate. They have ers in which he had swum year-round peaks were reached, on average, 16 days certainly added to the grievances that turned to dust in summer. Skies once per year. By 2100 “wet-bulb tempera- many in both countries feel. crowded with storks and herons were tures”—a measure of humidity and heat— The mere prospect of shortages can empty. Drought had pushed farmers to could rise so high in the Gulf as to make it lead to conflicts, as states race to secure wa- abandon theircrops, and dust storms, once all but uninhabitable, according to a study ter supplies at the expense of downstream rare, choked the air. Inspired to act, he in Nature (though its most catastrophic pre- neighbours. When Ethiopia started build- joined a local conservationist group, Na- dictions are based on the assumption that ing an enormous dam on the Nile, poten- ture Iraq, to lobby forgreener practices. But emissions are not abated). Last year Iran tially limiting the flow, Egypt, which relies Kurdish officials pay little attention. “One came close to breaking the highest reliably on the river for nearly all of its water, of the last things we want to think about is recorded temperature of 54°C, which Ku- threatened war. Turkish and Iranian dams climate change,” says Mr Musa. wait reached the year before. along the Tigris, Euphrates and other rivers Apathy towards climate change is com- have raised similar ire in Iraq, which is be- mon across the Middle East and north Afri- Dry and discontented set by droughts. ca, even as the problems associated with it Water presents another problem. The Mid- Scientists have laid out steps that Arab get worse. Longer droughts, hotter heat- dle East and north Africa have little of it to countries could take to adapt to climate waves and more frequent dust storms will begin with, and rainfall is expected to de- change. Agricultural production could be occur from Rabat to Tehran, according to cline because of climate change. In some shifted to heat-resilient crops. Israel uses Germany’s Max PlanckInstitute forChem- areas, such as the Moroccan highlands, it drip irrigation, which saves water and istry. Already-long dry seasons are grow- could drop by up to 40%. (Climate change could be copied. Cities could be modified ing longer and drier, withering crops. Heat might bring extra rain to coastal countries, to reduce the “urban heat-island effect”, by spikes are a growing problem too, with such as Yemen, but that will probably be which heat from buildings and cars makes countries regularly notching lethal sum- offset by higher evaporation.) Farmers cities warmer than nearby rural areas. Few mer temperatures. Stretch such trends out struggling to nourish thirsty crops are dig- of these efforts have been tried by Arab a few years and they seem frightening—a ging more wells, draining centuries-old governments, which are often preoccu- few decades and they seem apocalyptic. aquifers. A study using NASA satellites pied with other problems. Mr Musa says The institute forecasts that summer found that the Tigris and Euphrates basins the Kurdish officials he lobbies have been temperatures in the Middle East and north lost 144 cubic kilometres (about the vol- distracted by a war with Islamic State, a Africa will rise over twice as fast as the glo- ume of the Dead Sea) of fresh water from failed referendum on independence and, bal average. Extreme temperatures of 46°C 2003 to 2010. Most of this reduction was now, repairing relations with Iraq’s central 1 44 Middle East and Africa The Economist June 2nd 2018

2 government in Baghdad. A Ramadan viewing guide Politics often gets in the way of problem-solving. Countries are rarely able to agree on how to share rivers and aquifers. Cairo Five-0 In Gaza, where the seepage of saltwater CAIRO and sewage into an overused aquiferraises Egypt’s bumbling police always get theirman, at least on television the riskofdisease, a blockade by Israel and Egypt has made it harder to build and run HE clockis ticking and the interroga- some viewers. In one episode of“Ka- desalination plants. In Lebanon there is lit- Ttion is tense. Hoping to unravel a plot, labsh” terrorists attacka checkpoint in tle hope that the government, divided the warden ofAqrab (“Scorpion”) prison Fayoum, a city100km southwest of along sectarian lines, will do anything to grills an Islamist seated alone in his cell. Cairo. A lawyer filed suit against the forestall the decline in the water supply He scowls, delivers a warning—and then show’s producers, accusing them of predicted by the environment ministry. leaves, his questions unanswered. The distorting Fayoum’s image. Other shows Countries such as Iraq and Syria, where scene might confuse anyone familiar offend governments. Ibrahim Eissa, an war has devastated infrastructure, will with Aqrab, one ofEgypt’s most notori- Egyptian journalist, was to appear in struggle to prepare fora hotter, drier future. ous jails, where militants and political “Ard al-Nefaq” (“Land ofHypocrisy”), a Some countries are, at least, trying to prisoners are packed into cramped dun- drama about a struggling worker. But his curb emissions. Morocco is building a co- geons and tortured. It looks altogether role annoyed the show’s Saudi broad- lossal solar-power plant in the desert, as is different on “Kalabsh” (“Handcuffs”), a caster. Mr Eissa has accused Saudi Arabia Dubai, part ofUnited Arab Emirates (UAE). popular series on Egyptian television. of“corrupting the minds ofEgyptians”. Saudi Arabia is not going to stop exporting The inmates are clean and their interroga- After a Saudi official complained, the oil, but it plans to build a solar plant that tions polite, nary a cattle prod in sight. series was reshot without him. Another will be about 200 times the size of the big- In many Arab homes the television is show, which depicts an Egyptian militant gest such facility operating today. Like oth- the centrepiece ofRamadan. Families seeking refuge in Sudan, drew a protest er sun-drenched countries in the region, it stuffthemselves at iftar, a communal from the Sudanese foreign ministry. sees solar power as a cost-effective way to meal at sundown, then sprawl in front of Adel Imam, Egypt’s most beloved increase the electricity supply and cut en- the set to watch nightly serials known as comic actor, makes a serious turn in ergy subsidies. “When I first started, peo- mosalsalat. A recent survey found that “Awalem Khafeya” (“Hidden Worlds”), ple looked at environmentalists as tree- viewership goes up 78% during the holi- playing a journalist who finds dirt on huggers,” says Safa al-Jayoussi ofIndyACT, day. But these shows are more than senior officials. This story also seems a conservationist group in Beirut. “But entertainment. In a region where govern- pulled from the headlines. In February now I think the most important argument ments wield political and financial pow- Hisham Geneina, Egypt’s formertop is the economic one.” er over producers, television is a bell- auditor, was arrested forsaying he knew States in the Middle East and north Afri- wether forpolitics. ofsecret documents about crimes the ca can do little on their own to mitigate cli- The surprise hit of2015, forexample, army committed during the 2011revolu- mate change. Inevitably, though, they will was “Harat al-Yehud”, a warm portrayal tion. After a swift trial, he was sentenced need to adapt. So fardepressingly little has ofCairo’s Jewish quarter in 1948. Jews to five years in a military prison. Fans of been done. “Sometimes I feel like I’m on a had long been the conniving villains of Mr Imam hope fora happier ending. treadmill,” says Mr Musa. 7 Egyptian television. Suddenly they appeared as ordinary citizens, patriotic and pious. It fit perfectly with the mood un- Russia in the Middle East der Abdel-Fattah al-Sisi, the president, who sees Israel as an ally. The balancing This year viewers can choose from six shows about terrorism, most with sym- bear pathetic portrayals ofthe security forces. Mr Sisi and his generals have struggled to put down a long-running Islamist insur- BEIRUT, JERUSALEM AND MOSCOW gency.The army struggles with basic Tensions between Israel and Iran test discipline. Dozens ofpolicemen were Russia’s abilityto manoeuvre killed in October when they stumbled S MISSILES rolled across Red Square into an ambush. None ofthis matters on Aduring Russia’s Victory Day parade on “Nesr al-Saeed” (“HawkofUpper May 9th, Binyamin Netanyahu, the prime Egypt”), in which the hero dispatches minister of Israel, stood squarely beside terrorists with ease. President Vladimir Putin. He had come to Even these glossy portrayals anger secure Russian support for containing Iran in Syria. Pinned to his lapel was the orange and black St George’s ribbon, a symbol of Since intervening in Syria’s civil war in late But as the war begins to wind down in the second world war that has become 2015, Russia has positioned itself as the in- Syria, Russia may feel that it needs Iran synonymous with Russian revanchism in dispensable player, able to speak to nearly less. In the past it looked the other way Ukraine. The overtures appear to have all sides. It has maintained contact with when Israel bombed convoys in Syria car- worked: as The Economist went to press, Turkey, America and the Arab countries in- rying weapons to Hizbullah, an Iranian- Russia and Israel were finalising an agree- volved in the conflict. Most notably, it has backed Lebanese militia that fought a ment that would attempt to keep Iranian kept good relations with Israel, with which bloody war with Israel in 2006. Some forces some 15 miles (24km) away from the it shares strong cultural and economic ties, think Russia is now going further. As Iran Israeli border in Syria. as well as Iran, its partner in propping up tries to establish permanent bases in Syria, The agreement highlights Mr Putin’s the regime of Bashar al-Assad, Syria’s Israel has attacked its positions. The night delicate balancing act in the Middle East. blood-soaked president. of the parade in Moscow, Israel launched 1 The Economist June 2nd 2018 Middle East and Africa 45

Social security in Africa temporary, often implemented by donors Turkish troops/ rebels TURKEY in response to natural disasters or conflict. Extending the net Few are designed to help households man- Afrin age the private misfortunes—such as ill- Kurds Med. Sea Aleppo Raqqa ness or the death ofa family member—that can tip them into destitution. They also do Deir ez-Zor Rebels SYRIA ADDIS ABABA a poor job of reducing the chronic unem- Hizbullah ployment that has taken root in many Afri- dominated Government Islamic Ethiopia’s scheme to help the poor ra can cities. State Euph tes could be a model forothercountries LEBANON Ethiopia’s programme is a step towards Golan IRAQ SIDE ZEWIDE has lived in the shadow building a national social-security system Heights Damascus Areas of control Tof the national palace in Addis Ababa that will, in time, replace a hotch-potch of ISRAEL May 28th 2018 for more than 50 years. Since her husband small ones. It builds on Ethiopia’s flagship Sources: IHS Conflict JORDAN Monitor; Institute for died four years ago the 73-year-old has rural safety-net, which is the largest of its 100 km the Study of War cared for three orphans, the grandchildren kind on the continent and covers some of her late sister, alone in a rundown gov- 10m poor people in the countryside (out of 2 dozens of air strikes on Iranian forces, un- ernment-owned shack. She has no pen- a total population ofabout102m). The gov- impeded by Russian air defences in Syria. sion and, until recently, had no income. “I ernment has committed $150m to fund the Some Iranians suspect that Mr Putin pro- relied on the kindness of my neighbours,” new scheme and the World Bank has vided Mr Netanyahu with the co-ordinates she sighs. stumped up the remaining $300m needed ofIranian bases. Last year Mrs Zewide’s fortunes for the first five years. Ethiopia hopes that Whether an agreement between Israel changed. She and some 80 of her neigh- within ten years it will no longerneed help and Russia over the deployment ofIranian bours rise at dawn to sweep the streets of financing the programme. troops can be enforced remains to be seen. the Ethiopian capital for three hours a day. For years the Ethiopian government “Russia has limited levers of influence,” For this she is paid 1,200 Ethiopian birr flinched at terms like “social protection”. says Nikolai Kozhanov, a former Russian ($44) a month, a fifth of which she is re- Donors are hopeful that it now considers diplomat in Iran and professor at the Euro- quired to save. “It’s good forme psycholog- the safety-net a long-term policy rather pean University in St Petersburg. “Much ically,” she says. “It keeps me busy, and than “a stickingplasterthatwon’tbe neces- depends on the desires of Iran itself.” now at least I can tell people I have a job.” sary once industrialisation takes off”, says While MrPutin hascalled forforeign forces Her teammates nod in agreement. Tom Lavers of Manchester University. But, to leave when the waris over, Iran’s foreign They are participants in Ethiopia’s Ur- he notes, antipathy towards Western-style legion, the Quds Force of the Islamic Revo- ban Productive Safety Net Project, which welfarism remains strong. The govern- lutionary Guards Corps, which some was launched in 2017 and is among the ment flatly rejected the idea of no-strings countries classify as a terrorist group, largest social programmes in sub-Saharan cash handouts, which are popular among seems bent on staying. Africa (outside South Africa) designed spe- donors and development economists, The interests ofRussia and Israel, on the cifically for urban areas. About 400,000 partly because they are cheap to adminis- other hand, appear to be converging. “We poor Ethiopians in 11 cities are already enter. “People can’t expect a free lunch,” says have a good understanding with Russia rolled. The government hopes it will even- Belynshe Regassa, the head of Mrs Ze- and we can prevent another political crisis tually help 4.7m people in almost 1,000 wide’s local committee. in Syria,” says a senior Israeli official. “As towns. Beneficiaries are selected by a Ethiopia’s rural scheme is widely re- faras we’re concerned Assad will continue neighbourhood committee based on how garded as a success. It has reduced rural to rule.” That is bad news for rebel groups poor and vulnerable they are. In addition povertyand helped the poorbuyfood dur- in the Syrian villages near the border, to the paid work, they also receive training. ing a severe drought in 2016 that might which Israel had assisted with food, medi- Those who want to start their own busi- have led to famine. Buttownsand cities are cal supplies and the occasional shipment nesses are given grants. a different challenge altogether. It can be of light arms. Rebel commanders say they Safety-nets, in one form or another, hard to know which people are most in have already seen soldiers from Iranian- have proliferated across Africa in recent need. Applicants must have lived in the backed militias pulling back. An offensive years. Spending on them in sub-Saharan district forat least six months to be eligible, by the Assad regime seems likely to follow. Africa now amounts to about 1.5% of GDP so transient urban folk may slip through Only “representatives of the Syrian Arab (see chart). In Tanzania 10% of the popula- the safety-net. Mrs Regassa says locals Republic’s army [should] stand at Syria’s tion is covered by its safety-net (at a cost of complained to her when they were not se- borderwith Israel,” said Sergei Lavrov, Rus- just 0.3% of GDP). Most schemes in Africa lected by the committee. Critics say sup- sia’s foreign minister. are focused on rural people and many are porters of the ruling party are more likely Israel may not be satisfied even with to get picked. that. Iranian forces continue to operate in Despite such gripes, Ethiopia’s experi- other parts of Syria. An Iranian drone that Net benefit ence suggests that even poor countries can entered Israeli airspace in February came Social safety-net spending, as % of GDP start extending safety-nets. But if Ethiopia from a base 150 miles away from the bor- 2016 or latest available is to achieve its goal of weaning the 0 0.5 1.0 1.5 2.0 2.5 der. If Mr Assad and his Russian backers scheme off donor support, it may have to fail to contain Iran, more strikes are likely Europe & Central Asia make cuts to wasteful subsidies, which from Israel—and not just on Iranian targets. Sub-Saharan Africa would be politically painful. Israeli officials note that the sorties on May The biggest challenge lies in the fact that Latin America & 10th also hit Syrian anti-aircraftmissile bat- the Caribbean even the broadest safety-nets in Africa teries, provided by Russia. The balancing East Asia & the Pacific only cover a small portion of the poor. Mrs act may yet become more difficult for Rus- Regassa, for example, is not eligible for Middle East & sia. “The ‘let’s talk to everyone’ strategy north Africa help because she ownsherown house. But will collapse sooner or later,” says Mr Koz- South Asia as a single mother with four children she hanov. “At some point a situation will arise hopes the programme will one day in- when a serious choice has to be made.” 7 Source: World Bank clude her, too. 7 46 Middle East and Africa The Economist June 2nd 2018

Cameroon English- taped to their bodies of people tortured, Lake Chad speaking mutilated ormurdered bythe government. Fighting talk region The conflict started in October 2016, NIGERIA when English-speakinglawyerstookto the CHAD streets complaining that legal documents were not being translated from French and that English-speakers were discriminated YAOUNDE NORTH against. The country has been officially bi- Repression is intensifying amid an WEST lingual since its two constituent parts vot- uprising overlanguage CENTRAL SOUTH AFRICAN ed to form a federal republic after gaining WEST HE parade featured singing schoolchil- CAMEROON REPUBLIC independence in 1960 and 1961. But Eng- Tdren and goose-stepping soldiers. A Douala lish-speakers, who make up less than a giant presidential portrait was wheeled Yaoundé fifth ofthe population, say theirregions get along the boulevard. To some observers it Gulf of less than their fair share of public money CONGO Guinea must have looked like a comicsketch about EQUATATORIAL and that the government forces them to an event staged by an African dictator. But GUINEA CONGO- use French in schools, courts and other 200 km no one dared snigger. The celebration of GABON BRAZZAVILLE public institutions. Cameroon’s national day on May 20th Mr Biya’s government responded by ar- was lorded over by President Paul Biya, uprisinghasbeen metbybrutal repression. resting activists and cutting off the internet who at 85 is Africa’s oldest head ofstate. As members of the main opposition party, in English-speaking regions. In doing so it He hoped the parade would show na- the Social Democratic Front, marched past fanned secessionism, transforming peace- tional unity. But it hinted at a deep fissure the president they showed their indigna- ful protests into a vicious war, with kid- dividing Cameroon. In the country’s two tion. Placards were banned, so the march- nappings and beheadings. Atrocities have English-speaking regions a simmering ers pulled up their shirts to expose pictures been committed by both sides. More than 100 civilians have reportedly been killed, Fast funerals as have more than 40 members of the security forces. Peter Henry Barlerin, America’s ambas- Do not go gently sador to Cameroon, says April proved the CONAKRY bloodiest month. He accuses the government ofauthorising “targeted killings” and Hearses are putting pedal to the metal in Guinea the “burning and looting of villages”. SIREN wails out across the jammed twice the average daily wage in one of Thousands of people have fled, many of Astreets ofConakry, the capital of the world’s poorest countries, says Abou- them across the border into Nigeria. Guinea. As horns toot, vehicles part fora bacar Diallo ofGamal Abdel Nasser The strife is also affecting the fight car sporting a spinning blue light. It is not University in Conakry. Yet getting to the against Boko Haram, a jihadist insurgency the police or an ambulance. Instead a cemetery can prove difficult because the that has spilled over from Nigeria into hearse comes wailing through. Politicians capital is set along a narrow peninsula neighbouring countries. The dense and the emergency services are not the and has tight, congested roads. Driving swampsthatsurround Lake Chad in north- only ones to use lights and sirens in Con- across town can take as long as five ern Cameroon give the jihadists cover. akry. Congestion is so bad that the dead hours. To cope with the challenge, some Elite Cameroonian soldiers, who are use them, too. funeral companies have started offering a among the most effective fighters in the re- Funerals generally have to take place speedy blue-siren service for300,000- gion, have been removed from Lake Chad quickly. Most people in Guinea are Mus- 500,000 francs ($30-55). and redeployed to English-speaking re- lims and their faith prohibits the em- Many thinkit is money well spent. gions in the south (see map). balming ofthe dead. It also stipulates that Bodies do not do well in the stifling heat, There are few signs that Mr Biya is try- people should be buried as soon as pos- especially ifstuckin a “monster jam”, ing to find a peaceful solution. For much of sible after they have died, and generally says the manager ofone funeral com- the year the ageing president reportedly within 24 hours. Another reason for pany. Mohammad Keita, a local driver rules Cameroon from a luxury hotel in quickburials is economic. Keeping the making way fora blue-light hearse Switzerland, a country he likes to visit with remains ofa loved one chilled in a mortu- agrees: “Ifthey don’t get through quickly his wife Chantal (known for her designer ary costs about $5.50 a day, or more than the bodies might begin to smell.” dresses and signature hairstyle). In March Mr Biya called his first cabinet meeting since October 2015 and gave a speech that sounded as if he had already hit the campaign trail for the presidential election scheduled for later this year. Mr Biya hasnotyetsaid whetherhe will stand, but if he does run it would be for his seventh term in office. In any case, the government is wasting no time clearing his path. Ahead ofsenato- rial elections in March it arrested several journalists and opposition activists. On May25th seven activistswere convicted on charges of rebellion and acts of terrorism. They were given jail sentences of 10-15 years. Cameroon’s war over words seems likely only to intensify. 7 Europe The Economist June 2nd 2018 47

Also in this section 48 French country roads 48 Macron battles the unions 50 Ireland votes to permit abortion 51 Turkey’s conﬁdent opposition 52 Charlemagne: Germany and 1968

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

Italy timidate everybody.” That is especially true of Italy, whose public debt stands at Matteo Salvini’s quest for power around 130% of GDP. If investors in its government bonds start to worry about the risk of default, as they did this week, they demand a greater return in the form of higher yields, making it costlier for the gov- ROME ernment to borrow, and in turn increasing the riskofdefault. The right-wing Northern League is on a roll The EU’s budget commissioner, HE powers of an Italian president are weeks, even months. On the one hand, the GüntherOettinger, sparked outrage in Italy Tfew, but mighty. He—there has never president has equipped Italy’s populists when he said thathe hoped the market tur- been a she—can declare war, dissolve par- with a dream narrative: mainstream elitist moil would persuade Italians “not to hand liament and name the prime minister. The thwarts the representatives of the popular populistson the rightand leftanyresponsi- constitution also stipulates that the presi- will (together, the M5S and the League won bility in government”. Politicians of all dent names the ministers, “on the propos- half the votes in the general election on stripes accused him ofinterfering in the af- al” of the prime minister-designate—a pro- March 4th and together hold a majority in fairs of a member state. But he had a point, vision that has been interpreted to mean parliament). Incomprehensibly, Mr Matta- and it was not lost on the young leader of that a prospective head of government rella added credence to that tale by hand- the M5S, Luigi Di Maio. Hours later Mr Di must table a list of choices that the presi- ing the task of forming a stop-gap govern- Maio made an abrupt U-turn, dropping an dent can accept or, sometimes, reject. ment to Carlo Cottarelli, a formerofficial in earlier call for Mr Mattarella to be im- On May 27th President Sergio Matta- the IMF, an organisation reviled by anti-es- peached and signalling his readiness to re- rella deployed the last of those powers to tablishmentarians the world over. new talks on a coalition. Amid rumours of devastating effect, halting the formation of But on the other hand, Italy’s continu- a compromise that would give the finance a populist coalition between the anti-es- ing political melodrama has demonstrated portfolio to a euro-friendly economist, a tablishment Five Star Movement (M5S) thatEurope’spopulistinsurgentsare under degree ofcalm returned to the markets. But and the hard-right Northern League. He re- immense constraints. James Carville, who that ignored the attitude of Matteo Salvini, fused to swearin a Eurosceptic, Paolo Savo- helped Bill Clinton to power, famously the pugnacious head of the League, who na, as finance minister. After the prospec- quipped that he wanted to be reincarnated initially said that all he wanted was a date tive coalition partnersrefused to withdraw as the bond market, because “You can infor fresh elections, but not until after the Mr Savona’s name, Giuseppe Conte, the summer. This revived suspicions that his lawyer who was to have headed their gov- aim from the outsethad lessto do with put- ernment, backed out. North rising tinga Euroscepticin the Treasurythan with His withdrawal raised the likelihood of Italy, party support if an election for the picking a fight with the president that an early election that could become a Chamber of Deputies were held today, % would force a new election. proxy referendum on euro membership. One thing that is clear is that the anti- 40 The prospect sent a wave of panic through Five Star Movement immigrant League is on a roll, as much for capital markets far beyond Italy (see Fi- 30 its views on kicking out migrants as on the nance section) as investors fretted that the Northern League economy. Its support has grown from 17.4% euro zone’s third-biggest economy might 20 at the general election to as high as 27% in leave the single currency. Democratic Party some opinion polls. Just as important, But as Italy approached its 90th day 10 backing for the League’s rival for the lead- without a properly functioning govern- Forza Italia ership ofthe right, Silvio Berlusconi’s Forza ment, it was far from clear whether Mr 0 Italia party, hasslumped from 14% to aslow Mattarella’s rebuff had advanced or ob- March April May as 8% in some polls. One recent survey structed the march of Eurosceptic popu- 2018 found Mr Salvini is now Italy’s most popu- lism. The answer may not be clear for Sources: Italian Interior Ministry; SWG lar political leader. As The Economist went1 48 Europe The Economist June 2nd 2018

2 to press, it was still unclearwhether MrSal- tions. There has been a degree of specula- major party has said it would back it in the vini would now continue to push for an tion that the M5S might again to seeka deal votesofconfidence itwould need to win in early election, or whether a new agree- with the left-of-centre Democratic Party both houses of parliament. Without them, ment between the two populist parties, (PD). But the PD, which had a disastrous Mr Cottarelli’s enterprise would be re- without Mr Savona as finance minister, election, is bitterly split and has so far reduced to keeping the country ticking over was backon the cards. fused even to talk to the M5S. Others have until election day. And when that came, Both parties are to hold rallies on June wondered about a right-wing coalition of perhaps as soon as the autumn, there 2nd, a national holiday in Italy. Police have the League, Forza Italia and two smaller would be every possibility that the elector- been asked to increase protection for offi- groups. But this would be a minority gov- ate would again deliver a result that hands cial buildings. But, for now, the threat ofvi- ernment, forced to cobble together ad hoc the majority ofvotes and seats to two pop- olence is remote. The Five Star Movement majorities forevery bill. ulist parties that remain deeply wary of is doctrinally pacifist. The League’s bark As for Mr Cottarelli, were he indeed each other, thatdisagree on howto get Italy has always been worse than its bite. But needed to head up a caretaker govern- working for ordinary people, yet who still there are plenty of other reasons to feel ment, he may not have much difficulty as- may well end up working together in a glum about Italy. Apart from an all-popu- semblinga team ofapolitical experts. But it star-crossed coalition. Neither outcome list government, there are no obvious op- would have scant legitimacy: not a single looks encouraging. 7

French roads France Foot oﬀ the gas Neap tide

GÉNICOURT An unpopularattempt to save lives

ASSING through wide fields ofwheat PARIS and potatoes, route D915 links the P The French president is on course for northern French port ofDieppe with victoryin his battle with the street Pontoise, north-west ofParis. On a straight stretch ofsingle-carriageway NE protester carried a placard depict- road, lined with sycamores, cars tear Oing Emmanuel Macron as a Nazi. An- along above the 90kph (55mph) speed other produced an effigy of the French limit, dodging oncoming traffic to over- president swinging from the gallows. As take. Periodically, as on other similar France prepares for its tenth week of roads, vehicles collide, killing their occu- strikes, the mood among protesters on the pants. To curb the country’s accident rate, streets has ranged from festive to violent. the French government is reducing the On May 26th some 190 rallies and marches speed limit on country roads from July were held across the country in an attempt 1st. In rural France, few recent policies to create a “popular tide” against Mr Mac- have prompted such indignation. ron’s reforms of the railways, universities Speeding is the main cause offatal and much else besides. traffic accidents in France, most of which, At first glance, the pressure on the as elsewhere, take place on single-lane French president remains intense. Train roads that lacka central reservation. Cars drivers and other railwaymen are due to crash either into each other, orinto one of continue their rolling strike, on two days the shade-providing trees that line many out of every five, until June 28th, as country routes. It was on just such a road planned. On May 29th over half of train that Albert Camus, at the age of46, and drivers were still observing the strike, his publisher, Michel Gallimard, were The good old days thereby continuing to make life miserable killed when their car collided with a for commuters. Last week civil servants roadside plane tree in 1960. Today, Edou- protest. Fully 86% ofrural folkare against also took to the streets to defend their spe- ard Philippe, the prime minister, says that the reduction in the speed limit, next to cial status. Fresh complaints by students reducing the speed limit to 80kph on 74% ofthe French as a whole. Parisians, arose after half of the 800,000 applicants roads that are not protected by a central forthe most part, are unbothered. But the to university this year under a new, reservation—about 400,000km ofthem— furtheraway from big cities one gets, the tougher, admission system ended up last will save 300-400 lives a year. more people are fed up with the measure. weekwith no initial offer. French roads have a hold on the col- Politicians say that it is one ofthe most Yet, behind the scenes ofdiscontent, Mr lective imagination. In the early 20th frequently raised subjects ofdiscontent Macron may in fact be on the verge of an century, Michelin developed its guides to among voters in rural areas. At a time important victory. The evidence for this is encourage touring motorists to potter when President Emmanuel Macron is threefold. First, railway workers, or chemi- along them, making the odd detour for a trying to push through difficult reforms, nots, themselves seem to be losing faith. steak frites (and to wear out their tyres). some ofhis own deputies are perplexed Fully 77% of train drivers went on strike on For tourists, motorways and chain-run as to why he is allowing it. As one of the first day of industrial action in early service stations have long since taken them points out, a reduction in the speed April, well above the currentrate. The over- over that role. But forthose who live and limit was not in his election manifesto, all share of railway workers taking part in workin rural France, roads are not for and the push has come from the prime the strikes has dropped from 34% then to dawdling but getting about, and fast. minister. Mr Macron now says that the just 14% today. With worries about loss of Rural France is not happy.Over 2m measure will be tested over two years, pay, and lack of impact, only a small mi- people have already signed a petition to and then reviewed. nority has decided to battle on. Public opinion, too, has grown tired of1 FREE RETIREMENT PL NNER “When will I have enough money to retire?”

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after that, in 1986, the same religious coalition persuaded 63% of voters to retain a constitutional ban on divorce. By then, though, the power of the church had already passed its zenith. In 1985 the sale of condoms, previously tightly restricted, was liberalised despite the church’s best efforts. Divorce was permitted in 1995. In 2012 Savita Halappanavar, a 31-year- old dentist, died of septic shock in Galway afterbeingrefused a termination. In the en- suing public outcry, the state ignored the anti-abortion lobby and legalised termina- tions when needed to save the life of a mother. Then, in 2015, Ireland became the first country in the world to approve gay marriage by popularvote. Last yearLeo Va- radkar (only 38 at the time) took over as The last gasp? prime minister; he has a steady boyfriend, though he has yet to tie the knot. 2 the industrial action, but not in the way it of the railways’ debt—assuming this se- So it should not have been much of a did in the past. In 1995, when Alain Juppé, a cures EU approval. For his part, Mr Macron surprise when Irish voters chose last week centre-right prime minister, abandoned has been clear from the start that there was to repeal the eighth amendment entirely pension reform in the face of paralysing “no chance” he would shelve railway re- and clear the way for legal abortion. And strikes, popular support for the unions in- form. Even student frustration seems to be yet the result had been in doubt. Opinion creased as the weeks wore on. This time, ebbing. A week in, with university offers polls had shown a majority in favour of re- support for the government has increased updated regularly,two-thirds ofapplicants peal, but there was a very high percentage from 51% on the eve of the first day of had received at least one. of undecided voters. Many who sup- strikes to 64% now. The strikes have been If Mr Macron does indeed emerge vic- ported repeal of the ban for “hard cases” inconvenient, occasionally exasperating, torious from his battle over the railways like rape, incest and fatal fetal abnormality but not crippling. New technology, from this summer, it will not automatically clear were less persuaded by the government’s apps to organise ride-sharing to the SNCF’s the way for further reforms. A planned plan—which Mr Varadkar says he will now live updated train schedules, has helped overhaul of pensions and public spending put into effect—to legislate for abortion on commuters cope. “could be more difficult because they di- request in the first trimester ofpregnancy. Third, an attempt by unionists and po- rectly affect everybody,” says Alexandre The pro-life campaign focused its ef- litical leaders to bring about a convergence Holroyd, one of his La République en forts on winning these waverers over. In des luttes (convergence of struggles), Marche members of parliament. Yet, if the end, the measure was passed by a whereby workers and students unite—as nothing else, Mr Macron’s show of steeli- much higher vote than anyone had pre- they did in May 1968—in a moment of ness in the face ofthe longest disruption so dicted—66% on a 64% turnout, with the worker-bourgeois solidarity, has failed. far to his young presidency will have supportofboth sexesand all age groups ex- Universities, from Rennes to Montpellier, shown that, when properly handled, re- cept the over 65s, and of all but one (Done- that were blocked by sit-ins have been form in France is possible. 7 gal) of the Republic’s 26 counties. For the cleared, and most end-of-year exams are crowd of mostly young and female cam- taking place. There have been some paigners who packed into Dublin Castle to joined-up events. Unusually, the Confédé- Ireland share “After Eight” mints and hear the re- ration Générale du Travail (CGT), a big un- sult, pleasure was heightened by surprise ion that likes to organise its own demon- A modern country and relief: the “hidden Ireland” of unde- strations, tookparton May26th in marches cided and undeclared voters, of reticent organised by Jean-Luc Mélenchon’s Un- men and shy old country ladies, had, it submissive France (FI), a far-left party. Yet seemed, mostly been hiding an intention, the numbers on the streets that day—some however reluctant, to vote yes. In 35 years, 32,000 in Paris—were meagre. It “was not DUBLIN Ireland has changed utterly. an equinox tide,” conceded François Ruf- A solid vote to allow abortion Daithí Ó Corráin, a historian at Dublin fin, an FI deputy, wryly. City University, says that, since the 1990s, a Caution is always in order when it N1979, when Pope John Paul II visited the now familiar wave of abuse scandals comes to the French street. Things could IRepublic of Ireland, 1.2m people attend- weakened the church’s moral authority. yet get out ofhand. But the chances are that ed his open-air mass in Phoenix Park in But he believes that its real decline began the government will now get its railway re- Dublin—more than a third of the popula- 30 years earlier, when a reforming prime form through the Senate, where it went for tion of the country at that time. As many minister, Sean Lemass, undertook to mo- review this week, without ceding much again turned up at other smaller venues. dernise Ireland’s stagnant and rural econ- ground. Edouard Philippe, the prime min- Four years later Catholic clergy and lay omy. Acentral plank of this policy was the ister, has done a decent job of explaining groups held back the tide of social reform introduction of free secondary education. that the reform is not about privatisation, sweepingacrossmuch ofthe restofEurope “Instead of just listening to the clergy, peo- as some unionists claim, but about giving by getting two-thirds of voters to back the ple were able to make up their own minds the French railways a chance ofwithstand- eighth amendment to the constitution, for themselves,” said Mr Ó Corráin. ing competition under forthcoming Euro- banningabortion in anycircumstances, in- “When the first cohort of these people pean Union rules. To this end, he has an- cluding rape, incest and even an imminent came out in the 70s, you really see changes nounced that the state will take on €35bn threat to the life ofthe mother. Three years beginning from there.” 7 The Economist June 2nd 2018 Europe 51

Turkey’s opposition mous towards the HDP, which was not in- vited to join the alliance. Most Turks view Wind in their sails the party as a front for the PKK, a Kurdish insurgent group. But some overtures have been made. The presidential contenders have all called for Mr Demirtas to be re- ANKARA leased before the elections, a plea the courts and the government have ignored. Is Recep Tayyip Erdogan in difficultyaftercalling early presidential and The sight of the CHP, a secularist party, parliamentaryelections next month? in cahoots with the SP, an Islamist one, ICTORY for Turkey’s Recep Tayyip Er- probably has their respective founders, Ke- Vdogan and his Justice and Develop- Not a walk-over mal Ataturk, the father of modern Turkey, ment (AK) party in presidential and parlia- Turkey, presidential election polling and Necmettin Erbakan, a former prime mentary elections on June 24th should Selected candidates, % minister, turning in their graves. But des- have been a foregone conclusion. The 60 perate times make for desperate bedfel- strongman enjoys unwavering support lows. Temel Karamollaoglu, the SP’sleader, Erdogan (AKP) from his religious base, indirect control 50 says the alliance is a marriage of necessity over practically all big news outlets, and designed to rescue what remains of Tur- 40 emergency powers that allow him to rule key’s democracy from Mr Erdogan’s grip. by decree, lock up some critics and make 30 The president and his men have less in Ince (CHP) others thinktwice before speaking. Aksener (IYI) common with political Islam than with The second-largest opposition party in 20 crony capitalism, says Mr Karamollaoglu. parliament, the pro-Kurdish People’s “There is no justice,” he says. “The separa- 10 Democratic Party (HDP), has been in effect Demirtas (HDP) tion ofpowers is gone.” Karamollaoglu (SP) banished from the airwaves. Its candidate 0 The opposition parties have vowed to for president, one of Mr Erdogan’s most Sep Oct Nov Dec Jan Feb Mar Apr May scrap Mr Erdogan’s new constitution, outspoken rivals, Selahattin Demirtas, was 2017 2018 which passed by a sliver in a 2017 referen- arrested in 2016 on trumped-up terrorism Sources: National polls; The Economist dum marred by irregularities and allega- charges, and is leading his campaign from tions of fraud. The changes will kick in im- a prison cell. tional stage. Remarkably fora party found- mediately after the elections, reducing The president’s opponents are still the ed less than a year ago, Iyi seems poised to parliamentary oversight, abolishingthe of- underdogs in the coming votes, to be held receive well above 10% of the vote in the fice ofprime ministerand concentrating all early and for the first time simultaneously. parliamentary election. Recent polls give executive power in the hands of the presi- But they seem to have picked up momen- Mrs Aksener herself up to 20% in the first dent. MrInce describes this as a recipe fora tum—and found the right candidates. Mu- round of the presidential contest. Mr De- “one-man regime” and promises to change harrem Ince, the nominee of the Republi- mirtashasalso polled in the double digits— the constitution again to return to parlia- can People’s Party (CHP), is a popular not bad fora politician forced to communi- mentary rule “as soon as possible”. He and firebrand and one ofthe few secular politi- cate with the outside world through his others also pledge to end the state of emer- cians capable of connecting with religious lawyers and a few social-media accounts. gency, which began days after an abortive voters. Born into a conservative family, Mr Mr Erdogan’s opponents have taken a coup in July 2016, and which has served as Ince prays regularly and defends the right few pages out of the president’s playbook. cover for sweeping government repres- offemale civil servants to wear the Islamic Earlier this year AK formed an electoral co- sion. They may be able to do this, if they headscarf, but also seems to enjoy an occa- alition with the right-wing Nationalist can win enough seats to wrest control of sional drink. Meral Aksener, a veteran Movement Party (MHP), whose leader parliament from the AK. nationalist and a former minister of the in- spent years calling Mr Erdogan a dictator For now, Mr Erdogan’s biggest head- terior, has propelled herself and her Iyi only to change tack in exchange for help ache is a currency crisis largely of his own (“Good”) party from obscurity to the na- fighting off an internal challenge. By hitch- making. The president has long insisted on ing its wagon to the ruling party’s, the MHP holding lending rates down to keep the will no longer have to clear the 10% thresh- economy firing on all cylinders. The cen- old needed to enter parliament. tral bank has obliged. But the resulting The opposition has responded in kind. credit binge has come at a cost. The value Soon after Mr Erdogan called early elec- ofthe Turkish lira has fallen by half against tions, the CHP, Iyi, the Felicity Party (SP) the dollar since 2015. Following an inter- and the small Democrat Party forged an al- view in May in which Mr Erdogan repeat- liance of their own, paving the way for ed his odd view that high interest rates even the smallest of the group to send a cause inflation and signalled he would few members to parliament. A surprising take even greater control ofmonetary poli- display of solidarity followed. When ru- cy after the elections, the currency lost 10% moursstarted to flythatIyi mightbe barred of its value in a week. It strengthened only from running in the elections due to a con- when Mr Erdogan ceded to orthodoxy and troversy about the timing of its party con- allowed the central bank to raise rates (see gress, the CHP loaned it some of its own Finance section). Turkish companies that MPs. (Any party with at least 20 members racked up mountains of foreign debt may of parliament can take part in the elec- now be on the verge of default. Despite his tions.) Each of the two main opposition authoritarian record and wacky economic hopefuls has promised to endorse the oth- theories, the markets have always pre- er in the second round against Mr Erdogan, ferred Mr Erdogan and his AK to the frag- assuming he does not win outright. mented opposition. Over the past month Aksener, taking on Erdogan The opposition has been less magnani- they may have had a change ofheart. 7 52 Europe The Economist June 2nd 2018 Charlemagne After the revolution

German politics is becoming a big debate about the legacy of1968 per loathed by the 68er students, even noisily backed Mrs Mer- kel’s decision to keep Germany open to refugees in 2016. The most prominent site of this post-68 Germany is, perhaps, the Holocaust Memorial in Berlin, a vast concrete expression of the urge to commemorate Nazi crimes. But its spiritual home is Prenzlauer Berg, a north Berlin district of posh cafés and organic shops beloved by prosperous bohemians. It sums up the good and the bad about old-68ers and their like: progressive and well- meaning, butsanctimonious, a bittoo comfortable and too reflex- ively defensive of 1968. Sophie Dannenberg, an author who in 2011 drew attention to the student movement’s totalitarian elements in “The Pale Heart ofthe Revolution”, was deemed “crazy” and “one ofthe worst100 Berliners” forher pains. Arrayed against this nostalgia are two sources of dissent, the first more objectionable and the second more influential. The former is centred on the right-wing Alternative for Germany party (AfD), which often lambasts the “foul, red-green, 68er generation”, and includes commentators who claim 1968 infected the country with self-loathing. The fact that some such figures were leftist activists in the 1960s should not come as a surprise: as Ms Dannenberg observed, the movement’s occasional lust for viol- T RESEMBLES just another Berlin courtyard—some straggly ent revolt and sympathy for dictators like Pol Pot might explain Ibushes and a bike rack—but Krumme Strasse 66 can claim to be the ease with which some of its alumni have now lurched to the a birthplace oftoday’s Germany. It was1967; the Shah ofIran was right-wing extreme. at a performance of “The Magic Flute” at the nearby Opera; The second group of1968-critics comprises Merkel-sceptics on crowds of protesters had been forced into side streets; a shot rang the centre-right. Among their number are Jens Spahn, the health out. Benno Ohnesorg, a 26-year-old, lay bleeding on the ground, minister and a possible future chancellor, who in February de- his head cradled by another student in a photo that shocked the clared the post-68 era in Germany over; and Alexander Dobrindt, youngFederal Republicand radicalised the movementfor the de- a Bavarian conservative who is calling fora “conservative revolu- monstrations that swept German universities over the following tion” on the grounds that “Prenzlauer Berg determines public de- year. Ohnesorg’s killer had been an unmarked police officer, later bate in Germany”. They believe that the 68ers have been in acquitted. This convinced protesters that, long after1945, authori- charge for too long. Their proposed remedy seems to take the tarian violence still lurked in German society. form of tighter refugee policies, restrictions on abortion advice In Germany “1968” means more than just such events. It is a and a more confident sense of German identity. It is in this direc- symbol—a “memory marker”, says Armin Nassehi, the author of tion that mainstream German conservatism may well evolve a new book on the subject—that also denotes the wider down- once Mrs Merkel goes. gradingofvalues like tradition, deference and unabashed national pride which, the student protesters believed, had led their par- Hardenberg versus Michael and Bruno ents’ generation into the abyss. In its 50th anniversary year, The overall spectrum of views on such matters is wide. But in- implicit and explicit debates about 1968 and its legacy are roiling creasingly it seems to coalesce into two distinct sides. On one is German politics. the broad pro-1968 establishment, particularly Mrs Merkel’s liber- Many “68ers” ended up running things. The movement was al wing of the CDU, the Greens and much of the wider left. One institutionalised by the birth of the environmentalist, anti-au- might call them the Hardenbergs. On the other are those who be- thoritarian Green party in 1980. It came of age in 1998, when the lieve the 1968 settlement needs contesting or dismantling: parts Greens under Joschka Fischer (who started his political career of the broader CDU, the liberal Free Democrats, but also the AfD throwing things at police in Frankfurt) joined a federal govern- and parts of the socialist Left party. Ifthey had a cinematic coun- ment with the Social Democrats (SPD) under Gerhard Schröder terpart, it might be Michael and Bruno, the nihilistic brothers (who had defended many radicals as a young lawyer). Angela who rebel against their hippy mother in “The Elementary Parti- Merkel’sgovernmentsfrom 2005, led byherChristian Democrats cles”, a darkly humorous German film based on a French novel. (CDU), have largely continued the earlier “red-green” priorities: Both camps contain multitudes, but the sense of division in child care, green energy and open borders. German politics was illustrated on May 28th, when the most con- The protesters have become the establishment, in other vinced wings of both came onto the streets of Berlin to demon- words. German films and novels abound with “old 68ers”, typi- strate. On the one side was the AfD. On the other was a counter- cally former student militants now in their 60s and 70s and run- rally organised by techno clubs, epitomes of the right-on, post-68 ning industries, ministries and newspapers. In one movie, “The Germany. Both presented a starkversion oftheir camps. The furi- Edukators”, a gang ofjuvenile anti-capitalists are discombobulat- ous AfDers, chanting “We are the people”, were a long way from ed when Hardenberg, the millionaire they kidnap, turns out to the moderate Merkel-sceptics of the CDU and CSU. And the rain- have been a major figure in the 1968 protests. Cultural radicals bow-painted ravers were hardly classic Merkel or SPD suppor- from the era like Alice Schwarzer, a feminist commentator, are ters. But in a country that has become used to consensus, it spoke nowpartofthe talk-showestablishment. Bild, a populistnewspa- ofsomething unfamiliar: polarisation. 7 International The Economist June 2nd 2018 53

Eﬀective altruism Also in this section Faith, hope and clarity 54 Career choices for do-gooders

A growing movement is trying to bring scientificrigourto philanthropy ONORS to charities rarely make the Not all of this money was given with poor countries, can produce big public Dsort of cost-benefit calculations inves- the intention of maximising human wel- benefits for relatively small amounts of tors, for example, would think obligatory. fare. Take, for instance, the Make-A-Wish money. One estimate finds that surgery So charities attract donations with pictures Foundation, which helps children stricken that prevents blindness induced by tracho- of smiling gap-toothed children, rather with life-threatening illnesses, by granting ma, an infectious disease, costs a charity than spreadsheetsshowinghowtheyactu- “wishes”, such as meeting celebrities or just $100 per operation. ally spend their money. Tugging at the visiting theme parks. The typical wish William MacAskill, a philosopher at heartstrings, however, does little to allay coststhe foundation around $10,000 to ful- Oxford University, argues that promoting the doubts of economists sceptical about fil—heartwarming for the recipient but of inefficientcharitiesmightactuallydo more the efficacyofcharity. Who isto say wheth- little help in improving health generally. harm than good. Competition for dona- erdonatingto a homeless shelteris a better Yet some charities, notably those active in tions is acute. Research by the Centre forEf- use ofmoney than donating to a school? fective Altruism, a think-tank he co-found- Yet advances in social science, particu- ed, finds that every dollar raised by one larly in development economics, mean do- Life choices charity means 50 cents less for others. Mr nors can now have a reasonably good idea Charities, cost of saving the life* of a child MacAskill also worries about “moral li- of how far each dollar will go. Empirically Aged 5 years and under, 2018, $’000 censing”. One study found that people minded do-gooders, members of the na- 0123Cause tend to treat giving to charity like buying a scent “effective altruism” movement, ar- Deworm the medieval indulgence—they may believe World Deworming gue that it is at last possible to put into prac- Schistosomiasis they have the right to act immorally if they tice a “fundamental axiom” of utilit- Control Initiative Deworming have done something they deem altruistic. arianism, first invoked in 1776 by Jeremy Helen Keller Vitamin A Measuring a charity’s efficiency is not Bentham, a British philosopher: “It is the International supplements straightforward, however. Effective altru- Malaria greatest happiness of the greatest number Consortium Malaria ism’s most-cited evaluator is GiveWell, a that is the measure ofright and wrong.” Against Malaria non-profit group based in San Francisco The vast majority of charitable contri- Foundation Malaria founded in 2007 by Holden Karnofsky and butions come not from big foundations, Sightsavers Deworming Elie Hassenfeld, two former hedge-fund but from individuals. Data from the Giving analysts. Traditionally, charities used to be USA Foundation, a non-profit, showthat of The END Fund Deworming rated according to their overheads. Give- the $390bn Americans gave to charity in No Lean Season Migration Well instead calculates standardised re- 2016, $280bn came from individual do- turns on investment across charities, as nors. Of this, around $120bn went to reli- GiveDirectly 11.3 measured by factors such as cost per life gious organisations and $60bn to educa- Direct-cash transfers saved (see chart). The charities it rates most tional institutions (mostly universities). Source: GiveWell *Or significant health benefit highly are not all household names. 1 54 International The Economist June 2nd 2018

2 Toby Ord, another philosopher at Ox- donations based almost exclusively on the tive-altruism movement has grown quick- ford, argues that people from rich coun- Open Philanthropy Project’s recommen- ly, it has mainly done so within a limited tries who are interested in maximising hu- dations. It does not accept outside dona- group of people—ie, young white men man welfare should focus their charity tions, but is dedicated to spendingMr Mos- with degrees in science and philosophy. abroad. A donor who wants to improve kovitz’s and Ms Tuna’s wealth, which Effective altruism can be a hard sell, educational outcomes, forinstance, would Forbes reckons to be $15bn. Last year, Good even forthe rationally minded. Silicon Val- do better to donate not to American Ventures gave out over $300m in grants. ley-types have been keener to embrace the schools but to charities trying to improve Effective altruists fret that their move- philosophy than those working on Wall the diets of children in poorer countries. A ment might, in fact, have very limited ap- Street, for instance. Mr Hassenfeld reckons rough meta-analysis by GiveWell finds peal. Utility-maximising automatons that this is partly because programmers that ensuring children in a poor country might see the sense in buying mosquito who get rich tend to do so at a young age, have enough iodine in their diets can lead nets over the internet for distant strangers. and are hence more open-minded about to a four-point increase in average IQ. Human beings might find, say, volunteer- charity. Bankers, in contrast, start to make One of GiveWell’s highest-rated chari- ing at a local soup kitchen more satisfying real money only in their 40s, by which ties is the Against Malaria Foundation emotionally. Ari Kagan, a researcher at the time they may already have formed their (AMF), which distributes medically treated Centre for Advanced Hindsight, a think- charitable habits. With many potential do- bed nets in poor countries. Malaria still tank at Duke University, points out that nors, Mr Hassenfeld says, “it’s easy to get kills some 400,000 a year, mostly in sub- many people find the idea of applying intellectual agreement, butharderto getac- Saharan Africa. There is still no cure forthe quantitative reasoning to altruism repug- tion.” As utilitarians have long found, and mosquito-borne disease. But it is relatively nant—like charging family members for a Bentham himself lamented, “the rarest of easy to prevent its spread. The AMF esti- meal. Surveys show that while the effec- all human qualities is consistency.” 7 mates that it costs $5 to buy and distribute a treated bed net. According to GiveWell’s Career choices analysis, the health benefits from this in sub-Saharan Africa are equivalent to a child’s life saved forevery $2,000 spent. Put money in thy purse GiveWell’s approach to evaluation has its limitations. It is hard to make like-for- Why job-hunting do-gooders should ponderthe counterfactual like comparisons of the efficacy of different charities with different goals. An alter- HEN Kit Harris was a student at advises people on careers they should native approach is simply to give money to WOxford University, he was not sure pickto maximise their impact on the poor people. A proliferation of mobile- what he wanted to do later. He thought world. It argues such decisions should be payment apps has made this easier than about becoming an actuary—decent pay based not on how much good a profes- ever before. GiveDirectly, a charity found- and hours and the chance to use his sion does overall, but on how much good ed by a group of development economists training in probability theory. But, an individual would do personally. One in 2008, facilitates direct transfers to peo- though Mr Harris enjoyed solving maths woman started her career as a teacher, ple in Kenya and Uganda. Mr Hassenfeld puzzles, he also wanted to help the less but doubted she was actually making likens the organisation to an index—it fortunate. Dilemma resolved! Naturally, any impact. Inspired by 80,000 Hours, serves as a baseline against which other he tooka job as a derivatives trader. she decided to workforan investment charities can be judged. GiveWell reckons He reasoned that, though plenty of bankinstead, calculating that she would thatin orderfora charityto be more cost-ef- do-gooders can grab entry-level jobs at have much more money to donate. Her ficient than GiveDirectly, it would have to non-profit groups, few have the quantita- leftish friends were aghast. provide goods or services that people can- tive skills to earn six-figure salaries at a Medicine is another obvious profes- not readily purchase by themselves. bank. So he could make more ofa differ- sion fordo-gooders. It is not one, how- Inevitably, even effective altruists have ence by taking a lucrative job and donat- ever, on which 80,000 Hours is very to accept a degree of uncertainty about the ing large chunks ofsalary than by work- keen. Rich countries have plenty of doc- impact of their donation. The question is ing fora charity directly. tors, and even the best clinicians can see how much? GiveWell is relatively conser- Shunning his own advice, Mr Harris only one patient at a time. So the impact vative when it comes to recommending has since left finance to workforthe that a single doctor will have is minimal. charities, listing just nine organisations un- Centre forEffective Altruism in Oxford. Gregory Lewis, a public-health research- der its list of “top charities”. The Open Phi- One ofits initiatives, 80,000 Hours, er, estimates that adding an additional lanthropy Project, a research group spun doctor to America’s labour supply would out of GiveWell, is more willing to back yield health benefits equivalent to only ventures with only a small chance of suc- around fourlives saved. cess provided the potential benefits are big The typical medical student, however, enough. An extreme example is its recom- should expect to save closer to no lives at mendation that donors finance research all. Entrance to medical school is compet- on the safe use ofartificial intelligence (AI). itive. So a student who is accepted would The increasing economic importance of not increase a given country’s total stock AI, and the fact that it is so poorly under- ofdoctors. Instead, she would merely be stood, have led many altruists to believe it taking the place ofsomeone who is may soon become one of the biggest slightly less qualified. Doctors, though, threats to society. do make good money, especially in It is hard to gauge quite how big the ef- America. A plastic surgeon who donates fective-altruism movement has become. halfofher earnings to charity will prob- But it does have some serious backers. ably have much bigger social impact on Good Ventures, a non-profit group found- the margin than an emergency-room ed by Dustin Moskovitz, a co-founder of doctor who donates none. Facebook, and his wife, Cari Tuna, makes Business The Economist June 2nd 2018 55

Also in this section 56 Bartleby: Not working properly 57 Vedanta Resources mired in violence 58 ThyssenKrupp under pressure 59 Wizz v Ryanair 59 Comcast and Disney battle over Fox 60 Chinese tea chains 61 Schumpeter: Six muddles about share buy-backs

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

The future of tech startups dangerous, because of the dominance of Amazon, Facebookand Google (owned by Into the danger zone Alphabet). Venture capitalists are wary of backing startups in online search, social media, mobile and e-commerce. It has become harder for startups to secure a first financing round. According to Pitchbook, a SAN FRANCISCO research company, in 2017 the number of these rounds were down by around 22% Big, rich and paranoid, today’s tech giants are making life complicated forstartups from 2012 (see chart). T IS a classic startup story, but with startups by copying them, or they pay to The wariness comes from seeing what Ia twist. Three 20-somethings launched a scoop them up early to eliminate a threat. happens to startups when they enter the firm out of a dorm room at the Massachu- The idea of a kill-zone may bring to kill-zone, either deliberately or accidental- setts Institute of Technology in 2016, with mind Microsoft’s long reign in the 1990s, as ly. Snap is the most prominent example; the goal of using algorithms to predict the it embraced a strategy of “embrace, extend after Snap rebuffed Facebook’s attempts to reply to an e-mail. In May they were fun- and extinguish” and tried to intimidate buy the firm in 2013, for $3bn, Facebook draising for their startup, EasyEmail, when startups from entering its domain. But en- cloned many of its successful features and Google held its annual conference for soft- trepreneurs’ and venture capitalists’ con- has put a damper on its growth. A less ware developers and announced a tool cerns are striking because for a long while known example is Life on Air, which similar to EasyEmail’s. Filip Twarowski, its afterwards, startups had free rein. In 2014 launched Meerkat, a live video-streaming boss, sees Google’s incursion as “incredi- The Economist likened the proliferation of app, in 2015. It was obliterated when Twit- ble confirmation” they are working on startups to the Cambrian explosion: soft- ter acquired and promoted a competing something worthwhile. But he also admits ware made running a startup cheaper than app, Periscope. Life on Air shut Meerkat that it came as “a little bit of a shock”. The ever and opportunities seemed abundant. down and launched a different app, called giant has scared offat least one prospective Today, less so. Anything having to do Houseparty, which offered group video backerofEasyEmail, because venture capi- with the consumer internet is perceived as chats. This briefly gained prominence, but talists try to dodge spaces where the tech wasthen copied byFacebook, seizingusers giants might step. and attention away from the startup. The behemoths’ annual conferences, Less ventured, fewer gains The kill-zone operates in business soft- held to announce new tools, features, and United States, number of startup financings ware (“enterprise” in the lingo) as well, acquisitions, always “send shock waves of ’000 with the shadows of Microsoft, Amazon fear through entrepreneurs”, says Mike 10 and Alphabet looming large. Amazon’s Driscoll, a partner at Data Collective, an in- First financings cloud service, Amazon Web Services vestment firm. “Venture capitalists attend Follow-on 8 (AWS), haslabelled manystartupsas “part- to see which of their companies are going financings ners”, only to copy their functionality and to get killed next.” But anxiety about the 6 offer them as a cheap or free service. A tech giants on the part ofstartups and their giant pushing into a startup’s territory, 4 investors goes much deeper than such while controlling the platform that startup events. Venture capitalists, such as Albert 2 depends on for distribution, makes life Wenger of Union Square Ventures, who tricky. For example, Elastic, a data-manage- was an early investor in Twitter, now talk 0 ment firm, lost sales after AWS launched a of a “kill-zone” around the giants. Once a 2006 08 10 12 14 16 18* competitor, Elasticsearch, in 2015. young firm enters, it can be extremely diffi- Sources: PitchBook; National Even if giants do not copy startups out- *Q1 annualised cult to survive. Tech giants try to squash Venture Capital Association right, they can dent their prospects. Last1 56 Business The Economist June 2nd 2018

2 yearAmazon boughtWhole FoodsMarket, search, social media, digital advertising, the giants noticing, says Aaron Levie of a grocer, for$13.7bn. Blue Apron, a meal-de- virtual reality, messaging and communica- Box, a cloud and file-sharing service that liverystartup thatwaspreparingto go pub- tions, smartphones and home speakers, has avoided the kill-zone (it has a market lic, was suddenly perceived as unappetis- cloud computing, smart software, e-com- value ofaround $3.8bn). Buttodaystartups ing, as expectations mounted that Amazon merce and more. This makes it challenging can only get a six- to 12-month lead before would push into the space. This phenome- for startups to find space to break through incumbents quickly catch up, he says. non is not limited to young firms: recently and avoid being stamped on. Today’s There are some exceptions. Airbnb, Facebook announced it was moving into giants are “much more ruthless and intro- Uber, Slack and other “unicorns” have online dating, causing the share price of spective. They will eat their own children faced down competition from incum- Match Group, which wentpublicin 2015, to to live another day,” according to Matt bents. But they are few in number and plummet by 22% that day. Ocko, a venture capitalist with Data Col- many startups have learned to set their It has never been easy to make it as a lective. And they are constantly scanning sights on more achievable aims. Entrepre- startup. Now the army of fearsome tech- the horizon for incipient threats. Startups neurs are “thinking much earlier about nology giants is larger, and operates in a used to be able to have several years’ head which consolidator is going to buy them”, wider range of areas, including online start working on something novel without says Larry Chu of Goodwin Proctor, a law 1 Bartleby Not working properly

A modern authorrediscovers Parkinson’s Law

ISYPHUS, king of Corinth, was con- many low-level workers they could lay Sdemned for all eternity to push a boul- off, they then hired lots of management der up a hill, only to watch it roll down flunkies to enhance their status. And he again. David Graeber, an anthropologist, postulates that it is all part of a system of thinks that many modern workers face social control, in which young people are the same fate today, forced to perform loaded up with debt and then pushed pointless tasks, or “bullshit jobs”, as his into meaninglessjobsin orderto pay itoff, new book* calls them. thereby keeping them docile. Mr Graeber defines a bullshit job as But these explanations seem inherent- one “that is so completely pointless, un- ly unlikely. Modern executives are moti- necessary or pernicious that even the em- vated by share options which usually re- ployee cannot justify its existence”, quire them to meet profit targets. They are though they may have to pretend that pursued by activist investors, who may they believe in it. This definition, and in- get them fired if they underperform. Giv- deed much of the book, combines two en those threats, bosses would hardly em- categories ofroles. In the first are jobs that ploy lots ofuseless, profit-sapping staff. Mr Graeber tends to think are socially Instead, the problem lies in the nature worthless, such as corporate lawyers or Nor are feelings of boredom and point- of a services company. In a factory, you investment bankers. (Some of those less activity confined to the arena of work. can count the widgets made each day, workers may take an equally dim view of Anyone who has been a schoolchild can which limits the scope for bullshit. In a the utility of anthropologists.) In the sec- remember being forced to write essays, or service business, it is harder to monitor ond group are jobs where employees find take tests, about subjects that seemed nei- the quality and quantity of output. Like themselves with little or nothing to do ther interesting nor likely to be of any use the old quip about advertising, executives and, worse, must still look as if they are in later life. Indeed, many teachers are may know that halfoftheir workers’ time frantically busy. probably as bored marking the school- is wasted, but not which half. What is his evidence? The author workas pupils are producing it. In response to this lack of knowledge, places a lot of faith in anecdotes and a Nevertheless, some workers will feel executives create a host of targets, and couple of opinion surveys which found that Mr Graeber’s analysis is timely. Both hold a lot ofmeetings to try to understand that only 37-40% ofworkers in Britain and meaningless job titles and mindless tasks what is going on. As Messrs Hamel and the Netherlands felt they “made a mean- seem to have proliferated. A study† by Zanini put it, “A growing percentage of ingful contribution to the world.” He Gary Hamel and Michele Zanini, two employee time gets consumed in efforts doesn’t seem to allow for the possibility management theorists, estimated that to keep the organisation from collapsing that modesty might govern theiranswers. there are nearly 24m corporate “bureau- under the weight ofits own complexity.” In any case, the contention that many crats” in America, or about one for every In other words, there is no need for Mr of us are wasting much of our time at 4.7 workers. Reassigning them to more pro- Graeber to construct elaborate theories work is hardly a new one. C. Northcote ductive tasks could give the American about neoliberal conspiracies to explain Parkinson coined the idea that “work ex- economy a $3trn boost, they reckon. the phenomenon ofwasted effort.Parkin- pands to fill the time available” in an es- Mr Graeber constructs some elaborate son nailed the issue six decades ago: “Of- say in The Economist in 1955, adding that theories as to why this problem has arisen. ficials make workforeach other.” “there need be little or no relationship be- He suggests that automation in recent de- tween the workto be done and the size of cades did cause mass unemployment but ...... the staffto which it may be assigned.” The that society conspired to create a bunch of * “Bullshit Jobs: A Theory”, published by Allen Lane † “The $3 Trillion Prize for Busting Bureaucracy (And futility of many middle-class jobs is also illusory jobs to disguise the fact. He also ar- How to Claim It)” an old theme, being the plot driver of the gues that while executives in the Reagan/ 1970s British sitcom “The Good Life”. Thatcher era prided themselves on how Economist.com/blogs/bartleby The Economist June 2nd 2018 Business 57

2 firm. The tech giants have been avid ac- generally feel excited about gaining exper- quirers: Alphabet, Amazon, Apple, Face- tise from such a successful firm, but some book and Microsoft spent a combined may rue the day they accepted funding, be- $31.6bn on acquisitions in 2017. This has led cause of conflicts. Uber, for example, took some startups to be less ambitious. “Nine- money from one of Alphabet’s venture- ty per cent of the startups I see are built for capital funds, but soon found itself com- sale, not for scale,” says Ajay Royan of peting against the giant’s self-driving car Mithril Capital, which invests in tech. unit, Waymo. Thumbtack, a marketplace This can be enriching to founders, who for skilled workers, also accepted money can go on to startanotherfirm orprovide fi- from Alphabet, but then watched as the nancing to peers with smart ideas. To the parent company rolled out a competing extent that such exits provide more capital service, Google Home Services. Amazon to spurinnovation, thisisno bad thing. The and Apple invest less in startups, but they tech giants can help the firms they acquire too have clashed with them. Amazon in- grow more than they might have been able vested in a home intercom system, called to do on their own. For example, Face- Nucleus, and then rolled out a very similar book’s acquisition of Instagram took out a product ofits own last year. would-be competitor, but it has thrived un- Recruiting is a second tool the giants der the social-networking giant’s sway by will use to enforce their kill zones. Big tech adopting the technical infrastructure, staff firms are able to shell out huge sums to and know-howthatFacebookhad in place. keep top performers and even average employees in their fold and make it uneco- Friend or foe? nomical for their workers to consider join- But plenty of people in the Valley reckon ing startups. In 2017 Alphabet, Amazon, the bad outweighs the good and that early, Apple, Facebook and Microsoft allocated a Vedanta Resources “shoot-out” acquisitions have sapped in- combined a whopping $23.7bn to stock- novation. “The dominance of the big plat- based compensation. Big companies’ Copper bottom forms has had a meaningful effect on the hoarding of talent stops startups scaling entrepreneurial culture of Silicon Valley,” quickly. According to Mike Volpi of Index says Roger McNamee of Elevation Part- Ventures, a venture-capital firm, startups ners, a private-equity firm, who was an in the firm’s portfolio are currently 10-20% MUMBAI early investor in Facebook. “It’s shifted the behind in their hiring goals forthe year. A fatal shooting ofprotesters in India incentives from trying to create a large plat- A third reason that startups may strug- will tarnish many reputations form to creating a small morsel that’s tasty gle to break through is that there is no sign to be acquired by one ofthe giants.” of a new platform emerging which could FTER 99 peaceful days of protests, the And when startups are bullied into sell- disrupt the incumbents, even more than a A100th brought carnage. On May 22nd ing, as some are, it is even more worrying. decade after the rise of mobile. For exam- in Tuticorin, a coastal town near the south- Big tech firms have been known to intimi- ple, the rise ofmobile wounded Microsoft, ern tip of India, police indiscriminately date startups into agreeing to a sale, saying which was dominant on personal comput- fired live rounds into a crowd of several that they will launch a competing service ers, and gave power to both Facebook and thousand demonstrators who were op- and put the startup out of business unless Google, enablingthem to capture more on- posing the planned expansion ofa copper- they agree to a deal, says one person who line ad dollars and attention. But there is smelting facility. Thirteen people died and was in charge of these negotiations at a big no big new platform today. And the giants scores more were injured. The fallout software firm (which uses such tactics). make it extremely expensive to get atten- threatens to be a chronic headache both There are three reasons to thinkthat the tion: Facebook, Google and Amazon all forthe Indian authorities and Vedanta, the kill-zone is likely to stay. First, the giants charge a hefty toll for new apps and ser- mining giant which owns the facility. have tons of data to identify emerging ri- vices to get in front ofconsumers. Corporate public-relations consultants vals fasterthan everbefore. Google collects Seeing little opportunity to compete in London, where Vedanta’s main holding signals about how internet users are with the tech giants on their own turf, in- company is based, have depressingly am- spending time and money through its vestors and startups are going where they ple experience in helping commodities Chrome browser, e-mail service, Android can spot an opening. The lackofan incum- firms whose reputations risk being sullied operating system, app store, cloud service bent giant is one reason why there is so by such police violence. Royal Dutch Shell, and more. Facebook can see which apps much investor enthusiasm for crypto-cur- an oil group, still faces ire for the way Nige- people use and where they travel online. It renciesand forsyntheticbiologytoday. But rian authorities arrested then executed acquired the app Onavo, which helped it the giants are starting to pay more atten- Ken Saro-Wiwa, an activist, in 1995. Lon- recognise that Instagram was gaining tion. There are rumours Facebookwants to min, a platinum-miner also listed in Lon- steam. Itboughtthe youngfirm for$1bn be- buy Coinbase, a cryptocurrency firm. don, had to rebuff claims by South African fore it could mature into a real threat, and Regulators will be watching what the police that it should carry some blame for last year it purchased a nascent social-poll- giants try next. Criticism that they have cops shooting its striking workers there in ing firm, tbh, in a similar manner. Amazon been too laxin approvingdeals where tech 2012, which resulted in 34 deaths. can glean reams of data from its e-com- firms buy tiny competitors that could one Vedanta’s Indian founder and boss, merce platform and cloud business. day challenge them has been mounting. Anil Agarwal, stuckto the PR script, repeat- Another source of market information Facebook’s acquisition of Instagram and edlydescribingthe shootingas“absolutely comes from investing in startups, which Google’s purchase of YouTube, before it unfortunate”. That proved an insufficient helps tech firms gain insights into new was obvious how the pair might have tak- penance: state authorities in Tamil Nadu markets and possible disrupters. Of all en on the giants, might well have been announced the Tuticorin plant would be American tech firms, Alphabet has been blocked today. To fight backagainst the kill- shut permanently, never mind expanded. the most active. Since 2013 it has spent zone, regulators must closely consider As a firm that gets stuff out of the $12.6bn investing in 308 startups. Startups what weapons to wield themselves. 7 ground, mostly in poor places, Vedanta is1 58 Business The Economist June 2nd 2018

2 used to campaigns. But its claims of world- ThyssenKrupp class environmental stewardship at the In need of elevation Tamil Nadu plant sit awkwardly with re- Steeling itself ThyssenKrupp, operating margin by segment*, % ports of every home in Tuticorin contain- 2016 2017 ing at least one person wheezing or worse. 20246810– + In 2013 it was fined 1bn rupees (then $16m) Lifts for violating pollution control norms. Its ESSEN troubles span the country. Earlier this year † Activists want to shake up the last of Steel itsaid itwould write off$600m afterlosing Germany’s unreformed conglomerates rights to drill iron ore in Goa, on India’s Components western coast, after “pollution and licens- EW industrial scenes offer the drama of Group ing irregularities”. A tribe in Odisha, a state Fa steelworks in full flow. Perched high in Materials up the coast from Tamil Nadu, fought for a cabin, a technician guides a bucket the services years to stop Vedanta drillingforbauxite in size of a house to send 250 tons of lava-like Industrial hills it considered sacred, invitingcompari- molten metal into a vast crucible. As a roar solutions sons to the plot ofthe film “Avatar”. echoes across a gargantuan hall, a pile of *Financial years ending September 30th † Neither the firm nor the authorities scrap slides into the mixture. Plumes of il- Source: Company reports Europe only come out of the latest dispute well. Au- luminated smoke rise. Sparks like giant thorities in Tamil Nadu stand accused both fireflies tumble down. ThyssenKrupp’s server, askingwhat makers oflifts and sub- of being too soft on Vedanta before the steelmaking plant in Duisburg makes marines have in common. shooting and of over-reacting in its after- 30,000 tons ofthe metal daily. Two big changes loom, as activist inves- math. The reason they gave for closing the The firm itself is going through an in- tors demand reform. One is the end of plant was that it was unpopular, some- dustrial drama, after years of ailing. Its steel, which provides two-fifths of rev- thing which was clearly true before it de- boss, Heinrich Hiesinger, was seen as its enues. The firm hasagreed with Tata, an In- cided to shoot people for saying just that. saviour after arriving from Siemens late in dian maker, to bundle their European steel Vedanta will surely challenge the closure 2010. But swiftness is not his forte: a col- assets into a joint venture. The idea is to rein court once tempers have cooled. league says he talks of “diligence before duce steelmaking capacity and for Thys- M.K. Stalin, a prominent Tamil opposi- speed”. He did rid the firm of loss-making senKrupp to pass on pension liabilities. Yet tion politician, questioned why protesters steel plants, such as assets in the Americas the Tata deal, announced in September, were given no warnings before shots were that cost €8bn ($9.3bn) in write-downs. Yet has dragged. ThyssenKrupp partly blames fired, terming the incident “mass murder he has not reformed a top-heavy company. months of delays on Brexit (Tata faces un- of innocent people”. A video of a police- Several bits ofthe group—a hotch-potch certainty over its operations in Port Talbot, man before the shooting, saying that at that includes submarine-, ship- and lift- in Wales) and on a new boss at Tata. A sign- least one protester should die, looks in- building, auto supplies and a unit for con- ing ceremony is due this month. criminating. The violence and its chaotic structing entire factories—underperform The second, bigger question is how to aftermath are hardly the image the Indian their peers. Notwithstanding some bright revive the firm’s industrial activities. Mr government will want advertised as it as- areas, such as lifts (see chart), overall oper- Hiesinger says he has bright ideas for siduously courts foreign investment. ating margins are just 3.5%, after years of change, but will not spill them until the The firm’s own share ofthe trouble will failed promises by managers to match the deal with Tata is signed. He talks up the ac- take more than press releases to remedy. Its market average for European peers of 7%. tivitiesofhigh-end engineeringunits, nota- shares have tumbled by a quarter since the All divisions are guided by a powerful bly the lift business. Yet analysts say even Tuticorin protests kicked off. Standard & head office in Essen that is said to guzzle an the better-performing units suffer under a Poor’s, a credit-ratingagency, saysthe facili- extraordinary 30% of total profits. Thys- heavy superstructure. As a stand-alone ty’s closure could trim pre-tax earnings by senKrupp’s share price badly lags behind firm, liftmaking, which is far more profit- up to $250m (about half of the pain would Germany’s largest listed firms. Meanwhile, able than the firm’s other divisions, could be borne by outside investors in the Indian Siemens, Bayer and others have broken off be worth more than the entire conglomer- entity). The parent company’s comparable subsidiary units and simplified structures. ate’s market capitalisation of €14.5bn, ar- earnings last year were $1.4bn. This “is the last man standing” says an ob- gues one observer. Managers still trot out Opponents seized on Vedanta’s Lon- 20th-century-style defences of conglomer- don stockmarket listing to exert pressure. ates. They say units can share bright ideas John McDonnell, shadow chancellor of and technology, citinga niftyidea for a hor- the exchequer for the opposition Labour izontal motorised lift that came from the party, called the shooting a massacre and railways team. Yet more autonomous un- demanding Vedanta shares be delisted. its, or outright independent firms, would The episode will vindicate those who al- be most open to innovation. ready think its opaque structure, complex Cevian, an activist shareholder of long corporate governance and recurring run- standing which owns 18% of Thyssen- ins with environmental watchdogs as rea- Krupp, is demanding “fundamental reor- son enough to avoid it. ganisation” of industrial activities, scrap- Mr Agarwal, once a scrap merchant ping Mr Hiesinger’s centralised structure. who built the company over four decades, Cevian is relatively friendly to managers; a hasprided himselfon understandingIndia sharper spur to action is Elliott, the world’s better than foreign interlopers trying to largest activist hedge fund, which has just make a quickrupee. Despite his regret over bought a stake. Both may have some quiet the deaths, he says that “fake activists” are support from unions and from the Krupp taking advantage of its democracy. Having family foundation, in Essen, which has the refined and reprocessed metals forso long, dominant stake. ThyssenKrupp’s shares he will now have to do a similar job on his leapt after news of Elliott’s arrival: the company’s reputation. 7 White heat of change hope is forbig changes this summer. 7 The Economist June 2nd 2018 Business 59

European low-cost carriers explains Daniel Roeska of Bernstein, a re- Media mergers search firm. It is one. One ofRyanair’s early Wizz on the up investors, Bill Franke of Indigo Partners, a There can be only private-equity firm, is also Wizz’s biggest backer. It saw in Wizz an opportunity to one take the Ryanairmodel to an extreme. Wizz BUDAPEST cuts basic fares lower than Ryanair and NEW YORK makes even more back in extra charges on A Hungarian startup threatens Europe’s Comcast and Disney prepare forbattle luggage and the like. It also wants to avoid biggest and lowest-cost airline overmuch ofRupert Murdoch’s empire complications such as connecting flights— UST a few hundred metres from Buda- which Ryanair has started to offer—so they YEAR ago, investors in 21st Century Jpest airport’s runways, the wails of do not bloat its cost base. AFox, Rupert Murdoch’s entertainment scorched airline passengers echo around Wizz’s big advantage is that its home empire, could have been forgiven a bout of an industrial estate. But no real people are country has some of the lowest labour the blues. Shares were down by 30% from being harmed. Here Wizz Air, a rapidly costs in the EU. It can undercut Ryanair on their peak in December 2014. Viewership growing Hungarian carrier, trains cabin pay while appearing to offer good jobs by of most of the company’s American net- crew and pilots in evacuating its planes local standards. Its Irish rival, in contrast, is works was in decline, and millions had safely. Last year the airline recruited 1,000 often pilloried fortreating its staff badly by dropped expensive pay-TV packages, in- new staff, twice as many as the yearbefore. western European norms to save money. cluding its own, in favour of cheaper web- In February construction workstarted on a Ryanair’s trump card is that its size and delivered video. bigger training centre to teach an extra established status means its cost of aircraft On May 25th Fox’s shares reached a 1,400 cabin crew it will need next year. ownership is lower than for Wizz. But the new all-time high, rising above $39 a share. If anyone will be burned by this expan- gap is closing, Mr Varadi says. As Wizz’s The business has not turned around, but sion it will be Europe’s cheapest airline, profits grow it can borrow money and Fox’s value has, as a prize for other media Ryanair. Over the past two decades its lease planes more cheaply. And it has start- titans seeking global scale. Comcast, a ca- chief executive, Michael O’Leary, turned ed to get discounts on new jets by buying in ble giant, ispreparingto top Disney’s$52bn the Irish minnow into Europe’s biggest car- bulk with Indigo Partners’ other airlines all-stock offer for much of Fox (plus almost rier by copying the low-cost model of across the world. $15bn in debt) with an all-cash offer of at Southwest, an American budget airline. It To its credit, Ryanair has long prepared least $60bn. Disney is reportedly readying has long had no-frills rivals such as easyJet for the day a competitor rivalled it on cost. cash to sweeten its offer, which Fox’s board and Norwegian. But these two have never Its chief financial officer, Neil Sorahan, had approved in December. The final sale been able to match Ryanair’slowcostbase. points out that seats on short-haul flights price could exceed $70bn. The winner will Yet after Wizz’s full-year results on May are a low-margin commodity. There is little take on Netflix and Amazon in the compe- 24th, in which it reported record profits, an- to stop another airline competing away tition for customers globally. The loser will alysts say the carrier is about to do just that your profits, he admits. And so Ryanair be at riskoffalling behind in that chase. (on the basis of cost incurred for each wants to use its heft in the airline business The bidding war, ifit comes, will proba- “available seat kilometre”, a measure that to profit from selling high-margin holiday bly not begin until June 12th, when a feder- takes into account distance flown). Wizz is extras such as hotel rooms, car hire and the al judge in Washington is expected to rule now launching an assault on Ryanair’s like. Kenny Jacobs, its chief marketing offi- on the government’s antitrust lawsuit western European strongholds. cer, wants its website to be the “Amazon of seeking to block AT&T’s $109bn purchase Already the biggest airline in eastern travel”, even selling airline tickets for its of Time Warner. If that vertical merger of Europe, Wizz has aimed to expand across competitors. Ryanairis not rollingover, but distribution and content goes through, the entire continentsince the start, saysJoz- its planned diversification is a sign of how Comcast will have a more credible case sef Varadi, its founder and chief executive. much Wizz has achieved. 7 that its offer could pass regulatory muster. Its first flight from Katowice in Poland to If the deal is blocked, Comcast may limit London in May 2004 came just weeks after what it seeks to buy from Foxorfocus on its Hungary joined the EU, which allowed its Wizard results £22bn ($29bn) bid forSky, a European satel- airlines to fly anywhere within the bloc. So lite broadcaster that was to be turned over Ancillary revenues* as % of total far it has focused on flights between east- to Disney in the Fox sale. 50 ern and western Europe. Booming flows of Fox’s size, rather than its trajectory as a migrants and tourists on these routes have 40 business, explainsthe fervourofits suitors. Wizz Air increased its passenger numbers from 14m Much like Randall Stephenson, the boss of 30 in 2014 to over 28m last year (see chart). AT&T, Bob Iger of Disney and Brian Rob- Ryanair MrVaradi nowthinksthe time isright to 20 erts of Comcast have concluded that to start flying within western Europe. In May compete with Netflix and other tech giants Wizz launched a British unit to fly new 2012 13 14 15 16 17 18 for customers in entertainment, they must Financial years ending March 31st routes within the region, such as from Lon- achieve huge scale. Disney plans to launch don to Iceland and to Bari in Italy. Juicier Passengers carried, m a direct-to-consumerNetflix-like streaming fares and profits are a big lure. Wizz also 150 service in 2019; Comcast, which owns sees Ryanair’s recent troubles as an oppor- Ryanair NBCUniversal, probably would announce Wizz Air tunity. The Irish carrier is struggling to find 100 similar plans were it to add heft. enough cheap labour to man its flights. The assets that Mr Murdoch agreed to Last September it cancelled 20,000 flights sell to Disney meet that need: Fox’s film 50 because ofa pilot shortage. It has also lost a and TV studios; its vast library of content, court case over cabin-crew contracts, a including “The Simpsons”; cable networks 0 FX judgment that will swell its pay bill. 2014 15 16 17 18 such as ; international assets like Sky Keeping staff costs low is essential for Financial years ending March 31st (pending Fox’s battle with Comcast for Wizz and Ryanair. The Hungarian upstart *Baggage, food and control of Sky); and Fox’s 30% stake in does notjust looklike a “Ryanairmini-me”, Source: Company reports other extras Hulu, which would give either Disney or 1 60 Business The Economist June 2nd 2018

2 Comcast, each of which also owns 30%, a Disney-Fox transaction. Either victor enough to receive their drink and snap a control of a streaming platform with 20m may need to surrender some assets as con- selfie or two. In that sense HEYTEA turns customers in America. (Mr Murdoch and cessions to regulators. the concept of ritual-laden chaguan, or tea his family would retain the flagship broad- The Murdochs prefer Disney, saying it is rooms, which seem stuffyto youngpeople, cast network and their national sports and a better fit (they turned down an offer from on its head. It may be making tea-drinking news networks, including Fox News Chan- Comcast in the autumn). On March 29th cool again. Mr Nie thinks the early idea nel, the company’s cash cow). James Murdoch, Fox’s boss, reiterated this from Starbucks, to create “a third space” for The stakes appear higher for Comcast. rationale at Code, a media conference in coffee drinkers—neither the home nor the Disney’s enviable collection of film fran- California. But the family holds only 17% of office—is no longer as relevant when chises should provide enough backing for Fox. Otherinvestorsmaywell optfor Com- youngsters are gathering online to chatter. a successful streaming service without cast’s cash over Disney’s shares; the cash is Instead he wants his pretty stores to be Fox. Comcast, if it were to lose, would be taxable but so would the shares be once widely shared, “social-media currency”. left to hunt for much smaller prey to bulk sold. In the end most analysts believe Mr This year HEYTEA will open in provin- up its offering. Lionsgate, a mini-studio, Iger will raise Disney’s bid by as much as it cial capitals in middle and western China, might be one target. Mr Roberts could also takes to get Fox. Either way Fox investors including Chengdu and Chongqing. A sec- seek to prise Hulu or other properties from will not have minded the attention. 7 ond funding round completed in April that raised 400m yuan ($63m) was led by Longzhu Capital, the venture-capital arm of Meituan-Dianping, an online-services and delivery giant. Exclusivity was good for the brand early on, says Jason Yu of Kantar Worldpanel, a market-research firm, but success will depend on scale. The firm wants to double the number of its stores to 200 by the end ofthis year. Will that be at Starbucks’s expense in China? Mr Nie says that he is not trying to challenge the American caffeine giant. Still, he is probably competing for the same, premium market, charging 25-30 yuan for a cup of tea. His concept stores, such as HEYTEA Black, bring to mind the Starbucks Reserve Roastery, which features in-house roasting of unusual coffees. Since entering China in 1999, Starbucks has fared well selling coffee to a nation of tea- drinkers. It has around 3,300 stores that serve more than 6m customers a week. Last month it raised its target fornew stores from 500 to 600 a year until 2022. Yet sales offreshly prepared tea grew by Tea chains in China 19% in 2017 as those of coffee fell by 4%, according to Kantar. Yi Dian Dian, a Taiwan- Anewleaf ese milk-tea company, has become the world’s largest chain of streetside kiosks, according to Euromonitor, expanding from 300 outlets in mainland China in 2012 to over 3,500 last year. Citic Securities, a bro- SHANGHAI ker, predicts that the combined revenue of HEYTEA wants to do fortea in China what Starbucks has done forcoffee China’s new big tea chains will soon reach 12bn yuan, close to Starbucks China’s esti- IPPED, not stirred, is how hip young smacked of “thirst marketing”, purposely mated revenue of 13.8bn yuan in 2016. Yi Tthingsin China nowtake theirtea. To be keepingsupply scarce. HEYTEA denies this, Dian Dian, whose stalls arrived in main- exact, at a 45-degree tilt. So advise the tea- as well as accusations of padding out its land China in 2011, has reportedly attracted ristas of HEYTEA, a budding, pricey tea own queues. Though everything from fan- 700m yuan in local investment. A large chain, the better to blend the bitter tang of cy eateries to convenience stores is on Chi- supplierto drinks chains in China says that freshly brewed leaves with a salty cream- na’s main food-delivery apps, HEYTEA Starbucks’s expansion plans feel for the cheese “cap”. Naigai cha, or cheese-tea, has stayed off them early on (the firm’s first first time like “a defend strategy”. taken China’s rich eastern cities by storm. shops were in a handful of second-tier cit- Meanwhile HEYTEA is riding a frothy For months after HEYTEA shops appeared ies in southern Guangdong in 2012). Nie cream-cheese wave (it also offers popular in Shanghai in February 2017, security Yunchen, its 26-year-old founder, says his fruit-based teas). Singapore is among the guards had to manage queues with wait- priority was to offer high-quality teas. candidates for the location of its first shop ing times of up to three hours. Impatient These are gently brewed and cheese- abroad. Each one in China makes more customers hired queuers from personal- capped to order: not for him the grab- than 1m yuan in monthly revenue, selling services apps to stand in line for them. and-go streetside tea chains that use pow- between 1,000 and 2,000 cups a day. It Cups were limited to two purchases a per- dered mixes. Most HEYTEA outlets are in hopes that its distinctive blends, such as son to ward off scalpers (the limit is still in ritzy shopping malls, with space to sit and the “Golden Phoenix King”, will get cus- place in Beijing). wall displays oftea in glass beakers. tomers hooked: either a flight of fancy—or To many in the beverage industry this But many customers only stay long the rebirth ofthe tea business. 7 The Economist June 2nd 2018 Business 61 Schumpeter Six muddles about buy-backs

Stockrepurchases by American firms are on the rise. So is the confusion surrounding them can turn the tap on and offwithout disappointing investors. The second confusion is that buy-backs create shareholder wealth. That is like saying that withdrawing dollars from an ATM makes you richer. Buy-backs can transfer wealth between shareholders—if you sell at a price that later turns out to be low, the remaining owners benefit. They can also send signals about how managers intend to allocate capital. But they do not significantly change the underlying worth ofAmerica Inc or its shareholders. The third mix-up is that firms’ main motivation is to manipulate either their stock prices or their earnings-per-share (EPS), which can be cosmetically boosted as the number of shares falls. The charge is hard to sustain, in aggregate, because buy-backs are small relative to the stockmarket, worth 2% of its value and 1% of shares traded for S&P 500 firms each year. Rules prevent firms from dominating trading in any given day. True, if executive-pay schemes are poorly designed around EPS, they can artificially encourage buy-backs. Butofthe 20 largestrepurchaserstoday, three- quarters do not have EPS as a main element oftheir pay plans. A fourth muddle is the idea that the world would be a better place ifthe same firms doinghuge buy-backs reinvested the money instead. The trouble is that buy-backs are dominated by firms HE last time a corporate-finance concept went mainstream that specialise in intellectual property, which would be unable to Twas during the financial crisis, when banks’ capital became a reinvest all their profits. For example, had Apple reinvested the subject you could raise in yoga studios or biker bars without be- sums it has repurchased in the past decade, its physical plant ing hushed or hospitalised. Now there is a new candidate: share would be six times larger than it is. A healthy economy is one in buy-backs, which reached $189bn in the three months to March which abnormally high profits are recycled by the financial sys- for firms in the S&P 500 index, a record high. They may rise even tem, not one in which fat incumbents get ever more sprawling. further when a wave of cash comes home in response to Ameri- The fifth confusion isthatbuy-backslead to lowinvestment. A ca’s new tax rules, which encourage firms to repatriate the $1trn study by Federal Reserve economists in 2017 found little evidence of funds they have parked in foreign subsidiaries. Apple plans to of this. As firms’ cashflow has risen relative to GDP since the spend $100bn on buy-backs, forexample. 1990s, a lower proportion has been spent on investment. But this As the sums rise, so does the controversy. In a buy-back a firm reflects the denominator rising, not the numerator shrinking: in- acquires its own stock to return cash to its shareholders. To critics vestment relative to GDP is in line with 1990s levels. Surges in they are a financial voodoo that exacerbates inequality and de- buy-backs and investment may sometimes even be comple- presses investment. Elizabeth Warren, a left-leaning senator, ments, notsubstitutes. Theycan happen atthe same time, such as wants them partially banned. But among investors such hostility in the second half of 2007. Today, buy-backs and investment are is seen as a “derangement syndrome”, to quote Cliff Asness, the rising sharply again, in tandem. In the most recent quarter 64% of boss of AQR, an investment firm. The financiers are right. Buy- firms that boosted buy-backs also boosted investment—indeed backs are a sensible tool. They largely reflect economic imbal- they were slightly more likely to do so than other firms. ances, such as bloated profit margins, rather than cause them. The sixth muddle is that buy-backs are a good measure of First permitted by American regulators in 1982, buy-backs are whether corporate-tax reform was in the public interest. They are now widely used. Some 97% of firms in the S&P 500 indulged not. Better alternatives are whether overall investment rises by over the past decade, slightly more than paid dividends. Even more than the annual $100bn tax break (this looks possible in holdouts, such as Berkshire Hathaway, have no objection in prin- 2018), whether firms’ wage bills are rising (yes, but not much fast- ciple. Of the $8trn returned to shareholders in this period, just er than before) and whether these effectswill last (debatable). over half was via share repurchases. A fifth of buy-back activity was by ten big spenders, including Apple, Microsoft and Exxon. Born to be wild The recent surge is clearto see but also skewed. Buy-backs rose Most criticism of buy-backs is motivated by legitimate concerns by 41% in the last quarter compared with the prior year. The share about serious problems, including excessively high profits and of gross cashflow paid out as buy-backs rose to 48%, versus a ten- squeezed wages, the concentrated ownership offirms and the re- year average of30% (excluding financial firms). However, an elite luctance of the financial industry to back more capital-hungry of20-odd firms with piles ofcash stashed abroad accounted fora startups (Tesla and Uber are exceptions). All are important but third of this rise. If you also exclude a monster buy-back by Am- none would be solved by obliging already profitable firms to gen, a drugs company, the share of cashflow spent on repur- hoard even more cash. Indeed, the most important signal sent by chases by the remainder has risen more modestly. surging buy-backs is rather different. Leverage is creeping up, as The debate over buy-backs is bedevilled by six muddles. The 54% offirms spent and invested more than they earned in the last first is an inchoate sense that firms buying themselves is unnatu- quarter. And when firms splurge on their own stockit is usually a ral. In fact buy-backs are like dividends: cash moves from the firm sign of peak optimism: the last time they did was right before the to its owners. Their advantage is flexibility. Unlike with divi- 2008 crash. That’s worth mentioning the next time you chat dur- dends, shareholders can elect whether to participate, and firms ing a downward dog or are quizzed by a Hell’s Angel. 7 Answer the call with the Earnings Tool.

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Also in this section 64 Greek banks’ bad loans 65 Turkey’s monetary policy 65 America’s trade wars 66 New banks in America 68 Buttonwood: Lessons from Las Vegas 69 The trade in second-hand garments 70 Free exchange: Power is money

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Italy and financial markets So far, this adds up to a nasty bout ofthe jitters rather than full-blown panic. Italy’s Tragedy or farce? two-year bond yield is farbelow the 7.6% it hit in November 2011, at the depths of the euro zone’s previous crisis. The effect on the euro area’s other problem members has been limited—even though yields in Greece, Portugal and Spain, where the A political crisis in southern Europe and fears forthe future ofthe euro zone roil prime minister faces a confidence vote on financial markets once more June 1st, reached their highest this year on ERE we go again. Financial markets were hit hardest. UniCredit, the country’s May 29th. Hdon’tmuch like uncertainty. Thanks to biggest, fell by 9.2% and Intesa Sanpaolo, Foreigners are also unlikely to have suf- Italy’s politicians, in recent days they have the number two, lost 7.2% on May 28th and fered much direct harm from the fall in had plenty. By May 30th some calm had re- 29th. Other European banks’ shares were bond prices (the corollary of rising yields). turned: it seemed possible that a pair of also roughed up. The worries rippled Although Italy’s huge public-debt market populist parties, the Five Star Movement across the Atlantic. The S&P 500 index givesita decentweightin global bond indi- and the Northern League, would form a slipped by 1.2% on May 29th, with banks ces, foreign investors, knowing a bad bet government after all (see Europe section). again leading the way down. The yield on when they saw one, had cut back. Analysts Markets had been in turmoil for two days, ten-year Treasury bonds fell from 2.93% to at Deutsche Bank calculate that between unsettled by a farcical back-and-forth be- 2.77%, the biggest drop since the day after the second quarter of 2015 and the third tween the populists and the country’s Britons voted forBrexit in June 2016. quarter of last year foreign investors other president, who had rejected the parties’ than banks cut their Italian holdings from choice of a Eurosceptic economist as fi- €473bn to €250bn. Deutsche’s Torsten nance minister. The politicians may have Burnt in a day Slok adds that the exposure of banks out- done the markets a service, by shaking Ten-year government-bond yields, % side Italy has fallen by almost half since them out of complacency. Investors may 10 2009, to €133bn. have returned the favour, by shaking some Nor has the run-up in yields yet threat- 8 sense into the politicians—at least for now. Greece ened the sustainability of Italy’s debt. On Italy is perennially slow-growing and 6 May 30th Italy sold a total of€5.6bn-worth groans under public debt of around 4 offive-, seven- and ten-yearbondsat yields €2.3trn ($2.7trn), or132% ofGDP. The drama Portugal Italy of 2.32%, 2% and 3% respectively. Granted, 2 reawakened dormant worries about those Spain thatisdearerthan in the recent past, butitis two problems—and the deeper fear that 0 well below the average coupon of 3.4% on the euro zone’s third-biggest member 2017 2018 its existing stock of debt. And the longish might be sneaking towards the exit. So the Two-year government-bond yields, % average maturity of its bonds, around sev- yield on Italian two-year bonds, negative 2.5 en years, gives it breathing space. Alberto as recently as May 15th, leapt to almost 1% 1.5 Gallo of Algebris, an investment firm, esti- Italy on May 28th. It carried on climbing the 1.5 mates that yields would have to be at least next day, touching 2.73%, the highest since 4-4.5% for several months before higher 1.0 2013, before retreating. Ten-year yields also Portugal coupon payments would make debt un- 0.5 rose, if less spectacularly. Yields on Ger- + supportable. That is not unimaginable, but man Bunds, Europe’s safest government 0 is some way off. Spain – bonds, declined. 0.5 One reason forthat is the backing ofthe Share prices tumbled. Banks in Italy, 2017 2018 European Central Bank (ECB)—ironically, a holders of €600bn of government bonds, Source: Thomson Reuters bugbear of the Italian populists. Under its 1 64 Finance and economics The Economist June 2nd 2018

2 quantitative-easing programme, which is not Greece (see next story), in that it is in Clearing away the NPE rubble and re- has held down borrowing costs across the far better shape. But it is not Greece, too, in newing lending are both vital. GDP shriv- euro area, the ECB has bought €340bn- that it is much, much bigger. In 2012 Mario elled by a quarter in 2010-13 and then stag- worth of Italian bonds; it holds around a Draghi, the ECB’s president, quelled the cri- nated for three more years. Though it is sixth of the stock. In effect, it has been a sis that looked likely to destroy the curren- growing once more, at 1.4% in 2017 and willing buyer as foreigners have quit. cy club by saying that the ECB would do maybe 2% in 2018, it is scarcely roaring Yet none of this means that markets “whatever it takes to preserve the euro”. back. Write-offs and sales have accounted could not turn against Italy with greater vi- If liquidity dries up the ECB can con- for most of the reduction in NPEs, though olence—if, say, a populist government un- duct “outright monetary transactions”— “cures” (as borrowers return to health or did recent reforms, opened the fiscal taps buying a government’s bonds on second- simply find the cash) have ticked up too. or picked a fight with bureaucrats in Brus- ary markets—although it has not used the Sales have mainly been of unsecured con- sels or Frankfurt. Although the biggest scheme yet. But this scarcely gives Italy a sumer debt, for a few cents on the euro. In banks are now in decent health (or getting free pass. It is intended forextreme circum- OctoberEurobank, anotherleadinglender, there), they own lots of government stances. As Mr Draghi’s deputy, Vítor Con- sold a €1.5bn portfolio to Intrum, a Swed- bonds. One bank, Monte dei Paschi di Si- stâncio, who was due to leave office on ish specialist, forabout€40m. In March Al- ena, is still in intensive care. The bad-loan May 31st, told Der Spiegel, a German maga- pha shed €3.7bn of loans to Norwegian- burden, though reduced, remains heavy. zine, this week, such help comes with owned B2Kapital Greece for€90m. Departure from the euro area would be strings. A government has to request it and Selling business loans is harder. unthinkably costly—for both Italy and the be in an adjustment programme agreed on Though provisions already cover half of zone. As when Argentina abandoned dol- with European institutions. Greece has NPEs, and collateral notionally covers the lar parity at the start of 2002, the value of been labouring under a similar regime. Ita- rest, banks and loan-buyers must still dis- Italians’ bank deposits would plunge. Italy ly’s populists are unlikely to volunteer. 7 cern which indebted businesses are viable and which not, and what collateral is truly worth. Debtors may owe money to more than one bank, and different parts of a property (parking space, storage areas) may have been pledged separately. Bank- ers reckon that 25% ofdefaulters are “strategic”—thatis, theycan paybutwon’t, believing foreclosure will never come. Lately online public auctions of fore- closed commercial and residential properties have also begun. Up to 20,000 pieces may go under the e-hammer this year. Banks are buying a high proportion themselves—at Piraeus, 80%—but at least sales are happening. Protests prevented physical auctions last year. E-auctions have smoked out some strategic defaulters: perhaps a fifth of properties put up for sale have been pulled when borrowers found the money or asked to restructure the debt. At the top of the scale Pillarstone, a Greek banks’ bad loans turnaround specialist owned by KKR, a private-equity giant, is taking on a few Rebuilding the ruins large, troubled companies. It is overhaul- ing Famar, a drugmaker, and is close to deals with Alpha and Eurobankto reshape Notos, a department-store chain, and Kalli- manis, a frozen-seafood firm. Banks have ATHENS also set up a forum to tackle companies owing money to more than one lender. A critical task, forboth Greece’s banks and its economy, enters a new phase Among other positive signs, all four F THE €57.7bn ($68.2bn) of loans that balance-sheet of much of Greece’s econ- banks boast healthy capital ratios and OPiraeus Bank, one of Greece’s four omy, from restaurants to manufacturing. came through stress tests by the European dominant lenders, had on its books at the But a new phase of this task is under way, Central Bank (ECB) this month without be- end of March, €20.5bn were more than 90 with the first sale of secured commercial ing required to raise more equity. They days overdue. A further €11.7bn were also loans. On May 29th Piraeus said it had should soon be weaned off ECB emergen- deemed unlikely to be repaid. In all, at the agreed to sell Amoeba, a €1.45bn bundle of cy funding, which by April was down to end of2017 Greekbanks carried €95.7bn of loans to around 180 borrowers, to Bain €10.2bn, from €86.7bn in mid-2015. Depos- such non-performing exposures (NPEs)—at Capital Credit, which has previously its that gushed out in the crisis have begun 43.1% of loans, the heaviest burden in Eu- bought bad debts in Italy and Spain. The to flow back. rope. Still, the pile was €13bn smaller than collateral, comprising about 1,700 proper- Yet much of the masonry is far from at its peakin March 2016. The banks plan to ties, is mainly in big cities. Other banks firm. Leonidas Fragkiadakis, chief execu- reduce it by €30bn this year and next. have been watching keenly. Alpha Bank, tive of National Bank of Greece, the other Dealing with bad loans to business— anotherofthe fourbigbanks, is weighing a big bank, resigned on the eve of the stress around 60% of NPEs, mostly to small similar sale. Bankers and investors say tests, havingfallen outwith his board. Priv- firms—is the most daunting part of this Amoeba has helpfully spawned an eco- ate-sector deposits, at €120bn, are still 45% monumental job. It means resetting the system ofbuyers and advisers. lower than at the end of 2009. Tens of bil-1 The Economist June 2nd 2018 Finance and economics 65

2 lions are stashed in homes—even buried in asking themselves how long the central gardens—or abroad. Over rated bank can persevere with its tightened Despite changes in the law intended to Turkey, central bank policy rates and stance, and whether it will raise rates again speed up bankruptcies, procedures are still interest-rate corridor, % if the lira’s weakness or oil’s strength fur- 20 “a mess”, believes Stathis Potamitis of Overnight ther threatens price stability. Other emerg- PotamitisVekris, a law firm in Athens. The Late-liquidity lending rate ing markets have shown great persistence statute is too complicated for small firms, window in the fight against inflation. Russia has he says. Many new “out of court” work- 15 kept its interest rates more than three per- outs will in fact require judges’ rulings be- centage points above inflation for more cause the state, often the biggest creditor, 10 than two years; Brazil has done so for more will object to banks’ plans. And Greece than four. By mid-2016, even the IMF called lacksspecialised courts: a judge can rule on on Russia’s central bankto relent. Average funding cost a divorce one day and a foreclosure the 5 As a sign of Turkey’s commitment for next. Lastyear,accordingto Creditreform, a Overnight One-week the long haul, its simplification of mone- debt-collection group, Greece saw just 120 borrowing rate repo rate tary policy may be as important as its tight- company insolvencies. Similarly-sized 0 ening of it. The reform shows that the cen- Portugal had over 6,000. 2011 12 13 14 15 16 17 18* tral bank is no longer trying to accom- The terms of Greece’s graduation from Source: Haver Analytics *Effective June 1st modate competing objectives. India sent a its third bail-out programme, due in Au- similar message when it began clarifying gust, also matter. Yannis Stournaras, the tion target. On the other hand, the presi- its inflation-fighting goals in 2014 and central bank’s governor, argues that the dent, Recep Tayyip Erdogan, is eager to sus- adopted formal inflation targeting in 2015. government should ask for a precaution- tain the economy’s furious pace of growth Even before Mr Erdogan intruded so ary credit line from the European Stability (7.3% in the last quarter of 2017, compared clumsily on its independence, the Turkish Mechanism, as insurance against a sharp with a year earlier) and to defy the usuri- central bank was known for monetary in- rise in borrowing costs (which would feed ous claims of what he calls the “interest- tricacy. Unlike other central banks, it often through to banks). The left-wing govern- rate lobby”. According to the well-trained let market rates wander quite far from its ment vehemently disagrees, preferring to technocrats dotted throughout Turkey’s target. And its overnight deposit and lend- rely on building a cash reserve. policymaking apparatus, higher interest ing rates, which establish a floor and ceil- Even ifbanks fulfil their plans, they will rates would help stabilise the economy, ing forinterest rates, were often positioned still have €65bn of NPEs—a ratio of 35%—at curbing excessive spending and luring “asymmetrically”, with one further from the end of 2019. Theodore Kalantonis, the backthe foreign capital on which the coun- the target rate than the other. It felt that head of Eurobank’s troubled-assets divi- try relies to finance its current-account def- adding gratuitous uncertainty to interest sion, says the “biggest question” is how icit (5.6% of GDP in 2017). According to Mr rates would deter speculative inflows of lenders will come up with a new plan after Erdogan, however, higher interest rates do capital. Its new framework abandons this that, to bring NPEs closer to the European not curb inflation, but cause it. asymmetry. Turkey has many problems. average.“Canwedoit?Theanswerhasto In apparent deference to Mr Erdogan, But the need to deter inflows of capital is be yes. But it will not be easy.” 7 Turkey’s central bank has long refrained no longer one ofthem. 7 from raising the one-weekrepo rate, which had served as its monetary mainstay. In- Monetary policy stead it increased the cost of borrowing Trade negotiations from a more obscure facility, the late- Turkish baroque liquidity window, which lends to banks Puzzle pieces that have run short of money at the end of the day. It also forced banks to turn to this expensive window for a larger share of their funding. In this way, it surreptitiously increased their average cost ofborrowing. Turkey has finally streamlined its fight There is madness, but perhaps also In recent weeks, however, it became im- against inflation method, in America’s trade policies possible to appease both Mr Erdogan and HE baroque era in Turkish architecture increasingly demanding bond markets. As IVINING meaning in the Trump ad- Tlasted deep into the 19th century, leav- American Treasury yields, the dollar and Dministration’s trade announcements ing behind lavish buildings, such as the oil prices began to rise, foreign investors is a thankless task. No sooner does a policy Lily Mosque in Istanbul and waterside pa- began to doubt Turkey’s commitment to seem settled than it is thrown up in the air vilions that seem to float on the Bospho- keeping its imbalances in check. Any poli- once more. On May 23rd, days before a rus. The baroque period in Turkish mone- cy move big enough to convince the mar- scheduled meeting with the European Un- tary policy will last until June 1st, when the kets would also be stark enough to antago- ion and Japan on a joint trade strategy and central bank will simplify its equally or- nise Mr Erdogan. in the middle of talks to revamp the North nate monetary-policy framework. It will Fora frighteningweek, it looked as ifMr American Free-Trade Agreement (NAFTA), henceforth rely on a single interest rate (the Erdogan’s sensitivities would prevail. But it began an investigation into whether car one-week repo rate), which it will raise to the more he bullied the central bank, the imports are a threat to America’s national 16.5%. Thiswill supersede a jumble ofinter- more the markets bullied him. The lira slid security. On May 29th, days after tariffs on est rates (see chart) that has left the Turkish by over 12% in the two weeks before May imports from China were supposedly put currency perilously close to submersion. 23rd, when the central bankfinallydecided on hold, official word came that tariffs on Turkish baroque mingled Western and to raise interest rates by three percentage $50bn of Chinese imports would be im- Ottoman styles. The country’sfussymone- points, followed five days later by its deci- posed “shortly” after June 15th. Barring a tary policy also reflects competing influ- sion to simplify policymaking. last-minute change ofheart—which would ences. Itscentral bankwantsto stabilise the The new interest rate of 16.5% is almost not be the first—as The Economist went to lira and quell inflation, which remains in six percentage points above Turkey’s rate press the administration was expected to double digits, far in excess of its 5% infla- of inflation. Foreign investors will now be announce tariffs on steel and aluminium 1 66 Finance and economics The Economist June 2nd 2018

New banks in America Muscle cars United States, value of imports subject to trade tariffs, 2017, $bn Tariff rate, % Small is beautiful 0 50 100 150 200 250 300 350 Washing machines 20-50 Solar panels 30 IMPOSED KERRVILLE, TEXAS Aluminium* 25 Hardly anyone tries to found a bank 10 Steel* these days. How hard can it be? Aluminium† 25 HE single-storey main branch of the † THREATENED Steel 10 TTexas Hill Country Bank, in Kerrville, China (various) 25 sits at the backofa tired shoppingcentre, in Cars CANADA AND MEXICO 25 the shade of a six-storey Wells Fargo build- Sources: International Trade Centre; *Including imports from Japan, China and Russia ing. When Roy Thompson, the chiefexecu- Peterson Institute for International Economics †Including imports from Mexico, Canada and EU tive, was hired (from Wells) in 2012, three yearsafteritopened, he ran a radio ad cam- 2 imports from the EU from June 1st. Wheth- The NAFTA talks are stalled over the paign to alert locals to its existence. It asked er America’s partners in NAFTA, Canada conditions a car must satisfy in order to listeners to help a mother (his) to find her and Mexico, would also be hit was unclear. qualify for tariff-free trade within the bloc. child (Roy himself), who had gone missing The chaos is partly the consequence of American negotiators want more de- after joining a community bank. President Donald Trump’s mercurial tem- manding national-content requirements, If Mr Thompson had shared the fate of perament, and the fact that he is served by and a rule that at least 30% ofa carbe made many small-town bankers, he would have adviserswho disagree with each other. Ste- by workers earning above a high wage remained missing. Since 2012 more than ven Mnuchin, histreasurysecretary, seems threshold. But they have woken up to the 2,000 American banks have closed (see more interested than, say, Peter Navarro, possibilitythatcarmakersthatfind the pro- chart). Almost all were small, operating in his trade adviser, in avoiding a trade con- posed rules too burdensome might simply the shadows of big banks with big budgets flict with China. It may also be an attempt, ignore them and pay the non-NAFTA tariff for marketing, technology and regulatory in the style of “The Art of the Deal”, to of 2.5%. That would become far less feasi- compliance. For the same reasons, almost throw negotiating counterparties off-bal- ble if the tariff were to rise tenfold, with no new banks have opened. Before the cri- ance and cow them into submission—and NAFTA members exempted. sis the Federal Deposit Insurance Corpora- perhaps to convince companies abroad A stiff tariff on auto imports might also tion (FDIC) approved hundreds of bank that exporting to America is too risky. seem to fulfil other objectives of American charters each year. Since 2009 there have But hidden in the muddle there is also a trade hawks. Mr Trump seems convinced been only a dozen in total. grim logic. Mr Trump, and at least some of that the EU’s 10% tariff on car imports vio- So sudden has been the stop that the his trade advisers, believe that when one lates the spirit ofreciprocity, and that Japan FDIC is seeking to encourage new banks to unorthodox trade move has knock-on con- treats American car companies unfairly in open. In 2017 it published “A Handbookfor sequences, the solution is not to rethink it, other ways, such as subjecting them to Organisers of De Novo Institutions”. It has but to follow it with another. onerous inspections (there is no tariff on held seminars on how to set up a bank in The investigation announced by the cars entering Japan). If these other coun- seven cities. But few would-be bankers Department of Commerce on May 23rd, tries are unwilling to lower their trade bar- have heeded the call. Only 12 applications into whether imports of cars and car parts riers, then a tariff would at least shut out forbanking licences are pending. threaten national security, is illustrative. their exports. If NAFTA producers are ex- West Texas is a shining exception. Texas The suggestion is absurd, and ifthe conclu- cluded from any restrictions, then they Hill Country has grown steadily since it sion is that they do, it would make a mock- could even find themselves with a large ta- was founded in 2009. Though Kerrville ery of the global rules-based system of riff preference in the American market, residents still come up to Mr Thompson in trade. But the administration would be which would help offsetanyextra burdens the street to declare him found, in reality able to apply whatever tariffs it liked to imposed by the new deal. they all know where, and who, he is. On a auto imports while staying within the let- If this is the strategy, then carmakers tour of town he explains who owns this ter, ifnot the spirit, ofAmerican law. elsewhere should be worried. Cars are the lumberyard, that car-repairshop, the other Tariffs of 25% on cars and car parts, as most traded product in the world by value, medical centre—he has provided them all Mr Trump apparently wants, would be according to the MIT Observatory of Eco- with financing, or else hopes to. 1 disastrous for Canada’s and Mexico’s car nomic Complexity. And America is the industries, though American buyers of world’s largest importer. In 2017 cars made cars and parts would suffer too. (Around up 41% of the value of Japan’s goods ex- Closing time 56% ofthe light vehicles sold in America in ports to America, and 14% ofthe EU’s. United States, commercial banks 2017 were assembled in the country, and Some companies, including Ford, GM Total institutions 22% in Canada and Mexico together.) On and Honda, already assemble most of the New charters at year end, ’000 400 16 May 24th Justin Trudeau, Canada’s prime carstheysell in America within itsborders. Financial crisis minister, wearily told Reuters that the deci- But other manufacturers seem more ex- sion to target cars was connected to the posed to a 25% non-NAFTA tariff, including 300 12 NAFTA negotiations. It seems unlikely that Mazda, BMW and Daimler, which produce the move will do anything to encourage more than 60% of their American sales 200 8 Canadian and Mexican negotiators to set- outside NAFTA, estimates Barclays, a bank. tle quickly—the Department of Commerce Whether with imports ofsteel, aluminium 100 4 hearings will take months. But it will in- and cars, or the bilateral relationship with crease America’s leverage as it tries to re- China, at some point the Trump adminis- 0 0 shape NAFTA’s rules on cars in ways it has tration may decide to show the world that 1946 60 70 80 90 2000 10 17 already signalled. it is not bluffing. 7 Source: FDIC

68 Finance and economics The Economist June 2nd 2018

2 Texas Hill Country was the creation ofJ. ger counts as small, with $800m in assets. Henry & Associates, a provider of IT ser- Bruce Bugg, a tax lawyer who put himself Return on equity is more than 12%. Texas vices to financial institutions. Its share through college with jobs in banks. In 1989, Hill has $117m in assets and return on equ- price has risen six-fold since the crisis. aged 29, he bought a bank and sold it at a ity is a still-respectable 8.9%. Their success And new banks also have advantages, profit. In 2007 he returned to the business, meant Mr Bugg was easily able to raise Mr Bugg contends: no bad assets, demoral- founding the Bank of San Antonio, fol- money for the Bank of Austin, which is on ised employees or outmoded technology, lowed by Texas Hill and, last year, the Bank track to be profitable soon. Half of its 120 plus strong local connections. Each of his of Austin. In the 1980s many Texan banks shareholders were keen enough to show three banks is separately capitalised with had been taken over after a previous finan- up forits first annual meeting on May 15th. local shareholders—businesspeople who cial crisis. After the crisis of 2008, distant Small banks, as new banks inevitably act as ambassadors. Each is managed by an headquarters closed branches and turned are, face great challenges. But they are eas- experienced escapee from a large bank, away staff. Banks were “inviting their cus- ing. Regulations tightened after the crisis who, through stockoptions, can own up to tomers out the door”, says Mr Bugg—and have been loosened for smaller institu- 5% of the institution they lead. The model he was there to scoop them up. tions. The cost of technology is falling. The Mr Bugg is developing has no patent. Com- Today, the Bank of San Antonio no lon- Bugg banks’ electronic spine is from Jack munity banking may be due a revival. 7 Buttonwood Lessons from Las Vegas

Forall but the most talented, a rules-based approach works best—in pokerand investing T THE annual World Series of Poker, quantitative analyst and author of “The Awhich begins this week in Las Vegas, Poker Face of Wall Street”, a sound princi- the main event is the no-limit Texas hold ple is to settle on a basic strategy and stick ’em tournament. In the course of two to it. In poker that means choosing in ad- weeks ofgruelling knock-out play, several vance which starting hands you will play thousand players are whittled down to in each table position and deciding how just two, playing “heads-up” for one of you will bet should those hands improve the WSOP’s coveted bracelets. when the shared cards are dealt. In last year’s final hand, both players The policyalso worksin investment. A had pushed all their chips in, with five simple strategy is to allocate a fixed por- shared cards yet to be dealt. Scott Blum- tion of your wealth to different assets— stein, who held Ace-Deuce, was a big half in a broad index of stocks, say, and underdog against Daniel Ott, who held half in bonds—and to “rebalance” every Ace-Eight. With one card to come, Mr so often so that the weights are kept con- Blumstein’s hand had not improved. His stant. An advantage is that you will auto- chances had narrowed to 7%. Of the re- matically sell assets that have become maining 44 cards, only one of the other dearer and buy assets that have become three deuces could give him victory. It is tempting to think that investing is cheaper. “It turns out that any simple The cards—and thus the odds of win- like this—that the risks are calculable in ad- fixed-weight allocation works well,” ning or losing—were known to both play- vance. They are not. Investment returns writes Andrew Ang, of BlackRock, in his ers, because they had already committed are highlyuncertain and irregular. Extreme book, “Asset Management”. all their chips. Poker is not usually like events, such as market crashes, are more Though simple in principle, a rules- this. Winning depends not only on your frequent than you would expect if dice based approach is difficult to follow in cards but on the unseen cards held by oth- gameswere yourmodel ofthe world. After practice. It is hard to stay disciplined erplayers, on yourability to deceive them repeated rolls, dice throws fit a pattern that when your opponents in poker repeat- by your betting policy and on their ability is known beforehand. In markets, almost edly draw the improbable cards they in turn to deceive you. Fear and greed in- anything can happen. need to beat your strongest hands. A play- duce errors. In short, there is uncertainty. That is also true of poker. Each player eris said to be “on tilt” when frustration at All this is also true of investing. The truly has to live with uncertainty: about the bad luck leads him to abandon his strat- talented are able to read complex situa- cards opponents hold; about their betting egy. Investors are prone to similar sorts of tions to their advantage. But there are strategy; about their understanding of errorswhen thingsgo againstthem. “Hav- ways for the less gifted to succeed—in your betting strategy; and even their grasp ing a non-stupid strategy and sticking to it both poker and investing. ofthe game. Emotionscome into play. Play- will leave you better off than most peo- They can start by being aware of the ers fold winning hands because an aggres- ple,” says Mr Brown. ludic fallacy. This is how Nassim Nicholas sive bluff makes them fear losing. And Bad luck is part of the game. The best Taleb, an author, refers to the belief that players call bets with losing hands out of you can do is to try to make the right deci- riskin financial markets can be calculated greed fora bigpot. The bestplayers, like the sions given the inevitable uncertainty. In as if it were a game with known odds. If best investors, seem to thrive on uncertain- the final hand of the WSOP main event you throw a pair of fair dice, you cannot ty. They look for betting patterns or for last year, Mr Ott made the right decision know how they will land. But you do “tells” (expressions or hand movements) when he called Mr Blumstein’s bet. The know some things. There are 36 possible that betray the strength or weakness of an odds favoured him. And they continued pairs of numbers. Some totals are more opponent’s hand. They make uncertainty to until the moment when the dealer likely than others. There are six ways to workforthem. They find spots where a big turned over the final card—a deuce. throw a seven, for instance, but only one bluffis hard foran opponent to call. way to throw either a two or a 12. For the rest of us, says Aaron Brown, a Economist.com/blogs/buttonwood The Economist June 2nd 2018 Finance and economics 69

The trade in second-hand garments monds, the executive director of the Afri- can Cotton and Textile Industries Federa- Worn out tion, an industry body. Second-hand imports now dominate African markets. Researchers at the Over- seas Development Institute, a British think- tank, reckon that Tanzania imports 540m KIGALI AND MANSFIELD used items of clothing and 180m new ones each year, while producing fewer than Clothing donated to charity is often resold in Africa. It is not always welcome 20m itself. African manufacturing is weak N A market in Kigali, Rwanda’s capital, a countries, from South Africa to India. for many reasons, from clumsy privatisa- Icacophonous auction is under way. Sell- A complex supply chain begins with tions to crumbling infrastructure. But sec- ers hold crumpled T-shirts and faded jeans people like Elizabeth Forsythe, stuffing a ond-hand imports are a major culprit, ac- aloft; traders shout and jostle for the best bag of old clothes into a donation bin in cording to a paper in 2008 by Garth Frazer picks. Everything is second-hand. A north London. She assumes that they will of the University of Toronto. He estimated Tommy Hilfiger shirt goes for 5,000 Rwan- end up in a charity shop. But in most rich that they accounted for half of the fall in dan francs ($5.82); a plain one fora tenth of countries the supply of used clothing far employment making apparel in Africa be- that. Afterwards, a trader sorts through the outstrips demand. Less than half of dona- tween 1981and 2000. purchases he will resell in his home vil- tions are sold locally. Most of the rest are lage. The logos hint at their previous lives: sold to exporters. In Britain a tonne of tex- Spinning wheels Kent State University, a rotary club in Penn- tiles from a bin fetches £170-315 ($225-420). Loose fibres blow around the idle ma- sylvania, Number One Dad. At Savanna Rags, in Mansfield in the Eng- chinesatUTEXRWA, a textilesand garment These auctions were once twice as lish Midlands, 500 tonnes of old clothes factory in Kigali. The plant operates at 40% busy, says Félicité Mukarurangwa, a trader. glide along conveyor belts each week. The of capacity and employs 600 workers, But in 2016 Rwanda’s government hiked workers, mostly eastern European immi- down from 1,100 in the 1990s. It is hard to import duties on a kilo of used clothes grants, sift items into categories depending compete, sighs Ritesh Patel, its manager, from $0.20 to $2.50. Now she struggles to on the market, such as “childrenswear” when a used T-shirt sells for the price of a break even. The traders are not the only and “Asian clothing”, transforming a jum- bottle of water. Instead, the company spe- oneswho are unhappy. Exportersin Amer- ble offabricinto plastic-wrapped bales. cialises in uniforms forpolice, soldiers and ica claim the tariffsare costingjobs there. In In Africa, these motley bundles are a security guards, which cannot be bought March President Donald Trump warned valuable commodity. Men’s clothes are second-hand. thathe would suspend Rwanda’sduty-free pricier, since fewerarrive. American pieces Even so, says Mr Patel, higher tariffs access to American markets for its apparel are often too large and have to be resized have not helped much. “The big challenge after 60 days if it did not back down. That by tailors. No matter. “A person would is not second-hand clothes or Chinese deadline expired on May 28th without rather buy second-hand from America, in- clothes,” he says. “It’s buying power.” Al- Rwanda shifting its position. stead of buying a new Chinese product,” though the government is promoting The dispute tugs at the threads of a says Nelson Mandela, a Ugandan trader “Made in Rwanda” products, firms like trade that knits together charity and busi- with a suitably second-hand name. Shop- UTEXRWA cannot produce cheaply ness, gift and profit. Globally, about $4bn pers complain that new Asian clothes enough for most local consumers. Zips, of worn clothes crossed borders in 2016. damage easily and look like uniforms, dyes and synthetic fibres are sourced from The share from China and South Korea is without variety. Hucksters sometimes other continents. A new garment-maker growing, but 70% still come from Europe dunk Chinese imports in dirty water to has opened in a special economic zone, and North America. Most go to Asia, east- pass them offas used ones from Europe. cutting and sewing Chinese-made fabrics. ern Europe and Africa, the largest market. Some suspect that high-quality, un- But it mostly sells abroad. Where nascent The trade clothes the poor and creates re- worn clothes are smuggled into bales as a industry shows promise, as in Ethiopia, it is tail jobs. But governments worry that cast- way for the rich world’s clothing industry often export-led. offs undercut their fledgling industries. Im- to offload samples and unsold items. “It’s Rwandan apparel exports currently en- ports are banned or tightly restricted in 41 just a form of dumping,” says Belinda Ed- ter America under the African Growth and Opportunity Act (AGOA), which eases market access for African countries. The threatened suspension would hurt, but not very much. Last year Rwanda sent a mere $1.5m of apparel to America. Nor, with 12m people, is it a bigmarket. America is more concerned about Kenya, Uganda and Tanzania, which all planned to phase out second-hand imports before yielding to American pressure. Meanwhile, exporters of used clothes in the rich world, like Savanna Rags, have other worries. Fast-fashion retailers churn out poorer-quality clothes, which do not survive long enough to be worth reselling. Sorting is moving to India, Pakistan or the United Arab Emirates, where wages are lower. Skittish consumerism and ruthless competition have long underpinned the used-clothing trade. They may now be un- Glad rags to sad rags ravelling it. 7 70 Finance and economics The Economist June 2nd 2018 Free exchange Power is money

Wage gains may prove elusive until workers enjoy a strongerbargaining position from1973 to 2016, while average payrose bylessthan 50% and median pay by just over10%. A direct link between pay and productivity would imply that raising the minimum wage would automatically cut employment, as those workers who had been paid accordingto theircontributions suddenly became overpaid (and, shortly thereafter, unemployed). But no such clear, negative relationship shows up in the data. The reason, economistsreckon, is power. Newhiresgenerate a surplus, reflecting the fact that both worker and firm expect to gain from the transaction. Wage bargaining is a negotiation over how to split this surplus. If firms have the upper hand, because a new job is harder to find than a new worker, employers capture most of the surplus, creating a gap between the value created by workers and what they are paid. A rise in the minimum wage could then boost pay without reducingemployment by redistrib- uting some ofthis surplus, leavinga firm with a smaller gain than before, but a gain nonetheless. There isgood reason to thinkthatpowerimbalancesplay a big part in the rich world’s wage stagnation. Product markets have become more concentrated, meaningthatfewerfirmsaccount for a larger share of output. That increases companies’ power in la- T’S just not going to happen,” said Troy Taylor, the boss of a bour markets, since workers are less able to find alternative em- “ICoca Cola bottling company, when asked at a recent Federal ployment or to pit rival employers against each other in a bidding Reserve event whether he foresaw broad-based wage gains. His war. In a recent paper Suresh Naidu, Eric Posner and Glen Weyl remarks (unlike the fizzy drinks he sells) were unsweetened. But estimate that this rise in firms’ power may reduce labour’s share experience suggests he may have a point. In most rich countries, ofnational income by as much as a fifth. They argue that one way real pay has grown by at most1% per year, on average, since 2000. to help struggling workers might be to use antitrust policies to For low-wage workers the stagnation has been more severe and make product markets less concentrated and more competitive. prolonged: between 1979 and 2016, pay adjusted for inflation for A complementary approach would be to increase workers’ the bottom fifth ofAmerican earners barely rose at all. Politicians power. Historically, this has been most effectively done by bring- are scrambling for scapegoats and solutions. But addressing stag- ingmore workersinto unions. Acrossadvanced economies, wage nant wages requires a better understanding of the relationship inequality tends to rise as the share ofworkers who are members between pay, productivity and power. of unions declines. A new paper examining detailed, historical In the simplest economic models, productivity is almost all data from America makes the point especially well. Henry Far- that matters. Workers are paid exactly and precisely in accor- ber, Daniel Herbst, Ilyana Kuziemko and Mr Naidu find that the dance with their contribution to a firm’s output. Were they paid premium earned byunion membersin America hasheld remark- less, rival employers could profit by luring them away with high- ably constant during the post-war period. But in the 1950s and er pay, and wages would be bid up until they came into line with 1960s the expansion of unions brought in less-skilled workers, productivity. Firms paying more than workers contribute would squeezing the wage distribution and shrinking inequality. Un- be losing out forno reason. ions are not the only way to boost worker power. More radical This sort of view suggests a few ways to improve workers’ lot. ideas like a universal basic income—a welfare payment made to Governments could pursue policies that would help workers everyone regardless of work status—or a jobs guarantee, which move from low-productivity jobs to high-productivity ones, for extends the right to a government job paying a decent wage to instance. That might mean investing in education and training, or everyone, would shift power to workers and force firms to work removing obstacles to relocation or moving from one employer harder to retain employees. to another, such as high housing costs in places with productive companies, or laws that enforce non-compete clauses in job con- Strong bad tracts. When productivity-boosting strategies are not enough to Economists are unlikely to cheer such proposals. A broad jobs do the trick, a government’s best option is to top up low pay as ef- guarantee would transform society in unpredictable and costly ficiently as possible. Economists favour wage subsidies, such as ways. And unions look like monopoly sellers of labour—cartels, Milton Friedman’s proposed negative income tax, which influ- intended to leech rents from society as a whole. But the powerful enced the design of America’s earned-income tax credit. Such unions of the post-war decades did not stop productivity grow- subsidies encourage people to stay in work in order to qualify, ing much faster than advanced economies have since managed. and do not make workers more expensive and thus discourage And it was duringthat period that growth in real pay most closely hiring. They are also simple to administer. tracked growth in labour productivity, as the simplest economic But it has long been clear that wage-setting is more complicat- models reckon it should. More empowered workers would no ed than the simplest models allow. Growth in pay is linked to doubt unnerve bosses. But a world in which pay rises are un- growth in productivity, as Anna Stansbury and Lawrence Sum- imaginable is farscarier. 7 mers noted in a paper last year. But other influences seem to de- press wages. Thus labour productivity rose by 75% in America Economist.com/blogs/freeexchange Science and technology The Economist June 2nd 2018 71

Also in this section 72 The Great Barrier Reef’s many lives 73 The sunk-cost fallacy spreads 73 A volunteer tissue bank for AIDS 74 A rocket that eats itself

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

Evolution cifically, brainoids), which are in vitro repli- cas of developing brains, made in this case The history of big-headedness using mouse cells. He used these to test the effects of adding or deleting his newly discovered genes. In the absence of NOTCH2NL, the organoids developed nor- mally. With it added, stem cells in the organoid which would otherwise have generated newneuronsdivided instead to create Genes crucial to the evolutionaryexpansion ofthe brain have been discovered more stem cells. The result, when those OW the human got his brain” is opmental biologist at the Free University stem cells did eventually turn into neu- “Hprobably the most important “Just ofBrussels, in Belgium. rons, was more neurons than normal, and So” story that Rudyard Kipling never Dr Haussler stumbled on his discovery thus a bigger organoid. In effect, NOTCH2NL wrote. Kipling did not ignore people in his while comparing the development of the had generated a larger brain. quirky take on evolution. Two of his tales brain’s cortex in human beings and in ma- Encouraged by this discovery, Dr describe the invention ofthe alphabet and caques, a type of monkey. He and his col- Haussler and his colleagues performed the invention of letter-writing. But he took leagues found in humans what appeared one further test, with the co-operation of forgranted the human brains behind these to be several previously undiscovered ver- real human beings. These were people inventions, which are three times the size sions of NOTCH2, alongside the established with macro- or microcephaly (unusually of those of humanity’s closest living rela- one. The new genes, which they refer to as large orsmall brains). Aftertesting the DNA tives, the great apes, and are thus as charac- NOTCH2NLs, were absent from their ma- of each of these volunteers, the team teristic ofpeople as trunks are ofelephants caques and—as a search of genetic data- found that NOTCH2NL, though present in or humps are ofcamels. bases showed—from all other living ani- people with larger than average brains, This week, though, sees the publication mals except chimpanzees and gorillas. In was absent from those whose brains were oftwo studieswhich, added together, form these two great apes there were two abnormally small—confirming the suspi- an important paragraph in the story of the NOTCH2NL genes, but they seemed to be in- cion that it is involved in the hypertrophi- human brain. Both concern a version of a active. The difference between apes and cation ofhuman brains. gene called NOTCH2, which has been humans is that in the human line one of known forsome time to be involved in em- these NOTCH2NLs has now become active, Cogito ergo sum bryonic development. Both point to an and has multiplied to create three versions, Unlike Dr Haussler, who came across his event in the past which changed the activi- known as A, B and C. initial result serendipitously, Dr Vander- ty of this gene in the evolutionary line that Crucially, this A, B, C pattern isreplicated haeghen set out from the start to find genes leads to modern people. And both are sup- in the DNA of two extinct species of hu- that are unique to people, are directly reported by experiments which suggest that man, Neanderthals and Denisovans. By sponsible forcreatingnewbrain cells in the the change in question is crucial to the looking at minor differences between the cortex, are active and are specifically work- emergence of the big brains which distin- various NOTCH-related genes in the three ing to encourage the development of stem guish human beings from all other living human species and the two great apes, the cells into neurons. The needle that animal species. researchers were able to estimate when emerged from this haystack of demands The two studies, which were carried the active NOTCH2NL arose: 3m-4m years was the same set of NOTCH2NLs that Dr out independently, are published in Cell. ago. That is when, according to the fossil re- Haussler’s team had lit upon. Seeking con- One was by a team led by David Haussler, cord, the craniums of mankind’s ancestors firmation of the genes’ function, Dr Van- a bioinformatician at the University of started expanding. derhaeghen introduced them into mouse California, Santa Cruz. The other was di- To follow up this discovery Dr Haussler embryos and found that the number of rected by Pierre Vanderhaeghen, a devel- created what are known as organoids (spe- stem cells in the embryos’ brains was1 72 Science and technology The Economist June 2nd 2018

2 therebyincreased. He then repeated the ex- have been useful in the context in which pansion thus remains unknown. Tool- periment using stem cells taken from hu- the mutation occurred. making is one explanation. A more intrigu- man fetuses and got the same results as Dr What that context was is unclear. ing theory is that human brains are the Haussler’s team had observed in their or- Though it is hard for human beings to con- equivalentofbrightlycoloured plumage in ganoids. Sure enough, NOTCH2NLs encour- template the idea that bigbrains could ever birds, permitting the sexes to show off to aged stem cells to proliferate without turn- be undesirable, small-brained animals do each other what good mates they would ing into neurons, increasing the total perfectly well without them. And big make. Yet another idea, the Machiavellian- number ofneurons generated. brains are expensive to maintain. Some intelligence hypothesis, is that big brains Taken together, these two studies sug- calculations suggest humans could not af- enable people to manipulate others to gest that NOTCH2NL has played a crucial ford them calorifically without the inven- their own advantage—a trick that the in- role in the tale of “How the human got his tion of cooking—a process that liberates vention of language would also assist. Nor brain”. They do not, however, answer the otherwise indigestible nutrients. Humans need manipulation be malevolent. Col- question ofwhy this happened. Mutations now dominate Earth, but that was not true laboration is also a form ofmanipulation. occur all the time. It is improbable that this for most of the 3m-4m years since active These ideas are not, ofcourse, mutually was the first occasion in history something NOTCH2NL arose and brain hypertrophica- exclusive. Any or all of them may be cor- like NOTCH2NL has arisen. For NOTCH2NL to tion began. Until 10,000 years or so ago, rect. Whether human beings are big- have prospered in the way that it did, natu- when agriculture was adopted, humans brained enough to decide between them ral selection would have had to have fa- were rare. and thus complete the missing “Just So” voured it. Big brains, in other words, must The ultimate cause of human brain ex- story remains to be seen. 7

Conservation A great survivor

Australia’s coral barrierreefkeeps dying and coming back HE Great Barrier Reef, which runs for Reef-forming corals prefershallow water itselfis encouraging. But whether it could T2,300km along the coast ofQueens- so, as the world’s sea levels have yo-yoed rise from the dead a sixth time is moot. land, is one ofthe icons ofenvironmen- during the Ice Ages, the barrier reef has The threat now is different. It is called talism. Conservationists constantly come and gone. The details ofthis have bleaching and involves the tiny animals, worry that human activity, particularly just been revealed in a paper published in known as polyps, which are the living greenhouse-gas-induced global warm- Nature Geoscience by Jody Webster ofthe part ofa reef, ejecting their symbiotic ing, will harm or even destroy it. Such University ofSydney and her colleagues. algae. These algae provide much ofa fears are not foolish, but they do reflect a The authors examined cores drilled polyp’s food, but also generate toxins if view ofthe reef’s permanence that is at through the reefin different places. They the temperature gets too high, in which variance with the truth. For, a mere discovered, as the chart shows, that it has case the polyp throws them out. That 10,000 years ago, the coral-covered sea- died and then been reborn five times causes the coral to lose its colour. bed that now forms the Great Barrier during the past 30,000 years. Two early Polyps can tolerate occasional bleach- Reefwas dry land—a fact lamented in the reefswere destroyed by exposure as sea ing, but ifit goes on too long, then they songs, tales and dances ofindigenous levels fell. Three more recent ones were die. In the short term, therefore, global people living along the coast, which overwhelmed by water too deep forthem warming really does looka serious threat speakofhomelands being drowned by to live in, and also smothered by sediment to the reef. It would, no doubt, return if incoming waters. from the mainland. The current reefis and when the sea temperature dropped The reality ofthe Great Barrier Reef’s therefore the sixth ofthe period. again. But when that would be, who existence is that it is a movable feast. The barrier reef’s ability to resurrect knows?

0 Coral arrangements Sea level metres below Development stages of the Great Barrier Reef present sea level Rise of last Ice Age Peak of last Ice Age Decline of last Ice Age Glacial retreat Modern reef 20 30,000–22,000 years ago (ya) 22,000–17,000 years ago 17,000–13,000 years ago 13,000–10,000 years ago 10,000 years ago–today 30 The Great Barrier Reef grew in As the Ice Age progressed, sea Sea levels continued Sixth reef stages over the last Ice Age. Early levels fell further, killing to rise, drowning the last 10,000 years 40 on, sea levels fell and the reef was these corals as well. But as new reef. Another Sea level slopes up to left above water and died. New glaciers began to melt, waters layer of coral formed sea level 50 corals grew at the new level. rose and a new reef formed. above it. 10,000 ya 60 Sperm whale (to scale) 70 Type of coral Fifth reef Shallow-water Deep-water Sea level 13-10 tya* 80 Third reef 13,000 ya As sea 21-17 tya* levels 90 First reef Rising sea continued Sea level Fourth reef formed more Sea level 17-13 tya* levels and more to rise, the sea 100 than 30,000 22,000 ya 17,000 ya sediment front advanced years ago circulating in the inland, and the 110 Second reef Last glacial ocean buried modern (sixth) 27-22 tya* maximum these corals too, reef grew over 120 Sea level making way for what had long 21,000 ya yet another layer. been dry land. 130 Source: Jody M. Webster et al., Nature Geoscience *Thousand years ago The Economist June 2nd 2018 Science and technology 73

The sunk-cost fallacy AIDS Ball-game theory Parthian shots

SAN DIEGO Another’s wasted investment is as Studying HIV in every organ is crucial to disturbing as one’s own understanding how to eliminate it HAT human beings often continue to UCH of the medical research con- Tpour money into bad projects because Mducted on HIV, the virus that causes they have already invested in them and AIDS, looks at patients’ blood. This is no cannot bring themselves to lose that in- surprise. Blood is both easy to collect and vestment is well known. Indeed the sunk- easy to preserve. But HIV is not confined to cost fallacy, as this phenomenon is called, the bloodstreams of those infected by it. It is frequently cited as an example ofpeople is found in almost all of their bodily tis- failing to behave in the “rational” way that sues. In the view of Davey Smith, a virolo- classical economics suggests they should. gistatthe UniversityofCalifornia, San Die- Though the exact psychological undergo (UCSD), focusing only on the pinning of the sunk-cost fallacy is debated, metaphorical “trees” of the blood is there- it might reasonably be expected to apply fore a mistake. It misses the “forest” of the only when the person displaying it also other organs. made the original investment. However a Inspired by similar programmes in can- study published recently in Psychological cer research, Dr Smith therefore set up, in Science byChristopherOlivola ofCarnegie Auntie’s choice July 2017, a project called “Last Gift”. This Melon University suggests this is not true. seeks HIV-positive volunteers who are ter- In making decisions, people may also take watch it on TV, more often than those told minally ill for some other reason and asks into account the sunkcosts ofothers. they had obtained it free. Intriguingly, them to bequeath theirtissues for cryogen- Dr Olivola was led into his investiga- though, this was also true of those told ic preservation and subsequent study. So tion by a thought experiment of the sort they had been given the ticket, ifthey were far, five people have signed up, two of sometimes conducted by physicists. His told as well that the ticket had originally whom have died. Dr Smith hopes for 20 imagined experimental subject had just re- cost money rather than being a freebie. more over the next fouryears. ceived, as a present from a well-inten- Moreover, similar results obtained in other The crux of Last Gift’s operation is tioned aunt, a gaudy and uncomfortable experimentsDrOlivola conducted, involv- speed, because HIV’s genes and proteins jumper. He asked himself whether the pu- ing imaginary tennis-club memberships, start to degrade within four hours of a pa- tative subject would be more likely to wear movie-watching and chocolate cake. tient’s death. An autopsy team is therefore the jumper if he also knew that his aunt always on call to attend a volunteer’s had made significant sacrifices to buy it, Oooo! It’s lovely! deathbed, collect samples from his organs and he suspected that the answer would A possible explanation for these results, and bring them back to a laboratory at be “yes”. and also for Dr Olivola’s own intuitive re- UCSD for cryogenic preservation. The Having experimented reflectively on sponse to the aunt problem, is that social team take specimens of brain, spinal cord, himself, he decided to try something like it signalling is involved. In all cases the gift lungs, heart, kidneys, liver, spleen, muscle, on other people. He recruited volunteers was supposed to have come from a close bone marrow, adrenal glands, thyroid, and posed them similarhypothetical ques- social connection (either a friend or a rela- lymph nodes, genital-tract tissues, foreskin tions, though not involving aunts. tive), so part of the act of using it was to and intestine. In his first experiment he asked 602 show appreciation for its receipt. The cost- That HIV can hide in such solid tissues people to imagine that they had obtained a lier the gift, the more appreciation a donor has been known foryears. It is a retrovirus, front-row ticket to a basketball game but might expect to be demonstrated, which meaning that it integrates its genes into its that a terrible storm on the day ofthe game was consistent with what he found. host’s DNA. Once integrated in this way it meant travelling to watch it would be cold, To double-check the role of social con- can remain dormant indefinitely. The re- slow and potentially hazardous. Partici- nection, however, he decided to conduct sulting reservoirs are the main barrier to pants were also told that it was too late to one final round of experiments. In these eradicating it from someone’s system. Ex- exchange the ticket or to give it to someone the putative gift was supposed to have isting drugs control viral replication, but else. They were then asked to imagine ei- come not from a bosom buddy but rather cannot affect dormant, integrated viral ther that they had obtained the ticket for from a casual acquaintance or a stranger. genes. Ifsomeone stops taking those drugs themselves or that a friend had obtained it, To his surprise, the effect was often stron- it requires only a small leakfrom one ofthe but because of an unexpected work-relat- ger with these people than it was with reservoirs to bring the infection roaring ed trip could not attend and had therefore friends and relatives. back. Dormancy, moreover, makes HIV in- given it to them. They were also asked to What is going on here is obscure. Per- visible to the immune system. Under- imagine either that they or their friend had haps exaggerated gratitude towards ac- standing viral dormancy in solid tissues is obtained the ticket free, or had paid $200 quaintances and strangers is a way of turn- thus important. forit. Armed with all this information they ing them into friends. All told, however, Dr Even though they have only two sets of were then asked whether they would go to Olivola believes he has demonstrated that tissues to work with at the moment, Dr see the game live or stay at home and the sunk-cost phenomenon shapes hu- Smith and his colleagues have already watch it on television. man behaviour much more broadly than made discoveries. They have, for example, As sunk-cost theory predicts, those told was previously thought. Yet more evi- recorded surprisingly high levels of live (as they had paid for the ticket themselves dence, then, that Homo sapiens and Homo opposed to dormant) virusin the brain, the opted to attend the match, rather than economicus are different species. 7 spleen and the liver. They have also docu-1 74 Science and technology The Economist June 2nd 2018

2 mented disparities in the levels of live vi- ach. Understanding what is going on in the difficulty, too. rus within and between these organs. intestines is thus crucial to understanding The fuel forthe motor is a hollow cylin- They are especially interested in epige- the way the infection sustains itself once it der made from polypropylene, a plastic netic modifications of cells taken from has become established. hard and strong enough to form a rocket’s their volunteers’ organs. Such modifica- The need forspeed means Last Gift is, at outer casing. The middle of the cylinder is tions, which serve to regulate the activity the moment, necessarily confined to vol- filled with a powdered mixture of ammo- ofgenes, are chemical alterations of a cell’s unteers living in, or close to, San Diego. But nium perchlorate and ammonium nitrate, DNA and ofthe proteinsin which that DNA DrSmith is hopefulthat his method will be the oxidants. For their test firing, the re- is packed. The team hope to spot epigenet- replicated elsewhere. His team are already searchers used a hydraulic ram to drive the ic patterns that will both give away those sharing data with researchers at the Uni- cylinder into a preheated engine. Here, it cells which are infected and help explain versity of California, San Francisco, who made contact with a specially designed va- how HIV genes in a cell’s nucleus are acti- might one day start their own version of porisation surface, heated in order to turn vated and deactivated. the operation. And scientists from three both fuel and oxidants into gases and Another area ofspecific concern is how other American universities, and also the pierced by holes designed to collect the HIV replicates in the gut. Most new parti- National Institutes of Health, have ex- gases separately and channel them into a cles of the virus are produced in immune- pressed interest in partnerships. That is to combustion chamber, where they mixed system cells called T-lymphocytes. And be welcomed. Any true cure for HIV infec- and burnt. To start the process, the vapori- most of the human immune system re- tion will involve flushing the virus out of sation surface had to be warmed to its op- sides in the intestines, where it deals with its solid-tissue hidey-holes. Knowing what erating temperature by a gas burner (this pathogens ingested by mouth that have is really going on in those hidey-holes is would be done electrically in an opera- not succumbed to the acidity of the stom- therefore essential. 7 tional model), but once the system was up and running, vaporisation and combustion became self sustaining. And, by vary- Space flight ing the rate at which the propellant tube entered the engine, it was possible to con- Munching into orbit trol the amount ofthrust developed. A real rocket would, of course, have no ram to feed in the fuel. But Dr Harkness hopes Newton’s laws of motion will deal with that. Though the prototype under test is not yet powerful enough to make this work properly, the idea is that the accelera- A rocket that devours itselfmay soon take off tion of the motor will push constantly T TAKES a lot of oomph to launch a satel- requires both fuel and oxidant to be solid. against the inertia of the propellant cylin- Ilite into space. Typically, the payload rep- Solid-fuelled rockets are common in mili- der, forcing the cylinder against the vapor- resents only about 5% ofthe mass ofa rock- tary applications, such as intercontinental isation surface and causing it to be con- et as it leaves the launch pad. The rocket’s ballistic missiles, but are less frequently sumed. That process, moreover, is capable motorsaccountforsome ofthe rest, but the employed for launching satellites because ofregulation by using some sort ofthrottle bulk of it consists of the propellants (the their thrust is hard to regulate. Like fire- to slow the cylinder’s feed-in speed, per- fuel and oxidant that react to produce the work rockets (themselves solid-fuelled), mitting control of the amount of thrust de- thrust required to reach orbit) and the gub- once the metaphorical blue touchpaper veloped in a way not possible for a normal bins needed to handle these propellants hasbeen lit, the fuel burnsasitwill. Liquid- solid-fuelled rocket, in which the fuel (tanks, pumps, valves, piping and the fuelled rockets are preferred as satellite burns in situ. bodywork that contains them). The gub- launchers because their thrust can be The autophage design Dr Harkness and bins are not only expensive in themselves, tuned by changing the flow of propellant Dr Yemets have come up with is not, in but their mass also requires extra fuel to to the motor. That makes it easier to posi- truth, likely to worry those who use large lift. Things would be more efficient if the tion a payload into orbit correctly. But Dr liquid-fuelled rockets to launch heavy sat- gubbins could be dispensed with and a Harkness and Dr Yemets think that their ellites. The way rockets scale up means rocket designed that consists of only pay- self-consuming design can overcome this that freedom from gubbins is more valu- load, motor and propellants. able for small craft than big ones. But a This is exactly what those behind what small solid-fuel rocket fitted with an au- they call the “autophage” rocket hope to tophage engine might prove an ideal achieve. This team, a group of researchers launcher for the growing number of small led by Patrick Harkness of Glasgow Uni- satellites being sent into space. Dr Hark- versity, in Britain, and Vitaly Yemets of ness thinks such a vehicle could even be Oles Honchar Dnipro National University, designed to launch an individual CubeSat, in Ukraine, is designing a rocket that has a a type of satellite that has a volume of a li- body made of a rigid cylinder of fuel and tre and a maximum weight of1.33kg. oxidant. Atlaunch, the engine will sit atthe At present, most CubeSats are taken up base of this cylinder, but by the time the in batchesalongside otherpayloadson big, craft reaches orbit, it will have gobbled its liquid-fuelled rockets, and even Rocket way up towards the top, consuming the Lab, a firm thathasrecentlystarted offering rocket’s structure on the way. That will dedicated CubeSat launches, uses liquid save on launch weight, and thus on fuel. propulsion. A solid-fuel rocket would, And, as they report in the Journal of Space- though, be easier to handle than one full of craft and Rockets, Dr Harkness and Dr Ye- liquid so, though a working autophage mets have now carried out the first static rocket is still several years from produc- test-firing ofsuch a rocket’s motor. tion, a launch vehicle that eats its way into Self-evidently, the design they propose Race you to space space looks an attractive idea. 7 Books and arts The Economist June 2nd 2018 75

Also in this section 76 Michael Ondaatje’s new novel 77 The vogue for retro photography 77 A startup’s rise and fall 78 Love and madness

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A dystopian prophecy comrades disposed ofthe evidence, saving him from execution, but he was sentenced We and us to three months in solitary confinement forhis activism. In prison, Zamyatin began writing in code, hiding his insubordination in plain sight. Released in March of1906 and exiled to his childhood village of Lebedian, he An influential novel by a disillusioned Bolshevikhas proved more prescient than found Russia in a state of upheaval after he could have imagined the previous year’s revolution. The au- T IS the 26th century and humans have thorities were preoccupied, and he We. By Yevgeny Zamyatin. Translated by become “Numbers”—automatons who sneaked backinto StPetersburgto continue I Clarence Brown. Illustrated by Kit Russell. prioritise efficiencyoverfreedom. They are his studies. A decade later, during the first The Folio Society; 240 pages; £36.95 watched by menacing drones, which hov- world war, the Russian government sent erabove the OneState’s streets. The Bureau Zamyatin—by then a respected engi- ofGuardians eavesdrops on conversations via Butler that take up his inquiry into uto- neer—to Newcastle in England. A German to ensure productivity. Walls encase the pia and its shortcomings. flotilla had blocked Russia’s access to the metropolis, keeping at bay undocumented But “We”—recently republished with an Baltic, but with the proper technology, a people and an unruly environment. introduction by Ursula Le Guin—is more channel could be cut through the White One of these Numbers, an engineer than an academic curiosity. Zamyatin’s Sea and Arctic Ocean. Zamyatin super- named D-503, is building the INTEGRAL, a bleak vision was forged in the ferment vised the construction of icebreaking spaceship designed for galactic imperial- after the Russian revolution; but, with its ships. Already an aspiring author, he satir- ism. He has been ordered to spread the prophetic reflections on climate change ised England in his offhours. OneState’s ideology to other planets, colo- and surveillance culture, it is as relevant to- He returned to Russia in 1917, when the nising resources and perhaps workers. But day as it was a century ago. October revolution was under way. He ar- a dangerous condition festers within him. rived in tweeds, smoking a pipe; friends In a world of conformity and mechanical A hair’s breadth of time nicknamed him “the Englishman”. Zamya- obedience, he develops an antiquated fac- “We” was written between the fall of the tin’s politics, however, remained fiercely ulty that has longbeen thought extinct. Im- Russian empire and the rise of the Soviet independent. He had become disillu- probably, D-503 acquires a soul. Union. It both caricatures the autocracy of sioned with the Bolsheviks, whom he ac- This plot may sound like something out tsarism and anticipates Bolshevism’s de- cused of “stealing the honourable title of of HBO’s “Westworld” or Margaret At- scent into tyranny. The hero, D-503, resem- socialists and democrats”. In 1922 he was wood’s “The Handmaid’s Tale”, but it is bles Zamyatin himself, looking back at life arrested again, after censors intercepted in- much older. This is the world of “We”, a as ifin a funhouse mirror. vitations to publish “We” in Berlin and Par- novel written by Yevgeny Zamyatin in 1921. As an engineering student in St Peters- is. Fortunately he had befriended Maxim Little-known today, Zamyatin influenced burg at the turn of the century, Zamyatin Gorky, the godfather of Socialist Realist lit- some ofthe most celebrated authors of the had thrown himself into revolutionary erature, who personally appealed to Stalin 20th century. George Orwell used “We” as politics. He was first arrested in 1905, short- forleniency. Zamyatin was eventually per- a blueprint for “Nineteen Eighty-Four”. Al- lyaftertsaristtroopsdetained Leon Trotsky mitted to leave forexile in Paris. dous Huxley’s “Brave New World” follows and other leaders of the Petersburg Soviet. When Orwell reviewed “We” in 1946, a similar arc to Zamyatin’s story. Writers Zamyatin had left socialist pamphlets un- the novel had been published in English, such as Anthony Burgess, Kurt Vonnegut der his bed and nitrocellulose, an explo- French and Czech, but it would not appear and Ayn Rand were in his debt, as are more sive, on his windowsill (alongside his sta- in the Soviet Union until 1988, during glas- recent novels by Kazuo Ishiguro and Octa- ples of sugar and salami). His Bolshevik nost. In Orwell’sview, the booktargets “the1 76 Books and arts The Economist June 2nd 2018

2 implied aims ofindustrial civilisation” as a whole, rather than any particular society. Still, he notes the stark resemblance between the OneState and Stalinism, with its cult of personality, rapid industrialisation and political repression. But to modern readers, other aspects of Zamyatin’s multi- farious parable will seem more relevant. Somethinghas gone wrongwith nature in the OneState. Storms have become stronger and more frequent, requiring the erection ofan “Accumulator Tower” to prevent lightning damage. Plants are growing uncontrollably. To safeguard industrial production, a Green Wall is built to isolate the city from the countryside—“unknown and terrible” jungles filled with yellow- eyed beasts and irradiated creatures. To INTE- maintain the status quo until the Historical fiction GRAL can explore new planets, Guardians gather intelligence with hidden micro- In the shadows of war phones and “spy tubes”. A resistance movement arises among the Numbers, who communicate in code to avoid detec- tion, like Zamyatin in his prison cell. In some ways, the OneState looks less Warlight. By Michael Ondaatje. Knopf; 304 spivery” through the hotels and bomb- far-fetched now than it must originally pages; $26.95. Jonathan Cape; £16.99 sites ofLondon in a time of“fewer rules, have seemed. Lightning strikes in America less order”. Nathaniel, and Mr Ondaatje, could increase by 50% over the next cen- CHARACTER in “Warlight”, Michael relish these underworld adventures. tury as a result of climate change. As sea AOndaatje’s seventh novel, remarks A fledgling spy, Nathaniel learns to be levels rise, dikes have been proposed to that “Wars don’t end. They never remain “a caterpillar changing colour” to survive. protect low-lying cities, much like Zamya- in the past.” Not in England, anyway, Meanwhile the novel glances at the tin’s Green Wall. Spaceships like the INTE- where the mythology ofthe second chaos ofpost-war Europe, where Rose GRAL are no longer the stuff of science fic- world war has shaped and distorted the operates in the shadows. Score-settling tion. Elon Musk has built his SpaceX nation’s identity. Aquarter-century ago, between armed factions, notably in rocketry companyon the dream ofcolonis- the Sri Lankan-born Canadian writer Yugoslavia, persists despite Germany’s ing Mars. Meanwhile, revelations about won global acclaim with “The English surrender, as “acts ofwar continued data collection and privacy have popular- Patient”. With subtlety and grace, that beyond public hearing”. Yet an “almost ised encrypted messaging applications novel clouded the legends ofconflict in apocalyptic censorship”, which British such as WhatsApp and Wickr. Egypt and Italy in doubts as dense as a intelligence abets, hides this (largely These have spooked autocrats in Russia Western Desert sandstorm. Now Mr forgotten) bloodshed. There is, Nathaniel and elsewhere. In the run-up to Vladimir Ondaatje, who spent his teenage years in reflects, “so much left unburied at the end Putin’s latest inauguration, a Moscow London, returns to Britain’s war and its ofa war”. court attempted to block Telegram, a simi- immediate aftermath. Mr Ondaatje illuminates this rubble- lar service, after the company refused to “Warlight” unfolds after1945 in a strewn landscape from angled sidelights. provide access to private communications. bomb-ravaged city that, although victo- Lyrical but oblique, his prose matches a The Kremlin may have been trying to stave rious, “still felt wounded, unsure of mood ofmystery and suspicion that off the sort of protests that caught it off itself”. Nathaniel, the narrator, is a junior tantalises, ifoccasionally frustrates, the guard in 2011. Zamyatin foresaw such British intelligence officer. From the reader. With Nathaniel, he shows the surges of dissent, too. At the end of “We”, vantage-point ofthe late 1950s, he looks child observer as a kind ofsecret agent, D-503 attends the annual re-election of the backto Blitz-wrecked London and seeks piecing together baffling fragments OneState’s Benefactor. For as long as any- to understand the “omissions and si- picked up from the hidden lives ofadults. one can remember, the vote has always lences” that haunted his disrupted child- As more ofRose’s career in espionage been a unanimous “yes”. Not this time. hood. His father, an executive with Uni- becomes visible, along with the clandes- lever, apparently left fora post in tine stunts ofthe Moth and his pals, All this took the hundredth part of a second, Singapore. Rose, his beloved but elusive “Warlight” also explores the English a hair’s breadth of time. I saw a thousand mother, also vanished—to workun- talent forcamouflage and deceit: “the hands shoot up—‘opposed’—and come down. dercover, the reader grasps by incre- most remarkable theatrical performance A revolution has begun. After his exile, ments, in the “unknown and unspoken ofany European nation”. though, Zamyatin’s own activism was con- world” ofthe secret services. Still, those arts ofsubterfuge that win fined to his articles, stories and plays. On Already shaped by this “family of a war may ruin the peace. A colleague of his deathbed in 1937, as another terrible disguises”, Nathaniel and his rebellious Rose’s in the twilit fellowship ofspies war loomed, he could not have known sister Rachel grow up in the care of reads a classified report about the state of how prescient his novel would come to louche informal guardians who make a continental Europe, which finds that seem. Today reading “We” is like opening a murky living “on the edge ofthe law”. “nothing has moved into the past and no time capsule, sentfrom the pastwith a plea Known by nicknames such as “the Moth” wounds have healed with time”. That for the present. To peerinto Zamyatin’s fu- and “the Pimlico Darter”, these memora- verdict, “Warlight” suggests, applies on ture is to see modernity’s reflection gazing ble hustlers move their “shifting tents of the British side ofthe Channel. darkly back. 7 The Economist June 2nd 2018 Books and arts 77

Antique photography techniques tographic paperas a kind ofretina, creating a modern camera obscura. She thought Ghosts in the machine her experiment would be short-lived, but the subsequent work proved popular. She often builds wooden cameras on-site, fa- vouring industrial and architectural subjects (see below), though at Photo London Mr Kraus exhibited a serene treescape she made in Cold Spring, New York, rendered As digital images proliferate, artists are turning backto the origins ofphotography eerie by the reversal ofblackand white. ILLIAM HENRY FOX TALBOT did objects are laid directly onto it. Exposure What all these artists have in common Wnot set out to be a photographer. He hardens the chemicals, except under the is that, in today’s world, their output hard- was inspired by friends who made exact covered parts. Removing the objects and ly seems like photography at all. Ms Lutter drawings using a camera obscura—a dark washing the sheet with an acid leaves a trained in conceptual art in Munich. Ms room with a small hole in one side, which kind of engraved plate that can be used to Kung began as a painter. Ms Parker makes projects an inverted image of the outside make prints. Ms Parker did that with some sculptures and installations; her technique viewonto the opposite wall. An indifferent glassware Talbot had also photographed, results not in photographs but photograms draughtsman, Talbot wished that by some the glass emerging as diaphanous black on (the name for images produced by contact trick the drawings could make themselves. a white background. between objects and paper). They did not By experimenting with chemical-coated What was once a retro hobby now ac- set out to be photography pioneers. But paper, he found a way to do just that. counts for a growing segment of the art- then, neither did Talbot. 7 Louis Daguerre’s images, imprinted on photography scene; Mr Kraus reckons the metal rather than paper, were sharper. Ini- numberofartists experimentingwith such tially, as the two men competed in the methods is rising at an “exponential” rate. A startup’s rise and fall mid-19th century, the daguerreotypes he Irene Kung, a Swiss artist, begins with the pioneered were more popular. But Talbot’s height of modern technology: a digital Blood money innovation led more directly to photogra- camera with exceptional resolution. That phy as it is understood today. Daguerreo- yields enormous electronic files with ex- types were unique artefacts; Talbot’s calo- quisite detail, which she manipulates in type was a paper negative that could yield software and then uses to generate photo any number of positive copies. Over time negatives. From there, the real fun begins. Bad Blood: Secrets and Lies in a Silicon his idea led to the development of photog- Ms Kung and an expert printer lay the Valley Startup. By John Carreyrou. Knopf; raphy as a form ofinfinite reproduction. negative on a piece of paper coated in fer- 352 pages; $27.95. Picador; £20 Fast forward to the digital age, and peo- ric, chloroplatinite and chloropalladite ple take so many snaps that they clog salts. The resulting print is bathed in a sol- FEW years ago Elizabeth Holmes, boss smartphones and hard-drives. In re- ution derived (she says with delight) from AofTheranos, dressed up as Queen Eliz- sponse, photographers are revisiting tech- spinach. The outcome is razor-sharp black- abeth I for the company’s Halloween niques from the art’s earliest days to pro- and-white images—in Ms Kung’s case, of party. At the time she reigned over Silicon duce, once again, arresting and unique landmarks such as the Brooklyn Bridge or Valley’s startup scene. In 2013-15 she raised pictures from slow, smelly processes. La Scala opera house in Milan—against a around $700m to fund herfirm, which had At Photo London, a fair held in May, ghostly black background. Each print takes supposedly developed a way to test blood Hans Kraus junior, a New York-based deal- a full day to make, and is slightly different with a single pinprick. Ms Holmes (pic- er in antique photography, curated a dis- from any other. tured on next page) was hailed as the next play of works by Talbot, his modern disci- By contrast, Vera Lutter uses modern Steve Jobs and the youngest female self- ples and followers ofDaguerre. An English chemistry but the oldest of cameras. In the made billionaire in history. Atitspeak, The- artist, Cornelia Parker, has revived Talbot’s 1990s she turned the window of her apart- ranos claimed a private valuation of$9bn. photogravure process: a sheet of metal is ment in New Yorkinto an eye, drilled a pin- But the startup throne is precarious. covered in light-sensitive chemicals, then hole asa lensand used a huge piece of pho- “Bad Blood”, an enjoyable book by John Carreyrou, an investigative journalist, charts Ms Holmes’s rise and dramatic fall. It was Mr Carreyrou who first raised questions about Theranos, suggesting in the Wall Street Journal in 2015 that its testing technique yielded unreliable results. Earli- er this year Ms Holmes settled civil charges brought by America’s financial regulator, the Securities and Exchange Commission (SEC), of defrauding investors. A criminal inquiry is believed to be in train. What went wrong? Mr Carreyrou suggests Ms Holmes cared less for patients than about advancing her own interests and personal brand. According to the SEC, she and Sunny Balwani, her deputy (and, says Mr Carreyrou, secretly her boyfriend), misled investors and other corporations about the state of Theranos’s technology and sales. These falsehoods lured new Not shot on an iPhone partners. For example, Safeway, a grocery 1 78 Books and arts The Economist June 2nd 2018

Matters of the heart everybody wants love and nobody wants to be mad—being in love is itself a kind of Better to have madness, so the border between sane and insane passion ismurky. “The merestspark loved ofsexual attraction can cause a fire thathas the potential to consume us. We all share this dormant propensity, which explains why examples of its full expression in the The Incurable Romantic. By Frank Tallis. clinic are so arresting and alarming.” Little, Brown; 304 pages; £18.99. To be Mr Tallis is a gifted storyteller. He prac- published in America by Basic Books in tises this art mostly in a series of detective September; $27 novels, in which a young Viennese psy- EGAN was a woman in her mid-40s, chotherapist and disciple of Freud helps to Mwith neat, bobbed brown hair. She solve murder cases. In “The Incurable Ro- had been married to an accountant for 20 mantic” he applies a novelist’s skill to his years. They had no children, and nothing clinical material. He asked Mavis, a dowdy, out of the ordinary had ever happened to depressed, elderly widow, what she most The queen in her castle them—until she developed a tricky tooth missed about her husband: “She looked at problem and had to visita dentist who spe- me through the smudged lenses of her 2 chain, and Walgreens, a pharmacy giant, cialised in complicated extractions. He op- spectacles and answered without hesita- respectively stumped up around $400m erated on her, and when she awoke from tion, ‘The sex’.” The book is rich not just in and $140m to collaborate with Theranos. the anaesthetic, Megan fell instantly and memorable, strange characters but in fine, Ms Holmes is not the only one implicat- passionately in love with him. perceptive lines. OfMavis, MrTallis writes: ed in the debacle. It highlights the Valley’s She phoned him, wrote to him and “The numbness of depression is simply propensity to glorify lone, inexperienced waited outside his office and home. Partly pain in anotherform—like waterbecoming entrepreneurs who promise to reshape an to escape the harassment, he moved to Du- ice when the temperature drops.” industry—and enrich those who spot them bai, butherfeelingsdid notwaver. She kept Each case gives him the opportunity to early. Ms Holmes’s partners and investors a box covered with white cloth, containing discuss a theme related to his subject. desperatelywanted to believe thata young things he had touched, such as his busi- These include the concept ofromantic pas- woman could get to the top. Her face was ness card and an information leaflet about sion, which came to Europe from Arab po- plastered on magazine covers, even as she dental health, and would sit next to it with etry through the Islamic conquest ofSpain; refused to reveal the details of her firm’s her eyes closed. “It was as though she love as the central purpose of life—and technology. Too little scrutiny was offered was—I don’t know, praying,” Philip, Me- thus as a way of staving off intimations of by the older men on her board, who even- gan’s husband, told Frank Tallis, her psy- mortality; the intimate relationship be- tually included Henry Kissinger and chotherapist. When Mr Tallisasked if Phil- tween religion and psychosis; and paedo- George Shultz (both former secretaries of ip objected to this ritual, he recoiled. “I philia. He is unfailingly interesting, except state). Mr Carreyrou says the board had couldn’t force her to throw those things when he writes like a psychotherapist. been set to sack Ms Holmes in 2008, but away. It would be crushing,” he replied. Mr “Freud”, he notes, “employed the term rep- she wangled another chance. Tallis was touched. “Ordinary, non-patho- etition-compulsion to describe an innate In reality, Theranos’stestswere never as logical love”, he observes, “can also be tendency to reproduce early traumas in the sound as the firm claimed. Instead of ad- very extraordinary.” context ofcurrent relationships.” mitting that the technology was not ready “The Incurable Romantic” tells the sto- There are few such passages. The psy- to deploy, Theranos “hacked” a solution, ries ofa dozen ofMrTallis’spatients. Story- chotherapist is held in check, but so is the using modified traditional devices from telling, he explains, is what really attracted storyteller. Mr Tallis rarely tries to force his other manufacturers. Perhaps Ms Holmes him to psychotherapy. He likes helping characters’ complexity into neat diag- was adhering to the Valley’s spirit of dis- people, and the science interests him, but noses, and he does not attempt a novelist’s ruption by improvising a fix. That might psychotherapy, he says, is “as much about resolution of their tales. Most of them drift workforsoftware and internetfirms. In the narrative as it is about science or compas- outofhislife, leavingboth shrinkand read- health-care business, the stakes are higher. sion…People are living story books. Talk- er in ignorance of their fates. Yet this is not The book is especially engaging on Ms ing cures open the covers.” unsatisfying: Mr Tallis’s characters remain Holmes’s battle with the author himself. Deranged love is a particularly fertile sharply, painfully real, their stories as in- She tried to squelch Mr Carreyrou’s initial zone for a storyteller, because—though conclusive, messy and fascinatingas life. 7 exposé, going so far as to recruit Rupert Murdoch, the Journal’s proprietor, as an investor. (He put$125m into Theranosin 2015, a stake that is now worthless.) Mr Carrey- rou is weaker on Ms Holmes’s psychology. He never got close enough to her or her confidants to illuminate her motives. One striking oversight is an examina- tion of her company’s origins. Ms Holmes apparently wrote a patent application for a medical device aftera yearat Stanford Uni- versity and a summer internship in Singa- pore. Mr Carreyrou recounts this creation myth without comment. Still, the story and its telling are not over yet. A Holly- wood film starring Jennifer Lawrence as Ms Holmes is in the works. 7 Courses 79

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Republic of Mauritius Ministry of Technology, Communication and Innovation Press Communiqué Data Protection Act 2017

Chateau in Normandy, France Controllers, Processors and the public at large are hereby For Sale - EUR 1.9m informed that the Data Protection Act 2017 has been proclaimed on 15 January 2018 to align with the European Union General 18th century French chateau in the heart of Calvados - Normandy, France, set Data Protection Regulation 2016/679 (GDPR) and the Council of within 12 acres (4.8 hectares) of walled parkland. Europe Convention for the Protection of Individuals with regard The grounds feature a fountain, well-manicured lawns, flower gardens, woods to Automatic Processing of Personal Data (Convention 108). and tennis court. A copy of the Data Protection Act 2017 is available on the websites The chateau is comprised of 9 bedrooms, 8 bathrooms and 3 living rooms, with of the Ministry of Technology, Communication and Innovation listed hand painted wall murals, and has been beautifully restored by the current owner/occupier. at: http://mtci.govmu.org and the Data Protection Office at: http://dataprotection.govmu.org. Copies of Guidelines and Facilities are in place both inside and outside to host weddings and events. Information Leaflet on the Data Protection Act 2017 are also Additionally there are numerous outbuildings, including a 3 bedroom guest available on the websites. cottage, two 1 bedroom apartments and office space. Ministry of Technology, Communication and Innovation The property is surrounded by fields, and is 30 minutes from the sea, 2.5 hours Levels 6 & 7, SICOM Tower from Paris, and 40 minutes away from both Caen and Deauville international Wall Street airports. Ebène http://www.lemesnildo.fr/ Republic of Mauritius Contact: Guillaume +447532003972 [email protected] 13th March 2018 The Economist June 2nd 2018 80 Economic and financial indicators The Economist June 2nd 2018

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* 2018† latest latest 2018† rate, % months, $bn 2018† 2018† bonds, latest May 30th year ago United States +2.8 Q1 +2.2 +2.8 +3.5 Apr +2.5 Apr +2.4 3.9 Apr -466.2 Q4 -2.8 -4.6 2.95 - - China +6.8 Q1 +5.7 +6.6 +7.0 Apr +1.8 Apr +2.3 3.9 Q1§ +121.0 Q1 +1.1 -3.5 3.45§§ 6.42 6.86 Japan +0.9 Q1 -0.6 +1.4 +2.5 Apr +0.6 Apr +1.0 2.5 Apr +197.0 Mar +4.0 -4.9 0.03 109 111 Britain +1.2 Q1 +0.4 +1.4 +2.9 Mar +2.4 Apr +2.5 4.2 Feb†† -106.7 Q4 -3.7 -1.8 1.42 0.75 0.78 Canada +2.9 Q4 +1.7 +2.3 +4.5 Feb +2.2 Apr +2.2 5.8 Apr -53.8 Q1 -2.7 -2.0 2.27 1.29 1.35 Euro area +2.5 Q1 +1.6 +2.3 +3.0 Mar +1.2 Apr +1.5 8.5 Mar +473.7 Mar +3.3 -0.8 0.36 0.86 0.89 Austria +3.4 Q1 +9.7 +2.8 +3.9 Mar +1.8 Apr +2.1 5.0 Mar +7.7 Q4 +2.4 -0.6 0.45 0.86 0.89 Belgium +1.5 Q1 +1.3 +1.9 +3.5 Mar +1.8 May +1.7 6.4 Mar -0.8 Dec nil -0.9 0.77 0.86 0.89 France +2.2 Q1 +0.7 +2.0 +1.8 Mar +1.6 Apr +1.7 8.8 Mar -12.6 Mar -0.8 -2.4 0.69 0.86 0.89 Germany +2.3 Q1 +1.2 +2.3 +3.2 Mar +2.2 May +1.6 3.4 Mar‡ +312.3 Mar +7.7 +1.0 0.36 0.86 0.89 Greece +1.8 Q4 +0.4 +1.6 +1.1 Mar nil Apr +0.7 20.8 Feb -1.8 Mar -1.2 +0.2 4.61 0.86 0.89 Italy +1.4 Q1 +1.2 +1.4 +3.6 Mar +0.5 Apr +1.1 11.0 Mar +53.0 Mar +2.7 -2.0 2.96 0.86 0.89 Netherlands +2.8 Q1 +2.1 +2.8 +3.5 Mar +0.9 Apr +1.4 4.9 Apr +84.9 Q4 +9.8 +0.8 0.49 0.86 0.89 Spain +2.9 Q1 +2.8 +2.8 -3.6 Mar +2.1 May +1.4 16.1 Mar +25.9 Feb +1.7 -2.6 1.45 0.86 0.89 Czech Republic +5.5 Q4 +2.0 +3.6 -1.0 Mar +1.9 Apr +1.8 2.2 Mar‡ +1.9 Q4 +0.7 +0.9 1.95 22.3 23.7 Denmark +1.3 Q4 +1.2 +1.9 -9.8 Mar +0.8 Apr +1.2 4.1 Mar +23.0 Mar +7.8 -0.7 0.38 6.41 6.66 Norway +0.3 Q1 +2.5 +1.9 -6.7 Mar +2.4 Apr +2.2 3.9 Mar‡‡ +20.2 Q4 +6.1 +4.9 1.75 8.20 8.45 Poland +5.2 Q1 +6.6 +4.2 +9.2 Apr +1.7 May +1.9 6.3 Apr§ -0.5 Mar -0.7 -2.2 3.28 3.72 3.74 Russia +1.3 Q1 na +1.7 +1.0 Apr +2.4 Apr +3.1 4.9 Apr§ +41.7 Q1 +3.4 +0.3 8.13 62.3 56.6 Sweden +3.3 Q1 +2.9 +2.5 +6.8 Mar +1.7 Apr +1.7 6.8 Apr§ +17.1 Q4 +4.0 +0.8 0.47 8.83 8.74 Switzerland +1.9 Q4 +2.4 +2.2 +8.7 Q4 +0.8 Apr +0.7 2.7 Apr +66.6 Q4 +9.7 +0.8 -0.06 0.99 0.98 Turkey +7.3 Q4 na +4.3 +6.8 Mar +10.8 Apr +10.7 10.6 Feb§ -55.4 Mar -5.7 -2.8 14.08 4.47 3.55 Australia +2.4 Q4 +1.5 +2.7 +1.6 Q4 +1.9 Q1 +2.1 5.6 Apr -32.3 Q4 -2.2 -1.2 2.69 1.32 1.34 Hong Kong +4.7 Q1 +9.2 +2.9 +0.7 Q4 +1.9 Apr +2.5 2.8 Apr‡‡ +14.7 Q4 +4.0 +0.8 2.16 7.85 7.79 India +7.2 Q4 +6.6 +7.2 +4.4 Mar +4.6 Apr +4.8 5.9 Apr -39.1 Q4 -2.0 -3.5 7.78 67.5 64.6 Indonesia +5.1 Q1 na +5.3 +1.1 Mar +3.4 Apr +3.5 5.0 Q1§ -20.9 Q1 -2.1 -2.5 7.05 13,990 13,323 Malaysia +5.4 Q1 na +5.5 +3.1 Mar +1.4 Apr +2.5 3.3 Mar§ +12.2 Q1 +3.2 -2.8 4.27 3.99 4.28 Pakistan +5.4 2018** na +5.4 +1.8 Mar +3.7 Apr +5.0 5.9 2015 -16.7 Q1 -5.8 -5.4 8.50††† 116 105 Philippines +6.8 Q1 +6.1 +6.4 +13.5 Mar +4.5 Apr +5.1 5.3 Q1§ -2.5 Dec -1.2 -1.8 6.15 52.6 49.8 Singapore +4.4 Q1 +1.7 +3.2 +9.1 Apr +0.1 Apr +0.9 2.0 Q1 +61.7 Q1 +20.6 -0.7 2.58 1.34 1.39 South Korea +2.9 Q1 +4.4 +2.9 +0.9 Apr +1.6 Apr +1.7 4.1 Apr§ +71.1 Mar +4.7 +0.7 2.70 1,081 1,125 Taiwan +3.0 Q1 +0.8 +2.7 +3.1 Mar +2.0 Apr +1.3 3.7 Apr +84.8 Q1 +13.9 -0.9 1.00 30.1 30.1 Thailand +4.8 Q1 +8.1 +4.0 +4.0 Apr +1.1 Apr +1.3 1.2 Mar§ +50.2 Q1 +10.2 -2.3 2.54 32.1 34.1 Argentina +3.9 Q4 +3.9 +2.6 +3.2 Apr +25.6 Apr +22.5 7.2 Q4§ -30.8 Q4 -5.3 -5.1 6.15 24.9 16.1 Brazil +1.2 Q1 +1.8 +2.6 +1.3 Mar +2.8 Apr +3.4 12.9 Apr§ -8.9 Apr -1.2 -7.0 8.77 3.74 3.27 Chile +4.2 Q1 +4.9 +3.7 +8.7 Mar +1.9 Apr +2.4 6.9 Mar§‡‡ -3.1 Q1 -1.1 -2.0 4.55 629 676 Colombia +2.8 Q1 +2.8 +2.5 -1.4 Mar +3.1 Apr +3.3 9.5 Apr§ -10.4 Q4 -2.9 -2.0 6.63 2,881 2,918 Mexico +1.3 Q1 +4.6 +2.1 -3.7 Mar +4.6 Apr +4.3 3.4 Apr -15.9 Q1 -1.8 -2.3 7.77 19.7 18.7 Peru +3.2 Q1 +5.6 +3.7 +2.4 Mar +0.5 Apr +1.8 7.0 Mar§ -2.9 Q1 -1.7 -3.5 na 3.27 3.29 Egypt +5.3 Q4 na +5.4 +6.2 Mar +13.1 Apr +16.9 10.6 Q1§ -9.3 Q4 -2.6 -9.3 na 17.9 18.0 Israel +3.9 Q1 +4.2 +3.8 +4.2 Mar +0.4 Apr +1.5 3.6 Mar +10.5 Q4 +2.6 -2.4 1.80 3.58 3.54 Saudi Arabia -0.7 2017 na +1.0 na +2.6 Apr +4.4 6.0 Q4 +15.2 Q4 +5.0 -6.1 na 3.75 3.75 South Africa +1.5 Q4 +3.1 +1.9 +2.3 Mar +4.5 Apr +4.8 26.7 Q1§ -8.6 Q4 -2.8 -3.5 8.53 12.6 13.1 Source: Haver Analytics. *% change on previous quarter, annual rate. †The Economist poll or Economist Intelligence Unit estimate/forecast. §Not seasonally adjusted. ‡New series. **Year ending June. ††Latest 3 months. ‡‡3-month moving average. §§5-year yield. †††Dollar-denominated bonds. The Economist June 2nd 2018 Economic and ﬁnancial indicators 81

Markets % change on Central banks Holdings of domestic government debt, $trn* Dec 29th 2017 Since the 2007-08 ﬁnancial crisis, big Index one in local in $ 12 May 30th week currency terms central banks have carried out asset- United States (DJIA) 24,667.8 -0.9 -0.2 -0.2 purchase programmes to stimulate eco- Britain 10 China (Shanghai Comp) 3,041.4 -4.0 -8.0 -6.8 nomic growth and reduce borrowing Japan (Nikkei 225) 22,018.5 -3.0 -3.3 +0.1 costs. Government-bond yields have Europe† Britain (FTSE 100) 7,689.6 -1.3 nil -1.9 fallen as a result. More than $9trn of 8 Canada (S&P TSX) 16,048.7 -0.5 -1.0 -3.7 global sovereign bonds were trading at Euro area (FTSE Euro 100) 1,200.5 -2.6 -0.8 -4.0 negative rates last summer, according to 3,441.2 -2.8 -1.8 -5.0 6 Euro area (EURO STOXX 50) the OECD. The Bank of Japan now holds Austria (ATX) 3,362.5 -3.4 -1.7 -4.9 over 40% of the country’s government Japan Belgium (Bel 20) 3,784.7 -2.6 -4.9 -8.0 4 France (CAC 40) 5,427.4 -2.5 +2.2 -1.2 debt. Monetary policy has diverged Germany (DAX)* 12,783.8 -1.5 -1.0 -4.3 between America and Europe. Whereas Greece (Athex Comp) 749.3 -4.5 -6.6 -9.7 the Federal Reserve started to reduce the 2 Italy (FTSE/MIB) 21,797.8 -4.9 -0.3 -3.5 size of its balance-sheet last year, the United States Netherlands (AEX) 557.6 -1.3 +2.4 -1.0 European Central Bank intends to contin- 0 Spain (IBEX 35) 9,566.2 -4.6 -4.8 -7.9 ue asset purchases until inﬂation is close 2008 09 10 11 12 13 14 15 16 17 Czech Republic (PX) 1,079.7 -1.8 +0.1 -4.4 to the target of just under 2%. Source: OECD *2009 prices †OECD euro area Denmark (OMXCB) 894.2 -2.3 -3.5 -6.7 Hungary (BUX) 34,837.1 -1.7 -11.5 -17.0 Norway (OSEAX) 990.8 -1.3 +9.2 +9.0 Poland (WIG) 57,282.7 -1.3 -10.1 -16.1 Other markets The Economist commodity-price index Russia (RTS, $ terms) 1,163.0 -1.0 +0.7 +0.7 2005=100 % change on % change on Sweden (OMXS30) 1,562.5 -2.5 -0.9 -8.2 Dec 29th 2017 one one Switzerland (SMI) 8,578.7 -2.5 -8.6 -10.0 Index one in local in $ May 22nd May 29th* month year Turkey (BIST) 103,869.0 +1.9 -9.9 -23.6 May 30th week currency terms Dollar Index Australia (All Ord.) 6,093.8 -0.8 -1.2 -4.0 United States (S&P 500) 2,724.0 -0.3 +1.9 +1.9 All Items 157.3 156.5 -0.4 +10.1 Hong Kong (Hang Seng) 30,056.8 -2.0 +0.5 +0.1 United States (NAScomp) 7,462.5 +0.5 +8.1 +8.1 Food 161.2 159.4 -2.4 +4.0 India (BSE) 34,906.1 +1.6 +2.5 -3.1 China (Shenzhen Comp) 1,736.3 -5.4 -8.6 -7.3 Indonesia (JSX) 6,011.1 +3.8 -5.4 -8.3 Japan (Topix) 1,736.1 -3.4 -4.5 -1.2 Industrials Malaysia (KLSE) 1,719.3 -4.7 -4.3 -2.9 Europe (FTSEurofirst 300) 1,508.8 -2.0 -1.4 -4.6 All 153.2 153.5 +1.8 +17.5 Pakistan (KSE) 42,546.5 -0.5 +5.1 +0.4 World, dev'd (MSCI) 2,100.4 -1.1 -0.1 -0.1 Nfa† 147.8 148.0 +3.4 +10.2 Singapore (STI) 3,444.0 -1.5 +1.2 +0.9 Emerging markets (MSCI) 1,112.7 -1.8 -3.9 -3.9 Metals 155.5 155.8 +1.2 +20.8 South Korea (KOSPI) 2,409.0 -2.5 -2.4 -3.3 World, all (MSCI) 510.0 -1.1 -0.6 -0.6 Sterling Index Taiwan (TWI) 10,821.2 -0.6 +1.7 +0.7 World bonds (Citigroup) 939.9 +0.3 -1.1 -1.1 All items 213.1 214.5 +2.0 +6.7 Thailand (SET) 1,725.1 -1.6 -1.6 -0.2 EMBI+ (JPMorgan) 797.2 +0.4 -4.7 -4.7 Argentina (MERV) 28,389.4 -6.1 -5.6 -28.7 Hedge funds (HFRX) 1,262.7§ -0.7 -1.0 -1.0 Euro Index Brazil (BVSP) 76,753.6 -5.1 +0.5 -11.0 Volatility, US (VIX) 14.9 +12.6 +11.0 (levels) All items 166.1 168.3 +3.3 +6.4 Chile (IGPA) 27,786.6 -2.2 -0.7 -2.9 CDSs, Eur (iTRAXX)† 68.6 +11.6 +52.1 +47.1 Gold Colombia (IGBC) 12,302.8 +2.1 +7.2 +11.0 CDSs, N Am (CDX)† 65.2 +5.3 +32.8 +32.8 $ per oz 1,292.6 1,302.0 -0.2 +3.1 Mexico (IPC) 44,715.9 -2.3 -9.4 -10.1 Carbon trading (EU ETS) € 15.9 -2.6 +95.1 +88.7 West Texas Intermediate Peru (S&P/BVL)* 20,787.0 -16.0 +4.1 +3.2 Sources: IHS Markit; Thomson Reuters. *Total return index. $ per barrel 72.2 66.7 -0.8 +34.4 Egypt (EGX 30) 16,760.2 +0.6 +11.6 +10.7 †Credit-default-swap spreads, basis points. §May 29th. Israel (TA-125) 1,364.3 +0.4 nil -2.9 Sources: Bloomberg; CME Group; Cotlook; Darmenn & Curl; FT; ICCO; Indicators for more countries and additional ICO; ISO; Live Rice Index; LME; NZ Wool Services; Thompson Lloyd & Saudi Arabia (Tadawul) 8,009.6 -0.4 +10.8 +10.8 Ewart; Thomson Reuters; Urner Barry; WSJ. *Provisional South Africa (JSE AS) 55,601.6 -2.5 -6.6 -8.0 series, go to: Economist.com/indicators †Non-food agriculturals. 82 Obituary Lini Puthussery The Economist June 2nd 2018

In her spare time she was busy improving her knowledge, to be eligible for a permanent government nursing job. She had filled a large black hard-bound book with neatly underlined entries in English, rather than her native Malayalam, on diseases and their treatments. Her notes, however, did not seem to cover what Sadiq had. She and her colleagues called it “the mystery disease”. In a few days he had died ofit. She cried a lot, not out of fear, but because she had taken such complete care of him. The story came out slowly. Sadiq had gone to clean a disused well with his elder brother Saliah. Their parents had just boughta newhouse and the brothers, who also worked in the Gulf, had come back to help. The well was deep, and as they went down into it they disturbed so many bats that they gave up the job in horror. Those bats were the clue. They had either infected the water, or had bitten and infected the mangoes that grew round it. On May 21st officials from the Health De- partment, the ForestryDepartment, the Re- gional Diagnostic Laboratory and the Ani- mal Husbandry Department caught a bat fortestingand sealed the well with nets. By Treating a mystery then, Saliah and his aunt Mariumma were dead too: not of Japanese encephalitis or some strain of malaria, as the doctors kept guessing, but (it turned out) ofNipah virus, which had appeared only once before in India. It was fatal in 70% ofcases. For the virus to spread between hu- Lini Puthussery, a nurse in Kerala, died ofthe Nipah virus on May 21st, aged 28 mans, contact had to be intensive and di- HEN the patient was admitted at the ers gathered outside the village office to rect. That was exactly what Lini, with her Wend of April, Lini Puthussery was protest when their land was misclassified tireless nursing, had provided. On May starting her night shift. He was a young as protected forest and theirclaims to own- 16th she felt feverish, but insisted to Sa- man of 26, bearded, and with his hair fash- ership were rebuffed. In 2017 a farmer jeesh that she would go to work because ionably swept back from his forehead. His hanged himself there. Yet apart from those “lots of patients are there”, as always. name was Mohamed Sadiq, from Changa- things it was a quiet, green place, with her When she grewworse, she checked herself roth panchayat. The symptoms were fever parents, aunts and cousins all close by. into a hospital in Kozhikode and asked to and difficulty breathing, which struck her As a daily-wage nurse, she worked flex- be quarantined. Sajeesh flew back from as unusual, even then. But her job was to ible hours. That suited her, because she Bahrain to find her barely conscious. She care forhim, so she gave him fluids and pa- had her two small boys, five-year-old left him a note, partly in Malayalam and racetamol, changed his sweaty clothes and Rithul and two-year-old Sidharth, to look partly in English, which he folded away in- sheets, and sat up with him all night long. after. Her husband, Sajeesh, had been side the cover of his phone. She had been working seven months away for five years, working as an accoun- on contract at the Perambra Taluk hospital, tant for a small firm in Bahrain. He re- Sajeeshetta, am almost on the way. I don’t in the countryside outside Kozhikode turned a few times a year, and they spoke think I will be able to see you again. Sorry. Please take good care of our children. Poor (once Calicut). The place had been upgrad- every day on the phone. Many Keralans Kunju [Sidharth], please take him to the Gulf ed from a community health centre a de- worked in the Gulf. It was more lucrative with you. Don’t stay single like our father. cade ago, but was still short of doctors and than staying at home, and meant in Lini’s Plz. With lots oflove, Umma specialists. Difficult cases had to go to Ko- case that they could afford their one-storey zhikode, 50km away. Not many people brick house, with a small terraced garden, By the end ofMay the outbreakwas not filled the beds, but every day 1,000 or so looking over open pasture. They took yet contained. At the hospital in Perambra, queued at the outpatient counter or at the proud pictures ofthemselves outside it. Lini’s colleagues now wore protective pharmacy. The noisy crowd still milled coats, gloves and masks. Their patients, there when she arrived fornight shifts. The book of notes however, had fled from the waiting rooms The journey from her home village of Sajeesh had tried to get a family visa, but and even from their beds. In Changaroth Chempanoda by bus was slow but beauti- Lini hadn’t wanted to go unless she could panchayat halfthe houses were leftempty. ful, across fresh-flowing rivers, through get a nursing job there first. She loved her On social media, rumours still swirled. Ni- groves of areca-nut and rubber trees and work too much. Nonetheless she kept pah had not spread from bats. It had come past wooded hills. The Western Ghats tow- dreaming of the Gulf as a magical place, in with migrants. Perhaps—some said—it ered to the east and, in the evenings, took telling Rithul all the time that if he studied had even come in from Lini’s wonderland the light ofthe sun. The place was not quite well, he could go there like his father. And of possibility and opportunity, across the paradise, because from time to time farm- she would not have minded more money. Arabian Sea. 7