Don’t panic over plastic

Hollywood after Weinstein

Povera Italia: a dismal choice

A special report on autonomous vehicles MARCH 3RD–9TH 2018 How the West got China wrong COLLECTION Fi y Fathoms

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6 The world this week 31 Managing spies Spooks for hire 32 The Velvet Hammer Leaders Michael Madigan 9 Chinese power 33 Lexington What the West got wrong Lost Boy found 10 Italy’s alarming election Povera Italia The Americas 11 Pollution Plastic surgery 34 Canada’s economy What’s next 11 The Indian economy Italy’s election The world’s No mere formality 35 Language in Brazil Dialects under threat eighth-largest economy faces 12 Sexism in Hollywood a woeful set of electoral #MeToo, part two 36 Bello Venezuela and values choices: leader, page 10. Italy On the cover 14 Autonomous vehicles risks political confusion when The West bet that China Who is behind the wheel? it votes on March 4th, page 41. would head towards Middle East and Africa The dangers of leaders who democracy and the market hold power without office: Letters 37 Zimbabwe economy. The gamble has A rocky start Charlemagne, page 45 failed: leader, page 9. How 16 On the Democratic Republic of Congo, Costa 38 Emmerson Mnangagwa the West got China wrong, A chat with the president page 18. Xi Jinping decides Rica, 5G, Italy, Vietnam, to abolish presidential term Brexit 38 Safer sex in Senegal limits. This will have big Beating back HIV 39 Arms deals in the Gulf implications for Chinese Briefing politics, page 25. Are China’s How much for a pilot? 18 China and the West state giants reformable? 39 Churches in Jerusalem Not the partner you were Schumpeter, page 60 Holy, profitable land looking for 40 Development in Morocco Idle and angry The Economist online Asia 21 Security in Pakistan Daily analysis and opinion to Special report: Mopping up Brexit Jeremy Corbyn shakes supplement the print edition, plus Autonomous vehicles up the debate, page 46. How a audio and video, and a daily chart 22 Old drivers in Japan Reinventing wheels customs union with Europe Economist.com End of the road After page 40 unexpectedly became a E-mail: newsletters and 22 Politics in Afghanistan burning issue, page 47. It is mobile edition Power-shedding not clear that Theresa May will Economist.com/email 23 Myanmar’s economy Europe be able to get a hard Brexit Print edition: available online by The 238-point plan 41 Italy’s election through Parliament: Bagehot, 7pm London time each Thursday 24 Taiwan’s toilet-paper The right road is wholly page 48 Economist.com/printedition shortage lost and gone Audio edition: available online Wiped out 42 Germany to download each Friday Succession planning Economist.com/audioedition 43 Turkey China Muzzling the fourth estate 25 The reign of Xi Jinping 44 Military service in France For ever and ever? Aux armes, citoyens! 44 Spain United States Volume 426 Number 9081 A fit of intolerance 27 Schools 45 Charlemagne Published since September 1843 Portfolio theory Europe’s back-seat drivers to take part in "a severe contest between intelligence, which presses forward, and 28 Veterans’ affairs an unworthy, timid ignorance obstructing V strange Plastics They are not the our progress." Britain world’s worst environmental 30 The Supreme Court Editorial offices in London and also: 46 Labour’s strategy problem, nor one that is all Beijing, Berlin, Brussels, Cairo, Chicago, Madrid, Labour’s lost Mexico City, Moscow, Mumbai, Nairobi, New Delhi, Master of (almost) all he that hard to solve, page 49. New York, Paris, San Francisco, São Paulo, Seoul, 31 The JROTC surveys To tackle the polymer problem, Shanghai, Singapore, Tokyo, Washington DC School soldiering 47 Brexit and trade look east: leader, page 11 The customs of the country 48 Bagehot Parliament’s silent majority

1 Contents continues overleaf 4 Contents The Economist March 3rd 2018

International Science and technology 49 Plastic pollution 67 Robot laboratories Too much of a good thing Gene machines 68 Agricultural chemicals Business For better or worse 53 German cars 68 The limits of biology Last lap of luxury Waiting for rain 55 Business and the NRA 69 Psychology Outgunned? Authoritarianism 56 Royal Dutch Shell and Eni India’s shadow economy Hollywood after Weinstein Drillers in the dock Books and arts Narendra Modi’s battle to The scandal is changing formalise the economy 57 McKinsey’s new boss 70 Hollywood and Weinstein film-making for the better in provides lessons in what to Firm direction After the fall more ways than one: leader, emulate—and what to avoid: 57 Comcast 72 A requiem for the factory page 12. It has implications leader, page 11. How India is Excuse me while I bid for Sky When giants ruled the world not only for the personnel but nudging businesses, and 58 Private-jet terminals 72 The reality of war the stories that make it to the citizens, to abandon Time for an upgrade Fragments and ruins screen, page 70 informality, page 61 60 Schumpeter 73 Johnson Are China’s state giants For whom, the bell tolls Subscription service reformable? For our full range of subscription offers, including digital only or print and digital 76 Economic and financial combined visit Finance and economics indicators Economist.com/offers You can subscribe or renew your subscription 61 India’s economy Statistics on 42 economies, by mail, telephone or fax at the details below: Emerging from the shadows plus a closer look at metal Telephone: +65 6534 5166 prices Facsimile: +65 6534 5066 62 Buttonwood Web: Economist.com/offers Interest rates E-mail: [email protected] Obituary Post: The Economist 63 The rise and fall of Anbang Subscription Centre, Out with a whimper 78 Billy Graham Tanjong Pagar Post Office 63 Emerging markets The hour of decision PO Box 671 Singapore 910817 Driverless cars Self-driving Putin’s fiscal fortress Subscription for 1 year (51 issues)Print only vehicles offer great potential 64 Asia’s stockmarkets Australia A$465 benefits—but could also be a China CNY 2,300 Duelling exchanges Hong Kong & Macau HK$2,300 powerful tool of social control: India 10,000 64 Tax and the dollar leader, page 14. They will Japan Yen 44,300 Green-backs back Korea KRW 375,000 change the world, just as cars Malaysia RM 780 65 Trade and the dollar New Zealand NZ$530 did before them. See our Singapore & Brunei S$425 special report after page 40. Push me pull you Taiwan NT$9,000 Thailand US$300 German luxury cars have the 66 Free exchange Other countries Contact us as above most to lose from all the Driving productivity dramatic changes facing the auto industry, page 53 Principal commercial offices: The Adelphi Building, 1-11John Adam Street, London WC2N 6HT Tel: +44 (0) 20 7830 7000 Rue de l’Athénée 32 1206 Geneva, Switzerland Tel: +4122 566 2470 750 3rd Avenue, 5th Floor, New York, NY 10017 Tel: +1212 5410500 1301Cityplaza Four, 12 Taikoo Wan Road, Taikoo Shing, Hong Kong Tel: +852 2585 3888 Other commercial offices: Chicago, Dubai, Frankfurt, Los Angeles, Paris, San Francisco and Singapore

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6 The world this week The Economist March 3rd 2018

Baffled and bewildered boycotting the election and That it’s come to this Politics In what appeared to be an has booted him out fordecid- Campaigning ended in Italy’s about-turn from his recent ing to participate. general election, which takes comments, Donald Trump place on March 4th. The polls called forstrong gun-control Police in Honduras arrested show that a hung parliament is measures, such as increasing Rosa Elena Bonilla de Lobo, likely, which could mean a background checks on buyers. the wife ofPorfirio Lobo, a protracted period without a One Republican senator said formerpresident, on charges government. Silvio Berlusconi, Mr Trump’sremarks were ofembezzlement. Prosecutors an 81-year-old formerprime “surreal”. The Democrats were from an anti-corruption unit minister, may well emerge as a unsure what to make ofthem. backed by the Organisation of kingmaker. American States allege that Ms Hope Hicks announced that Bonilla withdrew $510,000 Jan Kuciak, an investigative she is resigning as the White from public funds and deposit- journalist in Slovakia, was House’s communications ed the money in her personal murdered along with his China’s Communist Party director. A confidante ofMr bankaccount just before her partner. He had been probing proposed the abolition ofterm Trump, she was one ofthe few husband stepped down as the Mafia’s involvement in limits for the posts ofpresident people left standing in the president in 2014. high-level political corruption. and vice-president. The coun- West Wing from Mr Trump’s Slovakia’s prime minister has try’s rubber-stamp parliament original team. Mexican authorities arrested offered a €1m reward for is expected to give its approval fourpolice officers suspected information. early this month. The change America’s federal housing ofkidnapping three Italian will make it easier forXi Jinp- department was mocked for tourists from a petrol station in Jeremy Corbyn, the leader of ing to cling to power indefinite- spending $31,000 on a new the state ofJalisco. According Britain’s opposition Labour ly, raising concerns in Western table and chairs forthe office to prosecutors, the officers Party, announced that he capitals that China will renege ofBen Carson, the housing have confessed to handing the wants a permanent customs on promises to liberalise mar- secretary. MrCarson has tourists over to a local criminal union with the European kets and allow limited forms pledged to clamp down on gang in exchange forabout Union after Brexit. It was the ofdemocracy. extravagant spending at his $50. They are still missing. clearest indication yet of department, which oversees Labour’s position on relations AshrafGhani, the president of programmes offering afford- A new era under Ramaphosa? with the EU after March 2019 Afghanistan, offered to allow able housing to poor families. South Africa’s parliament and was welcomed by pro- the insurgents ofthe Taliban to voted in favour ofa proposal remain Conservative MPsand become a political party and The temerity of Temer to amend the constitution in business as well as Labour contest elections ifthey agreed Brazil’s president, Michel order to allow the government supporters. Mr Corbyn said a to a ceasefire and promised to Temer, put the army in charge to seize land without paying customs union would avoid a workwithin the constitution. ofpublic safety by creating a compensation. The governing hard border in Northern The Taliban have called for new security ministry. He African National Congress Ireland, one ofthe thorniest talks with America, not the appointed one general to lead says it wants to change the law issues in the Brexit Afghan government. a military intervention in Rio to put more farmland under negotiations. de Janeiro state. Meanwhile, blackownership. The govern- America announced new the government sacked the ment’s detractors accuse it of measures aimed at enforcing federal police chiefafter an not using the vast powers it UN sanctions on North Korea. interview in which he said already has to support poor It blacklisted 28 ships thought that an ongoing bribery rural people. to be smuggling oil to the investigation into Mr Temer country, and said it would ask had found no evidence of Nigeria’s ruling All Progres- other countries’ permission to corruption. sives Congress reportedly begin inspecting ships at sea. renominated the country’s president, Muhammadu In the latest ofa series of Buhari, as its candidate for delays, the leader of presidential elections that are Thailand’s military junta, scheduled to take place next Prayuth Chan-ocha, said elec- year. Mr Buhari’s first term has Boris Johnson, Britain’s for- tions to restore democratic rule been characterised by eco- eign secretary and a leading that were planned forNovem- nomic crisis and a brutal insur- Brexiteer, claimed that the ber might now be held as late gency in the north-east. Northern Irish border was as February 2019. being trumped up as an insolu- The UN accused North Korea ble issue to frustrate the Brexit Authorities in Indonesia ofproviding materials used to process. He pointed out that seized a yacht that America’s make chemical weapons in “there’s no border between Department ofJustice says was In Venezuela Henri Falcón Syria. Meanwhile the Syrian Camden and Westminster,” bought with money stolen announced plans to run army again attacked Eastern two boroughs in London, and from 1MDB, a Malaysian against President Nicolás Ghouta, a rebel-held suburb of said that the technology be- development agency. The Maduro in April’s presidential Damascus, in defiance ofa hind London’s congestion Americans say Malaysia’s election. Mr Falcón left the resolution by the Security charge, “without any need for prime minister was involved ruling socialist party in 2010 to Council calling fora 30-day border checks” could be in the theft, which he denies. join the opposition, which is ceasefire. applied in the province. 1 The Economist March 3rd 2018 The world this week 7

ler raised eyebrows in Ger- Sky, Britain’s premier sub- rities. The bankreported its Business many. Geely built the stake scription-TV broadcaster. Fox first annual profit in a decade. through derivatives, so it did owns 39% ofSky and is trying In 2017 RBS made a profit of The Chinese government not have to notify German to buy the remaining 61% (it £752m ($968m), following stepped in to take control of authorities when it passed would then sell the entire 100% accumulated losses over the Anbang, a giant insurer with holdings of3% and 5%. to Disney) but has met resis- previous nine years of£58bn. more than $300bn in assets, tance from Britain’s competi- following months ofstate tion regulator. Stockmarkets wobbled and attempts to rein in the com- Car registrations the dollar rose as investors pany’s growing debt. Wu By fuel type, EU countries, % Amazon agreed to buy Ring, interpreted Jerome Powell’s Xiaohui, who transformed 60 which makes video doorbells remarks on the strength ofthe Diesel Anbang from a tiny car-insur- 55 that enable householders to American economy to mean ance firm to a powerhouse 50 use their phones and comput- that the Federal Reserve is on acquiring stakes in foreign ers to see who has come call- course to raise interest rates 45 hotels and financial assets, is Petrol ing. The deal is said to be fourtimes this year. Mr Powell charged with “economic 40 worth $1bn, making it one of made his comments during his crimes”. It was that expansion, Amazon’s biggest acquisitions. first testimony to Congress as 2007 09 11 13 15 17 underscored by the purchase Fed chairman. Source: JATO ofthe WaldorfAstoria hotel in Avoiding a conventional IPO, New Yorkin 2014, that China’s A federal court in Germany Spotify filed papers to list its Hide from seek regulators came to view as a ruled that the cities ofDus- shares directly on the New Google revealed that it had threat to financial stability. seldorfand Stuttgart could ban York Stock Exchange. The received requests to remove older diesel cars from their music-streaming service will 2.4m web addresses from its No more gunning for business streets. The government, offerits existing shares to the search engines following the More companies distanced which is against the ban, tried public rather than issue new European Court ofJustice’s themselves from the gun to calm drivers and carmakers, ones. It has warned that trad- ruling in 2014 that people have lobby in the aftermath ofthe saying this did not mean ing will be volatile. “the right to be forgotten”. That mass shooting at a school in furtherbans were imminent. is farfrom being a “right”. Florida. Walmart said it would Sales in Europe have declined The tough environment for Google has not delisted 57% of prevent people aged under 21 sharply in recent years as Britain’s bricks-and-mortar the sites, in part because they from buying guns, as did Dick’s several countries have an- retailers claimed two more contain information which is Sporting Goods, which will nounced the phasing out of victims. The British arm of “in the public interest”. That also stop selling semi-automat- diesel-powered cars that emit Toys “R” Us and Maplin Elec- policy is being put to the test ic rifles. But the power ofthe polluting nitrogen oxides. tronics went into administra- by a businessman in London, gun lobby is undiminished; tion, putting 5,300 jobs at risk. who is in court challenging Republicans in Georgia have The new-reality TV Google’s decision not to re- moved to chop a tax breakfor Rupert Murdoch’s plan to sell Royal Bank of Scotland’s move his conviction forac- Delta Air Lines in retaliation 21st Century Fox’s entertain- share price was weighed down counting fraud from searches. forits decision to end a dis- ment assets to Disney hit a by concerns about its exposure count scheme formembers of new snag when Comcast to charges in America ofmis- Other economic data and news the National Rifle Association. submitted a surprise bid for selling mortgage-backed secu- can be found on pages 76-77

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India’s GDP grew at an annual rate of7.2% in the last three months of2017. With the gov- ernment spending more on infrastructure and welfare, the economy has rebounded from the twin hits ofa surprise monetisation programme and the implementation ofa goods and services tax.

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Commonwealth Bank of Australia ABN 48 123 123 124 AFSL and Australian credit license 234945. Leaders The Economist March 3rd 2018 9 What the West got wrong

It bet that China would head towards democracy and the market economy. The gamble has failed AST weekend China stepped Yet China is not a market economy and, on its present Lfrom autocracy into dictator- course, never will be. Instead, it increasingly controls business ship. That was when Xi Jinping, as an arm of state power. It sees a vast range of industries as alreadythe world’smostpower- strategic. Its “Made in China 2025” plan, forinstance, sets out to ful man, let it be known that he use subsidies and protection to create world leaders in ten in- will change China’sconstitution dustries, including aviation, tech and energy, which together so that he can rule as president cover nearly 40% ofitsmanufacturing. Although China has be- for as long as he chooses—and come less blatant about industrial espionage, Western compa- conceivably for life. Not since Mao Zedong has a Chinese nies still complain of state-sponsored raids on their intellectu- leader wielded so much power so openly. This is not just a big al property. Meanwhile, foreign businesses are profitable but change for China (see page 25), but also strong evidence that miserable, because commerce always seems to be on China’s the West’s 25-year bet on China has failed. terms. American credit-card firms, for example, were let in After the collapse of the Soviet Union, the West welcomed only after payments had shifted to mobile phones. the next big communist country into the global economic or- China embraces some Western rules, but also seems to be der. Western leaders believed that giving China a stake in insti- draftinga parallel system ofitsown. Take the Beltand Road Ini- tutions such as the World Trade Organisation (WTO) would tiative, which promises to invest over $1tn in markets abroad, bind it into the rules-based system set up after the second ultimately dwarfing the Marshall plan. This is partly a scheme world war(see page 18). They hoped that economic integration to develop China’s troubled west, but it also creates a Chinese- would encourage China to evolve into a market economy and funded web of influence that includes pretty much any coun- that, as they grew wealthier, its people would come to yearn try willing to sign up. The initiative asks countries to accept fordemocratic freedoms, rights and the rule oflaw. Chinese-based dispute-resolution. Should today’s Western It was a worthy vision, which this newspaper shared, and norms frustrate Chinese ambition, this mechanism could be- better than shutting China out. China has grown rich beyond come an alternative. anybody’s imagining. Under the leadership of Hu Jintao, you And China uses business to confront its enemies. It seeks to could still picture the bet paying off. When Mr Xi took power punish firms directly, as when Mercedes-Benz, a German car- five years ago China was rife with speculation that he would maker, was recently obliged to issue a grovelling apology after move towards constitutional rule. Today the illusion has been unthinkingly quoting the Dalai Lama online. It also punishes shattered. In reality, Mr Xi has steered politics and economics them for the behaviour of their governments. When the Phil- towards repression, state control and confrontation. ippines contested China’s claim to Scarborough Shoal in the South China Sea, China suddenly stopped buying its bananas, All hail, Xi Dada supposedly for health reasons. As China’s economic clout Start with politics. Mr Xi has used his power to reassert the grows, so could this sort ofpressure. dominance of the Communist Party and of his own position This “sharp power” in commerce is a complement to the within it. As part of a campaign against corruption, he has hard power ofarmed force. Here, China behaves as a regional purged potential rivals. He has executed a sweeping reorgani- superpower bent on driving America out ofEast Asia. As with sation of the People’s Liberation Army (PLA), partly to ensure Scarborough Shoal, China has seized and built on a number of its loyalty to the party, and to him personally. He has impris- reefs and islets. The pace of Chinese military modernisation oned free-thinking lawyers and stamped out criticism of the and investment is raising doubts about America’s long-run party and the government in the media and online. Though commitmentto retain itsdominance in the region. The PLA still people’s personal lives remain relatively free, he is creating a could not defeat America in a fight, but power is about resolve surveillance state to monitor discontent and deviance. as well as strength. Even as China’s challenge has become China used to profess no interest in how other countries overt, America has been unwilling or unable to stop it. run themselves, so long as it was left alone. Increasingly, how- ever, it holds its authoritarian system up as a rival to liberal de- Take a deep breath mocracy. At the party’s 19th congress last autumn, Mr Xi of- What to do? The West has lost its bet on China, just when its fered “a new option for other countries” that would involve own democracies are sufferinga crisis ofconfidence. President “Chinese wisdom and a Chinese approach to solving the pro- Donald Trump saw the Chinese threat early but he conceives blems facingmankind.” Mr Xi later said that China would not ofit chiefly in terms ofthe bilateral trade deficit, which is not in export its model, but you sense that America now has not just itself a threat. A trade war would undermine the very norms an economic rival, but an ideological one, too. he should be protecting and harm America’s allies just when The bet to embed markets has been more successful. China they need unity in the face ofChinese bullying. And, however has been integrated into the global economy. It is the world’s much Mr Trump protests, his promise to “Make America Great biggest exporter, with over 13% of the total. It is enterprising Again” smacks of a retreat into unilateralism that can only and resourceful, and home to 12 of the world’s 100 most valu- strengthen China’s hand. able listed companies. It has created extraordinary prosperity, Instead Mr Trump needs to recast the range ofChina policy. for itselfand those who have done business with it. China and the West will have to learn to live with their differ-1 10 Leaders The Economist March 3rd 2018

2 ences. Putting up with misbehaviour today in the hope that the WTO. Mr Trump should demonstrate his commitment to engagement will make China better tomorrow does not make America’s allies by reconsideringmembership ofthe Trans-Pa- sense. The longer the West grudgingly accommodates China’s cific Partnership, as he has hinted. To counter China’s hard abuses, the more dangerous it will be to challenge them later. power, America needs to invest in new weapons systems and, In every sphere, therefore, policy needs to be harder edged, most of all, ensure that it draws closer to its allies—who, wit- even as the West cleaves to the values it claims are universal. nessing China’s resolve, will naturally lookto America. To counter China’s sharp power, Western societies should Rivalry between the reigning and rising superpowers need seek to shed light on links between independent foundations, not lead to war. But Mr Xi’s thirst for power has raised the even student groups, and the Chinese state. To counter China’s chance of devastating instability. He may one day try to claim misuse of economic power, the West should scrutinise invest- glorybyretakingTaiwan. And recall thatChina first limited the ments by state-owned companies and, with sensitive technol- term of its leaders so that it would never again have to live ogies, by Chinese companies of any kind. It should bolster in- through the chaos and crimes of Mao’s one-man rule. A pow- stitutions that defend the order it is trying to preserve. For erful, yet fragile, dictatorship is not where the West’s China bet months America has blocked the appointment of officials at was supposed to lead. But that is where it has ended up. 7

Italy’s alarming election Povera Italia

The world’s eighth-largest economy faces a woeful set ofelectoral choices O HEAR Italy’s politicians against humanity”, and favours (as does Mr Berlusconi) a flat Ttell it, the country is, if not tax which would hit revenues hard. The party is soft-pedalling quite out of the woods, then at its traditional demand fornorthern separatism. It is now more least emerginginto an unexpect- of a far-right national party (allied with the National Front in ed clearing, blinking gratefully. France). The coalition, however, looks likely to come up short. Growth has returned, exports That might be either a relief or awful. A relief, because nei- are up, some of the weakest ther the 81-year-old Mr Berlusconi nor Mr Salvini is fit to lead It- banks have been repaired and aly; awful because there is a small chance that Mr Salvini even the migration crisis seems to be undercontrol, thanks to a might in that case be tempted to throw in his lot with the Five deal with Libya’s warlords. Emboldened, the aspirants are out- StarMovement (M5S), anotherpopulist outfit that is led by a 31- bidding each other to promise gifts to voters. Benefits will rise, year-old with no experience of running anything apart from a taxes will fall and jobs will soon return. website. The most popular party in Italy, M5S is chiefly a prot- Sadly, thingsare notquite so rosy. The deal with Libya ispre- est movement. It has toned down its anti-Europeanism but has carious, to say the least. Although the economy is expanding few credible policies and no ideological underpinning. The again, its recovery is much weaker than that of the other big role of its founder and self-styled “guarantor”, a comedian euro-area economies. Output growth of 1.7% a year trails the named Beppe Grillo, remains a mystery. euro-zone average by a full percentage point. Unemployment is still over10%, and farworse among young people. Banks are It has to be the Democrats sitting on large portfolios of non-performing loans. At around If The Economist had a vote, we would reject those woeful op- 130% of GDP, Italy’s public-sector debt is still a huge burden, tions and plump instead for continued government by the left- even as quantitative easing by the European Central Bank, of-centre Democratic Party (PD). Under it, the country has at which kept interest rates low, is coming to an end. The country least been sensibly managed, and its “jobs act” introduced a is in poor shape to withstand the next downturn. Responsible, few reforms into a system that still over-protects those with reforming government is as badly needed as ever. permanent jobs, encouraging companies to hire young people Alas, Italy is unlikelyto getiton March 4th. The election that only on short-term contracts. However, the polls suggest that day is being fought using a new system that combines propor- the voters, tired of years of austerity and PD infighting, will tional representation with first-past-the-post contests in al- punish it at the polls. Barring a surprise, it will not be able to most40% ofthe seats(see page 41). Predictionsare hard, but the govern on its own. signs point to a hung parliament, followed by a period ofdeal- Italy is hopelessly stuck. The least bad way forward would making, with a riskofthings going seriously wrong. be another “government of the president”, a broad coalition Most seats will probably go to an unsavoury right-wing co- underwritten by Sergio Mattarella, the head ofstate. For all the alition that consists ofForza Italia, led by a convicted fraudster, flaws of such a system, it has allowed Italy to muddle along Silvio Berlusconi; the anti-EU and anti-immigrant Northern since Mr Berlusconi stepped down at the height ofthe debt cri- League; and a hard-right outfit called the Brothers of Italy. For- sis in 2011. The current prime minister, Paolo Gentiloni of the tunately, Mr Berlusconi cannot be prime minister. Because of PD, has been in office for just over a year, but has already his conviction he is barred from parliament, at least until next shown the diplomatic skill to manage such an unwieldy beast. year. Ifthe League winsmore seatsthan Forza (polls have them In Pier Carlo Padoan, Italy has been fortunate to have an astute near-tied), itwill be the one pushingforthe top job anyway. An finance minister who understands the need for fiscal disci- administration led by its boss, Matteo Salvini, would spook pline and reform. For Italy’s sake, both of them deserve to stay markets and investors: he once described the euro as a “crime in charge. 7 The Economist March 3rd 2018 Leaders 11

Pollution Plastic surgery

To solve the polymerproblem, lookeast T IS everywhere, as visible as it pared with $13bn from plastic marine litter. Then lookat the al- Virgin plastics Iis vilified. From car parts to ternatives. A cotton tote bag must be used 131 times before its Global, tonnes, m crisp packets, plastic has suf- carbon footprint improves on that ofa throwaway carrier bag. 400 Production 300 fused the Earth, and beyond—in This does not stop plastic from being a problem. But bans 200 1969 Neil Armstrong planted a and penalties on plastic bags in rich countries may be better Waste 100 nylon Stars and Stripes on the forthe conscience than forthe environment (see page 49). Pro- 0 moon. More than 8bn tonnes hibition makes sense in poor places like Bangladesh and Ken- 1950 75 2000 15 has been produced since the ya thatlackproperwaste-managementsystems. Itisless useful 1950s, enough to wrap the continents in clingfilm four times in tidy France where rubbish collection works smoothly. It over. Only 9% was recycled; 60% was dumped, mostly in land- would be more effective for rich countries to shore up their re- fills, too often in the natural world. Untold tonnes end up as ir- cycling industries. They may have little choice in any case. In retrievable ocean flotsam, which sunlight and salt fragment January China stopped receiving imports of recyclable plastic into microscopic pieces that attract toxins and may be gulped waste. Because it took half the total traded around the world, by creatures that become seafood. that has left hillocks ofthe stuffpiling up in the West. Plastic weighs heavily on the mind, too. Nine in ten Euro- Acarbon taxmayspurrecycling, which islessenergy-inten- peans worry about its impact on ecosystems; three in four fret sive than producing virgin plastic. Mandating minimum recy- that it can harm their own health. In Britain hatred of plastic cled contentin plasticcontainers, asCalifornia has since 1991, is unites the right-wing Daily Mail, the leftie Guardian, and the also a useful tool. Governments could exempt second-hand queen, who has banned plastic straws from her castles. But polymers from value-added tax; after all, the tax has already hold on. The little scientists know about plastic suggests that been paid on the fresh source material. although it is the most noticeable pollutant, it is far from the But by itself, the West will not solve the problem. Among most harmful. Using less is at best a partial solution. A better the ten biggest plastic polluters, all but two are in developing answer is to collect more—especially in Asia. Asia. Together, they account for two-thirds of the plastic spewed into the ocean. Ofthese, onlyChina could afford West- Rubbish data ern-style waste-managementin the nearfuture. Others are just The effects of plastic on nature and human health are hard to wakingup to the problem; before plasticbegan piling up, it rea- gauge. Most polymers are chemically inert. That makes them sonably seemed less of a priority for governments. Bangla- durable. It also makes them less likely to be a health risk to hu- desh may be able to copy India which, despite its1.3bn people, mans and beasts. As a pollutant, their impact is much lower fallsoutside the top ten thanksto armiesofragpickers. The rest, than less tangible menaces. By one estimate, the environmen- like Vietnam or Thailand, may be too wealthy for raddiwal- tal and social costs of plastic run to $139bn a year, chiefly from lahs, yet too poor for sophisticated rubbish collection. The rich the greenhouse gases produced in its production and trans- world should focus its attention—and resources, including port. The figure for farming is $3trn. Fertiliser run-off alone charity—on chivvying them along. That is the surest way to causes $200bn-800bn worth of damage to the ocean, com- stem the plastic tide. 7

The Indian economy No mere formality

Narendra Modi’s battle to formalise the economy provides lessons in what to emulate—and what to avoid OR hulking bureaucracy, it is est wave. Not many Indians make enough money to pay that Indirect-tax registrants Fa thoughtful gesture. Each kind of income tax, and many of those who do opt not to. Per- India, GST introduced July 1st 2017 year the chairman of the Indian haps half of India’s economic activity, and even more of its Central Board ofDirect Taxation jobs, involve dodging tax. That is why Narendra Modi, the Before 6.4m e-mails a “Certificate ofAppreci- prime minister, has set out to formalise the economy. The re- ation” to every resident who has sults are hit and miss (see page 61). But they are clear enough to After 9.8m paid over 100,000 rupees give other tax-catchers a guide to how they should cast the net. ($1,500) in tax. There are even Having a more formal economy makes sense. Taxes pay for helpful instructions on how best to print out this “recognition public services. India’s rampant informality is one reason why of your contribution towards building of our great nation”, its tax-to-GDP ratio has been stuck at a measly15% or so for de- should you want to frame it. cades, cramping education and health care. Formal jobs pay Fret not for India’s forests. In a country of1.3bn, fewer than up to 20 times more than informal ones, by one government 400,000 ofthese precious testaments were awarded in the lat- estimate, and formal firms are more likely to innovate, grow1 12 Leaders The Economist March 3rd 2018

2 and export. Having people and businesses operate outside the do, demonetisation was more akin to a cricket bat to the head. rules, whether by dodging taxes or avoiding regulations, is an A better approach is to tempt people out of the shadows. A affront to the idea ofa fairsociety. government scheme to provide bank accounts to all citizens, But formality is easy to get wrong. Fetishising it can confuse and have them linked to mobile phones and biometric nation- means with ends. Countries tend to become more formal as al IDs, has turbocharged digital payments, which are easier to they get richer because formal firms expand to displace infor- track and tax. Dealings with the authorities increasingly take mal ones. Hence a relatively smaller grey economy is more place online, where it is harder to get shaken down for a bribe. likely to be the outcome of rising prosperity than its precondi- That makes the prospect of being a formal business less terri- tion. Indeed, draconian policies to expand tax collection often fying. A newish goods and services tax entitles formal busi- hamper the very growth that brings it about. nesses to refunds that are not available in the grey economy. Mr Modi’s chief pro-formality policy was the “demonetisa- The number offirms registered has risen by 50%. tion” of most banknotes in 2016. The cost, several quarters of sub-par growth, outweighed the benefits. It caused such dislo- Coax, don’t coerce cation that it is hard to see others emulating it (even the panto- The bestresultsare those thatlead to formalisation asa by-pro- mime central-planners of Venezuela rowed back after an- duct of sensible rule-making. Small companies fail to grow nouncing that they would scrap their own banknotes). into large (usually formal) ones because hundreds of unre- Throttling the informal sector meant hurting not just crooks formed labour laws make doing business legitimately a night- and tax-dodgers, who were Mr Modi’s targets, but also hun- mare. Business taxes in India are among the highest in the dreds of millions scratching out a living in the jobs market of world, or can be escaped only by using loopholes. Courts that last resort. Most Indians would work in the formal sector if formal businesses rely on often fail to help. Mr Modi is right they could, but jobs are scarce. Rather than “nudging” them to- that a more formal economy is a good thing, but he has over- wards better behaviour, as policymakers are often advised to looked the most effective solutions. 7

Sexism in Hollywood #MeToo, part two

The Weinstein scandal is changing Hollywood forthe betterin more ways than one N OFFICES around the world, correctness, or tokenistic positive discrimination. On the con- Ithe scandal over Harvey trary, they are likely to be as good for movie-makers’ profits as Weinstein’s depredations has they are forfemale talent. obliged men to rethink their in- That is because Hollywood’s chauvinistic assumptions teractions with women. Many about audience tastes are based less on scientific fact than on are struggling to decipher where prejudice. Although women account for half of cinema-ticket the bounds of propriety lie sales in North America, for example, executives were so con- (handshake or kiss?). In Holly- vinced that female-led action flicks were a turn-off that they wood itself, the furore has ruined reputations and ended ca- hardlymade any. The recentsuccessof“WonderWoman”—the reers. And film executives have been forced to reconsider not third-highest-grossing film in North America last year—indi- just workplace mores but the stories they choose to tell. It is a cates a neglected market for strong female characters. Similar- disorienting moment, but a promising one—for female artists, ly, the triumph of“Black Panther”, a chart-topper in the United the studios themselves and fortheir viewers. States and abroad, has discredited another Hollywood shib- For such a faddish industry, Hollywood can be amazingly boleth, namely that pictures with black casts could not suc- ossified. Female characters may no longer be tied to train- ceed overseas. tracks and rescued by mustachioed heroes, but they still tend to be stereotyped and marginalised. Male actors do most of Happily ever after the talking; women are farlikelier to take their clothes off. That Perhapsfemale and minorityviewerswere once more tolerant is in part because conventional wisdom among decision-mak- offilms that offered only caricatures ofthemselves, or omitted ers holds that big-budget films with female leads are liable to their likenesses altogether. Probably, many always felt short- underperform. Not coincidentally, from boardroom to writers’ changed, but Hollywood was too self-involved to notice. Now, room to director’s chair, the vast majority of those decision- however, the studios seem poised to learn from the hits these makers are men. That the Academy Awards on March 4th will audiences turn out for, rather than dismissing them as outliers. feature a woman nominated for directing is a rarity; that a Meanwhile women writers and directors are beginningto pro- woman has been nominated forcinematography is a first. vide actors with more complex female roles—a trend that the Now the #MeToo movement has begun to redistribute scandal has accelerated. power in Hollywood. Instead of being stymied by harass- All this matters beyond Hollywood, because its products ment, some women are being promoted; more are being given are not like other industries’. Television and films have vast a chance to direct. At the same time there are signs that the stu- power to shape the way their audiences see themselves and dios are becoming squeamish about gratuitous sex and mi- other people. If the Weinstein episode circuitously leads to sogynistic violence, two staples of the silver screen (see page more rounded depictions of women on screens around the 70). To sceptics, those changes might look like woolly political world, this grim saga might find a sort ofhappy ending. 7 « Some watches tell time. Some tell

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Autonomous vehicles Who is behind the wheel?

Self-driving cars offergreat benefits—but could also be a powerful tool ofsocial control NEW kind of vehicle is tak- conclusion of existing schemes. Some cities already have con- Aing to the roads, and people gestion-charging regimes, subsidise ride-hailing in poor areas are notsure whatto make of it. Is ill-served by public transport, or impose per-ride taxes on it safe? How will it get along Uber, Lyft and their kind. with other road users? Will it Yet the same tolling schemes that will let city planners min- really shake up the way we tra- imise congestion or subsidise robotaxi services in under- vel? These questions are being served “transport deserts” have a darker side—and one to asked today about autonomous which too little attention has been paid. AVs will offer an ex- vehicles (AVs). Exactly the same questions were posed when traordinarilysubtle policytool which can, in theory, be used to the firstmotorcarsrumbled onto the roads. Bygranting drivers transform cities; but in the hands of authoritarian govern- unprecedented freedom, automobiles changed the world. ments could also become a powerful means ofsocial control. They also led to unforeseen harm, from strip malls and urban sprawl to road rage and climate change. Now AVs are poised to Panopticons on wheels rewrite the rules of transport—and there is a danger that the For a start, AVs will record everything that happens in and same mistake will be made all over again. around them. When a crime is committed, the police will ask AVs are on the threshold ofbeing able to drive, without hu- nearby cars if they saw anything. Fleet operators will know a man supervision, within limited and carefully mapped areas great deal about their riders. In one infamous analysis of pas- (see special report). Waymo, the self-driving-car unit of Goo- senger data, Uber identified one-night stands. If, as seems like- gle’s parent company, hopes to launch an autonomous “robo- ly, human-driven carsare gradually banned on safetygrounds, taxi” service in the suburbs of Phoenix, Arizona later this year. passengers could lose the freedom to go anywhere they General Motors, America’s biggest carmaker, plans its own choose. The risk that not all robotaxis will serve all destina- robotaxi service for 2019. On February 26th California said it tions could open the door to segregation and discrimination. would abolish the rule that experimental AVs must always In authoritarian countries, robotaxis could restrict people’s have a safety driver on board ready to assume control. movements. If all this sounds implausible, recall that Robert Moses notoriously designed the Southern State Parkway, link- Clean, dream machines ing New York City to Long Island’s beaches, with low bridges Assuming the technology can be made to workas AV firms ex- to favour access by rich whites in cars, while discriminating pect, it is not hard to imagine the beginnings of the driverless against poor blacks in buses. And China’s “social credit” sys- era. Cost means that self-driving vehicles will at first serve as tem, which awards points based on people’s behaviour, al- robotaxis, summoned using a ride-hailing app. That way they ready restricts train travel forthose who step out of line. get used more, offsetting their costs, and provide transport that So as robotaxi services roll out this year, and expand to cov- is cheaper per mile than owning a car, undermining the case er wider areas in more cities in the years to come, there is more for car ownership, at least for townies. UBS, a bank, reckons to think about than technology and transport policy. Experi- that urban carownership will fall by 70% by 2050. Today’s cars ments with different pricing schemes, decisions about wheth- situnused 95% ofthe time, so a widespread switch to robotaxis er to ban private vehicles from city centres, and license auc- would let urban land wasted on parking be reallocated. tions for competing private robotaxi operators sound AVs would dramatically reduce the number of road deaths harmless enough. But collectively they represent a seismic and, being electric, cut harmful emissions in places with clean shift for society. Autonomous vehicles offer passengers free- grids. Clever routing, closer spacing between vehicles and dy- dom from accidents, pollution, congestion and the bother of namic congestion-charging could cut traffic. Like cars before trying to find a parking space. But they will require other free- them, AVs will reshape cities (a long commute is easier if you doms to be given up in return—especially the ability to drive work or sleep en route) and redefine retailing (shops can come your own vehicle anywhere. Choices about who can go to you). Carmakers will face enormous change (see page 53); where, when and how are inescapably political in nature. instead of selling to individuals, they will supply fleet opera- A century ago cars were seized upon as a solution to the tors, or reinvent themselves as “mobility service” providers. drawbacks of horses, which were clogging city streets with Economists and urban planners should rejoice because manure. The broader social consequences of cars, both good AVs mean that, for the first time, the unwelcome externalities and bad, were entirely unforeseen. Today the danger is that associated with cars can be fully priced in. In particular, dy- AVs will be treated merely as a technological solution to the namic road-tolling and congestion charging, adjusting the cost problems associated with cars and that, once again, the wider per kilometre according to the time of day, level of traffic, impacts will be overlooked. AVs have the potential to trans- length oftrip and so on, will allow fine-tuning ofentire urban- form physical transport as radically as packet-switching trans- transport systems. By setting taxes and tolls accordingly, plan- formed the delivery of data. But as with the internet, realising ners can subsidise rides in poor districts, for example, or en- their benefits is a matter of politics as well as technology. AVs courage people to use public transport for longer trips. They offera chance to forge a new and better trade-offbetween per- can also ensure thatthe roadsdo notend up full ofempty vehi- sonal mobility and social impact—but only if the lesson of the cles looking forriders. 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World-Leading Cyber AI 16 Letters The Economist March 3rd 2018

Keeping Kabila to his word legitimate leader ofCongo but In fact, a main challenge for In “Villages”, Richard he and his cohorts will be 5G is that it requires much Critchfield referred to the One crucial aspect about the subject to sanctions. denser deployments, as you Combined Action Programme, crisis in the Democratic Repub- JAMES P. RUBIN point out. The main obstacle to in which a squad ofAmerican lic ofCongo received short Former American assistant such density is not the cost of marines worked alongside a shrift in your otherwise com- secretary of state the base station. Usually it is platoon ofVietnamese pop- prehensive coverage (“Waiting Washington, DC restrictive red tape and NIMBY ular forces and patrolled a to erupt”, February17th). That laws. The right answer could hamlet. The results were is that under the St Sylvester Costly Costa Rica again be looser regulation, not mixed, but those hamlets in accord which was accepted by a government takeover ofthe the programme avoided the all key Congolese, opposition Bello claims that Costa Rica cellular network. destruction ofGeneral West- leaders should be allowed to has not been able to tackle JEFFREY ANDREWS moreland’s concept ofsearch return safely and campaign in poverty and inequality in part Professor of electrical and and destroy. I was a participant national elections. because it has a low tax rev- computer engineering and can say, with mixed emo- President Joseph Kabila’s enue of14% ofGDP (February University of Texas at Austin tions, but nevertheless some legitimacy derives directly 10th). That figure does not pride, that we avoided such OECD from the St Sylvester agree- measure revenues using The death of civic Italy destruction. ment brokered in December standards, which also take into MICHAEL PETERSON 2016 by Catholic bishops in account local and social-secu- Italy’s Five Star Movement Eugene, Oregon Kinshasa. The agreement rity taxes. Once you incorpo- (M5S) would not have seen the allowed him to remain in rate those, the tax burden rises light ifItalians had been able to We don’t need another hero office past the end ofhis to over 22% ofGDP, the fifth enjoy honest and responsible second term, but only as part highest in Latin America. governments without rampant ofa package ofother crucial Moreover, a lackoffunds favouritism, corruption and steps necessary to ensure a cannot explain the stagnant illegality (“Star man”, February peaceful democratic transition. poverty rate. Costa Rica’s 17th). By their unprincipled In particular, since the bishops social spending is among the control ofthe offices ofthe were entrusted with examin- highest in the region as a state and the media, political ing charges that have in effect percentage ofGDP. parties have poisoned the well exiled Moise Katumbi and Wages in Costa Rica’s pub- ofrepresentative democratic other opposition leaders, and lic sector are significantly government to such a point since the churchmen have higher and rising at a much that trust in politicians and the concluded that the charges are fasterpace than in the private political system is non-existent baseless and politically sector, which causes inequali- and their enunciations patent- motivated, Mr Kabila’s govern- ty. More tax revenue will only ly implausible. I see that the secretary of state ment has an obligation to exacerbate the problem. The The M5S will not wrest forexiting the European Union ensure that those charges are World Economic Forum ranks power from the government, has sought to reassure our dropped and that the exiles Costa Rica at101among136 which will probably be European partners that post- can return home freely to countries on efficiency of replaced by an alliance Brexit Britain would not be a participate in politics. government spending. That is between the democratic and “Mad Max” dystopia (“The The St Sylvester agreement hardly an endorsement for the non-extremist parties or right way to do Brexit”, Febru- also requires the government giving its government a larger the parts thereof. It will make a ary 24th). On reflection, as Mel to ensure that forthcoming share ofthe economic pie. respectable showing but pale Gibson has coped with being presidential elections are free JUAN CARLOS HIDALGO to insignificance as a political William Wallace, dealt with and fair, and that Mr Katumbi Policy analyst on Latin America force. This is because although Jesus Christ and knows “What and the other likely candidates Cato Institute what it is trying to do is worth Women Want”, he might like a can compete in a secure and Washington, DC doing, there is no longer an crackat being prime minister. safe environment. IfMr appropriate civic culture for it DICK SCOTT Kabila’s government fails to Preparing for5G to grow roots and prosper. Exeter abide by these crucial parts of DERYCK RHODES the accord, then the interna- Another trend taking place in Rome Boris Johnson mistakes the tional community should the telecoms industry (“Next meaning ofBrexchosis, a word declare the agreement generation thinking”, Febru- One legacy of Vietnam he claims to have coined. It is inoperative. Mr Kabila would ary10th) is the aggregation of in fact an extreme form of then no longer be regarded as many operators’ base stations As your review ofMax Boot’s halitosis brought on by contin- the legitimate president. onto a shared site, such as a bookon the Vietnam war uously talking crap about the The path forward is clear. If tower. These towers are observed, counterinsurgency benefits ofBrexit. furtherchaos and crisis in increasingly owned by third- was tried and eventually failed PETER KENDALL Congo is to be averted, party companies, which then (“Wishful thinking”, January London 7 democratic elections must go rent and maintain the stations 18th). Staffin the armed forces ahead pursuant to the St Syl- at a fraction ofwhat it would and the CIA at the time had a vester agreement negotiated cost individual telecoms to saying: “Sinkor swim with Letters are welcome and should be by the Congolese themselves. have their own towers. This Ngo Dinh Diem”, meaning that addressed to the Editor at The Economist, The Adelphi Building, Africa and the West should shared infrastructure shows the South Vietnamese leader 1-11John Adam Street, send Mr Kabila a clear message that the private sector can was our only hope, and ifhe London WC2N 6HT that ifhe chooses a different solve such problems without should fail (and he did) we E-mail: [email protected] course, not only will he no heavy-handed government ought to get out ofVietnam to More letters are available at: longer be regarded as the regulation ofthe industry. avoid furtherdamage. Economist.com/letters Executive Focus 17

The Economist March 3rd 2018 18 Briefing China and the West The Economist March 3rd 2018

benefits were real. Cheaper goods have Not the partner you were looking for been a boon for American consumers; many American companies have done well out of China. And the simple fact that hundreds of millions of Chinese were raised from poverty counted for some- HONG KONG thing with some Westerners. But the China sceptics had a point. The The West got China wrong. That is no reason to bungle what comes next West was too confident that a prosperous N MARCH 2000 Bill Clinton divided modern geopolitics. Political leaders and China would inevitably see its liberal de- IAmerican opinion on China into two China-watchers across the West—most no- mocracies as a model. In hindsight, a lot of camps. First came optimists with an eye on tably in America, but also in Europe, Aus- clever predictions about China look like the future, who could see China becoming tralia and Japan—have come to believe that wishes in disguise. “the next great capitalist tiger, with the big- they were wrong about China’s rise. From There is nothing dreamy about the Na- gest market in the world.” Then came cabinets to boardrooms to book-lined tional Security Strategy America pub- hawks and pessimists, stuck in the past, studies, voices which once argued that a lished late last year. A general statement of who saw China stubbornly remaining growing middle class would drive China the administration’s worldview, it says “the world’s last great communist dragon towards Western values have fallen silent. that China “challenge[s] American power, and a threat to stability in Asia.” A genera- Hopes for reform were dealt a fresh blow influence, and interests”. For decades, it tion later, those words have the poignancy when the Communist Party announced goes on, American policy was “rooted in ofa message from a lost world. the scrapping of term limits for China’s the belief that support for China’s rise and Like many either/ors, this one turned presidency, allowing Xi Jinping to remain foritsintegration into the post-war interna- out to be a both/and. The China of Xi Jin- head ofstate indefinitely (see page 25). tional order would liberalise China.” This ping is a great mercantilist dragon under is deemed a mistake: “Contrary to our strict Communist Party control, using the Greatest good, greatest number hopes, China expanded its powerat the ex- power ofits vast markets to cow and co-opt Instead debate divides those who think pense ofthe sovereignty ofothers.” capitalist rivals, to bend and break the that it was naive to try engaging with Chi- In consequence, though the strategy rules-based order and to push America to na on the basis ofsuch optimism and those stops short of urging a return to cold-war the periphery of the Asia-Pacific region. It who believe it was rational to make the at- containment, it proposes tougher curbs on is confident of its strength—since the finan- tempt. Defenders of engagement have a Chinese spying and theft of intellectual cial crisis of2008 it has touted state-guided point. China decided to rejoin the world property, especially from the most innova- capitalism as superior to free markets—and afterdecades ofMaoist isolation ofits own tive American firms. In January an Ameri- newly willing to show its teeth, deploying accord; thinking that it was better to man- can business delegation warned Chinese militarymightto redrawmapsin the South age the process than not, as successive officials of Politburo rank that aggressive China Sea. It punishes foreign businesses American governments did, made sense. trade actions by America are more likely forthe actions oftheir home governments. Few were entirely Panglossian on the sub- than not. Mr Trump’s administration an- It is engirdling Eurasia with the contracts ject. Even in the headiest times America nounced tariffs on aluminium foil on Feb- and rules that come along with the roads, paired engagement with a need for “bal- ruary 28th. It is soon to decide on steep ta- railways and fibre-optic cables of its Belt ancing” China’s rise, strengthening Ameri- riffs against steel imports and the merits of and Road Initiative. can forces in the Asia-Pacific and deepen- a trade complaint punishing China for This has led to the starkest reversal in ing security and trading alliances. The forced transfers oftechnology; that may al-1 The Economist March 3rd 2018 Briefing China and the West 19

2 lege close to $1trn in total damages. like the radars, which could see deep into would enjoy “more open contact with the Even those on the free-trade side of theirterritory. So they have closed Lotte su- world offreedom.’’ these debates worry about such showcase permarkets in China, ostensibly as fire haz- The optimists’ camp could count on policies as “Made in China 2025”, a tech- ards. Such arbitrary actions oblige even support from political and business elites, nology strategy aiming to create national those businesses making hefty profits in and from diplomats and sinologists who champions in robotics, biomedicine, elec- China to think hard about diversifying had been watching China’s rise since the tric vehicles and more. When asked if they their risks. last days of Chairman Mao. The pessi- worry that China-curbing measures might Though some sectorsofAmerican busi- mists’ camp was much smaller, and was disrupt global supply chains, nationalists ness, including retailers and commodity dominated by old-school security hawks on Team Trump reply that they want to re- exporters, enjoyed a bumper 2017 in Chi- and hard-to-impress trade union leaders, route such chainsbackinto America, while na, the days when boardrooms would nod sniffinga plot by bosses to lowerAmerican there is still time. In the Senate Republican through anything resembling a bold China wages. Now one oftheir number sits in the free-traders like John Cornyn of Texas and strategy are over. Today, faced with contin- Oval Office. Democratic champions of openness like ued Chinese subsidies, competition from Dianne Feinstein of California are co- state-backed rivals (see Schumpeter) and Westplaining modernity sponsoringa bill to tighten the screening of limited market access, the mood is grim. The optimists made two sorts of mistake. Chinese and other foreign investments for It could get grimmer. Western officials The first was to overestimate the subver- national security. and experts note China’s growing military sive power of various novelties. This was Not long ago, such sabre-rattling would strength and its increased willingness to often an error of projection: they could not have triggered an uproar from corporate interfere in political debates across the imagine being as tireless as Chinese lead- chieftains, worried about reprisals that democratic world, whether by funding ers turned out to be in defending their au- would shut them out of China’s markets. friendly politicians and academic institu- thority. Modern telecommunications tech- But big business is no longer a reliable tions, stirring up nationalism among Chi- nologies “have proved an unambiguous cheerleader forChina. The Stockholm Chi- nese students overseas, buying up foreign threat to totalitarian regimes,” Rupert Mur- na Forum, a private gathering of senior media outlets or bullying publishers. The doch claimed in 1993. He later recanted, government officials, diplomats, business “window” forconfrontingand challenging seeking to assuage appalled Chinese lead- bosses and academics from China and the Chinese aggression, they say, is closing. ers, but plenty of others insisted that he West, recentlymetin HongKong. Neverbe- Part of what is so spectacular about the had been right first time, if not about the fore in the forum’s 11 years have those as- decline of Sino-optimism is how recently faxes and satellite televisions of the 1990s, sembled sounded so gloomy. and how thoroughly it held the high then about the internet of the 2000s. Why, ground. The idea that global engagement technology entrepreneurs would scoff in Nothing to lose but your supply chains and rising prosperity would drive Chinese Beijingbars a generation ago, China would Foreign businesspeople talked of the “pro- convergence with Western values was one have to hire hundreds of thousands of se- mise fatigue” that has set in as Chinese of the last beliefs shared by all sides in the cret policemen to control the internet. markets are opened only after they have Washington elite. In that speech from Then China did more or less precisely that. ceased to matter (the recent decision to al- 2000, aimed at encouraging Congress to When Britain returned Hong Kong to low in American credit cards now mobile dismantle barriers to commerce with Chi- China in 1997, under a 50-year agreement payment systems have made them irrele- na priorto itsjoiningthe World Trade Orga- to preserve its free speech, free markets, vant is an example). There was talk of nisation (WTO), Mr Clinton drew a direct rule of law and limited democracy, a New dawn raids by Chinese regulators who line between free enterprise and pressure York Times columnist wondered if the city take away computers filled with priceless for accountable government. When indi- would prove a “colossal Trojan Horse”, intellectual property and global client lists, viduals have the power to realise their bringing democracy to China’s mainland. and of Western businessmen detained on dreams, he enthused, “Theywill demand a Today Benny Tai, an activist law professor, murky grounds. They were especially greater say.” Just two months later George sees little scope for an Odysseus of Hong shaken by the Chinese government’s pun- Bush, campaigning for the presidency at a Kong. MrTai wasone ofthe foundersof the ishment last year of Lotte, a South Korean- giant Boeing plant, predicted that China’s Occupy Central protest movement which Japanese firm which owns land south-east WTO entry would bring both more jobs blocked streets in the business and finan- of Seoul on which American anti-missile and political benefits. American goods cial heart of Hong Kong for weeks in 2014, batteries are now based. The Chinese dis- would flow to Chinese consumers, China in a bid to press the government to move 1

Things change

GDP at PPP* Exports of goods Military budgets† Crude steel production Carbon-dioxide emissions‡ $trn $trn $trn, 2018 prices Tonnes, m Gigatonnes 30 3.0 1.0 1,000 10 China China 25 2.5 0.8 800 8 20 2.0 EU28 United United States 0.6 600 States 6 15 1.5 0.4 400 EU28 4 10 1.0

0.2 200 2 5 0.5 EST. F’CAST F’CAST F’CAST F’CAST F’CAST 0 0 0 0 0 1998 2005 10 15 20 1998 2005 10 15 20 1998 2005 10 15 20 1998 2005 10 15 19 1998 2005 10 15 20 Sources: IMF; Eurostat; Economist Intelligence Unit; Jane’s by IHS Markit; *Purchasing-power parity †Estimates for China until 2017, forecasts from 2018 SIPRI; World Steel Association; DBS; EEA; The Economist ‡Estimates for China and US in 2016 and 2017. Estimate for EU28 in 2017 20 Briefing China and the West The Economist March 3rd 2018

2 towards universal suffrage—something ing China for embracing global goods, Initiative to be subject to special dispute Hong Kong’s Basic Law promises. But he with varying degrees of justification. Euro- settlement courts in China, but it makes no longer believes that direct pressure peans spoke admiringly of the leadership American and European officials anxious. from Hong Kong democrats is enough to it showed in climate diplomacy and re- Weighing the challenge of a rising Chi- achieve universal suffrage. He now be- newable energy. Its rulers were hailed for na dispassionately is made harder by a si- lieves Hong Kong’s best hope is the emer- hosting six-party talks aimed at curbing multaneous, and not coincidental, crisis of gence ofa democratic movement in China. North Korea’s nuclear programme. The confidence in the West. One happy story The second broad error made by opti- mood has soured now. China has signed that no longer provides much cheer is the mists was to imagine that Western govern- up to unprecedented sanctions on North idea that open societies will always out- ments and organisations could explain to Korea, curbing its coal trade with that mur- pace lumberingautocracies. In 2013 Ameri- Chinese leaders where China’s self-inter- derous regime. But Chinese leaders contin- ca’s vice-president, Joe Biden, dropped in est lay. The modern history offoreign inter- ue to water down and resist still-harsher on the visa queue at the American embas- actions with China is littered with such sanctions, as they fear the collapse of the sy in Beijing and startled the Chinese stu- sometimes condescending attempts. An Kim regime more than its nukes. dents there with his observation that ambassador to Beijing, 20 years ago, was though American school pupils might not fond of describing one of the West’s roles The strong and the weak be at the top of global league tables, their as helping China to correct its worst blun- Some past optimism was a form of cocki- defiance of orthodoxy gave them an edge. ders. Our job is “to build ladders for China ness. Asked about some warships China “Innovation can only occur where you can to climb down,” he would sigh. had bought from Russia in 2000, an Ameri- breathe free,” he told them. In a speech in More subtle attempts to influence Chi- can in Beijing described them as “an inter- 2014 MrBiden conceded that China is grad- na aimed to harness forces pushing for esting morning’s work for the Seventh uating lots of scientists, but challenged his change within the system. Working with Fleet.” Not now. Pentagon types question audience to name “one innovative product reformist officials, Western governments the military utility of China’s outposts in that has come out ofChina.” promoted the idea that China could bene- the South China Sea. But the new bases, Today the West is in a funk. It is a time fit from the rule of law, even if it were not built atop reefs bulked up with dredged for serious thinking about how to balance ready to adopt universal values. They or- rock and sand, have real diplomatic nui- China more effectively, with a united front ganised seminars and gave scholarships to sance value. Ian Storey of the Institute of and without losing sight ofthe strengths of judges and lawyers to study abroad on the Southeast Asian Studies in Singapore democratic, accountable government, a argument that, if prosecutors, police offi- notes that China is urging neighbouring free press and independent courts. Instead cers and courts were to grant citizens the governments to agree on a Code of Con- the West feels tired, timid and tetchy. From rights which in theory they already en- duct for the South China Sea that would Washington to the capitals of Europe, the joyed underChina’slawsand constitution, ban military exercises within the 200-nau- air is filled with calls for “reciprocity” in that would be a big advance. But with tical-mile (370km) Exclusive Economic dealings with China. Such calls cover some reformist lawyers jailed and many Zone of any coastal state without that everything from more aggressive screen- more silenced, and with Mr Xi opposed to state’s permission. That would greatly ing of investments to proposals to deny any separation of powers that might put complicate America’s life in the Pacific. Chinese academics visas if Western coun- laws above the Communist Party, a foreign Far from China converging with inter- terparts are denied access to China. More expert says: “The window has closed, the national laws, Western officials see the transparency is a necessity when Chinese chance of using the rule of law to advance country seeking to be subject only to weak moneyison offer. Butfewwill win from tit- human rights has vanished.” and vague rules over which it maintains for-tat reprisals. Attempts to explain to China why it strong powers of interpretation. Though Western politicians have spent years ra- should join the West in a rules-based glo- not challenging bodies like the WTO or UN tionalising their retreats in the face of Chi- bal order reached a high point in 2005. In directly, China is increasingly keen on al- nese pressure. The West has lost hope that an influential speech Robert Zoellick, then ternative forums. Nobody is quite sure it can make China embrace universal val- America’s deputy Secretary of State, urged what China means when it calls for ues. That would be a poor reason for the China to become a “responsible stakehold- schemes funded under the Belt and Road West to betray those values in response. 7 er” in the international system that was helping it become stronger and more prosperous. The world, he said, was watching China’s rise and was wondering how it would use the influence that came with it. Thatverygentle, veiled threat came along with an assessment ofChina’s fragil- ity. Pointingto strikes, rural anti-corruption protests and rising crime, Mr Zoellick ad- vised: “Closed politics cannot be a perma- nent feature of Chinese society. It is simply not sustainable—as economic growth con- tinues, better-offChinese will wanta great- er say in their future, and pressure builds forpolitical reform.” Seekingsigns ofhope, he pointed to village and grassroots elec- tions and suggested that “they might be ex- panded—perhaps to counties and prov- inces—as a next step.” That turned out to be a mirage—but only after American presi- dents had praised such elections time and again in speeches to Chinese audiences. Western leaders also spent years prais- Asia The Economist March 3rd 2018 21

Also in this section 22 A plague of senile drivers in Japan 22 Afghanistan’s fragile government 23 Feeble economic reform in Myanmar 24 Taiwan’s toilet-paper shortage Banyan is away

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

Security in Pakistan dists in the Federally Administered Tribal Areas (FATA), which includes North Wa- Mopping up ziristan, rose from 86 in 2016 to 138 last year, according to the FATA Research Centre, an independent think-tank. North Waziristan has remained fairly quiet, but the neigh- bouring district, Kurram, accounted for , Miran Shah, North Waziristan 76% of casualties suggesting that some of the fighters ejected from North Waziristan The army is becoming evermore serious about defeating domestic terrorism are still uncomfortably close by. TRIP around Miran Shah with an es- There are ambitious plans for develop- Among those now holed up in Kurram Acort of heavily armed soldiers is a sur- ment elsewhere in North Waziristan. The is the Haqqani network, an ally of the Af- real experience. The town is the adminis- army wants to build schools and bring wa- ghan Taliban that America says the Paki- trative centre of the northern half of ter and electricity to neglected villages. It stani army is shielding. In his first tweet of Waziristan, a lawless region once con- even talks of tourism. But the forts dotted 2018, Donald Trump accused Pakistan of trolled by jihadists that Barack Obama across the barren hills are a reminder that “lies and deceit”. He later suspended $2bn called “the most dangerous place in the security is more tenuous outside Miran in military aid. An American drone strike world”. But Pakistan’s army, which fought Shah than the briefinggiven bythe army in in North Waziristan last month reportedly a 22-month campaign from 2014 to evict an underground bunker suggests. Indeed, killed a Haqqani commander and two of militants from North Waziristan, is trying a rocket attack on an army vehicle just a his accomplices. It came just a day after a to transform the town from a byword for few miles away on the day of your corre- deadly attack on a hotel in Kabul that Af- extremism into a showcase of the stability spondent’s visit killed two soldiers and in- ghan officials claimed was carried out by to which the generals say the country is re- jured three more. the Haqqanis. turning. The number of civilians killed by jiha- The army insists it no longer makes any The army lost nearly 500 men in the distinction between “good” terrorists, who

fighting. About 3,400 militants were killed; confine their attacks to Afghanistan or In- 300 km Kunar many more fled across the border to Af- Kabul dia, and “bad” ones who target Pakistan. ghanistan. Signs of the violence are every- Nangarhar Islamabad As part of a new campaign launched last where. But so too are efforts to provide Khost Kurram year, ithasstepped up itscounter-terrorism greaterprosperity fortraumatised civilians Miran Shah efforts across FATA. In 2017 it carried out 164 AFGHANISTAN (nearly1m people living in the region were Paktika North “intelligence-led operations” targeting ji- displaced). New roads fan out from the Waziristan hadists within the country, especially the town. Lots of buildings, including shops, Roads built Pakistani arm ofthe Taliban, the Tehreek-e- or upgraded FEDERALLY clinics and a sports stadium, are going up. ADMINISTERED Taliban Pakistan (TTP). But not, it would under CPEC TRIBAL AREAS A children’s playground has been laid out PUNJAB seem, the Haqqanis. next to the river that flows through the PAKISTAN The army’s pounding of the insurgents town, dotted with Disneyfied fake cows. has had an effect. According to the South The army has also painstakingly recon- BALOCHISTAN Asia Terrorism Portal, a website that mon- structed a jihadist complex, complete with IRAN itors terrorism across the region, civilian a bomb-makingfactory, escape tunnels, an INDIA deaths from extremist attacks in Pakistan armoury stuffed with assault rifles and a have dropped from over 3,000 in 2013 to SINDH blood-spattered torture-chamber. The 540 last year. The figure is on track to fall Gwadar courtyard is shared by a bullet-scarred Karachi again this year, with just 24 deaths so far. Humvee stolen from American forces in Arabian Sea Officials maintain that the majority of Afghanistan and two tethered goats. terrorist attacks in Pakistan now originate 1 22 Asia The Economist March 3rd 2018

2 from Afghanistan, where the TTP and oth- accuses Indian and Afghan spooks ofhelp- One potential beneficiary ofthe army’s er groups have found a haven in the coun- ing the TTP and Islamic State, which is also campaign against domesticterrorism is the try’s “wild east”. Since the bulk of NATO active in another turbulent part of Paki- China-Pakistan Economic Corridor forces left Afghanistan in 2014, border stan, the southern province ofBalochistan. (CPEC). This is the Pakistani leg of China’s provinces such as Paktika, Khost, Nangar- The army is seeking to reduce what it Belt and Road Initiative to revive Asia’s an- har and Kunar (see map on previous page) sees as the mayhem spreading across the cient trading routes. have become largely ungoverned spaces border with Afghanistan by building a China is investing over $60bn to up- from which jihadists can operate with rela- fence alongall accessible parts ofthe 1,500- grade Pakistan’s neglected infrastructure. tive impunity. mile (2,400km) frontier. Major-General New roads, railways, much-needed power Nasir Khan Janjua, a retired general Asif Ghafoor, an army spokesman, says stationsand a deep-watercommercial port who is national security adviser to the that the first phase, covering the most vul- at Gwadar in Balochistan are all part ofthe prime minister, Shahid Khaqan Abbasi, nerable 270 miles, should be completed by plan, which would link western China says he has evidence that 143 attacks in the end of the year and the rest of the with the Arabian Sea. The projects could Pakistan have been organised by groups in $550m project a year after that. It will con- account for 20% of Pakistan’s GDP over the Afghanistan. In a mirror image of the long- sist of two tall fences with barbed wire, nextfive yearsand boosteconomicgrowth standing claim that Pakistan’s Inter-Ser- about two metres apart. Pressure sensors by three percentage points. vices Intelligence agency actively supports and CCTV cameras will run along its But it is hard to imagine China seeing (and even runs) groups that carry out at- length. There will be manned posts every the projects through, or other investors pil- tacks in Afghanistan and India, Mr Janjua mile or so and 443 forts along its course. ing in, unless security can be improved. At either end of CPEC are two violence-prone regions: Pakistan-administered Kashmir Driving in Japan and Balochistan. Last year Baloch separat- ists killed ten labourers helping to build End of the road Gwadar port. There is talk of a Chinese-in- CCTV TOKYO spired scheme to install to monitor all the main roads that are part ofCPEC. Elderly motorists are underpressure to surrendertheirlicences The army’s sprawling commercial em- FTER nearly halfa century behind the wrong way into motorways every year. pire provides further encouragement to Awheel, Hisao Matsumoto, who is 85, In January an 85-year-old man steered his tame lawlessness. The top brass are well is not ready to stop driving. He and his vehicle into oncoming traffic on a coun- aware of the business opportunities CPEC wife depend on their car to escape the try road, hitting a car and mowing down presents both forthe country and for itself. confines ofHakone, the lakeside town two schoolgirls. Police believe he mis- That, more than Mr Trump’s angry tweets, where they live. Horror stories ofpile-ups tookthe accelerator forthe brake. The may persuade Pakistan to redouble its involving elderly drivers do not ruffle man’s family said he had long resisted commitment to the war on terror. 7 him. “I’m not that old yet,” he says. “I still their pleas to hand over his keys. have 15 more years to go till I reach 100.” Such stubbornness is common, notes Mr Matsumoto is one ofmore than Kazunori Iwakoshi, who heads an NGO Politics in Afghanistan 5m drivers in Japan aged 75 or older. A that supports elderly drivers. Motorists million more will be on the roads by 2021. now in their mid-70s were born after the Power-shedding Unnerved, the police are trying to coax war and helped drive Japan’s economic many out oftheir cars. Over-75s are twice rebirth, he says. Many have never had an as likely to cause a fatal accident as youn- accident and resent being cast aside. ger drivers, says the National Police Agen- Since last March over-75s renewing KABUL cy (NPA). Nearly halfofolder drivers who their licences must take cognitive tests to The always-fragile government is caused fatal accidents last year had signs screen fordementia. Tests are also man- becoming evermore embattled ofcognitive impairment. datory after telltale violations, such as Hundreds ofolder drivers turn the ignoring road signs. The NPA expects ROM behind the counter of his opti- these changes to take 15,000 drivers off Fcian’s shop on the north bankofthe Ka- the road each year. It would also like to bul river, Noorullah looks anxiously at his limit elderly drivers to cars with automat- ten-year-old son. He fearsforthe boy’sedu- ic braking systems. cation under the current government Nagging familiesmay be more effec- and—worse—for his life. In the past month tive. More than 250,000 over-75s surren- terrorists from Islamic State and the Tali- dered their licences last year. Many were ban have run amokin the city, killing 150 ci- pushed down to the local police station vilians. Police recently found a suicide vest by relatives, says Mr Iwakoshi. His organi- at a nearby checkpoint. “These attacks are sation publishes a checklist for elderly good for the government,” he says bitterly. drivers, aimed at getting them to gauge “They are the only reason it is still surviv- their responses themselves. ing. People are afraid to go on the streets The Matsumotos are lucky. Hakone and protest.” gives pensioners unlimited access to Pressure is building on the government public transport for¥10,000 ($94) a year. ofPresident AshrafGhani nonetheless. He Thousands ofelderly people are stuck in has labelled a recent suicide bombing, rural communities with no buses. Next which killed 105 civilians, as his “9/11”. But year, MrMatsumoto says, he may give up the government does not seem capable of his car, which costs him over ¥500,000 a stopping the attacks. Its haplessness is em- year. But he’ll keep his licence just in case. boldening critics. Mr Ghani remains in a He has just passed his driving test again. stand-off with the governor of the north- ern province of Balkh, Atta Muhammad 1 The Economist March 3rd 2018 Asia 23

Another helpful step would be to allow candidates for the national parliament to run as representatives of a party, rather than as individuals. This could help Mr Ghani subdue the strongmen, says Tabish Forugh, a former official at the Indepen- dent Election Commission, by offering vot- ers the chance to pick a platform, rather than a personality. Institutionalising par- ties would also make it possible to adopt a system of proportional representation, which might give those excluded from power under the current first-past-the-post system more ofa stake in electoral politics. “The next administration, with more credibility, can deal with these issues,” says one official, who points out that it will be a tall order to hold the parliamentary election on time, under any electoral sys- tem. Plans to produce a proper electoral roll are well behind schedule, even though the vote is due in July. Meanwhile, ordinary Afghans see little President Ghani does not have much to smile about improvement in their daily lives. Outside his tyre shop in central Kabul, Hassan Ali 2 Noor, who in December refused his order of strongmen. Whereas his predecessor, nervously wipes a knife against his knee. to resign. On February 25th Mr Noor Hamid Karzai, used to entertain former “Even in the civil war I could eat,” he says, blamed the “irresponsible” and “narcissis- warlords in the presidential palace, Mr “butnowI go hungrymostnights.” Accord- tic” government forthe attacks. Ghani has shunned them. His disdain is ing to a survey conducted last year by the The foundations of this administration understandable. They treat state revenues Asia Foundation, a think-tank, 33% of Af- were flimsy to begin with. When the presi- as their own and consider themselves ghans feel optimistic about the country’s dential election of 2014 produced a stale- above the law. Among those he has side- future; 61% are pessimistic. When Mr mate between Mr Ghani and his main ri- lined is the vice-president, Abdul Rashid Ghani tookoffice in 2014, the optimists out- val, Abdullah Abdullah, America brokered Dostum, who was accused last year of or- numbered the pessimists by 55% to 40%. 7 a vague “power-sharing agreement” by dering henchmen to sodomise a political which Mr Abdullah became chief execu- rival with an AK-47 rifle. tive (a post invented to mollify him). This But the face-off with Mr Noor shows Myanmar’s economy staved off the threat of civil war. But it left how difficult such figures are to dislodge, the government in chaos as the pair vied and how easily they can stir up trouble. Mr The 238-point plan forcontrol, blocking or duplicating one an- Noor has refused to surrender control of other’s appointments. It did not help that the main border crossing with Uzbekistan, the two-headed administration emerged from which he is thought to be earning just after the departure of 125,000 foreign around $90m a year. Instead, he is stoking Yangon troops, an exodus that caused the econ- divisions between Pushtuns like Mr Ghani When it comes to the investment omy to slow dramatically and prompted and the country’s many smaller ethnic climate, the government is all talk the Taliban to redouble their efforts to top- groups, who formed the bulk of Mr Abdul- ple the government. lah’s voters in 2014. He has also joined an HE Yangon Stock Exchange does not Mr Ghani’s theoretical training for his alliance of peeved strongmen, the grandly Tlack ambition. It is housed within the job is unparalleled. In 2008, the thin, com- named Coalition for the Salvation of Af- imposing former headquarters of the cen- bustible academic co-authored “Fixing ghanistan. At best the row is a distraction tral bank. The two guards manning the en- Failed States”, a summary of his life’s re- from the president’s reforms, says Michael trance protect a stack of visitor badges, search into the construction of institutions Kugelman ofthe Woodrow Wilson Centre, mostly unused. Inside, a list of “mis- in war-torn countries. The former World a think-tank. If it turns into a more concert- sions”—integrity, fairness and openness— Bank official has since put some of his the- ed rebellion, he says, it will pose a grave hangs beside a Christmas tree which still ories into action, stabilising the economy, threat to the country’s stability. has presents stacked beneath it in late Feb- opening up new trade routes with Iran, Uz- Institutional reforms might help to de- ruary. Books by Warren Buffett and Thom- bekistan and Turkmenistan, and recruiting fuse some of the political tensions. Under as Piketty are prominently displayed. The a cadre ofspreadsheet-friendly ministers. the power-sharing agreement, Mr Ghani centrepiece is a series of television screens The president is now trying to reduce and Mr Abdullah were supposed to have tracking the fortunesofthe five companies bloodshed by offering to negotiate with agreed on various constitutional amend- listed on the exchange. When a power cut the Taliban. This weekhe said he would be ments within two years, in part to formal- momentarily shuts everything down, one willing to recognise them as a political ise the position ofchiefexecutive (or prime of the 20 employees is reassuring. “Don’t party and allow them to contest elections minister). But it is not possible to amend worry—we have a generator,” he explains, if they agreed to a ceasefire and worked the constitution without holding elections as the lights gradually return. within the constitution. The Taliban, who for local district councils, because the When Myanmar’s transition to democ- recentlycalled fornegotiationswith Amer- councils select delegates to a loya jirga, or racy began in 2011, the government ica, have not yet responded to the offer. constitutional convention. Local elections seemed equally hopeful for the economy. In the meantime Mr Ghani is seeking to have, in turn, become mired in a dispute The president of the day, Thein Sein, a for- free Afghan politics from the half-nelson between the president and the legislature. mer army general, started reversing half a 1 24 Asia The Economist March 3rd 2018

2 century of stasis and isolation. He gave the just above Liberia but below Sudan. It is all the easy reforms. “Sometimes it is a central bank more independence and ranked particularly badly at protecting mi- wonder so much economic reform takes awarded mobile licences to foreign tele- nority investors, enforcing contracts and place at all,” sighs Sean Turnell, an Austra- coms companies. Several special eco- resolving insolvency. lian economist who advises Ms Suu Kyi. nomic zones were set up to encourage in- The government has narrowed the fis- But the state counsellor, as Ms Suu Kyi vestment. The economy grew 8.4% in 2013. cal deficit and is relying less on the central styles herself, has made ending Myan- Land values in Yangon, the former capital, bankto finance the shortfall, issuing bonds mar’s many ethnic insurgencies her priori- surged, as office space became scarce. instead. That has helped to reduce infla- ty. It is not clear that the economy is of Yet since Aung San Suu Kyi’s National tion from 10% in 2015 to 6.5% last year. But it much interest to her. It does not help that League for Democracy (NLD) won elec- has yet to take the necessary bureaucratic she is not so much a micro-manager as a tions in 2015 progress has been as under- steps to bring into force a law permitting “nano-manager”, as one critic puts it, leav- whelming as the stock exchange. A regula- foreign investors to take a 35% stake in local ing everyone else uncomfortable making tory crackdown stalled most construction companies. The central bank, for its part, any decisions. Policy wonks complain in Yangon in the government’s first year. has called offa drive to get private banks to that, whereas the previous government This, combined with a poor harvest, led to write down non-performing loans, forfear would take advice from technocrats, the lower-than-expected growth, which is that their balance-sheets were already NLD shuns outsiders. The party’s long list only just starting to pickup (see chart). overstretched. of promised policies disguises a “lack of Four months after coming to power the Supporters of the government argue willingness” to reform, says Eric Rose. He NLD issued a 12-point plan for the econ- that 50 years of isolation and 20 years of shut the local office of his law firm early omy which sounded promising, if woolly. sanctions are hard to reverse, and that the last month after five years of trying to help There was talk of boosting foreign invest- previousgovernmenthad alreadyadopted Americans invest in Myanmar. 7 ment and making life easier for small busi- nesses. Almost two years later, on Febru- Taiwan’s toilet-paper shortage ary 26th, the government released a document fleshing out these ideas with no fewer than 238 measures to spur the econ- Wiped out omy, from improving the justice system to reforming state-owned enterprises. But Looming price rises triggera panic there was no indication of who would push all these changes through, much less N ANXIOUS times, political leaders try any sense ofurgency. Ito assuage fears. So it was this week There should be. With one ofthe lowest when William Lai, Taiwan’s prime min- tax takes in the world, at just 6.4% of GDP, ister, appealed for calm after a run on that the government can afford little in the way most essential ofgoods, toilet paper. of public services. Most ministries are Reports oflooming price increases had Dickensian, with piles of paper stacked up started the panic. When local television on desks and a lack of co-ordination be- and newspapers featured stories about tween one department and another. Shod- people stocking up, even more rushed to dy infrastructure means that, although on the shops to follow suit. Supermarket paper the country has 50m consumers, in shelves were stripped bare; tissue paper reality only about half of them can be and kitchen towels were also snapped reached easily by road. Skilled workers are up. As the frenzy spread, Mr Lai assured hard to find. The courts are unreliable at the country that supplies would be more best. A steady supply ofelectricity, particu- than sufficient to meet needs. larly in summer, is a rarity. “Youcan have a The mess began on February 23rd low labour cost,” points out Filip Lauwery- when Taiwanese retailers, including sen of the European chamber of com- several supermarket chains, said that merce. “But it is useless if you have the toilet-paper producers would increase whole labour force doing nothing because prices by as much as 30% in mid-March Bummer of a power cut.” As a result, Myanmar lan- because the cost ofraw pulp had gone guishes near the bottom of the World up. The announcements aroused suspi- non-perishable and relatively com- Bank’s ease-of-doing-business rankings, cions ofcollusion. On February 27th the pact—is easy. FairTrade Commission met with three The peculiarities ofTaiwan’s paper toilet-paper suppliers and five retailers to industry are also a factor. Rising pulp Ups and downs lookinto allegations ofprice-gouging. Mr prices are a global phenomenon, but Myanmar, % increase on a year earlier Lai also asked a task-force to investigate affect Taiwan more than most rich coun- GDP Consumer prices whether retailers had hoarded supplies. tries because local toilet-paper producers 10 10 For many observers, though, the use barely any recycled content. If pulp bigger question is why Taiwanese care so prices stay high, that may change. 8 8 much about the cost oftoilet paper. Tai- The toilet-paper debacle adds to the wan ranks 34th in the world in income challenges forTsai Ing-wen, the presi- 6 6 per person, richer than Portugal or dent, whose approval rating has fallen Greece. But wages have stagnated in sharply since she tookoffice in 2016. The 4 4 recent years, making people more sensi- Kuomintang, the main opposition party, 2 2 tive to the prices ofstaples. The habit of says that ifMs Tsai cannot manage some- preparing fortyphoons has also sharp- thing as trivial as toilet paper, she cannot 0 0 ened the impulse to stockpile. Loading be trusted on bigger problems. She, natu- 2010 15 18* 2010 15 18* up on a commodity such as toilet paper— rally, rejects this smear. Source: IMF *Forecast China The Economist March 3rd 2018 25

Constitutional change nore convention that party chiefs step down after ten years, and keep all of his Under the cover jobs after 2023. It also pierces the veil of politics and shows what kind of ruler he wants to be. At a time when he is trying to boost China’s image globally as a modern, outward-lookingand responsible state, the BEIJING political system he governs seems pre- modern, opaque and treacherous. Xi Jinping decides to abolish presidential term limits. Uh-oh The system itself is extremely unusual. LOGGERS in China surpassed them- ventive mockery in response to the China has two ladders of authority: the B selves in their ingenuity after the Com- startling announcement on February 25th government and the party. The party hier- munist Party announced its plan to get rid than there wasduringthe country’sbiggest archyoutranksthe state one. In other coun- of presidential term limits, which would political eventofthe pastfewyears, a party tries, the ministers of finance and foreign have required Xi Jinping to step down as congresslastOctober. There wasalso some affairs (government jobs) are usually the head ofstate in 2023. One online commen- unusual open dissent. Aprominent former most important ones after the president or tator posted a picture of Winnie-the-Pooh editor, Li Datong, and a well-known busi- prime minister. In China, they are not even hugging a jar of honey, with the caption nesswoman, Wang Ying, both appealed to in the top 25. Neither man is a member of “Find the thing you love and stick with it.” the legislature through WeChat, a social- the Politburo, let alone its inner sanctum, The Bear of VeryLittle Brain is used in Chi- media platform, demanding that it reject the Politburo Standing Committee. For- na as code for the portly Mr Xi—the post what Ms Wang called an “outright betray- mally, the People’s Liberation Army is con- was swiftly deleted by humourless cen- al”. Many Chinese, it seems, regard scrap- trolled by the party, notthe government. In sors. Others posted mock condom adver- ping term limits as a return to the bad old one respect, though, Chinese politics is all tisements with tag lines such as “Doing it days ofstrongman rule. too normal. As with other Leninist sys- twice is not enough” and “I like how you’re tems, it is bedevilled by the problem of always on top.” (The manufacturer sol- Terms of art leadership succession. Of the 11party lead- emnly informed readers that these were Such limits may not matter much in them- ers since 1921 (seven since the party seized fakes.) Otherbanned terms included “I dis- selves (they will be formally abolished at powerin 1949), only one—MrXi’s predeces- agree”, “Animal Farm” (the novel), “emi- an annual session ofthe rubber-stamp par- sor, Hu Jintao—has stepped down from all grate”, “board the plane” (dengji, which liament, which starts on March 5th). The his posts in accordance with a timetable. also sounds like “ascend the throne”) and presidency is a weak office. Mr Xi could Seven were executed or purged. “Yuan Shikai”, an early 20th-century war- stay in power as the party’s general secre- In the 1980s, reacting to the chaos of the lord who declared himself emperor and tary and military chief, to which term lim- Mao era, Deng Xiaoping tried to make the died six months later. its do not apply. But the abolition is still im- system more orderly and predictable by in- Censorship makes judging public reac- portant partly because it is the clearest troducing new rules, norms and prece- tion in China hard. But there was more in- evidence that Mr Xi does, in fact, plan to ig- dents. These included the reinstitution of1 26 China The Economist March 3rd 2018

2 the post of president (there had not been meeting produced a communiqué about tional Supervision Commission. This will one since 1968), along with a two-term lim- constitutional reform, which did not men- incorporate the party’s discipline-enforce- it for the holder of that office as well as the tion that term limits had been discussed. ment body but work closely with the vice-president. Mandatory retirement ages So last weekend’s news that they would be courts and report to the legislature—ie, were also introduced. After Mao’s one- abolished was a complete surprise. Curi- there will be no separation of powers. It man freak show, Deng argued that China ously, it was revealed by the English-lan- will be able to interrogate, search, detain needed “collective leadership”. In a speech guage service ofXinhua, the government’s and punish any official, whether from the in 1980 he said the system should avoid an main news-agency, hours before it was re- party or the government bureaucracy, in “over-concentration of power”, which, he leased in Chinese (heads rolled at Xinhua cases involving corruption, violations of warned, was “liable to give rise to arbitrary because ofthis). ethics and ideological deviation. rule”. He said it should make a clearer sep- It is not unusual for important party de- Such changes are controversial. Han aration between the party and the govern- cisions to be circulated first among party Dayuan of Renmin University in Beijing ment. And it had to “solve the problem of members before they are made public. But suggests that some of them—notably the succession in leadership”. Before he re- foran important one such as this to be kept abolition of term limits—may even under- signed in 1989 as head of the party’s Cen- under wraps for so long, without a leak, mine the constitution. For years scholars tral Military Commission, Deng said his fi- suggests that relatively few senior officials like him have been trying, as Deng did, to nal task was to “take the lead in were involved. The length of time before devise ways of reconciling constitutional establishing a retirement system”. the announcement may also be an indica- norms with one-party rule. They fear that As the abolition of term limits shows, tion of unexpected opposition. There has Mr Xi has turned his backon this effort. he failed—or at least, his reforms failed to been surprisingly little commentary in rein in Mr Xi. Instead of avoiding an over- state-run media on such a momentous Look on my Works, ye Mighty concentration ofpowers, the president has change, further suggesting a lack of elite So why has he done this? He could have made himself chairman of everything. In- consensus. The term-limit abolition was stayed on as general secretary. His ideolo- stead of separating party from state, he has not even announced separately. The news gy, called “Xi Jinping Thought for a New injected partycontrol into areaswhich had emerged only as part of a list of constitu- Era”, would still have been in the party’s once been relatively free of it, such as priv- tional amendments, buried at the bottom own charter, giving him the status of final ate companies (see page 63). Now he has of the second page of the party’s flagship arbiter in any dispute. The answer must be cast aside Deng’s efforts to introduce a sys- newspaper, People’s Daily. that it is because of the kind of leader he tem ofsuccession by timetable. Mr Xi’s constitutional changes—which wants to be: with his power on full display, Deng’s reforms also failed in a more ob- go beyond scrapping term limits—could not hidden behind the scenes. A reason for vious way—they did not change the politi- make the political system even more wanting this is that he is trying to project cal system as he had promised. Before Mr opaque and draconian. Top ofthe list ofre- Chinese influence round the world. Be- Xi took over, Jiang Zemin, Deng’s succes- visions to be approved by the legislature in cause of diplomatic protocol it is easier to sor, was still influential behind the scenes, March is one that will replace the phrase meet foreign leaders as president than as though he had retired in 2004 (see chart). “socialist legal system” with “socialist rule general secretary. Another reason may be In 2012 Mr Xi’s rival, Bo Xilai, was arrested by law”—making it clear that courts should that he faces opposition (not least because and jailed following a scandal involving be a tool ofparty control. of his anti-corruption campaign) and must corruption and the murder of a British The current constitution mentions the continuously show rivals who is in charge. businessman on the ordersofMrBo’swife. leading role of the party only in its pream- It is even possible, as People’s Daily argued Mr Xi has used his anti-graft campaign to ble. The revised version will referto it in ar- online on February 26th, that staying as rid himself of other rivals—most recently ticle one, declaring that: “The socialist sys- president and party chief for another ten Sun Zhengcai, who was party chief of the tem is the fundamental system of the years or more will lead to more consistent, south-western region of Chongqing, the People’s Republic ofChina. The leadership long-term policy-making and perhaps en- same job that Mr Bo had held. This hardly of the Chinese Communist Party is the able him to get to grips with some of the looks like a predictable, orderly system. most essential feature of socialism with economy’s entrenched problems. The events leading up to the removal of Chinese characteristics.” Party and state Perhaps. But it is equally likely that the term limits show how murky politics re- could hardly become more amalgamated. changes will increase what Chinese ob- mains. The proposal came from the party’s No less important, the parliament will servers call the “bad emperor” risk: that if Central Committee, comprising its most approve what looks like a new administra- Mr Xi is set on a course that will prove a big senior 200-odd officials. It was dated Janu- tive branch that merges elements of the mistake, nobody will be able to stop him. ary 26th. But the committee did not meet party, government, police and judiciary The abolition of term limits may be just that day. It had met a week earlier. That into a powerful organisation called the Na- such a blunder. 7

From Mao to now China’s leadership Mao Deng Mao Zedong dies Deng Xiaoping dies Xi Jinping Jiang Zemin Supreme leader/ Hua final arbiter Guofeng Hu Yaobang Zhao Ziyang Chairman General General Jiang Zemin Hu Jintao Zhou Enlai Pushed secretary secretary General secretary/ General secretary/ Prime Minister Zhou dies out of office Forced to resign Purged president president

1949 50s 60s 70s 80s 90s 2000s 10s 18 President Liu Hu Qili, member of the Bo Xilai, party chief of The fate of Deng Xiaoping purged Shaoqi dismissed. Politburo Standing Committee* Qiao Shi (PSC) Li Ruihuan (PSC) Chongqing, dismissed; other rivals (again in 1976) Died in prison (PSC), dismissed forced to retire forced to retire jailed Selected events Marshal Peng Peng Zhen, party Marshal Lin “Gang of Four”, “Gang of Four” Chen Xitong, Chen Liangyu, party chief Zhou Yongkang, Sun Zhengcai, Dehuai purged chief of Beijing, Biao killed in including Mao’s sentenced Politburo member, purged of Shanghai, dismissed former security chief of purged plane crash widow, Jiang Qing, for corruption; jailed for corruption; jailed chief, jailed Chongqing, arrested dismissed Source: The Economist *Highest leaders of the Chinese Communist Party. Historically composed of five to 11 members United States The Economist March 3rd 2018 27

Also in this section 28 Veterans and novices 30 The Supreme Court and unions 31 High-school soldiering 31 Spooks for hire 32 Michael Madigan, Velvet Hammer 33 Lexington: Lost Boy found

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

Schools its woeful education system after Hurri- cane Katrina, 93% of pupils are now edu- Portfolio theory cated in charters, where they have made considerable improvement. Other urban school districts are not as far along as New Orleans, but many are emulating it. Cities like Philadelphia, Indi- PHILADELPHIA anapolis and Washington, where 46% of pupils are enrolled in charters, are exam- With little direction from Washington, many more pupils are picking theirschools ples of a growing “portfolio model” move- ILLIAM HITE, Philadelphia’s school it”, says Jerry Jordan, the president of the ment. Underthisapproach, school districts Wsuperintendent, has a difficult job. Philadelphia Federation ofTeachers. treat their charter and traditional public- His school district, which contains some of Philadelphia’s case may be unusually school offerings much as stock-pickers do the poorest pupils in the nation, has been contentious, but it reflects a nationwide their financial portfolios, by strenuously under state control since 2001, an arrange- trend as school-choice initiatives, like char- monitoring performance and quickly rid- ment that will end this year. Proficiency in ters and vouchers offering public subsidies ding themselves of low-performing assets. reading and maths lags about 30 percent- for private education, continue their Rather than creating unfettered markets, age points behind the rest of the state. To growth without much help from Washing- where the ready availability of public cash boost results the district has turned to pro- ton. That is despite the appointmentof Bet- can attract unscrupulous providers, tech- liferating charter schools, which receive sy DeVos, a longtime funder of school- nocrats wield a heavy cudgel—the threat of public funds but have independent man- choice efforts, as secretary of education. closure—to force accountability. agement and now educate one in three The federal government pays for less than The financial analogy of “portfolio children in the district. Twenty-one low- 10% of public-school funds. Control is de- model”, and its association with Michael performingpublic schools, christened “Re- volved to states and school districts, leav- Bloomberg when he was mayor of New naissance schools”, have been turned over ing the education secretary rather weak in York City, has made the term pejorative to charter operators. At a school-board setting policy. At a recent breakfast put on among those who talk of education being meeting on February 15th vocal charter by school-choice advocates on Capitol Hill privatised. But the portfolio model is actu- supporters, mostlyblackparentsfrustrated for Republican congressional staffers, Ms ally less like a pure market in education, with poor local schools, confronted angry, DeVos was not mentioned once. She may because it takes choices away from par- mostly white, teachers. have had more influence as a deep-pocket- ents, many of whom are attached to their “I can’t and I won’t let my sons down,” ed donor, who helped the rapid expansion local school, no matterhowmediocre. Paul testified Rasheeda Fossey, whose children in charter schools in Michigan, than as Hill, the intellectual progenitor of the port- are in the school system. After a lawyer for education secretary. folio model, reckons that 40 school dis- charterschools finished speaking, teachers States, especially those governed by Re- tricts, most of them large and urban, have booed and hissed “Bullshit”. Mr Hite, publicans, are expanding schemes such as now adopted this method. trapped in the middle ofthe squabble, says vouchers and education savings accounts, Even with their impressive growth, his role is “to ensure high-quality schools” where the state transfers cash directly to charters educate only 7% of American pu- and “not ask what kind of school it is”. parents. Spending on such programmes, pils. The grand experiment can be justified Charters are chafing under the district’s which now include 470,000 children, has on two grounds. The first is moral—there is supervision, which they see as biased, tripled as a share of education expenses in inherentgood in beingable to pickschools. while the teachers’ union operates in a the past ten years, according to EdChoice, “Parents’ right to choice is really the civil- state of war. The expansion of charter an advocacy group. Charter schools now rights issue of the 21st century,” says John schools represents “a concerted effort to educate 3.1m pupils, a sevenfold increase Schilling, president ofthe American Feder- dismantle public education as we know since 2000. In New Orleans, which rebuilt ation for Children, which Ms DeVos once 1 28 United States The Economist March 3rd 2018

2 chaired and helped found. “Low-income Detroit’s charters, which Ms DeVos learn that the VA health system actually parents should also have the ability to pushed mightily, are widely seen as a seems to provide higher-quality care than send their kids where they want,” he adds. mess. Students in Philadelphia’s charters itscompetitors. Areviewbythe RAND Cor- The second justification for choice is do better in reading exams, but not in poration showed that the VA outper- pragmatic—to spur competition and inno- maths. The evidence on school vouchers is formed non-VA care on 45 of 47 outpatient vation which would “drag education out similarlyuninspiring, with little gain in test quality measures. More than 80% of new of the 19th century”, as Milton Friedman scores and only marginal increases in grad- primary care patients are able to get an ap- put it. For this crowd, outcomes are impor- uation rates. Pupils who took part in Indi- pointment within two weeks. Annual sur- tant. But, like the traditional public schools ana and Louisiana’s voucher schemes veys show satisfaction levels with treat- theyseekto replace, charterschools tend to posted significantly worse results than ment close to 80%. In-patient care was produce uneven results. The best nation- those who remained in the public-school more mixed, however, and performance wide study, by researchers at Stanford Uni- system. Treating schools like a portfolio, tends to vary greatly between hospitals. versity, suggests they have little overall ef- where bad ones are quickly pushed out of Clearly the system needs fixing, but funda- fect on learning. business, might worka bit better. 7 mentally broken it does not appear to be. Few of the prominent organisations that help veterans think the VA health sys- Veterans’ affairs tem requires a radical restructuring. For this reason, they do not much like the CVA, V strange which spends a fair amount of money highlighting the health system’s inadequa- cies. The motives of the Koch brothers, the CVA’s backers, are more likely to be ideo- logical than financial. The industrialists, WASHINGTON, DC whose business interests are concentrated in energy rather than health care, have a A window onto the Trump administration’s special brand ofchaos long-standing antipathy towards social- AVID SHULKIN, the secretary ofveter- cials, installed by the White House, appear ised medicine, of which the VA health sys- Dans’ affairs, did a dim-witted thing to have divided loyalties and are, in Mr tem is the prime example in America. Like when he took a leisurely trip to Europe in Shulkin’s view, scheming to subvert him. Britain’s National Health Service, the gov- July 2017 at taxpayers’ expense. The gov- Many of them have ties to Concerned Vet- ernment programme is a single purchaser ernment paid his wife’s travel costs while erans for America (CVA), an outfit bank- which owns its own facilities and employs the pair toured Westminster Abbey, rolled by the conservative Koch brothers, its own doctors. cruised down the Thames, improperly ac- who want more ex-servicemen to receive In the aftermath of the scandal in 2014, cepted tickets to Wimbledon and went health care through private markets. Congress passed a law to pay for more vet- shopping in Denmark. For this, Mr Shulkin Formany Americans, the phrase “veter- erans to purchase care outside the VA sys- has been appropriately excoriated by his ans’ health care” conjures images of scan- tem. The VA has long paid for such ser- department’s inspector-general in a report dal and ineptitude. Much ofthis is because vices, usually for those who live far away that was released on February14th. of a crisis in 2014, when it was discovered from specialists or who are unable to ob- In most administrations, such daft be- that hospital officials had falsified records tain an appointment fast enough. But the haviour would be a sacking offence. In the to avoid reporting delays in appointments. cost of purchased care has surged 500% Trump administration, where five cabinet Heads rolled when it appeared that 40 ex- from 2002 to 2014, and a lackofdata makes members have faced investigations over servicemen had died while waiting for ap- quality assessment impossible. Unsurpris- travel expenses, it seems rather pedestrian. pointments. Less coverage was given to lat- ingly, a review in 2016 shows significant Only one, Tom Price, the health secretary, er investigations, which have been largely cost mark-ups. The cost of diabetes treat- has had to resign. Yet in Mr Shulkin’s case, unable to blame the deaths on the extend- ment nearly tripled, the cost of prostate- the flap has pushed another scandal to the ed waiting times. cancer treatment almost doubled. fore. Some top Veterans’ Affairs (VA) offi- Most Americans would be shocked to The CVA, which is careful to avoid the word privatisation, would like to push the VA further in this direction regardless. “That’s fantastically expensive, it’s proba- bly bad medicine, and it would lead to all kinds of fragmentation in care,” says Phil- lip Longman, policy director at the Open Markets Institute, who has written a book on the VA health system. “It also leads, in effect, to the privatisation of the system, because you won’t have the volumes to stand up hospitals.” Within the department, paranoia has taken hold. Mr Shulkin told reporters that he had been given him the authority to purge “subversive” staff. A leaked memo obtained by ProPublica, a non-profit, and written by Jake Leinenkugel, a former beer executive and senior adviser on veterans’ affairs installed by the White House, plot- ted firing senior officials like the deputy secretary, the secretary’s chief of staff and, Every day is Halloween for David Shulkin eventually, the secretary himself. Commu-1

30 United States The Economist March 3rd 2018

2 nications staff disregard orders from the ing policy that pushed for more privatisa- versitystudentsare compelled to pay a stu- boss. One lobbied to have him fired. tion of the agency’s health services. In his dent-activities fee, Justice Ruth Bader The press secretary removed one of Mr formerlife, Mr Selnickdrafted a plan to dis- Ginsburg observed, though they may ob- Shulkin’s statements from the VA website, mantle the government-run veterans’ hos- ject on principle to campus groups receiv- and appeared to overrule him on the re- pitals and turn over care entirely to private ing money. The same goes for lawyers wording of an agency motto. Another se- markets. Since being ejected from the VA, forced to pay dues to bar associations ad- nior adviser, Darin Selnick, who previous- reportedly at Mr Shulkin’s insistence, he vocating positions they reject. When Mr ly served as head of policy for CVA, was has taken up residence on the White Messengercited good reasons forthose du- installed as senior adviser to the secretary, House Domestic Policy Council, where his ties, Justice Sonia Sotomayor was incredu- where he quickly began unilaterally craft- freewheeling policymaking continues. 7 lous: “The government purpose here is la- bour relations and labour peace.” Why isn’t that “a compelling state interest”? Abandoning Abood after four decades would be a radical move for a handful of judges to foist on America, Justice Elena Kagan added. “I don’t think that we have ever overruled a case”, she said, “where re- liance interests are remotely as strong as they are here.” Laws in 23 states would be upended “at once” and labour contracts would be invalidated for “maybe up to over10m workers”. Worried about fitting a “modern framework on older cases”, Jus- tice Stephen Breyer asked whether long- settled rulingslike Abood should be dugup and analysed anew. What, he mused, about Marbury v Madison, the decision of 1803 justifying the court’s power to review the constitutionality oflegislation? With his eye on Justice Gorsuch, Justice Breyer floated what he called a “compro- mise”. It is possible to vindicate the rights The Supreme Court of workers like Mr Janus without under- mining the state-mandated status of pub- Labour’s lost lic-sector unions in half of America, and the solution bears the imprimatur of solid conservative thinkers. A brief co-authored by Charles Fried, a solicitor-general under Ronald Reagan, argues that it is “manifestly NEW YORK incorrect” that all union speech is political. Such a view threatens to “constitutionalise The future ofpublic-sectorunions may hinge on the vote ofNeil Gorsuch every workplace dispute”. Still, Abood has USTICES ofthe Supreme Court rarely an- “I’m not a bank,” says Mark Janus (pic- grown too loose, Mr Fried writes: non- Jnounce what they are going to do before tured above), the Illinois social worker member employees should be charged ruling. But Justice Antonin Scalia’s death who brought the case. When the local only for collective bargaining, not for “lob- two years ago has made open books of AFSCME chapter draws $24 from his pay- bying, advertising and other speech out- eight justices in Janus v American Federa- check twice a month to help pay for collec- side of a state’s system for managing its tion ofState, County and Municipal Employ- tive bargaining, it advocates policies Mr Ja- workforce”. He points to an opinion from ees (AFSCME), a case that could kneecap nus says he opposes. It is wrong to push for 1991 by one Justice Scalia as the model for America’s labour movement. When Mr payrises, MrJanussays, when hisstate isin retaining, but sharply limiting, agency fees. Scalia died, he and his colleagues were a “terrible financial condition” with “bil- Whether the junior justice, nearing his poised to decide whether unions could lions in unpaid bills”. According to Abood, first anniversary on the court, likes this charge public workers “agency fees” even it is fine to charge non-members to support middle path will be revealed when a deci- if they did not become members. The re- collective bargaining but not to fund a un- sion comes by the end ofJune. But it is clear maining justices deadlocked 4-4, leaving in ion’s strictly political actions, such as cam- that the jurist who usually occupies the place a lower-court decision that upheld paigning. But William Messenger, Mr Ja- swing seat, Anthony Kennedy, is a vote the fees under Abood v Detroit Board of nus’s lawyer, rejected that distinction. A against the unions. When the lawyer for Il- Education, a precedent dating from 1977. “compulsory fee for speech to influence linois said states were keen to have a “sta- Now Neil Gorsuch, Mr Scalia’s replace- governmental policies” chafes against the ble, responsible, independent counter- ment, holds the key vote in Janus. But with First Amendment, too. Workers should not party” on the other side of the bargaining a spotlight on his chair during the oral ar- be obliged to support any part of a union’s table, Justice Kennedy erupted. Are unions gument on February 26th, Justice Gorsuch mission. For Pat Hughes, president of the the state’s “partner” in demanding higher had an apparent bout ofstage fright. While Liberty Justice Centre, which is supporting wages, tax increases and “massive govern- his colleagues sparred over forced subsi- Mr Janus, forced feesare “un-American”. ment”? For Yvonne Walker, president of dies, free speech and the merits of Abood— The four liberal justices pushed back California’s largest public-sector union, which holds that mandatory fees preserve against Mr Janus’s call to overturn Abood this was the “one-sided” rant of a man “labour peace” and prevent cheapskates by noting other contexts in which people “playing Jeopardy”. He seems to “already from free-riding on their dues-paying col- finance groups or ideas they oppose with- have the answer”, she said, he’s just leagues—Justice Gorsuch sat mum. out harm to their freedom of speech. Uni- “phrased it in the form ofa question”. 7 The Economist March 3rd 2018 United States 31

Public education Managing spies Soldiering on Spooks for hire

Intelligence agencies are finding creative ways to compete fortalent MERICA’S intelligence agencies are forhigher pay which, forshorter con- The Parkland school shooting raises struggling to attract and retain talent. tracts at least, can reach $350,000 a year. questions about an army programme A Leon Panetta, a formerPentagon and CIA Hiring by Disney and other firms whit- N 2016 the Junior Reserve Officers’ Train- boss, says this is “a developing crisis”. tled his old team ofeight down to one. Iing Corps (JROTC), a Pentagon-funded Barbs from President Donald Trump have Until the agencies solve this problem, programme that provides military-style chipped away at the prestige ofwork that he says, they will fall short in their mis- training to high-school pupils, notched up some consider already tarnished by leaks sion or end up paying more forexpertise its centenary. The occasion was marked and the beliefthat “enhanced interroga- from contractors. By one estimate, con- with balls, dinners and fun runs. Today the tions” is another way ofsaying torture. tractors provide a third ofthe intelligence mood among JROTC units is less celebra- The backlog ofpeople waiting fora secu- community’s workforce. This can sap tory. On February 14th a former JROTC ca- rity clearance approval or renewal has morale, as government analysts who quit det opened fire at a high school in Park- swollen to 700,000 or so, with an aver- fora higher contractor salary are often land, Florida, killing 14 students and three age waiting time ofwell over a year. assigned, sometimes just days later, to teachers. When the shooter, 19-year-old Ni- Many applicants simply give up. their formerworkplace, says Ben Venzke, kolas Cruz, was arrested by authorities, he The squeeze is tightest in cyber-securi- boss ofIntel Center, a Virginian firm that was wearing a polo shirt emblazoned with ty, programming, engineering and data sells reports on extremist activity. the JROTC crest. As ifthis were not enough, science. Deborah Kircher at the Office of Part ofthe problem is the demand in days after the shooting it emerged that in the Director ofNational Intelligence the private sector forskills that used to be 2016 Mr Cruz’s unit had received $10,827 (ODNI) says entry-level data analysts needed almost exclusively by govern- from the National Rifle Association. earn $25,000-50,000 more a year in the ment agencies, says Robert Cardillo, head This is not the first time the JROTC has private sector. Others report bigger differ- ofthe National Geospatial-Intelligence faced public scrutiny. Parents and advoca- ences. At the Pentagon’s Central Com- Agency (NGA). To hire people forgeospa- cy groups have criticised the programme, mand in Tampa, some data scientists’ tial data analysis, he must now compete which offers courses in military history salaries have fallen from about $180,000 with firms like Fitbit, a maker ofactivity- and marksmanship, for steering pupils to- to roughly $100,000, says one who left measurement gadgets. One result ofthis, wards the armed services rather than high- says Mr Panetta, the former CIA chief, is er education. Such recruitment efforts, “a real tug-of-war” inside agencies, be- they say, target pupils in poor minority tween reformers keen to make the gov- neighbourhoods. The JROTC programme ernment careers more attractive and an is also costly. The Department of Defence old guard that resists innovation in hiring spends $370m a year supplying about and employment conditions. 3,500 public high schools with textbooks, The NGA now encourages certain staff uniforms and equipment, but local school to worktemporarily forprivate firms districts pay half of instructors’ salaries. while continuing to draw a government Some parentssaythe moneywould be bet- salary. After six months or a year, they ter spent on something other than march- return, bringing “invaluable” skills to the ing and shooting. NGA, Mr Cardillo says. Firms return the Military top brass chafe at the sugges- favour by quietly lending the NGA ex- tion that the JROTC is chiefly a recruitment perts in app development and database scheme. But for many years the pro- security. There is also a greater willing- gramme’s funding fell under the recruit- ness to let intelligence experts moonlight. ment-and-training section of the Penta- Not only do stafftop up their salaries, gon’s budget. And in 2000 William Cohen, they become happier employees, says then defence secretary, told congressmen Chris Burgess, a former CIA station chief. thatthe JROTC was“one ofourbestrecruit- His sideline? Importing household dec- ing tools”. And the truth shall make you free orations into America. The claim that JROTC programmes are aimed at poor minority schools also has some truth to it. A recent paper by the argued, would provide disadvantaged pu- 2,000 high-school rifle teams registered RAND Corporation, a think-tank, finds that pilswith structure and discipline. Since the with America’s Civilian Marksmanship among schools with JROTC programmes, JROTC’s expansion, several studies have Programme, a gun-safety advocacy group. 57% of pupils are eligible for free or re- found that the programme is associated In the aftermath of the Columbine High duced-cost lunches and 29% are black. At with stronger academic results, including School shooting in 1999, in which 12 stu- schools without JROTC, these figures are better attendance and higher graduation dents and a teacher were killed, Chicago’s 47% and 12% respectively. rates. Many pupils say the programme has public schools ended JROTC rifle training Supporters argue, however, that these changed their lives. because it clashed with the city’s “zero tol- are precisely the students that benefit most Whetherthe JROTC also leadsto greater erance” gun policy. That was not the case from JROTC. In 1992, at the behest of Gen- gun use is less clear. Many JROTC cadets forSmithfield-Selma High School in Smith- eral Colin Powell, President George H.W. take marksmanship courses and compete field, North Carolina. In 2016, the school Bush doubled the size of the JROTC, ex- on rifle teams(mostuse airrifles, which fire made headlines for converting an unused panding the programme into America’s in- pellets, rather than actual firearms, which greenhouse into a 1,200-square-foot on- nercities. Amilitary-style education, it was use gunpowder). There are more than campus shooting range. It cost $10,400. 7 32 United States The Economist March 3rd 2018

The Velvet Hammer with a yellow Post-it note bearing the names oftwo workers the Speaker wanted Can’t touch this promoted. In another meeting, a longtime Madigan aide who worked as a lobbyist for Metra was spotted leaving the Speak- er’s office with two CVs. Even during the Metra scandal Mr Mad- CHICAGO igan was able to keep a low profile. This changed after Bruce Rauner took over as Forhow much longercan Michael Madigan rule Illinois? governor the next year. The neophyte Re- WO well-known Chicago dinosaurs son Gonzales, a political consultant, dared publican pursued the Speaker mercilessly Tare attracting gawpers right now. One is to challenge him in the primaries in March after they fell out over passing the state Sue, the city’s beloved 40-foot-long Tyran- 2016 forhis House seat, he retaliated with a budget. Mr Rauner took to blaming Mr nosaurus rex, who is moving from the Field campaign of television and radio ads bru- Madigan for the state’s abysmal finances Museum’s main exhibition hall to her priv- tal even by Illinois standards. and every other problem, accused him of ate suite on the second floor. The other is “Madigan is very much of the old having shady ties with trade unions and Michael Madigan, the Democratic Speaker school of machine politics,” says Christo- even called him a crook. He also spent mil- of the Illinois House, who has represented pher Mooney of the University of Illinois lions trying to tarnish Democrats by link- his district on the south-west side of Chica- at Chicago. He is a moderate Democrat of ing them to Mr Madigan. “Demonising go for 47 years and been Speaker for 33 Irish-German extraction who mixes a lack Madigan is one thing the governor has years. For the first time in his long career, ofideology with a reverence forthe Catho- done successfully,” says Kelly Cassidy, a Mr Madigan is facing calls to resign from lic church. After losing the Speaker’s job state representative. members of his own party, because of the between 1995 and 1997 when Republicans Seeing his opponent weakened thanks way he handled allegations of harassment held the majority, he became almost exclu- to the #MeToo movement suits Mr Rauner at his office. Yet this episode has served sively focused on winning elections. Local a fewweeksbefore the primariesforgover- mainly as a reminder of the extraordinary lore saysthatwhen he cleared outhis office nor on March 20th. “Mike Madigan has grip Mr Madigan has on state politics. for his Republican rival he left behind a spent his three-decade reign as Speaker of Daniel Biss, a state senator, and Christo- vintage first-aid kit, a not-so-subtle hint at the House advancing his own political ca- pher Kennedy, a businessman, both bloody battles ahead. reer at the expense of Illinois taxpayers,” Democratic candidates for governor, are MrMadigan has built an unrivalled net- says Mr Rauner, but now “his corruption is leading the charge. Mr Biss called on Mr work of campaign aides and volunteers, finally catching up to him.” Madigan to resign immediately as chair- who are devoted to him. In April 2013 Alex Yet Mr Madigan remains very power- man ofthe Democratic PartyofIllinois, an- Clifford, the chief executive of Metra, a re- ful, and is safer in his job than Mr Rauner. other of Mr Madigan’s functions. Mr Ken- gional commuter railway company, wrote Depending on the outcome of the investi- nedysaid MrMadigan “chose to protecthis in a memo that MrMadigan had asked him gations of harassment on his watch, he machine political allies instead of the to give a pay rise to one political ally who might be forced to step down as chairman women who were abused by them”, and worked at Metra and a job to another. Two of the party. But after what is likely to be a “he no longer can lead our party.” months later Mr Clifford was fired, albeit resounding victory in the legislative pri- Alaina Hampton, a young political con- with a whopping severance package of maries in March (he is running unop- sultant, alleges that the Speaker and his en- $871,000. Subsequent investigations posed) as well as the mid-term elections in tourage tried to sweep her complaints un- cleared Mr Madigan of any wrongdoing, November, he will almost certainly be re- der the carpet when she accused Kevin but a report by Thomas Homer, then the elected Speaker in January 2019. No seri- Quinn, a long-standing Madigan aide, of legislative inspector-general, published in ous challengeris in sight. Like Sue the dino- harassing her for more than five months. 2014 by the Chicago Tribune, contained an saur, who is moving to a smaller hall, Mr Ms Hampton worked forMarty Quinn, Ke- account of Metra’s chairwoman entering Madigan may just have to get used to a vin’s brother, a powerful alderman and Mr Madigan’s office for a chat and leaving slightly smaller sphere ofinfluence. 7 close ally of Mr Madigan with whom he shares office space in his ward. She is also accusing Mr Madigan’s people of refusing to hire her fora political campaign in retali- ation forher allegations. Few state representatives or aldermen are openly criticising a man nicknamed the “Velvet Hammer”. In 2013 his daughter, who is the state’s attorney-general, pulled the plug on a run for governor because her father was not ready to stand down. Mr Madigan is the longest-serving—and possi- bly most powerful—Speaker of any state assembly. And, at 75, he shows no sign of wishing to retire. In his decades in Springfield, he has built a machine that is admirably efficient at getting his candidates into state office. He has been elected 17 times as Speaker, seldom with any challenge from another Democrat (Illinois does not have term lim- its). In his constituency in Chicago he tends to win with over 60% ofthe vote. When Ja- Michael Madigan, political immortal The Economist March 3rd 2018 United States 33 Lexington Lost Boy found

A lesson in American greatness, from an old acquaintance tem President Donald Trump controls, he has ravaged it. This year’s refugee quota, 45,000, is the lowest in three de- cades, and isnotexpected to be met. MrTrump also excluded a lot of wretched people from it, by temporarily placing additional re- strictions on anyone from a secret list of11countries, which is said to include South Sudan, as well as Syria and Iraq. A low-cost na- tivist signal to his supporters, these are the biggest changes Mr Trump has made to America’s immigration regime. They are also counter-productive, as well as cruel, a typical case of nativists mistaking American strengths forweakness. The argument against refugees, which Republican governors in Texasand Michigan were makingeven before MrTrump’selec- tion, is that they are a financial burden and security threat. Both charges are unfounded. For though it is true that refugees repre- sent a bigger upfront cost than other migrants—America spends between $10,000 and $20,000 resettling each one—they repay that in spades. A decade after their arrival, the average income of a refugee family is close to the American average. Mr Makender has paid over $100,000 in taxes. Americans can also relax about their odds of being killed by a refugee. None of the 3m-odd fugi- tivesAmerica hastaken since 1980 hasbeen involved in a fatal ter- OTHING is more American than Emmanuel Makender’s dis- rorist attack. That reflects the rigour of America’s vetting, refu- Ncontent. A 35-year-old taxi driver in Grand Rapids, Michigan, gees’ hunger foradvancement—and America’s ability to feed it. Mr Makender has a comfortable four-bedroom house and two Notall the Lost Boys have thrived; some hitthe bottle and end- cars outside it. He earns $40,000 a year, the average family in- ed up in jail (as might anyone orphaned, shot at and chased by come in Grand Rapids, which means his pregnant wife need not crocodiles). Yet a few have done extremely well: one is a dip- work. Yet when congratulated on his achievements, he says he lomat, another a chess master. Mr Makender, whom Lexington hopes “to be successful one day”. Dissatisfaction, hunger and traced through a Lutheran charity that fixed his resettlement, is striving are intertwined. “Still living the American dream, we more representative. A few days after he learned “about some- struggle on!” he says, at the end ofa two-hour catch-up. thing called snow”, he was ensconced in Michigan with a family Lexington had met Mr Makender 18 years before, in different ofwhite evangelicals(“myAmerican parents”, he callsthem) and circumstances. He was then a destitute war orphan living in a fly- attending high school. He meanwhile worked evenings in a groc- blown refugee camp in northern Kenya. A fugitive from the war ery, a part-time job he has maintained, even as he has found bet- in Sudan, which had claimed an estimated 2m lives, including ter-paid work, because “the people there are nice to me”. most of Mr Makender’s immediate family, he had fled his village He has also worked in a factory, making granola bars, and sixyearsearlier, aftersoldiersattacked itone night. Theykilled his completed two years of a three-year nursing degree. He did not father, three of his siblings and, he thought, his mother, leaving finish it because he had such little luck finding an internship he him, aged around 12, terrified and alone in the dark. began to suspect that America, though short of nurses, was not He joined a straggling column of fugitive children, mostly ready to hire an African man as one. “When you keep getting boys, who trekked hundreds of miles east to Ethiopia to escape called backfor job interviews and not gettingthe job, you suspect the warand rebel press gangs. But anotherwarbroke out there, so there is something else going on,” he shrugs. But he kept on work- they trekked backacross Sudan to Kenya. The arduousness ofthe ing, ten hours a day, often seven days a week. journey, which Mr Makender survived by eating wild plants (“Some were so bitter,” he says) and many did not, made them a Working out celebrated disaster story. They were known as the Lost Boys, and, After a trip to South Sudan, where he was joyfully reunited with on November 4th 2000, the day your columnist visited Kakuma hismother, he started sendingmostofhiswagesto her and to pay refugee camp, America offered them sanctuary. Over the next forthe education ofthree nephews, in Kenya and Uganda. Thatil- year 3,800 Sudanese children and teenagers were resettled in 18 lustrates another virtuous potential of refugees. They tend to be states. It was one ofAmerica’s biggest resettlement projects. generous to those they leave behind and better at targeting their It also illustrates two ofthe Refugee Admissions Programme’s assistance than aid agencies. That is good fortheirnew countryas traditional strengths. Since it was launched in 1980 it has had an well as theirold one, because thereby they create networks forfu- average quota of 95,000 refugees a year, more than that of any ture commerce and exercising of soft power. The businesses So- other rich country. America has also tended to take the most for- mali-Americans have started in Mogadishu may head off more lorn cases. Some were victims of its foreign-policy blunders, in- anti-American rage than any counter-terrorism measure. cluding hundreds of thousands of Vietnamese refugees. Yet this There is, of course, another argument for barring refugees. tendency also reflected the values and self-confidence of a coun- Some Americans simply don’t want more foreigners in their try founded by fugitives, which, over the ensuing four centuries, midst, and itistheirrightto hold thatview. Yetthe politicianswho has been relentlessly successful at turning them into productive dignify it with specious arguments are making fools of them- citizens. Those traditional strengthsno longerapply, however. Be- selves and harming America. Refugees make the country stron- cause refugee policy is one ofthe few bits ofthe immigration sys- ger, as well as better. They always have. 7 34 The Americas The Economist March 3rd 2018

Also in this section 35 Brazil’s threatened dialects 36 Bello: Venezuela and Latin American values

Canada’s economy cut orwith a dose ofderegulation. Mr Mor- neau disappointed them. The budget con- Don’t drill, plant tinues the government’s methodical ap- proach to fixing the economy’s problems. Mr Morneau and the prime minister, Justin Trudeau, prefer to plant patiently rather than to drill aggressively. GATINEAU That was evident in the “equality and growth” budget’s big idea: putting more Old sources ofgrowth are running dry. The government is looking fornew ones women to work. Just over 61% of working- VERYBODY thinks this is a 50-pound Agreement (NAFTA) with the United States age women have a job or are looking for “Esack of seeds,” says Steven Fabijan- and Mexico, underwhich the trade in vehi- one, compared with around 70% of men. ski as he hefts a large white bag onto a ta- cles takes place. Businessmen also worry Women working full time earn 88% of ble. “Actually, it’s 8,000 litres of jet fuel.” about the new American tax law, which whatmen do on average. Thatisnotbad by That is what Agrisoma Biosciences, the slashes the tax on corporate profits from the standards of other rich countries. But company Mr Fabijanski runs in Quebec, 35% to 21%, below the average Canadian Mr Morneau reckons that much could be plans to make from the bagful of carinata, rate of 26.7%. Jack Mintz, an economist, has gained by doing better. If female participa- or Ethiopian mustard seed. In January a called it a “tax tsunami” for Canada. That tion in the labour force rose to that of men, Boeing787 Dreamlineroperated byQantas and the threat to NAFTA are encouraging an unlikely scenario, the economy would flew from Los Angeles to Melbourne on a American businesses to keep their money be 4% larger, according to RBC, a bank. mixture of jet fuel and juice extracted from at home rather than investing in Canada, Agrisoma’s mustard seeds. Eventually, a says the central bank. A woman’s place is in the office third ofbiofuel foraviation will come from This comes on top of other discourage- Mr Morneau quoted that prediction to jus- seeds bred by the company, Mr Fabijanski ments to growth. The workforce is shrink- tify a range of female-friendly policies. He predicts. His slogan is: “don’t drill, plant.” ing as ageing baby-boomers retire. Econo- will raise the child benefit, which parents Biofuel looks like an industry of the fu- mists worry that consumers, who have can spend on day care, and improve incen- ture in a country that depends on those of built up record levels of debt, will spend tives for new fathers to take time off work. the past. Oil and vehicles, Canada’s two less as interest rates rise. Dominic Barton, There will be extra moneyforfemale entre- biggest exports, are both declining, and the managing partner of McKinsey, a con- preneurs and to fight sexual harassment. may continue to do so. Oil from Alberta’s sultancy, has warned that, without The federal government will close its own tar sands is expensive to produce. The Un- changes, GDP will grow by an average of pay gap, Mr Morneau promised. ited States, by far its biggest foreign custom- 1.5% over the next 50 years, half the rate of Female-friendliness is fashionable, but er, isfrackingmore and importingless. Car- the previous 50. The economy grew 3% last it also fits with the strategy of removing making has never fully recovered from a year. But the government forecasts a slow- economic roadblocks advocated by Mr recession in the United States in 2008. Pro- down to 2.2% this year and to 1.6% in 2019. Barton, a Canadian who leads a panel that duction has dropped from a peakof3m ve- These gloomy expectations were in the advises the government on how to pro- hicles in 1999 to 2.2m last year. air when Bill Morneau, the finance minis- mote growth. Encouraging women to With Donald Trump in the White ter, presented the government’s budget in work is a politically palatable alternative House, Canadians worry that things will parliament on February 27th. Business- to raising immigration. Polls suggest that get worse. No one knows what will come people were hoping he would give the Canadians do not want to increase the tar- out of the renegotiation demanded by Mr economy a quick boost, perhaps by reduc- get from its current 310,000 a year. The gov- Trump of the North American Free-Trade ing taxes to match Mr Trump’s corporate ernment plans to spend C$180bn ($140bn) 1 The Economist March 3rd 2018 The Americas 35

2 on infrastructure over 12 years. It has not ber of Mr Barton’s advisory panel, worries “deep denial”, fumed the Fraser Institute, a yet followed economists’ advice to im- that support targeted at specific industries free-market think-tank. John Manley of the prove competitiveness by lifting restric- risks “spreading the proverbial peanut but- Business Council called the budget “disap- tions on foreign ownership of airlines and ter too thin”. The government should back pointingly thin”. But Mr Morneau, who telecoms firms. proven winners, not potential ones, he has abandoned his promise to balance the More appealing to the Liberal govern- says. Others think it should let individual budget by next fiscal year, cannot afford ment is the idea oftradingmore with coun- firms and sectors fend forthemselves. the tax cuts many of his critics favour. The tries besides the United States. The value The criticism aimed at Mr Morneau’s government’s patient planting strategy offoreign trade isequivalentto 64% ofCan- budget is blunter. He responded to gather- makes sense, as long as a storm does not ada’s GDP. The United States buys three- ing threats from the United States with ruin the harvest. 7 quarters of its exports. Apart from threat- ening NAFTA, the Trump administration has slapped tariffs on Canadian softwood and newsprint, and may impose them on steel and aluminium. Canada needs friendlier partners. It is making progress. An economic and trade deal with the European Union, nego- tiated bythe previousgovernment, took ef- fect last September. Canada is due to sign a deal with ten Pacific countries, including Japan and Vietnam, on March 8th. But its quest for further agreements has faltered. Mr Trudeau failed to launch trade talks with China on a visit there in December. His trip last month to India, with which Canada has been conducting fruitless talks since 2010, was a disappointment. MrMor- neau did not mention India when he listed “new markets” Canada hopes to enter. Canada is unlikely to make much im- pression on those markets with the same Language in Brazil old industries. That is where companies like Agrisoma come in. It exemplifies the Gialdo alert idea, promoted by Mr Barton among oth- ers, that tomorrow’s winners will come from addingtechnology to yesterday’s suc- cesses, especially agriculture. The Sas- katchewan Food Industry Development SERAFINA CORRÊA Centre, a non-profit lab in Saskatoon, is European dialects are threatened by the primacy ofPortuguese working with growers of pulses, wheat and soya beans to produce meat substi- HE two dozen old men playing cards in threats. Getúlio Vargas, Brazil’s president tutes. It has produced passable chicken fin- Tthe parish hall in Serafina Corrêa, a when it entered the second world war on gers, says Shannon Hood-Niefer, its chief small town in the southern Brazilian state the allies’ side, banned all foreign lan- scientist. James Cameron, a Hollywood di- of Rio Grande do Sul, seem unremarkable guages, the most common of which were rector, has invested in a plant in Vanscoy, until you eavesdrop. They banter not in German and Italian. “Manypeople wentto Saskatchewan, to make new foods from Portuguese but in Talian, a dialect that jail,” says Paulo Massolini, a doctor who peas. “Shame on us if we don’t develop mixes words from Venetian and other Ital- heads the Federation of Italian-Brazilian agri-food as a focal point of growth,” says ian dialects as well as Portuguese. It is spo- Associations of Rio Grande do Sul. These Philip Cross, an economist at the Macdon- ken by perhaps 2m descendants of immi- days, Talian speakers are pilloried rather ald-Laurier Institute in Ottawa. grants who came to Brazil 150 years ago. A than prosecuted. Some have trouble pro- In January, BlackBerry, a Canadian sign at a zebra crossing in the town asks, nouncing nasal diphthongal sounds in technology company, announced a part- “Parché Corer Cossi? Va Pianpian” (“Why Portuguese words such as pão (bread). nership with Baidu, a big Chinese internet are you racing? Slow down”). Although Talian and the other dialects firm, to work on ways to use artificial intel- Serafina Corrêa calls itself the “capital” are hybrids, their defenders fear that the ligence in cars. Last month the government of Talian, one of about 30 non-indigenous Portuguese influence is becoming domi- said that it would spend nearly C$1bn over tongues used in Brazil, especially in the nant. In the 1950s a fatigued Talian speaker five years to help groups of firms and re- south. They include Polish, Russian and would have called himself stanco; today, search institutes working on artificial intel- Dutch, but also rare dialects such as Trenti- he islikelyto sayhe iscansado—tired in Por- ligence, food protein, marine vehicles, ad- no, another import from northern Italy, tuguese—says Dr Massolini. In Hunsrück- vanced manufacturing and digital and Riograndenser Hunsrückisch and East isch, schuhloja—shoe shop—is reassuringly technology. It hopes that these projects Pomeranian, both forms of German. Their a hybrid of the German for shoe with the will lead to the development ofSilicon Val- speakers fret that the advance of Portu- Portuguese for shop. But an aeroplane is ley-like “superclusters”. guese will drive them to extinction. Marli simply an aviong, from the Portuguese Subsidising such things probably has a Zanella, who works in a boutique in Sera- avião rather than the German Flugzeug. lower economic pay-off than encouraging fina Corrêa, complains that when she ad- Talian has an energetic lobbying cam- women to work and improving infrastruc- dresses her 23-year-old daughter in Talian, paign behind it, which may improve its ture. Mark Wiseman of BlackRock, an “she only replies in Portuguese.” chances of survival. Known formerly as American investment firm, who is a mem- The dialects have survived other “Venetian-Brazilian”, Dr Massolini and 1 36 The Americas The Economist March 3rd 2018

2 other campaigners coined the new name correct one”, complains Giorgia Miazzo, a cordings. “It’s the first step in getting it for- in 1995. It comes from Venetians’ habit of linguist who has recorded speakers of Ital- mally recognised,” he says. He dreams of dropping the first and last vowel sounds of ian dialects across Brazil. (They have 15 dif- opening a museum oflinguistic diversity. some words. Talian champions published ferent ways of saying “yellow”, she found. But museums and dictionaries are fee- a grammar. Dictionaries and teach-your- In Talian, it’sgialdo.) Cléo Altenhofen, a lin- ble defence against globalisation and ur- self books followed. In 2009 Serafina Cor- guist at the Federal University of Rio Gran- banisation. The best way ofkeeping the di- rêa’s municipal council ordered that offi- de do Sul, laments that Hunsrückisch, spo- alects alive would be to use them as a cial documents be printed in Talian as well ken by some 1.2m descendants of medium of instruction in public schools. as Portuguese, and in 2014 Brazil’s ministry immigrants from Rhineland-Palatinate, But the national government sets the curri- of culture recognised it as part of the coun- lacks Talian’s celebrity. “They have diction- culum, so that is unlikely to happen. Par- try’s cultural heritage. Mr Massolini is aries, and we have a research project,” he ents are a poorsubstitute forteachers. “The pressing UNESCO to recognise it. says wistfully. more you make kids speak a language the Speakers of less favoured dialects are He and his colleagues are mapping the more they rebel,” says Mr Altenhofen. His resentful and envious. Talian speakers in regions in which Hunsrückisch is spoken 16-year-old daughter is learning Japanese. Serafina Corrêa “act as iftheirvariant is the and have amassed 800 hours of audio re- She wants to study Korean next. 7 Bello Venezuela and Latin American values

Regional solidarity should not trump the defence ofdemocracy HEN Bill Clinton called the first cratic regress in Latin America. Its descent recognise the result as legitimate,” says WSummit of the Americas in Miami into economic chaos, human misery and Juan Carlos Varela, Panama’s president. in 1994 he wanted to celebrate the shared dictatorship is ofunprecedented gravity. On February 23rd the OAS, which commitment of all 34 countries in the Mr Maduro’s regime has stopped pub- brings together all countries except Cuba, hemisphere to democracy and free lishing many statistics. A survey by three approved a resolution similar to the Lima trade—all, that is, except Cuba, the 35th, universities published last month found group’s. But it did so only by a bare major- which was not invited. At the seventh widespread malnutrition; 87% of respon- ity. Venezuela’s regime still has a few al- summit in Panama in 2015, regional sol- dents were poor and 61% were extremely lies (and clients among Caribbean island- idarity prevailed. At Latin America’s insis- so. That is farabove the Latin American av- states that receive cheap oil). Some may tence, Cuba was invited and Raúl Castro erages of 31% and 10% respectively, and boycott the Lima summit in solidarity. sat down with Barack Obama, setting the should shame all those who hailed Hugo What chance is there that action by seal on their diplomatic détente. Chávez, Mr Maduro’s late mentor, as an Venezuela’s neighbours can achieve re- So it was a big diplomatic step when anti-capitalist paragon. The survey esti- sults? “This is the moment for mediation last month Peru’s government, the host of mates that 815,000 Venezuelans have emi- [in Venezuela], but it has to be by every- the eighth summit, scheduled for April grated since 2012, most in the past two one, by Latin America, the United States 13th-14th, announced that it was with- years. Their arrival in other South Ameri- and Europe,” says César Gaviria, a former drawing Venezuela’s invitation and that can countries is pushing the region to act. secretary-general of the OAS. The priority Nicolás Maduro, its president, would be Having weakened the opposition must be a free and fair election. Failing denied entry. Peru acted for the 14-nation through the imprisonment or banning of that, the region will have to ramp up the ad hoc “Lima group”, which includes its leaders and the intimidation (including pressure. most Latin American countries. They re- torture) ofits activists, Mr Maduro is trying Ostracism is a start. That it hurts the re- jected Mr Maduro’s decision to hold a to seal his dictatorship by bringingforward gime’s pride was clear in 2016 when the sham presidential election on April 22nd. the presidential election due laterthis year. foreign minister tried to gatecrash a meet- Latin America is once again giving priori- Since the government refuses the condi- ing of the Mercosur trade group, from ty to the defence of democracy. Can it do tions for a free and faircontest, the opposi- which her country has been suspended. so consistently and effectively? tion coalition says that it will boycott the Latin American countries should follow If democracy is to be the criterion for poll next month. In those circumstances, the United States and the EU in barring participation (as agreed at the meeting in “a lot of Latin American countries will not the regime’s leaders from visiting, and in Quebec in 2001), why not exclude others? seizing their looted assets. It should also Neither Cuba nor Nicaragua should qual- demand that the faction-ridden opposi- ify. Nor, arguably, does Honduras. Having tion unite behind a single leadership. ended term limits in dubious fashion, Latin America has plenty of disagree- Juan Orlando Hernández, a pro-Ameri- ments with Donald Trump, but anti-im- can conservative, won a second term as perialism should not, as Venezuela ar- president in November in an election that gues, override the defence of democracy the opposition and outside observers and human rights. Neither should the tra- claim was rigged. His party’s legislators dition of non-intervention, nor an insis- have given themselves carte blanche to tence on unattainable regional unanim- steal public money, eviscerating an anti- ity. That means the OAS might not be the corruption mission under the aegis of the right diplomatic vehicle. Rather, the Organisation ofAmerican States (OAS). Group of Lima should turn itself into an But the electoral fraud in Honduras open-ended coalition of the willing to was not clear-cut. Mr Hernández should take whatever political action is neces- be warned but not excluded. Venezuela sary to return Venezuela to democracy remains the most dramatic case of demo- and stave off a humanitarian disaster. Middle East and Africa The Economist March 3rd 2018 37

Also in this section 38 A chat with Zimbabwe’s president 38 How Senegal curbs AIDS 39 Arms deals in the Gulf 39 Church property in Jerusalem 40 Uneven development in Morocco

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

Zimbabwe ond city, are preyed on by Zanu-PF thugs demanding pay-offs. Electricity and water The crocodile swims in murky waters are intermittent, even in hospitals. ATMs are empty. State workers’ wages are paid months late. In a residual population of 13m, 3m survive on food handouts from America and Britain. Perhaps 3m Zimba- HARARE bweans have fled abroad. The biggest question-mark hangs over Having won powerin a coup, Emmerson Mnangagwa says he is a democrat. Is he? the elections. The voters’ roll, which was ILL parliamentary and presidential er than it was under Mr Mugabe. The po- manipulated in 2013, has been updated Welections, which must be held by late lice, who routinely plundered drivers at quite well. The electoral commission that July, be free and fair? If so, will Emmerson ubiquitous roadblocks, are off the streets. used to pander to Mr Mugabe has a new Mnangagwa and his Zanu-PF party, which Many Zimbabweans hope for a rosier fu- chairperson claiming independence. Mr has run Zimbabwe since independence in ture after decades of economic decline Mnangagwa has lifted Mr Mugabe’s ban 1980, win? And if they lose, will they hand punctuated by bouts of horrific violence on election observers from the West, in- over power to the victors, as they have orchestrated by the ruling party. Foreign in- cluding the European Union and the Com- brazenly failed to do in the past? This set of vestors are sniffing around forthe first time monwealth. “I’m very happy that the questions hangs over the country. One cer- since the land-grabs began. Doubting Thomases can come in,” he says. tainty, however, is that Zimbabwe is better But old worries are creeping back. Is Mr The opposition Movement for Demo- off now that it is no longer under the Mnangagwa master or servant of the gen- cratic Change (MDC) has been torn by in- thumb of Robert Mugabe, who ruled it for erals who made him president? Whereas fighting, before and even during the de- 37 years. Even better is that it has not fallen many hoped he would widen his cabinet mise of Morgan Tsvangirai, its founding under the sway of his greedy wife, 52-year- and kick out the worst rascals, he has kept leader. His death on February 14th pro- old Grace Mugabe, whose tightening grip some of the nastiest of the old guard. Con- voked a massive outpouring ofgriefin Ha- over her then 93-year-old husband stantino Chiwenga, the army commander rare that rattled the government. It may be prompted the army to step in, shove the who led the coup, is his vice-president. easier for the main opposition, made up of old man into retirement and lift Mr Mnan- three endlessly splintering alliances, to gagwa into the top spot in November. The urge to purge sort itself out now that Mr Tsvangirai is Yet the new 75-year-old leader, known Mr Mnangagwa’s anti-corruption drive gone. Nelson Chamisa, 40, an articulate as the Crocodile, remains an enigma (see has so far been aimed entirely at his ene- lawyer who appeals to young urbanites, next article). He has made some sensible mies in Zanu-PF, particularly Mrs Mu- could rally it ahead of the election. It may noises, promising to amend a law that de- gabe’s favourites, putting many behind well sweep the cities, as it has done before. clares that businesses should be at least bars. The reviled Obert Mpofu, who has But Zanu-PF’s brutally effective mach- 51% owned by black Zimbabweans or the been accused in parliament of demanding ine is expected to wrap up the more nu- state. He wants to compensate the 4,000- vast bribes when minister ofmines, is now merous rural populace, who are easier to plus white farmers whose land has been home minister. The Crocodile has not yet intimidate. Civic groups say the party’s confiscated since 2000, and re-establish dared to scrunch the formerfirst lady, even heavies have persuaded villagers that how property rights (up to a point) by providing though he reckons she tried to assassinate they vote can be detected via the barcodes 99-year leases to commercial farmers, him (with poisoned ice-cream). of their biometric registration slips. Joice white and black. He has promised fair elec- The economy is still dire. About 90% of Mujuru, a former vice-president now in tions and says he and his party will bow working-age people lack formal jobs. The opposition who fell out with Mr Mugabe out ifthey lose. legions reduced to hawking on the streets (and whose husband, a formerhead of the The mood in Harare, the capital, is jolli- of Harare and Bulawayo, Zimbabwe’s sec- army, was mysteriously burned to death in 1 38 Middle East and Africa The Economist March 3rd 2018

2 2011), claims that 3,000 soldiers have al- Safer sex in Senegal ready been sent to the countryside in civil- ian garb to campaign and bully. Villagers Beating back HIV fear that rural chiefs and headmen will withhold food aid if they suspect them of voting the wrong way. Zanu-PF’s national political commissar menacingly told a ru- DAKAR ral gatheringthatpeople should remember Even a poorcountry can curb the 2008, when thousands of MDC activists in SENEGAL PF epidemic the countryside were set upon by Zanu- HIV prevalence militias and hundreds were murdered. S Amiddle-class Senegalese man, Salou Sub-Saharan Africa Many analysts think that Zanu-PF’s rural A(not his real name) was ratherproud of 2016 or latest 15- to 49-year-olds, % voting bloc should ensure victory for Mr his roundness in 2002. But by 2003 his More than 20.0 Mnangagwa, even without resorting to vi- clothes were falling off. He got tested and AIDS 10.0-20.0 olence. “Just the memory of 2008 is found he had . His pregnant wife was 5.0-9.9 enough,” says a former MDC campaigner. also infected with HIV. They went to Da- 1.0-4.9 But that is no certainty. Ifit is a tight race, kar, Senegal’s capital, and she was put on Less than 1.0 the ultimate question is whether the army antiretroviral drugs to prevent the infec- Source: UNAIDS will hold back. The new head of the elec- tion of her unborn child. “When my son toral commission admits that 15% of the was born he tested negative, thank God,” of new infections each year in the south commission’s staff are retired military offi- exclaimed Salou. and east has fallen by 29% since 2010, to cers. In previous elections, army com- The hopeful tale of Salou’s baby is far 790,000. Alas, new infections in west and manders declared that they would never from universal. Although west and central central Africa have fallen just 9%, to serve under the MDC. Mr Mnangagwa in- Africa have long had a lower prevalence of 370,000. Moreover, about 310,000 people sists that the generals are not involved in HIV than the south and east (see map), the die from HIV-related illnesses each year in politics and that “those statements are region still has a stubbornly high rate of west and central Africa, compared with dead.” But he rejects the idea that General new infections. In south and east Africa 420,000 a yearin east and southern Africa. Chiwenga and the new head of the army close on 20m people have the virus, al- This high toll is prompting urgent calls should publicly say so. Zimbabwe is in for mostfourtimesmore than in westand cen- from global bodies such as UNAIDS and a nervous few months. 7 tral Africa. From thishigh base, the number UNICEF for a new approach. An example of that may be found in Senegal, which has cut new infections by Emmerson Mnangagwa almost three-quarters since 2010, leaving it with one of the least-afflicted populations Open for business, closed for remorse in Africa. Whereas 4.3% of people in sub- HIV HARARE Saharan Africa are -positive, the preva- lence in Senegal is just 0.4%. Zimbabwe’s new president is feisty about the future, prickly about the past Senegal may be poor but its HIV pre- HE land resettlement was a huge government. He blames the economy’s vention and treatment system punches “Tsuccess in terms ofour people, collapse on sanctions, even though these above its weight. It was the first country in 367,000 ofour people, backin possession were targeted on leading figures such as sub-Saharan Africa to start a government- ofthe land,” says President Emmerson himself. He testily rejects a suggestion backed programme to treat people with Mnangagwa ofthe expropriation ofmost that they were farlighter than those antiretrovirals in 1998, not just prolonging ofZimbabwe’s white-owned farmland levelled against the white-supremacist the lives of those with HIV but reducing since 2000—a move that wrecked the regime ofIan Smith before Mr Mugabe the chances that they would pass it on. In a economy and pushed millions into pov- tookover in 1980. “Youare plain igno- bold move in 2003 it made the treatment erty. Was it fairthat bigwigs ofhis ruling rant,” he tells The Economist. free, several years before the World Health Zanu-PF party tookseveral farms each? He knows that the West will not sup- Organisation recommended that coun- “No, no, it is one farm, one person,” he port Zimbabwe until the coming elec- tries do so. says. “I have 404 hectares and I paid for tions have been deemed free and fair, It has also pushed backsocial taboos by the equipment myself.” and insists they will be. But he denies ensuring that drug users and sex workers Mr Mnangagwa admits, however, that that previous elections were unfair, are treated. Prostitution is legal in Senegal, Zimbabwe “became almost a country especially in 2008, when NGOs reckoned so long as sex workers have health check- without friends” under Robert Mugabe, that at least 270 activists ofthe opposi- ups every three months. If they get HIV, who was ejected in a coup last year. Now tion Movement forDemocratic Change they are not driven underground, where “Zimbabwe is open for business,” says were killed. “It was fair, very fair. Where they might continue to spread the disease. Mr Mnangagwa, speaking in his home in is the evidence forviolence? Not a single Instead they are allowed to workwhile be- Borrowdale, the poshest suburb ofHa- case was taken to the police.” Indeed the ing given free treatment, which makes rare, the capital. police were part ofthe problem. them less infectious. As a result, HIV preva- Stockily built, with watchful hooded And will he apologise forthe killing lence among sex workers dropped from eyes and a friendly gap-toothed smile, Mr ofsome 20,000 members ofthe Ndebele 28% in 2002 to 7% in 2016, according to UN- Mnangagwa is viewed as a pragmatist. ethnic group, most ofthem civilians, in AIDS. Drug users are given free syringes, so And he says much to reassure Western the early1980s when he was head ofthe they are less tempted to use dirty ones. diplomats and investors. He wants to security service? He blithely denies that Senegal’s decentralised health-care sys- arrange compensation for those whose he once called dissidents “cockroaches tem helps, says Ibrahima Traoré of the So- land was seized. But his economic vision who must be exterminated”. “Let’s not cial Polytechnic Institute ofHygiene in Da- is hardly liberal. He extols a “command” live in the past,” he says. “The future must kar. The number ofsites offeringvoluntary model where agriculture is guided by be harmonious.” counselling and testing increased by 600% in the fouryears to 2010. 1 The Economist March 3rd 2018 Middle East and Africa 39

2 One thing that Senegal has done re- decision that puzzles some military atta- supported the move (and sent a small con- markably well is to involve a wide range of chés. Mr Attiyah defends the purchases. tingent of troops), but many people felt it groups in tackling the virus. Marabouts The F-15s are strike fighters, he notes, set a troubling precedent. (imams) talkabout HIV in mosques. Wom- whereas the European jets are better suited Qatar’s best defence against outside ag- en’s groups try to find unregulated sex to air-to-air combat. gression is al-Udeid, a sprawling airbase workers and Senegal’s famous wrestling But for Qatar and its neighbours, arms that is the forward headquarters of Ameri- groups teach men about the risks ofunsafe deals are also a way to shore up support in ca’s Central Command. To please Ameri- sex. This use of civil society is something Western capitals. Bahrain is spending ca’s airmen, Qatar is constructing 200 that is sorely lacking elsewhere in the re- $3.8bn to about double its fleet ofF-16s. The housing units for officers and their fam- gion, says Nathalie Cartier of Médecins UAE signed a $1.6bn deal with Lockheed ilies, plus an entertainment complex. It Sans Frontières. Martin, an American firm, to upgrade its also wants to build ports that could host To be sure, there is work to be done. air force. During his visit to Saudi Arabia American warships. Bahrain is currently About halfofpeople infected with HIV are last May, President Donald Trump an- home to America’s Fifth Fleet. That is un- still notbeingtreated. Onlyabouta quarter nounced arms deals with the kingdom likely to change, but the proposal under- ofchildren with the virus are getting medi- worth $110bn. It was the largest such sale in scores how important the American secu- cation for it. And gay men are afraid to ask American history—or, at least, it appeared rity umbrella is to Qatar. for advice because homosexuality is pun- to be. “It was a shopping list, but the Saudis The military build-up is already raising ishable by up to five years in jail. Nonethe- haven’t actually signed contracts for most tensions in the Gulf. In January the UAE less, Senegal has shown that even a poor ofit,” says an American diplomat. claimed that two Qatari fighter jets inter- country can curb the epidemic. 7 Qatar has been most aggressive in pur- cepted a civilian airliner. Bahraini state suing this strategy. On June 9th Mr Trump television aired a video thatshowed the ra- called the emirate a sponsor of terrorism. dartracks ofall three aircraft. They were in- Arms deals in the Gulf Five days later his defence secretary signed deed close to each other. But the Qatari jets off on the F-15 deal, undermining the presi- were flying on a perpendicular course to How much for a dent’s narrative. In October BAE Systems, a the Emiratesplane, and 2,000 feetbelowit. British firm, announced that it would lay With scores of new warplanes buzzing the pilot? off nearly 2,000 workers because of slug- skies over the Gulf, though, such run-ins gish Typhoon sales. But the $6.7bn deal may become more common. 7 CAIRO with Qatar, announced two months later, will help keep the production lines hum- Forthe Gulfstates, diplomacy involves ming. The frenzied defence spending mir- Church property in Jerusalem buying weapons they don’t need rors a flood ofQatari cash into Washington HEN Qatar celebrated its national lobbying firms, which totals $4.7m since Holy, profitable Wday in December, warplanes June. (In the five years before that, it spent whizzed over the seaside corniche in quick only $6.5m on lobbying in America.) land succession: six French-made Mirage fight- A mitten-shaped peninsula that juts off ers, sixcargo planesand a squadron of pro- Saudi Arabia’s eastern coast, Qatar has al- JERUSALEM peller-powered trainers. That was half of ways felt insecure. In 1996, soon after the A dispute over real estate roils the Holy the air force. The world’s wealthiest state, previous emir took power, dozens of ex- Land with a native population of only 300,000, military officers were charged with plot- has never been known for its martial pro- ting a coup. Qatar blamed Saudi Arabia SMALL wooden ladder stands on a wess. The first three aircraft deployed to and the UAE, though they denied involve- Aledge above the entrance to the enforce a no-fly zone over Libya in 2011had ment. Qatar’s fears were amplified in 2011 Church of the Holy Sepulchre in Jerusa- to make emergency landings in Cyprus. when other Gulf states deployed troops to lem, the spot where Christians believe Je- Yet Qatar plans to increase the size ofits Bahrain to quash a popular uprising. Qatar sus was crucified, buried and resurrected. air force. Since June it has signed $20bn in The ladder serves no purpose, but it has contracts to buy 96 new jets from three been moved only twice in the past two countries: F-15s from America, Typhoons centuries. That is because all six Christian from Britain and Rafales from France. The denominations that have a presence in the shopping spree is one side-effect of the church must agree to rearrange things. nine-month-old blockade ofQatar by Bah- They rarely do. rain, Egypt, Saudi Arabia and the United On February 25th, however, the main Arab Emirates (UAE). The quartet wants occupants—the Catholics, GreekOrthodox Qatarto end itssupportforIslamist groups, and Armenians—showed rare ecumenical among other things. But the move has unity. They decided to close the church in awakened rare displays of nationalism in protest against an attempt by city hall to the tiny emirate, the military build-up be- tax commercial property owned by the ing one example. “We need to plan for the churches, and a draft law in the Knesset worst,” says Khalid al-Attiyah, the defence that would allow the government to ex- minister. “I still see $25bn as not enough.” propriate land sold by churches to private Western defence officials already won- buyers. Church leaderscompared the mea- der how Qatar will incorporate the new sures to laws “enacted against the Jews kit. The standing army numbers just 27,500 during darkperiods in Europe”. men. Fewer than 10% are in the air force, Two days later Binyamin Netanyahu, which will need hundreds ofnew pilots to the prime minister, stepped in. He said that fly an expanded fleet. The air academy a committee led by Tzachi Hanegbi, a cabi- graduated just 30 last year, though it hopes net minister, would work with the to double that number in 2018. It will need churches to resolve the dispute over taxes; to train them on three different platforms, a Tools of diplomacy, or just mirages? the legislation in the Knesset would be put 1 40 Middle East and Africa The Economist March 3rd 2018

Poverty has dropped over the past de- cade. Still, many people feel left behind. Tolls on the new roads mean that most Mo- roccans remain on clogged and dangerous carriageways. The high-speed train may please tourists, but it will be a luxury for the average family. As many as two-thirds of Moroccans entering the labour market fail to find work. The situation has grown dire in parts of the country. In much of the north, the youth unemployment rate is 40%, over twice the national average. Acharity distri- buting food in Sidi Boulaalam, 200 miles south of Casablanca, was swamped with applicants last November, leading to a stampede that killed 15 people. Tens of thousands of Moroccans cross the Strait of Gibraltar each year on unreliable dinghies, How many patriarchs does it take to move a ladder? hoping to find work in Europe. Relatives backhome rely on their remittances. 2 on hold. On February 28th the Church of cused ofunjust practices. The GreekOrtho- Protests, sometimes violent, have the Holy Sepulchre was reopened, ending dox patriarch in Jerusalem was fired after pricked the conscience of King Muham- the immediate crisis before it could disrupt his church sold property to Jewish settler mad VI. He warns of “a political earth- the Easter pilgrimage. groups, which then evicted Palestinian quake” and scolds his government for fail- But the underlying problems persist. tenants. Land issues in the city are inher- ing to “reduce disparities between They have roots in the 16th century, when ently fraught. Much like the immovable segments of the population, correct inter- churches began buying property in Jerusa- ladder, that is unlikely to change. 7 regional imbalances or achieve social jus- lem from the Ottomans, who ruled the city. tice”. He gripes that only a sliver of his five- The churches built schools, hostels and year development plan for the north has hospitals for pilgrims and local Christians. Development in Morocco been implemented. Several ministers have The property served as a symbol ofclerical been sacked. power. By the 20th century, as Jerusalem Idle and angry But the king spends much of his time grew, and was divided and reunited by convalescing abroad. (Last month he was war, the Christian population shrank. The travelling again, for heart surgery.) He sur- land was increasingly used forcommercial faces to cut ribbons on new projects. In his purposes. New neighbourhoods were NADOR absence, though, only some come to fru- built on plots leased from the churches, ition. The ruling elite, known as the makh- Morocco has grown richer, but fartoo which are still the city’s largest private zen (“storehouse”), controls much of the many remain jobless landowners. economy and puts its projects first. Although the Israeli government has OR over a year, fishermen, miners and Some in the Rif, a northern mountain long exempted churches from taxes, Jeru- Fjobless graduates in northern Morocco region with a rebellious history, dream ofa salem’s municipality has demanded that have demanded more help from the gov- new uprising. King Muhammad’s father, their businesses pay local levies. The dis- ernment. To be fair, the government is Hassan II, violently suppressed a Riffian pute was supposed to be resolved in talks acutely aware of the need to create more revolt in the 1950s, then neglected the local with the Vatican, but these have dragged jobs. Even as the protests rage, workers are Berbers, whom he called savages. His son on for two decades. So in early February putting the finishing touches on Marchica, prefers to exercise soft power. He has Nir Barkat, the mayor of Jerusalem, put the first of seven eco-resorts planned for championed development in the north, liens on the churches’ bank accounts (now the northern coast under the king’s ten- where he often holidays, and made the lifted) for unpaid taxes totalling 650m year plan to increase tourism. “We can’t Berber tongue, Tamazight, an official lan- shekels ($187m). Mr Barkat may also have just build hospitals and schools,” says guage. Only three people have been killed hoped to put pressure on the finance min- Sami Bouhmidi, one ofMarchica’s manag- in the year-long protests. istry to help cover a local budget deficit. ers. “We need to lay the foundations for in- In February King Muhammad sent the The proposal in the Knesset was consid- vestment and regeneration.” mild-mannered prime minister, Saad Ed- ered even more noxious by the churches, Morocco’s development has been im- dine El Othmani, on a conciliatory tour of which have begun to sell much oftheir res- pressive. A growing manufacturing sector, Jerada. The desolate city in the north has idential property in West Jerusalem, the investment by European and Chinese been rocked by protests since December, main Jewish half of the city. The proposal firms, and stronger links with sub-Saharan when two brothers died collecting coal in was meant to protect lease-holdingtenants Africa have boosted the economy. Since an abandoned mine. State-run mines were from having to negotiate with real-estate 2000 GDP perperson hasincreased by 70% once a mainstay of the city’s economy, but developers over the future of their homes. in real terms. Tax breaks have drawn a the government shut them down in the But the churches claim that the possibility splurge of foreign investors, including 110 1990s. The security forces kept things calm of expropriation by the government aerospace firms and 150 automotive com- during Mr Othmani’s visit, but protesters would scare away potential buyers oftheir panies, to the north. Progress can be seen returned to the streets as soon as he left. land. Theysee the measure aspolitical pos- in new roads that cut through the moun- Hundreds have been arrested. Over 50 are turing, especially as the Knesset member tains and a high-speed train that is set to on trial for undermining the state. “The who proposed the law is a potential candi- hurtle down the coast by year’s end. Tour- people want an economic alternative,” date for mayor. ists are already flocking to the country in they chanted. A few eco-resorts are proba- The churches themselves have been ac- record numbers. bly not enough. 7 SPECIAL REPORT HC March 3rd 2018 Join the only event dedicated to commercial payments in the Asia-Pacifi c region

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Reinventing wheels

Driverless vehicles will change the world, just as cars did before them. What went wrong last time round holds valuable lessons for getting it right this time, says Tom Standage

EVERYDAYAROUND 10m people take an Uber. The company has made ride-hailingcommonplace in more than 600 citiesin 82 countries. Butthe Volvo XC90 picking its way through traffic on a wintry morning in Pitts- burgh is no ordinary Uber. Climb into the back, and you will see a screen mounted between the front seats, showing a digital representation ofthe world around the car, with other vehicles, pedestrians and cyclists high- lighted as clusters of blue dots. Tap the screen to say you are ready to leave, and the car starts to move. But no one is driving it. This Uber is an autonomous vehicle (AV)—a car that can drive itself. Admittedly, Uber’sself-driv- ing robotaxi has a human sitting in the driving seat, but only to take over if something unexpect- ed happens. The car drives care- fully but confidently in down- town traffic and light snow, handling four-way stops, traffic lights and pedestrian crossings CONTENTS with aplomb. It even knows how to deal with drivers performing 5 Technology the “Pittsburgh left”, a local cus- From here to autonomy tom that allows the first vehicle at 7 The impact on industry a traffic light to turn left in front of Selling rides, not cars oncoming traffic. The most no- ticeable difference from a human 8 Urban planning driver is that the vehicle makes The new autopia no attempt to avoid Pittsburgh’s 10 Society notorious potholes, so the ride is A different world slightly bumpy at times. The engi- neer in your correspondent’s ro- 11 Implications for botaxi takes overoccasionally, for policymakers example to guide the car through Rules of the road roadworks where the lane markings have recently been changed. Autonomousvehiclesare notyetquite readyto operate without hu- man supervision, then. But they have made rapid progress in recent years, and can nowbe seen on the roadsin several American cities, easily identified by the clusters of sensors on their roofs. Uber’s robotaxis ferry riders around in Pittsburgh and Phoenix. Waymo, Google’s self-driving car unit which is now a separate company in the Alphabet family, has gone a step further, operating autonomous minivans in Chandler, a sub- urb of Phoenix, without safety engineers in the driving seat. It plans to launch a commercial ride-hailing service there this year. GM, America’s biggest carmaker, hopes to launch a robotaxi service in 2019 using auton- omous Chevy Bolt cars that do not even have steering wheels or pedals. ACKNOWLEDGMENTS AVs operated by tech giants, startups and established carmakers In addition to those quoted in this can also be seen around Silicon Valley and Pittsburgh, America’s two special report, the author wishes to main hubs ofthe emergingindustry, drawingon talentfrom Stanford and thank the following for their help Carnegie Mellon universities respectively. In other parts of the world, and guidance in its preparation: driverless shuttles ferry passengers on university campuses, in business Bruce Agnew, Tom Alberg, Jeremy AV CES Carlson, Claus Ehlers, Richard parks or along special bus lanes. s stole the show at , the world’s Florida, Luis Martinez, Carlo Ratti, biggest technology fair, in LasVegas in January. Suddenly, it seems, every- Jack Stilgoe and Jarrett Walker. body is jumping on the driverless bandwagon. 1

The Economist March 3rd 2018 3 SPECIAL REPORT AUTONOMOUS VEHICLES

2 Recent progress in computer vision and other machine- learning systems is one reason. Tech folk from chipmakers to Designated driver software firms see AVs as a lucrative new market for their pro- Cost per mile, worldwide, $ ducts. Within the automotive industry, the rise ofUber and other 0 0.5 1.0 1.5 2.0 2.5 ride-hailing services caused a “massive shift in perception Private car around 2015”, says Sebastian Thrun, a pioneer of AVs at Stanford now who led the development of Google’s first self-driving car. Car- Ride-hailing car now makers realised that they needed to take AVs seriously—because they will redefine their industry. Future The combination of autonomy and ride-hailing, together robotaxi with a switch to electric vehicles, seems likely to undermine the Source: UBS logic of car ownership for many people. Ride-hailing services in the rich world currently cost around $2.50 per mile, compared with about $1.20 per mile to own and operate a private car (see about machine learning and computer vision, but not making chart). But the driver accounts for about 60% of the cost of ride- cars. The ride-hailing firms, for their part, have their apps in- hailing. UBS, an investment bank, reckons that automation, com- stalled on millions ofusers’ phones, providing the obvious route petition and electrification (which makes cars more expensive to to market. The result has been a flurry of deals, much hedging of buy but much cheaper to run) will cut the cost of ride-hailing by bets and a constantly evolving web ofalliances (see chart). 70%, to about $0.70 per mile. So a typical Western household driving10,000 miles a year could ditch its car, use robotaxis and Mix and match save $5,000 a year. And there are other advantages, explains Mr Intel, a chipmaking giant, bought Mobileye, a maker of au- Thrun: “You can be drunk, you don’t have to look for parking, tonomous-driving systems, for$15.3bn in March 2017. GM bought and your kids can take the car.” Cruise, an AV startup, for$1bn in March 2016, set up Maven, a car- “Once the car becomes autonomous, the relevance of car sharing service, and invested $500m in Lyft, Uber’s main ride- ownership drops materially,” says David Lesne of UBS. His firm hailing rival in America. Ford fired its CEO in May 2017, partly in predicts that robotaxis will take off rapidly after 2025, with 80% response to concerns that the firm was falling behind in electric of people using them in cities, where available, by 2035. BCG, a and autonomous vehicles; it is now investing$1bn in Argo, an AV consultancy, reckons that by 2030 a quarter of passenger-miles startup, and also has an alliance with Lyft. Delphi, a big parts- travelled on America’s roads will be in shared, self-driving elec- maker, bought nuTonomy, an AV startup, for $450m, and has tric vehicles, reducing the number of cars on city streets by 60%, since reinvented itself as an AV company called Aptiv. Uber re- emissions by 80% and road accidents by 90%. Though some peo- cently agreed to buy 24,000 self-driving cars from Volvo, for use ple will want to own their autonomous cars, about half of AVs in its robotaxi fleet; it also has a partnership with Daimler. For its will be shared robotaxis, says Nikolaus Lang of BCG. Globally, part, Daimlerhas been buyingup ride-hailingservices across Eu- the “passenger economy” created by the convergence ofautono- rope and the Middle East that compete with Uber, and also owns mous vehicles and ride-hailing will be worth $7trn a year by a car-sharing service. Volkswagen, Europe’s biggest carmaker, 2050, says Strategy Analytics, a consultancy. has strucka deal with Aurora, an AV startup founded by veterans Carmakers, technology giants, startups and ride-hailing ofGoogle, Uber and Tesla. And so on. firms are already engaged in a furious battle to dominate this In short, the tectonic plates of technology and carmaking emerging industry. The carmakers understand metal-bashing, are colliding, heralding a carquake. This seismic shift will trans- but know less about complex software. The tech firms know form both industries, and its aftershockswill be feltfar and wide: AVs will be as transformative a technology as the smartphone. Just as cars reshaped the world in the 20th century, in ways good and bad, AVs could change how people live, workand play. They Ride-sharing Circle size is proportional could dramatically reduce the number of road deaths, the time to market capitalisation Industry connections and alliances Feb 12th 2018, $bn spent sitting in traffic and the space wasted on parking. In urban AV Hardware 100 planning, s provide “a great opportunity to address a lot of Carmakers 50 problems at the same time”, says Joel Kotkin, an urban-studies Ride-hailing 10 expert at Chapman University in Orange, California. “Ifthe 20th Software Nvidia century was about cars giving us independence, the 21st will be about autonomous vehicles giving us independence from cars,” MobilEye Uber* says Justin Erlich, head ofpolicy for AVs at Uber. Daimler But just as cars had unexpected side-effects, AVs are raising Lyft* BMW new concerns about safety, cyber-security, liability and inequali- ty. “Autonomousvehicleswill open a Pandora’sboxofunintend- Renault- Nissan- Tesla GM ed effects,” says Peter Norton, a social historian at the University Mitsubishi of Virginia. A century ago cars promised to provide safe, fast and Ford congestion-free transport. The similarities with the claims now Volkswagen being made about AVs are “eerie”, notes Mr Norton. This special report will assume that the technological hurdles to full autono- Toyota my can be overcome. It will consider the implications of AVsfor Argo personal mobility, car ownership and carmaking, but will also FCA Aptiv look at the wider economic, social and cultural knock-on effects. How will everyday activities be transformed? How could AVsre- Waymo* shape cities? And what lessons does the rise ofthe car in the 20th Sources: Press reports; Bloomberg *Estimate century hold fordriverless vehicles in the 21st? 7

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Technology It seemed that DARPA had set the bar too high. Yet when it held another competition in October 2005, five of the 23 partici- pants completed the entire 132-mile course, and all but one beat From here to autonomy the 7.4-mile record from the previous year. The winning vehicle was built by a team from Stanford University led by Sebastian Thrun; Sandstorm finished second. In just 18 months, autono- mous driving had gone from hopeless to feasible. In a third DARPA Making vehicles drive themselves is hard, but getting contest, in November 2007, vehicles had to complete tasks in a simulated urban environment, coping with road signs, easier traffic signals and other vehicles. Six out of 11 teams completed THE MODERN AUTOMOTIVE era began with a competi- this much more complex challenge. tion. In the early 1890s there was much interest in the Encouraged by this rapid progress, Google set up a self-driv- emerging technology of horseless carriages, which promised to ing car project in 2009, led by Mr Thrun. Since then the partici- combine the speed of a train with the flexibility of a horse and pants in the various DARPA contests have gone on to workon au- the convenience ofa bicycle. Le Petit Journal, a French newspaper tonomous-vehicle technology at Google, Uber, Tesla and a host with a knackfor publicity stunts, decided to hold a contest to dis- of startups. Prototype self-driving cars first took to America’s cover the best method of propulsion: steam, electricity or petrol public roads in 2012; they have since travelled millions of miles engine. It invited entrants to drive from Paris to Rouen, a distance and have become steadily more capable. But the technology is of 79 miles. Their vehicles would be judged not by their speed not ready for mass deployment just yet. A fully autonomous car but whether they were safe, easy to use and economical to run. must solve three separate tasks: perception (figuring out what is The competition, held in July 1894, attracted crowds of on- going on in the world), prediction (determining what will hap- lookers as 21 contraptions set out from Paris. Only 17 vehicles pen next) and driving policy (taking the appropriate action). The stayed the course; along the way, seven dogs were run over and last of these is the simplest, making up just 10% of the problem, one cyclist was injured. The clear winner was not a direct partici- says Mr Thrun; perception and prediction are the hard parts. pant but an inventor: Gottlieb Daimler, whose internal-combus- tion engine had powered nine ofthe vehicles, including the four I see that shared first prize. He had, the judges proclaimed, “turned pe- Autonomous cars perceive the world through a combina- troleum or gasoline fuel into a practical solution” for self-pro- tion of sensors including cameras, radar and LIDAR—a radar-like pelled vehicles, which were starting to be referred to in French as technique that uses invisible pulses of light to create a high-reso- “automobiles”. Daimler’s victory helped establish the suprema- lution 3D map of the surrounding area. The three complement cy ofpetrol-powered cars in the 20th century, and the term auto- each other. Cameras are cheap and can see road markings, but mobile soon spread into English and other languages. cannotmeasure distance; radarcan measure distance and veloci- Fittingly, the modern era of autonomous vehicles also be- ty, but cannot see in fine detail; LIDAR provides fine detail but is gan with a competition, held in March 2004 in the Mojave des- expensive and gets confused by snow. Most people working on ert. It was organised by DARPA, America’s main military-re- autonomous vehicles believe a combination of sensors is need- search agency, and required driverless vehicles to navigate a ed to ensure safety and reliability. (Tesla is a notable exception: it 150-mile off-road course. A total of 21 teams qualified, but after hopes to achieve full autonomy without the use ofLIDAR.) High- pre-contest trials and mishaps only 12 vehicles crossed the start- end LIDAR systems currently cost tens of thousands of dollars, ing line. Amid mechanical failures and encounters with ditches, but startups are devising new solid-state designs that should none of them made it to the finish. Carnegie Mellon’s Sand- eventually reduce the price to a few hundred dollars. storm, the vehicle that did best, travelled 7.4 miles before getting Havingcombined the data from its sensors, the carneeds to stuck; as it tried to free itself, its front wheels caught fire. identify the items around it: other vehicles, pedestrians, cyclists, road markings, road signs and so forth. Humans are much better at this than ma- chines, which have to be trained with lots of carefully labelled examples. One way to obtain them is to pay people to label images manually. Mighty AI, based in Se- attle, has an online community of 300,000 people who carefully label im- ages of street scenes for a range of auto- motive clients. “We want cars to have hu- man judgment,” says Mighty AI’s boss, Daryn Nakhuda, “and for that we need human expertise.” Imagery from video games such as “Grand Theft Auto”, which features strikingly realistic street scenes, can also help. Because the game software knows what everything is, it can label such scenes with perfect accuracy, allow- ing them to be used fortraining. The hardest things to identify, says Mr Thrun, are rarely seen items such as debris on the road or plastic bags blowing Learner non-driver acrossa highway. In the earlydays ofGoo- 1

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2 gle’s AV project, he recalls, “ourperception module could not dis- tinguish a plastic bag from a flying child.” Puddles on the road I give up also caused confusion. Combining data from multiple sensors, Testing of autonomous vehicles in California* however, can reveal whether an item in the road is a solid obsta- December 2016-November 2017 cle or not. Cars can also compare their sensor readings with Disengagement rate† Total number of Test miles on those gathered previously by other cars on the same road, learn- per 1,000 miles disengagements† public roads ing from each other’s experiences in a process called “fleet learn- 0200 400600 800 0200 400600 800 ing”. That gives an edge to first movers with thousands or mil- Waymo 0.2 352,544 lions of miles of self-driving experience under their belts; but some startups also create and sell ready-made high-resolution Renault-Nissan 4.8 5,007 AV maps for use by s. Cruise (GM) 5.7 18,517 Once a vehicle has identified everything around it, it needs 1,971 to predict what will happen in the next few seconds and decide Baidu 24 how to respond. Road signs, traffic lights, brake lights and turning Delphi 45 1,810 signals provide some clues. But AVs are at a disadvantage to hu- Bosch 411 1,454 man drivers, who are used to dealing with exceptions to the nor- mal flowoftraffic, such asroadworks, broken-down vehicles, de- Mercedes-Benz 774 1,088

livery trucks, emergency vehicles, fallen trees or bad weather. Source: California Dept. *Ford, Tesla and Uber do not test in California Snow is a particular challenge: LIDAR systems must be carefully of Motor Vehicles †Self-driving mode stopped owing to system error or human intervention tuned to ignore falling snow, and accumulations of snow on the roads make high-resolution street maps less accurate. While the technology is still being developed, it helps to safe to do so. Mr Thrun suggests such operators could, in future, stickto limited areas that have been mapped in detail and gener- end up supervising thousands ofAVs at a time. allyhave good weather. ThatexplainswhyPhoenix, with itssun- Meanwhile, limited formsofautonomyare beinggradually shine and regular grid system, is a popular place to test AVs. Pitts- added to existing production cars. A scale devised by the Society burgh is considered more difficult because of its harsher of Automotive Engineers defines the levels of autonomy. Level 1 weather. Cruise, an AV startup now owned by GM, has demon- involves basic assistance (such as cruise control). Level 2 adds strated some impressive autonomous driving in the complex features such as lane-keeping, allowing the car to drive itself on streets of downtown San Francisco. Kyle Vogt, Cruise’s boss, ar- highways, but still requiring the driver to pay full attention. The gues that testing in densely populated environments means cars new Audi A8, launched this year, is the first car to achieve level 3, experience unusual situations more often, and thus learn faster. which means it can drive itselfand monitor its surroundings, but When an AV gets confused and does not know how to re- the driver must take back control when asked. Waymo, Uber and others are at- tempting to jump directly to level 4, The public seems concerned mainly about two potential which provides full autonomy under cer- tain conditions, such as in a specific part risks associated with AVs: ethical dilemmas and of a city. Some in the industry consider cyber-attacks the partial automation of levels 2 and 3 to be unsafe, because drivers are still re- quired to pay attention even when they spond, or makes the wrong decision, the safety engineer in the have handed over control of the vehicle, which they find hard to driving seat takes over. This is known as a “disengagement”, and do. (The driver of a level 2 Tesla Model S was killed when his ve- the number of disengagements per 1,000 miles travelled pro- hicle hit a lorry in May 2016; investigators found that despite vides a crude measure of how the companies developing AVs warnings from the car, he failed to keep an eye on the road.) compare (see chart). Disengagementsare bestseen notas failures One problem for AVs is that the world was built to cater for but as learning experiences that help AV systems improve. Sen- human drivers, with whom they must share the roads. Humans sor data recorded in the lead-up to a disengagement can reveal communicate by flashing their lights and using other non-verbal what the car got wrong, says Noah Zych, head of safety at Uber’s cues, which (like other driving customs) can vary from place to AV unit. Modifications to its software can then be tested in sim- place. AVs will probably end up being tuned to fit in with their ulation. “We can play it back again and again, vary the scenario surroundings, driving more aggressively in Boston than in Cali- and see the distribution of outcomes,” says Mr Zych. The im- fornia, forexample, suggests Amnon Shashua, the bossof Mobil- proved software is then rolled out in real cars. eye, a maker ofautonomous-driving technology. “Youhave to make the vehicle so it can operate in the world What do I do now? as it is today,” says Chris Urmson of Aurora, an autonomous- Even when AVs are widely deployed, they will probably driving startup. But things should get easier in future. There may still need to ask for human assistance sometimes. Consider an be road lanes or entire districts dedicated to AVs, and special AV caught behind a broken-down truck on a two-lane road with equipment to support them, known as vehicle-to-infrastructure a solid line down the middle, says Christophe Sapet of Navya, a (V2I) technology. Already, in some areas where AVs operate, traf- maker ofdriverless shuttles. Because it has been programmed to fic lights have been modified to tell approaching vehicles when obey road markings, the AV will get stuck. Human drivers would they will change. In future, V2I and V2V (vehicle-to-vehicle) tech- simply bend the rules and drive around the truck when the road nology should allow AVs to co-ordinate their actions better. is clear. Navya’s AVs instead call a remote supervision centre, The public seems concerned mainly about two potential where a human operator can see live feeds from their cameras. risksassociated with AVs. The firstishowtheyshould respond to Rather than controlling such a vehicle remotely, the operator ethical dilemmas: say, choosing between hitting a group of chil- gives it temporary permission to cross the white line when it is dren in the road or swerving and hitting another vehicle. Many 1

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2 people working in the field think that such questions do not re- AV will be in a vehicle you hail using an app, not one you own. flect the real world, and point out that the best course ofaction is Waymo, Alphabet’s AV effort, istestinga robotaxi service in usually to slam on the brakes. AVs have superhuman, 360-de- Chandler, a suburb of Phoenix, and hopes to launch a commer- gree perception and much faster reaction times, notes Danny cial service later this year. Uber is operating driverless taxis in Shapiro ofNVIDIA, a chipmaker whose products power AVs. parts of Phoenix and Pittsburgh; users who hail a ride may find The second worryisaboutcyber-attacks. AVs, which are es- themselves being picked up by an autonomous car, supervised sentially computers on wheels, could be remotely hijacked or by an engineer (Uber gives riders the option to use an ordinary sabotaged. Engineers working on AVs insist that they take cyber- car instead if they prefer). Voyage, an AV startup, runs a robotaxi security very seriously, and say that the multiple redundant sen- service in The Villages, a retirement community in San Jose, and sor and control systems they build in to make a vehicle mechani- is expanding to a second location, in Florida. Navya, a French cally safe will also provide some protection. Ifany part ofthe ve- startup, is operating an eight-seater autonomous shuttle bus in hicle starts to behave strangely, for whatever reason, it will stop. downtown Las Vegas, with three stops along a 1km (0.6 mile) “It is easier to use an ordinary vehicle to kill people than to take route. It also has shuttles running in several other cities around control ofa driverless car,” says Mr Sapet. the world, as does Easymile, a rival French firm. Large-scale de- AVs are on the cusp of working on public roads, at least in ployments of AVs are most likely to start with geofenced robo- orderly environments with good weather. “Once you can crack taxi services in parts of cities such as Singapore or Dubai, and that nut, it’s incremental,” says Mr Urmson. For his part, Mr then expand over several years, predicts Nikolaus Lang of BCG. Thrun has moved on to a new challenge: building cars that fly. Itislikelyto be manyyearsbefore AVsare cheap enough for Automotive bosses thinkhe is crazy, he admits. But until quite re- individuals to buy them, and capable enough to operate outside cently they were just as sceptical about self-driving cars. 7 predefined, geofenced areas. Meanwhile, the roll-out of cheap robotaxis in urban areas might encourage many young urba- nites, who are already going off car ownership anyway, to aban- The impact on industry don it altogether. The combination of ride-hailing and autono- mous-driving technology confronts carmakers with “the most profound challenge to their business models in a century”, de- Selling rides, not cars clares a recent report from BCG. That is why carmakers are now piling into ride-hailing and car-sharing services and pushing on with theirown AV programmes. In an autonomousfuture where ownership is optional, they need to be selling rides, not cars. This shift offers carmakers a big opportunity. The car mar- Carmakers, tech companies and ride-hailing firms are ket is worth around $2trn a year globally, whereas the market for all fighting for a piece of the action personal transport is worth as much as $10trn, according to Mor- IF YOU WANTto buy a fully self-driving car, you may have gan Stanley, a bank. But it also exposes them to new competitors, to wait for another decade. Autonomous vehicles will ini- in the form oftechnology companies and ride-hailing networks. tially be offered for sale not to private owners but to robotaxi- Some carmakers have launched their own mobility services; fleetoperators, fortwo reasons. First, LIDAR sensorsare still so ex- others may preferto act as fleet managers, providing capacity for pensive that, deployed in production cars, they would cost more ride-hailing operators and charging them by the mile. Some will than the rest of the vehicle put together. For AVs in a robotaxi even make “white label” fleets badged with the name ofa city or fleet, that is less ofa problem, because vehicles will be operating, a ride-hailing network, rather than their own brand. and thus generating revenue, throughout the day, whereas priv- Robotaxi fleets running around the clock will generate pre- ate cars are in use only about 5% ofthe time. dictable yields that will appeal to institutional investors. Turning Second, getting AVs to worksafely and reliably is much eas- themselves into asset managers forsuch fleets would be a logical ier if their geographical range is limited to places that have been step for carmakers, whose finance arms are already involved in mapped in fine detail, such as city centres. So your first ride in an fleet management, says David Lesne ofUBS. Pricingmodels forusers will change, too: Uber is already testing telecoms-like monthly price plans in some cities, which include a certain number ofrides or miles for a fixed price, just as a mobile calling plan offers a certain amount of calls, texts and data. One big question is the effect of AVs on the number of vehicles sold world- wide per year, currently around 80m. Since mostcarssitunused 95% ofthe time, switching to shared robotaxis that oper- ate around the clock could greatly reduce the number of vehicles on the road. UBS reckons the global fleet size will halve by 2030 (see chart, next page). But if robo- taxis are in use 50% rather than 5% of the time, they will need to be replaced far more often, says Johann Jungwirth, chief digital officer of Volkswagen. So unless Quality time vehicle lifespans can be greatly extended, 1

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2 the number ofnew vehicles needed each year will rise. Making vehicles reliably in large quantities is hard, as Tes- la’s production problems have shown. “The core expertise that we’ve had for decades is excellent manufacturing,” says Ponz Pandikuthira, head of product planning for the European arm of Nissan. So even in a world of robotaxis, being a carmaker could still be a big business—just a different one from what it is today. After 130 years making hardware, says Mr Jungwirth, “we need to take software and services just as seriously.” That requires tak- ing on new staff, retraining, acquisitions and partnerships. AVs will also accelerate the switch to electric vehicles, which have fewer components and need fewer assembly workers. Form follows function It will not just be carmakers that change shape; so will cars. Just as early “horseless carriages” resembled horse-drawn car- riages, without the horse, most autonomous vehicles today are ordinary cars, retrofitted to drive themselves. But take away the need for a steering wheel and pedals, and AVs can assume a much wider range of shapes and sizes; Volkswagen’s Sedric and the Mercedes-Benz F015 are pods in which passengers sit facing each other. Future AVs may need to allow forsome physical sep- aration ofpassengers to encourage people to share vehicles with strangers, says Karl Iagnemma of nuTonomy, while families might hail a different vehicle that lets everyone sit together. Urban planning All this is bad news for car dealers. Most are barely profit- able now and make their money from car financing and servic- ing, so even a small shift from car ownership to shared robotaxis The new autopia could hit them hard. Repair shops and partsmakers could also suffer, assuming AVs reduce the number of car accidents. Al- ready, some parts suppliers are listing AVs as a threat to their fu- ture profitability in regulatory filings. Insurers would be hit hard by a fall in private car ownership and fewer accidents. Health- How autonomous vehicles will reshape cities care providers and personal-injury lawyers would also suffer if there were fewer accidents, though few will feel sorryfor them. MODERNCITIES, PARTICULARLYin America, are habitats People who drive taxis, delivery vehicles and trucks are forcarsasmuch aspeople, devotinghuge amountsof space most directly threatened by AVs. Uber and Lyft say they will con- to roads and parking. “America is a great place to be—if you’re a tinue to need human drivers on some routes for years to come, car,” says Donald Shoup of the University of California at Los but driving jobs might be redefined rather than abolished. Deliv- Angeles. The expectation that people should be able to drive ery drivers could be employed to manhandle large packages into anywhere, encountering little or no congestion on the way and customers’ homes. Truck drivers might become overseers of pla- parkingattheirdestination, led to a splurge ofconstruction in the toons of vehicles travelling on highways. And AVs will create 20th century. Urban freeways, commuter suburbs and manda- newjobsforremote fleetsupervisorsand mobile repair workers. tory parking requirements reshaped cities. Now AVs promise to It already seems clear that AVs will cause the car industry transform them once again, undermining many car-centric as- and its adjacent businesses to change shape dramatically over sumptions made in the 20th century, opening up new possibili- the next couple of decades. But the consequences will not stop ties and turning urban-planning debates upside down. “For the there. Like carsbefore them, AVsare sure to have far-reaching cul- first time in a generation, we can really rethink what suburban tural and social effects too, most obviously in cities. 7 development looks like,” says Alan Berger, a professor of urban studies at the Massachusetts Institute ofTechnology. Simply put, building cities around cars increases conges- tion, discourages the use of public transport and encourages Decongestion charge sprawl, all ofwhich urban planners generally disapprove of. The Number of urban vehicles worldwide, bn odd thing is that AVs could either reverse or accelerate each of these trends. They could reduce or increase traffic; make afford- 1.2 FORECAST able transport more orless accessible; and lead to denser cities or 1.0 more sprawl. It all depends on the rules for their use, and in par- ticular the pricing. AVs know exactly where they are at all times, 0.8 which makes it much easier to introduce fine-grained road tolls 0.6 and congestion charges based on time ofday, traffic levels and so Private cars 0.4 on. That makes them a powerful and flexible policy tool. Start with congestion. A switch to shared robotaxis could 0.2 increase vehicle occupancy rates, reducing the number of vehi- Robotaxis 0 cles needed to move people around and easing congestion. But 2015 20 25 30 35 40 45 50 low-cost robotaxis might also encourage more people to take Source: UBS more trips—the familiar problem of “induced demand” when 1

8 The Economist March 3rd 2018 SPECIAL REPORT AUTONOMOUS VEHICLES

model, with a centre surrounded by suburbs, is a thing of the past. In many large American and European cities, jobs are mov- ing from downtown to the periphery, and workers increasingly commute from one suburb to another, rather than to and from the centre. His analysis shows that 75% ofjobs in a typical Ameri- can city are outside the urban centre. In European and Asian cit- ies with dense public-transport networks this decentralisation is easier to cope with, but retrofitting the necessary infrastructure onto American cities would be too expensive. “American cities need door-to-door transport systems to get to work, and driver- less cars will play this role beautifully,” says Mr Angel. Robotaxis hailed on demand promise to be a lotmore efficientthan private- ly owned vehicles, he says, and are well suited to the spatial structure of both present and future American cities. Mr Berger agrees. “It’s not affordable to build mass transit that goes from suburb to suburb,” he says. “The best solution I’ve seen in my ca- reer is the idea ofshared autonomous vehicles.” That raises the question of urban sprawl. On the one hand, a switch to shared AVsbyurban dwellerscould lead to denser cit- ies as some of the space currently used for parking is reallocated to housing. New high-density housing is already being planned with pick-up and drop-off zones for ride-hailing vehicles, and fewer parking spaces. On the other hand, AVs could also encour- age sprawl by making long commutes more acceptable, because 2 road travel is cheap and easy. The roads could also fill up with au- riders will be able to work or even sleep on the move. “The big- tonomous delivery vehicles with nobody on board. The night- gest negative ofsuburban living is the driving and the amount of mare scenario, says William Riggs of the University of San Fran- space that has to be devoted to cars,” says Joel Kotkin of Chap- cisco, is that “we create another form of congestion—it just man University. By doing away with driving and making city happens to be automated congestion.” But careful pricing of centres easier to access, AVs will increase the appeal ofsuburban roads and rides should be able to prevent that. Some cities al- living. So it seems likely that AVs will make cities both denser ready have congestion-charging schemes of various kinds, or and more spread out, depending on the road-pricing regime. rules to encourage vehicle-sharing, such as dedicated car-shar- ing lanes. Some are starting to price access to kerb space, for ex- Turning back the clock ample at airports. AVs would allow far more subtle forms of AVs could also make possible new kinds ofsuburbs, updat- charging, taking account of time, place, vehicle type, number of ing the 20th-century dream of garden cities. “Over the last 100 riders, traffic levels and so forth, to maximise sharing and min- years our landscape has been drastically altered by the automo- imise congestion. “It will be that interplay that ensures we don’t bile,” says Mr Berger. With AVs, “all the land we’ve given to the end up with highly congested roads,” says Justin Erlich ofUber. automobile can be put back into landscape and ecological func- What about the impact on public transport? A study by UC tions.” By doing away with parking and using one-way, single- Davis found that amongUberand Lyftriders in America, bus use lane roads that loop through neighbourhoods, the area of paved fell by 6% and light-rail use by 3%. AVs would be cheaper, so they surface can be reduced by 50%, he calculates. That means more space for plants, more biodiversity and betterwaterretention, reducingthe riskof Using AVs for the “last mile” to move people to and from flooding in the urban core. Suburbs will have enough space to generate their own railway stations could make public transport more solar power or grow their own food. viable in less densely populated areas City centres will end up looking dif- ferent, too. In effect, cities have banked a large amount ofvaluable real estate in the could draw even more people away from public transport and form of parking lots and garages, notes Peter Norton of the Uni- onto the roads. This might discourage furtherinvestment in pub- versity ofVirginia, and must decide how to spend their windfall. lic transport, which in turn could create more “transit deserts” Housing is one obvious use; parks are another. Some streets where large numbers ofpeople (typically the poor and the elder- could be reconfigured to more imaginative uses than high-vol- ly) depend on publictransportbutgetan inadequate service. The ume thoroughfares, he suggests. In particular, some quieter economics of robotaxis will work best in dense urban centres, streets could become spaces where pedestrians and slow-mov- says Mr Riggs, so “we could see social-equity implications ing AVs share the roadway as equals, with neither having priori- around the fringes of cities.” But again, there is also a rosier sce- ty. This would mark a return to the way streets worked a century nario. Using AVs for the “last mile” to move people to and from ago, before cars took over. “Streets should not just be roads for railway stations could make public transport more viable in less cars but places forpeople,” says Mr Shoup. densely populated areas. Some cities might also operate their In retrospect, many drawbacks associated with cars in the own robotaxi fleets, or subsidise rides in poor neighbourhoods 20th century arose from a failure to price their use properly. With using toll revenues collected in rich ones. appropriate pricing, AVs should be able to avoid many of those The emergence ofAVs helpfully coincides with a change in problems, giving urban planners and policymakers a much wid- the structure of cities, says Shlomo Angel, an urban-studies ex- er range ofchoices about how cities and transport systems could pert at New York University. He argues that the monocentric be structured. The challenge will be to choose wisely. 7

The Economist March 3rd 2018 9 SPECIAL REPORT AUTONOMOUS VEHICLES

Society ate deaths caused by human drivers, but AVs will have to be more or less infallible. A realistic goal is a thousandfold improve- ment over human drivers, says Amnon Shashua of Mobileye, a A different world maker of AV technology. That would reduce the number of road deaths in America each year from 40,000 to 40, a level last seen in 1900. Ifthis can be achieved, future generations may lookback on the era of vehicles driven by humans as an aberration. Even with modern safety features, some 650,000 Americans have Foreseen and unforeseen consequences died on the roadssince 2000, more than were slain in all the wars ofthe 20th century (about 630,000). ROAD TRIPS. DRIVE-THROUGHS. Shopping malls. Free- To take advantage of much lower operating costs per mile, ways. Car chases. Road rage. Cars changed the world in all most AVs are almost certain to be electric, which will reduce sorts ofunforeseen ways. They granted enormous personal free- harmful emissions of two kinds: particulates, which cause lung dom, but in return they imposed heavy costs. People working on and heart diseases, and climate-changing greenhouse gases. autonomous vehicles generally see their main benefits as miti- Even electric vehicles, however, still cause some particulate gating those costs, notably road accidents, pollution and conges- emissions from tyre and road wear, and the drop in greenhouse- tion. GM’s boss, Mary Barra, likes to talk of “zero crashes, zero gas emissions depends on how green the power grid is. The emissions and zero congestion.” AVs, theirchampions argue, can switch to electric vehicles will require more generating capacity offerall the advantages ofcars without the drawbacks. (UBS estimates that it will increase European electricity con- In particular, AVs could greatly reduce deaths and injuries sumption by 20-30% by 2050) and new infrastructure, such as from road accidents. Globally, around 1.25m people die in such charging stations and grid upgrades. For urban dwellers, the accidents each year, according to the WHO; it is the leading cause benefits will be better air quality and less noise. of death among those aged 15-29. Another 20m-50m people are Whether AVs will be able to reduce congestion is much less injured. Most accidents occur in developing countries, where the clear. The lesson of the 20th century is that building more roads arrival of autonomous vehicles is still some way off. But if the to ease congestion encouragesmore carjourneys. Ifrobotaxis are switch to AVscan be advanced even bya single year, “that’s1.25m cheap and fast, people will want to use them more. Yet there are people who don’t die,” says Chris Urmson ofAurora, an AV start- reasons to think that the roads would become less crowded. up. In recent decades cars have become much saferthanks to fea- Widespread sharing of vehicles would make much more effi- tures such as seat belts and airbags, but in America road deaths cient use of road space; computer-controlled cars can be smart have risen since 2014, apparently because of distraction by aboutroute planning; and once theyare widespread, AVscan tra- smartphones. AVs would let riders text (or drink) to their heart’s vel closer together than existing cars, increasing road capacity. content without endangering anyone. What is certain is that riders who no longer have to drive Evidence that AVs are saferis already buildingup. Waymo’s will gain an enormous amount oftime that can be used to work, vehicles have driven 4m miles on public roads; the only acci- play or socialise. “Americans can take back a total of 30bn hours dents they have been involved in while driving autonomously per year that they now spend driving, sitting in traffic or looking were caused by humans in other vehicles. AVs have superhu- fora parking space,” says BCG. man perception and can slam on the brakes in less than a milli- Yet to think about AVs as a fix for the problems caused by second, compared with a second or so for human drivers. But cars is to risk falling into a familiar historical trap. This is exactly “better than human” is a low bar. People seem prepared to toler- how people thought about cars when they first appeared: as a fix forthe problems caused by horses. In the 1890s, big cities around the world were grappling with growing volumes of horse ma- nure and urine and the rottingbodies ofthousands ofdead hors- es, spreading disease. In 1894 the Times of London famously pre- dicted that by the 1940s every street in the city would be buried under nine feet of manure. By comparison, cars seemed clean and hygienic, a key reason why they were adopted so quickly in the 20th century. “Cars replaced something that was in many ways farworse,” says Donald Shoup ofthe University ofCalifor- nia at Los Angeles. “But because of bad planning, they had unin- tended consequences.” What might follow from AVs? Shops that come to you Cars transformed retailing, giving rise to suburban malls with lotsofshopsand plentyofparking. AVs, combined with the rise of e-commerce, could transform it again. “The Walmart of the future might be fleets of vehicles ready to drop off anything thatyoumightgetata Walmart,” saysPeterNorton ofthe Univer- sity ofVirginia. Or you might order an AV to take you home from work, and arrange to have your groceries, or a meal, waiting for youwhen youclimb aboard. And whyshould shops, restaurants or other facilities be fixed in place? Coffee shops or food stands could restock at a central depot and then migrate to business neighbourhoods in the morning and entertainment districts in the evening, suggests Chenoe Hart, an architectural designer at Goodbye to all that the University of California at Berkeley. Mobile shops selling 1

10 The Economist March 3rd 2018 SPECIAL REPORT AUTONOMOUS VEHICLES

2 items such as shoes, clothes or cosmetics could visit particular Implications for policymakers neighbourhoods on a regular schedule, or when hailed by a cus- tomer. “It gives us flexibility to reassign space,” says Ms Hart. Carmakers are experimenting with delivery vehicles that Rules of the road draw up outside a customer’s home, announce their arrival by text message and allow items to be retrieved from a locked com- partmentbyenteringa code. Low-costdeliveriesusingAVscould stimulate local production of all kinds of things, most notably Smart regulation and smart technology must go food. Already, food-delivery services like UberEats, Deliveroo, Seamless and GrubHub have given rise to “ghost restaurants” hand in hand that produce food fordelivery only, centralising food production REGULATING A COMPLEXnew technology is hard, partic- in a few kitchens. Cheap autonomous deliveries could make this ularly if it is evolving rapidly. With autonomous vehicles kind ofmodel more widespread. just around the corner, what can policymakers do to ensure that Another possibility, says Johann Jungwirth ofVolkswagen, they arrive safely and smoothly and deliver on their promise? is that restaurants or retailers might cover the cost of travel to en- The immediate goal is to make sure that AVs are safe with- courage customers to visit them. Fancy restaurants might lay on out inhibiting innovation. In America, experimental AVs are al- luxury AVsto ferrysozzled customershome, aspart ofthe cost of lowed on the roadsin manystatesaslongasthe companies oper- a meal. Retailers could offer to pay for shoppers’ rides. Ride-hail- ating them accept legal liability. Chris Urmson of Aurora says ingnetworkshave a lotofcustomerdata thatcould be used to tar- American regulators have got things right, working closely with get in-vehicle advertising. Hail an AV to go to one shop or restau- AV firms and issuingguidelines ratherthan strict rules that might rant, and you might see ads for a rival. Riders may be offered hamstringthe industry. “It’s important that we don’t leap to regu- cheaper rides with ads or more expensive ones without them. lation before we actually have something to regulate,” he says. Self-driving vehicles could also deliver other services, let- At the other end of the spectrum, Singapore’s government ting you work out with your personal trainer on the way to the has taken the most hands-on approach to preparing for AVs, says office or summon a hairdresser to your home. Toyota’s e-Palette Karl Iagnemma ofnuTonomy, an AV startup that has tested vehi- vehicles are boxes on wheels in different sizes that can be kitted cles in the city-state. For example, it has introduced a “driving out as mobile shops, offices or beauty salons. Moreover, AVs test” that AVs must pass before they can go on the road. This does could give rise to new kinds of social activities, just as cars pro- not guarantee safety but sets a minimum standard. The city of vided teenagers with new social opportunities. Ride-hailing net- Boston has done something similar, requiring AVs to be tested in works might group together people with similar interests or a small region before roaming more widely. friends in common when assigning rides. Or they might work Elsewhere, regulators have permitted limited testing on with a dating app, pairing people up with a potential match public roads but want to see more evidence that the vehicles are when they take a ride. AVs might also function as mobile party safe before going further, says Takao Asami of the Renault-Nis- venues, or double as sleeping pods on long trips, offering an al- san-Mitsubishi alliance. “Simple accumulation of mileage will ternative to hotels and low-cost airlines. never prove that the vehicle is safe,” he says. Instead, regulators are talking to carmakers and technology firms to develop new A watchful eye safety standards. Marten Levenstam, head of product strategy at What unintended consequences might there be? One Volvo, likens the process to that of developing a new drug. First much-heralded benefit ofAVs is that they will offerfreedom and youshowin the laboratorythatitmightwork; then you run clini- independence to people who cannot drive cars: the very old, the cal trials in which you carefully test its safety and efficacy in real very young and the disabled. Such vehicles are already ferrying patients; and iftheyare successful, youaskforregulatory approv- around people in retirement communities, and one of Google’s al to make the drug generally available. On this analogy, autono- videos shows a blind man doing errands in an autonomous car. mous cars are currently at the clinical-trial stage, without final But AVs could also encroach on freedom by invading people’s approval as yet. privacy. Robotaxi operators will chronicle their riders’ every What form would that approval take? Eventually, it will move, so they will end up knowing a great deal about them. mean formal certification of vehicles capable of operating fully Some taxis already record riders for security reasons; robotaxis autonomously, so they can be offered forsale. But initial approv- will surely surveil both their passengers and their surroundings al is likely to be granted to operators of specific robotaxi fleets, to protect themselves. Police investigating a crime will ask AVsin rather than vendors of particular vehicles, suggests Mr Leven- the vicinity what they saw. stam, because fleet operators will monitor all vehicles closely to 1 If people no longer drive cars, one consequence may be new forms of segregation, notes Ms Hart. Access to some places may be restricted to certain riders or robotaxi networks, just as some online services are “walled gardens” orcannot be accessed Belt up on all devices. She thinks there may be a need for a physical Would you want to ride in a driverless vehicle? equivalent of “network neutrality” rules, to ensure that all loca- US respondents, 2017, % tions are equally accessible to all AVs. In authoritarian societies, 020406010 30 50 AVs could be a powerful tool ofsocial control. No, 56% AV s could also trigger a shortage of organ donors (many of Don’t trust it Safety concerns Enjoy Other whom are young people killed in car accidents) and a drop in driving smoking (more than half of all tobacco sales in America are Yes, 44% made at petrol stations, which will vanish, notes Mr Evans). And For the Can do if cars are no longer symbols of independence and self-defini- Safer other Less Other experience things stress tion for the young, other things will have to take their place. Like cars before them, AVs will change the texture ofeveryday life. 7 Source: Pew Research Centre

The Economist March 3rd 2018 11 SPECIAL REPORT AUTONOMOUS VEHICLES

Assuming that AVs can be shown to be safe, regulators will Offer to readers face a second challenge: setting Reprints of this special report are available. A minimum order of five copies is required. the rules around how and Please contact: Jill Kaletha at Foster where they operate, and how Printing Tel: +1 866 879 9144 Ext: 168 they relate to other forms of e-mail: [email protected] transport. Fine-tuning of pricing Corporate offer will, in theory, let planners con- Corporate orders of 100 copies or more are trol congestion and promote available. We also offer a customisation equal access to mobility. service. Please contact us to discuss your Governments wishing to requirements. encourage the adoption ofrobo- Tel: +44 (0)20 7576 8148 e-mail: [email protected] taxi services could go further, re- For more information on how to order special stricting the use of private cars reports, reprints or any copyright queries (Gothenburg, London, Milan, you may have, please contact: Singapore and Stockholm al- The Rights and Syndication Department ready have congestion charges 20 Cabot Square Cities for people, not cars of various kinds) or banning London E14 4QW them from some areas. That Tel: +44 (0)20 7576 8148 2 Fax: +44 (0)20 7576 8492 ensure and maintain safety. Even this will be a calculated risk. It might be unpopular, and not e-mail: [email protected] is not possible to prove that a new drug is entirely safe, but the just with car-owners. “I think www.economist.com/rights risk is worth taking because of the benefits the drug provides. It there will be some real resis- will be the same for AVs, he suggests. After all, the status quo of Future special reports tance to measures that compel Technology Quarterly: Oceans human-driven vehicles is hardly risk-free. people to use autonomous vehi- March 10th Mr Asami draws another analogy, with aviation. “Black cles,” says Peter Norton of the The geopolitics of energy March 17th box” data recorders and careful testing have enabled air tran- University of Virginia. AVs AI and business March 31st sport to evolve, despite crashes, because passengers know safety could be seen as an Orwellian Universal health care April 14th is taken seriously. In fact, America’s National Transportation technology, an instrument of Previous special reports and a list of NTSB forthcoming ones can be found online: Safety Board ( ) has started applying its aviation expertise to surveillance and social control. economist.com/specialreports autonomousvehicles. In manywaysAVsare more complexthan Protesters might object by aircraft, says Deborah Bruce of the NTSB, because they are close- standing in front of AVsand ly surrounded by other things that move in unpredictable ways. blocking traffic. That could lead But medicine and aviation have global (or at least regional) to calls for AV lanes to be fenced off, “thus making city streets regulatory standards, whereas AVs do not. The current patch- even more inhospitable to non-motorists than they already are”, work of regulation will have to be simplified if the technology is says Brian Ladd, author of“Autophobia”, a history ofopposition to be widely deployed. “Uniformity is the friend of scalability,” to cars. But an unregulated introduction of robotaxis could also says Mr Iagnemma. Questions of insurance and liability will cause problems. Rival fleet operators might flood the roads with also have to be worked out. Amnon Shashua of Mobileye wor- vehicles offering cut-price rides, making congestion worse. ries that because of today’s regulatory uncertainty, fatal acci- Choices about transport and pricing are inescapably politi- dents involving fully autonomous vehicles could plunge the in- cal in nature. How cities deal with them will depend on both dustry into legal limbo, or kill it altogether. He has proposed a set economics and political dynamics, notes Justin Erlich of Uber. of rules that define how a car should respond in all 37 scenarios “We should be exploring lots ofdifferent policies in lots ofdiffer- in the 6m-entry accident database maintained by NHTSA, Amer- ent cities,” he says. Meanwhile, two principles can help. ica’s car-safety regulator, and would like to see these rules adopt- The first is to consider AVs in the context of the wider tran- ed as an open industry standard. That would absolve carmakers sport system, and be clear about what role they are expected to from makingimplicitethical choicesin theirsoftware while leav- play. AVs might be deployed as the primary means of transport ing room for innovation in other areas. Mr Iagnemma thinks it is in a particular area; or they could be used in “first mile, last mile” a good start. Without such standards, he says, every company mode to ferry people to and from railway stations, filling mobil- will develop its own way of translating the rules of the road, de- ity gaps and complementing other forms oftransport. vised forhumans, into a code that can be followed by machines. The second principle is to be mindful ofthe balance offree- doms. AVs can potentially free people from driving, congestion, Political potholes ahead pollution and parking—but in return may require them to give up The risk of a backlash seems real enough. A survey by Ad- some other freedoms, such as the ability to take their own vehi- vocates for Highway and Auto Safety, a consumer lobby, found cle anywhere. In liberal countries, AVs will be accepted only if that 64% of Americans were worried about sharing the road people feel that they enhance freedom rather than reduce it. with AVs. In another survey, by the Pew Research Centre, 56% of A century ago cars raised fundamental questions about Americans said they would not ride in a self-driving vehicle (see personal autonomy, freedom ofchoice and mobility. AVs will do chart, previous page). Seeing AVs in action will be an important the same again. But this time around, with the benefit of hind- element of building public trust. In cities where AVs are com- sight, there is a chance that they will be seen not simply as a new monplace, drivers have got used to them. Uber, Waymo and oth- form of transport but as a technology with far-reaching social ers are also starting to provide robotaxi rides in limited areas, so and economic implications. Driverless cars present an opportu- people can discover that riding in an AV is thrilling forthe first 30 nity to forge a new and better trade-offbetween personal mobil- seconds and then quickly becomes boring. “But that’s the re- ity and societal impact. But AVs will deliver on their promise sponse we really want,” says Noah Zych of Uber, because it only if policymakers—like passengers climbing into a robotaxi— means riders feel safe. are absolutely clear about where they want to end up. 7

12 The Economist March 3rd 2018 Europe The Economist March 3rd 2018 41

Also in this section 42 The Merkel succession 43 Turkey’s muzzled press 44 Military service in France 44 Free speech in Spain 45 Charlemagne: Back-seat drivers

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

Italy more than 20 trials on charges ranging from false accounting to bribing judges The right road is wholly lost and gone and a conviction for tax fraud, Mr Berlus- coni remains an arbiterofhis country’s for- tunes. He cannot be prime minister be- ROME cause his conviction carried a ban from public office. But he has said that he will Italy risks political confusion when it votes on March 4th stand if another election has to be held ITH a rosary in one hand and a copy rella, that he would soon be sending him next year, afterthe ban expires. By then, Mr Wof the New Testament in the other, the names of his cabinet. Embarrassingly Berlusconi will be almost 83 years old. In the leader of the Northern League, Matteo for Mr Di Maio, the president chose not to the meantime, this election could boost his Salvini, swore himself in on February 24th receive him. Worse still, one ofhis putative importance yet further. as Italy’s next prime minister. No matter ministers turned the job down. that Italy’s general election was not to be The originator of this optimistically an- Return of the crooner held until March 4th, or that his party was ticipatory technique was Silvio Berlusconi His right-wing alliance is the only one with polling just 13% of the national vote. One (pictured above right, with Mr Salvini), any hope ofan outright parliamentary ma- day, he told his audience at a rally in the ca- whose Forza Italia party is yoked to the jority. To secure one, analysis suggests the thedral square of Milan, they would look Northern League in a right-wing electoral right needs only around 40% of the vote. backand say: “I was there.” alliance: in 1994, he announced his entry That is because a 3% threshold will keep Acting like a prime minister before be- into politics in a video showing him at a numerous small parties out of parliament, coming one is not uncommon in Italy desk in a book-lined study, looking as if he and the alliance can expect to win a large among those who aspire to the job. The were making an address to the nation. Not number of seats in first-past-the-post con- day before, Luigi Di Maio, candidate of the long afterwards, he was indeed elected. tests that a new electoral system intro- anti-establishment Five Star Movement Perhaps the oddest aspect of Italy’s bi- duces. It is tantalisingly close. Polls pub- (M5S), had gone to the Quirinal palace in zarre election campaign this year is that 24 lished just before a ban in the last fortnight Rome to tell the president, Sergio Matta- years on, despite a stream of sex scandals, of the campaign show the media tycoon and his allies running at around 37%. But depending on how votes translate into The Democrats’ decline seats underthe new system, that might still Italy, general election polling, selected parties, % Election be enough for victory. Ifthe right did win, Constitutional referendum day whether Mr Salvini or a temporary 35 stand-in for Mr Berlusconi would be pro- Five Star Movement 30 posed as prime minister would depend on which oftheirpartieshad won more votes. 25 Democratic Party Forza Italia went into the final straight with 20 a narrow advantage in the polls. Northern League* A peculiar aspect of the campaign was 15 Mr Berlusconi’s prolonged refusal to dis- Forza Italia* 10 close his choice for the top job. That meant Free and Equal Brothers of Italy* he monopolised the limelight—but since 5 We’re with Italy* he is a talented campaigner, it may have 0 been a wise move. On February 27th he fi- Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar nally plumped for the moderate, if platitu- 2016 17 18 dinous, president of the European Parlia- The Economist Sources: National polls; *Part of centre-right alliance ment in Strasbourg, Antonio Tajani. 1 42 Europe The Economist March 3rd 2018

2 The difference between a government most popular party in Italy. But with less led byMrTajani and one headed byMr Sal- than 30%, the M5S, which is running alone, vini, a punchy, hard-right, populist Euro- appeared to be well short of an outright sceptic, would be considerable. It illus- majority. The movement’s policy till now trates a point made by Wolfango Piccoli of has been that until it gets one, it should not Teneo Intelligence, a political-risk consul- make deals with mainstream parties to get tancy, about the effects of Italy’s new elec- power. What remains unclear, and could toral law: “A shift of a few percentage force a return to the ballot box, is how far points in voters’ preferences could have a the M5S will be prepared to engage in any dramatic impact on the ability to form a coalition talks after the vote. new government, and its eventual compo- The prospect of a hung parliament has sition and leadership.” raised fears of gridlock. But Italians have The choice between Mr Tajani and Mr more than 70 years’ experience of solving Salvini would at least reflect voters’ prefer- apparently intractable political conun- ences. The same cannot be said of the oth- drums. Arguably greater than the threat to er likely outcome—a hung parliament. No governability is that to good government. one, for example, will have voted for a Whichever coalition emerges from the “grand coalition” of Forza Italia, the centre- election is likely to be heterogeneous. That left Democratic Party (PD) and perhaps the is inevitable in the case of a “grand co- League and some smaller parties (party alition”, but just as likely if the right wins leaders can ditch their allies to make new outright. Mr Berlusconi and Mr Salvini deals after the election). Yet that remains have repeatedly disparaged each other’s the likeliest upshot if no alliance secures ideas. They have fallen out over Mr Salvi- an outright parliamentary majority, and a ni’s proposals for closing mosques and re- furtherreason forbelieving that Mr Berlus- introducing conscription, their attitudes to coni’s influence could grow. the euro zone’s budget-deficit limit (of 3% A grand coalition, particularly if it has of GDP) and the rate at which they would Germany the incumbent prime minister, Paolo Gen- implement their alliance’s star pledge: a tiloni, in charge, would certainly reassure flat rate ofincome tax. Succession investors. But the PD, which faces competi- A further reason for concern is the lack tion from a breakaway new party further of any serious discussion of Italy’s eco- planning to the left, has slipped in the polls to be- nomic challenges during the election cam- tween 20% and 25%. As the dominant paign. Marcello Messori, director of the BERLIN partner in Mr Gentiloni’s coalition, it risks school of European political economy at Angela Merkel finally grants herparty a further punishment because of the travel the LUISS university in Rome, notes the ab- serious choice about its future disruption caused by the snow that fell in sence ofattention to the central issue ofIta- unlikely places, including Naples and ly’s declining productivity. Arecent Oxford WO weeks ago, Germany’s chancellor Rome, this week. Economics study found that, despite a Tseemed to be in trouble. Her Christian To assemble a majority, Mr Mattarella modest increase last year, output per hour Democrat (CDU) party and the more con- may need to involve the inexperienced had risen by 20% less than Germany’s servative Christian Social Union (CSU), its M5S which, despite a campaign marked by since 1999. “Nor have the politicians dis- Bavarian sister, hated the bland coalition blundering and controversy, remains the cussed another issue,” says Mr Messori. “If deal she had just forged with the Social productivity is to be improved, there are Democrat (SPD) leadership. They also hat- goingto be plentyofvictims. People are go- ed the fact that she had conceded the ing to be thrown out ofworkand will need mighty German finance ministry to her to be retrained. They will need welfare prospective centre-left partners to help support in the short-term. How is that go- them win a membership vote, the result of ing to be financed?” which is due on March 4th. And they hated Another pressing question is how Italy, the fact that she had not brought any pros- with its giant debts, will cope with the rise pective successors into the cabinet. in borrowing costs to be expected when Since then, however, Angela Merkel the European Central Bank withdraws its has rewritten the final chapters of her support from the bond market. The party chancellorship. At a CDU conference in manifestos all contain vague promises to Berlin on February 26th Annegret Kramp- slash public debt. Yet they sit alongside Karrenbauer, her preferred candidate to be plans for higher spending and lower taxes general secretary (and, many reckon, to that would unavoidably increase it, at least succeed her as chancellor) was elected to in the short term, ifimplemented. the job with 98.9% of votes. The party also AstudyforLa Repubblica, a centre-left opted for a new “grand coalition” with the daily, by Roberto Perotti, an economics SPD by a similarmargin. In herspeech, Mrs professor at Bocconi University in Milan, Merkel blamed her poor election result in calculated that the programmes of the PD, September on Unbehagen, or malaise, M5S and right would add €56bn ($68bn), about the capacity of the German state in €63bn and at least €161bn respectively to moments like the refugee crisis, about tech- the deficit. The highest of those figures nological change and about an unpredict- would take it to almost 12% of GDP. Long able wider world. before then, however, the markets would It is still possible that the SPD members have been seized by panic, doubtless tip- will vote against the coalition deal. In that Can Mr Gentiloni keep it together? ping the euro zone into a second crisis. 7 case Mrs Merkel would probably form a 1 The Economist March 3rd 2018 Europe 43

2 minority government, though it would be Turkey American troops embedded with the unlikely to last a full four years. Or she Kurds elsewhere in Syria “an Ottoman could try to force new elections. But it Muzzling the slap”, no fewer than 16 newspapers fea- looks more likely that grass-roots Social tured his words on their front pages the fol- Democrats will—very reluctantly—back fourth estate lowing day. Turkey’s army claims to have the deal. If so, Mrs Merkel’s fourth term as “neutralised” over 2,000 YPG fighters in German chancellor will begin around ISTANBUL Afrin withoutkillinga single civilian. Nota mid-March. single mainstream media outlet has ques- Turkey’s press is in thrall to the Several new figures would then mark tioned the figures. government German politics. Olaf Scholz, the fiscally Turkey is the world’s biggest jailer of conservative SPD mayor of Hamburg, T THE start of its offensive against Kurd- journalists, with over100 currently behind would be finance minister and thus domi- Aish insurgents in Syria’s Afrin province bars. Mr Erdogan seems determined to nate discussions with Emmanuel Macron, last month, Turkey’s prime minister, Binali keep it that way. On February 16th a court the French president, on euro-zone reform. Yildirim, held a morning briefing with sentenced six media workers, including a The pugilistic Andrea Nahles, the incom- more than a dozen editors of the country’s prominent novelist, to life in prison with- ing SPD leader, would strive to give her leading news outlets. According to ac- out parole on trumped-up charges of in- party new definition in the Bundestag. Mrs counts of the meeting, the journalists were volvement in an abortive coup in 2016. The Kramp-Karrenbauer, the moderate former provided with guidelines on how to cover same day Turkey released Deniz Yucel, a minister-president of the Saarland, would the unfolding war. Reporters were asked to correspondent for a German newspaper, launch a programme of renewal in the “bear in mind Turkey’s national interests”, from pre-trial detention. Widely consid- CDU. In her speech at her party’s confer- one participant recalled. News published ered a bargaining chip in Turkey’s fraught ence in Berlin she committed to making it in the foreign media was to be treated with relations with Germany, Mr Yucel had once more “the place where there’s a real caution as it was likely to give a platform to been locked up for over a year without contest”. Meanwhile Jens Spahn, an ambi- “terrorist propaganda”. Readers were to be even an indictment. tious MP from the Rhineland, would be- reminded that the army would take the ut- Arrest is the weapon of last resort. come health minister. most care to avoid civilian casualties. The What gets Turkey’s government the cover- The expected contest between Mrs coverage was to highlight that Turkish age it wants is a more nuanced system of Kramp-Karrenbauer and Mr Spahn to re- troops would be fighting Islamic State (IS) incentives and sanctions. Because the big- place Mrs Merkel—who most people in gunmen in addition to Kurdish ones— gestnewsoutlets are run by conglomerates Berlin assume will step down before the though IS has no presence in Afrin. with interests in sectors like mining, con- next election, due in 2021—would pit two With a handful of exceptions, Turkey’s struction and shipping, even those media starkly different visions of the CDU/CSU media have followed the government’s bosses privately opposed to the govern- alliance against each other. The former, recommendations to the letter. The main ment dance to Mr Erdogan’s tune to avoid aged 55, belongs like Mrs Merkel to the channels have competed to be first to re- losing out on lucrative state contracts. party’s Christian-social wing. She is a so- port on the number of villages captured Some hire government cronies. Critical cial conservative and economic centrist and the numbers of Kurdish People’s Pro- pundits are banished from the main news who as leader would probably prefer yet tection Units (YPG) killed by Turkish channels. Reporters sacked under govern- another coalition with the SPD. By contrast troops. (The government detests the YPG ment pressure become unemployable. Mr Spahn, who is only 37, and is gay, be- because of its support for Kurdish separat- Others are dragged through the courts. longs to the CDU’ssociallyliberal wing, yet ists inside Turkey.) News stories have tend- Some still test the boundaries, but most are has won over the party’s conservatives ed to be no more than a blend of govern- resigned to living inside them. “There’s no with a tough line on immigration and inte- ment talking points and army need for censorship any more,” despairs a gration, and would most probably seek to communiqués. When Turkey’s president, columnist. “Journalists understand what is form a new government with his friend Recep Tayyip Erdogan, threatened to give expected ofthem.” Christian Lindner of the pro-business Free The climate of fear, the ongoing state of Democrats, if the numbers permitted. He emergencyand the nationalistzealotry un- admires dynamic young centre-right Euro- leashed by the coup have made objective pean leaders like Sebastian Kurz in Austria coverage of the war in Afrin impossible. and Leo Varadkar in Ireland. “Journalists are incapable ofreporting crit- For Europe a new German “grand co- ically without being accused of treason,” alition” would be preferable to the alterna- says Erol Onderoglu, the Turkish represen- tive: more muddle. The continent’s mighti- tative of Reporters Without Borders. The est economy has now gone five months internet is no longer a safe space for dis- without leadership. Mr Macron and others sent. In the pastmonth more than 800 peo- want to do a preliminary deal by June to ple have been detained for protesting strengthen the euro zone before its next cri- against the war on social media. Newspa- sis. A “no” from the SPD membership pers that cite the Syrian Observatory for would make a new government before the Human Rights (SOHR) when reporting autumn unlikely. But even a “yes” would atrocities committed by Syrian regime leave big questions open. Would SPD con- forces in Ghouta or Idlib ignore the group’s trol ofthe finance ministrymove Germany reports from Afrin. The SOHR estimates much towards French proposals on the in- that at least 112 civilians on the Syrian side tegration of the euro zone? Would Mrs of the border have died in the fighting, in Kramp-Karrenbauer consolidate her posi- addition to seven Turkish civilians killed tion as Mrs Merkel’s preferred successor? by rockets fired from YPG strongholds. “All Would Mr Spahn stay loyal or agitate news of civilian casualties is considered as against the chancellor? Mrs Merkel’s posi- false orasterroristpropaganda,” saysKadri tion is secure for now. What comes next is Gursel, a veteran journalist. “There’s a less certain. 7 blackout.” 7 44 Europe The Economist March 3rd 2018

France Spain Aux armes, A fit of intolerance

citoyens! MADRID Why Spanish courts censorart, speech and rap lyrics PARIS F YOU want to give a workofart loads had previously heard of, objected to his Emmanuel Macron wants to bring back ofpublicity, censor it. That is what the name appearing in the book. national service I hosts ofMadrid’s Contemporary Art Fair These incidents confirm a worrying HEN Sweden brought backconscrip- (ARCO) did with a tableau by Santiago trend. Since 2015 Spain’s courts have Wtion atthe startofthisyear, itwasa di- Sierra called “Political Prisoners in Con- convicted more than 50 people for “hate rect response to rising tension in the Baltic temporary Spain” featuring 24 pixelated speech” or the glorification ofterrorism. region and the difficulty of recruiting sol- mugshots, three ofthem ofjailed Catalan Spaniards are still emotionally scarred by diers. Now France, too, is debating the rein- separatist leaders. On February 21st the the crimes ofETA, a Basque separatist troduction of military service, which the director ofthe exhibition centre where group that murdered 829 people, and by country used to require of all young men ARCO is held ordered a participating two big jihadist attacks (the latest one in until it was abolished by the Gaullist Presi- gallery to remove the work. With that, he Barcelona in 2017). But ETA gave up vio- dent Jacques Chirac in 1997. Unlike in Swe- triggered a national debate. lence in 2011and is dissolving itself. That den, however, it is far from clear what the His decision coincided with two other didn’t stop a court last year from convict- point in France would be. acts ofintolerance. The previous day the ing Cassandra Vera, a student, for tweets During his election campaign last year, Supreme Court upheld a 42-month jail mocking the murder by ETA in 1973 of Emmanuel Macron (who is too young to sentence against Josep Miquel Arenas, a Luis Carrero Blanco, Franco’s prime have had to do it himself) promised to rapper who calls himselfValtónyc, for minister, even though the dead man’s bring back compulsory military service, if insulting the monarchy and glorifying granddaughter called forclemency. onlyfora month. Itwould apply, he said, to terrorism in YouTube posts. That fol- None ofthese legal decisions was all men and women, and take place in the lowed an order by a lower-court judge to taken by the conservative government of three years following an individual’s 18th withdraw a bookabout the drug trade in Mariano Rajoy’s People’s Party; they birthday. Nothing detailed is yet on the ta- Galicia, published in 2015. Aformer mostly show the impact ofa new penal ble. Yet in recent declarations the president mayor in a small town, whom nobody code, and the zeal ofindependent and has begun to talk about a “universal na- deeply conservative judges. But they are tional service”, which might be partly “civ- damaging the image ofSpanish democra- ic”, but would involve some unspecified cy at a delicate time. “exposure” to military affairs. Unlike the Four Catalan separatist leaders have Swedish system, in which conscripts serve been in pre-trial detention foralmost four for nine to 12 months, the French version, months; two dozen more face charges. By said Mr Macron, would now last from holding a referendum and then declaring three to six months. He has put a general in independence, the separatists deliberate- charge ofrolling out the idea. ly violated the constitution and the law. Some three-fifths ofthe French approve Spanish politicians point out that the of the plan, according to one poll. And Mr separatists face charges fortheir actions, Macron seems determined to press ahead. not their beliefs, and thus, contrary to Mr But the defence establishment is distinctly Sierra’s contention, are not “political unkeen. The army faces no particular re- prisoners”. They might well have been cruitment problem. It is already stretched prosecuted anywhere in Europe. But by operations in the African Sahel and the human-rights groups worry that charges Middle East, as well aspatrollingthe streets ofrebellion (carrying a possible 30-year in France. When Mr Macron refers to the jail sentence) and lengthy pre-trial deten- need for “national cohesion”, or calls his tion are disproportionate. plan a “project for society”, military types As forMr Sierra, a professional provo- see red. They have no wish to act as a sort cateur, he sold his tableau to a Catalan of glorified social service to the 600,000- entrepreneur forits asking price of 800,000 young people who would be cov- €80,000. It is to be displayed at a muse- ered each year, nor to enforce attendance Now you see it, now you don’t um in Lleida, in the west ofthe region. on the unwilling. “If you cannot tell young people that this is a national defence im- perative, it will be very difficult to coerce the numbers were slipped into the candi- nation-building experience. them,” notes François Heisbourg, of the date’s speech by defence advisers eager to Even so, the broader social aim may Foundation for Strategic Research, who is make the idea appear unworkable. More prove elusive. A recent parliamentary re- sceptical about the idea. recent estimates suggested that the cost of portwasscathingaboutthe usefulness ofa There are concerns about the budget, building 18 regional centres across France, month of compulsory service for such a too. Mr Macron originally estimated costs in order to take in 4,500 young people fora purpose. It pointed out that teenagers who for his one month’s military service at month ata time, would be closerto €3.6bn. turn to crime, or become radicalised, often €2bn-3bn ($2.4bn-3.7bn) a year, amounts Perhaps least clear of all is what Mr do so before the age of18. Nor did it believe that were steep enough. Yet he also re- Macron wants to get out of this. He seems that such a project could bond the nation. ferred during the campaign to an invest- to have various aims, none directly related The idea that “a few weeks of military in- ment cost of €15bn-20bn, vast sums that, if to national defence: to build respect forthe struction would be enough to develop serious, would amount to half the annual security forces, to bring people from differ- among18- to 21-year-olds a sense ofnation- French defence budget. Some suggest that ent backgrounds together and to provide a al belonging”, it concluded, “is illusory”. 7 The Economist March 3rd 2018 Europe 45 Charlemagne Europe’s back-seat drivers

The dangers ofleaders who hold powerwithout office support conditional on his stepping aside. Yet like PiS and Roma- nia’s Social Democrats, ANO is a one-man band: if Mr Babis is shunted aside, he will simply direct the action from offstage. And then there is Italy. It is impossible to predict the outcome of the election on March 4th, but one possibility is victory for the three-party right-wing coalition, of which Silvio Berlusconi’s Forza Italia might, accordingto the latest polls, win the most seats. As with Mr Dragnea, a criminal conviction, in this case for tax fraud, bars Mr Berlusconi from taking office, at least until next year, but he has loyal lieutenants. The most plausible contender for prime minister is Antonio Tajani, president of the European Parliament. MrTajani hassignallyfailed to shed hisair ofmedioc- rity in that job, but possesses the cardinal virtue of having re- mained loyal to Mr Berlusconi, whom he once served as spokes- man, since Forza’s founding in 1993. Europe’s back-seat drivers have several things in common. They have emerged in countries where parties have shallow roots or have been atomised, enabling strongmen to dominate their organisation and personnel decisions. That is easiest in ex- communistcountrieswith barelythree decadesofmultiparty de- mocracy under their belts. In Italy Forza Italia was established by HEN Rex Tillerson, America’s secretary ofstate, dropped in Mr Berlusconi in the wake of the “clean hands” corruption scan- Wto see the most important politician in Poland a few weeks dal that destroyed the Christian Democrats in the 1990s. Messrs ago, he might have hoped forgrandersurroundings. But power in Berlusconi, Kaczynski and Babis all co-founded their respective Warsaw resides not in the presidential palace, the prime minis- parties. None has shown much interest in grooming colleagues ter’s chancellery or the parliament. Instead Mr Tillerson had to who may harbour ambitions oftheir own. duck into the headquarters of Poland’s ruling Law and Justice (PiS) party, a dingy office that shares a building with a shuttered The crash to come Japanese restaurant in an unremarkable corner of the capital. But the problems with such arrangements are obvious. Interna- There he was greeted by Jaroslaw Kaczynski, who chairs the tional partners can hardly negotiate with political ciphers in party but holds no constitutional position beyond his role as a good faith. Two years ago EU officials discussing judicial reforms backbench MP serving Warsaw constituents. with the Polish governmentthoughttheyhad secured a deal until Europeans got used to dealing with back-seat drivers when Mr Kaczynski emerged from nowhere to squash it at the last mi- Vladimir Putin ran Russia as prime minister in 2008-12, while his nute. In Italy’s case this could hamper difficult talks on euro-zone factotum, Dmitry Medvedev, kept the presidential throne warm. reform later this year, especially when it comes to managing the But now they are found closer to home. Mr Kaczynski is perhaps sovereign debt on which some of the country’s banks have the most prominent among them. Polish prime ministers serve at gorged. It is frankly difficult to imagine MrTajani negotiating such hispleasure. In Decemberhe summarilydispatched Beata Szydlo issues seriously with Angela Merkel or Emmanuel Macron. More to make way for Mateusz Morawiecki, her deputy. That decision broadly, European summits depend on mutual trust among lead- was taken to improve Poland’s scratchy relations with its Euro- ers that each will follow through at home on commitments made pean partners; the suave, English-speaking Mr Morawiecki is in Brussels. How can that be done when the real leader is thou- seen as a more convincing exponent of his boss’s views. But Eu- sands of miles away? During her two-year stint in office Ms Szy- rope’s leaders know who is really in charge. dlo sometimes asked for summits to be suspended, to give her Mr Kaczynski has chosen to stay in the shadows, perhaps to time to phone home forinstructions. avoid inflaming the large segment ofPolish voters who detest his There can be checks on unaccountable leaders, including in- brand of nationalist populism. But elsewhere criminal convic- dependently elected parliaments and presidents. In Romania tions have kept puppet-master politicians from the stage. In Ro- Klaus Iohannis has at times been a bulwark against the Social mania a vote-rigging conviction bars Liviu Dragnea, who leads Democrats’ excesses. Even appointed prime ministers who are the ruling Social Democrats, from office. He also faces a string of supposed merely to execute their master’s will can develop a corruption probes. So instead he directs a series of unimpressive taste for office; that is why Mr Dragnea has rattled through so prime ministers while urginghis party to wage waron Romania’s many of them. Mr Morawiecki, who has no standing of his own “deep state”, including its anti-corruption directorate, and to pass inside PiS, has been loyal so farbut that could be tested. laws making it harder to tackle graft. In January Viorica Dancila, Yet this is no way to run a country. Leaders who are unac- an obscure member of the European Parliament, became Roma- countable to voters endanger democracy and undermine institu- nia’s fifth prime minister in just over two years. tions. Basic governance becomes harder when lines of authority In the Czech Republic Andrej Babis, a tycoon-turned-politi- are blurred and ministersserve atthe whim offigureswho do not cian facing corruption charges of his own, has been unable to occupy formal office. The incompetence of Romania’s latest gov- form a majoritysince hisANO (“Yes”) partywon the mostseats in ernment is outrageous, says Oana Popescu of Global Focus, a an election last October. He serves as acting prime minister but think-tank in Bucharest. It does not take a back-seat driver to en- perhapsnotforlong; potential coalition partnershave made their sure that a country is badly run. But it certainly helps. 7 46 Britain The Economist March 3rd 2018

Also in this section 47 Customs unions’ pros and cons 48 Bagehot: Parliament’s silent majority against hard Brexit

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

Labour’s strategy Arranging a municipal purge takes time, manpower and a near-superhuman Master of (almost) all he surveys stamina for procedural warfare. It is one thing to pull it off in a densely populated London borough, with an eager supply of activists a Tube ride away, but quite anoth- er to do it in the regions, points out one ac- tivist from another wing ofthe party. Dese- Jeremy Corbyn’s position is strongerthan ever, but the battle goes on forcontrol of lecting rebellious MPs would prove even Labour’s councils, officials—and ideas trickier, they argue. For now, at least, a Y THE time he had finished speaking, some MPs is easier said than done. block of moderate local politicians and B Jeremy Corbyn had made some unlike- In some local parties, by contrast, MPs who often only grin and bear Mr Cor- ly friends. The Labour leader was in Cov- bloody intraparty battles rage. In Haringey, byn’s policies is set to stay. entry, declaring that under his radical left- a Labour-run north-London borough, the Labour’s central party apparatus, by wing government Britain would remain in controversial redevelopment of a run- contrast, is increasingly stuffed with true a customs union with the EU after Brexit. down housing estate sparked a civil war believers. On February 23rd Iain McNicol, The Confederation of British Industry, from which the left wing of the local party the moderate general-secretary, resigned hardly a bastion of socialism, hailed the emerged victorious. The result was the de- aftermonths ofcriticism from left-wingers. policy as a “real-world solution”. Rebel- selection or resignation of more than 20 The two most likely contenders to succeed lious Conservative MPs campaigning for a Labour councillors, under pressure from him are Jon Lansman, the founder of Mo- soft Brexit cheered it. Labour MPs who had Momentum, an activist group founded to mentum, and Jennie Formby, an appara- bayed forMr Corbyn’s sacking after the EU support Mr Corbyn. After a round of local tchik from the Unite union, Labour’s big- referendum, only 18 months ago, heaped elections due in May, Haringey is likely to gest donor. They disagree on whether praise on the announcement. become the first Momentum-controlled members orunions should have the bigger After the ridicule and rebellion that council in the country. Meanwhile in New- say in how the party is run. But both are dogged hisstartasleaderofthe opposition, ham, east London, Sir Robin Wales for the strong supporters of Mr Corbyn, in whose it is quite a reversal. Recent Labour leaders first time faces a battle to be reselected as image the party is slowly being remade. have faded in the role. MrCorbyn has done Labour’s mayoral candidate. His oppo- Yet although Mr Corbyn’s critics have the opposite. “He’s gone from Mr Bean to nent? A Momentum-backed candidate. surrendered control of the party bureauc- Stalin,” says one adviser. Two-and-a-half Outside London, Momentum is finding racy, otherbattles are still under way. “The years into the job, Mr Corbyn has never the going harder. It has caused barely a rip- organisational fight may be being won by been stronger. Once-mutinous MPshave ple in the sea of red that is Labour’s north- the hard left, but the philosophical and fallen into line. Corbynites fill crucial posi- ern urban territory. All 96 ofManchester’s policy fight is up forgrabs”, says one senior tions in the party’s apparatus. Left-wingers council seats (of which Labour holds 94) Labour MP. The most important battle- dominate Labour councils in London. But are up for election in May. Only six candi- ground is Brexit. This week Mr Corbyn re- Mr Corbyn’s rule is far from absolute. dates belong to Momentum. It is a similar iterated that Britain “voted to leave the EU, In the parliamentary Labour Party, story in Leeds, where Momentum has ten that’s a done deal.” But Labour’s position peace reigns. “Acquiescent” is the common candidates running, out of 99. In other big on the manner of departure is still in flux, description of backbenchers. If offered an cities, such as Birmingham, Sheffield and as shown by the customs-union shift. immaculate ejection of their party leader, Newcastle, Momentum has struggled to For Mr Corbyn, a lifelong Eurosceptic most MPs would take it. For some of those gain significant footholds. The group’s who in the end campaigned tepidly for Re- close to the Labour leader, the feeling is own organisers say this shows that its sup- main in the referendum, Brexit sometimes mutual. But with Labour nudging ahead of posed takeover of the Labour Party is a seems to represent a political obstacle rath- the Tories in opinion polls, there is no ap- myth. “When you look at the numbers, it er than a matter of great ideological inter- petite for a coup, and deselecting trouble- just isn’t there,” says one. est. Some of Mr Corbyn’s opponents fear1 The Economist March 3rd 2018 Britain 47

2 that he would use Brexit to administer a may keep voters loyal. Labour’s Leave-vot- problems by demanding not only a com- “reverse shock-doctrine”, using Brexit-in- ers strongly support Corbynite policies prehensive customs union but also the duced trauma as an excuse to foist social- such as nationalisation and are generally right to do trade deals and to have a say in ism on Britain. Yet some in Mr Corbyn’s left-wing, points out Mr Cunningham. future EU free-trade negotiations. Brussels camp worry about the opposite—that Meanwhile, Labour’s softening line on is unlikely to agree formally to this; indeed, Brexit may create a black hole in the public Brexit creates the prospect of splitting the the ECJ would refuse to allow it. But Brit- finances that would rule out some of the Conservatives, whose contingent of Re- ain, with greater clout than Turkey, might party’s expensive policies. So far, Labour’s main voters is roughly equal to Labour’s just be able to secure an informal right of position on Brexit has been driven by a Leave minority. Tory rebels have already consultation over EU trade deals. simple aim: to get elected. proposed legislative amendments de- The government still rules out any cus- That will not be easy. The party’s mem- signed to keep Britain within a customs un- toms union at all. On February 27th Liam bers are solidly pro-EU: 89% voted to re- ion, which could inflict a damaging defeat Fox, the international-trade secretary, la- main, as did 96% of Labour MPs. Among on Theresa May’s government if Labour belled the notion a “sell-out” of British in- Labour voters, however, the figure was supports them (see Bagehot). Mr Corbyn’s terests. Yet a customs union that covered 64%. The defection of Labour’s Leave-vot- new stance placates those Labour MPs only goods would allow free-trade deals in ers would torpedo its chances offorming a who had demanded he come up with a services, which Dr Fox energetically pro- government. Yet for most people there is softer Brexit policy, and creates a potential motes. And the gains from possible future more to life than Brexit, argues Kevin Cun- route to Downing Street should Brexit deals are smaller and further off than the ningham, a former Labour adviser and blow up for the Tories. The Labour leader immediate losses from leaving the EU and now a pollster at XY Campaigns. The may not have total control of his party, but its free-trade deals with third countries. party’s position on more familiar issues he is moving closer to a bigger prize. 7 This point was made by DrFox’s former permanent secretary, Sir Martin Donnelly, who likened his ex-boss’s position to re- Brexit and trade jecting a three-course meal now in favour ofa packet ofcrisps later. The Treasury also The customs of the country frets that future gains are too remote to off- set today’s losses. So does the Confedera- tion of British Industry, which wants “a customs union for now”—that is, until fu- ture deals materialise. Another business lobby, the Institute of Directors, suggests a customs union that excludes most pro- How a customs union with Europe unexpectedly became a burning issue cessed agricultural products and services, REXIT keeps on throwing up surprises. ment of people, being directly subject to so these could be in free-trade deals. B One came this week when the issue of the European Court of Justice (ECJ) or pay- The customs issue is bound up with an- a customs union with the European Union ing into the EU budget. other Brexit headache: averting a hard bor- suddenly moved into the political spot- Yet there are drawbacks to a customs der with Ireland. The European Commis- light. Another was the sight of business union. As Turkey has found, being in one sion has released a draft legal text of the lobbies praising Jeremy Corbyn, Labour’s makes it impossible to strike free-trade Article 50 withdrawal agreement, whose far-left leader, because he supported the deals in goods with other countries. principles it agreed with Britain in Decem- idea of forming such a union, in hopes of Worse, it means that any such deals that ber. The paper spells out the fallback op- uniting with rebel Tory MPs to defeat the the EU makes automatically open the Turk- tion for avoiding a border, which is to keep government. Yet this technical-sounding ish market without giving Turkey recipro- Northern Ireland in a customs union and matter was barely mentioned in the Brexit cal rights (cheap Mexican imports, for in- in full alignment with single-market rules. referendum—and few voters or even MPs stance, can enter Turkey even though it has This implies that there might be a border in really understand it. no free-trade deal with Mexico). Turkey’s the Irish Sea, an idea rejected by the Demo- The concept is old enough. The Zollve- customs union is only partial, excluding cratic Unionists, who prop up Theresa rein, which abolished tariffs between Ger- farm products, and it does not cover ser- May’s government. “No UK prime minister man states in the 1830s, is a famous exam- vices. There are lengthy checks at the Turk- could everagree to it,” she declared. Ifthere ple. The EU’s customs union dates from its ish border with the EU. can be no border on land or sea, a customs inception in 1957, though it was not com- Mr Corbyn tried to get around these union could yet be forced on her. 7 pleted until 1968. Like a free-trade area, a customs union scraps internal tariffs and quotas, but it adds a common external ta- riff. By definition, leaving the EU means leaving its customs union. But it does not preclude forming a new customs union with the EU, as Andorra, Monaco—and, on a bigger scale, Turkey—have done. Bygettingrid oftariffsand quotas, a cus- toms union facilitates trade. The EU’s cus- toms union is essential to supply chains across Europe, with car parts and cabbages freely criss-crossing borders many times over. Unlike in a free-trade area, there are no costly rules-of-origin requirements to prove where products came from. And un- like membership of the EU’s single market, a customs union does not entail free move- The border becomes a battleground 48 Britain The Economist March 3rd 2018 Bagehot Parliament’s silent majority

It is not clearthat Theresa May will be able to get a hard Brexit through Parliament against the Brexiteers. In particular, Anna Soubry is bringing the same determination to her cause that Jacob Rees-Mogg, an out- spoken Brexit purist, has brought to his. Together with Tory re- mainers such as Ken Clarke and Labour Remainers such as Chuka Umunna, Ms Soubry has tabled amendments to both the Taxation (Cross-Border Trade) Bill and the Trade Bill that would force Britain to be partofa customs union with the EU afterBrexit, a position that directly contradicts Conservative Party policy. The second is that, on February 26th, Jeremy Corbyn em- braced the idea ofstayingin a customs union. Thissent an electric shock through politics. It suggested that Mr Corbyn is so keen on getting to Downing Street that he is willing to abandon his long- standing suspicion ofthe “capitalist club” in Brussels. It energised the pro-EU majority of Labour MPs who have been infuriated by Mr Corbyn’s Euroscepticism. And it increased the chances of a parliamentary showdown over Ms Soubry’s amendments. Is there really a possibility that moderate Tories will defeat theirown government? The arithmeticcould be demanding. Sev- eral pro-Brexit Labour MPs, such as Frank Field and Kate Hoey, might vote with the government. Tories will be highly sensitive to the charge that they are making it more likely that Britain will HE British constitution is a mysterious thing. It is not written fall out of the EU without a deal, and that Mr Corbyn will slither Tdown in any single place. It is sometimes frustratingly fuzzy. into Downing Street. But they are also reluctant to vote fora mea- Yet on the most important subject of all—where sovereignty sure that threatens not only to hampertrade with Britain’sbiggest lies—it is crystal clear. Sovereignty does not lie with the govern- marketbutalso to impose a hard borderin Ireland. And the Fixed- ment. It does not lie, thankGod, with that dangerous abstraction, Term Parliaments Act makes it possible to vote against the gov- “the people”. It lies with Parliament, and ultimately with the ernment without precipitating an election. The government is so House ofCommons. worried about the gathering revolt of the moderates, with 20 To- Theresa May has tried her best to massage this inconvenient ries indicating that they might vote with Ms Soubry, that it is de- constitutional fact into a manageable political shape. She called laying votes for as long as possible. an election in order to increase her majority and with it her abili- Sir John Major, the Tory prime minister in 1990-97, has gone ty to bribe and bully herMPs. She argued that MPs would only be even further than Ms Soubry in standing up to the Brexiteers, given a vote on the European Union (Withdrawal) Bill at the last whom he describes as being “wrong” on “nearly all they have moment. But it was as if the spirit of parliamentary sovereignty said or promised”. In a speech on February 28th he argued that was determined to frustrate her. First, she lost her majority in Parliament’s vote on the Brexit deal should be not only “mean- June 2017. Then, in October, Dominic Grieve, a normally faithful ingful” but “decisive”. MPs should be given a free vote on wheth- party man and former attorney-general, pushed through an er to accept or reject the outcome of the negotiations. Parliament amendmentobligingthe governmentto give MPsa “meaningful” should be able to send the negotiators back to seek improve- vote on the Brexit deal. ments. And it should be free to order another referendum. “That Mrs May has recently focused all her energies on securing is what parliamentary sovereignty means,” Sir John said. agreement within her cabinet. At the prime minister’s country residence, Chequers, on February 22nd, the various factions The mother of arguments agreed on a policy they called “managed divergence”. But what- The next few months could bring high political drama. The gov- everthe meritsofthisplan—and mostpeople regard itas a pigthat ernment could be humiliated on the customs union; Tory MPs won’t fly in Brussels—the battleground is now moving from the could precipitate another leadership election; and, ifSir John has cabinet, where Brexiteers and anti-Brexiteers are evenly bal- his way, they could reject the final deal orsend everything backto anced, to Parliament, where a different logic prevails. the electorate. Parliament’s growing assertiveness will make it Three-quarters of MPs voted to remain. This pro-EU majority more difficult for Mrs May to negotiate with Brussels. It is hard has been humbled by the vote to leave—after all, Parliament ex- enough negotiating with an implacable bureaucracy without plicitly contracted the decision to the voters. It has also been mar- having your position constantly redefined by a volatile Parlia- ginalised by day-to-day politics. The leaders ofthe two main par- ment. It will also make it harder to pass the mass of Brexit-related ties both embraced the “Brexit means Brexit” formula. Brexiteers legislation that is working its way through Parliament. advanced their position with discipline and determination. But But this is a price worth paying for making the right decision people who voted against Brexit in the first place are naturally on a subject that will shape Britain for generations. Parliamenta- predisposed to voting fora soft Brexit, such as remaining in a cus- ry scrutiny will reduce the chance that Britain adopts a hardline toms union with the EU. One calculation puts the numberof MPs version of Brexit on the say-so of zealots. And it will increase the who support a customs union at 487, compared with just155 who chance that the government takes into account the 48% who vot- oppose it (150 Tories plus five Labour MPs). This silent majority is ed to remain. The strongest argument for leaving the EU was al- now finding its voice, thanks to two developments. ways about restoring parliamentary sovereignty. The sooner the The first is that moderate Tories are beginning to push back silent majority ofMPs makes the most ofthis, the better. 7 International The Economist March 3rd 2018 49 all the drinks containers it shifts each year, including 110bn plastic bottles. Consumer- goods giants such as Unilever and Procter & Gamble vow to use more recycled plas- tics. McDonald’s plans to make all its pack- aging from recycled or renewable sources by 2025, up from half today, and wants ev- ery one of its restaurants to recycle straws, wrappers, cups and the like. The perception of plastics as ugly, un- natural, inauthentic and disposable is not new. Even in “The Graduate” they symbol- ised America’s consumerism and moral emptiness. Visible plastic pollution is an old complaint, too (years ago, plastic bags caught in trees were nicknamed “witches’ knickers”). What is new is the suspicion that microplastics are causing widespread harm to humans and the environment in an invisible, insidious manner. “Blue Plan- et 2”, a nature series presented by Sir David Attenborough that aired in Britain last Oc- tober and in America in January, made the case beautifully. But the truth is that little is known about the environmental conse- quences of plastic—and what is known doesn’t lookhugely alarming.

A load of rubbish We can be surest about how much plastic is produced and where it ends up. In a pa- per published last year in Science Ad- vances, Roland Geyer of the University of California, Santa Barbara, and his col- leagues put the cumulative amount of sol- Plastic pollution id plastic waste produced since the 1950s that has not been burned or recycled at Too much of a good thing 4.9bn tonnes (see chart 1 on next page). It could all have been dumped in a landfill 70 metres deep and 57 square kilometres in area—that is to say, the size ofManhattan. If only it had all remained on land, or even washed up on beaches, where it Plastics are not the world’s worst environmental problem, norone that is all that could be collected. A bigger environmental hard to solve worry is that much plastic has ended up in R MCGUIRE had just one word for salt water and ultraviolet light, it can frag- the ocean, where, dispersed by currents, Myoung Benjamin, in “The Graduate”: ment into “microplastics” small enough the stuff becomes virtually irretrievable, plastics. It was 1967, and chemical engi- to find their way into fish bellies. From especially once it has fragmented into neershad spentthe previousdecade devis- there, it seems only a short journey to microplastics. Computer models suggest ingcheap waysto splice differenthydrocar- dinner plates. that seas hold as many as 51trn microplas- bon molecules from petroleum into Countries as varied as Bangladesh, tic particles. Some are the product of larger strands that could be moulded into any- France and Rwanda have duly banned pieces breaking apart; others, like micro- thing from drinks bottles to Barbie dolls. plasticbags. Since lastyearanyone offering beads added to toothpaste or face scrubs, Since then global plastic production has them in Kenya risks four years in prison or were designed to be tiny. risen from around 2m tonnes a year to a fine of up to $40,000. In January China Whereas salt and sunlight can cause 380m tonnes, nearly three times faster barred imports of plastic waste, while the plastics physically to break apart into than world GDP. European Union launched a “plastics strat- smaller pieces, chemically the hydro- Unfortunately, of the 6.3bn tonnes of egy”, aiming, among other things, to make carbons linked together into the polymer plasticwaste produced since the 1950sonly all plastic packaging recyclable by 2030 chains of which plastics are made do not 9% has been recycled and another 12% in- and raise the proportion that is recycled spontaneously decompose into other cinerated. The rest has been dumped in from 30% to 55% over the next seven years. compounds. Like crude oil, from which landfills or the natural environment. Of- A British levy on plastic shopping bags, in- most polymers are derived, that happens 1 ten, as with disposable coffee cups, drinks troduced in 2015, helped cut use ofthem by bottles, sweet wrappers and other packets 85%. On February 22nd Britain’s environ- Defence correspondent: We are looking for a senior that account for much of the plastic pro- ment secretary, Michael Gove, mused writer to cover global defence and security. Applicants duced in Europe and America, this hap- about prohibiting plastic straws altogether. should send a CV and an original 600-word article, pens after a brief, one-offindulgence. Ifthe Fearful fortheirreputations, big compa- suitable for publication in The Economist, to [email protected] by March 5th. No stuffends up in the sea, it can wash up on a nies are shaping up. Coca-Cola has prom- journalistic experience is required, but a knowledge of distant beach or choke a seal. Exposed to ised to collect and recycle the equivalent of military and geopolitical affairs is essential. 50 International The Economist March 3rd 2018

2 only if they are burned at a high tempera- known that because polymers repel water ture to release mainly carbon dioxide and The end of all things 1 (which is why droplets form on their sur- water. In normal conditions plastic simply Global plastic production and use face), plastic particles also attract certain accumulates in the environment, much as 1950-2015, tonnes, bn compounds from their surroundings.

carbon dioxide does in the atmosphere. Total virgin plastic produced 8.3 Some of these could be toxic. Laboratory Even if the flow of plastic into the sea, studies have shown that if swallowed by totalling perhaps 10m tonnes a year, was fish, compounds in plastic fragments can instantly stanched, huge quantities would be absorbed from the digestive tract into Virgin plastic remain. And the flow will not stop. Most of still in use Used once flesh. However, no studies have so farbeen the plastic in the ocean comes not from 2.5 5.8 performed to testwhethersuch toxins con- tidy Europe and America, but from coun- centrate up the food chain, as mercury tries in fast-developing East Asia, where Recycled does in fish. The only direct evidence of still in use waste-collection systems are flawed or plastic entering the human diet is a study 0.1 0.5 non-existent (see map). Last Octoberscien- Recycled by Belgian scientists who discovered plas- tists at the Helmholtz Centre for Environ- tic fragments in mussels. Unlike fish, bi- mental Research, in Germany, found that valves are eaten whole, guts and all. 0.7 ten rivers—two in Africa and the rest in Incinerated Munching moules-frites seasoned with Asia—discharge 90% of all plastic marine a pinch of plastic may sound unappetising 0.3 4.6 debris. The Yangtze alone carries 1.5m Discarded but need not be worrisome, says Steph- tonnes a year. anie Wright, who studies the subject at On current trends, by 2050 there could Source: “Production, use, and fate of all plastics King’s College, London. Polymers are ever made” by R. Geyer et al., Science Advances be more plastic in the world’s waters than chemically inert, and so do not themselves fish, measured by weight. Such numbers present a health risk. Some common addi- frighten people and change their behav- On land, the damage from litter, which tives such as phthalates (which soften PVC) iour. Nine in ten Europeans worry about exercises many anti-plastic campaigners, or bisphenol-A (which hardens many plastic’s impact on the environment. More is limited. Most refuse does not spread too types of plastic used in consumer goods) than half told pollsters for Eurobarometer far beyond population centres, where (at are chemically akin to human hormones, in 2017 that they try to forgo plastic bags least in principle) it can be managed. At and might therefore disrupt them in high when shopping. By comparison, only one- sea, most plastics end up in vast rubbish concentrations. For decades both have tenth consider fuel-efficiency when buy- patches fed by ocean circulation patterns, been licensed for use in everything from ing a new car. Unlike other kinds of pollu- the biggest of which can be found in the pipes to shampoo bottles because human tion, plastic is an eyesore, notes Liz Good- north Pacific. exposure was unlikely to exceed safe lim- win of the World Resources Institute, a Mid-ocean gyres are fortunately nei- its. America now bans some phthalates in think-tank. Yet if a comprehensive league- ther especially rich in fauna nor particular- toys and child-care products because of table of environmental ills existed—which ly biodiverse. The effects of plastics on potential harm to growing children. it does not—plastics would not top it. busier bits of the ocean, such as reefs, have Just 10% of 3.6m tonnes of solid waste been little studied. One paper, published Weighing the damage discarded each day the world over is plas- this year in Science by Joleah Lamb of Cor- Trucost, a research arm of Standard & tic. Whereas filthy air kills 7m people a nell University and colleagues, linked plas- Poor’s, a financial-information provider, year, nearly all ofthem in low- and middle- ticlitterto coral disease nearIndonesia and has estimated that marine litter costs $13bn income countries, plastic pollution is not Myanmar. But little similar work exists for a year, mainly through its adverse effect on directly blamed for any. A report last year other sedentary species, let alone slippery fisheries, tourism and biodiversity. It puts by the Lancet Commission on pollution migratory ones. the overall social and environmental cost and health, which put the total number of Researchers have identified 400 spe- ofplastic pollution at $139bn a year. Ofthat pollution-related deaths at 9m, mentions cies of animal whose members either in- half arises from the climate effects of plastics once in its 45 pages. gested plastics or got entangled in it. It is greenhouse-gas emissions linked to pro- ducing and transporting plastic. Another third comes from the impact of associated China as number one air, water and land pollution on health, Estimated mass of mismanaged plastic waste cropsand the environment, plusthe cost of 2010, tonnes, m waste disposal. To put that into perspective, the United Nations Development Programme says that the costs of overfishing and fertiliser run-off amount to some $50bn and $200bn-800bn a year, respectively. By 2100 ocean acidification, which is caused by at- mospheric carbon dioxide dissolving into >8.00 water, could cost $1.2trn a year. The costs of 1.00-8.00 rapid ocean warming caused by human- 0.25-1.00 induced climate change are hard to fathom 0.01-0.25 400 but are likely to be enormous. <0.01 The overall cost of plastic pollution 300 No data Virgin plastic compares favourably with other sorts of Global, tonnes, m 200 man-made harm mostly because plastics Production 100 are light. Making a kilogram of virgin plas- Waste generation 0 tic releases 2-3kg of carbon dioxide, about 1950 60 70 80 90 2000 10 15 as much as the same amount of steel and Sources: “Plastic waste inputs from land into the ocean”, by J. Jambeck et al., Science five times more than wood. But a product 1

52 International The Economist March 3rd 2018

vice-president for sustainability. In other The trouble is, it’s so useful 2 words, erratic demand appears to dampen Global primary plastic production including additives, 2015, tonnes, m supply while insufficient supply inhibits 0 50 100 150 200 250 300 350 400 demand. Recyclers everywhere face that problem. There is no guarantee that targets Consumer & EU Packaging Building & Textilesinstitutional Other like the ’s will solve it. construction products China’s import ban may provide the Transportation necessary jolt. Introduced as part of a Electrical/ Industrial broader clampdown on pollution, it took Source: R. Geyer et al., Science Advances electronic machinery waste exporters by surprise. In 2017 Euro- pean countries shipped a sixth of their 2 made of plastic can weigh a fraction of a drew perhaps 200 participants. This year plastic waste for disposal abroad. Most comparable one made ofother materials. organisers had to cap attendance at 600 sailed to China. In the short run some sur- That is why replacing plastic with other and turn people away. plus waste can go to Malaysia or India, but things could raise environmental costs at While researchers get a better handle those countries’ capacity is a fraction of least fourfold, according to Trucost’s an- on the science, campaigners badger politi- China’s. Eventually, refuse exporters will alysts. This is even true of the various vir- cians and browbeat consumers to kick the have to deal with more ofit at home. tue-signalling alternatives to plastic bags. polymer habit. They often invoke the pre- Building recycling capacity is one op- A British government analysis from 2011 cautionary principle. If the impact of tion. Incineration is fallingout offavour for calculated that a cotton tote bag must be something is uncertain but could be great, heating or electricity generation as coal- used 131times before greenhouse-gas emis- the argument goes, better forestall it just in fired plants are replaced with gas, which sions from making and transporting it im- case. As the proliferation of plastic bans emits less greenhouse gases than waste-to- prove on disposable plastic bags. The fig- and strategies suggest, they are having energy plants. From an ecological stand- ure rises to 173 times if 40% of the plastic some success. point, landfilling is not as bad as it looks, so bags are reused as bin liners, reflecting the long as additives that might leach out of proportion in Britain that are so repur- PET peeves the polymers are prevented from escaping. posed. The carbon footprint ofa paper bag Much ofthis activity makes scarcely a dent Plasma recycling, where refuse is heated to that is not recycled is four times that of a in the world’s plastic pollution problem, as much as 5,000°C, turning it into unadul- plastic bag. however. Some has unintended conse- terated hydrocarbons plus a solid residue, And other materials could not replace quences. Making plastics biodegradable, looks promising but remains some way plastics in all circumstances. Imagine a byaddingcorn starch orvegetable oil to pe- from commercialisation. hospital without surgical gloves, or pro- troleum-derived hydrocarbons, renders To be disposed of, though, plastic waste miscuity without condoms. By keeping them harder to recycle. Recyclers already must be collected. In Europe, America and food fresh forlonger, plasticpackaging sub- struggle to invest in capacity or innovation other developed places, virtually all ofit is. stantially reduces organic waste, itself a even in countries that collect lots of their To eliminate marine litter in particular, growing environmental concern. In 2015 J. rubbish. Periodic declines in the oil price, more rubbish needs to be picked in the Sainsbury, a British grocer, reduced waste which makes virgin plastic cheaper, can leaky Asian countries. in a beefsteakline by more than half by us- bankrupt recyclers, many of which are China’s anti-pollution drive may bring ing plastic vacuum packaging. small or medium-sized companies, says about improvements, although the coun- Plastic pollution “is not the Earth’s most Peter Borkey of the OECD, a rich-country try now pays more attention to filthy air pressing problem”, in the words of one think-tank. and water, which are more pressing con- European official. But, he immediately Meanwhile consumer-goods firms cerns. Indonesia has launched its own Na- adds, just because plastics may not be the sometimes say that too little recycled plas- tional Action Plan on marine plastic. The biggest problem facing humanity does not tic is available to buy. With costs of some other big polluters are eyeing similar mea- make them trouble-free. As scientists nev- recycled plastic competitive with virgin sures. What happens there over the next er tire of repeating, more research is need- stuff, “supply is a bigger issue than cost,” few decades will matter more than any ed. It is the absence ofevidence about how says Virginie Helias, Procter & Gamble’s number ofWestern plastic-bag bans. 7 plastics influence health rather than evi- dence of absence that explains their bit part in the Lancet Commission report, says Philip Landrigan of the Icahn School of Medicine in New York, who chaired it. Fresh science may be forthcoming. In the past two years Ms Wright has noticed an uptick in grants for plastics-related re- search. Erik van Sebille, of Utrecht Univer- sity in the Netherlands, recalls that a few years ago a seminar on ocean plastic pollu- tion organised by America’s National Oce- anic and Atmospheric Administration

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Also in this section 55 American business and the NRA 56 Royal Dutch Shell and Eni in court 57 McKinsey’s new boss 57 Comcast and Sky 58 Flying private goes more upmarket 60 Schumpeter: Are China’s state giants reformable?

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The car business Paris and London, imposing bans. Second, the industry is woefully be- Last lap of luxury hind in designing and selling electric vehi- cles (EVs), which consumers are increas- ingly taking to. It is not the Germans, supposedly the leading innovators in cars, BERLIN but Renault-Nissan-Mitsubishi, a mass- market rival, that makes the world’s best- Germany’s high-end cars have the most to lose from the dramatic changes facing selling EV, the Nissan Leaf, sales of which the auto industry have reached some 300,000 since the car’s ERMAN carmakers have much in com- The first is one of public trust. VW’s emis- launch in 2010. Chinese carmakers are Gmon with the self-confident roadhogs sions scandal in 2015, when it admitted it streets ahead (see chart). who favour their vehicles. The cars they installed software in cars to trick tests of Third, the complex mechanical ma- produce, with sleek design, doors that emissions, and accusations last year of col- chines at which the country’s engineers ex- close with a satisfyingthunkand roomy in- lusion on diesel standards on a vast scale, cel are gradually transforming into (bat- teriors swagged with leather and technol- have damaged carmakers’ reputations and tery-powered) computers on wheels that ogy, are the dominant force at the upper also their political backing. A reminder of will drive themselves. Superior mechani- end ofthe car market worldwide. At home, the seriousnessofthe issue came on Febru- cal-engineering technology has been the too, they are the purring engine of the ary 27th when a federal court in Leipzig industry’s foundation, but there is no guar- economy; carmaking is by far Germany’s said that authorities in Stuttgart and antee that it will lead in the electronic engi- biggest industrial sector. Düsseldorf can prohibit entry of diesel neeringand IT data-processingcapabilities But cars are changing. Electric power cars, a ruling relevant to some 70 German that will count most in future. Matthias and autonomous vehicles will alter radi- cities. The prospect of city bans across Eu- Wissmann, president ofthe German Auto- cally the way they are used (see special re- rope on polluting cars is drawing closer. mobile Industry Association, concedes port). The difficulty in adapting threatens Anti-diesel sentiments are spreading be- that such developments together mean his not only future revenues and profits at the yond Germany, with other cities, such as members face a “challenging moment”. big three—Daimler, BMW and Volkswagen The tyre tread of its carmakers has left a (VW)–but also Germany’s status as a mean big impression on Germany. Cars are economic machine. Overtaken worldwide road-going adverts for the na- Fornow they are ahead. Brands built on Electric vehicle and plug-in hybrid sales tional brand. “Made in Germany” has be- unmatched quality mean four-fifths of the Worldwide, m come a guarantee of engineering prowess world’s premium cars have German 1.25 that has helped to promote the country’s badges. BMW and Daimler’s Mercedes- exports of industrial equipment and a Other Benz both make over 2.2m cars a year. VW myriad of niche products from the Mittel- Japan 1.00 vies with Toyota and the Renault-Nissan- Germany stand ofmedium-sized firms. Around four- Mitsubishi alliance as the world’s biggest Norway fifths of all cars made in Germany, worth United 0.75 carmaker. It knocks out some 10m vehicles States €256bn ($283bn) in 2016, are exported. A annually but relies on selling around 2m workforce ofaround 800,000 is employed Audis and Porsches for 65% of its profits. 0.50 directly or by suppliers. And these are The three companies’ total output of over China plum jobs, with high pay and lots of perks 15m vehicles in 2016 represented around a 0.25 (including, forsome, big company cars). fifth ofthe global total. “We are still the best The industry’ssuccesscomesin part be- carproducersin the world”, bragsMatthias 0 cause the premium segment has long been 2010 11 12 13 14 15 16 17 Machnig, a deputy economy minister. growing faster than the car market as a Source: www.EV-volumes.com Yet the industry has three big problems. whole. As motorists get richer they tend to 1 54 Business The Economist March 3rd 2018

2 trade up to a nicer set of wheels. The Ger- Germany’s current chancellor, Angela to public worries over air pollution from mans have also cannily expanded what Merkel, has been only too willing to help. their cars. As political opponents grow counts as a premium car. Once they spe- She pressed the EU to block an agreement more outspoken in favour of bans—the cialised in big saloons. But a decade or so on toughening carbon-dioxide emissions Greens in parliament suggest sending pet- ago they put their badges on smaller, in 2013 (big German cars remain heavy rol and diesel cars to the scrapyard nation- cheaper cars, such as BMW’s1-Series or the emitters, although diesel produces less car- wide by 2030—even Mrs Merkel’s ruling Mercedes A-Class. For a little extra drivers bon dioxide than petrol). German politi- party is adjusting its position on diesel. could have a prestigious German marque, cians lobbied the European Commission Last week a junior minister suggested that a step up from mass-market models, which to temper the severity of the latest set of temporary driving restrictions on some ceded market share. emissions rules, for 2020 and beyond, an- routes might be introduced in an effort to Scale and strong brands have kept com- nounced in November. As Lutz Meier, a limit the worst episodes ofurban smog. petitors at bay. Toyota’s Lexus division and motor journalist in Berlin puts it, cars, and Political support in past years helped Jaguar Land Rover (JLR), a British-based In- the policies that favour them, have helped the industry in the short term but is widely dian-owned firm with, not coincidentally, to “determine our national psyche”. felt to have contributed to complacency a former BMW executive in charge, have Yet consumers, especially younger and to German manufacturers’ lagging po- mounted the most successful challenge ones, are increasingly doubtful about sition in the EV race. Gettingthe cold shoul- but are still minnows in comparison. They diesel-powered cars. The share of diesel der from government might be beneficial sold over 670,000 and 610,000 cars respec- sales has tumbled in Germany from a peak ifitspurred firmsto actfasterin responding tivelyin 2017. The premium brandsofother of 48% in 2012 to 33% this year and is plum- to changing consumer tastes, producing carmakers have made even less of a dent. meting elsewhere in Europe too. Ger- electric or cleaner vehicles and keeping up Only Tesla’s swish electric cars have given many’s car firms are heavily reliant on with changing demand from abroad. But the Germans cause to lose sleep. diesel sales in Europe; they make up well carmakers will fret that they are losing sup- The Institute for Economic Research over a third ofglobal sales forDaimler and port, and if the mesh of rules and incen- (IFO) says that carmakers account for 13% for BMW and a quarter for VW. So if Ger- tives that keep consumers driving their na- of industrial value creation in Germany. man cities do impose driving bans on die- tional treasures change, it could have a Cars are a spur of the technological inno- sel cars, in response to evidence that pollu- sharply detrimental effect on the industry. vation for which the country is famed. In tion threatens residents’ health, that could 2016 the industry spent nearly€22bn on re- prove to be a “Fukushima moment” forthe Electric shock search and development, over a third of industry, suggests Christian Hochfeld, of Today it is Tesla that dominates the luxury Germany’s total. Serving the car industry Agora, a Berlin think-tank focused on ener- market for EVs. This year JLR will be the is a key part of the businesses of industrial gy and transport, referring to the fact that first premium carmaker to start selling a di- giants such as Bosch and Siemens. Germany’s nuclear business collapsed fol- rect competitor to Tesla’s Model S saloon, lowingthe disaster in Japan in 2011. He also the I-Pace. Audi’s Q6 e-tron will arrive later Germany, company town forcarmakers notes that resale values of diesel cars are in 2018 and Porsche’s Mission E will not ar- This economic power has in turn given the tumbling. Ifcarmakers are obliged to retro- rive until 2019. Volkwagen’s and Daimler’s car manufacturers plenty of political heft. fit diesel vehicles with hardware to reduce EVs are based on established internal com- The Christian Democratic Union (CDU) is nitrogen oxide emissions, as many people bustion engine (ICE) vehicles and sell only heavily supported by the car companies; are now calling for, the cost to them would in small quantities. In 2017 VW sold under the Social Democrats by trade unions at run to billions ofeuros in Germany alone. 13,000 ofits most popular all-electric mod- the big three. Winfried Kretschmann, Coddling of the industry by politicians el in Europe and Mercedes just over 5,000. leader of Baden-Württemberg, home to is likely to decline. Mrs Merkel told bosses BMW has done better with its “i” sub- many car producers, is from the Green of the main car firms in September that “a brand, established in 2011. Global sales of Party. Even he has defended the long-term lot of trust has been destroyed” in recent the i3, a neat if pricey saloon, exceeded production ofdiesel cars. scandals. In November she warned the in- 31,000 in 2017 but sales have never Critics complain of a revolving door dustry that it is running out of time to react matched the firm’s expectations. that has led carmakers to believe that they Tardy arrival has significant costs. Sup- could get away with bad behaviour. A re- pliersare notin place to supportan entirely cent president of Germany, the previous new industry. German expertise in making chancellorand the currentdeputychancel- chemicals and electronics could have been lor have all served on VW’s board. Eckart deployed to produce a battery industry to von Klaeden, once a senior official in the feed a thriving electric-car market. “We CDU, became Daimler’s chief lobbyist in have no one in Germany who really un- Berlin in 2013. Mr Wissmann, the boss of derstands batteries, and we lack the value Germany’s leading car-lobbyist group, chain; we are very, very late”, laments Fer- also held a senior position in the CDU, and dinand Dudenhöffer, of the Centre for was transport minister in the 1990s. And so Automotive Research, in Essen. the list goes on. Further delays in switching to rapid de- These links have bestowed seeming ad- velopment of electric cars would prove vantages. “Free driving for free citizens” more costly for everyone, executives say. runs one German saying. Bosses and poli- “The longer you wait, the more jobs you ticians flit between cities on autobahns lose”, says Mr Dudenhöffer. Many are at with no speed limits. Germans pay no stake. The IFO offers a startling estimate road tax. Tax policy keeps diesel substan- that426,000 jobsamongthe main carmak- tially cheaper at the pump than petrol, ers, plus another 130,000 jobs among sup- nudging consumers to prefer big cars that pliers, depend directly on making parts for rely on diesel engines to meet emissions ICE vehicles. regulations. Othertaxrules also encourage In theory, German carmakers have the companies to provide workers with pre- skills and cash to respond quickly, by mium cars and fuel allowances. buildinghigh-quality hybrid, plug-in orall-1 The Economist March 3rd 2018 Business 55

2 electric cars. And they have ambitious Yet even if demand forfancy vehicles is ger journeys, perhaps by wealthier com- plans to catch up. VW says up to 25% of its still there, the business model is highly un- muters who are happy to pay more for cars sold in 2025 will be electrified. But certain. The convention of making money added luxury and status. they will not come cheap. EVs are pricier to chiefly from selling cars (the industry also Even if the road to future profits is hard make than cars powered by an ICE. Daim- profits from after-sales services) will have to make out, at least the Germans are more ler, which also says that up to 25% ofits cars to be augmented and perhaps eventually advanced in some areas than many com- will be electrified by the same date, admits replaced by new sources of income. As car petitors. Daimler, for example, is widely the shift will hit profits hard. Most carmak- drivers switch from ownership to services, acknowledged as a technological leader in ers are looking to spread the cost. Geely, a revenues from sales will fall. It is unclear developing autonomous cars. All three Chinese carmaker, announced on Febru- how long it will take for robotaxis and have teamed up to buy HERE, a mapping ary 23rd that it had taken a 9.7% stake in shared services to hit car ownership but company of the sort that is vital for self- Daimler, partly, itisthought, to forge an alli- some forecasts suggest that private sales driving. The Germans do have the luxury ance to share the costs ofdeveloping EVs. will fall dramatically once these emerge. of “deep pockets, deep thinking and time”, Neither is it clear what carmakers reck- notesMaxWarburton ofBernstein, a bank. Ultimately, self-driving machines on those models will be. As Dieter Zetsche, It may be that the last hold-outs who drive Another problem is how to defend the boss of Daimler, admits, he cannot say themselves are the rich and indulgent. If carefully nurtured brands themselves where the big returns will come in the fu- so, conventional luxury cars will still have from disruption. The reputation was built ture. “Maybe robotaxis and a sharing mod- some customers. But that could be an ever on superior engineering, ICEs and driving el…maybe something else”. He adds that dwindlingniche. The onus is on carmakers pleasure. Premium cars sell for more be- for short journeys no one will much care to prove they can successfully reinvent cause they are on the cutting edge of devel- about what brand of vehicle they are in. themselves—and continue to keep the opments in motoring. Antilock brakes, tur- That leaves luxury robotaxis used on lon- German economy in the fast lane. 7 bocharged (diesel) engines and a host of other whizzy extras all showed up first on German cars. In return carmakers can charge more and rake in fatter profits than their mass-market counterparts (margins average around 10% compared with 5% or below in the mass market). Yet desirable brands and mechanical brilliance maybe much lessuse ascarmak- ing is turned upside down. EVs, mobility servicesand autonomousvehiclesare like- ly to be increasing sources of profits. Elec- tric motors are largely standardised and may not command the same premium. German cars, engineered to please their discerning drivers, are unlikely to carry the same kudos when vehicles drive them- selves. BMW, which advertised its cars as “The Ultimate DrivingMachine” may have to rethinkits marketing. German manufacturers, naturally, ar- gue that there is plenty of scope for pre- American business and the NRA mium brands as the landscape transforms. The engine, after all, is a small part of a Outgunned? package that includes those plush interi- ors, smooth suspension and superior de- sign, they note. That is because by using clever electronics, car manufacturers can tweak the performance of electric engines NEW YORK to give a premium experience, they say. To Companies, urged on by activists, snub the National Rifle Association be on the safe side, BMW is even manufac- turing its own electric engines. Passengers OR all the controversy that the National issuing NRA-branded credit cards. Angry will still pay extra fora better driving expe- FRifle Association (NRA), America’s gun customers and riled-up activists, students rience even if they are no longer at the lobby, arouses, Americans of all political from MarjoryStoneman Douglasforemost wheel, they contend. stripes have tended to regard it as nearly among them, have pushed a campaign to Like all carmakers, Daimler, VW and unassailable. The NRA and its 5m mem- #BoycottNRA on Twitter, pilingpressure on BMW are trying to reinvent themselves as bers have therefore been valued custom- companies. In the span of just a few days, “mobility providers”. They have pilot pro- ers for companies, too. But after the latest several firms ended their discounts for jects for services including sharing ones school shooting, at Marjory Stoneman NRA members, including Delta and Un- such as Daimler’s car2go and BMW’s Dri- Douglas High School in Florida on Febru- ited, two airlines; MetLife, an insurer; Sy- veNow. In late 2016 VW created MOIA, a ary 14th, that has started to change. Not mantec, an antivirus-software firm; and separate division dedicated to new mobil- only has the political discussion shifted, Avis Budget Group, Hertz and Enterprise ity, including an investment in Gett, a ride- but corporate America has reacted. Holdings, the country’s three largest car- hailing firm, and plans for carpooling and Snubs from big business began just a rental outfits. shuttle services. It says MOIA will “gener- weekafter the shooting. On February 22nd “NRA Carry Guard”, an insurance poli- ate a substantial share” of revenues by First National BankofOmaha, a bank, said cy meant for NRA members to cover their 2025. Yet it offers no details on how. “customer feedback” prompted it to stop legal costs in shootingcases, dubbed “mur-1 56 Business The Economist March 3rd 2018

2 der insurance” by critics, was abandoned would argue that their moves are driven to trial in Milan on March 5th. both by Chubb, the insurer underwriting by public-relations considerations. Once The case centres on the purchase of a it, and Lockton, the broker managing it (in the furore dies down, they may say little bigoffshore oil field known asOPL 245, and Chubb’s case, the decision was made more on gun control. But being seen to be touches the top ranks of both firms. In the months ago but only announced now). On opportunistic in a politically fraught envi- dock will be, among others, Eni’s current February 28th, Dick’s Sporting Goods, a ronment could hurt firms, warns Nien-he CEO, Claudio Descalzi, and Shell’s former large retailer, said it would stop selling as- Hsieh of Harvard Business School. They exploration chief, Malcolm Brinded. Also sault rifles and raise the minimum age to are better offbeing consistent, he says. on trial are the firms themselves, charged buy any sort ofguns from 18 to 21, declaring Their own workers will be watching with failingto preventbribery. The individ- that “thoughts and prayers are not closely. Employee pressure has factored in uals face jail if convicted; the companies enough.” That same day, Walmart, another a numberofrecentpositionstaken by com- face fines. All deny wrongdoing. retailer, also said it would bar firearm pur- panies. Silicon Valley firms’ stance against In 2011Shell and Eni jointly paid the Ni- chases from those under 21. President Donald Trump’sban last year on gerian government $1.3bn for OPL 245. A backlash against the firms is already travel from several Muslim countries, or Prosecutors allege they knew the govern- brewing. Conservatives and gun-rights the outspokenness of Kenneth Frazier, the ment would pass $1.1bn of the funds to a supporters vowed to boycott them. Repub- chief executive of Merck, a pharma giant, shell company called Malabu, controlled licans in Georgia’s state legislature, on the after Mr Trump refused to condemn white by Dan Etete, a former oil minister. They verge of approving a tax cut on jet fuel supremacists in Charlottesville, are just a claim the companies had reason to believe meant to benefit Delta, which is based in few examples. Once again, companies and Mr Etete would use much of what he re- Atlanta, threatened to spike it unless the their bosses are expected to step into the ceived to pay off officials, including Nige- airline reinstated its discount. void left by political dysfunction. 7 ria’s president at the time, Goodluck Jona- Companies that opted to do nothing than. They also suspect that more than face no less pressure. Noting that it “op- $50m may have gone to Shell and Eni exec- poses assault rifles…in the hands of civil- The OPL 245 affair utives as kickbacks. Mr Jonathan has de- ians” did nothing to save FedEx from liber- nied involvement. MrEtete facescharges in al ire after the logistics firm opted to retain Drillers in the Nigeria; his whereabouts are unknown. discountson shipmentsforNRA members. Shell says that based on the case files, It did not seem to matter that the discount dock “we do not believe there is a basis to con- was part of a routine programme that of- vict Shell orany ofits formeremployees. If fers them to members of all sorts of large the evidence ultimately proves that im- groups, including the Society of American proper payments were made by Malabu or Two oil majors face a trial in Milan over Florists. Discounts were not the only issue others…it is Shell’s position that none of a controversial deal in Nigeria at hand. Amazon and Apple, in turn, faced those payments were made with its boycott calls for continuing to carry NRA ESOURCE-RICH Nigeria has long ignit- knowledge, authorisation oron its behalf.” TV, a bundle of online-only channels. Red interest from oil firms, but it can be a Eni says it acted with “correctness and in- These are chock-full ofthe gun lobby’s pro- dangerously combustible environment tegrity” throughout. Its board says it has gun content (with programmes such as when it comes to the risk of corruption. full confidence in the firm and its boss. “Love at First Shot”). Two firms caught up in scandals are Royal International investors are particularly Activists and commentators on the left Dutch Shell and Eni, Italy’s state-backed vexed about the alleged involvement of called on the private sector to do more. energy group. In 2010 both entered into Shell, a blue-chip oil major. Last year, after Democratic legislators in New Jersey plan deferred-prosecution agreements with e-mails were leaked, it admitted that exec- to introduce a bill to bar the state’s pension America’s Department of Justice after be- utives had known that much of the pur- funds from investing in gun manufactur- ingimplicated in separate Nigerian bribery chase price would go to Mr Etete, a convict- ers. BlackRock and State Street, the world’s schemes. But those pale beside a case in- ed money-launderer. In the e-mails, they largest and third-largest asset managers, volving the two companies that is set to go speculated that funds might flow on to Mr said they would speak with the gunmak- Etete’s political friends. One investor says ers in their portfolios. The most radical that Shell, by emphasising for so long who idea floated so far, in the New York Times, is the contract was with, not where the mon- that banks and payment systems could ey was going, honoured the letter but not block transactions for assault weapons, the spirit of good governance—“and that’s even ifthe federal governmentbrings in no not good enough anymore”. new restrictions—though this was received Dutch investigators, too, are on Shell’s coolly by the industry. One banker reck- back. They raided its offices in The Hague oned the proposal was a “slippery slope” in 2016 and tapped the phone of Ben van that would force banks to become unlikely Beurden, Shell’s current chief executive. arbiters of moral acceptability. Mr van Beurden was not in the job when Could companies make a difference on the oil blockwas bought and faces no char- gun control? The NRA itself dismisses the ges. A sizeable team of Dutch investigators idea. Accusing firms dropping perks of “a is still working on the case, though the Ital- shameful display of political and civic ians have been given the lead. cowardice”, the organisation insisted that There has also been disquiet over Eni’s these companies would, in time, be re- treatment of inquisitive board members. placed by others who saw value in serving Luigi Zingales, who teachesatthe Universi- its members. But with only 5m of them, its ty of Chicago’s Booth School of Business, influence stems from speaking for a wider was an independent director until 2015, group of sympathisers. If the wider public when he left the board citing “irreconcil- is put off by well-known firms taking a able differences” over how Eni tackled cor- stand, the NRA may be diminished. ruption risks. Another non-executive di- As for firms’ staying power, a cynic Better uses for $1.1bn rector with solid governance credentials, 1 The Economist March 3rd 2018 Business 57

2 Karina Litvack, wasremoved in 2016 from a a shift towards a results-based fee model, board risk committee that had access to Big Mc bringing the firm into line with its nearest OPL 245 files. The reason, Eni said, was that Leading management consulting firms competitors, the Boston Consulting Group she had been implicated in a case of al- 2017 or latest and Bain & Company. leged defamation against the firm that was Revenues Employees Countries As McKinsey takes on more people and being investigated by a prosecutor in Sicily. $bn ’000 with offices practices, cracks in its distinctive “One Mr Zingales was also targeted: the prosecu- Firm” ethos, and its reputation for discre- McKinsey 10 27 65 tor signed a notification that he was under & Company tion, might start to show. It is under investi- investigation just days after Mr Zingales Boston gation in South Africa for working with FBI Consulting 5.6 14 50 had informed Eni that America’s , Group Trillian, a local consulting firm owned by which was following the OPL 245 money an associate of the controversial Gupta Bain & 36 trail, had contacted him about testifying. Company 2.3 6 family, on a contract worth hundreds of To many outsiders the defamation millions of dollars for Eskom, a state- Forbes claims, always vague, looked like part of a Sources: Company reports; owned utility. The firm says it never dirty-tricks campaign to discredit two free- worked for the Guptas, but admits to “er- thinkingboard members. Eni deniestrying Dominic Barton as managing partner—the rors of judgment”, particularly in starting to silence anyone or pervert the course of top job. He inherits a thriving business. work with Trillian before its internal due justice. It has confirmed that Massimo The firm remains by far the biggest of the diligence was complete. The fallout so far Mantovani, its general counsel at the time premium consultancies (see table). Over has been limited to South Africa, with a (now head of the gas division), is a suspect the past decade, annual revenues have few local clients, including Coca-Cola’s lo- in a probe by Milan prosecutors into how doubled to $10bn; so too has the size of the cal unit and some banks, saying they will the defamation case came about. Mr Man- partnership, to more than 2,000. not give McKinsey any new work. tovani declined to comment. The defama- The firm has also overhauled its own Events in South Africa may be an aber- tion claims have been dropped. Investors operations in many respects. Mr Barton ration, rather than a consequence of rapid nonetheless kicked up a stink. In response, claims that half of what it does today falls growth. Butthe tension between profit and Eni has reinstated Ms Litvack to the risk within capabilities that did not exist five principle is not new. It manifested itself committee, but tensions remain high. One years ago. It is working to ensure that cus- most clearly when Rajat Gupta, a former large investor calls the committee, the tomers turn to McKinseyites for help with managing partner, was convicted of insid- board’s most important, “dysfunctional”. all thingsdigital. Ithashad to make acquisi- er trading in 2012. Can McKinsey continue Winning the case would help the two tions in some areas: recent purchases in- to grow rapidly while keeping its key as- firms restore confidence. Losing would be clude QuantumBlack, an advanced-ana- set—its reputation as a trusted adviser—in- expensive. Eni would have to replace Mr lytics firm in London, and LUNAR, a tact? Now there is a question worthy of the Descalzi, who is highly regarded by indus- Silicon-Valleydesign company. Itisincreas- world’s best consultants. 7 try analysts. Both firms would face fines ingly recruiting outside the usual business not only in Europe but possibly also in schools to bring in seasoned data scientists America, whose crime-busters could use and software developers. Comcast the deferred-prosecution agreements from Staying relevant to big tech firms is not 2010 to brand Shell and Eni repeat offend- easy, however. McKinsey has kept plenty Excuse me while I ers, calculating their fines accordingly. 7 of older ones as clients, such as Hewlett Packard, but it has a lot more to do to crack bid for Sky newtech giantsand unicorns(private start- Management consulting ups worth more than $1bn). In general, NEW YORK management consultancies have made America’s Comcast announces a fewer inroads into firms such as Facebook Firm direction surprise offerforthe British TV firm and Google. That is partly because consul- tants typically help struggling firms cut AVING failed to get Rupert Murdoch’s costs; they have less appeal to firms al- Hattention before, Brian Roberts, chief ready on the cutting edge. Cash-rich tech executive of Comcast, certainly has it now. firms also tend to prefer keeping things in- On February 27th the American pay-televi- McKinsey’s new boss has repairwork house rather than bringing in consultants. sion giant said it would make a £22.1bn to do, and must tackle the tech sector They compete with McKinsey in some ($30.7bn) offer for Sky, the European satel- HE Jesuits, the US Marines and the ways, too. Amazon has become the largest lite broadcaster, potentially disrupting Dis- TFreemasons: McKinsey has been com- recruiter at some business schools, and the ney’s agreed $66bn purchase of much of pared to them all, at one time or other. The firm’s own consultants are lured away by 21st Century Fox. firm prides itself on being the most presti- tech firms’ generous pay packages. The surprise announcement comes as gious management consultancy, sending McKinsey’s response is to try to gain a Fox, which owns 39% ofSky, is trying to get out its bright, young footsoldiers to advise foothold earlieron in tech firms’ life-cycles. regulatory approval in Britain for its own executives and policymakers on tricky It is targeting medium-sized companies, purchase of the remaining 61% of the satel- strategic issues. It is everywhere, counsel- which would not have been able to afford lite broadcaster, which it would then hand ling 90 of the top 100 firms (as ranked by its fees, by offering shorter projects with overto Disneyaftershareholdersand regu- Forbes magazine). Amongits many govern- smaller “startup-sized” teams. As it chases lators approve that deal (perhaps by the ment assignments it is helping Britain to growth, the firm is also doing things it used end of this year). By putting himself in the leave the EU, Lebanon to fix its economy to eschew as being insufficiently glamor- middle of that complex transaction, with and the Saudis to wean themselves off oil. ous. In 2010 it moved into business restruc- an all-cash offer16% richer than that ofFox, Occasionally the company needs new turing and it has also set up a global strat- Mr Roberts is causing people to wonder leadership itself. On February 25th the re- egy “implementation” practice. That is a what his goal is. He had tried to outbid Dis- sult of a long election process was made far cry from the days when its consultants ney forFox’s assets in the autumn, but gave public. Kevin Sneader, the Scottish chair- stuck mainly to blue-sky thoughts in their up due to a lack of engagement from Mr man of McKinsey’s Asia unit, will replace ivory towers. Mr Barton has also overseen Murdoch. He maynowonlybe afterSky, or1 58 Business The Economist March 3rd 2018

Dishing it out Flying private Sky Britain and Ireland Cost of Premier League Time for an upgrade subscriber churn rate, % broadcasting rights, £bn 15 1.5 DUBAI Private-jet terminals are going upmarket by learning from luxury hotels 12 1.2 HE private-jet industry advertises industry jargon—used to be grim affairs, 9 0.9 Titselfas the height ofluxury for the mostly run by individual, family-run rich. But travelling through the ramshack- firms. They competed on price rather 6 0.6 le, ugly buildings it used to use as termi- than quality, losing money on their facil- 3 0.3 nals was rather like going commercial. ities in return forsteep mark-ups on jet No longer. At one ofDubai’s newest fuel, notes Adam Twidell ofPrivateFly, a 0 0 facilitiesfor private jets—built by Jetex, a booking service. But the financial crisis 2000 05 10 15 19 fast-growing chain—passengers strum blew up this model. Businesspeople used Sources: Company reports; Enders Analysis guitars on hammock-shaped sofas to account forover 80% ofthe FBOs’ trade around a coffee table dressed up as a and were generally in too much ofa 2 he may intend to make a still bigger hostile campfire, before being whisked away to hurry to note the tattiness. But now they bid to top Disney’s. their planes in limousines. Others amuse use private jets much less, and wealthy In American media-industry circles the themselves playing table football or individuals have taken up the slack. betting is on the latter, as investors there having elaborate spa treatments. They have the time and the money to take a dim view of the prospects of Sky, It is unsurprising that such a facility be pampered at airports with all the which relies on a declining form of distri- has emerged in Dubai. But the boom in services a smart hotel can provide, says bution in satellite and whose pay-TV sub- luxurious terminals that lookmore like Mr Mardini. Terminals must compete as scribers are increasingly fickle (see chart). playpens foradults than somewhere to much on service as cost. That gives “It’s hard to see it as anything other than a fly from is spreading. Jetex has opened 39 branded chains ofluxury facilities an prelude for a bigger bid for Fox,” says Craig ofthem in more than 20 countries since edge over the mom-and-pop outfits of Moffett of MoffettNathanson, a research 2005. Adel Mardini, the firm’s boss, is old, which are being swept away by firm. Such a bid is not realistic at the mo- clear about how he wants to disrupt the consolidation. Over the past15 years the ment because American regulators have industry. He says he wants airport facil- number ofindependent operators has sued to block a similar vertical merger, ities to feel “like a five-star hotel”. fallen by a third in America. AT&T’s purchase of Time Warner. If AT&T Often little more than a Portakabin Mr Mardini also wants to imitate the were to win that case, Mr Roberts might filled with stained sofas, private-jet termi- hospitality business in other ways. He feel emboldened to make a play for Fox’s nals—or “fixed-base operators” (FBOs) in plans to franchise out the Jetex brand, just other assets, including its film studio and as hotel groups do. Independent FBO TV networks. operators, meanwhile, are preparing to For now Mr Roberts is telling investors resist the new global chains such as Jetex that his bid makes sense, partly because he and Signature by pooling their marketing views Sky as being more than a satellite budgets and loyalty schemes. broadcaster. Like Comcast, which bought Luxury brands that currently have NBCUniversal in 2011, Sky operates TV net- little to do with aviation are muscling in. works in sports, news and entertainment, Harrods, a department store, has opened produces original shows and holds sports FBOs under its own brand at Luton and rights in key markets (which are getting Stansted airports in Britain, and wants to cheaper in Europe, in contrast to sports- franchise out its name. Hotel chains, too, rights inflation in America). Sky has 23m see FBOs as their natural habitat. The first retail customers in Europe, compared to Hilton-branded hotel in an FBO opened Comcast’s 29m at home. “Operationally last summer on the idyllic St Simons we do very similar things,” Mr Roberts Island in the state ofGeorgia. Three says. Thatmakesfora good fitnow, he says, chains—Peninsula, Aman and Four Sea- while building scale for the challenges sons—operate their own private jets and posed byNetflixand Amazon. Sky also has are considering moving into ground a Netflix-like product, Now TV, that has facilities. The luxury-FBO upstarts could gained in popularity as customers drop its be disrupted by the very firms they are more expensive satellite packages. Harder to expense seeking to emulate. Despite disapproval from Comcast in- vestors, who would probably prefer the company to buy back shares (Comcast’s What Bob Iger, Disney’s chief, and Mr Mr Roberts notes that Comcast has been a share price has fallen by 8.5% since the an- Murdoch will make of the timing is anoth- reliable steward ofNBC News. nouncement), there is a case to be made for er question. For Mr Murdoch the Comcast Fox has reiterated its commitment to its buying Sky. In January it posted strong re- announcementcomplicatesthe years-long offer of £11.7bn for the other 61% of Sky, sults for the last six months of2017, with 5% drama that has been his effort to take full made in December 2016. Disney has said revenue growth and 10% growth in earn- control ofSky. In February Foxpromised to nothing. If Mr Iger wants to safeguard Dis- ings before interest, taxes, depreciation regulators that Sky News would get an in- ney’s acquisition of the Fox assets, he can and amortisation, to £1.1bn. Then in Febru- dependent editorial board, a move that ask Fox to increase its offer for Sky, a cost ary Sky secured the next three years of Pre- was expected to help satisfy concerns that that would eventually be borne by Disney. mier League football rights for less than it the network not be influenced by the Mur- Either way it is clear Sky is worth more paid last time, a surprise to some that in- dochs, who have a big presence in British now, whether on its merits or as a pawn in creased the value ofthe company. media and operate Fox News in America. a larger game. 7

60 Business The Economist March 3rd 2018 Schumpeter Are China’s state giants reformable?

Suspend yourdisbelieffora moment. Here is what China’s technocrats say tions since 2016, to give the Communist Party a formal role in their governance. The top 60 listed SOEs, excluding banks, collec- tively trade at a lowly 1.2 times capital employed—suggesting in- vestors are unsure ifthey are run forpoliticians or shareholders. While SASAC is not explicit about it, it has three, conflicting, objectives: to boost profits and cut debts; to persuade foreigners that SOEs have more autonomy, and to cement the party’s mus- cular role. According to SASAC, the Party wants to guide the con- duct of SOE bosses but not micromanage. SASAC itself does not want to be responsible for firms’ results, but wants to set the boundaries of strategy. So ifPetroChina, an energy giant, bought an oilfield, forexample, SASAC says it would not intervene, but if it tried to buy a goldfield it would. Likewise, SASAC caps the sala- ries ofSOEs’ top brass whereas it is relaxed about underlings’ pay. One option would be to copy Singapore. It has Temasek, an in- dependent firm with holdings in “strategic” listed firms. Temasek is expected to maximise long-term returns and rarely meddles. SASAC replies that China’s SOEs are too big for this structure to work well. The top 60, excluding banks, have a market value of $1.5trn, seven times that of Temasek’s holdings. SASAC argues that a Chinese Temasek, huge and with autonomy, would have MONG investors it is fashionable to say that China’s state- too much power (SASAC is also enormous but part ofthe govern- Aowned enterprises (SOEs) do not matter much any more and ment and subservient to it). that entrepreneurs now power the world’s second-largest econ- Is there any way to square the circle? SASAC’s experiments fall omy. But China’s SOEs are still hard to avoid. They account for into two buckets. In the first are less-than-convincing initiatives, 40% of its stockmarket and a third of its investment, and they such as changing SOEs’ culture so that they allocate resources dominate heavy industry. On the global stage, SOEs’ appetites more like private firms. That is impossible to verify. It has promot- sway commodity prices and many are expanding abroad. ed “mixed ownership” in which SOEs raise private capital. Last These empires of men and machines account for 45 cents of year China Unicom, a telecoms firm, raised $12bn from a consor- every dollarofdebt in China, so theirhealth determines whether tium that included Tencent and Alibaba. But Unicom, like most the country’s financial system will escape a crisis or blow up. SOEs, already had private minority investors so it is not clear And SOEs have become a loaded gun on the negotiating table be- what has really changed. SASAC has also pushed for mega-merg- tween China and America. Treasury officials argue that China ers, such as that between Shenhua Group, a coal firm, and China has broken the promises it made upon joining the World Trade Guodian Group, a power company. It is likely that such combina- Organisation in 2001 about further liberalising its economy. Ac- tions cut costs, improve profits and lower debt. But they might cording to one negotiator, it is “abusing the system” by subsidis- also create a new class of monster SOEs with even more clout. ing SOEs which in turn rig markets, dump cheap exports abroad In the other bucket are SASAC ideas that could make some dif- and deter foreign firms from winning market share in China. ference. It says that in “competitive” industries (including coal, Schumpeter is sympathetic to the complaints, but to hear the steel, pharmaceuticals and construction) it will let its stake drop other side, he met the State-owned Assets Supervision and Ad- well below 50%. That could signal a willingness on the part ofthe ministration Commission (SASAC), an agency at the heart of Chi- state to concede some ground. And SASAC wants SOEs to find na’s industrial deep state. It controls 100-odd of the largest SOEs. ways to expand abroad while containing political tensions. An The overall impression is ofan organisation that wants to moder- example is ChemChina, which in 2016 bought Syngenta, a Swiss nise state firms, but which is struggling to reconcile goals that ap- chemicals firm, for $46bn. The deal was controversial and in or- pear to be fundamentally contradictory. der to convince customers and the Swiss that Syngenta is not run Forty years ago most industries were government depart- from the party’s leadership compound, Zhongnanhai, ChemChi- ments without proper book-keeping or independent regulators. na gave its target an unusual degree of autonomy—it will keep its Today 63% of SASAC’s portfolio is listed on the stockmarket. Re- headquarters in Basel and is to have independent directors. form was intended to make firms more efficient and responsive to market signals. In the 2000s it was possible to dream that Chi- Show them the money na might eventually relinquish control of its SOEs. SASAC has a hard task to sway critics. At the very least it should But after the subprime crisis in 2008 things went in the other press SOEs to boost returns as a way of showing that they are not direction. China’s stimulus programme led SOEs to expand and underpricing products or being subsidised. Total operating pro- run up debts. Since Xi Jinping became China’s leader in 2012, he fits for the top 60 listed SOEs (excluding banks) have risen by 17% has bossed about both SOEs and private firms. On February 22nd since 2016, according to Bloomberg data, and leverage has stabil- the state seized control of Anbang, a private insurer that is ac- ised. That is progress, yet returns on capital are still a dismal 5%, cused of fraud (see page 63). Some reckon the Chinese govern- half the level expected of private firms. Mr Xi clearly sees busi- ment may have indirectly helped fund Geely’s purchase ofa 9.7% ness as an arm of state power. SASAC will therefore struggle to stake in Daimler, which was announced on February 24th. At show the world that SOEs are free from interference. But demon- least 30 SOEs listed in Hong Kong have changed their constitu- strating that they make commercial rates ofreturn would help. 7 Finance and economics The Economist March 3rd 2018 61

Also in this section 62 Buttonwood: The only way is up? 63 The rise and fall of Anbang 63 Russia’s rating rises; Brazil’s falls 64 Asian exchanges face off 64 Tax and the dollar 65 Trade and the dollar 66 Free exchange: Productivity

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India’s economy turning “an old civilisation into a modern society” is no overstatement. Emerging from the shadows As so often in India, data are patchy. But Mr Modi can claim some success. A new Goods and Services Tax (GST) introduced in July has boosted the number of firms MUMBAI registered to pay indirect taxes by 50%, to nearly10m. This has become the most seri- Narendra Modi wants Indian businesses, and citizens, to abandon informality. ous challenge to those looking to do busi- How is he faring? ness underthe radar. It subsumed a pletho- ATCHING money drain from your bank accounts is easier to track, trace and ra of nationwide and state taxes adding up Wbank account has never been so tax. That is helpful because pushing more to 40% of India’s total take. A sort of value- much fun. On WhatsApp, a messaging ser- ofthe Indian economy out ofthe shadows, added tax, it compels businesses to declare vice ubiquitous in India, sending rupees is where perhaps half of all activity takes both their purchases and their sales if they now as easy as posting a selfie. Set-up is a place, and onto the authorities’ radar has are to qualify for tax refunds. Plenty of breeze, because all Indian banks have been a central policy of Narendra Modi, loopholes have been built in, and lots of been corralled onto a common payment the prime minister. features have had to be delayed because of platform on which anyone, from Google Informality has long been the norm in IT problems. But the miseries of imple- and Samsung to local payment firms and India. Economists estimate that nine in ten mentation—and the nearly two decades of banks themselves, can build their own workerstoil in the greyeconomy(recent re- political bickering it took to get GST user interface. Money zips instantly from search from the finance ministry suggests passed—should yield more gain than pain. one bankaccountto the other, without any the figure may be somewhat lower). Infor- That is more than can be said for “de- need to set up a pesky digital wallet or mal outfits, often small, employ two-thirds monetisation”, which in November 2016 download some new app. At least outside of all manufacturing workers, at far lower compelled Indians to trade ordeposit most China, there is no simpler way to shift pay than in formal manufacturing jobs. of their cash holdings at banks before their money today. The informal sector remains the employer notes turned to worthless pieces of paper. WhatsApp’s offering is being rolled out oflastresort. So MrModi’sclaim thatwide- It led to the abrupt withdrawal of86% ofall gradually. The number of transactions spread formalisation would be akin to bank notes from circulation. Only now is routed through the United Payments Inter- currency in circulation, which some see as face (UPI), the system on which WhatsApp a proxy for informality, creeping up to pre- and the rest are riding, has soared from al- Roaring back vious levels even as the economy has most nothing in early 2017 to over 150m a India, currency in circulation, rupees, trn grown (see chart). month in January. On current trends, UPI Ban on largest currency bills The costs were clear: India’s economy transfers will overtake cash withdrawals 20 slowed markedly. Fans argued, though, from banks within weeks. Some 665bn ru- that it jolted India onto a new, more formal pees ($10.2bn) will have shifted hands—or 15 track. But if so, that track has not visibly di- phones—in the year to March. verged from the one it was on before. All this is good news for tech-savvy In- 10 Though there was a rise in the number of dian citizens. It is even better news for the Indians signing up to pay income tax, the taxman. Electronic transactions, unlike revenue from income tax is expected to 5 those in hard currency, leave a digital trail come in at 2.3% ofGDP, up only a little from that makes it harder to do business infor- around 2% in previous years. Even the mally. Just as an Uber driver cannot hide 0 jump in indirect-tax registrants because of 2014 15 16 17 18 his income in the same way as a cash-in- GST has led to a relatively modest increase Source: Reserve Bank of India hand cabbie can, money routed through in revenue. But at least there is a sense that1 62 Finance and economics The Economist March 3rd 2018

2 dodging taxes is less acceptable in polite cheaper for formal firms, while informal more than 25 people, compared with society than it used to be. ones have still had to make do with loans around one in fourin China. Saurabh Mukherjea of Ambit, an in- whose interestismeasured in monthly, not Indians have everything they need to vestment bank, argues that market forces annual, rates. lead a formal life. Thanks to a financial in- have done more to nudge businesses to go But whatever edge a formal business clusion drive launched by the previous formal than any government scheme has. might have gained is more than undone by government and enthusiastically contin- Better infrastructure and logistics have a thicket of labour laws that prevent small ued under Mr Modi, nearly all have bank made it easier for formal businesses to firms from growing into mid-sized or big accounts. Hundreds of millions receive achieve economies of scale, and so to take ones, which tend to be more formal. These government subsidies for fertiliser or gas on informal rivals whose sole competitive have barely been touched since Mr Modi as digital payments, rather than as in-kind advantage is their ability to dodge taxes came to office in 2014. The fear of being rations, which were often pilfered. As pay- and regulation. Moderate inflation, due in shaken down by venal bureaucrats and ing digitally becomes easier than paying in part to the low price of crude oil, of which taxmen remains a powerful reason to stay cash, India’s government should ask itself India imports oodles, has allowed for low- below the radar. As a result, only one in 20 why so many citizens would still rather the er interest rates. That has made financing Indian workers toil in firms that employ authorities know nothing about them. 7 Buttonwood The only way is up?

A new report concludes that automation will drive interest rates higher EAL interest rates in the developed Bain line of reasoning) thereby reducing Rworld have been low ever since the fi- Rate expectations inequality, but also driving up inflation. nancial crisis of 2008-09 (see chart). The United States, ten-year inflation-indexed Keeping it under control will require high- global economy might have struggled to Treasury-bond yield, % er nominal interest rates. Furthermore, recover had that not been the case; higher 3 desired savings will fall faster than de- rates would have caused many more sired investment, and real rates will rise. companies and homeowners to default. What about the argument that “secu- 2 Central banks are now startingto push lar stagnation” will keep interest rates rates slightly higher. And according to a low? Andrew Smithers, an independent new paper* from Bain, a management 1 economist based in London, says that be- + consultancy, the trend towards robotics cause there is no reason to expect world will push them higher still—at least for a 0 growth to be slowerthan average over the decade. That could be a shock for the fi- – next decade, global interest rates could nancial markets. 1 well rise to more normal levels. However, 2008 10 12 14 16 18 Bain estimates that by 2030 American he adds, growth may be less important Source: Federal Reserve Bank of St. Louis companies will have invested as much as for rates than is the balance between fis- $8trn in automation. As companies cal and monetary policy. With fiscal poli- scramble to borrow money in order to vest than lower-paid workers, who spend cy easing in both America and Europe, buy machinery and robots, the resulting virtually all their income. So after the ini- monetary policy will need to be tight- investment boom will drive up rates. tial interest-rate surge, the increase in sav- ened, he reckons. Automation will boost productivity, ing and the hit to demand could cause in- That would make the road to higher which has grown sluggishly in recent terest rates to plunge again, falling back to rates a bumpy one. The piles ofdebt accu- years. This slowdown may have been zero in real terms. mulated before the financial crisis have caused bythe shiftfrom manufacturing to In a paper** written last year for the been redistributed rather than eliminat- services, where productivity gains are Bank for International Settlements, a cen- ed. A sudden rise in rates might hurt eco- harder to achieve. Between 1993 and 2014, tral-bankers’ club, Charles Goodhart and nomicactivity, and thusbe self-limiting, if the American car industry more than Manoj Pradhan came up with similar pre- central banks have to reverse policy. Fi- doubled itsproductivity, butlost28% ofits dictions for interest rates using a different nancial markets have translated low rates workforce. By contrast, over the same per- chain of reasoning. They thought demog- into high valuations. Equities are priced iod hospitals added 28% more jobsand in- raphy would be the main reason interest as the discounted value of future profits; creased productivity by just16%. rates would rise. Real rates adjust to bal- the lower the discount rate, the higher the But automation is about to come to a ance the desired levels of savings and in- price. But in the Goodhart/Pradhan sce- wide range of service industries. Though vestment. The current low level of real nario, shares might face a double wham- that will be a boon for productivity, Bain rates indicates that the former has exceed- my. As employers compete for scarce estimates that 20-25% of current jobs ed the latter as the baby boomers have workers, the discount rate would rise and could be eliminated by 2030. This shift made provision fortheirold age. But global profits would be squeezed. Homeown- will be much faster than previous labour- population growth is slowing and the size ers, and companies with lots of debt on market transformations, such as that from of working-age cohorts in the advanced their balance-sheets, would get a nasty agriculture to industry at the start of the economies and China will decline. shock. As rates rise, stress levels will, too. 20th century. Lower-skilled workers, such As workers retire, they will run down ...... as waiters, will take the biggest hit. their savings pots. Companies will substi- *Labour 2030: The Collision of Demographics, The result would be an even more un- tute capital for labour as the workforce Automation and Inequality equal economy, because a greater share shrinks. A smaller pool of workers will ** Demographics will reverse three multi-decade of income would go to highly paid work- earn higher wages, pushing up the labour global trends, BIS Working Papers No 656 ers. They are more likely to save and in- share of GDP and (in a divergence from the Economist.com/blogs/buttonwood The Economist March 3rd 2018 Finance and economics 63

The rise and fall of Anbang pay debts. But none has come under as bang’s business model was inherently un- much pressure as Anbang. stable. Closing the loopholes it exploited Out with a That may be because Anbang lacks de- should put China’s economy on a more fenders in high places. State-owned banks stable footing. Credit Suisse, a bank, says whimper are some of the main creditors to HNA and that Anbang’s rush to expand generated Wanda, whereas Anbang has relied more “irrational competition” in the insurance SHANGHAI on premiums from insurance sales. For a sector. Its takeover will help stop that. time, Mr Wu was backed by powerful Finally, there is the political backdrop. China’s government takes control ofits princelings, as the descendants of revolu- Mr Xi has warned many times that no one would-be financial colossus tionary leaders are known. He was mar- is immune from his crackdown on corrup- HEN it comes to the meaning of ried to the granddaughter of Deng Xiao- tion. But princelings have, for the most “Wlife, we will all return to zero one ping, China’s revered former leader. Chen part, been less affected. The question is day.” So philosophised Wu Xiaohui, a Chi- Xiaolu, the son of a military commander whether Mr Wu’s takedown is a sign that nese tycoon, as he reflected on his success under Mao, was listed as a company direc- all tycoons, no matter how well connect- in 2015. Little did he realise how soon his tor. Mr Wu was also reputed to have a close ed, are now vulnerable—or whether his words would be proved true. He founded relationship with Xiang Junbo, the top in- protection had simply evaporated. 7 his firm, Anbang, as a small car-insurance surance regulator during Anbang’s rise. company just over a decade ago. By 2017 it But under Mr Xi, these connections ap- ranked amongthe world’s biggest insurers, pear to have frayed. In 2015 Caixin, a Chi- Emerging markets with some $300bn of assets, including nese financial magazine, reported that stakes in hotels and financial firms in Deng’s granddaughter had separated from Putin’s fiscal America, Europe and Asia. But then, even MrWu. MrChen distanced himselfaswell, more vertiginous than its ascent, came its sayinghe wasmerelyan adviser. And early fortress fall. On February 23rd China’s government last year Mr Xiang, the regulator, was de- said it had taken over Anbang and would tained forcorruption. prosecute Mr Wu for economic crimes. There will be three things to watch in Rarely in corporate history has a giant the coming months. The first is whether Russia’s credit rating rises; Brazil’s falls grown and collapsed so quickly. But An- regulators can limit the collateral damage bang’s tale is also interesting for what it re- as they unwind Anbang’s excesses. The RAZIL and Russia, the third- and fourth- veals about China’s economic landscape. stated goal is to manage the firm for one B biggest emerging economies, have It is the clearest demonstration that regula- year, stabilise its operations and return it to much in common beyond their size. Each tors are serious about defusing debt risks private hands. The real goal, according to boasts annual GDP per person of around that have built up in recent years. And it re- two executives with other insurers, is to $10,000, which depends more than either veals the murky political waters running pay off policy-holders and honour its would like on natural riches. After com- through the financial system. AsXi Jinping, debts by selling its assets. Although An- modity prices tumbled in 2014, their econ- China’s president, consolidates his grip on bang might have overpaid on its interna- omies shrank and their currencies sank. power, these seem to be getting rougher. tional forays, it bought into domestic Their central banks have fought hard On the surface, nationalising Anbang is banks and property developers when they against the ensuing inflation, driving it be- a case of smart, preventive regulation. The were priced more cheaply. Its stakes in low 3%. That has allowed both to cut inter- insurance watchdog said it intervened be- Minsheng Bank and China Merchants est rates, contributing to modest economic cause illegal operations had “seriously en- Bank, two ofthe country’s top lenders, will recoveries. dangered” Anbang’s solvency. It did not be sought after by other insurers. But their fiscal fortunes have diverged. spell out Anbang’s alleged offences, but The second is the impact on the finan- Brazil’s credit rating was cut by Fitch on two features of its business were problem- cial sector. With its reliance on short-term February 18th, making its sovereign bonds atic. The first was its method of raising debt and undisciplined deal-making, An- even “junkier” (ie, more speculative). Rus- cash. It sold high-yielding, short-term in- sia’s rating, by contrast, was raised a few vestment products disguised as insurance, days later by S&P Global, which became turning what should have been the safest the second agency to rate Russian sover- part of the financial system, the insurance eign debt as “investment grade”. sector, into one ofthe most dangerous. That might seem an odd description for The second was what it did with that a country embroiled in two wars and en- cash. It was an aggressive, some say fool- cumbered by sanctions. But Russia’s up- hardy, investor overseas. It paid $2bn for grade is not hard to justify. Though its ap- New York’s Waldorf Astoria hotel and proach to geopolitics is adventurous, its $6.5bn for hotels owned by Blackstone approach to macroeconomics is deeply Group, the world’s largest private-equity conservative. Indeed, in many ways Rus- firm. When Mr Xi last year called for a sia’s geopolitical adventurism has necessi- crackdown on “financial crocodiles”— tated its economic conservatism. companies destabilising the economy “The whole Russian economic policy, with reckless borrowing and investment— starting from the president, is focused on Anbang’s misery deepened. The regulator keeping inflation low, ensuring that the blocked its overseas deals, reined in its in- budget is stable, and that reserves are mov- surance business and detained Mr Wu. ing up,” says Oleg Kouzmin ofRenaissance Beneath the surface, though, there are Capital, an investment bank. It is a “very political currents. The overseas invest- defensive” strategy, argues Timothy Ash of ments of other high-flyers, notably HNA BlueBay Asset Management, designed to and Wanda, two of China’s biggest private help Russia weather future sanctions and conglomerates, have also faced close scru- build defences against the West. tiny. They, too, are racing to sell assets to re- Terminal velocity When oil prices fell in 2014, Russia’s1 64 Finance and economics The Economist March 3rd 2018

2 government realised that belts needed to Asia’s stockmarkets changes have both pledged safeguards. be tightened. After a briefstruggle, it let the HKEX has proposed that companies with rouble fall. It squeezed demand by hiking Duelling dual-class shares must have an additional interest rates and cutting public spending. corporate-governance committee to en- From 2013 to 2016, GDP per person fell by exchanges sure they are managed forthe benefit ofall over 40% in dollar terms. In its realism and shareholders. More boldly, Singapore rapidity, Russia’s response to its crisis was SINGAPORE might include a sunset clause, establishing the best of any emerging market this de- a date at which shares with extra voting Hong Kong and Singapore succumb to cade, says Mr Kouzmin. rights convert into ordinary shares. And the lure ofdual-class shares The government’s deficit now stands at both exchanges say they want to restrict just 1.5% of GDP. Its net debt is only 8.4% of OR Charles Li, Alibaba was the one that dual-class shares to firms in innovative, GDP. This conservatism may persist. Its lat- Fgot away. The head of the Hong Kong emerging sectors. est fiscal rule requires it to assume an oil stock exchange (HKEX) courted the Chi- But Jamie Allen of the Asian Corporate price of$40 a barrel, even though the Urals nese e-commerce giant when it sought a Governance Association predicts they will oil price is now over $64. venue for its listing five years ago, but he have a hard time holding the line against Brazil also has a stringent fiscal rule, could not push through rule changes want- powerful companies in other sectors. obliging it to freeze federal spending in real ed by Alibaba to keep control of the com- “Once the genie is out of the bottle, it’s terms for20 years. But the government has pany in its leaders’ hands. It opted instead out,” he says. Over time, the fear is that if yetto bringitsothercommitmentsinto line for an initial public offering (IPO) in New the standards of their stockmarkets slip, with this limit. An attempt to delay pay York. “Losing one or two listing candidates the reputation ofAsia’s financial centres as hikes for civil servants was blocked by the isnota bigdeal forHongKong,” he wrote at generally clean, reliable places to do busi- supreme court. And an essential reform of the time. “But losing a generation of com- ness will suffer, too. pensions was watered down in negotia- panies from China’s new economy is.” In recent years the fortunes of the two tions with congress, which then refused to Since then he has been determined to exchanges have diverged. HKEX gained support it anyway. make the next big catch. momentum from a flurry of initiatives, Brazil suffers from a fiscal “tragedy of It is finally within his grasp. After a de- most notably a channel for cross-border the commons”. Its jostling lawmakers bate that has trundled on for several years trading with Chinese mainland stock- overgraze, demanding too much from the HKEX is, in the coming weeks, poised to al- markets. Singapore, meanwhile, faces stiff- state, because if they do not, they know low companies to issue shares with differ- er competition from exchanges in the sur- their rivals will. By contrast, Russia’s presi- ent voting rights. Known as dual-class rounding region. HKEX hopes dual-class dent and chief policymaker, Vladimir Pu- shares, these give founders the ability to shares will boost it further. For the Singa- tin, has few rivals forhis fiscal pasture. That control their firms, even as minority own- pore exchange, they are a way to defend its makes him keen to preserve it. ers. This should make Hong Kong the fa- turf. Concernsaboutshareholderrights are Russia’s economic defensiveness is voured destination for the next wave of unlikely to stop either ofthem. 7 good for its credit rating, but may have an Chinese tech firms to go public, from unwelcome side-effect: squashing growth. Xiaomi, a smartphone maker, to Ant Fi- More relaxed fiscal and monetary policy nancial, Alibaba’s fintech spin-off. It Tax and the dollar would give the economy room to breathe, should also bolsterthe city’s claim to being argues Mr Ash. “What is the point of hav- Asia’s leading financial centre. Green-back ing a good balance-sheet if your economy But Mr Li’s success is controversial. is not growing?” Some ofthe biggestinvestorsin Hong Kong And Mr Putin’s reluctance to cede con- warn that the changes will undermine cor- trol may be stymieing the reforms Russia porate governance and harm most share- WASHINGTON, DC needs. If it is to grow, the state must allow holders. They fear a “race to the bottom” Capital is on its way to America, but for new entrants, including foreigners, to around the region, as David Smith ofAber- bad reasons prosper at the expense of incumbents. In- deen Asset Management Asia puts it. Sin- stead, entrepreneurs are well aware that gapore, Hong Kong’s rival for financial pre- CCORDING to President Donald they prosper only at the regime’s pleasure. eminence in Asia, is on track to be the next ATrump, money is pouring into Ameri- “Do you ever really own anything in Rus- market to allow dual-class shares. There ca from abroad. The tax reform he signed sia?” asks Mr Ash. Fiscal entitlements are are murmurings that some ofthe bigger ex- into law in December means American too secure in Brazil. But in Russia, property changes in South-East Asia might follow. firms can no longer defer paying taxes on rights are not secure enough. 7 The erosion of “one share, one vote”, profits left sitting in foreign subsidiaries. long a cornerstone of equity markets, be- The change has led to some uplifting head- gan in the 1980s on the New York Stock Ex- lines. Apple said that it would make a one- Two ratings diverged change. The tech boom of the past decade offtax payment of$38bn relating to its past Foreign-currency sovereign credit-ratings accelerated the shift to dual-class shares, accumulation of $252bn in foreign earn- starting with Google’s IPO in 2004. Com- ings. Presumably, it will now start to bring BBB+ INVESTMENT GRADES panies say unequal voting rights enable this cash home. “Huge win for American BBB them to escape the short-termism of stock- workers and the USA!” tweeted Mr Trump. BBB– markets. Critics counter that conventional Yet despite the prospectoflarge-scale profit Russia shareholding structures can serve long- repatriations, the dollar has been strangely BB+ term goals just as well, with less chance of weak of late. Since the start of November, BB Brazil mismanagement. Ironically, as Asia adopts when tax reform began looking likely to BB– dual-class shares, opposition is mounting pass, the greenback has fallen by about 3%. SPECULATIVE GRADES FTSE S P B+ in America. Last year Russell and & , What is going on? two big index providers, barred compa- Start with the fact that repatriations are 2012 13 14 15 16 17 18 nies from joining their stockmarket gauges mostly not true capital inflows. An analy- ifthey list only non-voting shares. sis by Zoltan Pozsar of Credit Suisse finds Source: Standard & Poor’s The Hong Kong and Singapore ex- that, as of March 2017, American corpora-1 The Economist March 3rd 2018 Finance and economics 65

could explain a cheaper greenbacktoday. justing for countries’ business cycles, a 1% The current value ofthe dollar seems to dollar strengthening predicted a fall in reflect a mix of both effects, says Brad trade volumes outside America of0.6%. Setser of the Council on Foreign Relations, They explain the connection by upend- a think-tank. Good economic news else- ing the standard way of thinking about the where, particularly in Europe, has made in- impact of exchange rates on trade. Text- vestors think twice about where to park book models tend to assume that import- their funds. Yet the dollar remains relative- ers face prices in the exporting country’s ly strong by the standards of the past de- currency, which are hard to renegotiate. An cade, reflecting America’s higher interest importer whose currency falls against the rates. On February 27th Jerome Powell, the exporter’sissqueezed. Buthiscountrymen Fed’snewchairman, told Congressthat the who export in the opposite direction get a outlookforthe economyhad strengthened fillip, as their wares become more compet- since December, in part because of the fis- itive. In this neat and symmetric world, as cal stimulus. Markets took this as a sign a country’s imports fall because of a weak- that the Fed might raise interest rates four er currency, its exports rise. times in 2018, rather than three, as previ- But what of importers like Mr Sacchal, ously expected, and the dollar rose. who buy in dollars? The researchers argue Capital inflows are awkward for Mr that here, the symmetry breaks down. A Trump. He has promised to cut America’s stronger dollar squashes his demand for 2 tions had amassed around $2.2trn of earn- trade deficit, which, as a matter ofnational Chinese products, without Argentine ex- ings in overseas subsidiaries. About half accounting, goes hand in hand with bor- porters to China gaining a countervailing was tied up in illiquid investments such as rowing from abroad. His best hope is that- bump. A strong dollar would then mean local firms and factories. Most of the rest— growth and more domestic saving keep that trade volumes outside America fall. the money that could “come home”—is al- the twin deficitsdown, atleastasa share of Supporting their theory, they find that ready in dollar-denominated assets. GDP. If not, capital flooding into America dollar exchange rates seem to be more use- Take Apple. In its most recent annual re- may not be something he should cheer. 7 ful than those of other currencies when port, it said that its $252bn was “generally predicting changes in trade flows and based in…dollar-denominated holdings”. prices. This is particularly so in places that According to Mr Pozsar, Apple holds more Trade and the dollar invoice a highershare ofimportsin dollars. Treasuries and other government securi- Alternatively, as suggested in a recent ties than Bank of America does. The same Bills, bills, bills working paper published by the Bank for is true of Microsoft. Repatriation makes International Settlements, a strong dollar these funds available for distribution to could tighten global credit conditions, shareholders, but neither increases de- making it harder to finance long supply mand for dollars nor sharpens the incen- chains and so crimping trade flows. The tive to invest in America. In fact, argues Mr BUENOS AIRES authors find that a strong dollar is associat- Pozsar, if firms start selling bonds, it could ed with slower-growing company inven- A weakdollarboosts global trade lead to tighter credit. tories (shorter supply chains require less Even if repatriation is a damp squib, GUS SACCHAL sells sheets and blan- stockto be held along the way). however, America can expect capital in- Akets from a warehouse in Buenos Given the dollar’s recent weakness, flows in 2018. They will be needed to plug Aires, for which he is paid in Argentine pe- what does all this suggest about future the hole tax cuts have made in the federal sos. While the pesos go into his wallet, two trade flows? The recent trade surge might budget. Tax reform will increase borrow- other banknotes are stuckto his office win- be only temporary, if traders renegotiate ing by $1.1trn overa decade, accordingto of- dow. One is a ten-yuan note from a visit to dollar prices. The results of Ms Gopinath ficial projections. In 2019 America’s budget China, where he went in search of cheap and hercoauthors suggest otherwise. They deficit may surpass $1trn, or 5% of GDP. textiles. The other is a $5 bill, pinned next find that, since 2002, the effects of dollar Someone must lend the government this to an invoice, also in dollars. Though he movements on trade have persisted. Ga- money. American households are unlikely does not trade with America directly, briel Sterne of Oxford Economics, a con- to do so. In Decemberthe personal-savings when importing he uses the greenback. sultancy, reckons that about half of the in- rate was just 2.4%. So the government will Argentina’s rocky financial history crease in trade flowsdue to the weak dollar probably borrow more from abroad. In makes the dollar’s dominance there unsur- since 2017 is yet to come. 7 other words, the current-account deficit, as prising. Still, it is an extreme case ofa wider well as the fiscal deficit, will rise. phenomenon. After gathering data on 91% The implication for the dollar of these of the world’s imports, by value, Gita Gop- Push me pull you “twin deficits” is ambiguous, says Zach inath of Harvard University found that Deviation from trend or equilibrium, % Pandl of Goldman Sachs. Should the Fed- America accounts for nearly 10%. But its 20 eral Reserve raise interest rates to stop tax currency is used in over 40% ofinvoicing. Detrended world trade* cuts from overheating the economy, Amer- Recent research suggests that this 10 ica’s bonds will automatically become creates a link between a weak dollar and + more attractive to foreigners. The dollar buoyant trade flows—and vice versa. 0 should rise as investors take advantage of Trends since 1999 are suggestive (see chart). – higher returns, as when Ronald Reagan cut During 2017 the dollar depreciated by 7% 10 taxes in the 1980s. Alternatively, foreigners against a basket of other currencies, as glo- $ over-/under-valuation† might be enticed to buy American bonds bal trade flows surged by 4.5%. Some other 20 by the prospect of a cheap currency with factors could be driving both. But a recent 1999 05 10 15 17 *Deviation of world trade from long-run trend room to rise. So if the Fed refrains from paper by Ms Gopinath, Emine Boz of the †US real effective exchange rate relative to tightening in response to the fiscal stimu- IMF and Mikkel Plagborg-Møller of Prince- equilibrium exchange rate Source: Oxford Economics lus, the need for more external financing ton University found that, even after ad- 66 Finance and economics The Economist March 3rd 2018 Free exchange Better, stronger, faster

Labour-monitoring technologies raise efficiency—and hard questions who were paid according to the amount of work successfully completed. Some struggled with self-control, the authors deter- mined, as shown by their tendency to slack off for much of each month but put in more effortas payday approached. When work- ers were offered contracts that penalised them for failing to hit performance targets, those who struggled to stay on-task dispro- portionately accepted, and achieved big gains in output and pay as a result. In many settings, pay is less clearly linked to performance. Whether additional effort translates into higher wages depends on the other options available to workers and on their bargaining power—in particular, whether they feel able to leave if the pay is not worth the trouble. Indeed, in the past, high turnover helped motivate some factory owners to share the gains from workplace discipline with workers. The “$5 day” introduced by Henry Ford in 1914 was an “efficiency wage”, according to Daniel Raff, of the University ofPennsylvania, and Larry Summers, ofHarvard Uni- versity. Workerson Ford’sassemblylinesspententire shifts doing mind-numbingly repetitive work, and many could not stick it for long. Ford’s solution was to pay a wage well above what workers could earn elsewhere. That helped compensate them for their OSSES have always sought control over how workers do their suffering. More important, it led to a long queue of eager appli- B jobs. Whateversubtlety there once was to this art, technology cants, and the knowledge that anyone who left would quickly be is now obliterating. In February Amazon received patents for a replaced and could not easily return. wristband apparently intended to shepherd labourers in its But high turnover does not appear to bother Amazon much. warehousesthrough theirjobswith maximum efficiency. The de- The past decade’s weak labour markets have meant queues of vice, were Amazon to produce and use it, could collect detailed willing workers even without the promise of above-market pay. information about each worker’s whereabouts and movements, The same technologies that monitor workers can also reduce the and strategically vibrate in order to guide their actions. Using training time needed to prepare new employees, since the gad- such technologyseemsan obviousstep forfirmsseeking to maxi- gets around them guide most oftheir activity. mise productivity. Whether workers should welcome the trend, And new disciplinary technologies create an additional risk or fear it, is harder to say. for workers. Heaps of data about their activities within a work- Workplace discipline came into its own during the Industrial space are gathered, while their cognitive contribution is reduced. Revolution. As production came to depend ever more on expen- In both ways, such technologies pave the way for automation, sive capital equipment, bosses, not keen to see that equipment much as the introduction of regimentation and discipline in fac- sitting idle, curtailed their workers’ freedom, demanding they tories facilitated the replacement of humans by machines. The work during set hours, in co-ordination with other employees, at potential for automation increases the power offirms over work- a pace dictated by the firm. Technology creates new opportuni- ers. Anyone thinkingofdemandinghigherpay, orofjoining a un- ties for oversight. Editors can see which oftheir journalists attract ion in the hope of organising to grab a share of the returns to in- the most readers (though many wisely focus on other measures creased efficiency, can be cowed with the threat ofrobots. of quality). Referees at sporting events are subject to reviews that checktheir decisions to within millimetres. Who watches the watch, man Workers and labour activists have often attacked strict disci- White-collar workers are not spared oppressive bosses. Indeed, pline as coercive, unfairand potentially counterproductive. Text- as the New York Times reported in 2015, Amazon has experiment- book economics suggests, though, that in a competitive labour ed with data-driven management techniques known to drive market any attempt to coerce people into working harder than some white-collar workers to tears. (Others, though, told the they want will fail, since workers can simply switch jobs. Studies Times that they thrived at Amazon, “because it pushed them past of factory work paint a more complicated picture, however. Peo- what they thought were their limits”.) ple would like to work hard and earn high wages, this story goes. The high pay of workers with exacting jobs in finance or tech- But they struggle with self-control and do not work as hard as nologycan reasonablybe seen ascompensation fortheir burden- they wish they would. They consequently choose to work for some working conditions. And unhappy professionals can usu- firms that use disciplinary measures to push them. During indus- ally find less oppressive work that pays a lower but still decent trialisation, workers “effectively hired capitalists to make them wage. As Amazon and other firms embrace new tools to monitor work harder”, says Gregory Clark of the University of California, and direct their workers, the difference between progress and Davis, in a seminal paper on the subject. dystopia comes down to whether workers feel comfortable de- If that seems an implausibly sunny description of life in 19th- manding raises, and whether they can quit without fear of seri- century factories, researchers have found evidence for such be- ous hardship. Indeed, firms could ponder such matters them- haviourin modern contexts. Supreet Kaur, ofColumbia Universi- selves before the inevitable backlash. 7 ty, and Michael Kremer and Sendhil Mullainathan, of Harvard University, ran a 13-month experiment using data-entry workers, Economist.com/blogs/freeexchange Science and technology The Economist March 3rd 2018 67

Also in this section 68 Herbicides and the flavour of crops 68 Life in the Atacama desert 69 Politics and a sense of smell

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

Robot laboratories test DNA plasmids only. Some other bio- foundries, however, offer a wider range of Gene machines services. Forexample Transcriptic, a firm in Silicon Valley, will also allow customers to store entire cell lines that may be tested lat- er, orto grow tissues from them fortesting. One of Transcriptic’s particular special- ities is preclinical drug screening. This in- volvestestingvastnumbersofcompounds The design ofsynthetic lifeforms could become a new industry that might possibly end up as drugs. A drug N THE basement of Imperial College sits foundry’s head of automation, calls might, forexample, be intended to alter the Ithe London DNA Foundry. The word “parts”. These are snippets of genetic code operation of a particular protein that shut- “foundry” calls forth images of liquid met- from which different genetic “circuits” can tles, say, calcium in and out ofa cell. In that al being poured into moulds—of the early be assembled. Acircuit, in biotech speak, is case, potential drugs might be screened phase ofthe Industrial Revolution, in other a collection of genes that work together to- against both the protein in free suspension, words. This foundry is, however, deter- wards a common goal—forexample, gener- and intact cells that have such channels in minedly modern. Liquid is indeed being ating a series of enzymes that convert one their membranes. moved around and poured. But it is in mi- type of chemical into another. The genes nuscule quantities, and it is not metal. In- comprising a potential circuit are then as- Little and large stead, it is an aqueous suspension of the sembled into circular DNA molecules Many of Transcriptic’s customers are genetic codes oflife. called plasmids. small, newly founded firms that cannot af- The laboratoryisan example ofa wider To obtain appropriate plasmids the ford their own test facilities. One such, Pli- movement. Similar biofoundries are being foundry’s customers may simply order ant Therapeutics, also in Silicon Valley, is setup around the world, from the Broad In- parts from the library. They may also pro- using Transcriptic to test treatments for fi- stitute in Cambridge, Massachusetts, via vide their own proprietary snippets. All brotic disease—the formation of scar tissue Silicon Valley, to the National University of the required parts are then transferred to in places like the lungs and the heart. Large, Singapore. All offer ways of centralising bar-coded wells in the dishes and their established firms use its facilities, too, the donkeyworkofgenetic-engineering re- contents mixed automatically. The whole though. It is often cheaperforthem to do so search. Instead of biotechnology compa- process is controlled by a piece of comput- than to carry out tests in house. nies buying and operating their own lab- er code, provided by the customer, that de- At the moment, each foundry is going oratories, foundries will do it forthem. scribes the experiment. its own way, as the industry finds its feet. London DNA Foundry’s operations Once the mixture is correct, the test But Paul Freemont, a director of the Lon- room is filled with boxy devices, each de- plates are whisked into a machine which don DNA Foundry, hopes that once it is signed to do one particular operation, such multiplies the number of plasmids in each clear what processes are ofmost interest to as pipetting, repeatedly and quickly. A ro- well using a process called a polymerase customers, the sorts of industrial stan- botic arm shuttles small plastic dishes be- chain reaction (PCR). And then, when the dards which are commonplace in other in- tween the machines. Each dish contains PCR has done its work, the plasmids are in- dustries will start to emerge among bio- up to 1,536 minuscule wells. And in each of troduced into living cells—either bacterial foundries. That will make it easier for the those wells sits several microlitres of liquid or yeast. After that, the cells are incubated, process of designing new synthetic life- and a few strands of DNA. Using this ar- and the result is tested to see which, if any, forms to be scaled up from the bespoke rangement, the foundry can mix, in the ofthe circuits performs as expected. boutique business it is now to something precise concentrations required, 150,000 Such is the London DNA Foundry’s more like a global industry. That day is not samples ofDNA in a morning. scale that it can build and test about 15,000 yet here. But if there is demand, then bio- The starting-point for the process is a li- different genetic designs in a day. True to its foundries will surely play their part in the brary of what David McClymont, the name, the foundry is set up to build and next phase ofthe Industrial Revolution. 7 68 Science and technology The Economist March 3rd 2018

Agricultural chemicals sometimes pairing it with the herbicides It remains unclear precisely how these and sometimes allowing the herbicides to changes affect the flavour of sweetcorn, al- For better or workon their own. though Dr Cutulle thinks they are proba- The researchers planted sweetcorn in bly big enough to be noticeable. He sug- worse several plots split between two different gests that further studies are carried out to locations. When the plants were between lookinto the matter using panels ofpeople five and ten centimetres in height, they ex- carrying out tastings. Perhaps more impor- posed each plot to one of seven different tantly, the findings show that pesticides are Spraying herbicides changes the flavour herbicide/safener combinations. As a con- capable oftransforming crops in ways that and nutritional value ofcrops trol, one field was treated with atrazine be- shape their nutritional value. Some of ARDENERS know only too well how fore the corn was planted (a full control us- these, like the iron-enhancing property of Ghard it is to keep on top of weeds, be- ing no herbicides at all would have been nicosulfuron combined with the safener, cause hoeing and pulling them out is back- destroyed by weeds without an over- could help with iron deficiency in diets, breaking work. With big fields to look after, whelming amount of hand weeding). which is responsible for a number of se- most farmers turn to herbicides. Over the After 45 days the sweetcorn was gathered. vere health conditions, such as anaemia. years these chemicals have become better The mature kernels were analysed for lev- Other factors, however, might not be so at knocking out weeds but leaving com- els of antioxidants, sugars, amino acids, welcome. The fructose-enriching aspects mercial crops alone. Organic farmers do proteins, fatty acids, minerals and fibre. of herbicides may make sweetcorn even not use artificial herbicides, and can suffer sweeter, but that could be detrimental to lower yields as a result. Which system pro- Sugary outcome health because fructose is increasingly be- duces the “better” crop is open to debate, The results, just published in the Journal of ing implicated in a number of illnesses, although it is known that crops sprayed Agricultural and Food Chemistry, revealed such as fatty-liver disease and diabetes. with herbicides are biochemically trans- that applying herbicides increased the Working out how to grow the best crops formed in subtle ways. New work shows amount of protein that the plants stored in has become a lot more complicated. 7 those changes in treated crops are substan- their kernels by as little as 4% and as much tial enough to change both their nutrition- as 12% when nicosulfuron was combined al value and flavour. with the safener. The amounts of mineral The limits of biology The investigation was led by Matthew taken up by the plants increased as well, Cutulle, a horticulturalist at Clemson Uni- with levels of phosphorous, magnesium Waiting for rain versity in South Carolina, in collaboration and manganese going up by between 14% with Greg Armel at the University of Ten- and 51% and iron content rising by 67% in nessee, Knoxville, and their colleagues. plants exposed to the nicosulfuron/sa- They ran an extensive series of trials on fener combination. The balance of sugars large fields growing sweetcorn, a widely found in the tissues of the sweetcorn Life clings on even in the driest corners eaten vegetable. changed as well. Fructose concentrations ofEarth The team worked with the four com- shot up by 48% upon exposure to nicosul- monly used herbicides: mesotrione, topra- furon; 63% to topramezone and 68% to the T DOES not rain much in the Atacama mezone, nicosulfuron and atrazine. These nicosulfuron/safener combination. Glu- Idesert. A 1,000km strip of land running are often used in combination with safen- cose concentrations increased by 19% with along the Chilean coast, it is Earth’s driest ers, which are chemicals that selectively mesotrione, 40% with topramezone and desert outside its poles. Average annual help protect crops from herbicide damage. 43% with the nicosulfuron/safener combi- rainfall in certain parts can be as low as a Hence a safener called isoxadifen-ethyl nation. In contrast, sucrose levels in the millimetre or two a year, and some Ataca- was also included in the experiment, corn dropped. man weather stations have never seen a drop of water. Yetitdoesrain occasionally. And asDirk Schulze-Makuch, an astrobiologist at the Technical University of Berlin, and his col- leagues report in Proceedings of the Nation- al Academy of Sciences, a desert downpour in 2015 offered the perfect natural experi- ment forprobing the limits ofwhat sorts of conditions life can tolerate. The Atacama is not quite lifeless. A few specialised animalsand plantsscrape a liv- ing in the less arid parts. And scientists have found evidence ofmicrobial life even in the very driest areas. What is less clear, though, is whether those microbes are na- tives able to endure such extreme aridity, perhaps by becoming dormant, or wheth- er they are merely the dead remains of in- terlopers, blown in on the wind but unable to survive in theirharsh newenvironment. The rains offered a chance to check. If the microbes were alive, or dormant, then the rain should have ushered in a brief golden age of growth, as the scarcest re- source in the ecosystem—water—became Your sweetness is my weakness briefly abundant. If the desert was merely 1 The Economist March 3rd 2018 Science and technology 69

ence, he shows that there is. Members ofthe team have developed a body-odour disgust scale (BODS). This is based on asking volunteers a series of questions about different scenarios, such as noticing that a friend’s feet smell. From this it can be established how strongly, on a scale of one to five, a person reacts to bad smells. To see ifthis ranking reflected a per- son’s authoritarian leanings, the team re- cruited 201 volunteers through Amazon Mechanical Turk, a website where people from all over the world carry out small tasks in exchange for cash.

Passing the smell test The volunteers completed the BODS ques- tionnaire and othersthatgauged the extent to which they sympathised with certain authoritarian views (“Our country needs a powerful leader, in order to destroy the Down desolation road radical and immoral currents prevailing in society today”, for instance) and with 2 strewn with corpses, though, then itwould the Martian surface is bitterly cold and more socially, fiscally or morally conserva- have made no difference. blasted by solar radiation. That radiation tive views. The researchers found that Shortly after the rains in 2015, therefore, creates powerful oxidants that would like- those scoring highly on the BODS scale did Dr Schulze-Makuch and his colleagues dug ly destroy any living cells. If anything does indeed hold more authoritarian views. trenches in the desert and took samples survive, it will be deeply buried. That is They found no such correlation between from the soils at various depths. They re- one reason why the ExoMars rover—built the BODS score and more broadly conser- turned in 2016 and 2017 to get more sam- by Roscosmos and the European Space vative opinions. ples. The ones from 2015 showed evidence Agency, and due to blast off in 2020—car- As their work was being conducted in of microbial metabolism, including mole- ries a drill capable of digging almost two 2016, when Donald Trump’s campaign to cules like adenosine triphosphate, or ATP, metres below the surface. 7 become president of the United States was which is used by all cells to store energy, as in full swing, the researchers wondered if well as enzymes, fatty acids and the by- such a relationship would hold true for products of biochemical processes. Cru- Psychology Americans. If so, would there be any hint cially, when they turned to the later sam- of an increased sensitivity to bad smells ples, all those chemicals had become dra- Sniffing out among his supporters? matically scarcer. Levels of ATP in 2017 To test this idea, they recruited 159 more were around a thousandth oftheirvalue in authoritarianism participants solely from the United States 2015. There were similar falls for other bio- and repeated the experiment. They found logical molecules, too. Those results were a similar pattern with their American vol- bolstered by others showing that different unteers: those sensitive to bad smells tend- How yoursense ofsmell may affect kinds ofbacteria and fungi were present in ed to hold authoritarian views. The effect yourpolitics different layers ofdesert soil. That suggests was small, enough to explain between 4% organised ecosystems rather than mere UMANS, like other animals, have and 16% of the difference in viewpoints bacterial boneyards. Hevolved to notice and avoid sources of (family background, economic circum- The driest soils on Earth, in other infection, whether that be rotten food or stances and other factors would presum- words, do indeed seem to play host to mi- sickly members of their own species. This ably account formuch ofthe rest). crobial ecosystems that can flourish when “behavioural immune system” can have Last, the team recruited more Ameri- the rainseventuallycome. Asa demonstra- unexpected consequences. Studies have, cans to test whether the BODS score would tion of life’s resilience, that is interesting for instance, shown that those whose tell them anything about voting intentions enough. But it may have broader implica- noses are more easily offended are also in the presidential election. Expecting an tions. Astrobiologists such as Dr Schulze- more likely to shun foreigners or disap- even weaker correlation this time, they Makuch see the Atacama as the closest prove of homosexuals. More broadly, peo- used 391 participants in the hope that they Earthly analogue for the surface of Mars. ple who live in regions with more to fear would be able to discern an effect, if itwere There is plenty of geological evidence to from pathogens tend to be less promiscu- there. They did indeed find such a relation- suggest that the Mars of billions of years ous and gregarious (such risky behaviour ship. High BODS scores were a feature of ago was much wetter than it is today. And may spread disease). These effects are, by those intending to vote for Mr Trump, but results from orbiting probes suggest that their nature, generally small but evidence not the Democratic Party’s nominee, Hilla- dribbles of water occasionally appear on has been amassed that they do in fact exist. ryClinton. Thistime, however, the associa- the modern planet’s surface, possibly This led Marco Liuzza of the Magna tion was even weaker—enough to account caused by the intermittent melting of sub- Graecia University of Catanzaro, in Italy, foronly about1% ofvoting intention. terranean ice. If life did arise on Mars, then and his colleagues to wonder whether A tiny effect, but an effect nevertheless. it may still be clinging on, lying dormant in there might be a link between a person’s The work of Dr Liuzza and his colleagues the regolith and waiting for the next brief sensitivityto malodorousnessand the like- adds to the persistent evidence suggesting pulse ofmeltwater. lihood of them being sympathetic to right- that prejudices and political views can be Admittedly, Mars is even less hospita- wing authoritarian views. In work pub- influenced by a person’s desire to avoid ble than the Atacama. Besides the aridity, lished this week in Royal Society Open Sci- disease and bad smells. 7 70 Books and arts The Economist March 3rd 2018

Also in this section 72 A requiem for the factory 72 The reality of war 73 Johnson: For whom, the bell tolls

For daily analysis and debate on books, arts and culture, visit Economist.com/culture

Hollywood after Weinstein pay-TV and streaming television, female- dominated shows such as “Big Little Lies” After the fall and “The Handmaid’s Tale” have thrived on a business model that depends less on overall viewership than on passionate support, via subscriptions. The sprawling medium forces producers to be more origi- nal. Asone executive notes, itwould be dif- The Weinstein scandal is set to change not only the personnel in Hollywood but the ficult for another television show about a stories that make it to the screen white, heterosexual, male doctor to get no- N 2009 Nina Jacobson—formerly presi- But there are signs, too, of what may ticed. Some of the most influential people Ident of a Walt Disney studio, by then an prove an equallyimportantshift, in the sto- in TV are women, including Shonda independent film producer—was pitching ries Hollywood tells. The most powerful Rhimes, a producer who signed a lucrative a new franchise to Hollywood bigwigs. people in the industry—who are mainly development deal with Netflix last year. “The Hunger Games”, based on a bestsell- men—have justified their decisions about Reese Witherspoon, producer and star of ing novel, was the sort of dystopian sci-fi what to put on screen by what they say “Big Little Lies”, has acquired multiple epic that might seem an easy sell. Yet sever- sells tickets. Ms Jacobson’s experience sug- women-centred stories to develop at her al executives passed, partly because the gests many have been operating on flawed company. Women (and minorities) are in- heroes were teenagers—and partly be- and myopic hunches. So does “Wonder creasingly being hired as directors, though cause the central character was a woman. Woman”, directed by and starring women they are still underrepresented: about one “I was taught as though it were a common- (pictured), which last year was the third- in six TV episodes is directed by a woman. knowledge truth that girls will identify highest-grossing film at the North Ameri- Mainstream Hollywood isstrikingly os- with a male protagonist, but boys will not can box office. Likewise “Black Panther”, sified in comparison. As it happens, the identify with a female protagonist,” says with itsblackdirectorand stars, is poised to first person to direct fictional films was a Ms Jacobson, who eventually sold the pro- become one of the most successful Marvel woman. Alice Guy was an employee of ject to Lionsgate, a minor studio. Starring filmsever—dispellinganotherassumption, Gaumont when in 1896 she began telling JenniferLawrence, it became a huge hit. that predominantly African-American short stories with film. She went on to Ms Jacobson describes the industry’s films do not succeed internationally. make popular features, including action rules of thumb about women on screen as filmswith women in leadingrolesand nar- “bias disguised as knowledge”. The trou- Back to the future ratives that captured an enlightened view ble was, she says, that “there weren’t In the past such successes have typically of marriage. Eventually, though, as film- enough cases to prove the theories been isolated blips. Now, as women de- making became industrialised under the wrong.” There may be soon. mand more power in the production of male-run studio system, women directors The scandal over Harvey Weinstein’s film and television—and begin to get it— all but disappeared. Behind the camera, as treatment of women, and over the other that pattern may be changing. The busi- in front of it, the studios’ woman problem reprobates exposed in his wake, is chang- ness ofmass entertainment, and its output, is as deep as it is entrenched. ing Hollywood irrevocably. The #MeToo are set to become more diverse, in ways Male actors command about twice the and #TimesUp movements have forced a subtle and profound. The trend began be- screen time offemale ones. Men are the he- reckoning of the industry’s monsters, of fore the scandal but has been accelerated roes and villains and do most of the talk- the countless careers that were destroyed by it. It promises to be good for female ac- ing, with (at the last count) two-thirds of by them, and ofa sexist culture that let it all tors and directors, for the studios, and, speaking parts in successful films, a ratio happen. Regal men have been dethroned. above all, foraudiences. only slightly better than in the late 1940s. The furore will colour the Academy In recent years women have made Women, still, are often ornaments or vic- Awards ceremony on March 4th. some headway on the small screen. In tims, love interests or damsels in distress: 1 The Economist March 3rd 2018 Books and arts 71

2 useful forbeing disrobed, attacked or both. ica, too. “Women are just as game as men in women who “aren’t raped in the first So one of the simple ways that studios are,” says Ms Jacobson; “it’s just a matter of five pages and aren’t simply there to be the can be more inclusive is to put more wom- who gets to tell the stories.” But the Wein- loving girlfriend or wife”. en and minorities in central roles. The stein convulsions are spurring a rethink. Another, more concrete ramification of Geena Davis Institute on Gender in Media, The change won’t mean “purifying” enter- Hollywood’s Weinstein moment, ob- founded by the co-star of “Thelma and tainment, says a senior movie agent, but serves Ms Jacobson, is that fewer careers of Louise”, has been lobbying them for years will mean films offer a more “balanced” ambitious young women will be crushed to do this on a broad scale. Disney’s Lucas- view of sexuality. Figures in the industry by harassment. Fewer abusive men will film, run by Kathleen Kennedy, made whispered to the Hollywood Reporter that mentoracolytes in theirimage. In time that women the heroines ofits new “StarWars” executives have become skittish about will mean more women taking decisions. trilogy and a spin-off, “Rogue One: A Star greenlighting films with gratuitous sex. Two big agencies have pledged to achieve Wars Story”. Next yearBrie Larson will star Like a better equilibrium between male equal representation in senior posts by in “Captain Marvel”, the first female-led and female roles, a less pornographic ap- 2020. Some redistribution has already be- feature from Marvel Studios (now owned proach to sex might actually be good for gun. The former boss of Amazon Studios, by Disney). business. Data suggest female viewers are who left under a cloud, has been replaced This rebalancing might seem like com- turned off by the exploitative sexualisa- by a woman, JenniferSalke. mon sense, given that women buy halfthe tion of women and girls. Nick Meaney of Change has begun in the director’s cinema tickets. The same logic holds for Epagogix, a consultancy that evaluates chair as well. Martha Lauzen of San Diego minority actors, considering non-white screenplays algorithmically to predict box- State University found that, for the top 100 moviegoers buy more tickets per person in office takings, says that sex scenes can in- films in 2017, 8% of directors were women. North America than white ones; altogeth- deed help films make money, but only That seems paltry, but in 2016 the figure er they too account for half of total sales. when they fit organically into the story. was 4%; in 2010, it was 2%. Greta Gerwig, Yet in the past female-led hits such as “The one of that minority, has been nominated Hunger Games” have not been widely em- Hollywood, the sequel for the best-director Oscar for “Lady Bird”. ulated. Perhaps “Wonder Woman”, a fe- If sex on screen is under scrutiny, so is mi- Afemale cinematographer has been nomi- male superhero flickwith a male star asthe sogynistic violence. Films portraying nated for the first time (Rachel Morrison sidekick, will buck that trend. Flops, mean- women in distress are unlikely to go out of for “Mudbound”). The link between more while, have been taken to confirm the old fashion, but they might be made in a style female artists and more rounded pictures chauvinist biases. After “Catwoman” that is less crass and demeaning. As it hap- is hard to quantify, but it is real. John Land- bombed in 2004, it took Warner Bros 13 pens, says Mr Meaney, that would also graf, president of FX, a network that has years to release “Wonder Woman”. help at the box office. ‘Woman in peril’ raised itsshare offemale and non-white di- Thus the number of female characters films fare best, he finds, when the woman rectors to around a half, notes that “broad- in action films has risen only slightly since fights back and wins at the end. This ad- ening the diversity of our roster” has 2007, from 20% to 23% in 2016, says Stacy vance from primitive victimisation may al- “yielded a widerand often times more sur- Smith, who analyses screen portrayals of readybe underway. Keira Knightleyrecent- prising range ofchoices”. women and minoritiesatthe University of ly said that, reviewing scripts set in the All this matters beyond Hollywood be- Southern California. (Her research also present, she had noticed a welcome uptick cause of the example it sets to viewers found that women are much more likely to everywhere. To take one small but telling be given only one shot at directing a studio instance of that influence, after the release film.) Females are nudged out of the pic- of “The Hunger Games” there was a surge ture in varied ways. Ms Jacobson says that in girls’ interest in archery, the heroine’s when she was doing research for “Antz”, speciality. Almost two-thirds of women an animated movie released in 1998, she say that watching a strong role model on learned that females had a lot of the most screen made them more ambitious or as- important jobs in ant colonies. Then an ex- sertive, says Rachel Pashley of J. Walter ecutive at DreamWorks SKG, she wanted to Thompson, a marketing firm. Women re- switch a leading role from a male ant to a port seeing greater possibilities in the real female one, but was rebuffed. world iftheir avatars realise them on cellu- Ofthe top 100 films at the North Ameri- loid: “What they said was, ‘if we saw more can box office in 2016, 34 featured women female scientists or female leaders or fe- in leading or co-leading roles, compared male politicians on screen, it would make with 20 in 2007, accordingto Ms Smith’s re- it easier forthat to happen in real life’.” search. That looks like progress—but wom- A new kind of storytelling does not en are not being deployed more imagina- mean homogenising men and women, or tively. About one in fourwere shown nude eliminating sex and violence. It means tell- orpartiallynude in thatsample, almost tre- ing much the same stories, but with a dif- ble the rate for men. That includes 35% of ferent eye. Recent television provides a females aged 13-20, up from 23% in 2007. template. “Big Little Lies” is in part a saga of The #MeToo movement has produced domestic abuse. “The Handmaid’s Tale” is chilling accounts of actors being intimidat- a parable of women being systematically ed into taking their clothes off on camera. controlled. But they are told from the per- Salma Hayek wrote a harrowing article in spective ofthe women. Similarly, “Wonder the New York Times in which she alleged Woman” was a superhero film in more that Mr Weinstein pressured her into a les- than name. Some people who went to see bian-sex scene in “Frida”, a film about it waited with trepidation for the scene in Frida Kahlo, an artist. (Mr Weinstein “does which the heroine is reduced to a fetish ob- not recall” pressuring her into the scene.) ject; that scene never came. Instead wom- Nobody thinks sex is going to vanish en and girls walked out ofscreenings ready from screen. After all, women enjoy erot- Making up for lost time to conquer the world. 7 72 Books and arts The Economist March 3rd 2018

A requiem for the factory floor and beyond the factory walls, from The Rouge, for instance, lives on, but with union battles to worker exploitation and, just 6,000 workers making pick-up trucks. When giants ruled in the case of Foxconn, suicides. Consider, Some see offshoring to low-wage coun- forexample, his account ofone ofthe most tries, particularly in Asia, as the mega-fac- the world famous factory bosses ofall. tory’s last hurrah. Yet long supply chains Henry Ford launched his Model T in and distant plants are leaving producers 1908, turning the car from a luxury into a vulnerable to rapid changes in their home mass-manufactured product. Ford’s origi- markets, so production has been trickling Behemoth: A History of the Factory and nal factory, just outside Detroit, used stan- back. Meanwhile new materials and the Making of the Modern World. By Joshua dardised parts and fitted them to vehicles manufacturing methods, such as 3D print- Freeman. W.W. Norton & Company; 448 as they travelled along a moving assembly ing, are demolishing the economies of pages; $27.95 and £22 line. By1914 thiscutthe labourtime needed scale that giant factories have relied on. Al- HEN it was built in 1721 beside the to assemble a Model T from 12.5 hours to 93 though Mr Freeman is not ready to write WRiver Derwent, in Britain’s East Mid- minutes. Before long the nearby River off his behemoths, he has probably writ- lands, Lombe’s silk mill became some- Rouge complex became the centre ofa ver- ten their obituary. 7 thing of a tourist attraction. Daniel Defoe, tically integrated empire, designed to pro- one of its many visitors, described its “vast duce everything required to make a car. bulk” as “a curiosity of a very extraordi- The Model T, however, soon became The reality of war narynature”. Employingsome 300 people, obsolete. As MrFreeman describes, this ex- mostly children in ghastly conditions, the posed the weakness of the Ford system: it Fragments and mill was not large by modern standards. is extremely expensive and slow to switch But it is widely regarded as the first success- a giant factory from one product to anoth- ruins ful mechanised factory, an innovation that er. In 1927 Ford halted production and laid over the next 100 years transformed the off 60,000 workers, causing a social crisis way people lived and worked. in the Detroit area. After six months 15,000 Eat the Apple. By Matt Young. Bloomsbury; Lombe’s mill is the natural starting- machine tools had been replaced and 272 pages; $26 and £14.99 point for Joshua Freeman’s lively chronicle 25,000 others rebuilt, so that the Rouge ofthe factory, which as the title of his book was ready to make the new Model A. At its HAT is it like to wage war? Corre- “Behemoth” implies, concentrates on the zenith the factory employed 100,000 peo- Wspondents and film-makers try to de- largest specimens of their time. Mr Free- ple. But it was a brutal place to work, with pict it, while veterans often struggle to con- man, a historian at Queens College in New employees subject to harsh discipline and vey the reality. Matt Young manages to York, travels from Britain’s textile mills, tyrannical foremen. “A man checks ’is answer better than most. which centralised tasks that were previ- brains and ’is freedom at the door,” one As an alienated young man he joined ously carried out in homes and small Rouge worker complained. the Marines in 2005 and served three tours workshops, to monster steel and carmak- As the switch from Model T to Model A in Iraq during the bloodiest years of the ing factories in 20th-century America, Eu- plunged Ford into loss, Alfred P. Sloan, American occupation. In “Eat the Apple” rope and the Soviet Union. His journey president of General Motors, presciently he offers a series of vignettes drawn from ends in southern China at Foxconn’s city- observed that carmakers would need to his experience, changing tone and voice sized plant, which makes iPhones and oth- “adopt the ‘laws’ of Paris dressmakers”. with each. Sometimes he refers to himself er electronic gadgets. That meant bringingout new models more as “this recruit”, at others he is “the boy”. Mr Freeman rolls up his sleeves and often. The shortening of product cycles Rarely does he write as “I”, more often re- delves into the nitty-gritty of manufactur- and the fickle nature of modern markets ferring to “we” and “us”. Here he narrates ing. He successfully melds together those has duly seen manufacturing atomise into with cold distance, there he is close and nuggets with social history, on the shop smaller, nimbler, more specialist factories. grisly. Some pages are tender and wistful, others repulsive, still others funny. The experimental, jagged account matches the disjointed life of the soldier: long periods of boredom, interspersed with terror and confusion in battle, and drunken brawls on leave. The comrade- ship ofmen at arms becomes a refuge from the incomprehension of family. The Ma- rines’ dog-tags become talismans, both remnants of fallen friends and “a foretell- ing ofviolent anonymous death”. Mr Young draws, too. One sketch de- scribes how, with a towel and rubber glove, a serviceman can fashion a home- made aid to onanism. “Masturbation is a means of survival. Jerking off has saved countlesslivesthrough countlesswars,” he writes, noting how it helps keep men awake on long nights ofguard duty. His scenes recall the body- and soul- deadening training; the urge to desert on the eve of his first deployment to conflict; the exhilaration and struggle to survive amid the heat and insects. Violence ex- In the belly of the beast plodes on the pages suddenly, like impro-1 The Economist March 3rd 2018 Books and arts 73

2 vised explosive devices (IEDs). After a car- club backhome, he emphasises the “undu- fucked over.” bomb blasts his Humvee, he becomes a lating stretch marks and caesarean scars” “Eat the Apple” is not a treatise on grand “person-thing”. Confronting the Iraqi on- ofthe naked girls. strategy. Itoffersno lessonson defeating in- lookers, he steps on a fleshy pile, which On occasion he reflects on America’s surgencies or the intricacies ofcountries in turns out to be the suicide-bomber’s face. wars. A night patrol prompts the observa- which America fights. This is a grunt’s “The person-thing thinks it is wonderful tion that: “There is no light pollution in story, ofthe world seen through gun-sights and hilarious and physically amazing. It Iraq. There might’ve been once, but not and the reinforced glass of armoured vehi- holds the bomber’s face in front ofhis own any more. Bombs dropped, buildings col- cles. The enemy is unknown and generic: and screams at the crowd through plump, lapsed, people died. But now there are muj, hajji and “raghead”. blood-flecked lips, watching the crowd’s stars.” He imagines a letter to a dark- Instead, MrYoung’sisa tale ofpathos. A reaction through empty eyeholes.” skinned taxi-driver he punched. Recalling young man tries to find himselfby going to He has an eye for the absurd. After his that many cabbies are Somalis, he asks, war, but fails. “I didn’t even get to kill any- patrol isblown up byan IED, he recovers in “Are you one of them?…It seems I can’t go one,” he laments. He has only shot dogs, a field hospital, upset that the doctors are anywhere without running into someone guiltily at that. Yet, in writing about war, he cutting away his favourite boots. At a strip whose country the Marine Corps has has found a purpose and his voice. 7 Johnson For whom, the bell tolls

In the court ofcommon usage, an old pronoun is losing its case AST week The Economist considered I”. (It should be between you and me, be- Lthe new South African president’s in- cause both you and me are objects of the tray, advertising our advice on the cover preposition.) But this is a marginal mis- with the words “Who Cyril Ramaphosa take, made mostly by educated people should fire”. Some readers might have taking to excess the childhood lesson not wondered whether someone should fire to say “you and me” in sentences such as our proofreaders. Shouldn’t that be “you and me are going to be friends.” Re- “Whom Cyril Ramaphosa should fire”? gardless, that children say “you and me It wasn’t a cock-up. On its face, our edi- are going” and grown-ups say “between tors agreed, the grammar was clear. It you and I”, and both are perfectly under- should be whom. Who is used for sub- stood, illustrates the point: case just isn’t jects, whom for objects, including direct important to meaning in English. objects such as that of the verb to fire. “He Whom is special. It is used in questions fires him”, not “He fires he”. Thus, “He and relative clauses, which are rarer and fires whom”. more complex than “he saw him” type The issue is not as simple as that. sentences. Itisnotalwaysobvious wheth- Whom is one of the few remaining ves- er the relevant word is a subject or an ob- tiges of case in English. At the time of ject, as in sentences such as, “He’s the can- “Beowulf”, the great monster-slaying An- didate who(m) we think will win”. (It glo-Saxon epic, English nouns, pronouns should be who.) Perhaps because these and adjectives, plus words like the, all had sentences are tricky, and swapping who an ending showing case. Four different and whom rarely causes confusion, the cases in Old English tell you whether a has a way ofsolving the problem, whether two words have been collapsing into just word is a subject, direct object, indirect it has cases or not. In English and other one combined form: who, which is used, object or possessor. Other languages, case-poorlanguages, from Swedish to Viet- just like you, as both subject and object. from Ancient Greek to Russian to Esto- namese, the solution is word order. Whom is stuffier in some places than nian, have farricher case systems still. In Old English, Latin or Russian sub- in others. The pomposity of Sideshow More than 1,000 years later, that sys- jects, objects and other words can appear Bob from “The Simpsons” is clear when tem has vanished almost entirely—proba- in different orders; this gives speakers and he asks his audience “Whoooom do you bly fatally weakened by foreign invaders. writers a way to play with rhythm and em- love?” By contrast Twitter recommends When foreign speakers learn a second phasis. The loss of case in modern English “Who to follow”. (Changing the site lan- language, as the Vikingsand then the Nor- means that word order must be relatively guage to British English oddly changes mans did when they conquered England, fixed, usually subject, verb and object in this to “Whom to follow”, though Britons cases are tricky to pick up, as any student that sequence. Steve loves Sally means that do not actually use whom any more than of Russian knows. If they can be dis- Steve is the lover, Sally the loved. This Americans.) After a preposition, whom pensed with, they often will be. Those Vi- could be reversed in Old English, with the still feels necessary: “people for whom a kings and Normans feebly learning Old meaning unchanged, because the case- holiday is a far-off dream”. But in cases English helped turn itinto Middle English, endings would show who loved whom. like our cover flash, “Whom Cyril Rama- in which case was far less often visible. In English today just six words still phosa should fire” felt so unacceptably Ye t fa n s o f whom might ask, how can show a distinction between subject and stilted that our editors decided against it. youdispense with case withoutthrowing object: I, he, she, we, they and who. For the The case, as it were, is getting stronger out intelligibility? It’s important to know first five, making the case-distinction is against whom. Except in the most formal what word in a sentence is the subject, mandatory nearly all of the time. You can- language—think courtrooms and pray- which the direct object, and so on. That is not say “I love she and she loves I”. Admit- ers—this little word may not survive. For true—so true that every language on Earth tedly, some people say “between you and whom, the bell tolls. 74 Announcements

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The Economist March 3rd 2018 76 Economic and financial indicators The Economist March 3rd 2018

Economic data % change on year ago Budget Interest Industrial Current-account balance balance rates, % Economic Gross domestic data product production Consumer prices Unemployment latest 12 % of GDP % of GDP 10-year gov't Currency units, per $ latest qtr* 2017† latest latest 2017† rate, % months, $bn 2017† 2017† bonds, latest Feb 28th year ago United States +2.5 Q4 +2.5 +2.3 +3.7 Jan +2.1 Jan +2.1 4.1 Jan -452.5 Q3 -2.4 -3.5 2.88 - - China +6.8 Q4 +6.6 +6.8 +6.2 Dec +1.5 Jan +1.6 3.9 Q4§ +172.0 Q4 +1.2 -3.7 3.76§§ 6.33 6.87 Japan +1.5 Q4 +0.5 +1.7 +2.7 Jan +1.3 Jan +0.5 2.8 Dec +195.5 Dec +3.9 -4.4 0.04 107 112 Britain +1.4 Q4 +1.6 +1.7 nil Dec Statistics+3.0 Jan +2.7 on 42 economies,4.4 Nov†† -118.1 plus Q3 a closer-4.5 -2.9 1.55 0.73 0.80 Canada +3.0 Q3 +1.7 +3.1 +4.7 Nov look+1.7 Jan at metal+1.6 prices5.9 Jan -45.8 Q3 -2.9 -1.6 2.23 1.28 1.32 Euro area +2.7 Q4 +2.4 +2.4 +5.2 Dec +1.2 Feb +1.5 8.7 Dec +448.0 Dec +3.2 -1.0 0.66 0.82 0.94 Austria +2.9 Q4 +1.6 +2.9 +3.5 Dec +1.8 Jan +2.2 5.3 Dec +8.5 Q3 +2.2 -1.1 0.77 0.82 0.94 Belgium +1.9 Q4 +2.1 +1.7 -2.8 Dec +1.5 Feb +2.2 6.6 Dec -3.9 Sep -0.7 -1.7 0.92 0.82 0.94 France +2.5 Q4 +2.6 +1.9 +4.5 Dec +1.2 Feb +1.1 9.2 Dec -28.5 Dec -1.3 -2.9 0.93 0.82 0.94 Germany +2.9 Q4 +2.4 +2.5 +6.7 Dec +1.4 Feb +1.7 3.6 Dec‡ +291.4 Dec +7.9 +1.2 0.66 0.82 0.94 Greece +1.3 Q3 +1.2 +1.3 +0.2 Dec -0.2 Jan +1.1 20.9 Nov -1.4 Dec -0.4 -0.6 4.41 0.82 0.94 Italy +1.6 Q4 +1.2 +1.5 +4.9 Dec +0.6 Feb +1.3 10.8 Dec +57.3 Dec +2.7 -2.3 2.09 0.82 0.94 Netherlands +2.9 Q4 +3.2 +3.2 +5.2 Dec +1.5 Jan +1.3 5.2 Jan +80.7 Q3 +9.6 +0.9 0.73 0.82 0.94 Spain +3.1 Q4 +2.8 +3.1 +2.8 Dec +1.0 Feb +2.0 16.4 Dec +23.0 Dec +1.6 -3.0 1.48 0.82 0.94 Czech Republic +4.7 Q3 +2.0 +4.4 +2.7 Dec +2.2 Jan +2.5 2.4 Dec‡ +0.9 Q3 +1.0 +0.7 1.93 20.8 25.4 Denmark +1.2 Q4 +3.9 +2.0 -3.1 Dec +0.7 Jan +1.1 4.2 Dec +24.8 Dec +8.3 -0.3 0.73 6.10 7.00 Norway +1.4 Q4 -1.1 +1.9 -3.2 Dec +1.6 Jan +1.9 4.1 Dec‡‡ +21.1 Q3 +4.6 +4.9 1.99 7.89 8.36 Poland +4.3 Q4 +4.1 +4.6 +8.6 Jan +1.9 Jan +2.0 6.9 Jan§ +0.2 Dec nil -1.3 3.35 3.43 4.06 Russia +1.8 Q3 na +1.7 +2.8 Jan +2.2 Jan +3.5 5.2 Jan§ +40.2 Q4 +2.4 -1.5 8.13 56.3 58.4 Sweden +3.3 Q4 +3.5 +2.7 +8.1 Dec +1.6 Jan +1.8 7.0 Jan§ +21.1 Q3 +4.7 +1.0 0.83 8.29 9.01 Switzerland +1.2 Q3 +2.5 +1.0 +8.7 Q4 +0.7 Jan +0.5 3.0 Jan +66.4 Q3 +9.3 +0.8 0.12 0.95 1.00 Turkey +11.1 Q3 na +6.7 +6.5 Dec +10.3 Jan +11.1 10.3 Nov§ -47.1 Dec -5.0 -1.5 11.95 3.81 3.63 Australia +2.8 Q3 +2.4 +2.3 +3.5 Q3 +1.9 Q4 +1.9 5.5 Jan -22.2 Q3 -1.7 -1.5 2.81 1.28 1.30 Hong Kong +3.4 Q4 +3.3 +3.7 +0.4 Q3 +1.6 Jan +1.5 2.9 Jan‡‡ +14.8 Q3 +4.3 +4.2 2.02 7.83 7.76 India +7.2 Q4 +6.6 +6.4 +7.1 Dec +5.1 Jan +3.5 6.1 Feb -33.6 Q3 -1.6 -3.5 7.72 65.2 66.7 Indonesia +5.2 Q4 na +5.1 +3.4 Dec +3.3 Jan +3.8 5.5 Q3§ -17.3 Q4 -1.6 -2.8 6.57 13,749 13,336 Malaysia +5.9 Q4 na +6.0 +2.8 Dec +2.7 Jan +3.8 3.3 Dec§ +9.4 Q4 +2.6 -2.9 4.05 3.92 4.44 Pakistan +5.7 2017** na +5.7 -1.4 Dec +4.4 Jan +4.1 5.9 2015 -15.3 Q4 -4.8 -5.9 8.80††† 111 105 Philippines +6.6 Q4 +6.1 +6.7 -9.7 Dec +4.0 Jan +3.2 5.0 Q4§ -0.5 Sep -0.3 -2.1 6.73 52.1 50.2 Singapore +3.6 Q4 +2.1 +3.5 +17.9 Jan nil Jan +0.6 2.1 Q4 +61.0 Q4 +18.5 -1.0 2.39 1.32 1.40 South Korea +3.0 Q4 -0.9 +3.1 -6.0 Dec +1.0 Jan +2.0 3.7 Jan§ +78.5 Dec +5.3 +1.1 2.74 1,083 1,131 Taiwan +3.3 Q4 +4.3 +2.9 +1.2 Dec +0.9 Jan +0.6 3.7 Jan +84.1 Q4 +13.8 -0.1 1.04 29.2 30.7 Thailand +4.0 Q4 +1.8 +3.7 +3.4 Jan +0.7 Jan +0.7 1.3 Jan§ +49.3 Q4 +11.6 -2.5 2.51 31.4 34.9 Argentina +4.2 Q3 +3.6 +2.9 +1.1 Jan +25.4 Jan +25.2 8.3 Q3§ -26.6 Q3 -4.2 -5.8 4.19 20.1 15.5 Brazil +1.4 Q3 +0.6 +1.0 +4.4 Dec +2.9 Jan +3.3 12.2 Jan§ -9.0 Jan -0.6 -8.0 8.37 3.25 3.11 Chile +2.2 Q3 +6.0 +1.4 +5.3 Jan +2.2 Jan +2.2 6.5 Jan§‡‡ -4.6 Q3 -1.3 -2.7 4.56 595 650 Colombia +1.6 Q4 +1.1 +1.6 -0.8 Dec +3.7 Jan +4.3 11.8 Jan§ -11.1 Q3 -3.4 -2.3 6.62 2,868 2,922 Mexico +1.5 Q4 +3.2 +2.1 -0.7 Dec +5.5 Jan +6.0 3.4 Jan -18.8 Q4 -1.7 -1.1 7.65 18.9 20.0 Peru +2.2 Q4 -1.3 +2.5 -12.5 Dec +1.3 Jan +2.8 6.9 Dec§ -2.7 Q4 -2.1 -3.3 na 3.26 3.27 Egypt na na +4.2 +19.5 Dec +17.1 Jan +29.5 11.3 Q4§ -12.2 Q3 -7.1 -11.0 na 17.7 15.8 Israel +2.9 Q4 +3.6 +3.3 +1.5 Dec +0.1 Jan +0.2 3.7 Jan +10.5 Q3 +3.0 -2.0 1.77 3.47 3.64 Saudi Arabia -0.7 2017 na -0.7 na +3.0 Jan -0.2 5.8 Q3 +12.4 Q3 +2.7 -8.9 na 3.75 3.75 South Africa +0.8 Q3 +2.0 +0.9 +2.8 Dec +4.4 Jan +5.3 26.7 Q4§ -7.3 Q3 -2.2 -3.9 8.15 11.8 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 March 3rd 2018 Economic and financial indicators 77

Markets % change on Metal prices January 3rd 2017=100, $ terms Dec 29th 2017 The gold price rose by 13% in 2017, its one 130 Index in local in $ best performance in seven years. A stut- The Economist Feb 28th week currency terms ’s metal-price index Markets tering dollar and a boost in demand from 125 United States (DJIA) 25,029.2 +0.9 +1.3 +1.3 lunar new-year celebrations has helped China (SSEA) 3,413.7 +1.9 -1.4 +1.4 Japan (Nikkei 225) 22,068.2 +0.4 -3.1 +2.3 the rally continue. Gold is up by 7% since 120 Britain (FTSE 100) 7,231.9 -0.7 -5.9 -4.2 mid-December and recently hit a near Canada (S&P TSX) 15,442.7 -0.5 -4.7 -6.8 18-month high. Platinum, used in emis- 115 Gold Euro area (FTSE Euro 100) 1,198.5 +0.3 -0.9 +0.6 sions-reduction technology, has also Euro area (EURO STOXX 50) 3,439.0 +0.3 -1.9 -0.3 seen its price rebound from a mid-Decem- 110 Austria (ATX) 3,476.0 +1.4 +1.6 +3.2 ber slump, benefiting from its strong 105 Belgium (Bel 20) 3,994.5 +1.1 +0.4 +2.0 correlation with gold and China’s crack- Platinum France (CAC 40) 5,320.5 +0.3 +0.1 +1.7 down on pollution. Base-metal prices 100 Germany (DAX)* 12,435.9 -0.3 -3.7 -2.2 have risen even faster. The Economist’s Greece (Athex Comp) 835.7 -0.4 +4.1 +5.8 Italy (FTSE/MIB) 22,607.6 -0.2 +3.5 +5.1 metal-price index, which excludes pre- 95 Netherlands (AEX) 535.6 +0.3 -1.7 -0.1 cious metals, rose by 23% in 2017. This Spain (IBEX 35) 9,840.3 +0.2 -2.0 -0.5 was largely driven by factory closures in 90 JFMAMJJASONDJF Czech Republic (PX) 1,120.5 +0.8 +3.9 +6.1 China and the hope that electric vehicles, 2017 2018 Denmark (OMXCB) 919.6 +1.3 -0.8 +0.7 full of copper, are coming of age. Sources: Thomson Reuters; The Economist Hungary (BUX) 38,112.0 -2.2 -3.2 -2.9 Norway (OSEAX) 918.7 +1.0 +1.3 +5.0 Poland (WIG) 61,703.2 -1.4 -3.2 -1.8 Other markets The Economist commodity-price index Russia (RTS, $ terms) 1,285.5 -0.4 +11.4 +11.4 2005=100 Othermarkets % change on % change on Sweden (OMXS30) 1,583.4 +0.5 +0.4 -0.8 Dec 29th 2017 The Economist commodity-priceone index one Switzerland (SMI) 8,906.4 -0.9 -5.1 -2.1 Index one in local in $ Feb 20th Feb 27th* month year Turkey (BIST) 118,950.8 +2.3 +3.1 +2.7 Feb 28th week currency terms Dollar Index Australia (All Ord.) 6,117.3 +1.2 -0.8 -1.3 United States (S&P 500) 2,713.8 +0.5 +1.5 +1.5 All Items 154.0 155.1 +1.0 +5.7 Hong Kong (Hang Seng) 30,844.7 -1.9 +3.1 +3.0 United States (NAScomp) 7,273.0 +0.8 +5.4 +5.4 Food 155.1 157.0 +2.2 +0.4 India (BSE) 34,184.0 +1.0 +0.4 -1.7 China (SSEB, $ terms) 327.9 +1.2 -4.1 -4.1 Indonesia (JSX) 6,597.2 -0.7 +3.8 +2.4 Japan (Topix) 1,768.2 +0.4 -2.7 +2.7 Industrials Malaysia (KLSE) 1,856.2 -0.1 +3.3 +6.7 Europe (FTSEurofirst 300) 1,487.2 -0.3 -2.8 -1.2 All 152.9 153.0 -0.1 +11.9 Pakistan (KSE) 43,239.4 +0.7 +6.8 +6.7 World, dev'd (MSCI) 2,118.0 nil +0.7 +0.7 Nfa† 138.7 142.4 +2.4 -1.3 Singapore (STI) 3,517.9 nil +3.4 +4.4 Emerging markets (MSCI) 1,195.2 -1.2 +3.2 +3.2 Metals 159.0 157.6 -1.1 +18.0 South Korea (KOSPI) 2,427.4 -0.1 -1.6 -2.7 World, all (MSCI) 518.1 -0.2 +1.0 +1.0 Sterling Index Taiwan (TWI) 10,815.5 +0.9 +1.6 +3.6 World bonds (Citigroup) 959.1 +0.1 +0.9 +0.9 All items 200.0 203.2 +2.8 -5.3 Thailand (SET) 1,830.1 +1.6 +4.4 +8.3 EMBI+ (JPMorgan) 815.0 +0.4 -2.5 -2.5 Argentina (MERV) 33,010.9 -0.1 +9.8 +2.7 Hedge funds (HFRX) 1,280.6§ -0.8 +0.4 +0.4 Euro Index Brazil (BVSP) 85,353.6 -0.8 +11.7 +14.1 Volatility, US (VIX) 19.9 +20.0 +11.0 (levels) All items 155.1 157.5 +2.5 -8.2 Chile (IGPA) 28,132.2 -1.7 +0.5 +4.0 CDSs, Eur (iTRAXX)† 52.4 +1.6 +16.2 +18.0 Gold Colombia (IGBC) 11,411.1 -3.0 -0.6 +3.4 CDSs, N Am (CDX)† 56.1 +1.0 +14.4 +14.4 $ per oz 1,336.3 1,318.5 -1.6 +4.9 Mexico (IPC) 47,437.9 -2.3 -3.9 -0.3 Carbon trading (EU ETS) € 10.1 +3.8 +24.2 +26.2 West Texas Intermediate Peru (S&P/BVL)* 20,831.8 +0.6 +4.3 +3.6 Sources: IHS Markit; Thomson Reuters. *Total return index. $ per barrel 61.8 63.0 -2.3 +16.7 Egypt (EGX 30) 15,472.7 +1.5 +3.0 +3.7 †Credit-default-swap spreads, basis points. §Feb 27th. Israel (TA-125) 1,362.0 -0.3 -0.2 -0.3 Sources: Bloomberg; CME Group; Cotlook; Darmenn & Curl; FT; ICCO; Indicators for more countries and additional ICO; ISO; Live Rice Index; LME; NZ Wool Services; Thompson Lloyd & Saudi Arabia (Tadawul) 7,418.8 -1.2 +2.7 +2.7 Ewart; Thomson Reuters; Urner Barry; WSJ. *Provisional South Africa (JSE AS) 58,325.1 -0.5 -2.0 +2.8 series, go to: Economist.com/indicators †Non-food agriculturals. 78 Obituary Billy Graham The Economist March 3rd 2018

give their lives to Him? When would they repent and earn God’s forgiveness? Now was the time, today! For at any moment God might call them to His judgment. This was not a political message. “Evan- gelical” simply meant, of the Gospel. Yet it drew in presidents, not least because a Godly America was bound to prevail against Soviet evil. He prayed beside the deathbed of Eisenhower and the sickbed of Johnson; put his strong arm round Nix- on’s shoulders after his early election de- feats; helped George W. Bush to give up drink, and told all ofthem that God’s grace alone, not any works of theirs, would as- sure them of Heaven. Through all this he struggled not to be partisan, kneeling down (and playing golf) with Republicans and Democrats alike and managing, too, to like Kennedy, though he had not wanted this Catholic in the White House. When the evangelical right, inspired by him, rose up in power, he kept his distance. Because his mission was to save souls, he was bound to love everyone in Christ. The ground at the footofthe Cross was lev- el. When he received Him he began to see people without colour, which in the Deep The hour of decision South astounded him. It led him to tear down the ropes separating whites from blacks in his early southern Crusades, and to a friendship with Martin Luther King that extended to bailing him out of jail. With other groups, God’s command was harder. At times both Jews and Muslims Billy Graham, preacher, died on February 21st, aged 99 bothered him. Asforhomosexuals, though HEN the moment came, Billy Gra- hungry forGod, 155,000 came to hear him. he refused to join the ultra-conservative Wham did not feel any special emo- Technologyadvanced ashe did, spread- Moral Majority, he prayed they would re- tion. The woman next to him had tears ing the message. From 1947 to 2008 around pent oftheir perversion. streaming down her face, but he was calm, 2.2bn people watched the Crusades on The Bible was clear on that point. God’s full of peace, as he returned to his seat. He television, video or webcast, or listened to inspired Word defined marriage as be- had committed himself to Christ as his his “Hour of Decision” radio talk, which tween a man and a woman and stipulated, Lord and Saviour at the invitation of aired weekly for more than 60 years. His too, that the man should lead and the Preacher Mordecai Ham at a rally in Char- magazine, Decision, had 2m subscribers. woman should follow. So while he trav- lotte, North Carolina. He was15, just a farm All this was God’s wondrous doing, not elled the world, bringing the Good News boywith poorgrades, and alreadythe Lord his. And the number that really mattered to its leaders, his wife Ruth held everything was preparing mighty works in him. But was that over his years of ministry, when together at home. And their marriage en- He worked quietly. Three years later, when he issued the Invitation to come forward, dured, built on the rockofdaily prayer and the calm had worn off and the wrestling at least 3.2m people walked to the Cross to Bible readings. The children rebelled, then had started, the Holy Spirit moved in him receive Jesus Christ as their Saviour. returned to Christ. He was not a funda- again as he wandered disconsolate one His way of preaching was not hellfire mentalist, not a Bible-pounding Old Testa- night across a golf course in Florida. At the and brimstone in the old revivalist style, ment man, but handed out the Gospel of edge of the 18th green he was urged to though it started that way at the Florida Bi- John at his Crusades. John’s message was kneel, pray and accept the call to ministry. ble Institute, where he would go into the redeeming love, pure and simple. Again, there were no signs in the heavens. swamps to shout at alligators with a voice But this time the tears that flowed were his. already resonant from practising Tarzan On the mountaintop On the strength ofthatpromise made to yells as a boy, the pullingvoice that preach- In his heart he would have been quite hap- the Lord, who now controlled each step of ers needed. As he got better at it—working py as the pastor of some little church up in his life, he set out to preach the Gospel in up from a basement church in Illinois to lo- the Blue Ridge Mountains, where he loved every land. Over more than half a century, cal radio broadcasts to his first revivalist to walkand talkwith God. He did not need as he changed from a strapping, vigorous, meetings, in two old circus tents in Los An- the global adulation or his star on the Hol- shiny-suit evangelist to a frail patriarch geles in 1949—his delivery modulated, but lywood Walk of Fame. All he needed was with a white mane, around 215m people in not his urgency. Men and women had al- Jesus Christ. But God had mysteriously 185 countries heard him live at more than lowed their souls to shrivel up in sin. They planned his life otherwise. And he trusted 400 Crusades. In 1957 he packed Madison had forgotten God. Yet God had sent His that, sinner though he was, the Holy Spirit Square Garden every night for 16 weeks, only Son into the world to save sinners. Je- would testify to his faithfulness; and that and in Seoul in 1973 he drew a crowd of sus had hung, and bled, and died on the afterall histravellinghe would have the as- more than a million. In Moscow in 1992, so Cross, for them. When were they going to surance ofHeaven, truly home. 7 the standard % rate with code 20 off TE3348 Register today and save WAR ON CANCER SOUTH-EAST ASIA 2018 March 20th Shared struggles, 2018 collective success Jakarta

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