Biden's Stimulus

Biden’s stimulus: what size is right? Amazon enters the Jassy era Beyond Myanmar’s coup Why Africa faces a long covid

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By Imtiaz Shahid Advanced Publishers For Order Call/WhatsApp 03336042057 - 0726540141 Contents The Economist February 6th 2021 3

The world this week United States 7 A summary of political 19 California, Texas and and business news covid-19 20 Vanishing pupils Leaders 21 Chicago’s unions 9 Global finance 22 Covid-19 relief, episode 6 The real revolution 23 Abortion arguments 10 Fiscal stimulus in America 24 Lexington The courage of How much is too much? Adam Kinzinger 10 Despots v democrats The Americas Myanmar’s coup 25 Judging the FARC 11 Brexit and the City The price is wrong 26 A busy election year On the cover 12 Development 27 Bello A new social High tech meets high finance, Africa’s long covid contract a promising, but volatile, combination: leader, page 9. Letters A new epoch for retail investors, On Ethiopia, vaccine page 56. The rise of high-speed 14 passports, space debris, Asia marketmakers and payment for Wikipedia 29 Defending South Korea order flow, page 59. Why the WallStreetBets crowd are able 30 Insular young Japanese to profit from predatory Briefing 31 Business cards v covid-19 trading: Buttonwood, page 61. 15 Myanmar’s coup 31 Censorship in India Redditors and call options: Reversion to type 32 Banyan Vietnam’s graphic detail, page 73 surprising leader • Biden’s stimulus: what size is right? Targeted relief would be China better than indiscriminate 33 Online Maoists spending: leader, page 10. Republicans test the precise 34 Toughening up the young meaning of Joe Biden’s unity 35 Chaguan Migrants’ woes agenda, page 22 as a big holiday looms • Amazon enters the Jassy era The online giant’s larger-than-life founder is a tough act to follow. Does Andy Jassy have the chops? Middle East & Africa Page 50 36 Covid-19 in Africa • Beyond Myanmar’s coup 39 Bibi’s difficult friends Attempts to dress up 39 A car shortage in Algeria authoritarian regimes as 40 No end to honour killings democracies are unlikely to succeed: leader, page 10. A general’s thirst for power has shut down democratic rule: briefing, page 15

Bartleby Executives, not investors, may be to We are working hard to blame for short-termism, ensure that there is no dis- page 54 ruption to print copies of The Economist as a result of the coronavirus. But if you have digital access as part of your subscription, then acti- vating it will ensure that you can always read the digital version of the newspaper as well as all of our daily jour- nalism. To do so, visit economist.com/activate 1 Contents continues overleaf 4 Contents The Economist February 6th 2021

Europe Finance & economics 41 Italy’s next prime minister 56 Retail investing 42 Alexei Navalny 59 High-frequency traders 43 Nord Stream 2 limps on 59 WallStreetBets 43 Sweden’s lonely film 60 China’s capital outflows festival 60 German regulation 44 Charlemagne The 61 Buttonwood Predatory vaccine blame game trading 62 Free exchange The Britain economics of biodiversity 45 The City and Brexit 46 Captain Sir Tom Moore Science & technology 47 Bagehot Boris rides high 63 Manufacturing vaccines 64 Variants and vaccines 65 Daughters and divorce 65 Deep-sea plastic oases International 66 How fish grew legs 48 The future of nightclubs Books & arts 67 Abuse in France 68 Chaos in Karachi 69 Climate-change fiction 69 The death of age Business 70 Proust and the people 50 Amazon after Bezos 51 Daimler and Benz part Economic & financial indicators ways 72 Statistics on 42 economies 52 China Inc retreats home 53 Cook v Zuck Graphic detail 53 Football’s TV drought 73 The favourite stocks of WallStreetBets 54 Bartleby Executive short-termism Obituary 55 Schumpeter ExxonMobil 74 Nikolai Antoshkin, hero of Chernobyl

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used them. This triggered a Colombia’s “special juris- furious row with Britain, diction for peace”, which in- Coronavirus briefs which intensified after the eu vestigates and judges crimes To 6am GMT February 4th 2021 threatened to invoke Article 16 committed during the 52-year Weekly confirmed deaths by area, ’000 of the Brexit agreement, which conflict between the state and would create a hard border the farc guerrilla group, is- 30 Western Other between Northern Ireland and sued a damning indictment of Europe 20 the Republic of Ireland. After the group’s leader, Rodrigo US

across-the-board criticism, Londoño, and seven other 10 including from the Republic, commanders. It held them Latin the commission backed down. responsible for the mistreat- America 0 ment of hostages, which it said 2020 21 The army seized power in a A court sent Alexei Navalny, amounted to war crimes and Vaccination doses coup in Myanmar and arrested Russia’s main opposition crimes against humanity. Total Per 100 Aung San Suu Kyi, the leader of leader, to prison for two and a This week, ’000 ’000 people the ruling party, the National half years. It said he had violat- Brazil’s “Lava Jato” anti-cor- Israel 1,148 5,092 58.83 League for Democracy. It ed the conditions under which ruption task-force, which has UAE 701 3,441 34.79 claimed that elections the nld a sentence for embezzlement convicted dozens of busi- Seychelles 12 31 31.38 won by a landslide in Novem- had been suspended. He says nessmen and politicians since Britain 2,620 10,144 14.94 Bahrain 16 174 10.23 ber were fraudulent, and that it the original case was fabricat- 2014, was unceremoniously United States 8,942 32,781 9.80 had to intervene to ensure a ed; and that he could not at- disbanded. Politicians had Serbia 265 496 7.29 fair poll could be conducted. tend the parole hearings as he turned against it and were Malta 8 29 6.57 The army said it would return was in Germany in a coma after joined by the populist presi- Denmark 49 283 4.88 power to civilians within a being poisoned by Russian dent, Jair Bolsonaro, whose Ireland 47 200 4.05 year. The military authorities agents. More than a thousand son, a senator, is being investi- Sources: Johns Hopkins University CSSE; indicted Ms Suu Kyi with the protesters were arrested. gated for money-laundering. Our World in Data; United Nations bizarre charge of importing some walkie-talkies without Police in Istanbul arrested 159 Rebels opposed to the re- A non-peer-reviewed study the proper paperwork, and the students at Bogazici University election of President Faustin- suggested that the Astra- president, Win Myint, also who were protesting against Archange Touadéra closed in Zeneca-Oxford vaccine can from the nld, with violating the detention of four gay activ- on Bangui, the capital of the reduce transmissions by social-distancing rules. ists for depicting Islam’s most Central African Republic. two-thirds. Meanwhile, the sacred site with the Pride flag. European Medicines Agency Mori Yoshiro, a former prime Turkey’s interior minister said Iran’s foreign minister said the approved the az jab for every- minister and the head of the the activists were “freaks”. European Union should “cho- one over 18. But officials in organising committee for the reograph” a synchronised France, Germany and Sweden Tokyo Olympics, which are In Scotland Nicola Sturgeon return of both America and are recommending that it not scheduled to start in July, reshuffled her ruling national- Iran to the deal under which be offered to over 65s, and in complained about how long party government in the hope Iran curbed its nuclear pro- Poland to over 60s, believing women talk at board meetings. of galvanising it before a par- gramme in return for sanctions there is insufficient data to The comments prompted liamentary election in May relief. President Joe Biden has say it is effective in those age widespread calls for his resig- that is being presented as a said he wants to re-enter the groups. Switzerland refused nation. Separately, the Inter- proxy vote on Scottish in- deal. But he has insisted that to license it at all. national Olympic Committee dependence. But the ejection Iran must first comply with the issued guidelines to help of a frontbencher who dis- accord’s directives. Johnson & Johnson reported prevent the spread of covid-19. agrees with Ms Sturgeon’s that its new single-jab vaccine Spectators, it said, could clap independence strategy only Thousands gathered in Jerusa- was 66% effective overall in but not chant or sing. amplified the snp’s divisions. lem to attend the funeral of an preventing covid-19, and that ultra-Orthodox rabbi, flouting protection increases over Mario Draghi, a former head of In his first significant trade- Israel’s coronavirus restric- time. As with other vaccines, the European Central Bank, policy decision, Joe Biden tions. Cases and deaths have j&j’s trials showed its jab has was asked by the president of reinstated tariffs on alumi- been rising in Israel, which is lower efficacy in South Africa, Italy to try to form a govern- nium imports from the United still leading the world in vacci- where a particularly perni- ment. The current prime min- Arab Emirates, which Donald nation per person. Israel cious strain of covid-19 has ister, Giuseppe Conte, has lost Trump had lifted on his last agreed to transfer 5,000 doses been observed. his majority in a spat over day in office. Mr Biden, per- of the vaccine to the Palestin- covid-recovery funds. Mr haps mindful of his close ian Authority, which began A peer-reviewed analysis in Draghi needs the support of election margin in the rustbelt jabbing health workers. the Lancet of Russia’s Sputnik one of the two big populist states, says imports from the V vaccine showed it had an parties, the Northern League or uae hurt domestic production. Tanzania is not planning to efficacy rate of 91.6%. the Five Star Movement. That vaccinate the public against may be tricky. The Senate approved Pete covid-19, its health minister Buttigieg as transport secre- said. President John Magufuli For our latest coverage of the The European Commission tary in the Biden administra- has said he does not think the virus please visit economist.com/ took powers to block the export tion. He is the first openly gay vaccines work. Tanzanians are coronavirus or download the of covid-19 vaccines to non-eu person to be confirmed to a being urged to to use tradition- Economist app. countries, though it has not yet cabinet position in America. al medicine. 8 The world this week Business The Economist February 6th 2021

share price of GameStop, one agency, thinks gdp will is close to securing a deal with Biggest companies United States, by market capitalisation of the stocks defended by the roughly return to its pre-pan- officials about restructuring its February 3rd 2021, $trn day traders, has lost more than demic level by the middle of business. 0.50 2.52.01.51.0 80% of its value since the end this year, even without any Apple of the market skirmish. more stimulus. The economy, McKinsey drew up a deal with however, will lag its potential 47 American states to settle Microsoft The effect of lower oil prices until 2025, keeping employ- claims that the consultancy Amazon was laid bare in the annual ment subdued. firm advised Purdue Pharma to Alphabet earnings of oil and gas compa- vigorously market its OxyCon- Tesla nies. ExxonMobil and Shell Britain formally submitted a tin painkiller, contributing to each recorded annual net request to join the Compre- America’s opioid crisis. It is a Source: Bloomberg losses of around $22bn last hensive and Progressive rare instance of McKinsey Taking markets by surprise, year. bp’s loss, its first in a Agreement for Trans-Pacific being held legally accountable Jeff Bezos said he would stand decade, was $20.3bn. Chev- Partnership, a free-trade for its advice to clients. down as Amazon’s chief exec- ron’s second-weakest year for agreement among 11countries, utive later this year, telling his revenues since 2000 pushed it which include Australia, Cana- General Motors’ share price “fellow Amazonians” in a letter to a loss of $5.5bn. da, Japan and Mexico. retained the gains it made after that he wants to devote more the carmaker announced that time to his climate-change The euro zone’s economy Uber expanded its home- it would phase out production project, the Washington Post shrank by 6.8% last year. Ger- delivery business by agreeing of petrol-fuelled vehicles by and other business and charity many’s gdp contracted by 5%, to buy Drizly, which supplies 2035 and instead sell only cars interests. Mr Bezos, who has France’s by 8.3% and Spain’s by alcohol to your door, for $1.1bn. and pickup trucks with zero led the company he founded 11%, the worst economic per- One estimate reckons that exhaust emissions. gm is since1994, will become exec- formance for all three coun- online sales of alcohol grew by investing $27bn in electric- utive chairman. The new ceo tries since the second world 80% in America last year as a and autonomous-car tech- will be Andy Jassy, who heads war. The currency bloc’s annu- consequence of lockdown. nology, and promises that by Amazon’s cloud-computing al rate of inflation jumped to the end of 2025, 40% of its division, the most profitable 0.9% in January, ending five Alibaba undertook a round of models in America will be part of the company. months of deflation. With dollar bond sales with the aim powered by battery. activity curtailed by lockdown, of raising a reported $5bn, after the rise in consumer prices the Chinese e-commerce giant King of the retail jungle reflected factors such as higher exceeded quarterly sales fore- A happy occasion Amazon’s quarterly sales shipping costs and a revision casts. The company’s founder, One of the winners from passed $125bn for the first time to the index’s weightings. Jack Ma, has fallen foul of the lockdown, Moonpig, had a in the final three months of authorities, to such an extent successful ipo in London. The 2020. For the year as a whole America’s economy was 3.5% that his name has been omit- online provider of greeting revenues were up by more than smaller in 2020 than in 2019, ted from a list of China’s entre- cards and gifts saw its share a third to $386bn, almost though it is growing again at a preneurial greats published by price soar by 17% on its special $100bn more than Apple’s faster rate than many had state media. Ant Group, a day, prompting salutations of revenues for last year. expected. The Congressional fintech firm founded by Mr Ma congratulations and I love yous Budget Office, a nonpartisan that is affiliated with Alibaba, from investors. Google’s parent company, Alphabet, also surpassed expectations in the fourth quarter, as sales from advertising jumped by more than a fifth, year on year. Its cloud-services division, however, made an operating loss, for the quarter and for the whole year.

Following a bout of volatile trading, in which the s&p 500 had its worst week since October, stockmarkets quiet- ened down. Investors remain nervous about the co-ordi- nated action of a group of retail traders, through message boards such as Reddit, to drive up some share prices which hedge funds were betting would fall. Those hedge funds have incurred losses worth billions of dollars. There were other casualties from the stock-war battleﬁeld. The Leaders Leaders 9 The real revolution on Wall Street

High tech meets high finance. It is a promising, but volatile, combination vents on Wall Street have become so strange that Netflix is fornia, executes trades through Citadel, a broker in Chicago. In Esaid to be planning a show to immortalise them. But what return for free trading, users’ trades are directed to brokers who, should be the plot? One story is of an anti-establishment move- as on Facebook, pay to harvest the data from them. ment causing chaos in high finance, just as it has in politics. An- Far from being a passing fad, the disruption of markets will other is how volatile shares, strutting online traders and cash- intensify. Computers can aggregate baskets of illiquid assets and crunches at brokerage firms signal that a toppy market is poised deploy algorithms to price similar but not identical assets, ex- to crash. Both gloss over what is really going on. Information panding the universe of assets that can be traded easily. A sharply technology is being used to make trading free, shift information rising proportion of bonds is being traded through liquid ex- flows and catalyse new business models, transforming how change-traded funds, intermediated by a new breed of market- markets work (see Finance section). And, despite the clamour of makers, such as Jane Street. Contenders such as Zillow are trying recent weeks, this promises to bring big long-term benefits. to make housing sales quick and cheap, and in time commercial- Don’t expect screenwriters to dwell on that, obviously. Their property and private-equity stakes may follow. focus will be the 8m followers of WallStreetBets, an investment On paper this digitisation holds huge promise. More people forum on Reddit, who have invented a new financial adventur- will be able to gain access to markets cheaply, participate directly ism: call it swarm trading. Together, they bid up the prices of in the ownership of a broader range of assets and vote over how some obscure firms in late January. This triggered vast losses at they are run. The cost of capital for today’s illiquid assets will fall. hedge funds that had bet on share prices falling (see Button- It will be easier to match your exposure to your appetite for risk. wood). And it led to a cash squeeze at online brokers which must But financial progress is often chaotic. First time around, in- post collateral if volatility rises. Since January 28th the most novations can cause crises, as the structured-credit boom did in prominent, Robinhood, has raised $3.4bn to shore itself up. 2007-09. The capacity of social media to spread misinformation The swarm seems to have moved on. This week the price of and contagion is a worry. It is hard to see how some underlying some favoured shares sank and silver leapt. Meanwhile, in many assets justify the price rises of the past few weeks. Some fear that markets the normal rules of play have been suspended. Almost powerful firms hoarding the data of individual investors will ex- 300 “spacs” listed last year, raising over $80bn ploit them. Already the Robinhood saga has led and allowing firms to float without the hassle of politicians on the right and the left to fret about an initial public offering (ipo). Tesla has become losses for retail investors, mispriced assets and America’s fifth most valuable firm. Bitcoin, hav- the threat to financial stability if market infra- ing gone from the fringe to the mainstream, has structure should be overwhelmed as investors a total value of $680bn. Trading volumes for stampede from one asset to the next. Tellingly, shares are at their highest in at least a decade the only big stockmarket dominated by techno- and those for some derivatives are off the charts. logically sophisticated retail investors is Chi- Part of the reason for this is that government na’s. Its government employs censorship and an bail-outs have put a floor under risky debt. Banks have so much array of price and behavioural controls to try to keep a lid on it. spare cash—JPMorgan Chase’s pile has risen by $580bn in the Although that is thankfully not an option in America, the reg- pandemic—that they are turning depositors away. Instead of us- ulators’ toolkit does need to be updated. It must be made clear ing the lockdown to learn Mandarin and discover Tolstoy, some that speculators, amateur and professional, will still bear losses, people have used their stimulus cheques to daytrade. Although even if they attract sympathy from politicians. Irrationality the whiff of mania is alarming, you can find reasons to support thrives in online politics because it imposes no direct cost. By today’s prices. When interest rates are so low, other assets look contrast, in markets losses act as a disciplining force. If today’s relatively attractive. Compared with the real yield on five-year frothiest assets collapse, the bill could be perhaps $2trn: painful Treasuries, shares are cheaper than before the crash of 2000. but not catastrophic in a stockmarket worth $44trn. Yet the excitement also reflects a fundamental shift in finance. In recent decades trading costs for shares have collapsed Don’t forget season two to roughly zero. The first to benefit were quantitative funds and Insider-dealing and manipulation rules also need to be moder- big asset managers such as BlackRock. Now retail investors are nised to deal with new information flows. Stupidity, greed and a included, which is why they accounted for a quarter of all trading killer instinct are all perfectly acceptable: deception, including in January. Meanwhile, information flows, the lifeblood of mar- the spread of misinformation, is not. Price-sensitive data need to kets, are being disaggregated. News about firms and the econ- be kept widely available. And the plumbing must be renovated. omy used to come from reports and meetings governed by insid- America’s trade-settlement system works with a two-day delay, er-trading and market-manipulation laws. Now a vast pool of creating a timing mismatch that can lead to cash shortfalls. It instant data from scraping websites, tracking industrial sensors needs to be able to cope with faster trading in an expanding range and monitoring social-media chatter is available to those with a of assets so that the system can withstand a crash. Netflix’s tv screen and the time to spare. Last, new business models are pass- drama will doubtless pitch daytrading heroes like Roaring Kitty ing Wall Street by. spacs are a Silicon Valley rebellion against the against the wicked professionals on Wall Street. Off-screen, in cost and rigidity of ipos. Robinhood, a tech platform from Cali- the real revolution in finance, a far bigger cast can win. 7 10 Leaders The Economist February 6th 2021

Fiscal stimulus in America How much is too much?

Targeted relief would be better than indiscriminate spending merica’s economy will recover faster from the pandemic money. Yet should vaccinations let the economy reopen fully in Athan its rich-world peers, the imf predicts. Not because it the second half of 2021, the pent-up effects of stimulus may has controlled the spread of disease—it hasn’t—but mostly because the economy to overheat, leading to a burst of inflation. cause of its enormous economic stimulus, which boosted Higher inflation would be tolerable—welcome, even, up to a household incomes by more than 6% in 2020 even as the unem- point. But it would mean any further deficit spending, for exam- ployment rate peaked near 15%. Before Joe Biden became presi- ple on Mr Biden’s infrastructure plan, would further stoke the dent, Congress had already spent $4trn fighting the crisis. Now fire. Better to preserve fiscal fuel by avoiding unnecessary lar- he proposes $1.9trn more emergency spending, which would gesse. Democrats want to send cheques worth $1,400 to most intake the total to over 25% of gdp in 2019. Republicans think that dividuals, adding to the $600 they recently received. Universal is too much. A group of the party’s senators has made a counter- handouts stop people falling through the cracks of bureaucratic offer of a plan worth about $600bn (see United States section). means-tested programmes, but $2,000 is an arbitrary total pop- The right size for the bill is not best judged from the top down. ularised by Donald Trump. Mr Biden’s plan also includes $350bn America is not in a normal recession that is best solved by a califor state and local governments. Early in the crisis it looked as if brated slug of government spending. No they would suffer a collapse in tax revenues. In amount of pump-priming will fully reopen res- Cumulative stimulus packages fact, their budgets have held up as the federal taurants, nightclubs and offices while the virus United States, 2020-21, $trn government’s generous unemployment bene- remains prevalent—nor would that be desir- 6543210 fits and a burst of spending on goods have boost- able. The government must instead fight the cri- ed their tax receipts. Neither of these items in sis from the bottom up. Mr Biden’s bill is a priority. Congress should spend whatever is needed The right fiscal policy would be flexible, pro- Pre-December December Biden on vaccinations and on replenishing the in- 2020 deal proposal viding emergency spending for as long as the comes of workers bearing the brunt of the crisis. pandemic persists and saving a broader fiscal They have lost their jobs through no fault of their own, and if boost for later if necessary. Republicans—and some moderate their incomes collapsed, they would slash their spending, Democrats—are right to argue that $1.9trn is excessive today. Mr spreading the pain to the rest of the economy. Extending a gener- Biden may be willing to trim his proposal. A figure of around ous top-up to unemployment-insurance benefits beyond its ex- $950bn would allow for unemployment insurance, a smaller piry in March should be a priority. amount of catch-all universal cheques, Mr Biden’s assault on Nobody should fret about the cost of providing what is in ef- child poverty and extra spending on vaccines. fect disaster relief. Prolonging vast deficits, however, does carry Equally, Democrats are right to fear that hawks in Congress a risk. According to official projections released on February 1st, could derail the recovery if the crisis worsens. Republicans without more stimulus America’s gdp would lag behind its po- should pledge to support further spending were that to happen. tential by only 1.3% at the end of 2021. Mr Biden’s proposed The Democrats should husband their limited opportunities to spending is six times bigger than the shortfall. The “multiplier” circumvent Republican opposition in the Senate. A bipartisan effect of government spending on output is hard to estimate, but agreement now will raise the odds that the economy will get the is small today because many households are saving stimulus right amount of support at the right time. 7

Despots v democrats The meaning of Myanmar’s coup

Attempts to dress up authoritarian regimes as democracies are unlikely to succeed ost politicians find winning over a majority of the elec- statements emanating from the high command in the days be- Mtorate challenging enough. Imagine, then, the difficulties forehand, for the simple reason that the army was already in con- of candidates in Myanmar, who must secure the approval not trol of almost everything that mattered to it. Under the constitu- only of voters, but also of the army’s top brass. The National tion, which the top brass itself foisted on the country, the army League for Democracy, the party led by Aung San Suu Kyi, a veter- chief commands all the security services. He appoints his own an dissident, excels at the first task. It has won the past two na- boss (the minister of defence), as well as several other ministers tional elections with landslide votes. But it is not so good at the and a quarter of mps. That, in turn, gives him a veto over any at- second. On February 1st, as mps elected at the most recent poll tempts to change all this by amending the constitution. The sys- were about to take their seats, the army arrested them and said tem is designed to preserve the army’s interests, no matter what that it would run the country instead (see Briefing). voters say they want. So why would the generals upend it? Few outsiders had predicted the coup, despite the snarling Putschists and despots tend to crave at least a veneer of legiti-1 The Economist February 6th 2021 Leaders 11

2 macy. A semblance of democracy may help keep their subjects for ways around the obstacles erected by the men with guns. quiescent and certainly makes international summits less awk- Myanmar’s generals thought they had sidelined Ms Suu Kyi by ward. Their dream is to create some scope for genuine political barring her from the presidency, but she invented a new posi- competition, the better to appease the masses and their foreign tion, “state counsellor”, which she declared was “above the presi- friends, while retaining control over all important decisions. dent”. Political parties in Thailand that are hostile to the top The generals who run Pakistan and Thailand have attempted to brass keep winning elections and trying to form governments, devise such systems, as have the autocrats ruling Cambodia, forcing the authorities to ban more and more of them. Russia and Venezuela, among others. But few have been as ex- That hints at the most unpredictable force disguised despots plicit as Myanmar’s top brass about seeking to enshrine their au- contend with: their citizens. They tend to vote for the wrong peo- thority in perpetuity in what otherwise resembles a democracy. ple (witness how often the Pakistani army has had to see oﬀ tire- Such arrangements, however, are inherently unstable. Auto- some prime ministers). The people can also take to the streets if crats dislike being shown up, no matter how negligible the con- the system is a hollow pretence. In Belarus, after phoney elec- sequences. The regime of Vladimir Putin, Russia’s president, tions, thousands have been braving brutal repression. So too in this week jailed Alexei Navalny, a prominent critic, after he had Russia where, as Mr Navalny said this week, “Lawlessness and ty- the cheek to survive an assassination attempt, and to use his new ranny pose as state prosecutors and dress in judges’ robes.” lease on life to publicise a billion-dollar secret palace he says be- Protests are also possible in Myanmar—as is their violent longs to Mr Putin (see Europe section). In Myanmar Ms Suu Kyi suppression. The army, after all, has quelled peaceful demon- was always careful to speak politely about the army, but her party strations by force plenty of times over the years. But the pariah repeatedly thumped the one backed by the generals, winning 12 status that comes with naked repression is precisely what the times as many seats in the election in November. The snowﬂake army was hoping to escape when it concocted the constitution it generals found such humiliation hard to bear. has just violated. In that sense, the coup, although crushing to Unarmed politicians in Potemkin democracies naturally look Myanmar’s democrats, is a defeat for the generals, too. 7

Brexit and the City The price is wrong

If the eu insists that Britain accept its financial rules in return for market access, Britain should say no hen talks between Britain and the European Union about The eu is a valuable market for Britain’s financial-services in- Wtrade went to the wire in December, they nearly collapsed dustry, making up around a third of its exports. Being bound by over fishing, which contributes less than 0.1% to British gdp. Fi- the eu’s existing rules would be no great burden, for Britain had a nancial services, which contribute 7%, were left in the cold. As big role in designing them. But those rules will probably tighten. far as banks, insurance firms and the like are concerned, there Europe’s politicians tend to be more interventionist and protec- might just as well have been no deal at all. American firms now tionist than Britain’s, and they suspect Britain’s light-touch reg- trade with the eu on better terms than British ones do. ulation of having contributed to the financial crisis and the euro- Britain’s financial-services industry is already counting the zone meltdown. They could also write rules designed to boost cost of the government’s negligence. Between the referendum in their own financial centres by undermining London. June 2016 and the end of 2020, around 7,500 jobs and over £1.2trn If Britain accepts eu financial regulation, it will be a large dog ($1.6trn) of assets moved from Britain to various European capi- being wagged by a small European tail in many areas of business. tals. But as with much about Brexit, the terms of Where Britain is dominant, such as in deriva- Britain’s departure from this market have still to tives and foreign exchange, and in new areas be settled (see Britain section). The two sides such as carbon credits where it has a good continue to negotiate over whether Britain chance of taking a slice of the business, it should should enjoy “equivalence”—a temporary right be seeking to make the rules alongside big mar- to trade on equal terms with eu companies. kets such as America and Japan, and forward- Free trade in financial services would benefit looking ones such as Australia and Switzerland. both sides. If the eu is prepared to offer it on the Although the price of equivalence is likely to basis that both sets of regulators are aiming at be high, the prize is not especially valuable. The similar outcomes—such as orderly and stable markets—then eu’s share of the global market is shrinking; and equivalence can Britain should accept it. However, as with the overall trade deal, be withdrawn at 30 days’ notice, as Switzerland found in 2014 Europe expects to extract a price for market access. If the price is when it fell out with the eu and stocks listed there were suddenly that the eu writes the rules, Britain should walk away. banned from eu exchanges. The eu has little compunction in us- Politics is one of the reasons. When things go wrong in fi- ing rules as political cudgels, as its threat last month to stop vac- nance the government often has to step in. If the voters’ money is cine trade between Ireland and Northern Ireland demonstrated. used to prop up a system, their representatives will rightly ex- Britain would have done better to stay in Europe’s financial- pect to be in charge. Andrew Bailey, who as governor of the Bank services market, and to retain its clout over the rules that govern of England is responsible for the system’s stability, told Parlia- it. That’s no longer an option. Being kicked out of trading Euro- ment earlier this year that being a “rule-taker” would be too high pean products will hurt. But rather than accept rules set by other a price for Britain to pay. governments, Britain should cut its losses and diverge. 7 12 Leaders The Economist February 6th 2021

Disease and development Africa’s long covid

The pandemic threatens to undercut the poorest continent’s precarious progress n the years before covid-19 sub-Saharan Africans were not Fully 46 introduced social-welfare grants, but they did not stop Ionly the world’s youngest people, with a median age of less 32m people falling into extreme poverty. To avoid debt crises, than 20, they were also some of the most optimistic. Just 12% of many African governments may curtail spending on infrastruc- Japanese told pollsters they thought their lives would improve ture, too. This will stymie growth. Without better ports, roads over the following 15 years, compared with 78% of Kenyans. Ni- and power supplies, Africa will reap fewer benefits from a conti- gerians and Senegalese were even more upbeat. nental free-trade deal that came into effect last month. The pandemic has made it harder to be sunny. When covid-19 Africa is at the back of the queue for vaccines, alas. The Econo- first struck, a lot of pundits thought Africans might be spared the mist Intelligence Unit, our sister organisation, predicts the re- worst, because so many are young or work on the land (and gion will struggle to obtain enough doses to reach herd immuni- would thus be little affected by lockdowns). Yet it now looks as if ty before 2024. As much of the rest of the world gets back to work, the virus will leave more lasting scars in Africa than elsewhere. travel and play, Africa could find that covid-19 is, in effect, en- Whereas rich countries can hope for a rapid economic rebound demic. The travellers and tourists who help generate almost 9% as they vaccinate their people, Africa is years away from jabbing of gdp will stay away. Lockdowns and curfews will choke mar- enough to achieve general immunity. The imf predicts it will be kets and bars. Most worrying, schools could close again. the slowest-growing large region this year. Repeated waves of in- Sub-Saharan classrooms have been fully or partly shut for 23 fection will also disrupt the schooling of millions, putting at risk weeks, above the global average. Since half of Africans are with- the educational and demographic trends that are among Africa’s out electricity, never mind laptops and Wi-Fi, remote learning is best reasons to be hopeful. tricky. Modelling by the World Bank suggests that the classes al- Optimism about Africa began before the pandemic, with a ready forgone will cost close to $500bn in future earnings, or al- long commodities boom in the years to 2014, which fuelled rapid most $7,000 per child. This is a huge sum in a part of the world economic growth. The share of Africans who were extremely where the average gdp per person is less than $1,600 a year. poor declined from 56% in 2003 to 40% in 2018. And many more To make matters worse, many children—mostly girls—will children started attending school. In Ethiopia, for instance, al- never go back to their books. Many will become child labourers most all children were enrolled in primary or brides. In one coastal area of Kenya, for exam- school by the time of the pandemic, up from ple, only 388 of the 946 schoolgirls who got preg- 65% in 2003. Better-educated children earn nant during the school shutdown last year have more as adults. If female, they also go on to have resumed their studies. It is too soon to know smaller families and devote more effort to edu- how many girls will stay away for good, but if cating each child. Africa’s demographic transi- large numbers do, Africa’s demographic transition promised future prosperity. tion may be at risk. In general those with no When the first wave of covid-19 hit, Africa schooling go on to have six or more children seemed to weather it well. Sub-Saharan gdp fell each. This falls to about four for women who fin- by 2.6% in 2020, compared with 3.5% for the world. Of the 24 ish primary school and two for secondary school. countries that posted any growth at all, 11 were in sub-Saharan Two things need to happen urgently to mitigate Africa’s co- Africa. Its official covid-19 statistics look good, too: with 14% of vid-induced calamity. First, people must be vaccinated more the global population, it has about 3% of recorded cases and quickly than on current plans. Many African governments, wary deaths. Alas, those statistics are surely misleading. Few African of the cost, have been slow to order vaccines. Yet the returns to countries have tested enough to have any real sense of how many spending on vaccination are likely to be far higher than on just cases they have suffered. And few record more than a fraction of about anything else. The approval of new vaccines promises to deaths. If South Africa, which tests a lot, is any guide, cases and help ease global shortages. Rich countries, which have ordered deaths in the rest of Africa are much higher than reported. more than they need, should donate excess stocks and money to The greatest harm is likely to come not from the immediate covax, the global programme for pooling the purchase and allo- impact of the pandemic, but rather from its lingering effects on cation of vaccines. economies, households and societies (see Middle East & Africa section). Start with Africa’s economies. Before the pandemic, When the jabbing is done growth was already slowing. Because the region’s population is Even if vaccines come soon, African treasuries will still need growing by 2.7% a year, about twice the pace of Asia’s, Africa help to avoid drawn-out debt crises and growth-choking cuts to needs at least as much economic expansion merely to stand still. spending. Lenders such as the World Bank and imf should offer Yet gdp has lagged behind population growth since 2016. more cheap loans, and support proposals by the African Devel- What is more, governments entered the crisis with strained opment Bank and others to woo more private capital. balance-sheets. By the end of 2019, public debt was 62% of gdp; Africa’s cries for help—whether in the form of jabs or loans— in 2020 it rose to 70%. Rich countries can borrow cheaply and risk being lost amid the tumult of a truly global crisis. But the fra- pay citizens to stay at home: on average they have spent more gility of African economies and societies is a reason to act swift- than 7% of gdp cushioning the shock of covid-19. African gov- ly. It is also in outsiders’ interest to help. So long as the virus is ernments have spent only 3% of gdp, and even that was a burden. rampant somewhere, it can mutate and spread anywhere. 7 Executive focus 13

Chairs in Transnational Governance School of Transnational Governance Florence, Italy The European University Institute’s School of Transnational Governance seeks to recruit outstanding scholars for three chairs in Transnational Governance. The School of Transnational Governance (STG) (https://stg.eui.eu/) was created in 2017 with the aim of delivering teaching and high-level executive education in the methods, knowledge, skills and practice of governance beyond the State. Candidates should enjoy an international reputation in the social sciences and humanities with an openness to inter-disciplinarity. Their experience and expertise should be within areas relevant to transnational governance in all its forms, especially but not exclusively in the following areas: • Global South: with particular reference to substantive policy areas related to development, such as economic growth, corruption, poverty reduction or resource-management. • Global Public Health: with a transnational outlook, including the ‘nexus’ of economic risks and social welfare. • Leadership: including decision-making theory and practice; the interplay of private and public sectors; ethics. • Transnational law: with particular emphasis on issues, forms and regulation of the law beyond the State. The successful candidates will support the further development of the STG and will have a proven track-record of innovative course design, programme development and teaching at the Master level. Candidates will have a strong publication record, a demonstrated interest in transnational dimensions of public policy, experience in developing and delivering executive education programmes, and a proven ability to mobilise external funding. The EUI is an equal opportunities employer and takes into account the importance of balance in gender, geographical and minority representation. For more information or to apply, consult www.eui.eu/vacancies Deadline for receipt of applications: 1 March 2021 14 Letters The Economist February 6th 2021

in Africa are either evil or There is, however, some glim- edly reinserted by other con- Ethiopia responds incompetent. mer of hope. Moves towards tributors with a competing The government of Ethiopia ambassador redwan the serious financial backing agenda, will attest to the site's condemns in the strongest hussein on behalf of the of debris-removal technology unreliability. Even counting on terms the accusation that it is State of Emergency Media Task are under way and efforts to Wikipedia as a repository of “Wielding hunger as a weap- Force develop a new treaty to address basic information, such as on” (January 23rd). Your claim Addis Ababa the legal consequences of names, dates and places, is a is based on unknown accounts debris have started among crap shoot. Perhaps the vast and frettings. In fact, the gov- legal academics. majority of its articles are ernment has mobilised and Two concepts of liberty Ultimately, it will take indeed accurate, but which delivered more than 31,000 Vaccine passports “raise eth- regulation and economic ones constitute that majority, tonnes of food, non-food ical questions”, you say (“A measures, such as perform- and at what point in time? items and medical supplies to marathon ahead”, January ance bonds, taxes and fees. The Literally no one knows; it has Tigray in the past month. 23rd). The general adoption of big question is how to imple- become so vast that moderat- There is a delicate balance vaccine passports is meant to ment the requirements on a ing its millions of entries in between guaranteeing basic encourage people who might global basis. As you pointed any comprehensive way would necessities and maintaining otherwise resist getting a jab. out: everybody’s business is be impossible. This is how the security in the Tigray region. To abuse Sir Isaiah Berlin’s nobody’s business. Getting site is designed to work. The defence forces and other famous distinction, the “nega- agreement on an international barry edelson security institutions have tive” liberty of any individual treaty is not easy, hence all we Huntington, New York demonstrated exceptional not to be forcibly vaccinated have are non-binding resolu- courage and skill in this re- will remain inviolate. But at tions and other international Wikipedia may be unique gard. Utility companies and the same time, the sheer guidelines promoting debris- online because it “sells no other service providers are weight of the incentives that mitigation measures. To be advertising”. However, it does working at full speed to restore the passport system entails effective a treaty would need to provide a free platform for amenities in Tigray. They are will make getting vaccinated include at the very least all the companies to display their doing so in the wake of acts of seem like the only realistic countries with launch capab- corporate messages, written by vandalism against infrastruc- route to living a good life, or ility in the hopes that they their marketing departments. ture carried out by the Tigray being “positively” free, in would put pressure on their Are these true statements People’s Liberation Front. Berlin’s sense. Instinctive payload customers. vetted by Wikipedia? No. Wiki- Reconstruction will take time. vaccine-dodgers will therefore philip chrystal pedia also has a devil’s bargain The people of Ethiopia want choose to get it for fear of Of counsel with Google. No matter what peace and the rule of law. The missing out. gbf Attorneys-at-Law you search for on Google, from tplf has been the sponsor of In most circumstances, Zurich “cats” to “Catullus”, Wikipedia destabilisation, terror and corralling people towards is positioned first. If you do massacres over the past three particular choices (especially enter “cats”, to learn about the decades. It has not eased its choices to do with their bod- Checking the facts animal, you get what reads like thirst for power, even after it ies) is a dangerous and illiberal Wikipedia’s Utopian ideal is a Wikipedia advertorial for the was unseated through protests use of state or societal power. also a weakness (“Diderot’s movie “Cats”. and the electoral rules it had But in this very peculiar sit- dream”, January 9th). Being peggy troupin itself helped engineer. uation, in which the mass able to make infinite correc- New York The gravest error the article exercise by individuals of their tions is not the same as being made was its shortsighted- negative freedom not to get correct. How does one know, Yeovil Town Football Club ness. The past two years have injected would result in end- when reading a particular “toils in obscurity in the fifth been profoundly painful for all less further lockdowns, there article, at what stage of its tier of the English league”, you Ethiopians, but the govern- are good liberal reasons for evolution one finds it? Wikipe- say. Any article on encyclope- ment believes we are heading nudging everyone towards dia defends its disclaimer of dias should strive for complete the right way. Magnifying opting for a vaccine. accuracy as comparable to that accuracy, so I must point out troubles and echoing accusa- sam williams of authoritative publications, that Yeovil Town plays in the tions of past regimes is a dis- Dubai such as “Encyclopedia Britan- National League, which is the traction. Ethiopia is reforming nica”. But entries in traditional fifth tier of the English football and entering a new era. The encyclopedias are signed by pyramid, but is not part of the law-enforcement operation in Space trash their authors and vetted by official English Football Tigray is a costly but necessary Trying to clean up space debris editors. This is by no means a League. “Toils in obscurity” is step in that direction. is a problem that has been guarantee of accuracy or lack perfectly correct. In this complicated and festering for decades (“New of bias, but it is a serious and richard baker high-stakes operation, human- brooms needed”, January 16th). transparent attempt at both. Editor itarian, diplomatic and media The legal framework in the Moreover, readers may judge Takeustothegame.com agencies will have to endure context of liability in the event from its byline whether a London the inconvenience of heeding of collision is vague and large- “Britannica” entry is slanted to the direction of the govern- ly untested in law. Meanwhile, towards a particular point of ment. The success of this insurers who have quietly view; the anonymity of Wiki- Letters are welcome and should be operation necessitates that, as supported efforts to tackle the pedia’s contributors makes addressed to the Editor at The Economist, The Adelphi Building, Tigray transitions to rebuild- issue have been distracted by a such discernment impossible. 1-11 John Adam Street, London wc2n 6ht ing and recovery. series of unrelated and sus- Anyone who has ever tried Email: [email protected] More letters are available at: It is regrettable that The tained satellite losses coincid- to correct errors in a Wikipedia Economist.com/letters Economist assumes that leaders ing with declining premiums. entry, only to find them repeat- Briefing Myanmar’s coup The Economist February 6th 2021 15

savagely quashed a democratic uprising. Reversion to type In 2011, though, the Tatmadaw amazed the world by making way for a civilian government. There were two reasons. The first was that they were worried about the country’s direction of travel. Decades of diplomatic isolation by the West had forced Myanmar into China’s orbit, something the SINGAPORE AND YANGON generals were uneasy about. They were A general’s thirst for power has shut down democratic rule also embarrassed about the country’s econ- yawaddy, a television station film-maker, Min Htin Ko Ko Gyi. Aung San omy, which they had driven into the Mowned by the Burmese army, is nor- Suu Kyi, who became a figure of global re- ground. In 1962 Burma had been one of mally so bad as to be unwatchable. But nown when she led the nld from house ar- Asia’s richest countries. Fifty years later it when the residents of Naypyidaw, Myan- rest during the 1990s and 2000s, and who was one of the poorest. In 2008 the regime’s mar’s capital, and Yangon, its largest city, as “state counsellor” was the country’s un- woeful response to Cyclone Nargis, which woke on February 1st to find soldiers in the disputed civilian leader, now finds herself killed 140,000 people, destroyed any ves- streets and martial music blaring from under lock and key again. tiges of credibility it might still have had. their radios Myawaddy became “must-see The army, known as the Tatmadaw, is The second reason for allowing a civil- tv”. It was a Myawaddy newsreader who an- used to being in charge. When created ian government was that the Tatmadaw nounced that the country was in a state of through conquest in the 19th century, Brit- thought it could do so without really losing emergency and under the control of Min ish Burma lumped together over 100 differ- power. The generals painstakingly de- Aung Hlaing, the head of the army. ent ethnic groups. After independence in signed a hybrid political system that en- Soldiers were stationed in government 1948 many of those groups promptly re- trusted the thankless task of governance to offices. Airports were closed and, in the cit- belled against the new government. The civilians but enshrined the Tatmadaw’s in- ies, the internet shut down. Hundreds of army, then as now dominated by officers dependence and many of its powers. In the politicians from the National League for from the Bamar ethnic majority, began a constitution for this “discipline-flourish- Democracy (nld), which won an over- suppression of such separatism that has ing democracy”, as they memorably called whelming victory in the country’s parlia- gone on ever since. After toppling a demo- it, the commander-in-chief of the army ap- mentary elections last November, were put cratically elected government in 1962 it points the man who is notionally his boss, under house arrest. The armed forces also stayed in power almost continuously for the minister of defence, as well as the min- rounded up chief ministers from all the nearly 50 years, justifying its rule on the ba- isters of the interior and border control. He country’s 14 states in addition to democra- sis that it was the only institution capable thus commands all the organs of state se- cy activists, writers, three monks and a of holding the country together. In 1988 it curity. A quarter of the seats in parliament 1 16 Briefing Myanmar’s coup The Economist February 6th 2021

2 are reserved for serving military officers she alienated many minorities by refusing was refusing to rule out the possibility of a appointed to them, which gives the army to take their grievances seriously or to in- coup. At crisis talks on January 28th the an effective veto over all constitutional clude their representatives in government. army demanded that the new session of change. Even as tensions rose over the past General Min Aung Hlaing had particular parliament, scheduled to start on February few weeks, many believed a coup unlikely reason to hope that this poor record would 1st, be delayed while a nationwide recount simply because the constitution already be reflected in November’s vote. He was of the vote took place. The government re- protects the Tatmadaw’s interests so well. due to retire from the armed forces this fused, and over the weekend parliamentar- Ms Suu Kyi’s nld boycotted the first coming July and appears to have harboured ians duly gathered in Naypyidaw to get on elections held under this new constitution hopes of becoming president; he has a with things—which made it easy for the in 2010, ushering in five years of rule by hunger for “raw power”, says David Mathie- armed forces to gather them all up at once. Thein Sein, an ex-general, and his Union son, an analyst based in Thailand. With a Solidarity and Development Party (usdp), a quarter of the seats in parliament occupied Forwards to the past proxy for the Tatmadaw. But in 2011, follow- by loyal officers come what may, a reason- In many ways post-coup Myanmar looks ing talks with Mr Thein Sein, Ms Suu Kyi able showing by the usdp would have pro- familiar. The army is again in charge, but engaged in the process. After success in by- duced a legislature happy to vote him into the reasons it had for stepping aside per- elections the nld won a landslide victory office even if the nld was the biggest party. sist. Ms Suu Kyi is again under house ar- in the general election of 2015. It was not to be. Myanmar’s system of rest, but remains by far the most popular The army had tried to ensure that, even first-past-the-post constituencies gave the politician in the country. if her party won at the polls, Ms Suu Kyi nld 83% of the elected seats in parliament; Her international standing, admittedly, could not herself wield power. The framers the usdp got just 7%. The usdp promptly is not what it was. In 2017 insurgents from of its constitution included a novel clause made allegations of fraud to the electoral the Muslim Rohingya minority attacked an that bars anyone with foreign relatives commission, which administered the poll. army base in Rakhine. The Tatmadaw, in from the presidency; it is in no way a coin- The commission denied them. concert with Buddhist mobs, responded by cidence that Ms Suu Kyi has two British There were some problems with the sacking Rohingya villages, killing at least sons. It was to circumvent this obstacle election, and the government refused to al- 10,000 and impelling 720,000 to flee to that, after the nld took office in 2016, par- low any voting in some places, citing fears neighbouring Bangladesh. Many Bamars liament created the new position of state of violence. The same had been done in cheered the army on. counsellor. 2010 and 2015, but this time the no-vote The generals may have hoped that this zones in the states of Bago, Kachin, Karen, violence would see Ms Suu Kyi, a Nobel- Best laid plans Mon, Rakhine and Shan were significantly prizewinning human-rights icon, sacrifice The generals were able to take some conso- larger. Nonetheless, independent election support at home by defending the rights of lation from the fact that, having achieved observers, including those from overseas, Rohingyas. She went the other way, refus- power, Ms Suu Kyi did not use it very well. A agreed that there was no proof of fraud on a ing to denounce the army’s “clearance op- lacklustre performance was to some extent scale sufficient to overturn the nld’s land- erations”. In 2019 she went to the Interna- unavoidable, given the constitutional con- slide victory. tional Court of Justice (icj) in The Hague to straints that stopped her from exerting The army, which thought its hand- defend the generals accused of genocide. power over the army and the weakness of crafted constitution would never see it in Her reputation abroad will never recover; all other governmental institutions. But the minority, faced the prospect of taking at home it was burnished. Her perfor- the state counsellor added unforced errors. up permanent residence there. And Gen- mance at the icj probably helped win the At first she surrounded herself with minis- eral Min Aung Hlaing’s personal ambitions nld their massive majority in November. ters whose only credentials were loyalty were dashed. He still “needed something to The army’s best chance of getting out of and grey hair, and though some of the duf- guarantee his legacy, his liberty and his the cleft stick into which it has reinserted fers were later replaced with technocrats family wealth,” says a Western diplomat itself is to delegitimise the nld and make her management wasted their potential; based in Yangon. But, denied the presiden- itself and its proxies more popular. To fur- she brooked no dissent and refused to dele- cy, “He didn’t have a plan b.” ther the first agenda it argues that its coup gate. The economy was sluggish; the coun- In a conscious or unconscious echo of was a defence of democracy in the face of try’s precariat grew. Though Ms Suu Kyi what was going on in Washington, dc, the the nld’s stolen election, and carried out in continued peace talks with various sepa- Tatmadaw took up the usdp’s cry of “terri- a perfectly proper way. The state of emer- ratist factions begun under Mr Thein Sein, ble fraud”. By January 26th its spokesman gency was, as the constitution requires, en-1

There and back again? Myanmar, selected events, 1985-2021

Aung San Suu Kyi founds National Army retakes control with coup. Ms Suu Kyi arrested League for Democracy (NLD) NLD wins November eleelectionction Mass popular protests brutally put down Sanctions on senior generrals by newly formed State Law and Order Council Parliament creates state counsellor position for Ms Suu Kyi Name changed from Burma to Myanmar TThein Sein becomes president, NLD sweeps Rohingya Overwhelming win for NLD in ending direct military rule to victory in “clearancee free elections; results annulled; Ms Suu KyiKyirreleasedeleasedffromrom hohouse arrest; NLD boycotts general election operations” Ms Suu Kyi placed under elections; USDP wins parliamentary majority house arrest Government Cyclone Nargis kills 140,000 people Myanmar joins pledges to adopt a Association of South-East “Saffron revolution” protests, led federal system Asian Nations (ASEAN) by monks, violently suppressed 85 90 95 00 05 10 15 20 21

Source: The Economist The Economist February 6th 2021 Brieﬁng Myanmar’s coup 17

2 acted by the president—albeit a rather ca Straits and for exports to be shipped out hesively to this challenge it now faces,” fresh one, as Myint Swe, a retired general, of its inner provinces. In time it could be a says Mr Kean. had been elevated from the vice-presiden- military foothold, too. Nay Phone Latt, an activist and political cy only minutes earlier, following the de- The physical manifestation of these prisoner under the last junta, suspects that tention of the former president, Win Myint strategic desires is the China-Myanmar at least for the moment people would of the nld. Ms Suu Kyi’s detention is justi- Economic Corridor, over $21bn-worth of prefer to express their dissent on social fied by the charge that she had improperly country-spanning projects including a media rather than in the streets, daunted as imported walkie-talkies—a charge which railway, oil and gas pipelines and a deep- they are by the twin risks of catching co- puts her at risk of being barred from office. water port at Kyaukphyu. These projects vid-19 and provoking the army. “We saw Most of the other politicians originally de- were troubled even before the uncertainty such brutal crackdowns in the past,” he tained have since been released. injected by the coup. It is far from clear how says. After the coup’s initial restrictions on The commander-in-chief will try to Myanmar can pay for them all. And the internet use were eased (they were too dis- “position [his administration] as a more ef- links run through the territories of various ruptive to business) criticism flooded so- fective government, relative to the nld,” ethnic minorities, including, in Rakhine, cial media, leading the regime to order in- says Tom Kean, editor-in-chief of Frontier, the territory where the ethnic cleansing of ternet providers to block Facebook, widely a magazine based in Yangon. General Min Rohingyas took place. Chinese-backed used in Myanmar, for four days from Feb- Aung Hlaing has said that his government construction is more likely to inflame ex- ruary 4th. In the longer term the Tatmadaw will focus on battling covid-19, boosting isting ethnic conflicts in such places than has other weapons at its disposal, like dis- the economy and brokering peace with in- to bring peace and development. information. Mr Wai Yan Phyoe Moe al- surgent forces. leges that the army is already trying to sow International sanctions might put paid The wars at home doubt about the true identities of protes- to his hopes of economic growth—but they While outsiders vie for favour and seek to ters in order to foment instability. are not a foregone conclusion. Since 2019 engineer an outcome they prefer, political As these fights continue online, others America has had specific sanctions aimed opposition inside Myanmar may be weak. will be fought on the ground. General Min at General Min Aung Hlaing and three other On February 3rd staff at 70 hospitals in 30 Aung Hlaing’s talk of reinvigorating peace officers associated with the pogroms towns went on strike. The following day, a talks needs to be read in the context of the against Rohingyas. President Joe Biden has small demonstration took place in Manda- army’s belief that negotiation works best threatened to reimpose broader sanctions lay, Myanmar’s second city. The All Burma from a position of strength. “[The coup] is a lifted after the elections of 2010. Such sanc- Federation of Student Unions, which precursor to a much more aggressive [mil- tions might well, as they did during the played a role in the seminal protest move- itary] approach,” says Avinash Paliwal, of years of military rule, hurt the poorest ment which saw Ms Suu Kyi emerge as a the School of Oriental and African Studies members of a highly unequal society most. leader in 1988, is planning protests across in London. He believes that the Kachin In- Myanmar’s army rulers and the business the country, according to Wai Yan Phyoe dependence Army, one of the more power- networks and smuggling rackets they pa- Moe, the organisation’s vice-chair. But the ful armed groups, has privately warned its tronise, used to such constraints, would be nld itself is in disarray. “Without [Ms Suu rank and file to “prepare for the worst”. It much less affected. Kyi’s] leadership in the short term, I think it may not escape the junta’s notice that more One of those sceptical about a policy of will be difficult for the nld to respond co- intense fighting could offer a pretext for ex- isolation may well be the Indo-Pacific tsar tending the state of emergency. in Mr Biden’s National Security Council, China-Myanmar 200 km Attending to health and the economy Kurt Campbell, who from 2009 on orches- Economic Corridor while refraining from violence in the Ba- trated America’s rapprochement with Gas pipeline Planned rail/road mar heartland may win the new regime the Myanmar under Barack Obama. On past Oil pipeline Economic zones support it needs for the next election to form he will argue that engagement with produce a parliament more to the Tatma- Myanmar is the only hope of getting the INDIA daw’s liking. To help things along it has al- CHINA democratic process back on track. BANGLADESH Kachin ready appointed loyalists to a new election Part of Mr Campbell’s strategy in the commission, and Ian Holliday of the Uni- 2010s was to play on the Tatmadaw’s wor- versity of Hong Kong suspects that it may Muse Kunming ries about China’s power over their isolated Sagaing seek a way to ditch the first-past-the-post country. Those fears, like the other drivers MYANMAR system which has amplified the nld’s par- behind that opening-up, are still apparent Mandalay liamentary majorities. today. The army is wary of Chinese support Chin Their aim is not inconceivable. Most Magway for insurgencies along their shared border. Shan Burmese adore Ms Suu Kyi. But their views Rakhine Chinese interests are deeply embedded in Naypyidaw LAOS on democracy are ambivalent. Although the country’s dysfunctional economy, easi- 87% of those surveyed in 2019 by the Asian Kayah ly discerned in arms sales, infrastructure Kyaukphyu Bago Barometer Survey say that they support de- projects, an army of small traders and bor- mocracy, two-thirds believe it neither pro- der enclaves that are havens for gambling, Bay of motes economic growth nor maintains or- Bengal Yangon Kayin smuggling and money-laundering. Irrawaddy der. Nearly half support a role for the Mon THAILAND The fact that Chinese state media de- Tatmadaw in politics—more than in 2015. scribed the coup as no more than a “major But having had a taste of democracy for cabinet reshuffle” suggests that the Chi- 2020 election result the past five years, many Burmese will be T nese government, which had been wooing Lower House, by party a loth to give it up. “We are afraid of being n i Ms Suu Kyi, is keen to be on good terms n beaten or killed or shot,” says Mr Wai Yan t NLD (258) h

a with the new regime. Myanmar oﬀers it a r Phyoe Moe. “But we have also seen that USDP (26) y

i strategically crucial direct route to the Bay SNLD (13) many people have sacriﬁced their lives of Bengal and the Indian Ocean beyond—a Others (18) ﬁghting injustice during the military dicta- way for China’s imports of oil and gas to by- Townships where elections Sources: torship in past decades. This time it is our pass the potential chokehold of the Malac- were totally cancelled (15) MIMU; HKUST duty to end the injustice.” 7 Deep trouble. Boundless opportunities. Hear from 150 global leaders as we examine how business can improve the health of the ocean while accelerating a sustainable ocean economy.

Patricia Scotland Zac Goldsmith Secretary-general Minister of state for Paciﬁ c and the environment The Commonwealth of Nations UK Government

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HSH Prince Albert II Ted Danson Sovereign prince Actor, advocate and board member Monaco Oceana

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California v Texas v covid-19 California, in contrast, has taken a more activist role in responding to the pandem- Life, liberty ic, says Jennifer Tolbert of the Kaiser Fam- ily Foundation, a non-profit. This reflects the state’s philosophy that government in- tervention can be a force for good. It was the first state to impose a shelter-in-place DALLAS order last year and still has some of the America’s two largest states have taken opposite approaches to fighting covid-19. strictest guidelines in the country. Until re- The results are not as different as might be expected cently, the state banned even outdoor res- f crisis reveals character, as the saying health and economic health largely played taurant dining as it grappled with a winter Igoes, it can also reveal contrast. In Ameri- out in favour of business interests. Last surge of cases, prompting complaints and ca, the two most populous states—Califor- year during lockdown, Dan Patrick, the his- lawsuits from businesses. Not until Janu- nia (the largest Democratic state) and Texas trionic lieutenant-governor, summed up ary 25th did Governor Gavin Newsom an- (its Republican rival)—have adopted strik- this philosophy by arguing that “there are nounce that the state would lift, again, its ingly different approaches to managing the more important things than living” and stay-at-home order. Public schools have pandemic. How well they have fared is sig- claiming “lots of” grandparents were will- mostly remained closed for in-person nificant to the health of the nation, since ing to die to save the economy. Underscor- learning, while those in Texas have been one-fifth of Americans live in the two ing the state’s view of business, on Febru- open since last autumn—by state decree. states. Their relative fortunes also show ary 1st Mr Abbott used his state-of-the-state Despite their contrasting approaches, how hard it is for states, which are in address to declare five “emergency items”. the results have not been as different as ex- charge of America’s response to covid-19, to The only one related to covid-19 had noth- pected. Texas has a higher death rate per get the trade-offs right between locking to do with stopping deaths, but instead person—only Arizona and South Carolina downs, economic damage and the spread was aimed at helping businesses, health- have fared worse, according to the cdc. But of the virus—and show the limits of public care providers and individuals to avoid co- the gap is not as great as you might expect: policy when state borders are porous. vid-related lawsuits. Texas has had 127 deaths per 100,000 com- Texas, ever sceptical of government, has pared with 104 per 100,000 in California. taken a lighter-touch approach to public- “People in California are frustrated be- health measures. Last year Greg Abbott, the Also in this section cause they feel like they are experiencing governor, was slow to issue a mask man- the worst of both worlds,” says Ken Miller 20 Vanishing pupils date and fought cities and counties that of Claremont McKenna college and author wanted to implement stricter rules. Texas 21 Unions and schools of the book “Texas vs California”. They have did issue a stay-at-home-order, but it was endured never-ending lockdowns, and yet 22 Covid-19 relief, episode 6 one of the first states to reopen, doing so deaths are currently higher than ever. even earlier than Donald Trump’s White 23 Overturning Roe Meanwhile, in Texas, the economic bene- House suggested. Cases spiked. fits of a more libertarian approach are hard 24 Lexington: Adam Kinzinger In Texas the trade-off between public to discern. The unemployment rate in both 1 20 United States The Economist February 6th 2021

2 states is higher than the national average. whereas poorer Californians had to go care workers and then those over 75. After a It is still too early to issue a post-mor- work, thereby running the risk of bringing slow and chaotic start, California has tem on why this is. But there are several fac- the virus back to their families. That is a picked up pace. In the past week California tors that may help explain the states’ differ- strange outcome for America’s most pro- administered around 4 jabs per 1,000 peo- ent experiences. First is the role of more gressive state. ple each day, compared with 2.8 in Texas. infectious mutations. Anne Rimoin, a pro- Even Mr Newsom got pandemic fatigue, Those Californians and Texans who fessor of epidemiology at ucla School of dining indoors at the French Laundry, one hope the federal government may step in Public Health, describes variants as “the of the country’s most expensive restau- and fix glitches with vaccinations seem big x-factor”. She thinks a variant may be rants, with acquaintances in November likely to be disappointed. “We thought they one cause of the spike southern California after urging Californians to practise social were going to bring in the army and the Na- saw in cases this winter, but it is too early to distancing. Disapproval of his action has tional Guard. Now we realise it was left en- say so conclusively, because so little geno- been mounting, and he is facing a recall tirely left to the states, but it doesn’t look mic sequencing and surveillance have campaign, which if it gathers enough sig- like the states understood the complexity been done. “As has been shown from the re- natures, will go on the ballot and could re- of what was involved,” says Peter Hotez of cent surge in California, the virus often move him from office. His Texan counter- Baylor College of Medicine. Having mud- wins, no matter what you try to do as a gov- part has also seen his approval ratings dled through the past year with opposite ernment,” says Larry Levitt of the Kaiser drop, but is not facing a political crisis. policies and quite similar results, Ameri- Family Foundation. A third factor explaining the pandem- ca’s two biggest states must once more find ic’s toll in these two states is access to their way back to normality themselves. 7 Lone Stars and lockdowns health care. Texas chose not to expand A second factor is the length of lockdowns health-care coverage under the Affordable people can tolerate before the policy be- Care Act. Its share of uninsured adults and School enrolment comes counterproductive. Most public- children (18%) is the highest in the country health experts believe that Texas was too and twice the national average (in Califor- Vanishing act quick to come out of its lockdown and paid nia, the figure is 8%). Lack of health care is the price with thousands of lives. Yet Cali- probably one reason why Texan deaths per fornia has shown the limitations of long- capita have been higher, although its in- lasting, intermittent lockdowns. The Gold- habitants are more spread out. “Because en State’s most recent ban on outdoor din- there’s such a limited safety-net, you’re BOSTON A large number of pupils have gone ing in the winter may have simply pushed seeing people seek help and not getting it, missing during the epidemic private gatherings indoors, causing the vi- but some people aren’t seeking help at all,” rus to spread. Jay Bhattacharya, a professor says Lina Hidalgo, county judge of Harris hildren are vanishing from public of medicine at Stanford University, calls County in Texas. “Incredibly high numbers Cschools. New York City has lost 30,000 lockdowns “trickle-down epidemiology of people are dying at home.” pupils this school year compared with the policy”, because they gave an advantage to The pandemic has laid bare the short- previous one, a 3% decline. Los Angeles the wealthy who could work from home, comings of both states. Texas has always Unified’s roster decreased by 19,233 (4%), been run lean, with few benefits for those and Boston’s by 5% (2,368 pupils). For a who fall on hard times. California makes a variety of reasons, children from pre-kin- No right answer point of offering more help to the needy, dergarten to high school are disappearing United States, covid-19, monthly confirmed yet has been unable to deliver on its prom- from the rolls. cases and deaths, per 100,000 people ises. The state’s inability to reopen public How worrying is this? Analyses are lim- Texas and TX Mask schools—which would require breaking ited, but a deep dive into preliminary data California opens mandate with powerful teachers’ unions—has sad- from Massachusetts’ public schools by lockdown CA Mask Lockdown Opens dled the state’s neediest families with extra Thomas Dee of Stanford University and opens mandate burdens. The administration of unemploy- Mark Murphy of the University of Hawaii at ment benefits in California has also been a Manoa shows that most traditional public Confirmed cases, ’000 2.5 disaster, resulting in delayed cheques to districts in the state—274 out of 289—had the needy and improperly paid ones to enrolment declines this year in compari- Lockdown California 2.0 fraudsters, including some in jail. A state son with last year. Massachusetts experi- 1.5 audit says the fraudulent claims could enced a 4% statewide loss in this academic amount to as much as $30bn, or $20,000 year (37,363 pupils) compared with the year Texas 1.0 for every unemployed Californian. before. Not all districts lost pupils, how- 0.5 Getting their residents vaccinated will ever; charter, vocational and virtual (com- US be the next test. The states that are cur- pletely online) districts saw increases. Two 0 rently doing best on that score, such as virtual districts gained 611pupils, a 21% in- 2020 2021 West Virginia, tend to be smaller. Texas’s crease over the past year, and charter dis- Confirmed deaths roll-out was initially faster. It was early to tricts gained 1,277 pupils, a 3% increase 40 expand vaccine eligibility beyond health- over 78 districts. Lockdown California care workers to all those over 65, which Some of the decline is no cause for con- 30 helped speed up the roll-out. But a lack of a cern. A portion of Massachusetts public- centralised booking system has led to school pupils are probably attending class- Texas 20 many double bookings for shots. At one es out of state, while others are leaving for US 10 vaccination site in Dallas that your corre- charter schools, private schools or home- spondent visited, 500 people are being vac- schooling. Some families may also leave 0 cinated a day, but there are 100 no-shows, districts to move to second homes, ex- 2020 2021 many of whom are suspected of booking plains Mr Dee. He found that some holiday Sources: CDC; US Census Bureau elsewhere and forgetting to cancel. By con- spots like Martha’s Vineyard and Province- trast, California focused first on health- town grew by 2-3%. 1 The Economist February 6th 2021 United States 21

2 Other pupils are simply missing school, crowded homes, wobbly wifi and a lack of however. Mr Dee and Mr Murphy found laptops may make decent distance-learn- that enrolment decreases were associated ing almost impossible. After the worst in- with smaller, whiter and poorer school dis- fection rates fell from a November peak, Ms tricts, mostly in rural areas, where parents Jackson has tried again to get the youngest are unlikely to have moved to the wealthy children back to class. A few trickled in last beaches of Cape Cod. Although the analysis month. Children aged up to 14 were sup- is preliminary, Mr Dee thinks that disen- posed to follow this week. gagement from schools may be more con- The city says teachers will lose pay if centrated in these communities. they fail to appear in class. In-person That echoes a concern heard beyond teaching looks relatively safe now that Massachusetts. David Monaco, head of Par- everyone puts on masks. The city has spent ish Episcopal School, a private school in $100m retrofitting buildings, installing Dallas, saw some pupils leave for more per- screens and better ventilation, and taking sonalised small-group or individual other precautions. Meanwhile hundreds of schooling, though his overall enrolment nurseries and private schools, besides over remains steady. By contrast, Michael Hino- 90 Catholic-run ones, and others in the josa, the superintendent of Dallas Inde- suburbs, have been open for long spells pendent School District, where 85% of all with no ill effects. Plenty of studies, includ- pupils are classified as low-income, ex- ing a report last week from the Centres for plained that while some of his pupils could Disease Control, say younger children in be sitting at home playing video games, Unions and schools schools have not been virus spreaders. others are taking care of younger siblings But again the ctu has balked. This week while their parents work. “A lot of [pupils] Class warfare its leaders staged “teach-ins” at desks in are out there working...to support their deep snow outside schools. It wants all families,” says David Vroonland, superin- teachers vaccinated first, which could take tendent of Mesquite Independent School months, and says the city’s protective gear, District, a small city near Dallas where 75% promises of tests and other resources are of pupils are classified as poor. CHICAGO not up to scratch. It worries that schools The struggle over reopening Chicago’s Pupils missing school are not just a lack space for social distancing and wants schools reflects deeper divisions worry for their families (and for the coun- committees with powers to quickly close try’s future). Since America’s schools are n city lore, the Chicago Teachers Union them again if local infection rates rise. It funded on a per-person basis, the decline I(ctu) is a mighty beast. Its 25,000 mem- fears new strains of the virus, too. In late in enrolments also creates financial pro- bers have frequently shut down America’s January 71% of its members, urged by its blems. Whereas some states, like Texas, are third-largest public-school system. The leaders, voted to walk off the job rather allocating school funding based on last most recent strike, late in 2019, doubly than be forced back in. year’s intake, schools in New York City may pleased the 84-year-old group. An 11-day A strike would look awful, both for the need to return money this year because en- shutdown helped to get teachers a gener- union and the city, so negotiations to avert rolment has declined. And all schools risk ous five-year pay deal and dealt a blow to one have gone on all week. ctu intransi- losing funding next year if enrolment con- Lori Lightfoot, the recently elected mayor. gence looks mostly to blame for the pros- tinues to fall. She had vowed that her debt-ridden city pect of closure. But as Harry Katz, an expert Getting missing pupils back to school would never fund such a “bail-out” for in labour disputes at Cornell University, takes an extraordinary effort. Sara Bonser, teachers, yet the union forced her hand. points out some teachers are genuinely superintendent of the Plano Independent Ms Lightfoot is a Democrat, but she has fearful and the union’s job is to give them a School District north of Dallas, lost 6.5% of little love for militants at the ctu. The un- voice. “It’s a mess; health and safety are her pupils (3,883) at the beginning of the ion had endorsed her rival in the run-off to really difficult to get right,” he says. year. To find these children, her staff called be mayor. Its members snipe that she and It is notable, too, how parents shape the thousands of families and conducted 115 her school director, Janice Jackson (who debate. The union, called Local 1 at its home visits to get 1,279 pupils back on the earlier served Rahm Emanuel, who was founding in the 1930s, has repeatedly dis- books. To encourage attendance, Ms Bon- even more reviled by many teachers), are rupted school life over generations, yet re- ser and her staff have provided support be- “neo-liberals” who supposedly do the bid- mains broadly supported in an over- yond the typical bounds of schooling. ding of wealthy Chicagoans. Suspicion has whelmingly Democratic city. That may One parent had a job that required leav- only grown since the epidemic abruptly reflect class solidarity. Racial and social di- ing home at 6am, and her four children ended in-class teaching in March. The city visions also play a part. A survey of parents were not waking up for remote classes. Ms first tried to order a partial reopening of in December found only around one-third Bonser’s team found the mother employ- schools in September, only to be blocked by of Hispanics and African-Americans (who ment closer to home so she could leave lat- the union, which called it unsafe for its together account for the vast majority of all er and wake her children for school. Ms members to return to their workplaces. pupils) were ready to send their children Bonser described other types of support, Both sides agree that the effects of back. In contrast, some two-thirds of white including allowing deadline flexibility to home-learning are grim for over 300,000 ones would do so. accommodate pupils’ work schedules and children, many of whom have lost almost a What explains the gap? Non-whites providing struggling families with food, year of education. Ms Lightfoot says pupils may have been likelier to have seen co- furniture, clothing and toys. Existing dis- are “falling woefully behind” and wants vid-19 deaths at close hand, so perhaps fear trict funds were reallocated so no addition- them back at school; the union talks more health risks more. Wealthier whites, in al money was needed for the programme. of how to do better with remote study. turn, may be more anxious about the long- But the district’s work with one family Shutting schools hits hardest in poorer Af- term costs of missed education, especially hints at what a daunting job finding all rican-American and Hispanic neighbour- if they see others—at private schools—al- those missing pupils will be. 7 hoods, south and west of the city, where ready back in class. 7 22 United States The Economist February 6th 2021

Covid-19 relief, episode 6 Census Bureau—although this has not much dampened Democratic zeal to pro- Stimulating talks vide the funds. So much so that the $350bn on offer exceeds the total estimated shortfall in state tax collections over the first nine months of 2020 by a factor of ten. The long-held ambition of progressive Demo- crats to raise the federal minimum wage to WASHINGTON, DC $15 an hour is dutifully tacked on as well. Republicans test the precise meaning of Joe Biden’s talk of unity The Republican counter-offer treats he symmetry is fearful. Twelve years ups to unemployment benefits, which many of these additions as an editor might Tago, another freshly elected Democratic would otherwise expire in March. A tempo- treat the flabby copy of a correspondent. president faced an economic crisis and was rary boost to earned-income and child-tax There is no proposed rise in the minimum forced to devote the first month of his term credits, which sounds stultifying techno- wage and no bail-out for state budgets in to crafting a stimulus measure to cushion cratic, would dent the alarming increases more or less fine shape. The proposed the blow. Joe Biden’s experience then, as in poverty and food insecurity that re- spending on vaccinations remains the Barack Obama’s lieutenant, informs his searchers have noticed in recent months. same, but the direct cheques would be calculation now. Mr Obama succeeded in Some of the administration’s other pri- more modest (only $1,000) and, somewhat getting his bill, the American Recovery and orities are harder to justify. About a quarter unusually for Republicans, more aggres- Reinvestment Act, but at considerable cost. of the fiscal firehose ($463bn) would be sively means-tested (limited to people That was not just the literal, gargantuan ex- aimed at disbursing a third round of direct making less than $50,000). The plan dis- pense (at least for its time) of $787bn, or cheques to most American households. cards Democratic proposals for more gen- nearly $1trn in present dollars, but the The promised amount, $1,400, is of du- erous means-tested tax credits that are pro- steep political cost, too. Opposition to Mr bious provenance. In the waning days of ven anti-poverty policies. The $20bn Obama’s supposedly spendthrift measure his presidency, Donald Trump briefly flirt- allocated to expeditiously reopen schools, spurred the Tea Party movement, which ed with rejecting the previous stimulus bill which in some parts of the country have would eventually morph from deficit (worth $900bn) because its $600 cheques been closed for nearly a full year, is a frac- hawkery to proto-populism and eventually were too small. He favoured the bigger, tion of the $130bn Mr Biden would like. full-blown Trumpism. rounder number of $2,000—which his Precisely how much stimulus the econ- Greater modesty is not the moral Mr Bi- own Republican allies in Congress re- omy needs after the extraordinary mea- den seems to have learned from his tute- soundingly rejected. Seeking to make sures taken in 2020 remains difficult to de- lage in the last recession. Rather, he seems much of this own-goal ahead of critical termine. Modelling by the Congressional worried about being insufficiently bold. Senate elections in Georgia, Mr Biden em- Budget Office projected a faster recovery The enormous stimulus plan he unveiled braced the promise of $2,000 in total than before even without any additional as his legislative priority, the familiarly (hence a new $1,400 cheque). The presi- spending—real gdp growth is expected to named American Rescue Plan, costs dent’s own economic advisers are reported be 4.6% in 2021, and the unemployment $1.9trn, nearly twice as much as Mr to be doubtful of its merits. rate is projected to drop from 8.1% to 5.7%. Obama’s hotly disputed rescue measure in Democrats have also been attached to Given that rosier trajectory and the general 2009. And it comes after Congress had al- sending an enormous cash infusion to oddities of a pandemic-driven economic ready passed $4trn-worth of fiscal stimu- state and local governments since the early slump, the benefits of another large stimulus to counter the economic fallout from days of the pandemic, when they (reason- lus measure are difficult to predict. One covid-19. ably) feared huge budgetary shortfalls and analysis of the Biden plan by the Brookings Having been poor practitioners of the the resulting vast layoffs of public workers. Institution, a think-tank, suggests that it fiscal stewardship they preach, Republi- State and local budgets have in fact done would increase real gdpby 4% over the cur- cans have not yet mustered a rebuke as bel- much better than feared—dropping by rent analysis; another respected macro- licose as in 2009. A counter-offer delivered only 0.7%, according to estimates by the economic modeller, the Penn Wharton1 by ten Republican senators—the number that would be needed to surmount the inevitable threat of a filibuster—costing an estimated $618bn looks modest only on a relative scale. A cordial Oval Office meeting between the group of senators and Mr Bi- den on February 1st was notable both for its length (close to two hours) and its anti-cli- mactic, non-committal resolution. How the negotiations play out will be significant beyond just the haggling over a few loose hundred billion. They will also determine whether Mr Biden’s aspirations for unity and bipartisan dealmaking are work- able, or mere happy talk. The president’s opening offer is a maxi- malist agglomeration of Democratic ambitions—left-liberal provisions with varying levels of plausible justification. Some, like the $160bn to accelerate vaccine manufacturing and distribution, are plainly needed. So too is an extension of the federal top- Going solo The Economist February 6th 2021 United States 23

2 Budget Model, estimates that it would con- America have abortions because their ba- tribute a mere 0.6% of growth. bies would be black, Asian or female (as the Unlike Mr Obama, Mr Biden has never race and sex bans imply). There is evidence been mistaken for a remarkable orator. His that they do so when the fetus they are car- choice of one particular word, “unity”, as rying is found to have a genetic abnormali- the opening theme of his administration is ty: a majority of diagnoses of Down syn- imprecise. Mr Biden seems to mean not a drome result in an abortion. But even if it return to the era of good feelings but a low- was decided a woman should be deprived er-temperature politics where the party in of the ability to end a pregnancy for this charge still leads but compromise is to be reason, such bans are impracticable. It is pursued. Some Republicans, tripping over “ridiculous and impossible”, says Khiara the imprecision, have professed anger and Bridges, a professor at University of Cali- confusion that Mr Biden is in fact pursuing fornia, Berkeley School of Law, to try to de- conventional Democratic policies. termine the reason for an abortion, even if Yet for all that, a compromise is now a woman has received a particular prenatal discernable. Senate Democrats have al- diagnosis. “She may have also lost her job. ready voted to start debate on a budget res- There is rarely a single reason a woman has olution, which would allow them to pass a an abortion.” State-level bans may also lead compromise-free stimulus bill through a to more abortions later in pregnancy as parliamentary procedure called reconcilia- women are forced to look (and then travel) tion, by which budget bills can pass with 51 Anti-discrimination campaigner further afield for providers. votes, avoiding a filibuster. But Mr Biden’s Ellen Clayton, a professor of paedia- team appears open to accept means-testing should generally be legal in the first three trics, law and health policy at Vanderbilt the $1,400 cheques, which would bring the months of pregnancy, but not thereafter. Law School in Tennessee, says one of the overall cost of the package down signifi- In November a federal appeals court up- arguments increasingly advanced by anti- cantly. Mr Obama mustered only 3 Republi- held a ban in Tennessee on abortion on the abortionists, that abortion of Down syn- can votes for his stimulus. Mr Biden could grounds of race, sex or a diagnosis of Down drome babies fosters a wider atmosphere well improve on that. 7 syndrome (it struck down another law ban- of discrimination, is “flat out wrong”. She ning abortions as soon as a heartbeat was points out that even as prenatal diagnostic detected, around six weeks). The state thus tests have improved, increasing the num- Abortion arguments became one of four to have a law banning ber of such abortions, other medical ad- abortion in cases of fetal abnormality and vances and changing attitudes have meant Roe-ing back one of around a dozen to have a bar on ter- people born with Down syndrome live lon- minations on particular grounds including ger, have more opportunities, and are more sex or race. Elsewhere, courts have blocked integrated into society than in the past. such bans. But in some of those cases, Abortion providers, meanwhile, are judges have called for the Supreme Court to concerned that the proliferation of such WASHINGTON, DC reconsider them. In January, when a court bans will have deleterious effects on wom- How religious conservatives learned to struck down a ban in Arkansas on abor- en’s prenatal health care. Dr Colleen McNi- love anti-discrimination laws tions because of Down syndrome, two of cholas, the chief medical officer for merica’s anti-abortion campaigners the three judges thought the ruling failed Planned Parenthood of the St Louis Region Atend not to be noisy champions of ra- to adequately consider “the state’s compel- and Southwest Missouri—the last abortion cial equality, the rights of women or the ling interest in preventing abortion from clinic in the state, thanks to regulations disabled. But they intend to change that. In becoming a tool of modern-day eugenics”. that make it impossible for clinics to oper- recent months conservative states have The revival of reason bans as a weapon ate—says it is “ethically questionable if not introduced bills banning abortion on the in America’s long-running abortion wars is unethical altogether” to offer prenatal test- grounds of race, sex or the diagnosis of a fe- shrewd. Such bans are potent because they ing without being able to offer interven- tal abnormality. Last week South Dakota are rooted in the argument that abortion tions. Doctors, she says, may also find it became the latest to do so, when the gover- can constitute discrimination against a hard to know what is allowable, since such nor introduced a bill banning abortion be- particular group. Melissa Murray of nyu laws are “written to be confusing”. cause of Down syndrome. The aim, besides Law points out that though Supreme Court Yet some believe the battling sparked by limiting access to abortion, is to push a justices rarely overturn earlier rulings they such bans may not be entirely negative. case before the Supreme Court justices in are more likely to do if there is a “special The arguments that tend to dominate ei- the hope that they will use it to overturn justification”. In some cases, that has been ther side of America’s polarised abortion Roe v Wade, the Supreme Court ruling of the desire to correct racial injustice. debate—that abortion is simply an issue of 1973 that legalised abortion. Clarke Forsythe, senior lawyer for bodily autonomy on one and plain wrong Since Amy Coney Barrett joined the Americans United for Life, which has in every case on the other—makes it im- court in October, giving it a 6-3 conserva- drawn up many successful state-level abor- possible to reach any kind of consensus on tive majority, such an outcome seems like- tion regulations, says he believes reason how abortion laws and practices might be lier than ever. Mary Ziegler of Florida State bans, especially in the case of Down syn- reformed. The introduction of issues that University reckons the end of Roe (“a ques- drome, are both emotive and “persuasive require a more nuanced approach might tion of when rather than if”), is likely to as a matter of law”. The legal strides made improve the debate. “Abortion rights activ- come through one of these “reason bans”, in the prohibition of discrimination in ists’ refrain of ‘my body, my choice’ is pow- or a law banning abortions later in preg- America, he says, means that the anti-dis- erful, but they should also be having con- nancy. Supreme Court rulings allow abor- crimination rationale of such bans could versations about ethical decisions around tion on demand (that is, for any reason) un- override the right to an abortion declared abortion, including on things like disabili- til a fetus is viable, at around 24 weeks. by Roe and subsequent rulings. ty rights,” says Ms Bridges. “Otherwise, Polling suggests most Americans think it There is no evidence that women in they cede such issues to the other side.” 7 24 United States The Economist February 6th 2021 Lexington The courage of Adam Kinzinger

A congressman from Illinois has launched the most full-throated Republican challenge to populism Caucus, a precursor to Trumpism. Caucus members such as Mick Mulvaney became zealous Trump enablers. Mr Kinzinger consid- ers their belligerent colleague Jim Jordan the de facto House Re- publican leader. And he has had it with the lot of them. He says he regrets voting for Mr Trump, is glad Mr Biden won and advocates sweeping Republican reform. The angry pushback he is getting is only making him more critical. After a relation and fellow evangelical Christian accused him of being possessed by the devil, he slammed the slavishness of Mr Trump’s Christian fan base: “The devil’s ultimate trick for Christianity…is embarrassing the church”. This week he announced his intention to lead a “country first” campaign against Trumpism. “It’s time to unplug the out- rage machine, reject the politics of personality, and cast aside the conspiracy theories and the rage,” he said in a promotional video. He knows he is up against it. The Trumpists are in charge because that is what Republican voters seem to want. Yet he makes a reasonable political and stronger personal case for sticking it to them anyhow. He suggests many Republicans are backing Mr Trump for want of alternative leaders. “People need to be remind- ed that the Republican Party has this rich history. We used to be optimistic,” he says. He then compares the current state of Abraham Lincoln’s party to a drunk awaking after a “massive bender”. rofiles in courage”, John F. Kennedy’s ghostwritten hom- “You’re like, what the hell did I do last night? And you have a “Page to politicians who stood on principle against their own choice. You can take a delicious Bloody Mary, or actually confront parties, is a revealingly slim tome. Even in the 19th century, from your choices and become a better person.” Mr Kinzinger, a former which most of Kennedy’s eight examples were drawn, the social college dropout, speaks with the authority of one who knows what and electoral disincentives to crossing a party line were formida- it is to err. He also has logic on his side. Republicans need to ex- ble. With the introduction of the primary system in the 1970s, pand their support, which post-insurrection Trumpism cannot which made candidates accountable to their parties’ most raving do. “There’s just not enough Proud Boys or far-right fringe groups loyalists, they have increased. And politicians, who mostly want to to compensate for the people we’ve alienated,” he says. be liked even more than the rest of us, are especially averse to such He has probably already guaranteed himself a primary chal- pressures. Depressing as the Republicans’ capitulation to Donald lenge. But so what? he says, before pausing, gunslinger-style, to Trump has been, history suggests it was on the cards. spit a glob of tobacco into an empty cola bottle. There are worse This makes the one-man resistance to Mr Trump and all his things than political failure—a truth he says he learned fighting in works latterly launched by Congressman Adam Kinzinger of Illi- Iraq. “And it’s not like all I ever wanted to be was a congressman.” nois all the more remarkable. Mr Trump’s few Republican critics However Mr Kinzinger gets on, his brave stand is already signif- have mostly been on the way out, as Bob Corker and Jeff Flake were, icant. It shows how beleaguered the Republican mainstream is. He or, like the Never Trumpers, already in the wilderness. A couple of is hardly a front-rank leader and pretty much out on his own. And others, Lisa Murkowski and Mitt Romney have strong enough yet his argument that the moment for a reckoning is now, when Mr home-state brands to get away with criticising the former presi- Trump’s defeat and insurrection are fresh in the mind, is persua- dent selectively. By contrast, Mr Kinzinger, a 42-year-old House sive. The former president’s continued grip on the party is member whose good looks and television manner are said to have strengthening its worst elements, such as the hate-filled Marjorie impressed Mr Trump, is in his political prime, vulnerable to the Taylor Greene. It is also eroding the scope of his likeliest succes- ruling Trumpists, but now all in against them. sors, such as Nikki Haley or Marco Rubio, to repudiate them. If The air-force veteran was one of the first Republicans to con- they will not turn on Trumpism now, they will struggle to do so gratulate Mr Biden on his win and almost the only House Repub- credibly later. Mr Kinzinger might even turn out to have been his lican to dismiss Mr Trump’s election-fraud conspiracy as danger- party’s last best hope of a return to sanity. ous nonsense. After the insurrection it sparked (which Mr Kinzinger claims to have been forewarned of by the threats he re- A zinger from Kinzinger ceived on social media) he was the only Republican to vote for Mr He will have been a good advertisement for heroic failure if so. Un- Trump to be removed under the 25th amendment. He was one of like his Trump-beaten colleagues, with their telltale aggressive de- the ten who voted for his impeachment. And where the other nine, fensiveness, he exudes contentment. Embracing the possibility of including Liz Cheney, the third-ranking House Republican, are failure is liberating, he says: “If you say, career-wise, I’m already now mostly lying low, Mr Kinzinger has expanded his critique. dead and I’m just going to speak the truth, you may end up not get- In an interview this week he described Mr Trump as symptom- ting re-elected, but you can feel pretty good about it.” atic of a deeper rot on the right, the politics of nihilism and griev- Kennedy’s exemplars must have felt a similar satisfaction in ance he encountered on entering Congress in 2011. Though nomi- their noble, mostly failed, undertakings to limit the spread of slav- nally a Tea Partier, he unveiled McCainite views and an interest in ery, prevent the civil war and so forth. They were also immortal- governing. His fellow insurgents meanwhile pursued the brain- ised for them. That is another consolation Mr Kinzinger might less extremism (“legislative terrorism,” he calls it) of the Freedom hope for, as he takes his slingshot to the Goliath of Mar-a-Lago. 7 The Americas The Economist February 6th 2021 25

Colombia rillas, who claimed to be fighting for a more just society, seized rich and poor alike. The terrible truth They beat and starved the hostages. Many were forced to urinate in their clothes and not allowed to clean themselves for months. Some were locked in wooden box- es barely larger than their bodies. The rebels ordered some to dig their own graves BOGOTÁ as a form of psychological torture. A peace tribunal issues a crushing judgment against the farc The jep’s revelations show that Colom- ritics of colombia’s peace deal with former top commander, Rodrigo Londoño, bia’s unique “transitional-justice” system Cthe farc rebel group, which in 2016 known as Timochenko, and two leaders can succeed. Most such tribunals have ended a 52-year war with the government, who are now members of Congress. Seven been established by international bodies, complain that it lets the guerrillas off too of the eight (one has died) have 30 working such as the un. The jep is the first such easily. The fault, in their view, lies with the days from the ruling either to accept or body for prosecuting war crimes and “special jurisdiction for peace” (jep), an in- deny the accusations. If they accept, the jep crimes against humanity to have been stitution set up under the accord to investi- will restrict their freedom, perhaps by or- created by the warring parties through a gate and judge crimes committed during dering them to de-mine land or build peace accord. It adjudicates such crimes the conflict. The Democratic Centre party, schools in war-torn areas. If they reject the through “restorative”, rather than retribu- founded by Álvaro Uribe, who fought the charges, the jep’s investigative unit will tive, justice. This seeks to reconcile victims farc as Colombia’s president in the early seek to prove them in a trial. If the defen- with offenders, mostly by uncovering the 2000s and is the mentor of the incumbent, dants are convicted, the jep’s judges could truth. The tribunal talked to more than Iván Duque, claims that the jep’s purpose is sentence them to 20 years in prison. 2,500 kidnapping victims. Colombia’s or- to go after government soldiers while se- The 322-page ruling reveals hitherto un- dinary justice system had not done that curing impunity for farc criminals. disclosed details of the conditions in when it tried some farc members in ab- On January 28th the jep proved the crit- which the farc kept some of the 21,396 hos- sentia during the war. The jep took testi- ics wrong. In its first ruling since its found- tages they took from 1990 to 2016. The guer- mony from the hostage-takers, who under ing four years ago, it indicted eight farc the peace agreement are obliged to confess. leaders for war crimes and crimes against Some spoke for 16 hours. Also in this section humanity. All were connected with the The farc’s leaders claimed to be group’s practice of taking hostages and ran- 26 Latin America’s busy election year shocked by the gruesome accounts, says soming them to finance its war against the Julieta Lemaitre, the judge investigating 27 Bello: A new social contract state. Among the alleged culprits are the hostage-taking. Commanders like Timo-1 26 The Americas The Economist February 6th 2021

2 chenko say they ordered good treatment Elections in Latin America reno, the current occupant, disappointed for the hostages. In fact, says the ruling, the him by abandoning his populist economic orders were merely to keep them alive. Un- More midgets than policies and pursuing corruption cases der international law, commanders are re- against members of Mr Correa’s regime. sponsible for preventing subordinates Mussolinis Now Mr Correa is backing Andrés Arauz, a from committing war crimes. The jep little-known economist who has said that charged them as if they personally had Mr Correa will be his main adviser. Mr committed the abuses. LIMA, MEXICO CITY, QUITO AND SANTIAGO Arauz frightens business folk, for example A series of votes will test the strength The ruling is devastating for the farc, by questioning Ecuador’s use of the dollar of the region’s democracies now a political party. The peace deal guar- as its currency. antees it ten seats in Congress until 2026. hen ecuadoreans choose a new On the left Mr Arauz faces competition So far it has not had enough popular sup- Wpresident and legislature on Febru- from Yaku Pérez of Pachakutik, a party that port to win any beyond that. In a congres- ary 7th, they will begin a busy political year represents mainly indigenous Ecuador- sional election in 2018 it got just 0.5% of the across Latin America. Chile, Haiti, Hondu- eans. The split helps Guillermo Lasso, a vote. Last month the party changed its ras, Peru and Nicaragua are due to hold na- conservative businessman who is making name to Comunes, or Common People’s tional elections (see chart). Chile will elect his third run for the presidency. Though party, to distance itself from its violent his- a constitutional assembly. Argentina, El likelier to continue economic reforms than tory. One of its core commitments is to ful- Salvador and Mexico will hold legislative Mr Arauz, he too has bowed to Ecuado- fil its part of the peace agreement. and regional votes. reans’ anti-austerity mood, promising to The jep’s ruling will test that promise. If They are a diverse bunch. Chile is a ma- raise the minimum wage to $500 a month the farc’s leaders deny the accusations the ture democracy. Ecuador and Peru are row- from $400. jep would have to conduct a long trial, de- dier ones and Haiti is dysfunctional. Nica- Peruvians face greater uncertainty. The laying rulings on other crimes, says Juana ragua’s strongman, Daniel Ortega, has current president, Francisco Sagasti, is the Acosta, a professor at the University of La stamped out democracy. Nayib Bukele may fourth to hold the office since March 2018. Sabana in Bogotá. Worse, that would un- be doing so in El Salvador. Chile and Peru His three predecessors were forced out ei- dermine reconciliation with the farc’s vic- have managed their economies well. Ar- ther by scandals or by protests. Peru needs tims, which depends on the guerrillas re- gentina and Ecuador have recently de- stability, but the aspirants to succeed Mr cognising the suffering they caused. A faulted on their debts. Sagasti (who is not running) seem unlikely denial would also give new heart to the Common factors cut across these dis- to provide it. The early leader is George For- peace deal’s detractors, who have been distinctions. Corruption, inequality, poor syth, a former football goalkeeper and one- orientated by the ruling, says Jorge Res- public services and price rises provoked time mayor. He has made corruption his trepo, an analyst. mass protests in 2019 and 2020 in Chile, Ec- main issue, but showed his inexperience If the farc leaders’ guilt is confirmed, uador, Haiti and Peru. The pandemic qui- by proposing that graft cases be decided by the jep will face a difficult decision over eted the streets, but raised the stress. Econ- juries “like in the movies”, which would re- whether those in Congress can keep their omies contracted and poverty rose (see quire an overhaul of the justice system. seats. A decision to let them remain in the Bello). Recovery is expected to be slow. Par- Mr Forsyth’s 12% support leaves room legislature would give new ammunition to ties are weak and discredited almost every- for rivals. Keiko Fujimori, the daughter of a the jep’s critics and enrage many ordinary where. Elections in Central America will former president now serving a prison sen- Colombians. “The continuity in Congress strain democracy. In South America, tence for human-rights crimes, has spent of those who are responsible for kidnap- though there are worries about Ecuador, time in jail while prosecutors investigated ping offends us all,” says Mr Restrepo. Yet they will probably affirm it. corruption charges against her. Daniel Ur- banning the farc’s leaders from congres- Who will take charge is more of a mys- resti, a nationalist, is on trial for the mur- sional seats would weaken a pillar of the tery than usual. There is a plethora of presi- der in 1988 of a journalist, Hugo Bustíos, peace deal: the farc’s agreement to pursue dential candidates, a disturbing number of near an army base he commanded. Candi- their political aims democratically rather whom have criminal records. Ecuador has dates with less chequered pasts include Ve- than by force. 16 presidential aspirants; Peru has 17. In rónika Mendoza, the left’s standard-bearer, In the next few months the jep will is- Chile, where two people have alternated in and Hernando de Soto, an economist who sue rulings on mid-level commanders who the presidency since 2006, the race is open. advocates strengthening property rights as had direct contact with hostages and on Looming over Ecuador’s election is Ra- a way to reduce poverty. child-recruitment by the farc. Perhaps lat- fael Correa, the authoritarian left-wing Chile’s presidential field looks less col- er this year it will issue a finding on what president from 2007 to 2017 who last year ourful. It is likely to narrow after primaries role the Colombian state played in the was convicted in absentia of corruption. in July. The front-runners are mayors of “false-positives scandal”, in which soldiers He is making a second attempt to install a districts of Santiago, the capital, on oppo- murdered thousands of civilians, claiming puppet in the Carondelet Palace. Lenín Mo- site ends of the spectrum: Joaquín Lavín, of 1 that they were guerrillas killed in combat. If that ruling is as crushing as the one on hostages, former generals could be indict- The long trail ed in the same way as Timochenko and his Selected elections, 2021 First/general Presidential/gubernatorial run-off farc fellow defendants. Such a finding Ecuador Presidential, legislative Haiti Presidential, legislative would change how Colombians view Mr El Salvador Legislative, local midterms Uribe’s offensive against the guerrillas. Chile Gubernatorial, local, constitutional Now many believe it saved the country. Peru Nicaragua The jep’s future decisions could polar- Presidential, legislative Presidential, legislative Mexico Legislative, gubernatorial, local Honduras Presidential, legislative, local ise Colombians. Underlying the peace deal, Primaries however, is the notion that only the truth Chile Presidential, legislative, regional can heal the country and ensure that such Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec crimes never again occur. So far, the jep has Sources: Americas Society/Council of the Americas; The Economist risen to the challenge of uncovering it. 7 The Economist February 6th 2021 The Americas 27

2 the right-wing Independent Democratic aspires to lead a “national-unity” govern- accused Mr Asfura of embezzling $1m of Union, and Daniel Jadue, a Communist. ment. Mr Jadue would have to strike deals the city’s money. Yani Rosenthal, who may Paula Narváez, a spokeswoman for the So- with centre-left parties. run for the opposition Liberal Party, was cialist government of 2014-18, will proba- Central America is more worrying. Mr serving a sentence for money-laundering bly be the centre-left’s candidate. In April Ortega, though unpopular in Nicaragua, is in an American prison until August. Chileans will for the first time vote for re- not budging. A victory by Mr Bukele’s New In the messiness there are also reasons gional governors and for members of a Ideas party in a congressional election will for hope. Outside Central America there are constitutional convention. tighten his grip. The probable candidates to few budding strongmen. Elections channel Chile’s temperate political culture, and succeed Juan Orlando Hernández, whose discontent, which is better than violent the need for compromise in the constitu- re-election as Honduras’s president in 2017 protest. They offer “somewhat of a safety tional convention, will push candidates in is widely thought to have been unfair, offer valve”, says Christopher Sabatini of Chat- the later national elections towards the little prospect of improvement. He is likely ham House, a think-tank in London. But centre, says Kenneth Bunker of Tresquin- to back Nasry Asfura, the mayor of Teguci- massive problems await the winners. tos, a political-analysis platform. Mr Lavín galpa, the capital. In October prosecutors Honeymoons will be short. 7 Bello A grand bargain

Debate rages about a new social contract in Latin America n mexico city and Lima covid-19 pa- marckian contributory social-security can offer a minimum income for the Itients are once again being turned schemes, set up in the mid-20th century, poorest citizens. away from hospitals with no beds to have been overtaken. On average half the These changes would cost annually spare, while in Manaus, in northern population works in the informal econ- around 3% of gdp, reckons Luis Felipe Brazil, a new variant of the virus is killing omy and is outside these schemes. Gov- López-Calva, the undp’s boss for Latin a hundred people a day. The pandemic’s ernments have offered some non-contrib- America. He thinks this could be paid for recession pushed 33m Latin Americans utory benefits to these people, creating partly by increasing property taxes, below the $5.50-a-day poverty line last incentives to stay informal. The more which collect only around 0.5% of gdp in year, according to the World Bank. Gov- sensible ideas for a new social contract Latin America, compared with around ernments in the region are struggling to stress three things: creating a floor of 3% in Europe. line up vaccines. So it may seem like a universal social protection; raising taxes Money will be especially tight for the strange moment to be talking of a new to pay for this; and increasing citizens’ next couple of years, and there are many social contract—an abstraction. involvement in politics in ways that pressing needs. These include, immedi- Yet the term has become a mantra in strengthen representative democracy. ately, rolling out vaccination pro- Latin America. Both the United Nations The pandemic has highlighted the grammes and getting schools going Development Programme (undp) and problem of informality, with workers again. Many countries need to spend the oecd, a group of mainly rich coun- violating lockdowns to gain their daily more on transport infrastructure and on tries, are working on hefty reports relat- subsistence. Reformers argue that all Latin education. Governments are piling up ed to the subject. That is because the Americans, whatever their status in the debts they will have to service. Reformers pandemic has exposed long-standing labour market, should be eligible for tax- propose a plan whereby new social- fragilities. The region’s health-care and payer-financed unemployment insurance protection measures and taxes and other social-protection schemes are fragment- and basic retirement and disability pen- reforms take effect in, say, three years. ed and unequal. Its economies have sions. That would mean reserving contrib- There will be resistance. Take Colom- stagnated for the past six years, largely utory financing for top-up insurance and bia. “The upper-middle class is saying because of low productivity. Political pension schemes. This would encourage ‘enough’,” says Sergio Clavijo, a Colombi- systems are discredited. Citizens are formal employment with lower payroll an economist. He notes that the top angry. People sense that Latin American costs. Conditional cash-transfer schemes income-tax rate has gone up steadily (to democracies cannot carry on like this. 39%) and that well-off Colombians pay a The question is how much and how wealth tax. He argues for closing loop- quickly can they change. holes through which the rich avoid taxes For some on the left, a new social and expanding the tax base (only 1m contract offers a mirage of turning Latin Colombians pay income tax). Both steps America into Scandinavia with a snap of will take time. an international bureaucrat’s fingers. With legislatures and political parties Others think of a new constitution. In in disrepute in many countries, a broad- Chile an assembly to write one will be er public debate is needed to set priori- elected in April; it is likely to mandate ties, bringing together politicians, busi- more state social provision. The left in ness people, trade unions and other soc- Peru also wants a new constitution, to ial and civic groups. One such exercise give a bigger economic role to the state. will start soon in Panama. “If we don’t get Some people on the right fear a slide people together to discuss the way for- towards socialism. ward, the alternative is very chaotic, Some Latin American countries, such probably with a lot of discontent,” says as Uruguay and Costa Rica, have broad- Mr López-Calva. “This is not easy. But it’s based welfare states. In others, Bis- the best way to weather the storm.” Subscriber-only live digital event Editor’s conversations: Christine Lagarde, president of the European Central Bank

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Defending South Korea itself in an increasingly alarming geopolit- ical environment. Security types like to re- Strengthening the shrimp fer to it as a “shrimp among whales”. China has shown itself to be hostile: in 2017, after South Korea allowed the deployment of an American anti-missile system intended chiefly as a defence against North Korea, China punished it with a painful economic SEOUL boycott. Relations with Japan, a fellow The armed forces are preparing for a lonelier future in scarier surroundings American ally, continue to be disrupted by hen he did his basic military train- The reforms are driven partly by demo- a simmering argument over Japan’s obliga- Wing in 2009, Lee Ju-min was so dis- graphy. South Korea is ageing faster than tions to elderly Koreans forced to work in connected from the world for four months any other country in the world. Last year factories and brothels by the Japanese that he forgot how to use a computer. Josh the population shrank for the first time army during the second world war. North Yang got three minutes of phone time dur- since records began. That makes the past Korea, though a fellow shrimp, is still tech- ing his first six weeks in training in 2016. reliance on a big army manned by con- nically at war with the South and is con- But by the time Chon Dong-yeong joined scripts impossible to sustain, says Sheen tinuing to build up its arsenal of both nuc- the South Korean army in 2019, he was al- Seong-ho of Seoul National University. It lear and conventional weapons. lowed to use his mobile phone every eve- therefore provides an impetus to overhaul The shifting dynamics of the alliance ning, from the end of drilling until lights the command structure, to beef up the navy with America are of particular concern. Do- out. “My experience in the army was very and air force, and to acquire more ad- nald Trump kept demanding that South Ko- different from that of my friends, even vanced weapons. rea cover more of the cost of keeping 28,500 those who started a year earlier,” he says. More modern forces are seen as all the American troops in the country, and mut- The easing of restrictions on soldiers more important because South Korea finds tered about withdrawing them altogether. has been one of the more visible changes in In 2019 he called off joint exercises that had South Korea’s armed forces in recent years. been held with South Korea every year Also in this section But it is only one of many. The government since 1961. Even with a new president in the wants to make the army smaller, more effi- 30 Insular young Japanese White House, America will expect South cient and better able to deal with the chang- Korea to take on more responsibility and 31 Covid-proof business cards ing threats the country faces. At the same develop its capabilities in areas such as in- time, politicians want it to become more 31 India’s imaginative censors telligence-gathering, planning, and naval attuned to the increasingly liberal society and air defence, says a military officer in- 32 Banyan: Vietnam’s surprising leader that it is there to defend. volved in the defence reforms. “The new 1 30 Asia The Economist February 6th 2021

2 administration is going to be more dip- Insularity in Japan seas soared. A strong yen allowed many to lomatic and polite about it, so I expect we’ll study abroad without scholarships or get on better, but their objectives will not Home, sweet home loans. Japan’s biggest banks shipped out change fundamentally,” he says. hundreds of their employees each year to To some degree, America’s aims match business schools in America. “There were those of the South Korean government, dozens of us Japanese in the same class- which would like more say in the alliance. room at Harvard,” reminisces Hiraga Tomi- At present, command of all South Korean TOKYO kazu of Osaka Seikei University, who at- Few young people want to work or forces would be handed to an American in tended Harvard Business School. “We study abroad the event of a war on the peninsula. This ar- would study together and share our notes, rangement dates back to the origins of the aito chihiro and Saito Seika have a lot so we could all pass the course.” alliance, during the Korean war, when the Sin common: they are twins. Now 26, Today Chinese and Indian students South was considered unable to defend it- they grew up together in northern Tokyo. abroad far outnumber Japanese. That is self alone against an assault from the They share many interests, including a partly because of Japan’s strong labour North. But in the early 2000s the left-of- passion for Hollywood films. But their market. The unemployment rate hovered centre government of Roh Moo-hyun be- paths diverged when Chihiro moved to below 3% for the three years until the co- gan trying to build the capacity to take back Hungary to study medicine, and Seika en- vid-19 pandemic began, when working or control of the country’s own forces. The rolled in a Japanese university to pursue studying overseas became impractical any- current government, which is led by Moon art. “I was always interested in the outside way. With new graduates easily finding Jae-in, who was Roh’s chief-of-staff, had world,” Chihiro says. Her sister, too, con- jobs in Japan, there is “little merit” in hoped to complete the transfer by the end sidered studying overseas, but ultimately studying or working abroad, says Yone- of Mr Moon’s term, next year. But it looks abandoned the idea. “I could learn a lot of zawa Akiyoshi of Tohoku University: “In a unlikely that the armed forces’ capabilities things in Japan,” says Seika. “And I wasn’t way, the Japanese labour structure does not will have improved to the degree required sure if I could actually live abroad.” discriminate based on academic back- in time. The rise of “inward-looking youth”, ground.” At any rate remuneration for Other aspects of the reforms are pro- with little interest in venturing outside Ja- those with degrees from foreign institu- gressing faster. The number of troops de- pan, has caused consternation among tions is little different from that of col- clined to 555,000 at the end of last year, Japanese journalists, policymakers and leagues who studied at home. down from 600,000 in 2018. It is supposed business leaders in recent years. Only 4% By the same token, experience of work- to fall below half a million by the end of this of all university students study overseas, ing abroad is seldom rewarded. Many firms year, with the bulk of the cuts made to the says the education ministry. Another gov- instead prize “Japaneseness” among their army. Mandatory military service is being ernment survey from 2019 found that just a employees, laments Kato Etsuko of the shortened to 18 months. Wages for con- third of young Japanese want to study International Christian University in To- scripts are rising sharply. The government abroad, compared with 66% of South Ko- kyo. Experience abroad no longer seems to aims to hire more women and more civil- reans and 51% of Germans. The Japanese increase the chances of promotion. Em- ians to work for the armed forces, to help are equally lukewarm about working over- ployees who rotate around offices in Japan, bridge the gap between soldiers and the seas. A survey by Sanno University in 2017 as opposed to foreign branches, may even rest of society. found that 60% of young employees did get promoted faster. Last summer the country launched its not want to work in other countries, up A crippling fear of the outside world de- first military-communications satellite. It from 36% a decade beforehand. ters some young people from going abroad. also secured America’s approval to modify This inward shift marks a departure. Many cite their “English allergy”—a shy- past agreements to permit it to use solid From the late 1980s to early 2000s, the ness about speaking English or other lan- fuel in missiles, which allows them to be number of Japanese seeking degrees over- guages—as a reason for their insularity. launched more quickly and easily. That Their anxiety is not entirely baseless: the should pave the way for better deterrence Japanese rank low in the index of profi- against the North, although the South says ciency in English compiled by ef, a firm it plans mainly to launch satellites this that specialises in language instruction way. Defence spending rose by 8.2% in 2019 and educational exchanges, behind their and by 7.4% in 2020; this year’s budget en- neighbours from South Korea. Seika, the visages an increase of 5%, despite the in- artist, was apprehensive about studying in tense competition for funds created by the a different language. “I wasn’t as confident covid-19 pandemic. with my English skills as Chihiro was,” she Some of the money will be misspent. says. It does not help that Japan is one of Last year, for instance, the navy announced the most convenient and safest countries that it would soon build an aircraft-carri- in the world. er—a pointless trophy, in the eyes of many. The growing insularity is awkward for “It’s like having a golden gun,” says the de- the government, which is eager to play a fence-planning officer. But the armed more active role on the international stage. forces are also stocking up on drones, sub- “Japan is falling behind and hasn’t even no- marines and anti-submarine defences, ticed its decline,” says Mr Hiraga, who be- among other sensible purchases. lieves that the country’s influence is wan- In public, Mr Moon’s administration in- ing in Asia and beyond. For firms, too, the sists that it is committed to peace with scarcity of cosmopolitan young hires im- North Korea and does not expect funda- pedes their aspirations to do more busi- mental changes to the alliance with Ameri- ness abroad. “There is so much growth and ca. The cheery language, however, masks push to go overseas in other parts of the quiet but elaborate contingency planning, world,” says Mr Yonezawa. “That’s a wave in case either expectation is dashed. 7 Intrepid explorer in a far-off land Japan also needs to ride.” 7 The Economist February 6th 2021 Asia 31

Asian corporate culture trouble of this sort. Someone else familiar with such “in- Here’s my QR code tent” is Munawar Faruqui. A popular young stand-up comedian, Mr Faruqui is also now behind bars. Along with five associates, he was arrested in the city of Indore, in central India, on January 1st after the son of a politician from the ruling Bharatiya Ja- SINGAPORE nata Party (bjp) complained about the con- Business cards are going online tent of their show—or rather, content that n asia meetings do not begin until busi- the plaintiff believed might appear in the Iness cards have been swapped. It is no show. In fact, there is no evidence that the mere formality. Accept the card with two show did include “derogatory remarks” hands and carefully examine it, noting the about Hindu gods or government minis- giver’s title and other indicators of rank— ters, as alleged. Nevertheless Mr Faruqui essential information in any strongly hier- and his friends have repeatedly been de- archical business culture. It is so important nied bail, with one judge commenting that to master this ritual in Japan (just how deep “such people” must not be spared. does one bow?) that numerous books and “That’s sometimes a little bit rude,” he says. These may look like isolated cases, but courses promise to transform bumbling Many others in Singapore are evidently they reflect a wider trend. In anticipation novices into meishi-koukan (card-swap- fond of paper cards, too. Sales at Express- of popular protests, the government reflex- ping) virtuosos. If a new acquaintance fails Print, a printing company, have picked up ively pulls the plug on internet service, par- to give a card to Glenn Lim of ceo Asia, a in the past two months, as more people re- ticularly via smartphone. Such shutdowns Singaporean business-networking com- sume in-person meetings. Stephen For- were pioneered in restive Kashmir, where pany, “it makes me forget them,” he says. shaw, head of public affairs at Temasek, the revocation of local autonomy and Yet the pandemic has put the business Singapore’s sovereign-wealth fund, says statehood in 2019 was accompanied by pre- card on life support. Networking is diffi- that he recently topped up his supply of emptive arrests and a 213-day internet cult when white-collar workers have fled to cards for the “first time in a long time”. blockade. Ostensibly for security reasons, home offices, business lunches have been Even Edward Senju, the head of Sansan’s mobile connections in much of the former cancelled and conferences have migrated operations in South-East Asia, still keeps state—now run directly by the national online. Orders for business cards from some in his wallet, “just in case”. 7 government—remain limited to lumber- Vistaprint, a multinational printing coming 2g service. The authorities now deploy pany, plummeted by 70% in late March and internet-muting as a crowd-control tactic early April and have yet to recover fully. Mr Free speech in India across India, including the capital. During Lim normally hands out about 200 cards a the ongoing stand-off between protesting month. In the six months following Singa- Prevention is farmers and police on the borders of Delhi, pore’s lockdown in March, he reckons he mobile networks have been shut down for dispensed about five. “I’ve forgotten what better than cure hours at a time to discourage flash mobs. A business cards look like,” remarks a British recent report estimates that the 8,927 hours banker based in Singapore. “How do you of internet restrictions imposed by the sanitise them?” DELHI government during 2020 cost the country The government has taken to But it is still helpful to know who is who $2.8bn in forgone economic activity. censoring people before they comment at meetings, even when they take place on In addition to this scattershot ap- Zoom. Companies are therefore reimagin- di amin, the late Ugandan dictator, once proach, the government is also targeting ing the business card for the era of social Ideclared that he respected freedom of individuals. One new initiative invites distancing. Nagaya, a Japanese firm, prints speech, but could not guarantee freedom “cyber volunteers” to join police in hunting them on face masks (a literal interpretation after speech. India’s government seems to “anti-national content” on the internet. of a Japanese metaphor that likens busi- be taking this concept one step further. De- Twitter reports that during the first six ness cards to one’s face). After the launch of spite running what is often hailed as the months of 2020, the number of official de- the “Meishi” mask, traffic to Nagaya’s web- world’s biggest democracy, it has gained a mands to remove content swelled by 254%,1 site surged by 65,000%. taste for curtailing freedom before speech. Sansan, another Japanese firm, allows Just ask Siddique Kappan, a journalist companies to sort scanned business cards who has been detained since October un- Tweet heat so bosses can see which employees have der the Unlawful Activities Prevention Act. India, number of legal demands to remove made new contacts. It also offers “virtual His sin was to have been caught driving to- or withhold content on Twitter qr cards”. Users receive codes which they wards Hathras, a district in the state of Ut- 3,000 display as virtual backgrounds on video- tar Pradesh. Other reporters had gathered conferencing apps. Scanning the code with there to cover the alleged gang rape and January-June July-December a phone camera will summon the user’s murder of a Dalit woman by upper-caste 2,000 digital business card. Some 4,300 compa- men. Mr Kappan never reached the village nies have begun using Sansan’s virtual of the 19-year-old victim, whose family as- cards since they launched in June. sert that state police sided with her alleged 1,000 But Mr Lim, who uses Sansan’s virtual killers, to the point of seizing and cremat- cards, does not plan on binning the paper ing her brutalised corpse to conceal the evi- version just yet. People tend to exchange dence. On the defensive, police have 0 virtual cards after meetings have started or claimed a wider conspiracy to cause caste 201918171615142013 as they end, forcing participants to ask who conflict. They accuse Mr Kappan, arrested Source: Twitter does what during the meeting itself. at a highway toll booth, of “intent” to stir up 32 Asia The Economist February 6th 2021

2 to more than 2,700 (see chart on previous found themselves charged by police with state-run institutes and universities to page). On February 1st users of the service sedition in multiple bjp-ruled states in seek prior permission from the ministry erupted in protest after it blocked some 250 similarly worded rapsheets. Their crime for any online conference or seminar accounts, including those of prominent was to have raised questions regarding “clearly related to India’s internal matters”. journalists, at the government’s request. whether one farm protester had been killed Professors may soon find it harder to travel When it hastily unblocked them, citing in a road accident, as police claim, or by po- abroad, too. Police in the state of Uttara- freedom of speech, the government replied lice gunfire, as his family and independent khand have announced that henceforth, with a threat to sue it for “disobedience to medical experts reportedly believe. anyone they deem to have posted “anti-na- legal blocking orders”. The fingered ac- In another move to pre-empt open dis- tional” content on the internet will not get counts had shared a provocative hashtag cussion of touchy issues, the foreign min- a passport. Not to be outdone, police in Bi- regarding the farmers’ protest, but its use istry has imposed new rules on academic har say that anyone who joins a protest can in most cases appeared inadvertent. It does conferences. In addition to the existing, forget ever having a government job or con- not help the government’s case that several stringent scrutiny of foreigners invited to tract—a jarring rule in a country that won of the journalists, all among its critics, conventional events, it will now require independence through peaceful protest. 7 Banyan The shock of the old

The new general secretary of the Vietnamese Communist Party is a surprise hen compared with the vibrant experience and a broad patronage net- and Vuong as general secretary, and Wbustle and chaos in the rest of work. Yet Mr Phuc comes from the centre lacking a compromise candidate, the Hanoi—where drag queens perform for of Vietnam, when all previous general congress voted instead for the white- rapturous audiences and break-dancers secretaries have hailed from the commu- haired Mr Trong to remain for a third throw down moves on the city’s pave- nist heartland in the north. Moreover, says term. That is unprecedented, but it may ments—the five-yearly congress of the Le Hong Hiep of the iseas-Yusof Ishak have been Mr Trong’s intention all along. Communist Party of Vietnam could not Institute in Singapore, that same patron- His ability to stay in power is all the more have stood in starker contrast. The exact- age network, in Mr Trong’s eyes, counted remarkable given that he is thought to ly spaced potted palms and bouquets; the against him. It might have constrained Mr have suffered a stroke in 2019. Never, says serried ranks of 1,600-odd delegates (few Phuc’s ability to continue Mr Trong’s “blaz- Tuong Vu of the University of Oregon, of them women) all dutifully raising red ing furnace” campaign against corruption, make the mistake of underestimating Mr cards to vote; even the ban on delegates which has brought down party bigwigs, Trong. meeting to chat in the evening: every- business folk and others. Mr Trong main- Even so, he was no blazing furnace at thing was arranged to present a narrative tains that rooting out corruption is the key the congress, appearing frail. Specu- of conformity, calm and consensual to the party’s survival. lation is swirling about whether he order within one of the world’s most In the event, Mr Trong and his allies might step down midway through his secretive political organisations. succeeded in blocking Mr Phuc. But Mr new term. If so, his successor is likely to And yet the main outcome of the Trong’s protégé, Tran Quoc Vuong, also be either the new speaker of the national congress appears, on the face of things, failed to win the job of general secretary. assembly, Vuong Dinh Hue, an econom- anything but orthodox. The party has Mr Vuong, a party stalwart and former top ics professor and former finance min- tended to disapprove of the kind of per- prosecutor, heads the anti-corruption ister, or the new prime minister, Pham sonal power that Xi Jinping has gathered campaign. But he lacks his own network of Minh Chinh. The promotion of this next door in China. Rather, authority is allies, which seems to have diminished his former police general and head of party spread among the four “pillars” of the standing among members of the party’s personnel and organisation is also un- government: the general secretary of the powerful central committee. usual. Until now the prime minister has party, the prime minister, the president A stinging blow for Mr Trong? Think been chosen from among the deputy and the speaker of the national assembly. again. For, having ruled out Messrs Phuc prime ministers. (The 66-year-old Mr At the previous congress in 2016 it was Phuc, meanwhile, has been kicked up- unusual enough that the general secre- stairs to the largely ceremonial post of tary, Nguyen Phu Trong, saw off a pow- president, restoring the four pillars.) erful reformist rival to secure a second For now, the conservative writ of the term—especially since he was well over 76-year-old Mr Trong, a Marxist theoreti- 65, the usual age limit for re-election to cian, runs in a country of 96m, more than the Politburo. He then also assumed the half of whom are under the age of 35. Mr position of president on the death of the Trong means not only to continue his incumbent in 2018, compressing four anti-corruption drive. He also means to pillars to three. crack down further on Vietnam’s rela- Almost certainly the outgoing prime tively open social media. His enduring minister, Nguyen Xuan Phuc, fancied his sway suggests the party’s intolerance of chances of succeeding Mr Trong as gen- dissent will continue, says Thao Dinh, a eral secretary, the most important of the prominent young activist. A tight grip, top four posts. Mr Phuc has overseen an Mr Trong seems to believe, is necessary impressive campaign against the co- to keep the country on course. Lighten vid-19 pandemic, despite a recent spate up, the drag queens and break-dancers of infections. He has extensive executive seem to be answering. China The Economist February 6th 2021 33

Ideological battles targeting China’s big tech firms with new antitrust rules aimed at curbing their pow- Red Guards, redux er. “It looks like they are using public frus- tration to help give tailwind to this campaign,” says Mr Blanchette. (Ant Group has agreed with regulators on a restructuring plan, Bloomberg reported on February 3rd). Lately netizens have also been attacking SHANGHAI Pinduoduo, a discount-shopping app that Marxist rhetoric is gaining currency among the young and overworked rivals Mr Ma’s Alibaba, of which Ant Group n the booming realm of short-video line rants against capitalism. (Mr Ma disap- is an affiliate. On January 4th it was re- Iapps in China, the most popular clips of- peared from public view for nearly three vealed that one of Pinduoduo’s employees, ten feature silly gags or cute animals, or months, but re-emerged on January 20th to a 23-year-old woman, had collapsed while both. Recently, however, a different genre give an online speech to rural teachers.) walking home after an overtime shift. She has climbed the charts: criticism of capital- In recent weeks netizens’ anger has also died later in hospital. A national debate en- ism. In December a user going by the name surged against other private firms and their sued, focused mainly on the culture of Zeng Shike posted a video on Douyin, the bosses. Jude Blanchette, whose book “Chi- overwork in China. Some pointed to what inside-China version of TikTok. In it he na’s New Red Guards” describes a revival of they saw as a more basic problem. “In Chi- lambasted Jack Ma, an e-commerce tycoon, Maoism among Chinese people since the na’s speed-obsessed tech world, the labour for being a selfish capitalist. “These big 1990s, argues that opposition to big non- law is treated like a tablecloth or toilet pa- shots are trampling on small merchants,” state businesses has long been evident in per. It is never respected,” said the narrator he said in the amateurish production: just the margins of public sentiment. The gov- of one video about “Capitalist Pinduoduo”. a city scene with a voice-over. “It used to be ernment normally supports firms such as It has been watched more than half a mil- about serving people and making life more Mr Ma’s and tries to dampen neo-Maoist lion times. In another video a young man convenient. Now they’re causing financial suggestions that China is capitulating to in a black hoodie calls on consumers to trouble and harming society.” capitalism. But sometimes it gives Maoists stop spending money on the company’s Mr Ma’s business has been in the gov- more freedom to air their grievances. That app: “The capitalists are just squeezing us. ernment’s sights, too. On November 3rd appears to be happening now. Officials are They don’t see us as people.” Ant Group, a fintech company that he Even Huawei, a telecom giant much founded, was forced to halt what would loved by the government, has not been im- Also in this section have been the world’s biggest initial public mune. Specifically, critics have focused on offering because of new regulations that 34 Toughening up the young Annabel Yao, the youngest daughter of Ren will up-end its business model. It was after Zhengfei, the firm’s founder. On January 35 Chaguan: The poor and the pandemic this that he became a lightning rod for on- 14th Ms Yao released a 17-minute documen-1 34 China The Economist February 6th 2021

2 tary to announce the start of a hoped-for The attacks on capitalism are, in a nar- in “excellent” health. Half of pupils sur- career as an entertainer. She was greeted row sense, consistent with official rhetoric veyed there had myopia. Today one in five with scorn. “Controlling our material life is that still describes China’s economy as “so- Chinese children is overweight, up from not enough. Capitalists also want to con- cialist” even though private business gen- just one in 20 in 1995. Such statistics fan an- trol our cultural life,” read the most-liked erates 80% of urban employment and 60% other fear: that today’s youngsters, and comment on her account on Weibo, a of gdp. But why let tech titans be described boys in particular, are over-indulged microblog platform. A flood of short videos as money-grubbing capitalists when they wimps. The state news agency, Xinhua, derided her claim to be self-made. are often also hailed as leaders of China’s grimly summed it up with a headline: But the videos go beyond mockeries of drive to become more innovative? “Why good times produce weak children”. this or that wealthy person. One piece In part this reflects the Communist In 2018 many parents were upset that a about how capitalism works explains that Party’s ideological ambiguity. It sees big children’s show—co-produced by the edu- dairy farmers, in order to keep prices high, private firms as national champions, but it cation ministry, ironically—had featured would rather dump excess milk than give it also regards the preservation of Mao’s male pop stars who, with their perfect coifs to poor people. In another, a young pre- sanctity as essential to its grip on power and eyeliner, were not deemed role models senter, hat on backwards, praises Mao for (de-Stalinisation was the start of a slide to- manly enough for their sons. In January the arguing in 1972 that turning China capital- wards the Soviet Union’s ruin, say party ministry pledged to “pay more attention to ist would allow global firms to take control historians). That gives a bit of leeway to cultivating pupils’ masculinity” and en- and make the country a semi-colony. “This people who wave the banner of Maoism, dorsed a politician’s proposal to hire more great man’s vision has carried through the even if what they say is not entirely in line male pe teachers to prevent the “feminisa- ages,” he says, with a thumbs-up. with the party’s current thinking. Having tion” of teen boys. Zhu Weiqiang of East Many of the videos lack revolutionary let the anti-capitalist fires burn brightly for China Normal University, who advises the punch. Renditions of the “Internationale”, a time, censors will douse the flames. 7 government on pe reforms, says that teach- a socialist anthem, garner many clicks but ing a non-aggressive form of kung fu was seem more like kitschy nostalgia or funny once commonly proposed. Now officials memes than calls to action. The young peo- Syllabus reform want children to learn wrestling. ple drawn to them are nothing like the Red But parents do not want their children Guards of Mao’s day, who used horrific vio- Young at art to be distracted from their books. They are lence against those branded as “capitalist used to pupils getting full marks in pe with roaders”. Yet their resentment of the busi- next-to-no effort, partly because examin- ness elite appears genuine. A rough indica- ers have tended to grade generously to tor is the torrent of comments overlaid on avoid “unfairly” penalising hard-working videos carried by Bilibili, another popular BEIJING students, says Mr Zhu. Schools often can- Officials make pupils take sport and art app. Videos showing Mr Ma once inspired cel pe and art classes in favour of extra revi- seriously—with exams both respect and humour, with some view- sion-sessions for other subjects. ers praising his business acumen and oth- n exam-obsessed China, educators have This will change with the new reforms. ers sarcastically asking for money. Recent- Ilong struggled with the problem of over- But parents are already griping that pe will ly the tone has darkened, with comments worked schoolchildren. Attempts to do be just one more source of stress. They fret such as “down with Jack Ma” and “workers away with some test-oriented teaching of- about how art will be appraised. Some of the world, unite!” ten face resistance from parents, who wor- point out that schools in big cities will be ry that their offspring could lose out in the able to fork out for boxing gear and trips to Nothing to lose but your memes race to get into a good university. Some en- calligraphy museums, giving their pupils The anger is easy to explain. Inequality has lightened officials are taking a new tack. In yet another edge in the zhongkao. Mr Zhu soared in China over the decades. The pro- the south-western province of Yunnan laments the use of exam pressure to get liferation of social media has made people they have not only revamped the physical- people’s attention. Still, he hopes it is but a more aware of the obscene wealth of some education test in the zhongkao, an exam- hop, skip and a jump to greater fitness. 7 of their compatriots. After Ms Yao, the ination for entrance to senior secondary daughter of Huawei’s founder, released her school. They have also given it the same documentary, one short video analysed her weighting in the exam as all-important backdrop to draw viewers’ attention to the subjects like maths and Chinese. Eight value of her luxurious home. provinces have joined Yunnan in including Coupled with a sense of unfairness is art and music tests in the zhongkao. bitterness about unreasonable work de- These reforms are in response to demands. Employees of tech firms complain mands by the central government for a about what they call the “996” culture: an more well-rounded approach to education. expectation that they should be in the of- In 2017 primary and secondary schools fice from 9am to 9pm, six days a week. Mi- were ordered to hire only specialists to grant workers from rural areas have it teach pe and art. In October they were di- worse, whether grinding it out in factory rected to organise daily gym classes; to in- jobs or rushing around as food-delivery clude pe and art in the zhongkao; and to workers (see Chaguan). But overworked make pupils’ graduation conditional on young professionals have started referring their fitness (it did not say how to assess to themselves as dagongren, a term that this). The government says it wants to fos- used to describe those who do menial jobs. ter a “lifelong habit of exercise” and, Yan Fei, a sociologist at Tsinghua Universi- through art, “noble sentiments”. ty, describes an emerging class identity The government worries about how among people who are struggling to get many youngsters are in poor shape. In 2017 ahead. It embraces both white-collar and officials in the southern city of Guangzhou blue-collar workers. found that only 2.6% of local children were The painful race to academic success The Economist February 6th 2021 China 35 Chaguan Of sickness and homesickness

To fight covid-19, migrants are being asked to miss the biggest holiday of the year need not worry about interprovincial controls. Chaguan meets one selling noodles part-time outside the station. A university student, she hails from Shantou, a city in the same province as Guangzhou, and plans to pop home by bus. She concedes that classmates from provinces which have seen recent outbreaks, in China’s icy north-east, are forbidden to leave college over the holi- days. Still, she backs restrictions: “It’s best if you stay home and don’t cause trouble for the country.” A married couple from Dengzhou county in Henan province are found waiting for their train on a low wall. Fearing infection, they paid for a ride-sharing car to the station to avoid crowded public transport. Both work for the same plastic-tubing manufacturer and are spurning an offer by bosses to pay 1,000 yuan to workers who skip holiday travel—employees’ movements can be verified with the help of smartphone health apps that are now ubiquitous in China. Extra money would help: the couple was stuck in their home village for a month on minimum pay when the virus hit around the lunar new year in 2020. But they long to see their daughter, 15, and son, 12, who live in Henan with grandparents. “My parents are getting old, my kids are still young. If we didn’t go back, my heart wouldn’t be at ease,” says the husband. A group of older workers from Lingbao county, a poor region of o crowd in China is truly anonymous. Subtle badges of class, Henan, are bracing themselves for 25 hours on hard seats on a slow Nincome and even region mark out individuals in the densest train home. Earning just 107 yuan a day at a hardware factory, they throngs, such as those seen at lunar new year, when hundreds of have brought buckets of steamed buns and fruit to avoid “expen- millions of migrant labourers, white-collar workers and students sive” train food. They each paid 75 yuan for a covid test and will cram into trains, buses, aeroplanes or cars to visit faraway rela- need another after self-isolating for a week in their mountain tives. China is a country in constant, restless motion. But even in a homes. “Making money is hard,” sighs one. Yet their precarious normal year, it is also a place of hard-to-shed social distinctions. status gives them some autonomy, too. Their short-term contracts This is not a normal year. In line with China’s ambition of keep- expired before the holiday, so no boss can make them stay. ing covid-19 infections as close to zero as possible, national health At one point, Chaguan hears conflicting views. You in the West authorities have asked the public to avoid non-essential travel to call China’s travel curbs mandatory but they are just advisory, in- see in the year of the ox. That is a reasonable request. But the bur- sists a hotel tout. He asserts that China’s Confucian culture means den falls heavily on those 300m migrant workers, for whom the that people like to agree with the government. Another man holiday is often a rare chance to see children and aged parents. weighs in, declaring that migrant workers are treated worse than China’s transport ministry predicts that a total of 1.7bn journeys city folk. Moreover, he says, once “advice” from national leaders is will be made during the travel surge either side of new year, which enforced by grassroots officials it turns into an order. Abruptly, his this year falls on February 12th. That is down from about 3bn jour- indignation subsides. He is going home, unable to bear missing neys in 2019, before the pandemic. Millions employed by the gov- new year with his wife and children. “I have to go back, they are ernment or state-owned enterprises have simply been ordered to waiting for me to set off the firecrackers,” he says simply. The Com- stay put. Workers in the private sector being harder to boss about, munist Party seems wary of public anger. On February 3rd it several wealthy regions are offering bonuses to migrants who warned local officials not to over-egg virus controls. abandon plans to return home. These range from cash payments of up to 1,000 yuan ($155), to extra points to help migrants apply for The ones staying behind school places or residence papers in the city where they work. Away from the station, in a suburb of factories and shabby apart- Travellers to rural areas with weak health services must take tests ment blocks, many migrants are resigned to a holiday alone. A res- for covid-19 and self-isolate on arrival for a week or two. taurant owner from the north-eastern province of Heilongjiang re- These various nudges and prods are having a visible impact. On ports that most fellow northerners are staying in Guangzhou, for a recent weekday, there was only a thin crowd outside the main fear of getting stuck by a covid outbreak back home. railway station in Guangzhou, a southern boomtown of 13m peo- In a nearby alley a seller of fake Gucci shoes last saw his chil- ple. Travellers were almost outnumbered by steel-helmeted police dren half a year ago. He is not going home to rural Henan, in case officers and guards, as well as health inspectors in protective suits. he is quarantined for too long and his children miss the start of Talking to that crowd, it becomes clear that this is no monolith- term in their primary school. His children understand, he says. He ic mass of people. Instead, each individual’s decision to return has sent them toys and their teachers have told them that “every- home is shaped by employment status and regional background. one has to tough it out a little this year.” Actually, Chinese families Several migrants explain that they are taking off as much as a week are not all experiencing the same tough new year. The migrants at earlier than usual. Many private employers have granted flexible the bottom of the social ladder have it worst. The pandemic is holiday dates this year, enabling staff to stagger their departures. teaching the shoeseller’s children this harsh lesson at a young age. That allows all to enjoy emptier trains and roads, and some to get As village kids in a crowded country that is better at economic than home before the strictest travel rules bite. A fortunate few locals social mobility, they have more such lessons to come. 7 36 Middle East & Africa The Economist February 6th 2021

Africa and covid-19 supercycle driven by Chinese demand for oil, metals and minerals came to an end. In At the end of the line most African countries commodities account for at least 80% of goods exports, so lower prices hurt. From 2000 to 2014 sub- Saharan Africa’s gdp was expanding almost twice as fast as its population. But since then, gdp per head has fallen. DAKAR, JOHANNESBURG AND NAIROBI There are big exceptions. Countries that Africa’s recovery from the pandemic will be slow and leave deep scars depend less on mining or pumping oil, t first glance, sub-Saharan Africa al years for gdp per person to get back to such as Benin, Ethiopia, Ivory Coast, Kenya Aappears to have avoided the worst of where it was before covid-19. Governments and Senegal, have been among the fastest- the pandemic. It has 14% of the world’s face the challenge of procuring scarce vac- growing economies in the world. “But the population but, even as it is drenched by a cines and, in many cases, dealing with fi- rest had not recovered from the commod- second wave, just 3% of known cases and nancing crises that threaten basic services. ities shock when covid hit,” says Albert deaths. In 2020 its economy shrank by less All of this—as well as widespread Zeufack of the World Bank. Since many gov- than the global average, estimates the imf. school closures—will leave lasting scars. ernments kept spending and borrowing, Eleven of the 24 countries that grew at all Africa has a young and fast-growing popu- they had higher debts than they did before last year were in the region. lation. The median age is 19.5; by 2035 it will the global financial crisis. But try telling the finance minister of be adding more people of working age to When covid-19 spread across the world, one of those, Ghana, that African countries the global population than everywhere else African countries felt a triple whammy. have had it easy. Ken Ofori-Atta worries put together. A long, sluggish recovery Global demand plunged. Trade slowed. Tra- that Africa is “going to lose a decade”, if would make it harder for the largest-ever vel and tourism, which are huge generators nothing is done to respond to the pandem- generation of young Africans to find jobs, of jobs and hard currency in several African ic’s economic shock. He admits to a vertigi- heaping pressure on ageing leaders. countries, collapsed. Lockdowns choked nous feeling: “It’s like sailing down Niagara The shock of the pandemic arrived domestic commerce. Falls in an African canoe.” when much of sub-Saharan Africa was al- Having a young population has some- Mr Ofori-Atta has reason to worry. The ready vulnerable. In 2014 a commodities what protected the continent from the vi- rich world is expecting a rapid, vaccine- rus. Officially fewer Africans have died of it fuelled recovery. But in sub-Saharan Africa Also in this section than Americans or Europeans. The true the damaging effects of the pandemic will scale, however, is hard to gauge. In South 39 Netanyahu’s difficult friends drag on, causing harm in the short, medi- Africa, one of a few African countries that um and long term. The imf forecasts that in 39 Why Algerians cannot hitch a ride track whether more people are dying than 2021 it will be the slowest-growing major would be expected, there have been 132,000 40 Honour killings in the Arab world region. In many countries it will take sever- “excess deaths” since May—a higher rate1

The Economist February 6th 2021 Middle East & Africa 37

2 per person than that recorded in countries to the food parcels?” she asks. “Councillors lenges: vaccines and finance. A few have in western Europe. tell us a different story every day.” not fully grasped the urgency of the situa- Even countries that dealt well with the Not all the news is bad. Some 46 sub-Sa- tion. South Africa, for example, is spending first wave are struggling with the second. haran countries have introduced a total of a fortune bailing out the national airline In Senegal, for instance, the main public 166 social-protection policies, such as cash while dawdling over buying vaccines. Tan- hospital in Dakar, the capital, is asking transfers or free electricity, though most zania’s president, John Magufuli, casts ngos for basic items such as masks and are still very small. The pandemic has doubt on whether they even work. “If the gloves. Doctors believe that the case count spurred several to digitise faster. Ethiopia white man was able to come up with vacci- is many times higher than the official tally. has adopted a law giving electronic docu- nations,” he said, “then vaccinations for “We are afraid,” says a clinician. ments legal force. Togo has issued welfare aids...malaria and cancer would have been The economic impact is also worse than payments using mobile money. found.” He told the health ministry not to it looks. Because sub-Saharan Africa’s pop- Another hopeful development is the Af- adopt a vaccine until it has been certified ulation is growing at 2.7% a year, gdp needs rican Continental Free Trade Area, which by Tanzanian experts. to grow at least as fast, or people will be- was launched on January 1st. It should Most African governments, however, come poorer. Last year the area’s economy eventually ease trade within Africa. That are eager to get vaccines as fast as possible. shrank for the first time in 25 years. Some could boost manufacturing, the impor- The biggest problem is that it will take time 32m people fell into extreme poverty (earn- tance of which the pandemic has stressed. for the world’s vaccine-makers to churn ing below $1.90 a day), erasing five years of The lack of domestically made surgical out enough for everyone. Under covax, a progress against want, says the World masks and drugs made Africa “very, very global vaccine scheme largely funded by Bank. Millions more may have lost their vulnerable”, says Akinwumi Adesina, pres- donors, governments are trying to get place in the nascent middle class. ident of the African Development Bank. enough for 20% of people in poor countries Countries that rely on tourism were “We must be more self-reliant,” says Ama- by the end of this year. The African Union devastated. gdp fell by 12.9% in Mauritius dou Hott, Senegal’s economy minister. has separately secured 670m vaccine and 15.9% in the Seychelles last year, as However, when it comes to cushioning doses, roughly enough for a further 25% of beach-lovers stayed at home. Botswana’s the economic shock of covid-19, sub-Saha- Africans, from Pfizer, Johnson & Johnson economy contracted by almost 10% as for- ran governments have fewer options than and AstraZeneca, though it is unclear when eigners went without diamonds or safaris. rich countries do, mostly because they can- they will arrive. Some countries are also International bookings at camps in the not borrow as cheaply. On average they negotiating directly with suppliers, in- Okavango Delta fell by 95%. Game-poach- spent just 3% of gdp to respond to the cri- cluding Chinese and Russian ones. ing is rising as locals struggle to get by. sis, compared with about 5% in the imf’s Whereas rich countries aim to vacci- Oil-exporting countries were walloped, group of “emerging markets” and more nate most people by the middle of this year, too. In 2020 their economies shrank by an than 7% in rich countries. Whereas central John Nkengasong, the head of Africa cdc, a average of 4%, versus 0.4% among oil im- banks in advanced economies have pur- public-health body, is aiming for 60% of porters (excluding South Africa). In Ango- sued radical policies, those in Africa have Africans to be jabbed by the end of next la, sub-Saharan Africa’s second-largest oil stuck to orthodox ones, lest they endanger year. Even that may be optimistic. The producer, bottles of Château Pétrus costing their macroeconomic stability. Only about Economist Intelligence Unit, our sister or- $3,000 can still be found in supermar- half have cut interest rates. The difference ganisation, estimates that in most African kets—relics of the 2000s, when high oil is between doing “whatever it takes” and countries most people will not be inoculat- prices made Luanda one of the world’s “whatever is possible”, argues Abebe ed until mid-2023 or early 2024 (see map). most expensive cities. But in 2020 Angola’s Aemro Selassie of the imf. So Africa may suffer waves of infection economy slumped for a fifth year in a row. In the next few years governments in after the disease has ebbed in the rich Covid-19 has exposed the weakness of sub-Saharan Africa will face two huge chal- world. This will cause more death and suf- Africa’s biggest economies, Nigeria and fering as well as economic pain. It may also South Africa, which generate almost half of allow new variants to evolve, which could sub-Saharan gdp. Nigeria, the continent’s Waiting game endanger people in rich countries, too. largest oil producer and home to one-fifth Covid-19, when will widespread vaccination Repeated waves would worsen the fi- of sub-Saharan Africans, faces an “unprec- coverage be achieved? nancing crises in many African countries. edented crisis”, says the World Bank, which Forecast* This is the second big issue in the medium seldom uses such blunt language. More term. To understand the scale of it, the imf than two in three households are poorer has totted up what the region would need than a year ago. By 2022 the number of Ni- to pay to meet its external debt obligations, gerians who are extremely poor is expected fund its current-account deficits and to rise by 20m, to 100m. mount a modest response to the pandemic. South Africa was in its second recession It estimated a shortfall of between $130bn in two years before the pandemic, as a re- and $410bn, equivalent to 8%-25% of result of low commodity prices, corruption, gional gdp, for 2020-23. If that gap is not power cuts and scant investment. In 2020 filled, it will be hard for some countries to its gdp shrank by 7.8%, as joblessness rose Number of avoid defaulting on debt or slashing spend- countries above 30%. The poor, women and the least- ing on public services—or both. By year educated have been worst hit. Sub-Saharan governments are on aver- Letsha Lekota (not her real name) lost age spending more than 30% of the rev- her job in March. In her village she signed enue they raise on paying debts, up from up to get government food parcels. They about 20% before the pandemic. Public never arrived. She suspects they were sto- debt as a share of gdp rose by eight percent- len—a common problem in a country 37 30 37 84 age points to 70% last year. It will rise high- where even funds for personal protective er still in 2021. Over half of low-income Late Mid Late From *At Jan 22nd 2021 equipment and tablets to help kids study at 2021 2022 2023 Source: Economist Intelligence Unit sub-Saharan countries are in “debt dis- home have been looted. “What happened tress” or at high risk of it, says the imf. It is 1 38 Middle East & Africa The Economist February 6th 2021

gramme.” To pretend otherwise, given the can afford to send only some of their chil- Where credit is due numbers, he adds, “is to be disingenuous dren to school. The girls who drop out will Sub-Saharan Africa, external government debt with ourselves”. not only earn less but are also likely to start $bn The reality, though, is fiendishly diffi- having babies sooner, and to have more of 400 cult. Unlike in the 2000s, getting all the in- them. In Kilifi County, on Kenya’s coast, Owed to: terested parties in the same room would re- only 388 schoolgirls out of the 946 who got private creditors* 300 quire a huge table, or at least a premium pregnant during the closure last year have Zoom subscription. They need to trust that reported back to school, according to Terre if one creditor grants debt relief, the debtor des Hommes, a charity. Others 200 bilateral creditors will not use that money to pay off another. The link between female education and China African governments worry that if their family size is strong everywhere. Women 100 private debt is restructured, rating agen- with no formal schooling tend to have multilateral creditors cies will downgrade them, making it hard- about six children, whereas those with sec- 0 er for them to borrow in the future. ondary education have roughly two. This 2009 2019 Finance ministers may put off asking matters because better-educated mothers *Bonds, commercial Sources: World Bank; David Mihalyi banks and others for help, hoping for a miracle. If so, that will tend to lavish education on their smaller prolong the pain. Around the middle of the broods. Before covid-19 hit, Africa was in decade a wall of commercial-debt repay- the middle of a demographic transition. 2 hard to get out of these holes. It will be es- ments looms. Girls were going to school for longer. Wolf- pecially difficult in countries that have Africa’s fiscal woes could cause long- gang Lutz of the Wittgenstein Centre for more dollar-denominated debt to pay back term harm. When revenues are tight “the Demography and Global Human Capital in than they have dollar reserves. In January first thing to go is the development bud- Vienna predicted that this would soon Moody’s, a credit-rating agency, highlight- get,” says Benno Ndulu, a former governor translate into smaller families. That be- ed the risks faced this year by Zambia, Gha- of Tanzania’s central bank. More than half nign shift is at risk if the pandemic disrupts na and Ethiopia, in particular. The latter of African countries cut capital spending too many young girls’ schooling. two were among the world’s fastest-grow- last year—a big worry when roads are dire, So the stakes are high. By damaging ing economies over the past five years. Yet ports are bottlenecks and more than half of their health, wealth and education, co- all three face trouble paying their foreign Africans still do not have electricity. vid-19 endangers the future of Africa’s larg- bills—in Ethiopia’s case, aggravated by war. The damage caused by the widespread est-ever generation. On the plus side, vac- The picture for the two biggest econo- closure of schools may be even worse. This cine roll-outs may accelerate once rich mies is slightly different. Nigeria’s debts can be glimpsed in Korogocho, a slum in nations have inoculated most of their peo- are relatively low, but an acute lack of for- Nairobi. Outside 13-year-old Grace Emi- ple. Commodity prices may rise again as eign currency—and a graft-ridden regime loyo’s house, the peak of a dump site towers the global economy recovers. Investors’ ap- of multiple official exchange rates—is over residents. Every morning, instead of petite for risk may be big enough to enable pushing inflation up and risks provoking a going to school as she did before the pan- African governments to keep borrowing. balance-of-payments crisis. demic, Ms Emiloyo wakes up, prays, then But the weight of evidence points to- In South Africa most government debt braves her way through the stench and wards further waves of the virus hitting be- is owed in rand to local borrowers. But debt men’s catcalls to the dump’s summit where leaguered health systems, adding to an service is nevertheless swallowing an ever- she collects plastics and metals to sell. economic “long covid” across Africa. larger share of government revenues: 40% Last year Kenya closed classrooms for Though some economies are well placed to by the end of the decade, according to the nine months. Ms Emiloyo and her ten- rally as the pandemic fades, more of them, country’s treasury. year-old brother, Nurdeen Tawfiq, are including the biggest, will struggle to re- Talk of debt crises in Africa can provoke among the 40% of students in Korogocho cover. Africans have shown remarkable re- a sense of déjà vu. Two decades ago 30 Afri- who have not gone back to their books. Ms silience in response to the virus. But the can countries had big chunks of their Emiloyo’s mother, Maureen Kasandi, pre- toughest years are yet to come. 7 sovereign debt forgiven. This time around, viously made a living going door-to-door to things are more complicated. They owe clean people’s houses. But during the pan- large sums to commercial creditors demic many families opted for live-in (roughly 43% of all government debt) and housekeepers for fear of infection. Nobody to China’s government (16%), not just to could take care of Ms Kasandi’s children if rich governments and multilateral lenders. she went away to work, so she has sent the The rest of the world is offering support. older ones out to make money. Last year the imf provided $16bn in loans, When children drop out of school to mostly with few strings attached, to help work, it helps families put ugali (a starchy African countries respond to the pandemic staple) on the table in the short term. But it and prevent liquidity crises. The World blights those children’s future prospects. Bank disbursed another $10bn. But most Without education, they will struggle to es- countries will soon exhaust their emergen- cape from a life of drudgery. cy allocations. And the Washington-based Similar stories are playing out else- lenders’ pockets are not bottomless. where across the continent. Almost all of The g20, a group of the world’s largest Africa’s 253m pupils live in countries that economies, has helped poor countries put at some point closed schools. About seven off debt repayments until July. Yet this is months of closures could cost African chil- just “kicking the can down the road”, says dren $500bn in lifetime earnings, warns Mr Zeufack. This is the year, says Mr Ofori- the World Bank. Atta, to “sit down with the West and China The effects could last more than a gen- for a much more comprehensive debt- eration. Most of the dropouts will be girls, restructuring and debt-cancellation pro- since many families favour sons when they Light in the lockdown The Economist February 6th 2021 Middle East & Africa 39

Algeria’s car shortage Broken-down country

CAIRO Why Algerians cannot hitch a ride n most places a new car is a bad store of Ivalue. Its resale price plummets the moment it is driven out of the dealership. But not in Algeria. Hassan Houicha has been getting offers to buy his Volkswagen for the same sum he paid for it in 2013. Still, he re- fuses to sell. “What if I can’t find another car?” he says. Algeria has a problem. It does not produce cars. Yet, in an effort to keep hard currency in the country, it banned car imports Israeli politics in 2016. To no one’s surprise, this caused a shortage. Such shoddy policies are typical A sea of trouble of how the government is handling a stub- born current-account deficit and resulting hard-cash crunch (see chart). Its capricious actions increase volatility in a country that toppled its autocrat in an uprising two years ago, and where the economy shrank JERUSALEM by 5.5% in 2020. Will his alliance with the ultra-Orthodox doom Binyamin Netanyahu? Over 90% of Algeria’s foreign-currency e was hardly a household name, but of the new cases. receipts come from oil and gas exports. But Hthe funeral of Rabbi Meshulam Dovid In a recent poll, 61% of Israelis said they receipts have been on a downward trajec- Soloveitchik on January 31st may prove a did not want ultra-Orthodox parties in the tory for years. (A slump in energy demand turning-point in Israel’s election cam- next government. Many voters believe Mr because of the pandemic has not helped.) paign. The event drew some 20,000 ultra- Lapid is the only contender who would de- Meanwhile, over the past decade Algeria Orthodox mourners, in defiance of a na- finitely leave them out. His own party, Yesh has spent more than 28% of its gdp each tionwide lockdown to combat covid-19 (see Atid, has moved up to second, behind Mr year on imports. As a result, its foreign re- picture). “It’s wrong to break the lockdown, Netanyahu’s Likud, in the polls. The vote is serves have fallen from almost $200bn in but when a man like this passes, there is an on March 23rd. “I don’t want my campaign 2014 to under $50bn today. Economists say uncontrollable urge to demonstrate our re- to focus on [ultra-Orthodox] against secu- they could run out in two years. spect for the life he led,” says Chaim Wal- lar,” says Mr Lapid. “It’s about a return to So the country has been trying to spend der, an ultra-Orthodox writer. normalcy versus a sense of chaos, which is less hard cash. It significantly cut its im- For more secular Israelis, the funeral what most Israelis are now feeling.” port bill in 2020. Sonatrach, the state ener- was yet another reminder of the govern- Mr Lapid, a former television talk-show gy firm, which does much of its business in ment’s failure to enforce covid-related re- host, created Yesh Atid in 2012. He served as foreign currency, has been told to slash strictions on the ultra-Orthodox, who are Mr Netanyahu’s finance minister from 2013 spending for this year by half. The govern- 12% of the population. The devout contin- to 2014. But for years he was seen as lacking ment has levied tariffs of up to 200% on ue to pray in packed synagogues and hold the experience and gravitas to be prime everything from chocolate to mobile 1 big weddings. Some ultra-Orthodox minister. He seemed to acknowledge that schools and yeshivas remain open, despite in 2019, when he teamed up with Benny all other schools being closed. Many of Gantz to create the Blue and White list of Dollars and deficits those angry about the disparity have candidates—led by Mr Gantz. It battled to a Algeria blamed Binyamin Netanyahu, the prime virtual draw with Likud in an election last minister, and thrown their support behind year, but split after Mr Gantz broke his pro- Current-account Foreign-exchange the party of Yair Lapid, a secularist. mise not to serve under Mr Netanyahu, balance, $bn reserves, $bn Mr Netanyahu’s coalition relies on the who faces charges of bribery and fraud. 20 200 backing of two ultra-Orthodox parties, so Early in this campaign it seemed as if 10 he goes easy on the group. “There are gath- the main threat to Mr Netanyahu would 150 erings on all sides, in all communities,” he come from his right. A former ally, Gideon 0 said after the funeral. The prime minister Sa’ar, formed a party for disgruntled Likud- 100 would rather talk about how Israel leads niks. But Mr Sa’ar is also wary of antagonis- -10 the world in vaccination per person. Over a ing the ultra-Orthodox, whom he would 50 -20 third of the population have been jabbed. like to draw away from Mr Netanyahu. Mr Still, covid-19 cases and deaths have been Lapid is better placed to capitalise on the -30 0 rising. The main reason appears to be the prevailing mood—and, perhaps, to put to- 20152010 20152010 arrival of a more infectious variant. But the gether a coalition that does not include Li- Sources: IMF; Refinitiv Datastream ultra-Orthodox account for nearly a quarter kud or the ultra-Orthodox parties. 7 40 Middle East & Africa The Economist February 6th 2021

2 phones. In January it suspended the import Honour killings of red meat. Two weeks earlier, President Abdelmadjid Tebboune sacked the trans- Murder, plain and simple port minister and the boss of Air Algeria, the national carrier, for using hard currency to buy catering supplies. The ban on foreign cars, though, has proved more controversial. Last year Fer- hat Ait Ali, the minister of industry, said Male-dominated governments are doing little to end the killing of women they were “not a priority”. But growing public anger over the shortage has prompted uwait’s national assembly is so row- range hideouts for women in danger. Mr Ali to change tack. In January he said Kdy that debates sometimes descend There has been some progress. Several that $2bn would be allocated for car im- into fisticuffs. But on one issue, at least, the governments have passed laws against do- ports by vetted dealerships. The allocation mps have little to say. Sheikha al-Ajmi, a mestic violence and abolished ones that al- is meant to cover everything from passen- parliamentary employee, was killed by her lowed rapists to dodge prosecution by mar- ger cars to commercial trucks. “They are brother in December. Some say he didn’t rying their victims. Jordan, which used to trying to avoid another uprising,” says Zine like her working as a security guard; others put women seeking refuge in jail, opened Ghebouli, an analyst. “But at a certain point say he was angry that she wanted to marry its first shelter for women in 2018. But only people will recognise that $2bn is not outside their clan. The chamber offered no Lebanon, Tunisia and the Palestinian Au- enough.” The car-import bill in 2013, when condolences. mps may have feared the thority have abolished laws that treat hon- there were no restrictions, topped $6bn. wrath of her tribe. Some probably ap- our crimes leniently. In November the Un- Algeria has long tried to diversify away proved. “They think what happens at ited Arab Emirates said it had, too, though from energy, build up manufacturing and home, even murder, is a private matter,” it has yet to publish the provisions. reduce its reliance on imports. After ban- says Nour AlMukhled, a Kuwaiti activist. Critics dismiss the measures as lip ser- ning car imports in 2016 it set up partner- No country in the Middle East and north vice. Enforcement by judges, officials and ships between foreign producers and Alge- Africa releases an official count of “honour police—mostly men—is patchy, they say. rian businessmen with the aim of assemb- killings”, which typically involve men Local authorities sometimes register hon- ling cars locally. The government hoped to murdering female relatives for actions our killings as suicides or disappearances. create a motor industry as hefty as that of they consider immoral. Activists say such The legal system is superseded by tribal Morocco, Algeria’s neighbour, which ships killings are still common in the region, de- codes in some areas. And rulers find it easi- cars to Europe and across Africa. spite years of campaigning against them. er to stop peaceful female activists than Algeria’s plan drew foreign partners Most states treat them more lightly than murderous men. When women in Saudi such as Renault, Volkswagen, Hyundai and other forms of murder. Take Kuwait, where Arabia tried to register a charity to set up Kia. The partnerships were given free land a man who catches his wife committing shelters in large cities, Muhammad bin Sal- and subsidised energy for their plants, and adultery or a female relative in the pres- man, the crown prince, had them jailed. breaks on taxes and custom duties. In re- ence of a man and kills her (or him) faces at Arab opinion is difficult to gauge be- turn, they were required gradually to in- most three years in prison for what is con- cause polling is forbidden in many places. crease their use of local materials. But sidered a mere misdemeanour. But in 2018 and 2019 a survey of six coun- building a local supply chain is difficult in Activists have tried to shame leaders tries in the region (and in the Palestinians’ a country with no history of carmaking. into changing such laws. Abolish 153, a West Bank) by Arab Barometer, a pollster, Critics say the new plants used more for- group in Kuwait, aims to get rid of Article found that more people thought honour eign parts than they were supposed to, and 153 of the penal code, which sets out the lax killings were acceptable than thought so of the cars they produced cost more than the punishments for honour killings. Last homosexuality. In most places, young Ar- imported cars they replaced, while still eat- summer the hashtag #Ahlam’s_Screams abs were more likely than their parents to ing up hard currency. trended in Jordan after a man was filmed in condone honour killing (see chart). Algerians saw it as yet another example public using a brick to smash the skull of The results are reflected on the Arab of regime insiders lining their pockets at his daughter, Ahlam. (He then sat down street and on social media, where oppo- the public’s expense, a defining feature of next to her body, drank tea and waited for nents of honour killings are accused of pro- President Abdelaziz Bouteflika’s rule. Since the police to arrive.) Elsewhere, groups ar- moting adultery and Western norms. A he was pushed out in 2019, there has been year ago thousands of protesters rallied in some accountability. On January 28th a Hebron, the West Bank’s largest city, after court upheld prison sentences for two for- To their shame the Palestinian Authority signed the un’s mer prime ministers convicted of award- Respondents who consider honour killings Convention on the Elimination of All ing contracts to cronies and costing the to be “acceptable”, by age group, 2019, % of total Forms of Discrimination Against Women. state hundreds of millions of dollars. Two 18-34 35 and over Worse, the scope of what is deemed a former industry ministers and several punishable breach of honour is widening. businessmen have also received jail time. 0 5210 15 20 530 35 In the past year women have been mur- Still, Algerians complain that the old Jordan dered for such offences as wearing elite remains in charge—and the people Algeria make-up and chatting online. Last month a still need cars. The assembly plants had Saudi woman was killed by her brothers for their import licences revoked and were Morocco having a Snapchat account. (When her sis- closed. The government says it is seeking Lebanon ter wrote on social media that her body had to establish new partnerships between for- been dumped in the desert, the police de- West Bank eign firms and local businessmen, and that tained her.) More generally, during lock- this time it will ensure that more produc- Tunisia downs to contain covid-19, violence tion happens locally. But no new deals have Sudan against women has increased. “No woman been announced. And Algeria is still run- feels safe,” says Ms AlMukhled. “Men are Source: Arab Barometer ning out of cash. 7 getting away with murder.” 7 Europe The Economist February 6th 2021 41

Also in this section 42 Russia jails Alexei Navalny 43 Nord Stream 2 limps on 43 Sweden’s lonely ﬁlm festival 44 Charlemagne: The vaccines blame game

Italy on how to spend more than €200bn ($240bn, or 4.3% of gdp) in grants and Send in the technocrats, again loans from the eu’s recovery fund; the grants alone are more than half what in real terms it got from the Marshall Plan after the second world war. Other member states want it to use the money in a way that re- verses two decades of dismally low growth ROME that has threatened the stability of the eu’s Mario Draghi is summoned to form a government single currency. Few are better equipped to n certain countries, when the politi- shrank by 8% to just over 100 basis points. tackle the economic challenge than “Super Icians are considered to have failed, it is The reaction was understandable. As Mr Mario”, the man whose decisive action time for an unsmiling general to appear on Draghi noted, with bankerly understate- saved the euro in 2012. television to announce he has seized pow- ment, Italy faces a difficult moment. Not The outcome of the crisis that erupted er. In Italy, the procedure is more benign: a only is it in the midst of a pandemic; in when Mr Conte resigned on January 26th man in a well-cut suit, usually one with a March, a ban on firings is due to be lifted, represents a triumph for Mr Renzi, himself successful career as a central banker be- unleashing a wave of job losses. And by the a former prime minister. He has brought hind him, is called to the presidential pal- end of April, the government has to agree down a coalition whose policies, including ace to get the nod. its plans for the allocation of the eu’s On February 3rd just such a man, Mario funds, he increasingly deplored. He has Draghi, arrived at the palace on the Quiri- Who needs politicians? unseated a popular prime minister who nal hill to be asked by the president, Sergio Italy, prime ministers, 1993-2021 threatened to challenge him in the middle Mattarella, to head a new government. Mr ground of politics. And both outcomes Politician Mario Draghi* Draghi accepted, conditional on the sup- Technocrat Giuseppe Conte have been achieved without an election port of a parliamentary majority. Mr Matta- Paolo Gentiloni that could have destroyed Mr Renzi’s tiny rella called in the former boss of the Euro- Matteo Renzi party. Italia Viva had enough seats in par- pean Central Bank after Matteo Renzi’s Enrico Letta liament to have been crucial to Mr Conte’s Italia Viva group torpedoed hopes of a deal Mario Monti majority, but polls suggest it now has the Giuliano Amato between the parties that had supported the Massimo D’Alema support of less than 3% of the electorate. outgoing prime minister, Giuseppe Conte, Romano Prodi Mr Renzi’s victory was scarcely a win for and his left-leaning coalition. Lamberto Dini Italian democracy, however. Something is Markets rejoiced. The Milan bourse Silvio Berlusconi wrong in a country where a party as tiny as leapt nearly 3% at the opening. The yield Carlo Azeglio Ciampi (Republic’s first technocratic PM) his can oust a government, let alone one gap between Italian and German govern- 1993 2000 21151005 that has had as frequent recourse as Italy in ment bonds, which widens as doubts grow the past 30 years to political outsiders. Source: The Economist *Not yet confirmed by parliament about Italy’s ability to repay its vast debts, The first was Carlo Azeglio Ciampi—like1 42 Europe The Economist February 6th 2021

2 Mr Draghi, a former governor of the Bank of Russia [Mr Putin] by surviving. And then I com- Italy. Mr Ciampi took office in 1993 as the mitted an even more serious offence: I country’s post-war order, dominated by A mockery of didn’t run and hide.” Worse still, Mr Na- Christian Democrats and Communists, valny had revealed that Russia’s Federal Se- was falling apart. He remained at the helm justice curity Service (fsb) had smeared his under- until an election the following year. But pants with Novichok, a toxin. Mr Putin after the winner of that election, Silvio Ber- would go down in history not as a global lusconi, was ousted in 1995, another Bank MOSCOW statesman but as “Vladimir the Underpants The sentencing of Alexei Navalny to of Italy alumnus, Lamberto Dini, was Poisoner”, said Mr Navalny. His speech, prison may yet weaken Vladimir Putin tapped to head a government composed blanked out by state television, was broad- mostly of technocrats like himself. The udging by the security measures, you cast by tv Rain, an independent internet country’s next existential trauma, an effect Jwould have thought Moscow was experi- channel, and watched by nearly 9m people and a cause of the wider euro crisis, wafted encing a terrorist attack. Police in riot gear on YouTube. Within minutes of the sen- a former European commissioner, Mario surrounded the capital’s main court and tencing, Mr Navalny’s team had called peo- Monti, to power in 2011. Then, after the 2018 blocked the approaches. Muscovites sus- ple out onto the streets. elections, when the leaders of the hard- pected of being protesters were whisked Taking no chances, riot police closed right Northern League and the anti-estab- away and bundled into police vans. By metro stations and took over the main lishment Five Star Movement (m5s) were lunchtime 350 people, including journal- squares and crossroads. Videos that spread unable to agree on who should get the top ists, had been detained, adding to nearly instantly on social media showed small job, they gave it to Mr Conte, an obscure law 2,000 arrested during protests two days groups of mostly young and peaceful Mus- professor. He survived to lead a second earlier. Jails and detention centres filled up covites walking through the centre chant- government that yoked the m5s to the cen- so fast that many demonstrators were held ing “Navalny” and being shoved into side tre-left Democratic Party (pd). in police vans in freezing temperatures streets where they were beaten. The alternative to a technocratic prime without food or water for up to 40 hours. The poisoning of Mr Navalny made it minister, and the normal response in most The reason for the mass arrests was clear that the fsb, rather than the civilian democracies, is the ballot box. Mr Matta- Alexei Navalny, Russia’s opposition leader, technocrats who were once responsible for rella argued, with some justification, that who had returned last month from Ger- domestic politics, are now dominant, says the challenges facing Italy are too urgent to many, where he had been treated for poi- Alexei Venediktov of Echo Moskvy, an inde- allow for an early vote. But, in doing so, he soning, ordered, he says, by President pendent radio station. “They describe Na- highlighted another shortcoming: Italy’s Vladimir Putin himself. On February 2nd valny as ‘the engine’ and ‘the banner’ of the cumbersome procedures for transferring Mr Navalny was put in a glass cage inside protest movement.” Locking him up will power. The president recalled that it had the Moscow court and sentenced to nearly disable the engine, they reckon. taken five months to install a government three years in prison. This converted the They also plan to sully the banner by in 2018 and four months in 2013. original, suspended, sentence handed portraying Mr Navalny as a foreign agent Mr Mattarella says he wants a high-pro- down in 2014 into a trumped-up case de- planted by the West to overthrow Mr Pu- file administration that “ought not be iden- signed to stop him from standing for elec- tin’s regime. They cite the protests by tified with any one political formula”. That tion. The European Court of Human Rights democratic countries, including America, does not necessarily mean the next cabinet in Strasbourg had previously exonerated Britain and Germany, and the attendance should be purely technocratic. Italy’s non- him of that charge and made Russia pay of their ambassadors at Mr Navalny’s sen- party prime ministers have not all headed him compensation. tencing, as proof of its determination to non-party governments: Mr Ciampi’s cabi- The latest proceeding was a mockery of hobble Russia. Mr Navalny’s call for sanc- net and Mr Conte’s two governments were the law. Mr Navalny denounced it as “one tions against Mr Putin’s friends could bring made up of politicians. man’s hatred and fear…I mortally offended a new charge of treason that carries a sen- All, however, have suffered from two tence of up to 20 years. Prosecutors are also shared weaknesses. Their leaders have working on a new fraud case, alleging that been new to the roughhouse of Italian do- Mr Navalny has stolen donations to his mestic politics. And, however technocrat- own anti-corruption foundation. ic, they have depended for their survival on Yet by unleashing violence against the goodwill of politicians in what are of- peaceful protesters, the Kremlin is helping ten ill-assorted parliamentary coalitions. Mr Navalny in his main task: undermining The first signs were that Mr Draghi Mr Putin’s legitimacy. The president is could win the support of Italia Viva, the pd clearly rattled by Mr Navalny’s bold return and Mr Berlusconi’s Forza Italia, but that he and his explosive two-hour video, which faced opposition from the m5s and from was watched by 100m people, showing a the two most radical groups in parliament: vast secret palace allegedly belonging to Mr the Free and Equal party on the left and the Putin. The president is now trusted by only Brothers of Italy on the right. It was unclear 29% of the population, says a recent poll by whether the League would back him ex- the Levada Centre, a fall of 20 percentage plicitly, or implicitly by means of absten- points since he was re-elected in 2018. For tion. But Mr Draghi risks finding himself this, blame corruption, a stagnant econ- dependent on the support of two parties, omy and a shift in media consumption. Mr the pd and the League, with fundamentally Putin dominates state tv. But most Rus- different ideas on how best to govern Italy. sians under the age of 40 get their news and It is a problem with which his technocratic views from the internet, where Mr Navalny predecessors became wearily familiar and is strong. The Kremlin would like his sen- one that helps to explain the brevity of tencing to display its limitless power. In their governments. On average they lasted fact it, enhances Mr Navalny’s moral stat- for a year and four months. 7 The Kremlin tries to win hearts and minds ure at Mr Putin’s expense. 7 The Economist February 6th 2021 Europe 43

Nord Stream 2 Gas-pipeline routes design standards, “cannot be simply trans- 500 km Nord Stream ferred to some murky Russian company.” Running out of Nord Stream 2 What now? The aggressive sanctions Selected others policy of the Trump administration unset- NORWAY gas? FINLAND tled even stalwart foes of Nord Stream 2 in SWEDEN Europe. Joe Biden is keen to rebuild Ameri- St Petersburg ca’s tattered alliances, but his team also op- BERLIN Baltic poses the pipeline. Optimists think the Germany won’t kill Nord Stream 2. Sea ESTONIA DENMARK most recent sanctions legislation could of- Americans sanctions might RUSSIA Bornholm LATVIA fer a way out. The sanctions are mandatory, n the chill waters off Bornholm, a Dan- limiting the White House’s room for (Under LITH. Moscow Iish island in the Baltic sea, a complex construction) manoeuvre. But as Dan Fried, a sanctions game of cat-and-mouse is playing out. A Mecklenburg co-ordinator at the State Department in the West-Pomerania BELARUS flotilla of Russian boats is rushing to com- GERMANY Obama administration, notes, the text also plete the construction of Nord Stream 2, a lowers the bar for the president to waive 1,230km (765-mile) gas pipeline that would POLAND the sanctions. “It’s a hint that Congress double capacity from Russia to Germany. UKRAINE A wants a deal,” he says. Mr Biden’s team has Less than 150km of it remains to be built. indicated that it is open to suggestions. Meanwhile, the American government, to rise. On January 19th the American gov- What might a deal look like? One idea is armed with sanctions legislation, is pick- ernment made good on its threats for the an automatic mechanism to impose sanc- ing off companies it suspects of involve- first time, slapping sanctions on Fortuna, a tions on Gazprom should the Kremlin re- ment. As the saga enters its endgame, the Russian vessel repurposed for pipe-laying. nege on a deal brokered by Mrs Merkel in pipeline’s fate may depend on the outcome A few weeks earlier Congress passed an 2019 to keep gas flowing across Ukraine. of this race. amendment to a different sanctions law, This could form part of a grand bargain in Nord Stream 2 has inspired criticism passed in 2019. By radically expanding the which America drops its sanctions in ex- ever since 2015, when Gazprom, Russia’s set of companies now exposed to American change for German commitments to bol- state-backed gas giant, and five European action to include insurers, certifiers and ster energy- and other forms of security in energy firms formed a consortium to lay a any entity supporting “pipe-laying activi- eastern Europe. But Germany would need new pipeline costing €9.5bn ($11bn) next to ties”, the new law is a “game-changer”, says not only to signal interest in such ideas, but an existing one along the Baltic seabed. Mateusz Kubiak of Esperis, a Polish consul- to pause support for the pipe. And officials American opposition, grounded in con- tancy. Russian assets may eventually be in Berlin fear hardliners in Congress may cerns that the new pipe will expand the able to finish the pipe-laying, he says. But tie Mr Biden’s hands. The diplomatic stale- Kremlin’s influence, is bipartisan. Eastern certification, a technical exercise to show mate, then, may drag on. Meanwhile, the Europeans, as well as France, fear growing the pipeline meets international safety and delicate dance in the Baltic continues. 7 dependence on Russian energy—and de- priving Ukraine, from which Russia has Sweden gobbled territory, of transit fees from an existing land pipeline. Attitudes in Brussels range from concern to bitter opposition. Solitary cinema Germans who value these opinions wonder why their politicians insist on A Swedish film festival has just one attendee ploughing ahead in splendid isolation. Yet Angela Merkel’s government has long hen the Goteborg Film Festival keeping with how millions have watched sought to insulate the pipeline from dip- Woffered the chance for a film fan to movies of late. And like the lighthouse lomatic rows. Challenged after the recent spend seven days alone on an island, that towers over the island, streamed and detention in Moscow of Alexei Navalny, a with only 60 films for company, the downloaded films shine a ray of hope. Russian dissident, Mrs Merkel said she had organisers weren’t sure if anyone would Still, some films are not meant to be not changed her mind on the pipeline. To want to apply. The pandemic has been watched alone. By day three, Ms Enroth circumvent American sanctions, the gov- isolating enough, even for Swedes, who was already rueing her lack of friends ernment of Mecklenburg-West Pomerania, have yet to lock down like other Euro- and wine. “I should have had someone a rural German state where the pipeline peans. The lucky winner would not be there to cling onto,” she said in a video makes landfall, has set up a foundation, able to bring a phone or contact friends diary after watching “The Macaluso funded mainly by Gazprom, to mediate be- and family during a week of stormy seas Sisters”, a tragic Italian drama. She con- tween Nord Stream 2 and private contrac- and dark Swedish winter. No one was fessed to having “started talking to the tors—in the name, risibly, of “climate pro- expecting that the festival would get over stove”. It is easy to understand how she tection”. (Genuine greens are appalled.) 12,000 applications from 45 countries. feels, alone on a rocky outpost. Yet such Yet not only does that ploy look The chosen castaway, a pink-haired sentiments have long been common all doomed, America’s dogged efforts to kill Swedish nurse called Lisa Enroth, has over Sweden. Half of Swedish house- the pipe are bearing fruit. Congress has been on Hamneskar island, 37km north- holds are single-person ones. passed two sets of sanctions aimed at it. In west of Gothenburg (as it is spelt in Eng- When lighthouse-keepers first came December 2019 the mere threat forced All- lish), since January 31st. Sending her by to Hamneskar, no one thought they seas, a Swiss undersea construction firm, boat to an “isolated cinema” was the best could survive long in such desolation. to pull its vessels from the project, halting way to carry on the festival this year, says Ms Enroth’s prospects are rosier. A psy- construction for a year and costing Gaz- its chief organiser, Mirja Wester. A single chiatrist is on standby in case she starts prom a fortune. Many other international person watching films cannot spread the to struggle. And for an emergency nurse companies have been scared off. virus (unlike the160,000 at last year’s whose energy has been drained by the Russian ships eventually restarted event). The solitary experience is also in pandemic, solitude may even be a relief. work in December. But the heat continues 44 Europe The Economist February 6th 2021 Charlemagne Looking for someone to blame

When something goes wrong in the eu, responsibility is passed around deals, were tasked with dealing with makers of novel pharmaceu- ticals. Reshuffling institutional responsibilities while in the middle of a crisis is risky, yet surprisingly normal in the eu. The job of overseeing a project costing €2.7bn ($3.35bn) to vaccinate 450m people was handed to a department whose main previous concern was food labelling—all at the behest of national capitals. Mrs von der Leyen’s clumsy handling of the crisis casts the spotlight on the national leaders who gave her the job in the first place. Picking the European Commission president is not a meritocratic process. Mrs von der Leyen, who was having a rough patch as German defence minister at the time, ended up with the job because she raised the fewest objections, rather than due to wild support among leaders. Convenience trumps track records when it comes to divvying out top jobs in the eu. (And explains why three of the past four prime ministers of Luxembourg—a country of 600,000—have led the commission, among the biggest roles in Europe.) Ultimately, the last thing the eu’s 27 heads of government want is someone with too much ambition or political star power in the role. After all, the eu’s treaties are littered with unused tools that could reshape the continent in the hands of someone with the right mix of political nous and ambition. By contrast, Mrs von der Leyen’s main qualification for the job was an expectation that she t the end of December, a smiling Ursula von der Leyen ap- would do what she was told by her main backers, who include Em- Apeared in front of a camera to hail the beginning of the eu’s manuel Macron, the French president, and Angela Merkel, her for- vaccination programme. The president of the European Commis- mer boss. After the past few weeks’ performance, leaders may wish sion boasted that from Sofia to Helsinki Europeans were being they had opted for other qualities. jabbed with drugs bought collectively and then divvied up by the commission. It was, she beamed, “a touching moment of unity and In the eu, no one can hear you scream a European success story”. A month later, the smiles have van- When it comes to complaining about the eu’s management, ave- ished. The eu has vaccinated a much smaller proportion of its peo- nues of dissent are limited. A typical government has opposition ple than America, Britain or Israel has done. The programme has parties waiting on the sidelines, loudly explaining why it is bad been dogged by a lack of doses and clunky roll-outs. Supply pro- and why they would do much better. In Brussels, there is no such blems hit when AstraZeneca, an Anglo-Swedish drug firm, warned public political competition. The commission can be kicked out if that it would provide less than half of the 80m doses it had pledged meps so choose, but the European Parliament—the main demo- to the eu in the first quarter of the year. A touching moment has be- cratic organ of the eu—is weak. Schemes to turn the club into come a tortuous one and the blame game has begun. Where does something resembling a parliamentary democracy, with the com- the responsibility lie? mission president chosen on the basis of election results, were Start with the body Mrs von der Leyen heads: the commission. shelved in favour of the private haggling between leaders that re- It took months to sign contracts for covid-19 vaccines, something sulted in Mrs von der Leyen’s selection. Lawmakers spinelessly that could have been done in weeks. Shrugging off liability—en- played along. The result is that opposition is left to fringe parties suring that the drug firms were on the hook should anything go with the teleological belief that the eu will, at some point, im- wrong—was prioritised over speedy delivery. The row with Astra- plode. Attacks on the current management are cast as opposition Zeneca was badly handled. In a mix of institutional panic and fury, to the whole project, argues Hans Kundnani of Chatham House, a Mrs von der Leyen demanded export controls on any vaccines think-tank in London. This makes for an unhealthy political scene, heading out of the eu. This threat of a blockade led to concern from where criticism is regarded as illegitimate, and anything short of Tokyo to Ottawa, rather undermining the eu’s claim to be the outright collapse is seen as vindication. doughtiest defender of the rules-based trading system. A plan to And thus, complaints about the vaccination programme have block exports to Northern Ireland using a mechanism in the Brexit been overridden. Rather than apologising to voters for the fact that deal that is widely seen as a nuclear option was revealed and then European pensioners are less protected than American, British or dropped via a midnight press release. To cap it all, while trying to Israeli ones, the eu reminds them that things could be much apologise for blundering into Northern Ireland’s conflict between worse. In this telling, purchasing collectively has enabled eu Protestants and Catholics, the commission’s spokesman uttered a countries to avoid fighting each other over scarce supplies. Other world-class gaffe: “Only the pope is infallible.” countries took risks by more quickly approving the very drugs that But no one forced national governments to put the commission will be injected into European arms, runs another defence. A noble in charge. Legally, eu institutions have barely any responsibility intention is, apparently, enough to forgive faulty execution. Mrs for the health care of the continent’s citizens, which is left to na- Merkel summed up this attitude on the vaccine roll-out in an in- tional governments. Rather than deal with the tricky politics of terview: “On the whole, nothing went wrong.” When it comes to some eu countries buying more vaccines than others, govern- the eu, voters are left in a no-man’s land, unsure how to air their ments outsourced the job to the commission. Commission negoti- anger, where to aim it or even if they should be upset at all. For a ators, used to arguing over simpler things like beef quotas in trade democratic club, this is not a healthy place to be. 7 Britain The Economist February 6th 2021 45

Also in this section 46 Captain Sir Tom Moore 47 Bagehot: Boris rides high

Brexit able—but the trend is unmistakable. There are some small upsides to Brexit. The view from the City New immigration rules that make it harder for firms to recruit low-paid Europeans also make it easier for them to hire highly- paid people from anywhere in the world. Brexit has prompted fresh thoughts about regulation. A review of the British listing The price of access to the eu for financial services is likely to be high, regime, for instance, which Lord Hill, a for- and the industry is divided over whether Britain should pay it mer European Commissioner, is doing, n the final weeks before Britain struck the financial crisis and a belief among poli- may make London a more attractive desti- Iits Christmas Eve trade agreement with ticians that the City can look after itself— nation for Asian firms seeking to raise cap- the European Union, Boris Johnson em- are obscure, but the consequences are ital. “We could have done 80% of the sug- ployed a euphemism for a no-deal out- clear. Between the Brexit referendum in gested changes while in the eu, but it didn’t come: he called it an “Australian-style” re- June 2016 and the end of the transition per- feel so pressing,” says a banker. lationship. The agreement was sealed, to iod at the 2020, around 7,500 jobs—5% of The main question now is whether the the relief of Britain’s manufacturing sector, financial-services employment—and over eu will grant Britain further “equiva- but for financial services—the country’s £1.2trn ($1.6trn) of assets moved from Brit- lences”. The designation is a poor substi- core competence and dominant industry, ain to European financial centres accord- tute for the “passporting” rights which en- which makes up 7% of its gdp—the out- ing to ey, a professional-services firm. That titled British firms to trade freely all over come was sub-Australian. The eu recog- may be an underestimate, as ey tracked the eu. Equivalence covers fewer market nises Australian rules as broadly equiva- only larger firms; and more may go. Under functions and can be withdrawn with 30 lent to its own in 17 different areas, “target operating models” agreed with days’ notice. As the eu has demonstrated in compared with only two for Britain. It is European regulators, many firms have its dealings with Switzerland—the right for now easier to sell many financial products promised to shift more jobs to the conti- Swiss-listed shares to be traded on Euro- to clients in the eu from 10,000 miles away nent by the end of 2021. pean exchanges was suddenly withdrawn in Sydney than from across the Channel. Recruitment data suggest that Brexit in 2014—equivalence can be used for polit- “You just can’t imagine the Germans may not just be sending work abroad but ical leverage. But it is the only form of mar- throwing the car industry under the bus also discouraging growth in Britain. Even ket access on offer to Britain. like that,” laments a British asset manager. before the pandemic, the number of vacan- In November, Britain granted the eu a The causes of the government’s neglect cies posted for jobs in British-based finan- wide range of equivalences. Hoping to get of the financial-services sector—which cial-services firms was falling swiftly, ac- the same in return, the Treasury filled out probably include a general hostility to cording to Morgan McKinley, a head- some 2,500 pages of questions on the Brit- bankers, fury at the generous application hunting firm (see chart on next page). The ish regulatory regime, an exercise which an of taxpayers’ money to the industry after figures are gross—net figures are unavail- official derides as “especially pointless giv-1 46 Britain The Economist February 6th 2021

work for regulating them. Many want it Pointing in the wrong direction dropped, and the sector deregulated by, for instance, lowering authorisation require- Britain, new financial-services jobs, ’000 Financial activity, by region, selected metrics, 2018, % ments and dropping disclosure rules. But 25 Britain while such a step would go down well in United States Asia Pacific pricey Mayfair eateries, those who dine in EU27 Rest of world 20 marginally less expensive City restaurants 100806040200 fear it would invite retaliation from Europe 15 Derivatives trading and thus make their lives more difficult. The hedge funds are not alone in want- FX trading 10 ing divergence. Many in the insurance in- Assets under dustry believe that a review of the Solvency 5 management by location II regulatory regime focusing on the needs Investment funds by of British firms could lead to some margin- domicile 0 al improvements. Smaller challenger Average* banks hope that Britain can tweak the pru- 2017 18 19 20 dential framework to suit them better. Sources: Morgan McKinley; European Fund and Asset Management Association; European Central Bank; Dealogic *Of 22 metrics For sectors such as manufacturing and agriculture, Britain must choose whether 2 en they know what our regime is. It’s their cated, opinion is heavily in favour of di- to align with European or American regula- regime.” But so far the eu has granted Brit- vergence. Hedge fund managers’ views, tions. In financial services it has more ain only time-limited equivalence for shaped by a fast-moving world in which clout. The eu without Britain is not a huge clearing Irish securities and the operation regulation is often a drag on innovation, force in finance (see chart). Its share of the of central clearing counterparties. Negotia- tend to be more eurosceptic than those of overall business has fallen from a fifth to tions are continuing, and the Treasury is the bosses of global firms located in the 13% as a result of Brexit, compared with keen for a deal, but the eu does not seem to City and Canary Wharf. While most City Britain’s 8% share. In many areas, Britain’s be in a hurry. A March deadline already figures wanted Britain to remain in the eu, share is bigger than that of the eu 27. Now looks likely to slip. high-profile hedge-fund bosses such as that it no longer needs to agree rules with Some suspect that the eu is going slow- Crispin Odey and Sir Paul Marshall helped its old European partners, Britain can make ly on purpose, because uncertainty may finance the Leave campaign. deals with countries like America, Singa- encourage business to flow from London to Unlike banks, which do a lot of business pore, Switzerland and Japan that offer a European capitals. William Wright of New in Europe, hedge funds raise most of their path to capturing fast-growing new mar- Financial, a think-tank, reckons that the capital in Asia and the Middle East. They kets such as fintech and carbon trading and outflow from London over the last four are lightly regulated, and plan to stay that for setting the rules that determine how years will “embolden Europe to push hard- way. “The only times the euhas affected my those businesses are done. er to repatriate more business”. business is when they have tried to destroy The question of whether Britain should The eu says it cannot make a decision it,” says a hedge-fund manager. The alter- go for equivalence will probably be settled on equivalences until Britain makes its ap- native investment sector is fairly small—it not in the City, Mayfair or Westminster but proach to divergence clear. The British gov- pays less than £5bn a year in tax and em- in Brussels. The eu’s sluggish approach to ernment has talked in vague terms about ploys around 40,000 people—but its big negotiations suggests that it sees no great deregulation—Rishi Sunak, the chancellor cheeses are generous Conservative Party advantage in offering Britain equivalence of the exchequer, referred to “Big Bang 2.0 donors, so it has an outsized political voice. deals on terms that are likely to be accept- or whatever” in a newspaper interview— The hedge funds’ particular bugbear is ed. If that is so, the City will have to adapt to but has not committed itself to divergence. the eu’s Alternative Investment Fund Man- a new world—as it has done before, and A crucial question is what the eu would re- agers Directive, which provides a frame- will no doubt do again. 7 quire of Britain in exchange for equivalence. “If it means targeting the same broad outcomes of well-functioning markets Spirit of the age that is fine,” says an insurer. “But we can’t For 99 of his 100 years, Captain Sir Tom agree to line-by-line regulation by email.” Moore was unknown to most of his Big firms in the City are keener on compatriots. But when he died on equivalence than divergence. Europe, the February 2nd the prime minister and the source of a third of the financial-services queen paid tribute to him. He came to industry’s export business, is important to fame last year when his effort to raise them, and European rules, which Britain £1,000 to support health workers by helped to shape, have served them well. For walking 100 laps of his garden before his global firms, a common regulatory system 100th birthday caught the public between Britain and the eu makes the imagination. He raised £33m. world a simpler place. Sir Tom touched a couple of soft British Compared with global City firms, those spots. One is a love of the underdog: his headquartered in Britain are less set on feat was humble yet brave. The second is a equivalence. They are more concerned fascination with the second world war, a about what will happen when, uncon- common reference point for Britons strained by British policymakers, Europe’s struggling to make sense of a crisis that more interventionist instincts are brought left them simultaneously terrified and to bear on regulation. bored. Sir Tom, who served in Burma, was Over to the west of the City in Mayfair, one of a dwindling generation that linked where most of London’s hedge funds are lo- present troubles to past conflict. The Economist February 6th 2021 Britain 47 Bagehot Riding high

Boris Johnson is suddenly flush with political capital. Here’s how he should spend it fixing social care, which has long been the third rail of British politics. A poorly thought-out plan to fix it, quickly dubbed the “de- mentia tax”, lost Theresa May her majority in the 2017 election. But now the cost of doing nothing exceeds the cost of doing something: even before more than 25,000 care-home residents died with covid-19 last year, the system was visibly rotting, with over- crowded facilities and mounting staff shortages. Mr Johnson has frequently promised to provide a lasting settlement for the sector. He should now fulfil his pledge in the name of building a national memorial for the victims of the pandemic. The simplest way to reform the system is to preserve the principle at the heart of the nhs that care should be largely free at the point of delivery: cap personal contributions at, say, £50,000 ($68,000) and then pay for the rest out of general taxation, even if this means raising taxes. According to Policy Exchange, a think-tank, fully funding long-term social care would cost 0.5% of gdp—not a massive sum for so pressing a need. The other end of the age spectrum, the young whose education has been sacrificed to protect their elders, also needs attention. The Institute for Fiscal Studies, a think-tank, estimates that school closures will cost the average pupil £40,000 in lost wages over their lifetime. The notion of average is misleading. Poor children olitical capital is a prime minister’s most precious resource: who lack the ready internet access and quiet space needed for Pthe magic substance that mobilises supporters, marginalises home study feel the consequences more than richer ones. The gov- opponents and turns vague dreams into legislative triumphs. It is ernment needs to make sure that they have the chance to make up also the most ephemeral, here today and gone tomorrow. Having for lost time by, for example, establishing summer schools, accumulated a lot in the last general election, Boris Johnson saw it lengthening the school day, extending the school year, offering en- disappear a year ago as he floundered in the face of covid-19. There riched classes and allowing some children to repeat whole years. was talk of him being “gone by Christmas”. Along with this domestic agenda, Mr Johnson needs a foreign- Now the Bank of Boris is in surplus again. The vaccine pro- policy triumph. What better than for the man who brought Britain gramme’s success has blunted the accusation that he’s an incom- Brexit to preside over a new rapprochement with the eu? The eu is petent blunderer. With 14% of the population vaccinated, well not about to autocombust, whatever the more excitable Euro- ahead of Germany (2.4%) and France (2.3%), Britain has done bet- sceptics may think, and can make Britain’s life difficult. Its current ter than any other big country. The eu, with its bungled vaccine na- embarrassment should calm fears that any warming of the rela- tionalism, is doing its utmost to prove that the Eurosceptics were tionship is a prelude to rejoining, and thus give Mr Johnson room right all along. An opinion poll published on January 31st put the for manoeuvre. Tories three points ahead of Labour; one on February 1st showed It is time he rejected the dogmatic Brexiteer belief that Britain that only 36% of Britons have a favourable view of the eu compared should deal primarily with nation-states, particularly France and with 50% who have an unfavourable one. And Mr Johnson seems Germany, rather than international abstractions. He should ex- to be maturing as a politician: his tone is more statesmanlike and plore ways of working with the eu, particularly on foreign and se- Downing Street more professional. curity policy. Britain broadly agrees with the eu on big challenges If Mr Johnson is wise, he will spend his political capital swiftly such as Iran and climate change. It also has more to gain than to rather than trying to hoard it, for it may well evaporate. With the lose by co-operating with it on cross-border crime even if that in- official covid-19 death toll having passed 100,000, Britain has one volves the notional recognition of the European Court of Justice. of the highest mortality rates in the world from the disease. Brexit Granting full diplomatic status to the European ambassador, João is gumming up trade; the Manchester Chamber of Commerce re- Vale de Almeida, would be a good way to start a rapprochement. ports that it is hitting the business of over a quarter of companies in the region. Northern Ireland is in crisis over the constitutional A good man after a crisis arrangements for the province. Mr Johnson famously regards Winston Churchill as his model. But But where exactly should Mr Johnson spend it? The two most when it comes to spending political capital the best model may be obvious answers are making good on his promise to “level up” the Churchill’s friend and rival, Clement Attlee, the subject of a fine country and preventing the break-up of the United Kingdom. But biography, “Citizen Clem”, by John Bew, a member of Number 10’s “levelling up” is at best the work of a generation and potentially a policy unit. Attlee reignited the nation’s spirit after the dark days labour of Sisyphus: whatever can be done to push the boulder up- of the war by passing the 1946 National Health Service Act, which hill will be undone by the incline of the British economy to the provided free health care for all, and nurturing the 1944 Education south-east. The best way to prevent Scotland from seeking inde- Act, which created a more meritocratic society. He also laid the pendence is to prove that Britain is working so well that leaving it foundations of post-war foreign policy by forging a deep alliance would be idiotic. with the United States despite the virulent anti-Americanism of In spending his political capital—and the nation’s cash—Mr many of his own mps. The spirit of the late 1940s may be just what Johnson should prioritise three more concrete policies. The first is Britain needs in the early 2020s. 7 48 International The Economist February 6th 2021

The future of nightclubs the world to return to something like normal; and second, whether that normality Don’t stand so close to me will include you. For restaurants that can switch to home delivery, survival until revival seems possible. Cinemas were thriv- ing when the pandemic struck; they can hope for the vigour to return afterwards. BERLIN For clubs, the trends diverge. In rich coun- Even before covid-19 nightclubs were struggling. The pandemic has left them tries the pandemic may be over soon—but fighting for their survival populations were already ageing and clubs n normal times it is notoriously diffi- nightclubs are bound to suffer in a pan- ailing. In poor ones they entered the pan- Icult to get past the bouncers at Berghain, demic. Indeed, sars-cov-2, the virus demic in better health. But a return to nor- a techno nightclub in eastern Berlin. But in which causes covid-19, thrives in poorly mality could take much longer: Africa may September the establishment flung its ventilated spaces and spreads more easily not reach herd immunity until 2024. If doors wide: anyone could come in, not to at close quarters and when people are dance floors are to host a repeat of the dance, but to inspect work by 115 Berlin art- breathing heavily—as they tend to on Roaring Twenties, clubs everywhere will ists. The organisers tried hard to recreate dance floors. have to innovate. the club’s forbidding atmosphere. Stickers In rich countries fewer people are going were placed over visitors’ phone-cameras. Saturday night fever clubbing because of greater competition, Security officials, released from furlough, Even before governments had started to online-dating sites, growing abstemious- exhibited an authentic grumpiness. Vis- shut down the hospitality industry, night- ness—and, above all, ageing. In the decade itors were denied anything as useful as clubs were recognised as an unusually se- before the pandemic, the number of night- signs telling them about the art. rious vector of infection. In May South Ko- clubs shrank by 21% in Britain, and by 10% The venue’s motive was simple. As a rea’s government advised them to close for in both America and Germany, according nightclub, it had had to close as part of a month after tracing a number of cases to ibisWorld, a market-research firm. In measures intended to limit the spread of back to gay clubs in Seoul. Where clubs big cities the decline has been particularly covid-19. But as a gallery, it could reopen were allowed to open, they tried to make it sharp. London has lost around half of its (though it had to close again in November). work. But whereas al fresco dining, or cine- clubs in the past decade. New ones have It is not the only club to have found an in- mas and theatres with half the seats out of opened but not in sufficient numbers to novative way to make ends meet during action, may still appeal, socially distanced offset the fall. Rents have risen and visitor the pandemic. KitKatClub, one of the city’s clubbing misses the point. numbers have declined. In Britain licens- fetish joints, is renting its outdoor space to The questions posed by covid-19 for all ing changes introduced in 2005 have al- a firm offering covid-19 tests. hospitality and social industries are: first, lowed pubs and bars to stay open later, vy- Like restaurants, cinemas and hotels, whether you can hang on long enough for ing with clubs for late-night custom. Since The Economist February 6th 2021 International 49

2006 most German states have also ex- A curfew in Kenya has forced clubs to disused textile factory in the gritty down- tended their opening hours. Meanwhile, in close by 10pm. To stay in business many town area. At Nos Trilhos, a largely outdoor rich countries young people are drinking have started opening during the day: venue that was once the city’s train grave- less. They are more likely to meet their though the atmosphere is flat and dance yard, djs set up their sound systems in partners on apps than leaning against a floors are largely empty, this at least keeps rusting locomotive carriages while club- bar. In Britain 5% of 20-somethings say some money coming in. But they are hard- bers gyrate around the railway tracks. they met their beau at a bar; among ly dancing to the bank. The lack of any gov- Landlords are keen to rent such spaces over-50s the figure is 20%. And as social ernment support means they have also had to club-owners; it is an easier way of mak- media put people in constant contact with to lay off staff. “Now there is little to no ing money than developing them. But they their friends, the appeal of a Friday-night budget for entertainment, and most revel- are also quick to boot their tenants out at blowout has dimmed. lers prefer to drink at home and avoid the the first sign of trouble. As more of São Some of the ways clubs have responded police,” says Ms Musembi. Paulo becomes residential, clubs find have made things worse. In an effort to off- A continuing source of revenue is use- themselves rubbing up against new neigh- set the impact of falling attendance, many ful during an economic crisis. But it is link- bours. “The city is growing so fast that ven- increased prices of tickets and drinks, ed to a big reason why the pandemic will ues are becoming a problem,” says Guga which has made them even less popular. last longer in the developing world: gov- Trevisani, a music producer and agent And when it comes to music, they are ernments are less willing and able to act. In based in the city. Complaints, police raids struggling to stay on trend. As people in- Brazil, for example, even as a contagious and closures follow. And rents increase. creasingly stream personalised playlists, new variant seems to be spreading from The monthly rate at a venue in São Paulo compiling a set of killer tunes for hundreds Manaus in the northern Amazonian re- shot up from 5,000 reais ($950) in 2015 to on the dance floor has become harder. gion, Jair Bolsonaro, the populist presi- 30,000 reais ($5,600) at the start of 2020. Clubs will not be able to operate nor- dent, has resisted lockdowns and joked This makes clubs’ futures precarious. mally until most people are vaccinated. that covid-19 vaccines might turn people nimbyism is a problem for a sector that Those that focus on niche but enthusiastic into crocodiles or bearded ladies. comes alive when sober citizens want to audiences, and which draw international If nightclubs in developing countries sleep, and which is linked to all sorts of stars, will thrive as long-cooped-up revel- make it through their long covid, they will shenanigans. (Even in Ibiza, Europe’s club- lers pour out onto the streets. But for the face some of the same pressures that curbing capital since the 1980s, three-quarters average city nightclub, with its tired set rently bear down on their counterparts in of islanders still say they oppose nightlife lists and high drink prices, a return to the rich countries. To survive, they will have to tourism.) In November 2019 four of Nairo- status quo ante will not be enough. make the same sorts of accommodations: bi’s biggest clubs were ordered to close by finding new, more formal venues; building the local government after lobbying And the beat moves on better relations with local residents, often against them by a residents’ group. One, As the rich world has aged, the pulse of the by making less noise; and persuading au- the Space Lounge, posted a sign: “Sorry, nightclub industry has shifted to big cities thorities that they are both a useful source we’re closed (but still open-minded)”. in the developing world, where people are of jobs and a way to keep cities centres In Europe nightlife lobby groups have younger, the share of the population with safer at night. managed to persuade governments that some disposable income was rising until The clubbing scene in São Paulo and clubbing is good for cities, rather than a the pandemic, and licensing laws are less similar cities is big but informal, like Ber- nuisance. Relations with officialdom have strict—or at least less strictly enforced. Ci- lin’s during its heyday in the 1990s. Club greatly improved in Berlin over the past ties such as Nairobi are now on the beaten space was easy to come by in the German two decades. Police raids, which blighted track for big djs. Just as party animals capital after the fall of the wall, when a the city’s club scene in the 1990s, are rare. might have gone to Berlin in the 1990s, they third of buildings in the east of the city Noise complaints are often part of the bit- now go to São Paulo and Marrakech. were empty. Abandoned warehouses and terest disputes. The city’s government Nights with famous djs have drawn rev- banks quickly became home to club nights started a €1m ($1.2m) noise-insulation ellers from across Brazil and beyond to and raves. But as prosperity increased, fund in 2018, but clubs generally now sim- Campinas, the third-largest city in São such venues became scarcer. One of São ply pay for expensive soundproofing. Paulo state. The lgbt night at Caos, a club Paulo’s most popular, Fabriketa, is a huge Their counterparts in developing coun- in an old warehouse in one of the city’s in- tries still face scepticism—or perhaps industrial estates, is one of the biggest in a difference. A pre-pandemic campaign to largely conservative region. In Nairobi new have Nairobi nightlife added to Kenya’s clubs have emerged as the number of tourism literature came to nothing. One young people with a bit of spare cash has line of argument is that they can keep a city risen. Around most corners sits a new centre alive outside business hours. “Emp- apartment or office block and for each one ty cities are not very comfortable to live in,” there is a nightclub, says Jeannette Mu- points out Lutz Leichsenring of the Berlin sembi of Bars Kenya, an industry group. Club Commission, a lobby group. “If, at Unlike their counterparts in the rich night, you’re standing at an empty bus world, clubs in developing countries have stop, you don’t feel very safe.” not, by and large, been forced by govern- Emphasising their economic contribu- ments to close—though they may have to tion will probably be more useful. As coun- add measures such as social distancing tries emerge from the pandemic, their gov- and temperature checks. Caos is operating ernments will be desperate for growth at 20% capacity, with groups of six seated from any source. And as Mirik Milan, foun- around tables wearing masks. It was mak- der of the Global Nighttime Recovery Plan, ing a healthy profit before covid-19 struck, an industry group trying to come up with though it opened only three or four times a ideas for reopening, points out: “When a month. It now opens five days a week in an lot of people are dancing, there are a lot of effort to stay afloat. people working, too.”  50 Business The Economist February 6th 2021

The future of Amazon tence that Amazon’s employees treat every day as if it were “day one” at a hard-pressed Life after Jeff startup has helped the firm move into new lines of business, from smart speakers and video-streaming to advertising and cloud- computing. Its valuation has risen 3,000- fold since its market debut in 1997. NEW YORK AND SAN FRANCISCO Mr Jassy, in other words, will take con- The online giant’s larger-than-life founder is a tough act to follow. trol of a firm in an enviable position. Ama- Does Andy Jassy have the chops? zon is not without problems—it has strug- n february 2nd Amazon, America’s Services (aws), the firm’s highly profitable gled in some overseas markets, and faces Othird-most-valuable public company, cloud-computing division. attention from trustbusters in America and announced its best-ever quarter. Propelled The news prompted gushing tributes to elsewhere. Still, few firms are in better nick by the covid-19 pandemic, which has con- a man who began selling books online in to face those challenges down. fined consumers to their homes, the firm 1994 with a recycled wooden door for a Founders often find it hard to let go. One reported that quarterly sales had risen 44% desk. Bernstein, a broker, described Mr Be- immediate question is therefore how year on year, and exceeded $100bn for the zos as the “greatest of all time”. Mr Bezos much control Mr Bezos will actually cede. first time. It was a barnstorming perfor- has certainly made a mark. In 2019 Amazon “I think it’s inevitable that there will be at mance. But it was not the main story. On delivered 3.5bn parcels, one for every other least a bit of back-seat driving for the first the same day the firm announced that Jeff human being on the planet—and that was few years,” says Nick McQuire of ccs In- Bezos, its boss and founder, will step down before the pandemic turbocharged online sight, a research firm. But Mr Bezos may as chief executive this summer after nearly shopping. His rigorous, tight-fisted insis- not need day-to-day involvement to see his three decades in charge. company carry on in his image. “Amazon Mr Bezos will not leave the company. He has the most codified culture of any big Also in this section plans to boot himself upstairs to become tech firm,” says Aaron Levie, the boss of executive chairman. That role, he said, will 51 Daimler and Benz part ways Box, a cloud-computing company. “It is allow him to remain “engaged in important built to outlast its founder.” 52 China Inc retreats home Amazon initiatives”, but also give him Mr Jassy is in any case more of a con- more time to focus on other interests, no- 53 Cook v Zuck tinuity candidate than a revolutionary. Bri- tably space travel, fighting climate change an Olsavsky, Amazon’s finance chief, reas- 53 Football’s TV drought and the Washington Post, a newspaper he sured analysts on the earnings call that bought in 2013. His replacement as ceo will 54 Bartleby: Executive short-termism “He’s been here almost as long as Jeff.” Mr be Andy Jassy, a long-serving Amazon em- Jassy joined in the year Amazon went pub- 55 Schumpeter: ExxonMobil in a vice ployee who built and runs Amazon Web lic and has been close to Mr Bezos since. He 1 The Economist February 6th 2021 Business 51

2 comes across as detail-oriented and more Carmaking than a little nerdy—much like Mr Bezos in Welcome to the Jassy age his first couple of decades in charge. Amazon Driving apart That does not mean that nothing will change. Although Bernstein expects Ama- $trn Buys Whole Foods 2.0 zon’s retail-related revenues to remain at Initial public offering roughly two-thirds of the total in the next few years, by 2024 digital adverts may be its Marketplace launch 1.5 Daimler Truck and Mercedes-Benz biggest source of profits, overtaking cloud Amazon Web part ways computing; retail may actually add materi- Services launch ally to the bottom line (see chart). Last year 1.0 ottlieb daimler and Carl Benz built Jeff Wilke, who ran the mammoth retail Market capitalisation Gthe world’s first motor cars at the same arm, said he would leave the company, de- time in 1886, not far apart in Germany. 0.5 priving Mr Jassy of an able lieutenant. Their names have been tied together since Customers in America are beginning to Revenues a merger of their firms in 1926. Daimler is grumble that Amazon is becoming a flea 0 the parent company of Mercedes-Benz. Yet market, with ever shoddier products juiced 20001997 151005 21 the two men never met. So perhaps they with faked reviews. This has yet to stop would not have minded that on February them shopping there, as the latest results Operating profit by segment, $bn 3rd it was announced that their names attest. But it could turn into a problem. 60 would go their separate ways. Abroad, where sales grew briskly last year, Advertising A majority stake in Daimler Truck, the the incoming boss will have to decide Amazon Web group’s lorry-and-bus business, will be whether to pursue expansion in places like Services 40 spun off to existing shareholders and listed South America and India, where Amazon Retail & other in Frankfurt later this year. The luxury-car faces stiff local competition. 20 arm, to be renamed Mercedes-Benz, will At least one investor worries that Mr Jas- retain a minority stake. The manoeuvre has sy’s background in cloud-computing may set pulses racing in the staid lorry busi- leave him struggling to direct the firm’s re- 0 ness. Ola Kallenius, the group’s boss, called tail arm. Meanwhile, those who would it an “emotional and exciting day”. FORECAST prefer to see the money-spinning aws -20 The split is an acknowledgement that hived off into a separate company may 2423222120192018 making cars and lorries are not the same wonder if the man who created it has any Sources: Bloomberg; Bernstein Research business. Mr Kallenius noted the different more appetite for such a radical move than “customer groups, technology paths and Mr Bezos did. capital needs”. Car buyers care about Those aren’t the only dilemmas in Mr litical awkwardness may have influenced brands, styling and plush interiors. Busi- Jassy’s in-tray. Amazon’s demands on the timing of Mr Bezos’s decision to stand nesses with wares to ferry are concerned workers in its warehouses and at times in- back. Perhaps. Mr Bezos, for his part, gives with the total cost of ownership, not what trusive surveillance have come under scru- every indication of being a man with a the badge says about them as a person. tiny. The firm has spent heavily on im- higher calling. When Bill Gates stepped Electric lorries will probably run on hydro- proved working conditions and pays a $15 down as the boss of Microsoft in 2000, he gen, not batteries, which are too expensive. minimum wage in America. But it contin- threw himself wholeheartedly into the Splitting also has the advantage of giv- ues to attract criticism, especially as it re- Gates Foundation, which, as the world’s ing investors a clear choice between which sists unionisation among logistics work- biggest private charity, funds everything business they favour. It could unlock hid-1 ers. Many of aws’s well-paid programmers from malaria-prevention to aids research. empathise with their colleagues on the Mr Bezos, whose near-$200bn fortune warehouse floor. In May Tim Bray, an aws is even larger than Mr Gates’s, may be plan- executive, quit in disgust over what he de- ning a similar change of focus. He is sym- scribed as Amazon’s “chickenshit” sacking pathetic to at least some environmental of workers who had complained about concerns: he has said before that growing poor safety during the pandemic. resource consumption is not compatible Amid a general souring on the Utopian with a finite planet. Of his many other busi- promises of big tech, Amazon’s success has nesses, Blue Origin, his rocketry firm, is also attracted attention from American widely reckoned to be his favourite. Like trustbusters. They worry it may be using Elon Musk, who this year overtook him as sales data from the third-party sellers on its the world’s richest man, Mr Bezos is a fully platform to inform the development of in- paid-up space cadet. Blue Origin is already house products which then drive those involved in America’s plans to return astro- sellers out of business. A congressional re- nauts to the moon. port in 2020 cited claims that Amazon used In 2019 Mr Bezos sketched out a vision the rich profits from aws to subsidise its of the future in which a trillion humans unlucrative retail operations—but said live in gigantic, artificial space-going habi- that the firm had not provided the data nec- tats, relieving the pressure on a crowded essary to decide one way or another. Some Earth. It is an apocalyptic idea—and, to put politicians have talked of barring Amazon it mildly, a bold one. To Mr Bezos it may from competing with its third-party sell- seem more fun than running an online de- ers, or even of splitting it up. Amazon department store with a sideline in server nies doing anything wrong. farms and virtual billboards—even one as Some speculate that such looming po- era-defining as Amazon. 7 No truck with cars 52 Business The Economist February 6th 2021

2 den shareholder value. Daimler Truck is hicles and is on course to cut costs by 20%. lived (see chart). By 2018 Chinese authori- the last of the world’s biggest lorry-makers But the car industry is changing. Tesla and ties had grown wary of the domestic finan- to do so. Sweden’s Volvo split apart in 1999. other newcomers without the legacy of the cial repercussions of reckless overseas ad- Volkswagen spun off a10% stake in its lorry internal combustion engine will make the ventures. At the same time, officials in division in 2019 and may go further. Bern- business ever more competitive. America and Europe began to fret about the stein, a broker, reckons Daimler Truck, Lorries are a different matter. Yes, the national-security implications of some which delivered around 500,000 commer- challenges of electrification and self-driv- Chinese investments. cial vehicles in 2019, more than any rival, ing remain. Tesla and other startups are In April 2018 Mr Lai was detained by the could be worth €35bn ($42bn). That is snapping at the incumbents’ exhaust Chinese authorities. Three months later around half of the undivided company’s pipes. But the big three have a tight grip. hna’s co-chairman, Wang Jian, fell to his current market capitalisation. Mr Kalle- Bernstein reckons they control 75% of the death in the French countryside. The inci- nius hopes that the car business will also market in important regions, aside from dent was deemed an accident by local po- “significantly re-rate”. China. Martin Daum, current chairman of lice. After that his group began to sell as- The car division needs all the help it can Daimler Truck, says that by going it alone sets. Earlier that year the chairman of cefc get. Operating profits of $6.6bn in 2020 his business will be more nimble in “shap- Energy, a conglomerate with interests in oil comfortably beat analysts’ expectations in ing its own destiny”. He can build on an il- and finance and another of Huarong’s cli- a year blighted by the pandemic. Its has lustrious legacy. In 1896 Gottlieb Daimler ents, was also detained, after attempting to plans for an impressive range of electric ve- also constructed the world’s first lorry. 7 buy a $9bn stake in Rosneft, Russia’s state- controlled oil giant. Chinese regulators were forced to take over Anbang. After Chinese firms abroad more than two years they are still trying to offload its blingy assets, many of which Too close to the sun have lost their sheen. Not all of the era’s acquisitions were duds. Volvo, an iconic Swedish marque, seems to have thrived under Geely, a Chi- nese carmaking giant which bought it in 2010. In 2016 Midea, a white-goods manu- HONG KONG facturer, bought Kuka, a German robot- China is cleaning up the mess caused by its overseas acquisition spree maker, for $5bn and absorbed its valuable ew life stories are as soap-operatic as ing to claw back lost loans from the bank- know-how. ChemChina appears to be a de- FLai Xiaomin’s. The fallen state financier rupt concern. cent custodian of Syngenta. On February dallied with more than 100 mistresses, ac- hna became known for amassing more 2nd Alibaba reported 37% year-on-year cording to Chinese media. He was subse- than $80bn in debts and large stakes in Hil- growth in revenues for its international re- quently caught with three tonnes of cash in ton, a large American hotel operator, and tail business; this, China’s e-commerce ti- one of his dozens of homes. The sheer scale Deutsche Bank. But in recent years it often tan said, was mainly thanks to the strong of his thievery—1.8bn yuan ($279m) in found itself short of cash. In 2019 it was in performance of Lazada, a Singapore-based kickbacks, the largest bribery case since effect taken over by a state-backed manage- online-shopping platform it snapped up the founding of the People’s Republic of ment team, installed to stop the rot infect- five years ago, and of Trendyol, a Turkish China in 1949—justified the death penalty, ing the rest of the financial system. To retail group in which it purchased a large a judge opined. In a tragic denouement, Mr make matters worse, disclosures made stake in 2018. Lai was executed on January 29th. public on January 30th by hna’s listed un- These quiet success stories are, how- The moneyman’s most serious of- its, such as Hainan Airlines Holding, re- ever, overshadowed by spectacular failures fense—and the one that ultimately cost vealed that an internal investigation had like that of hna. They may be the last win- him everything—may have been some- found that some existing shareholders and ners for a while, at least in the West, where thing else. Under Mr Lai’s control, Huarong associates had misused around $10bn of governments and the public view Mr Xi’s Asset Management, a state-run financial company money. unconcealed authoritarianism with grow- group, became the lender of last resort to hna’s demise, like Mr Lai’s, marks the ing anxiety. In 2020 Chinese firms spent China’s riskiest corporate borrowers. end of an era for China Inc’s overseas ambi- just $32bn on foreign acquisitions, the low- When state banks said “no” to loans, Hua- tions. The conglomerate’s rise to promi- est figure since 2007. 7 rong said “no problem”. Its lending helped nence began in 2015, when it paid $7.6bn private conglomerates get around capital for Avalon, an Irish aircraft-leasing busi- controls and scoop up assets overseas. This ness. Such transactions fuelled a boom in Trips down memory lane enabled some of them to enlarge their bal- outbound Chinese mergers and acquisi- China, outbound mergers & acquisitions ance-sheets—occasionally to breaking tions. In 2016 Chinese firms splurged Value, $bn Number of deals point. These strains put the broader finan- $218bn on foreign deals, more than twice as 250 1,000 cial system at risk. And that perturbed the much as the year before, according to Dea- communist regime’s paramount leader, Xi logic, a data-provider. 200 800 Jinping, who prizes stability—including Some purchases looked strategically the financial sort—above all else. sound—for instance ChemChina’s $43bn 150 600 The latest example came within hours acquisition of Syngenta, a Swiss chemicals of Mr Lai’s execution. hna Group, a sprawl- firm. Less disciplined buyers picked up tro- 100 400 ing conglomerate with interests in air- phy assets, such as the Waldorf Astoria ho- 50 200 lines, finance, logistics, property, tourism tel in New York (bought by Anbang, which and much else besides, said that its credi- started out in insurance) and Club Med 0 0 tors had applied to a local court to initiate (purchased by Fosun, another unwieldy 2005 10 15 21* bankruptcy and restructuring proceed- holding company). Source: Dealogic *To February 3rd ings. Huarong was among the groups seek- The globetrotting bonanza was short- The Economist February 6th 2021 Business 53

track its customers at all. Football TV rights The sixth incarnation of ios introduced a new, less intrusive tool called “identifiers Goalless defeat for advertisers”. Unlike udids, these can be blocked, and do not identify users personally; any data collected are aggregated before being used. But they still allow tracking, which is switched on by default on PARIS The beautiful game is in an ugly iPhones, and fiddly to turn off. Apple’s aim financial situation back then was to help app developers earn revenue in ios. f a football match is played but no fans Now privacy is more central than ever to Iwatch it, either in the stands or on televi- Apple’s brand. Four years ago it stopped sion, did it really happen? The quandary tracking users on Safari, its web browser. might once have amused Albert Camus, a Google, too, has announced plans to elimi- fine goalkeeper who dabbled in philoso- nate third-party tracking “cookies” from its phising. It is also existential, in another Chrome browser by 2022. Ad-industry in- way, for French football clubs. First, co- siders find it odd that identifiers for adver- vid-19 has deprived them of live suppor- tisers are still around; last year some in the ters. Then the top league’s broadcasting mobile-ad industry reckoned Apple was partner skipped town without paying. Feuding tech giants going to kill them off. With app-tracking Teams that once feared relegation now transparency at least some users will pre- worry about bankruptcy. Cook v Zuck sumably allow cookies to stay. This year France’s Ligue 1 had hoped to Facebook has nevertheless fought back kick off its journey to the European elite. hard. In December the social network took Though the national team won the most re- out newspaper ads claiming that Apple’s cent World Cup, the domestic champion- changes would hurt small businesses. An- ship in which many of its stars compete is, nouncing Facebook’s earnings on January financially speaking, outplayed by richer Apple’s privacy policy kicks Facebook 27th Mark Zuckerberg, its boss, explained leagues in England, Germany, Italy and where it hurts how his firm gives tiny firms ad-targeting Spain. A whopper broadcasting deal start- eldom has a tech giant excoriated an- tools that in the past only large companies ing this season, worth over €1bn ($1.2bn) a Sother as Apple did Facebook. “What are had the resources to employ. This echoed year, up by 60% on the previous arrange- the consequences of prioritising conspira- other ad-tech types’ warnings of a return to ment, would help it level the playing field. cy theories and violent incitement simply a “spray and pay” world where, once again, The deal proved too big a whopper even because of their high rates of engagement?” half of all ads are wasted but no one knows for Mediapro, the Spanish broadcasting asked Apple’s boss, Tim Cook, in a speech which half. Moreover, Facebook argues, group with Chinese backers that snapped on January 28th. “A social dilemma”, he Apple is trying to shift the internet’s busi- up most of the matches. The channel it had thundered, “cannot be allowed to become a ness model from one that is chiefly ad-sup- set up to show Ligue 1 clashes attracted few social catastrophe.” Facebook was singled ported to one that is increasingly paid for. punters. Stretched for cash, it made just out without being named. Last year it com- In this view, Apple’s stance on privacy is one quarterly instalment in August, then plained about its portrayal in “The Social not selfless but self-serving. stopped paying entirely. By December the Dilemma”, a hit Netflix documentary. Facebook’s campaign against Apple contract was voided. Mr Cook’s warning came in response to could go beyond public admonishments. On February 1st an auction was held to 1 Facebook’s own broadsides against Apple’s Last month rumours swirled that Mr Zuck- forthcoming “app-tracking transparency” erberg’s firm might sue the iPhone-maker measure. Soon a pop-up from Apple will over alleged preferential treatment given start asking users of the latest version of to its own apps in its App Store, while it im- ios, its mobile operating system, if they poses restrictions on third-party develop- want named apps such as Facebook to track ers like Facebook. Apple’s App Store is al- their digital activity across other compa- ready under scrutiny by America’s nies’ apps and websites. Huge numbers are Department of Justice and the European expected to demur. That is likely to damage Union’s competition watchdog. Facebook, possibly Google and a wide Of course, Facebook’s own protesta- range of other ad-tech businesses. tions are not exactly disinterested. It may Mr Cook’s righteous wrath makes it easy want to divert attention from the antitrust to forget how in the early days, Apple en- lawsuits it itself faces. And the company abled ad tracking. In the 2000s app devel- will probably take a hit to its top line as a re- opers and advertisers learned to use its sult of Apple’s move. In late January it “unique device identifiers” to follow users named the latest ios changes as a head- around the internet. These udids, as they wind for its ad business this year. were known for short, were permanently Most people will welcome Apple’s pri- attached to every iPhone or iPad and made vacy proposal. But its ability to impose it on it easy to keep tabs on individuals’ online a big industry has underlined its power in a activity. Then in 2010 a privacy furore way that may not be entirely helpful for it. erupted around Apple and Google. Two As for Facebook, its task now is to come up years later Apple responded by banning with its own pop-up to reassure people that app developers from using udids. For a its ad-tracking is harmless—even for the brief few months advertisers could barely most talented ad creative, a tough brief. 7 The league is hurting, too 54 Business The Economist February 6th 2021

2 replace Mediapro. No credible buyer casting deal for most matches—a catastro- Other European leagues are also ailing. emerged. Canal+, a pay-tv group con- phe for clubs that rely on such rights for a Some, like the English Premier League, of- trolled by Vincent Bolloré, a ports-to- third of their income (often more for small- fered rebates to broadcasters during the co- media tycoon, unexpectedly stayed away. er teams). They are already facing an entire vid-19 crisis. An auction for Italy’s Serie a Having lost the main football rights in 2018 season with no gate receipts. Pandemic-hit rights in January fell short of expectations. after several decades, Canal+ says it can sponsors have less money to throw around. A group of European clubs estimates 360 live without Ligue 1(it still shows a handful Player transfers, a traditional source of teams will need financial help to survive. of matches). Many think it may rejoin the cash, are tricky in a depressed market. The The main concern in France is which chan- fray, but offer much less than Mediapro league has already indebted itself to tide nel will be airing the showdown on Febru- did. Amazon has also shown interest in teams over; struggling clubs have been able ary 7th between Olympique de Marseille streaming rights, but has offered stingier to tap banks for state-backed loans. But a and Paris Saint-Germain—if any. French terms than traditional broadcasters. tv public bail-out of an industry that rewards football wanted to be viewed as the most channels may bid for one match at a time. its stars with multimillion-euro contracts competitive in Europe. Now it would be For now, French football has no broad- would look unseemly. happy just to be viewed. 7 Bartleby Talent management

Executives, not investors, may be to blame for short-termism ow best should managers be in- growth at the expense of short-term pro- shareholders by non-financial American Hcentivised? In the biblical parable of fits without experiencing any significant companies was just19.6% between1947 the talents, a master divides his property pressure from shareholders. Indeed, and1999. By the end of that era, share among three servants before going away. growth stocks in general (defined as those options became a popular means of Two put his money to work and double where the value depends on the expecta- motivating managers. Subsequently, the its value; the third buries it in the tion of future increases in profits) have proportion of cashflow paid to share- ground. The first two servants are re- been very much in fashion in recent years. holders averaged 40.7% between 2000 to warded and the third is punished. Mr Bebchuk says this short-termism 2017, while cash used for investment fell. The biblical story is an early example “bogeyman” has been enlisted to argue in To examine the effect of incentives, of the principal-agent problem. When favour of insulating managers from share- Xavier Baeten, a professor at the Vlerick delegating authority, how can a principal holder control using restricted voting Business School in Belgium, studied the be sure that their agents will act respon- rights, special shares and the rest. Some Stoxx Europe 600 index of big European sibly? The problem is usually discussed think executives may be constrained by companies between 2014 and 2019. When in terms of the potential for the agents to the concentration of ownership in a few he compared individual firms’ returns be greedy, and take money for them- institutional hands, as the fund-manage- on assets with the chief executives’ selves. The unfortunate servant in the ment industry consolidates. Mr Bebchuk remuneration, he found a positive im- parable acts out of fear, declaring: “Mas- believes it is foolish to think back to a pact of high pay on performance over the ter, I knew you to be a hard man.” Sure “golden era” when share ownership was short term, defined as the next12 enough, the servant is cast into the “out- dispersed. Managers may have felt no months. Yet no such relationship er darkness” where there will be “weep- pressure to produce short-term results. showed up over a three-year period, ing and gnashing of teeth”. “But”, he says, “they felt no pressure to implying that the initial gains soon In the corporate world, some say, fear produce long-term results either.” dissipated. (The study controls for vari- plays as big a part as greed in distorting Perhaps the problem lies not with ables including a firm’s size.) manager incentives. Critics claim that investors, but with the incentives used to Mr Baeten then examined the compo- managers are unwilling to invest in motivate executives. Andrew Smithers, an sition of the executives’ packages. He long-term projects because they fret this economist, has calculated that the propor- found that short-term performance was will damage the company’s profit growth tion of operating cashflow paid out to better when incentives were more than in the short term. If that happens, the 200% of base pay than when incentives managers may worry that they will be were less than100%. He also found that fired by the board, or that the company after the first12 months, the impact will be subject to a takeover bid. switched. Executives with incentives of Companies have several layers of more than 300% of base pay performed agents. The board is worried about pres- significantly worse in the next two years sure from fund managers who are them- than those who received less than100%. selves acting on behalf of the underlying This is not proof that executive in- investors, and fear losing clients if they centives have led to an excessive short- do not deliver above-average returns. term focus. But it suggests the need for Lucian Bebchuk of Harvard Law carefully designed incentive schemes. School argues that there has been too The principal-agent problem requires much focus on the role of institutional, eternal vigilance by shareholders. Get the and particularly activist, investors in formula wrong and weeping and gnash- driving short-termism. Writing in the ing of teeth will follow. Harvard Business Review*, he notes that ...... managers at both Amazon and Netflix * https://hbr.org/2021/01/dont-let-the-short- have been able to pursue long-term termism-bogeyman-scare-you The Economist February 6th 2021 Business 55 Schumpeter The long squeeze

Shareholders are rebelling against ExxonMobil’s hydrocarbon-heavy strategy D.E. Shaw, a big hedge fund, is urging ExxonMobil to spend more wisely. The company’s return on capital employed in explo- ration and production fell from an average of over 30% in 2001-10 to 6% in 2015-19. The fund has urged Mr Woods to be more like Mi- chael Wirth, his opposite number at Chevron, who has focused more on value and less on volume. More eye-catchingly, Engine No.1, a newish fund with a stake of just 0.02%, is trying to green- shame Mr Woods with a mantra as straightforward as ExxonMo- bil’s: if the company continues on its current course, and demand shifts quickly to cleaner energy, it risks terminal decline. The fund has launched a proxy battle by proposing four new directors; the current board, it complains, is long on blue-chip corporate credentials but short on energy expertise. Engine No.1’s agitation for a shake-up has won backing from, among others, Calstrs, which manages $283bn on behalf of California’s public-sector workers. Most important, the tone from ExxonMobil’s three biggest institutional shareholders—BlackRock, Vanguard and State Street— has also shifted. Between them these titans of asset management own around 20%. That understates their power. Many retail shareholders who own the company’s stock directly do not bother to vote, leaving the big guns that do with outsized sway. Where once asset managers occasionally wagged a finger at climate-unfriend- wo american giants, spooked by a crisis that has roiled oil ly firms, they are starting to threaten to walk away. Tmarkets, fall into each other’s arms. The tie-up strings back to- In a recent letter to clients, Larry Fink, boss of BlackRock, talked gether bits of Standard Oil—broken up in 1911 in the world’s most of greener stocks enjoying a “sustainability premium” and dirty famous trustbusting exercise. The year was 1999, and Exxon had ones jeopardising portfolios’ long-term returns. He hinted that his just completed an $81bn merger with Mobil. Might history repeat firm—the world’s largest asset manager—might divest from firms itself in 2021? The world of corporate dealmaking is abuzz follow- that failed to appreciate the “tectonic shift” taking place. Van- ing reports that last year the bosses of ExxonMobil and Chevron guard, too, has called out ExxonMobil for flawed governance. discussed combining the two firms, clobbered by covid-19 along Such badgering used to fall on deaf ears. Now, ExxonMobil with the rest of their industry. The talks are off, apparently. But seems ready to make some changes. It has just added the ex-boss of they could be rekindled. The resulting crude-pumping colossus Petronas, a Malaysian energy group, as a director, as part of a could produce enough to meet over 7% of global oil demand. “board refreshment”. It also unveiled a $3bn effort to intensify its This time, though, the deal would not be a show of strength, es- work on carbon capture. The firm is paring back spending on new pecially for ExxonMobil. The company was under strain before the rigs, and narrowing its focus to higher-return fields in places like pandemic. Despite a $261bn capital-spending splurge between Guyana and to America’s Permian shale basin. 2010 and 2019, its oil production was flat. Its net debt has ballooned from small change to $63bn, in part to maintain its sacrosanct div- Texas let ’em go idend, which costs it $15bn annually. The company, which had a This is a start. But it looks unlikely to appease increasingly restive market capitalisation of $410bn ten years ago—and in 2013 was the shareholders. Some of the green-minded rebels think ExxonMobil world’s most valuable listed firm—is worth less than half that now. is too focused on carbon-capture technology, which is costly and In a symbolic blow, last August it was ejected from the Dow Jones has yet to be deployed at scale by anyone who has tried, and not fo- Industrial Average, after 92 years in the index. cused enough on reducing emissions. Unlike many peers, the firm Adding injury to insult, on February 2nd ExxonMobil reported has set targets for bringing down only the intensity of emissions that a decade of gushing profits—which averaged $26bn a year be- from its operations, not their overall level—leaving room for more tween 2010 and 2019—had come to an end. The firm booked its belching if production rises. It lags behind rivals in targeting first-ever annual net loss, of a staggering $22bn. Much of that was a “scope 3” emissions: those of customers burning its petrol and jet one-off write-down of natural-gas assets. ExxonMobil is not the fuel. ExxonMobil may also have to offer further concessions to only oil firm suffering; Britain’s bp also announced an annual loss those shareholders who fret more about capital than carbon. A big this week. Darren Woods, ExxonMobil’s chief executive, gamely cut in capital spending in 2020 has gone down well, but its argued that the firm was “in the best possible position” to bounce planned annual outlay of $20bn-25bn in coming years still looks back. As rivals have talked about a new future of renewable-energy splashy compared with that of parsimonious rivals. investment, Mr Woods has been frank about doubling down on hy- The firm’s response “has only emboldened us”, says a member drocarbons. His firm’s strategic mantra is that demand for fossil of Engine No.1’s proxy-fight team. “They are still looking at the fuels will remain high for decades as consumers in emerging mar- world today, or in five years, not the long-term trajectory—which kets buy more cars, air-conditioning units and aeroplane tickets. is exactly what got them into this mess.” Last year Mr Woods sur- Shareholders are no longer so sure. Those concerned about vived a shareholder resolution, backed among others by Black- greenery are angered by ExxonMobil’s continued carbon-cud- Rock, to strip him of his dual role as ExxonMobil’s chairman. This dling. Those who care more about greenbacks are irked by its capi- time around, as Davids and Goliaths gang up on him, the oilman tal indiscipline. Right now, both are pushing in the same direction. may be less lucky. 7 56 Finance & economics The Economist February 6th 2021

Also in this section 59 High-speed traders in the spotlight 59 How WallStreetBets works 60 China’s investors nip abroad 60 A beeﬁer BaFin 61 Buttonwood: Predatory trading 62 Free exchange: Biodiversity

Retail investing ful institutional investors that had padded their bottom lines by charging meaty fees Transfer of power for exposure to stocks saw the assets they control slip away. Now they compete with a range of vastly cheaper offerings: index funds that track the market; exchange- traded funds (etfs), which offer access to NEW YORK baskets of assets; and robo-advisers, which Stockmarkets may be nearly frictionless, but a new epoch for retail investors is allocate cash among cheap funds accord- just beginning. Technology is making all kinds of asset markets more liquid ing to portfolio-management theories. or nearly a fortnight, the world was tion of huge fixed commissions and the en- Such innovations, possible thanks to ad- Fmesmerised by the fortunes of Game- try of discount brokers like Charles vances in computing power and machine Stop. Shares in the beleaguered brick-and- Schwab, says Yakov Amihud of New York learning, have probably saved investors mortar purveyor of video games soared University. Then came automated trading $1trn or more in fees since 1975. from a few dollars in 2020 to above $480 on and the decimalisation of share prices. By Outside stocks, fat fees and thin vol- January 28th, before sinking as low as $81 the 2010s, high-frequency traders had risen umes still gum up markets, resulting in on February 2nd. A firm that was worth to dominate share trading (see next story). slow-motion transactions and deterring $200m in April last year was briefly valued “At each stop along the road, the market off- traders. But the same forces that pushed at $30bn before falling back to Earth. The loaded some trading costs and liquidity down trading costs and drove up liquidity gyrations, fuelled by an army of day traders improved,” says Mr Amihud. in the stockmarket are poised to disrupt all that dwells on forums on Reddit, a social- Trading costs tumbled, and the quantity manner of assets, from corporate bonds to media site, have been chronicled on every of shares traded ballooned. The more par- property, and even Picassos and classic front page and ruffled the feathers of regu- ticipants piled in, the quicker and cheaper cars. As happened with stocks, this will lators and politicians in Washington, dc. it became to trade, in turn (see chart 1 on eventually empower individuals at the ex- Look beyond the memes and the mania, next page). In 2015 Robinhood, the online pense of established intermediaries. though, and the story tells you something broker through which many GameStop Wherever you look, technology has about the deep structural changes in finan- trades would flow, was launched, becom- helped create new, liquid markets. “The cial markets. The fact that the fast-paced ing the first platform to charge users no market for knick-knacks in the attic was frenzy was possible is a testament to just fees at all. That, and the pandemic, which once illiquid,” says Alvin Roth, a Nobel- how frictionless trading stocks has be- freed up time and provided stimulus prize-winning economist. “The internet come, aided by technological advances. cheques as starter funds, have spurred re- made it possible to have your lawn sale on Shares can be bought on an app while you tail participation to new heights. Retail in- eBay.” gps and smartphones made ride- queue for a coffee, at a price that is whisker- vestors made up a tenth of trading volumes sharing apps—which create thick markets close to the wholesale price. in America in 2019. By January this year for journeys—possible. Progress towards unfettered stock- their share had risen to a quarter. Examples in financial markets abound. market access began in 1975, with the aboli- As frictions were sanded down, power- In 19th-century America buyers travelled 1 The Economist February 6th 2021 Finance & economics 57

2 from farm to farm testing wheat before bonds to add to its etf, pushing the price striking a deal with a single farmer. Then Let down gently 1 back towards fair value. Jane Street gets to railways made it possible to move grains United States, stockmarket illiquidity* keep the difference—it bought those 400 cheaply in silo cars. But these silos also January 2000=100 bonds at market price, and sells them at the etf made it wasteful to store farmers’ grains 125 implied premium at which the was separately. So in 1848 the Chicago Board of trading. When the etf gets cheaper, the re- Trade started classifying wheat by quality (1 100 verse occurs. Jane Street redeems units of etf the best, 5 the worst) and by type (red or 75 the for its component bonds at a dis- white, soft or hard, winter or spring). Stan- count and sells them for market prices dardisation brought down the cost of mov- 50 (again, pocketing the spread). All this activ- ing and shopping for grains, making the 25 ity, which is increasingly automatic, en- market more efficient. The process was so hances price discovery. effective that the word commodity is now 0 The second effect is through the wider synonymous with standardisation. 2000 05 10 1715 trading of an etf. Each time it trades, a ref- But building a liquid market for an asset *Average daily ratio of returns to trading volumes; erence for its component parts is created, is not easy. To see why, compare the mar- a measure of how much a trade moves a share price which helps price other bonds. And etfs Source: Yakov Amihud, New York University kets for bonds and property with equities. trade far more frequently than their com- They are broadly comparable in size (see ponents. In March 2020, as volatility shook chart 2). Yet bonds and buildings change er. Traders either attempt to match a seller markets, BlackRock’s biggest investment- hands in different ways. This is largely the with a buyer, or look at recent transactions grade corporate-bond etf traded 90,000 result of fragmentation. There are 4,400 in similar bonds as a guide. Pricing proper- times a day. The top five holdings of the listed firms in America. An investor buying ty is a similar, but more glacial, process. fund traded just 37 times. Price accuracy a share in at&t does not care which one Fragmentation long seemed a hurdle to means lower trading costs—a step towards they hold—it is as if they were picking from making the bond market as rapid-fire as frictionless markets. a set of identical marbles. Now imagine the stockmarket. An institutional investor Trading technology is also improving. they want to buy an at&t bond. It is as if a wanting to buy a bond would talk to two or MarketAxess was set up to make it easier single marble had been smashed into hun- three big banks or brokers that dominate for investors to contact all the big banks’ dreds of pieces, each of them different. the market. But this is starting to change bond desks and brokerage firms—around There are 224 at&t bonds alone: each pay thanks, in large part, to open-ended fixed- 20 firms in total—at once. But the platform different coupons, mature at different income etfs, funds that hold diversified has since introduced open trading, which times and are worth different amounts. baskets of bonds. These enhance price dis- functions almost like an exchange, letting And there are 300,000 distinct corporate covery and trading volumes in two ways. all participants interact with each other. bonds in America. Now imagine the inves- The result is that trading need not be solely tor wants to buy property. All those marble All the world’s a market dependent on banks for liquidity, says Mr fragments have been ground into sand. The first is through their design. Some of Schiffman. Around a third of the transac- Available figures suggest there are 5m-6m the fixed-income etfs offered by Black- tions MarketAxess facilitates on its plat- commercial buildings and more than 140m Rock, an asset manager, have 8,000 or form are such “all-to-all” transactions. dwellings in America, each unique. more different bonds in them. As demand The next phase might be automating Fragmentation chills trading activity. for an etf rises, it begins to trade above the bond trading. Overbond, a fixed-income The market for stocks is bustling. at&t fair value of its component bonds (ie, at a analytics firm, consolidates trading data shares change hands 40m times a day premium). “When one of our etfs trades at that it plugs into a machine-learning algo- (though some investors will hold for years, a premium we expect to see creation activi- rithm. The algorithm finds recent transac- and high-frequency traders might hold for ty,” says Samara Cohen of BlackRock. The tions in similar bonds and spits out im- less than a second). Small-cap stocks—re- firm works with a handful of marketmak- plied prices. It was the arrival of fast cent action in GameStop aside—tend to ers, which have an incentive to expand the serverless cloud computing that helped the trade less frequently. size of the etf when it trades at a premium. algorithm mimic a human trader in real Bonds are stickier and dearer to trade. Jane Street Capital, one such marketmaker, time, says Vuk Magdelinic of Overbond. Even the most liquid of at&t’s bonds only might offer BlackRock a portfolio of 400 In less liquid assets, like private equity 1 trades a few hundred times a day. “Some bonds are like museum pieces: they get put away in insurance companies’ portfolios, Go with the flows 2 never to trade again,” says Richard Schiff- United States, 2020 man of MarketAxess, a trading platform. At the stickiest end is property. A slice of Market capitalisation, Daily trading Asset classes by liquidity real-estate investment is offered to the $trn volume, $trn Illiquid Semi-liquid Liquid Risk§, % 40 masses, via listed trusts. But the big invest- 80400 0.80.40 ments, managed by private-equity firms, Private equity Liquid debt 30 are open only to institutions like pension securities* funds or wealthy individuals. Houses, too, 20 turn over slowly. Buyers and sellers must Equities Equities be painstakingly matched. Sellers in Amer- Property** 10 ica pay a meaty 5-6% commission. Just 5% Less liquid High-yield corporate bonds of homes change hands a year. debt† Government bonds 0 Low transaction volumes make it diffi- 20151050-5 Property‡ cult to price assets. The price of a share in Ten-year expected return, % at&t can be arrived at instantly. Some *Treasuries and mortgage-backed securities †Corporate bonds, municipal bonds and other debt securities ‡Residential and commercial properties and transactions §Variation in expected return **Real-estate investment proxy, published by BlackRock bonds, like recently issued Treasuries, are Sources: Cboe; SIFMA; Zillow; National Association of Real Estate Investment Trusts; BlackRock; The Economist easy to price too. Older issuances are tricki- 58 Finance & economics The Economist February 6th 2021

tainer ships) and private credit. In 2015 the Securities and Exchange Commission changed its rules on “mini” initial public offerings (ipos), increasing the amount that can be raised to $50m. A clutch of firms have since listed artworks and classic cars. Even in residential property, the most sluggish and expensive market of all, firms are using technology to improve efficiency. “When we thought about what makes a properly functioning marketplace, it all came down to price discovery and data,” says Rich Barton, the founder of Zillow, an “i-buying” firm, which acts like a marketmaker for houses. After a decade gathering data on every home in America, it can now plug a property’s characteristics into machine-learning algorithms to price them, just as Mr Magdelinic plugs in characteristics of bonds. Zillow buys homes based on the algorithm’s assessment, taking them onto its balance-sheet. It then sells these on its platform. 2 and property, the seeds of change have just match those keen to exit the fund with oth- There is evidence this is pushing down been planted. To smaller investors, illi- ers buying in, using third-party valuations. agents’ fees. Commissions are dropping quidity can be a curse: nervous regulators Other startups want to go even further. quickly in areas in which i-buyers operate. try to restrict access to illiquid assets. But Regulation is helping them. Only accredit- A study by Mike DelPrete of the University for institutions, it is a boon. Private-equity ed investors can invest in property, ven- of Colorado suggests that the fees i-buyers pitch books chatter about the “illiquidity ture-capital funds or hedge funds. “Accred- pay to buyers’ agents are falling. In places premium” their investments earn. The re- ited” once meant the rich, those earning such as Phoenix, Dallas, and Raleigh the sult is that private markets hold appeal for more than $200,000, or worth more than fees paid to agents have dropped by around certain types of investors that are willing $1m. But a rule change in 2017 means that 0.5-1 percentage points in a little over a and able to lock their money up, but not those with professional experience or year. In Atlanta they have fallen by half in others. A quarter of university endow- knowledge are now eligible too. just two years. ments and a sixth of sovereign-wealth This change has fuelled the growth of Bring these developments across dispa- funds’ capital are invested in them. By con- startups offering property investments to rate markets together, and it seems clear trast, insurers and retail investors plough the masses. One such firm is Cadre, set up that technology is making it possible for li- just 1% of their capital into private markets. in 2014. Ryan Williams, its co-founder, who quidity, price transparency and competi- previously worked at Blackstone, an alter- tion to crop up in a variety of financial mar- And all the men and women traders native asset-manager, wants to build an ex- kets. True, the markets for art, bonds and This too could eventually change. For one, change for commercial property that al- houses will never be quite as frictionless as firms in private markets are beginning to lows people to trade stakes in buildings, the stockmarket. Mr Schiffman thinks Tes- create funds that can expand or shrink as almost like a “digital stockmarket”. la’s bonds are unlikely to be as exciting as they gain or lose clients, an innovation that Cadre finds an investment opportunity its shares. The clue is in the name. “It is echoes that of bond etfs. Investors typical- with a life of around five or seven years and fixed income!” he laughs. No one will make ly buy into private markets when a fund lists it on its platform. Investors can buy a snap decision to buy or sell a house—be- manager raises capital. The capital is pieces of it through the site. Every quarter, cause they have to live in it. locked up for a decade or more, and used to rental income is paid out and investors can buy 20 or so companies or real-estate in- choose to cash out through a trading sys- They have their exits and entrances vestments over several years. But in Janu- tem. “We provide a quarterly valuation for Yet the oncoming rush of liquidity should ary Hamilton Lane, an asset manager, their investment, and they can choose to worry institutional investors. Many help launched a private-equity and private- sell all or some of their stake at a range of their customers gain exposure to a basket credit fund that circumvents this dynamic prices,” says Mr Williams. This secondary of small companies, or to commercial by ditching the fundraising cycle. market typically clears quickly. property. But that often comes as part of a “When a [private-equity] fund manager Low fees are likely to be part of the draw. pricey package deal: clients must also buy buys a company for their fund they may ask Cadre charges a 1% fee on any cash deposit- the slick advice that comes with it. Once it us to partner with them for the equity for ed on the platform and an annual manage- became possible to buy exposure alone in the project,” says Drew Schardt of Hamil- ment fee of 1.5%. This is just a quarter of the stockmarket, many of them ditched ton Lane. This is a cheaper way of getting what an investor might pay a traditional al- their stock-pickers. access, he notes: direct or co-investment ternative-asset manager. The firm’s clients Now price transparency and liquidity deals do not have any underlying fees at- include the establishment: Goldman seem bound to deliver fierce fee competi- tached to them. These deals come along Sachs, a bank, is spending $250m on behalf tion in other asset markets. Retail inves- fairly regularly, allowing the fund to grow of its wealth-management clients. But in- tors may one day be able to stuff their cash with demand. It can also shrink: the fund is dividuals are stepping in, too. into a portfolio of low-fee funds in every- structured so that its investments mature Yieldstreet, which was founded in 2015, thing from stocks and bonds to art and regularly. They should do so at a rate of 20% offers property investments as well as property. It is this, rather than gyrations in a year, fulfilling the limited redemptions those in snazzier alternatives like art, ma- GameStop stock, that will give retail inves- the firm plans to offer. It also plans to rine finance (such as the funding of con- tors more power over Wall Street. 7 The Economist February 6th 2021 Finance & economics 59

The new intermediaries value. The decision outraged users and was parent company owns Citadel, a hedge condemned by lawmakers on both sides of fund. It had bailed out Melvin Capital, one Pay-per trade the aisle. Robinhood contends the decision of the funds short-selling GameStop, reflected its obligations to the dtcc, a which had been targeted by the army of re- clearing-house that settles most equity tail investors. trades. There is a two-day lag between an Users have questioned whether these equity trade and its settlement, when the links played some part in Robinhood’s de- NEW YORK buyer gets their share and the seller re- cision to halt buy orders. (As has Elon The rise of high-speed marketmakers ceives their cash. In the interim, brokers Musk, the boss of Tesla, who nicknamed and payment for order flow must post collateral for users’ trades. Mr Tenev “Vlad the stock impaler” when he rom one perspective, retail stock trad- Vladimir Tenev, one of Robinhood’s interviewed him about the decision on so- Fers have never had it so good. There is founders, said he received a “nerve-wrack- cial media on January 31st.) Mr Tenev has fierce competition among brokers, including” call from the dtcc as GameStop prices said “we absolutely did not do this at the di- ing the likes of Charles Schwab and Fideli- surged, asking him to post $3bn in collater- rection of any marketmaker or hedge ty, for their business. This broke out into an al. To meet these demands, the firm drew fund.” And Citadel has said it is not in- all-out price war in 2019 when these firms down its credit lines with banks and raised volved in, or responsible for, any retail bro- cut stock-trading commissions to zero, $1bn in capital. (It has since raised a further ker’s decision to stop trading. four years after Robinhood, a startup pro- $2.4bn.) And to limit the amount of collat- But questions about the ethics and mising commission-free trading, came on eral it would have to post, it also temporar- prevalence of the practice, which is banned the scene. Retail participation in stock ily halted buy orders for certain stocks. in Britain and Canada, are likely to linger. trading is at a new high. Users decried the decision. Robinhood The GameStop episode has drawn atten- This happy picture is somewhat mud- earned around $200m from pfof in the tion to a group of tech-savvy high-frequen- died by the practice of payment for order fourth quarter of 2020 (see chart). Last year cy marketmakers, notably Citadel, that has flow (pfof). Instead of charging users for most of its orders flowed through Citadel largely replaced banks as the main inter- each trade, brokers are paid by marketmak- Securities, a marketmaker run by Ken Grif- mediaries of stockmarkets. They stand in ers to direct users’ trades—or “order fin, a Chicago-based billionaire. The same between market participants and stock ex-1 flow”—through them. Marketmakers take small profits on the difference between the WallStreetBets price that a broker’s user pays and that at which a share is offered for sale in the market. The mania around GameStop, a seller Meme team of video games, has put the practice, and its practitioners, in the spotlight. How the Reddit community of 8m “degenerates” works On January 28th Robinhood decided to suspend buy orders for GameStop, after the ike 4chan found a Bloomberg the world’s richest man, who has ex- retailer went viral in a forum on Reddit, a “Lterminal.” This is how WallStreet- pressed support for the forum, features social-media site, and its shares spiked in Bets, a forum with 8.5m followers on heavily in its memes, accompanied by Reddit, a social-media site, describes statements of devotion, such as “Daddy itself. 4chan is an older site with a looser Musk is taking us all to Mars.” The pecking order moderation policy that results in dis- Financial markets are the perfect Payments for order flow, Q4 2020, $m cussions ranging from the hilarious to focus for the community because they the illegal. Bloomberg terminals are are ever-changing, constantly offering Marketmaker Broker expensive computers used by profes- new material for commentary. As The sional traders to access financial data. Economist went to press, the forum was The self-description is accurate. The coming to terms with the crashing price worlds of online discourse and finance of one of its favourite stocks, GameStop. have collided in spectacular fashion over The “degenerates”, as its followers call Robinhood Citadel 196.5 the past two weeks, dominating head- themselves, urged each other not to sell 249.4 lines and swinging members’ fortunes their holdings, calling on the community up and down. to continue sticking it to the hedge funds The forum has already become a short-selling the stock. Those who hold subject of study. A paper published on are “diamond hands” and heroes. Those January 28th by sociologists at the Geor- who sell are pathetic “paper hands”. Global Execution TD Ameritrade gia Institute of Technology concludes It is tempting to dismiss WallStreet- Brokers 84.8 128.3 that, despite appearing chaotic and Bets and the GameStop saga as a one-off offensive to outside observers, to its outburst from the murky corners of the members WallStreetBets represents a internet. That would be a mistake. The G1X 49.4 real and valuable online community. researchers say the forum is an example E*Trade 97.4 The researchers spent hundreds of of a “third place”, a term in social science hours reading posts and interviewing for a hub that is not home or work; Virtu 37.9 members. They say that the forum’s foul churches, cafés and barber shops are all language and crass memes, mostly in the examples from the physical world. It may Wolverine 37.0 Charles Schwab 44.5 form of humour, serve as a barrier to be baffling, but understanding the com- entry—new arrivals who are not commit- munity is worth the effort. Not least Dash Financial Fidelity 16.9 ted to learning the community’s me- because, as one user pointed out, even if Technologies 25.3 metic language are swiftly driven out. the collective holding of stocks hasn’t worked this time, it can always try again. Source: Company reports They also act as social glue. Elon Musk, 60 Finance & economics The Economist February 6th 2021

2 changes, matching trades in microsec- thousands of dollars using Chinese credit Wirecard onds. Though they take orders from all cards, only to later cash them out in Hong sorts of institutions, including hedge Kong dollars. In Macau, plastic watches After months of funds and pension funds, they typically once sold for $10,000. Upon swiping their only pay for orders from retail brokers. Chinese cards, buyers received the tawdry dithering... That in itself is not necessarily suspi- timepiece along with a stack of dollars. cious: marketmakers regard retail order China’s regulators have sought to crush flow as “friendly”. Institutions might “run these schemes, wary of outflows of capital BERLIN ...Germany’s finance minister plans to over” a marketmaker by placing orders in from the country. Yet they have also ac- overhaul its discredited watchdog several places simultaneously, or place an knowledged the very real demand for over- “iceberg” order, one much larger than it seas investments. A series of reforms have hen matthew earl first called the first appears. Both strategies make it hard been launched over the past two decades to Wwhistleblower hotline of BaFin, Ger- for the marketmaker to profit on trades. Re- construct a closely monitored regime for many’s financial regulator, to report suspi- tail orders carry no such risk. cross-border investments, mostly catering cious business practices at Wirecard, the Much of the scrutiny, though, is likely to institutional investors. Stock Connect, person who picked up the phone said he to rest on Robinhood. The online broker which since 2014 has allowed Chinese in- could not understand English well enough. earns a lot more from marketmakers than vestors to buy shares in Hong Kong, helped The London-based short-seller, who co- its peers do. This is because it charges make the territory the world’s best-per- wrote a report in 2016 alleging fraud at the more: for every 100 shares Robinhood’s us- forming major stockmarket in January. payment-processing company and bet on a ers traded in companies listed in the s&p Money from the mainland poured into fall in its share price, rang again. His re- 500 in the fourth quarter of 2020, it collect- stocks such as smic and China Mobile, spondent simply hung up. “That is when I ed an average of 41.8 cents from market- which have been, or face being, delisted gave up,” Mr Earl told a parliamentary in- makers. Charles Schwab, by contrast, col- from the New York Stock Exchange, and quiry into the regulatory failings that al- lected just 11.7 cents. have been removed from some msci indi- lowed the Wirecard disaster to happen. Robinhood has been in trouble with ces. Buy trades from Shanghai to Hong BaFin has been the target of criticism regulators before. In December the Securi- Kong hit HK$423bn ($55bn) in January, up ever since the spectacular collapse of Wire- ties and Exchange Commission told it off by 155% from December. China’s retail in- card in June 2020, which followed the Ba- for not telling users it made money from vestors played a significant role in the rally. varian company’s admission that €1.9bn pfof. The commission also found the bro- In coming weeks regulators in Hong ($2.1bn) of funds, nearly a quarter of its bal- ker failed in its duty to execute users’ trades Kong and China will take another step to- ance-sheet, “probably do not exist”. Olaf at the best possible price. Robinhood paid wards opening up, with an investment Scholz, the finance minister, dithered over $65m to settle the charges. (It has said the channel called Wealth Management Con- holding the bosses of the regulator ac- fine relates to historical practices.) nect. This will allow rich individuals to buy countable, as well as over the announce- Mr Tenev is due to testify in front of the unlisted investment products in Hong ment of changes to Germany’s piecemeal House Financial Services Committee on Kong, opening a new world of assets to system of financial regulation. The emer- February 18th. The subject of pfof will in- those who qualify. But rather like crossing gence of allegations of insider trading in evitably come up. As its share price tum- the bridge between the jurisdictions, the Wirecard shares by a BaFin employee was bles, GameStop’s time in the spotlight may technical details of the plan are onerous. the last straw. On January 29th Mr Scholz soon be over. For Robinhood and pfof, For a start, the scheme will be open only fired Felix Hufeld, the boss of BaFin, and though, this is perhaps just the start. 7 to people living in the Greater Bay Area, a Elisabeth Roegele, Mr Hufeld’s deputy. region of about 72m people in Hong Kong, Four days later he presented his plans for a Macau and much of China’s Guangdong regulator “with more bite” that, he says, China’s capital outflows province. To use the channel, investors can be as good as the best in the world. must open an account at a bank in China Mr Scholz’s seven-point roadmap, Border crossings and then travel to Hong Kong to open a sep- which Roland Berger, a consultancy, arate account in person—a difficult task helpedtodraft,containssnazzyAnglo-Sax- during the covid-19 pandemic. The invest- on jargon, such as “data-intelligence unit”.1 ment size, at1m yuan ($155,000) a year, will be rather limited for China’s wealthy punt- HONG KONG ers. The overall programme is to be restrict- Mainland investors’ access to foreign ed to 150bn yuan ($23bn) a year, a drop in assets expands—a bit the ocean next to China’s $3.2trn in for- he 55-kilometre Hong Kong-Zhuhai- eign-exchange reserves. TMacau bridge is a quick drive but a tech- The design of Wealth Management Con- nical challenge. The trip requires motorists nect underlines Beijing’s desire for unwa- to buy insurance in three jurisdictions. vering control over its capital account even Those making the jaunt from Hong Kong to as it ever so gradually opens up. Much like Macau must still buy a Chinese policy, be- Stock Connect, the new scheme will oper- cause the waters below the bridge belong to ate in a closed loop that does not allow con- the mainland. Traffic is low. vertibility beyond the target investments. Such are the barriers to movement in Cashing out can be done in yuan only. Pro- and out of China. For most people, attempt- ceeds must be sent back to the mainland. ing to shift money between China and the “Regulators are still very cautious on capi- territories can be even more frustrating. tal outflows,” says a partner at a large ac- For many years insurance products sold in counting firm. Whether such limited expo- Hong Kong created a bustling business sure to offshore assets replaces the whereby rich customers from the main- demand for pricey plastic watches in Ma- land bought policies worth hundreds of cau remains to be seen. 7 Scholz reflects on Wirecard The Economist February 6th 2021 Finance & economics 61

2 The finance minister wants to hire more ket participants and systematically regis- ties and Markets Authority criticised BaFin experts, in particular auditors: currently, ter complaints from whistleblowers. for its “deficient” handling of Wirecard. only five of the roughly 2,700 employees of Not everyone thinks Mr Scholz has gone Mr Scholz did not announce BaFin’s the watchdog are auditors. A “focused- far enough. Fabio De Masi, a member of next boss; Mr Hufeld departs on April 1st. oversight body” is to supervise complex parliament from the Left, a socialist party, Jörg Kukies, a junior finance minister and a companies in their entirety. (The supervi- who sits on the Wirecard inquiry, argues former banker at Goldman Sachs, has been sion of Wirecard was split between BaFin that Germany needs an elite forensic team talked of as a candidate, but says he does and other agencies, some at the state, rath- that is paid top euro. He also wants the not want the job. Mr Scholz says he is look- er than federal, level.) agency to be independent of the finance ing around the world for a top finance ex- A task force will carry out forensic au- ministry. Danyal Bayaz, a parliamentarian pert who can mark a new start at the regu- dits of companies suspected of fraud. Ba- with the Greens, finds the reform “a bit lator. If they are to communicate with Fin’s it system will be improved. Rather thin”. He had been looking for a mention of employees manning the hotline, though, than hanging up on calls, the reformed reg- co-ordination with other European Union any foreign appointees will need to brush ulator will encourage exchanges with mar- members. Last year the European Securi- up on their German. 7 Buttonwood Shark attack

Why the WallStreetBets crowd are able to profit from predatory trading here are no loyalties on Wall crowd are hedge funds, which are happy to driving the price to $90. “TStreet. When you smell blood in trade every day. In this world there are only This example is adapted from the the water, you become a shark.” The two hedge funds. Each has ten shares in a model in “Predatory Trading”, a paper by sentiment—or lack of it—would not look company. Each share has an expected Markus Brunnermeier and Lasse Pe- out of place on r/wallstreetbets, the locus value of $150 in the long run, but in the dersen published in 2005 in the Journal of for a new breed of stockmarket hammer- short run can trade at any price. Finance. The model elegantly highlights heads, which has helped push up the Say the stock falls to $100 a share—low the key features of financial shark attack. share prices of tech darlings and enough to force one of the hedge funds to Markets must be illiquid (ie, large trades bombed-out companies to nosebleed rush to sell its entire holding, perhaps can move prices in the short run). Trad- levels, crippling professional short- because its investors panic. The trouble is ers must have limited capacity, meaning sellers in the process. But the quote the market for the stock is not very liquid. they cannot sustain losses beyond a comes from a boomer, not a millennial: The slow-money crowd will buy two certain point—for regulatory reasons, “Confessions of a Wall Street Addict”, by shares per day but the price must get because of redemptions by investors or Jim Cramer, a trader-cum-tv-star. He is cheaper by $2 a day to induce them to because of the psychological pain. describing the remorseless logic of pred- trade. In a world without predatory trad- The authors draw out some implica- atory trading. ers, the distressed hedge fund manages to tions. The more illiquid the market, the It is something that is discovered sell its stock over five days, with the last more scope for predators to profit: it anew by each generation of traders—the share going for $90. takes longer for the prey to escape their dark art of picking off investors who are But the other hedge fund knows the positions, so the price falls by more. The in distress, for profit. Every big market prey is wounded. So it becomes a predator. quicker the distressed trader sells, the meltdown is made worse by it. Every It joins in the selling. With only a few fewer losses it makes. Any delay allows melt-up—including the current one— buyers, it now takes the distressed seller the predator to trade ahead of (front-run) makes prey of those who are brave ten days, rather than five, to get rid of its the prey. The more predators there are, enough to sell it short. Those schooled in shares. The final one is sold for $80. The the less profitable predation is. the idea of efficient capital markets will predator is then free to buy back shares at a How does the WallStreetBets episode be puzzled by the latest goings-on. The lower price than he sold them for. He buys fit this template? The predators are act- textbooks say this sort of thing cannot the shares as fast as he can, over five days, ing in concert, so their strategy may be happen. They assume there is abundant more effective. Better still, the prey are capital that can be put to work to correct short-sellers, who bet on stocks falling. prices that have got out of whack. They are especially vulnerable: the more But in the real world, and in the right the price rises, the more they lose. Their conditions, predatory trading is a profit- potential losses are unlimited. And their able strategy. Prices can be pushed to positions are often common knowledge. extremes before they are pulled back to This is why a lot of hedge funds put sensible levels. All it takes are illiquid their trades through several brokers in an markets, traders that are bleeding and attempt to mask them. Even so, the other traders who can smell the blood. incentive for brokers to front-run a To understand how this works, pic- struggling customer is hard to resist— ture a world in which there are two types and not always resisted, as Mr Cramer of investor—fast and slow. The slow- recounts in his book. “There was some- money investors are pension funds. They thing about a dying client that sent these eschew short-term trading. When they brokers to go to the untapped pay phone enter the market it is in a measured way, downstairs—all brokerage calls are to buy and sell when share prices look recorded—and tell their buddies.” There unduly cheap or dear. The fast-money really are no loyalties on Wall Street. 62 Finance & economics The Economist February 6th 2021 Free exchange The natural question

A new report puts the eco into economics ty, exaggerating human capabilities. The inclusion of natural capital enables an analysis of the sustainability of current rates of economic growth. As people produce gdp, they extract resources from nature and dump waste back into it. If this extraction and dumping exceeds nature’s capacity to re- pair itself, the stock of natural capital shrinks and with it the flow of valuable environmental services. Between 1992 and 2014, according to a report published by the un, the value of produced capital (such as machines and buildings) roughly doubled and that of human capital (workers and their skills) rose by 13%, while the estimated value of natural capital declined by nearly 40%. The demands humans currently place on nature, in terms of resource extraction and the dumping of harmful waste, are roughly equivalent to the sustainable output of 1.6 Earths (of which, alas, there is only the one). To reduce these demands without slowing growth would be a monumental task. Between 1992 and 2014, Professor Dasgupta estimates, the efficiency with which humans transformed natural capital into gdp grew at about 3.5% a year. To stop natural capital declining by 2030 while maintaining current growth trends, however, would require growth in efficiency of about 10% a year. Even these sorts of rough calculations fail to capture fully hu- hat is the contribution of nature to the economy? Students mans’ potential vulnerability, because complex natural systems Wof economics are well acquainted with production func- can flip from one equilibrium to another under pressure. The cost tions, which work out how inputs like capital and labour combine of restoring an ecosystem that has been destroyed can be larger to yield output. These functions make all sorts of assumptions, than the value of the services it provided when healthy—assuming many of which economists know well (that the contributions of restoration is possible. Deforestation of the Amazon rainforest be- capital and labour are subject to diminishing returns, say). Others yond some critical threshold is likely to cause an abrupt transfor- rarely get a thought: that a mix of inputs that generates output on mation of the forest into savannah, a change that may prove irre- Earth will not on Venus, for example. The breathable air, drinkable versible. Indeed, Professor Dasgupta argues that economists water and tolerable temperatures that allow humans to do every- should acknowledge that there are in fact limits to growth. As the thing they do, and the complex ecosystems that maintain them, efficiency with which we make use of Earth’s finite bounty is tend to be taken for granted. This is more than a mere analytical bounded (by the laws of physics), there is necessarily some maxi- oversight, reckons a new report on the economics of biodiversity mum sustainable level of gdp. commissioned by the British government, and produced by Partha This is a striking admission from an economist. For now, these Dasgupta of the University of Cambridge. By overlooking the role ultimate limits to growth are not yet binding. There is still consid- nature plays in economic activity, economists underestimate the erable room for efficiency to improve (in part, the review notes, be- risks from environmental damage to growth and human welfare. cause of government subsidies, worth 5-7% of global gdp, which Professor Dasgupta’s review is similar in spirit to a report on cli- encourage environmentally wasteful activities). But a more press- mate change by Nicholas Stern, commissioned by Britain’s Trea- ing worry is that activity pushes nature beyond critical thresh- sury in 2006, and now widely regarded as a seminal economic olds—in terms of global temperatures, the chemistry of the work on the subject. It does not seek to play on the heartstrings oceans, the productivity of the soil, or something else—before hu- with tales of starving polar bears. Rather, it makes the hard-headed mans are able to recognise the danger and react. case that services provided by nature are an indispensable input to economic activity. Some of these services are relatively easy to dis- Down to earth cern: fish stocks, say, in the open ocean. Others are far less visible: That economics stands to benefit from a better understanding of such as the complex ecosystems within soil that recycle nutrients, nature’s contributions to activity seems clear enough. But whether purify water and absorb atmospheric carbon. These are unfamiliar a better understanding of the economics of biodiversity is essen- topics for economists, so the review seeks to provide a “grammar” tial to improving humans’ relationship with nature is another through which they can be analysed. question. Economists’ work on climate change has yielded in- The report features its own illustrative production function, sights, for example, but it is less clear that the profession has im- which includes nature. The environment appears once as a source proved the policy response. of flows of extractable resources (like fish or timber). But it also Professor Dasgupta hints at this problem by appealing to the shows up more broadly as a stock of “natural” capital from which “sacredness” of nature, in addition to his mathematical models humans derive “regulating and maintenance services”: the work and analytical arguments. Clear thinking about nature can benefit of environmental cycles that refresh the air, churn waste products from framing it in economic terms: as an asset and input to pro- into nutrients, and keep global temperatures hospitable, among duction, the overuse of which is a problem of incentives and prop- other things. With this new production function in hand, econo- erty rights. Building the political will to prevent irreparable dam- mists can properly account for nature’s contributions to growth. age to the environment, though, may require an appeal to values Functions that omit nature misattribute its benefits to productivi- that are beyond the purview of economics. 7 Science & technology The Economist February 6th 2021 63

Making vaccines the molecular factories, known as ribo- somes, which do the actual manufactur- Doing the do ing. In the case of covid-19, the instructions in question generate spike, a protein found on the surfaces of particles of sars- cov-2, the virus that causes this illness. Suitably packaged and delivered, such mrna can induce some of the body cells of the inoculee to turn out spike, which the Vaccines must now be produced on a scale greater than ever before. That is hard immune system then learns to recognise. ine vaccines against covid-19 have al- two abstracted from the target virus, or To make this type of vaccine you therefore Nready been approved in one jurisdic- even just isolated target-viral proteins. The have to generate lots of the relevant mrna. tion or another, with many more in various point is that the vaccine should introduce That process does indeed start with stages of preparation. That this has hap- into the body, or induce that body to make, cells, though they are bacterial cells, rather pened within a year of the illness coming something which the immune system can than those of animals. But it does not end to the world’s attention is remarkable. But learn to recognise and attack if the real tar- with them. The bacteria used, normally a it is one thing to design and test vaccines. It get virus should ever turn up. well-understood species called E coli, have is another to make them at sufficient scale spliced into them a dna version of the part to generate the billions of doses needed to In with the new of the sars-cov-2 genome which describes vaccinate the world’s population, and to do The alternative method, developed recent- spike. (Confusingly, as is true of many vi- so at such speed that the rate of inocula- ly and employed to make the mrna vac- ruses, sars-cov-2’s actual genes are made tion can outpace the spread and possible cines, such as those of Moderna and Pfizer, of rna.) The bacteria are then allowed to mutation of the virus. that the pandemic has stimulated the in- multiply for a few days before being bro- Broadly, there are two ways of making vention of, requires culturing cells only at ken open, their dna filtered out, and the antiviral vaccines. One, tried and trusted, the beginning of the process. mrna is the dna versions of the spike gene extracted as involves growing, in tanks called bioreac- substance that carries instructions about what is known as a dna template. tors, cell cultures that act as hosts for vi- how to make a protein from a cell’s dna to Once purified, this template is mixed ruses which are then used in one way or with a soup of pertinent enzymes and fed another to make the vaccine in question. Also in this section molecules called nucleotides, the chem- Cells grown this way can be of many → ical “letters” of which rna is composed. types—insect, human kidney, monkey kid- 64 Viral variants and vaccination Thus supplied, the enzymes use the tem- rna ney, hamster ovary—as can the resulting 65 Daughters and divorce plates to run off appropriate m s by the vaccines. These may be weakened or killed zillion. These are extracted and packaged versions of the virus to be protected 65 Oases of plastic in the deep sea into tiny, fatty bubbles to form the vaccine. rna against, or live viruses of a different and 66 How fish grew legs Both the cell-culture and the m ap- less-dangerous sort that carry a gene or proaches have benefits and drawbacks. 64 Science & technology The Economist February 6th 2021

The former has the advantage of being well gmp facilities. Andrey Zarur, boss of established. Versions of it go back to vac- GreenLight Biosciences, a firm in Boston cine-making’s origins. But keeping cultur- that is developing an mrna vaccine, says ed animal cells alive and healthy is a tricky his company has employees whose entire business. A whole subfield of bioengineer- job, at present, is to work the phones trying ing is dedicated to this task. Vaccine-mak- to find gmp facilities in which to make ers who rely on live cultures constantly their vaccine. There is, though, nothing struggle with yields. Using this method to available. He is therefore looking to buy make a lot of vaccine, fast, is hard. firms whose vaccine candidates have turn- It was difficulties of this sort that Pascal ed out not to work, simply in order to ac- Soriot, boss of AstraZeneca, cited on Janu- quire the facilities in question. ary 26th in defence of his firm’s failure to Supplies of raw materials such as nu- provide vaccine supplies which the Eu- cleotides are also tight. According to Dr Za- ropean Union claimed it had been prom- rur, Thermo Fisher, an American chem- ised. AstraZeneca is an Anglo-Swedish ical-supplies company, has spent $200m company that, in collaboration with Ox- on a new facility in Lithuania to make ford University, created one of the first vac- these molecules, though the firm itself cines to be approved. As Mr Soriot told La would not confirm this. Repubblica, an Italian newspaper, “You On top of all this, the transport and dis- have glitches, you have scale-up problems. tribution of vaccines once they have been The best site we have produces three times made presents yet further challenges, and more vaccine out of a batch than the low- concomitant potential for hold ups. Vac- est-producing site.” cines must be stored in special non-reac- Viral variants and vaccination tive glass vials. Some, such as the current De-necking the bottles version of Pfizer’s mrna vaccine, must al- Enigma variations Maximising a bioreactor’s yield is as much so be kept at extremely low temperatures, an art as a science. The underlying health though that problem may go away soon. of the cells involved matters. So do envi- Drew Weissman, one of the inventors of ronmental conditions at the manufactur- mrna-vaccine technology, says producers ing site. That AstraZeneca has not been are now testing shots which are stable for Will variants of sars-cov-2 make able to meet its own production targets three months when kept at 4°C. vaccination harder? shows how hard it is to predict when the Once supply chains for both cell-cul- right balance of biology will be found. The ture and mrna vaccines have been scaled iruses evolve through natural selec- company says it can take six to nine up, and bottlenecks unblocked, the manu- Vtion. Whenever they replicate, changes months to start a production site up from facturing processes may face a different can creep into their genetic material. If ad- scratch, and that even this timetable is test—how quickly they can produce new vantageous, these will cause variants possible only by working with experienced vaccines to deal with new viral variants as sporting them to prosper. One conse- partners and at an accelerated pace. At the these emerge. The continued efficacy of quence is that such variants spread rapidly. moment, AstraZeneca is working with 25 approved vaccines against such variants is Predictably, then, new variants of sars- manufacturing organisations in 15 coun- not guaranteed, and it may be necessary to cov-2, the virus that causes covid-19, have tries to make its vaccine. make others (see following story). started to appear around the world. Four Producing mrna vaccines at scale has Here, the mrna approach may have an are particularly worrying. One, detected problems, too. The biggest is how to pro- advantage. Its production systems will re- first in Britain, in September, is believed to tect the mrna molecules both from the en- quire a simple tweak—the dropping in at be 30-50% more transmissible than the vironment they must travel through in or- the start of a dna template describing the original wild-type virus. A second, identi- der to reach the arm of their recipient, and new variant’s spike protein. Cell-culture fied in South Africa a month later, has been from the recipient’s own body, which will systems, by contrast, will have to be rebuilt linked to higher viral loads in throat and attack them as they journey to the ribo- to some degree for every new variant they nasal swabs. That makes it easier for it to somes which will transcribe them. aim to vaccinate against. spread. Two others emerged in America Protection from the environment is (July) and Brazil (December). And this week mainly a matter of having a strategically lo- Scale models a variant of the British variant has also cated set of refrigerators, known as a cold Producers, such as those in China, who use been detected, now sporting a mutation al- chain. Protection from the body, though, is older-fashioned cell-culture techniques, so found in the South African variant. where the fatty bubbles come in. will have to recalibrate their entire oper- There is no strong evidence to suggest that Production of these bubbles was a cot- ations. Newer systems, like AstraZeneca’s, any of these new variants is more deadly tage industry before the pandemic. A small which use cells specially designed so as than the wild type, but researchers are wor- Austrian firm, Polymun Scientific, is one not to be influenced by the new version of ried about the risk of one or more of them of just a handful that can make them. Their the spike gene in the viruses they are carry- evading existing vaccines. main previous use was in niche cancer ing, should be able to get on track in the The particular causes of this concern treatments. Scaling up their production, time it takes to start a culture from are mutations in the gene that encodes a which is happening right now, has never scratch—about a month. For mrna sys- protein called spike, which is found on the been done before and adds uncertainty to tems, Drs Weissman and Zarur say it would surfaces of sars-cov-2 virus particles. This the continued supply of mrna vaccine. take a couple of months to go from new protein is the means by which the virus There are other bottlenecks, too. In par- variant to large-scale vaccine production. gains entry to cells. b.1.1.7, the viral variant ticular, the factories in which vaccines are If variants resistant to the current crop of first found in Britain, has more than 20 made must be built to a high standard, vaccines do evolve, then that speed and mutations, not all of them in the gene for known as gmp, for “Good Manufacturing certainty in making new vaccines to com- spike. But one which is helps lock spike on- Practice”. There is currently a shortage of bat them will be essential.  to its target on the cell surface, a receptor The Economist February 6th 2021 Science & technology 65 protein called ace2. The variant first found Daughters and divorce is a daughter—an increase in probability of in South Africa, known as b.1.351, has fewer 1.8%. But in the five years when the first- mutations than b.1.1.7, but three of them Teenage rampage born is between the ages of 13 and 18, that appear to enhance resistance to antibodies increase goes up to 5%. And it peaks, at 9%, that people develop in response to the when the child is 15. In America, for which wild-type virus. the data the researchers collected were This enhanced resistance has caused sparser than those in the Netherlands, the concern that the variants in question numbers are roughly double this. Daughters provoke parental strife, might be able to evade immunity people Anyone who has—or has been—a teen- but only when they are teenagers had gained from previous infections or ager knows how turbulent those years can vaccination—particularly since all vac- aughters have long been linked with be. Surveys confirm that teenage daughters cines currently in use are intended to pro- Ddivorce. Several studies conducted in and fathers, in particular, get on each oth- voke an immune response to spike. Ac- America since the 1980s provide strong evi- er’s nerves. They also show that parents of cording to America’s Centres for Disease dence that a couple’s first-born being a girl teenage daughters argue more about par- Control and Prevention, variants will need increases the likelihood of their subse- enting than do the parents of sons, and to accumulate multiple mutations in spike quently splitting up. At the time, the re- that mothers of teenage daughters report to evade vaccine-induced immunity. Nev- searchers involved speculated that this significantly more disagreements with ertheless, the results of trials announced was an expression of “son preference”, a their partners over money, and become on January 28th showed that a jab made by phenomenon which, in its most extreme more open to the idea of divorce. Earlier re- Novavax, an American pharmaceutical form, manifests itself as the selective abor- search has also shown that one of the most firm, which was almost 90% effective in tion or infanticide of female offspring. common things parents fight over is how preventing symptoms of covid-19 in Bri- Work published in the Economic Jour- much they should control their teenagers’ tain, was only 50-60% effective in South nal, however, debunks that particular idea. personal choices, such as how they dress, Africa. Johnson & Johnson, another Amer- In “Daughters and Divorce”, Jan Kabatek of whom they date and where they work. ican firm, found a similar result when it the University of Melbourne and David Ri- In light of all this, it is intriguing to note tested its single-dose vaccine in South bar of Georgia State University, in Atlanta, that Dr Kabatek and Dr Ribar found one Africa, the United States and parts of Latin confirm that having a female first-born type of couple who seem immune to the America. Its vaccine, too, was less effective does indeed increase the risk of that child’s daughter effect: those in which the father in South Africa than in the other places. parents divorcing, in both America and the grew up with a sister. Having seen things That suggests b.1.351 is less amenable to ex- Netherlands. But, unlike previous work, somewhat from a sister’s point of view may isting vaccines than is its predecessor. their study also looked at the effect of the act as a sort of social inoculation.  Even so, the vaccines worked well enough girl’s age. It found that “daughter-divorce” to prevent serious disease in most cases. risk emerges only in a first-born girl’s teen- Vaccine-makers will have to continue age years (see chart). Before they reach the Marine ecology adapting their vaccines to keep up with age of 12, daughters are no more linked to mutations in coming years. This may be couples splitting up than sons are. “If fa- Plastic oases done by providing booster shots tailored to thers were really more likely to take off be- different variants, or by creating bivalent cause they preferred sons, surely they vaccines that work against both the origi- wouldn’t wait 13 years to do so,” reasons Dr nal strain and a mutant. Moderna, the Kabatek. Instead, he argues, the fact that maker of a vaccine that has already been the risk is so age-specific requires a differ- Pollution is boosting the amount of approved for use in several places, is plan- ent explanation, namely that parents quar- animal life in the depths ning to work on a booster that will enhance rel more over the upbringing of teenage the body’s immune response to b.1.351 and daughters than of teenage sons. he ocean deep, where pressure is high, could work in combination with all of the Taken over the years, the daughter ef- Tlight absent and nutrients scarce, is of- other leading vaccine candidates. Clinical fect, though real, is small. In the Nether- ten seen as a desert. But, as with other de- trials of this approach are scheduled to lands, by the time their first-born is 18, serts, it has oases. Hydrothermal vents, start in July, and should be completed 20.12% of couples will have divorced if that methane-gas seeps and whale corpses are within a year. Pfizer and BioNTech, the child is a son, compared with 20.48% if she hot spots for marine wildlife. And observa- partners who created another widely ap- tions reported in Environmental Science and proved vaccine, say they can produce a jab Technology Letters by Song Xikun of Xia- adapted to new variants in six weeks. Peak pique men University, in Fujian, and Peng Xiao- America’s Food and Drug Administration, Excess risk of divorce for couples with first-born tong of the Chinese Academy of Sciences’ that country’s medical regulator, has daughters compared with first-born sons*, % campus at Sanya, in Hainan, suggest these promised a “streamlined” process for au- 15 natural loci of biodiversity are now being thorising updated vaccines. This would be joined by unnatural ones made of plastic. satisfied by small trials intended to make ↑ Higher risk 10 Carried down slopes by submarine sure a modified vaccine triggers a suitable with daughters landslips, plastic objects accumulate in immune response, rather than the big, so- 5 patches in the deep. Dr Song and Dr Peng called phase-three trials required to test a 0 had seen pictures showing sponges, corals completely new product. and anemones on or near these accumula- Researchers, then, are still learning ↓ Lower risk -5 tions. This led them to wonder about their about how the new variants behave. But ul- with daughters 95% confidence ecology. So they went to have a look. timately the best way to stop a virus from -10 Their vehicle was Shen Hai Yong Shi, a evolving is to prevent it from spreading by 2520151050 deep-diving submarine that carries a six- whatever means are available. All the more Age of child person crew. This descended nine times reason, therefore, to vaccinate as quickly Source: “Daughters and divorce”, by J. Kabatek into the Xisha trough, a feature at the bot- and D. C. Ribar, the Economic Journal, 2020 *Of the same age and as widely as possible.  tom of the South China Sea, in search of 66 Science & technology The Economist February 6th 2021

The origin of land animals Getting a leg up

A tiny genetic alteration may have let vertebrates leave the sea bout 370m years ago, in the latter local skeleton. Most intriguingly of all, Apart of the Devonian period, the however, was that this considerable ancestor of all land vertebrates stepped anatomical shift was brought about by out of the ocean and began to take ad- the substitution in a single type of pro- vantage of the untapped riches found tein molecule, called Wasl, of a single ashore. This was a big step, both literally one of its amino-acid building blocks. and metaphorically, and evolutionary Wasl is a signalling protein. But it is biologists have long assumed that bring- not one which, as far as the team could ing about the anatomical shift from tell by searching through the literature functional fin to proto-leg which enabled on embryonic development, had previ- Denizens of the deep it to happen required a fortuitous coinci- ously been associated by anyone with the dence of several genetic mutations. This, process of limb formation in vertebrates. plastic objects. Dr Peng himself was on though, may not be the case. A paper just However, an experiment they then con- board for three of these trips. published in Cell, by Brent Hawkins, ducted on mice, which involved knock- It was a risky business. Submerged jun- Katrin Henke and Matthew Harris of ing out the gene that encodes Wasl, kyards of this sort often contain ropes and Harvard University, suggests the process resulted in deformation of the pertinent fishing nets that can entangle a subma- was propelled by a single genetic change bones in all four of the rodents’ limbs, rine’s propellers. Paradoxically, that was of the smallest sort possible. not just the forelimbs. Clearly, then, this why the researchers chose to visit in per- The better to understand the origin of protein does indeed play a role in tetra- son, rather than sending a robot. People on tetrapods, as land vertebrates are known pod limb formation. board are able to steer and avoid these haz- collectively to zoologists, the trio were The most recent common ancestor of ards more easily than a crew on a support looking at what happened to zebrafish (a zebrafish and mice predates even the ship who are relying on cameras to see common subject of experiments in Devonian. That gives lots of time for what is happening. developmental biology because they are patterns of embryonic development to To ensure their craft’s safety, the re- small, transparent and breed prolifically) have changed in the lines leading to searchers collected objects only from the when they made minor tweaks to those those two species—and, specifically, to edge of each dump, and also collected fishes’ genes. Searching through more have changed in the way that the fins of some by dredging. In all, they obtained 33. than 10,000 mutated specimens they modern fish develop. So the fact that Most were bags, bottles and food wrappers, noticed that one group of mutants sport- nowadays the mutation the team have but they picked up some derelict fishing ed an unusual pattern of bones in their discovered affects only the pectoral fin ropes and traps as well. pectoral fins. Instead of having four, they does not rule out the possibility of its As Dr Song and Dr Peng had hoped, had six. having also stimulated, way back then, these objects were teeming with life. When Intriguingly, the additional pairs were the arrival in the pelvic fin of the fishy they examined their finds in a laboratory, some distance from the body, and the progenitor of the mouse, of the bones they found nearly 1,200 individual orga- bones involved lay parallel with each now known as the fibula and tibia. It nisms representing 49 species of crusta- other in the way that the radius and ulna therefore looks quite possible that Drs ceans, corals, echinoderms, flatworms, do in the forelimb of a tetrapod (see Hawkins, Henke and Harris have found molluscs (see picture), polychaete worms diagram below). Moreover, and yet more the source of the crucial change that and fungi. They also discovered evidence intriguingly, the two new bones in- enabled the ancestor of mice—and of that some of these species were breeding. tegrated neatly with the fin’s muscles human beings, too—to scramble ashore There were egg capsules from four differ- and articulated well with the rest of the and leave the sea behind. ent types of snail, and a cocoon from a flat- worm known for parasitising crustaceans. This result suggests that accumulations Changing its stripes of plastic are, indeed, benthic oases. Data A zebrafish mutant develops limb-like bones in its fins from such depths are sparse. But 49 species is more than the 41 found in 2016 on a dead whale at the bottom of the Atlantic Ocean. Pectoral fin As to why organisms colonise the objects in these accumulations, the short answer is, “because they are there”. Most of the deep-ocean floor is covered with ooze, on which it is difficult to get a purchase ex- Normal Mutant version zebrafish Bones attached cept by burrowing. Solid objects suitable to shoulder Develops new bones that New Human for settling on are at a premium. Whether are not directly attached Fin rays to the shoulder. They form bones arm it is a good or a bad thing that people are joints with neighbouring adding to the number of these objects, and bones and are integrated thus to the richness of the benthic fauna, is into the musculature. a debatable point. What is not in doubt, though, is that even Earth’s remotest hab- Source: “Latent developmental potential to form limb-like skeletal structures in zebrafish”, M. B. Hawkins et al., Cell, 2021 itats cannot escape human influence.  Books & arts The Economist February 6th 2021 67

→ Also in this section 68 Chaos in Karachi 69 Climate-change ﬁction 69 The death of age 70 Proust and the people

France’s shame erary editor and broadcaster. He married Camille’s mother, Évelyne Pisier, a law pro- Open secrets fessor and one-time lover of Castro, after she left Bernard Kouchner, the twins’ father and a former foreign minister and co- founder of Médecins Sans Frontières. (Mr Kouchner has publicly praised his daughter for having the courage to speak out.) PARIS While decrying what he calls “personal at- The silence in France over the sexual abuse of minors is at last beginning to break tacks” against him, Mr Duhamel has re- t was a childhood wrapped in comfort, signed as head of the foundation that over- Ireverie and freedom. Long summers in La familia grande. By Camille Kouchner. sees Sciences Po, an elite Paris university, the south of France at the family home, Éditions du Seuil; 205 pages; €18 and from other posts. That has prompted a amid almond trees and lavender, literary Consent: A Memoir. By Vanessa Springora. cascade of other resignations, including friends and cousins, former Maoists and Translated by Natasha Lehrer. HarperVia; that of Élisabeth Guigou, a friend and So- acolytes of Fidel Castro. Dinners late into 208 pages; $27.99 and £12.99 cialist former justice minister, who presi- the night, when the familia grande would ded over an official commission—on in- gather to put the world to rights. Guests guilt and shame. The account is tightly cest. She has said that she knew nothing. went barefoot in the dried grass, and naked written, improbably controlled, and over- Reporting by Le Monde suggests that in the pool. The seasonal rituals reassured; whelming. At first, as a young teenager, she many in Mr Duhamel’s circle did know, but the political dreams inspired. had no real idea what was going on behind turned away. This is deeply disturbing. It is Until the day that Camille Kouchner’s that closed bedroom door, detecting only not just the scale of the problem that un- twin brother, whom she calls Victor, told “unknown smells” as her stepfather left. settles: a French poll found that one in ten her that their stepfather had visited his Her adoration of him blinded her to any people has been the victim of some form of bedroom in the night. “He stroked me, and wrong she might have sensed. Besides, was incest. It is also the complicit silence, par- you know…” They were, she writes, 14 years this not the lifestyle that their extended ticularly among an older generation that old. Victor was sworn by their stepfather to family embraced? In their Mediterranean tends to dismiss the #MeToo movement as silence. “If you talk about it, I will die,” he home an entire room was decorated with a form of bourgeois Anglo-Saxon puritan- implored his sister. The night-time visits posters celebrating May ’68. Her stepfather ism that has no place in France. “There is a continued for two or three years. It took flirted with his friends’ wives. The young tolerance both from society and the law, nearly three decades, and her mother’s were “offered” to older women. “Fucking is with a very serious degree of impunity,” death, before Ms Kouchner heard a lawyer our liberty,” her mother once told her. said Muriel Salmona, a psychiatrist specia- name this crime for what it was: incest. Ms Kouchner has lobbed a grenade into lising in sexual abuse. Under French law Now aged 45, and with Victor’s permis- the heart of the cosy Paris left-bank intel- incest (which covers relations with step- sion, Ms Kouchner has told her story in an lectual elite. For the stepfather in question parents) is not a separate crime, but an ag- attempt “to poison the hydra” of paralysing is Olivier Duhamel, a political scientist, lit- gravating circumstance in cases of rape or 68 Books & arts The Economist February 6th 2021

sexual violence. Moreover, the burden is are empowering a new generation. Thou- lieved to be a serious understatement. on even a minor under 15 to prove that sands of victims of incest have spoken out, It is far from the deadliest episode cov- there was no consent. under the hashtag #MeTooInceste. The ered in “Karachi Vice”, a gripping account But what constitutes consent? This is public prosecutor has opened a criminal of the city’s recent history by Samira Shack- the conundrum at the heart of Vanessa investigation into Mr Duhamel; Victor has le, a British journalist whose mother was Springora’s memoir. Published in French pressed charges against him for the first born in the city. Violence and death recur last year, it comes out in English this time. Mr Matzneff is under investigation with sickening regularity. In December month. Ms Springora was 13 years old, her for rape of a minor (he has called the allega- 2009 at least 43 people were killed when an parents having separated, when her moth- tions against him “unjust and excessive”). Ashura procession by Shia Muslims was er dragged her along one evening to a din- President Emmanuel Macron, too, has bombed by Sunni extremists, a blast fol- ner party with literary friends. One guest, weighed in, promising that “these words, lowed by the torching of over 3,000 shops. who she later learned was Gabriel Matz- these cries, nobody can ignore them any In September 2012 hundreds died in a fire neff, a novelist, could not take his eyes off longer.” A bill going through parliament at a textile factory. In 2014 the internation- her. “No man had ever looked at me like will criminalise any sexual relations with a al airport was the scene of a pitched battle, that before,” she writes. Thus began the minor under 13 years, “consensual” or not. after it was invaded by terrorists from the writer’s ruthless pursuit, which led to a But lawmakers have not yet agreed to Pakistani Taliban. Besides these atrocities sexual relationship with Ms Springora that raise this to 15, the age at which sex is legal. the book is full of a steady stream of assas- began when she was 14. He was nearly 50. France may have found the words to talk sinations, gangland murders and police The word that best captures the com- about its ghastly secrets, but not yet the le- “encounters”—extra-judicial killings. plex psychological dependency that Ms gal framework to stamp them out.  To make sense of this city of some 20m Springora narrates in this chilling account inhabitants, Ms Shackle follows five char- is emprise: the hold, or grip, in which the acters as they try to navigate it: an ambu- older man traps his pubescent prey. Not by Urban turmoil lance-driver for Edhi, a huge charity; a physical force, but manipulation and the teacher-turned-development worker; a tel- cold exercise of power. Anxious for affec- Tales of the city evision crime reporter; a social activist tion, she thought she entered into this re- whose organisation maps unofficial settle- lationship willingly: “I felt adored as never ments in an attempt to bring their resi- before.” But did she really? “Are you aware dents some rights; and a young woman he’s a paedophile?” her mother asks casu- from a village who defies her circumstanc- ally when the girl first confides in her. es to stay at school until graduation. When the teenage Ms Springora puts such From these personal stories emerges a thoughts to Mr Matzneff, he brushes them Karachi Vice. By Samira Shackle. Granta; subtle portrait of Karachi’s overlapping off as puritan nonsense and insists on her 272 pages; £14.99 conflicts. Many are those of Pakistan as a good fortune: “Are you aware that in an- whole. Both have always been prey to eth- cient times, the sexual initiation of young utside the city, few people have heard nic and sectarian tension. Though Karachi people by adults was not only encouraged, Oof the “eight-day operation” mounted is in Sindh province, many among its pop- it was considered a duty?” in Lyari, a district of Karachi, in April 2012. ulation are not Sindhis but “Mohajirs”, Ur- In retrospect, these questions torture About 3,000 heavily armed policemen in du-speakers who migrated from India at Ms Springora. As angry as she is with Mr armoured personnel-carriers laid siege to the time of partition in 1947, or from East Matzneff, she is almost more so with her the area in a battle with local gangsters. Pakistan when it became Bangladesh in mother, who consulted her friends but “no The electricity, gas and water were shut off. 1971. And the Pushtun population has one, apparently, was particularly dis- The machine-gun and rocket fire were so grown this century as extremism and vio- turbed.” In the 1970s there was a movement intense that leaving home was impossible. lence took root in Pakistan’s north-west, in France to decriminalise sex between On the eighth day, the police retreated, where it blurs into Afghanistan, driving adults and minors. Letters and petitions their mission an unmitigated disaster, many to seek refuge in Karachi, including signed by literary luminaries appeared in with five officers dead and the official fig- some of the violent extremists. Le Monde and Libération. Paedophilia fea- ure of 20 civilian casualties widely be- Unique to Karachi was the stranglehold tures repeatedly in Mr Matzneff’s own nov- els—including one later based on his relationship with Ms Springora—in which he writes of his quest for “young meat”. Paris éditeurs readily published his work; he won literary prizes. Normality, in this world, was grotesquely deformed. On- ly later does Ms Springora see that, at 14, “it’s not normal…to find yourself in his bed at teatime with his penis in your mouth.”

The old normal It is precisely this emprise that makes such abuse so toxic. It flips the sense of guilt and shame onto the victim, locks in the lies, deepens suffering and silences complaint. Ms Springora and Ms Kouchner struggled for years to put the blame where it be- longed. “Your silence is your responsibility,” Ms Kouchner’s mother tells her. Might things now change? These books Very mean streets The Economist February 6th 2021 Books & arts 69 long held on politics by the mqm, a party The death of age representing Mohajir interests, run for years by its pudgy but oddly charismatic Who wants to live leader, Altaf Hussain, from exile in Lon- don. The links between militias, gangsters for ever? and mainstream politics became harder to disentangle in Karachi than anywhere else in Pakistan. “Every street criminal had a political affiliation,” notes Ms Shackle, “every political party had its fingerprints all Ageless. By Andrew Steele. Doubleday; over multiple criminal enterprises.” 352 pages; $29. Bloomsbury; £20 The book has a happy ending—up to a point. The violence has been restrained ld age is a massacre,” wrote Philip and the mqm diminished as a political “ORoth, long before the pandemic un- force. But the village of the poorest of Ms derscored its hazards. Even those who Shackle’s characters suffers outrageous ex- count as young must often watch the in- propriation. And the crime reporter re- eluctable drift of loved ones into decrepi- mains sceptical of the changes: “The situa- tude. Andrew Steele has a hopeful message tion is under control, but it is not peace.” for all those facing this prospect (ie, every- “Karachi Vice” recalls “Maximum City” World’s end one). Old age needn’t be a massacre; in fact, (published in 2004), Suketu Mehta’s epic old age needn’t even be old. chronicle of another South Asian megacity, their long migration south. Mr Steele’s thesis in “Ageless” is that Bombay (now Mumbai), which also told its For reasons that are not entirely clear, ageing can be cured—and, at least in part, story through the lives of vividly drawn in- Ennis Malone, the grizzled captain of a that it very soon will be. The giant tortoises dividuals. Ms Shackle’s book differs in be- fishing trawler, is persuaded to follow the of the Galapagos Islands show no age-re- ing much shorter, and, unlike Mr Mehta’s, terns south. There are strong echoes of lated decline, in some ways seeming as in seeing her city largely through the eyes “Moby Dick” in his dreams of “the Golden youthful at 170 as at 30. Mr Steele thinks of good people trying to make a terrible sit- Catch”, a great bounty and his own white this phenomenon, known as negligible se- uation better. It is a moving account of the whale, and in a sea fished and polluted to nescence, is within humanity’s grasp, too. struggles of everyday heroes—and of the the point of extinction. Franny joins the Whether or not readers are persuaded unhappy metropolis that needs them.  crew—a motley, charismatic bunch—as that ageless humans could ever be more they head off, with some trepidation, in than a theoretical possibility—and it is a search of the terns and the fabled catch. stretch—this book will convince them that Eco-fiction The new nature writing places the per- discounting the theoretical possibility al- sonal, emotional response of the author at together is based on nothing but prejudice. Sea change the centre of its representation of the natu- Western art may have something to do ral world. The bird of prey in “H is for with it, bristling as it is with morality tales Hawk” helps Ms Macdonald get closer to about the folly of wanting to turn back the her dead father; Ms Liptrot turns to the rug- clock; but there is actually no good reason ged beauty of Orkney to tackle her alcohol- to assume an upper limit to longevity, or ism. Similarly, in this novel the narrative that ageing must come with decline. And of the fishing voyage is interwoven with there is quite a lot of evidence to the con- Migrations. By Charlotte McConaghy. the tale of Franny’s difficult, itinerant up- trary. Without the rich world’s denizens Flatiron Books; 272 pages; $26.99. bringing, her tricky marriage to Niall, an really noticing, a life that ends after the Published in Britain as “The Last Migration”; environmentalist and university lecturer, biblical three score years and ten has al- Chatto & Windus; £12.99 and the dark secrets that she carries with ready come to seem a life cut short; in- her and may explain her volatile temper stead, 90 is now seen as a good innings. he vogue for emotive literary engage- and self-destructive impulses. This prejudice held back the field of Tments with the natural world—known Recently the climate crisis has dom- biogerontology for a very long time, but in as the “new nature writing” and encom- inated literary dystopias, spawning anoth- the past few decades some scientists have passing the work of Amy Liptrot, Helen er new genre: cli-fi. From Margaret At- cast it aside. This has enabled them to see Macdonald and Robert Macfarlane—can be wood’s “The Year of the Flood” to John Lan- that the real folly lies in the attempt to cure interpreted as a form of mourning, an at- chester’s “The Wall”, authors have consid- the diseases of old age one by one, rather tempt to fix on the page a beauty and varie- ered how rising temperatures will change than tackling their underlying cause—age- ty that are vanishing. Landscapes, sea- human life. Ms McConaghy’s novel may be ing itself. Now they are trying to under- scapes and wild creatures are described by the first in the genre to put the animal stand that process in all its extraordinary these writers just as they slip away because world at the centre of its story, mourning complexity, and to intervene much earlier. of climate change and the loss of habitats. dying species and asking what might hap- They have many tools at their disposal, The debut novel by Charlotte McCo- pen when people forget “what it feels like and Mr Steele, who has a background in naghy, an Australian author, is a fascinat- to love creatures that aren’t human”. computational biology, evaluates them ex- ing hybrid of nature writing and dystopian These grand ambitions do not always pertly and with verve. They range from fiction. The reader meets Franny Lynch, cohere. The seafaring yarn is gripping, but drugs that mimic the life-extending effects the book’s protagonist, in Tasiilaq, Green- Franny remains an enigma, the flashbacks of dietary restriction to gene-editing tools land, some time in the not-so-distant fu- to her early life interrupting the story’s such as crispr and computer models that ture. Human activity has reduced biodiver- flow. Yet by merging cli-fi and nature writ- simulate whole biological systems. Such sity to a handful of creatures at the edges of ing, the novel powerfully demonstrates the models may eventually prove the key that the globe. Franny is an ornithologist, tag- spiritual and emotional costs of environ- unlocks the inner Methuselah in everyone, ging the last remaining Arctic terns before mental destruction.  by revealing both the limits to these sys- 70 Books & arts The Economist February 6th 2021

tems and their redundancies: what can be would itself be quite a milestone on the rich detail, she divided it into filmable tweaked, and what had best be left alone. road to negligible senescence. snapshots. Trusting in happenstance, she Temporarily—and with a bitter irony— This interim goal is easily within reach, finds and recruits interesting people. covid-19 has slammed the brakes on this he claims. Many scientists agree—and are Readers then recommend friends. She li- burgeoning area of research. But Mr Steele among those who have chosen to take ex- kens the project to a locomotive, “each new thinks its first dividends will emerge with- perimental anti-ageing drugs. For some of person adding a wagon”. in a couple of years, perhaps in the form of these treatments they have calculated that They have declaimed from bunk beds senolytic drugs that clear the accumulat- the risks are small, compared with the po- and stairwells or standing in the sea. Some ing cellular detritus of a long life. He makes tential benefits. The true sign that a scien- are wreathed in cigarette smoke. A curate the valid point that if, for every year of sci- tific revolution is in the offing is that the with a pigeon on his shoulder is silhouet- entific endeavour, a year could be added to scientists themselves have bought into it. ted against the stained-glass window of his the average human lifespan, old age would Whether that revolution is desirable is a abbey in Combray, where the novel begins. recede into the future at the same rate as different question, which it may fall to a A straw-strewn cowshed is coldly illumi- today’s population approached it. That new generation of artists to answer.  nated by strip-lights: “Madame Swann,” a young woman intones, “seeing the enormous proportions that the Dreyfus affair Proust and the people was assuming, and fearing that her husband’s origins might be used against her, The time of their lives had begged him to no longer speak of the innocence of the convicted man…” Differing accents and proficiencies generate a dream-like rhythm that swings between the theatrical and the prosaic— just as the novel combines the mundane and profound. Actors such as Kevin Kline, A tag-team reading of a masterpiece mimics the mood of the original Annie Girardot and Mathieu Amalric fea- itting in her pink living room in Tah- Proust’s seven-volume masterpiece ture alongside inconnus who have not read Siti, Natti Tumahai reads in French from runs to more than 4,000 pages. Each par- aloud since school. “In 2001 one girl chose “In Search of Lost Time” as her family eats ticipant reads just two of them, so at the to rap,” Ms Aubouy recalls. Now 65, Marie lunch: “I cannot say, looking back, how current rate the project will not be com- Benoît contributed in 2007 from her Nor- much of Albertine’s life was overlaid by pleted until 2050—57 years after filming mandy smallholding, accompanied by two fluctuating, fleeting and often contradict- began. It is already 150 hours long (much of donkeys. The experience “was very mov- ory desires…” The passage comes from vol- the footage is available to watch on You- ing, because reading in this way, at home, ume five of Marcel Proust’s roman-fleuve, Tube). By contrast, Proust took a mere 14 showed that anyone can enjoy Proust.” and Ms Tumahai is the 1,262nd person to years to write the book, finishing it in 1922, Each scene is one continuous shot, pre- appear before the camera. shortly before his death. Tracing the narra- ceded by a slide stating a name and loca- From Bali to Paris, the readers in Véro- tor’s life from childhood to old age, “it of- tion. Then comes a brief silence, as if the nique Aubouy’s huge project, “Proust Lu” fers a singularly accurate depiction in fic- new reader has been listening to the previ- (“Proust Read”), have been captured in tion of how consciousness works,” says Pa- ous one. Like the novel, the clips are por- bedrooms, offices, supermarkets, factories trick McGuinness of the University of Ox- tals into lost worlds. Over the decades the and beauty spots. Farmers, schoolchil- ford. “His writing forces you to inhabit images become sharper; fashions, haircuts dren, businessmen, even the French direc- time. It doesn’t do the normal thing of and the timbre of speech evolve. tor’s doctor have participated. “It’s a slice of compressing narrative into chunks—it Even during the pandemic, “Proust Lu” life,” Ms Aubouy says; “a reading about makes the narrative more like life.” has marched on. Ms Aubouy let some par- time, in time.” The cast is as diverse as the Ms Aubouy set out to make a screen ticipants film their readings on their novel’s, brought together by their own web equivalent. Instead of condensing the text phones. And the disease itself has echoes of connections and coincidences. into a conventional plot, thereby losing its in Proust’s life and writing. His father, Adrien Proust, was an epidemiologist who tracked a cholera outbreak in 1869 and proposed a cordon sanitaire to slow its spread. Marcel’s own squeamishness about germs surfaces in volume four, when the narrator relates his discomfort at sharing a lift with a man who has whooping cough. Today, as lockdown time has seemed to blur, when days feel long and months short, Proust’s mesmeric work has found its time—again. Ms Aubouy says readers often believe they have been handed an extract for a reason: though ostensibly concerned with a different era, Proust’s story seems to reflect the precise moments they have reached in their lives. “And yet in reality, it’s just the moment we’ve arrived at in the book.” The sensation arises, she thinks, because “the persistence of memory, and the feeling of having wasted time, are universal.” Per- Never-ending story haps never more than now.  Courses 71

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Economic data

Gross domestic product Consumer prices Unemployment Current-account Budget Interest rates Currency units % change on year ago % change on year ago rate balance balance 10-yr gov't bonds change on per $ % change latest quarter* 2020† latest 2020† % % of GDP, 2020† % of GDP, 2020† latest,% year ago, bp Feb 3rd on year ago United States -2.5 Q4 4.0 -3.6 1.4 Dec 1.2 6.7 Dec -2.2 -14.9 1.1 -39.0 - China 6.5 Q4 10.8 1.9 0.2 Dec 2.5 5.2 Dec‡§ 1.5 -5.2 3.0 §§ 43.0 6.46 8.7 Japan -5.7 Q3 22.9 -5.3 -1.2 Dec nil 2.9 Dec 2.7 -12.2 nil -8.0 105 3.5 Britain -8.6 Q3 81.1 -11.4 0.6 Dec 0.9 5.0 Oct†† -1.3 -19.7 0.4 -20.0 0.73 5.5 Canada -5.2 Q3 40.5 -5.3 0.7 Dec 0.8 8.8 Dec -2.1 -13.5 0.9 -31.0 1.28 3.9 Euro area -5.1 Q4 -2.8 -7.6 0.9 Jan 0.3 8.3 Dec 2.6 -9.2 -0.5 -1.0 0.83 8.4 Austria -4.0 Q3 54.6 -6.9 1.2 Dec 1.1 5.8 Dec 2.4 -8.5 -0.3 -6.0 0.83 8.4 Belgium -4.7 Q4 0.8 -7.9 0.3 Jan 0.4 5.8 Dec -1.3 -9.1 -0.3 -11.0 0.83 8.4 France -5.0 Q4 -5.3 -9.2 0.6 Jan 0.5 8.9 Dec -2.3 -11.3 -0.3 -7.0 0.83 8.4 Germany -3.9 Q4 0.4 -5.4 1.0 Jan 0.4 4.6 Dec 6.8 -7.0 -0.5 -1.0 0.83 8.4 Greece -9.6 Q3 9.5 -9.9 -2.3 Dec -1.4 16.7 Oct -6.6 -9.2 0.6 -57.0 0.83 8.4 Italy -6.6 Q4 -7.7 -9.1 0.2 Jan -0.1 9.0 Dec 2.9 -11.3 0.6 -38.0 0.83 8.4 Netherlands -2.5 Q3 34.8 -4.4 1.0 Dec 1.1 3.8 Mar 7.2 -6.9 -0.5 -14.0 0.83 8.4 Spain -9.1 Q4 1.6 -11.4 0.5 Jan -0.3 16.2 Dec 0.8 -12.0 0.1 -15.0 0.83 8.4 Czech Republic -5.3 Q3 1.2 -6.6 2.3 Dec 3.1 3.2 Dec‡ 1.3 -6.7 1.4 -9.0 21.6 5.7 Denmark -3.8 Q3 22.6 -4.0 0.5 Dec 0.4 4.4 Dec 8.5 -3.6 -0.3 9.0 6.19 9.2 Norway -0.2 Q3 19.7 -1.7 1.4 Dec 1.4 5.0 Nov‡‡ 3.2 -1.3 1.2 -16.0 8.60 7.8 Poland -1.8 Q3 35.5 -3.0 2.4 Dec 3.4 6.2 Dec§ 2.6 -7.9 1.2 -95.0 3.73 4.3 Russia -3.4 Q3 na -3.8 4.9 Dec 3.4 5.9 Dec§ 2.1 -4.3 6.7 30.0 76.0 -16.4 Sweden -2.6 Q4 2.0 -3.2 0.5 Dec 0.4 8.2 Dec§ 4.8 -3.5 0.1 17.0 8.42 14.6 Switzerland -1.6 Q3 31.9 -3.0 -0.8 Dec -0.7 3.4 Dec 9.1 -3.7 -0.4 30.0 0.90 7.8 Turkey 6.7 Q3 na 0.4 15.0 Jan 12.3 12.7 Oct§ -5.4 -3.4 12.7 272 7.16 -16.5 Australia -3.8 Q3 14.0 -2.9 0.9 Q4 0.9 6.6 Dec 1.2 -7.3 1.1 21.0 1.31 13.7 Hong Kong -3.0 Q4 11.8 -5.7 -0.6 Dec 0.4 6.6 Dec‡‡ 5.5 -6.7 1.0 -34.0 7.75 0.3 India -7.5 Q3 125 -7.9 4.6 Dec 6.7 6.5 Jan 1.3 -7.2 6.1 -42.0 73.0 -2.2 Indonesia -3.5 Q3 na -2.2 1.6 Jan 2.0 7.1 Q3§ -1.4 -7.2 6.1 -56.0 14,005 -1.9 Malaysia -2.7 Q3 na -5.3 -1.4 Dec -1.1 4.8 Nov§ 4.8 -7.4 2.7 -42.0 4.05 1.5 Pakistan 0.5 2020** na -2.8 5.7 Jan 9.5 5.8 2018 0.1 -8.1 9.9 ††† -125 160 -3.5 Philippines -8.3 Q4 24.4 -9.3 3.5 Dec 2.6 8.7 Q4§ 3.4 -7.8 3.1 -143 48.0 5.8 Singapore -3.8 Q4 8.7 -6.0 nil Dec -0.3 3.2 Q4 18.0 -13.9 1.1 -51.0 1.33 3.0 South Korea -1.3 Q4 4.4 -1.0 0.6 Jan 0.5 4.1 Dec§ 3.8 -5.7 1.8 22.0 1,115 7.2 Taiwan 4.9 Q4 7.8 2.4 0.1 Dec -0.2 3.8 Dec 13.8 -1.5 0.3 -27.0 27.9 8.4 Thailand -6.4 Q3 28.8 -6.1 -0.3 Dec -0.8 1.5 Dec§ 3.7 -6.4 1.2 6.0 30.1 3.4 Argentina -10.2 Q3 61.7 -9.8 36.1 Dec‡ 42.0 11.7 Q3§ 1.4 -8.0 na -464 87.8 -31.2 Brazil -3.9 Q3 34.6 -4.4 4.5 Dec 3.2 14.1 Nov§‡‡ -0.7 -15.8 7.3 70.0 5.37 -21.0 Chile -9.1 Q3 22.6 -6.2 3.0 Dec 3.0 10.3 Dec§‡‡ 1.4 -7.9 2.6 -85.0 732 7.6 Colombia -9.5 Q3 39.6 -7.0 1.6 Dec 2.5 13.4 Dec§ -3.6 -8.8 4.8 -88.0 3,520 -3.4 Mexico -4.5 Q4 13.0 -8.9 3.2 Dec 3.4 4.4 Dec 2.3 -4.5 5.2 -145 20.2 -7.1 Peru -9.4 Q3 187 -12.0 2.7 Jan 1.8 11.8 Dec§ 1.0 -8.0 3.7 -21.0 3.64 -7.4 Egypt 0.7 Q3 na 3.6 5.4 Dec 5.1 7.3 Q3§ -3.6 -8.5 na nil 15.7 0.7 Israel -1.5 Q3 39.7 -3.7 -0.7 Dec -0.6 4.8 Dec 4.0 -11.3 0.9 nil 3.30 4.5 Saudi Arabia 0.3 2019 na -4.2 5.4 Dec 3.4 8.5 Q3 -3.7 -10.6 na nil 3.75 nil South Africa -6.0 Q3 66.1 -7.3 3.1 Dec 3.3 30.8 Q3§ 0.6 -16.0 8.4 -46.0 15.0 -0.6 Source: Haver Analytics. *% change on previous quarter, annual rate. †The 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.

Markets Commodities % change on: % change on: The Economist commodity-price index Index one Dec 31st index one Dec 31st % change on In local currency Feb 3rd week 2019 Feb 3rd week 2019 2015=100 Jan 26th Feb 2nd* month year United States S&P 500 3,830.2 2.1 18.6 Pakistan KSE 46,933.6 1.0 15.2 Dollar Index United States NAScomp 13,610.5 2.6 51.7 Singapore STI 2,927.5 -1.1 -9.2 All Items 158.4 153.7 -3.3 41.4 China Shanghai Comp 3,517.3 -1.6 15.3 South Korea KOSPI 3,129.7 0.2 42.4 Food 124.5 125.4 1.5 28.2 China Shenzhen Comp 2,380.8 -1.7 38.2 Taiwan TWI 15,771.3 0.4 31.5 Industrials Japan Nikkei 225 28,646.5 nil 21.1 Thailand SET 1,481.8 -1.1 -6.2 All 190.0 180.1 -6.2 51.5 Japan Topix 1,871.1 0.6 8.7 Argentina MERV 49,857.6 -0.2 19.6 Non-food agriculturals 131.8 133.4 1.7 33.9 Britain FTSE 100 6,507.8 -0.9 -13.7 Brazil BVSP 119,724.8 3.3 3.5 Metals 207.3 194.0 -7.7 55.7 Canada S&P TSX 17,915.9 2.8 5.0 Mexico IPC 43,957.1 -0.7 1.0 Sterling Index Euro area EURO STOXX 50 3,609.7 2.1 -3.6 Egypt EGX 30 11,619.1 0.3 -16.8 All items 175.9 172.1 -3.6 35.1 France CAC 40 5,563.1 1.9 -6.9 Israel TA-125 1,655.4 1.0 2.4 Germany DAX* 13,933.6 2.3 5.2 Saudi Arabia Tadawul 8,542.6 -2.8 1.8 Euro Index Italy FTSE/MIB 22,527.9 4.0 -4.2 South Africa JSE AS 63,010.6 0.4 10.4 All items 144.4 141.7 -1.3 29.8 Netherlands AEX 654.9 1.1 8.3 World, dev'd MSCI 2,737.9 1.6 16.1 Gold Spain IBEX 35 8,012.8 2.0 -16.1 Emerging markets MSCI 1,392.6 1.5 24.9 $ per oz 1,853.5 1,838.6 -5.6 18.2 Poland WIG 56,944.1 0.9 -1.5 Brent Russia RTS, $ terms 1,387.0 -0.4 -10.5 $ per barrel 56.0 57.5 7.2 4.5 Switzerland SMI 10,775.7 -1.2 1.5 US corporate bonds, spread over Treasuries Turkey BIST 1,533.6 4.5 34.0 Dec 31st Sources: Bloomberg; CME Group; Cotlook; Reﬁnitiv Datastream; Australia All Ord. 7,090.9 0.4 4.2 Basis points latest 2019 Fastmarkets; FT; ICCO; ICO; ISO; Live Rice Index; LME; NZ Wool Services; Thompson Lloyd & Ewart; Urner Barry; WSJ. *Provisional. Hong Kong Hang Seng 29,307.5 nil 4.0 Investment grade 134 141 India BSE 50,255.8 6.0 21.8 High-yield 404 449 Indonesia IDX 6,077.7 -0.5 -3.5 Sources: Reﬁnitiv Datastream; Standard & Poor's Global Fixed Income For more countries and additional data, visit Malaysia KLSE 1,583.0 0.1 -0.4 Research. *Total return index. Economist.com/indicators Graphic detail Stockmarkets The Economist February 6th 2021 73

→ Redditors may have helped trigger a short squeeze, but call options are the best indicator of their whims

Three most-mentioned shares on r/wallstreetbets, Jan 26th-Feb 1st 2021 Price, $ Short-selling (externally borrowed shares as % of outstanding shares*)

300 30 30 GameStop 44,733 mentions AMC Entertainment 17,898 mentions BlackBerry 14,084 mentions 200 20 20

100 10 10

0 0 0 2019 20 21 2019 20 21 2019 20 21 100 Drop due to increase in number 100 BlackBerry shares have rallied, 100 75 of outstanding shares, not 75 even without enough short 75 reduced borrowing interest for a “short squeeze” 50 50 50 25 25 25 0 0 0 2019 20 21 2019 20 21 2019 20 21

Modelled probability that a share will have at least ten Actual number of mentions, log scale Impact on probability that a share will have mentions on r/wallstreetbets v actual number of mentions at least ten mentions on r/wallstreetbets† 50,000 Jan 26th-Feb 1st 2021 GameStop Percentage points BlackBerry AMC 10,000 Ratio of call options to outstanding shares

Bubble size= Palantir Tesla 27 market capitalisation Apple Daily trading volume 1,000 Bed Bath 20 AMD & Beyond Market capitalisation

American 100 16 Airlines SunPower Short interest Novavax Vaxart 11 10 Academy Moderna Volatility IFF Sports Discovery Sumo Logic 4 1 DuPont Catabasis Pharma 0 *Portion of short interest borrowed externally by broker-dealers †For a share with a 50% chance of having at least ten mentions, increase in probability associated with a one-standard-deviation 0255075100 increase in each variable, holding other factors constant Modelled probability that a share will have at least ten mentions, % Sources: Bloomberg; IHS Markit; Venkatesh Thallam

tors’ hearts aflutter is a ranking on Stonks and market capitalisation mattered more. Sweet memes are News, a website, of how often stocks have The best predictor was the ratio of call op- been cited on r/wallstreetbets since Janu- tions—which grant the right to buy a share made of this ary 26th. Although novel, the list overrates at a set price, without obligation—to total firms whose tickers are also words, like shares. This tracks short-term bullish bets. ServiceNow (which trades as now) and The This model flags firms that look like RealReal (real), because a post saying “It’s meme stocks, but are not yet on Redditors’ What the favourite stocks of real now!” will add to their tallies. radar screens. They include heavily short- r/wallstreetbets have in common At our request, Venkatesh Thallam, the ed names like Discovery (of the Discovery ost investors were stunned when site’s creator, has shared a stricter ranking. cable-tv channel) and SunPower (a solar- Mthe share price of GameStop, a chain It counts only words that contain a “$” or panel maker); the covid-19 vaccine firms of video-game shops, rose by 2,265% from are in upper case—both markers for tick- Vaxart, Novavax and Moderna; and both the start of January 13th to mid-morning on ers. After culling names like ProPetro sides of the merger of a division of DuPont January 28th. But for denizens of the Red- (pump) and dmc Global (boom), we derived with International Flavors and Fragrances. dit forum r/wallstreetbets, the surge a recognisable list of current meme stocks. Investors should not race to buy these capped a long campaign singing the firm’s We then examined what these names names. We may have missed a variable that praises. Share prices of other names touted had in common. So that the GameStop- would explain why Redditors shun certain on Reddit, like amc (a cinema owner) and amc duo did not dominate our analysis—it stocks. If Redditors themselves are buying Express (a fashion retailer), also soared. got 55% of all references—we modelled the up options on their favourite shares, they Media coverage of these movements chances of each stock in the Russell 3000 may keep ignoring others with heavy call has focused on a “short squeeze”: Reddi- index receiving at least ten mentions. De- volume. Posts on r/wallstreetbets could tors forcing investors who had bet against spite treating names with ten references merely represent chatter about past vola- these firms to close positions. This does the same as those with 10,000, this still tility, rather than anticipating future explain some of GameStop’s run-up. How- identified GameStop as the trendiest firm. trends. And meme stocks can suffer big ever, many other “meme stocks”, such as Short interest was tied to popularity on- dips: GameStop is down 80% from its peak. BlackBerry, a smartphone maker, were not ly loosely. For every oft-discussed, heavily Yet such concerns haven’t stopped Red- heavily shorted. If Reddit’s madness has a shorted firm, there was also a popular but ditors from betting big. If you think invest- method, short interest does not capture it. rarely shorted name, or a widely shorted ing is more about adrenalin than about A better measure of what sets Reddi- stock with few mentions. Trading volume owning a slice of a good business, dig in.  74 Obituary Nikolai Antoshkin The Economist February 6th 2021

By the time he had driven from Kyiv, where he commanded the district air force, to Pripyat, the nearest town to the plant, it was sunset, and the sky was full of flames. Plumes of smoke were rising 400-600 metres into the air. A light wind was blowing, taking radiation here, there and everywhere. He had a dosimeter with him; at the stadium, just outside town, the roentgen count shot up alarmingly. But most striking to him was the sight of the people leaving Pripyat, the children skipping and excited, and the long lines of buses at the city limits waiting to take them away. His orders, when he got them, were plain enough. It was up to him to work out how to do it. This was now a total air operation, his province, as it had been ever since his triumphant progress through the Orenburg Higher Military Aviation School. At once he sprang to the task, calling in 600 volunteer pilots from all over the Soviet Union and commandeering 100 helicopters. He also ordered 10,000 brake parachutes, each to be loaded with sand, clay, boron and lead and dropped to seal the inferno. Having set all that in train he then went down to the Pripyat river, with a spade, to help dig sand. He reckoned they might need 5,000 tonnes of it. The task was both delicate and terrifying. The target aperture was only 19 metres across; each pilot had to hover 200 metres above the core, in thick smoke, while another man held by a har- ness leaned out to drop the parachute. The air temperature was as much as 200°C, scorching the fuselages of the craft. Amid all this neither he, nor they, had adequate protection. In the air they wore masks; on landing they changed their uniforms and took baths to wash off the radioactive dirt. He remembered smearing on some At war with the invisible nasty cream from Leningrad. Yet they had been exposed not to 1,500 roentgens as he thought, already enough to kill a man, but double that. Twenty-eight pilots died soon afterwards; 14 more died later, from lingering cancers. He himself spent the next two years in hospital, though he was to die, eventually, of coronavirus, not the fire. They flew, and dumped sand, and dumped sand again: General Nikolai Timofeyevich Antoshkin, commander of the 4,000 sorties in all, until after two weeks the blaze was out and “Liquidators” at Chernobyl, died on January 17th, aged 78 concrete was poured in to seal the core. ew people knew they were there until he sat joking and drink- It was all rather different from what he had imagined as a boy, Fing with his friends in the steam bath, and then they were vis- herding sheep in the southern Urals, as he paused to watch the ible: the long livid scars across his upper body, where surgeons fighter aircraft roar overhead to the Orenburg base. The life of a pi- had cut into him to treat radiation sickness. And there were other lot seemed one of bold and glorious adventure, soaring above his signs. If he nicked himself while shaving, the cut would bleed for a peasant world. Later he organised a troupe called the Russian very long time. And three times a day he had to swallow eight pills Knights to put on aerobatic displays, and called his force at Cher- to deal with this ache, or that tiredness, caused by the job he had nobyl “the Liquidators”. Yet his highest award, Hero of the Soviet done at Chernobyl in the spring of 1986, when Reactor number 4 at Union, was earned not on the Soviet-Chinese border, where he the nuclear power plant had exploded, and he had been sum- flew in skirmishes, or in Afghanistan, or for his long service as a moned to quench the fire. His doctor had told him, “Chernobyl flight commander. His “selfless service to the Motherland” was es- will never let go of you.” True enough. sentially an industrial operation against no enemy, except the in- He had suspected that from his very first view of the scene from sidious beams that nobody could see. the air. His speciality was helicopter reconnaissance; he had flown This rankled. Everyone celebrated the heroes of the Great Patri- many missions in Afghanistan before the Soviet invasion, scout- otic War, like his father, who had fought on the eastern front. Ev- ing out the camps of the mujahideen and their shadowy move- eryone obviously revered the cosmonauts. For some reason, ments through the mountains. At Reactor number 4 there was though, it was not cool to have the same regard for those who dealt nothing shadowy. The graphite core had ignited when exposed with domestic terror or, like him, domestic horror. Some solace and was burning freely. This was a fire like the demon of hell, bil- lay in organising the Moscow Club of Heroes, and in simply pin- lowing smoke that filled his mouth with a taste of rusty iron until ning the great gold Hero star to his suit lapel when he retired and he had to vomit. Death stared in his face, and terrified him. This briefly, after 2014, sat in the Duma to make laws. He was proud, was not like Afghanistan, where your helicopter got shot at but too, to be consulted as an expert when other nuclear accidents oc- you landed, forgot about it, and went back up. This would make it- curred. In 2011 he sighed over Fukushima, and how slow the Japa- self felt for a lifetime, and his children’s lifetimes. nese were. They should have called on the whole world to help. The operation had begun in confusion. He got the first alert on At Chernobyl, though, they had called mostly on him. Ten years the afternoon of April 26th, a Saturday. It was cryptic, trying to later he drove past it again. It was now surrounded by a 20km ex- play down the damage. Officials seemed offended that the blast clusion zone, with the plant itself enclosed in a concrete sarcoph- had even happened; man had tamed the atom, after all. His own agus. At the Pripyat stadium wild trees were thrusting through the overriding thought, as an air-force man, was that this needed air- turf. In the abandoned outlying villages, thickets had taken over craft, and he was ready. But for some hours no orders came. The of- the sagging houses. Wolves prowled there in winter. There was ficials brought in ground fire crews instead, who were sickened at talk of creating a nature reserve; he knew the mushrooms had al- once and whose hoses proved useless. He twitched with anxiety ways been good. The earth was healing itself. It was doing better, until they called him in. perhaps, than he was.  Brake Habits We understand that even good drivers have bad days.

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