The world’s least successful president Putin threatens Belarus Pakistan: impoverished by its army How the mighty dollar falls

JANUARY 12TH–18TH 2019 Red moon rising Will China dominate science?

Contents The Economist January 12th 2019 3

The world this week United States 6 A round-up of political 21 The shutdown, contd. and business news 22 Health economics 23 Swatting Leaders 24 #MeToo’s foes 9 Chinese science Red moon rising 25 Chicago corruption Lexington John Kasich: 10 Politics in Washington 26 How the shutdown ends conservative orphan 10 Britain’s opposition The Americas Still having its cake 27 Nicolás Maduro’s mess 11 Pakistan Praetorian penury 28 Protecting scarlet macaws 30 Bello Brazil’s confused On the cover 12 Peak smartphone Bad news for Apple. Good foreign policy If China dominates science, news for humanity should the world worry? Leader, page 9. It has become a Letters leading scientific power. Can it On animal rights, Asia go on to become a great one? 14 genocide, working, 31 Health care in Japan Page 68 Foucault, Brexit, Santa 32 The king of Malaysia • The world’s least successful Claus 33 Quotas in India president After a catastrophic 33 Refugees in the outback first term, Nicolás Maduro is Briefing 34 Banyan Democracy in digging in for a second, page 27 Pakistan 17 Taiwan • Putin threatens Belarus Tales of self-harm As Vladimir Putin tightens his bear-hug, the leader of Belarus China fights back, page 42. Two new 35 Unemployment woes documentaries depict the 36 Detecting HIV optimistic beginning and 37 Chaguan A craze for eventual fraying of Mr Putin’s 1,800-year-old fashion long reign, page 73 • Pakistan: impoverished by its army The penury of Pakistan’s 208m citizens is a disgrace—and Middle East & Africa the army is to blame: leader, 38 Protests in Sudan page 11. Why Imran Khan will struggle to make their life better: 39 Congo’s new president Briefing, page 17 39 Coups in Africa • How the mighty dollar falls 40 America and Iraq The fate of the greenback will 41 Agritech in Israel shape financial markets in 2019, page 62. Against the dollar, other currencies are at their cheapest Charlemagne The notion in 30 years: Graphic detail, of an east-west split in page 81 the EU is simplistic and defeatist, page 46

1 Contents continues overleaf 4 Contents The Economist January 12th 2019

Europe Finance & economics 42 Belarus and Russia 61 Emerging markets 43 Orthodox schism 62 Buttonwood How the 44 Pitching Fort Trump mighty dollar falls 44 Women and street signs 63 Studies in sexism 45 French inequality 64 Jim jumps from the World Bank 45 Germany finds “GOd” 64 Open banking in Europe 46 Charlemagne East and west in Europe 65 Wall Street v exchanges 66 Free exchange Down Britain towns 47 Labour’s balancing act Science & technology 48 Can “no deal” be stopped? 68 Can China become a 50 Bagehot Speaker of the scientific superpower? House, head of the asylum

International 51 Missionaries from poor countries target the Books & arts godless West 73 Vladimir Putin on film 76 Who owns Kafka? 76 “Cat Person” returns 77 The Troubles

Business 53 Peak smartphone Economic & financial indicators 54 Consumer electronics 80 Statistics on 42 economies 56 Bartleby Psychological safety at work Graphic detail 57 PG&E feels the heat 81 The Big Mac index 57 Carlos Ghosn in court 58 E-commerce in Indonesia Obituary 59 Schumpeter On the edge 82 Herb Kelleher, co-founder of Southwest Airlines of Mordor

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The Saudi government struck a the country. Christian Zerpa The king of Malaysia, Sultan blow for feminism, decreeing called Mr Maduro’s regime a Muhammad V of Kelantan, that women whose husbands “dictatorship” and said the abdicated abruptly for undis- divorce them must be in- court had become “an appen- closed reasons. The hereditary formed of this fact. Courts will dage of the executive branch”. monarchs who rule over nine notify them by text message. This was an about-turn for Mr of Malaysia’s 13 states will meet Zerpa, who in 2016 wrote the soon to pick one of their num- Félix Tshisekedi, an opposition court’s opinion justifying the ber to serve a five-year term as candidate, was unexpectedly usurpation of the legislature’s king. declared the winner of a presi- powers by the government. dential election in the Demo- Jolovan Wham, a Singaporean cratic Republic of Congo. Brazil’s new populist govern- activist, was found guilty of America’s federal government Pre-election polls had put ment sent the national guard organising a public assembly remained shut down, as Demo- another opposition leader, to the state of Ceará to curb an without a permit. He had crats refused to fund Donald Martin Fayulu, far ahead. outbreak of violence. Crimi- convened a seminar on civil Trump’s wall on the Mexican Furious voters speculated nals have staged attacks, disobedience. border (which he had previous- about a possible stitch-up. Mr including fire-bombings, on ly said Mexico would pay for). Fayulu had vowed to investi- banks, buses and petrol In his first televised speech gate corruption within the stations. By any means necessary from the Oval Office, the outgoing regime of President In Britain a cross-party president said that migrants Joseph Kabila. amendment to the govern- trying to cross the border A taste for travel ment’s finance bill designed to illegally represented a Protests spread across Sudan. North Korea’s dictator, Kim reduce the chances of crashing “humanitarian and security What began as an isolated rally Jong Un, paid a visit to Beijing out of the eu without a deal crisis”.Democrats offered to against high bread prices has where he met the Chinese passed by 303 to 296 votes, the reopen the government by become a broad movement president, Xi Jinping. It was his first defeat on a budget mea- funding everything bar the against the dictatorship of fourth to China in ten months. sure since 1978. Although the Department of Homeland Omar al-Bashir, who has run This latest trip has fuelled measure cannot stop a no-deal Security. Mr Trump walked out the country since1989 and is speculation that he may be Brexit, it would prevent the of a meeting with them. accused of genocide in Darfur. preparing for another summit government from varying At least 40 people have been with Donald Trump. taxes if there were no deal by John Bolton, Mr Trump’s killed in the protests. March 29th. And in a constitu- national security adviser, Officials allowed a handful of tionally suspect move, the assured allies that American The constitutional court in foreign reporters to visit three speaker of the House of Com- troops would not be leaving Madagascar confirmed the of the camps in the far western mons, John Bercow, permitted Syria quickly, all but contra- election of Andry Rajoelina as region of Xinjiang where an amendment requiring the dicting what Mr Trump had president after his opponent human-rights groups say government to outline a Plan B said a few days earlier. Mr complained of electoral fraud. hundreds of thousands of within three days if, as expect- Bolton said that, before any Mr Rajoelina took 55% of the Muslims, mostly ethnic ed, it loses a crucial vote on its withdrawal, Islamic State had vote in last month’s run-off Uighurs, have been detained Brexit deal on January 15th. to be fully defeated and Turkey against Marc Ravalomanana. and pressed to be less pious. had to promise not to attack The journalists heard residents Germany identified the alleged Syrian Kurds. Turkey’s presi- singing “If you’re happy and hacker of the personal details dent, Recep Tayyip Erdogan, Only doing its job you know it, clap your hands” of 1,000 politicians, journalists rejected that idea, saying that Guatemala’s government in English. Xinjiang’s governor and celebrities: not Russia, but his plans for an offensive ordered the shutdown of the said the facilities had been a 20-year-old who lives with against the Kurdish force, International Commission “extremely effective” in reduc- his parents. which Turkey regards as a against Impunity in Guatemala ing extremism. terrorist group, were almost (cicig) and the expulsion of its complete. foreign workers within 24 China’s anti-graft agency is hours. The foreign minister investigating offences alleged- accused the un-backed body of ly committed by a former Family values exceeding its authority and vice-mayor of Beijing, Chen A Saudi teenager who had politicising its work. But the Gang. Mr Chen was responsible barricaded herself into a hotel constitutional court suspend- for urban planning in the room in Bangkok and live- ed the order, setting the stage build-up to the city’s Olympic tweeted her ordeal was de- for a confrontation. cicig has games in 2008. clared a legitimate refugee by been investigating corruption, the un. Rahaf Mohammed including allegations against Ethnic Rakhine militants al-Qunun said she wanted the family of the president, attacked police posts in Myan- asylum in Australia. She fears Jimmy Morales. mar’s Rakhine state, exacer- Ukraine’s Orthodox church that her family will kill her if bating tensions in the region in broke away from the patriarch- she is returned to Saudi Only days before Nicolás Ma- which pogroms by the army ate of Moscow. This was seen Arabia, because she has re- duro was to be sworn in for a and Rakhines against as a blow to Vladimir Putin, nounced Islam. She also fears second term as president of Rohingyas, a Muslim minority, who prizes Russian primacy being forced into an unwanted Venezuela, a justice of the led to an exodus of 800,000 over its neighbours in matters marriage. country’s supreme court fled Rohingya refugees in 2017. spiritual as well as temporal. 1 The world this week Business The Economist January 12th 2019 7

Carlos Ghosn appeared in Federal Reserve, that the cen- able clout. The two next-big- such a large commitment, public for the first time since tral bank would take a “flex- gest shareholders each have which would have been the being taken into custody in ible” approach both to interest- stakes of around 5%. largest ever in a tech startup, mid-November amid claims of rate rises and winding down amid a slump in technology wrongdoing, which led to his the assets it accrued through stocks. WeWork, meanwhile, dismissal as Nissan’s chair- quantitative easing, a soft- World’s biggest companies rebranded itself as the We By market capitalisation man. Mr Ghosn appeared at a ening of the remarks he made January 8th 2019, $trn Company. court in Tokyo where he denied after the Fed’s recent meeting. 0 0.2 0.4 0.6 0.8 1.0 all the allegations, which Amazon include a “breach of trust” at Negotiators from America and A combustible mix Nissan and understating his China wrapped up their first Microsoft The share price of Pacific Gas pay to the authorities. He round of talks since a truce was Alphabet & Electric, California’s biggest described the claims as “mer- called in the two countries’ Apple energy provider, plunged amid itless”.The court nevertheless trade dispute. The mood at the Berkshire speculation that it might de- Hathaway recommended that he remain talks was said to be positive, clare bankruptcy. The com- Source: Datastream from Refinitiv in custody. with China making more pany is being investigated in concessions to deal with Amer- Amazon became the world’s relation to the outbreak of Ford announced a root-and- ican complaints. Both sides are most valuable publicly listed wildfires in 2017-18, the deadli- branch restructuring of its working towards beating a company when its market est in the state’s history. pg&e operations in Europe, a loss- deadline of March 1st, after capitalisation at the close of will have to fork out billions of making region for the carmak- which America threatens to trading ended up above Micro- dollars in damages if its power er. Thousands of jobs are raise its tariffs significantly if soft’s. Microsoft had only just lines are found to have contrib- expected to go. Jaguar Land the issues aren’t resolved. regained the crown from Ap- uted to the infernos, even if it Rover prepared its workers for ple, which has seen its share observed strict safety rules. huge job losses in Britain. Bristol-Myers Squibb agreed price tumble over worries to buy Celgene, a specialist in about its growth prospects. Jim Yong Kim decided to step drugs that tackle cancer. The Amazon is now worth around down as president of the What a drag takeover, worth around $90bn, $800bn, much less than the World Bank, three years before Samsung said that it expects is one of the biggest ever in the $1trn valuation it hit (along the end of his second term. its operating profit for the last pharmaceuticals industry. with Apple) in the middle of Following the convention that three months of 2018 to be last year. America gets to select the head significantly lower than ex- The announcement that Jeff of the World Bank (and Euro- pected, its first decline in Bezos and his wife are to di- SoftBank was reported to have peans get to choose the leader quarterly profit in two years. vorce raised questions about slashed the amount it was of the imf), Mr Kim was nomi- The South Korean electronics his stake in Amazon. Mr Bezos thinking of investing in nated for the job by Barack giant blamed weaker demand married MacKenzie in 1993, a WeWork, which provides Obama. Mr Kim’s appointment in China, a factor that lay be- year before he founded the shared-office space in 96 cities was the first to be challenged hind Apple’s recent warning e-commerce company. He around the world, from $16bn by candidates from developing about decreased revenues. holds a 16.3% stake in Amazon, to $2bn. The Japanese tech countries. Such opposition but if Mrs Bezos gets half of conglomerate is said to have may intensify with Donald The unemployment rate in that she could carry consider- been nervous about making Trump in the White House. the euro area dipped to 7.9% in November, the lowest it has been since October 2008. The youth unemployment rate stood at 16.9%, but remained much higher in Greece, Italy and Spain.

American employers added 312,000 jobs to the payrolls in December, exceeding forecasts and capping a year in which the most jobs were created since 2015, thanks in part to tax cuts. As the labour market tightens, wages are rising as employers vie for workers. Average hourly earnings were up by 3.2% year on year.

The good news on jobs sent stockmarkets soaring follow- ing a month of turbulence. Investors were also buoyed by assurances from Jerome Powell, the chairman of the

Leaders Leaders 9 Red moon rising

If China dominates science, should the world worry? hundred years ago a wave of student protests broke over ons and oppression. From better batteries and new treatments AChina’s great cities. Desperate to reverse a century of decline, for disease to fundamental discoveries about, say, dark matter, the leaders of the May Fourth Movement wanted to jettison Con- the world has much to gain from China’s efforts. fucianism and import the dynamism of the West. The creation of Moreover, it is unclear whether Mr Xi is right. If Chinese re- a modern China would come about, they argued, by recruiting search really is to lead the field, then science may end up chang- “Mr Science” and “Mr Democracy”. ing China in ways he is not expecting. Today the country that the May Fourth students helped shape Mr Xi talks of science and technology as a national project. is more than ever consumed by the pursuit of national greatness. However, in most scientific research, chauvinism is a handicap. China’s landing of a spacecraft on the far side of the Moon on Jan- Expertise, good ideas and creativity do not respect national fron- uary 3rd, a first for any country, was a mark of its soaring ambi- tiers. Research takes place in teams, which may involve dozens tion. But today’s leaders reject the idea that Mr Science belongs in of scientists. Published papers get you only so far: conferences the company of Mr Democracy. On the contrary, President Xi and face-to-face encounters are essential to grasp the subtleties Jinping is counting on being able to harness leading-edge re- of what everyone else is up to. There is competition, to be sure; search even as the Communist Party tightens its stranglehold on military and commercial research must remain secret. But pure politics. Amid the growing rivalry between China and America, science thrives on collaboration and exchange. many in the West fear that he will succeed. This gives Chinese scientists an incentive to observe interna- There is no doubting Mr Xi’s determination. Modern science tional rules—because that is what will win its researchers access depends on money, institutions and oodles of brainpower. Partly to the best conferences, laboratories and journals, and because because its government can marshal all three, China is hurtling unethical science diminishes China’s soft power. Mr He’s gene- up the rankings of scientific achievement, as our investigations editing may well be remembered not just for his ethical breach, show (see Science section). It has spent many billions of dollars but also for the furious condemnation he received from his Chi- on machines to detect dark matter and neutrinos, and on insti- nese colleagues and the threat of punishment from the authori- tutes galore that delve into everything from genomics and quan- ties. The satellite destruction in 2007 caused outrage in China. It tum communications to renewable energy and has not been repeated. advanced materials. An analysis of 17.2m papers The tantalising question is how this bears on in 2013-18, by Nikkei, a Japanese publisher, and Mr Democracy. Nothing says the best scientists Elsevier, a scientific publisher, found that more have to believe in political freedom. And yet came from China than from any other country critical thinking, scepticism, empiricism and in 23 of the 30 busiest fields, such as sodium-ion frequent contact with foreign colleagues threat- batteries and neuron-activation analysis. The en authoritarians, who survive by controlling quality of American research has remained what people say and think. Soviet Russia sought higher, but China has been catching up, ac- to resolve that contradiction by giving its scien- counting for 11% of the most influential papers in 2014-16. tists privileges, but isolating many of them in closed cities. Such is the pressure on Chinese scientists to make break- China will not be able to corral its rapidly growing scientific throughs that some put ends before means. Last year He Jiankui, elite in that way. Although many researchers will be satisfied an academic from Shenzhen, edited the genomes of embryos with just their academic freedom, only a small number need without proper regard for their post-partum welfare—or that of seek broader self-expression to cause problems for the Commu- any children they might go on to have. Chinese artificial-intelli- nist Party. Think of Andrei Sakharov, who developed the Russian gence (ai) researchers are thought to train their algorithms on hydrogen bomb, and later became a chief Soviet dissident; or data harvested from Chinese citizens with little oversight. In Fang Lizhi, an astrophysicist who inspired the students leading 2007 China tested a space-weapon on one of its weather satel- the Tiananmen Square protests in 1989. When the official ver- lites, littering orbits with lethal space debris. Intellectual-prop- sion of reality was tired and stilted, both stood out as seekers of erty theft is rampant. the truth. That gave them immense moral authority. The looming prospect of a dominant, rule-breaking, high- Some in the West may feel threatened by China’s advances in tech China alarms Western politicians, and not just because of science, and therefore aim to keep its researchers at arm’s length. the new weaponry it will develop. Authoritarian governments That would be wise for weapons science and commercial re- have a history of using science to oppress their own people. Chi- search, where elaborate mechanisms to preserve secrecy already na already deploys ai techniques like facial recognition to mon- exist and could be strengthened. But to extend an arm’s-length itor its population in real time. The outside world might find a approach to ordinary research would be self-defeating. Collabo- China dabbling in genetic enhancement, autonomous ais or ration is the best way of ensuring that Chinese science is respon- geoengineering extremely frightening. sible and transparent. It might even foster the next Fang. These fears are justified. A scientific superpower wrapped up Hard as it is to imagine, Mr Xi could end up facing a much in a one-party dictatorship is indeed intimidating. But the ef- tougher choice: to be content with lagging behind, or to give his fects of China’s growing scientific clout do not all point one way. scientists the freedom they need and risk the consequences. In For a start, Chinese science is about much more than weap- that sense, he is running the biggest experiment of all. 7 10 Leaders The Economist January 12th 2019

Politics in Washington How America’s shutdown ends

An almighty fight over presidential authority is brewing he government has partially shut down. Again. No other But the fight is really about Mr Trump’s authority. The presi- Tadvanced democracy has government shutdowns. In Ameri- dent was offered just such a trade a year ago by Senate Democrats. ca they have become almost routine. This is the third since Do- He turned it down, saying he wanted cuts to legal immigration, nald Trump became president and by far the most damaging. The too. Had he accepted it, the wall would by now be under con- others were resolved quickly; this is already the second-longest struction, but Mr Trump is not the master dealmaker he claims to on record. It is not happening because America is in turmoil: the be. In December he said he would be “proud to shut down the country is not at war, unemployment is as low as it has ever been. government for border security”. Having picked a fight, he must It is happening because that is what the president wants. win it or see his power diminished for the rest of his term. What is playing out in Washington is the denouement of a po- If politics blocks the obvious deal, Congress could pass a bill litical fight (see United States section). Mr Trump was elected on funding the entire government or, along the lines of a Democrat- a promise to build a wall on the southern border, though Mexico ic idea, all of it barring Homeland Security, and then override the was supposed to pay for it. The new Democratic majority in the president’s veto. But that would take a two-thirds majority in House is reluctant to give the president a victory on his best- both houses, and so will not happen soon. known policy. The Senate majority leader, who Hence things may get worse before the shut- might be able to end the stand-off, is awol. down ends. Nearly 1m federal employees are House Democrats have reason on their side. working without pay or have been sent home. At Even knowledgeable immigration hawks think some point their absence will make itself felt. spending $5.7bn on a wall would be a waste of Federal spending on food for the poor could also money. The number of people crossing the run dry, which will hit programmes that pay for southern border illegally is at a 45-year low. school lunches and milk for infants. The irs Vastly more people fly into the country legally may be unable to pay tax refunds on time. Na- and then overstay their visas. If illegal immigra- tional parks and monuments will remain un- tion is the problem, Mr Trump should be focusing on that. staffed, harming businesses that depend on tourism. Eventually, Yet it is also true that $5.7bn is peanuts in budgetary terms. the pressure on Republicans in the Senate to bypass the presi- The federal government spends that amount every12 hours. And, dent and cut a deal could prove irresistible. despite what Nancy Pelosi, the House Speaker, says, there is There is another possibility. The president could cut out Con- nothing inherently “immoral” about a wall. Quite a lot of wall gress and award himself emergency powers, allowing him to and fencing was built on the southern border long before Mr spend money on the wall as “military construction”, even as he Trump became president, and with Democratic support. reopens the government. That would set off a legal dispute over If this were just a fight about policy, it is clear what a deal the limits of his authority. Sadly, the prospect of such a raw exer- would look like. Congress would pass a bill giving citizenship to cise of presidential power—to say nothing of a good old fight those who arrived in the country illegally as children, amount- over the law—could appeal to all Mr Trump’s worst instincts. ing to about 700,000 people, and fund the wall in exchange. The And yet to declare an emergency where one doesn’t exist, legal or president gets something he wants; Democrats get something not, would open another chapter in Washington’s degradation of they want; America gets back its government. good government. 7

Britain’s opposition Still having its cake

Labour’s Brexit cop-out makes a mockery of its promise to empower party members s the deadline for Britain’s departure from the European bled down on his policy of calculated equivocation. Labour will AUnion approaches, with an exit deal still elusive, mps are vote against the government’s draft Brexit deal on January 15th, haring off in every direction. Parliament has descended into but has no plausible explanation of how it would get a better one, guerrilla warfare, as backbenchers attempt to wrestle the initia- nor a convincing strategy to break the impasse in Parliament if tive from the executive (see Britain section). Meanwhile the gov- the deal is defeated. Its abdication of responsibility makes La- ernment organised a pretend traffic-jam of 89 lorries on the road bour complicit in the crisis that is about to engulf Britain. And it to Dover, as part of preparations for a “no deal” exit. All it showed exposes the hollowness of Mr Corbyn’s promise that, as leader, was that Britain is hopelessly unprepared for what happens next. he would hand power back to the party’s members, whose grow- Amid the chaos, on January 10th the leader of the opposition, ing calls for a second referendum he continues to ignore. Jeremy Corbyn, stepped forward to propose a way out of the Labour’s Brexit policy amounts to cake followed by more mess. Yet his speech, delivered as we went to press, merely dou- cake. Though the party sensibly rejects the option of leaving with 1 The Economist January 12th 2019 Leaders 11

2 no deal, it insists that the withdrawal terms should provide the Yet Labour’s equivocation is at odds with the strongly pro-eu “exact same benefits” as membership of the single market while views of the half-million party members who elected him. Eight also allowing Britain to manage migration—something the eu out of ten of them voted to remain in 2016. Now seven out of ten would never agree to. In its refusal to acknowledge Brexit’s basic want a second referendum. A party “policy forum” this week trade-offs, Labour is at a stage in the argument that even the most heard calls from constituency associations around the country deluded Tory Brexiteers left behind months ago. for Labour to back a second vote. Even most members of Momen- Its tactics in Parliament are thoroughly obscure. If the gov- tum, a hard-left activist group set up to support Mr Corbyn, want ernment’s deal is voted down, Labour will try to force a general the party to endorse a referendum. election. But that is not in the party’s gift: success depends on the support of Tory and Democratic Unionist mps, who do not want Hearing without listening Mr Corbyn anywhere near Downing Street. The other way to Although all party leaders sometimes have to ignore their mem- break the stalemate would be another referendum. But Labour bers, for Mr Corbyn to go over the heads of the rank and file in says only that such a vote should be one “option on the table”. Mr this instance reeks of hypocrisy. When members re-elected him Corbyn, a convinced Eurosceptic who campaigned only half- leader in 2016, Mr Corbyn said that Labour’s growing member- heartedly to remain in 2016, has confused matters further by ap- ship “has to be reflected much more in decision-making”. Yet, pearing to accept that any referendum should have an option to over Brexit, Labour members who swallowed his promise of remain, but also saying that “we can’t stop” Brexit. “people-powered politics” have been had. Party managers have There is a certain political logic in this lack of clarity. Four out done their best to keep controversial Brexit motions off the agen- of ten Labour voters and six out of ten Labour constituencies da at Labour’s conferences, in feats of stage management worthy backed Brexit. Many voters see a second referendum as a plot to of Tony Blair, a predecessor he derides. thwart the will of the people. It may even be in Labour’s interests More important Mr Corbyn’s refusal to listen is letting down to let the Tories drive Britain over the no-deal cliff. Mr Corbyn, the country at large. Britain’s democracy relies on an opposition whose main achievement during three decades in Parliament to provide an alternative. For Labour to show that it is the “gov- was grabbing a selfie with Hugo Chávez, would not win an elec- ernment in waiting” that it claims, it would have to put forward a tion under normal circumstances. The shock doctrine of no deal better Brexit plan than the Tories. This is a dismally low bar. But might just make Britain susceptible to his disaster socialism. the opposition has so far failed to clear it. 7

Pakistan Praetorian penury

The impoverishment of Pakistan’s 208m citizens is a disgrace—and the army is to blame t has for so long been a country of such unmet potential that citizenry. And the army, believing the country to be surrounded Ithe scale of Pakistan’s dereliction towards its people is easily by enemies, promotes a doctrine of persecution and paranoia. forgotten. Yet on every measure of progress, Pakistanis fare atro- The effects are dire. Religiosity has bred an extremism that at ciously. More than 20m children are deprived of school. Less times has looked like tearing Pakistan apart. The state backed than 30% of women are employed. Exports have grown at a fifth those who took up arms in the name of Islam. Although they ini- of the rate in Bangladesh and India over the past 20 years. And tially waged war on Pakistan’s perceived enemies, before long now the ambitions of the new government under Imran Khan, they began to wreak havoc at home. Some 60,000 Pakistanis who at least acknowledges his country’s problems (see Briefing), have died at the hands of militants, most of whom come under are thwarted by a balance-of-payments crisis. If Mr Khan gets an the Tehreek-e-Taliban Pakistan (ttp). The army at last moved imf bail-out, it will be Pakistan’s 22nd. The per- against them following an appalling school sistence of poverty and maladministration, and massacre in 2014. Yet even today it shelters viol- the instability they foster, is a disaster for the ent groups it finds useful. Some leaders of the world’s sixth-most-populous country. Thanks Afghan Taliban reside in Quetta. The presumed to its nuclear weapons and plentiful religious instigator of a series of attacks in Mumbai in zealots, it poses a danger for the world, too. 2008, which killed 174, remains a free man. Many, including Mr Khan, blame venal poli- Melding religion and state has other costs, ticians for Pakistan’s problems. Others argue including the harsh suppression of local identi- that Pakistan sits in a uniquely hostile part of ties—hence long-running insurgencies in Ba- the world, between war-torn Afghanistan and implacable India. loch and Pushtun areas. Religious minorities, such as the Ahma- Both these woes are used to justify the power of the armed forces. dis, are cruelly persecuted. As for the paranoia, the army is no Yet the army’s pre-eminence is precisely what lies at the heart of more the state’s glorious guardian than India is the implacable Pakistan’s troubles. The army lords it over civilian politicians. foe. Of the four wars between the two countries, all of which Last year it helped cast out the previous prime minister, Nawaz Pakistan lost, India launched only one, in 1971—to put an end to Sharif, and engineer Mr Khan’s rise (as it once did Mr Sharif’s). the genocide Pakistan was unleashing in what became Bangla- Since the founding of Pakistan in 1947, the army has not just desh. Even if politicking before a coming general election ob- defended state ideology but defined it, in two destructive ways. scures it, development interests India more than picking fights. The country exists to safeguard Islam, not a tolerant, prosperous The paranoid doctrine helps the armed forces commandeer 1 12 Leaders The Economist January 12th 2019

2 resources. More money goes to them than on development. stan’s population will have increased by half. Only sizzling rates Worse, it has bred a habit of geopolitical blackmail: help us fi- of economic growth can guarantee Pakistanis a decent life, and nancially or we might add to your perils in a very dangerous part that demands profound change in how the economy works, peo- of the world. This is at the root of Pakistan’s addiction to aid, de- ple are taught and welfare is conceived. Failing so many, in con- spite its prickly nationalism. The latest iteration of this is Chi- trast, really will be felt beyond the country’s borders. na’s $60bn investment in roads, railways, power plants and Transformation depends on Pakistan doing away with the ports, known as the China-Pakistan Economic Corridor (cpec). state’s twin props of religion and paranoia—and with them the The fantasy that, without other transformations, prosperity can army’s power. Mr Khan is not obviously the catalyst for radical be brought in from outside is underscored by cpec’s transport change. But he must recognise the problem. He has made a start links. Without an opening to India, they will never fulfil their po- by standing up to demagogues baying for the death of Asia Bibi, a tential. But the army blocks any rapprochement. Christian labourer falsely accused of blasphemy. Mr Khan’s government can do much to improve things. It However, wholesale reform is beyond the reach of any one in- should increase its tax take by clamping down on evasion, give dividual, including the prime minister. Many politicians, busi- independence to the monetary authority and unify the official nesspeople, intellectuals, journalists and even whisky-swilling and black-market exchange rates. Above all, it should seek to generals would far rather a more secular Pakistan. They should boost competitiveness and integrate Pakistan’s economy with speak out. Yes, for some there are risks, not least to their lives or the world’s. All that can raise growth. liberty. But for most—especially if they act together—the elites Yet the challenge is so much greater. By mid-century, Paki- have nothing to lose but their hypocrisy. 7

Peak smartphone Bad news for Apple. Good news for humanity

The maturing of the smartphone industry should be celebrated, not lamented hen apple cut its revenue estimate for the last quarter of What about the people who still lack a smartphone? Sales of W2018 because of unexpectedly slow sales of iPhones, mar- 1.4bn units a year implies 2.8bn users who replace their handsets kets convulsed. The company’s share price, which had been slid- every two years, or 4.2bn who replace them every three years. ing for months, fell by a further 10% on January 3rd, the day after The reality is somewhere in between, and replacement cycles are the news came out. Apple’s suppliers’ shares were also hit. This lengthening as new models offer only marginal improvements. week Samsung, the world’s largest maker of smartphones by vol- Many phones are used for longer than three years, often refur- ume, which also sells components to other smartphone-makers, bished or as hand-me-downs. So even with flat sales, the longer said its sales were weaker than expected for the quarter, too. gaps between upgrades mean that overall penetration is still ris- Analysts reckon that the number of smartphones sold in 2018 ing. People who already have phones benefit, too. For all but the will be slightly lower than in 2017, the industry’s first ever annual most obsessive gadget fans, the slowing treadmill of upgrades decline. All this is terrible news for investors who had banked on comes as a welcome relief. continued growth (see Business). But step back and look at the Does that mean innovation is slowing? No. The latest phones bigger picture. That smartphone sales have peaked, and seem to contain amazingly clever technology, such as 3d face-scanners be levelling off at around 1.4bn units a year, is and cameras assisted by artificial intelligence. good news for humanity. Smartphone sales But as with mature technologies such as cars or People have voted with their wallets to make Worldwide, units bn washing machines, extra bells and whistles no 1.6 the smartphone the most successful consumer longer make a deep impression. 1.4 product in history: nearly 4bn of the 5.5bn 1.2 More important is that smartphones support adults on the planet now have one. And no won- 1.0 extra innovation in other areas. Deploying apps der. They connect billions of people to the inter- and services on an immature platform whose net’s plethora of information and services. 2014 15 16 17 18 prospects are uncertain is risky; on a mature Phones make markets more efficient, compen- one it is not. Smartphones thus provide a foun- sate for poor infrastructure in developing countries and boost dation for today’s innovations, like mobile payments and video growth. Yes, they can be used for wasting time and spreading dis- streaming, and for future ones, such as controlling “smart” information. But the good far outweighs the bad. They might be home appliances or hailing robotaxis. the most effective tool of development in existence. As computers become smaller, still more personal and closer The slowdown does not reflect disenchantment; quite the to people’s bodies, many techies reckon that wearable devices, contrary. It is the result of market saturation. After a decade of from smart watches to augmented-reality headsets, will be the rapid adoption, there is much less scope to sell handsets to first- next big thing. Even so, finding another product with the scope time buyers as so few of them are left. That hits Apple the hardest of the smartphone is a tall order. The smartphone retains its pro- because, despite a relatively small market share (13% of smart- mise as the device that will make computing and communica- phone users), it captures almost all of the industry’s profits. But tions universal. The recent slowing of smartphone sales is bad Apple’s pain is humanity’s gain. The fact that the benefits of news for the industry, obviously. But for the rest of humanity it is these magical devices are now so widely distributed is some- a welcome sign that a transformative technology has become al- thing to be celebrated. most universal. 7 “Our broker at First Republic knows us and understands us – and that is extremely valuable.”

MARC MCMORRIS, Co-Founder and Director, Carrick Capital Partners MARJORIE MCMORRIS, Founder and Director, The Helix School Foundation

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and whales have demonstrated Drachman of the Jewish Sab- I asked my daughter, who Nonsense on stilts? conscious awareness and bath Alliance campaigned for a studies classics, to give me a The speciousness of animal emotional experience beyond five-day week in America as Greek word for a political rights is obvious when one reasonable doubt. Their basic early as1910. In earlier times, system where the incompe- considers what animals do to right to life, without cruelty or Puritans passed legislation to tent, the irresponsible, the each other in nature (“Do they extreme confinement, should ensure workers had time for corrupt and the con artists have rights?”, December 22nd). be a no-brainer for all liberals recreation. And laws dating to emerge in political parties and When a cheetah kills a gazelle, seeking to advance happiness 958 in England and1203 in manage to win elections. The are rights being violated? Is a and freedom. I would love to Scotland restricted labour on term she gave me was crime being committed? Is the see The Economist adopt this Saturday afternoons in order to “kakistocracy”. I prefer Bage- gazelle’s family entitled to radical, but entirely reason- prepare for the Sabbath. hot’s more pedestrian and less damages? Jurists who find able, position. Those who wish to secure a cacophonic term: “chumo- these questions perplexing are justin giles four-day work week should cracy” (December 22nd). more likely to find clarity in Charlotte, North Carolina note that the weekend as we claudio coltro basic moral philosophy than in know it has been brought Milan case law. Especially helpful is about not only by organised Immanuel Kant’s grounding of Child killers labour, but also by organised Perhaps “chumpocracy” would duties and rights in our accep- I read with great interest, and religion. be more apt. tance of a universal moral law, indeed sadness, your piece on karl johnson andrew johnston our capacity to recognise the genocide prevention (“Never Ithaca, New York Radley, Oxfordshire rights of others and temper our again, again and again”, behaviour accordingly. This December 8th). In your brief trait is uniquely human. account of the Rwandan geno- Illustrator’s Fouc-aulp Ho, ho, ho! The fact that animals can cide, you referred specifically The illustrated calendar in The As a former consultant, I feel pain or show glimmers of to Hutu officers organising World in 2019 depicts the wrong enjoyed Bartleby’s report on human-like cognition or adult Hutus to slaughter their Foucault. Léon Foucault, Santa Claus’s organisation at behaviour does not confer Tutsi neighbours. Although known for his pendulum and the North Pole (December rights. Laws protecting ani- most of those who committed celebrating his 200th birthday 22nd). However, his good mals are perfectly justifiable, genocidal acts in Rwanda were in September 2019, died with a journalistic instincts got in the not because they have rights, indeed adults, there were full head of hair and favoured way of consulting best prac- but because we value their nonetheless some children, three-piece suits over turtle- tice. There was a distinct lack welfare and are repulsed by including the very young, who necks. Pictured in his stead, of incomprehensible jargon, acts of cruelty against them. were involved as perpetrators. with trademark bald pate and and the recommendations Upholding such laws does not The participation of chil- spectacles, is Michel Foucault, were delivered in clearly writ- require the cascade of non- dren in acts of atrocity carries a French philosopher and ten prose, instead of a baffling sense that would ensue from with it certain implications, literary theorist. Acolytes of 45-slide PowerPoint deck. pretending that animals have particularly when it comes to Foucauldian-discourse analy- Nevertheless I’ll look for- moral or legal standing. how countries deal with such sis will toast to the centennial ward this year to a progress Thinkers of a certain bent violent crimes. Regrettably, of his birth in 2026. report on how things are going will find it irresistible to attack Rwanda is not the exception. peter kalal with outsourcing the rdo the species barrier by decon- To provide just one recent New York (reindeer delivery operations), structing human behaviour example, video propaganda changes to the ceca (chimney- into purely biological or evolu- from Islamic State over the enabled customer access) tionary factors. At the rawest past couple of years has shown A missed opportunity process, and the nonvt levels of description, they may children as executioners in You say that Brussels is more (naughty-or-nice verification have a point. Still, the fact that Syria. International efforts to eager to make concessions to transformation) project. I am “animal law” seems to focus prevent and respond to such eu member countries than sure Bartleby’s imaginary exclusively on how people tragic events must not neglect non-members (“Brussels consultancy firm will be happy treat them, rather than how children’s involvement. pouts”, December 22nd). Sadly, to help with these initiatives animals treat themselves, is a dr jastine barrett this was not David Cameron’s (for a juicy fee and Lapland tacit acknowledgment of a Harpenden, Hertfordshire experience before the referen- Airways expenses, of course). moral distinction. dum in 2016. Back then, the eu nathaniel kent henry stephenson should have offered an emer- London O’Fallon, Illinois God blessed the seventh day gency brake on free movement. Regarding the prospect of a But it is not too late. Indeed, Surely Bartleby’s “Yule Univer- I was excited to see your article four-day work week, an given the events in Europe over sity” would be a member of the on the advancement of animal understanding of the past is the past two years, an eu-wide Holly League. rights. Your newspaper has indeed in order, but it is too emergency brake of some form charlie wilson frequently called for a bolder simple to say that “organised would probably be welcomed Oxford and more radical modern labour has led the charge for throughout the eu. Now we liberalism, and this is an obvi- reduced working hours” (Free know so much more about ous issue in need of an update. exchange, December 22nd). Brexit, that concession would Letters are welcome and should be Although animal welfare in Christian clergy and lay leaders certainly clinch a vote for addressed to the Editor at The Economist, The Adelphi Building, general remains complicated on both sides of the Atlantic Remain in a re-run. Come on 1-11John Adam Street, London WC2N 6HT (and I for one have no desire to collaborated with labour to Angela! Email: [email protected] give rights to clams), species push for shorter hours in the andrew robson More letters are available at: Economist.com/letters such as great apes, dolphins 19th century. Rabbi Bernard Chailey, East Sussex Executive focus 15 16 Executive focus

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In this context, the bosses’ virtue-sig- Tales of self-harm nalling on the Prophet’s birthday is cheap. Yet spare a thought for businesses, too. They make money only in the face of steep odds, or with help from friends in high places. In Karachi a cotton-mill-owner em- ploying 250 workers, a big rice exporter, the owner of a shoe factory and the head of a KARACHI AND RAWALPINDI family-run chain of small chemist shops Why Imran Khan will struggle to make life better for Pakistanis (drugstores) all said that rising costs of undreds of workers and their fam- barely make ends meet. Life was always electricity and water were extreme head- Hilies pressed through the iron gates of a precarious. It has now grown more so. aches. The drugstore boss complains that, factory that knocks out trainers in Rawal- Afaq Hussain has worked in the same with no electricity from the grid for up to 16 pindi towards the end of last year. In the al- backstreet shoe workshop hammering on hours a day, the use of diesel generators leyway behind it the factory-owner was soles for 32 years. Last year the cobbler and doubles his energy bills. The mill-owner dishing out biryani. It was the Prophet Mu- his wife were struck down with dengue fe- says higher prices for power and water have hammad’s birthday. Children flocked ver. In municipalities with tolerable ad- added 2 rupees a metre to the cost of pro- around great steaming pots, as employees ministration, the disease is largely avoid- ducing his cloth, wiping out his thin mar- replaced those emptied with full ones. In able—a question of draining the pools of gins. The businessmen complain that they all, the owner said, he would dole out a stagnant water in which the mosquitoes are losing out to competitors not just in tonne of rice and 800kg of beef. The mes- that spread the disease may breed. Karachi China but in Bangladesh, India and Sri Lan- saging was hardly subliminal: this boss is does not have such administration. Mr ka. The shoe-factory boss has just laid off magnanimous, god-sent. Hussain had to fork out 3,000 rupees for half of his 70 workers. For workers across the country feasts treatment. “People are scared all the time,” such as this may be welcome. But many say he says. “If they are sick, they think: who Hard business they would prefer a pay rise. A squeeze on will pay?” The damning fact is that, even when eco- workers has been made worse by the ef- Rarely the bosses. Few employers pro- nomic growth ran at a better clip for five fects of rising interest rates and a fall in the vide more than the stingiest health care. By years and a handful of new power stations Pakistani rupee in the past year of nearly their own admission, they see malingerers at last ameliorated the country’s chronic 30%. The economy, which a year ago was everywhere. Unions are weak, when they energy shortages, the real value of exports growing at 5.8% annually, has slowed exist at all. Good jobs even for skilled la- failed to grow. Today few businessmen are sharply. The cost of food, electricity and bourers are hard to find. One Karachi tex- confident that exports can pick up even fol- clean water has shot up. Factory workers in tile boss, who employs more than 500 peo- lowing the currency’s devaluation. Karachi, Pakistan’s biggest city and indus- ple, puts it bluntly. “They get a job and they Asking what the government is doing to trial heartland, say that, earning only don’t like to make trouble,” he says. “After help elicits hollow laughs. In parched Kara- 22,000 rupees ($160) a month, they can all, where else are they going to get work?” chi, there is anger that the government 1 18 Briefing Pakistan The Economist January 12th 2019

2 cannot even keep water flowing. With wa- That is certainly Mr Khan’s intention. ter mains often sucked dry by politically China-Pakistan Kashgar He campaigned on a promise of what he TAJIKISTAN connected mafias, employers and consum- Economic Corridor CHINA calls “Islamic welfare”. There is little speci- ers are forced to pay through the nose for Coal-fired power ficity to the phrase. But it is an appeal to water from tankers driven by those same station/coal mine Pakistan’s downtrodden and a welcome Hydropower KASHMIR gangs. As for bureaucracy and government KHYBER (administered recognition of the price of poverty and so- Wind farm PAKHTUNKHWA by Pakistan) corruption, it seems to be getting worse. Solar cial injustice among several tens of mil- Port officials frequently demand bribes Islamabad JAMMU & lions of Pakistanis at the bottom of the pile. Road upgrades/ KASHMIR from the drugstore boss for importing new roads TRIBAL Rawalpindi (administered By the un’s measure of human develop- beauty products. The rice exporter lists 14 Source: Government AREAS by India) ment, Pakistan ranks the lowest in South of Pakistan separate agencies that insist on receiving Lahore Asia. Pakistan accounts for one in every 13 PUNJAB bribes, ranging from civil defence to health AFGHANISTAN of the world’s unschooled, and most of and safety. Quetta them are girls. Some 21m Pakistanis have PAKISTAN no access to clean water. Imran to the crease INDIA “Social protection” is a phrase on the IRAN BALOCHISTAN It is against this backdrop that Imran Khan SINDH lips of many of the new government’s and the party he founded, Pakistan Teh- 300 km members. In the planning ministry the pti Hyderabad reek-e-Insaf ( ), came to power after Gwadar parliamentary secretary, Kanwal Shauzab, elections in July. The 66-year-old former Karachi is a social scientist who did her fieldwork playboy and cricketing superstar, who was Arabian Sea in caste- and class-based discrimination once married to a British-Jewish socialite, against women in the southern part of has had something of a remake as a devout Punjab province, Pakistan’s most popu- upholder of Islam. That has drawn rural Pakistani ambassador to America now at lous. She and Western-educated female ad- conservatives to a movement that found its the Hudson Institute in Washington, dc, visers eagerly lay out what they intend to early support among urban and often secu- writes in his recent book, “Reimagining accomplish in terms of human-develop- lar middle classes. It sits oddly with those Pakistan”, that not only does the army set ment goals—reducing poverty, improving familiar with Mr Khan’s hedonistic procliv- itself up as the protector of the national in- education, providing sanitation and clean ities, or his well-dressed crowd of hangers- terest, it also “defines national interest au- water. The challenges are immense, and on—people who, as one political observer tonomously of elected civilians” and it begin with a palpable lack of zeal in the who knows them puts it, “either want to does not “countenance any interpretation ministry’s adjacent, somnolent offices. fuck him or fuck like him.” of national interest other than the one it in- Yet there is little doubting Mr Khan’s stitutionally advances.” The buckle on the belt and road personal honesty, or the pride he evinces in Key tenets of the state ideology the army Yet Mr Khan’s aspirations have careened the two cancer hospitals he has founded, has fostered are an Islamist religiosity; a into Pakistan’s immediate challenge: a full- the first in 1994. His own living has long doctrine of insecurity, tipping into para- blown balance-of-payments crisis. The been presumed to be underwritten by noia, resting upon divining enemies cease- country has an addiction to these, especial- benefactors. Though hardly all homespun lessly at work to undermine Pakistan (none ly after budget-busting elections. But this frugality, Mr Khan is not deep-pocketed more so than nefarious India); and the crisis has a particular feature, the influence like members of Pakistan’s usual political army’s own praetorian role in the Pakistani of China. The previous government under clans. Nor does he represent a self-perpet- state. The country’s nuclear doctrine— Mr Sharif came to office just as President Xi uating dynasty, as they do. This is part of Pakistan has possessed nuclear weapons Jinping was laying out his grand plan to use his appeal. For years he has railed against since 1998—flows from, and winds China’s surplus dollars and excess capacity nepotism and political corruption. He won through, all three tenets. So does a long to create a web of globe-girdling infrastruc- national office at last thanks to his anti- propensity, striking in a state with such a ture, now known as the Belt and Road Ini- graft message finding a wide audience prickly nationalism, to play up its geopolit- tiative (bri). The China-Pakistan Eco- among disenchanted Pakistanis. ical importance in return for foreign aid. nomic Corridor (cpec) is easily the biggest That and help, behind the scenes, from Mr Khan, for all that he paints himself part of the initiative. the army’s top brass. The army has always as a populist outsider, has become a vocal China has strategic as well as economic played an outsized role in public life. One upholder of these tenets, and in return the reasons to want to connect its landlocked of its critics, Husain Haqqani, a former army backed his rise. First the generals hinterlands to the Indian Ocean. Hugely went after the prime minister since 2013, ambitious plans were drawn up for power Nawaz Sharif, and his Pakistan Muslim plants, roads, industrial zones and the de- Sub continent League-Nawaz (pml-n). They deemed him velopment of Gwadar, until recently a flea- GDP, 2000=100 insufficiently biddable and last year en- pit on the Arabian Sea, into a modern port. 350 couraged what was in effect a judicial coup. Over $60bn in Chinese investment and The generals then strong-armed the press loans was promised. As the projects got un- India 300 and television to back Mr Khan, while shut- der way, the tide of money pumped up do- Bangladesh ting off that oxygen for Mr Sharif. mestic demand, inflated a property bubble, Sri Lanka 250 Nearer the election the generals helped pushed up the value of the currency and led Pakistan 200 pliant politicians with large local follow- to an unsustainable surge in imports. The ings switch sides and bring their “vote current-account deficit was 1% of gdp in 150 banks” with them. On election night they 2015. By 2018 it had widened to over 5% of helped rig pti victories in a dozen or more gdp. Foreign-exchange reserves have fall- 100 crucial seats. The cowed media may men- en sharply, previously brisk economic 50 tion none of this. Some analysts even think growth has slowed leaving Pakistan’s to it an acceptable evil: at last a civilian gov- continue trailing behind its neighbours 2000 05 10 15 18* ernment that does not rile the army can roll (see chart). Inflation and interest rates are Source: IMF *Estimate up its sleeves and get economic stuff done. rising, too. 1

20 Briefing Pakistan The Economist January 12th 2019

2 Mr Khan at first declared that he was is to conspire against the national inter- damned if he was going cap-in-hand to the est—which the army holds the monopoly imf, turning to Pakistan’s all-weather of defining. The sanction for media outfits friends, Saudi Arabia and China, instead. that cross the army is closure. Saudi’s rulers opened the chequebook only Sensitivity over cpec is understandable after an international furore over the mur- for another reason. China is Pakistan’s der of Jamal Khashoggi made them eager to closest diplomatic and military friend. improve their image. They have promised China helped it become a nuclear state and $6bn in loans and deferred payments for acts as a counterweight to India, the old oil. The United Arab Emirates is offering foe, as well as America, with which Paki- something similar. As for China, on Mr stan has troubled relations. Both sides in- Khan’s first trip as prime minister to Beij- sist that the “Sino-Pak” relationship is, in ing in November, he had none of the firm the words of an old phrase, “higher than the promises of financial aid that he had hoped Himalayas, deeper than the ocean, stron- for. And China dashed hopes for a renegoti- ger than steel and sweeter than honey”. But ation of cpec deals—which are, after all, any questions about it would be embar- commercial arrangements with state- rassing. The generals, with fingers in many owned enterprises, not with the state. pies, are surely keen to hide how hand- So Mr Khan has no choice but to turn to somely they are making out from cpec. the imf to bail out Pakistan, as it has done a The cpec taboo undermines the Pan- dozen times since 1988. Pakistan hopes for Plenty of guns, not much butter glossian argument that, now a civilian gov- up to $12bn. In return the imf is asking for ernment is at last aligned with the armed action such as raising energy prices, economist at Princeton University, argues, forces in Pakistan, much can be accom- clamping down on tax evasion and re- sustaining high imports, financed by ex- plished. As Mr Haqqani points out, an ob- vamping the export sector. The govern- ternal borrowing, is magical thinking. Suc- session with national security makes it ment has not won a deal as swiftly as its cess cannot be bought from outside with- hard to propose economic solutions to eco- members had predicted. Negotiators hope out concentrating on domestic product- nomic problems. for an agreement early this year. ivity growth and exports. cpec causes the Pakistan can probably dig itself out of currency to become overvalued and Paki- Restraint of trade its immediate hole, helped in part by recent stan to become less competitive globally. It The economic boom to make that invest- falls in the oil price—it is an energy import- is, Mr Mian says, Pakistan’s version of ment worthwhile can transpire only with er. The new finance minister, Asad Umar, a “Dutch disease”. vibrant trade ties with Pakistan’s neigh- former businessman, says that money And the damage is significant even be- bours, India above all. Yet obstructing such from Saudi Arabia and China solves his fore posing the question of servicing dol- ties is the country’s national-security pri- cash-flow problems for the coming year. lar-denominated Chinese debt. To date, ority, in the generals’ eyes. There are other An imf deal would buy another couple of cpec has helped increase Pakistan’s exter- ways in which the case is undermined. For years beyond that for a sweeping reform nal debt by half, to $97bn (32% of gdp), all Mr Khan’s integrity, the pti and its allies programme. Mr Umar claims it is less while debt-service costs outstrip the bud- have plenty of sleazy politicians and busi- about the final sums disbursed than about get for development. There are legitimate nessmen on the make. securing a new “strategic” direction that questions too about the nature of the deals A more subtle undermining concerns would make this bail-out Pakistan’s “last signed with China. No doubt Pakistan the case of Mr Mian, the economist from imf programme”. needs Chinese coal-fired power plants. But Princeton. On coming to office, Mr Khan Mr Umar gives the impression of trying the electricity tariffs Chinese investors are appointed him to his economic advisory to fix a vast number of things at once. But guaranteed for years look exceptionally council. But then Islamist parties which three areas are a priority, he says. The state high when solar power in sunny Pakistan the army had once fostered insisted on his raises a pitiful sum from taxes: only 10.5% offers a cheaper long-run alternative. dismissal on the grounds that he is an Ah- of gdp. Meanwhile, a thriving black market As for the loans China has made in re- madi. The Ahmadis are a sect who revere in foreign exchange helps the siphoning of turn for Chinese-built roads and the like, both the Prophet Muhammad and a 19th- ill-gotten wealth abroad. So clamping the interest rates Pakistan is charged are century messiah. They are often persecut- down on tax evasion is a must. Much hope usually competitive and no one else would ed. Indeed, the constitution stipulates that is placed on technology coming to the res- lend Pakistan the money. But without open they are not really Muslims (which they say cue. Mr Umar claims early success in using tenders for contracts, the concern, as Mr that they are), and mandates discrimina- data trawls to spot tax dodgers, identifying Mian puts it, is that Chinese companies tion against them. Mr Khan gave in to pres- them by spending patterns, for instance. charge $100 for equipment but install sure and sought the resignation of Mr The second area is helping Pakistan’s poorer kit that is worth, say, $80, a trick Mian, a world-class economist who only beleaguered exporters. But the task is huge: that sharply raises the cost of capital. wants to improve the lot of ordinary Paki- in the past four decades Pakistani exports There are hints that the establishment stanis. Thus, once again, does Pakistan have grown only one-fifth as fast as India’s is having second thoughts about cpec. It commit self-harm. 7 or Bangladesh’s. Third, Mr Umar promises might explain why the army, behind the to overhaul the state sector, taking state- scenes—and now perhaps Mr Khan him- Missing map? Sadly, India censors maps that show owned enterprises from the purview of self—are working hard to mend fences the current effective border, insisting instead that ministers and bureaucrats, for whom they with America. Yet openly criticising cpec only its full territorial claims be shown. It is more intolerant on this issue than either China or represent tempting targets for plunder and was taboo under the previous government Pakistan. Indian readers will therefore be deprived misrule, and into a professionally run and remains so. Mr Mian describes a “blan- of the map on the second page of this story. Unlike holding company. ket ban” on any objective assessment. Mis- their government, we think our Indian readers can Mr Umar’s aims are commendable. Yet givings about cpec are almost entirely ab- face political reality. Those who want to see an accurate depiction of the various territorial claims one topic in need of urgent debate remains sent in the press. In private Pakistani can do so using our interactive map at out of bounds: cpec itself. As Atif Mian, an journalists explain why. To question cpec Economist.com/asianborders United States The Economist January 12th 2019 21

Governing America soned that Congress did not intend to close them; it merely had not yet got around to This town, shut down formally providing their funding. In 1980, however, Benjamin Civiletti, then the attorney-general, opined that the only way that agencies could avoid violat- ing the Antideficiency Act—which forbids the government from spending money that WASHINGTON, DC has not been appropriated—is to cease op- As Republicans grow restive, the president makes his case to the public erating until Congress funds them (the ublic-relations professionals know ry, does not want to give it to him. Act’s authority stems from a constitutional Pthat the best time to release bad news is If this shutdown, the third in the past prohibition against the government late on Friday afternoons. Hacks and their year, stretches into next week it will be- spending public money unless the people, editors have one foot out of the door; no- come the longest in American history. How via their representatives, have authorised body wants to put their weekend plans on did the world’s most powerful government it to do so). The only exceptions concerned hold to start a new story. America has re- become so dysfunctional? The roots of this “the safety of human life or the protection cently discovered that a similar rule holds shutdown lie in two places: an attorney- of property”, which exempts active-duty true for government shutdowns: if it hap- general’s memo written in 1980, and Mr military, who are still working and getting pens just before Christmas, when federal Trump’s 2016 campaign. paid, and federal airport-security workers, workers are already on holiday and nobody Before 1980, federal agencies often op- who are working but not getting paid. is paying much attention to the news, then erated during funding gaps (meaning be- Mr Civiletti’s determination made the waste and pain will not seep into the fore Congress had appropriated the re- funding gaps less frequent. They were no headlines for a couple of weeks. quired money). They tried to stay lean, to longer technical and ignorable glitches; Now that quiet period has passed. Rub- avoid going too far into the red, but rea- they became, in effect, temporary closure bish is piling up in national parks; farmers orders, which made them costly and em- cannot get their loans processed; food- barrassing. But it also turned government stamp programmes are running out of Also in this section funding into a hostage-taking mechanism. funds; tax refunds may be delayed; and In late 1995, the Republican-controlled 22 Shopping for a Caesarean hundreds of thousands of federal workers House, led by Newt Gingrich, produced a remain either stuck at home or forced to 23 Swatting spending bill with deep cuts to social-wel- work without pay. To reopen the govern- fare programmes that were anathema to 24 MeToo and conservatism ment President Donald Trump demands then-president Bill Clinton. Mr Clinton re- $5.7bn for his border wall. Nancy Pelosi, 25 The city of back-handers fused to sign it, and the government shut who presides over the most polarised down—first for six days, and then for 21. 26 Lexington: John Kasich House of Representatives in recent memo- The shutdown ended when Congress and 1 22 United States The Economist January 12th 2019

2 the White House hammered out a budget migrants apprehended at the border rose deal with modest spending cuts and tax late last year, but from record lows. Overall hikes. In effect, Republicans caved. numbers are far below where they were a Although Mr Gingrich received most of decade ago. If there is a crisis, it is in Ameri- the blame for the shutdown (and Mr Clin- ca’s creepingly slow-moving asylum sys- ton was easily re-elected), it arguably tem. Yet that is a far less compelling argu- pushed the president’s agenda rightward. ment than Mr Trump’s assertion that Still, the opprobrium resulting from the foreigners are sneaking across the border government ceasing to function for nearly to behead American citizens, and that the a month was sufficient for Mr Gingrich only way to stop them is to build a big wall. never to try it again. Chuck Schumer, the Democratic leader in Another generation of Republican in- the senate, reiterated his party’s offer: con- surgents tried in 2013, when they insisted, tinue negotiating over border security and as a condition of passing a budget, that the pass bills to reopen the other shuttered Affordable Care Act, Barack Obama’s signa- parts of the government. ture achievement, be delayed or defunded. Most Senate Republicans would happi- That shutdown, which lasted 16 days, also ly accept this deal. Some who are up for re- ended with Republicans surrendering election in two years, such as Cory Gardner without getting what they demanded. But of Colorado and Susan Collins of Maine, neither did they pay a political cost; the have begun pushing for a resolution with- next year they took control of the Senate. out a wall. Even John Cornyn of Texas, the Like these two previous shutdowns, majority whip until recently, backed the this one is Republican-led. Unlike the past sort of hybrid solution—physical barriers, two, however, it stems from the president along with technology, drones and more trying to impose his will on Congress, rath- personnel—that Democrats could support. er than the inverse. Absent Mr Trump’s in- But far more Republican senators face re- sistence on $5.7bn for his wall, a spending election in solidly Republican states next bill could easily pass both houses of Con- year, and they fear a primary challenge Health economics gress. “This is not a hard shutdown,” says from the right more than losing to a Demo- Michael Steel, who was a spokesman for crat. Hence Mitch McConnell, the Senate Shopping for a John Boehner, the House speaker during majority leader, vowed not to bring for- the 2013 shutdown. “Put any number of bi- ward a bill that the president does not sup- Caesarean partisan senators in a room with a cocktail port, despite having called shutdowns “a napkin and they could figure this out.” failed policy” in 2014, when he also urged Instead of senators huddled around a the then-Democratic Senate to set “nation- Hospital prices are now public. That is cocktail napkin, America was treated to Mr al priorities [rather than] simply waiting on unlikely to push them down Trump and Democratic congressional the White House to do it.” leaders making their cases on prime-time For his part, Mr Trump feels he holds a rom the day it became law, the Afford- tv. Mr Trump called the border “a pipeline winning hand. Immigration hawkishness Fable Care Act, better known as Obama- for vast quantities of illegal drugs”, though helped propel him to victory in 2016 and re- care, has been a party piñata for the Repub- most come through ports of entry and a mains crucial to satisfying his base. licans. They keep bashing it from all sides, wall would not stop them. The number of Though a recent Reuters poll showed that trying to tear it apart. But one of its provi- most Americans blame him for the shut- sions was embraced and even bolstered by down (perhaps because he accepted blame the Trump administration: as of January 1st Coming apart in a televised interview), earlier polling hospitals are obliged to post online the United States, distribution of ideology data suggest that may fade by 2020. During standard charges for all of their services. of House members the two previous extended shutdowns, ap- The idea is, in theory, laudable. Patients, proval ratings for the incumbent presi- who are otherwise mostly blind as to what Democrats Republicans dents both fell, but they rebounded rela- their care will cost until the bill arrives, More liberal More conservative tively quickly. Yet that pattern may not would shop around for lower prices. The hold if this shutdown lasts months. biggest winners at first would be the Members of both parties fear that Mr roughly 10% of Americans who do not have1 Trump will reach not for Mr Schumer’s sol- ution but a more drastic one: invoking emergency powers to circumvent Congress $10,000 baby and build a wall using previously autho- Average price of birth delivery rised military funds. That would set a pre- Private sector, 2015 or latest, $’000 cedent that terrifies conservative senators: 024681012 what is to stop a future Democratic presi- dent from doing the same thing to deal United States with climate change or guns? Switzerland It would also precipitate a genuine con- Australia stitutional crisis and a fierce court battle. Perversely, that could suit Mr Trump well. France He may not get his wall, but he would get to Britain keep fighting for it, and he would still have Spain useful enemies—judges, Democrats—to Source: International Federation of Health Plans Source: VoteView.com blame for it having not been built yet. 7 The Economist January 12th 2019 United States 23

2 health insurance and the 43% covered by veil of secrecy”. Studies of people in high- gory, no nationwide tally exists. But Kevin cheap plans that require them to pay sub- deductible plans show that when they have Kolbye, a former fbi swatting expert who is stantial amounts towards medical bills be- access to prices they reduce their use of ser- now assistant police chief of Arlington, fore their insurance kicks in (known as vices but do not pay less for them. Patients Texas, reckons annual swatting incidents high-deductible plans). As patients flock to usually go for tests to wherever their doc- have climbed from roughly 400 in 2011 to competitors who charge less, hospitals tors refer them. more than 1,000 today. would cut prices to win them back—bring- The fallacy of pinning hopes on policies Part of this increase can be chalked up to ing America’s exorbitant prices closer to such as the new price-transparency rule is smartphone apps and online services that those in other rich countries (see chart). that patients in America are viewed as con- mask a caller’s location and identity, di- In reality, none of this is likely to hap- sumers who can easily shop around, rather minishing the risk of the swatter being pen. The price lists that are being pub- than people who are unwell and under du- caught. Another factor is the popularity of lished are of little practical use for patients. ress, says Dr Hsia. But knowing in advance streaming videogame play to an online au- Each private insurer negotiates discounted how much their care will cost would be a dience. A swatter who targets a rival gamer rates with each hospital, in contracts that step forward. 7 during a streaming session can watch the usually neither side is allowed to make victim’s reaction as his room is stormed by public. An analysis of payments for un- cops in tactical gear, weapons drawn. The complicated births in California in 2011, for Mischief and policing voyeuristic frisson thus obtained seems to example, found that discounted prices have outclassed the thrill of generating a paid by insurers were, on average, 37% of Swatting up news report of a swat raid on a celebrity’s hospitals’ list prices. home, an approach that was more common Uninsured patients, who are most like- in years past. (Stars subjected to a swatting ly to pay the list prices, face a headscratch- include Justin Bieber, Russell Brand, Tom er: working out which of the thousands of Cruise, Miley Cyrus, Clint Eastwood and items on the price lists, with descriptions SANTA BARBARA Paris Hilton.) Swatting is so widespread that it could like “echo tee guid tcat icar/vessel Most swatters, then, are seeking kicks become a federal crime structural intvn”, might apply for their or the settling of a score. Some, however, treatment. Even if they manage to nail nyone tempted to cry wolf might pon- are pursuing profit. Drug dealers some- down the big-ticket items, they will still be Ader the fate of Tyler Barriss. On January times swat rivals, hoping their unexpected missing a major portion of the final bill, be- 30th a federal judge will sentence the Cali- brush with the law will end up reducing cause the rates charged by physicians, radi- fornian to at least 20 years in prison for competition, says Robert Pusins, who until ologists and other specialists are not in- dozens of hoax 911emergency calls, includ- recently worked for the sheriff’s office in cluded in hospitals’ lists. To dispel ing one which resulted in the police in Broward County, Florida. confusion hospitals are posting, alongside Wichita, Kansas fatally shooting an inno- The risk of violence seems to rise in the their price lists, disclaimers and videos ex- cent and unarmed young father. But while swatting of victims who have not commit- plaining that they are useless. Mr Barriss’s mischief-making is over, at ted a crime. In the confusion of a raid, a The predicament of patients trying to least for a spell, police swat (special weap- law-abiding citizen is more likely to reckon get an idea of what something like a big op- ons and tactics) teams, which make use of that his home must be under attack by eration might cost them is laid bare by a military hardware and techniques, can ex- thugs. Thus unnerved, he is more likely to study conducted in 2016, in which re- pect plenty more “swatting” calls, as bogus brandish and use a weapon, which may searchers called 120 hospitals posing as a reports of violence have become known. draw police fire, Mr Kolbye says. During the grand-daughter looking for information Due to the lack of a uniform reporting cate- response to a fake bomb threat in 2015, the 1 on the cash price of hip replacement for her grandmother. Only eight of the hospitals were able to provide a full price, inclusive of physician charges; 53 were unable to provide any estimate. Nearby hospitals often have widely dif- ferent list prices, even for things as stan- dard as an x-ray or an aspirin tablet. Might some hospitals lower prices when they see what their competitors are charging? That, too, seems unlikely. Most states already re- quire hospitals to publish some of their prices. When prices become public, they may go up, not down, says Renee Hsia of the University of California in San Francis- co. Antitrust textbooks teach that transpa- rency can push up prices because firms know that discounting might trigger an immediate price war rather than boost their market share. America’s health care market poses par- ticular challenges. Hospitals set prices us- ing various multipliers and formulas that are often outdated and not linked to costs or quality—a process that the late Uwe Reinhardt, an economist at Princeton Uni- versity, once described as “chaos behind a It was only a game 24 United States The Economist January 12th 2019

2 police chief of Sentinel, Oklahoma was shot four times by a resident who, investi- gators said, was not charged because he be- lieved the intrusion was criminal. (A ballis- tic vest saved the officer’s life.) Of late, swatters seem to have become better at making their 911 calls appear to come from near the supposed scene of the crime, says Carrie Braun, spokeswoman for the sheriff’s office in Orange County, Cali- fornia. But even fishy reports of violence must be treated as real—“we will always re- spond,” she says. All this hits taxpayers hard. The bill for a swat raid complete with bomb squad and paramedics can run into six figures, according to the Michigan As- sociation of Police. More than a few swatters end up brag- ging online, an unwise move. To make prosecuting them easier, Congresswoman Katherine Clark, a Massachusetts Demo- crat, is pushing a bill in Congress that Her too would make swatting a federal crime. In 2016, not long after she had introduced the were publicly named and shamed over sex- port for #MeToo over the past year. initial version of the legislation, police ual misconduct allegations. Many more The partisan gender gap has already with rifles appeared outside her house near feared that “some lady” from the past widened. In 2016 Hillary Clinton won 54% Boston. A caller had said that a shooter was could, with one accusation, destroy them of women voters; in the 2018 mid-terms inside her home. 7 and their family. This lady became person- 59% of women voted for Democrats. Re- ified in Christine Blasey Ford, when in Sep- publicans appear unconcerned: a recent tember 2018 she accused Brett Kavanaugh poll found that 71% of likely primary voters #MeToo and conservatism of sexual assault, threatening to derail his expressed no concern that only 13 of the nomination to the Supreme Court. All this party’s 200 House members are women Sister sledging helped fuel a backlash against #MeToo, and (the lowest number in 25 years) and 60% not just among men. Many Twitter threads said nothing had to be done to recruit more on #HimToo, the hashtag about false accu- female candidates. sations, were posted by worried mothers. One explanation of this partisan gap is “We saw the split among Republican that it reflects a difference of opinion over women widen around the Kavanaugh hear- what true feminism is. Some conservative Republican women over 65 have ings. A lot of the rhetoric illustrated the women resist what they see as special become the most anti-#MeToo group generational gap,” remembers Jennifer Pie- treatment for women as vaguely patronis- o group has swung against #MeToo rotti Lim, from Republican Women for Pro- ing. There is another explanation, too. Ms Nmore than older women who voted for gress, a campaign group. “There’s a feeling Pierotti Lim of Republican Women for Pro- Donald Trump. They have gone from barely amongst that generation that a little light gress remembers campaigning in Wiscon- worrying about false accusations of sexual sexual assault is no big deal. For women of sin and Michigan in 2016 and being aston- assault, with only 8% agreeing in Novem- our generation that’s hard to understand.” ished by the number of older women who ber 2017 that these were worse than unre- Carrie Lukas of the Independent Wom- were afraid to even talk to her and who let ported assaults, to 42% saying so, accord- en’s Forum, a conservative advocacy group, their (Republican-voting) husbands fill in ing to two polls conducted for The recognises that the movement has done in their ballots. 7 Economist by YouGov, a pollster. They are encouraging people to speak out against now the most likely group to agree that a prominent men who “people have known man who harassed a woman 20 years ago were problems”, but wonders whether it Hey ladies should keep his job, and that a woman who has gone too far. “I don’t think the mantra United States, “men who sexually harassed women complains about harassment causes more ‘believe all women’ is sufficient,” she says. 20 years ago should keep their jobs today” problems than she solves. “Men need to be able to make mistakes, and % of adults agreeing*, by age Two things stand out. First, even have conversations with women and not be though Americans on average, and Repub- Nov 2017 Sep 2018 Clinton Trump walking on eggshells.” voters voters licans in particular, have become more Yet the biggest split on #MeToo, as with negative about #MeToo over the past year, any question pollsters ask about gender is Female 0 20406080 the change among this particular group is not between genders or generations but be- Over 65 spectacular (chart). Second, a generational tween political affiliations, says Juliana 30-64 gap now yawns between Republican wom- Horowitz from the Pew Research Centre. Under 30 en who are over 65 and those under 30, the Democrats have barely changed their views cohort least hostile to #MeToo within the on #MeToo over the past year, even as Re- Male 0 20406080 Republican Party. publicans have grown more sceptical. No Over 65 One obvious difference between the split separates the generation of Nancy Pe- 30-64 two groups is that many of the over-65s losi and Elizabeth Warren from younger fe- Under 30 have grown-up sons. In 2018 some of them male Democrats. In fact boomer Clinton- Source: YouGov *1,500 Americans surveyed fell off their pedestals as hundreds of men voting women have increased their sup- The Economist January 12th 2019 United States 25

Chicago corruption more. One notorious catch, Edward “Fast Eddie” Vrdolyak, is an ex-boss of the Demo- On the make by the lake cratic Party in Chicago. Recently other offi- cials, including an ex-boss of Chicago’s schools who pocketed $2m in kickbacks, have been imprisoned. “We are the most corrupt metropolitan region in America,” says Mr Simpson. CHICAGO Studs Terkel, a shrewd author, once de- Chicago’s opaque political system is set up to produce corruption clared Chicago is really the “most theatri- e wears a fedora hat, pinstriped suit Mr Burke and took his donations, despite cally corrupt” city in America. Nothing is Hand a scowl. In his breast pocket he his dubious past. He co-led a racist cam- done by halves. The Justice Department folds a handkerchief, colourful and silky. paign to stymie reforms by the city’s first says it recorded 1,642 federal public corrup- For the past half century, since 1969, Ed- black mayor, Harold Washington, in the tion convictions in Illinois’s northern judi- ward Burke has run his fief, the 14th ward, a 1980s. Previous federal investigations into cial district between 1976 and 2013, more gritty district in south Chicago, as an old- “ghosts” who padded city payrolls had than in any other district nationally. Austin school political boss. No other councillor— nabbed people close to Mr Burke. Berg, co-author of a newly published book alderman, say Chicagoans—has amassed Now he is alone. Rahm Emanuel, the on Chicago politics, says the autocratic such clout. Since 1983, save a couple of mayor, has stripped him of his committee power of the mayor and aldermen is the years, he chaired the city’s powerful fi- post and promises an audit of his work. Ms core problem. A city commission called the nance committee. A canny, financially lit- Preckwinkle, who runs the Democratic system an “anachronism” already in 1954. erate figure, he also oversaw a compensa- Party in Cook County, has booted him from Will anything change after Mr Burke’s tion scheme for public workers, doling out a party post. Other aldermen declare them- fall? A survey in 2016 found over 90% of $100m a year with little oversight. selves shocked, shocked. “We are not all Chicago business leaders saw cronyism in Mr Burke was a fixture even as mayors crooks,” said one, plaintively, this week. the city government. Small firms, especial- came and went. The ex-cop played piano, ly, consider that a drag. Mr Emanuel prom- wrote local histories and profited hand- Burke’s little platoon ises a clean-up in his final weeks. One may- somely by running a legal office that Politics in Illinois encourages conflicts of oral candidate, Bill Daley (himself from a helped corporate clients appeal against interest that would be criminal elsewhere. notorious clan of Chicago mayors) said this their city tax bills (Donald Trump, for a “The real crime is what is legal,” goes a week that he wants most of the alderman time, was a client). He was a noted figure, common Chicago refrain. Mr Burke could posts scrapped. lauded for adopting a child from a deprived work as a public official, setting policies for Chicago could adopt practices of better neighbourhood. Yet if you asked about Chi- companies, while also touting for business run places. Annual “menu money”, in cago’s machine—the system of patronage with the same clients to submit appeals which each alderman gets roughly $1m to jobs, political donations by businesses against the city. A predecessor on the fi- dispense in his ward, should end. The city seeking permits, corporate tax deals cut nance committee did the same. Michael needs a smaller city council; more transpa- over lunches in clubs—his was the first Madigan, speaker of the statehouse, has rency; a powerful inspector general; a char- name that sprang to everyone’s lips. long done something similar. ter and a set of ethics to ban politicians Now, most likely, Mr Burke is done. The Criminality among the city’s 50 alder- from enriching themselves with side busi- fbi lodged a 37-page criminal complaint men is also astonishingly common. Dick nesses. City departments should take over against him on January 2nd. He denies all Simpson of the University of Illinois, in zoning powers from aldermen. Gerryman- wrongdoing. But for much of 2017 the feds Chicago, estimates that there have been dering of city districts should end. Will any bugged his phone, recording about 40 calls 200 councillors since 1969, when Mr Burke of this come soon? Not likely. Chicagoans a day. They also trailed him. That excep- first got elected. Of them, 33 have been im- brag theirs is the “city of big shoulders”. It is tionally long period suggests they showed prisoned for bribery, extortion, fraud or also a city of back-handers. 7 a judge strong cause for suspicion. Agents raided his office late last year. They accuse him of attempted extortion, saying he withheld a permit for a restaurant owner to renovate, while demanding a pay-off. He could face 20 years in prison. He is the biggest fish caught in recent city history. The fbi alleges that he pressed the restaurant chain—reportedly Burger King—to hire his private office to handle all its tax affairs in Illinois. The firm resisted, but it did agree to serve up a whopper of a $10,000 political donation. One executive spoke of “reading between the lines”, grasping that he needed to pay to avoid trouble from powerful Mr Burke. The cash reportedly went to Toni Preckwinkle, the front-runner (until now) in the mayoral race, to be held next month. She says the campaign rejected it, so did nothing wrong. And she is returning a big pot of money Mr Burke raised separately for her. For years Chicago’s political elite lauded Edward Burke: councillor, pianist, suspect 26 United States The Economist January 12th 2019 Lexington John Kasich: conservative orphan

Ohio’s departing governor is a credit to his party and Donald Trump’s biggest critic has also been thumbing it to Republican orthodoxy more often. He signed off on modest gun and abortion controls and cam- paigned on health care alongside his Democratic counterpart from Colorado, John Hickenlooper. Ideological fixity on the right, he says, mainly reflects a lack of new ideas. “That’s where my party fell short. Maybe there is something in the conservative dna that makes it easier to be against something than for it.” He believes Mr Trump’s success was based on filling the void. It follows that he considers Republicans to be open to a course correction now. “Peo- ple are going to get serious about what they want to see in the country,” he says. “So do I think someone like me could stand up and change the whole debate? I do.” Mr Kasich has suggested he will run against Mr Trump in 2020, ideally as a Republican, or else as an independent, if there is enough money and other encourage- ment available to suggest he can win. As things stand, there won’t be. His rather self-serving explana- tion of why he lost in 2016 is a clue to that. Mr Kasich says he was drowned out by the media’s obsession with Mr Trump. But journal- ists gave him more time than most Republicans. Even after his mainstream rivals were eliminated, he raised little money, and only won his own state. As Mr Kasich acknowledges, a resentful Republican primary audience was not in the mood for his talk of ou got 20 minutes,” growled John Kasich. The governor of bipartisan problem-solving. But it also spurned his ideas. It turned “YOhio had just chaired his last cabinet meeting and was impa- out many Republicans had long preferred Mr Trump’s talk of bor- tient to leave the office which he has occupied for the past eight der walls and protectionism to Mr Kasich’s support for immigra- years and will vacate permanently this week. Several hours later, tion and trade. The surveys he disdains suggest they still do. Kasich after an extended discussion of his state, America, why he lost in voters tended to be Republicans hostile to Mr Trump, and are those 2016 to Donald Trump, the damage done by his presidency, politics most likely to have quit the party since his election. Mr Kasich is on the right, golf, faith and Mr Kasich’s electric car (“It’s like driv- still popular in Ohio, but more with Democrats than Republicans. ing a space rocket!”), Lexington bade him farewell at a party for his After his previous break from politics—following an 18-year spell security detail on the other side of Columbus. He had reached it via in Congress—he worked for Fox News and Lehman Brothers. He is the governor’s office, car, house and garage, with pauses to chat about as likely to return to one as the other. His party has left him. with Mr Kasich’s wife and teenage twin daughters (“C’mere girls, I His record in Ohio, which had 89 cents in its rainy day fund in brought you a Brit...”) along the way. 2011and now has $2.69bn, points to the cost of that. It is no coinci- The governor, who is Mr Trump’s biggest Republican critic, dence that the most successful Republican governors tend to be does not stand on ceremony. He kicks up a conversational fire- moderates, or that they are generally found in states, such as Mas- storm, racing from topic to topic, showing the same fervent inter- sachusetts, Maryland and Texas, where Republicans need inde- est in a controversial dam project as in his home suburb’s connec- pendent or Democratic voters to win statewide. As the Republican tion to the Underground Railroad and the future of the West. Party becomes increasingly inhospitable to such figures national- Unlike many politicians, he is also able to surprise. Bullish and ly, it is not obvious how it can retain them at the state level. Either irascible, he is most interested in his own views, trusts his gut it will have to reverse course from Trumpian nationalism, which where the evidence fails him, and sweeps counter-arguments may take longer—perhaps including a couple of crushing presi- aside: ignore the polls, evangelical Christians are not the solid dential election defeats—than Mr Kasich predicts. Or else the Trump constituency many say, he insists, “and I happen to know Democrats may seize the opportunity they have been given to ex- this”. Yet he periodically backs up, as if suddenly irritated by his pand their coalition. It is not hard to imagine Mr Kasich in the own certainty. “Forget that—what do you think?” “Do you think same party as Mr Hickenlooper. “He thinks about things pretty any of us really knows what we’re doing?” much the same way I do,” Mr Kasich says. A more original politician than he appeared to be in 2016, when his upbeat Reaganite message found few takers, Mr Kasich’s go- A moderate by any other name verning record reveals the same mix of intensity, single-minded- A third possibility is that Democrats continue marching to the ness and sporadic eccentricity. Inheriting a state in economic cri- left—creating an opportunity for a third-party candidate to surge sis, including an $8bn budget shortfall, he slashed spending, through the middle. It seems unlikely; Democratic extremism is privatised services and accepted protest as proof of concept. Doing often exaggerated and independent candidates face big financial the right thing, no matter the political cost, is one of his mantras. and other barriers. Mr Kasich seems nonetheless most intrigued That usually means the conservative thing. Fairly solidly pro-life by this prospect, and in the event of a presidential face-off be- and pro-gun, Mr Kasich is not the squishy centrist he is sometimes tween, say, Mr Trump and Senator Bernie Sanders, it would be portrayed as—except when he is. When it comes to helping the wrong to rule it out. But he might in that case consider a word of poor, incarcerated and addicted, he has long argued that the end advice. He is an innovator who in 2016 came across as rather a justifies the means. His decision to expand Medicaid despite op- stick-in-the-mud. To assemble a new centrist coalition, Mr Kasich position from Republicans illustrated that. Since the election, he should unleash the political cross-dressing maverick that he is. 7 The Americas The Economist January 12th 2019 27

Also in this section 28 Protecting scarlet macaws 30 Bello: Brazil’s confused foreign policy

Nicolás Maduro to cheap dollars, giving them instead to loyalists, some of whom became billion- Six more years? aires. The black-market (ie, true) value of the bolívar collapsed. gdp has dropped by nearly half since Mr Maduro took office. He responded to the crisis either with half-measures, such as inadequate devalu- ations of the official bolívar, or policies that CARACAS made things worse, such as new price con- After a catastrophic first term, Nicolás Maduro is digging in for a second trols. As reserves of foreign exchange nder venezuela’s constitution, pres- owned oil firm that is Venezuela’s main plummeted, in 2017 he partially defaulted Uidents are supposed to be sworn in be- source of hard currency, for not supporting on bonds issued by pdvsa and the govern- fore the national assembly, the country’s him politically. ment. The government has avoided full de- legislature. But the ceremony that will be- Chávez was lucky. Oil prices were high fault only by mortgaging oil, gas and gold gin Nicolás Maduro’s second six-year term, during most of his 14 years in office. That fields, mainly to Chinese and Russian planned for January 10th, is to take place at kept goods on the shelves and budget defi- state-controlled firms. the supreme court. That is because the op- cits under control. When he died, the econ- Last August Mr Maduro removed five position-controlled assembly regards Mr omy was headed for a steep decline, but zeros from the currency and relaunched it Maduro’s election last May as a farce and that was not yet apparent. Mr Maduro cast as the “sovereign bolívar”. But without any his second term as illegitimate. The nomi- himself as the “son” of Chávez, who still in- action by the government to rein in deficits nally independent court, by contrast, re- spired devotion among poor Venezuelans or alleviate shortages, it has lost 95% of its mains an obedient servant of the regime. and gullible leftists abroad. He won a dis- value against the dollar. Banks are already The change of venue is a characteristic puted presidential election against Hen- refusing to accept two-bolívar notes, the manoeuvre by Mr Maduro, who is keeping rique Capriles, a centre-left state governor. lowest denomination, although they are power by increasingly dictatorial means. In 2014 oil prices began to slide. brand new. That is his one talent. After a cata- Mr Maduro doggedly adhered to cha- Even if oil prices bounce back, Venezue- strophic first term, Mr Maduro is arguably vismo even as conditions turned against it. la is unlikely to benefit much. That is be- the world’s least successful president (see To continue paying Venezuela’s interna- cause the government has looted pdvsa. charts on next page). But the seeds of disas- tional creditors he slashed imports, lead- Under Chávez, in addition to paying for ter were planted by his predecessor, Hugo ing to shortages and hunger. He printed popular social programmes it provided Chávez, who died in 2013. An eloquent pop- money to finance massive budget deficits. petrol to Venezuelans nearly free and oil to ulist, Chávez thought that the best way to Both measures stoked inflation, which was friendly governments, such as Cuba’s, on help the poor was to ramp up government probably more than one million per cent easy terms. Investment and exploration spending while throttling markets. He last year. He kept the official exchange rate suffered. pdvsa’s decline sped up under Mr seized private businesses, imposed price of the bolívar artificially high, ostensibly to Maduro, who has appointed as its presi- controls, borrowed lavishly and sacked make essential imports affordable. In fact, dent a major-general with no experience in competent managers at pdvsa, the state- the regime denied honest importers access the oil industry. Scavengers, including em-1 28 The Americas The Economist January 12th 2019

2 ployees made desperate by the collapse in Mr Maduro to plots against him. But cash is their incomes, have begun to pilfer ma- …and the human one becoming scarce and plots may be prolifer- chinery. Now in partial default on its ating. In August some people apparently bonds, Venezuela produces less oil than it Under-five mortality per 1,000 live births tried to kill Mr Maduro with explosive-lad- did in the 1950s. Output per citizen is where 30 en drones as he addressed a gathering of it was in the 1920s. national guardsmen. The government has Latin America The consequence is misery. Electricity 20 tortured dozens of soldiers accused of plot- and water supplies are faltering because of ting against it, according to Human Rights Venezuela corruption, underinvestment and absen- 10 Watch, an ngo. Nicolás Maduro teeism by workers who cannot live on their assumes office 0 Defections from chavismo may pose a salaries. Violence has soared and health bigger danger. Subject to sanctions, some 2000 05 10 1715 care has all but collapsed. A tenth of the members of the regime may fear being population, 3m people, have emigrated, trapped in Venezuela when power shifts largely to neighbouring countries such as Annual asylum applications from Venezuelans suddenly. They may be tempted to strike a Colombia. At least 2.5m have left since ’000 deal with the opposition, probably mediat- 2014. (A minority apply for asylum.) 120 ed by an outside group, leading to some Depending on what happens to oil in- 90 sort of transitional government. Mr León come and remittances, 5m more could 60 says that tension between those prepared leave, according to a study by the Brookings 30 to negotiate and those who refuse could Institution, a think-tank in Washington. lead to the government’s “implosion”. “My daughter is just 15 and she’s already 0 The regime has already suffered several hinting she wants to go,” says Carlos Val- 2000 05 10 1715 high-profile defections, especially by buena, an office worker in Caracas. “What Sources: UN Inter-agency Group for members of the judiciary. The latest came do I tell her?” he wonders. Child Mortality Estimation; UNHCR on January 6th, when Christian Zerpa, a The answer hinges on how long Mr Ma- judge on the supreme court, appeared in duro will remain in power. That, in turn, in good-enough shape that on January 5th Miami to denounce Mr Maduro. His rule depends on how long the regime can re- it carried out a redistribution of top jobs in “has no other name than a dictatorship”, main united under pressure from its foes the legislature under a pact reached after declared the once-loyal justice. That is an and from the stresses it has placed on itself. the parliamentary election in 2015, Vene- embarrassment, but not a serious threat. It On January 4th the Lima group, which in- zuela’s last fair election. Juan Guaidó, a is from his friends, rather than from his cludes the biggest Latin American coun- founder of Voluntad Popular (Popular servants on the supreme court, that Mr Ma- tries and Canada, said it would stop recog- Will), one of the most confrontational op- duro has most to fear. 7 nising Mr Maduro as president in his position parties, became the assembly’s second term and urged him to cede power president. The party’s leader, Leopoldo Ló- to the national assembly. That gesture was pez, is under house arrest and its national Wildlife trafficking weakened by the refusal of Mexico, under co-ordinator, Freddy Guevara, has taken its new left-wing president, Andrés Ma- refuge in the Chilean embassy since 2017. Guarding guaras nuel López Obrador, to sign the statement. In his acceptance speech, Mr Guaidó Peru has now joined the United States damned Mr Maduro’s presidency as illegit- and the European Union in barring mem- imate and called on the army to help “re- bers of the regime from visiting and con- store the constitutional order”. Mr Guaidó ducting financial transactions. Other will be “the head of the struggle for change MABITA In cocaine country, smugglers are members of the Lima group may follow. in Venezuela”, predicts Luis Vicente León, a going after scarlet macaws More painful are American sanctions that pollster and political analyst in Caracas. stop firms from dealing in newly issued But the main threat to Mr Maduro he mosquito coast of eastern Hondu- debt. That is making it difficult for Vene- comes from “inside chavismo”, says Mr Tras is not notably infested with mosqui- zuela to reach agreements with creditors. León. Until now, loot from oil production, toes, but swarms with cocaine traffickers. The Lima group’s endorsement of the smuggling and drug-trafficking, which the They use the sparsely populated region as a national assembly is a fillip to the divided government tolerates, has held the regime trans-shipment point for drugs headed for and ineffectual opposition. The alliance is together. A network of Cuban spies alerts the United States. (The area gets its name from the Miskito people, descendants of a mix of shipwrecked slaves, English seafar- The economic cost of Maduro… ers and indigenous people.) Venezuela The region holds another treasure cov- eted by rich foreigners. To spot it, just look Bolívar per $, black-market GDP per person at PPP† Crude-oil production up. Splodges of red, blue and gold amidst exchange rate, inverted log scale $’000 Barrels per day, m the trees in Mabita, a Miskito hamlet four 1 20 3 hours’ drive from the coast, are guaras— Sovereign 10¹ Venezuela large, loud parrots known to English- bolívar 15 speakers as scarlet macaws. The ancient 10² 2 10³ Mayans thought they flew between Earth 10 104 and the heavens and honoured them with Nicolás Bolívar* 105 Latin America 1 statues. They are Honduras’s national bird. Maduro 5 Once common across Central America, assumes 106 office 107 0 0 they are extinct in El Salvador and rare else- where in the region. The 500 or so on the 2010 12 14 16 19 2000 05 10 15 18 2000 05 10 15 18 Mosquito Coast are the last big population, Sources: DolarToday; IMF; Energy Intelligence Group *Replaced by sovereign bolívar †Purchasing-power parity, current prices says Marlene Arias of the Forest Conserva-1 HUMANS 2.0

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Supported by 30 The Americas The Economist January 12th 2019

2 tion Institute, a Honduran government At first little happened. That changed in the humans don’t taste anything,” she agency. They are under threat. 2015 when the group started paying villag- grumbles. Poachers, many from nearby Jamaica, ers 200 lempiras ($8) a day. They began But there are compensations. The mon- climb the pine trees where the guaras nest camping in the forest to chase poachers ey from patrolling has seeded a cash econ- and pinch the chicks before they learn to away. Last year 103 nests were left undis- omy in Mabita. The inhabitants have used fly. Fanciers in China, Australia and the turbed in the area, says Ms Joyner. About it to build a small stone church. Five other Middle East buy them online for up to 150 baby guaras survived. villages in the area have joined the scheme, $6,000. In 2014 not one newborn guara Once scarcely seen, now they are every- which is financed by the United States Fish reached adulthood in its native habitat. where, says Anaide Pántin López, a resi- and Wildlife Service. And the folk of the Four years earlier, LoraKim Joyner of dent of Mabita who manages the patrollers. Mosquito Coast seem to get as much plea- One Earth Conservation, an American par- This has disadvantages. The birds devour sure from watching guaras as those who rot-conservation group, had enlisted the the wild mangoes and guavas that the vil- pay to have them stolen from their habitat. residents of Mabita, which consists of a lagers once enjoyed, says Ms Pántin, cra- “It is so beautiful to see them flying in the score of wooden huts, to patrol the forest. dling a piglet on her porch. “In fruit season, morning,” says Ms Pántin López. 7 Bello Open or closed?

The contradictions of Brazil’s new foreign policy n brazil past glory is more fre- nationalists in other countries—above all ister, Paulo Guedes, promises liberal “Iquently associated with diplomacy Donald Trump, but also the leaders of Italy, reforms, including privatisation and than with military feats,” notes Rubens Hungary and Poland. Mr Bolsonaro has opening Brazil to trade and competition. Ricupero, a former minister, in his mon- seemed to entertain the idea of inviting The best way to do that is not to ally itself umental history of his country’s dealings the United States to set up a military base. slavishly with the protectionist-in-chief with the world. This legacy is above all Like Mr Trump, he has declared himself a in the White House. Mr Bolsonaro’s the achievement of the Baron of Rio foe of China. He visited Taiwan during last stance on climate change has already Branco, the foreign minister from 1902 to year’s election campaign. dented the chances of the European 1912, who through peaceful negotiation Certainly, Itamaraty has sometimes Union concluding a long-delayed trade settled the country’s borders with all ten combined sophistication with do-nothing agreement with Mercosur (to which of its neighbours (in some cases expand- complacency. And in their critique of Brazil belongs). ing its territory). foreign policy under governments led by Mr Bolsonaro heads a ramshackle The values Rio Branco espoused— the Workers’ Party (pt) from 2003 to 2016, alliance of populist-nationalists (notably peace, moderation, trust in international Mr Bolsonaro’s people have a point. The pt two of his sons), religious zealots, busi- law, non-intervention and what would abandoned some of Rio Branco’s values. Its ness lobbies and the security forces. Mr now be called the pursuit of soft power— priority of “south-south” links was often a Araújo owes his job to the first two became integral to Brazil’s idea of itself, veil for anti-Americanism. It failed to groups. The armed forces—represented Mr Ricupero argues. And Itamaraty, as stand up for democracy in Latin America, by seven retired generals in the cabinet— the foreign ministry is known (from the preferring to ally itself with left-wing espouse a different kind of nationalism, palace in Rio de Janeiro it formerly occu- dictatorships in Venezuela and Cuba. grounded in hard-headed geopolitics. pied), came to be seen as the Rolls-Royce But Mr Araújo risks making the same They are interested in co-operation with of Brazilian government, its prestige mistake—of basing policy on ephemeral the United States against organised based on meritocracy and knowledge. ideological affinity, rather than on under- crime, but will resist automatic align- So the appointment of Ernesto Araújo lying national interest. His assault on ment with Mr Trump. Then there is Mr as foreign minister in the new govern- “globalism” also exposes a contradiction at Guedes, who has seized control of trade ment of Jair Bolsonaro has come as a the heart of Mr Bolsonaro’s project. The policy from Itamaraty. The economic shock to the Brazilian intelligentsia. Mr new president’s powerful economy min- team has no interest in quarrelling either Araújo is a career diplomat, but a fairly with China, a big investor with which junior one. Aged 51, he only recently Brazil has a trade surplus, or with Arab achieved ambassadorial rank. His mis- countries (by moving Brazil’s embassy in sion, he said, is “to liberate Brazilian Israel to Jerusalem, as Mr Bolsonaro has foreign policy” and Itamaraty “through promised). truth”. But this truth “cannot be taught by Faced with these more organised analytical deduction”, he added. Rather, rivals, some think Mr Araújo may not last it is religious in nature. “God is back and long. Yet even if he does not, he has made the nation is back,” he has written. his mark. For the first time since the early Mr Araújo’s foreign policy will con- 1970s during the cold war, Brazilians have front what he denounces as “globalism”, been offered an extreme right-wing a sneering term for openness to the foreign policy, notes Matias Spektor, an world. Diplomats should read the New international-relations specialist at York Times less and Brazilian authors Fundação Getulio Vargas, a university. more, he said. Even if modulated, bits of it are likely to Mr Bolsonaro wants to pull Brazil out be applied by Mr Bolsonaro. It is a long of the Paris climate accord. His govern- way from Rio Branco, and is unlikely to ment has aligned itself with populist- do much for Brazil’s soft power. Asia The Economist January 12th 2019 31

Ageing in Japan 65, into which people must pay from the age of 40. It works the same way. The pre- Home help miums and co-payments cover around 60% of the cost of the services provided; the government pays for the rest. And it is the old who cost the most. The government reckons that the average annual cost of health care for someone over 75 is KUNITACHI AND ONOMICHI ¥942,000, compared with just ¥221,000 for The government is struggling to curb the rising cost of health care everyone else. n a sunny room in a small apartment in the public health-insurance scheme. With By the standards of ageing nations, Ja- Ithe Tokyo satellite town of Kunitachi lies public debt at 250% of gdp, and debt ser- pan has managed to curb medical costs Yasuyuki Ibaraki, eyes closed and breath- vice consuming a further 24% of spending, fairly well, says Naoki Ikegami of St Luke’s ing laboured. Yukio Miyazaki, his doctor, the government is looking desperately for International University in Tokyo. The gov- who visits fortnightly from a local clinic, ways to cut costs. It reckons caring for peo- ernment sets fees for services to keep costs suspects that he does not have much time ple at home is one of its best options. down (although that encourages providers left: he has brain damage from a cerebral All Japanese pay a monthly premium to to perform unnecessary procedures to infarction, a tumour in his digestive sys- the public insurance scheme, either make more money: Japan has more ct tem and is unable to swallow or talk. Reiko, through their employer or the local mu- scanners relative to its population than any his wife, feeds him through a tube to his nicipality. In return they are entitled to other country). It has also promoted the stomach and clears phlegm from his treatment and drugs from public and priv- use of generic drugs, which are cheaper. throat. “He is from a close-knit family and ate doctors and hospitals, although they is a quiet man, so I think it is better for him must also pay a portion of the cost of treat- Life-giving, budget-busting to be here rather than in a hospital,” she ment (a co-payment, in American par- Nonetheless, the country has crept up to says, over green tea and grapes. lance), subject to a cap. In 2000 Japan intro- sixth place in the oecd’s ranking of the Life expectancy in Japan is the highest duced an additional public insurance share of gdp spent on health care, behind in the world, at 84. This is good news for its scheme for long-term care for those over France and America, but ahead of Italy and people, but means that an ever-higher South Korea—two other ageing countries share of the population is elderly. Fully (see chart on next page). It is not just that Also in this section 28% of Japanese are older than 65, com- the number of old people is increasing; pared with 15% of Americans and 21% of 32 The king of Malaysia abdicates spending per person is rising, too, as peo- Germans. More old people, in turn, means ple live longer with diseases like Alz- 33 Affirmative action for all in India higher health-care costs. Last year the gov- heimer’s and diabetes. ernment budgeted ¥15trn ($138bn, or 15% of 33 Refugees in the outback Japan has promoted home care for its total expenditure) for health care and many years, but it is pushing it harder now. nursing, excluding the charges it levies for 34 Banyan: Democracy in Taiwan The policy is especially beneficial given 1 32 Asia The Economist January 12th 2019

The king of Malaysia Unhealthy Total health spending, 2017, % of GDP Monarchical merry-go-round 0 3 6 9 121518 United States New head of state wanted. Only sultans need apply France he announcement was unexpected chor. One view holds that in a state with- Japan Tand unexplained. On January 6th out a sultan, society becomes nihilistic. Canada Sultan Muhammad V, Malaysia’s king, Modern royals are thus expected to be- Britain stepped down from the throne. It was the have with a certain decorum—although first time a Malaysian king had abdicat- many of their forebears married glamor- Australia ed. He had only reigned for two years. ous young foreigners. At any rate, King Italy The king presides over one of the Muhammad’s conduct must have jarred South Korea world’s most peculiar monarchies, estab- with some. The other sultans are thought lished at independence in 1957. Malaysia to have issued an ultimatum, forcing Source: OECD is a federation made up of 13 states. The him to quit. titular head of the government in nine of The election of a new monarch, 2 that the average hospital stay in Japan is them is a sultan (democratically appoint- scheduled for January 24th, may cause a three times longer than in the Netherlands, ed chief ministers actually run the further hiccup. The next in line under the for instance. The health ministry reckons show). The nine sultans choose one of system of rotation is the sultan of Pa- that 1m people will receive care at home in their own to serve a five-year term as hang, who served as king once before, 40 2025—one-and-a-half times the current to- king whenever the job becomes vacant. years ago. He is elderly and in ill health, tal. The number of special nursing units ex- In practice, the nine states take it in however. His family is reported to be clusively for home visits has risen from turns. The king’s job is largely ceremoni- contemplating getting him to abdicate, 7,473 in 2014 to 10,418 in 2018. al, although he can delay legislation and to allow his son to become sultan and Last year a government panel suggested refuse a prime minister’s request to then king in short order. Typical: you raising the amount doctors are paid for dissolve parliament. wait 60 years for an abdication, and then home visits and making consultations No reason was given for the abdica- two come along at once. conducted via video-conferencing services tion, but many suspect the king’s love life eligible, too. It also proposed new rules to had raised too many eyebrows. In 2008, encourage care at home. Hospitals should when still crown prince of Kelantan, the be obliged to talk to social services when most conservative and devoutly Islamic they discharge a patient, for example. state in the country, he had divorced his Some municipalities are already offer- wife, a Muslim princess from neigh- ing good care in the community. Ono- bouring Thailand. In 2016 he became the michi, a small provincial city that is even first king to ascend to the throne un- older than the country as a whole, is one. Its married. Then, in November, he took a medical facilities have 15-minute “care two-month leave of absence following conferences” with doctors, nurses, family medical treatment. During that period members and even dentists, to discuss the 49-year-old snuck off to Russia and how they will go about looking after peo- married Oksana Voevodina, a 25-year-old ple. “It used to be hard for hospitals to tell a former Miss Moscow. patient to return home as there was no sys- The wedding poses an “existential tem for that; that has changed,” says Hi- question” for the monarchy, says Francis sashi Katayama, a doctor. Hutchinson of iseas-Yusof Ishak In- Community care for specific diseases is stitute, a think-tank in Singapore. Sul- improving, too. Take dementia, which cur- tans are supposed to be defenders of the rently affects 5m Japanese (4% of the popu- culture and religion of the country’s lation), and will afflict 6-7% by 2030. Rath- ethnic-Malay majority. Older and rural er than provide only institutional care and Malays in particular hold sultans in high medicine, some towns, such as Matsudo, esteem and see them as a cultural an- His kingdom for a queen north-east of Tokyo, have set up cafés to of- fer advice and companionship to patients and their carers. Day centres that give re- incidence of diseases that affect older peo- should start by doubling that to 20%, says spite to families tending to elderly relatives ple, but have their origins in behaviour at a Shigefumi Kawamoto, managing director are common. Much more could be done: younger age. “We have tended to focus on of Kenporen, the national federation of only 13% of Japanese die at home, although the old, but we need to look at the younger health-insurance societies. “Some elderly most say they want to. to prevent disease,” says Kazumi Nishi- people don’t have resources, but many do,” But more widespread home care will kawa of the economy ministry. He is partic- he avers. The government could exclude not be enough to make Japan’s health care ularly focused on giving people more in- some items from coverage, he says, such as affordable. The government of Shinzo Abe formation on what causes diabetes, which over-the-counter drugs. wants to revamp the social-security sys- is on the rise in Japan, or exercises that can Meanwhile, back in Kunitachi, Dr Miya- tem, which it reckons will help reduce stem the progression of dementia. zaki talks to Reiko about her husband’s health-care costs. Raising the retirement People are likely to have to pay more for condition. She is worried that her husband age, for example, will keep people active, health care, too. Co-payments for many of is getting worse, she says, and is anxious healthier and paying tax for longer. The those over 75 are only 10%, compared with between visits. The doctor promises to government also wants to try to reduce the 30% for everyone else. The government come weekly from now on. 7 The Economist January 12th 2019 Asia 33

Anti-meritocracy in India Rural Australia Quotas for all Immigrants in the outback

DELHI WAGGA WAGGA Almost all Indians will soon qualify for Unlikely new residents are reviving affirmative action country towns ffirmative action, as Americans irst came the Burmese, then the Af- Aconfusingly call it, has been a defining Fghans and the Africans. Since 2016, 400- feature of modern India. The constitution odd Yazidis have washed up in Wagga allows the government to make “special Wagga, a regional centre south-west of provision for the advancement of any so- Sydney. Its primary school has had to hire cially and educationally backward classes interpreters to communicate with families of citizens”. Since it came into force in 1950, (fully a fifth of its students are refugees). “reservations” (quotas) have often been de- The local college teems with parents learn- manded and doled out. By setting aside ing English and new trades. Doctors have government jobs and places at universities had to brush up on illnesses rarely found in for members of communities that had the area. Few locals seem fussed about the been oppressed for hundreds if not thou- changes. And to those fresh out of war sands of years, the thinking ran, the coun- zones, “Wagga” is an idyll. “My children are try would soon rid itself of the iniquities of Marching for mooching safe,” says Ismail Darwesh, a Yazidi who caste, and with it the need for reservations. fled Islamic State’s attempt to wipe out his Instead, Indians have been mired in a whom were no needier than they were. In people, a religious minority in Iraq and Syr- zero-sum competition for official favour 2006 much of India erupted into protests ia. “Everything you want you can get here.” ever since. The first beneficiaries were against reservations. More recently, in- The refugees have been sent to Wagga “scheduled castes and tribes”, in particular stead of calling for the abolition or reduc- Wagga under a scheme which brings bene- untouchables (now known as Dalits)— tion of reservations, relatively prosperous ficiaries from foreign camps to rural Aus- those at the bottom of the social order. In- castes have agitated for inclusion in the tralia (most settle in urban areas). The hope evitably, the considerably less disadvan- quotas. The bjp’s new policy looks like a is that they can offset the population de- taged “other backward classes” (obcs) soon sop to such important “vote banks” as the cline that threatens many outback settle- began to clamour for quotas of their own. Patidars of Gujarat or the Rajputs of Raja- ments with extinction, as birth rates fall Political parties sprang up to demand new sthan, who are too well-to-do, by and large, and youngsters head for cities. Wagga or bigger reservations for different castes. to be considered backward, but poor Wagga’s Multicultural Council says the It was only in 1992 that the Supreme Court enough to resent that. population is only growing thanks to the appeared to put a stop to the scramble by These groups are also numerous new arrivals. Immigrants are helping to ruling that no more than 50% of jobs or enough to be central to the efforts of Naren- stem shrinkage in another 150 localities. university spaces could be reserved under dra Modi, the prime minister, to win a sec- The scheme helps big cities, too, by eas- caste-based quotas. But on January 7th, ond term. And they are agitated about lack ing the pressure on roads, schools and hos- with general elections due in just three of opportunity. The Centre for Monitoring pitals there. Thousands of Iraqis and Syri- months, the ruling Bharatiya Janata Party the Indian Economy, a think-tank in Mum- ans descended on Sydney’s western (bjp) came up with a new way to expand bai, reckons that the number of people in suburbs after extra visas were dished out to reservations: to set aside a further 10% of work fell during the past fiscal year, even as them in 2016 and 2017. Many have struggled jobs and university places for relatively im- the working-age population swelled. to find work, and conservatives grumble poverished Indians, of whatever caste or To be fair, the bjp is not alone in its brib- about ghettoisation. A recent report from religion. A motion to change the constitu- ery. The state of Tamil Nadu reserves fully the Centre for Policy Development, a think- tion to that end cleared both houses of par- 69% of university places and government tank, found that just 17% of “humanitarian liament in just two days, a record, with al- jobs for disadvantaged castes—an appar- entrants” have jobs after 18 months in Aus- most no dissent. ent breach of the Supreme Court’s ruling tralia. Yet remote towns are crying out for 1 The scheme’s details remain hazy, but that has been the subject of long litigation. reports suggest that any family earning less Other states have created reservations for than 800,000 rupees ($11,375) a year would women, the disabled, religious minorities, AUSTRALIA be eligible. That is a generous sum in a former soldiers and so on. Congress, the country where the average income per per- main opposition party, proposed some- New South Wales son was $1,976 in 2017. Indeed, 800,000 ru- thing similar to the new scheme years ago. Sydney Wagga pees is the level of income that defines the The leader of another opposition party says Wagga Canberra “creamy layer”—families wealthy enough that now that the 50% ceiling has been Pyramid Hill that the courts have barred them from any breached, the reservation devoted to obcs, Walla Walla sort of reservation, whatever their caste or for whom his party claims to speak, should Nhill Victoria tribe. All but the richest, in other words, be doubled to 54%, in proportion with their Melbourne will now be eligible for a reservation. share of the population. The bjp used to oppose excessive reser- The irony is that quotas will not help PACIFIC vations, since it derived much of its sup- much. In November the national railways Bass OCEAN Strait port from higher castes who felt that their received 19m applications for 63,000 lowly opportunities were being diminished by posts. That meant plenty of disappoint- Tasmania 250 km their lower-caste neighbours, some of ment to be shared among every caste. 7 34 Asia The Economist January 12th 2019

2 people to fill vacancies on farms, in abat- refugees from Melbourne with jobs at a ister, has suggested that some of Australia’s toirs and to look after the elderly. The cost food company, adding perhaps A$40m 500,000 foreign students could be sent to of living is lower than in Sydney or Mel- ($28m) to its economy. A group of residents regional universities. The population min- bourne and, for farmers like Mr Darwesh, a in Walla Walla, a dot in New South Wales, is ister, Alan Tudge, added that visa restric- quiet life is appealing anyway. now scouting for refugees from Sydney. tions and incentives could be used to push To stay afloat, some outback towns have “We have jobs, we have housing and we skilled migrants out of Melbourne and Syd- taken to recruiting migrants for them- have education,” says Andrew Kotzur, who ney. Almost all the best-qualified arrivals selves. A piggery in Pyramid Hill, in north- runs the local steelworks. “We just need settle in those two cities, but luring them ern Victoria, started sponsoring workers more people to sustain them.” out will not be easy. It is partly owing to mi- from the Philippines a decade ago. They Asylum-seekers and farm labourers gration that Sydney and Melbourne are now make up a fifth of its 500-odd popula- make up a tiny portion of the immigrants thriving. Foreign accountants and it geeks tion, keeping not just the business afloat, pouring into Australia. The conservative choose them for well-paid work and but also the local school. Another town in coalition government is keen to rusticate swanky suburbs. Rob them of both, and far the same state, Nhill, lured 160 Burmese others, too. Scott Morrison, the prime min- fewer would come to Oz at all. 7 Banyan Free and uneasy

Even as Taiwan perfects its democracy, China is sabotaging it ower to the people” read the ernment must act on the results, provided ing Chinese disinformation by getting “Pwords newly emblazoned across the turnout is high enough—which it was. the government to respond faster to the floor of the grandest old building in By any standard, let alone that of most online falsehoods. She wants official Taipei. The slogan is part of an exhibit countries in the region, democracy in denials to appear within four hours. Ms about the history of the structure, which Taiwan is thriving. Yet, by the admission of Tsai says she has instructed the security was built to house the offices of the Tsai Ing-wen, the president, it faces a services to prepare countermeasures. colonial governor sent from Japan. It potentially fatal threat: “China’s attempts That is all well and good, but it is really later served as the seat of administrators to use the openness and freedom of our another way of saying that the govern- dispatched from Beijing and then of the democratic system to interfere in Taiwan’s ment does not know what it can do. Big dictators who ruled Taiwan after its split internal politics and social development”. Taiwanese firms have invested heavily in from China in 1949. For the past 22 years, Her government, which did very badly in China. It is the easiest thing in the world however, it has hosted Taiwan’s demo- the elections, accused China of meddling for the Chinese government to signal to cratically elected presidents. The ground in them by spreading disinformation, them that, if they want their investments floor is open to the public every weekday steering money to the opposition and to prosper, they should donate money to morning—no booking required. inducing Taiwanese media to provide certain politicians back home, or even Such openness is one of the many slanted coverage. China’s president, Xi purchase a media outlet that propagates ways in which power does indeed rest Jinping, seemed implicitly to acknowledge views considered distasteful by the with the people in Taiwan. On a recent such a campaign earlier this month when Chinese leadership, to institute friendli- visit Banyan faced tighter security get- he gleefully declared that China had won er coverage. ting into his hotel than into the offices of “a great victory in frustrating the Taiwan There are plenty of ways for China to members of parliament. He was also independence movement”—an apparent influence humbler voters, too. It cut off slightly befuddled to be told by Audrey reference to the electoral defeat of Ms the flow of package tourists to signal its Tang, the minister in charge of digital Tsai’s dpp, which would like to abandon disapproval after Ms Tsai was elected in outreach, that she practised a policy of the idea that Taiwan and China will even- 2016, hurting small businesses. Analysts “radical transparency” and that tran- tually be unified and instead officially expect a flood of tourists to Kaohsiung, scripts of all her meetings, including any declare Taiwan a separate country. the third-biggest city and a dpp strong- interviews, are published online ten Ms Tang talks excitedly about counter- hold, after it unexpectedly chose a mayor working days after the event (she leaves from the opposition Kuomintang, which the room when the cabinet starts talking advocates warmer relations with China. about national security). And since a tenth of working-age Tai- Then there is the law on referendums, wanese live in China, and 29% of exports which was amended in 2017 to make it go there, voters are reluctant to antago- easier to get them on the ballot. Even nise their looming neighbour. though there are competitive elections, a There is a horrible irony in the fact free and diverse press and an ingrained that Taiwan has succeeded in instituting culture of mass protest about everything a model democracy in which all big from nuclear power to public pensions, decisions are up to voters except the one the ruling Democratic Progressive Party that seems most important: whether (dpp) decided that it was not easy enough Taiwan should be a country at all. Indeed, for ordinary people to make their voices the referendum law makes that explicit, heard. Now any question for which by allowing votes on any subject except activists can muster the signatures of cross-strait relations. Taiwan may have 1.5% of the electorate earns a spot on the transferred power to its people, in short, ballot. At nationwide local elections in but China has already begun to yank it November, nine made the cut. The gov- away from them. China The Economist January 12th 2019 35

The economy said their priority would be to stabilise em- ployment. They are anxious about social Oh, for an assembly-line job stability in a year studded with sensitive anniversaries. Among them will be the 30th of the Tiananmen protests, which in- volved economic grievances as well as po- litical ones. Suppression of labour unrest has become even harsher in recent ZHENGZHOU months. In one case, police detained more Worries about unemployment mount, but China has buffers of a kind than 30 students and activists who had he factory town known as iPhone city ple’s disappointing sales. They still have tried to help workers organise a union at a Tused to pulse with life as workers got off other electronics factories as clients, but firm in the southern city of Shenzhen. their shifts. These days the complex that they are all suffering. “Washing machines, Worries about jobs are, so far, focused churns out roughly half of all Apple smart- fridges, vacuum cleaners. Everyone now on the export sector. Trade matters less to phones is quieter. A staff dormitory just be- has these, and they last longer,” she says. Chinese growth than it once did, but it still, yond its gates is empty, its entrance sealed “So factories have fewer orders.” directly and indirectly, supports as many with barbed wire. A barbecue restaurant, a A slowing economy is putting pressure as 180m jobs, nearly one-quarter of formal noodle shop and, fittingly, a mobile-phone on jobs in China (though Apple’s woes may employment, the government estimates. outlet have all closed. At a karaoke bar involve other factors, too—see Business The trade spat with America has plunged where workers would croon into the wee section). The official unemployment rate is firms into uncertainty. Exporters cut their hours on rest days, the owner was recently stable at around 5%, but as always this fig- demand for new hires in the third quarter seen packing up his speakers. ure is a poor guide. Surveys in the manufac- by 53% compared with a year earlier, say re- The giant complex on the edge of the turing and service sectors show that com- searchers at Renmin University in Beijing. central city of Zhengzhou is run by Fox- panies have been cutting staff since at least In December export orders fell at their conn, Apple’s Taiwanese manufacturing September. Wage growth is tepid compared sharpest rate in more than three years. partner. It remains one of the world’s busi- with the sizzling norm of a few years ago. In A second area of concern is the high- est factories. But it is well off its peak, when November profits at industrial firms fell tech sector. As investors turn cautious, jobs as many as 350,000 people kept production for the first time in nearly three years. are coming under threat. The starkest ex- humming around the clock. Workers say When China’s leaders met in December ample is Ofo, a bike-sharing company pre- they are down to eight hours a day, five days to map out economic policy for 2019, they viously feted as an innovator. Today it is a week. That means they are not doing the battling to survive. Search engines, online overtime that accounts for much of their travel agencies and e-commerce websites Also in this section pay. “It feels like they’re forcing us to quit,” have all reportedly trimmed staff. This says a six-year veteran. 36 HIV on the rise could be bad news for this year’s record Cao Yingying, a woman at a nearby re- number of university graduates (students 37 Chaguan: Something old, cruitment centre, says they stopped hiring in Zhengzhou are pictured at a job fair last something new for Foxconn in late October because of Ap- year). Wang Xing, head of Meituan Dian-1 36 China The Economist January 12th 2019

2 ping, a company known for its food-deliv- with job ads. “They want young lads for the ery app, captured the gloom last month courier jobs. Faster on their bikes, faster on Teachers, take note with this line on his micro-blog: “2019 their smartphones,” he says. China, HIV transmission modes, % of total might be the worst year of the past decade, China’s economic situation differs from 80 but it might also be the best year of the the financial tsunami of 2008 in another Heterosexual coming decade.” crucial way. This time the troubles have intercourse Industries undergoing cyclical slumps built up gradually, giving the government 60 are a final area of concern. With the stock- time to ready its defences. It has already market down 30% in the past year, finan- started to help beleaguered companies. In 40 cial firms, especially brokerages, have cut December the State Council announced Sex between men staff. A property slowdown has led several that firms which refrain from firing staff 20 big developers to freeze hiring. canget50%refunds onunemployment-in- Other Intravenous How would China cope with a big rise in surance payments. Officials have hinted drug use unemployment? In 2008 when the global that they will offer subsidies for those buy- 0 financial crisis struck, millions of mi- ing home appliances, a boost for manufac- 2005* 07 09 11 13 15 17 grants left coastal factories and returned to turers. And after initially taking a hard line Source: Chinese Centre for *1985-2005 the countryside. They did not have to wait in its trade dispute with America, China Disease Control and Prevention average long for prospects to improve. Half a year has softened somewhat. That helped pave later the government revved up growth the way to talks between the two countries much higher than that of female sex work- with a massive stimulus programme. this week in Beijing that augur well for a ers. Social media have made it easier for gay A similar exodus is less likely this time. deal, however fragile. men to find casual partners. The country The economy is profoundly different, in The government is also boosting its has the world’s largest gay social-network- ways that should cushion workers from the own recruitment. At a labour centre in ing app, Blued. On January 6th the service slowdown. Services, from restaurants to northern Zhengzhou, once used for hiring said it was suspending registrations for couriers, now account for more of the Foxconn workers, the biggest ad is for jobs one week after a Chinese magazine report- economy than manufacturers, and they are in Hami, a city in Xinjiang, the north-west- ed that boys under 18 had contracted hiv more labour-intensive. But service jobs are ern region where officials have incarcerat- through encounters facilitated by the app even less secure than those in factories. ed vast numbers of ethnic-Uighur Muslims (Blued says it will step up enforcement of Workers in China’s vast gig economy— for “re-education”.Hami is looking for aux- measures to prevent minors from joining). driving cars for hire, delivering food or iliary police. “Join us to realise your But social media can also spread aware- trucking packages between cities—rarely dreams”, says the poster, with a picture of ness of hiv. Blued has added a red ribbon get overtime pay or unemployment insur- officers brandishing machine guns. Appli- icon to its platform, clicking on which of- ance, says Geoffrey Crothall of China La- cants, who must be between 18 and 35, are fers information about hiv services. ngos bour Bulletin, an ngo. Older people strug- promised monthly salaries of at least 6,100 also use WeChat, a messaging app, to urge gle. On a street in Zhengzhou, a man in his yuan ($890), roughly the wages at Foxconn people, gay and straight, to get tested. Such late 40s glumly surveys a board plastered when the going was good. 7 tactics may be helping: 200m tests were performed in 2017, up 38% from 2015. Encouraging people to come forward is AIDS still difficult, however. The government reckons that 400,000 people may have the Testing times virus but not know it, ie, less than 70% of cases appear to have been detected. unaids believes that less than half of gay men car- rying hiv in China are aware of it. Discrim- ination may be deterring some from being screened. A survey of 2,000 people with hiv found that 12% had been refused medi- hiv infections are being spotted more quickly in China cal treatment and 15% had been denied ang xiaoshuai, a gay man in the The virus may not be spreading as fast work, presumably because of prejudice. Wcentral city of Hefei, used to believe as these figures suggest. The rapid increase Officials’ efforts to make free testing that only people who injected drugs could is largely the result of better detection. available outside the public health system contract hiv. But then a man he had sex Over the past decade the number of health suggest they are aware of the problem. with revealed that he had tested hiv-posi- facilities offering hiv tests has quadru- Those tested at state hospitals typically tive. Mr Wang visited a local ngo and took a pled. In 2016 China launched a five-year have to pay 60-100 yuan ($9-15). Zheng pinprick test to determine whether he, too, plan to combat hiv and aids. It increased Huang, who manages an hiv-related ngo was infected. Happily, he was not. But the funding to ngos providing free self-testing in Shanghai, says gay people like to use its experience was terrifying. “It never oc- kits to high-risk groups, such as gay men testing services not only because they are curred to me that someone around me and sex workers. It also gave ngos money free, but because most of the staff are gay. could actually get hiv,” he says. to provide hiv-positive people with free hiv prevalence is low in China com- Many others are less fortunate. In No- medicine. In 2015 nearly 70% of those diag- pared with the West. The proportion of vember China’s Centre for Disease Control nosed with hiv were receiving antiretrovi- people believed to have the virus is only said that 850,000 people were known to be ral drugs. In 2017 just over 80% were. 0.09%. In Britain it is 0.15% and in America hiv-positive, 12% more than a year earlier Most people in China are infected 0.34%. But the leading role of sex as a mode and almost three times the number in 2010. through heterosexual activity. Sex between of transmission is common both to China An official study found that new cases of men has also become a big contributor, re- and the West. Preventing infection rates hiv among students aged between 15 and sulting in about one-quarter of transmis- from climbing in China will require shat- 24 rose by more than one-third every year sions (see chart). The proportion of sexual- tering taboos and teaching young people in 2011-15, mostly as a result of gay sex. ly active gay men infected with hiv is now about how to have safe sex. 7 The Economist January 12th 2019 China 37 Chaguan Something old, something new

Why young Chinese are sporting 1,800-year-old fashions ver jewellery, even as Han delegates appear in Western suits and ties. This both patronises minorities and renders the Han an in- visible nationality—representatives of a sort of generic modernity. As Mr Chen shares his story, the slight, bespectacled teenager is wearing robes of lilac and white, embroidered with blue clouds, an outfit he says is Jin-dynasty day-wear. All around are thousands of fellow enthusiasts attending a Hanfu cultural festival held annual- ly in Xitang, a quaint, canal-side town near Shanghai. Hanfu wearers vary in their devotion to historical accuracy. Mr Chen has brought along a classmate whose look combines a black- and-white military uniform, 21st-century sneakers and an air of faint embarrassment. “I think this is Han dynasty,” the classmate mumbles, when asked. The colours are more Ming, says Mr Chen, gently correcting his friend’s dates by about 1,100 years. Enthusiasm counts for more than precision. On this sunny fes- tival weekend a local Starbucks boasts baristas in toga-like robes, a warrior in chain-mail queuing for coffee, and outside, a Taoist priest in a tunic and cloak outfit he calls “a bit of messed-up fu- sion”. Luling Manman, an author invited to the festival as an expert on ancient etiquette, defines Hanfu as “all forms of clothes we Han people have worn over the course of 5,000 years”. Others take a narrower view, describing a tradition cut cruelly short when the ike teenagers the world over, Chen Bolin, a Chinese universi- last ethnic-Han dynasty, the Ming, was overthrown in 1644. In Lty student, feels a need to belong. Unlike many of his peers, Mr European terms, that is like wrangling over a school of fashion that Chen has found a spiritual home: China of the Wei and Jin dynas- supposedly began in Neolithic times and flowered in the Middle ties, about 1,800 years ago. So deep is this bond that on special oc- Ages, and may or may not have ended during the English civil war. casions he wears flowing, wide-sleeved robes inspired by third- Since the Hanfu movement emerged in the early 2000s, some century dress. One moment of connection stood out, when he members have framed it as a way to restore Han customs sup- wore robes to a museum in Shaoxing, the eastern city where he pressed by ethnic Manchu warriors who conquered China from studies. There he found a sculpture depicting sages from the Wei the north and ruled as emperors of the Qing dynasty from 1644 un- and Jin era. His own clothes were “exactly like theirs”, he recalls til 1911. Han nationalists scorn such “Chinese” traditions as tight- happily. He saluted the statues and told them: “Dear ancestors, I’ve fitting qipao dresses or high-collared jackets precisely because heard so much about you. It is my good fortune to see you today.” they are derived from Manchu, Qing-era fashions. The teenager developed his passion at high school in Pingliang, perched in the hills of Gansu, an inland province. Though a rather The visible Hans small, sleepy spot, Pingliang is home to a Han culture association. At the Xitang festival, it should be said, brooding nationalists are Such clubs are spreading fast. They celebrate the Han ethnic group outnumbered by youngsters having uncool, goofy fun. Blushing to which more than nine out of ten people in China belong. students giggle their way through a lesson in ancient dancing. Ear- Enthusiasts claim that a million Chinese, mostly youngsters, nest, robe-wearing young men take photographs of each other regularly wear Hanfu, or robes inspired by traditional Han dress. playing the flute or practising archery. Children take part in a fash- The unplanned emergence of any social movement in China pre- ion show, swishing perilously along a catwalk in too-long finery. sents Communist bosses with a choice: scramble to the front of the The festival organiser is Vincent Fang Wenshan, a Taiwanese parade and claim to lead it, or ban it. For now, the parade contin- lyricist behind some of the most famous Mandarin pop songs of ues. State media hail Hanfu as a welcome complement to calls recent times. A dapper 49-year-old in black embroidered robes, Mr from President Xi Jinping to revive traditional culture and values. Fang urges younger enthusiasts to eschew Han chauvinism and to In April 2018 the Central Committee of the Communist Youth be open to modernised Hanfu. He sighs that some purists will not League, a recruitment channel for party members, declared a first tolerate any dress not found in ancient wall paintings, and draws a “Traditional Chinese Garment Day”. The league urged young Chi- wistful comparison with Japan, where traditional customs and nese to don ancient finery to demonstrate “cultural confidence” to modern culture co-exist easily. Wearing a kimono on a Japanese the world. There was a caveat, however. The league’s commemora- bus causes no astonishment, notes Mr Fang, lamenting that a gap tive day honours what it calls Huafu, or “Chinese dress”. That en- of several centuries separates Han traditional culture from the compasses not only Han traditions but those of China’s 55 official modern world. He would like to see Hanfu fans bridge that gap. ethnic minorities, from such places as Tibet, Inner Mongolia or Historians might quibble with some of Mr Fang’s details. Plenty the restive Muslim region of Xinjiang. The league’s caution reflects of Han traditions actually survived under the Qing. The country’s wariness about overt Han chauvinism, which threatens official sharpest break with tradition came during the first decades of narratives about a unified, multi-ethnic China. Communist rule, when leftist zealotry made it safest to wear blue In truth, clumsy Communist propaganda extolling national and green Mao suits. But that is to take the Hanfu movement too unity arguably helped create a hunger for Han traditions. At big literally, perhaps. Look past the invented costumes and the dodgy party events, ethnic-minority delegates typically attend in bright- history, and something simpler and more poignant appears: a ly coloured folk costumes trimmed with silks, furs or jangling sil- whole country yearning to know where it belongs. 7 38 Middle East & Africa The Economist January 12th 2019

Sudan gress Party (ncp) have been burned. On Jan- uary 6th protesters marched on the presi- “We are all Darfur” dential palace to deliver a petition for Mr Bashir to resign. The president, who came to power in a coup in 1989 and later won some dodgy elections, plans to stand for another term in 2020. At least eight parties have withdrawn from the ruling coalition. KHARTOUM Can he last? Mr Bashir is no stranger to Sudan’s genocidal regime is under siege unrest. His regime has fought rebels and hundred or more were brought in ev- gering protests, the government tried to re- committed genocide against civilians in Aery hour. Soon the police station in verse course and reintroduced some of the the south and in the Darfur region. It has northern Khartoum, Sudan’s capital, was subsidy. But the economy—already strug- survived many protests before. Yet the lat- so full that detainees were flowing onto the gling following the secession of South Su- est ones seem to have rattled the regime. lawn. Atif, an activist picked up around dan, which took away 75% of Sudan’s oil re- Mr Bashir has promised to stop cutting noon on December 31st, says he saw at least serves, in 2011—has nosedived. It shrank by subsidies and to increase state spending by 1,000 arrested that day. Many were beaten; about 2.3% in 2018. Unable to pay its bills, 39%, partly on higher salaries for public others had their hair shaved off. Lawyers the government has printed money. Infla- employees. He has called the protesters and doctors were singled out for insults. tion, at around 70%, is now the second “traitors, sell-outs, agents and saboteurs”. Atif is one of tens of thousands of Suda- highest in the world after Venezuela. The government has accused rebels from nese who have taken to the streets in recent Ordinary Sudanese face shortages of Darfur of conspiring with Israel to destabil- weeks. What began as a riot over the price bread, fuel and basic medicine. “You stand ise the country. Since late December more of bread in the eastern city of Atbara on De- in line at the bank waiting for cash that will than 50 Darfuri students have been round- cember 19th has billowed across the coun- barely buy you anything,” says Abuzar Os- ed up and detained in unknown locations. try. By some estimates, at least 40 people man, a 28-year-old photographer who was His tactic of blaming Darfuri rebels has have been killed by security forces during arrested last month. “We now spend our had little success. Protesters from the re- nearly 400 protests. The government says lives standing in queues.” gime’s traditional strongholds in Khar- it has detained at least 800 people (the real Calls for regime change are widespread. toum and the north have chanted “We are figure is surely far higher). Yet this has District offices of Mr Bashir’s National Con- all Darfur” while marching. And even done little to muffle what is now a nation- though the police have shot and arrested wide uprising against the rule of Omar al- people, the demonstrations have shown Also in this section Bashir and his 30-year-old kleptocracy. little sign of abating. If anything they seem The seeds of the current crisis were 39 Congo’s election shock to be getting better organised. The protest sown in late 2017, when the government movement is now largely led by the Suda- 39 Coups in Africa announced plans to end wheat subsidies. nese Professionals Association, a coalition The aim was to plug a budget deficit fore- 40 America wants more from Iraq of trade unions including those represent- cast to hit almost 5% of gdp this year. When ing doctors, lawyers and journalists. 41 Agritech in Israel the price of bread doubled a year ago, trig- Some have likened the protests to Su-1 The Economist January 12th 2019 Middle East & Africa 39

2 dan’s previous uprisings against military Even so, he is running out of options. In African presidents dictatorships, in 1964 and 1985. Then, too, recent years Sudan has moved away from middle-class folks helped turn isolated ri- Iran, an old ally, and grown closer to Saudi Till death do us ots into a broad movement for political Arabia and the United Arab Emirates. Their change. Both of Mr Bashir’s predecessors financial largesse helped to mask Sudan’s part stepped aside once it was clear the army economic malaise. But neither appears in- was backing the protesters. But Mr Bashir clined to bail out the regime, perhaps be- may prove harder to dislodge. “The army cause Mr Bashir is an unfaithful ally. (He Coups are getting rarer in Africa, and has been his for 29 years,” notes Alex de has made overtures to their regional rivals, its presidents’ average age is rising Waal of Tufts University. He has a knack for Turkey and Qatar.) Broke and alone, Mr Ba- playing factions against each other. Senior shir faces protesters who keep returning to t was all over within hours. At 4.30am officers may also fear prosecution for war the streets, despite tear gas and bullets. Ion January 7th a small group of junior crimes in Darfur should Mr Bashir go. And “The people’s rage is infinite,” says Brahim army officers seized the national radio sta- he has a formidable spy agency which, for Snoopy, a film-maker. “We don’t know tion in Gabon, an oil-rich country in cen- now, remains loyal. what will happen next.” 7 tral Africa, and declared a coup. They said they were motivated by the “pitiful sight” of Ali Bongo Ondimba, Gabon’s 59-year-old Congo’s election president, delivering a televised address from Morocco, where he has been conva- The Kinshasa surprise lescing since November after suffering a stroke. The attempt to unseat him was KINSHASA short-lived: by midday, most of the coup- Congo unexpectedly announces that an opposition leader has won the election plotters had been rounded up and the gov- ongo is free at last,” wailed an old rather different. It said that Mr Tshise- ernment was back in control. “Cwoman, tears streaming down her kedi had won with 7.05m votes. Mr Fay- The drama in Gabon is a throwback to cheeks. “We have waited years for this ulu was behind him on 6.37m. The un- more turbulent times. Coups have become moment!” Two young girls behind her popular ruling-party candidate, rarer across Africa—a sign that basic demo- gyrated their hips and sang, “Bye-oh Emmanuel Ramazani Shadary, received cratic norms are more widespread than Kabila,” again and again. just 4.36m. “These results have nothing they were. But checks and balances on In the early hours of January 10th, to do with the truth at the ballot box,” Mr presidential power are often still weak, so days after the result was scheduled to be Fayulu said in an interview with Radio many African leaders have been able to released, the Democratic Republic of France International. “It’s a real electoral cling to office far longer than is possible in Congo heard that it had a new presi- coup, it’s incomprehensible.” more competitive polities. Five have died dent—Félix Tshisekedi, the son of a Critics say that Mr Kabila was desper- in office since 2010—all of natural causes. charismatic opposition leader who died ate to keep Mr Fayulu away from the Seven of the current crop have been in pow- two years ago. Moments after the news throne because he was backed by two of er for over two decades. Mr Bongo, whose was announced, Mr Tshisekedi walked the president’s biggest adversaries previous jobs include minister of defence out of his office and prayed in front of a (Moïse Katumbi, a businessman, and and funk singer, has been in power for only photograph of his father. His shrieking Jean-Pierre Bemba, a former warlord, ten years, but his family has run Gabon supporters jostled around him. He is who were both barred from standing). Mr since 1967; he inherited the top job when popular in the capital, Kinshasa. Fayulu appeared to represent real his father died. The declaration marks the end of the change. He had campaigned on a pro- Mr Bongo is not the only African presi- ruling party’s long stay in power and mise to reduce corruption and enforce dent who rules from his sickbed. Muham- means that President Joseph Kabila and the rule of law—an obvious threat to madu Buhari, Nigeria’s septuagenarian his preferred successor must admit those who have looted this giant, miner- president, spent much of 2017 abroad re- defeat. Mr Kabila, who had refused to al-rich country for decades. covering from an undisclosed illness. Last step down when his term expired in 2016, Mr Tshisekedi, by contrast, is thought month he was forced to deny that he had has ruled Congo badly for nearly 18 years. less likely to shake things up, or to ask died and been replaced by a body double. The vast country has never seen a transi- awkward questions about Mr Kabila’s He is standing for re-election in February. 1 tion of power via the ballot box. All its business empire and the dazzling wealth former leaders either fled or were killed. of his cronies. “The Kabila camp was The fact that the election went ahead at never afraid of Félix,” says Kris Berwouts, The old keep hold all—and that an opposition candidate the author of “Congo’s violent peace”. Africa was declared the winner—is astonishing. “They consider him a weak personality.” But many voters think they have been Mr Tshisekedi, for his part, said, “I pay Presidents’ age Coups cheated nonetheless. Mr Tshisekedi was tribute to President Joseph Kabila and Average, years By decade not the man tipped to win. A respected today we should no longer see him as an 70 Successful Failed ngo Catholic that had deployed 40,000 adversary, but rather, a partner in demo- 65 40 observers to monitor the election on cratic change.” December 30th said on January 3rd that The election result will surely be 60 30 its tallies showed a clear winner. Al- contested. France has queried it. How- 55 though it did not publicly name him, it ever, the declaration of an opposition 20 told Western diplomats that Martin candidate as winner may give regional 50 Fayulu, a former oil executive, had won. bodies such as the African Union enough 10 45 He also came top, by a wide margin, in a of an excuse to call it free and fair. Congo 0 pre-election opinion poll. badly needs a change. But this was not The electoral commission’s count was what most voters had in mind. 1970 2000 19 1970s90s 2010s Sources: Jonathan M. Powell; press reports 40 Middle East & Africa The Economist January 12th 2019

2 Algerians often speculate about the health has undoubtedly deterred some coups, and of Abdelaziz Bouteflika, their 81-year-old helped to foil others. In Burkina Faso, for autocrat. He is rarely seen in public, but instance, it played a big role in forcing sol- may run for a fifth term this year. diers to hand power back to civilians after In the past such frail leaders would have they deposed the president in 2015. made easy pickings for a young upstart The decline in coups is a good thing. But plotting a coup. But the most recent suc- political competition for the top spot is still cessful coup in Africa, in which the Zimba- constrained. Most African countries have bwean army deposed 93-year-old Robert presidential term limits. But since 2000 Mugabe in 2017, marks the exception rather ten countries’ leaders have simply changed than the rule. From1980 to 2000 there were their constitutions to stay in power. Omar 38 successful coups in Africa. Since then al-Bashir, Sudan’s ruler since1989, recently there have only been 15. This is partly be- said he would follow suit, even as his gov- cause presidents have grown more adept at ernment tear-gassed protesters. coup-proofing their regimes. Many place As a result, the average age of Africa’s relatives in key roles, keep the army weak presidents has risen steadily, from 52 in and play factions off against each other. 1980 to 66 today.This is not just because au- The spread of democracy in Africa has tocrats are living longer. In noisy democra- also helped stave off putsches. The African cies, too, political parties are often domin- Union (au) has adopted a policy of “zero ated by older figures who are reluctant to tolerance” towards coups, though it some- leave the limelight. Mr Buhari’s main chal- times turns a blind eye if given a semi- lenger in elections next month is also over What’s in it for Donald? plausible excuse to do so. In Zimbabwe, for 70, and has run for president four times be- example, the generals detaining Mr Mu- fore. Tunisia democratically replaced a 69- happy Christmas, boasted about giving gabe insisted that they were protecting year-old president with an 88-year-old in them a pay rise, then left—without seeing rather than overthrowing him. The au did 2014. The continent’s greying leaders are in Iraq’s leaders. A meeting with Adel Abdul- not point out that this was an obvious fib. no hurry to leave, a sentiment expressed Mahdi, the new Iraqi prime minister, fell Mr Mugabe was not popular. funkily by Mr Bongo in his 1977 song “I through after Mr Trump insisted that he In other cases, though, the au’s policy wanna stay with you”. 7 come to America’s base in the desert west of Baghdad. Mr Trump’s withdrawal from Syria has America and Iraq some Iraqis thinking that they could be next to see American troops go. On January Crude deals over oil 9th Mike Pompeo, America’s secretary of state, tried to reassure them. In a meeting with Mr Abdul-Mahdi (at the prime minis- ter’s office) he discussed continuing Amer- ica’s co-operation with the Iraqi security forces. He also emphasised “Iraq’s energy independence”, according to a statement. Washington is trying to get more out of its relationship with Iraq Officials in Iraq interpret such talk as an ef- resident donald trump thinks Amer- decade. “It was a quid pro quo,” says an oil- fort to get it to stop buying gas from Iran— Pica is being ripped off. “We have spent man. “You give us priority and we’ll give and to start hiring American companies to $7trn—trillion with a T—$7trn in the Mid- you an exemption.” develop Iraq’s gasfields. dle East,” he told a crowd last year, exagger- The strategy seems to be working. Gen- If America’s intention is to prise Iraq ating slightly. “You know what we have for eral Electric, an American company, has away from Iran, it will have a difficult time. it? Nothing. Nothing.” To right this per- muscled in on a big contract to upgrade The neighbours get along, for the most ceived wrong, Mr Trump has long favoured Iraq’s decrepit electricity grid, which had part, and trade a lot. Iraq depends on Iran seizing Iraq’s oil. But after he hinted at the been earmarked for Siemens, a German for food and power. When Iran cut electric- idea with the Iraqi prime minister (who de- firm. American companies have also ity to Iraq last summer, for want of pay- murred), his aides admonished him. “We signed deals to supply Iraq with grains and ment, southern Iraq over-heated and prot- can’t do this and you shouldn’t talk about poultry, important Iranian exports. Chev- ests brought down the government. it,” said H.R. McMaster, the national securi- ron and Exxon, American oil giants, have American firms would not be able to re- ty adviser at the time, according to reports. avoided the inconvenience of a bidding place the supply from Iran in the short Still, Mr Trump may be getting what he process by negotiating directly with Iraq’s term. Iranian forces are also helping to wants from Iraq in other ways. oil ministry for large concessions. A previ- keep Iraq secure from is, which is resurfac- When America reimposed sanctions on ous Iraqi government put off a decision on ing in some areas. Iran last year it gave some countries extra Exxon’s bid to help boost Iraq’s oil export Bickering between Iraq’s big political time to stop buying Iranian oil before they capacity and build a desalination plant. blocs—the Iran-leaning Fatah and anti- would lose access to the American market. Now it is said to be a priority. Iranian Saairoun—reflects tussling be- Most were given 90-day exemptions. In Iraq is more stable, secure and rich than tween America and Iran over the composi- November Iraq, which shares a long border it has been since America’s invasion in tion of Mr Abdul-Mahdi’s cabinet. The with Iran, was given half that time to cut off 2003. Having helped to roll back the jiha- positions of defence, interior and justice electricity and gas imports. As it negotiated dists of Islamic State (is), Mr Trump thinks minister remain vacant. A return to insta- for extensions, American companies made America is owed something for the coun- bility would imperil America’s contracts. a push for Iraqi contracts. In December, try’s success. Beyond that he is not terribly But Mr Trump is happy enough for now. In Rick Perry, the energy secretary, led Ameri- engaged with Iraq. When he flew there in December he gave Iraq 90 more days to ca’s largest trade delegation to Iraq in over a December, Mr Trump wished his troops comply with America’s sanctions. 7 The Economist January 12th 2019 Middle East & Africa 41

Agritech in Israel less on research. Next year, for the first time, the government plans to sponsor pi- Silicon makes the desert bloom lot projects that connect startups with farmers, so that technology can be tried and tested locally before being introduced to international markets. The state also helps in other ways. Mili- tary service is mandatory in Israel, where bright young conscripts spend years devel- How arid Israel is transforming farming oping equipment or software that does ink bollworms are the scourge of cot- founded in Israel last year include Su- well in unpredictable environments. Such Pton farmers. The insect is less than an fresca, which is developing edible coatings skills have direct applications in agritech. inch long, but it has a voracious appetite that extend the shelf life of fruits and vege- Nadav Liebermann, the chief technology for the plant’s seeds. As a child living on tables; Beewise, which uses artificial intel- officer of CropX, a company that uses wire- Kibbutz Ginosar, in Israel’s north, Ofir ligence to automate beehive maintenance; less sensors to measure soil moisture, Schlam would wake up at dawn to inspect and Armenta, which is working on new served in a unit that created hardware for leaves for the pest. “They were really hard therapies to treat sick dairy cows. Other special forces, including devices placed to find,” he recalls. firms are targeting trendy sectors like phar- underground in enemy territory to gather Spotting the enemy has become much maceutical crops and alternative proteins. intelligence. His software chief, who easier. Four years ago, Mr Schlam co- The new firms benefit from an oversup- learned to code in the army, ran a team of 50 founded Taranis, a company that uses ply of produce worldwide, which has led to developers at the age of 23. Two branches high-resolution imagery from drones, lower margins for farmers and greater de- are particularly good at churning out tech planes and satellites to diagnose problems mand for tools that increase productivity entrepreneurs: Unit 8200, the army’s sig- in the field—among them bollworms, dis- and boost profits. After an unprecedented nals-intelligence arm, and Unit 9900, eases, dryness and nutrient deficiencies. round of mergers in 2016, farming giants which specialises in gleaning intelligence Investors are joining the effort: in Novem- have been looking to cut costs. Share- from geospatial imagery. ber, Taranis raised $20m. holders are also looking for new ways of Faced with unfriendly neighbours and doing things (six out of the ten biggest food Small is not always beautiful an arid climate, Israel has had to innovate companies have replaced their ceos in the The next challenge for Israel’s agritech to survive. Taranis is the poster child of its past three years). Many firms see external firms will be scaling up. Limited farmland stunning rise in agritech. Over 500 compa- innovation as faster and cheaper than in- means they must look for partners abroad nies operate in the field, nearly twice as house research and development (r&d). early on. So does the need to understand many as in the better-known cyber-securi- Israel’s overall civilian r&d spending, distant export markets with a different cli- ty sector. A third of them did not exist five measured as a share of gdp, is more than mate, like Brazil or the American Midwest. years ago. Israeli agritech firms attracted that of any European country. Agritech gets Founders of startups are often quick to sell $171m in equity investment in 2017, consid- a chunk of this cash. The government sup- up, rather than building their ventures into erably more than those in bigger farming ports universities and labs; it has also in- big global companies. Many reinvest their countries, such as Australia and Brazil. vested in venture-capital funds and di- riches in new startups and buyers often Other countries have bet big on agri- rectly in startups. The country is good at continue to use Israel as their base for r&d. tech, but Israel is ahead of all but America, turning ideas into profits. The Israel Insti- The danger is that, without bigger home- say investors. Large countries with big ap- tute of Technology (known as Technion) grown firms, many less-skilled Israelis— petites are taking notice. When Wang earns over half as much licensing patents including kibbutzniks—will be cut off Qishan, China’s vice-president, visited Is- as mit in America, despite spending much from the booming tech industry. 7 rael in October, he toured agritech exhibits. “Agricultural parks” using Israeli technol- ogy have mushroomed across China. Indi- an and African officials have also made re- cent trips to Israel seeking inspiration. Because it trades little with its neigh- bours, Israel long relied on the kibbutzim and other collective farms to grow food for its rising population. That heritage is pro- viding rich pickings today: 54% of Israel’s agritech ventures are managed by some- one who grew up in a kibbutz. Conditions forced them to be creative. The southern part of the country often receives less rain- fall in a year than England gets in a day. That led to an early breakthrough in water management. In the 1950s Simcha Blass and his son, Yeshayahu, greatly reduced water use by applying it directly to the roots of plants. They helped form Netafim, the world’s leading maker of drip-irriga- tion systems, worth nearly $1.9bn. Newer companies are exploiting tech- nological advances in areas such as plant biology and artificial intelligence. Startups The desert shall rejoice 42 Europe The Economist January 12th 2019

Also in this section 43 Putin splits the Orthodox church 44 Poland’s “Fort Trump” 44 Women and street names 45 Income redistribution in France 45 Germany finds “G0d” 46 Charlemagne: East and west in Europe

Belarus of Russia and Belarus”, nominally formed in 1999, exists mainly on paper. In reality, He had a friend in Minsk Mr Lukashenko has skilfully played Mos- cow against the West, cashing in on his country’s geopolitical position. This ambivalence has irked Russia but has bought Belarus time to allow a real private sector to emerge. It now accounts MINSK for half of jobs and has created a middle As Vladimir Putin tightens his bear-hug around Belarus, its leader fights back class that values hard work and education. giant statue of Lenin still stands be- well beyond symbols. Minsk’s vibrant it industry now employs Afore the forbidding House of Govern- Unlike his neighbours, Mr Lukashenko some 40,000 staff developing apps and ment in Minsk, built by Stalin in 1934 and never embraced free markets and democra- games such as Viber and World of Tanks. occupied by the Gestapo a few years later. cy, or privatised Belarus’s state factories. As Balazs Jarabik of the Carnegie En- But behind this totalitarian façade now sits Instead, he guarantees full employment, at dowment for International Peace, a think- a government that is trying to work out the cost of stifling productivity. Belarus has tank, observes, the social contract is chang- how to reform Belarus’s economy while no oligarchs, relatively little everyday cor- ing. A recent poll shows that Belarusians following a political trajectory set a quar- ruption and some of the lowest rates of in- above all want their government to create ter-century ago by the country’s authoritar- equality and of people who live on less than the conditions that would let them make ian leader, Alexander Lukashenko. Now he $5 a day in the former Soviet empire. Again money. Mr Lukashenko has tried to do this, must also fend off Russia’s looming threats borrowing from Lenin’s lexicon, Mr Lu- appointing a former banker to run the gov- to its independence. This is not an easy cir- kashenko consolidated power by coercion, ernment and promising to promote a digi- cle to square. But Mr Lukashenko is no or- jailing rivals and journalists, disbanding tal economy. Alexander Turchin, the depu- dinary politician. protests and earning Western sanctions ty prime minister, says the government is and a reputation as “Europe’s last dictator”. planning to rein in the security services Learning from Lenin Still, he has retained broad domestic sup- and soften laws against economic crimes. A former collective-farm boss, Mr Lukash- port by keeping up adequate living stan- Although Belarus still has the death penal- enko was swept to power in a landslide in dards, a sense of social justice and decent ty and harasses the opposition, Mr Lukash- 1994, three years after the collapse of the public infrastructure. enko has become more tolerant of civil Soviet Union. He has ruled Belarus ever Mr Lukashenko’s authoritarian model, society, even allowing a measure of public since, making him Europe’s longest-serv- though, has relied on Russian subsidies. criticism and debate. ing president. Unlike his peers in other Keen to bind in an ally, Moscow has kept He is surely not a reborn liberal. His European former Soviet republics, who re- natural-gas prices low and supplied cut- softening results largely from fear of Mos- jected the old system as they asserted inde- price crude oil, which Belarus has been cow. Russia’s war against neighbouring Uk- pendence, he cherished the Soviet legacy. able to refine and sell at market prices. In raine in 2014 made Belarus feel vulnerable. Belarus still marks the Great October Revo- exchange, Mr Lukashenko swore loyalty to Mr Lukashenko refused to recognise Rus- lution of 1917 with a public holiday. And Mr Russia, and entered into military and eco- sia’s annexation of Crimea and retains Lukashenko’s adherence to socialism goes nomic alliances with it. Yet a “Union State good relations with Ukraine. He has 1 The Economist January 12th 2019 Europe 43

2 clamped down on Russian propaganda, The Orthodox church Mr Putin has devoted enormous effort to giving suspended jail sentences to three re-establishing Russia’s influence, wheth- Russian-paid bloggers who stirred anti- A tale of two er political, commercial or spiritual, over Belarusian sentiment, for instance by mes- the lands that used to be part of the Soviet saging that “the study of the Belarusian patriarchs Union. This schism is a move in the oppo- language can spoil children’s brains.” He site direction. More than 12,000 parishes has also set about mending fences with still lie under the Moscow-aligned Ukrai- America, which withdrew its ambassador KIEV AND VLADIMIR nian Orthodox Church; now the new body, The conflict between Russia and from Minsk in 2008 in protest against po- the Orthodox Church of Ukraine, which al- Ukraine splits the Orthodox church litical repression. Last year Mr Putin omi- ready controls about 7,000 parishes, will nously sent a former security-service com- ith snow falling on the green domes try to woo those communities into its fold. mando as ambassador. Wof Kiev’s Saint Sophia cathedral, Uk- Another point of contention is control over Having lost Ukraine, Russia now wants raine’s president, Petro Poroshenko, strode valuable church property and over historic to integrate Belarus more deeply, citing triumphantly towards its ancient doors on sites such as the Kiev-Pechersk Lavra, a those dormant agreements of the 1990s. January 7th to mark an Orthodox Christ- famed cave monastery. Archbishop Kli- More to the point, Mr Putin reckons Bela- mas like no other. Beside him stood Metro- ment, a cleric of the Moscow-aligned patri- rus could help him retain power after his politan Epifaniy, the newly minted head of archate, frets about threats against the current and supposedly final presidential the Orthodox Church of Ukraine. They car- branch’s churches. Some Moscow-aligned term ends in 2024. A full-blown union of ried a document, called a tomos, granting priests have been called in for questioning Belarus and Russia, created with or with- the new Ukrainian church independence by the Ukrainian security services. out Mr Lukashenko’s agreement, could let from the Moscow patriarchate, the result of Nonetheless, Mr Putin may be hard- Mr Putin dodge term limits in Russia by be- a year of intensive negotiations between pressed to find popular support for fresh coming the first president of a new entity, political leaders and clerics in Kiev and Is- intervention in Ukraine on religious Russia-and-Belarus. tanbul, home to Patriarch Bartholomew I, grounds. The spiritual stand-off has failed In December Mr Putin twice met Mr Lu- the “first among equals” in the eastern to arouse much passion among ordinary kashenko, and dispatched his prime min- Christian world. Russian citizens. Some 60% say they are ister, Dmitry Medvedev, to Belarus. Telling Until this week, the only international- not bothered by the Ukrainian split; even reporters that “Russia is ready to go further ly recognised Orthodox church in Ukraine among self-identified believers, just 43% in building a Union State”, Mr Medvedev had been a body whose ultimate master is say they are concerned. At Christmas cele- suggested that Russia could take over the Patriarch Kirill of Moscow. After Russia an- brations in the medieval Russian town of Belarus customs, central bank and courts. nexed Crimea and stoked a war in Ukraine’s Vladimir, believers refused to let church Russia has many cards to play if it wants east in 2014, that struck many Ukrainians politics in Istanbul or Kiev spoil the festi- to get tough. It is winding down its oil sub- as untenable. “We have cut the last chain val. “Let those who did this worry about it,” sidy, which accounts for nearly 4% of Bela- that connected us to Moscow and its fanta- said Eduard, a middle-aged factory worker, rus’s gdp, implicitly linking it to integra- sies about Ukraine as the canonical territo- as he approached the Assumption Cathe- tion. Deprived of cheap money, Belarus’s ry of the Russian Orthodox Church,” said dral. “We’re having a holiday.” state firms, laden with bad debts, would Mr Poroshenko. The bid for ecclesiastical Mr Poroshenko hopes the move will in- struggle to stay afloat. As a hedge against independence, which is as much about Uk- spire greater zeal among Ukrainian voters. Russia, Mr Lukashenko has turned to Chi- raine’s desire to break from Moscow’s po- With presidential elections looming in na, luring its investors and lenders. Minsk litical orbit as it is about theological au- March, he has made church independence now boasts a vast Chinese industrial park. thority, has enraged both Kirill and Russia’s a central pillar of his campaign. Some of Yet an overt Chinese presence might pro- earthly ruler, Vladimir Putin, who has said those who came to the service on January voke resentment in Russian-speaking that the church schism could “turn into a 7th say their views of the president have Belarus. Russia is also Belarus’s largest sin- heavy dispute, if not bloodshed”. improved thanks to the autocephaly. But it gle market. Blocking exports, something The warning reflects the significance of has yet to shift the polls so far; the presi- Moscow tried a decade ago, could fuel dis- the church split for the Russian president. dent is still trailing. 7 content ahead of Belarus’s presidential election in 2020. For his part, Mr Lukashenko has sounded defiant. He has ruled out the idea of a Russian military base in Belarus, and has hosted American generals and dip- lomats. On December 14th he told Russian journalists: “If someone wants to break [Belarus] into regions and force us to be- come a subject of Russia, that will never happen.” He cannot afford a formal rift with Russia, but he is calculating that Mr Putin’s hand will be restrained by Russians’ growing weariness of military adventures and by Mr Lukashenko’s popularity among them. “I made a joke that we are sick and tired of each other,” Mr Lukashenko said in Moscow just before Christmas. In the same bantering spirit, he brought Mr Putin a Christmas gift: fours sacks of potatoes and a slab of lard. Mr Putin did not respond, but is unlikely to feel satiated. 7 All I want for Christmas is autocephaly 44 Europe The Economist January 12th 2019

Polish defence Street names Fort Trump Maiden lanes

The push to name more roads after women ome cities are symbolised by their WARSAW monuments, such as the Eiffel Tower, Poland’s push for a branded tank base S the Colosseum and the Brandenburg oles like being reminded of the time Gate. But streets can do the job, too. Many Pthey came to America’s defence. Meet- are named after national heroes—nearly ing his counterpart in November, James all of them male. Mattis, America’s now-departed defence Dozens of streets in Hungary are secretary, waxed lyrical about General Ta- named after Petofi Sandor, the national deusz Kosciuszko, who built a string of vi- poet. A visitor to any Italian city is likely tal forts during America’s revolutionary to tread on Via Dante, Mazzini, Garibaldi war. Poland’s government hopes America or Verdi. Women remain conspicuously will return the favour with some fort- absent, apart from a certain Middle building of its own. Easterner famed for her virginity. Even Having been repeatedly carved up by so, tens of lesser-known gents come bigger powers, Poland is keen to cement ahead of Jesus’s mother. In Paris, 31% of alliances. It rushed to join nato in 1999, streets are named after men, just 2.6% and in 2016 welcomed the headquarters of after women. nato’s “enhanced forward presence” The invisibility of women in Europe’s scheme, which stationed 4,600 combat- street names is mainly a historical hang- ready troops in eastern Europe. Yet neither over. This summer, residents of Brussels Destiny fulfilled this, nor the several thousand American had the chance to name 28 new streets. soldiers who rotate through Poland annu- None are named after individual men— from Paris to Tbilisi are taking matters ally, nor the nato missile defence system the new Place des Grands Hommes instead into their own hands. A Parisian group America is building on the country’s Baltic gives them collective recognition. Two has unofficially renamed the Pont au Sea coast have settled Polish nerves. streets will be named after women: a Change after the entertainer and resis- Documents leaked last May showed Po- doctor, Isala van Diest, and a film direc- tance fighter Josephine Baker; and the land had asked America to deploy an ar- tor, Chantal Akerman. But the achieve- Boulevard du Palais after the 18th-cen- moured division (roughly 15,000 troops) ments of these ladies appears on a par tury philosopher Emilie du Châtelet. permanently on its soil, to which Poland with local fondness for delicacies like Beyoncé Boulevard appeared in place of would contribute up to $2bn. The proposal kriek (cherry beer) and speculoos (ginger- Rokin Boulevard in Amsterdam in Au- was sprinkled with references to 1776 and bread biscuits), which will also give their gust. Some local governments have quotes from President Donald Trump’s name to new streets. The ingenious joined the cause. La-Ville-aux-Dames, a speech in Warsaw in July 2017. It noted that naming of Ceci n’est pas une rue (“This is town in France, has aptly named most of Poland is one of the few allies that meet not a street”) will pay homage to the its roads after women. Brussels and a nato’s target of spending 2% of gdp on de- Belgian surrealist artist René Magritte—a town in Burgundy have officially paid fence. It alluded to Poland’s contributions deserving choice, but some may rue the respect to Jo Cox, a British mp who was to American wars in Iraq and Afghanistan, missed opportunity to highlight other murdered in 2016 by a pro-Brexit con- and to America’s 70% favourability rating worthy women. spiracy theorist. More such recognition among Poles. Maps of potential locations Meanwhile, vigilante sign-stickers would surely improve cities’ street cred. even showed the schools that the hypo- thetical Americans’ offspring might at- tend. In September Andrzej Duda, Poland’s Russian demands for a base for years, but it is pumping much of its growing defence president, tried to close the deal: the base American tanks next door could force his budget into an American Patriot air de- could be called “Fort Trump”. hand. That, in turn, would create a head- fence system worth $4.8bn. The eu also Though this struck many Poles as toe- ache for Ukraine, which might have to shift frets that an American base would convey curlingly crass, the proposal kicked off a forces to defend its border with Belarus. A approval for Poland’s illiberal nationalist serious debate. Supporters, including bilateral deal, cut over nato’s head, might government, hampering the bloc’s efforts some American generals, argue that a per- compound growing unease over America’s to stop it from weakening the judiciary and manent deployment would be preferable commitment to multilateral alliances. The undermining the rule of law. to the current rotational arrangement, be- Baltic states “would inevitably feel margin- Congress has told the Pentagon to re- cause commanders would get to know alised”, a recent Estonian study cautioned. port on the feasibility of a base by March their surroundings. Sceptics replied that Another worry is that an American base 1st. A huge garrison looks less likely than a America does not have tanks to spare and might deepen the wedge between Poland slimmer deployment, perhaps to existing that moving existing units eastward from and the eu. In 2009 Poland helped launch sites. American officials fear the proposed Germany would make them a juicy target talks on the eu’s Permanent Structured Co- new sites lack space for tank manoeuvres. for Russian rocket artillery. operation (pesco), a framework for Euro- In December Mr Duda suggested that Mr Critics also warn that Russia could re- pean defence co-operation. But in 2017 it Mattis’s departure would make it “easier to spond by building up forces in Kaliningrad, was the last to sign the agreement, under- talk”, as he had been sceptical of the idea. its European exclave to Poland’s north, or lining its tilt towards America. In 2016 the But the Pentagon is in disarray, with the in Belarus. Alexander Lukashenko, Bela- government cancelled an order for 50 Air- new leadership unlikely to rank eastern rus’ autocratic president, has beaten back bus helicopters, offending France. Instead Europe high on its agenda. 7 The Economist January 12th 2019 Europe 45

France ably more balanced. Thanks to high taxes Cyber-crime and benefits, France stands out among big More égalité than European economies as the country that Germany finds G0d does the most to reduce income inequality, you might think says James Browne, an economist at the oecd (see chart). Sweden does end up with a slightly more equal overall income distri- PARIS bution, but the French system reduces the BERLIN France’s highly redistributive tax and A young hacker spooks the German gap by more. A recent study by insee, the benefits system establishment national statistics body, shows that the hen emmanuel macron launches gross income of the top 10% of people is 22 n the end, God turned out to be a 20- Whis promised “great national debate” times that of the bottom 10%. Yet that gap is Iyear-old amateur hacker living with his on January 15th, he hopes to show a willing- reduced to just six times by taxes and trans- parents in a small western German town. ness to listen to the popular rage behind fers. “Let’s stop pretending that France is a Throughout December God, or “GOd”, to use the gilets jaunes (yellow jacket) protesters country where solidarity doesn’t exist,” his Twitter handle, had leaked the phone who have been occupying roundabouts said Mr Macron in his address. numbers, addresses and, in some cases, and motorway toll booths in anger initially So why do the gilets jaunes feel so private photos and credit-card details of at fuel tax rises, but now with a much lon- squeezed? The answer is not stagnating av- nearly 1,000 German politicians, celebri- ger list of grievances. The French president erage wages. Real household income in ties and journalists. For weeks no one no- has asked for ideas on four topics, which he France grew by 8% from 2007 to 2017, de- ticed. But panic set in once the news wants to be discussed online and in town spite the financial crisis, more than in emerged on January 3rd. Was this an expert halls until mid-March: the environment, many other European countries, as Jean Pi- group of cyber-anarchists hell-bent on de- democracy, public services and taxes. It sani-Ferry, an economist at Sciences Po stroying the system? Was it the handiwork was the claim of unfair taxation—and a (and a former adviser to Mr Macron), of Vladimir Putin? feeling among protesters that the money points out. He identifies a breakdown in In fact the culprit, arrested in the town raised did them no good—that first mobil- social mobility, and thus in faith that the of Homberg (Ohm) on January 6th, turned ised the gilets jaunes. “But what do you do system can improve lives for the next gen- out to be a determined “script kiddie” with all that dough?” asked one early gilet eration, as part of the explanation. Anoth- (slang for a hacker who uses code written jaune in a clip that went viral. er, according to research by the World In- by others), apparently acting alone. He France has a long-standing preference equality Lab, linked to Thomas Piketty, a seems to have obtained the data by guess- for taxes and spending. Its tax take as well French economist, is that the bottom 50% ing passwords, cracking address books and as its level of public spending, which ac- are disproportionately touched by non- so on. Asked to explain his motivation, he counts for 57% of gdp, are higher than in progressive social-security charges and in- told police that he was “annoyed” by politi- any other European Union country. Much direct taxes, such as those on fuel. Include cians (apart from those of the far-right Al- goes on subsidising public services, these, and the French redistribution sys- ternative for Germany, whom he spared). whether riding in high-speed trains or tem still works, but rather less well. Germany is still a laggard in cyber-secu- studying at university, that cost users more Such matters will form part of Mr Mac- rity, says Matthias Schulze at the German elsewhere. As Mr Macron pointed out in his ron’s consultation. Town halls have already Institute for International and Security new year’s address, France has excellent in- opened “books of grievances”. The govern- Policy (swp), a think-tank. So it must often frastructure, (mostly) free education and ment has ruled out certain demands—in- turn abroad for help. A more serious attack, first-rate health care that comes at little di- cluding a return of the wealth tax—as well probably steered from Moscow, on the rect cost to patients. Such services are often as subjects that fall outside the designated Bundestag’s servers in 2015 was cleared up taken for granted. If the French want lower topics. In one early online forum, a com- with British help; this time German offi- taxes, some of that spending will have to mon demand has been the abolition of gay cials reportedly turned to American ex- give, too. marriage. Mr Macron’s promise of a debate, perts. Yet it has been catching up. Ger- The gilets jaunes, however, argue that along with €10bn to boost pay packets, may many’s cyber-security strategy has been they are unfairly squeezed by taxes to pay have calmed some of the protesters. But he revised, funds are flowing, agencies are to for all this while the rich are let off. Their now needs to persuade people that the con- be beefed up and the army is building up tax revolt began against a rise in green tax- sultation is not just a gimmick, while not cyber-offensive capabilities. A planned es on diesel and petrol. But the backdrop jeopardising his reform programme. 7 cyber-security bill will now be brought for- was Mr Macron’s decision in 2017 to abolish ward to the first half of 2019. the country’s wealth tax, in line with a Some politicians have urged a more manifesto promise. Although the presi- Re-slicing the pie muscular response to the December at- dent introduced a (more modest) mansion Income inequality, Gini coefficient*, 2016 tacks. Yet the true lessons are more mun- tax in its place, the tag “president of the dane. First, even relatively unskilled ama- rich” has stuck. No longer subject to the After direct taxes and transfers teurs working alone can cause serious wealth tax on top of income tax, the richest Before taxes and transfers disruption. There was little of conse- 1% have indeed seen the single biggest in- 0 0.1 0.2 0.3 0.4 0.5 0.6 quence in the leaked material but, in the crease in disposable income under Mr United States wrong hands, phone numbers and ad- Macron, according to the Institut des Poli- Britain dresses can be used for mischief. Second, tiques Publiques. Spain the multitude of agencies working on Still, unlike in America, the richest 1% Italy cyber-security creates vulnerabilities and in France collectively earn less before taxes confused lines of responsibility. And third, Germany† than the poorest 50%. At least until the Germans need to get better at minding most recent change, the gap has remained France their yards. Many victims used passwords fairly stable since 1995 in France, whereas it Sweden like “123456” or “iloveyou”; classic exam- has risen sharply in America. And the *0=perfect equality, 1=perfect inequality ples of poor cyber-hygiene. Cleanliness, broader redistribution picture is consider- Source: OECD †2015 after all, is next to G0dliness. 7 46 Europe The Economist January 12th 2019 Charlemagne A Carolingian folly

The notion of an east-west split in the EU is simplistic and defeatist leadership—nor representative of the whole region. Liberal plural- ism remains in better fettle in the Czech Republic. The Baltic states have exemplary civic and e-citizenship traditions (witness Latvia’s successful experiments with e-petitions). Meanwhile Marine Le Pen’s 34% vote at the last French election, the governing Freedom Party’s assaults on Austria’s institutions and Denmark’s decision to expel asylum seekers to an island once reserved for contagious animals all give the lie to western Europe’s supposed immunity to conspiracist populism. Italy, a founding member of the eu where measles cases are soaring thanks to anti-immunisation hysteria and whose populist government met with that of Poland on Janu- ary 7th to discuss a new European nationalist alliance, further dis- proves that lazy myth. The east-west dichotomy also obscures dissenting voices in central Europe. Every Saturday in Paris, “yellow jacket” protesters march for a manifesto that includes abolishing gay marriage, stop- ping immigration and quitting the eu. On weekends in Warsaw, Prague, Bratislava and Budapest, people march for independent courts, free media and, often, rapprochement with Brussels. Zso- fia Nagy, a Hungarian sociologist, describes the anger she felt at the Orban government’s implausible reaction to the Sargentini Re- port, an eu-backed analysis of its anti-democratic record. “It was udapest in january ill-suits political action. A freezing wind full of lies,” she fumes. The young mother took matters into her Brushes off the Hungarian plain and whips the grand 19th-cen- own hands, forgoing sleep for a week to dismantle the govern- tury boulevards. The streets glisten with ice and slushy snow. Yet ment’s defence line-by-line. Her text was circulated widely on in- march the people did once more on January 5th. They bore Hun- dependent online media. garian and European flags, party-political banners and the insig- Asked about the supposed east-west divide, Rafael Trzaskow- nia of charities, trade unions and ngos. “Orban out!” they chanted. ski, Warsaw’s new mayor, replies: “bullshit”. Elected in an anti- “It’s the biggest protest yet,” enthused Andras Lederer, a veteran of government surge at municipal elections in October, he recalls: “I successive demonstrations. fought a pro-openness campaign and people embraced it.” One No political dinner party in Brussels, Paris or Berlin is complete Polish opposition analyst reckons pis’s core vote is only about 30% without the observation that the shroud of illiberalism is settling of the electorate, to which it has added swing voters with a welfare on central Europe. Viktor Orban, the Hungarian prime minister, bonanza paid for by the last government’s economic boom. New has mastered the country’s mass media, courts and universities, polling by ipsos on the government’s dispute with the eu over its and is now trying to force overtime on workers under legislation rule-of-law infringements suggests that over half of Poles (and one dubbed the “slave law”. In Poland the populist-nationalist Law and in five pis voters) back Brussels over Warsaw. Justice (pis) government has stacked courts and state-run compa- nies with cronies. Corruption scandals, democratic backsliding Don’t patronise them and assaults on the press stalk other eastern members of the eu, Democratic institutions in post-communist states have, it is true, including Romania, which took over its rotating presidency on shallower roots than counterparts that grew up on the other side of January 1st. the Iron Curtain. And the eu is right to take on Hungary and Poland Such news stirs up old prejudices about the eastern eu states. for their abuses. But it is defeatist to believe that the better parts of Since the Emperor Charlemagne’s time, the continent’s political those countries’ natures are doomed. This attitude, though, is ex- fulcrum has resided in the old Frankish empire and its great cities: pressed in the obsession with restarting the Franco-German mo- Aachen, Paris, Strasbourg, Frankfurt, Brussels, Milan and more. tor, an inadequate engine for the expanded eu, rather than trying This Europe has often looked down on the Poles, the Hungarians to bind in countries like Poland. It is also apparent in the indul- and the Czechs, let alone the Ukrainians or Estonians, for their gence of the European People’s Party (epp), the mainstream centre- supposed exoticism and backwardness. Timothy Garton Ash, a right family that includes Angela Merkel’s Christian Democrats, historian, calls this tradition “intra-European orientalism”. Jean- for Mr Orban and his Fidesz party. When figures like Manfred We- Jacques Rousseau, a philosopher, characterised ordinary Poles as ber, the epp’s candidate for the European Commission presidency, noble savages. Heinrich Heine, a poet, romanticised and belittled coddle the Hungarian autocrat, they are implicitly acting as if the peoples to Germany’s east. After the fall of the Berlin Wall the Hungary’s embattled liberal tendencies do not exist. talk was of their “catching up” with the west. Today that tradition Europe’s leaders, east and west, face a choice. They can treat the lives on in coverage of illiberalism in the region and in suggestions continent as one: the product of a rough history of geographically that Europe’s future involves a permanent and exclusive integra- differentiated leaps forward and lurches backward in which no na- tionist vanguard, and a more sceptical outer layer. tion has a monopoly on progress; one in which each is expected to Reviving this tradition is wrongheaded on three counts. First, it apply the same standards and each is accorded the same status. Or is a wild generalisation. The abuses of the Hungarian and Polish they can accept the dichotomy of east and west and aspire, at best, governments are real. But they are neither a single phenomenon— to build wobbly bridges between the two. The former path offers Poland has a more dynamic opposition and a more ideological the better way forward. The latter points to collapse. 7 Britain The Economist January 12th 2019 47

The opposition bour’s biggest donor, can insist that boot- ing the Tories out is the priority. Labour’s Brexit balancing act Remainers, who include most members as well as some unions disturbed by the pros- pect of Brexit-induced job losses, can hang on to the hope of a second referendum. Nearly half of members say Labour has the right policy on Brexit, with just over a quar- How much longer can the party’s Eurosceptic leader keep the Europhile ter opposed, according to polling spon- membership happy? sored by the Economic and Social Research -shirts say a lot about Jeremy Corbyn’s So far Mr Corbyn has stuck to a line that Council’s Party Members Project. TLabour Party. During his campaign for just about satisfies them. In a speech deliv- Mr Corbyn’s critics argue that his policy the leadership in 2015, young supporters ered as we went to press on January 10th he is a cynical ploy to avoid committing the wore shirts featuring the ageing socialist restated Labour’s plan. The party will vote party to any firm course of action before Photoshopped to look like Che Guevara. against the government’s Brexit deal on Brexit day on March 29th. Some suspect Another popular design emblazoned Mr January 15th. If the deal is defeated, as ex- that he does not much care whether Britain Corbyn’s name on the logo of Run-dmc, a pected, Labour will call for an election. If stays or goes, and that he only wants to New York hip-hop group—an unlikely this fails, as also looks likely, it will consid- make sure that Labour does not get the choice for a 69-year-old manhole-cover en- er options including but not limited to a blame in the process. His supporters insist thusiast. Now, at Labour rallies his fans second referendum. that he is simply waiting for the right mo- sport a t-shirt with an equally surprising This carefully confected fudge provides ment to show his hand. message: “Love Corbyn, Hate Brexit”. something for everyone. Eurosceptics, Labour strategists see a second referen- Mr Corbyn is a lifelong Eurosceptic who who include a large minority of Labour vot- dum as a fire escape that should be used voted for Britain to leave the European ers and the boss of the Unite union, La- only if the building is close to collapse. Community in 1975, opposed its main They see three risks in using it any earlier. treaty revisions and campaigned only The first is democratic: asking people to grudgingly for Britain to remain in 2016. By Also in this section vote again could undermine faith in poli- contrast, Labour’s half-a-million mem- 48 Can no deal be stopped? tics and boost the far right, inflaming the bers, who have strongly backed Mr Corbyn culture war that Brexit has kicked off. The 50 Bagehot: The parliamentary asylum in two leadership elections, are full-throat- second is political: a second referendum ed in their desire for Britain to stay in the would hurt Labour, particularly in the Mid- eu. Some 72% of Labour members want a lands and the north, where its base has second referendum, an idea that Mr Cor- been hollowed out. Marching into a new byn and his allies are reluctant to endorse. referendum as the party of Remain could Read more from this week’s Britain section: Yet in spite of this, 65% of Labour members Economist.com/Britain provoke desertion by Leave voters. The still say they back their leader. third objection is personal. Some view the1 48 Britain The Economist January 12th 2019

2 “People’s Vote” referendum campaign as a those on the Eurosceptic left, who have The real purpose of such exercises is not bid to undermine Mr Corbyn. It is led by ex- long called for Labour to empower its party to prepare for a no-deal Brexit, for which it Labour and Liberal Democrat staffers who members, are now doing their best to side- is now far too late. It is to intimidate waver- have derided Mr Corbyn in the past. “They step them. At the same time centrist Re- ing Tory mps into backing Mrs May’s deal. have escalated a tactic into a principle,” mainer types, who during the Blair years So far this does not seem to be working, huffs one senior Labour apparatchik. were happy for the awkwardly radical partly because hardline Brexiteers, like Labour mps are divided. Seventy-two of membership to be overlooked, are calling most Tory party members, favour what the 257 have publicly backed a second vote, for the grassroots to be heard. “It is through they like to call a “managed” no deal. Yet as according to LabourList, a news site. Others the looking glass,” says one Labour mp. “In- became clear in voting on the finance bill would like to have such a vote, but not yet. side is outside, black is white.” A design for this week, a majority of mps, including They worry that rushing into a snap refer- the next t-shirt, perhaps. 7 dozens of Tories, are vehemently against a endum may backfire, resulting in a victory no-deal Brexit. for the government’s deal—or, worse, for Despite this, such an outcome is sur- no deal at all, if such an option were on the The Brexit debate prisingly hard to stop. It is now, in effect, ballot. Their priority is to avoid crashing the default option. As Cathy Haddon of the out on those terms. Others think that Brit- Can no deal be Institute for Government, a think-tank, ain’s best bet is to leave with a deal and puts it, “Parliament can vote for any num- then, in time, apply to rejoin. stopped? ber of motions, resolutions and amend- But pressure on Mr Corbyn to shuffle to- ments to bills, but none of these on their wards backing a referendum is growing. own is enough to stop no deal.” Only three People’s Vote insists that the electoral things, she says, can do that: passing an Parliament is against a no-deal Brexit, arithmetic makes sense for Labour. “If La- agreed Brexit deal; seeking an extension of but cannot easily prevent it bour believe that they will lose millions of Article 50, which needs the unanimous ap- votes—by maintaining [the current] posi- ven as the House of Commons began proval of 27 other eu governments, some of tion that their voters do not want—it will Efive days of debate on Theresa May’s which will be reluctant; or revoking the shift,” says one who works there. Six out of Brexit deal this week, mps were focusing on original Article 50 letter, which can be done ten Labour voters backed Remain in 2016. the vote due on January 15th. Everyone (ex- unilaterally up to March 29th but would be Polling commissioned by People’s Vote cept perhaps the prime minister herself) hugely embarrassing for Mrs May. suggests an exodus of Labour support if the expects it to be lost. But nobody agrees on A cross-party group of mps is now trying party is seen to back Brexit too heartily. Yet what happens next. Mrs May has simply out a variety of ways to force the govern- this thesis has already failed a real-world warned mps that they will be entering “un- ment to take a no-deal Brexit off the table. test. In the general election of 2017, Re- charted territory”. As it has done many times recently, the mainers flocked to Labour despite its com- This is not for lack of alternative plans. government can ignore votes in Parlia- mitment to carry out Brexit, on the basis They range from a Canadian-style free- ment, even if they have some political that Labour’s approach looked a bit softer trade deal, through a Norway-like option, force. But on January 8th Yvette Cooper, a than the hardline Tory version. to a second referendum. But at present Labour mp, successfully pushed through Other sources of pressure may be more there seems to be no majority in Parlia- an amendment to the finance bill to make effective. An increasing number on the left, ment for any of these. And there is another it unlawful for the government to vary tax- including many of Mr Corbyn’s ideological inconvenient truth. According to both Brit- es following a no-deal Brexit without ex- allies, are lobbying the Labour leader to re- ish law and Article 50 of the European Un- plicit parliamentary approval. This may consider. Manuel Cortes, the firebrand ion treaty, Brexit will happen on March well presage further rounds of guerrilla head of the tssa transport workers’ union, 29th, deal or no deal. Hence the govern- warfare by mps. has called for Brexit to be stopped, in the ment’s ramping up of no-deal planning, There are plenty of potential targets. At language of the left (“Brexit? No pasarán!” which has included such comically inept least nine Brexit-related bills need to be he wrote last year). Radical economists events as the award of a contract for ferry passed before March 29th, including on such as Ann Pettifor, who is close to the services to a firm that has no ships. such matters as trade, immigration and ag- shadow chancellor, John McDonnell, are riculture. Any of these could be amended to pressing for a vote, arguing that Brexit is a make a no-deal Brexit harder. Some mps right-wing movement to roll back regula- have also suggested that they might vote to tion and workers’ rights. Another Europe is cut ministerial salaries. Several Tory back- Possible, a left-wing campaign group, is benchers and even some ministers have making the case that a Labour government threatened to resign their party whip to could help to steer the eu in a more social- fight against no deal. In extremis they democratic direction, if Britain stays in. could join Labour in voting the govern- Members may also become impatient. ment out of office and triggering a general Mr Corbyn was elected leader in 2015, and election. But, as Ms Haddon points out, again in 2016, with their support, partly on even this would not on its own prevent a a pledge to involve the rank and file more no-deal Brexit. closely in policymaking, as part of a “de- None of this is to say that a no-deal mocratisation” of the party. If Labour is Brexit is inevitable if Mrs May’s deal is vot- seen to ignore the wishes of its members ed down next week. In the end, it would be on a fundamental issue, the backlash could a choice by the government of the day to al- be ugly. “Hell hath no fury like a party low no deal, as the default option, to pro- member scorned,” says Tim Bale of Queen ceed on March 29th. And most mps, like Mary University of London, who points out most businesses and voters, do not believe that Tony Blair was idolised by members that an orderly and pragmatic person like before they turned strongly against him. Mrs May would willingly indulge in such The result is a glorious irony. Some of an act of self-harm. 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The speaker of the House of Commons will be at the centre of the political storm for weeks to come tion, as well as for small parties and individual mps. It is easy to be annoyed by his style—he sometimes acts like a circus barker and uses unnecessarily rotund language (“chuntering from a seden- tary position” is one of his favourites). But he has always been a champion of mps having their say. Second, he is no patsy. Mr Bercow pushed back against accusa- tions of pro-Remain bias by pointing out that he has made time for mps with all sorts of political positions. He was backed by Sir Christopher Chope, a maverick Tory, who noted that Mr Bercow once accepted an amendment that, by a circuitous route, prepared the way for the referendum in 2016. His greatest bias is not against Labour or the Conservatives but against party grandees. Before be- coming speaker he infuriated David Cameron by ridiculing his Eton education and membership of the all-male White’s club. He has enjoyed holding Theresa May and her ministers accountable to the House. Mr Bercow’s enthusiasm for taking on the powers- that-be goes back to his childhood. As the undersized, Jewish son of a downwardly mobile small businessman turned taxi driver, he was picked on. But he took on the bullies in the playground and mocked them in class as they stumbled over their lessons. This week’s row saw the powers-that-be getting their own back. Andrea Leadsom, the leader of the House, made a point of asking n britain the line that divides ceremony and substance is sel- Mr Bercow to publish the advice from his clerk on whether to allow Idom clear. Sometimes ceremonial figures have no real power. the Grieve amendment, given that Mr Bercow had made so much Sometimes they have lots of it. And sometimes they can shift fuss about forcing the government to publish its advice on various quickly from the first column to the second. Brexit matters. Many Conservatives also tried to get their revenge The speaker of the House of Commons is a case in point. The for Mr Bercow’s presumed willingness to betray his original party British speaker is a very different figure from the one in the House in order to get support from Labour. of Representatives. Whereas the American speaker is the head of The last point in Mr Bercow’s defence is that his job is an ex- the majority party in Congress, the British speaker, an mp chosen traordinarily difficult one. Britain is seeing what happens when by their peers, is supposed to be above politics. They sit on an ele- powerful emotions collide with a convoluted and ambiguous par- vated chair under an elaborate wooden canopy, with three clerks liamentary tradition. The speaker is not simply in the business of in front of them and a padded footstool, and devote much of their reading a rulebook. He must make subtle choices between lots of time to ceremony. Yet the speaker is far from being just a tourist at- different rulebooks that have been produced over the centuries. traction. Even in normal times they wield a great deal of subtle Mr Bercow repeatedly pointed out that, if his critics didn’t like the power. In abnormal times they can become the centre of a political amendment he had chosen, they were free to vote against it—and storm, as happened this week. must have taken some comfort from the fact that it eventually John Bercow, who currently occupies the chair, provoked the passed by 308 votes to 297. fury of Brexiteers by accepting an amendment tabled by Dominic Grieve, a Tory backbencher, that demands that the government No sign of order outline a Plan B within three days if, as expected, its Brexit plan is It is likely that this procedural row will be the first of many. As Brit- defeated on January 15th. Brexiteers argued that Mr Bercow erred ish politics is consumed by chaos and acrimony, the speaker will by accepting a backbench amendment to a government business have to make many more difficult decisions. In normal circum- motion. They accused him of being a biased referee (who has been stances the speaker has to decide on the balance of power between spotted with a “Bollocks to Brexit” sticker on his car—though he the government and the Commons, and deal with four fairly cohe- says it is his wife’s). They claimed that he is prejudiced against the sive parties. But all this is breaking down. The government is los- Tories in general, and against this government in particular. ing control of events. And the parties are beginning to fragment. What are we to make of this storm? There is little doubt that Mr On January 7th Remainers on both the Labour and the Conserva- Bercow’s personal views are pro-Remain. He started life on the tive side marched through the lobby to vote against the govern- nationalist right of the Tory party. But he moved towards Labour, ment to try to stop it from taking Britain out of the eu without a particularly after meeting his Labour-supporting wife, Sally. There deal. The speaker will have to make far more complicated and del- is no doubt that he has feet of clay. He has been accused of bullying, icate decisions than he has ever made before. and of presiding over a culture of it. Despite the claims he not only This gives Mr Bercow great powers: to select this or that mp to clung on to his job but also continued to sit on a committee that ad- speak, to choose this or that amendment, or even to cast a tie- judicates over questions of behaviour in the Commons. breaking vote. But it also brings risks. If the speaker leans too far in But there are also important things to be said in his favour. The one direction, he risks damaging not just himself but the House of biggest is that he has been a doughty champion of the rights of Par- Commons. The most powerful argument in favour of Brexit is that liament against the government. For 30 years the balance of power it was an attempt to bring back control to Parliament. It will be a has shifted from the legislature to the executive. Mr Bercow has disaster if, in the process of bringing back control, Brexit also does done everything he can to stand up for Parliament as an institu- irreparable damage to that same institution. 7 International The Economist January 12th 2019 51

The new missionaries cluded are serving for at least two years. That ignores the many Christians (mostly Soul-savers from the south American) who travel overseas for as little as ten days as “short-term missionaries”. Meanwhile the number of undercover mis- sionaries who work in “house churches” in places where the faithful are persecuted, such as China and North Korea, can only be SCHEFFERVILLE guessed at. Preachers from poor countries are targeting the rich world Yet even with these patchy data it is very two weeks Ali Nnaemeka, a Ro- aries from the global south feel called to clear that the growth in missionaries is Eman Catholic priest (pictured), travels save the rich world from perdition. Mr coming from non-Western countries. The between Sept-Îles in Quebec, Canada, and a Nnaemeka, a Nigerian, is just one example. largest single exporter of soul-savers is still remote mining town, Schefferville, 355 In 2015 around 400,000 missionaries the United States (with 121,000 missionar- miles (570km) to the north. The trip, usual- were out saving souls, according to the ies, around half of whom are Mormons). ly by train, takes at least a day, sometimes World Christian Database, compiled at the But the number of American missionaries longer. It requires cutting through a moun- Gordon-Conwell Theological Seminary in is falling, as is the number of Europeans. By tainous river valley and travelling past flat Massachusetts (the latest data available). contrast, the number of missionaries from lakeland, frozen for much of the year. It is a Counting missionaries is an imperfect sci- Asia, Latin America and other poorer conti- bleak, monotonous journey. But it is worth ence, says Todd Johnson, who helps run the nents is steadily increasing. In 2015 there the trouble. Mr Nnaemeka, who spends database. For example, most of those in- were 27,400 African missionaries, an in- most of his time as a parish priest for two crease of 32% on 2010, and 30,000 Korean indigenous First Nation communities, is ones, an increase of 50% over the same per- on a mission from God. The changing face of faith iod. The countries which received the most Christian missionaries have always Global Christian population, % missionaries were the United States, Brazil travelled to remote spots to spread the and Russia. word. In previous centuries those places Sub-Saharan Africa Latin America Europe Increasingly, the most devout Chris- Asia-Pacific North America tended to be in Africa and Asia; many were tians are to be found in Africa and the colonies of Western powers. The mission- 0 20406080100Americas, so it is perhaps of little surprise aries tended to be European or American. 2015 that more and more proselytisers come These days the flow has partly reversed. 2060* from those places. In 1910 two-thirds of Poor countries are far more devout than Christians worldwide were in Europe and Source: Pew Research Centre *Forecast rich ones. As the piety gap grows, mission- over a quarter in the Americas. Just 1.4% 1 52 International The Economist January 12th 2019

2 were in sub-Saharan Africa. A century later Rios, a 20-year-old Ecuadorean whose un- Local-born missionaries may find it 37% of Christians were in the Americas and cle is a Roman Catholic bishop, converted easier to connect. Certainly, they are less 24% were in sub-Saharan Africa, says the to Mormonism after meeting missionaries likely to make the mistakes that some Pew Research Centre, a think-tank. on holiday in Bolivia. He has been preach- Western evangelists have made in Africa. The Church of Jesus Christ of Latter-Day ing on the cold, secular streets of Britain for In 2016 a video of a group of American mis- Saints (better known as the Mormon 18 months. The natives look down on him, sionary women, dancing in traditional church) was founded in America in 1830, he says, because English is not his first lan- Ugandan dresses while popping de- but now has more members abroad, largely guage. Nonetheless, he claims to have con- worming pills, caused uproar online. Many in Brazil and Mexico, than at home. This is verted at least a dozen people. locals saw their antics as patronising. In true of other denominations, too. And the Missionary duties have always been the video, which has now been taken off- trend is expected to continue. By 2060 the broader than just converting heathens. line, they sang about “bringing missions world’s largest number of Christians will Mother Teresa, probably the most famous back” to the tune of Justin Timberlake’s be in sub-Saharan Africa, Pew predicts (see missionary of the 20th century, ran medi- “SexyBack”. Last year the Ugandan police chart on previous page). cal services for the poor, diseased and or- arrested an American missionary who was phaned of Kolkata (in her day Calcutta). accused of assaulting a hotel employee; he Don’t mess with a missionary man Education has also always been important. is now on bail and pleads not guilty. Aside from his place of birth, Mr Nnaemeka Robert Mugabe, Zimbabwe’s former dicta- is in many ways a traditional missionary. tor, was born in a Jesuit mission station, He’s got God on his side He is part of the Missionary Oblates of Mary taken to Mass every day and taught by Cath- Some preachers from Africa find the god- Immaculate, a Catholic congregation olic priests. (It was a Jesuit, Father Fidelis lessness of the West an invigorating chal- founded in 1816 with the aim of converting Mukonori, who arguably helped persuade lenge. But many also become dispirited by others. He underwent ten years of training Mr Mugabe to step down in 2017.) it. This is particularly marked in Europe, in Cameroon and Italy. As with Western The new missionaries are especially the least pious continent (see map). “Mis- missionaries of old, he has lived among the likely to emphasise learning from the peo- sionary work is not easy,” says Andrianirira locals (in this case, the two First Nation ple they work with, rather than just press- Rakotondravao, a 22-year-old Mormon communities) for some time: almost four ing them to convert. Mormon missionaries missionary from Madagascar, who recently years. He says he will stay “as long as I’m in Britain—who come from dozens of spent two years in Britain. One time he needed”. Many of the people he works with countries, including Ecuador, Colombia stopped a man on the street and tried to are descendants of those who were con- and Madagascar—now also devote time to strike up a conversation about Jesus. The verted by Jesuit missionaries in the 17th volunteering in soup kitchens, says David man yelled back at him: “What would be century. Some have switched to Evangeli- Checketts, who heads the London branch your response if I tried to convert you to cal Christianity; others have lapsed alto- of that church. atheism?” When Mr Msele spent time in gether. Mr Nnaemeka’s job, which involves Many missionaries work close to home. Ireland he was depressed at how people running church services, baptisms and Stephen Msele, a priest from Tanzania, were not very “brotherly and sisterly” in pastoral care, is to reinvigorate their faith. trained in Ireland and Kenya but has now that nominally Catholic country. The expe- By contrast, many of today’s missionar- been based in Uganda, next door to his rience sorely tested his faith. ies will serve for no more than a few years. home country, for two decades. He says Faced with Western irreligiosity, some Some are independent proselytisers who that more African missionaries are joining missionaries have tried to soften their no- get little or no training and have only the him in evangelising their own continent. It tions of what makes a good Christian. Mr support of their home church and a crowd- is a struggle. “There is still a lot of corrup- Nnaemeka admits that in the “traditional funding website. Mr Johnson estimates tion, even more than Europe, in spite of the way of seeing things...you must be at that there could be 40,000 so-called inde- fact we say we are all Christians,” he sighs. church every day”. Most of his compatriots pendent missionaries, all of whom are un- He works on a peace-building initiative would agree: 89% of Nigerians go to a reli- counted in his research. and spends his time at a centre that offers gious service of some sort every week, Saving the rich is difficult, as Jesus once English classes to refugees from Ethiopia compared with about 10% of Germans, ac- observed, but not impossible. Eduardo and Eritrea. cording to Pew. Mr Nnaemeka has a looser view of what makes someone devout. “I think church should be something that one The holy hemisphere should be free to go to when you feel like “Religion is very important in my life”, % of Christians agreeing* going,” he says. Often, it is tricky for missionaries from poor countries to get visas to the West. Sceptical officials sometimes suspect them of seeking a better life in this world for themselves, rather than eternal life for oth- ers. Mr Nnaemeka’s organisation is big enough to smooth his way. African priests from little-known churches find it much harder, especially since the backlash against immigration has grown stronger in Europe and the United States. Yet even as the West seems increasingly unwelcom- ing, the new missionaries will keep com- ing. The early evangelists braved stormy seas and the risk of being thrown to the li- ons. Their modern heirs will not be de- Source: Pew terred by a few rude atheists or long waits Research Centre 0 20406080100 No data *Based on surveys from 2008-17 for visas. 7 Business The Economist January 12th 2019 53

Also in this section 54 Gadgets in Las Vegas 56 Bartleby: Permission to speak 57 The fallout from California’s fires 57 Carlos Ghosn states his case 58 E-commerce in Indonesia 59 Schumpeter: On the edge of Mordor

Peak smartphone in retrospect, is not very good,” says Pierre Ferragu at New Street Research, a firm of Cracks in the glass analysts. “So the value you bring with the second generation is enormous, and that drives rapid replacement.” But as engineers and firms learn what works, the process runs quickly into diminishing returns. Sales of personal computers, the smart- phone’s predecessors as mass-market Apple succumbs to the malaise in the smartphone market computing devices, peaked in 2011, once ast summer the market value of Apple full-year decline. Industry watchers think pcs had become good enough for most of Lpassed $1trn, a first for any publicly 2019 will be anaemic, with either more falls the things consumers wanted them for. traded Western company. It did not stay or very modest growth. Apple’s new fore- Something similar is happening with there for long. In November it passed the casts show it is feeling the same chill that is phones, with replacement cycles lengthen- $1trn mark again, travelling in the other di- affecting the rest of the industry. ing. ccs Insight, another firm of analysts, rection. Last week Tim Cook, the smart- A common diagnosis among those who reckons that the length of time for which phone maker’s boss, cut revenue forecasts watch the tech business is that what is hap- consumers hang on to their phones in for the first time in over a decade. Apple’s pening is what occurs, in the end, with al- Western Europe has risen from 26 months shares plunged a further 10% on the news, most any technology. “With a car, a tv, a in 2010 to 39 months today. dragging the world’s jittery stockmarkets phone or anything, the first model you sell, Only the most devoted Apple followers down with them. these days are ready to camp overnight to Mr Cook blamed the firm’s woes on an get their hands on the latest and greatest economic slowdown in China, which ac- Low battery model. New features attract polite interest counts for about 18% of Apple’s sales. An- Smartphone sales, units bn at best, and sometimes jokes (Nokia’s plans alysts talked gloomily about a slowing glo- Worldwide, annualised volume for a five-camera phone, for example, have bal economy, and pondered whether the 1.6 drawn wry comparisons with razor-mak- trade war between America and China ers’ penchant for adding ever more blades might be starting to affect buying habits. Total to their products). And consumers have But there are also simpler forces at 1.2 plenty of other high-tech gizmos compet- Others work. Smartphones revolutionised every- ing for their cash, from home-assistant thing from shopping and dating to politics 0.8 systems such as Amazon’s Echo to the bat- and computing itself. They are some of the China (top three) tery-powered skateboards and home-auto- most popular products ever put on sale. But 0.4 mation devices on show at electronics after a decade-long boom, devices once Samsung trade fairs (see next story). seen as miraculous have become ubiqui- Apple 0 For Apple’s shareholders, comparisons tous and even slightly boring. with personal computing will make un- 2014 15 16 17 18 Global smartphone sales fell in each of comfortable reading. As with the smart- Source: The pH Report the past four quarters (see chart), the first phone, it was a market that Apple helped 1 54 Business The Economist January 12th 2019

2 pioneer. But its strategy of selling high- is due to launch a foldable phone later this priced, aspirational gear eventually saw it Downgrade cycle year, which can function as a smartphone % change on relegated to the status of also-ran, sus- Smartphone shipments, m a year earlier or a tablet depending on whether it is open tained by a fan base of hipsters and creative Q3 2018 or closed. Phones compatible with ultra- types while ceding almost the entire mar- 0 20406080100 fast fifth-generation (“5g”) phone net- ket to cheaper, more flexible machines China -15.2 works are expected later in 2019. built to ibm’s pc standard and running Mi- India -1.1 Yet such advances feel evolutionary crosoft’s Windows operating system. United States -0.4 rather than revolutionary. Folding phones These days, ruthless competition comes Brazil -9.5 are considerably thicker than the svelte from high-quality smartphones made by “slablets” to which consumers have be- 13.2 Chinese firms such as Huawei or Xiaomi Indonesia come accustomed. There is as yet no obvi- which sell for a fraction of the price of Ap- Russia 11.5 ous “killer app” for 5g devices, and early ple’s products, and which run some ver- Mexico -15.4 phones are likely to be expensive and have sion of Android, an operating system de- Japan -2.2 lower battery life, blunting their appeal. veloped by Google. Britain -9.8 Even if those features fail to juice the Apple’s prices were bound to limit its market, there is still room for penetration Germany 2.4 reach, particularly outside the rich world. to rise. gsma Intelligence reckons that the Source: Canalys But smartphones are much more personal next seven years will see more than a bil- and intimate devices than desktop com- lion new internet users, mostly in poor puters ever were, says Tim Hatt of gsma In- up with a new mass-market computing countries and mostly using cheap Android telligence, the research arm of a trade asso- platform, in the hope that the firm could phones, the parts for which cost as little as ciation, and its customers are strikingly repeat the success of the iPhone. $50. Users are more dependent on their loyal. For the moment, therefore, Apple has While Apple is busy raising its prices, phones than ever (which makes Apple’s chosen to double down on its strategy, re- though, the opposite is happening in the emphasis on services look like a wise bet). leasing increasingly expensive phones in Android world, which accounts for more And there is plenty of room to make money the hope that squeezing customers can than 85% of global smartphone users. Us- in an industry that still ships 355m phones make up for lower volumes. To a degree, at ers wanting an Android phone can choose every three months. Just, perhaps, less least, that seems to be working. Early indi- from many suppliers in every segment of than there was. 7 cations are that the iPhone xs Max, which the market, from sub-$100 budget models starts at $1,099 and is Apple’s most expen- to $1,000 “flagships”. That has always made sive phone, is selling better than the plain for fierce competition between handset The future of consumer electronics old xs, which is $100 cheaper. manufacturers. Falling sales have made Even for Apple’s well-heeled customers, that competition tougher still. The results Keynote speaker though, such a strategy can only go so far. have been vicious price wars, heavy dis- The firm is heavily reliant on hardware counting and a rapid fall in the price of sales. iPhone sales made up 59% of its even the most capable devices. $63bn revenue in the third quarter of 2018, This has been further fuelled, as in so but that understates its dependence. Its many other industries, by the rise of Chi- Voice-enabled devices star at this year’s growing services division accounted for nese manufacturers, which in 2018 ac- biggest gadget show another 16% of revenue, and Mr Cook counted for more than half of all smart- wants it to double in size by 2020 com- phone sales worldwide. Samsung, a South he Consumer Electronics Show (ces) is pared with 2016. For now much of it con- Korean firm, is still the world’s biggest Ta bit like Disneyland for techies. Over sists of things like extended warranties or smartphone maker. But its sales have been 150,000 people from over 100 countries are revenues from the app store, which are dropping sharply. The charge is being led expected to descend on Las Vegas for this linked to iPhone use. Apple is trying hard to by Huawei, whose sales rose by 33% be- year’s jamboree, which opened on January diversify further. It may launch a tv- tween the third quarters of 2017 and 2018, 8th, to examine the very latest kit from streaming service later in the year. On Jan- and which has nudged Apple into third more than 4,000 firms. This time the show uary 6th Samsung, Apple’s arch-rival in the place. Nipping at Huawei’s heels are a host even features an amusement-park ride, smartphone business, said that iTunes, of other Chinese firms less familiar to run by Google, in which rapt visitors are Apple’s online film and music shop, would Western consumers, such as Xiaomi, Oppo ferried around in trolley cars through be coming to its televisions. and Vivo, all with big ambitions. Xiaomi, rooms full of talking animatronic charac- At the same time, it is exploring new for instance, has several phone factories in ters and singing macarons. kinds of hardware. It has its own entry in India, where it has overtaken Samsung in The search giant wanted to show off the the home-assistant market, though this market share. services offered by Assistant, its voice-con- has failed to trouble Amazon or Google, the trolled software powered by artificial intel- market leaders. There are no official sales The generation game ligence (ai) that it embeds in its products. figures for the Apple Watch, but Ben Stan- The steady commoditisation of good-qual- Riders followed along with Dad as he ran ton, an analyst at Canalys, reckons the pro- ity smartphone hardware is making life errands in preparation for Grandma’s duct is “very profitable” and that it domi- hard for smaller players such as lg, Sony or birthday, encountering various obstacles nates the market for smart watches. It has Nokia, which lack the scale of Samsung or along the way: bad traffic, foul weather, a let the firm dip its toes into the health-care the low-cost base of the Chinese newcom- baker speaking only French—each time, market, offering users the ability to keep ers. Some of those smaller players, reckons Assistant found clever solutions, includ- track of their heart rhythms. Apple has also Marina Koytcheva at ccs Insight, may ing real-time language interpretation, a signed deals with American health-insur- choose to abandon the market entirely. feature unveiled this week at ces. ance firms, though the highly regulated The big question is how long the slump “Speech is invading everything,” says medical-device market is very different will last. Optimists (and phonemakers) ar- Jeff Loucks of Deloitte, a consultancy, sur- from the consumer-tech space it is used to. gue that a new wave of innovation could re- veying the thousands of devices displayed The dream, says Mr Hatt, would be to come juvenate demand. Samsung, for instance, at ces that respond to “Hey, Google” or 1 Want to see more of the world this year?

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2 “Alexa” (the name of Amazon’s rival voice- offerings for cars. One even touted technol- platform, privacy could become a casualty. enabled offering). Voice-enabled gadgets ogy that allows a person to modify a room’s Voice technologies rely on sensors that are have improved thanks to the increasing scent through voice command (if you always listening to speech, which gets hoo- ability of software to decipher speech. And sound sleepy it might waft the smell of cof- vered up by the ai powering them in order the imminent arrival of 5g communica- fee). Mr Loucks reckons that helping couch to personalise offerings. As these devices tions networks, another theme of the potatoes control content on home enter- invade the most intimate bits of people’s event, is accelerating the spread of voice- tainment systems will be a killer app for lives (a voice-controlled lavatory from activated smart devices, ranging from voice technology. Kohler, an American firm, created a stir home-hub systems such as Mui’s minimal- The consumer-electronics giants’ bets this week), consumers will worry about ist wooden slab meant to resemble furni- on speech cannot hide two adverse devel- what data are being collected. Privacy- ture—which can control a home’s heating opments, however. First, they have not minded Apple fuelled concerns by hoisting and lights, and show the weather—to come up with a breakthrough on the scale a banner on the side of a Las Vegas hotel health-care aids. of the smartphone, sales of which are peak- with a provocation: “What happens on Several firms unveiled voice-directed ing. Second, in the race to create the next your iPhone, stays on your iPhone.” 7 Bartleby Permission to speak

Companies will perform better if employees are not cowed into silence n “dad’s army”, a British sitcom about people who failed to meet the targets were inhibits learning. And when confronted Ia home-defence force, Sergeant Wilson fired. This was not a place where workers with a problem, scared workers find would often query his commander’s were likely to question the wisdom of the ways of covering it up or getting around various orders with the languid phrase strategy. It is hardly surprising that em- it with inefficient practices. “Do you think that’s wise, sir?” His scepti- ployees resorted to subterfuge such as The answer is to create an atmosphere cism, although it was often ignored, was opening fake accounts to meet their goals. of “psychological safety” whereby work- usually justified. Similar problems emerged at Volks- ers can speak their minds. In a sense, this Many employees must be tempted to wagen, which was caught up in a scandal is the equivalent of Toyota’s “lean manu- echo Sgt. Wilson on a daily basis when over diesel emissions from 2015. The facturing” process, which allows any they see their bosses headed down the engines of its diesel models did not meet worker who spots a problem to stop the wrong track. But caution, for fear of American emissions standards and engi- production line. appearing insubordinate or foolish and neers devised a system to fool the regu- This does not mean that workers, or thus possibly at risk of losing their jobs, lators. Ms Edmondson says the company’s their ideas, are immune from criticism, often leads workers to keep silent. culture had been one based on intimida- or that they should complain incessant- A culture of silence can be dangerous, tion and fear; Ferdinand Piëch, its long- ly. The book describes how the success of argues a new book, “The Fearless Organi- time boss, boasted of telling engineers the second “Toy Story” film was due to a sation”*, by Amy Edmondson, a profes- they had six weeks to improve the body- rigorous editing process, in which the sor at Harvard Business School. Some of work fitting on pain of dismissal. In the early script was revamped. Pixar, the her examples are from the airline in- circumstances, engineers were under- production firm, created what it called a dustry. One was its deadliest accident: a standably unwilling to mention the bad “Braintrust” to give feedback to film crash between Boeing 747s in the Canary news on emissions standards and instead directors. The rules were that feedback Islands in 1977 when a co-pilot felt un- worked around the problem. should be constructive and about the able to query his captain’s decision to In a corporate culture based on fear and idea, not the person, and that filmmakers take off based on a misunderstanding of intimidation, it may appear that targets should not be defensive in response. instructions from air-traffic control. are being achieved in the short term. But in And psychological safety is not about Another case was that of the Columbia the long run the effect is likely to be coun- whistleblowing. Indeed, if an employee space shuttle in 2003; an engineer who terproductive. Studies show that fear feels the need to act as a whistleblower may have diagnosed damage to the shut- by speaking to external authorities, that tle’s wing before the flight felt unable to suggests managers have not created an speak as he was “too low down” at nasa. environment within the firm where The stakes may be lower than life or criticism can be aired. death in most organisations, but compa- Nor is such a culture only about safety nies also suffer when people keep or avoiding mistakes. As mundane tasks schtum, Ms Edmondson believes. The are automated, and workers rely on mis-selling scandal in 2016 at Wells computers for data analysis, the added Fargo, an American bank, for example, value of humans will stem from their related to its culture. The lender encour- creativity. But as Ms Edmondson’s book aged staff to persuade clients to buy amply demonstrates, it is hard to be additional products and for a while either constructive or creative if you are achieved levels of “cross-selling” that not confident about speaking out. were twice the industry average rate...... Pressure on employees was intense. * Subtitled “Creating Psychological Safety in the At some branches, staff were not allowed Workplace for Learning, Innovation and Growth”. to leave until they met their daily target. Published by Wiley. Bonuses were based on sales figures and Economist.com/blogs/bartleby The Economist January 12th 2019 Business 57

The fallout from California’s fires cover insurance claims and damages if its equipment contributed to the outbreak of a Money to burn wildfire, even if it is found to have obeyed all safety rules. If pg&e operated recklessly, it could face other charges, too. These in- clude not just criminal negligence but manslaughter and murder, according to NEW YORK California’s attorney-general. pg&e’s role in starting wildfires could pg&e also faces the spectre of being un- mean a break-up or even bankruptcy able to find insurance or borrow money. alifornia’s largest utility is accus- Bankruptcy is one option but not necessar- Ctomed to disaster. In 2001 pg&e de- ily the most likely. In December Califor- clared bankruptcy after the state misman- nia’s utility regulator said it would explore aged deregulation of the electricity market. “a broad range of alternatives to current In 2010 one of pg&e’s gas pipelines explod- management and operational structures”, ed. Its travails are even the stuff of Holly- including replacing the board and break- wood. “Erin Brockovich”, starring Julia ing up the firm. In the meantime pg&e may Roberts, told the story of how the company seek to take advantage of a new law, passed let toxic wastewater run into groundwater by California last year to help it deal with supplies and had to settle a class-action mounting costs. pg&e, after regulators’ ap- lawsuit in 1996 for hundreds of millions of proval, may issue new bonds to pay for dollars. Nevertheless, pg&e’s current tur- some wildfire costs; such securities would moil marks the start of something new. be backed by customers’ monthly pay- Still in good nick On January 7th the firm’s share price ments, and would result in higher rates. plunged by more than 20% on reports that Regardless of whether pg&e issues which he built into the world’s biggest car- it might declare bankruptcy. pg&e faces bil- those bonds, electricity charges seem cer- maker, are in the deep freeze. lions of dollars of liabilities over its possi- tain to rise. In December pg&e asked regu- During his court appearance Mr Ghosn ble role in starting the wildfires that have lators to authorise an increase of 12% next was permitted to address the allegations. ravaged California. Damages, legal fees and year. That would help cover its insurance These centre on his reporting of his pay and other costs from fires over the past two expenses and the cost of changes to its a new accusation of a “breach of trust” years may reach $29bn, estimates Gold- electricity system to reduce the risk of fire. whereby he is accused of shifting potential man Sachs, a bank. That sum, which far ex- It would not cover legal costs. 7 trading losses from personal foreign-ex- ceeds the company’s $17bn in operating change derivatives contracts to Nissan dur- revenue in 2017, would be hard enough for ing the financial crisis of 2008-09. pg&e to bear if it were an aberration. In fact, Carlos Ghosn in court Insisting on his “genuine love…for Nis- wildfire costs look set to become the norm. san”, he proclaimed his innocence, saying The firm’s predicament is the result of Wheels of justice he had never sought undisclosed pay and several factors, some beyond its control that the board had approved his activities and some self-inflicted. Hotter, dryer con- in the case of the derivatives contracts. In ditions and lax building standards have 2008-09 banks had demanded large made California vulnerable to ravenous amounts of collateral for foreign-exchange blazes. A utility’s operations would have to contracts to hedge Mr Ghosn’s yen salary, The car boss gets a chance to plead his be near-perfect to keep power cables and and since he could not provide this, Nissan innocence other equipment from inadvertently temporarily paid the collateral—and suf- sparking a fire, argues Michael Wara, an ex- even weeks in a Japanese prison have fered no loss on the contracts, he said. Mr pert on energy and environmental policy at Staken a toll on Carlos Ghosn. A diet Ghosn also defended his high pay, noting Stanford University. “What climate change based on rice and vegetables has left the that during his time as boss he had turned does is make the consequences of small er- former chairman of Nissan’s cheeks thin- down attractive offers to run four big car- rors much greater,” he says, “greater to the ner. His black hair is flecked with grey. But makers, including from Bill Ford, and from point where they threaten the financial vi- the physical effects have not made him less Steve Rattner when he was Barack Obama’s ability of the utility.” feisty. He used a court appearance on Janu- “car tsar” running General Motors. pg&e’s record includes alleged errors ary 8th, the first time he has been seen in Yet the judge did not grant bail, on the that are large: last month California’s utili- public since his arrest, to fight back against grounds that Mr Ghosn might flee or con- ty regulator charged it with falsifying safe- accusations of financial misconduct. ceal evidence. On January 11th, when his ty data for its pipelines for five years, from Mr Ghosn’s troubles began in November latest spell in jail expires, he can ask for bail 2012 to 2017. But the company’s deadliest when he was detained by prosecutors at To- again. But if, as is likely, he is charged with problems seem to have stemmed from its kyo’s Haneda airport. Nissan’s boss, Hiroto breach of trust, he will probably face more basic electricity equipment. Last year the Saikawa, then revealed that an internal in- time in prison awaiting trial. state’s fire investigators reported that vestigation had uncovered evidence that His incarceration has focused the pg&e’s poles and power lines were respon- Mr Ghosn had underreported his pay be- world’s attention on Japan’s flawed justice sible for sparking deadly blazes in northern tween 2010 and 2015 and failed to declare system. The length of detention, re-arrests California in 2017—in most instances, trees the use of properties owned by Nissan. A and an emphasis on long, stressful interro- fell on power lines. They are still investi- day before his 23rd day in detention, the gations without lawyers present puts pres- gating whether pg&e caused the two most limit in Japan, he was rearrested and kept sure on defendants to make confessions, deadly fires in California’s history: one in in jail while allegations of underreporting on which the judicial process is heavily de- Sonoma and Napa counties in 2017 and the pay for a later time period were investigat- pendent. For his part, Mr Ghosn has re- other which killed 86 people in November. ed. Meanwhile relations between members fused to confess. His supporters claim that Under California law the company must of the Renault-Nissan-Mitsubishi alliance, he has been set up to prevent his imminent 1 58 Business The Economist January 12th 2019

2 pursuit of a full merger between Nissan that counts Tencent, China’s internet Lazada is betting heavily on running its and Renault in which the French firm giant, as a big shareholder. Another is La- own logistics empire. Its warehouse on Ja- would have had the upper hand. zada, another Singapore-based e-com- karta’s outskirts is one of the country’s big- The legal hiatus is mirrored in the alli- merce firm, owned by Alibaba. Both count gest. About 1,000 employees help dispatch ance. Relations, often tense, are now icy. Indonesia as their biggest market. and restock thousands of goods, from gro- Nissan has extended its internal probe and Tokopedia, Shopee and Bukalapak earn ceries to laptops. Lazada has nine other a management shake-up that has seen Jose most of their revenues from selling adver- similar centres across Indonesia and plans Muñoz, its chief performance officer and a tising space on their platforms to online to build more. With warehouses pre- Ghosn ally, taking leave of absence. While vendors, and from flogging extra services, stocked with the goods its vendors sell, it Nissan and Mitsubishi have removed Mr such as data analytics. Bukalapak also offers lower delivery costs and faster Ghosn as chairman, Renault has kept him charges commissions to some bigger speed. Its network reaches 80% of the as its chairman and ceo, appointing an in- brands. Only Bukalapak discusses its pro- country, says Ashwath Ramesh, head of its terim boss. Mutual suspicions thus leave fits in Indonesia (it is in the red). logistics division. uncertain the future of an alliance in which Each firm has distinct advantages. To- Indonesians who shop online are as ac- Renault owns a controlling 43.4% of Nis- kopedia boasts reach. Partnerships with lo- customed to doing so through their smart- san, while Nissan has a non-voting 15% cal logistics firms let it deliver to 93% of In- phones as are Chinese e-commerce con- stake in Renault. Mr Ghosn had wanted to donesia’s 7,000 or so districts. It also has sumers, and Shopee is investing in mobile. make it “irreversible” through a full merg- substantial financial resources. In Decem- Its app lets customers chat online with er. That now looks impossible. And using ber it secured $1.1bn in a funding round led buyers, a feature that Taobao, a Chinese e- Nissan’s cash to buy Renault shares, to re- by SoftBank, a Japanese internet and tele- commerce platform, launched. Around balance the alliance in favour of Nissan, coms firm, and by Alibaba. Its value is re- 60% of Shopee’s sales happen after such an would be seen as deeply hostile in France, portedly $7bn. And Tokopedia is growing interaction. In addition, it allows buyers to even after the legal dust settles. 7 faster than the market; sales on its plat- follow their preferred sellers, tapping into form quadrupled between 2017 and 2018. the social e-commerce market, in which Tokopedia and Bukalapak possess most people sell goods on platforms such as Indonesia’s e-commerce binge local knowledge. The value of this, many Twitter and Facebook. point out, is demonstrated by the foray of The battle among these firms is now for Island shopping Uber, a ride-hailing firm, into South-East market share. Shoppers outside the big cit- Asia which ended last year when it sold its ies will be increasingly important—in 2017 business to Grab, a startup based in Singa- such buyers accounted for 30% of the value pore. Local entrepreneurs have “lived the of online sales, according to McKinsey, a problems they are trying to solve”,notes an consultancy, but by 2022 they will account JAKARTA investor in Bukalapak. for roughly half. For many, trust is still a Local champions are battling Useful information can be gleaned, for worry as online fraud is particularly preva- Chinese-backed firms example, from Bukalapak’s vast network of lent in Indonesia. Lazada therefore uses a ity the Indonesian courier. Delivering offline intermediaries. It has 400,000 cash-on-delivery model. Shopee’s chat fea- Pa package on the archipelago can be a “agents” around the country.Typically they ture also helps alleviate the problem; so too daunting task. The country’s 13,466 islands run small, pre-existing neighbourhood do Bukalapak’s agents. Tokopedia has stretch across almost 3,000km and to reach shops in rural or suburban areas and act as opened three centres in small cities where a distant atoll might mean waiting weeks a gateway to online shopping. At agents’ customers can learn about e-commerce for a boat. Many people in remote areas stores a customer can place online orders, and vendors can take business classes. lack a formal address; their roads are pay for goods and collect them, and the Wooing Indonesia’s online shoppers takes nameless and their houses often without agent takes a cut of sales. many forms. 7 number. Those with addresses sometimes rely on local landmarks—“the house by the big tree”, for example. Even in big cities many streets have the same name. Yet e-commerce startups and their in- vestors are willing to tackle logistical head- aches to become established in a promis- ing market. Since 2015, when estimates began, the value of goods sold online has roughly doubled each year, to $8-12bn pres- ently. Only about 15% of Indonesia’s popu- lation of 265m are believed to shop online but that should rise along with incomes and internet use. A report jointly written by Google and Temasek, Singapore’s sover- eign wealth fund, has forecast that the mar- ket will be worth $53bn by 2025. Competition among firms is already fierce. In the absence of Amazon, which has not ventured into Indonesia, two local companies, Tokopedia and Bukalapak, are thriving, and Chinese-backed regional companies have moved in. One is Shopee, a Singapore-based firm and subsidiary of Sea, a publicly-traded technology company Lego house near the water, Sumatra The Economist January 12th 2019 Business 59 Schumpeter On the edge of Mordor

For European industry, climate policy is an increasingly delicate balancing act prices in Europe because, absent a meaningful carbon price, coal has been dirt cheap. Yet industrial firms, massive energy consum- ers, seem to be viewing the changes with resignation, not revolt. Start with the ets. It works by setting a steadily falling cap on emissions and providing tradable allowances up to that limit. But it has been plagued by a huge surplus of permits, exacerbated by the 2008-09 financial crisis, making prices so low as to be mean- ingless. Reforms introduced this month (that remove almost a quarter of the oversupply each year until 2024) made carbon one of Europe’s hottest markets in 2018. The price of permits tripled from €8 ($9.60) per tonne to €25, as hedge funds piled in. Carbon prices could go up as dramatically as when the Arab em- bargo drove up the price of oil in 1973, reckons Per Lekander of Lansdowne Partners, an asset manager in London. That may be wishful thinking (carbon prices have tumbled this year), but even if prices stay where they are, the impact on heavy emitters will be severe. These firms say that compensation schemes are insuffi- cient. Still they insist the ets is the most market-friendly way of curbing emissions, and is better than ad hoc regulation. A second sign of acceptance is that although representatives of steel and other firms reckon a German coal phase-out would push up power prices, they are not battling for the black stuff. Their big oes anyone here speak English and want to talk to a journal- concern is “carbon leakage”—the risk that, for instance, steel pro- “Dist” yells Ulrich Kindermann, as he wheels his bicycle duced in countries with less stringent climate rules, such as Chi- through the 12,000-year-old Hambach Forest in north-west Ger- na, gain a competitive advantage. This is a legitimate worry. many. He appears to be shouting up to the treetops. Strangely, they Policymakers should work harder to establish a global carbon answer back. “Maybe”, comes a cry from Maximilian in his tree price. Yet heavy emitters elsewhere should not sleep soundly. house 20 metres up an oak tree. He rappels down, looking, with his When it comes to the climate, where Europe leads, others follow. curly hair and bright eyes, for all the world like Frodo Baggins. An- Fighting global warming requires a much faster shift towards other member of the fellowship squats by a stove at the foot of a clean energy by all. However, European firms have come a long tree. “It’s a strange picture. From up there, you can see life all way in modernising their views on emissions, partly influenced by around you,” she says, pointing at the tree house. “On the other the ets. The first to be hit hard by the new reality have been the re- side is Mordor.” gion’s utilities. A flood of renewables, especially after the accelera- What she calls Mordor is, in fact, the biggest brown-coal, or lig- tion of Germany’s energiewende (energy transition) in 2011, clob- nite, mine run by rwe, Germany’s largest power generator and the bered power prices and caused utilities such as Germany’s e.on biggest direct producer of carbon-dioxide emissions in Europe. and rwe to suffer years of losses. Some have since dumped their Lignite is a cheap source of electricity, but one of the dirtiest of fu- old fossil-fuel assets and embraced wind and solar, enabling them els. Germany is the world’s biggest lignite burner, making an em- to benefit from higher carbon prices. barrassment of its attempts to lead the world in clean energy. The Europe’s oil-and-gas companies are also changing their atti- hobbits aim to stop the Hambach mine digging farther into the for- tude, led by firms such as Royal Dutch Shell. What was once “green- est. A court recently supported their efforts. washing” now appears to be ways to explore “optionality”; ie, in- rwe would dispute the comparison with Middle-earth. It says vesting in zero-carbon technologies to gain experience in how to that lignite and its other forms of power generation offer custom- move away from oil. Increasingly, their investors are encouraging ers secure, round-the-clock electricity, and support lots of jobs. the switch, to hedge the risk that they are pouring money into But gazing down from a spot overlooking the mine that rwe calls soon-to-be-redundant oil wells. Steel, cement and other heavy in- “terra nova”, your columnist was appalled; it has left a gash in the dustries are also collaborating on technologies such as hydrogen earth almost as big as skyscraper-filled Manhattan. Nonetheless, it to reduce their carbon footprints (though Eurofer, Europe’s steel gave an opportunity to reflect on how well Europe’s heaviest pol- chamber, says that with high carbon prices they will struggle to luters are attempting to help mitigate global warming. They are find the investment to scale these up). not cutting emissions nearly fast enough. Yet it is not all bad news. This year two climate-related shake-ups are going ahead that in Lord of the smoke rings the past would have outraged Europe’s big emitters—utilities, Still, climate policy remains a delicate dance for big industrial and steel producers, paper and chemical firms. First is a reform to the energy companies. Consider rwe. This year it hopes to complete a European Union’s Emissions Trading System (ets), a cap-and- deal with e.on that will give it a big new renewables portfolio. Yet it trade system once ridiculed for the low price of its carbon allow- also faces the wrath of environmentalists for digging in over lig- ances. The second is the phasing out of coal owing to a growing nite. To some its actions feel like crass hypocrisy. But for investors, conviction in north-western Europe—including Britain, Belgium it could be clever gamesmanship, ensuring it gets the biggest pos- and France—that it should become history. Within a few weeks, a sible payout if the German government decides to expropriate its commission in Germany is expected to announce plans for a gra- coal mines. The Dark Lord Sauron would be smiling, even if the dual phase-out of coal. Both measures are likely to raise power hobbits of Hambach Forest are not. 7 ADVERTISEMENT

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Also in this section 62 Buttonwood: How the mighty fall 63 Studies in sexism 64 Jim jumps from the World Bank 64 Open banking in Europe 65 American stock exchanges 66 Free exchange: Down towns

Emerging markets rowed. A year ago Turkey’s lira was well above fair value (which has been estimated The bears’ clause as 5.5 to the dollar by the Institute of Inter- national Finance, or iif, a bankers’ think tank). It fell far below that level in August and is now back in line with it. Depressed imports and more competitive exports mean Turkey has run a current-account HONG KONG surplus three months in a row. For much of the world, a more fearful Fed is a less frightful one Also encouraging are signs of progress pare a thought for emerging markets. notable side-effect was that emerging- in talks on trade between America and Chi- SWhen America’s economy falters, they market shares ended that year 9% higher na. In a tweet on January 8th, President Do- often share the pain, because America is an than they had begun it. nald Trump said they were “going very indispensable market for their goods. But Can emerging markets look for a similar well”. The volatility in America’s stock- when America’s economy prospers, they recovery in 2019? One reason to hope for market may have alerted the White House can also suffer, because the Federal Reserve the best is that the worst has already hap- to the risks of further raising or expanding will raise interest rates, lessening demand pened. The currencies that looked most tariffs on China’s goods. When America’s for emerging-market assets. overpriced a year ago have already plum- stockmarket sneezes, Chinese policymak- This catch-22 was vividly illustrated in meted. The widest trade gaps have nar- ers catch a break. 2018. America’s economy expanded robust- But threats still abound. One lies in ly. But this boost to global demand was overreacting to Mr Powell’s comments. For overshadowed by the Fed’s response to it: Catch 2x2 months the financial markets have been four rate increases that wreaked havoc on Manufacturing purchasing expecting the Fed to take a pause between managers’ index* overvalued currencies and overstretched Three-month change, rate increases. Now that Mr Powell seems economies in the emerging world. An in- percentage points open to the idea, the markets have jumped dex of emerging-market equities compiled CONTRACTING EXPANDING 4 to the conclusion that he will stop hiking by msci fell by almost 17% over the year. altogether, points out Robin Brooks of the Emerging markets were therefore re- Brazil Vietnam 2 iif. Futures markets have priced in an 86% lieved by reassurances offered by Jerome Turkey Russia India chance that the federal funds rate will end Powell, the Fed’s chairman, on January 4th. Indonesia 0 the year no higher than it is today, accord- China Emerging markets He emphasised that American inflation re- -2 ing to the Chicago Mercantile Exchange. mained “muted”, that the Fed will be “pa- Mexico A second danger lies in the other clause tient”, and that it will listen “sensitively” to Taiwan -4 of that emerging-market catch-22. When United financial markets, which have turned skit- Malaysia States the Fed turns hawkish, it hurts emerging tish of late. He reminded his audience of -6 markets. But when, as now, the Fed turns how “nimbly” the Fed bent to the markets 44 46 48 50 52 54 56 doveish, it is usually because growth is fal- in 2016. It entered that year expecting to PMI score, December 2018 tering—which also hurts emerging mar- raise rates four times, but ended up waiting Sources: IHS Markit; Institute for Supply *Based on a survey kets. The Institute of Supply Management’s until December to raise them even once. A Management; Oxford Economics of purchasing executives monthly index of American manufactur-1 62 Finance & economics The Economist January 12th 2019

2 ing, which is based on surveys of purchas- And although an index below 50 is sup- Many are of recent vintage, which makes ing managers, fell by 5.2 points in Decem- posed to indicate a contraction, the thresh- them hard to evaluate as proxies for ber. Two similar purchasing managers’ old in practice seems lower. The emerging- growth. Arend Kapteyn and Pierre Lafour- indices (pmis) in China fell below the level market manufacturing pmi would have to cade of ubs, a bank, have tried to fill in the of 50 that supposedly separates expansion fall below 48 before industrial production gaps using some of the statistical tech- from contraction. That has raised fears of a would be expected to shrink, year on year, niques that also helped win the 2009 Net- global economic stagnation as synchro- according to Capital Economics. flix prize, an award the company offered to nised as the expansion of 2017. anyone who could help it to predict view- For the moment, those fears seem over- Two-star growth ers’ tastes in films based only on the star blown. The pmi for the emerging world as a Keeping track of emerging-market growth ratings those viewers had given to films in whole, published by J.P. Morgan and ihs is not easy. Many countries report quarter- the past. Markit, suggests that manufacturing is still ly gdp figures with a long lag and some do The ubs model suggests that the block- expanding, albeit more slowly than it was not report them at all. More timely indica- buster growth of late 2017 and early 2018 in early 2018 (see chart on previous page). tors, such as pmis, have shortcomings. has indeed flopped in more recent months.1 Buttonwood How the mighty fall

The fate of the dollar will shape financial markets in 2019 ver the holidays those who like out three pre-conditions for a decisive the pound. Capital is pushed into emerg- Otheir Christmas films free of seasonal turn in the dollar: a “pause” by the Fed, a ing markets, in search of better returns. cheer may have fixed on “The Lion in deal to end America’s trade dispute with Stockmarkets rally, especially outside Winter”, with Peter O’Toole as Henry II China and signs of a pickup in the euro- America. Everyone breathes a sigh of and Katharine Hepburn as Eleanor, his zone economy. The first is now less of a relief. It feels like 2017 again. estranged wife. Henry decides that none hurdle. The Fed’s boss, Jerome Powell, In the second scenario, the gap be- of his sons by Eleanor is a suitable heir hinted on January 4th that it might post- tween gdp growth in America and else- and condemns them to death. Locked in pone further interest-rate increases. Talks where also narrows. But in this case, it a cellar as his father approaches, Richard on trade with China have resumed. But the does so solely because of a slowdown in resolves not to cower. “As if the way one economic data from Europe remain weak. America, rather than better news else- falls down mattered,” mocks one of his Interest rates in America may not rise where. The trade dispute escalates. The brothers. “When the fall is all that is,” much further, if at all, but they are nev- continued uncertainty means China’s tax replies Richard, “it matters”. ertheless higher than in Japan or the euro cuts are saved, and not spent. Further Back at work, investors might useful- zone. Owning the dollar is still rewarding. weakness in China causes other emerg- ly apply this aphorism to the fate of the How might that change? Broadly, there ing markets to falter. The soft spot in the dollar. In a volatile period for financial are two scenarios. In the first, trade-war euro-zone economy turns out to be not markets, it rose by 7% against a broad clouds begin to disperse. Tax cuts and temporary, but a reflection of weak ex- basket of currencies in 2018 and by 4% looser monetary policy in China start to port demand. Risk assets sell off across against a narrower group of rich-country stimulate private-sector spending. That the board. The dollar falls sharply against currencies (see chart). One of the more stirs other Asian economies, which in turn the yen and the Swiss franc, habitual robust principles of foreign-exchange bucks up activity in the euro zone, which boltholes for the panicky. The euro stays trading is that what goes up must eventu- relies heavily on emerging-market de- weak. A shortage of safe-harbour cur- ally come down. The dollar is over-val- mand. Bond yields rise in the expectation rencies leads to a rising price for gold. ued on benchmarks, such as The Econo- that interest rates will go up in Europe. How closely reality conforms to one mist’s Big Mac Index (see Graphic Detail). They fall in America, as traders start to or other of these scenarios depends a lot It is due a fall. When that is all that is left, price in rate cuts. The dollar drifts down on what happens in China. A trade deal the manner of its falling will matter a against the euro. A softish Brexit boosts with America would boost emerging- great deal. market currencies against the dollar, as The bear case for the dollar is based would an effective fiscal stimulus. The on an expectation that gdp growth in High maintenance path the dollar takes against rich-coun- America will slow markedly. Last year, it Trade-weighted dollar, January 2011=100 try currencies depends on the slowdown in America, says Kit Juckes of Société was boosted by tax cuts. That stimulus 130 will fade. Interest-rate increases by the Générale, a French bank. If it is sudden, Major-currencies Federal Reserve will bite harder. A lower index the dollar falls against the yen. If it is oil price is a factor. It hurts investment in 120 gradual, it falls against the euro. America’s shale regions, but is a boon for How the dollar falls will be shaped by oil-importing countries in Asia and Broad index events and in turn will shape them. Europe. America’s stockmarket is rela- 110 Investors who are wary of selling out of tively dear. Its tech darlings no longer risk assets are advised by strategists at J.P. seem invulnerable. In short, an excep- 100 Morgan to take out some insurance by tional period for America’s economy is buying the yen, Swiss franc and gold— coming to an end. The dollar ought to the assets that are likely to go up should lose ground, too. 90 things get rough. If a fall is all that is left, But not just yet. In November Man- 2011 12 13 14 15 16 17 18 19 it matters that you have something to soor Mohi-uddin of NatWest Markets set Source: Datastream from Refinitiv cushion it. The Economist January 12th 2019 Finance & economics 63

2 Emerging markets probably grew at an an- ing grown so robustly in 2017, trade was dard when editorial boards decide what to nual rate of less than 4% in the last quarter always going to plateau. “If that’s all that’s publish. Also presented was a study by Lo- of 2018, compared with a pace of 5.7% in the going on…then we should start to bottom renzo Ductor of Middlesex University, San- first half of the year. The level of growth is out soon,” they write. jeev Goyal of the University of Cambridge as low as in late 2015, according to the mod- But that consoling thought assumes, of and Anja Prummer of Queen Mary Univer- el, and the drop in growth is comparable to course, that the trade war does not flare up sity London that found that women have the downswing in 2012. again. Whatever economic grievances smaller and more clustered networks of co- The two economists attribute the slow- America bears against China, a re-escala- authors, which the authors think may re- down largely to trade, but not necessarily tion would damage the chances of global flect women’s aversion to risk in a relative- to the trade war. Exports and other “exter- growth stabilising at a respectable level. As ly hostile environment. A third piece of re- nal” contributors to growth turned sour as Yossarian, the protagonist of “Catch-22”, search, by Anusha Chari of the University early as March 2018, before America im- points out, “it doesn’t make a damned bit of of North Carolina and Paul Goldsmith- posed punitive tariffs on China for en- difference who wins the war to someone Pinkham of Yale University, found that croaching on its intellectual property. Hav- who’s dead.” 7 women’s under-representation at the Na- tional Bureau of Economic Research’s sum- mer institute, an important economics Sexism in economics conference, could be explained by their lower submission rates. Study thyself The aea itself is trying to gather evi- dence on the profession’s problems. It is running a “climate survey”, asking mem- bers questions such as whether they have felt demeaned or experienced harassment. The results are due in April. But even if they ATLANTA are damning, some worry that senior male How the dismal science is trying to fix its gender problem economists will dismiss evidence of wide- emale economists are rare. So every work by Heather Sarsons of the University spread discontent, perhaps by pointing to Fyear, after the meeting of the American of Toronto showed that women get less the potential for bias if aggrieved women Economic Association (aea), a group flock credit in tenure decisions for papers writ- are more likely than others to respond. By together. On January 6th, before the junior ten with men than men do. And Heather January 4th the response rate was just 16%. women seeking mentoring arrived, their Antecol of Claremont McKenna College, And if sceptics can be won round, the seniors were asked to keep the tone posi- Kelly Bedard of the University of Califor- aea must then decide what to do. A newish tive, and to save discussion of their worst nia, Santa Barbara and Jenna Stearns of the code of conduct states that economists experiences of sexism for later, in the bar. University of California, Davis, have shown have a “professional obligation to conduct What followed included inspiration (when that giving parents extra time before they civil and respectful discourse in all fo- submitting papers, aim high) and tips on must prove themselves worthy of promo- rums”, and that it aims to create a “profes- how to get published, get tenure and work tion disadvantages women, as fathers tend sional environment with equal opportuni- out who is likely to help your career. to use the time to get more research done ty and fair treatment for all economists”. The scheme is just one of a growing while mothers use it for child care. But it mandates no penalties for breaches. number aimed at raising the share of wom- At the aea meeting Erin Hengel of the Recent revelations have raised the ques- en among academic economists. Others University of Liverpool presented results tion of whether it should. The aea faced were on display at the aea conference, in- showing that papers by women in the most calls to remove Roland Fryer of Harvard cluding some that drew on economists’ highly regarded journals were cited more University from its executive committee own intellectual toolkit. Donna Ginther of often than those with a man among the au- after the New York Times reported on allega- the University of Kansas, for example, pre- thors. That, she concluded, suggests that tions against him of sexual harassment. sented results showing that participation women’s research is held to a higher stan- Another case in which a pre-tenure woman in the mentoring workshop extends a accused a senior economist from a differ- woman’s network of collaborators, and ent institution of groping her raised the that she thus publishes more. Another question of whether the aea should be able study cited at the conference, by Leah to strip someone of membership. But the Boustan and Andrew Langan of Princeton aea has no bylaws allowing them to un- University, finds that departments with elect or expel a member, and doing so could more female phd students tend to have a expose them to litigation. greater awareness of gender bias and less of Hopefully, none of the women in the the aggressive questioning in seminars for mentoring session will face anything so se- which economics is notorious. rious. Martha Bailey of the University of Kasey Buckles of the University of Notre Michigan, who convened the workshop, Dame (and one of the mentors) recently re- felt a warm glow as the young women told viewed the evidence on what increases the her that they felt valued, a couple of them share of women in an economics depart- for the first time since they had become ment. She highlighted a randomised con- professional economists. Many at the aea trol trial at the University of Wisconsin- conference shared the feeling that the sta- Madison which found that workshops on tus quo was unacceptable. But there was gender bias for faculty responsible for hir- hope, too—that more male economists ing raised the share of women among new would become aware of imperfections in hires by 18 percentage points. the labour market closest to home. As Ro- Other researchers are studying the ob- hini Pande of Harvard University put it, stacles to women’s promotion. Earlier “this cannot just be the work of women.” 7 64 Finance & economics The Economist January 12th 2019

drew criticism from officials at America’s ers’ financial data, but without compro- Treasury department, America’s suspicion mising security. They allow third parties, of China worked to his advantage when he whether tech firms or other banks, to gath- was negotiating the capital increase. The er information from several accounts— bank agreed to charge higher interest rates with customers’ permission—in one place, on loans to upper-middle-income coun- so that people can manage their finances tries such as China, and to prioritise lend- better. They also make it easier for third- ing to poorer ones, in return for more mon- party firms to pay online merchants di- ey. Some Treasury officials think lending to rectly from customers’ accounts. China is at the expense of needier recipi- Open Banking is obligatory only for ents, though others see little harm in it, Britain’s nine biggest banks, although oth- since it brings both profits and a modicum ers have signed up. Not all of these were of influence. ready at the start. “For the past 200 years An understanding between America banks have focused on keeping customer and Europe has meant that the bank’s boss data and not letting anyone else get at it,” is always American, while a European says Emmet Rennick of Oliver Wyman, a leads the imf. And although it dislikes consulting firm. “In the past year or two multilateral institutions, the Trump ad- they’ve been told, ‘That’s not the game’. But ministration will probably insist this pat- they have improved their act. Some are tern continues, regarding the job as a re- rolling out their own aggregation apps. The straint on China’s ambitions. Dina Powell, average response time of banks’ apis—the The World Bank a banker at Goldman Sachs who advised Mr software which gives access to the permit- Trump on national security, is rumoured to ted data—to queries from third parties was Jim jumps be in the running. She is thought to have halved between July and November. helped gain White House approval for the Even so, Jaidev Janardana, chief execu- bank’s capital increase. tive of Zopa, a British online lender, says Scott Morris of the Centre for Global De- that the biggest improvement would be a velopment, a think-tank in Washington, slicker connection between Zopa’s smart- dc, points out that 2012, when Mr Kim won, phone app and those of would-be borrow- The multilateral lender’s boss departs was the first time candidates from poorer ers’ banks. (Applicants used to have to send for the private sector countries were in the running, and Ameri- pdfs of bank statements to confirm their arack obama’s nomination of Jim Yong ca’s relations with the rest of the world incomes; now Zopa can look through BKim as president of the World Bank was have soured since. An American nominee banks’ apis.) Only half the applicants who unexpected in Washington, dc, where the who is hawkish on China and opposes the reach this stage complete it: at banks with trained physician was little known. His im- bank’s green-finance projects, or is seen as the clunkiest apps, a mere 15-20% do. minent departure also comes as a surprise. a political stooge, would set off a row. Ms How banks’ apis will function else- Mr Kim said on January 7th that he would Powell would have the advantage of being a where in Europe is also a thorny question. step down next month, three years before globalist. In any case, developing countries Until that is answered, “important parts of his second term ends, to take up a position would need to unite behind one candidate the political and regulatory landscape will at Global Infrastructure Partners (gip), a to have any chance of overturning conven- remain unclear,” says Daniel Kjellen of private-equity firm in New York. tion. That would be a bigger surprise for Tink, a Swedish account aggregator. Last In fact Mr Kim probably decided to leave bank-watchers than any yet. 7 year the European Banking Authority, a months ago. He would have felt he had se- regulator, drew up technical standards, cured his legacy after a triumph last year, due to come into force in September. Banks when he persuaded shareholders to agree European banking are supposed to have apis in place well be- to a paid-in capital increase of $13bn, ex- fore then, so that third parties can test panding the bank’s lending capacity from Open plan them and regulators approve them. $60bn to $100bn by 2030. Once he had be- Financial-technology firms worry, for gun talking to his next employer, he could example, that banks will redirect custom- not stay long without creating a potential ers to their own apps to authorise the use of conflict of interest—gip also invests in in- data. This could make the process cumber- frastructure in poor countries. He will not some and put people off new services. An- The promised financial revolution is be missed by everyone. A reorganisation he other concern is that standards may prolif- still on the horizon oversaw was loathed by staffers, and he erate, raising third parties’ costs and doing fired several senior staff members, some of ew expected an overnight sensation. little to unify Europe’s banking markets. whom had only recently been given new FStill, January 13th 2018 was supposed to The Berlin Group, which involves dozens roles. Relations improved only in 2016, mark a big step towards exposing the Euro- of banks and financial firms, has published when his management responsibilities pean Union’s banking systems to digital a common framework. Some regulators are were passed on to Kristalina Georgieva, a competition. The eu’s revised payment also promoting national standards. former European Union commissioner, services directive (psd2) came into effect; An open question is how much appetite who took the newly created role of chief ex- so did a British variant, Open Banking, the Europeans have for more open banking. ecutive. She will act as interim president fruit of an investigation by the national People are notoriously loth to abandon until Mr Kim’s replacement is chosen. competition watchdog. A year on, there is their banks. Yet there are signs of latent de- Like Mr Kim, the new chief will be little sign of a stampede to switch banks. mand: Yolt, an aggregator owned by ing, a caught between America, the bank’s largest Yet progress is quietly being made. Dutch bank, already boasts more than shareholder, and China, its third-biggest In essence, the new rules seek to ensure 500,000 British users; online banks are one. Though Mr Kim’s support for China’s that digital technology sharpens competi- making a splash. In 2019 banks and up- “Belt and Road” infrastructure initiative tion, by loosening banks’ grip on custom- starts alike may get closer to an answer. 7 The Economist January 12th 2019 Finance & economics 65

American stock exchanges dearer private one. They charge more for higher-speed connections, even enabling Crashing the party customers to rent computers within the ex- change, allowing them to shave millisec- onds off their execution time. And finally, exchanges typically offer rebates to brokers based on their order vol- ume. Such sweeteners amounted to nearly $700m at Nasdaq in 2017. They then charge Another contender seeks to take on finance’s craftiest oligopoly fees for accessing quotes and make a profit n january 7th nine of America’s larg- But incumbents have bounced back: by pocketing the difference. More impor- Oest brokers and banks said they revenues and earnings at Nasdaq and ice tant, two market participants reckon, oper- planned to launch a new equities ex- (which owns nyse) have jumped since ators use rebates to try to lure quotes to change, dubbed the Members Exchange 2014. This is partly because of diversifica- specific exchanges, so as to keep more of (memx). Though it has yet to gain approval tion, says Kyle Voigt of kbw, a bank. Both the total market pie in the family. Ordinary from the Securities and Exchange Commis- have bought European peers; they now investors complain that all this informa- sion (sec), the share prices of Interconti- make more money from trading and clear- tional asymmetry and artificial complexity nental Exchange (ice), Nasdaq and cboe, ing derivatives than equities. But it is also favours high-frequency traders. the parent groups of America’s largest ex- because the market is less competitive memx is not the first attempt to shake changes, fell by 2-3%. But memx is merely than it seems. ice, Nasdaq and cboe have up the market: iex, an independent equity their latest reason to fret. swallowed up all but one equity exchange exchange that launched in 2016, vowed to For more than a century stock ex- and now account for 95% of public trades. be the first venue “built for fairness”. It of- changes were utilities: not-for-profit, self- This re-consolidation has its origins in fers no rebates and seeks to repulse high- regulated and owned by their broker mem- the reforms of 2005, which left exchanges speed traders by routing incoming orders bers. Starting in the 1990s most became with significant regulatory power. Eager to over a “speed bump”—a coil of fibre-optic companies, often listed on their own ex- offer brokers some protection, the sec cable that slows access to the market by 350 changes. The New York Stock Exchange capped transaction fees. But platforms microseconds. iex now trades more in val- (nyse) became publicly traded in 2006. have become remarkably canny at squeez- ue daily than the London Stock Exchange, Around the same time the sec created the ing their customers in other ways. Three of says Brad Katsuyama, its co-founder. But National Market System—rules designed their methods stand out. its market share in America is below 3%. to foster competition. Chief among these First, the three exchange families have Still, its arrival—and investors’ growing was Rule 611, the “order-protection rule”, continued to run their various exchanges irritation—may have prodded the regula- which requires brokers to route trades to separately, even though some are very tor into action. “It is time to put ‘exchange’ the exchange that displays the best price. small. Two of nyse’s five have less than a 1% back in the Securities and Exchange Com- Together with advances in technology, market share; Nasdaq’s smallest pair do not mission,” said Robert Jackson, one of its the reforms enticed new entrants and reach 3% between them. Yet complying commissioners, in September. The sec has created what looks like a fragmented mar- with Rule 611 means brokers have little since rejected requests to raise fees by nyse ket. America now has 13 equity exchanges choice but to track prices on every plat- and Nasdaq, and hosted a heated discus- and 44 off-exchange centres such as dark form. “Most large institutions will tell you sion with market participants about the pools (platforms run by banks and others they won’t trade with brokers who aren’t cost of data. It has also said it will examine that match large orders privately). nyse’s members of all 13 exchanges,” says Rich whether rebates make the market less effi- share of equity trading has shrunk from Steiner of rbc Capital Markets, a bank. Bro- cient. Customers are once again pitted 72% to 24% in a decade; off-exchange ven- kers must pay connection fees (among a against exchanges. “It’s round two,” says ues account for 36%. Meanwhile listing growing range of charges) for every one. John Ramsay of iex. and transaction fees have dried up as fast- Secondly, as well as the (slow and shaky) The launch of memx could be the start growing companies delay before tapping public feed of their data demanded by regu- of round three. It harks back to the times public markets or go private. lations, they also offer a higher-quality, when exchanges were member-owned, promising to offer low-cost data and con- nectivity. But memx will also pursue pro- fits, says Jamil Nazarali of Citadel Securi- ties, a founding member. That will require scale. Its founders, which rank among America’s biggest sellers of securities, may seek to attract liquidity by bringing their order books onto the exchange—though that could lead customers to worry about potential conflicts of interest. It is too soon to declare victory to the new contenders. Direct Edge and bats, two low-cost challengers created by industry heavyweights a decade ago, merged in 2014 and sold out to cboe in 2017 after rapidly gaining market share. And the latest bout of competition may be slow to start. With America’s government partially shuttered, the sec’s approval procedures are on hold. Gridlock on Capitol Hill could delay the Time for some old-fashioned customer service opening bell. 7 66 Finance & economics The Economist January 12th 2019 Free exchange Down towns

A new, grim look at the prospects for American workers without college degrees merica’s ageing economic boom can still produce pleasant mium used to hold across the range of skills. In 1970 workers with- Asurprises. Companies added an astonishing 312,000 new jobs out any college education could expect to get a boost to their earn- in December, the Bureau of Labour Statistics reported on January ings when they moved to a big city, just as better-educated workers 4th, and raised pay at the fastest clip in years. For the third of work- did (see chart). Since then the urban wage advantage for well-edu- ing-age Americans without any college education, such spells of cated workers has become more pronounced, even as that for less- rapid income growth have been exceedingly rare, not only since educated workers has all but disappeared. the financial crisis but in the past half-century. But however long Economists seeking to explain why poorer Americans are not this expansion lasts, their economic prospects still look grim. moving to find better opportunities should take note, Mr Autor The misfortunes of the left-behind were a recurring topic at mused in his lecture. Explanations for falling mobility in America this year’s meeting, in Atlanta, of the American Economic Associa- generally focus on obstacles to migration—expensive urban hous- tion, one of the biggest annual convocations of economists. David ing, location-specific occupational licences, varying government Autor of the Massachusetts Institute of Technology offered the benefits and so on. These no doubt matter, but may not be the most pointed characterisation, drawing on forthcoming research whole story. Often, people may be staying where their economic co-written with Juliette Fournier, also of mit. The earnings of prospects are best. workers without a college education have scarcely risen in 50 That is clearest among the well-off. In the past half-century years, after adjusting for inflation; for men they have fallen. This young adults tended to move from less populous to more popu- stagnation coincided with tectonic changes in American employ- lous places, often to attend university. Once they became middle- ment. The share of jobs that require either a lot of training, or very aged they tended to move to suburban or rural locations. That has little, has grown since 1970. Much of the production and office become far less likely. Falling mobility seems to reflect, in part, the work that requires moderate training, which once employed vast fact that people who move to big cities tend to stay there, kept by numbers of workers without college degrees, has disappeared, ei- higher wages, better amenities and crime rates in cities that are ther shipped abroad or offloaded on robots and computers. The re- lower than they used to be. sulting hardship has been implicated in a rise in mortality in parts But for workers without a college education, moving to big cit- of America and the turn toward angry nationalism that helped put ies in the first place may provide no benefit. Building more afford- Donald Trump in the White House. able housing in those cities would allow them to accommodate Working out what to do about those left behind by economic more people. But the collapse of the urban wage premium for less- progress is becoming an obsession of policy wonks. Mr Autor and educated workers means that the extra housing would mostly at- Ms Fournier provide important new context. In the 1950s, they tract additional college graduates. show, there was almost no relationship between how densely pop- ulated a place was and the share of its residents with college de- The last mile grees. That has changed utterly: the share of the working-age pop- For now, technological progress is reinforcing these trends. When ulation with a college degree is now 20 percentage points higher in a sufficient number of people asked by Census officials to name urban places than it is in rural ones. In 1970 that gap was just five their career respond with a previously untracked occupation (such percentage points. Several decades ago mid-skilled work was clus- as programmer or barista), the officials introduce a new occupa- tered in big cities, while low-skilled work was most prevalent in tional category. Analysing recent additions, Mr Autor and Ms Four- the countryside. No longer; those mid-skilled jobs that remain are nier reckon that new types of jobs fall into three broad categories: more likely to be found in rural areas than in urban ones. frontier work, closely associated with new technologies; wealth As the geographical pattern of work has shifted, so has that of work, catering to the needs of well-to-do professionals; and “last- wages. Economists have long acknowledged the existence of an mile jobs”, which Mr Autor characterises as those left over when urban wage premium: workers in more densely populated places most of a task has been automated. That includes delivery ser- earn more, in part because of the productivity benefits of crowding vices, picking packages in Amazon warehouses and scouring so- together that nurture urban growth in the first place. This pay pre- cial-media posts for offensive content. Most jobs in the first two of these categories are located in cit- ies, open mainly to holders of college degrees and decently paid Poorer by degrees (frontier work is particularly lucrative). Only the last-mile jobs are United States, hourly wages of adults aged 25-39 years, 2015 prices, $ occupied disproportionately by workers without a college educa- tion. They are better than nothing, but only just. Both wages and 1970 2000 2015 30 30 30 the quality of such jobs are typically low, which is just as well, since they are unlikely to avoid the creeping tide of automation for College educated 25 25 25 very long. Perhaps the past will not prove a prologue. Some futurists, in- 20 20 20 cluding Daniel Susskind of the University of Oxford, suggest that artificial intelligence may eventually displace highly trained pro- 15 15 15 fessionals, just as earlier innovations squeezed out others. That Non-college might not help left-behind workers but would reduce both in- educated 10 10 10 equality (though by levelling down, not up) and the cost of crucial 10 100 1,000 10 100 1,000 10 100 1,000 services. Meanwhile, as Mr Autor said, there is no land of opportu- Population per square mile, log scale nity for workers without a college education. That is a dismal state Source: “No Country for Young Men: The Inversion of the Rural-Urban Age Gradient”, of affairs, and one the thousands of economists in Atlanta are just by David Autor and Juliette Fournier starting to confront. 7 Property 67

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Chinese science ciency makes such ambitions look realisa- ble. It is a long way from landing on the The great experiment Moon to mining it. But it is not uncommon to hear speculation about such things. As one Weibo user put it after Chang’e-4’s landing, “China has made history! Half of the Moon will be ours.” The huge hopes China has for science BEIJING, DALIAN, GUANGZHOU, SHANGHAI AND SHENZHEN have prompted huge expenditure. Chinese China has become a leading scientific power. Can it go on to become a great one? spending on r&d grew tenfold between o land on the Moon, as China’s has ever mounted one. China has been 2000 and 2016 (see chart 1 on next page). TChang’e-4 spacecraft did on January 3rd, carefully building up the capacity to go This open chequebook has bought a lot of is not quite the pinnacle of achievement it where they have not; now it has done so. glitzy kit. Somewhere in the Haidian dis- once was. Both the Indian government and China is keen on such signals of pre- trict of Beijing, which houses the Ministry a well-backed Israeli team of enthusiasts eminence, and willing to put in the work of Science and Technology as well as Tsing- will attempt landings there this year; in they require. It wants the world, and its hua and Peking Universities, it seems there 2020 various American companies intend own people, to know that it is a global pow- is a civil servant quietly ticking things off a to light out for the lunar provinces, too. But er—that it boasts not just a titanic econ- list of scientific status symbols. Human all these non-Chinese efforts will land on omy, but the geopolitical sway and military space flight? Tick. Vast genome-sequenc- the Moon’s Earth-facing near side, and thus might to match, soft power of all sorts, a ing facilities? Tick. Fleet of research ves- within the solicitous sight of Earthbound storied past and a glorious future. Science sels? Tick. World’s largest radio telescope? controllers—just as all previous lunar is a big part of this. It is seen in China, as Tick. Climate researchers drilling cores landings, whether American, Soviet or, elsewhere, as an ennobling pursuit and a deep into the Antarctic icecap? Tick. since 2013, Chinese, have been. necessary foundation for technological ad- World’s most powerful supercomputer? Chang’e-4’s landing site in Von Kármán vance. China’s leaders see such advances as Tick (erased when America regained its crater, though, is on the far side of the crucial not just to their economy, but also lead, but watch this space). Underground Moon, where the spacecraft can no more to expanded military prowess and social neutrino and dark-matter detectors? Tick easily be reached by radio than it can be progress. They want the sort of science that and tick. World’s largest particle accelera- seen through a telescope. Landing there will help China project its power and re- tor? The pencil is hovering. and getting data back afterwards is possi- spond to its people’s particular problems. The spree is tellingly reminiscent of the ble only with the help of a cunningly pre- They want new clean-energy sources and golden years of “big science” in post-war positioned relay satellite. Other countries freedom from resource constraints. And America. Between the International Geo- have considered such missions, but none the country’s ever greater scientific profi- physical Year of 1957 and the cancellation of1 The Economist January 12th 2019 Science & technology 69

2 the Superconducting Super Collider (ssc) the context of the subsequent high-tech- in 1993, America’s government unfailingly nology era in which no American universi- invested ever more of the resources of an ty feels complete without a symbiotic mi- ever more powerful economy into the crobiome of venture capitalists pullulating things which the leaders of its scientific across its skin. The economic benefits of community most wanted. From the cre- research have increasingly come to be seen ation of quarks to the cloning of genes to as a possible boon to the researcher, as well the netting of Nobel prizes, American sci- as to society at large. ence came to dominate the world. For a particularly egregious example, Over those 40 years America—and, to a consider the most notable Chinese scien- lesser extent, Europe—were doing things tific first of 2018. He Jiankui looked like the that had never been done before. They model of a modern Chinese scientist. He opened up whole new fields of knowledge was educated at the University of Science such as high-energy astrophysics and mo- and Technology of China (ustc) in Hefei. lecular biology. Benefiting from the biggest He went on to equally prestigious Ameri- and best-educated native generations ever can universities, Rice and Stanford. He was produced, they also welcomed in the brought back by the government’s “Thou- brightest from around the world. And they sand Talents” programme to a new posi- did so in a culture dedicated to free inquiry, tion at the Southern University of Science one keenly differentiated from the com- and Technology in Shenzhen. Once estab- munist culture of the Soviet bloc. lished there, he took unpaid leave to start Measured against that boom—one of an entrepreneurial project. the most impressive periods of scientific That project was editing the dna of em- achievement in human history—China’s bryos that would then grow up into human new hardware, grand as it often is, falls a bit beings. Its result was two baby girls. They short. It has been catching up, not forging do not, as yet, appear unhealthy. Nor, ahead. It has not been a beacon for scien- structures ordained from the top down though, have they been provided with the tists elsewhere. And far from benefiting rather than built from the bottom up. questionable advantages Dr He says he was from a culture of free inquiry, Chinese sci- Top-down ambition can mean running trying to provide through his tinkering— ence takes place under the beady eye of a before you walk. Take fast, the Five-hun- tinkering which was unsanctioned, illegal Communist Party and government which dred-metre Aperture Spherical Telescope, and which, since he went public, has seen want the fruits of science but are not al- which opened in 2016. Built in a natural ba- opprobrium heaped upon him. ways comfortable about the untrammelled sin in Guizhou province, it is more than flow of information and the spirit of doubt twice the size of the world’s next-largest ra- You can’t clone success and critical scepticism from which they dio telescope, in America. But fast does The He affair could have taken place in normally grow. not have a director. Having leapt from no- many places, and it is hardly representative America’s science boom had a firm in- where to the top of the tree in terms of of the broad swathe of China’s researchers; stitutional and ideological foundation. It hardware, the country finds itself in the 122 of them signed an open letter denounc- grew out of the great research universities embarrassing position of having no radio- ing his actions. At the same time it is not at that came into their own in the first half of astronomer to hand who combines the sci- all surprising that the He affair took place the 20th century, and whose intellectual entific and administrative skills needed to in China. It was a perversion of what Chi- freedom had attracted extraordinary tal- run the thing. Nor, so far, has it been able to nese scientists are trying to achieve as they ents threatened by regimes elsewhere, in- recruit a qualified foreigner willing to live seek to establish themselves and their cluding Albert Einstein, Enrico Fermi and in the telescope’s remote location. country in the world of elite science. But it indeed Theodore von Kármán, the Hungar- Self-defeating shortcuts, symbolic and was also an illustration of it. ian-born aeronautical engineer in whose otherwise, are not only the preserve of the The staggering growth in the number of honour Chang’e-4’s new home is named. government; Chinese scientists are prey to scientific papers by Chinese researchers China has imported ideas and approaches such temptations, too. China is not only re- needs to be seen in this context. In terms of more than people and ideals. The resultant capitulating American science’s cold-war pure numbers, China overtook America in set-up has the ricketiness often seen in national-prestige boom. It is doing so in 2016 (see chart 2 on next page). But the quality of some of these papers is very low. In April 2018 Han Xueying and Richard Ap- As you sow… 1 pelbaum of the University of California, 2016 prices Santa Barbara, reported opinions gathered in a survey of 731 researchers at top-tier GDP,$trnatPPP* Military spending, $bn R&D spending, $bn at PPP* Chinese universities. As one from Fudan 30 800 600 University put it: “People fabricate or pla- giarise papers so that they can pass their 25 United States 600 United States annual performance evaluations.” Europe† 20 400 The Chinese government is aware of the 15 400 risks of a reputation for poor and even fraudulent research. It is one of the reasons United 10 Europe† 200 Europe† that it is orchestrating the development of States China 200 5 China a scientific establishment. One of its pillars China 0 0 0 is a core group of elite universities known as the c9. Fudan is one of them, as are 1997 2005 10 17 1997 2005 10 17 1997 2005 10 16 Tsinghua and Peking Universities and Dr Sources: Datastream from Refinitiv; IMF; SIPRI; UNESCO *Purchasing-power parity †Includes Russia He’s alma mater, ustc. The other is the Chi-1 70 Science & technology The Economist January 12th 2019

2 nese Academy of Sciences (cas), an official giant, capable of piling in on any new field agency that runs laboratories of its own, of promise with enormous, often centrally A matter of degree 3 which will adhere to prevailing interna- encouraged, force. Degrees in natural sciences and tional standards. The government is Developments in fields such as double- engineering issued per year clamping down on shoddy journals, espe- layer capacitors and biochar, two of those cially those in which researchers pay to be 23, may be important but are unlikely to be First degrees, ’000 published. Raising standards in this way much noticed, either by Nobel commit- 1,500 will not just improve science; it will also at- tees, the public or foreigners who need im- China tract the best scientists. pressing. For visible signals of its national 1,000 After Deng Xiaoping came to power in prowess, China is following the well-trod- 1978 the top tier of Chinese students was den path of big science in America, Europe European Union* 500 encouraged to go abroad for their graduate and Japan: building large physics experi- studies. Many returned, as had been in- ments and putting things—especially peo- United States 0 tended, filled with knowledge unavailable ple—into space. 2000 02 04 06 08 10 12 14 at home. Without them the current scien- The China National Space Administra- tific boom would not have happened, how- tion has sent several “taikonauts” into or- ever much the government had spent. But bit and provided them with some small Doctoral degrees, ’000 50 the best often chose to stay abroad. In 2008 space labs to hang around in while they are European Union* 40 the country started the Thousand Talents there. Its plans include, in the near term, a 30 programme to draw these exiles back with bigger space station, assembled in orbit 20 promises of lucre and lab space. from modules launched separately, and in United States 10 China In theory, the programme is open to any the longer term crewed missions to the 0 top-notch researcher working in an over- Moon enabled by a new booster more pow- seas laboratory, regardless of nationality. erful than any of today’s, the Long March 9. 2000 02 04 06 08 10 12 14 In practice, few non-Chinese have availed The National Space Science Centre, part Source: National Science Foundation *Top eight countries themselves of it. But many Chinese have. of cas, is busy putting up scientific satel- Such returners are known as haigui, the lites; in April 2018 it announced six new opment in the 1930s, circular particle accel- Chinese for “sea turtle”, since they are ones that should be launched by 2020 or erators have grown from the size of a room thought of as having come back to their na- soon after. Most of China’s launches, to the size of the Large Hadron Collider tal beach, as turtles do, to lay their eggs. though, are not scientific; they are for com- (lhc), which occupies a 27km loop of tun- Talent that has not been abroad is not, munications, Earth observation—and mil- nel beneath the Franco-Swiss border at however, neglected. A coeval programme, itary intelligence. China’s space pro- cern, Europe’s particle-physics laboratory. Changjiang Scholars, is aimed at identify- gramme began in the bosom of the People’s The bigger the accelerator, the more energy ing potential top-flight researchers who Liberation Army (pla), and though it is no it can pump into its particles. The lhc are languishing in thousands of provincial longer directly run by the armed forces, packs its protons with more than a million institutions. Once identified, they, too, are they are still keenly involved with the de- times more energy than the original ma- brought into the charmed circle. velopment of the country’s orbital abilities. chines did in 1930s Berkeley. In 2007 China tested an anti-satellite weap- Taikonauts back control on; its “Strategic Support Force” is thought Sharpening the gene shears This is yielding results at all but the very to co-ordinate its military space-, electron- The Chinese plan foresees a loop of tunnel highest levels. Chinese scientists working ic- and cyber-warfare capabilities. All Chi- as much as 100km long. Even China will not in China have as yet earned only one Nobel na’s taikonauts are pla officers. Other be able to foot the bill for such a beast prize. Other than that work—the discovery physics facilities have obvious military ap- alone. In the 2000s the lhc cost cern over of artemisinin, a novel antimalarial drug, plications, too, such as wind tunnels de- SFr4bn ($5bn); contributions to its experi- by Tu Youyou—there has not yet been any signed for research into forms of hyperson- ments from other countries, including Chinese scientific advance that a fair- ic flight that are really relevant only to the China and America, significantly in- minded person would be likely to think armed forces. creased the total. Making use of it has cost Nobel-worthy. No fundamental particle Beyond rocketry, China’s most ambi- billions more. Nor would China be able to has been discovered there, nor any new tious big-science plan is to build the largest supply all the physicists needed to make class of astronomical object. Chinese sci- particle accelerator ever. Since their devel- use of such a facility. Like the lhc, the next entists have not yet done anything to com- accelerator will be a single lab for the pare with, say, the development of crispr- world, wherever it is: these toys are one- Cas9 gene editing (America) or the creation …you shall reap 2 per-planet affairs. But the Chinese seem of pluripotent stem cells (Japan) or the in- Number of peer-reviewed science and more serious than anyone else about host- vention of dna sequencing itself (Britain). engineering articles published, ’000 ing and building the thing. Just as it meant But a great deal of Chinese science is 700 something beyond the world of particle now very good indeed, particularly in rela- European Union physics when America cancelled its pro- tively new fields with practical implica- 600 posed giant ssc and cern’s lhc became the tions. The country has a very large and ever 500 biggest game in town, so it would mean United States growing workforce (see chart 3) that is both 400 something if China took cern’s crown. enjoined and keen to tackle juicy topics. A Particle physics enjoys a particular China 300 study published by Elsevier, a scientific prestige in part because of its early (and publisher, and Nikkei, a Japanese news 200 now dissolved) association with the devel- Japan business, on January 6th found that China 100 opment of nuclear weapons, in part be- published more high-impact research pa- India 0 cause of the conceptual depths it plumbs, pers than America did in 23 out of 30 hot re- in part because of the sheer size and ex- 2003 05 07 09 11 13 15 16 search fields with clear technological ap- pense of its tools. But there are other parts Source: National Science Foundation plications. Chinese science is a nimble of physics with more of the cutting edge 1 The Economist January 12th 2019 Science & technology 71

2 about them. These include applications of research capacities to bridge the gap—an the more abstruse aspects of quantum me- The cutting edge 4 idea the Chinese are already integrating chanics to computation and cryptography, Number of CRISPR* publications, ’000 into their work. The government has an area where China is a world leader: it opened a translational-medicine centre in 1.4 was the first country to send a quantum- Shanghai, where laboratory researchers, encrypted message via a satellite. In com- 1.2 clinicians and patients will all be under the puter science, too, it has few peers. Though United States 1.0 same roof and biotech companies encour- it does not yet have a semiconductor in- aged to set up shop next door. Others may dustry that quite matches those elsewhere, 0.8 follow in Beijing, Chengdu and Xi’an. it is world class in many applications, espe- 0.6 Genetic research is a field where China cially in artificial intelligence. has both made big investments and sees a China 0.4 The same applies in trendy bits of biolo- big future. In the bgi, as what was once the Germany gy. Dr He was not the first person to edit the 0.2 Beijing Genomics Institute is now known, dna Japan of a human embryo. That honour be- 0 China has by some measures the largest ge- longs to Huang Junjiu, a researcher at Sun nome-sequencing centre in the world. 2013 14 15 16 17 Yat-sen University, in Guangzhou, whose Once an arm of cas, it declared indepen- research was blameless and above-board. Source: Elsevier *Gene-editing technology dence as a “citizen-managed, non-profit Like Dr He, Dr Huang was making use of the research institution” and has now become capabilities of crispr-Cas9. Since 2012 this where smoking is still common and the air a semi-commercial chimera, with one of form of gene editing has become one of the often dense with smog. Last year he con- its divisions listed as a company on the hottest fields in biology, and China is very ducted a trial in which four patients had Shenzhen stock exchange. well represented in it (see chart 4); accord- some lung tissue removed. The most The bgi’s corporate arm is also taking an ing to the study by Elsevier and Nikkei, it is healthy-looking stem cells in that tissue interest in beta thalassemia; it has devel- publishing 22.6% of the world’s most high- were isolated and encouraged to multiply, oped a dna blood test for it, one of an in- ly cited papers in gene editing, slightly and the revved-up results then sprayed creasing range it is making available across more than half the amount that comes back into the lung. The procedure appar- China. The tests use dna-sequencing ma- from America, and far more than from any ently repaired the lungs of two of the pa- chines the bgi developed with technology other country. tients; the other two showed neither bene- which it acquired when it bought Complete Dr Huang wants to apply crispr-Cas9 to fits nor harm. Dr Zuo has since organised a Genomics, an American firm, in 2013. the treatment of beta thalassemia, a second trial of 100 patients. He is working That battalion of machines has a lot of hereditary blood disease. To this end, in on a similar approach to kidney disease, other work to do. Non-commercial bits of 2015 he successfully edited the dna of sev- but so far only in mice. the bgi use them for pure research. The eral fertilised human eggs left over from outfit is also home to the China National ivf treatment. He had no intention of im- Let 100,000 genomes bloom GeneBank, the intended repository for sev- planting the results in anybody’s womb; he Dr Zuo’s work demonstrates another fea- eral hundred million samples taken from used embryos which, due to other abnor- ture of Chinese bioscience: keeping its ap- living creatures of all sorts, human and malities, were not able to develop. What he plication clearly in mind. In the West there non-human. It already holds the genomes learned about gene editing in those experi- has been an increasing concern over the of 140,000 Chinese people, part of a wider ments will, if all goes well, be used to edit past couple of decades that basic biology desire by the government to be at the fore- stem-cells extracted from the bone marrow led by independent academic researchers front of the field of precision medicine, in of people suffering from the disease, allow- has drifted too far from potential medical which diagnoses, and eventually treat- ing them to make better red blood cells. application. In America, in particular, bio- ments, are personalised with particular Stem-cell research is another hot topic medical-research prowess and the health emphasis on understanding a patient’s ge- to which China is adding its heft. Zuo Wei of the population are increasingly poorly netic make-up. of Tongji University in Shanghai is trying to correlated. The bgi is one example of China’s abili- use stem cells to repair lungs damaged by This concern has led to a new emphasis ty to bring big-science approaches to new emphysema, a big problem in China, on building up “translational-medicine” areas of research. For another you should look inside a low building in Zhuanghe, Liaoning province, where the world’s larg- est battery is taking shape. It is to have six times the storage capacity of the system supplied by Elon Musk, an American entre- preneur, to South Australia in 2017, which lashed together thousands of lithium-ion battery cells to make the world’s then-larg- est battery. It can do so because it uses a completely different approach based on a flow of vanadium-salt solutions. China’s near-insatiable demand for en- ergy has led to investments in wind and so- lar power that dwarf those in other parts of the world, and is now leading to research into better ways of handling the energy they produce. Vanadium-flow batteries are of interest because, unlike most batteries, in which a single electrolyte is built into the cell, a flow battery has two electrolytes and an open cell through which they pass. 1 72 Science & technology The Economist January 12th 2019

2 This means its storage capacity is governed In matters of promotion, job interviews solely by the size of the tanks that store the and grant-giving, the question of who you electrolytes. That makes it possible, in the- know seems much more important in Chi- ory, to build batteries big enough to store na than in the West (and even there, it is not energy on a scale useful to large grids. The negligible). For the past decade the Nation- theory has been developed by Zhang Hua- al Natural Science Foundation of China min, a researcher at the Dalian Institute of (nnsfc), one of the country’s main funding Chemical Physics, a local arm of cas. The bodies, has been running a campaign factory in Zhuanghe, owned by Dalian against such misconduct. Wei Yang, until Rongke Power, a local electricity company, recently the nnsfc’s boss, describes a situ- is trying to turn theory into practice. If it ation in which, to stop interference from works, it could revolutionise grid-scale outside, the composition of interview pan- electricity storage. els is kept secret until the last minute. Pan- The Dalian Institute’s researchers are ellists are not told in advance who candi- also looking into perovskites, materials dates are, and both panellists and with applications both in batteries and in candidates have their mobile phones con- solar cells. Their aim—also being pursued fiscated in order to avoid anyone being elsewhere in China and abroad—is to apply nobbled—which used to happen even perovskite solutions to everyday solar cells while interviews were being conducted. so that the resultant layers will absorb Some Chinese scientists fear that the wavelengths of light that the normal cells corruptions and silences endemic in au- cannot absorb. This could produce much thoritarian states will hold them back from more efficient solar panels for relatively the breakthrough-making Nobel-winning little extra cost. To the extent that academic Those requirements are very like the heights. Others may doubt this. China has publications are a good measure of tech- norms that are seen as basic to doing good been playing in science’s premier league nologies quite close to the market, perov- science in the West. Testing hypotheses, for only a decade or so. Its investments are skites are an area where China has a sub- finding the flaws in the work on which not at an end. China’s r&d was 2.07% of stantial lead over America, with 41.4% of your teacher’s reputation rests, question- gdp in 2015, up from 0.89% in 2000 (see the highest impact publications, compared ing your own assumptions, following the chart 5). That is higher than the average for with 21.5% from America. data wherever they lead, sharing data European states, but lower than France, openly with your rivals-sorry-colleagues: Germany or America. It is much lower than Taking things on trust this is how science is meant to work, even if in the Asian catch-up states that might be China’s energy research also extends to ar- in real life the ideal can be a bit tarnished. the most natural comparators, Japan and eas that the rest of the world is avoiding. In some labs and institutions in China South Korea. A China spending as much of China is building 13 new nuclear reactors to things doubtless do work that way. But the its gdp on research as South Korea does add to its fleet of 45; it has 43 more planned. authoritarian system in which they are em- would have an r&d budget twice today’s. If they are all built China will become the bedded makes it hard for Chinese science With resources on that scale and a scientif- world’s biggest generator of nuclear elec- to speak truth to power, or escape chal- ic workforce in the many millions, the hob- tricity. Those reactors are of similar design lenges to its integrity. This gnaws at the sci- bling effect of corrupt institutions might to the plants already in operation around entific body politic, and saps resources, be overcome by brute force. the world. But China is also exploring new both financial and moral. Others might argue that big break- reactor technologies—or rather, technol- In their survey of Chinese researchers throughs are not the only measure of good ogies abandoned elsewhere. These include Dr Han and Dr Appelbaum heard many science. Incremental work that solves reactors in which the core is filled not with complaints about excessive government practical problems is not to be sniffed at. fuel rods but with little ceramic peb- interference. A respondent from Sun Yat- Scientific research directed from the top bles—or, in the case of thorium reactors, sen University told them “There is still not down can serve national goals, and a one- with molten metal. enough academic freedom in higher edu- party system may give particularly consis- The lack of progress such reactors have cation. If the central government makes tent support to such programmes. China’s enjoyed in the West reflects a lack of appe- one statement, even if it is not fair, all of the lunar programme has built up its capabili- tite for new sorts of nuclear power much universities have to follow suit.” ties steadily in a way no Western space-sci- more than a lack of scientific plausibility. If ence programme has since Apollo, the China’s appetite is sharp and its research- achievements of which it may yet match. ers imaginative, progress may come swift- Just getting started 5 This is the sort of methodical science ly. The development of mass-produced, R&D spending, public and private, % of GDP that typically appeals to engineers oriented compact, cheap and safe nuclear reactors towards results—and from Jiang Zemin on- 5 would be a Chinese first that a world in the wards all China’s presidents, as well as al- throes of climate change would have real South Korea most all its other leading politicians, have 4 cause to celelebrate—and start importing. had engineering degrees. Xi Jinping, to- Japan That possibility, though, brings to the United States day’s president, studied chemical engi- 3 fore a shadow over the future of Chinese neering at Tsinghua. science. Making novel nuclear reactors ex- Germany 2 But the idea that you can get either truly tremely safe requires critical thinking and reliable science or truly great science in a obstinate truth-telling; so does convincing EU* 1 political system that depends on a culture others that you have done so. A culture that of unappealable authority is, as yet, unpro- China provides the results the boss wants, or does 0 ven. Perhaps you can. Perhaps you cannot. not investigate inconvenient anomalies, or And perhaps, in trying to do so, you will 2000 02 04 06 08 10 12 14 15 withholds data from nosy outsiders is not discover new ways of thinking as well as Source: National Science Foundation *Top eight countries good enough. fruitful knowledge. 7 Books & arts The Economist January 12th 2019 73

Russia on film tears,” she says like a latter-day Cassandra. “The ‘firm hand’ that people are so fond of Prophecies and revelations has arrived.” Her husband is more than a common witness. At the time he was head of docu- mentaries for Russian state television. The Yeltsin family would enlist him to present a soft, human image of Mr Putin as he cam- Two new documentaries depict the optimistic beginning and eventual fraying of paigned for the presidency in the subse- Vladimir Putin’s long reign quent election (see above). Much of the re- n one of Russian literature’s most mem- tory—and the lives of both directors have sulting footage was broadcast soon Iorable passages, Pimen, an elderly been twisted by it. Mr Mansky went into vo- afterwards; but, illuminated by later events chronicler in “Boris Godunov”, passes the luntary exile in Latvia after the annexation and Mr Mansky’s narration, even the famil- task of recording history to a young monk: of Crimea. Rastorguev was murdered in iar material acquires new resonance. murky circumstances last July while mak- Write down, avoiding crafty sophistries, Mr Putin emerges as if from the wings, a All things that you shall witness in this life: ing a film about Russian mercenaries in the supporting character cast in the role of Both war and peace, the edicts of our Tsars, Central African Republic. Real art, he re- president by the Yeltsins. “We will order The holy miracles of saintly men, marked shortly before his death, is made you about a little, with your permission,” All prophecies and blessed revelations… when artists “meet the energy of history— Mr Mansky says as Mr Putin enters his new unclear, incomprehensible”. Kremlin office. “Look at me kindly—as Pushkin wrote his drama about the “Time kindly as you can,” a photographer in- of Troubles” of the early 16th century in Papa, are you happy? structs him. It is hard to imagine such 1825, itself a turbulent moment in Russia. “Putin’s Witnesses” begins on the eve of the words being spoken to Mr Putin a few years The succession of Nicholas I in that year new millennium, in Mr Mansky’s home. later, or indeed being addressed to Yeltsin, was followed by the Decembrist uprising History intrudes in the form of Boris Yelt- a formidable figure even in his decline. and then an age of repression. Every coun- sin’s televised announcement that he is re- The outgoing president first appears in try experiences such pivots—at which ep- signing his office and appointing Mr Putin the film on the night of the election in ochs seem to begin and end, the current age as acting president. (Televisions make sev- March 2000. As a tv relays the result, Tat- retreats into history and the future seems eral appearances in the film, as both oracles yana Dyachenko, his daughter, shakes him to make itself present. In Russia as else- and transmitters of falsehoods.) Mr Man- by the arm. “Papa, are you happy?” “It is my where, artists have often sensed such shifts sky’s wife is unnerved both by the camera victory!” Yeltsin replies. “He would not before they are visible to the naked eye. and by the news. “I feel like bursting into have appointed a bad person,” his wife, Two arresting new documentaries sug- Naina, confides to Mr Mansky. “Right!” gest Russia may be approaching another Yeltsin says. “I’ve looked at 20 people over such inflection-point. “Putin’s Witnesses”, Also in this section four months and settled on this one.” directed by Vitaly Mansky, captures the But the triumph quickly turns to poi- 76 Who owns Kafka? moment Vladimir Putin came to power; gnant bitterness. Prompted by Mr Mansky, “Electing Russia” by Alexander Rastorguev 76 “Cat Person” returns Yeltsin reaches for a phone connected to examines the current phase of the Putin the Kremlin and asks for “Vladimir Vladi- 77 War and peace in Northern Ireland era. Both are imbued with a sense of his- mirovich”. But Mr Putin does not pick up. 1 74 Books & arts The Economist January 12th 2019

2 “They say he has gone out. They will find gans: “We are the power here!” and “Down proach had more in common with Tolstoy him and he will call back,” Yeltsin tells his with the tsar!” Riot policemen push back than with Pushkin’s romantic notion of family. By the time the crew leaves, Mr Pu- (see below). The officers and protesters are history. He shared Tolstoy’s vision of it not tin has not returned the call. roughly the same age; the camera captures as the product of great figures but as the Worse, as Mr Mansky intones, “the a close-up of a face behind a visor, sweating concatenation of ordinary people’s wills. ghost of the past [began] to appear again and anxious, and a face on the other side, Politics interested him not as a manifesta- and again, trying to make up for what was creased with anger and resistance. Seconds tion of ideas but as a crucible of action. lost in the present.” That unquiet ghost later, the police begin pummelling the When protests broke out in Moscow finds voice in the old Soviet anthem, sym- protesters with batons, randomly dragging and St Petersburg in 2011, Rastorguev was in bolically scrapped by Yeltsin but revived activists from the crowd. the thick of it, trying to convey the intoxi- (with new lyrics) by Mr Putin. Mr Mansky is The sequence encapsulates Rastor- cating atmosphere of freedom. The re- once again filming Yeltsin when the an- guev’s method. Whereas Mr Mansky’s film sult—a film called “The Term”—upset them is first broadcast. “Even the new lyr- focuses on Russia’s rulers, ending with a some prominent protesters. They thought ics don’t help?” Mr Mansky asks. Yeltsin si- panorama of ordinary folk—the objects of he had trivialised them, when he meant in- lently shakes his head and, almost power, speechless as they are at the climax stead to honour their humanity. One figure inaudibly, says: “It’s reddish!” In other of “Boris Godunov”—in Rastorguev’s work stood out: Mr Navalny, already emerging as words, too Soviet. He stares disconsolately the rulers become a backdrop, while the the leader of the anti-Putin movement. Yet ahead, as if glimpsing a future still hidden people become the actors and drivers of his determination and political acumen re- from his compatriots, even, perhaps, from history. Like a court portraitist, Mr Mansky pelled Rastorguev, who had an anarchist’s Mr Putin. preserves a certain distance from his sub- suspicion of power. He found Mr Navalny On election night, meanwhile, the cam- jects; by contrast, Rastorguev’s camera opaque and impenetrable. era follows Ms Dyachenko into Mr Putin’s seems integrated with them, as though the headquarters. The tv is on again, but its person behind it were invisible, shrinking Faces in the crowd sound is drowned by the celebrations. In the distance between action and viewer. The suspicion was mutual. Conscious of his film, though, Mr Mansky mutes the fes- He honed this technique over decades. his public image (he is a gift to future sculp- tivities and turns up the volume on the For “Clean Thursday” (2003), he filmed tors), Mr Navalny barred Rastorguev from television to hear the voice of Boris Nem- teenage conscripts in Chechnya as they filming behind the scenes for “Electing tsov, a liberal politician and a former con- washed, did laundry and read letters from Russia”. This tension between artist and tender to succeed Yeltsin. “We voted with girlfriends. In “Tender’s Heat. Wild, Wild subject helps drive the film, Rastorguev’s our hearts without knowing what would Beach” (2006), a Black Sea resort swarms last, which covers the bogus presidential happen to us tomorrow,” Nemtsov says. As with prostitutes, pimps, drunkards and election of March 2018. It recognises Mr Na- today’s viewers will know, in 2015 he was thieves. The only innocent creature is a valny as a central figure in Russian politics; assassinated beneath the Kremlin wall. camel, brought to the beach by a hustler for yet as in the director’s other work, it is the tourists to photograph; it comes to a sticky everyday lives that are starkest. A young Down with the tsar! end. Yet Rastorguev never condescends to lesbian campaigns in Murmansk, in the A few months after Mr Putin’s accession, his subjects and never judges them. Un- Arctic, while fighting for her right to live as Mr Mansky returned to film him one more flinchingly his camera cuts through the she wants. A schoolboy from a single-par- time. But as he walks with the president swearing and fleshy karaoke to their indi- ent family in Vladivostok, in the far east, is through a dark square inside the Kremlin— vidual stories. In all his work he was pre- punished for supporting Mr Navalny. where the opening scenes of “Boris Godu- occupied with existential questions of life “Electing Russia” was commissioned nov” are set—Mr Putin is pondering not and death, physical or spiritual. for German television, but Rastorguev in- how he plans to rule, but how he plans to As it happens, Mr Mansky served as pro- tended to make a domestic version that leave. Riding in a motorcade through emp- ducer on “Wild, Wild Beach”. In his view, would give even more space to these faces ty Moscow avenues, he confides that the Rastorguev may have been “the most out- in the crowd—witnesses to what may succession of power, a central theme of standing chronicler of this mad, somewhat prove a turning-point in Russian history, Russian history, has preoccupied him. “I meaningless and cruel Russian life at the or even shapers of that history. He was very much hope that one day I will manage beginning of the new century”. His ap- killed before he could finish it. 7 to go back to a normal life and that I will have some private future,” he says, remarks that seem otherworldly 18 years on. “I can’t say that the life of a monarch inspires me.” “Electing Russia” opens with a tableau of what his rule has become. It is June 12th 2017, Russia’s independence day, and the Kremlin end of Tverskaya, Moscow’s main drag, is occupied by re-enactors dressed as medieval knights, tsars, Cossacks and sec- ond-world-war soldiers waltzing to 1940s tunes. At the other end of the street a large demonstration by modern-day Muscovites swells behind police barriers, then floods over them. Rastorguev’s camera is in the middle, filming from below, creating the impres- sion of a sweeping human wave. Young protesters, some born in the year Mr Putin came to power and galvanised by his main challenger, Alexei Navalny, shout their slo- Times of trouble

76 Books & arts The Economist January 12th 2019

Bedroom fiction Teeth and claws

You Know You Want This. By Kristen the women in these pages are not all Roupenian. Gallery/Scout Press; 240 pages; victimised and manipulated. Many are $24.99. Jonathan Cape; £12.99 aggressors in their own right. In “Sardines”, Tilly, a ten-year-old girl, or a literary sensation, the short makes a monstrous birthday wish borne Fstory had an unassuming title. “Cat of the bullying she had endured and Person” portrayed the flirting and even- abandonment by her father. Ellie, the tual date between Margot, a 20-year-old protagonist of “Biter”, longs to sink her college student, and 34-year-old Robert teeth into a new colleague’s “sweet and (the supposed feline enthusiast of the gamy flesh”. When he kisses her against title). Their relationship culminates in her will at the Christmas party, she rips a strange and unpleasant—but not violent chunk of skin from his cheekbone. She or coercive—sex. The tale was published changes jobs regularly, “because, as Ellie in the New Yorker in December 2017, just quickly learned, there was one in every as the #MeToo movement began to en- office”—a creep who provides a chance courage women to speak up about ha- for her own form of predation. Literary posterity rassment, assault and abuses of power. It “You Know You Want This” at once inspired a glut of opinion pieces, plus a enchants and horrifies. Ms Roupenian’s Tales of a suitcase satirical retelling from Robert’s perspec- occasional supernatural touches can be tive, and may well be the most-read piece distracting, but at its best her writing of fiction in the history of the magazine. recalls the gloomy feminist fairy-tales of Little surprise, then, that there was a Angela Carter. This collection cements bidding war for Kristen Roupenian’s first her reputation as one of the most start- book, “You Know You Want This”. The ling new voices in fiction. collection of stories (some of which, like Kafka’s Last Trial: The Case of a Literary “Cat Person”, have been published be- Legacy. By Benjamin Balint. W.W. Norton; fore) circles around themes of desire, 288 pages; $26.95. Picador; £14.99 pain, obsession and transgression. “In- he nearest that Franz Kafka (above) spired by a small but nasty encounter” of Tcame to the Holy Land was the plan he her own, the fable that made Ms Roupe- hatched with his last lover, Dora Diamant, nian’s name resonated with many female to open a restaurant in Tel Aviv. She would readers’ experiences of 21st-century cook while he waited on tables. Alas, tuber- dating. Most of the tales in this volume culosis claimed the writer from Prague in are much darker and more disturbing. June 1924, before Kafka’s Place could open Many of them are shot through with its doors. (Speciality? Surely, grilled scape- moments of black comedy. goat.) However, in 1939 Kafka’s friend Max Ms Roupenian often peers behind the Brod fled Nazi-occupied Czechoslovakia bedroom curtain: at the woman who for Palestine with a suitcase that held most wants to be punched and kicked by of his idol’s manuscripts. It contained the strangers during foreplay; at the couple never-completed novels “The Trial”, “The who are titillated, then fixated, by the Castle” and “Amerika”, along with diaries, idea of their carnal embraces being over- notebooks and correspondence. heard; at the man who can achieve tu- Decades later, the contents of that refu- mescence only by pretending “that his gee’s valise prompted a clutch of hotly con- dick was a knife, and the woman he was tested lawsuits. They climbed the judicial fucking was stabbing herself with it”. Yet ladder until, in 2016, they landed in Israel’s Supreme Court. Benjamin Balint, a critic and translator, traces this saga in his ab- it—had instructed the devoted Brod to companion named Esther Hoffe, another sorbing book. Not only does Mr Balint ask, burn all his papers, “unread and to the last immigrant from Prague, helped him in his “Who owns Kafka?” He explores the mean- page”. For Brod, disobedience constituted a labours. At his death in 1968 Brod be- ing of a writer’s legacy in an age that, like higher loyalty. By 1939 his stewardship of queathed his belongings, including the Kafka’s disorienting stories, puts identity Kafka’s work had given his friend a fast-ris- precious Kafka papers, to Esther. At the and belonging in doubt. ing global renown. In Germany, it also in- same time, his ambiguous will also re- Kafka published little in his lifetime. curred the vandalistic wrath of the Nazis. quested that his estate enter a “public ar- His admirers will know that much of his After 1948, in newborn Israel, Brod chive” at her death. fiction can be read only thanks to an act of failed to revive his own literary career. But Thus the confused stage was set for later betrayal. Before he died, the German- he flourished as the keeper of Kafka’s legal quarrels. After a preliminary skirmish speaking Jewish author from a Czech flame. His interventionist editing means in 1974, they reached heights of properly city—an epitome of “marginality, disloca- that, as Mr Balint puts it, “the Kafka we Kafkaesque absurdity after Esther left the tion and estrangement”, as Mr Balint puts know is a creation of Brod.” A much-loved priceless stash to her daughter Eva, a re-1 The Economist January 12th 2019 Books & arts 77

2 tired El Al employee, in 2007. Now the Na- er. (Mr Radden Keefe, after hearing many tional Library of Israel claimed Kafka as “a views, is more sceptical.) In her youth she touchstone of modern Jewish cultural favoured dumping informers’ bodies on achievement” whose documents must rest the street, not making them vanish. But lat- on its shelves. Esther and Eva, though, had er she wondered whether McConville had already dealt with the national archive of to be killed at all: “What warrants death?” German literature in Marbach. The Ger- she mused in an interview with Ed Molo- mans had put in their own bid for Brod’s ney, an Irish author, of which Mr Radden treasure-trove. For their part, Mr Balint Keefe was shown a transcript. From that suggests, they wished to occupy the high document, he makes his own deduction ground of “European universalism against about who fired the fatal shot. Israeli particularism”. Still, there was one matter on which Do- Mr Balint elegantly intercuts courtroom lours and some others of her passionately scenes with episodes from Kafka’s biogra- republican bent harboured no doubt: the phy and cultural afterlife. He brings out ev- peace settlement that left Northern Ire- ery paradox of a judicial process that tried land’s future to be settled democratically to tie down this most ambivalent of au- was a betrayal. As the book relates, another thors, the ultimate “disaffiliated pariah”, to who felt that way was Brendan Hughes, a fixed identity. Kafka may have flirted with perhaps the doughtiest bomber, arms-pro- Zionism, but (in 1914) he also wrote: “What curer and jail-breaker to emerge from re- have I in common with the Jews? I have Burying Jean McConville, 30 years on publican Belfast in the 1970s. At one point, hardly anything in common with myself.” Hughes was close to Gerry Adams: the for- Disputes over his Jewishness, or Ger- tense conversations with her offspring, mer a frontline fighter, the latter a cool manness, became the grist for a slow- who ended their childhoods in horrible in- strategist. But Hughes abhorred the peace grinding legal mill. It sought clarity and stitutions and now campaign for justice. Mr Adams helped broker in the 1990s. certainty from a mind that, in literature Yet much of this masterly reportage empa- People like Hughes and Dolours Price and life, often “vacillated on the threshold thetically evokes the militant republican poured out their feelings in testimonials of consummation”. At length, the National world from which McConville’s killers offered by veterans of the conflict that were Library prevailed. Eva Hoffe denounced the came. Above all, it traces the relationships stored at Boston College, with a promise verdict as a violation. Mr Balint’s scrupu- that emerged among leading republicans they would remain sealed until their lous and sardonic prose makes you love as the slums of Belfast slid into a many-sid- deaths. The Northern Irish police fought a Kafka, and dread the law. Lali Michaeli, an ed war that debased everyone—relation- legal battle to obtain some of those inter- Israeli poet, deserves the last word. “From ships that soured after bombs gave way to views, and it was on that basis that they ar- my perspective,” she remarked of the writ- politics in the 1990s. rested Mr Adams for several days in 2014. er’s otherworldly talent, “Kafka’s manu- The discerning skill with which Mr Rad- He was released without charge; he contin- scripts should be sent to the moon.” 7 den Keefe gets inside these characters’ ues to deny that he was a member of the ira minds may unsettle some readers, but it is or had anything to do with the abduction of also his book’s strength. He shows how McConville, which he condemns. Violence and its aftermath people who in peacetime might just have been strong-willed or colourful types came Armalite to ballot box The price of peace to condone or perpetrate the unspeakable. This book’s most lasting achievement may The most memorable figure in this gal- lie not in its forensic analysis of the lery is Dolours Price. She and her sister McConville saga but in the questions it Marian were jailed in 1973 for planting raises about the Northern Irish settlement. bombs in London that injured 200 people As it chronicles, people were willing to en- and killed one. They went on hunger strike dure and inflict terrible pain so long as a and secured a transfer to a Northern Irish spirit of political maximalism prevailed: if Say Nothing: A True Story of Murder and jail. In their youth, the book notes, the sis- Ireland could be united fast, the thinking Memory in Northern Ireland. By Patrick ters were popular, attractive figures around went, all horrors could be redeemed. But Radden Keefe. Doubleday; 464 pages; Catholic Belfast, dubbed the Crazy Prices Mr Adams saw that maximalism must stop; $28.95. William Collins; £20 after a discount store. They were radical- instead the republican interest lay in well- n a winter evening in 1972, a mother ised after a civil-rights march was roughed timed compromise. That was devastating Oof ten, still recovering from her hus- up by thugs in 1969. for those who had suffered and killed. band’s death, received a fateful visit to her Dolours fascinated many people, in- Veterans like Hughes and Dolours Price high-rise flat in Belfast’s war zone. At least cluding Margaret Thatcher, who as prime were especially dismayed by the manoeu- eight people, most of them masked but a minister studied the sisters’ case closely. vres of Mr Adams who, as they saw it, had couple recognisable as neighbours, And it was Dolours who, as she disclosed once endorsed their methods but now marched her away. She was told she was be- before succumbing to an overdose in 2013, feigned absent-minded detachment. Yet ing taken to a charity home for her own drove McConville to her death. The squad Mr Adams’s sheer versatility, as a ruthless safety; she asked, pathetically, if her chil- waiting in the Irish Republic to fire the advocate of war and a tough enforcer of dren could join her. In fact she was execut- shots balked, so the execution had to be peace, was indispensable to the settle- ed as a supposed informer. Her body was done by another trio: Dolours herself, who ment. The book quotes a British govern- found on a beach in 2003. said she deliberately missed, plus two oth- ment report of 2015 which spells out this Among the many stories told in dark de- ers, only one of whom she named. unpalatable trade-off frankly. Peace had tail in Patrick Radden Keefe’s new book on The case long troubled her, Dolours re- held not because paramilitary groups had the Northern Irish conflict, the abduction vealed. It was not that she opposed punish- faded but because they, and those with in- of Jean McConville stands out. The 100- ing people who abetted the security forces, fluence over them, had survived—and plus interviews he conducted included in- or doubted that McConville was an inform- could finally rein in the hotheads. 7 78 Courses Appointments 79

Two Independent Non-Executive Board Members £15,500 + expenses, ca.15 days per annum The Institute of Chartered Accountants in England and Wales (ICAEW) is a leading professional membership organisation that promotes, develops and supports over 178,500 Chartered Accountants and students worldwide. It aims to protect the quality and integrity of the accountancy and finance profession. ICAEW is looking to appoint two Independent (i.e. non-Chartered accountant) Non-Executive Board Members with a view to increase the diversity of experience and skill sets at Board level and provide external perspective. This represents an excellent Board-level opportunity to contribute to the strategic work of ICAEW. Fidelio Partners is conducting this Search on an open and fair basis reflecting ICAEW’s commitment to diversity of background, skills and experience. Role requirements: • Senior Board-level / Executive experience in a large organisation • Demonstrable commitment to public service and clear grasp of the role of a Chartered professional body working in the public interest • Experience of reputational risk management at a senior level • Track record in shaping and guiding strategy within an organisation, as well as strong business and commercial understanding • A clear understanding of how the Chartered Accountancy profession underpins business confidence • A proven ability to communicate effectively with a broad range of colleagues and stakeholders • Career experience providing the basis for effective horizon scanning – a sensitivity and awareness of key stakeholder groups and an ability to identify long-term trends and risks Desirable attributes include one or more of the following: international track record; digital transformation experience; government/regulatory background; marketing/communications expertise. To apply for this role, please submit a CV and cover letter to Fidelio at: ICAEW@fideliopartners.com alternatively, call: +44(0) 207 759 2200. The closing date is Friday 8th February 2019. Courses Chair, International Auditing and Assurance Standards Board

Seeking an influential leader to be the next Chair of the International Auditing and Assurance Standards Board (IAASB). The Chair leads the IAASB’s strategic direction and development of high-quality international audit standards and facilitates the consultative processes that underpin the board’s credibility and activities. The Chair develops and maintains effective relationships with key stakeholders and must be a strong leader with relevant audit or standard-setting experience and a successful track record setting and implementing strategy; building consensus within multi-national and multi-stakeholder environments; and mobilizing volunteer Board. The IAASB chair is appointed for a renewable three-year term, beginning May 1, 2019. This is a full-time position with a competitive remuneration package. A complete job description is available on the IAASB website at www.iaasb.org. Applications are due by January 31, 2019.

The Mossavar-Rahmani Center for Business and Government at Harvard Kennedy School invites distinguished professionals with at least 20 years of experience in government and/or business to apply for a one-year, unpaid appointment as Senior Fellow to conduct research on topics at the intersection of the public and private sectors, including regulation, corporate governance, and the role of government in the changing global economy. The Center is led by Lawrence Summers, University Professor, and has numerous Harvard faculty as members.

Deadline for applications is March 1, 2019. For more information please visit

www.hks.harvard.edu/centers/mrcbg/about/program-description 80 Economic & financial indicators The Economist January 12th 2019

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* 2018† latest 2018† % % of GDP, 2018† % of GDP, 2018† latest,% year ago, bp Jan 9th on year ago United States 3.0 Q3 3.4 2.9 2.2 Nov 2.5 3.9 Dec -2.6 -3.8 2.7 22.0 - China 6.5 Q3 6.6 6.6 1.9 Dec 2.1 3.8 Q3§ 0.5 -3.5 2.9 §§ -94.0 6.83 -4.5 Japan nil Q3 -2.5 1.1 0.9 Nov 0.9 2.5 Nov 3.8 -3.8 nil -5.0 108 3.9 Britain 1.5 Q3 2.5 1.3 2.3 Nov 2.4 4.1 Sep†† -3.4 -1.3 1.3 -2.0 0.78 -5.1 Canada 2.1 Q3 2.0 2.3 1.7 Nov 2.3 5.6 Dec -2.6 -2.1 2.0 -23.0 1.32 -5.3 Euro area 1.6 Q3 0.6 2.1 1.6 Dec 1.7 7.9 Nov 3.4 -0.7 0.2 -24.0 0.87 -3.5 Austria 2.2 Q3 -1.9 2.9 2.2 Nov 2.1 4.7 Nov 2.2 -0.3 0.5 -11.0 0.87 -3.5 Belgium 1.6 Q3 1.2 1.5 2.3 Dec 2.2 5.6 Nov -0.3 -1.1 0.8 12.0 0.87 -3.5 France 1.4 Q3 1.3 1.7 1.6 Dec 2.1 8.9 Nov -0.9 -2.6 0.7 -8.0 0.87 -3.5 Germany 1.2 Q3 -0.8 1.9 1.7 Dec 1.8 3.3 Nov‡ 7.9 1.4 0.2 -24.0 0.87 -3.5 Greece 2.4 Q3 4.3 2.1 1.0 Nov 0.8 18.6 Sep -1.3 -0.1 4.3 62.0 0.87 -3.5 Italy 0.7 Q3 -0.5 1.1 1.1 Dec 1.4 10.5 Nov 2.4 -2.1 2.9 88.0 0.87 -3.5 Netherlands 2.4 Q3 0.6 2.8 2.0 Dec 1.7 4.4 Nov 10.1 1.7 0.4 -17.0 0.87 -3.5 Spain 2.5 Q3 2.2 2.7 1.2 Dec 1.8 14.7 Nov 1.1 -2.7 1.5 -1.0 0.87 -3.5 Czech Republic 2.5 Q3 2.3 2.8 2.0 Nov 2.3 1.9 Nov‡ 0.8 1.0 1.9 20.0 22.3 -3.9 Denmark 2.4 Q3 2.9 1.3 0.8 Nov 1.1 3.9 Nov 7.2 -0.7 0.2 -33.0 6.49 -3.9 Norway 1.1 Q3 2.3 1.7 3.5 Nov 2.7 4.0 Oct‡‡ 8.0 7.0 1.8 18.0 8.49 -4.4 Poland 5.7 Q3 7.0 5.1 1.1 Dec 1.7 5.9 Dec§ -0.4 -0.9 2.9 -46.0 3.73 -5.9 Russia 1.5 Q3 na 1.6 4.2 Dec 2.9 4.8 Nov§ 5.1 1.6 8.6 102 66.9 -14.8 Sweden 1.7 Q3 -0.9 2.7 2.0 Nov 2.0 5.5 Nov§ 3.8 0.9 0.4 -32.0 8.89 -7.3 Switzerland 2.4 Q3 -0.9 2.7 0.7 Dec 1.0 2.4 Dec 9.9 0.9 -0.1 -3.0 0.98 nil Turkey 1.6 Q3 na 3.8 20.3 Dec 15.3 11.4 Sep§ -5.7 -1.9 16.7 503 5.50 -31.4 Australia 2.8 Q3 1.0 3.2 1.9 Q3 2.1 5.1 Nov -2.6 -0.6 2.3 -31.0 1.40 -8.6 Hong Kong 2.9 Q3 0.3 3.4 2.6 Nov 2.4 2.8 Nov‡‡ 2.3 2.0 2.0 5.0 7.84 -0.3 India 7.1 Q3 3.3 7.4 2.3 Nov 4.6 7.4 Dec -2.4 -3.6 7.5 10.0 70.5 -9.7 Indonesia 5.2 Q3 na 5.2 3.1 Dec 3.4 5.3 Q3§ -2.6 -2.5 7.9 163 14,125 -4.9 Malaysia 4.4 Q3 na 4.7 0.2 Nov 0.8 3.3 Oct§ 2.3 -3.7 4.1 19.0 4.11 -2.4 Pakistan 5.4 2018** na 5.4 6.2 Dec 5.2 5.8 2018 -5.7 -5.4 13.2 ††† 522 139 -20.4 Philippines 6.1 Q3 5.7 6.2 5.1 Dec 5.3 5.1 Q4§ -2.4 -2.9 6.9 95.0 52.4 -3.9 Singapore 2.2 Q4 1.6 3.5 0.3 Nov 0.6 2.1 Q3 19.1 -0.5 2.3 19.0 1.35 -0.7 South Korea 2.0 Q3 2.3 2.8 1.3 Dec 1.6 3.4 Dec§ 4.5 0.7 2.0 -57.0 1,122 -4.9 Taiwan 2.3 Q3 1.5 2.6 nil Dec 1.4 3.7 Nov 12.9 -0.7 0.9 -14.0 30.8 -4.2 Thailand 3.3 Q3 -0.1 4.1 0.4 Dec 1.2 1.0 Nov§ 6.8 -3.0 2.3 1.0 32.0 0.8 Argentina -3.5 Q3 -2.7 -2.3 48.0 Nov 33.6 9.0 Q3§ -4.3 -5.6 11.3 562 37.5 -49.2 Brazil 1.3 Q3 3.1 1.5 4.0 Nov 3.8 11.6 Nov§ -1.0 -7.1 7.4 -129 3.68 -11.7 Chile 2.8 Q3 1.1 4.0 2.6 Dec 2.4 6.8 Nov§‡‡ -2.2 -2.0 4.2 -31.0 678 -10.3 Colombia 2.6 Q3 0.9 2.6 3.2 Dec 3.2 8.8 Nov§ -3.2 -2.4 6.7 30.0 3,134 -7.1 Mexico 2.5 Q3 3.4 2.1 4.8 Dec 4.8 3.3 Nov -1.8 -2.5 8.7 118 19.2 0.3 Peru 2.3 Q3 -8.3 3.7 2.2 Dec 1.3 5.7 Nov§ -2.2 -2.4 5.6 64.0 3.33 -3.3 Egypt 5.4 Q2 na 5.3 15.7 Nov 16.7 10.0 Q3§ -1.1 -9.5 na nil 17.9 -1.2 Israel 2.9 Q3 2.1 3.4 1.2 Nov 0.8 4.1 Nov 1.7 -3.1 2.2 60.0 3.68 -6.5 Saudi Arabia -0.9 2017 na 1.5 2.8 Nov 2.6 6.0 Q2 8.0 -2.8 na nil 3.75 nil South Africa 1.1 Q3 2.2 0.7 5.2 Nov 4.8 27.5 Q3§ -3.5 -3.9 8.8 19.0 13.9 -11.2 Source: Haver Analytics. *% change on previous quarter, annual rate. †The Economist poll or Economist Intelligence Unit estimate/forecast. §Not seasonally adjusted. ‡New series. **Year ending June. ††Latest 3 months. ‡‡3-month moving average. §§5-year yield. †††Dollar-denominated bonds.

Markets Commodities % change on: % change on: The Economist Index one Dec 29th index one Dec29th commodity-price index % change on In local currency Jan 9th week 2017 Jan 9th week 2017 2005=100 Jan 1st Jan 8th* month year United States S&P 500 2,585.0 3.0 -3.3 Pakistan KSE 38,921.7 3.0-3.8 Dollar Index United States NAScomp 6,957.1 4.4 0.8 Singapore STI 3,158.1 3.9-7.2 All Items 136.0 137.4 nil -8.2 China Shanghai Comp 2,544.3 3.2 -23.1 South Korea KOSPI 2,064.7 2.7 -16.3 Food 144.2 147.3 2.7 -1.2 China Shenzhen Comp 1,307.0 4.0 -31.2 Taiwan TWI 9,738.3 1.9 -8.5 Industrials Japan Nikkei 225 20,427.1 2.1 -10.3 Thailand SET 1,590.5 1.6-9.3 All 127.5 127.2 -2.9 -15.3 Japan Topix 1,535.1 2.7 -15.5 Argentina MERV 33,769.4 8.6 12.3 Non-food agriculturals 119.2 120.1 -0.8 -13.4 Britain FTSE 100 6,906.6 2.6 -10.2 Brazil BVSP 93,613.0 2.922.5 Metals 131.1 130.2 -3.8 -16.1 Canada S&P TSX 14,804.7 3.2 -8.7 Mexico IPC 43,648.1 3.3-11.6 Sterling Index Euro area EURO STOXX 50 3,070.2 2.6 -12.4 Egypt EGX 30 13,365.6 1.2 -11.0 All items 194.2 196.3 -1.6 -2.5 France CAC 40 4,813.6 2.6 -9.4 Israel TA-125 1,367.1 2.50.2 Germany DAX* 10,893.3 3.0 -15.7 Saudi Arabia Tadawul 8,146.7 4.6 12.7 Euro Index Italy FTSE/MIB 19,179.2 4.6 -12.2 South Africa JSE AS 53,222.9 3.8 -10.6 All items 147.9 149.3 -1.0 -4.2 Netherlands AEX 496.2 2.0 -8.9 World, dev'd MSCI 1,951.0 3.7 -7.2 Gold Spain IBEX 35 8,823.6 3.2 -12.1 Emerging markets MSCI 994.4 4.1 -14.2 $ per oz 1,281.3 1,284.5 3.2 -2.0 Poland WIG 59,336.6 1.8 -6.9 West Texas Intermediate Russia RTS, $ terms 1,135.5 6.5 -1.6 $ per barrel 45.4 49.8 -3.6 -20.9 Switzerland SMI 8,687.7 3.1 -7.4 US corporate bonds, spread over Treasuries Turkey BIST 91,156.9 2.6 -21.0 Dec 29th Sources: CME Group; Cotlook; Darmenn & Curl; Datastream from Australia All Ord. 5,838.4 3.8 -5.3 Basis points latest 2017 Refinitiv; FT; ICCO; ICO; ISO; Live Rice Index; LME; NZ Wool Services; Thompson Lloyd & Ewart; Urner Barry; WSJ. *Provisional. Hong Kong Hang Seng 26,462.3 5.3 -11.6 Investment grade 188 137 India BSE 36,212.9 0.9 6.3 High-yield 517 404 Indonesia IDX 6,272.2 1.5 -1.3 Sources: Datastream from Refinitiv; Standard & Poor's Global Fixed For more countries and additional data, visit Malaysia KLSE 1,667.8 nil -7.2 Income Research. *Total return index. Economist.com/indicators Graphic detail The Economist January 12th 2019 81

The Big Mac index says the world's currencies Currencies deemed undervalued by the are strikingly cheap against the dollar index tend to strengthen in the long term

Currencies’ over/undervaluation Projected appreciation against the dollar against the US dollar, % for every 10% that a currency is undervalued % points 8 Emerging economies Advanced economies 6

4

Advanced economies 2 100 0 9876543210 10 Years after Big Mac index valuation 75 The Swiss franc is one of only three currencies that look Emerging economies overvalued against 50 the dollar today 50

Trend line 25 weighted by trade with America Swiss ↑ franc Overvalued 0 0

Undervalued ↑ Brazilian real Euro 25 25 British pound Japanese yen Even rich countries’ Chinese currencies now look yuan 50 weak against the 50 dollar on average

Russian 75 rouble 75

1990 2000 2010 2019 1990 2000 2010 2019

Sources: McDonald’s; Thomson Reuters; The Economist

Burgernomics the price of an identical basket of are 27% cheaper than at home. goods—or in this case, a Big Mac—costs the Such deviations from burger parity may Pick of the menu same everywhere. By this metric most ex- persist in 2019. Exchange rates can depart change rates are well off the mark. In Rus- from fundamentals owing to monetary sia, for example, a Big Mac costs 110 roubles policy or changes in investors’ appetite for ($1.65), compared with $5.58 in America. risk. In 2018 higher interest rates and tax That suggests the rouble is undervalued by cuts made American assets more attrac- 70% against the greenback. In Switzerland tive, boosting the greenback’s value. That Against the dollar, other currencies are McDonald’s customers have to fork out was bad news for emerging-market econo- at their cheapest in 30 years SFr6.50 ($6.62), which implies that the mies with dollar-denominated debts. he big mac, the flagship burger of the Swiss franc is overvalued by 19%. Their currencies weakened as investors TMcDonald’s fast-food chain, is a model According to the index most currencies grew jittery. At the end of the year American of consistency. Composed of seven ingre- are even more undervalued against the dol- yields began to fall as the global economy dients, the double-decker sandwich is pro- lar than they were six months ago, when decelerated and investors anticipated a duced in nearly identical fashion across the greenback was already strong. In some more doveish Federal Reserve. But the dol- more than 36,000 restaurants in over 100 places this has been driven by shifts in ex- lar has so far remained strong. countries. This consistency is the secret change rates. The dollar buys 35% more Ar- Although ppp is a poor predictor of ex- sauce in the Big Mac index, The Economist’s gentinian pesos and 14% more Turkish li- change rates in the short-term, it stacks up lighthearted guide to exchange rates. Ac- ras than it did in July. In others changes in better over long periods. An analysis of cording to our latest batch of data, almost burger prices were mostly to blame. In Rus- data going back to 1986 shows that curren- every currency is undervalued against the sia the local price of a Big Mac fell by 15%. cies deemed undervalued by the Big Mac dollar. The result is that the greenback it- It is not unusual for emerging-market index tend to strengthen, on average, in the self looks stronger, relative to fundamen- currencies to look weak in our index. But subsequent ten years (and vice versa). tals, than at any point in three decades. today the dollar towers over rich and poor Something for investors to chew on. 7 The Big Mac index is based on the theory alike. The pound, for example, looked rea- of purchasing-power parity (ppp), which sonably priced five years ago. Today Ameri- To explore the full interactive version of the states that currencies should adjust until cans visiting Britain will find that Big Macs Big Mac index, visit Economist.com/bigmac 82 Obituary Herb Kelleher The Economist January 12th 2019

Continental applied for a restraining order stopping Southwest from taking to the skies, arguing that Texas was perfectly well served by existing airlines. For the next four years, through the state district court in Austin, the state court of civil appeals, the Texas Supreme Court and the US Supreme Court, the big airlines pleaded for injunctions that would kill off the new business. As the airline’s lawyer, and later its general counsel, he laid out its argu- ments and rebuttals. When, the night before one final hearing, an anxious chief executive suggested that a sheriff might show up at the last minute and stop Southwest’s first plane from taking off, Mr Kelleher gave him strict instructions: “You roll right over the son of a bitch and leave our tyre tracks on his uniform if you have to.” The legal battles forged the Southwest culture. Mr Kelleher, who became chairman in 1978 and then also CEO in 1981, was deeply af- fected by the tactics his rivals had used to try to strangle Southwest at birth. It offended the sense instilled in him by his mother that you should treat all people equally, and with respect. And it chal- lenged his beliefs about what America stood for. As he would later tell Kevin and Jackie Freiberg, two academics who studied South- west and went on to write the bestselling “Nuts! Southwest Air- lines’ Crazy Recipe for Business and Personal Success”: “It was an affront to my idealism. If you’re going to let these guys get away with this, it’s a radically different type of country from the one I wanted to believe in.” Southwest became his cause. When one airline ran an ad claim- ing that Southwest was a cheap carrier, he had himself filmed with a bag over his head, saying the airline was prepared to offer the The high priest of ha ha same to any mortified passenger. When another started a price war and halved its Dallas-Houston fare to $13, Southwest countered: pay full price and get a bottle of vodka or whisky in return. When a rival airline complained that Southwest pinched its slogan and be- gan advertising itself as “Just Plane Smart”, he suggested the two chairmen settle the matter over three rounds of arm-wrestling Herb Kelleher, a pioneer of cheap air travel, died on January instead of using lawyers. 3rd, aged 87 Kool cigarette and a glass of Wild Turkey bourbon at hand, he nusually for a man who believed in cutting costs wherever was always ready to tell stories about his airline. How it hired for Upossible, Herb Kelleher, the boss of Southwest Airlines, Amer- attitude; skills, you could always teach. How all its flight atten- ica’s most successful carrier, liked being flexible with trade un- dants wore hotpants. How when it won its first triple crown for ions. In 1994, during discussions over an unprecedented ten-year best on-time performance, fewest customer complaints and agreement that would freeze pilots’ wages for five years in return smallest number of mishandled bags, all its customer-service em- for stock options in the airline, he promised Gary Kerans, presi- ployees were allowed to give up their uniforms and dress casually dent of the pilots’ association, that if the contract went through, he for a year. He put his workers first, ahead of his customers. Fortune would freeze his own salary and bonus for five years as well. Chair- dubbed him the “high priest of ha ha”. man and pilots should get the same treatment. The deal was done. That every-day’s-a-holiday atmosphere would be called brand- Born in New Jersey, he studied English and philosophy at Wes- ing today, and was an important part of the Southwest story. But it leyan University and then law at New York University. It was his hid some hard-headed business decisions. In the 1970s Southwest wife, Joan, whom he met on a blind date, who persuaded him to set bought three brand-new 737-200s that Boeing had been unable to up a law firm in Texas. Southwest Airlines was born, not on the sell in the slump. The airline paid $4m rather than the usual $5m back of a cocktail napkin, as he later liked to boast, but when one of for the planes, and Boeing provided 90% of the finance. Southwest his legal clients, Rollin King, owner of a small commuter airline, used no other aircraft, a boon for servicing and spare parts. It and his banker, John Parker, came to his office. Both men found served no meals; just peanuts. And, to ensure the fastest turn- travelling between Houston, Dallas and San Antonio inconvenient around, it offered no seat assignments. Planes don’t make money and expensive, and thought they could do it better. when they are on the ground. And making money in good times to American aviation in the 1970s was dominated by the hub-and- ride out the lean years was what it was all about; Southwest has spoke approach, pioneered by Delta Air Lines in the belief that the made an annual profit for 45 years on the trot. most efficient way to fill planes was to fly through hub cities and Without Mr Kelleher, there would have been no Michael hoover up passengers. What King and Parker were proposing was O’Leary and Ryanair or Stelios Haji-Ioannou rolling up his sleeves cheap, point-to-point travel using small, convenient airports near at EasyJet. And yet somewhere along the line something was lost. to fast-growing centres. The competition was not other airlines, Cut-price air travel today is endured rather than enjoyed. It has they believed, but cars. After all, the distance between Houston become a hideous blend of zero-hours contracts and excuses to ex- and San Antonio was less than 200 miles, a three-hour journey by tort charges for everything from handbaggage that is deemed too road. Pacific Southwest Airlines had made city-hopping efficient big to failing to check in online. It is hard to imagine today’s airline in California, so why would it not work in Texas? He put up $10,000 workers taking out a full-page newspaper advertisement praising of his own money and on November 27th 1967 he filed Southwest’s their chairman. On Bosses’ Day in 1994, Southwest’s employees did application to fly between the three cities. just that, pitching in an hour’s salary each to raise $60,000. What he hadn’t reckoned on was the airborne competition. “Thanks Herb. For remembering every one of our names…For liste- Within a day, Braniff, Trans Texas (later Texas International) and ning…For being a friend, not just a boss.” 7