NOVEMBER 4TH–10TH 2017

Where next for Catalonia?

Mueller’s misunderstood mission

Trafficking brides to China

Luther at 500: an essay

Social media’s threatto democracy

The Economist November 4th 2017 5

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Volume 425 Number 9065

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Contents continues overleaf

Contents

1

Spain Catalans have accepteddirect rule from Madrid fornow. Time for Spain to holdout the prospect of a new deal:leader, page 12. Governmentintervention and a snapelection have defused, but notsettled, a crisis that goes tothe essence of Spanishdemocracy, page 53. Whendisputes over redistributionfuel separatism, thorny issuesarise: Free exchange, page 78.Javier Cercas probes Spain’sconvoluted history, page 85

On the coverFacebook, Google and Twitterwere supposed to improvepolitics. Something hasgone very wrong: leader,page 11. Once considered aboon to democracy, socialmedia have started to looklike its nemesis, page 19

8 The world this week

Leaders11 The politics of outrage

The threat of social media12 Mueller’s investigation

Filtering out the noise12 Catalonia

After a month of madness13 India’s government

Modi blues14 American health care

Prescription debate

Letters16 On inflation, land reform,

Britain, JohannesVermeer, women, beer

Briefing19 Politics and social media

How the world was trolled

Asia23 Trump’s Asian tour

Fore!24 America and

South-East AsiaMeet and retreat

26 Australian citizenshipNot in parliament

26 Indian politicsTax brake

28 The Kazakh languageApostrophes on the march

China29 Trafficking women

Abductions from abroad31 Banyan

The rise of Wang Huning

United States33 Tax reform

Deducting deductions34 Terrorism in New York

A faint echo34 Investigating Russia

Manafort overboard35 Children’s health

Chipped away

36 Hasidic JewsThe parting of Monroe

37 Texas politicsThus spake Joe

38 LexingtonObama/Trump voters

The Americas39 Venezuela’s debt crisis

Staying afloat, somehow40 Innovation in Canada

Founding Maple Valley42 Bello

Lessons from a Mexican leftist

Essay43 Luther’s reformation

The stand

Middle East and Africa49 Illiberal liberalism

A new kind of Arab despot50 Jews in Morocco

Shalom alaykum51 Land grabs in Syria

Bulldozing over therevolution

51 Politics in KenyaKenyatta’s hollow victory

52 Zimbabwe’s crisisSurviving under Mugabe

Europe53 Catalonia

The man who wasn’t there55 Russia

The ride of the mercenaries56 France’s croissant crisis

Sacré beurre57 Charlemagne

The British ghost

Britain58 The NHS

Policy transplant59 Political donations

Following the money60 Bagehot

The Palace of Pestminster

Robert Mueller To assess thespecial prosecutor’sinvestigation, recall his his jobdescription: leader, page 12.The former Trump campaignchief is indicted. Cue calls tojail Hillary Clinton, page 34

Luther at 500 Protestantismhelped shape the modernliberal West. What does itsrevival mean for the developingworld? Page 43

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6 Contents The Economist November 4th 2017

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Inflation The world economyis gathering momentum—butwhere’s the inflation? Page 71.The big risks may be incorporate, not government,bonds: Buttonwood, page 72

Health-care mergers Shouldregulators block CVS frombuying Aetna? Leader, page 14.Their merger might help curbthe unsustainable rise inAmerican health-care costs,page 63

Bride trafficking to ChinaDemand for wives is fuellingthe abduction of women fromneighbouring countries, page 29

Interstellar travellersThe first voyager to anotherstar may be a nematode or atardigrade, page 80. The firstvisitor from another solarsystem has just been spotted,page 79

International61 Lawsuits against

climate changeNew green advocates

Business63 Health care in America

The right dose?64 Trends in tourism

Fatal attractions65 IKEA and the internet

Frictionless furnishing66 Driving in Myanmar

On the other hand66 Japanese business

The wa forward67 Qatar Airways

Plane diplomacy68 Schumpeter

Making Europe great again

Finance and economics71 Global inflation

Gone missing72 Buttonwood

Bond yields73 Anti-money-laundering

Washing whiter73 The Federal Reserve

Powell empowered?74 Household debt in Asia

Mutable values76 Payments in Japan

A yen for plastic76 Trade deals

The GATT at 7078 Free exchange

Catalonia and fiscalredistribution

Science and technology79 Interstellar travel (1)

Rendezvous with Rama80 Interstellar travel (2)

Life in the fast lane80 Egyptology

Pyramid selling81 Mammoths

Mother knows best82 Military drones

Back to the unicopter

Books and arts83 Joseph Conrad

Globalisation’s firstnovelist

84 Vladimir Putin’s RussiaParsing totalitarianism

85 Catalonian yarnsJavier Cercas’s impostor

85 Living with godsTranscendental meditation

86 JohnsonProper English

88 Economic and financialindicatorsStatistics on 42 economies,plus a closer look atbusiness reforms

Obituary90 Fats Domino

On Rampart and Canal

8 The Economist November 4th 2017

1

A 29-year-old immigrant fromUzbekistan ploughed a pickuptruck into pedestrians along acycle path in New York, killingat least eight people in a terrorattackapparently inspired byIslamic State. The man wasdetained by police after beingshot. Although vehicles havebecome a familiar weapon ofchoice for jihadists in Europe,these are the first fatalities fromsuch an attack in America.

The first charges were laid inthe investigation led by RobertMueller, the special counsellooking into Russian interfer-ence in last year’s election.Paul Manafort, DonaldTrump’s former campaignmanager, and his businessassociate, RickGates, werecharged with conspiracy andmoney-laundering. Bothpleaded not guilty. GeorgePapadopoulos, a junior advis-er on foreign policy in theTrump campaign, pleadedguilty to lying to the FBI abouttrying to forge links with Rus-sian officials.

A judge blocked Mr Trump’sban on transgender peopleserving in the armed forcesfrom coming into effect, at leastuntil a lawsuit brought by agroup ofplaintiffs has beenresolved. The Pentagon iscurrently working out how toput the ban into place.

A pyrrhic victoryUhuru Kenyatta was declaredthe winner in Kenya’s disput-ed presidential election, whichwas boycotted by his mainopponent, Raila Odinga. Turn-out was low at less than 40%,around halfof that in the pollheld in August, which wasannulled by the supreme court

because of irregularities. MrOdinga said the result was asham.

Liberia’s supreme court halteda presidential run-offelectionthat was to be held on Novem-ber 7th, after complaints offraud by a losing candidate inlast month’s first round.George Weah and JosephBoakai are the two candidatesin the run-offvying to replaceEllen Johnson Sirleaf.

Rating agencies criticisedSouth Africa’s latest budget,warning that debt may soar toas much as 60% ofGDP.

Hamas, an Islamist party thattookcontrol ofGaza in 2007,started handing control overthe territory’s border crossingsto the Palestinian Authority aspart of the reconciliation dealbetween the two Palestinianfactions.

Masoud Barzani, the presidentof Iraq’s Kurdish region since2005, resigned in the aftermathofa referendum on indepen-dence that led to Iraqi govern-ment forces taking backcontrolofkey oilfields and the city ofKirkuk.

The fall of LenínEcuador’s ruling Alianza PAISparty kicked out its leader,Lenín Moreno, who is also thecountry’s president. The moveis the latest in a battle betweenRafael Correa, a former presi-dent, and Mr Moreno, who hasdistanced himself from thepopulist party by pursuingreform and building bridgeswith the opposition.

A recently elected governorwas sacked in Venezuela afterhe refused to swear loyalty tothe all-powerful constituentassembly aligned with Presi-

dent Nicolás Maduro’s rulingsocialists. Three oppositionparties announced that theywill boycott municipal elec-tions in December.

A team of international law-yers concluded that a networkofbusinessmen and stateofficials helped plan and coverup the murder in 2016 ofBertaCáceres, an environmentalactivist in Honduras.

Contestants in Peru’s MissUniverse pageant surprisedthe audience by reciting statis-tics about violence againstwomen rather than their bust,waist and hip measurements.

Peaceable diplomacyChina and South Koreaagreed to restore normal rela-tions. The two countries’ tieshave been strained by SouthKorea’s deployment ofanAmerican anti-missile systemknown as THAAD, whichChina describes as a threat toits security. China says itsposition has not changed, butit will ease its pressure onSouth Korean businesses.

China’s internet censorsannounced new regulationsaimed at curbing the spread of“illegal information”. Staffatnews websites will be requiredto undergo training in “theMarxist view of journalism”.Those who fail to promote “apositive and healthy…onlineculture” face dismissal.

The courts in Australia re-moved five MPs from parlia-ment because they hold dualnationality. They includeBarnaby Joyce, the deputyprime minister. His dismissalhas cost the government itsone-seat majority. Mr Joycehas renounced his New Zea-land citizenship and is contest-ing the by-election for his seat.

An official American watch-dog reported that 43% ofAfghanistan was either con-tested territory or under thecontrol of the Taliban, slightlymore than six months ago. TheAmerican army barred it fromreleasing details about thenumbers, casualty rates andreadiness ofAfghan forces.

Spain reasserts control

Spain imposed direct rule onCatalonia, hours after theregion’s parliament had ap-proved a unilateral declarationof independence. Catalonia’spresident, Carles Puigdemont,was stripped ofhis office andfled to Brussels to escape pro-posed charges ofsedition andrebellion, which could carry a30-year jail sentence. Newelections have been set forDecember 21st, one reasonwhy there was little protestagainst Madrid’s action.

In Britain, Sir Michael Fallonresigned as defence secretaryamid allegations of inappro-priate sexual behaviour, ad-mitting that his conduct had“fallen short”. Parliament isawash with rumours andspeculation ofmany moreaccusations from women, andsome men, ofsexual harass-ment by MPs. Britain’s deputyprime minister has also beenaccused of inappropriatebehaviour by a Tory activist,which he denies.

France ended a two-year stateofemergency, imposed follow-ing the terror attackon Paris in2015. A tough new security lawis now in place.

Cycle rackedAmsterdam’s district courtruled that officials can banbeerbikes, a popular way fortourists to enjoy occasionssuch as stag parties, ruling thatthey are a public-order offence.Operators of the beer-chug-gers’ chariots successfullychallenged a previous ban. Butnow the city’s residents, fed upwith freewheeling, drunkenlouts on their streets, haveworked in tandem to pressurethe council to act. There is noindication that it will back-pedal on this latest ruling.

Politics

The world this week

The Economist November 4th 2017 The world this week 9

Other economic data and newscan be found on pages 88-89

The Bank of England raised itsbenchmark interest rate by aquarter ofa percentage pointto 0.5%, its first rate increase ina decade. After the Brexitreferendum last year the bankcut the rate from 0.5% to 0.25%,but inflation, at 3%, is now wellabove the bank’s 2% target andthe economy is proving to bemore robust than expected. Forexample, data out this weeksuggest that manufacturing isthriving.

Markets were unfazed in theirreaction to the first steps by theEuropean Central Bank toease its monetary-stimulusprogramme. On October 26ththe ECB announced that it willcut in half the amount ofbonds it buys each month to€30bn ($35bn) from January,but said its programme re-mained open-ended. MarioDraghi, the ECB’s president,stressed that this was not“tapering…just a downsize”.

America and the euro zonereported solid economicgrowth for the third quarter.America’s GDP increased at anannualised rate of3%. Theeconomy has now expandedby 3% or more in two consec-utive quarters for the first timesince 2014. The euro zonerecorded growth of2.5% yearon year.

The new normal?Oil prices continued to rally,buoyed by support from offi-cials at OPEC and in Russia forextending the deal to cut out-put that has reduced a globalglut in the commodity. Theprice ofBrent crude rose by 9%in October and this weekwastrading close to $62 a barrel,the highest level in two years.

BP said it was planning itsoperations on the expectationthat oil prices will averagebetween $50 and $55 a barrelnext year. No longer hinderedby payouts related to the Deep-water Horizon oil spill in 2010,the oil company is reportinghealthy earnings again, dou-bling its headline profit in thelatest quarter to $1.9bn. It has

commenced a share buy-backprogramme for the first timesince 2014.

Carsten Kengeter decided tostep down as chiefexecutiveofDeutsche Börse at the endof the year, amid allegations ofinsider trading. Prosecutors areinvestigating him over sharesthat he bought in the Germanexchange before it announcedthat it was seeking a mergerwith the London StockEx-change, a deal that eventuallyfell apart. Mr Kengeter deniesany wrongdoing.

Peter Hain, a Labour peer, toldthe House ofLords in Britainthat he had information aboutillicit transfers of large sums ofmoney out ofSouth Africamade through a British bankby the Gupta business family,which is at the centre ofapolitical scandal in the coun-try. Lord Hain has sent a letterto the Treasury asking it toinvestigate the bank, which isreported to be HSBC.

The electronic industry’s hugeappetite for memory chipsdrove Samsung Electronics toanother bumper quarterlyprofit. Its semiconductor busi-ness made an operating profitof10trn won ($8.8bn) from Julyto September, up from 3.4trnwon in the same three months

last year. Meanwhile, theSouth Korean company shookup its senior management,replacing all three co-chiefexecutives. The de facto headofSamsung Group, Lee Jae-yong, was convicted in Augustofcorruption.

CVS Health, America’s largestchain ofpharmacies, wasreported to be in talks to buyAetna, a big health-insurer, for$66bn. An important part ofCVS’s business is as a pharma-cy-benefit manager, negotiat-ing drug prices for healthplans. If the pair strike a deal itwill face intense scrutiny fromtrustbusters.

In a deal that creates America’slargest homebuilder, Lennaragreed to buy CalAtlantic, asmaller competitor, for $9.3bn.The combined company willoperate in 21states.

Huntsman, an Americanchemical company, andClariant, a Swiss rival,scrapped their $20bn pro-posed merger, following oppo-sition from activist investors.

Tesla Motors pushed back itstarget ofproducing 5,000Model 3 cars a week, from theend of this year to March. TheModel 3 is the electric-carmak-er’s newest and cheapest

vehicle. It ran into productionsnags during the third quarter,which the company blames onassembling battery packs at itsfactory in Nevada.

Social that

Executives from Facebook,Google and Twitter weregrilled in Congress about whythey had not spotted the politi-cal ads from Russian provoca-teurs placed on their websitesduring last year’s election. Thepoliticians demanded moreaction from the social-mediagiants to monitor such activity.MarkZuckerberg (who was notat the hearings) said he was“dead serious” about rootingout “bad content”, but warnedthat Facebook’s costs wouldrise sharply as a result. He wasspeaking as Facebookreporteda year-on-year 79% jump inprofit for the third quarter.

Business

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The complexity of global currenciesevolved 12-fold over the last decade.

The Economist November 4th 2017 11

IN 1962 a British political scien-tist, Bernard Crick, published

“In Defence of Politics”. He ar-gued that the art of politicalhorse-trading, far from beingshabby, lets people of differentbeliefs live together in a peace-ful, thriving society. In a liberal

democracy, nobody gets exactly what he wants, but everyonebroadly has the freedom to lead the life he chooses. However,without decent information, civility and conciliation, societ-ies resolve their differences by resorting to coercion.

How Crick would have been dismayed by the falsehoodand partisanship on display in this week’s Senate committeehearings in Washington. Not long ago social media held outthe promise of a more enlightened politics, as accurate infor-mation and effortless communication helped good peopledrive out corruption, bigotry and lies. Yet Facebook acknowl-edged that before and after last year’s American election, be-tween January 2015 and August this year, 146m users may haveseen Russian misinformation on its platform. Google’s You-Tube admitted to 1,108 Russian-linked videos and Twitter to36,746 accounts. Far from bringing enlightenment, social me-dia have been spreading poison.

Russia’s trouble-making is only the start. From South Africato Spain, politics is getting uglier. Part of the reason is that, byspreading untruth and outrage, corroding voters’ judgmentand aggravating partisanship, social media erode the condi-tions for the horse-trading that Crick thought fosters liberty.

A shorterattention spa...oh, lookat that!The use of social media does not cause division so much asamplify it. The financial crisis of2007-08 stoked popularangerat a wealthy elite that had left everyone else behind. The cul-ture warshave splitvotersby identity rather than class. Noraresocial media alone in their power to polarise—just look at ca-ble TV and talkradio. But, whereas FoxNews is familiar, social-media platforms are new and still poorly understood. And, be-cause ofhow they work, they wield extraordinary influence.

They make their money by putting photos, personal posts,newsstoriesand ads in frontofyou. Because theycan measurehow you react, they know just how to get under your skin (seepage 19). They collect data about you in order to have algo-rithms to determine what will catch your eye, in an “attentioneconomy” that keeps users scrolling, clicking and sharing—again and again and again. Anyone setting out to shape opin-ion can produce dozens of ads, analyse them and see which ishardest to resist. The result is compelling: one study found thatusers in rich countries touch their phones 2,600 times a day.

Itwould be wonderful ifsuch a system helped wisdom andtruth rise to the surface. But, whatever Keats said, truth is notbeauty so much as it is hard work—especially when you dis-agree with it. Everyone who has scrolled through Facebookknows how, instead of imparting wisdom, the system dishesout compulsive stuffthat tends to reinforce people’s biases.

This aggravates the politics of contempt that took hold, in

the United States at least, in the 1990s. Because different sidessee different facts, they share no empirical basis for reaching acompromise. Because each side hears time and again that theother lot are good for nothing but lying, bad faith and slander,the system has even less room for empathy. Because peopleare sucked into a maelstrom of pettiness, scandal and outrage,they lose sight ofwhat matters for the society they share.

This tends to discredit the compromises and subtleties ofliberal democracy, and to boost the politicians who feed offconspiracy and nativism. Consider the probes into Russia’selection hack by Congress and the special prosecutor, RobertMueller, who has just issued his first indictments. After Russiaattacked America, Americans ended up attacking each other(see next leader). Because the framers ofthe constitution want-ed to hold back tyrants and mobs, social media aggravateWashington gridlock. In Hungary and Poland, without suchconstraints, they help sustain an illiberal, winner-takes-allstyle of democracy. In Myanmar, where Facebook is the mainsource of news for many, it has deepened the hatred of theRohingya, victims ofethnic cleansing.

Social media, social responsibilityWhat is to be done? People will adapt, as theyalways do. Asur-vey this week found that only 37% of Americans trust whatthey get from social media, half the share that trust printednewspapers and magazines. Yet in the time it takes to adapt,bad governments with bad politics could do a lot ofharm.

Society has created devices, such as libel, and ownershiplaws, to rein in old media. Some are calling for social-mediacompanies, like publishers, to be similarly accountable forwhat appears on their platforms; to be more transparent; andto be treated as monopolies that need breaking up. All theseideas have merit, but they come with trade-offs. When Face-book farms out items to independent outfits for fact-checking,the evidence that it moderates behaviour is mixed. Moreover,politics is not like other kinds ofspeech; it is dangerous to askahandful of big firms to deem what is healthy for society. Con-gress wants transparency about who pays for political ads, buta lot of malign influence comes through people carelesslysharing barely credible news posts. Breaking up social-mediagiants might make sense in antitrust terms, but it would nothelp with political speech—indeed, by multiplying the num-ber ofplatforms, it could make the industry harder to manage.

There are other remedies. The social-media companiesshould adjust their sites to make clearer if a post comes from afriend or a trusted source. They could accompany the sharingof posts with reminders of the harm from misinformation.Bots are often used to amplify political messages. Twittercould disallow the worst—or mark them as such. Most power-fully, they could adapt their algorithms to put clickbait lowerdown the feed. Because these changes cut against a business-model designed to monopolise attention, they may well haveto be imposed by law or by a regulator.

Social media are being abused. But, with a will, society canharness them and revive that early dream of enlightenment.The stakes for liberal democracy could hardly be higher. 7

Do social media threaten democracy?

Facebook, Google and Twitterwere supposed to improve politics. Something has gone verywrong

Leaders

12 Leaders The Economist November 4th 2017

1

ACCORDING to NATO’shandbook, the preferred

tactics in Russian informationwarfare can be summarised as“dismiss, distort, distract, dis-may”. That is a fair descriptionof the response in Americawhen Robert Mueller, the spe-

cial counsel, unsealed charges against Donald Trump’s formercampaign manager, Paul Manafort, and two others. The presi-dent’s most enthusiastic supporters denounced Mr Mueller,saying he should be fired or, failing that, redirected to investi-gate Hillary Clinton instead. Meanwhile, some of the presi-dent’sopponents tookMrMueller’smove as the prelude to im-peachment. Both views are wrong and unhelpful.

To think clearly about what Mr Mueller is up to, it helps torecall the terms of his appointment. The special counsel hasbeen told by the Justice Department to investigate links or co-ordination between the Russian government and individualsassociated with Mr Trump’s presidential campaign, and anyother matters that arise directly from that endeavour. Unlikethe three separate congressional inquiries into Russian gov-ernment meddling in last year’s election, Mr Mueller is autho-rised to prosecute anyone who committed a federal crime (seepage 34). The purpose of Mr Mueller’s investigation is not totake down Mr Trump. It is to make it harder for foreign govern-ments to interfere in future elections.

That is an aim all Americans should be able to unite be-hind. Instead, MrMueller’sprobe hasbecome the latest territo-ry for an uncomprehending shouting match between parti-sans. The keyboard warriors at the Internet Research Agencyin St Petersburg, Russia’s best-known troll farm, might like toimagine that this is all their doing. In reality, though, the Rus-sian meddling in America which, in the judgment of the intel-

ligence services, took place last year is now being followed byopen season for Americans to turn on each other.

To gauge the degree of partisan intoxication, recall that, asrecently as 2012, the Republican presidential candidate identi-fied Russia as America’s number one foreign-policy threat. MrTrump’s election has turned this on its head. Republicans arenowhalfas likely to say thatRussia posesa big threat to nation-al security as Democrats are. Around 35% of Republicans ex-press “confidence” in Vladimir Putin. No, that is not a misprint.The power of partisan thinking has created a favourable audi-ence for the idea offiring Mr Mueller.

The MuellermeterHowever, getting rid of Mr Mueller would be an act of presi-dential self-harm (unless, of course, Mr Trump would suffereven more from the truth comingout). Had MrTrump not firedJamesComey, MrMueller’spredecessorashead ofthe FBI, ear-lier this year, there would be no special counsel’s investiga-tion. If the president were to sack Mr Mueller, too, there is achance that he would once again set off a chain of events hecannot predict or control. IfMr Trump acts against Mr Mueller,Congress must reinstate him.

Step back, and the special counsel’s investigation looks likea test case for the country’s political system. In a staged democ-racy like Russia’s, someone who chaired the president’s victo-rious election campaign would never be arrested for money-laundering by an independent prosecutor just a year later, asMr Manafort has been. Even in America the separation ofpowers, the principle that no citizen is above the rule of law,and the integrity of future elections are all now being put un-der strain. Roll over on any of them and the information war-riors working for the Kremlin, who want the world to believethat America’s democratic institutions are no different fromRussia’s, really would have something to celebrate. 7

Robert Mueller’s investigation

Filtering out the noise

When thinking about the special prosecutor’s investigation, start byrecalling his job description

ASECESSIONIST leader fliesinto exile, seeking protec-

tion after being threatened witha 30-year prison sentence for se-dition and rebellion. In the capi-tal the government takes emer-gency powers, suspending aregional parliament after it ille-

gally declares independence, assuming direct control of its po-lice and civil service. Pinch yourself. This is not some poor, de-crepit country but, incredibly, a modern western Europeandemocracy—Spain.

Nobody emerges well from the sorry tale of arrogance, in-

flexibility and even violence in Catalonia (see page 53). Al-though the immediate crisis seems, thankfully, to be over, theimpact of the October madness will be felt for years to come.Nearly 2,000 businesses have moved their headquarters outof Barcelona and other Catalan cities. For many people, Span-ish politics has become harsher and more divisive than at anytime since the death of the dictator, Francisco Franco, in 1975.

How to repair the damage? The first thing is to recognisethat there have been grave faults on both sides. The worst mis-takes have been those of Carles Puigdemont, the president ofCatalonia until he was removed on October 27th. His extra-constitutional referendum, held on October 1st, was legallyflawed even in its own terms, conceived without proper Cata-

Catalonia

After a month of madness

Catalans have accepted direct rule from Madrid fornow. Time forSpain to worktowards a newdeal

The Economist November 4th 2017 Leaders 13

1

2

THE change in mood is re-markable. Earlier this year

Narendra Modi, India’s primeminister, had an airofinvincibil-ity. His government, althoughmore than halfway into its five-year term, seemed more popu-lar than ever. In March his Bha-

ratiya Janata Party (BJP) won the most lopsided electoral vic-tory since the 1970s in the country’s most populous state, UttarPradesh. In July he launched a reform that had eluded his pre-decessors for decades: a national goods-and-services tax(GST). Later that month he persuaded an ally of the main op-position party, Congress, to defect to the BJP’s camp, securingcontrol ofyet another state government.

Until recently another landslide at the next national elec-tion in 2019 seemed inevitable. The BJP is still likely to win, butMr Modi is losing his sheen—and for that, he has only himselfto blame (see page 26). All governments have their ups anddowns. Mr Modi’s recent setbacks, however, stem in large partfrom his preoccupation with presentation over substance.

Startwith the economy. Growth hasslowed, from 9.1% year-on-year in the first quarter of last year to 5.7% in the secondquarter of this year. That is in part because ofhis policy of “de-monetisation”, in which 86% of the banknotes in circulationwere abruptly voided. Mr Modi presented it as a crushingblow to gangsters and tax-dodgers, but in fact it caused great

hardship and disruption, without any clear benefit.The shambolic implementation of the GST is likely to make

matters worse. The government convened a midnight sessionof parliament to herald its adoption—something that had pre-viously been staged only to mark India’s independence andassociated anniversaries. Mr Modi triumphantly declared theGST a “good and simple tax”. But he did not listen to his ownadvisers’ suggestions on how to make it so. He plumped for sixrates instead of three, burying small businesses in paperworkand allowingpolitics to seep into the rules (the government re-cently cut the rate on khakras, a popular snack from his homestate ofGujarat, from 12% to 5%). He is now suffering the conse-quences, as businessmen across India howl at the complexity.

Unfunny businessIt does not help that the government bridles at criticism andharries its critics. Media firms are anxious not to offend it; jour-nalists who take it on often lose their jobs. The press has beenaskingawkward questions about the finances ofa firm ownedby the son of Amit Shah, the BJP’s number two; they weregreeted with rebukes from ministers and a lawsuit. Even com-edians who imitate Mr Modi have mysteriously disappearedfrom the airwaves. The resulting culture of adulation meansthat the government’s proposals seldom receive the sort ofscrutiny and debate that might improve them.

In fact, the BJP is not that interested in policy. It offers votersmainly distraction. The new government in Uttar Pradesh, for

India’s superficial government

Modi blues

The prime ministerfocuses too much on grandstanding, and not enough on substance

lan parliamentary debate. In the brief campaign Mr Puigde-mont failed to explain how independence would come about,falsely suggesting that Catalonia could swiftly become an EUmember. That idea has been shot down in Brussels. Finally, heissued a hollow declaration of independence, even though itwas clear that this would force the hand of the central govern-ment in Madrid. Having cooked up a mess, Mr Puigdemonthas fled the scene and left others to clean it up.

But the Spanish government has made mistakes, too. Mari-ano Rajoy, the prime minister, inflamed the situation on Octo-ber1st, when he sent in police to breakup MrPuigdemont’s ref-erendum, injuring peaceful Catalans taking part in ademocratic exercise that he would have been better advised toignore. Although he was right to respond to the declaration ofindependence by suspending the Catalan government, the at-temptbythe attorney-general to threaten MrPuigdemont witha long prison term is another error. Mr Rajoy is also guilty ofthe original blunder that set the course for today’s collision.Back in 2006, when he was leader of the opposition, he de-manded revisions to Catalonia’s autonomy statute, rollingback concessions that had given the Catalan language prefer-ential status and had defined Catalonia as a nation. The result-ing sense ofbetrayal galvanised the secessionists.

Oflate, MrRajoy has learned to temperhis firmness. He hassought consensus with opposition parties in Madrid and ex-pressed a readiness to review the constitution. In reimposingcentral authority on Catalonia, he ensured that direct rule

would be as short as possible by calling a snap election for De-cember 21st, sparing Catalonia’s streets from protests.

Mr Rajoy now has a valuable breathing space before De-cember’s vote. He must use it. The causes ofthe discontent willnot suddenly disappear. A large minority of Catalans are un-happy with the current dispensation and want to break away.So a political solution is needed, not merely a legal one. Mr Ra-joy needs to sketch out the contours of a new deal he could of-fer in future talks. They will take time and the courage to con-front his own party; any new constitutional settlement willhave to involve all ofSpain. For now, Mr Rajoy should indicatea willingness to offer concessions in those talks, These couldinclude something like a return to the 2006 statute; mecha-nisms to let Catalonia, one of Spain’s wealthiest regions, keepmore of its tax revenues; and the possibility ofa future referen-dum on independence after a new deal has been concluded.

How to support loyalistsSome will say that talk of concessions would reward bad be-haviour. In fact, it would give voice to the majority ofCatalanswho want to remain in Spain. That is what Britain did withScotland and Canada with Quebec. If Mr Rajoy can woo thedecisive middle ground—the perhaps one-third of Catalanswho want reform rather than secession—he will handily seeoffthe separatists at the ballot box. Ifnot, they might even winagain, and claim anothervictory for independence. That couldportend an even deeper crisis after December. 7

14 Leaders The Economist November 4th 2017

2

AMERICA has a competitionproblem. Market concentra-

tion has risen in more thanthree-quarters of industriessince the late 1990s. Concentra-tion has led to higher profits andhigher returns for shareholdersat the expense of consumers.

Antitrust authorities have become more supine: between 1970and 1999, regulators brought an average of16 cases a year in or-der to prevent big firms from becoming even bigger; between2000 and 2014, that number fell below three.

Health care is one ofthe industries that has been marked bybouts of consolidation. The annual number of hospital merg-ers in America doubled between 2005 and 2015; the nationalmarket share ofthe four largest insurerswent from 74% in 2006to 83% in 2014. Trustbusters have recently showed more teeth.In Februarya federal judge blocked a proposed tie-up betweenAetna and Humana, two health insurers. Antitrust authoritiespruned an acquisition byWalgreensofRite Aid, America’s sec-ond- and fifth-largest pharmacies respectively.

They may soon face anotherbig test. CVS Health, the largestpharmacy, is reportedly in talks to buy Aetna for $66bn (seepage 63), in what would be the country’s biggest-ever health-insurance deal. At first glance, it is hard to see why trustbusterswould wave through this deal if they have balked at others.But lookcloser and the picture becomes more complex.

Trustbusters have been clamping down on “horizontal”mergers between direct rivals, such as Aetna and Humana.The CVS-Aetna deal would be a different animal. It is an exam-ple of “vertical integration”, in which separate bits of a supplychain are brought together under one roof. This tie-up wouldreach across three distinct layers of the health-care industry:the retail pharmacies for which CVS is famous; the pharmacy-benefit managers (PBM), intermediaries which negotiate drugprices on behalfofmedical plans and whose numberagain in-cludes CVS; and the insurers, like Aetna. Supporters of the dealargue that aligning the interests of insurers and pharmacieswould reduce costsand improve life forconsumers. An insurerthat could send patients to walk-in clinics of the sort CVS ownswould be better placed to monitor and improve results.

Antitrust types are usually less worried by the vertical inte-gration of powerful firms than they are by horizontal mergersbetween them. The more market power a firm has, the greaterits ability to set prices above the level that would prevail in acompetitive market. If two such firms exist along a supplychain, prices are inflated at each stage. A tie-up between sup-plier and customer can solve this problem of “double margin-alisation”. As a result, vertical integration can achieve lowerprices for consumers.

In the case of CVS-Aetna, the incentive for the pharmacy-benefit manager to fatten its profits would disappear. Thequestion then is would that benefit accrue to the consumer?That depends on whether firms are dominant in their respec-tive markets. The benefits to consumers of a vertical mergerdisappear if one of the parties has a monopoly. The proposeddeal between AT&T and Time Warner, for instance, fails thistest. The monopoly that AT&T wields as a broadband providerin many parts of America means that rivals to Time Warnerhave no simple options for getting their content distributedthere. Uncontested markets would have a similar impact onthe CVS-Aetna deal: a combined entity would be free to restrictinsured customers to CVS medications and clinics, for exam-ple, if it had no rivals to fear.

Bitterpill orbetterpill?That seems unlikely. CVS has about 23% of the pharmacy mar-ket, and 24% of the PBM market; Aetna has about 6% of the in-surance market. And more competition may be on the way inthe pharmacy business: the prospective entry of Amazon liesbehind CVS’s hunt for Aetna. But the deal would require closescrutinyand mayneed conditionsattached. Aproposed agree-ment with Anthem, another insurer, which would give CVS aneven bigger slice of the PBM pie would need to be ditched. Andthe local picture matters. In the median American state, for ex-ample, the two largest health insurers have 66% of the market.Trustbusters might need to insist on the sale of some local as-sets to smaller rivals before approving a tie-up.

Make no mistake, America’s competition problem is real,and its messed-up health-care system would not be fixed byany single deal. But the bar to blocking a vertical tie-up likeCVS-Aetna is high. It is not obvious that this bar is met. 7

American health care

Prescription debate

US hospital mergersNumber

0

40

80

120

2005 07 09 11 13 15

Should regulators blockCVS Health from buying Aetna?

example, has painted buildings and buses saffron—a shade as-sociated with Hinduism—and picked fights with Muslims,leaving the Taj Mahal (built by a Muslim emperor) off a list ofthe state’s main attractions.

The party’s overriding focus is extending its own authority.Earlier this year the defence minister, Manohar Parrikar, re-signed to become chief minister of the tiny state of Goa. TheBJP had lost ground there in recent state elections, and the al-lies it needed to form a government insisted they would join itonly if Mr Parrikar, a former chief minister, returned. The fi-nance minister, forwhom making the GST workwasapparent-ly not a full-time job, took on the role of defence minister aswell for the next six months—a period of tension with both

China and Pakistan. In other words, a government that pridesitself on its muscular nationalism left defence policy rudder-less amid rows with its main military rivals, simply to retainpower in a state with just 0.1% of the population.

Politically, relentless electioneering has served Mr Modiwell. The BJP and its allies control 18 of India’s 29 states; justone big one is left with Congress. But the drawbacks, in termsof inept and inconsistent policymaking, are beginning to tell.There is even talkthat the partymayhave a fighton itshands inelections in December in Gujarat. If Mr Modi wants to keepwinning votes, he must concentrate not just on campaigns; hemust also show that he knows how to run the country. Sooneror later, voters will tire ofgrandstanding. 7

Cape CodTime beyond time.

TIME , A HERMÈS OB JECT.

16 The Economist November 4th 2017

Letters are welcome and should beaddressed to the Editor at The Economist, The Adelphi Building,1-11 John Adam Street, London WC2N 6HTE-mail: letters@economist.comMore letters are available at:Economist.com/letters

When the price is right

You are right to argue that itwould be clever for centralbanks to adopt a temporaryprice-level target if inflation istoo low, the lower bound oninterest rates has been reachedand a recession hits (Freeexchange, October 21st). Thatidea first came from WilliamWhite, a former economicadviser at the Bankfor Interna-tional Settlements, and figuresprominently in the bank’s 69thannual report, from June 1999.

Bill wrote the report withthe assistance ofa staffteam (Ihelped him with the chapteron monetary policy). He wasworried that falling prices inJapan would engender expec-tations offurther pricedeclines and raise real interestrates. To shift expectations, heargued that central banksshould make up any priceshortfalls by switching to aprice-level target. To be cred-ible, the possibility ofsuch aswitch would have to beannounced well in advance ofprices falling.

Although Bill is best knownfor warning before the finan-cial crisis that rapid creditgrowth, rising leverage andopaque markets would end intears, those who worked forhim can testify that that wasonly one ofhis many insightfulanalyses.STEFAN GERLACHFormer deputy-governor at theCentral Bank of IrelandZurich

Land reform in Asia

Noting the connectionbetween equitable, high-yieldhousehold farming andsuccessful economic devel-opment, Banyan (October14th)lauded Japan for its early andpeaceful land-reformprogramme in 1945 and 1946,carried out under Americanoccupation.

In that same period NorthKorea conducted what was atfirst a very successful, andpeaceful, land-reformprogramme using little morethan the remarkable persua-sive powers ofKim Il Sung. Ifand when Kim Jong Unresolves the political chal-

lenges that face his country,and continues incipient movesto de-collectivise agricultureand return to the high-yieldhousehold farming his grand-father started with, it is likelythat agriculture will underpinanother of those growth “mir-acles” that Banyan praised.

In Ethiopia and Rwanda,meanwhile, land reforms andinfrastructural, extension andfinancing support for high-yield household farming areunderpinning the best devel-opment stories in Africa today. JOE STUDWELLCambridge, Cambridgeshire

Land reform has indeedplayed an important role inAsia’s leading developmentsuccesses, including, as Ban-yan observed, Japan, Taiwan,South Korea and mainlandChina. But the list is not com-plete without Vietnam, wherethe successful “land to thetiller” programme in the southfrom 1970 to 1973 ultimately ledthe pragmatists to breakup allcollective farms.

The resulting agriculturedominated by small farmersshowed farm productivity andincome gains similar to thosein China.ROY PROSTERMANFounderLandesaSeattle

Efficiency test

I would venture that thecurrent Mr Bagehot confuseshis predecessor’s “efficient”element of the British constitu-tion—the prime minister,government ministries and soon—with smooth administra-tion (Bagehot, October 21st). In1877, the year that WalterBagehot died, Irish nationalistsembarked on a political questfor Irish home rule that overthe next 50 years reflected thedeeply held aspirations ofalarge portion of the Irish pop-ulation. This was somethingthat the “efficient” part of theconstitution proved unable toresolve, leading to non-parlia-mentary and sometimes viol-ent means to find a partialsolution.

Today, some political issuesrequire big answers. Managing

the status quo is sometimesnot enough, and an unsustain-able status quo needs to beremade. The Brexit referendumwas another extra-parliamen-tary action that involved thewidest participation by thepublic on an issue ofprofoundconstitutional importance, onewhich the efficient machineryofgovernment also had notbeen able to solve. JONATHAN MOORELondon

Rescued from obscurity

The mistaken notion ofJohannes Vermeer as an isolat-ed genius cannot simply beascribed to “a 19th-centuryart-historian” who nicknamedhim “the Sphinx ofDelft”(“Answering the riddle”, Octo-ber14th). The anonymousart-historian in question wasin fact Théophile Thoré, apolitical journalist, art criticand historian best-known forhis rediscovery ofVermeer.

His pioneering researchinto Vermeer began in the late1850s during his exile fromFrance at a time when onlyabout five or six paintingssecurely attributed to Vermeerwere generally known. Recog-nising Vermeer’s exceptionalartistic qualities, Thoré waspuzzled that so few paintingswere identified and that virtu-ally nothing was known abouthis life. This mysterious pauci-ty of information about Ver-meer led to Thoré’s sobriquetmon Sphinx.

Thoré’s championing of theartist prompted the rise inVermeer’s posthumous histori-cal and critical fortunes, but henever presented Vermeer as alone genius, isolated from hiscontemporaries. On the con-trary, Thoré studied Vermeer inthe context ofother17th-cen-

tury Dutch genre painters,such as Gabriël Metsu, Gerardter Borch and Pieter de Hooch.The difference was that manyofVermeer’s superb paintingshad been variously wronglyattributed to these contempo-raries, and his identity hadbecome unjustly neglected.Vermeer was an exceptionalartist, but not a lone genius.FRANCES SUZMAN JOWELLIndependent art-historianLondon

Equal before the law

The news about the sexualabuse ofwomen in the work-place (“Sex and power”, Octo-ber 21st) made me reflect on aninitiative that male politiciansin America might want toreconsider to show the otherhalf that we’re disgusted bywhat’s happening: reintroducethe proposed Equal RightsAmendment to the constitu-tion. This was front-page newsin the 1970s, passing Congressbut just falling shy ofratifica-tion in the states. It declaresthat “Equality of rights underthe law shall not be denied orabridged by the United Statesor any state on account ofsex.”Its time is now. PAUL FEINERGreenburgh, New York

A lifestyle choice

Oliver Reif remarked that“telling Americans to buyfewer guns is like telling Ger-mans to drink less beer” (Let-ters, October14th). Germansare drinking less beer. From1980 to 2016 annual consump-tion per head drooped from146 litres to 104. This probablyisn’t because ofexceptionallyrational behaviour on the partofGermans. I guess it is rathera lifestyle issue. Maybe that’sthe angle to try for reducinggun deaths in America as well. KARL BARTELSPotsdam, Germany 7

Letters

17

The Economist November 4th 2017

UNFPA, the United Nations Population Fund, is the lead UN agency for delivering a world where every pregnancy is wanted, every childbirth is safe and every young person’s potential is fulfi lled.

• Do you have the experience and passion to lead a dynamic, international, rights-based organisation?

• Can you advocate for the rights of young people and women to make informed decisions about their sexual reproductive health?

• Are you a catalyst for change, action, partnership and innovation?

If you have answered yes, UNFPA invites you to apply to the position of:

Deputy Executive Director for Programme (DED-Programme)at the Assistant Secretary General (ASG) level

Our Strategic Plan focuses on achieving universal access to sexual and reproductive health and reproductive rights, and has three transformative results to be reached by 2030: end preventable maternal deaths, end the unmet need for family planning, and end gender-based violence and harmful practices. To lead our work in delivering on the 2030 Agenda for Sustainable Development and contribute to the Secretary General’s vision for UN reform, UNFPA is seeking a dynamic leader for the DED-Programme position who can manage a diverse portfolio and drive collaboration with governments, UN and bilateral agencies, civil society and the private sector to make a positive difference in the lives of billions of people. How to ApplyPlease visit our job website at: http://www.unfpa.org/DED-P and if you wish to be considered for this position please upload your CV and a supporting letter (in MS Word) by Monday, 20 November, 2017 5pm EST. SRI-Executive has been retained by UNFPA to evaluate all candidate applications received for this position. All information will be kept in the strictest confi dence, as we pride ourselves on professionalism and confi dentiality.

JOIN A NEW GENERATION OF LEADERSHIP

Executive Focus

18

The Economist November 4th 2017

SECRETARY GENERAL

The International Chamber of Commerce (ICC) is recruiting a Secretary

General to lead the work of the World Business Organization based in

Paris.

About ICC

ICC is the world’s largest business organization with a network of over 6 million members in more than 100 countries. It works to promote international trade, responsible business conduct and a global approach to regulation through a unique mix of advocacy and standard setting activities—together with market-leading dispute resolution services.

ICC is the leading voice of global business on the international stage. In 2017, ICC became the fi rst private sector organization to be granted Observer Status at the United Nations General Assembly and has major roles in other intergovernmental forums and processes.

The role

Reporting to ICC’s Executive Board, the Secretary General is responsible for the strategic leadership of this unique global organization—from day-to-day governance through to external representation with the highest-levels of government and business.

ICC seeks a dynamic chief executive who has successfully led a major international business, organization or initiative—ideally with extensive experience working with multilateral organizations on economic policy issues.

Applicants are invited to visit our web page for more information on the

role requirements: https://iccwbo.org/secretarygeneral.

Deadline: 24 November 2017.

The Centre for Progressive Policy is a new think tank, which will launch in early 2018. The Centre believes that, within the framework of a market economy, there is a vital role for government to combine economic effi ciency, individual liberty and social justice. The Centre will help to identify key policies to promote these objectives, and will seek to infl uence policy makers and support stakeholders to implement them.

The Centre is looking to hire four senior analysts to build and lead a series of research areas, and two data and economic analysts to support this ambitious programme:

• Senior Analyst - Productivity and Trade (Ref: 1006)• Senior Analyst - Rethinking the welfare state (Ref: 1007)• Senior Analyst - Redesigning Britain’s approach to managing

public fi nances (Ref: 1008)• Senior Analyst - Regulation of natural monopolies (Ref: 1009)• Data & Economic Analyst (Ref: 1005)

Successful candidates will have excellent quantitative skills, capable of devising innovative research methods to bring new light onto public policy issues. Candidates should also have good qualitative skills and be adept at communicating their insight for specialist and non-specialist audiences. An interest in the role and complexity of government policy to effect positive economic and social change is essential.

The Centre for Progressive Policy builds on the initial success of the Centre for Progressive Capitalism. Joining at this start-up phase offers a rare and exciting opportunity to help shape the new Centre’s strategic direction and culture.

For further details see: http://progressive-capitalism.net/careers/

Centre for Progressive Policy

INTERNATIONAL BANK SUPERVISION ADVISORS(SPANISH SPEAKING)

The Department of the Treasury, Offi ce of Technical Assistance (OTA) is recruiting

individuals on a competitive basis to serve as resident and/or intermittent (short-

term) advisors, under personal services contracts, for its Banking & Financial

Services Program. This recruitment is for assignments in the Western Hemisphere and signifi cant international travel is required.

The Banking & Financial Services Program is charged with promoting fi nancial

sector development that effi ciently intermediates between savers and investors.

To achieve this, the program works with central banks, ministries of fi nance,

banking regulatory and supervision agencies, deposit insurance agencies, banking

associations, and related entities in countries with emerging or transition economies.

Treasury is seeking candidates who possess expertise in banking supervision

(on-site and off-site). Ideal candidates would have experience with the Offi ce of

the Comptroller of the Currency, Federal Reserve System, FDIC, state banking

commissions/departments, or other regulatory agencies overseeing commercial

banking sectors. Professional level fl uency in Spanish is required. Prior overseas

experience working in challenging environments would be a distinct advantage, but

is not mandatory.

Candidates must be U.S. citizens.

SALARY: Salaries will be negotiated in accordance with program regulations based

on demonstrated salary history. The salary ranges are from $63.14 to $82.42 per

hour. Overseas benefi ts are provided as allowed by federal regulations. Successful

applicants must be able to obtain medical and security clearances. If selected, the

applicant will be required to complete OGE fi nancial disclosure forms.

HOW TO APPLY: For more details and how to apply visit:

www.fbo.gov, search Solicitation # 2032K818R00001.

For more information about OTA visit: http://go.usa.gov/wyAB

The U.S. Government is an Equal Opportunity Employer.

The Johns Hopkins University seeks to appoint the inaugural Director of the SNF Agora Institute at JHU, a collaboration between the University and the Stavros Niarchos Foundation to forge new ways to facilitate the restoration of open and inclusive discourse that is the cornerstone of healthy democracies. Established with a $150 million gift from the Foundation and housed in the University’s Krieger School of Arts and Sciences, the Institute will become a leading academic and public forum bringing together experts from a range of fi elds in order to design and test mechanisms for improving dialogue, decision-making, and social engagement. The Director will have an extraordinary opportunity to build and shape the Institute’s faculty, programs, physical space, and reputation.

The Director will report to the Dean of the Krieger School and will work with the President and Provost and an international advisory board to fulfi ll the potential of the Agora vision. The Director will be a tenured member of the Arts and Sciences faculty and may have additional appointments elsewhere at Hopkins.

Candidates must possess academic stature worthy of appointment as full professor and a reputation that will attract attention to the Institute. The Director will exemplify both the inter-disciplinary and trans-national ethos of the Institute and will have a track record of academic leadership and effective development and management of human, fi nancial, and programmatic resources. S/he will have shown a strong commitment to enhancing diversity and inclusion. See http://krieger.jhu.edu/agora-search/ for more information.

Johns Hopkins University has retained Opus Partners to support this recruitment. Please send recommendations, nominations, or questions to lead Partner Craig Smith, PhD, via email: craig.smith@opuspartners.net. The search will continue in confi dence until the Director is appointed, but candidates should submit their materials (c.v. and cover letter as separate PDF fi les) before December 1, 2017. The University intends to make this appointment effective no later than July 1, 2018.

The Johns Hopkins University is an equal opportunity/affi rmative action employer committed to recruiting, supporting, and fostering a diverse community of outstanding faculty, staff, and students. All applicants who share this goal are encouraged to apply.

Inaugural Director

The Stavros Niarchos Foundation Agora Institute at Johns Hopkins University

Executive Focus

The Economist November 4th 2017 19

1

“COME on guys, let’s be serious. Ifyoureally want to do something, don’t

just ‘like’ this post. Write that you are ready,and we can try to start something.” Mus-tafa Nayem, a Ukrainian journalist, typedthose words into his Facebook account onthe morningofNovember21st 2013. Withinan hour his post had garnered 600 com-ments. That prompted Mr Nayem to writeagain, calling on his followers to gather lat-er that day on the Maidan square in Kiev.Three months later Ukraine’s president,Viktor Yanukovych, was removed.

At the time, this did not seem all that re-markable. From the protests around theIranian elections of2009 onwards, the roleof Facebook and Twitter in political upris-ings in dodgy countries had been promi-nent and celebrated. The social-media-fu-elled movements often failed, in the end,to achieve much; five months before MrNayem put up his post the army had re-established its power in Egypt, where so-cial media had been crucial to the down-fall of General Hosni Mubarak in 2011. Butthe idea had taken hold that, byconnectingpeople and giving them a voice, social me-dia had become a global force for plurality,democracy and progress.

A few months after the “Euromaidan”protests brought down Mr Yanukovych, aless widely noticed story provided a moredisturbing insight into the potential politi-

cal uses of social media. In August 2014Eron Gjoni, a computer scientist in Ameri-ca, published a long, rambling blog postabout his relationship with Zoe Quinn, acomputer-game developer, appearing toimply she had slept with a journalist to getfavourable coverage ofhernew game, “De-pression Quest”. The post was the epi-centre of “Gamergate”, a misogynisticcampaign in which mostly white menkeen to bolster each other’s egos let ripagainst feminists and all the other “socialjustice warriors” they despised in theworld ofgaming and beyond. According tosome estimates, more than 2m messageswith the hashtag #gamergate were sent inSeptember and October 2014.

The campaign used the entire spectrumof social-media tools. Videos, articles anddocuments leaked to embarrass ene-mies—a practice known as doxing—wereposted to YouTube and blogs. Twitter andFacebook circulated memes. Most peoplenot directly involved were able to ignore it;crucially, the mainstream media, whentheynoticed it, misinterpreted it. They tookGamergate to be a serious debate, in whichboth sides deserved to be heard, ratherthan a right-wing bullying campaign.

Looking at the role that social mediahave played in politics in the past couple ofyears, it is the fake-news squalorof Gamer-gate, not the activist idealism of the Euro-

maidan, which seems to have set the tone.In Germany the far-right Alternative forGermany party won 12.6% of parliament-ary seats in part because of fears and false-hoods spread on social media, such as theidea that Syrian refugees get better benefitsthan native Germans. In Kenya weap-onised online rumours and fake newshave further eroded trust in the country’spolitical system.

This is freaking some people out. In2010 Wael Ghonim, an entrepreneur andfellow at Harvard University, was one ofthe administrators of a Facebook pagecalled “We are all Khaled Saeed”, whichhelped sparkthe Egyptian uprisingcentredon Tahrir Square. “We wanted democra-cy,” he says today, “but got mobocracy.”Fake news spread on social media is one ofthe “biggest political problems facing lead-ers around the world”, says Jim Messina, apolitical strategist who has advised severalpresidents and prime ministers.

Governmentssimplydo notknowhowto deal with this—except, that is, for thosethat embrace it. In the Philippines Presi-dent Rodrigo Duterte relies on a “keyboardarmy” to disseminate false narratives. Hiscounterpart in South Africa, Jacob Zuma,also benefits from the protection of trolls.And then there is Russia, which has both along history of disinformation campaignsand a domestic political culture largely un-troubled by concerns of truth. It has takento the dark side of social media like a rat toa drainpipe, not just for internal use, but forexport, too.

Vladimir Putin’s regime has used socialmedia as part of surreptitious campaignsin its neighbours, including Ukraine, inFrance and Germany, in America and else-where. At outfits like the Internet Research

How the world was trolled

NEW YORK, SAN FRANCISCO AND WASHINGTON, DC

Once considered a boon to democracy, social media have started to looklike its nemesis

Briefing Social media and politics

20 Briefing Social media and politics The Economist November 4th 2017

1

2 Agency professional trolls work 12-hourshifts. Russian hackers set up bots by thethousand to keep Twitter well fed with on-message tweets (they have recently startedto tweet assiduously in support of Catalanindependence). Sputnik and RT, the gov-ernment-controlled news agency andbroadcaster, respectively, provide storiesfor the apparatus to spread (during theFrench election this year Sputnik reportedon a totally fictitious poll purporting to putconservative candidate François Fillon atthe head of the field).

These stories and incendiary postsbounce between social networks, includ-ingFacebook, its subsidiary Instagram, andTwitter. They often perform better thancontent from real people and media com-panies. Bots generated one out of everyfive political messages posted on Twitter inAmerica’s presidential campaign last year.The RAND Corporation, a think-tank, callsthis integrated, purposeful system a “fire-hose of falsehood”.

On November1st representatives of Fa-cebook, Google and Twitter fielded hostilequestions on Capitol Hill about the rolethey played in helping that firehose drenchAmerican voters. The hearings were trig-gered by reports that during the 2016 cam-paign Russian-controlled entities boughtads and posted content about divisive po-litical issues that spread virally, in an at-tempt to sow discord. Facebook has esti-mated that Russian content on its network,includingpostsand paid ads, reached 126mAmericans, around 40% of the nation’spopulation.

Given the concentration of power inthe market—Facebook and Google accountfor about 40% of America’s digital contentconsumption, according to Brian Wieser ofPivotal Research, a data provider—suchquestions are well worth worrying about.But the concerns about social media rundeeper than the actions of specific firms orparticular governments.

Social media are a mechanism for cap-turing, manipulating and consuming at-tention unlike any other. That in itselfmeans that power over those media—be itthe power of ownership, of regulation orof clever hacking—is of immense politicalimportance. Regardless of specific agen-das, though, it seems to many that themore information people consumethrough these media, the harder it will be-come to create a shared, open space for po-litical discussion—or even to imagine thatsuch a place might exist.

Years ago Jürgen Habermas, a notedGerman philosopher, suggested that whilethe connectivityofsocial media might des-tabilise authoritarian countries, it wouldalso erode the public sphere in democra-cies. James Williams, a doctoral student atOxford University and a former Googleemployee, now claims that “digital tech-nologies increasingly inhibit our ability to

pursue any politics worth having.” To savedemocracy, he argues, “we need to reformour attention economy.”

The idea of the attention economy isnot new. “What information consumes israther obvious: it consumes the attentionof its recipients,” Herbert Simon, a notedeconomist, wrote in 1971. A “wealth of in-formation,” he added, “creates a povertyof attention.” In “The Attention Mer-chants”, published in 2016, Tim Wu of Co-lumbia University explains how 20th-cen-tury media companies hoovered up evermore of this scarce resource for sale to ad-vertisers, and how Google and its ilk havecontinued the process.

What are you paying with?Social media have revolutionised this at-tention economy in two ways. The first isquantitative. New services and deviceshave penetrated every nook and cranny oflife, sucking up more and more time (seechart 1). The second is qualitative. The newopportunity to share things with the worldhas made people much more active solici-tors of attention, and this has fundamen-tally shifted the economy’s dynamics.

Interface designers, app-makers and so-cial-media firms employ armies of design-ers to keep people coming back, accordingto Tristan Harris, another ex-Googler andco-founder of an advocacy group called“Time Well Spent”. Notifications signallingnew followers or new e-mails beg to betapped on. The now ubiquitous “pull-to-refresh” feature, which lets users check fornew content, has turned smartphones intoslot machines.

Adult Americans who use Facebook,Instagram and WhatsApp spend around20 hours a month on the three services.Overall, Americans touch their smart-phones on average more than 2,600 timesa day (the heaviest users easily doublethat). The population of America fartsabout 3m times a minute. It likes things onFacebookabout 4m times a minute.

The average piece of content is lookedat for only a few seconds. But it is the over-all paying of attention, not the specific in-formation, that matters. The more peopleuse their addictive-by-design social media,the more attention social-media compa-nies can sell to advertisers—and the moredata about the users’ behaviour they cancollect for themselves. It is an increasinglylucrative business to be in. On November1st Facebook posted record quarterly pro-fits, up nearly 80% on the same quarter lastyear. Combined, Facebook and Alphabet,Google’s parent company, control half theworld’s digital advertising.

In general, the nature or meaning of theinformation being delivered does not mat-ter all that much, as long as some attentionis being paid. But there is one quality onwhich the system depends: that informa-tion gets shared.

People do not share content solely be-cause it is informative. Theyshare informa-tion because they want attention for them-selves, and for what the things they sharesayabout them. Theywant to be heard andseen, and respected. They want posts to beliked, tweets to be retweeted. Some typesofinformation spread more easily this waythan others; they pass through social-me-dia networks like viruses—a normallypathological trait which the social-mediabusiness is set up to reward.

Because of the data they collect, social-media companies have a good idea ofwhat sort of things go viral, and how totweak a message until it does. They arewilling to share such insights with clients—including with political campaigns versedin the necessary skills, or willing to buythem. The Leave campaign in Britain’s 2016Brexit referendum was among the pio-neers. It served about 1bn targeted digitaladvertisements, mostly on Facebook, ex-perimenting with different versions anddropping ineffective ones. The Trump cam-paign in 2016 did much the same, but on amuch larger scale: on an average day it fedFacebookbetween 50,000 and 60,000 dif-ferent versions of its advertisements, ac-cording to Brad Parscale, its digital director.Some were aimed at just a few dozen vot-ers in a particular district.

Perhaps the most subversive tech-niques, though, are those developed insomewhat obsessive and technically as-tute coteries of amateurs whose main mo-tivation is fun and recognition, some-times—but not necessarily—spiked withmalice. The internet has always benefitedfrom the attention of such people. In an ar-ticle entitled “Hacking the Attention Econ-omy” danah boyd (she spells her name inlower case letters), the president of Data &Society, a think-tank, looks at their impacton social media.

In the mid-2000s members of 4chan, amessaging board first used to share manga,anime and pornography, started to explore

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2 new ways to manipulate nascent socialmedia. They took particular pleasure ingenerating “memes”: funny images—oftenof cats, combined with a clever caption (agenre known as LOLcats)—which couldspread like wildfire. They gamed onlinepolls such as the one organised by Time tofind the world’s most important people.Ms boyd describes the ways in which suchhacks turned political. On and around4chan, groups which had mostly been ex-cluded from the mainstream media, fromwhite nationalists to men’s rights activists,developed the dark arts they would use tofurther theiragendas. Gamergate was theircoming-out party.

The pressure to go veganTo work at the level of the population as awhole, such social-media operations can-not stand alone. They need mechanismswhich can amplify messages developedonline, provide the illusion of objectivity,and validate people’s beliefs. Analysis ofsharing on Twitter and Facebook, and di-rect links between stories, shows that aspecific subset of America’s media nowperforms this role for the country’s rightwing. Centred on Breitbart, a publicationnow again run by Steve Bannon, a formeradviser to President Donald Trump, andFox News, a cable channel, this “ecosys-tem” includes hundreds of other online-only news sites, from Conservapedia, aright-wing Wikipedia, to Infowars, whichpeddles conspiracy theories. There is a left-wing media ecosystem, too, but it is muchless diversified and dominated by main-stream publications, such as the New YorkTimes and CNN.

In France the right-wing ecosystem iscalled the fachosphere and includes suchsites as Fdesouche and Égalité et Réconci-liation. Nearly half the links shared duringthe presidential campaign led to “alterna-tive” sources, according to Bakamo.Social,a consultancy. Although smaller, Ger-many’s right-wing Paralleluniversum, pop-ulated by the likes of Epoch Times andKopp Online, is gaining ground, says Stif-tung Neue Verantwortung, a think-tank.

Such ecosystems are a symptom of po-litical polarisation. They also drive it fur-ther. The algorithms that Facebook, You-Tube and others use to maximise“engagement” ensure users are more likelyto see information that they are liable to in-teract with. This tends to lead them intoclusters of like-minded people sharinglike-minded things, and can turn moderateviews into more extreme ones. “It’s likeyou start as a vegetarian and end up as avegan,” says Zeynep Tufekci of the Univer-sity of North Carolina at Chapel Hill, de-scribing her experience following the rec-ommendations on YouTube. These effectsare part ofwhat is increasingAmerica’s po-litical polarisation, she argues (see chart 2).

When putting these media ecosystemsto political purposes, various tools are use-ful. Humour is one. It spreads well; it alsodifferentiates the in-group from the out-group; how you feel about the humour, es-pecially if it is in questionable taste, bindsyou to one or the other. The best tool,though, is outrage. This is because it feedson itself; the outrage of others with whomone feels fellowship encourages one’sown. This shared outrage reinforces the fel-low feeling; a lack of appropriate outragemarks you out as not belonging. The re-verse is also true. Going into the enemycamp and posting or tweeting things thatcause them outrage—trolling, in otherwords—is a great way ofgetting attention.

Outrage and humour are thus political-ly powerful; indeed, they played big rolesin mobilisations such as that of TahrirSquare and the Euromaidan. They are alsoeasily integrated into rumour campaigns,such as the one about Hillary Clinton’shealth in 2016. In August 2016 far-rightblog-gers started circulating theories that shewas suffering from seizures and was physi-cally weak but that, outrageously, theDemocrats and their allies in the main-stream media were covering this up.

Video clips mocking her past coughingfits made the rounds online. Conservativemedia, such as the Drudge Report and FoxNews, picked up the story, mainly by ask-ing there’s-smoke-is-there-fire questions.

From there it made it into more liberalmainstream outlets. Ms Clinton saw her-self compelled to deny the rumours—onlyto see them gain strength when she indeeddeveloped pneumonia. As the campaignwent on, the amount of play such storiesgot on social media increased (see chart 3).

It would be easy to dismiss such hacksas mere pranks, as misfits showingofftheirhacking capabilities to one another andthe world, just as they did ten years ago on4chan. Butbacked up by an alternative me-dia ecosystem keen to support them, andwith judicious help from foreign powerscapable of organising themselves a littlemore thoroughly than ragtag mobocrats,they can become powerful. Although thefacts quickly supersede the fictions, oncean idea is out there, it tends to linger. Effortsto debunk fake news often don’t spread asfar, or through the same networks: indeed,they may well be ignored because theycome from mainstream media, whichmany no longer trust. And even if they arenot, they are never as engaging as the ru-mours they seek to replace.

The biggest attention hacker is noneother than Mr Trump himself. When hesends one of his outrageous tweets, oftenadroitly timed to distract from some othercontroversy, the world pays pathologicallevels of attention. The president is today’sattention economy made flesh. He reads aslittle as possible, gets most of his newsfrom cable television, retweets with mini-mal thought, and his humour makes itvery clear what in-group he is in with.Above all, he loves outrage—both causingit and feeling it.

Being this thoroughlypartofthe systemmakes Mr Trump eminently hackable. Hisstaff, it is said, compete to try and get ideasthey want him to take on board into mediathey know he will be exposed to. Outsid-ers can play the game, too. In 2015 enter-prising enemies set up a Twitter bot dedi-cated to sending him tweets withunattributed quotes from Benito Musso-lini, Italy’s fascist dictator. Last year MrTrump finally retweeted one: “It is better tolive one day as a lion than 100 years as asheep.” Cue Trump-is-a-fascist outrage.

The tension ofhistorySocial media are hardly the first communi-cation revolution to first threaten, then re-wire the body politic. The printing pressdid it (see our essay on Luther). So did tele-vision and radio, allowing conformity tobe imposed in authoritarian countries atthe same time as, in more open ones, pro-moting the norms of discourse which en-abled the first mass democracies.

In those democracies broadcasterswere often strictly regulated on the basisthat the airwaves they used were a publicgood of limited capacity. One strong argu-ment for not regulating the internet, hearda lot in the 1990s, was that this scarcity of

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22 Briefing Social media and politics The Economist November 4th 2017

2 spectrum no longer applied—the internet’scapacity was limitless. Seeing thingsthrough the lens of the attention economy,though, suggests that this distinction maynot be as sharp as once it seemed. As Si-mon said, people’s attention—forwhich, ininternet-speak, bandwidth is often used asa metaphor—is scarce.

But there is a raft ofproblems with justi-fying greater regulation on these grounds.One is ignorance, and the risk of perverseoutcomes that flows from it. As RasmusNielsen of Oxford and Roskilde universi-ties argues, not enough is known about theinner workings ofsocial media to come upwith effective regulations.

This is in part the fault of the tech com-panies, which have been less than gener-ouswith information about theirbusiness.For a firm which used to say its missionwas to make the world more open and con-nected, Facebook is strikingly closed andisolated. It collaborates with researcherslooking at the dynamics of social media,but only allows them to publish results,not underlying data. It has been even lesswilling than Google to share details abouthow it decides to recommend content or

target ads. Both firms have also lobbied toavoid disclosure rules for political ads thatconventional media have to comply with,arguing that digital ads lack the space tomake clear who paid for a campaign.

Correctly perceiving that public opin-ion is turning, the companies now say theywill be more forthcoming. Facebook andTwitter have volunteered to show thesource of any ads that appear in subscrib-ers’ news feeds and develop tools so peo-ple can see all the ads that the social-mediacompanies serve to their customers.Whether that is enough to head off legisla-tion remains to be seen: in America agroup of senators has introduced the“HonestAdsAct”, which would extend therules that apply to print, radio and televi-sion to social media. Proponents hope itwill become law before the 2018 mid-termelection.

Some, such as Mr Ghonim, the formerEgyptian activist, say that the “Honest AdsAct” does not go far enough. He wantsFacebook and other big social-media plat-forms to be required to maintain a publicfeed that provides a detailed overview ofthe information distributed on their net-works, such as how far a piece of contenthas spread and which sorts of users haveseen it. “This would allow us to see what isreally happening on these platforms,” saysMr Ghonim. Such demands for transpa-rency would extend to requirements to la-bel bots and fake accounts, so users can un-derstand who is behind a message.

Other proposals go beyond transpa-rency. Increased friction is one suggestion,offering users pop-ups with warningsalong the lines of: “Do you really want toshare this? This news item has been foundto be false.” Social-media firms could alsostart redirecting people to calmer contentafter they have been engaging with storiesthat are negative or hostile. YouTube has

experimented with redirecting jihadistsaway from extremist videos to content thatcontradicts what they have been watching.

Other proposals aim less at dynamics,more at content. As of this October Ger-many has required social-media compa-nies to take down hate speech, such as Ho-locaust denial, and fake news within 24hours or face fines of up to €50m ($58m).The sheer volume of content—more than500,000 comments are posted on Face-book every minute—makes such policinghard. It is possible, though, that a mixtureof better algorithms and more peoplecould achieve something. Facebookhas al-readyagreed to hire a fewthousand peoplefor this task; it may need a lot more.

Free-speech advocates cringe at thethought that Facebook should be allowedto become the “ministry of truth”—or, forthat matter, that companies might surrepti-tiously steer users activity to quieten themdown when they have been angry. As MrHabermas argues, there is a real value tothe opennesssocial media and the internetcan bring in restrictive societies. And beingangry and unsettled—even outraged—should be a part of that. Some point to Chi-na, where it is reported that more than 2mmoderators, most employed by social-media firms, scour the networks, erring onthe side of caution when they see some-thing that may displease official censors.

A more far-out proposal, which Ms Tu-fekci favours, is to require social-mediafirms to change their business model insome way, making their money, perhaps,directly from users, rather than from adver-tisers. Others argue that the social-mediaplatforms which dominate the attentioneconomy have become utilities andshould no longer be run as profit-maximis-ing companies. Mr Wu, the author of “TheAttention Merchants”, wants Facebook tobecome a “public benefit corporation”, ob-liged by law to aid the public. Wikipedia,an online encyclopedia, could be seen asthe model: it lives off donations and itshost of volunteers keeps it reasonablyclean, honest and reliable. None of this,though, offers a truly satisfactory responseto the problem.

AnotherofMussolini’s sayings—notyetretweeted by Mr Trump—was that “De-mocracy isbeautiful in theory; in practice itis a fallacy.” As with his preference for theleonine over the sheepish, it is sometimeshard not to sympathise with this, at least abit. But if, like all political systems, democ-racy has proved eminently fallible, it hasshown itself robustly superior to the restwhen it comes to fixing those failings andmaking good when faced by change. Onthat basis, history suggests it should beable to weather the storms ofsocial media.But it will not be easy. And, as with booksand broadcasts, the process is likely totransform, at least in part, that which itseeks to preserve. 7

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FOR those concerned about Americanneglect of Asia, it is an accomplishment

ofsorts thatDonald Trump is comingto theregion at all. A creature of habit, America’spresident is uncomfortable spendingnights away from his own bed. And now,with the first indictments in RobertMueller’s investigation into Russian inter-ference in the election that put Mr Trumpin office, foreign policy is likely to have fall-en even lower down his list of priorities.Yet on November 3rd Mr Trump begins a12-day trip, his longest foreign excursion aspresident and his first to Asia. He will takein (via Hawaii) Japan, South Korea, China,Vietnam and the Philippines.

The first rule in Asian politics, whereform trumps content, is just showing up.So far, so promising. What is more, al-though one of Mr Trump’s first moves aspresident was to pull out of the Trans-Pacif-ic Partnership (TPP), a 12-country free-tradedeal—“the greatest self-inflicted wound onAmerican regional influence since the Viet-nam war,” as Michael Green of the Centrefor Strategic and International Studies inWashington puts it—little has yet come ofMr Trump’s threats to erect barriers to im-ports from Asian countries running sur-pluses with America (ie, nearly all ofthem). Nor has Mr Trump followedthrough on his vow to stop Japan andSouth Korea free-riding, as he saw it, onAmerica’s defence guarantees.

to take home, promising not only to buyliquefied natural gas from America butalso to promote a network of terminals forits distribution across Asia.

Mr Abe’s aims are twofold. One is toprevent Mr Trump’s hostility to multilater-al trade deals from poisoning the region’strading relationships. Mr Abe is pushinghard to preserve TPP as a regional free-trade grouping without America. Its 11 sur-viving members gathered outside Tokyoshortly before Mr Trump was due there.

North Korea is the other pressing issue.As Japanese strategists see it, the North’srapid development of an intercontinentalballistic missile capable of striking Ameri-can cities has made America as worriedabout an attack as Japan and South Korea,which have long been vulnerable to one.Mr Abe has just fought and won a generalelection partly on a platform of standingup to the rogue state. He is likely to push forchanges to Japan’s pacifist constitutionthat legitimise Japan’s armed forces. To MrTrump, he will present this as evidencethat Japan is doing its bit, and as an induce-ment for America to continue to providesecurity and to pursue unflinching deter-rence against the North.

Mr Trump’s Japan visit will probably gowell. But his unpredictability still worriesJapanese strategists. At least rhetorically,he has lurched between wildly differentapproaches to North Korea, at times sug-gesting that he could resolve all his differ-ences with Kim Jong Un over a hamburgerand at others implying he was ready tolaunch a pre-emptive attack. For now, MrAbe’s mantra is, hold Mr Trump close.

Moon Jae-in, South Korea’s new presi-dent, intends to pursue the same approach,offering Mr Trump a state visit with all thetrimmings. Yet, in contrast to Mr Abe, hispersonal relationship with Mr Trump is

America’s relationships in Asia remainvulnerable to Mr Trump’s Twitter feed. Butas Aaron Connelly of the Lowy Institute inSydney points out, Mr Trump and thebomb-throwers who promised a radicalshift to an “America First” approach to for-eign policy have made little headway. Heputs that down to inexperience, the presi-dent’s feeble grasp of foreign affairs, theease with which he is distracted and hisfailure to fill important foreign-policy posi-tions with fellow travellers (or, often, withanyone at all). As a result, policy on Asia re-mains largely in the hands of centristssteeped in America’s long-standing alli-ances. Most notably, they believe in moreor less the same approach—deterrence—asthe previous administrations towards anincreasingly troublingNorth Korea. Ameri-can policy in Asia is on autopilot.

Golf and gasSome Asian leaders think they have themeasure of Mr Trump. In Japan the primeminister, Shinzo Abe, intends everythingto be sweetness and light. That starts withflattery, something Mr Abe understoodfrom the start of his personal relationshipwith the American president. Mr Trumpwill learn that Tokyo’s department storeshave stocked (exorbitantly marked-up)bottles from his Virginia winery to honourthe visit. There will, of course, be golf. AndMr Abe will give Mr Trump trade goodies

Donald Trump’s Asian tour

Fore!

BEIJING, TOKYO AND WASHINGTON, DC

America’s president is about to descend on Asia. His agenda is a mystery

AsiaAlso in this section

24 Donald Trump and South-East Asia

26 Messy dual citizenship in Australia

26 The BJP loses momentum

28 Changing the Kazakh alphabet

24 Asia The Economist November 4th 2017

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2 America and South-East Asia

Meet and retreat

AMONG recent guests to the WhiteHouse, Donald Trump has wel-

comed Prayuth Chan-ocha, the Thaigeneral who overthrew an elected gov-ernment in 2014, and Najib Razak, theprime minister ofMalaysia, whomAmerica’s Justice Department has ac-cused ofparticipating in the theft ofasmuch as $3.5bn from a Malaysian govern-ment fund. Mr Trump has referred to MrNajib as “my favourite prime minister”.Mr Trump’s presidency has coincidedwith a lurch towards authoritarianismaround South-East Asia. Such mattersseem to be far less ofa concern to him,however, than they were to his predeces-sor, BarackObama. For the region’sdemocrats, the discrepancy stings.

On his visit to Asia next week, MrTrump will call on Rodrigo Duterte, thepresident of the Philippines, who hasboasted about killing people and hasinstituted a campaign against drug deal-ers and users that has led to perhaps9,000 deaths. Mr Trump apparently

commended Mr Duterte in a phone callearlier this year for doing an “unbeliev-able job” fighting drugs. Mr Trump willalso visit Vietnam to attend a big interna-tional summit in Danang next week,ahead ofwhich the Communist Party isrepressing dissent especially fiercely.

Cambodia, Malaysia and Thailandare all expected to hold elections in thenext year, which their current leaders arepreparing to manipulate in various waysto prolong their grip on power. Americanpressure might have helped restrainthem; the lackof it seems likely to em-bolden them. They can certainly counton China for support. As the region be-comes increasingly illiberal, journalistsand opposition politicians are suffering.Mere social-media posts land govern-ment critics in court and in jail.

Admittedly, America has never beenespecially forceful about promotinghuman rights and democracy in South-East Asia. Its diplomats continue to con-demn abuses in much the manner theyalways have. But these days, they say,they struggle to convince locals that theircountry cares.

American warships do still conductfreedom ofnavigation operations in theSouth China Sea, helping to resist China’sexpansive territorial claims there, pointsout Ian Storey of the ISEAS-Yusof IshakInstitute, a think-tank in Singapore. ButAmerica does not seem to have a broaderplan to counter Chinese influence inSouth-East Asia, or to promote its ownvalues in the region. One ofMr Obama’stools for doing that had been the Trans-Pacific Partnership (TPP) trade deal,which would have obliged Vietnam, forexample, to allow independent tradeunions. Mr Trump’s first big Asian initia-tive was to withdraw from TPP. In itsplace, he seems to imagine a system ofwarm personal ties with the region’smany strongmen.

Singapore

Donald Trump has friends, but few plans, in the region

Mr Trump and his favourite prime minister

not easy-going. That is a concern to MrMoon’s advisers. Though no sandal-wear-ing leftie—Mr Moon served in the specialforces, and calls for stronger defencesagainst the North—his progressive castdoes notendearhim to MrTrump. Many ofhis countrymen are alarmed at the Ameri-can president’s loose talk of pre-emptivewar against the North, and think diplo-macy should be given much more of achance. Mr Moon’s people are nervousabout what Mr Trump might say or tweetwhile in the country. Meanwhile, MrTrump’s threats to tear up the five-year-oldUnited States-Korea Free Trade Agreementundermine the assurances of solidaritymade by his national-security team.

This equivocation is all the more strik-ing because China seems to be trying to re-pair relations with South Korea. Formonths it has bullied the South for install-ingAmerican anti-missile defencesknownas THAAD. Rather than accepting that theywere needed to counter North Korea, Chi-na argued, solipsistically, that they wereaimed at it. China punished South Koreawith boycotts of its products and a ban onChinese tour groups visiting South Korea.

But China’s president, Xi Jinping, hasemerged from the five-yearly CommunistParty congress with his authority cement-ed. Immediately afterwards, his govern-ment moved to restore cordial relationswith South Korea. Mr Xi is due to meet MrMoon on the sidelines of the Asia-PacificEconomic Co-operation (APEC) summit, apow-wow in Vietnam on November 10thand 11th that Mr Trump is also attending.MrMoon will affirm that South Korea doesnot plan more THAAD batteries for now,and will not join any wider security initia-tive aimed at China. Mr Xi might, in otherwords, be able to drive a bit of a wedge be-tween America and South Korea.

As for Mr Trump’s stop in Beijing, flat-tery will prevail there, too. Mr Xi has pre-pared a reception fit for a monarch (Chi-na’s ambassador to Washington calls it a“state-visit-plus”). Mr Trump, who seemsto get along well with strongmen, appearsin awe ofMrXi’s power. He referred to himas “the king ofChina” last month.

In truth, Mr Xi can afford to humour MrTrump, once a China hawk, in partbecauseMr Trump has not been very hawkish inhis dealings with China. Instead, MrTrump has cosied up to Mr Xi, apparentlyin the hope that he would bring Chinesepressure to bear on North Korea. TheAmerican president has praised China forenforcingnew UN sanctions barringNorthKorea from exporting textiles and limitingits imports of oil. Yet there is little sign thatChina is willing to take the one step thatmight change North Korea’s behaviour:cutting offits oil supply altogether.

As for trade, American business in Chi-na is agape at the skimpy agenda the ad-ministration has crafted for the trip. China

is expected to announce some energy in-vestments in Texas and the Virgin Islands.There might be orders for passengerplanes, along with concessions on Ameri-can credit cards, long in the works. But thiswould be small stuff. Instead of the Ameri-can side bringinga listofspecificdemands,it is asking for a broad attitudinal shift bythe Chinese government (ie, stop givingChinese firms an “unfair advantage”).American bureaucrats, at Mr Trump’s be-hest, are conducting a formal investigationof predatory Chinese trade practices, but it

is not due to report for months. No wonderChina’s leadersdeem the bilateral relation-ship to be as good as it has ever been—“ablessing to the world”, as the People’sDaily, a state-run newspaper, puts it.

Mr Trump’s trip is a missed opportuni-ty. As Douglas Paal of the Carnegie Endow-ment for International Peace argues, thepoint at which Mr Xi has consolidated hispower would have been the right one foran American president to explain how hiscountry wants to preserve its interests inAsia without bringing on a clash. A discus-

26 Asia The Economist November 4th 2017

1

2 sion could have involved contingencies onthe Korean peninsula, and avoiding con-flict in the South China Sea. An administra-tion more clear-eyed about what is at stakefor America might have taken more seri-ously China’s “belt-and-road” initiative,linking Asia by land and sea to the MiddleEast and beyond.

Possibly, Mr Trump will offer a compet-ing vision in the coming days along thelines proposed last month by his secretaryof state, Rex Tillerson, of a “free and openIndo-Pacific”, in which Australia, India, Ja-pan and even Vietnam will help Americacounter China’s maritime expansion. Butthe idea is bankrupt if America is againstfree and open trade. What is more, MrTrump hasdecided to cuthisAsia trip shortand so will miss the East Asia Summit inManila, the main annual get-together forthe region’s leaders. Mr Xi is attending. 7

WHERE will it end? On October 27ththe High Court stripped four sena-

tors and an MP of their seats, adopting astrict interpretation of the rules on eligibil-ity for parliament. The MP was BarnabyJoyce, the deputy prime minister, whoseejection has cost the government its major-ity in the lower house. Then on November1st Stephen Parry, the president of the Sen-ate, announced that he, too, suffered fromthe same affliction: he was a dual national,able to claim British citizenship as well asAustralian. He resigned the following day.

Mr Joyce was one of the “citizenshipseven”, parliamentarians who discoveredthat they were deemed to be citizens, vari-ously, of Britain, Canada, Italy and NewZealand, even though they had not formal-ly claimed citizenship. Australia’s constitu-tion bans from parliament anyone who isunder “acknowledgment of allegiance,obedience or adherence to a foreign pow-er”, orwho isa citizen ofa “foreign power”.

The government’s lawyers argued thatthe ban should apply only if someone ac-tively laid claim to a foreign nationality,not if they were ignorant that they wereconsidered a citizen of another country, asthe “citizenship seven” claimed to be. Butthe judges pointed out that parliamentarycandidates must complete a nominationform that asks whether they might be ineli-gible because they are dual citizens. This,they said, is “manifestly an occasion for se-rious reflection on this question”.

Asa result, the court removed five ofthe

seven parliamentarians. It let off Matt Ca-navan, a senator from the Nationals, the ju-nior party in the governing coalition, be-cause it was unclear whether he was reallyan Italian citizen. Nick Xenophon, anothersenator, escaped because his form of Brit-ish nationality, “a British overseas citizen”,conveyed so few rights that it was unwor-thy of the name, in the court’s view.

Mr Joyce’s ejection is a headache for thegovernment. Although he was born inAustralia, he learned in August that he wasalso considered a New Zealander becausehis father had been born in New Zealandbefore moving to Australia in 1947. Havingrenounced his Kiwi citizenship, Mr Joycewill try to reclaim his constituency at a by-election on December 2nd. Opinion pollssuggest he has a good chance. In the mean-time the government will control only 74of the 150 seats in the lower house, notcounting thatofthe speaker. Ithopes to sol-dier through the final session of the yearwith the help of independents.

The government already lacks a major-ity in the Senate, so the dismissal of thesenators will not affect its functioning.Nevertheless, Mr Parry’s case matters be-cause he is the first member of the LiberalParty of the prime minister, Malcolm Turn-bull, to fall foul of the citizenship rules. Ittranspires that he is a British citizenthrough his father, who emigrated to Aus-tralia in 1951. Mr Turnbull had sneered atthe “incredible sloppiness” of some of the“citizenship seven” for not checking theirstatus. Mr Parry says he waited to do so un-til after the High Court’s ruling because ithad now provided “absolute clarity”.

The drama has hastened calls to reformthe rules. Australians were considered Brit-ish subjects when the constitution cameinto force 116 years ago. Australian citizen-ship was created only in 1948. High levelsof immigration since then have given plen-

ty ofpeople unwittingclaims to foreign na-tionality. Some constitutional lawyersreckon all 226 federal parliamentariansshould now have their backgrounds audit-ed in a bid to clear up the mess. A parlia-mentary committee 20 years ago called forthe constitution to be changed to allowany Australian citizen to serve in parlia-ment. That would require a referendum,few ofwhich succeed.

Mr Turnbull has bravely asked a parlia-mentary committee to suggest a way for-ward. Meanwhile he insists that “the busi-nessofgovernmentgoeson.” Perhaps—butit has definitely become harder. 7

Dual citizenship in Australia

Ignorance is noexcuseSYDNEY

An antiquated rule undermines thegovernment’s parliamentarymajority

A fair dinkum battling ex-Kiwi

IF SUCCESS is the sweetest revenge thenthe makersof“Mersal”, a Tamil-language

action-romance, must be feeling smug.Supporters of the Hindu nationalist Bhara-tiya Janata Party (BJP) vented fury whenthe film was released in mid-October.Some shouted that it should be banned,unless a scene mocking government poli-cy was cut. Others sniffed that the film’slack of patriotic spirit might reflect the factthat its star, Thalapathy Vijay, is Christian.But for “Mersal” all this ugly talk was justgood publicity: it has already grossed over$32m, close to a record for Tamil cinema.

The backfiring of this attack might beread as a parable for the troubles facing theBJP. It had seemed an unstoppable jugger-naut, set to roll through a string of statepolls up to the next general election in 2019and beyond. It still holds trumps that anyparty would envy: a networkofmore than110m members, generousfunding, a largelysympathetic press and an energetic, charis-matic leader in Narendra Modi, the primeminister. His government can also claimsolid achievements: it is currently trumpet-ing India’s 30-rung climb up the WorldBank’s Ease of Doing Business ranking in ayear, to 100th place. Besides, the opposi-tion remains feeble and divided.

Yet a series of costly policy flops, alongwith an accumulation of dents to theparty’s clean image, have combined to putMr Modi on the defensive. For six weekslast winter Indians scrambled to makeends meet when the government abruptlyscrapped 86% of the country’s cash. Manysuffered cheerfully, believing they werehelping Mr Modi chase money-hoardingbad guys. But as time has passed, few cansee any gain from the pain.

Eight months after “demonetisation”,

Indian politics

Tax brake

Delhi

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2 The Kazakh language

Apostrophes on the march

RARELYhas the humble apostrophecaused such commotion. Nursultan

Nazarbayev, Kazakhstan’s president,wants the punctuation symbol to play amuch bigger part in public life. OrdinaryKazakhs are objecting. Some feel sostrongly that they have launched ananti-apostrophe campaign on socialmedia, adorning their Facebookpageswith crossed-out apostrophes.

At issue is the apostrophe-pepperedalphabet that the government wants tointroduce over the next eight years, toreplace the current rendering of the Ka-zakh language in Cyrillic—the alphabetused to write Russian, among otherlanguages. The new script is a modifiedform of the Latin alphabet, which is usedto write not only English but many otherlanguages, including Turkic ones relatedto Kazakh, such as Turkish.

Officially, the switch is about equip-ping Kazakhstan for the digital age. (Thenew script should be easier to type and torender online.) But the change is also todo with decolonisation. Kazakhstan wasa part first of the Russian empire and thenof the Soviet one, for over 250 years alltold. Over that time, Russian administra-tors promoted the Russian language;Kazakh nearly died out. To this day only62% of the population speaks Kazakhwell, whereas nearly all speakRussian.

In 1940 the Soviet authorities decreedthat Kazakh should be written in Cyrillic.(The only indigenous alphabet is a sys-tem ofancient runes; Arabic and Latinletters had also been used previously.)

But the version ofCyrillic the Sovietsadopted was unnecessarily cumber-some, with 42 letters, including severalrepresenting sounds that do not occur inKazakh, such as shch and ts. The newscript will have a mere 32 letters: 23 ordin-ary Latin ones (c, w and x did not makethe cut), and nine with apostrophes.

Many Kazakhs support the idea ofchanging the alphabet, but are irritatedby the lackofany formal public consul-tation and puzzled that the governmentseems to be reinventing the wheel, ratherthan adapting the version of the Latinalphabet that Turks use, say. The govern-ment floated another version ofa Latinscript, featuring digraphs (pairings ofletters to represent a single sound, such assh or ch in English), but it was mercilesslylampooned. Delighted critics pointed outthat the rendering of the Kazakh word forcarrot in that alphabet would have beensaebiz, which looks a bit like a transliter-ation of the Russian for “fuckoff”. Moresubstantively, some argued that it wouldbe simpler to represent each distinctsound with a single letter.

In theory, that is what the new al-phabet does, with the help ofall thoseapostrophes. But it is far from elegant.Aktau, a hub of the oil industry, willbecome Aq’tay’. Kazakhstan will becomeQazaqstan. It is not clear that the shift willhelp Kazakh supplant Russian, whichremains the lingua franca and retains itsprotected status, to the reliefof the fifth ofthe population who are ethnically Rus-sian. But it will at least lookmore distinct.

ALMATY

The government wants Kazakh to be written in Latin, not Cyrillic script

Apostrophe-free but humiliating

the government launched a nationalgoods-and-services tax (GST) with fanfare.It is meant to unify and simplify India’s be-wildering array of state and local taxes,therebyhelpingbusinessand boosting rev-enue. So far, it has done neither. To its cred-it, Mr Modi’s government has respondedto complaints by exempting more of the ti-niest firms from the tax and pushing backfiling deadlines. Even so, the complex, six-tiered tax, requiring multiple filings andhefty upfront payments on inputs withonly sluggish reimbursement, has provedso burdensome to small businesses thatmany have scaled back work. Consumers,meanwhile, are cross about high rates oncertain items (28% on shampoo).

As with demonetisation, the GST roll-out appears to have been sloppyand hasty.A more recent reform, a big bail-out ofstate-owned banks saddled with some$150bn in rotten loans, is neither of thosethings. The rescue package is cleverly de-vised, but woefully late: Mr Modi had ig-nored repeated warnings, notably fromRaghuram Rajan, his own central-bankchief who was sacked last year, that thedebt pile was smothering investment.

For the Indian public, policy foibleswould be more forgivable if they were notaccompanied by so much hype, as well asby aggressive attacks on critics. A scene in“Mersal” that the BJP found offensive, forinstance, included a rant against GST.Within hours of airing a report suggestingthat the son of the BJP’s powerful presi-dent, Amit Shah, has profited in businesssince the party came to power, the Wire, anonline news magazine, was fiercely at-tacked by ministers and slapped with botha gag order and a criminal lawsuit. Authorsof books investigating wealthy patrons ofthe party have been similarly assailed.Such pressures, as well as threats to adver-tising, have prompted wary media groupsto fire critical editors. Ordinary citizenshave also been hauled to court after post-ing jokes about Mr Modi on social media.

One person who is joking more at MrModi’s expense is Rahul Gandhi, a scion ofthe Nehru-Gandhi family who is expectedto be anointed head ofthe opposition Con-gress Party soon. Mr Gandhi, who until re-cently was widely regarded as a politicalweakling, has begun offering a steady bar-rage of acerbic barbs, to growing effect. Inthe past few months his following on Twit-ter has grown by two-thirds, threateningthe BJP’s dominance ofsocial media.

Congress isalso mountingan unexpect-edly strong challenge to the BJP in MrModi’s home state of Gujarat, which holdselections in December. The BJP has reignedthere for nearly 20 years, and few expect itto be unseated. Yet Mr Modi is taking nochances. He hascampaigned furiouslyandshowered the state with handouts. If theBJP loses even a little ground, some willsay its efforts backfired. 7

The Economist November 4th 2017 29

1

HUONG was only15 when she went outto meet a friend in Lao Cai, a city in

northern Vietnam on the Chinese border(see map on next page). She thought shewould be gone a few hours, but it wasthree years before she managed to returnhome. Her friend had brought with hertwo acquaintances—young men withmotorcycles. They squired the girls aroundtown and took them to a karaoke bar,where their drinks were spiked.

When the girls grew drowsy they werehoisted back onto the bikes, each sand-wiched between two male riders. Theywere driven into the hills and across theChinese border to a remote house in thecountryside. There they were told theywould be sold. The girls screamed andcried but were subdued by two men, oneof them wielding a stick. The traffickerstold Huong that by crossing the border shehad sullied her reputation, but that if shebehaved well they would find her a Chi-nese husband. After marrying she mightfind a way home, they said. If she refusedshe would stay stranded in the hills.

Huong—a pseudonym, to protect heridentity—is now 20 years old. She lives in alarge bungalow in Lao Cai, which sheshares with a dozen women aged between15 and 24 (an occupant is pictured). Theyare all survivors of trafficking networksthat smuggle girls across the Vietnam-Chi-

napping is rife.The stories told by trafficking survivors

and Vietnamese officials in Lao Cai shedlight on this grim trade. Each year between100 and 150 trafficked Vietnamese womenreturn to their country through the town’sborder gate, says an official there—proba-bly only a small proportion of the totalwho are lured or abducted the other way.Some of the victims’ ordeals begin when,like Huong, they are drugged or kid-napped. Others are duped into thinkingthey are going to a party or to meet a poten-tial boyfriend. Sometimes members oftheir own families are complicit.

Groomed onlineDiep Vuong of Pacific Links thinks victimsare getting younger (in China, womenhave to be at least 20 to get married, butmarriages to abducted foreigners are oftenunregistered). The spread of cheap smart-phones and improvements in mobile net-works are making it easier for traffickers touse social media to befriend schoolgirls inVietnam’s hills. These criminals earn as lit-tle as $50 for each woman they bring intoChina, where they are often resold far in-land by middlemen. Chinese police reportthat at their final destination Vietnamesewomen fetch prices of between around60,000 and 100,000 yuan ($9,000-15,000).

Some snatched women and girls returnhome swiftly. A17-year-old who lives at thebungalow with Huong says she was gonefor only two days before a woman on theChinese side ofthe borderhelped her to es-cape. Afellow resident, who returned fromChina a month ago, walks with a limp. Shesays she broke her leg leaping from thehouse in which her traffickers were hold-ing her. Chinese police later found her ly-ing in the street.

na border, sometimes to be sold as prosti-tutes but more often as brides. Their house,with its enormous teddy bears and fleet offuchsia-pinkbicycles, is a shelter run by Pa-cific Links Foundation, an American chari-ty, which helps victims finish their educa-tion and cope with their trauma.

Around the world some 15m people areliving in marriages into which they wereforced, including some who were abduct-ed, according to a recent study by the Inter-national Labour Organisation, a UN body,and human-rights groups. In China thetrafficking of women is particularly acute,in part because a preference for sons hasleft the country with a severely skewed sexratio. Between 1979 and 2015 the imbalancewas aggravated by a one-child-per-couplepolicy, which prompted many to abort fe-males before they were born. The ChineseAcademy of Social Sciences has estimatedthat by 2020 there will be 30m-40m Chi-nese men who will be unable to find wivesin their own country.

One consequence of this is boomingbusiness for matchmakers who offer to im-port women from China’s poorer neigh-bours, particularly Laos, Myanmar, Cam-bodia, Vietnam, Mongolia and NorthKorea. Some of these women, seeking aroute out ofpoverty at home, freely choosea Chinese marriage and gain the necessaryapprovals. But along China’s borders, kid-

Trafficking women

Fear on the border

BEIJING AND LAO CAI

Demand forwives is fuelling the abduction ofwomen from abroad

ChinaAlso in this section

31 Banyan: The rise of Wang Huning

For daily analysis and debate on China, visit

Economist.com/china

30 China The Economist November 4th 2017

2 Huong’s story is longer. She was kept ather traffickers’ house and threatened fortwo months. When she finally agreed to bemarried she was driven for two days to acity in Anhui, a province north-west ofShanghai. She was warned not to let hernew family find out that she was Vietnam-ese. She was to pretend to be a Chinese citi-zen belonging to an ethnic minority withcross-border cultural links.

The man to whom she was sold intomarriage was in his early 20s. He was froma wealthy family, which had paid 90,000yuan for her. Her husband explained thathe had not really wanted to get married,but that his parents were keen. They hadtold him that an ethnic-minority bridewould be more obedient than someonefrom the ethnic-Han majority. Such claimsare commonly made by matchmakers.One Chinese mail-order marriage site saysVietnamese women are cheap, obedientand unlikely to run away: they are “so gen-tle and loving they will make you melt”.

The greatest demand for foreign wivesis in the countryside, particularly amongmen who are poor or disabled, says JiangQuanbao of Xi’an Jiaotong University. Inrural areas not only is the sex ratio an im-pediment to finding a bride, so too is themigration of women to the cities in searchofworkand higher-status males. Impover-ished villages sometimes end up with doz-ens of foreign wives, as word spreads oftheir availability.

Villagers often have sympathy for thebuyers—they may even help to preventtrafficked women from fleeing. Escape isnot at all simple for women without mon-ey of their own and with limited Chinese-language skills. North Koreans who con-tact the authorities risk being repatriated

and then sent to concentration camps.That makes them particularly vulnerableto traffickers. Amid rising tensions on theKorean peninsula caused by North Korea’snuclear tests, police in nearby Chineseprovinces are becoming more watchful forunauthorised migrants from across theborder, including North Korean womenwho have been sold into marriage.

Once victims become mothers, theirdecisions about whether and how to leaveChina become even more difficult. So itwas for Huong. She had been taken to An-hui with anotherVietnamese girl who wasbeing sold into the same district. The pairagreed that they would find a way hometogether. But their plan had to be post-

poned soon after arrival, because Huong’sfriend became pregnant. By the time thebaby was delivered Huong was expectinga child, too. Less than a month after shegave birth, Huong’s in-laws sent her to liveand work at a textile factory nearly fourhours away, leaving her baby behind. Herhusband would turn up on payday to col-lect most of her wages—about 6,000 yuana month. Eventually Huong concludedthat the family meant to keep her es-tranged from her daughter. She resolved toescape back to Vietnam.

Huong scraped together enough mon-ey to travel independently. Her own par-ents, whom she had managed to contact afew months after reaching Anhui, helpedher work out where best to present herselfto the authorities. The Chinese police kepther for three months while they investigat-ed her story, after which they arrestedsome of the people involved in traffickingher. Then they sent her back to Vietnam,though her baby remained in China.

In June the American government re-ported that China was “not making signif-icant efforts” to tackle human trafficking. Itrelegated China to the ranks of countries,such as Venezuela, Turkmenistan andSouth Sudan, which it rates as the worst fortheir record in dealing with the problem.But Chinese police say they are not sittingon their hands. They report that between2009 and the middle of last year, they “res-cued several thousand women of foreignnationality” in anti-trafficking operationsthat involved co-operation with theircounterparts in Vietnam, Myanmar andLaos (pictured are victims being sent backto Vietnam by Chinese police in 2015).More than 1,000 people were arrested forrelated crimes.

In some provinces government regis-trars are trying to spot unwilling foreignbridesbyhiringstaffwith knowledge ofre-gional languages. The government saysthat stricter policing last year in the border-lands reduced trafficking from Vietnam.

It is difficult, however, to prosecute peo-ple for buying abducted women. In 2015the law was revised to make legal actioneasier. But the law says that, in cases wherethe woman wants to return and the buyerdoes not try to prevent it, punishment canbe lighter or the sentence can be commut-ed. Cross-border operations remain hos-tage to China’s relations with its neigh-bours. Ties with Vietnam, an age-old rival,are often frosty.

Huong is now finishing high school,and hopes to study medicine. She says she“will not regret” having to leave her daugh-ter in China. A baby would have been aburden on her family in Vietnam, and sheworried that having no father wouldthrust the child into a legal limbo. Her in-laws were wealthy, at least, and seemeddevoted to her daughter, she says. Theywere “good people.” 7

BeijingXINJIANG

TIBET

SICHUANCHONGQING

HENAN

HUBEI

HUNAN

HAINAN

GUANGDONG

JIANGXI

ANHUI

SHANDONG

HEBEISHANXI

SHAANXI

GANSU

JIANGSU

NINGXIA

LIAONING

JILIN

HEILONGJIANG

INNERMONGOLIA

TIANJIN

YUNNAN

GUIZHOU

GUANGXI

SHANGHAI

ZHEJIANG

FUJIAN

QINGHAI

MONGOLIA

NORTHKOREA

SOUTHKOREA

MYANMAR

INDIA BANG-LADESH

BHUTAN

C H I N A

VIET-NAM

LAOS

THAILAND

JAPAN

TAIWAN

PHILIPPINESS o u t hC h i n a

S e a

B a y o fB e n g a l

NEPAL

Lao Cai

Source: EconomistIntelligence Unit

Sex ratio, men per100 women2017 forecast

100

103

106

109

112

115

750 km

Heading home

The Economist November 4th 2017 China 31

THERE is really only one intellectual pursuit as unhealthy as aburning drive to reach the Standing Committee of the Polit-

buro of the Chinese Communist Party, and that is a morbid fasci-nation with the apparatchiks—their faces pasty and most of theirhair unnaturally black—that compose it. But bear with this col-umn. For in the new seven-man line-up at the top ofChina’s lead-ership that was unveiled last week is a striking character: a 62-year-old, Wang Huning.

It is probable that Mr Wang will be put in charge of the party’sideology and propaganda. He, along with Huang Kunming, thehead of the propaganda department, whom Mr Wang will over-see, are loyal supporters of China’s paramount leader, Xi Jinping.Perhaps that is not a surprise, but it is worth stating, becausethrough Mr Wang, Mr Xi now has even greater control of a vastand essential part of the Communist Party apparatus, somethingthat is not foreordained for the ruler.

The fascinating part is that Mr Wang is not himself a creationof the propaganda system. He is not like his predecessors in thejob, who spouted party-speak in their sleep. He has a mind of hisown. And ithasalreadydone much to help reshape official think-ing, putting ideology—broadly defined—at the heart of what theparty is attempting to do.

In the 1980s and early 1990s, as a precocious law professor atFudan University in Shanghai, Mr Wang grappled with the politi-cal consequences of Deng Xiaoping’s liberalising reforms. Theyhad led to a swift rise in living standards as peasants left collec-tives and profitably farmed their own plots, jumped into busi-ness or left to work in the cities. But that contributed to “a hollow-ing-out of Beijing’s control over its far-flung territories”, as JudeBlanchette ofthe Conference Board, an American research organ-isation, explains in a blog post about Wang Huning. Mr Wang setabout justifying a new political approach.

A notable aspect of Mr Wang’s intellectual history is that, un-like any other senior leader’s since Mao Zedong, it has been sur-prisingly well documented, through numerous writings—at leastuntil he was plucked from academia in the mid-1990s for higherthings. He once described Mao’s Cultural Revolution (fromwhich, as a youth, ill health largely spared him) as “an unprece-dented political catastrophe”. By the 1980s even Chinese ofa rela-

tively liberal bent were attracted to the notion that profound so-cial and economic change required a central authority to overseeit. Mr Wang provided the intellectual justification for “neo-au-thoritarianism”, with political liberties and democracy comingmuch later. This notion gained added salience after the chaos of1989, the year of the massacre around Tiananmen Square. MrWang’s thinking helped to convince leaders that they should re-centralise power and exert it more forcefully.

In the early 1990s Mr Wang also delved more deeply thanmost into the political consequences of corruption. Graft at thehighest levels, he wrote, was far more corrosive than that lowerdown, since it undermined trust in government. He warned thatit could lead China to the same fate as the Soviet Union. In focus-ing on this threat he presaged the phenomenon of Xi Jinping,who has fought against graft with unprecedented zeal.

In fact, Mr Wang helped to mould Xi Jinping’s thinking—aswell as, remarkably, that of Mr Xi’s two predecessors, Hu Jintaoand Jiang Zemin. By 1995 Mr Wang had come to the attention ofMrJiang, who drafted him into the Central PolicyResearch Office,the party’s highest think-tank, which to this day has no publicwebsite or telephone number. There, he devised Mr Jiang’s“Three Represents”, which acknowledged the need for the partyto appeal to more Chinese, including private businesspeople andmanagers. Mr Wang later provided a similar service for Mr Huwith his theory of “Scientific Development”. And his was thebrain behind “Xi Jinping Thought”, which was enshrined in thepartyconstitution late lastmonth. Central to Xi Thought is the no-tion of a “Chinese dream” of the country’s “great revival”—a dol-lop ofnationalism on top ofDeng’s pro-market rhetoric.

Clash ofcivilisationsBefore his elevation to the Standing Committee, Mr Wang wasrarely absent from MrXi’s side on his trips abroad—a foreign-poli-cy adviser and crafter of China’s external messaging too (includ-ing the ballyhooed “Belt and Road Initiative”). Haig Patapan andYi Wang of Griffith University argue that only during periods ofwrenching change and transition do idea-mongers become ad-visers, and advisers come to wield such authority.

Itmaysound encouraging thatMrWangstudied in America inthe late 1980s. He is the first senior leader since the generation ofDeng and Zhou Enlai to have had such Western exposure. But MrWang’s experience there did not entirely inspire him. As Niv Ho-resh of the University of Nottingham has shown, Mr Wang’sbookon his American sojourn, “America Against America”, pub-lished in 1991, lacks reflective qualities. While deploring Ameri-ca’s individualism and self-interest, MrWangfails to see the reachof philanthropy and voluntary organisations. And when hepoints to native Americans’ lack of political power, he seemsblind to the parallel with Tibetans and Uighurs.

But in ways that would be understood by another adviserwho reached the pinnacle of power, Donald Trump’s formerstrategist, Stephen Bannon, MrWangseesa world divided byfun-damentally different values and cultures. MrWang’s bookproph-esies that, following the rise of Japan, other races would chal-lenge American primacy, and the American system based on“self-defeating” notions such as liberty and democracy wouldfind itself in crisis. MrXi does not yet say this. But he has started toclaim that China should “take centre stage in the world” and thatits model of development presents “a new choice for other coun-tries”. That is Wang-think. Don’t say you were never warned. 7

The rise and rise of Wang Huning

The meaning of the man behind the Communist Party’s ideology

Banyan

The Economist November 4th 2017 33

For daily analysis and debate on America, visit

Economist.com/unitedstatesEconomist.com/blogs/democracyinamerica

1

REPUBLICANS have spent years talkingabout the need to cut and simplify tax-

es. In June 2016 Paul Ryan, the Speaker ofthe House of Representatives, released aplan to do so. President Donald Trump re-leased no fewer than three tax plans dur-ing his campaign for office. In Septemberthe administration championed an outlinesketch it had agreed with Republican lead-ers in Congress. Yet as The Economist wentto press, Republicans had delayed the re-lease of their tax bill by a day, having failedto iron out the details.

The main problem the party will face asthe legislation moves through Congress isfinding the money to pay for tax cuts. Re-publicans like to talk about abolishing taxdeductions, but every loophole has a lob-byist to defend it. Having given up on defi-cit-neutral reform, Congress has budgetedfor the taxpackage to increase the deficit by$1.5trn. But the Tax Policy Centre, a think-tank, puts the likely cost of the package$2.4trn. The main source of revenue Re-publicans hope to bank comes from scrap-ping the “state and local” deduction. Thisexempts, from federal taxes, money usedto pay state and local tax bills. Even gettingrid of this is proving difficult.

As long as there have been federal in-come taxes, there hasbeen a state and localdeduction. It first appeared in the RevenueAct of 1862, which financed the civil war,accordingto Jared Walczakofthe Tax Foun-dation, a think-tank. Federal income tax

only squeaked through the House by fourvotes (Republicans have a majority of 45).In an attempt to pacify dissenters, KevinBrady, chairman ofthe Ways& Meanscom-mittee, has since proposed keeping the de-duction in place for property taxes.

That would reshape, rather than elimi-nate, the distorted incentives the deduc-tion causes. These are twofold. First, thededuction encourages states to tax andspend more than they otherwise might,because when they do, some of the costsfall on the federal taxpayers. Second, in itscurrent form the deduction encouragesstates to use property and income taxeswhen sales taxes might be better. (Taxpay-ers can only deduct one of income andsales taxes, and generally it is easier andmore beneficial to pick income taxes.)

Property taxes account for about one-third of state and local deductions taken,by cost. Whereas seven states have no in-come tax at all, all 50 levy significant prop-erty taxes, so the benefits of this part of thededuction are more spread around. Main-taining it would disproportionately bene-fit some Republican-leaning states like Tex-as. But that limits the attraction of MrBrady’s offer to Republican lawmakersfrom Democratic-leaning states like Cali-fornia, New Yorkand New Jersey.

Eliminating the state and local deduc-tion would, all else equal, make federal tax-es more progressive. In 2014 nearly 90% ofthe benefits of the state and local deduc-tion as a whole flowed to those with in-comes over $100,000. The deduction’s re-gressive effects has more to do withincome than property taxes, according tothe Tax Foundation. This is because ashigh-earners get richer, they tend to pay ahigher proportion of their earnings in localincome taxes, but a lower proportion onproperty taxes. So the deduction for in-come taxes is more important to them.

was eventually found to be unconstitu-tional. When, after a constitutionalamendment, lawmakers recreated it in1913, they recreated the deduction, too. Theidea was to stop the federal governmentfrom monopolising states’ tax revenue.

Republicans have since come to viewthe state and local deduction as somethingthat encourages big government, ratherthan deterring it. It subsidises Democratic-leaning states that set their taxes high. (InNew York the deduction is worth about 9%of taxable incomes, compared with just2.5% in Texas.) In 1985 PresidentRonald Rea-gan proposed getting rid of the deduction,while acknowledging its status as “themost sacred ofcows” in the tax code.

Oiling the wheelsYet the deduction survived Reagan’s tax re-form in 1986. Lawmakers from highly taxedstates formed an unlikely alliance with theoil lobby, which was concerned about los-ing its own tax breaks. Each special interestsupported the other. The state and local de-duction stayed, and the oil lobby wonsome concessions.

Will today’s Republicans succeedwhere Reagan failed? An analysis byBloomberg in September found that thereare 52 Republican lawmakers whose con-stituents benefit disproportionately fromthe deduction. Concern about scrapping itis one reason the Republican’s budget out-line, which opened the door to tax reform,

Tax reform

Deducting deductions

WASHINGTON, DC

Scrapping the state and local taxdeduction will be difficult. But it is a good idea

United StatesAlso in this section

34 Terrorism in New York

34 Manafort overboard

35 Children’s health

36 Hasidic Jews in upstate New York

37 Texas politics after Joe Straus

38 Lexington: Obama/Trump voters

34 United States The Economist November 4th 2017

1

2 Despite its regressive nature, many onthe left like the state and local deduction,income taxes included. The Centre on Bud-get and Policy Priorities, a left-leaningthink-tank, argues that the deductionmakes it politically easier for states to levyhigher taxes on the rich, thereby increasinggovernmentspending. Moreover, local tax-es fund services such as education androads, which are already under strain be-cause of tight budgets.

Yet states are surely capable of balanc-ing their budgets without receiving a feder-al subsidy for doing so. There is no real jus-tification for distorting their fiscaldecisions one way or the other. For thatreason, the Republicans’ final tax bill willbe better if it curbs the state and local de-duction. And a partial repeal would be bet-ter than none at all. 7

JUST a few blocks away from wherearound 2,750 people were killed on Sep-tember 11th 2001, New York suffered an-

other deadly attack on October 31st. Thistime the attacker used a low-tech, less le-thal method, illustrating how the threatfrom terrorism is changing. Children wereabout to be dismissed from school andtourists were enjoying the afternoon sunwhen Sayfullo Saipov, a 29-year-old immi-grant from Uzbekistan, mounted the curbin a pickup truck and drove along the pe-destrian and cycle path between the WestSide highway and the Hudson River, hit-ting people on the mile-long stretch. Herammed into a school bus, injuring thoseinside. In all he killed eight people. Mostwere tourists from Argentina.

Ray Kelly, New York’s former policecommissioner, told NPR, a radio station,that he was surprised this had not hap-pened before, “because it is so easy to do”.The incident mimicked recent attacks inEurope, in which vehicles were used asweapons. Ever since Islamic State (IS) en-couraged supporters living in the West touse this method, the NYPD has been pre-paring. Barriers had been placed aroundsoft targets, including Times Square. TheNYPD worked with truck-rental compa-nies, visiting150 locations to talkabout sus-picious signs. After the attacks in Nice andBerlin, the police repeated those visits.

The NYPD has invested heavily in coun-ter-terrorism. It has posted detectives toAbu Dhabi, Amman, London and else-where. Among the rank-and-file are speak-

ers ofArabic, Dari, Urdu and Pushtu. Some500 officersare trained in behaviour analy-sis and how to detect explosives and radia-tion. Hundreds more are assigned to coun-ter-terrorism units. The city has been thetarget of about two dozen plots. Most havebeen foiled by police and intelligenceagents, or by civilians who spoke up whenthey saw something suspicious.

Despite those efforts at vigilance, thedriver appears to have hired a truck easily.Authorities say it appears he acted alone.Big plans with multiple plotters who chatand can be monitored are easier to foilthan low-tech ones by lone wolves. Onerecent plot that aimed to kill thousandsand make an “ocean out of their blood” bytargeting Times Square and the subwaywas thwarted by an undercover agent.John Miller, who heads up the NYPD’s in-telligence arm, says that Mr Saipov hasnever been part of an NYPD or FBI investi-gation. Mr Saipov appears to have closelyfollowed IS instructions on how to carryout such an attack. Police found notes writ-ten in Arabic near the truck which indicatehe had declared allegiance to IS. AndrewCuomo, New York’s governor, told CNNthat Mr Saipov became “radicalised do-mestically”. After spells in Ohio and Flori-da, he settled with his wife and children inPatterson, New Jersey, about 20 miles fromNew York City. He worked for Uber, theride-hailing firm, which said that he hadpassed all its background checks.

Unlike in 2001, when politicians cametogether, the attackwas quickly politicised.President Donald Trump tweet-orderedthe Department of Homeland Security tostep up its vetting process and picked afight with Chuck Schumer, New York’s se-nior senator. Mr Cuomo said Mr Trump’stweets were unhelpful. They play “into thehands of the terrorists”, he said. “The tonenow should be the exact opposite.” 7

Terrorism in New York

A faint echo

NEW YORK

NewYorkis attacked again, but remainsremarkably safe

IS in NY

BLAME it on “The Godfather”. For daysthe political village in Washington, DC

has been consumed by the wrong argu-ment about Robert Mueller, the specialcounsel tasked with investigating Russianinterference in the 2016 election. It beganon October 30th when Mr Mueller, a for-mer FBI boss, unveiled his first criminalcharges against members of DonaldTrump’s presidential campaign. Partisansand pundits responded by squabblingabout who is the bigger villain: Mr Trump,or his erstwhile rival, Hillary Clinton?

Mr Mueller’s investigation charged theformer Trump campaign chairman, PaulManafort, and his business partner, RickGates, with a scheme to conceal some$20m, much of it earned for lobbyingworkin Ukraine undertaken for pro-Russian in-terests. The indictments—to which bothmen plead not guilty—allege Mr Manafortspent millions on Range Rovers and land-scaping at properties in Florida, Manhat-tan and the Hamptons (he also dropped$934,000 at an antique rug shop, $849,000on clothing in New York and $520,000 at amen’s outfitters in Beverley Hills).

A second set of charges concerns ayoung campaign operative, George Papa-dopoulos, who has pleaded guilty to lyingto federal officials. Mr Trump tweeted that“few people knew the young, low levelvolunteernamed George, who has alreadyproven to be a liar.” Alas for the Trumpcampaign, the plea deal relates that afterbeing flipped and turned into a “proactiveco-operator” by prosecutors, young

Robert Mueller’s investigation

ManafortoverboardWASHINGTON, DC

The formerTrump campaign chief isindicted. Cue calls to jail HillaryClinton

The Economist November 4th 2017 United States 35

1

2 George disclosed months of contacts witha London-based academic with Russianties, “the Professor”, and a mysterious “Fe-male Russian National” who were keenlyinterested in his role with Team Trump,and told him in late April 2016 that the Rus-sian governmenthad “dirt” on MrsClintonin the form of“thousands ofe-mails.”

Though the provenance of those e-mails is not clear, the outside world did notlearn until June 2016 that embarrassing e-mails had been stolen from the Democrat-ic National Committee (DNC), and learnedonly in October that e-mails had also beenhacked from the account of John Podesta,head of the Clinton campaign. Americanintelligence chiefs blamed those hackingattacks on Russian military intelligence.

The federal filings do record MrPapado-poulos being rebuffed on occasion by se-nior Trump campaign officials as hepushed for a meeting between the candi-date and the Russian government. But theyalso quote a “Campaign Supervisor” tell-inghim in August 2016 to meet Russian offi-cials offthe record “if it is feasible”.

MrTrump observed, accurately, that themoney-laundering and tax-fraud chargeslaid againsthis formercampaign chairmanpredate the presidential campaign. He fur-ther noted, in a flurry of intemperatetweets, that the indictment against Mr Ma-nafortmakesno mention ofcollusion withRussia. This led him to complain: “But whyaren’t Crooked Hillary and the Dems thefocus?????” Drawing on recent reports thatthe DNC paid for opposition researchabout Mr Trump, involving sources in Rus-sia, his White House press secretary, SarahHuckabee Sanders, declared: “There isclear evidence of the Clinton campaigncolluding with Russian intelligence tosmear the president,” adding that “it mightnot be a bad idea” for Congress to investi-gate MrsClinton. Conservativeswere cock-a-hoop when Tony Podesta, a Democraticsuper-lobbyist (and brother of John Pode-sta), stepped down after his firm was ques-tioned over about late reporting work onUkraine, commissioned by Mr Manafort.

A former prosecutor who knows MrMueller and his team sees a two-prongedstrategy, involving “pure pressure” on MrManafort and Mr Gates to turn and co-op-erate, and the plea deal with Mr Papado-poulos to “telegraph that they are on to theRussia thing” and scare anyone who haddealings with the campaign aide, some ofwhom may now be re-interviewed. “Slowand steady,” says this source.

Samuel Buell, another former federalprosecutor, nowatDuke UniversitySchoolof Law, suggests that too many are treatingthe Mueller investigation like a “Mafia fam-ily case”, in which prosecutors are trying topin known crimes on a known crime boss,by working their way up a pyramid. “Thiscase doesn’t look like a pyramid to me, itlooks like a mosaic with different pieces.”

The real villain in thispuzzle is Russia. IfMr Trump and his supporters are anxiousto talkabout Mrs Clinton instead, that maybe because Russia’s meddling was, in thejudgment of American intelligence agen-cies, intended to help Mr Trump. More-over, the Trump camp was unusually pro-Russian in its policies, and careless aboutcontacts with Russian proxies. E-mails al-ready made public show Donald Trump

junior, the president’s son, being told inJune 2016 that the Russian governmenthadscuttlebutt on Mrs Clinton and wanted touse it to help his father. “I love it,” repliedthe younger Trump. A senior adviser to an-other Republican presidential campaignsays that if his team had been offered dirton an opponent by someone claimingRus-sian government connections, “We’d havegone straight to the FBI.” 7

CONGRESS seldom agrees on healthcare, as is shown by the Republicans’

fruitless attempts to rip up the AffordableCare Act, orObamacare. A longtime excep-tion to partisan feuds was the Children’sHealth Insurance Programme (CHIP), es-tablished in 1997. The scheme, which cov-ers some 9m American children, has beencredited, along with Medicaid, health in-surance for the poor, and Obamacare, withreducing the share of children withouthealth insurance from 14% to a record lowof 5% over the past 20 years. But on Sep-tember 30th federal funding for CHIP ex-pired. State agencies, which administer theprogramme with federal grants, are run-ning short ofcash and are on the cusp of is-suing notices cancelling policies.

Lawmakers, who must offer a fix to re-store the funds, are dithering while Repub-lican leaders concentrate on grander legis-latio. Senators Orrin Hatch of Utah, arock-ribbed Republican and a grandfatherofCHIP, and Ron Wyden, a Democrat from

Oregon, have offered a bipartisan patch tofund the programme for the nextfive years.Over the next ten the proposed fix wouldcost $8.2bn, a paltry sum for a Congressalso pondering a tax cut of $1.5trn. But thebill has become stuck in the House, wherecommittee members have attached con-tentious offsets tinkering with Medicaidand Medicare—health insurance for the el-derly—which are unlikely to be approvedby Democrats. This brinkmanship “breaksthe history of bipartisanship” that CHIPhas long enjoyed, says David Blumenthal,the president ofthe Commonwealth Fund,a health-policy think-tank. “We’re settingourselves up for a game ofchicken.” 

As yet, no state has been forced to sus-pend coverage or issue cancellations. StateCHIP programmes have instead run onfumes, subsisting on unspent funds andemergency injections of federal fundsfrom the Centres for Medicare & MedicaidServices. These jerry-rigged funding mech-anisms will not last long. By the end of the

High-stakes health care

Chipped away

NEW YORK AND WASHINGTON, DC

Congressional inaction threatens health insurance forpoorchildren

36 United States The Economist November 4th 2017

2 year six states, including California andOhio, expect to be completely out of cash.Most will have blown through reserves bythe first quarter of 2018. In Utah, where19,000 children are covered by CHIP, can-cellation notices were supposed to go outthis month, though the health departmentis trying to delay them as long as possible.

Because CHIP isfinanced through blockgrants, large cash transfers with few restric-tions, the scheme isadministered different-ly from state to state. Some create stand-alone programmes, but almost every stateenrolls children in Medicaid to reduce ad-ministrative burdens. Because a provisionof Obamacare requires states to maintaintheir insurance-eligibility standards untilthe end of 2019, states with children inMedicaid may be legally on the hook fortheir medical bills. Those with separatedprogrammes may freeze enrolment, createmore stringent eligibility rules or discon-tinue their operations altogether. Perhapsbecause of turmoil at the Department ofHealth and Human Services—the secretaryhas been sacked for using private planes atthe public’s cost—the Trump administra-tion has been quiet on the matter, not issu-ing public guidance to the states.

Besides wasting administrative re-sources, winding down CHIP programmesmight reverse the steady increase in in-sured children. Without federal funds, 1.2mchildren would lose their health insurancebecause alternative coverage would be tooexpensive, according to the Urban Insti-tute, a think-tank.

Even if funding is eventually restored,serving cancellation notices to families islike unfurling an “unwelcome mat” beforethem, says Joan Alker of Georgetown Uni-versity. Arizona temporarily stopped ac-cepting new children in December 2009.By July 2011, enrolments had dropped 60%.Continued congressional inaction willhave disparate impacts: around 45% ofcur-rently uninsured children are Hispanic. So-called mixed families, with undocu-mented parents but children who areAmerican citizens, may be especially waryof enrolling for fear of alerting the immi-gration authorities. 7

CHIP chop

Source: Urban Institute

United States, children without health insurance% of total

Age, years:5 and under 6-12 13-18

0

5

10

15

20

1997 99 2001 03 05 07 09 11 13 15

Total KIRYAS JOEL is not like other New Yorksuburbs. Although surrounded by bu-

colic winding roads and stunning vistas ofthe wooded foothills of the Catskill moun-tains, there are few stand-alone houseswith big back gardens or picket fences. Al-most everyone lives tightly packed in asquare-mile labyrinth of multistorey con-dominium complexes. The population ofthe village, which forms part of the townofMonroe, about 40 miles (65km) north ofNew York City, has grown by 5% a yearsince 2000. For the past few years, its surg-ing population and the resulting demandsfor land have put it at odds with long-timelocals. After lawsuits and tense negotia-tions, Monroe voters will decide in a refer-endum on November 7th whether to sepa-rate Kiryas Joel, add some land and create anew town, to be called Palm Tree.

Kiryas Joel was founded in the 1970s byJoel Teitelbaum, the grand rebbe of the Sat-mar Hasidic sect. The community hasgrown from 500 in 1977 to more than22,000 today. Many of the new arrivalswere priced out of their old neighbour-hoods in trendy Brooklyn. Part of thegrowth is driven by Hasidic custom: wom-en marry young and have big families. Butmany of the families are struggling, withmore than halfbelow the poverty line.

Like other Brooklyn-ites, Hasids like tolive within walking distance of synagogueand kosher delicatessens and butchers,and close to ritual bathhouses and yeshi-vas (schools). The rural footpaths are

packed with women in long skirts, whocover their hair with hats, wigs or scarves,and are usually pushing a pram whileholding a few more children by the hand.Bearded men, wearing black coats andbrimmed hats, walk purposefully. Streetand shop signs are often in Yiddish or He-brew. The conversations are conducted inYiddish. There is little interaction withtheir non-Hasidic neighbours.

“The tension [between the two groups]is not coming from a place of anti-Semi-tism,”, says Samuel Heilman, an expert onOrthodox Judaism and a professor atQueens College. But tensions there are. A“Welcome to Kiryas Joel” sign asks visitorsto wear long skirts and sleeves past the el-bow and to “maintain gender separationin all public areas”. It would be illegal topass a law to this effect, but such a rule is al-ready enforced by custom. Kiryas Joel al-ready has its own school district, whereboys and girls receive a religious educationin separate classrooms.

The village also has increasing politicalmuscle. Four years ago, Kiryas Joel showeditself to be a strong voting bloc, when mostof its votes went to the winner in an elec-tion to choose Monroe’s town supervisor.More than halfofall voters will be Hasidicby 2021, according to one estimate.

Some of Monroe’s non-Hasids see thesplit asa wayto restore theirpolitical voice,and end years of feuding. Others see thesplit as just delaying the inevitable end ofMonroe. Although the referendum’s termsdictate that no further annexation will bepermitted for ten years, Kiryas Joel is al-ready bursting at the seams and residentsare spilling into other parts of Monroe andinto neighbouring towns. Monroe will seea drop of10% in tax revenues if the referen-dum passes, requiring either spending cutsor tax increases. If Monroe votes to split it-self next week, the new town of Palm Treewill be founded in 2020. 7

Hasidic Jews in upstate New York

The parting ofMonroe

KIRYAS JOEL, NEW YORK

APalm Tree grows in the woods

Cheaper by the dozen

The Economist November 4th 2017 United States 37

SIX days after upending Texas politics bysuddenly announcing his retirement,

Joe Straus sounds like a man at peace. “Ifeel confident it was the right decision,”says Mr Straus, who has served as HouseSpeaker since 2009, longer than any otherRepublican. “I didn’t want to be one ofthose people who held on to an office justbecause he could…There are new playersand they deserve to have their voiceheard.” Not everyone believes his reasonsfor leaving are so high-minded. MarkJones, a political scientist at Rice Universi-ty, believes that Mr Straus “grew wearyand tired of saving the Republican Partyfrom itself, and not only not gettingthanked for it, but getting blasted and at-tacked for it.”

DuringMrStraus’sdozen years in office,Texas Republicans have marched furtherright. Mr Straus, by contrast, is a moderate.Though he worked for Ronald Reagan, MrStraus drives a hybrid car and his wifeserved on the board of Planned Parent-hood, which provides birth-control ser-vices (including abortions) in their home-town of San Antonio—both seriousdemerits in today’s Republican Party. Hewon repeated speakership elections withbipartisan support. As his state’s first Jew-ish Speaker, he weathered anti-Semitic at-tacks: one member of the state’s Republi-can executive committee urged membersto support “a true, Christian conservative”.His departure illustrates the waningpowerof his party’s business wing, and presages

a bruising intra-party fight in Texas—forwhich much of the South ought to startpreparing.

The party’s right wing is already cele-brating. Matt Rinaldi, a member of theHouse Freedom Caucus who represents asuburban Dallas district, called Mr Straus“a terrible Speaker…almost totalitarian.He silenced the voices of the majority inthe House.” Michael Quinn Sullivan, whoheads a powerful conservative advocacygroup called Empower Texans, said he was“happy…maybe now some pro-taxpayerinitiatives can finally move forward.”

Straus’s blue periodConservatives blame Mr Straus for failingto pass a bill that would have made it easi-er for citizens to veto a property-tax in-crease (because Texas has no income tax,local governments rely on property andsales taxes). In this year’s legislative ses-sions, he successfully opposed a school-voucher programme, measures to limitstate- and local-government spending, abill telling transgender people where theycan pee and a bill that would have bannedorganisations that also provide abortionsfrom receivingany taxmoney. GregAbbottand Dan Patrick, the state’s governor andlieutenant-governor respectively, champi-oned these measures, and fumed at MrStraus after the session ended. With MrStraus gone, these measures may pass inTexas’s next legislative session in 2019, ascould a version of the bathroom bill.

Yet his retirement may put them in thesame awkward position. With Mr Strauswielding the gavel, they could advo-cate—or in the case of Mr Patrick, whoheads the Senate, pass—harmful legisla-tion to burnish their social-conservativecredentials, knowing it would never passthe House. Indeed, rumours in Austin sug-gest that Mr Abbott offered precisely thatassurance to business leaders on the bath-room bill: Don’t worry, Joe will never let itthrough. If a social conservative runs theHouse, they will no longer be able to playboth sides; they will have to disappoint ei-ther Republican activists or business.

Whoever replaces MrStraus will proba-bly be more conservative, if only becausethe median Republican has moved right-ward. But his replacement is unlikely to bea bomb-thrower. Hard-right candidatesmay find themselves challenged early andstrongly in next year’s elections. Mr Straushas a $10m war-chest, and vows to “speakout [and] support responsible Republi-cans.” The business lobby looks likely tobreakwith habit, and get involved in prim-ary campaigns. Chris Wallace, president ofthe powerful Texas Association of Busi-ness (TAB), complains that this year’s radi-cal agenda spearheaded by Mr Patrick was“among the most anti-business legislativesessions we can remember”.

While previously TAB only endorsedcandidates, providing no financial sup-port, it has realised its brand no longer car-ries the weight it did among Republicans.The association has revived its political-ac-tion committee to disburse funds to pro-business candidates, even if they chal-lenge Republican incumbents. It is backinga challenger to a north Texas Republicansenator who believes, among other things,that bike paths are part ofa United Nationsplot, that public schools provide “commu-nist indoctrination” and that a previousopponent was controlled by Satan. MrWallace even left open the possibility ofsupporting a Democrat in the general elec-tion—a rarity for a business lobby.

Texas is so heavily Republican and re-districted that most races are won in theprimaries. Republicans in Texas, and inmuch of the South, have become whatDemocrats were for most of the 20th cen-tury: the only party that matters. The big-gest political fights are within, rather thanbetween, the parties. Low primary-voterturnout gives outsize power to committedactivists. Mr Straus and other moderate Re-publicans identify reversing that trend astheir biggest challenge.

Like Bob Corker and Jeff Flake, conser-vative but non-Trumpist US senators, MrStraus had found himself on the edges of aparty he once fitted solidly into. He leaveselected office without regrets. “I spent mytime trying to promote good ideas andreaching across the aisle. I don’t apologisefor that. More people ought to try it.” 7

Texas politics

Thus spake Joe

AUSTIN

The powerful Speakerof the Texas House ofRepresentatives, a champion ofmoderation and good government, steps down

38 United States The Economist November 4th 2017

ITIS WORTH underlining, in a weekdominated by reminders ofthe skulduggery that helped send Donald Trump to the White

House a year ago, that the main reason for his victory was demo-cratic. Mr Trump persuaded about 7m people who voted for Ba-rack Obama in 2012, most of them white, working-class and mal-content, to vote for him. Many had not voted Republican before.

In north-eastern Pennsylvania, where Lexington went to talkto some ofthese switchers, the rush to MrTrump was dramatic. Abirthplace of trade unionism, the region’s main towns, Wilkes-Barre and Scranton (which was also the birthplace of HillaryClinton’s father), were so Democratic that Republican gerryman-derers designed the 17th congressional district that contains themas a Democratic sink. Mr Obama won the district in 2012 by dou-ble digits. So did Mr Trump. “Soon as I went to vote and saw like50 people queueing up, I knew it was over,” says the barman atthe Anthracite Café, a popular joint in Wilkes-Barre, with miningmemorabilia on its walls and a vast lump ofcoal out front.

Obama-Trump voters represented only about 4% of the elec-torate. But because they were concentrated in the swing states ofthe industrial north-east and mid-west, they outweighed MrsClinton’smore modestgainswith groupssuch as the college-edu-cated whites who migrated from the Republicans to the Demo-crats. They are the main reason Mr Trump won Michigan, Penn-sylvania and Wisconsin, the states that sealed his victory. Bothparties are now obsessed with them.

Republican strategists say that if they stay with Mr Trump hewill be president until 2025. Considering the electoral advantagesincumbents enjoy (and the improbability that he will be forcedfrom office, no matter what Robert Mueller finds), they may beright. The Democrats are focused on the switchers in part for psy-chological reasons. Like amateur investors, political partiesmourn their losses more than they look forward to future gains.Yet their concern is justified. In the mid-term elections, the Demo-cratsneed to pickup 24 seats to take the House ofRepresentatives,and many of their likeliest gains are in places, such as Iowa andPennsylvania, thickwith Obama-Trump voters.

Democratsare planninga fusillade ofmessagingon the bread-and-butter economic issues they believe switchers care aboutmost. A set ofmoderately populist economic positions floated by

Democratic senators (the party’s nearest thing to a post-poll reck-oning) was an early salvo. “These voters turned to Trump be-cause they were desperate for economic change,” says Matt Cart-wright, the 17th district’s Democratic representative. “Take awaythe economic anxiety and the bigotry and misogyny go away.”Yet polling data offer little support for that.

Some switchers do seem open to persuasion. Almost 30% vot-ed for a Democratic House candidate in 2016, which suggestsboth a residual tie to the party and how singularly Mrs Clintonwas disliked. “She was the status quo and we wanted change,”says Mark Mackrell, owner of a Scranton barbershop. The dataalso suggest Obama-Trump voters are less pessimistic and moreregretful of their choice than the average Trump supporter—butonly a bit. Just16% lament their vote, compared with 6% ofTrumpsupporters overall. As this might suggest, Trump fans’ economicand cultural worries are not as separable as the Democrats hope.

Economic privation does not explain why so many working-class whites chose Mr Trump. The poorest picked Mrs Clinton. In-deed, analysisby the bipartisan VoterStudiesGroup finds no uni-fyingattitude amongTrump voters on any economic issue. Muchlikelier indicators ofsupport for him were cultural and not pretty.They included support for his promised Muslim ban and a beliefthat white Americans were discriminated against.

As Arlie Russell Hochschild, a sociologist, has written, such bi-ases are fuelled by anxiety about socioeconomic status in achangingAmerica. Even as working-class whites find themselvesworking harder, for less reward, they look around and see wom-en and non-whites on the rise—presumably at their expense,some conclude. This helps explain why there has been a steadyflow of working-class whites from the Democrats, the championofthose risinggroups, over the past two decades. MrTrump’s suc-cess was based on supercharging that pre-existing change,through his attacks on immigrants, Muslims and the trade dealsthat working-class Americans also decry.

For love ormoneyFor Democrats to unwind their recent losses they would have tosucceed where they have failed for two decades, against a partythat has learned to press its advantage with crude brilliance. Evenin the mid-terms, when Mr Trump will not be on the ballot, thismay be harder than they think, judging by the campaign Ed Gil-lespie is running in Virginia’s gubernatorial race. Formerlyknown asa pro-businessconservative, he isairingads that accusehisequally inoffensive Democraticopponent ofbeingan enablerfor a Salvadorean drug gang.

Even without Mrs Clinton weighing on their appeal, theDemocrats will need more than a new economic message to re-spond to that. They must show they are sufficiently in touch withtheir lost voters’ cultural worries to warrant a fair hearing. In a re-match against Mr Trump, that would be hard; the Democrats can-not refrain from condemning his bigotry without offending theirother supporters. Yet they can promote more candidates with so-cially conservative views. They can try articulating the concernsof their constituent groups in the broadest terms: equal pay forwomen matters for economic competitiveness as well as fair-ness; criminal-justice reform would be fiscally responsible aswell as just. It is a daunting task. But the alternative is to askObama-Trump voters to choose between cultural and economicanxieties, because neitherparty can address both. And, on recentevidence, culture wins that fight every time. 7

The great switcheroo

The Democrats will struggle to rebuild theirwhite working-class base. But they must try

Lexington

The Economist November 4th 2017 39

1

THE mere mention of Venezuela shouldmake most investors shudder. Its presi-

dent, Nicolás Maduro, says that capitalismhas “destroyed the planet” and vows tobuild a socialist Utopia. The country’s eco-nomic output has shrunk by more than athird since 2014, and it is sufferingfrom direshortages of food and medicine.

Nonetheless, one class of Venezuelanassets has delivered returns in recent yearsthat would leave any investor licking hischops: bonds issued by the governmentand by PDVSA, the state oil company. SinceJanuary 2015 they have risen in value bynearly 60%, while every coupon has beenpaid at sky-high interest rates. “There hasnever been a bondholder’s better friendthan Venezuela,” says Ray Zucaro of RVXAsset Management, a Florida-based in-vestment firm.

The spectacle of foreign creditors grow-ing fat offVenezuelan debt while the coun-try’s people go hungry—on average, re-spondents to a recent survey said theirweight had fallen by 9kg (20lbs) during thepast year—should eventually prove bothpolitically untenable and financially un-sustainable. Mr Maduro’s government isindeed teetering ever closer to the brink ofdefault. On October 27th PDVSA said it hadmade an $842m principal payment. How-ever, investors did not start to receive themoney until November1st, and intermedi-aries handling the transaction told clientsto expect a transfer on November 2nd—

at 60%. And the same factors that have en-abled Venezuela to stay afloat so far couldhelp it to hang on for far longer than mar-kets think is possible.

It is a testament to the magnitude ofmismanagement in Venezuela that a coun-try with more oil reserves than Saudi Ara-bia has reached such dire straits. Duringthe presidency of Hugo Chávez, which be-gan in 1999, the government systematicallydismantled the private sector. He expropri-ated thousands of businesses, establishedbyzantine controls on consumer pricesand foreign exchange, let cronies loot thepublic purse and turned PDVSA, once acash cow, into a make-workscheme. Whenhe died in 2013 high petroleum prices stillcovered up the economy’s rotting founda-tions. But the oil boom ended the follow-ing year, leaving Mr Maduro, a former busdriver whose main qualification for officewas his loyalty to Chávez, to run a countryin economic free-fall. Mr Maduro doubleddown on Chávez’s policies, turning a grimsituation into a humanitarian crisis.

To finance the government’s domesticbills, Mr Maduro has revved up the print-ing presses, setting offa bout ofhyperinfla-tion. Venezuela’s foreign creditors, how-ever, require payment in hard currency. Asthe country’s export revenues collapsedfrom $98bn in 2012 to a mere $29bn thisyear, the government has let the brunt ofthe adjustment fall on imports—even ofnecessities such as bread and toilet paper.

Venezuela’s surprising rectitude as adebtor stems from an unlikely confluenceof factors. No democratic governmentcould ever plunge its people into penuryand hope to stay in power. Mr Maduro,however, has dispensed with any pretenceoflegitimacy: in Augusthe installed a “con-stituentassembly” asa sham parliament toreplace the opposition-controlled nationalassembly. His security forces have re-

fourdaysafter the due date. Nomura, an in-vestment bank, calls the episode a “nearmiss”. Another instalment, worth $1.2bn,was also due on November 2nd. To fulfilthese obligations, Venezuela has delayedmore than $700m ofotherpayments, mak-ing use ofa 30-day grace period.

As the insolvent government shufflesmoney from one pocket to another to staveoff bankruptcy, investors expect the worst.The pricing of Venezuelan credit-defaultswaps corresponds to a 75% likelihood ofsome form of default within the next 12months, and a 99% chance during the nextfive years. However, the markets have longunderestimated Mr Maduro’s commit-ment to paying up: in March 2015 they putthe odds of a default in the following year

Venezuela’s debt crisis

Staying afloat, somehow

CARACAS

South America’s insolvent left-wing champion has been the starofsovereign-bondmarkets. Howlong can it keep paying up?

The AmericasAlso in this section

40 Artificial intelligence in Canada

42 Bello: Mexico’s leftist leaders

Good while it lasts

Sources: Central Bank of Venezuela; Thomson Reuters

Venezuela, international reservesincluding gold, $bn

JPMorgan emerging-markets bond indexJanuary 2010=100

2008 15 170

10

20

30

40

50

2010 15 1750

100

150

200

250Venezuela

component

Composite

40 The Americas The Economist November 4th 2017

1

2 sponded harshly to street protests: accord-ing to the UN, they have killed at least 46people in 2017. In general, cash-strappedcountries turn to the International Mone-tary Fund for loans during financial crises.However, Chávezwithdrewfrom the Fundin 2007, and it would presumably requireMr Maduro to institute sane policies in ex-change for its assistance.

Given the president’s leftism, his mostideologically consistent option would beto stop paying, as Argentina did in 2001.Unlike Argentina, however, Venezuela is apetro-state, with valuable assets abroad.PDVSA owns Citgo, an American refiner, aswell as tankers that dockat foreign ports. IfVenezuela defaults, international creditorswill try to seize those assets. That in turncould bring PDVSA’s operations—and byextension whatever remains of the Vene-zuelan economy—to a halt.

Even though Mr Maduro appears dead-set on avoiding default, he is still strugglingto cobble together enough hard currency.The biggest reason the government hasstayed current so far is largesse from for-eign patrons. During the past decade Chi-na has lent Venezuela more than $50bn,and accepts repayment in oil. Russia hasalso made a series of emergency loans toPDVSA, often just before sovereign-bondpaymentswere due. In April Rosneft, an oilcompany whose majority owner is theRussian government, lent PDVSA $1bn. Inreturn, according to an investigation byReuters, a news agency, it has been offeredpartial-ownership of as many as nine Ven-ezuelan oil projects.

What can’t go onHow long can Venezuela continue to makegood on its obligations? On one hand, thecountryappears to be runningoutoffinan-cial wriggle room. Its foreign-currency re-serveshave dwindled from a high of$43bnin 2008 to just $10bn now, much of it in theform ofsolid gold ingots. By next year, theyare expected to fall to just $2.4bn.

Moreover, the logistics of payment aregrowing increasingly difficult. As Mr Ma-duro haspushed the country into overt dic-tatorship, the United States has respondedwith sanctions. American entities arebanned from doing business with dozensof senior government figures, including

the president, vice-president, attorney-general and economy minister. They arealso prohibited from dealing in new bondissues by Venezuela and PDVSA. Both mea-sures appear to have spooked complianceofficers in international banks, the morecautious of whom are advising against alldealings with Venezuela.

Nonetheless, if Venezuela had to livewithin its domestic means, it would havegone bust already. The recent recovery inoil prices, which now exceed $50 a barrel,could delay the government’s day of reck-oning. And if Venezuela does fall behindon payments, its creditors may prove sur-prisingly flexible. Seeking redress from aVenezuelan default would be extraordi-narily complicated. The complex owner-ship structure of PDVSA, a sprawling con-glomerate, is likely to cause long legalbattles over which assets belong to whichentities. And because PDVSA has becomeindistinguishable from the Venezuelanstate, even small holders of its bonds—which lack “collective-action clauses” thatprevent individual creditors from holdingthe majority to ransom—might be able topress cross-claims against the government.

In Argentina’s case, litigious bondhold-ers managed to block Argentina’s pay-ments on its restructured debt nine yearsafter those bonds were issued. With thatexperience fresh in mind, many creditorsmay prefer to cut Venezuela some slackand continue to collect what they can.

Even if bondholders do play tough,Venezuela’s allies could come to its rescue.According to Monica de Bolle of the Peter-son Institute, a think-tank in Washington,both China and Russia “want to string thisalong”. The cost of maintaining Venezue-la’s debt performance is trivial relative tothe size of those governments’ budgets. Inexchange they both gain a lasting footholdin a country with vast energy reserves, andget to vex Donald Trump by propping upan anti-American regime just 1,300 milesfrom the mainland United States.

That geopolitical equation mightchange if Mr Maduro were toppled. Butbets on his ousting have so far proven justas fruitless as bets on default. His constitu-ent assembly may draft a new constitutionthat will secure him in power. And the op-position, a fragile coalition of parties un-ited only in their determination to defeathim, began to fracture visibly last month,followinga rout in elections forstate gover-norships (which appear to have beenpartly rigged by the government). Two ofits best-known leaders, Henry Ramos Al-lup and Henrique Capriles, exchanged in-sultsduringconsecutive press conferences.

Mr Zucaro predicts that the opposi-tion’s “cannibalistic” tendency will keepMr Maduro in office, and that investmentsin the black sheep of sovereign-debt mar-kets will continue to pay off. He declares: “Idon’t think the party is over yet.” 7

Accountant wanted

Source: EconomistIntelligence Unit

Venezuela, 2018 forecast, $bn

*Principal repayments, IMF debitsand interest payments

†Including gold

0 10 20 30 40

Liabilities

Assets

ImportsExternal

debt service*

Capitalflight

Exports Internationalreserves†

ROBOTS controlled by remote super-computers. Self-driving cars on nar-

row, winding streets. Board-game playersof unimaginable skill. These successes ofartificial intelligence (AI) rely on neuralnetworks: algorithms that churn throughdata using a structure loosely based on thehuman brain, and calculate functions toocomplex for humans to write. The use ofsuch networks is a signature of firms in Sil-icon Valley. But they were largely inventednot in California but in Canada.

How did this breakthrough emergefrom the land of moose and maple syrup?Canada cannot compete with America inresearch funding. Instead, it has made avirtue of limited resources, developing analternative model of innovation based onopenness to unorthodox ideas.

The roots of Canada’s contributions toAI reach back decades. In 1982 Fraser Mus-tard (pictured, centre), a doctor, foundedthe Canadian Institute for Advanced Re-search (CIFAR). He envisioned it as a “uni-versity without walls”, in which research-ers could work across disciplines. Fundedby the Canadian government, CIFAR en-couraged its fellows to share their bestideas rather than guarding them jealously.

Five years later Geoffrey Hinton, anEnglish polymath, joined CIFAR and be-gan work on the primitive field of neuralnetworks. After a long hiatus, he returnedin 2003 to set up a CIFAR group dedicatedto neural networks, called Neural Compu-tation and Adaptive Perception (NCAP).NCAP included Sebastian Thrun, who laterfounded the arm ofGoogle that researches“moonshot” technologies; Terry Sejnow-ski, a prominent neuroscientist; and JeffHawkins, who invented the Palm Pilot.

Innovation in Canada

The founding ofMaple ValleyTORONTO

How Canada’s unique research culturehas aided artificial intelligence

AI’s nerve centre

42 The Americas The Economist November 4th 2017

2

WHEN Latin America zigs, Mexicoseems to zag. In the mid-2000s a po-

litical “pinktide” swept left-of-centre lead-ers into power across the region, whileMexico elected two conservative presi-dents. Now that tide has ebbed, as Brazil,Argentina, Peru and others have swung tothe right. But Mexico may again prove anexception. The front-runner in its presi-dential contest in 2018 is Andrés ManuelLópez Obrador, a left-wing populist.

He is no policy wonk, and prefers fieryspeeches to ten-point plans. As mayor ofMexico City from 2000 to 2005, he fo-cused on motorways and local pensions.Even so, it is hard to predict how he mightgovern as president. He lists three formerpresidents—Benito Juárez, Francisco Ma-dero and Lázaro Cárdenas—as his heroes.Of these, Cárdenas, Mexico’s foremostleftist, appears uppermost in his mind.

Tata (“Papa”) Lázaro is rememberedabove all for two achievements. In 1938 heseized British- and American-owned oil-fields, and nationalised the industry. Healso enacted large-scale land reform,breakingup bigestates into ejidos, orpeas-ant collectives. These policies haveproved durable. The state still controls al-most all ofMexico’s oil, and ejidos remainthroughout the countryside.

Both issues sit near the top ofMr LópezObrador’s agenda. He denounces recentreforms to open the energy industry toprivate firms as the work of traitors, andhas called for a referendum on fully re-turning the oil sector to the state. In hisbook, “2018: The Way Out”, he lauds theprice floors Cárdenas set for basic crops,which he hopes to reinstate in order tomake Mexico self-sufficient in agriculture.

Yet MrLópez Obradorseems to misun-derstand how his idol left such a lastinglegacy. Cárdenas had a keen sense ofwhat his son, Cuauhtémoc, has called

“the distinction between the popular andthe populist”. Tata Lázaro sought to reducesocial division, not augment it. He seldomincited hatred against rivals, and pardoned10,000 people who had risen up againstthe state. Mr López Obrador, in contrast, isless fond ofunifyinggestures. Asmayor, hemocked anti-kidnapping protesters as pir-rurris (“rich kids”).

Cárdenas was also a proud institution-builder. When he tookoffice, his party waslittle more than a clique of generals fromthe Mexican Revolution. He transformed itinto a movement with 4.3m members,which would become the InstitutionalRevolutionary Party (PRI) and hold poweruntil 2000. In 1940, rather than cling topower or appoint a radical ally, the Marx-reading president picked a moderate suc-cessor. That set the stage for decades of po-litical stability and economic growth, andentrenched the principle of a single presi-dential term with no re-election that Mexi-co still abides by. The PRI was certainly cor-poratist and undemocratic. But as a systemstronger than the people who ran it, it wasunique in Latin America—at least until itunravelled into corrupt incompetence.

Mr López Obrador could not be moredifferent. He has undermined Mexico’sdemocratic institutions. After a narrowdefeat in the presidential election of2006,he refused to concede, claiming withoutevidence that the result was fraudulent.He declared himself the “legitimate presi-dent” and led protests for weeks.

He also has little use for political par-ties. After twice running as the presiden-tial candidate of the Party of the Demo-cratic Revolution, which was founded byCuauhtémoc Cárdenas, he ditched it in2012 to form Morena, a new left-wingparty, purely as a vehicle for his candida-cy. He is unlikely to enjoy a legislative ma-jority if elected, and his confrontationalmanner will make it difficult for him tofind allies for his policies.

Abroad, Mr López Obrador pledges toact “like the older brother in Latin Ameri-ca”, not the obedient younger brother ofthe United States. However, Cárdenasbased his oil expropriation on cool calcu-lation as well as nationalist zeal. He cor-rectly anticipated that Franklin Rooseveltwould be wary of driving Mexico to-wardsGermany, ensuring thatanyretalia-tion would be limited. If elected, Mr Ló-pez Obrador will face a much tetchierantagonist. In February he described Do-nald Trump as an “irresponsible neo-fas-cist”, a slight the thin-skinned Americanpresident is unlikely to forget.

If efforts to revise the North AmericanFree-Trade Agreement somehow satisfyMrTrump, MrLópezObradorstill vows torevisit any deal he finds “unfair”. And notall Mexican presidents have enjoyed Cár-denas’s good luck in tussles with UncleSam. A border dispute manufactured bythe Americans in 1846 ended with Mexicolosing halfof its territory. The longer viewshows that picking fights with the UnitedStates carries risks as well as rewards.

Learning from LázaroBello

Mexico’s presidential front-runnermisunderstands his leftist role model

NCAP, now called Learning in Ma-chines and Brains, funds researchers fromall over the world, not just Canada. It doesnot require them to workin the same place.But by providing them with modest fi-nancing and a framework for collabora-tion, it has created a breeding ground forout-of-the-box ideas. Mel Silverman, whoran NCAP for CIFAR, remembers a youngmember scrawling equations on a white-board that were intended to be a mathe-matical description ofconsciousness.

Before long, NCAP began to produce astream ofthe most cited research in AI, andits members spread to leading firms. In

2006 Mr Hinton published a paper withRuslan Salakhutdinov, who now leads Ap-ple’s AI efforts, showing that neural net-works can simplify complex models downto just a few variables. Six years later, twoof Mr Hinton’s students used neural net-works to win an image-recognition contestwith a system twice as accurate as the run-ner-up. Google hired both of them.

Canada’s open-information strategymakes it hard for the government to mea-sure the return on its investment. Nonethe-less, the soft benefits are clear. In June anew research lab called Element AI raised$102m. In recent months Google has set up

an office in Toronto, and Facebook andSamsunghave opened AI labs in Montreal.

CIFAR’s model has worked for topicsother than AI, though not to the same ex-tent. One project is exploring how interac-tions between genes and the environmentaffect human development; another focus-es on the networkofbacteria in the humangut, which is important for health. Neitherhas yet yielded an industry-changing tech-nology like neural networks, butboth havethat potential. The coming years will showwhether Canada got lucky with NCAP, orwhether its unique approach to innova-tion will continue to bear fruit. 7

The Economist November 4th 2017 E S S AY L U T H E R 43

1

IN THE summerof1974, a 26-year-old Mayan villager lay drunk ina town square in the Guatemalan highlands. Suddenly he heard

a voice that was to change the course of his life and that of hishome town, Almolonga. “I was lying there and I saw Jesus saying,‘I love you and I want you to serve me’,” says the man, MarianoRiscajche. He dusted himself down, sobered up and soon startedpreaching, establishing a small Protestant congregation in a roomnot far from the town’s ancient Catholic church.

Half a millennium earlier, a 33-year-old German monk experi-enced something similar. At some point between 1513 and 1517,Martin Luther had a direct encounter with God and felt himself“to be reborn and to have gone through open doors into paradise”.Hismomentofbeingborn again wasprivate. The dayon which heis said to have nailed a list of 95 complaints about ecclesiasticalcorruption to the church door in Wittenberg, Saxony—widelythought to have been October 31st 1517—made the private publicand, soon, political. A mixture of princely patronage, personalstubbornness and chance led what could have ended up as justanother minor protest in a remote corner of Europe to become aglobal movement.

At the heart of this Protestant faith were, and are, three beliefsresting on the Latin word for “alone”: sola fide (that people aresaved by faith in Jesus alone, not by anything they do); sola gratia(that this faith is given by grace alone, and cannot be earned); and

The stand

sola scriptura (that it is based on the authority of the Bible alone,and not on tradition or the church). In a way that complementedthe broader themes of the Renaissance, Luther wanted Christian-ity to go back to the “pristine Gospel”: the teachings of Jesus andthe apostles. This return offered a new sort of freedom, one cen-tred on the individual, which helped pave the way for modernity.“The separation of powers, toleration, freedom of conscience,they are all Protestant ideas,” says Jacques Berlinerblau, a sociolo-gist at Georgetown University.

A safe strongholdProtestantism continues to change lives today; indeed, over the re-cent decades the number of its adherents has grown substantially.Since the 1970s, about three-quarters of Almolonga’s 14,000 resi-dents have converted; more than 40% of Guatemala’s populationis now Protestant. Its story is a microcosm ofa broader “Protestantawakening” across Latin America and the developing world. Ac-cording to the Pew Research Centre Protestants currently make upslightly less than 40% of the world’s 2.3bn Christians; almost allthe rest are Roman Catholics. The United States is home to some150m Protestants, the largest number in any country.

In Luther’s native Germany roughly half the Christians followhis denomination. But today Europe accounts for only 13% of theworld’s Protestants. The faith’s home is the developing world. Ni-

ALMOLONGA, GUATEMALA

Protestantism shaped the developmentof the modern liberal West. What doesits current revival mean for thedeveloping world?

44 E S S AY L U T H E R The Economist November 4th 2017

2 geria has more than twice as many Protestants as Germany. Morethan 80m Chinese have embraced the faith in the past 40 years.

There are many ways to be a Protestant, from the quietist to theecstatic. The fastest-growing varieties tend to be the evangelicalones, which emphasise the need for spiritual rebirth and Biblicalauthority. Among developing-world evangelicals, Pentecostalsare dominant; theirversion ofthe faith is charismatic, in that it em-phasises the “gifts” of the Holy Spirit, held to be a universally ac-cessible and sustaining aspect of God. These gifts include healing,prophecy and glossolalia. According to the World Christian Data-base at Gordon-Conwell Theological Seminary in Massachusetts,Pentecostals and other evangelicals and charismatics account for35% of Europe’s Protestants, 74% of America’s and 88% of those indeveloping countries. They make up more than half of the devel-oping world’s Christians, and 10% ofall people on Earth.

Changed lives change places. Almolonga’s Pentecostal believ-ershave broughtnewenergy to their town. Where once the prisonwas full and drunks slumped in the streets, there is now a buzz ofactivity. A secondary school opened in 2003; it sends some of itsgraduates, all members ofthe indigenous K’iché people, to nation-al universities. “We want one of our students to work at NASA,”says Mr Riscajche’s son, Oscar, who chairs the school board.

Scholars have been surprised by the developing world’s Prot-estant boom. K.M. Panikkar, an Indian journalist, spoke for manywhen he predicted in the 1950s that Christianity would struggle ina post-colonial world. What might survive, he suggested, in bothProtestant and Catholic forms, would be a more modern, liberalform of the faith. The Pentecostal expansion proved him quitewrong. Peter Berger of Boston University, a leading sociologist ofreligion (who died this summer), saw it as a key part of a wider“desecularisation” of the world.

To some extent, this growth of Pentecostalism among the glo-bal poor marks a loss of faith in political and secular creeds. AsMike Davies, an American writer and activist, put it in 2004,“Marx has yielded the historical stage to Mohammed and theHolyGhost.” But it isworth notingthatbetween 2000 and 2017 the1.9% annual growth in the number of Muslims was mostly due toan expanding population, whereas a significant part of Pentecos-talism’s expansion of 2.2% a year was due to conversion. Half ofLatin America’s Protestants did not grow up in the faith.

Their emphasis on personal experience makes Pentecostalismand similar beliefs culturally malleable; their simplicity and abili-ty to dispense with clergy gives them a nimbleness that suits peo-ple on the move. They tend to erode distinctions of faith based onethnicity or birthplace. To Berger, that made this sort ofProtestant-ism a modernising force. It is, he argued, “the only major religionwhich, at the core of its piety, insists on an act of personal deci-

sion.” Its mixture of distinctive indi-vidualism and strong, supportivecommunities, he wrote, makes it “avery powerful package indeed”.

It is a bootstrapping faith. Anyonepulling himself up in the world canjoin. Many of those who do are fromthe margins of society. Churches pro-vide migrants in their congregationswith employment, support and thepossibility of advancement. Wherethe faith is not part of the establish-ment, as in Latin America or China, itcarries the potential for disruption.

For some sociologists, such ideasevoke the ghost of Max Weber,whose book, “The Protestant Ethic

and the Spirit ofCapitalism”, published in 1905, posited that mod-ern capitalism was the unintended consequence of an “inner-worldly asceticism” in early modern Protestantism. Such peoplemade money but did not spend it, creating a thrifty, hard-working,literate, self-denying citizenry who drove forward the economiesof their countries.

Few economists these days put much stock in Weber’s views.They point out that there was plenty of proto-capitalism—in 13th-century Italian city-states, for instance—before the Reformation,and the development of its modern form was influenced by manyother factors. Today the idea seems out of date: the borders thatonce ensured an overlap between national markets and eco-nomic moralities have given way to capital flows and a consumerculture in which unrestricted gratification seems to be the norm.

Yet some hear echoes of Weber’s ideas in Pentecostalism’sgrowing social influence. “In Guatemala the Pentecostal church isjust about the only functioning organisation of civil society,” saysKevin O’Neill of the University of Toronto. Almost all the drug-re-habilitation centres in Guatemala City, of which there are morethan 200, are run by Pentecostal volunteers. Throughout LatinAmerica, there are hints of the faith’s socioeconomic impact. A re-cent study of Brazilian men by Joseph Potter of the University ofTexas and others found that Protestant faith was associated withan increase in the earnings ofmale workers over a 30-year period,especially among less educated people ofcolour.

In Almolonga itself, in the first decade of this century, farmerson average earned twice as much as those in the next village,where Protestantism had not taken off. Sceptics attribute this tothe more fertile soil or new methods of farming. But according toBerger, “Max Weber is alive and well and living in Guatemala.”

“It insists on anact of personaldecision”

Onwards from Wittenberg

Sources: World Christian Database; The Economist *Includes Greenland and Bermuda

Number of Protestants, by region, m

1500 1600 1700 1800 1900 20000

200

400

600

800

1,000

1,200

Africa Asia Europe Latin America United States and Canada* Oceania

Luther attaches the95 Theses

to Wittenbergchurch door

October 31st 1517

MartinLutherborn10 Nov1483

Diet of Worms marksdoctrinal split withCatholicism1521

Marburg Colloquy fails toreconcile Luther and Zwingli1529

Peace of Westphaliaconfirms and expandsreligious freedomsof German states; largelyends era of religiouswars in Europe1648

Act of Tolerationprotects rights of non-Anglican Protestants inEngland1689

Gene Robinson is ordainedas first openly gayProtestant bishop

2004

Edinburgh MissionaryConference begins theecumenical movement;

seeks to evangelisethe world

1910

World Council of Churchesis formed

1948

Decolonisation is followedby rapid church growth in Africa;broader spread of Protestantism

in the developing world

Thirty Years Warover religious liberty

of German states;as many as one in five

Germans killed1618-1648

English Civil Warcaused by disputes betweenking and Puritan Protestants;unleashes wave of religiousreform1642-51

First Great Awakeningin New England infuses theAmerican colonies with a newwave of religious fervourthat will influence Americanrevolutionaries1730-1750 Second Great Awakening

leads to proliferation ofnew denominations,especially in America1790-1840

Peace of Augsburgallows rulers to choosethe religion of theirdomain; first legalrecognition ofProtestant faith1555

John Wesley foundsMethodist church inEngland1738

Azusa Street Revivalin Los Angeles marks

beginning ofPentecostalism

1906

The Economist November 4th 2017 E S S AY L U T H E R 45

1

LUTHER was an accidental revolutionary. He was not trying tomodernise his world but to save it. Had he become a lawyer, as

his father wanted, Christendom—the European order organisedby its rulers along lines largely set by the church—might haveevolved very differently. The church might have reformed morefrom within; it might have fractured even more deeply than it did.

It was change from within that Luther wanted. Having enteredan Augustinian monastery, he went on to teach at the Universityof Wittenberg. He still believed in Christendom, but his experi-ence ofGod persuaded him that the church was getting it wrong.

In 1521, at the Diet of Worms—an assembly called to discuss Lu-ther’s teachings presided over by the Holy Roman Emperor,Charles V—Luther was asked to recant his heretical view that menand women are saved by the grace of God alone. He replied thathe could do so only if the Bible could be shown to prove himwrong. “My conscience is captive to the word ofGod. I cannot andI will not recant anything, for to go against conscience is neitherright nor safe.” He may or may not have then said the words “HereI stand. I can do no other.” But that is the phrase that went on to de-fine him and his faith.

Some who of those who took Luther’s Reformation furtherwere betterat systematising the faith. By the 1550s John Calvin hadturned Geneva into a model Protestant city. Others were holierand shrewder. But few were such prolific agitators. Luther was re-sponsible for more than a fifth of the entire output of pamphletsfrom the empire’s newfangled printing presses during the 1520s.“Every day it rains Luther books,” sighed one churchman. “Noth-ing else sells.”

Cantankerous and fiercely anti-Semitic, Luther was far fromotherworldly. He abandoned his vows of chastity and entered anaffectionate marriage, swore freely, drank eagerly and referred fre-quently to the state of his bowels. He was by no means a demo-crat, but his ideas had a huge political impact. In 1596 Andrew Mel-ville, a Scottish Presbyterian, explained Luther’s doctrine of the“two kingdoms” to his king, James VI. In one kingdom James wasa king, ruling in earthly pomp. But in the other, the kingdom ofChrist, James was “not a king, nor a lord, nor a head, but a mem-ber”—the same as anyone else.

To begin with, Luther and other Protestants were keen thatchurch and state should continue to be bound together—just withmuch clearer lines between their realms of authority. Keeping thestate out of the church’s business meant clerics lost the power tosuppress heretics by force. But Lutherwas content with that. He in-sisted thatheresyshould be fought from pulpitsand in pamphlets,not by coercion. “Let the spirits collide,” he wrote. “If meanwhilesome are led astray, all right, such is war.”

The result was a fissile movement. Protestantism’s first splitwas between the “magisterial” reformers, such as Luther and Cal-vin, who believed in national churches backed by state power,and the “radical” reformers, such as Anabaptists—men and wom-en who wanted to form their own separate, perfect communitieswithout waiting for the world to catch up with them. Those in thesecond group were often millenarians who believed in the immi-nent return of Jesus, John Milton’s “shortly expected King”. It ispartly from this wing of the faith that the Pentecostal, evangelicaland charismatic strands ofmodern Protestantism have grown.

The division in Protestantism had political repercussions. TheGerman Peasants’ Revolt in 1524-25 was led by men who de-nounced serfdom as incompatible with Christian liberty and saidthey would desist only if they could be proved wrong on Biblicalgrounds. Luther was shocked at what he had unleashed, penninga pamphlet entitled “Against the Robbing and Murdering Hordesof Peasants”. But it was too late. The sects would not do as they

were told. If God had spoken to them directly through his word,what was there to fear from kings and bishops?

Though the magisterial reformation triumphed in the transfor-mation of northern European establishments from Catholic toProtestant, it was the longer-term triumph of the radical reforma-tion that arguably had the deepest effects, in northern Europe andelsewhere. The new Protestant sects’ insistence that they be free topractise their faith did not extend to others—notably Catholics—seeking to practise theirs. But it did open up some space for the tol-eration and freedom of conscience that eventually helped createthe principle of limited government. Milton’s “Areopagitica” of1644 urged freedom of thought and freedom to publish. Uncen-sored printing offered the possibility of choice, ending the statechurch’s monopoly on opinion-forming.

Protestant toleration was good for business, too. The CalvinistNetherlands of the late 16th century became the world’s richestsociety as Huguenots, Jews and otherhard-working refugees fromCatholic lands flooded in. “The really radical twist that Protestant-ism added was the idea ofhuman spiritual equalityhaving a polit-ical consequence,” says Alec Ryrie of Durham University, authorof“Protestants”, the best recent history of the faith.

This played out in the aftermath of the English civil war whenreligious groups such as the Diggers and the Levellers demandeduniversal male suffrage and common ownership of the land. In1647 one of them, Thomas Rainsborough, said in the Putney de-bates with Oliver Cromwell, the Puritan who had led parliament,that “The poorest man in England is not at all bound in a strictsense to that government that he hath not had a voice to put him-selfunder.” The Diggers were dispersed, but the idea that equalitybefore God implied full democracy tookroot.

The dispossessed, reclaiming what was theirsThe resistance ofdissenters impressed John Locke, an English phi-losopher with strong Protestant roots. Their stand influenced hiswritings on freedom of conscience, which were to form the foun-dation forEnglish liberalism, and the Toleration Act of 1689, whichformalised the legal acceptance of nonconformist sects. The par-ticipatory ways in which nonconformist churches often chosetheir leaders eventually filtered through to society in general.“Churches were schools of democracy,” says David Martin, a Brit-ish sociologist of religion.

If people were to find Bible-based salvation independent ofthe clergy, literacy was indispensable. By 1760 about 60% of Eng-land’s men, and 40% of its women, were able to read. Protestant

II How a turbulent monk turnedthe world upside down

46 E S S AY L U T H E R The Economist November 4th 2017

2

1

education provided opportunities for social mobility, improvedthe status of women and fostered economic growth. Elie Halévy,an influential early 20th-century French historian, believed thatMethodism helped 18th-centuryEngland avoid a revolution of thesort that later befell France by educating the lower classes andbringing about social reform. This admiration was not universal:Britain’s pioneering Marxist historian of the working class, E.P.Thompson, considered Methodism to be a “ritual form of psychicmasturbation”.

Before the Toleration Act and other developments made Brit-ain and northern Europe more amenable to radical Protestantism,many seeking religious freedom had crossed the Atlantic to secureit. A strong tradition of radical Protestantism became a feature ofthe American colonies and the subsequent history of the UnitedStates, refreshed from time to time by revivalist “great awaken-ings”. ThatAmerica became the fullest example oflimited govern-ment enshrined in law is in large part a consequence of its Protes-tant settlement. The truths the Founding Fathers held to beself-evident had not seemed so to anyone before the Reformation.

Like Roman Catholics, Protestants sought to bring their faith tootherpeoples, too. The motives for thiswere mixed, the respect forindigenous cultures often scant and frequently nonexistent andsome of the results disastrous. That said, Robert Woodberry ofBaylor University in Texas has mounted statistical arguments thatformer colonies where evangelical (what he calls “conversion-ary”) Protestant missionaries were active have become moredemocratic. He attributes this to mass education, religious libertyand a legacy ofvoluntarism.

In the colonies and Europe alike, Protestant Christianitybrought bloodshed and persecution aplenty. Protestants andCatholics burned each other at the stake. During the Thirty YearsWar, fought mainly between Protestant and Catholic states, 8mpeople died. Britain, with its established Protestant church, didmore than any other country to build up the trade that shippedsome 12m people across the Atlantic in chains; Protestant Americawhipped the slaves thusdelivered to work. In the 20th century the

apolitical attitude inherent in Luther’s “two kingdoms” approachled German Protestants to believe they should not interfere withthe state even when power fell into Nazi hands. Many were “ei-ther complicit or indifferent as unimaginable crimes were com-mitted around them”, says Mr Ryrie.

Throughout, Protestants had an almost comical capacity forhypocrisy of all kinds. It could be seen not just in their vices, butalso their virtues—particularly a rather selective toleration. The re-spect for their religious rights that 16th-century Mennonites de-manded from the Dutch Republic was not extended to dissenterswithin their own ranks. By1600 there were at least six Mennonitegroups in the country. They hated each other with a passion.

PROTESTANTISM’S fissiparous tendencies persist. Whensearching for Mr Riscajche’s church in Almolonga, the Evan-

gelical Church of Calvary, your confused correspondent thoughthe had arrived when he discovered the Mount Calvary Church.Not at all the same thing, it turned out. Almolonga, small though itis, has at least a dozen Pentecostal churches. But if the individualcongregations for each are small, their cumulative effect is not.

Until the 1970s Guatemala was a staunchly Catholic country.When Protestant aid agencies rushed in after a massive earth-quake in 1976, the faith gained a substantial foothold. After thecountry’s bloody civil war ended in 1996 it spread as if unshack-led. Guatemalans took to the faith for many reasons, says VirginiaGarrard of the University of Texas, but upheaval had a lot to dowith it. The civil war represented a definitive break with the past:when so much had been destroyed anyway, losing your Catholicheritage meant less. At a time of painful economic dislocation,people who felt that Catholicism and liberation theology had

failed them turned to an aspirationalfaith that promised a new upward mo-bility. With a low bar to entry and al-most no hierarchy, new Pentecostalchurches matched the entrepreneurialspirit of the times.

The message has resonated else-where. In South Korea, the Protestant-ism that accompanied the country’s diz-zying economic rise was an expressionof Korean nationalism. In China, a mo-dernising population is looking for amoral framework to go with its new mo-bility. Yang Fenggang of Purdue Univer-sity predicts that there could be at least160m Protestants in China by 2025. Heexpects the country will soon be hometo more Protestants than America.

As in early modern Europe, womenin developing countries have often beenespecially affected by Protestantism.Having studied churches in Colombia,Elizabeth Brusco, author of “The Refor-mation of Machismo”, was surprised tofind that evangelicalism was a women’smovement “like Western feminism”, ex-plaining that “it serves to reform genderroles in a way that enhances female sta-tus.” Male Colombian converts had pre-viously spent up to 40% of their pay inbars and brothels; that money was redi-rected to the family, raising the livingstandards of women and children. Tem-

III How far from the tree can thefruits of the spirit fall?

Many mansionsSelected denominations, origins

Source: The Economist *denomination or movement no longer exists

Early ChristianityEasternOrthodox

Roman Catholic

Lollard*John Wycliffe

England, mid-14th C

LutheranMartin Luther

Diet of WormsGermany, 1521

ReformedJohn Calvin

Switzerland, 1530s

PresbyterianJohn Knox

Scotland, 1560s

MennoniteSwitzerland, 1537

AmishSwitzerland, 1690

AnabaptistSwitzerland, 1525

AnglicanHenry VIII

Act of SupremacyEngland, 1534

QuakerGeorge Fox

England, 1650s

EpiscopalianUnited States, 17th C

Puritan*England, 16th-17th C

BaptistEngland, 1609

Southern BaptistUnited States, 1845

Seventh DayAdventist

United States, 1863

MethodistJohn Wesley

Britain, 1730s

Pietist*Germany, late 17th C

MoravianSaxony, 1720s

Holiness churchesBritain, 19th C

Salvation ArmyWilliam BoothBritain, 1865

CongregationalEngland, 17th C

PentecostalUnited States, early 20th C

Charismaticmovements

United States, 1960s

Assemblies of GodUnited States, 1914 Universal

Church of theKingdom of God

Brazil, 1977

Redeemed Christian

Church of GodNigeria, 1952

Hussite*Jan Hus

Bohemia, 1410s

PRE-REFORMATION

EUROPEANREFORMATION

ENGLISHREFORMATION

GREATAWAKENINGS

MODERNEVANGELICAL

MOVEMENT

V Great Schism U7th C–1054

The Reformation1517

hundreds of denominations, such as

Church of Scotland

The Economist November 4th 2017 E S S AY L U T H E R 47

2

1

perance helped employment, too. Scholars also argue that thevoice this has given women helps consolidate democracy; MrMartin sees parallels with England’s19th-century Methodists.

That does not mean the faith is egalitarian. Pentecostalism re-forms traditional gender roles rather than abolishing them; ittends to be robustly patriarchal, and profoundly intolerant of ho-mosexuality. Buta soberpatriarch committed to a moral code that,crucially, treats domestic violence as sinful can provide stability.An acceptance ofbirth control also eases women’s lot.

More stable, economically active households and well-knitcommunities have undoubtedly made places like Almolongamore agreeable for most who live there. But what effect do theyhave on a grander scale? Can they remake not just villages butwhole countries and their economies?

Pentecostals have traditionally been suspicious of politics astoo “worldly” and of development work as too long-term. But inGuatemala and elsewhere some are now mobilising for socialchange. Witness a rap battle in a community hall in one of the ar-eas of Guatemala City known as “red zones”. Teenagers take it inturns to get up on stage and rap against each other, with judges de-ciding who goes through to the next round. The event has been or-ganised by Angel, a local man who joined one of the city’s notori-ous gangs when he was 14. By the age of 22, he had shot “a lot ofpeople”, he says. When he found himself about to be executed bya rival gang, he called out to God for help; he escaped death andwas born again. For the past ten years, in a typically Pentecostalbottom-up initiative, he has been saving kids from gangs.

As yet, it is hard to see a broader impact from these individualtransformations. Guatemala remains poor and desperate. Manypeople do not vote or pay tax; only a tiny fraction ofmurder inves-tigations lead to convictions. The country lags behind the rest ofLatin America on many development indicators. “Guatemalatests the limits of religion as an agent of change,” says KevinO’Neill of Toronto University. “It’snot that the religion is ineffectual. Ithas changed a lot in society. It’s justthat it has not changed things mea-surable by the metricswe use, such assecurity, democracy and economy.”

Perhaps the sort of change thatcan be measured will arrive in duecourse. Guatemala’s history has left itpoor and oligarchic. “Five percent ofthe population controls 85% of thewealth,” says Mr O’Neill. More thanthree-quarters of the cocaine fromSouth America heading for the Un-ited States now passes through it;many gang members have been de-ported from Los Angeles. Any soci-

ety, never mind one recovering from a36-year civil war, would struggle. “Gua-temala is like a 400lb man who has lost100lb in weight. He is getting better, buthe is still in a bad state,” says Ms Garrard,who first visited in 1979. She ascribesmuch of the progress to the churches.

But it may also be that there are limitsto 21st-century Protestantism’s capacityfor large-scale reform. For one thing, it islargely a faith at the margins of society.In the places where Protestantism madeits clearest mark in early modern Europeit took root in the bourgeoisie, amongpeople of influence. A classic example isWilliam Wilberforce, a British politicianwhose legislation banning the slavetrade stemmed from his evangelical be-liefs. Moreover, northern Europe’s Prot-

estants lived in countries that already had clear property rightsand the rule of law. By contrast, Protestants in the developingworld are often among the poorest members of society, living inplaces with endemic corruption.

The otherworldly nature of Pentecostalism does not help. Be-lieving in imminent apocalypse militates against strong social en-gagement. The ship is sinking; rather than try to fix it, Pentecostalswant to get as many people as possible into the lifeboats. “WhatGuatemala needs is tax reform, voter registration, microloans,community organising,” says Mr O’Neill. But “people are just sit-ting there praying.”

That is not entirely true. “We know we need to change the sys-tem,” says Cash Luna, pastor of Casa de Dios, one of Guatemala’shalf-dozen megachurches. “We pay our taxes and we encourageour congregation to do the right thing,” he says. The church alsotries to mediate in the city’s gang warfare (Angel is a member) andholds classes forpolicemen on how to engage betterwith the pub-lic. Pentecostals took part in the anti-corruption movement thatbrought down the country’s president in 2015. But Protestant in-volvement in Guatemalan politics has been messy, and plentifulcompromises have dragged the faith into disrepute.

Protean politicsUnlike Catholics, Pentecostals have no unified theology of thestate, nor any well-formulated programme for sociopolitical re-form. To the extent that they are political at all, they merely thinkthat their co-religionists should be elected and that their countriesshould be Christian.

In many places they lean to the right. Efraín Ríos Montt, whotook control ofGuatemala in a coup in 1982—and thus became thecountry’s first Protestant leader—waged the civil war as a fierceanti-Communist. He was responsible for the deaths of tens ofthousands of people, 80% of them indigenous Mayans; for some,Protestantism became a survival strategy. At the same time manyNicaraguan evangelicals supported the left-wing Sandinista gov-ernment. In Brazil many of the country’s new evangelicals sup-ported Lula, a left-wing president, in the 2000s. The movement’spolitical engagement there has not gone well. One pastor talks ofthe problem being“a church withouta tradition…and an incapac-ity to thinkChristianly about society.”

It might be argued that the faith has been politically more suc-cessful in opposition than in power. Protestant churches, in partic-ular the historic denominations established by missionaries,were instrumental in apartheid’s downfall in South Africa. Simi-lar stories abound. “In Kenya during the 1980s, when all opposi-tion activity was banned, the leaders of the opposition were, in ef-fect, churchmen,” says Paul Gifford, emeritus professor of religionat the School ofOriental and African Studies in London.

But there were Protestants on the otherside, too: apartheid wasunderpinned by the Dutch Reformed Church. Besides, the time

United Statesand Canada*

LatinAmerica

Oceania

Europe

Africa

Asia

1970106m

2015133m

197023m

2015121m

197054m

2015341m

197010m

201515m

197038m

2015246m

1970116m

2015106m

Sources: Regional data compiled by Ryne Rohla; World Christian Database *Includes Greenland and Bermuda

Protestants, by region% of total population, 2016 or latest available

5 15 25 35 45 6555 75 85 95

“The leaders ofthe oppositionwere churchmen”

48 E S S AY L U T H E R The Economist November 4th 2017

2

IN1882 Friedrich Nietzsche, a philosopher raised in Saxony as theson of a Lutheran minister, declared that God was dead. The vi-

brant spiritual lives of billions would seem to give this the lie. Butin 20th-century Europe, at least, there seemed to be some truth toit; and a fair bit of the blame, or credit, fell to the Reformation. Inhelping to shape the West, Protestantism sowed the seeds of itsown destruction. In giving people space to believe what theywanted and choose what sort of life to lead, it allowed them tostop believing at all and choose something else. And it has notfought as hard to resist this trend as some faithsmight. Afterall, thewhole pointofProtestantism is that, in MrRyrie’swords, “itvaluesthe personal and the private over the political and the public.”

One effect of European (and, to some extent, American) secu-larisation is that old religious divisions are healing. There is stillsectarian prejudice in parts of Europe, but much less than there

IV What Protestants do best is protest

was. And Protestantism is also less distinct than it was. Accordingto the Pew Research Centre, 46% ofAmerican Protestants say faithalone is needed to attain salvation—the basis of Luther’s stand—but more than halfnow believe that good deeds are needed, too.

As interdenominational divisions have healed, some individ-ual churches have started to fall apart. In the Anglican commu-nion, which contains the Church of England and many of its off-shoots, homosexuality is driving a wedge between believers inthe northern hemisphere, many of whom increasingly supportgay rights, and those in developing countries, who mostly do not.

Even in America, the proportion of Protestants is declining.Mainline, often more liberal, denominations fell from 18.1% to14.7% between 2007 and 2014, according to the Pew Research Cen-tre. The proportion of evangelicals dropped less drastically, from26.3% to 25.4%. Meanwhile, the religiously unaffiliated rose from16.1% to 22.8%. In future, churches “that disdain the corruption ofpublic life and offer spiritual rather than political power may findthat theirmessage resonates most,” predicts MrRyrie. But the faithwill no doubt continue to be used as a weapon in the culture wars.

As for the developing world, the growth ofProtestantism in Af-rica and Latin America does not seem to be just a way-station onthe road to secularisation. But nor does it yet look like somethingthat will transform the economy or politics on a large scale. Its ef-fects may be strong, but they may also be largely indirect.

In some places Protestantism may settle down, with Pentecos-talsperhapsshifting to more staid denominations—or, indeed, fad-ing into secularism. Some Protestants have understood that whenthey become the dominant religion, their faith’s power—its here-I-stand refusal to accept orders from any source but God or con-science—tends to seep away.

The places where Protestantism is most alive and seems politi-cally most salient—where its churches continue to argue aboutwho is right and what the Bible means, issuing statements andcounterstatements just as Luther did—are often those where it hasretained its outsider status. The growth of evangelical faith in Chi-na, for example, is taking place in a context of disapproval fromwhich it seems to draw strength. In 2015 Wang Yi, a leading pastor,issued his own 95 theses on “Reaffirming our Stance on the HouseChurches”—the congregations outside the control of the govern-ment. It reiterated the need for freedom of conscience and forhouse churches to be allowed their independence, while protest-ing against the distortion of scripture and attacking state-ap-proved churches for collusion with the Communist Party authori-ties. Wherever overweening rulers clash with people demandingtheir right to religious freedom, Luther’s divisive, dynamic spiritwill remain an inspiration for a long time to come. 7

for such opposition has largely passed, and the churches that of-fered it have not themselves become more democratic. Their lead-ers, including Desmond Tutu, a South African clergyman andtheologian, have admitted that they have not adapted as well asthe less hierarchical Pentecostal churches to the post-apartheid or-der. “We knewwhatwe were against,” saysMrTutu. “It isnotnear-ly so easy to say what we are for.”

Early Protestantism tended to play down possessions. Lutherhimself called worldly success a sign of God’s displeasure. Thewealth observed by Weber was treated to some extent as an unin-tended consequence of its possessors’ Calvinist faith. But in the“prosperity Gospel”, a recent export from the United States,wealth is very much the intention. Many of the new generation ofpastors tell their flocks that God does not want them to be poor.

In Africa, many Pentecostal churches are concerned with “this-worldly” victory, says Mr Gifford. In Nigeria congregations withnames like the “Victory Bible Church” hang banners saying thingslike “Success is my Birthright”. One of Nigeria’s best known pas-tors, David Oyedepo, whose church has been attended by thecountry’s presidents, says that Christians must be rich. Suchpreachers suggest that “planting seeds” (giving money to thechurch) will bring a harvest of its own, and that wealth is proof ofGod’s love. God must love MrOyedepo a lot; the Nigerian press re-ports that he is worth more than $150m and owns fourprivate jets.

The Economist November 4th 2017 49

For daily analysis and debate on the Middle Eastand Africa, visit

Economist.com/world/middle-east-africa

1

DURING Friday prayers the congrega-tion of Muhammad Yousef, a young

puritanical preacher in the Egyptian townof Mansoura, once spilled out into the al-leys surrounding his mosque. Now SheikhMuhammad counts it a good week if hefills half the place.

In Cairo, 110km (68 miles) to the south,unveiled women sit in street cafés, tradi-tionally a male preserve, smoking water-pipes. Some ofthe establishments serve al-cohol, which Islam prohibits. “We’re in re-ligious decline,” moans SheikhMuhammad, whose despair is shared byclerics in many parts of the Arab world.

According to Arab Barometer, a pollster,much of the region is growing less reli-gious. Voters who backed Islamists afterthe upheaval of the Arab spring in 2011have grown disillusioned with their per-formance and changed their minds. InEgypt support for imposing sharia (Islamiclaw) fell from 84% in 2011 to 34% in 2016.Egyptians are praying less, too (see chart).In places such as Lebanon and MoroccoonlyhalfasmanyMuslims listen to recitalsof the Koran today, compared with 2011.Gender equality in education and theworkplace, long hindered by Muslim tradi-tion, is widely accepted. “Society is drivingchange,” says Michael Robbins, an Ameri-can who heads Barometer.

But so, too, is a new crop of Arab lead-

hammad bin Zayed, the crown prince ofAbu Dhabi and the UAE’s de facto leader,has financed the construction of Westernuniversity branches and art galleries. Hehas encouraged young women out of do-mestic seclusion and into military service,his daughter included. Female soldiers of-ten walk the streets in uniform. In markedcontrast to the region’s post-independencenationalist leaders, who purged their soci-eties of Armenians, Greeks, Italians andJews, he has embraced diversity, thoughtough restrictions on citizenship persist.

In Egypt President Abdel-Fattah al-Sisihas not only banned the Muslim Brother-hood, the region’s pre-eminent Islamistmovement, but denounced al-Azhar, theMuslim world’s oldest seat of learning, for“intolerance”. He has closed thousands ofmosques and said that Muslims must notsacrifice sheep in their homes during festi-vals without a licence. On some beachesburkinis—body-covering swimwear forconservative women—are banned. In abreakfrom his predecessors, Mr Sisi has at-tended Christmas mass in Cairo’s Copticcathedral three years in a row (though hedoesn’t stay long). “We’re becoming moreEuropean,” explains an Egyptian official.

The most remarkable, albeit nascent,transformation is in ultra-conservativeSaudi Arabia, where Muhammad bin Sal-man, the young crown prince, has curbedthe religious police, sacked thousands ofimams and launched a new Centre forModeration to censor “fake and extremisttexts”. Women will soon be allowed todrive cars and enter sports stadiums. Theyare already encouraged to work. NowPrince Muhammad wants to create a newcity, Neom, that seems modelled on free-wheeling Dubai. Its promotional videosshow women without headscarves party-

ers, who have adjusted their policies inline with the zeitgeist. They are acting, inpart, out of political self-interest. The re-gion’s authoritarians, who once tried to co-opt Islamists, now view them as the big-gest threat to their rule. By curbing the in-fluence of clerics they are also weakeningchecks on their own power. Still, manyArab leaders seem genuinely interested inmouldingmore secularand tolerantsociet-ies, even if their reforms do not extend tothe political sphere.

The United Arab Emirates (UAE) has ledthe way in relaxing religious and social re-strictions. While leading a regional cam-paign against Islamist movements, Mu-

Illiberal liberalism

The new Arab cosmopolitans

CAIRO

Despots are pushing the Arab world to become more secular

Middle East and AfricaAlso in this section

50 Jews return to Morocco

51 Land grabs in Syria

51 Kenya’s polarised politics

52 Zimbabwe’s deepening crisis

Prayer retreat

Source: Arab Barometer

Egypt, Muslims who pray daily, % of age group

0

20

40

60

80

100

2011 13 16

18-24 25-34 35-4445-54 55+

50 Middle East and Africa The Economist November 4th 2017

2 Jews in Morocco

Shalom alaykum

ONCE a year the little seaside town ofEssaouira, in Morocco, reclaims its

lost Jewish community. Sephardic trillsecho from its whitewashed synagogues.The medieval souks fill with Jewishskullcaps. Rabbis and cantors wish Mus-lims “Shabbat Shalom” and regale themwith Hebrew incantations. “It’s ourculture,” says a merchant from Marra-kech, who travelled 200km (124 miles) tohear them this year.

The revival is the initiative ofAndréAzoulay, a 76-year-old Jew from Essaoui-ra (one of just three) and a former coun-sellor to Morocco’s kings. Each autumnhe stages a colourful festival ofAndalu-sian music aimed at bringing hundredsof Jews and Muslims together for a week-end ofconcerts and dialogue. Locals packthe small stadium to watch Hebrewcantors and Koran-reciters sing arm-in-arm. Israelis and Palestinians flock there,too. “Essaouira is what the Middle Eastonce was and might yet be again,” saysMr Azoulay.

When Jews were expelled from Spainand Portugal in the 15th century, manyfled to Morocco. The Jewish populationin the kingdom rose to over 250,000 by1948, when the state of Israel was born. Inthe ensuing decades, as Arab-Jewishtensions increased, many left. Fewer than2,500 remain—still more than anywhereelse in the Arab world.

No Arab country has gone to thelengths ofMorocco to revive its Jewishheritage. The kingdom has restored 110synagogues, such as Slat Lkahal, whichopened in Essaouira during the festival. Acentre for Judeo-Islamic studies is set toopen in the old kasbah later this year. Thekingdom also boasts the Arab world’sonly Jewish museum. “We used to have asix-pointed star on our flag and coins, likeIsrael,” says Zhor Rehihil, the curator(who is Muslim). “It was changed underFrench rule to five.”

Morocco and Israel have no formaldiplomatic relations, but over 50,000Israelis visit the kingdom each year. Anew charter flight from Tel Aviv to Casa-blanca, Morocco’s largest city, beganoperating this summer. It stops in Maltafor halfan hour to maintain the pretencethat there are still no direct flights be-tween the countries. Morocco also issueshundreds ofpassports each year to IsraeliJews ofMoroccan descent, ofwhomthere are almost halfa million—“thebetter to travel in the Arab world,” says arecent recipient. It takes a month, nosecurity questions asked.

Mr Azoulay urges Israeli visitors tospread word ofhis idyll ofcoexistencewhen they return home. Some doubt thewarmth is transferable. One visitingIsraeli official puts it thus: “Morocco’sArabs are different to ours.”

ESSAOUIRA

Alittle idyll of Jewish-Muslim coexistence

Striking a harmonious note

ing with men. “We are only returning towhat we used to be, to moderate Islam,open to the world and all religions,” he toldforeign investors in October.

This move to moderation is far fromubiquitous. In countrieswith lessdynamicgovernments, such as Algeria, Jordan andPalestine, polls show that support for sha-ria and sympathy for Islamist movementsis high and growing. But secularists canbeen found in even the most conservativequarters. Freed from the grip of IslamicState (IS) jihadists, residents of Mosul, inIraq, congregate in revamped cafés thathave sprouted around the city’s wreckeduniversity. Many profess to be atheists. Thefine-arts department is reopening after itwas closed by IS three years ago, withtwice its previous intake ofstudents.

Economic hardship, long seen as fuel-ling Islamist opposition movements, mayalso be eroding traditional views on wom-en’s role in society. Amid soaring inflationand subsidy cuts in many countries, onesalary is rarely enough to support a family.So husbands encourage their wives towork. Daughtersare leavingtheirhomes inrural areas to studyorworkin cities. Healthworkers say premarital sex is more com-mon, in part because the age ofmarriage isrising (many blame high living costs).

Moderation without representationAll of the change is bittersweet for the re-gion’s liberals, who want more politicalopenness, too. But Arab leaders are actingmuch like Kemal Ataturk, Turkey’s dictatorin the early 20th century, who abolishedthe caliphate and sharia, and banned tradi-tional garb, all while consolidating hisown power.

In implementinghis modernisingagen-da, Prince Muhammad has downgradedhis family’s 250-year-old alliance with theWahhabist clergy, who enforced a puritan-ical version of Islam and seemed to ruleSaudi Arabia alongside the House ofSaud.Now clerics who push back too hardagainst decrees are muzzled—or arrested.Dozens of public figures (including liber-als) who were critical of the prince’s poli-cies were detained in September.

Similarly, Mr Sisi fans criticism of reli-gious movements, while censoring evenindirect barbs of his rule. He has bannedhundreds of newspapers and websites,and muzzled artists and musicians whomight provoke opposition.

Yet many Arabs seem ready to forfeitpolitical rights in exchange forpersonal lib-erties. A poll this year named the UAE asthe state Arabs most want to live in, despiteits dearth ofdemocratic rights. But secular-isation may last only as long as the despotspushing the plan. And even they may notgo as far as activists want. No sooner hadSaudi women won the right to drive thansome took their bicycles out on the roads,testing the limits ofofficial tolerance. 7

The Economist November 4th 2017 Middle East and Africa 51

YOUSOF AKASHEH, a rebel fighter, wasastonished to find out that the regime of

Bashar al-Assad in Syria was planning toseize his wife’s property. For one thing, sheis dead, killed three years ago when a war-plane bombed her apartment block. Foranother, she never owned property.

Such is the arbitrariness of the regime’scounter-terrorism court, which has brand-ed tens of thousands of opponents of MrAssad enemies of the state and sent themto the country’s hellish prisons. Thoselucky enough to escape arrest are tried inabsentia. As punishment, the court rou-tinely seizes their property.

The civil war in Syria has driven morethan 12m people from their homes, con-tributing to the largest refugee crisis in re-cent history. But in his typically appallingway, MrAssad hasspied opportunityamidthe tragedy. “We have lost the best of ouryoung people…but in return we havegained a healthier and more harmonioussociety,” the dictator said in August of awar that has killed more than 400,000 ofhis countrymen.

Mr Assad is determined to keep it thatway by making it exceedingly hard forthose who have left to return to theirhomes. Property registries have been de-liberately bombed, title deeds are seized atmilitary checkpoints and new laws havebeen passed to make it easier for the re-gime to grab land, businesses and homes.In some parts of the country the regimehas rewarded loyalists with property con-fiscated from its opponents. In other parts,bulldozers have simply flattened neigh-bourhoods that sided with the rebels.Large tracts of public land in cities are alsoquietly slipping into the hands of officials

and connected businessmen.Some of Syria’s poorest areas, where

manyofthe firstanti-regime protests flaredin 2011 and where most of the destructionhas occurred, will be rebuilt without theirunruly residents. The regime hopes tomove forward with projects that weredeeply unpopular before the war, raisingskyscrapers, hotels and restaurants fromthe rubble. Lacking enough cash of itsown, it has passed laws to encourage priv-ate investors to pay for the reconstruction.But few investors will build residences ifthere are no people to live in them.

Half of Syria’s pre-war population isscattered. Many have already sought newhomes abroad, away from a ruler who hassystematically bombed, starved and tor-tured his own people. Even if the displacedreturn to their neighbourhoods, few willbe able to afford the regime’s housing, ex-acerbating inequality that has grownworse during the conflict. Experts predictthat 2m lawsuits will be filed after the warby people seeking restitution for damagedor stolen property. The courts may buckleunder the burden.

The regime is not the only side to havegrabbed land during the war. Kurds innorthern Syria have claimed Arab landsfreed from the Islamic State group, whichitself used stolen property to buy loyalty.“The destabilising potential of all this ispretty fearsome,” says Rhodri Williams ofthe International Legal Assistance Consor-tium. “Few things stay in the minds of peo-ple longer than the property thatwas takenaway from them.” 7

Land grabs in Syria

Bulldozing overthe revolutionBEIRUT

The regime has put propertyat the heartof its campaign against the rebellion

KENYA, according to its deputy presi-dent, William Ruto, “is not the type of

country where you find a president getting99% of the vote”. That statement, made onOctober 16th, was tested just a week laterwhen Kenyans went to the polls for a re-run of the election on August 8th, whichthe country’s supreme court annulled.When the final results were announced bythe electoral commission on October 30th,Uhuru Kenyatta, the incumbent, had won(again) with 98.3% of the vote. Yet thesweeping victory seems unlikely to bringto an end Kenya’s political and emergingeconomic crises.

The reason for Mr Kenyatta’s huge vic-torywas thathismain opponent, Raila Od-inga, an opposition stalwart and perennialcandidate, withdrew from the race and

called on his supporters to refuse to vote.Turnout collapsed to just 38% from almost80% in the annulled poll of August. In twoof Kenya’s 47 counties—both strongholdsofMrOdinga in western Kenya—votingdidnot happen at all, as Mr Odinga’s suppor-ters prevented officials from opening poll-ing stations.

In the end, turnout strongly reflectedKenya’s political (and ethnic) make-up. Inthe central region, where Mr Kenyatta’stribe, the Kikuyu, are most concentrated,voters still crowded the polls (see map). InKiambu, his home county, turnout was78%, compared with 83% in August. A simi-larpattern held in MrRuto’sKalenjin heart-lands in the Rift Valley. By contrast, in pro-Odinga areas, dominated by the Luo, theboycott was clearest. In Mombasa, Kenya’ssecond-largest city, turnout fell from 59% tojust14%.

The worry for Mr Kenyatta is what hap-pens next. After the results were declared,Mr Odinga gave a speech in which he de-nounced the “sham election” and calledfor a “people’s assembly” to resist the gov-ernment. He has said he will not go back tocourt, but if he does, the logic of the previ-ous annulment suggests he has a chance ofwinning. Mr Kenyatta acknowledged asmuch in his victory speech, saying that hisre-election “is likely to be subjected to aconstitutional test through the courts”. Hisallies talk nervously about a Kafkaesquesituation where Kenya keeps holding elec-tions that are repeatedly rejected in court.

Yet most Kenyans have a more urgentworry. In the days after the second electionprotesters fought against police in Mr Od-inga’s strongholds in western Kenya andNairobi, the capital. Worse still, in parts ofNairobi tension between Luos and Kiku-yus spilled into street battles. In Kawang-ware, a slum in the west of the city, shopsand homes belonging to Kikuyus were seton fire, apparently in retaliation for attacksby a Kikuyu militia. At least a dozen peoplehave died since October 26th. If the vio-lence persists, Mr Kenyatta’s victory couldend up feeling very hollow, no matterwhat the courts say. 7

Polarised politics in Kenya

Kenyatta’s hollowvictoryNAIROBI

Alandslide re-election is marred by anopposition boycott

Nairobi

Mombasa

Another country

Kiambu

RI

FT

V

AL

LE

YK E N Y A

0-25

25-50

50-7575-100

Pollsclosed

Source: IEBC

ElectionturnoutOct 26th 2017By county, %

52 Middle East and Africa The Economist November 4th 2017

A MONEY-CHANGER deftly flicksthrough a brick of bills, her fingernails

a sparkly purple that matches her eye-shadow. She keeps the stack of “bondnotes” (Zimbabwe’s ersatz money) bun-dled inside a sock in a plastic carrier bag.Real American dollars are hidden in herbra. Although bond notes are officiallyworth the same as American dollars, hereon a pavement in Harare, the capital,greenbacks trade at a premium of 20-30%to the bills printed by MrMugabe’s govern-ment. Those wanting to buy dollar billswith mobile money, which is also suppos-edlydenominated in the American curren-cy, must pay a further premium of30%.

Such a range of values for Zimbabwe’smoney ought not to be possible since, offi-cially at least, it does not have a currency.The country adopted the American dollaralmost a decade ago after the centralbank’s profligate printing of Zimbabwedollars led to hyperinflation that peaked at500,000,000,000%. At the time, noteswith a face value of100trn Zimbabwe dol-lars could barely pay for a loafofbread.

Yet last year, when the governmentfound it could no longer pay its bills usingreal dollars, it started issuing bond notes,claiming they were interchangeable. So in-sistent is it in this assertion that it has out-lawed the street tradingofersatz dollars forthe real thing: money-changers can face adecade behind bars if convicted. But thismoney-changer says that some of her bestcustomers are government officials whohoover up greenbacks to spend or stashabroad. The value of real dollars spikeswhenever Robert Mugabe, who has ruledZimbabwe since its independence in 1980,goes abroad with his bloated entourage.“As long as there are bond notes, they willnever stop us hustlers,” says the money-changer. “They need us. We are the peoplewho are running the economy.”

After nearly two decades of lurchingfrom one economic crisis to the next, life inZimbabwe somehow still grinds on. MrMugabe, old and frail, presides over a frag-ile economy yet still controls his party,Zanu-PF. At 93, he is running yet again forpresident, with an election planned for thefirst half of next year. Though physicallyweak and forgetful (in 2015 he read thesame speech in parliament twice) he stillplays factions of the party off against eachother to stay in control.

At a party conference in December he isexpected to strengthen a faction aligned

with his wife, Grace, at the expense of Em-merson Mnangagwa, who previously ranthe security services and had been Mr Mu-gabe’s presumed successor. Mr Mnan-gagwa, one of two vice-presidents, lost hispost as justice minister in a recent cabinetshuffle. “When you become a threat to thecentre of power, he disposes of you,” saysTemba Mliswa, an independent memberof parliament and former Zanu-PF provin-cial chairman who is considered close toMr Mnangagwa. Mr Mugabe “is very oldbut he still understands power”.

Most Zimbabweans think nothing willchange until Mr Mugabe dies. In the mean-time they must scramble and adapt to sur-vive. As many as 95% of working peoplehustle for a living in the informal sector.On the streets one finds professionals andgraduates working as unlicensed traders.Sten Zvorwadza, who leads a street-ven-dors’ union, reckons there are 100,000such traders in Harare.

Some sell goods in the tiniest of quanti-ties—a squeeze of toothpaste, a teaspoonof sugar—because that is all many buyerscan afford. Mr Mugabe thinks hawkersmake the city look dirty, and wants themmoved to a dusty patch in a depressed in-dustrial area of Harare where there wouldbe fewer customers. Riot police known as“black boots” have used water cannons totry to remove the hawkers. But they arefighting back. “Not a vendor by choice,”

says a sign posted in central Harare. “If notthis, what?” says another.

Everywhere you feel a sense of im-pending economic collapse. Many in thecountryfret thathyperinflation will return,fuelled by the government’s printing ofelectronic dollars. Since it cannot get realones, and is running large fiscal deficits(about 8% of GDP last year and probablymore this year) it has been issuing dollar-denominated treasury bills, or IOUs, tobanks. The banks in turn credit it with elec-tronic dollars, which it uses to pay civil ser-vants, whose wages consume about 90%of government revenues. But that moneycannot be withdrawn.

The queues that once snaked aroundthe block outside banks have disappeared,but only because there is hardly any cashto be had. Nearly everyone pays withswipe cards linked to Zimbabwean bankaccounts, or EcoCash, a popular form ofmobile money. But the lack of foreign ex-change means that imports may becomescarce. In late September a shiver of panicover shortages of food and fuel rippledthrough the capital, sparking a round ofpanic-buying. And prices are rising.

John Robertson, an economist, reckonsthat the money supply expanded by 36% inthe 12 months to August, six times morethan the rate a few years earlier. “What’sbehind that money? Nothing,” says RobDavies, another economist in Harare. “It’sa Ponzi scheme.”

In October Mr Mugabe replaced hispragmatic finance minister, Patrick China-masa, with a loyalist. Mr Chinamasa losthis job while attending the annual meet-ings of the World Bank and InternationalMonetary Fund where he was pleading fordebt relief and new loans to restart theeconomy. Zimbabwe is unlikely to get ei-ther as long as Mr Mugabe is in charge. 7

Zimbabwe’s deepening crisis

Surviving under Mugabe

HARARE

A ruined country is waiting for the old man to go

Do you take electronic dollars?

The Economist November 4th 2017 53

1

ON THE morning of October 30th fivepolice vans staked out the Palace of

the Generalitat, the part-medieval seat ofthe government of Catalonia on the PlaçaSant Jaume in Barcelona’s gothic quarter.But there was no sign of Carles Puigde-mont, Catalonia’s now ex-president, nor ofany demonstrators protesting against hisdismissal by the Spanish government. In-stead, there were foreign journalists wait-ing for the clash that didn’t happen.

Three days earlier, Plaça Sant Jaumeoverflowed with a euphoric crowd cele-brating a declaration of independence bythe Catalan parliament. “Freedom”, theychanted. “It’s a dream, it’s marvellous,”said David Regalos, an estate agent whohad brought his teenage daughter for whathe saw as a historic occasion. “It may hurtthe business I work in,” he admitted, “butI’m thinking of the future ofmy children.”

But as dusk fell with an autumnal chill,the dream was revealed to be delirium.Even as the crowd caroused, in MadridMariano Rajoy, Spain’s prime minister, an-nounced that the government was takingdirect charge of Catalonia, using extraordi-nary powers underArticle 155 of the consti-tution of1978. The move was approved bySpain’s Senate minutes after the vote in theCatalan parliament. The government

which Spain decentralised many powersand revenues to 17 self-governing “autono-mous communities”. The constitution,which ushered in democracy after Fran-co’s long dictatorship (and was approvedoverwhelmingly by Catalans), has givenSpain the best years of its modern history.Since 1978 the country’s income perpersonhas doubled in real terms while regionalinequalities have narrowed. Spain hasbuilt an advanced democracy, created awelfare state and cast off its past isolationto join the European Union. Although theslump that followed the burstingofa hous-ing bubble in 2008 inflicted much hard-ship, Spain avoided social conflict.

The aftermath of austerity eroded butdid not break the two-party system, inwhich the Socialists and Mr Rajoy’s con-servative People’s Party (PP) have alternat-ed in government. Despite the emergenceofPodemos, a populist far-leftparty, MrRa-joy, who governed alone in 2011-15, man-aged to form a minority administrationlastyearwith the supportofCiudadanos, anew centre-right party. But having held Po-demosatbay, MrRajoyhasfound that pop-ulism in Catalonia poses an even biggerproblem, notes a former minister.

In the land ofmake-believeMr Puigdemont called the application ofArticle 155 “the worst attack on the institu-tions of Catalan self-government” sinceFranco. His critics say he precipitated it,starting with laws his parliament ap-proved in September to call the referen-dum and begin the transition to an inde-pendent state. As well as violating theSpanish constitution, these implicitlyabolished the Catalan autonomy statute.

swiftly sacked MrPuigdemontand hisgov-ernment, and replaced the commander ofthe Catalan police. And, to the surprise ofmany, Mr Rajoy called a regional electionin Catalonia for December 21st.

By abbreviating direct rule to the mini-mum, he removed much of its sting. MrPuigdemontcalled for“democraticopposi-tion”, but he opted not to organise resis-tance on the streets of Barcelona. Instead,he fled to Brussels. Spain’s National Courtis to investigate him and his colleaguesover charges of rebellion, which carries asentence of up to 30 years. Summonsed toappear on November 2nd, he said hewould stay in Belgium until he receivesguarantees ofa “fair trial”.

Enabling Catalans to vote swiftly mayhelp to release the tension that accumulat-ed in the region before and after the unau-thorised referendum on independenceheld on October 1st by the Generalitat. Butit cannot hide the gravity of Spain’s under-lying constitutional crisis. Article 155,which is an almost exact copy of a provi-sion in the German constitution, has neverbefore had to be invoked.

“This is a momentous decision,” said asenior official in past Socialist govern-ments. “It supposes the breakdown of theconstitution’s territorial model” under

Catalonia

The man who wasn’t there

BARCELONA AND MADRID

Government intervention and a snap election have defused, but not settled, a crisisthat goes to the essence ofSpanish democracy

EuropeAlso in this section

55 Russia’s secret mercenaries

56 France’s croissant crisis

57 Charlemagne: The British ghost atthe banquet

For daily analysis and debate on Europe, visit

Economist.com/europe

54 Europe The Economist November 4th 2017

1

2 The government was not “suspending au-tonomy but…returning Catalonia to self-government and legality as soon as possi-ble,” declared Mr Rajoy.

According to the Generalitat, 43% votedin the referendum (90% of them Yes),though the numbers cannot be verified.Buoyed by a wave of international sympa-thy, which was brought about by the gov-ernment’s disastrous deployment of riotpolice who tried and failed to stop the vote,Mr Puigdemont took the result as a man-date for a unilateral declaration of inde-pendence. That prospect has promptedmore than 1,800 companies to move theirlegal domicile out of Catalonia since Octo-ber 1st. Tourist bookings and consumerconfidence have both fallen. Alarmed,moderate nationalists pressed Mr Puigde-mont to draw back. On October 26th hewas poised to do so by calling a fresh re-gional election himself, which would havestalled Article 155.

But faced with accusations of treacheryfrom hardline nationalists, he insteadpushed the Catalan parliament to pass aresolution “constituting the Catalan repub-lic as an independent and sovereign state”.Approved by 70 votes out of135 (the oppo-sition walked out), it was a hollow declara-tion. No country recognised it. Privately, of-ficialsofthe Catalan governmentadmittedthey were completely unprepared forstatehood. Evidently, they were also un-prepared for the consequences of declar-ing independence.

Things fall apartSo why did it happen? Mr Puigdemont, anaffable former journalist and mayor of Gi-rona, blamed the government’s refusal totalk. MrRajoy’s riposte was thatMrPuigde-mont only ever wanted to talk about hold-ing a referendum, although the constitu-tion, in line with the continental Europeannorm, does not recognise a right of self-de-termination for regions.

In the end MrPuigdemont was as muchthe prisoner as the leader of the grass-rootsindependence movement the Catalan gov-ernment has promoted. After the referen-dum, separatists were further inflamed bythe jailing, pending trial for obstructing apolice raid, of the leaders of two secession-ist social movements. They formed part ofwhat in Barcelona was called “the generalstaff of the independence process”, seem-ing to co-govern with Mr Puigdemont.

While the government underestimatedthe strength of the independence move-ment, its leaders overestimated it. JosepBorell, a Catalan former Socialist ministerand opponent of independence, says thathe has “lifelong friends with whom I canno longer talk”. Some bookshops in small-town Catalonia now refuse to stock hisbest-selling book questioning the seces-sionists’ arguments. In this conflict, propa-ganda is the key weapon, he adds, and

“they use it very well and the governmentand unionist groups very badly.”

However, the Generalitat fell into thetrap ofbelieving its own propaganda. First,it denied that companies would leave, andthen minimised their departure, sayingthey would return. “That is not so easy,”says a Catalan business leader, citing theparallel with Quebec. Montreal never re-covered its position as Canada’s leadingbusiness centre after the secessionist scarein the 1980s and 1990s. That may be Barce-lona’s fate: companies will gradually trans-fer head-office functions and jobs, predictsAntón Costas, an economist at the Univer-sity ofBarcelona.

Second, Catalan officials alwaysthought that the EU would embrace theircause, although there was no reason to be-lieve that. They failed to appreciate thatoutsiders were left open-mouthed by theircomparison of Catalonia’s plight withinSpain to Lithuania’s liberation from the So-viet Union or Kosovo’s from Serbia.

Third, theyseemed to believe their pop-ulist claim to speak for “the Catalan peo-ple”. No sooner had they stated that 2.3mpeople voted on October 1st than theystarted claiming that police had “stolen700,000 votes”, for which there is not ascrap of evidence. After the independencevote in the parliament, Mr Puigdemont de-clared that “the immense majority” ofCat-alonia’s political representatives “have ful-filled a mandate validated by the ballotbox”. The reality is that independence hasnever commanded a majority, despite apost-referendum spike in a poll this week(see chart 1). The ruling coalition won only48% of the vote in the 2015 regional elec-tion; it had a bare majority of seats in thedissolved parliament only because of theover-representation of the region’s interi-or. Catalonia is more divided and angrilypolarised than at any time since 1978. Thebetter-off, and those in smaller towns orwith Catalan-speaking parents, favour in-dependence; poorer Catalans, and thoseliving in greater Barcelona or immigrantsfrom the rest ofSpain do not.

Plaça Sant Jaume has seen it all before.In the 1930s the Second Republic granted

self-government to Catalonia. Yet on Octo-ber 6th 1934—two years before Franco start-ed the civil war—Lluís Companys, the Cat-alan president, appeared on the balcony ofthe Generalitat to declare a “Catalan state”.It lasted just ten hours. “Even if we lose,”Companys had said, “Catalonia will winbecause we need martyrs who will tomor-row assure definitive victory.”

It is easy to see a parallel in Mr Puigde-mont’s conduct. By the same token, he seeshimself as the inheritor of a long tradition.He styles himself “the 130th president ofthe Generalitat”. But if nations are “imag-ined communities”, asBenedictAnderson,a historian, wrote, Catalonia is more imag-ined than most.

“Before the 20th century, there was nonation called Catalonia,” writes Jordi Ca-nal, a Catalan historian. The Generalitatbegan as a feudal institution in the Frank-ish County of Barcelona. This was ab-sorbed first into the Crown of Aragon andthen that of Spain. The region’s emergenceas the industrial powerhouse of Spainbrought social upheaval and immigra-tion—and a cultural renaissance centred onthe revival of the Catalan language, whichin turn spawned a nationalist movementamong the powerful Catalan bourgeoisie.According to MrCanal “Itwas the national-ists who, from the late 1890s, set out tobuild a nation and to nationalise Cata-lans.” Something similar happened in theBasque Countryand to a lesserextent Gali-cia, which each have their own language.

These regional exceptionalisms chal-lenged a weak Spanish state, whose im-pulse was to centralise. In the parliamenta-ry debate on the Catalan statute of 1932,José Ortega y Gasset, Spain’s foremost20th-century philosopher, argued that Cat-alonia was a “perpetual” problem that“cannot be settled, it can only be livedwith”. Manuel Azaña, the prime minister(later president) of the Republic, repliedthat Spain should positively embrace its re-gional diversity as part of its “spiritualwealth”, recognised in self-government.

2It’s complicated

Source: Sigma Dos

Spain, % polled, October 23rd-26th 2017

What outcome do you want for Catalonia?

Support for an agreed legal referendumon Catalonia’s status, %

0 20 40 60 80 100

In Spainas a whole

In Catalonia

IndependenceMore Same LessDon’t know

Autonomy:

0 20 40 60 80 100

In Spainas a whole

In Catalonia

1Binary decision

Source: Government of Catalonia Centre of Opinion Studies

“Do you want Catalonia to become anindependent state?”, % of Catalans polled

2014 15 16 17

38

40

42

44

46

48

50

Yes

No

The Economist November 4th 2017 Europe 55

1

2 That was the spirit, too, of the 1978 con-stitution, albeit flawed by the dilution ofregional exceptionalism with decentralisa-tion for the whole country. Nevertheless,the constitution was approved by 91% ofvoters in Catalonia on a 68% turnout. Foryears, it satisfied the nationalists. But thenseveral things came together to ignite thedrive for independence.

The first was an ill-fated attempt in2006 by a Socialist-led regional govern-ment to reform the Catalan statute, givingthe Generalitat more powers (over thecourts, for example) and in tortuous phras-ing recognising Catalonia as a nation. “Thewhole process was unfortunate,” says theSocialist former official, who was involvedin it. “Nobody had demanded a new stat-ute, the negotiation was very chaotic andthey came up with a jigsaw puzzle thatdidn’t fit.” Approved by 73% in a referen-dum (with a 49% turnout) in Catalonia, the2006 statute was then partially rejected bythe Constitutional Tribunal in 2010. Thatturned it into a casus belli.

The tribunal’s rulingcoincided with theonset of the economic slump. Artur Mas,the nationalistpresidentofthe Generalitat,at first had no compunction about apply-ing austerity. In June 2011 several thousandindignados surrounded the Catalan parlia-ment to protest against his budget cuts.That prompted him to demand fiscal con-cessions from Mr Rajoy, just when Spainwas on the brink of having to seek a Euro-pean bail-out. Rebuffed, he launched thedrive for an independence referendum.

Umbrage in CataloniaAnother red rag to Catalan nationalismwas the PP. It had campaigned against thenew statute. Many Catalans see the partyas the embodiment of Castilian central-ism, and feel marginalised by its drive toaggrandise Madrid. The Spanish state hasfailed to base any important institutions inBarcelona, for example. Many PP politi-cians in turn blame the rise of secession-ism on what they see as the disloyal abuseof self-government by the Generalitat sys-tematically to build a nation. This has had“very effective levers” in “the educationsystem, the public and subsidised privatemedia, and the gradual acceptance of thedisappearance of the symbols of the stateand of Spain in Catalonia”, Josep Piqué, aCatalan former PP minister, told El País, aMadrid newspaper.

Mr Puigdemont’s flight to Brusselsmarks the end of what Catalans call theprocés, the drive foran independence refer-endum. “Now the movement will concen-trate on defending its leaders,” says An-dreu Mas-Colell, the economic councillorin Mr Mas’s government. Even if the sepa-ratist coalition stays together and wins theelection, after the October debacle it is un-likely to do so on a platform that gives pri-ority to independence.

Must Spain “live with” an unresolvableCatalan problem? On paper, it is not hardto sketch a new solution: Catalans wouldprobably settle for a bit more money, guar-antees for the Catalan language and sym-bolic recognition of Catalonia as a nation.Another approach would be federalism,which would clarify responsibilities. Sincechange to the constitution and Catalonia’sstatute requires a referendum, it could offerthe vote the nationalists want.

But is any of this politically doable? Inreturn for Socialist support over Article 155Mr Rajoy agreed to a congressional com-mittee to discuss constitutional reform. MrMas-Colell is sceptical that it will produceanything useful. In the past two months,Catalan nationalism has awakened its dor-mant Spanish counterpart. Many Span-iards see Catalans as tight-fisted whingers.Supporters of the PP and of Ciudadanos,formed to oppose Catalan nationalism,want to roll backdecentralisation.

The underlying task is the restoration of

mutual trust between Catalonia and therest of the country. “This is an emotionalproblem, and the solution has to be emo-tional,” says Javier Vega de Seaone of theCirculo de Empresarios, a business group.

The Catalan crisis is merely the mostdramatic sign that Spain’s constitutionneeds updating. Decentralisation acrossthe country has added complexity andthrown up regulatory barriers. AndSpain’s entry into the EU in 1986 removedpowers from the central government. “Theimportant thing is that constitutional re-form doesn’t become a price to be paid butrather is a shared project,” says José Mariade Areilza, a lawprofessoratESADE, a busi-ness school.

The transition to democracy generateda sense ofpurpose in Spain that has recent-ly been missing, despite the country’s vig-orous economic recovery. Spain’s leadersnow have a choice. They can let the Cata-lan problem fester, or they can use it as thespur for national renewal. 7

The no-longer silent majority

“I AM Roman Sergeyevich Zabolotny,born in 1979, and I have been taken

prisoner,” says a Russian-speaking man ina video released lastmonth by the jihadistsof Islamic State (IS). A second soldier, hisright eye swollen shut, sits silently in greyrobes. Both were reportedly captured dur-inga battle nearDeir ez-Zor, a city in Syria’seast and the site of a recent offensive byRussian and Syrian government forces. Yet

the Russian defence ministry denied thatany of its soldiers had gone missing.Friends and relatives told Russian mediathat the men had gone to Syria notwith theRussian army, but as part of a shadowymercenary force known as “Wagner”.

The group has come to play a key role inRussian operations in Syria. Though Rus-sian law officially bans private militarycompanies (PMCs), a St Petersburg-based

Russia

The ride of the mercenaries

MOSCOW

Soldiers captured in Syria shed light on the workofa shadowy group

56 Europe The Economist November 4th 2017

2

France’s croissant crisis

Sacré beurre

“IT’S A true catastrophe, monsieur,”says a baker in central Paris as she

places warm, flaky croissants in a paperbag. The price of local butter has soaredin the past year, she says: “We are used tocosts going up, but this is really extreme.”Her pastry counter is well stocked, butmargins per croissant are squeezed.

Elsewhere it is shortages that bite. In anearby Carrefour supermarket, fridgesthat are usually crammed with packets ofbutter are mostly empty. Social-mediausers around France share photos of bareshelves using the tag #BeurreGate. Aprankster on an online-auction site of-fered to sell a slice ofbuttered toast. Pressreports talkofhoarding. Because butter isessential for much local cuisine—theFrench eat more of it than anyone—scarci-ty spreads dismay.

Various factors explain the currentchurn. Global appetite for dairy productsis rising. “China has discovered crois-sants,” notes Emmanuelle Auriole of theToulouse School ofEconomics. Western-ers fret that sugar is unhealthy but arerelearning the joys offull-cream milk,cheese and butter. A global dairy-priceindex of the Food and Agriculture Orga-nisation is up by 27% in a year. In Europe

butter recently sold on wholesale mar-kets for a record €6,500 ($7,600) a tonne,says Bloomberg. Yet suppliers have re-sponded slowly. Subsidy reforms and theend ofproduction quotas for dairy farm-ers in 2015 led to the melting away ofEurope’s butter mountain. Bad weatherand earlier price fluctuations made itharder for producers to plan.

These changes are global, yet Francealone suffers empty supermarketshelves. Blame that on rigid local condi-tions, notably a lackofcompetitionamong big retailers who refused to paymore for the product. A handful of thesehave monopsonistic power, negotiatingwith suppliers only once a year, in Febru-ary; regulatory barriers keep challengersout. No wonder French producers nowprefer to sell to Germany, where butterprices in supermarkets rose by 72% in theyear to August, rather than France wherethey rose by just 6%, according to oneindustry worker.

As for the baker, if supplies becometoo pricey, could there be alternatives?Might she even try to bake with—whisperit—margarine? Fat chance. “We useFrench butter or nothing,” she admonish-es, wagging a finger.

PARIS

Whythe French are fretting overa sudden buttershortage

independent news site, Fontanka.ru, re-ported in late 2015 that ex-soldiers were be-ing recruited to serve in Wagner by a for-mer special-forces officer, Dmitry Utkin.Numbering as many as 2,500 men, thegroup is believed to have figured heavily inoperations around Palmyra in 2016, serv-ing as “shock troops” alongside the Syrianarmy, says MarkGaleotti, an expert on Rus-sian security at the Institute of Internation-al Relations in Prague. Though the Russianarmy has not acknowledged Wagner’s ex-istence, Mr Utkin was photographed latelast year alongside President Vladimir Pu-tin at a Kremlin reception for military offi-cers in honour of Day of Heroes of the Fa-therland. This summer America addedhim to its list of officials sanctioned for in-volvement in the Ukraine conflict of 2014,where the group is said to have got its start.

When Russia launched its interventionin Syria in September 2015, the govern-ment spoke of a short air operation. Bootson the ground were seen as taboo, espe-cially to a population still haunted bymemories of the costly Soviet war in Af-ghanistan. (Nearly half the populationwould now like to see the Syrian operationwrapped up.) Buthavinga nominally inde-pendent cadre of fighters to deploy asground forces gives the Russian army plau-sible deniability. “They serve to solve aconcrete problem: have no casualties,”says Alexander Golts, a military analyst.OfficiallyRussia’sarmed forceshave in factreported some 41deaths in Syria, includinga general killed in shelling near Deir ez-Zorin September while commanding Syria’sFifth Corps of volunteers. However, inves-tigative journalists and bloggers reckonscores more Wagner-linked mercenarieshave died in combat. On the ground, theforce functions as a “pseudo-private” mili-tary company, taking direction from theRussian army, says Alexander Khramchik-hin, deputy director of the Institute for Po-litical and Military Analysis.

The model was first tested in the war ineastern Ukraine, where a patchwork offorces operated with differing degrees ofdistance from the Russian government.Alongside local separatists and regularRussian army units were groups ofRussianvolunteers and mercenaries, among themMr Utkin and an early iteration of the Wag-ner force. “The rumours are that theyfought, and fought well,” says one formersenior separatist commander, with a slysmile. As fighting slowed in 2015, merce-naries and volunteers returned home orsought employment elsewhere. It is no se-cret that many of them have since left forSyria, says another former separatistleader.

The emergence of such groups revivedtalk in Russia of legalising Russian PMCs tocreate companies in the vein of Americansecurity contractors such as Academi (for-merly called Blackwater). Mr Putin ex-

pressed tentative support for that idea backin 2011, calling it “a way of implementingnational interests without the direct in-volvement of the state”. In late 2014 Gen-nady Nosovko, a lawmaker with the JustRussia party, submitted a bill that wouldhave laid the legal groundwork, only to seeRussia’s powerful Security Council snuff itout. Resistance was also strong from with-in the military and security services,which worried about losing their monop-oly of violence. Other specialists, Mr No-sovko says, worried that powerful busi-

nessmen would ultimately seek to controltheir own private armies, with dreadfulimplications.

For now, the Wagnerians still operate ina grey zone. Fontanka.ru recently reportedthat their role has expanded to includeseizing oil wells held by IS for a newly-formed Russian company, Evro Polis. Asforthe two captives, their fates are probablysealed, says an MP from the home regionof one of them. “There’s a 99% chance thatRoman and the second prisonerare no lon-ger among the living.” 7

The Economist November 4th 2017 Europe 57

SCRATCH your head and the memory flickers into life. Britainwas once an influential member of the European Union. Its

politicians were infuriating but effective, its diplomats skilled atcrafting alliances, its officials adept at the push-me-pull-you ofshaping EU law. This is how Britain earned a budget rebate, anopt-out from the euro, and, under David Cameron, a “renegotia-tion” of its membership (since voided by the Brexit vote). Norwere its energies devoted solely to carving out special treatment.Vital EU achievements like the single market and post-1989 en-largement owe their existence to dogged British diplomacy.

How things change. British officials describe a chill that set inthe moment voters elected to leave. Ostensibly Britain remainsfully signed up to the EU, with voting rights, representation andall the paraphernalia of membership. In reality, its influence haslargely evaporated. That has a potent effect on the remaining 27members. “The balance of power is changing every day,” says adiplomat from a country friendly to Britain. “You can feel it.” Al-most 18 months before Britain is due to leave, Brexit is changingthe EU in a waythatunsettles some, inspiresothersand affectsall.

Few countries wanted Britain to leave, but for some the stakesare especially high. Assembling compromises inside the EU is adelicate dance often dominated by the positions of a few bigbeasts. Like-minded countries were delighted to rally behind theBritish on matters like trade, regulation and the single market.Smaller governments often appreciated Britain blocking Franco-German stitch-ups. Now few care to hear the views of a countrythat has one foot out of the door, and few British officials seek theopprobrium they would attract if they offered them.

Take trade, where fresh fault-linesare emerging. Countries likethe Netherlands, Denmark and even Spain are casting a suspi-cious eye on Emmanuel Macron, France’s president, whose callsfor a “Europe that protects” are starting to sound a little like pro-tectionism. At a recent summit Mark Rutte, the Dutch prime min-ister, questioned Mr Macron’s attempts to slow down EU tradetalks with Mercosur, a Latin American bloc; in the past, say Dutchofficials, they might have left it to Britain to take on the French. Onthe increasingly modish topic of “trade remedies” (anti-dumpingmeasures, investment screening and so on), the absence of asceptical British voice also tilts the scales against the free-traders.

Low-tax economies like Ireland and Luxembourg fear a freshFranco-German assault on their fiscal independence, another is-sue on which they could once rely on stout British resistance. TheEuropean Commission has already announced that it wants toremove governments’ rights to veto EU tax proposals. On foreignpolicy, the EU’s carefullyco-ordinated sanctionson Russia over itsincursions in Ukraine may have been shepherded by AngelaMerkel but were energised by a group ofhardliners led by Britain.The measures must be rolled over every six months; Britain’s de-parture could hasten their eventual end. Fellow Russia hawks,like the Baltic states, worry about what Brexit will mean for theEU’s ability to stand up to bullies.

But others spot opportunities created by the departure of theirascible Brits. Grand federalist schemes, such as replacing theBritish contingent of European parliamentarians with transna-tional lists presented to all EU voters, will go nowhere (for now).But Brexit has also inspired those who never liked the model ofendless exceptionalism pioneered by Britain but welcomed bymany others. On the single currency, for example, Britain’s pres-ence once served as a reassuring reminder to countries outsidethe euro zone that they could not be sidelined. Now the commis-sion is quietly reminding euro “outs” that most of them have a le-gal obligation to join.

Yet Britain’s departure also forces some tricky questions onthe rest of the EU. British governments used to veto anything thateven sniffed of defence co-operation inside the EU, for example,claiming it would undermine NATO. Now it is back on the table:Mr Macron wants other countries to share France’s military bur-dens in the Sahel and the commission wants a bigger commondefence fund. Brexit calls the bluffof leaders who said discussingsuch issues was useless while Britain was in the room. The loss ofone of the two members, along with France, with genuine mili-tary clout should also trigger concern over the EU slipping intogeopolitical irrelevance. But are Europe’s defence shirkers reallyprepared to pull theirweightnowthatBritain ison the wayout? Asummit in December will test the water.

Future imperfectIt is harder still to predict the long-term implications of Brexit forthe EU. Immediately after last year’s referendum some of themore gung-ho Brexiteers argued that the example of Britain’s de-parture would inspire floods of imitators. A series ofelectoral set-backs foranti-Europeansover the pastyear haskilled offthat ideafor now. Perhaps these prophecies will eventually be fulfilled ifBritain manages to make a success of life outside the club, al-though the chaotic process of Brexit seems to have given the EU’spopularity a bump everywhere else. A more plausible outcome,gently entertained by Mr Macron, is that over time the EU adoptsa more flexible model of membership, reassembling itself into“tiers” that allow countries to choose the level of integration towhich they are best suited.

Such notions, notes a disinterested British official, run upagainst the centripetal forces that drive many EU countries to re-main as close to the core as possible. At present it suits everyonein Europe to treat Brexit as a sui generis case from which no broad-er lessons can be drawn. Perhaps that is right. But it should notpreclude creative ideas that can accommodate a variety of prefer-ences, including an outer tier for laggards, stragglers and thosecountries that simply seek a looser relationship with the EU. Per-haps it might even one day find room for Britain. 7

The ghost at the banquet

Well before it happens, Brexit is alreadychanging the rest of the EU

Charlemagne

58 The Economist November 4th 2017

For daily analysis and debate on Britain, visit

Economist.com/britain

1

CLAIRE MORRIS used to workas an am-bulance paramedic in Lancaster, in

north-west England. But as part of recentchanges in the National Health Service,last year she moved 50 miles away to Mil-lom, a town of 8,500 people that has strug-gled since the closure of its ironworks halfa century ago. There she became part of anew system that continues to handle 999calls, butnowalso liaiseswith otherhealthworkers to ensure vulnerable residents re-ceive good enough care that they do nothave to call the emergency services in thefirst place.

Such an approach may seem like com-mon sense, but it is far from the norm. De-spite its name, the NHS it not a single ser-vice. It is a mish-mash that involves nearly7,500 general practices (clinics of GPs, orfamily doctors, which are independentcontractors); 233 “trusts”, as hospitals andother direct providers of care are known;and some 850 companies and charitiesthat provide care on behalf of the NHS. Allof these entities have their own contracts,budgets, employees and incentives. Noneis responsible for social care, the residen-tial support for elderly or disabled folk thatis mostly left to local authorities.

The project in Millom and its surround-ing area of Morecambe Bay is one of 50 ex-perimental “vanguard” sites set up by theNHS in England to piece together this frag-mented system, which is increasingly

by 23% and elective admissions by 16%.Emergency admissions from care homeswere cut by 10%. Between April 2015 andDecember 2016, the whole MorecambeBay region saw small drops in emergencyhospital admissions and occupancy rates,even as most of the country saw increases.

Those running the vanguard ascribethe results to co-operation. The NHS is “abit like ‘Game of Thrones’,” says John Ho-warth, one of the vanguard’s clinical lead-ers. “We’re a set of tribes who are often atwar…We need to rejoin the tribes into oneNHS tribe.” Millom’s one GP practice is inthe same building as the community hos-pital and the ambulance service but, untilMs Morris started there, they barely spokeand never shared data. Now they are inconstant touch, with workers goingthrough phone logs to identify pensionerswho call 999 because they do not knowwhat else to do, then liaising across the ser-vices to workout how best to care for themat home.

Morecambe and wiseGPs in Millom can now phone or video-link with specialists at regional hospitals.Though this takesa specialist’s time (whichunder the usual NHS model means thehospital billingfora consultation fee underthe NHS tariff), it can save more time andmoney later. In Morecambe Bay, thischange avoided 1,400 unnecessary outpa-tient referrals in the 11 months to February2017—no small achievement, since a busjourney from Millom to Lancaster can takemore than two hours.

A scheme allowing people with minoreye conditions to see a local optometristavoided 1,600 unnecessary referrals in itsfirst 18 weeks. Some GP practices are hiringnurses and paramedics to screen patientswho need not see a doctor. Other van-

struggling to cope with growing numbersof elderly people with multiple chronicconditions. Although the scope of eachvanguard varies, all aim to break down si-los by combining budgets and having stafffrom different parts of the health servicework more closely together. Simon Ste-vens, head of NHS England, wants thesesites to be models for the rest of the service.

At last, almost unnoticed, the NHS isstarting to change at its core. It is a shift thatindicates the end of an era of thinkingabout health care. In 1990 Ken Clarke, thenConservative health secretary, created an“internal market” by separating the partsof the NHS that pay for services from thosethat provide them. From 1997 Labour add-ed a vast set of targets and a tariff for eachprocedure, to reward the mostactive hospi-tals. The Tory-led coalition of 2010-15 de-volved more of the NHS budget to localgroups ofclinicians; today two-thirds of itsspending is done via 207 “clinical commis-sioning groups”, which buy services fromtrusts and other providers.

Vanguards deliberately undermine thishistory. In February Mr Stevens told MPsthat the reforms would “effectively end thepurchaser-provider split,” adding for thoseparliamentarians unfamiliar with NHS-speak: “This is pretty big stuff.”

In Millom the stuff seems to be work-ing. Between 2014 and 2016 the town re-duced emergency admissions to hospital

The National Health Service

Policy transplant

MILLOM

Aquiet counter-revolution in the NHS could signal the end of three decades ofmarket-based reforms

BritainAlso in this section

59 Did Russia fund Brexit?

60 Bagehot: The Palace of Pestminster

The Economist November 4th 2017 Britain 59

2

Political funding

Following the money

ARRON BANKS, the biggest financialbacker of last year’s Brexit campaign,

sounded unbothered when news brokeon November1st that the Electoral Com-mission had launched an investigationinto his donations. “Gosh I’m terrified,”he tweeted.

The probe concerns Better for theCountry Ltd, which doled out £2.4m($3.2m) to organisations that campaignedfor Brexit. The Electoral Commission,which regulates political spending, willexamine whether the company, ofwhichMr Banks was a director, was the “truesource” of these donations. At the heartof the investigation is the question ofwhether these donations in fact camefrom outside Britain, in breach of the law.

Recipients of the money—whichincluded the UK Independence Party andGrassroots Out, an organisation set up bya Conservative MP—will also be investi-gated, to see if they carried out appropri-ate checks on the donations. Althoughthe Electoral Commission is empoweredto hand out only puny fines ofup to£20,000 per breach, it can pass on infor-mation to the police if it comes acrosscriminal behaviour. Bob Posner, who isleading the investigation, justified it byarguing that persistent questions overfunding in the referendum risked harm-ing “voters’ confidence”.

The move was seized on by MPs whohave campaigned for a closer lookat howthe Leave campaign was financed. “Atlast!” proclaimed Ben Bradshaw, a La-bour MP, who linked the investigationwith efforts by American congressmen toexamine Russian interference in lastyear’s presidential election.

Mr Banks dismissed the idea ofa linkbetween Russia and Brexit as “completebollocks”. The only interaction he hashad with the Russians was a “boozysix-hour lunch with the ambassadorwhere we drankthe place dry”, he wrote.Mr Banks added that the brandy and

vodka provided was “cracking” and thathe had already written about the encoun-ter in his book, “The Bad Boys ofBrexit”.

Mr Banks set up Leave.EU, whichcampaigned for Brexit in parallel with theofficial Vote Leave campaign. Leave.EUbenefited from £6m in loans from MrBanks, making him the biggest individualbacker ofBrexit. This generosity wasmade possible by a personal fortune—built up via investments in banking,insurance and a diamond mine, amongother interests—which has been estimat-ed at £250m. Yet some, including MrBradshaw, have suggested that MrBanks’s true net worth may be muchlower. Leave.EU’s funding is also beingexamined by the Electoral Commissionas part ofa second probe.

Since the referendum, Mr Banks hasentertained himselfby toying with theidea ofsetting up a new populist party.For now, the Russia allegations seem notto have perturbed him much. He signedoffhis statement with a single word:“Nostrovia” (“Cheers”).

A multimillionaire Brexit-backerfaces investigation overhis donations

Banks v regulators

guards have GPs in their emergency de-partments to filter those who do not needurgent treatment. Morecambe runsweeklydrop-in “café” clinics: the Airways Café forrespiratory diseases; the Serenity Café formental-health problems; and the self-ex-planatory Leg Ulcer Café (Professor Ho-warth concedes it may need a new name).

Before the general election in June wasannounced, Mr Stevens updated his five-year blueprint for the NHS. He announcedthat the models of care in the vanguard ar-

eas would be imitated throughout the sys-tem, via 44 similar local agreementsknown as Sustainability and Transforma-tion Plans (STPs). A pioneering eight areaswill go further still, becoming what hetermed Accountable Care Systems (ACSs).These bodies are based on AccountableCare Organisations, an increasingly com-mon way of organising care in America,where most involve one or more health-care providers signing a contract with ahealth-care payer (such as Medicare, the

public scheme for retirees) to deliver spe-cific health outcomes for a defined popula-tion over a number of years. ACSs are er-satz versions of this model. They largelyformalise what the vanguards are alreadydoing: joiningproviders in one area togeth-er, with the aim of coming under one inte-grated budget which pays hospitals andclinics for how healthy they keep people,not how many procedures they carry out.

“This is a complete reversal of theHealth and Social Care Act of 2012 and thereforms under Andrew Lansley [the healthsecretary in 2010-12],” says Ben Collins ofthe King’s Fund, a think-tank. If the experi-mentwere expanded, he says, it could in ef-fect lead to the end of the internal market,since it blurs the line between providerand buyer. “We are finally building a mod-el of care based on the actual needs of thepopulation,” says Ranjit Gill, clinicalleader ofa vanguard in Stockport.

Vanguards and STPs are “worka-rounds”, in the words of one doctor.Though he supports them, Andrew Hal-denby of Reform, another think-tank, saysthat STPs have “mad geography, no execu-tive authority and inconsistent vision”. Tochange this would require new legislation,which is beyond the paralysed govern-ment. So the NHS is pushing on, trying toprove the plans’ worth before any legalchanges are required. It is betting that thebenefitsofintegration will exceed the costsoferoding the internal market.

Will they? True, the current systemwastes millions ofpounds on an unwieldycommissioning process. And fragmenta-tion is an incentive for employees to opti-mise their own performance with littlethought for the rest of the system. Never-theless, the imperfect market-based re-forms of the past 30 years have helped tocut waiting times, give patients morechoice and instil financial discipline.

Three challenges face the NHS as itmakes the case for change. The first is thatalthough integration may help patients, itdoes not always mean savings for the sys-tem, since the overall budget is predeter-mined. Reducing hospital occupancy ratesfrom 95% to 93% is great, says Professor Ho-warth, but it does not save money. The sec-ond, articulated by many doctors, is thatthe reforms will not be given time to work.The Labour Party is sceptical of STPs,which it sees as vehicles for cutting spend-ing. It wants to halt the plans and give localareas more money before asking them tofigure out how to proceed.

The final issue, says Mr Collins of theKing’s Fund, is accountability. “The wholereason the purchaser-provider split was in-troduced was because of unaccountablelocal monopolies,” he notes. Although theinternal market brought only imperfect ac-countability, what if the new models fail todeliver improvement? “We could find our-selves back in the 1970s,” he warns. 7

60 Britain The Economist November 4th 2017

IT WAS only a matter of time before Hurricane Harvey reachedthe Palace of Westminster. The Weinstein storm has ripped

through a succession of institutions that combine male powerwith blurred lines between professional and social life. Few insti-tutions combine these two things quite as explosively as theHouses ofParliament.

Now it has struck with a vengeance, shaking Brexit off thefront pages and even raising questions about the future of thegovernment. Sir Michael Fallon, the defence secretary, has re-signed on the grounds that his past personal conduct has “fallenbelow the high standards that we require of the armed forces”. Asenior civil servant is conducting an inquiry into the conduct oftwo other ministers: Damian Green, the deputy prime minister,who denies accusations that he made unwanted advances to awoman 30 years his junior, and Mark Garnier, a trade minister,who nicknamed his assistant “sugar tits” and dispatched her tobuy sex toys. Unnamed people in politics are accused of farworse. Bex Bailey, a Labour activist, has said that she was rapedby a “party figure” and then discouraged from reporting it by La-bour apparatchiks. The Westminster gossip mill, never idle evenat the quietest of times, is whirring madly, aided by leaked partydossiers on MPs, insinuating photographs in newspapers andsnippets from private WhatsApp groups.

The revelations are destabilising an already wobbly govern-ment. SirMichael wasone ofitsmostexperienced figures. He pro-vided ballast against political storms and a bridge between ideo-logues on both sides of the Brexit divide. Based on what wasknown at the time of his resignation, his departure has loweredthe bar for career-ending conduct. It has also reinforced the sensethat the government is at the mercy of events that it cannot con-trol: future revelations could force more ministers to resign orcompel the government to withdraw the whip from erring MPs.The focus is now on MrGreen, Theresa May’s oldest friend in pol-itics and another emollient figure who has provided politicalsense in a cabinet that is lacking it.

The scandal raises broader issues about how women aretreated in British politics. Parliament has all the characteristics ofother male-dominated institutions in spades: family-hostile (andbachelor-friendly) hours, pack behaviour, a culture of drinking.

No women sat in Parliament until 1919; as recently as 1997 theymade up less than 10% of MPs. When Margaret Thatcher got intothe cabinet in 1970 she was only the sixth woman to rise so high.

Politics is also a peculiar business. Social functions and politi-cal functions are fused. Campaigns are all-consuming. Pressingthe flesh is a way of life. MPs have enormous power over whomtheyhire, but little guidance in howto manage them. They are notjust representatives of the public but businesspeople who runtheir own offices. MPs who are not lucky enough to have Londonseats have no choice but to live double lives, spendingtheir week-ends in their constituencies and their weeks in the capital. Theylive double lives in another way, too, arriving in Westminsterthinking that they might be the next Winston Churchill or NyeBevan, but ending up as lobby fodder. The combination of loneli-ness and frustrated ambition, vanity and disappointment, en-courages aberrant behaviour.

ErringMPs are accountable to theirparties rather than to moreformal bureaucratic structures. And parties have every incentiveto keep secret any information that reflects badly on them, sinceexposing it could cause a scandal ora by-election. Parties can alsouse such information to keep their MPs in line. Whips’ officesmaintain “black books” of their own MPs’ secrets, to dangle overmembers threatening to rebel.

There is still a question as to howwidespread the most seriousoffences are. Rumours ranging from consensual affairs, to un-specified “inappropriateness”, to serious sexual assaults havebeen unhelpfully lumped together. Some of the MPs accused ofinappropriate behaviour have said they fear a witch hunt thatwill blur the distinction between facts and gossip, affairs andtransgressions, and misjudged passes and coercion. Yet there is adifference between keeping a clear head and downplaying thescandals. Parliament is grappling with two problems: a culturalone ofhow women are treated in political life and a criminal oneof sexual assault. But these two problems can blur into each oth-er. MPs are more likely to abuse their power over their subordi-nates if they operate in a world ofcasual sexist banter.

A blast of fresh airMPs already have a net trust rating of -74%. The latest revelationsmay entrench contempt for politicians, encouraging the harmfulpopulist rage against “the establishment” and discouraging tal-ented people from working in the Pestminster swamp. Yet thisweek also gave some cause for optimism. The debate has high-lighted how farwomen have advanced in recent years. They nowmake up a third of MPs and run three of the four countries of theUnited Kingdom. Digital forums such as WhatsApp give themtools to share their experiences privately and organise resistance.Parliament’s debate on sexual harassment on October 30th wasnotable for itsmaturityand good sense. John Bercow, the speaker,Andrea Leadsom, the leader of the House, and Harriet Harman,Labour’s representative, promised to tackle the problem swiftly.They also demonstrated that they recognise how doing so meansaddressing attitudes as well as setting up complaints systems.

The MPs’ expenses scandal of 2009 diminished Parliament’sreputation because MPs collectively failed to deal with the pro-blem quickly and convincingly. There is a chance that, if properlyhandled, the sexual-harassment scandal could help clean up be-haviour in Parliament, improve its reputation and persuade moreyoung people, particularly women, to make a career in politics.Some hurricanes wreaka creative kind ofdestruction. 7

The Palace of Pestminster

Accusations ofsexual predation have shaken Parliament. About time

Bagehot

The Economist November 4th 2017 61

1

IN FEBRUARY a tribunal in Kirkenes, inNorway’s far north, ruled that oil extrac-

tion in the Barents Sea was illegal. Thecourtroom—an auditorium sculpted from190 tonnes of ice, pictured above—and theverdict were fictitious, staged as part of afestival. But the legal question is real.

On November 14th a district court inOslo, Norway’s capital, will begin hearingthe case that inspired the theatrics. Green-peace and another pressure group, Natureand Youth, allege that by issuing licences toexplore for oil in the Arctic, Norway’s gov-ernment has breached its constitutionalobligation to preserve an environmentthat is “conducive to health” and to main-tain environmental “productivity and div-ersity”. Their case rests not on local harms,for example to wildlife or water quality,but on the contribution any oil extractedwill make to global warming which, underthe Paris accord of 2015, Norway and 195other countries have pledged to keep to“well below” 2°C compared with pre-in-dustrial times.

As policymakers prepare for the annualUN climate pow-wowin Germany, startingon November 6th, activists who think toolittle is being done to meet that goal areturning to the courts. Cases where the neg-ative effects of carbon emissions are cen-tral, not tagged on to more direct environ-mental damage, such as oil spills or therelease of noxious chemicals, are on the

group, that the Dutch government’s targetof a 17% cut in carbon emissions by 2020,compared with the level in 1990, fell shortof its constitutional “duty of care” towardsDutch society. It ordered a cut of at least25%. The same year a high court in Pakistanupheld an earlier decision in a casebrought by Ashgar Leghari, a farmer, that“the delay and lethargy of the State in im-plementing [its climate policies] offend thefundamental rights of the citizens”. It di-rected the government to make a list of pri-orities and create an independent commis-sion to monitor progress.

The prospect for climate-friendly ver-dicts is improving, says Sophie Marjanacof ClientEarth, an advocacy group, for tworeasons. The first is the growing volume ofclimate-related commitments for whichgovernments can be held to account. Thesecond is advances in climate science.

Globally, the number of national climate-change laws and policies hasswelled from around 60 in 1997 to nearly1,400 (see chart 2 on next page). A survey in2012 found that177 countries had laws, reg-ulations or court rulings guaranteeing theright to a clean or healthy environment. Inat least 92 that right was constitutional.Greenpeace v Norway was made possibleby a change to the country’s basic charterin 2014, which in effect converted preserv-ing a healthy, productive and diverse envi-ronment from a suggestion into an obliga-tion. It would have been harder for MrLeghari to win had the Pakistani govern-ment not spelled out 734 “action points”,232 ofwhich deserved priority.

The Paris accord is playing a role. Likemany environmental treaties, it does notbind signatories to fulfil their obligations,merely enjoins them to do so. But plaintiffscan assessgovernments’ and firms’ actionsagainst the 2°C goal.

rise. Joana Setzer of the Grantham Insti-tute, a think-tank in London, has found 64such cases in countries other than Americain the past 15 years. Twenty-one werelodged since 2015 (see chart1on next page).In litigious America around 20 are nowfiled each year, up from a couple in 2002.

The targets are governments, whichcampaigners argue are doing too little toavert climate change, and big energy firms,which they hold responsible for mostgreenhouse-gas emissions. A day beforethe Oslo hearings, for instance, a Germantribunal will consider an appeal by SaúlLuciano Lliuya, a Peruvian who sued RWE,a big German electricity producer. He ar-gues that it is partly liable for melting Andean glaciers that have raised the levelof water in a lake that threatens to floodHuaraz, his home town.

Making it stickThe legal obstacles are formidable. Like thelower court in Lliuya v RWE, many courtshave peremptorily dismissed climate law-suits as groundless. Climatologists deal inprobabilities, so it is hard to establish acausal link between a country’s or com-pany’semissionsand the damage wroughtby greenhouse gases. Singling out oneamong countless emitters is a stretch.

Even so, the occasional case succeeds.Two years ago a court in the Netherlandsagreed with Urgenda, an environmental

Lawsuits against climate change

New green advocates

The battle against global warming is increasinglybeing waged in courtrooms

International

62 International The Economist November 4th 2017

2 Such assessments are aided by a grow-ing understanding of Earth’s climate andhumanity’s effects on it. Scientists are in-creasingly confident that they knowroughly what shares of the greenhousegases in the atmosphere were emitted byindividual countries, and even by the big-gest corporate polluters. The Carbon Ma-jors Database, compiled by Richard Heede,a geographer, tallies historical emissionsby fossil-fuel firms and otherheavy carbonemitters such as cement-makers. He findsthat just 90 belched out 63% of all green-house gases between 1751 and 2010. Cam-paigners seek to argue that these deep-pocketed firms, and not their customers,are ultimately responsible for the emis-sions, just as cigarette-makers were held li-able for their products whereas retailerswho sold them on to consumers were not.

Splitting the billMr Heede’s calculations, which most sci-entists accept, mean that responsibility forpast and future warming can be appor-tioned—at least in principle. Mr Lliuya’sclaim of€17,000 ($19,800) against RWE cor-responds to 0.5% of the cost of protectinghis town against the glacial melt. That 0.5%is the utility’s estimated share of cumula-tive global greenhouse-gas emissions,chiefly from all the coal it has mined. Like-wise San Francisco, Oakland and threeother Californian counties have sued doz-ens of carbon majors, including BP, Chev-ron, ExxonMobil and Royal Dutch Shell,for damages proportional to their share.

Scientists are also becoming more will-ing to blame carbon emissions, not just forglobal warming, but for specific natural di-sasters such as heatwaves, floods and su-perstorms. But so far no plaintiff has beenawarded damages on the basis of such at-tribution arguments. After a legal battlethat lasted from 2005 to 2012, an Americanfederal court threw out a case brought byresidents of Mississippi against 34 big car-bon emitters for damages suffered as a re-sult of Hurricane Katrina, which they ar-gued had been made more devastating byclimate change. The court decided that theplaintiffs lacked “standing”, in otherwords

that they could not prove that they had suf-fered an injury, that the injury could betraced back to the defendant, and that thecourt could redress it (for instance by order-ing damages to be paid).

But “attribution research” has madestrides in the 14 years since Myles Allen ofOxford University introduced the notionof “climate liability” for calamities. Thefirst Bulletin of the American MeteorologicalSociety devoted to attribution studies, in2012, contained just six papers. Last year’sedition contained 26, and manymore wereturned down for lackofspace.

Researchers are even beginning to com-bine individual emitters’ climate impactswith event attribution. In a paper just pub-lished in Nature Climate Change, for in-stance, Friederike Otto of Oxford Universi-ty and colleagues (including ProfessorAllen) conclude that carbon emissionsfrom America and the European Unioneach raised the frequency of a particularlydevastating heatwave in Argentina byroughly a third. This increased chance, thescientists argued, could be interpreted astheir share of responsibility for a scorcherfour years ago. Many courts already acceptprobabilistic arguments, for example incases of occupational hazards. In Britainand America judges have ruled that firms“caused” workers to be exposed to toxicsubstances if the riskofexposure doubled.

Ms Marjanac expects attribution suitson similar grounds as the science devel-ops. In the meantime most plaintiffs aresticking to settled science. In Norway,Greenpeace is relying on the widely ac-cepted findings of the IntergovernmentalPanel on Climate Change, which says that,to meet the Paris goal, oil productionshould be wound down, not ramped up.The Californian counties have taken careto sue only those carbon majors with oper-ations in the state.

Plaintiffs are also using established le-gal arguments, albeit in novel ways—alleg-ing, for instance, that rising sea levelscaused by companies’ carbon emissionsconstitute trespass on county land. Theyare learning from one another. A lawsuitmodelled on Urgenda’s is under way inBelgium. On October 23rd an Irish courtagreed to hear another. A court in Oregonwill heara similarone in February. A groupof Brazilian NGOs hopes to file its own byApril. Following successful lawsuitsagainst cigarette manufacturers, courts areputting new stress on the fact that energyfirms have long known about the harmcaused by carbon emissions but have donenothing about it.

Defendants, for theirpart, usually arguethat, whatever the climate science or theharms caused by greenhouse gases, theyare simply not liable. Climate treaties pre-sume that each country is responsible forits own emissions, says Fredrik Sejersted,Norway’s attorney-general, who will ar-

gue the case against Greenpeace. “So Nor-way does not have a legal responsibilityfor emissions from oil and gas it exports.”No one denies that the Netherlands emitscarbon dioxide, says Edward Brans, an en-vironmental lawyer who is representingthe Dutch government in its appeal againstthe Urgenda ruling. The question is: “Arethe government’s actions unlawful?”

America’s Supreme Court is highly un-likely to discover“a constitutional right to astable climate” any time soon, saysMichael Burger of Columbia University’sSabin Centre for Climate Change Law. Itscourts hesitate to rule on issues generallyregarded as the preserve of the legislatureor the executive branch. Federal courts of-ten decline to consider lawsuits regardingnegligence, nuisance, trespass and the likestemming from carbon-dioxide emissions,arguing that these are already regulated bythe Environmental Protection Agency(EPA) under a federal law, the Clean Air Actof 1963, which prevails over common lawin its remit.

Fornow, plaintiffsapproach state courtsbecause federal statutes do not displacecommon law at the state level. In climate-friendly jurisdictions such as California, ajury could conceivably find in their favour,says Tracy Hester of the University ofHouston. But he adds that, if President Do-nald Trump or Republicans in Congress re-lieved the EPA of its obligation to regulategreenhouse gases, the way may be openedfor lawsuits in federal courts.

Courting the publicIn Norway an opinion poll in Augustfound for the first time that more peoplewould prefer to leave some oil in theground in order to limit emissions than toextract it all. This may not influence theOslo court’s decision. But as citizens’ con-cerns about climate change grow, so willthe prospect ofreal-life verdicts that resem-ble Kirkenes’s fictional one. 7

2Laws of nature

Source: Grantham Institute *And pre-1994

Global number of climate-change laws andexecutive policies, cumulative total, ’000

0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1994* 2000 05 10 15 17

Executive

Legislative

Don’t know

1Natural justice

Source: Joana Setzer and SabinCentre for Climate Change Law

*Excluding United States†To November 1st

Global lawsuits* where climate change iscentral or peripheral to the claim

0

10

20

30

40

1994 2000 05 10 15 17†

CentralPeripheral

Correction: In “Looking the other way” (October 28th)we said that the budget for the UN DevelopmentProgramme is $12bn a year. In fact, this is the sum spentby the UN on all forms of economic development. Sorry.

The Economist November 4th 2017 63

For daily coverage of business, visit

Economist.com/business-finance

1

STANLEY and Sidney Goldstein wouldscarcely recognise their creation. In 1963

the brothers opened a humble storefrontin Lowell, Massachusetts, selling healthand beauty products. Determined to putcustomers first, they named their enter-prise Consumer Value Stores. Today theGoldsteins’ startup, soon afterwards soldto a biggerfirm, isnothingshortof a health-care Goliath.

Revenues at CVS Health reached $177bnlast year, riches which come from 9,700 re-tail pharmacies and from its operations inmail-order drugs and sales of more expen-sive speciality medicines. The firm com-mands nearly a quarter of the Americanmarket for prescription drug sales (seechart on next page). It is also the biggestpharmacy-benefit manager (PBM) inAmerica, a type ofmiddleman that negoti-ates bulk discounts on drugs with largepharmaceutical firmson behalfofemploy-ers and insurers.

Yet even that formidable position is notenough. CVS is reported to have made abid for Aetna, a big American health insur-er (both firms have refused to commentpublicly). Aetna, which had revenues lastyear of about $63bn, is in a different busi-ness, serving mainly corporate clients byproviding health insurance for their em-ployees. The two companies already havea relationship, however, since CVS has acontract to serve as Aetna’s PBM. If con-

continue indefinitely. Drugretailers in particular fear the pros-

pect of Amazon entering their business.The e-commerce titan was recently report-ed to have sought regulatory approval todistribute pharmaceutical products in adozen or so states. That news, which brokein October, prompted sharp falls in theshares of several firms in the pharmaceuti-cal supply chain.

Selling drugs would be harder for Ama-zon than out-competing departmentstores, in part because consumers do nottypically pay much of the cost of drugs (in-surers do). If it has serious ambitions inhealth care, it might even be forced to buildorbuy a PBM. Even so, history suggests thatthe firm’s relentless focus on consumersand willingness to forgo profits for yearsmake it a huge potential threat to incum-bent pharmacies.

PBMs, once seen as cash cows, also facean uncertain future. These middlementook off in the 2000s by promising to cutdrug prices through aggregating demandand negotiating discounts with BigPharma. Pembroke, an industry consultan-cy, estimates that the total value of drug re-bates and discounts soared from $39bn in2008 to $125bn in 2015. Some PBMs usedquestionable practices, including secret re-bates (in addition to the discounts negoti-ated upfront on drug prices, that werepassed on to PBM customers), which al-lowed them to pocket much of the savingsrather than pass them on to insurers andemployers and in turn, to consumers.

Anthem, a big health insurer, sued Ex-press Scripts, which it fired as its PBM, for$15bn last year, alleging that the latter firmhad withheld savings and overcharged itby huge sums (Express Scripts denies theallegations). In October Anthem unveiledplans to launch its own in-house PBM with

summated, the transaction would be oneof the biggest ever in American health care(and a tie-up between the two woulddoubtless encourage other transactions ofa similar nature). That raises two ques-tions. Why would the two be contemplat-ing a deal? And crucially, given the tenden-cy of prior mergers to fatten profit marginsrather than lower prices, would such con-solidation yield benefits to consumers?

Start with the reasons for a deal. Healthcare isbecoming increasinglyunaffordablefor American consumers. Since 2014, totalhealth-care cost inflation has been 6-7%,owing to growth in the cost of everythingfrom doctors and hospitals to medical de-vices and drugs. Such large rises cannot

Health care in America

The right dose?

NEW YORK

Amergerbetween CVS Health and Aetna might help curb the unsustainable rise inAmerican health-care costs

BusinessAlso in this section

64 The dark side of tourism

65 IKEA and the internet

66 Foreign executives in Japan

66 Driving in Myanmar

67 Qatar Airways

68 Schumpeter: Making corporateEurope great again

In need of close monitoring

Source: OECD

Health spending as % of GDPSelected countries

0

5

10

15

20

2000 02 04 06 08 10 12 14 16

Germany

Italy

Japan

Britain

United States

64 Business The Economist November 4th 2017

2 help from CVS. UnitedHealth, anothergiant health insurer, acquired Catamaran,a big PBM, in 2015, and merged it into Op-tumRx, its in-house PBM.

Greater transparency in pricing is com-ing, argues Viren Mehta of Mehta Partners,an industry consultancy, be that throughvertical integration (as in the purporteddeal between CVS and Aetna) orvia the en-try of a titan like Amazon. “If opacity is re-duced, the PBMs lose market power andprofits,” he says.

This combination of forces explainswhy a CVS-Aetna merger might makesense: to make CVS a more formidablecompetitor against possible new entrants,such as Amazon, into the bit of the busi-ness started by the Goldsteins, and to ex-tract efficiencies by cutting out the middle-men in the health-care supply chain. Othersuch deals are easy to imagine. Analystsreckon that insurance firms including Well-Care, Centene and Humana are potentialtargets foracquisition. As the biggest stand-alone PBM, Express Scripts is thought to bea potential target, too. Anthem, which maylose CVSasa partner ifantitrustauthoritiesprise the two firms apart as a condition ofapproving a CVS-Aetna deal, may soon beshopping for a new PBM.

The specific nature of these sorts oftie-up offers some reason to hope that theanswer to the second question—whetherconsolidation will benefit consumers—will turn out to be positive. In the past,firms have typically joined horizontallywithin a market segment. This has general-ly led to oligopolies that enjoy fat profitsbut do little to lower prices and lift qualityfor patients. Such horizontal mergers havebeen increasingly frowned upon by regu-lators in recent years.

Up and down, not acrossThe CVS-Aetna deal is an effort at verticalintegration, which by removing rent-seek-ing middlemen can, in theory at least, leadto more choice, better health outcomesand lower prices for consumers. If thisseems far-fetched, consider the example ofUnited’s pioneering use of data analyticsand artificial intelligence at its in-housePBM. As costs spiral upwards, insurers’ in-terest in ensuring the good health of con-sumers deepens. Because United can now

analyse both a patient’s medical files andher pharmacy records, it can track howmedications are taken and whether or notthey work well. A small group of integrat-ed health-care systems in America, such asKaiserPermanente, Intermountain and theMayo Clinic, has been shown to have de-livered better care and lower costs. 

By creating a much more integratedfirm, the CVS-Aetna deal could do thesame. CVS already has more than a thou-sand MinuteClinics (cheap and cheerfulhealth centres) at its pharmacies offeringaffordable medical care seven daysa week.The combined firm would offereverything

from basic health services to diagnostics todrug-infusion centres. It would have astrong incentive to make sure that custom-ers have good access to primary care, in-cluding vaccinations, medical informa-tion, prescriptions, and follow-ups.“Consumers would save through lowerpremiums, lower out-of-pocket spendingat preferred CVS outlets, or both,” reckonsAdam Fein of Pembroke. Moreover, the ac-cumulation of data on what interventionswork best in similar patients would speedthe personalisation ofmedicine.

In truth, no one knows how a CVS-Aet-na deal would affect consumers of healthcare, as this structure of transaction, at thisscale, has not been tried. The concern forpatients—and for trustbusters—is whatwould happen if customers ofa combinedfirm wanted to receive care from other clin-ics or buy drugs from other pharmacies,perhaps because it was restricting choiceor increasing co-payments. The reason forhope is that thisvertical deal could becomea template for a new sort of health-carefirm, which offers a lower-cost ecosystemof quality health care. That could be aboon to consumers; it would have pleasedthe Goldstein brothers, too. 7

Doctors’ bills

Source: Drug Channels Institute *Excluding pharmacy-benefit-manager-related revenues

United States, pharmacy revenues*, 2016$bn

United States, pharmacy-benefit managers, 2016% of prescription claims managed

0 20 40 60 80 100

CVS Health

WalgreensBoots AllianceExpress Scripts

Walmart

Rite Aid Market share, %

23.4

13.8

10.6

5.0

4.6

0 5 10 15 20 25

Express Scripts

CVS Health

UnitedHealth(OptumRx)Humana

Prime Therapeutics

ONE recent morning in Salem, in thestate of Massachusetts, a witch ran

out of wands. Teri Kalgren, the owner ofArtemisia Botanicals, an apothecary andmagic shop, attributed the shortage to aboom in visitors. People have long flockedto Salem to learn about the infamouswitch trials of1692, in which Puritan hyste-ria led to the executions of 20 people (andtwo dogs). But since 1982, when the city in-troduced Haunted Happenings, a day-longHalloween festival for local families, theevent has expanded into a celebration thatlasts fora month and attracts500,000 tour-ists. In 2016 tourism pumped $104m intoSalem and funded some 800 jobs.

On America’s opposite coast, Scott Mi-chaels can also attest to the allure of themacabre. He has watched his Hollywood-based company, Dearly Departed Tours,grow from a one-man gig to an operationwith seven employees who take tourists tocelebrity grave sites every day of the week.“Just a few years ago, we were just thequirky ones doing tours in an old hearse,”says Mr Michaels.

The fact that tourism is soaring is well-known—between 1999 and 2016 the num-

ber of people opting for a foreign holidaydoubled, according to the UN World Tou-rism Organisation (UNWTO). As travellersembrace experiences, rather than justheading to the pool, visits to “dark tou-rism” sites have risen in tandem. This

Trends in tourism

Fatal attractions

SALEM

Darktourism spooks its way into the mainstream

The new Bali

1

The Economist November 4th 2017 Business 65

1

catch-all term includes sites of atrocitiessuch as Auschwitz or Cambodia’s killingfields; nuclear disaster zones such as Cher-nobyl in Ukraine and the Fukushima Dai-ichi power plant in Japan; and other mor-bid locations, such as the house where O.J.Simpson’s ex-wife was killed. The internethas raised awareness ofsuch places; cheapflights have made them easier to get to.

Take Chernobyl. The nuclear disaster ata power plant in what is now Ukraine, in1986, killed more than 30 workers, afflictedthousands with radiation poisoning andforced 180,000 Soviet citizens to abandontheir homes. A decade ago Dominik Orfa-nus, a Slovakian journalist, visited Pripyat,a modern city turned into a ghost town bythe explosion, and founded a tour com-pany. The number of visitors to the “exclu-sion zone” has since jumped (from 7,191 in2009 to 36,781in 2016). An easingofgovern-ment restrictions in 2011 and Ukraine’shosting of the 2012 European footballchampionship helped numbers swell fur-ther. CHERNOBYL.wel.come, Mr Orfanus’scompany, is one of three such firms which,collectively, have more than 2,000 reviewson TripAdvisor, a travel-review website. Ithands out shirts with slogans such as “En-joy Chernobyl, die later”.

Commodifying Chernobyl can be justi-fied by the passage of time and the fact thattourism is seen by locals as a boon to theirstunted economy. Salem is also easy tocommercialise because the deaths oc-curred so long ago. But recent tragedies de-mand greater sensitivity. Japanese authori-ties have banned tours to the vicinity ofFukushima Dai-ichi nuclear power plant,which went into meltdown after an earth-quake caused a tsunami that engulfed thecoast in 2011, killing nearly 19,000 people.Local guides still take over 2,000 touristseach year to villages near the reactors.

Michael Frazier, of the National Sep-tember 11 Memorial & Museum in NewYork, bristles at the word “attraction,” eventhough the museum charges admission,sells souvenirs and markets itself on itswebsite as TripAdvisor’s “#2” of 1,055Things to Do in New York City. It is also“#6” of the World’s Most InstagrammedMuseums. Last year more than 3m visitorsbrought in $67m for the non-profit founda-tion that runs the museum.

At the 9/11 museum and at Auschwitz,crowds are controlled with carefully timedtours. At Chernobyl, however, sometimes“there are so many buses that all of a sud-den the ghost town feels like Disneyland,”says Mr Orfanus. Carolyn Childs ofMyTra-velResearch.com, a research firm, seesplenty of room for thoughtful architecturefirms and design consultancies to helpsites walk the fine line between commem-oration and commercialisation.

Death sells, says Philip Stone of the In-stitute for Dark Tourism Research at theUniversity of Central Lancashire. But most

dark tourists seek meaning, not merely themacabre. His research into their motivesreveals not so much oddballs ticking atroc-itiesoffa list asamateurscholarsof humannature. The Salem Witch Museum tries tocater to such cerebral interest, castingwitch-hunts as a staple of America’s politi-cal culture. It cites cases such as Japaneseinternment after the attack on Pearl Har-bour in 1941, and Senator Joe McCarthy’sscapegoating ofalleged communists in the1950s. A guide asks a crowd clad in blackand orange to come up with modern paral-lels. The visitors leave deep in thought. 7

2

ON A Sunday afternoon, just beyondLondon’s M25 ring road, shoppers

participate in the ritual that is a trip toIKEA. Fuelled by a lunch of Swedish meat-balls, they negotiate their way around the400,000-square-foot maze of a store, pastchildren playing hide and seek and cou-ples arguingover the merits ofa PAX overaHEMNES wardrobe. Hours later, theyemerge, wearily pushing trolleys loadedwith flat-pack furniture and far more tealights than they had intended to buy. Thejoy ofassembly still awaits them.

This experience has changed remark-ably little since the late 1950s, when IKEA,which is still privately owned, set up itsfirst store in southern Sweden and foundthat people would travel long distances forlow-cost, self-assembled goods. IKEA hasbecome the world’s largest seller of furni-ture, with over 400 shops around theworld and €38bn ($42bn) of revenue.

But now it is acknowledging that cus-tomers might want to shop in new ways. Inwhat Torbjörn Lööf, chief executive of In-ter IKEA, which owns the brand, has de-scribed as its biggest change in interactingwith customers since the IKEA conceptwas founded, it has said it will experimentwith sellingfurniture on third-party onlineplatforms (it already sells items on its ownsite). It is not yet known whether it will sellon Amazon or China’s Alibaba, the biggestnames in e-commerce.

The firm also recognises that DIY la-bour does not always make people fonderof their purchases. In September IKEAGroup, which runs most of the retail out-lets, announced its acquisition of TaskRab-bit, an app that, among other things, con-nects handymen to customers with oddjobs to be done. Taken together with otherchanges introduced in recent years—suchas a handful of click-and-collect sites insome city centres, home delivery and anew augmented-reality app for smart-phones to help customers visualise furni-ture in their homes—it is clear that the com-panyiskeen to create alternatives to itsvastsuburban outlets.

Such steps seem overdue. According toa survey of29 countries by PwC, a consult-ing firm, around 30% of respondentswould rather buy furniture on the internetthan in shops. Although footfall at individ-ual IKEA stores has been falling since 2015,the number ofvisits to the group’s websitehas increased by over a fifth (see chart). Yetin 2016 online sales accounted for only 4%of the firm’s total revenue. IKEA has doubt-less noticed that an American competitor,Ashley Furniture, successfully sells itsgoods on Amazon, and that Alibaba, too,carries several ranges of furniture.

The new strategy carries the usual risksfaced by firms going online. Customers arenot shifting entirely to e-commerce, notesMarc-André Kamel of Bain & Company, aconsultingfirm, butwish to mixand matchchannels. Mr Lööf therefore has littlechoice but to offercustomers both physicaland digital options, which could raisecosts. IKEA is still planning bricks-and-mortarexpansion both in established mar-

IKEA and the internet

Frictionlessfurnishing

The furniture giant undertakes somehome improvements

Internet of flat-packed things

Source: Company reports

Years ending August

IKEA, customer visits, bn

0

0.5

1.0

1.5

2.0

2.5

2012 13 14 15 16 17

Store

Website

66 Business The Economist November 4th 2017

2

Driving in Myanmar

On the other hand

THE Japanese make cars that last butreplace them relatively quickly. The

average car in Japan is three years youn-ger than in America. This combination ofdurable manufacturing and dutiful con-sumption ofa prized national productworks out well for the rest of the world;many countries import older Japanesecars in bulk. Secondhand vehicles fill vastparking lots in Japan’s port cities, await-ing shipment to New Zealand, the UnitedArab Emirates and elsewhere.

The third-most-popular destination isMyanmar, which imported over 80,000used Japanese vehicles in the first ninemonths of this year, according to Japan’sInternational Auto Trade Association.Drivers believe that Toyotas, Hondas andNissans can stand up to the country’spockmarked roads, a faith not yet shownin South Korean and Chinese cars.

There is only one problem, which isthat Japan drives on the left, Myanmar onthe right. As a consequence, most ofMyanmar’s drivers sit on the wrong sideof the car, where it is harder to see on-coming traffic. Settle into the passengerseat ofa Honda taxi on a narrow ruralroad and you may be called upon toperform unexpected duties like tellingyour driver when it is safe to overtake aslow-moving lorry, without hitting ascooter, gaggle ofchildren or bonnet-lessjalopy travelling in the other direction.

Not everyone executes these responsi-bilities successfully. Myanmar has thehighest rate ofdeaths per vehicle amongthe ten members of the Association ofSouth-East Asian Nations (ASEAN), ac-cording to the World Health Organisa-tion. Evidence ofaccidents litters theroadside outside Yangon: a silver Toyotathat has lost everything in front of itswindscreen and a red Suzuki hatchbackthat also now has a hatchfront.

Myanmar’s government periodicallytightens the import rules to keep olderand less safe cars offthe country’s roads.In October it said it will allow individuals

to import only cars built in 2016 or after.And after this year, it will no longer grantimport permits for right-hand-drive cars.

The tighter policy may encouragelocal car assembly. Suzuki will open anew factory for left-hand-drive carsoutside Yangon next year, adding to itsexisting plant in the city’s east. But thechange will oblige drivers to buy cars thatare either more expensive or less authen-tically Japanese. The new left-hand-driveCorolla on display in the Toyota “Minga-lar” dealership in Yangon, for example,was made in Thailand and is listed at$33,900, over 26 times the country’snational income per person.

One other constituency may alsocome to regret the altered rules. Manypoorer residents ofYangon, where mo-torcycles are banned, ride bicycles or sitin three-wheeled “trishaws”, trundlingalongside the kerb. As more ofMyan-mar’s drivers shift to the left seat, oncom-ing traffic will be easier to spot; but thesekerbside pedal pushers will be moreexposed than ever.

YANGON

Japanese-made cars enjoyan afterlife in Myanmar. Not formuch longer

Gridlock in Yangon

MICHAEL WOODFORD, the first non-Japanese president of Olympus, lik-

ened the camera-maker’s board memberswho sacked him in 2011 to “children in aclassroom”. Mr Woodford had confrontedTsuyoshi Kikukawa, the company’s impe-rious chairman, over a $1.7bn hole in its fi-nances. Mr Kikukawa responded by or-chestrating a show of hands in aboardroom coup that sent the Englishmanpacking. It all fitted a cliché of Japan’sboardrooms as an all-Japanese, all-maleclub where wizened bosses ruthlessly en-force wa, or harmony.

Gradually, the serenity is being disrupt-ed. Nearly 15% of companies in the Nikkei225 stock index now have at least one non-Japanese on their boards. That is still lessthan half the share in Britain’s FTSE 100,but it is up from 12% in 2013 and the trajec-tory seems set. Japan’s biggest bank, Mit-subishi UFJ, and Takeda, its largest phar-maceuticals company (which in 2015appointed its first foreign chiefexecutive, aFrenchman) announced the appointmentof foreign directors this year. Of the ten di-rectors at SoftBank, a telecoms and inter-net giant, seven are non-Japanese.

When Japanese firms buy Westerncompetitors, they often absorb foreignersinto their higher echelons. Suntory, adrinks company, put the British chief exec-utive of Beam, a spirits-maker, onto itsboard in 2014 when it acquired the Ameri-can company. SoftBank’s embrace of for-eigners reflects a diverse portfolio that in-cludes ARM, a British chipmaker, andSprint, an American telecoms firm. Greateroutside influence over Japanese firms alsostems from more overseas investors, whohold about 30% of Japanese shares, upfrom 23.5% in 2008.

But more still needs to be done, andquickly, if large Japanese firms are to main-tain global relevance, says George Buckley,an outside director of Hitachi, a conglom-erate. Many boards continue to be rubber-

Japanese business

The wa forward

TOKYO

Japan Inc gingerly embraces moreforeigners

kets, such as Britain, and in new ones, suchas India next year and South America andSouth-East Asia in the future.

Its plan to experiment with using bigthird-party online sellers such as Amazonis surprising, says Mr Kamel, because itwould need to cede some control over itsbranding. Being on Amazon or Alibabawould also invite direct comparison withother furniture manufacturers on priceand quality. The Swedish giant is betting

that it can win new customers online whowould never trek to its superstores. But if itsimply substitutes offline demand for on-line sales it could lose out, because itwould have to hand over a big chunk of itsprofit margin to third parties (at least thereis plenty to go round; IKEA Group’s grossprofit margin averaged 40% between 2012and 2016).

Another risk comes from the demandsof a new type of customer. IKEA is used to

people who are willing to spend time onassembly in return for low prices, but willnowtry to appeal to online buyerswho de-mand cheap, quick delivery. Keeping themhappy will be hard. Online reviews ofIKEA’s new-style click-and-collect store inLondon complain of long lead times andslow service. Constructing a sturdy newsales model, rather like a flat-pack cup-board, could turn out to be trickier thanIKEA claims. 7

1

The Economist November 4th 2017 Business 67

AIRLINE bosses are often householdnames due to their attention-seeking

behaviour—from the foul-mouthed rantsof Michael O’Leary, chief executive ofRyanair, to the model-flanked antics ofRichard Branson of Virgin Atlantic. Buteven in an industry filled with characters,Akbar al-Baker, Qatar Airways’ chief exec-utive, stands out. He is known in the indus-try for behaving unpredictably at pressconferences and for his colourful attackson rival airlines. The word “crap” oftencomes up, as a description for new jetsfrom Airbus and Boeing, and also (in aquote from July): “there is no need to travelon these crap American carriers” on which“you will be served by grandmothers”.

Mr Baker could do with some allies justnow. Since June, Saudi Arabia, the UnitedArab Emirates, Bahrain and Egypt have im-posed a blockade on Qatar, banning its flagcarrier’s jets from their skies. That has re-sulted in the cancellation of over 50 dailyflights to these countries, costing the airli-ne a tenth of its business and $500m in

profit this year, calculates Diogenis Papio-mytis ofFrost & Sullivan, a consultancy.

A shock on this scale would kill manyprivate-sector airlines. But Qatar Airwayshas been fully state-owned since 2013. An-alysts think its airline operations are loss-making, and that they are cross-subsidisedby other parts of the group, includingDoha’s airport, hotels and a monopoly onalcohol and duty-free shopping. That sug-gests the airline’s main function: to put thetiny emirate on the world stage.

In 1996 Qatar’s then emir, Sheikh Ha-mad bin Khalifa al-Thani, put Mr Baker incharge to transform Qatar Airways from astartup with a few jets into a global airline.He was previously a civil servant at Qa-tar’s civil-aviation regulator. Despite a lackof experience, passenger numbers haverisen from almost nothing to over 32m in2016; the carrier has come first in Skytrax’sawards for service quality four times.

Rivals retort that its heavy reliance onstate support is what makes it special.America’s three biggest carriers claim thatQatar Airways has violated a US-Qatariopen-skies treaty by receiving $25.5bn instate subsidies since 2004. Peter Carter,Delta’s chief legal officer, reckons that theairline’s long-term plan is to push rivals outof business and raise fares later on. In Junethe Qatari carrier said it wanted to buy 10%ofshares in American Airlines, but its chiefexecutive, Doug Parker, fought Mr Bakeroff, fearing that his bid was a ploy to force itto lobby in favour of, rather than against,state-backed Gulfcarriers.

Nor does the airline have friends athome in the Gulf, where Emirates and Eti-had, its biggest regional rivals, may be ben-efitingfrom the blockade againstQatar. It isoften forgotten, notes Andrew Charlton ofAviation Advocacy, a Geneva-based con-sultancy, that the Qatari and Emirati air-lines “care more about competing witheach other than against the Americans”.The damage to Qatar Airways from theblockade is no accident, say former execu-tives from the two Emirati carriers.

Surrounded by foes in the Middle East,Mr Baker is obliged to make investmentsfurther afield. “It looks like he is plotting

Gulf domination through world domina-tion,” says Mr Charlton. Instead of buyingairlines outright, to feed traffic into ahub—a strategy that led Etihad to lose bil-lions of dollars when Alitalia and Air Ber-lin, its two big buys, went bust this sum-mer—Mr Baker plans to build a network ofhub airlines across the world. Qatar Air-ways has built a 20% stake in IAG, a groupof airlines that flies 100m passengers ayear, and a 10% stake in LATAM, LatinAmerica’s biggest carrier. After beingsnubbed by American Airlines, in Septem-ber Mr Baker bought 49% of Meridiana, anItalian carrier.

He might seem to lack the diplomaticskills for such dealmaking. Most airlinemanagers, after all, are globe-trotting ex-pats in the mould of Sir Tim Clark, presi-dent of Emirates. Mr Baker is known for atough management style at Qatar Airwaysas well as for abrasive public comments.Yet he is not to be underestimated. In 2013Qatar Airways become the first and onlyGulf carrier to join an international airlinealliance, oneworld, which includes BA,American Airlines and LATAM. Executivesat some of the other members say that MrBaker is in fact much easier to deal withthan they expected.

As a former watchdog, he also knowshow to handle aviation regulators. In Sep-tember he lent aircraft to Britain’s aviationauthority to help repatriate thousands ofholidaymakers after the collapse of Mon-arch Airlines, the country’s fifth-biggestcarrier, and in October Qatar made a dealwith the EU on closer co-operation on reg-ulation and safety. He has also been invit-ed by India’s government to set up an air-line with 100 jets. It isno wonder that someanalysts compare him to an arcade-gamemole: hit him hard in one part ofthe world,and he soon appears elsewhere. 7

Qatar Airways

Plane diplomacy

Akbaral-Baker, the airline industry’smost outspoken boss, goes global

What blockade?

Sources: Company reports; IATA

Passengers carried, 2011=100

80

100

120

140

160

180

200

2011 12 13 14 15 16

Qatar Airways

IAG

LATAM

Worldtotal

Akbar al-Baker on a high

stampers, not vigilant overseers of the sortthat foreigners expect to sit on, agrees Wil-liam Saito, a venture capitalistwho advisesthe government. Elderly ex-chairmen andchief executives often wield considerablepower even after retirement. (And if cor-porate giants are excluded, the number offoreigners on boards of listed firms hasbarely inched up, from 0.6% in 2001to 0.8%last year.)

Livelier boardrooms might help prodJapan’s risk-averse companies to investmore of their ¥214trn ($1.9trn) of cash, andboost the economy. Their foreign opera-tions would also benefit from appointingmore non-Japanese as business heads. Inthe past the easiest way for Japan’s manu-facturers to control subsidiaries abroadwas to send people they knew. That maynot workfor services, warns Masahiko Uo-tani, president of Shiseido, a cosmeticscompany. “You need people who can real-ly understand local tastes,” he counsels.

Unless Japanese business changes itsways, firms risk staying dangerously out oftouch, agrees Christina Ahmadjian, a non-executive director at Mitsubishi Heavy In-dustries, another conglomerate. The num-ber of Japanese companies in the FortuneGlobal 500, a scorecard for big business,has dropped from 149 in 1995 to 51. A bit ofdisharmony can be productive. 7

2

68 Business The Economist November 4th 2017

WHEN Emmanuel Macron first started work as a mergers-and-acquisitions bankerat Rothschild in Paris in 2008, tech-

nicians of the trade were not impressed. “He did not know whatEBITDA was,” sniffed a former colleague, according to the Finan-cial Times (it is a measure ofcompany profits). Yet MrMacron hadideas and made things happen, and four years later persuadedNestlé to spend $12bn buying Pfizer’s nutrition business.

Now that he is France’s president, Mr Macron is trying to re-vive the grandest idea of all in European business: creating conti-nental champions capable of taking on American and Chinesefirms. It is an ambitious mission that will prove highly frustrating.

Mr Macron laid out his vision at the Sorbonne in Paris in Sep-tember, promising a “re-foundation of Europe”, and that hewould bolster its “industrial and monetary power”. The sameday Alstom, a French transport firm, agreed to merge with thetransport arm of Siemens, a German rival. The combination willhave $18bn of sales, placing it second only to CRRC, a Chinesestate-run monster that sells locomotives around the world. JoeKaeser, Siemens’s boss, spoke of putting “the European idea towork” to create a “European champion”.

That label sounds corny but it used to make bosses tingle withexcitement. A wave of intra-European deals followed the cre-ation of the single market and the euro, accounting for 31% of glo-bal M&A activity between 2000 and 2005, according to Dealogic,a data provider. Some were orchestrated by governments—for ex-ample, the creation of EADS, a plane manufacturer (now Airbus)in 2000. Others were backed by investors—such as Vodafone’stakeover of Mannesmann in the same year, which created a mo-bile-phone giant. But the common thread was that having a hugehome market would give European firms the kind of economiesofscale enjoyed by American companies.

Europe’s longcrisis, which began when European bond yieldsspiked in 2010 (and which, hopefully, ended with Mr Macron’selection in May) paralysed this urge to consolidate. Pan-Europeandeals were just 12% of global M&A last year. Worried about theeuro’s stability and enticed by faster growth in emerging econo-mies, European companies have invested more elsewhere.Meanwhile, American and Chinese firmshave used dealsand or-ganic expansion to get even bigger in their domestic markets.

It is bad enough that Europe does not have any technologygiants on the scale of an Amazon or Alibaba, but these trendsmean that even the region’s bog-standard old-economy firms arerelatively small. The median listed European company is 78% asbig as the median American one (these figures are for the top 500firms in each geographical area, and use a blend of profits, bookvalue and market value to measure size, usingBloomberg data). Ifyou exclude Switzerland and Britain, which have lots of largecompanies and which either are not, or soon will not be, in theEuropean Union (EU), the median EU firm is just 48% ofthe size ofthe median American one. Chinese firms have almost caught up:the median company there is 94% as big as the median EU firmand within a couple more years will probably be larger.

Europe has a long tail of journeymen in some industries, in-cluding banking, media, defence and carmaking. For example,Peugeot produces one third of the cars that General Motors does.ProSiebenSat, a German broadcaster, hassales thatare less than atenth of Disney’s. Ericsson is less than half the size of Huawei, aChinese telecoms-equipment firm. Size is not everything. But alack of scale, and the costs of operating in lots of midsized coun-tries, may help explain corporate Europe’s weak return on equity,which at 9% lags behind America (13%) and China (10%).

With his aim to foster greater scale, Mr Macron should bepushingon an open door. Profitsare rising, makingmanagers bol-der, and Chinese and American predators are sniffing around,giving a sense of urgency. And over time the EU may try to deep-en the single market by harmonising corporate-tax rates andstrengthening itsbankingunion. All thiswill make pan-Europeandeals more likely.

Yet there are two stumbling-blocks. First, prickly national sen-sitivities. The Alstom-Siemens combination will have a Germancontrolling shareholder but its headquarters in France. Fingerscrossed that this fudge works. Elsewhere, European unity ap-pears scarce. A proposed $34bn takeover of Abertis, a Spanishcompany, by Atlantia, an Italian firm, would create the world’slargest toll-road operator. But a blocking counter-bid has beenmade by ACS, a Spanish firm, with the tacit backing of Spain’sgovernment. Meanwhile, Vincent Bolloré, a billionaire who con-trols Vivendi, a French media firm, wants to create a continentalpowerhouse and has tried to make inroads into Italy, buyingstakes in Telecom Italia and Mediaset, a media business con-trolled by Silvio Berlusconi, a former prime minister. But Mr Bol-loré has run into a wall of regulatory and political hostility.

Pleasing the people, and shareholders tooThe other stumbling-block is winning over shareholders. Pan-European deals are risky. Of the 100 largest bids, 30 have col-lapsed, often due to political rows. To justify paying a takeoverpremium, firms need to cut costs, but this can be hard for politicalreasons. The union of Finland’s Nokia and France’s Alcatel, twotelecoms-equipment firms, backed by Mr Macron when he wasfinance minister in 2015, has since incurred his wrath by trying tocut jobs in France. Lax antitrust enforcement has let Americanfirms form oligopolies and pass the gains to shareholders, notconsumers. But European regulators are, rightly, tougher, so dealsthat create windfalls for investors are harder to get approved.

Mr Macron’s instinct is correct. European firms have lost theirseat at the top table ofglobal business. But if the aspiration ofcre-atinga new cohort ofEuropean corporate champions is desirablein theory, it is daunting in practice. 7

Making Europe great again

Remembercorporate Europe? It wants to be noticed again

Schumpeter

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The Economist November 4th 2017 71

For daily analysis and debate on economics, visit

Economist.com/economics

1

AFEW years ago, the news about theeuro-zone economy was uniformly

bad to the point of tedium. These days, it isthe humdrum diet of benign data thatprompts a yawn. Figures this week showthat GDP rose by 0.6% in the three monthsto the end of September (an annualisedrate of 2.4%). The European Commission’seconomic-sentiment index rose to its high-est level in almost 17 years. Yet when theEuropean Central Bank’s governing coun-cil gathered on October 26th, it decided tokeep interest rates unchanged, at close tozero, and to extend its bond-buying pro-gramme (known as quantitative easing, orQE) for a further nine months.

The central bank said it would slowdown the pace of bond purchases eachmonth, to €30bn ($35bn) from January. ButMario Draghi, the bank’s boss, declined toset an end-date for QE. A hefty dose ofeasymoney will be necessary, he argued, untilinflation durably converges on the ECB’starget of just below 2%. It shows few signsof doing so, despite the economy’sstrength. Underlying, or core, inflation,which excludes the volatile prices of foodand energy, fell from 1.1% to 0.9% in Octo-ber, according to data published a few daysafter the ECB meeting. The euro zone’s mis-eries of 2010-12 were unique. But in its pre-sent, happier state ofvigorous activity, lowinflation and easy monetary policy, it islike many other big economies (see chart).

inflation. It has three elements: the price ofimports; the public’s expectations; and ca-pacity pressures (or “slack”) in the domes-tic economy. Start with imported inflation,which isdetermined bythe balance of sup-ply and demand in globally traded goods,such ascommodities, aswell as shifts in ex-change rates. Commodity prices havepicked up smartly from their nadir in early2016. The oil price, which fell below $30 abarrel then, has risen above $60.

This has put upward pressure on head-line inflation: in the euro zone it is 1.4%, halfa percentage point higher than the corerate. Where inflation is noticeably high, it isgenerally in countries, such as Argentina

After a decade of interest rates at recordlows, those central banks that are inclinedto tighten policynaturallyattractattention.The Bank of England’s monetary-policycommittee raised its benchmark interestrate from 0.25% to 0.5% on November 2nd,the first increase since 2007. On the sameday, the Czech National Bank raised inter-est rates for the second time this year. TheFederal Reserve kept interest rates un-changed this week, having raised them inMarch and June, but a further increase isexpected in December.

In Turkey, perhaps the only big econ-omy that is obviously overheating, the cen-tral bank—which has been browbeaten bythe president, Recep Tayyip Erdogan, whobelieves high interest rates cause infla-tion—opted on October 26th to keep inter-est rateson hold. Yet in mostbiggish econo-mies, underlying inflation is below target(see chart) and monetary policy is being re-laxed. Brazil’s central bankcut interest rateson October 25th from 8.25% to 7.5%. Twodays later, Russia’s central bank trimmedits main interest rate, to 8.25%. This weekthe Bank of Japan voted to keep rates un-changed and to continue buying assets at apace of around ¥80trn ($700bn) a year.These economies are gathering strength. Itis a puzzle that, in such circumstances, glo-bal inflation is stubbornly low.

To figure out why, consider the modelthat modern central banks use to explain

Global inflation

Gone missing

The world economyis gathering momentum—but where’s the inflation?

Finance and economicsAlso in this section

72 Buttonwood: Bond yields

73 Anti-money-laundering technology

73 The Federal Reserve

74 Household debt in Asia

76 Plastic, not that big in Japan

76 The GATT’s 70th birthday

78 Free exchange: Catalan questions

Core values

Sources: Haver Analytics; central banks; Reuters

*Excluding food & energy†PCE index

Consumer prices, October 2017 or latest available% increase on a year earlier

0 2 4 6 8 1010.7

3.3

27.7

5.0

12.4

5.3

2.7

5.0

4.3

4.0

5.5

6.2

4.2

6.2

8.9

2.8

Turkey

Mexico

South Africa

India

Brazil

Indonesia

Czech Rep.

Russia

Britain

China

Australia

Sweden

United States†

Canada

Euro area

Japan

Target rangeTarget

Unemploymentrate, %

Core rate*

72 Finance and economics The Economist November 4th 2017

2

FOR the umpteenth time in the past de-cade, a great turning-point has been

declared in the government-bond market.Bond yields have risen across the world,including in China, where the yield onthe ten-year bond has come close to 4%for the first time since 2014. The ten-yearTreasury-bond yield, the most importantbenchmark, has risen from 2.05% in earlySeptember to 2.37%, though that is still be-low its level ofearly March (see chart).

Investors have been expecting bondyields to rise for a while. A survey byJPMorgan Chase found that a record 70%of its clients with speculative accountshad “short” positions in Treasurybonds—ie, betting that prices would falland that yields would rise. Meanwhile apoll of global fund managers by Bank ofAmerica Merrill Lynch (BAML) in Octoberfound that a net 85% thought bonds over-valued. In addition, 82% of the managersexpected short-term interest rates to riseover the next 12 months—something thattends to push bond yields higher.

In part, this reflects greater optimismabout the global economy. For the firsttime since 2014, America has managedtwo consecutive quarters of annualisedgrowth of 3% or more. Forecasts for Euro-pean growth have also been revised high-er. Commodity prices, including oil, havebeen rising since June, which may be asign of improving demand.

The BAML survey found that, for thefirst time in six years, more managers be-lieve in a “Goldilocks” economy (inwhich growth is strong and inflation islow) than in a “secular stagnation” out-look (in which both growth and inflationare below trend). If those views turn outto be correct, then it might be expectedthat bond yields would move a bit closerto more “normal” levels. Until the crisis of2008, the ten-year Treasury-bond yield

had been above 5% for most of the previ-ous four decades.

Investors also expect that, eventually,some kind offiscal stimulus will be passedin Washington, DC. Of the fund managerspolled by BAML, 61% expect tax cuts in thefirst quarter of next year. Such a packagemay increase the deficit and induce moreeconomic growth; both factors wouldpush bond yields higher.

Another factor behind the upturn inyields is a shift in central-bank policy. TheFederal Reserve has started to wind downits balance-sheet, by not reinvesting theproceeds when bonds mature. The Euro-pean Central Bank will soon cut theamount of bonds it buys every month byhalf, to €30bn ($35bn). The private sectorwill have to absorb the bonds that centralbanks are no longer purchasing.

Whether this will trigger the long-prophesied collapse of the bull market inbonds isanothermatter. Globally, there areno signs of a sustained surge in inflation(see previous article). PIMCO, a fund-man-agement group, thinks that global eco-nomic conditions may now be “as good asit gets”. The momentum of growth may al-

ready have reached its peak.Central banks also know that higher

bond yields can act as a brake on eco-nomic growth. In G20 advanced econo-mies, the combined debt of households,governments and the non-financial cor-porate sector has been rising steadily andstands at 260% ofGDP. Every debt is also acreditor’s asset, but higher borrowingcosts can create awkward adjustments; inAmerica, for example, 30-year mortgagerates are around half a percentage pointhigher than they were a year ago. So thepace of tightening will be very slow. Andif the economy shows any sign of wob-bling, central banks will probably relent.

Perhaps the real area of worry shouldbe the corporate-bond market. Low gov-ernment-bond yields have pushed inves-tors in search of a higher income into tak-ing more risk. American mutual fundsnow own 30% of the high-yield bondmarket, up from less than 20% in 2008.The spread (extra interest rate over gov-ernment bonds) on these riskier securi-ties is close to its lowest level since beforethe financial crisis. BlackRock, anotherfund-management group, says there is “amore favourable environment for issuersat the expense of lenders”, especially asthe quality of the covenants protectinglenders has been deteriorating.

With the rate of bond defaults falling,and the global economy doing well, in-vestors probably feel there is little to wor-ry about. But there is a problem: the cor-porate-bond market is less liquid than itwas before 2007, as banks have pulledback from their market-making roles. In-vestors have found it easy to get into themarket in search of higher yields. Whenthe time comes, they will find it muchmore difficult to get out.

Yielding to temptation

Where China leads

Source: Thomson Reuters

Ten-year government-bond yields, %

2014 15 16 170

1

2

3

4

5

United States

China

Buttonwood

The big risks maybe in corporate, not government, bonds

Economist.com/blogs/buttonwood

(where it is 24%) or Egypt (32%), that havewithdrawn costly price subsidies andwhose currencies have fallen sharply invalue, making imported goods dearer. InBritain, rising import prices linked to aweaker pound have added around 0.75percentage points to inflation, which is 3%.

A second influence on inflation is thepublic’s expectations. Businesses will bemore inclined to push up their prices andemployees to bid for fatter pay packets ifthey believe inflation will rise. How theseexpectations are formed is not well under-stood. The measures that are available arebroadly consistent with the central bank’s

inflation target in most rich economies. Ja-pan is something of an outlier. It has strug-gled to meet its 2% inflation target in largepart because firms and employees havebecome conditioned to expect a lower rateof inflation. Japan’s prime minister, ShinzoAbe, recently called for companies to raisewages by 3% in next spring’s wage round tokick-start inflation.

Leave aside the transient effects of im-port prices, and inflation becomes a tug-of-war between expectations and a third biginfluence, the amount of slack in the econ-omy. The unemployment rate, a measureof labour-market slack, is the most-used

gauge. As the economy approaches fullemployment, the scarcity of workersought to put upward pressure on wages,which companies then pass on in higherprices. On some measures, Japan’s labourmarket is as tight as it has been since the1970s. America’s jobless rate, at 4.2%, is thelowest for over 16 years. Inflation has nev-ertheless been surprisingly weak.

In other words, the trade-off betweenunemployment and inflation, known asthe Phillips curve, has become less steep. Apaper last year by Olivier Blanchard, of thePeterson Institute for International Eco-nomics, found that a drop in the unem-1

The Economist November 4th 2017 Finance and economics 73

1

ployment rate in America has less than athird as much power to raise inflation as itdid in the mid-1970s.

The central banks that see a need fortighter monetary policy are worried aboutdiminishingslack. There are tentative signsof stronger pay pressures in Britain andAmerica, and firm evidence of them in theCzech Republic, where wage growth isabove 7%. Even so, with inflation expecta-tions so steady, the flatter Phillips curvesuggests that the cost for central banks inhigher inflation of delaying interest-raterises is rather low. The ECB is quite a wayfrom such considerations. The unemploy-ment rate is falling quickly, but remainshigh, at 8.9%. There is still room for theeuro-zone economy to grow quickly with-out stoking inflation. The dull routine ofgood news is likely to continue. 7

The Federal Reserve

Powell empowered?

YOU could forgive Janet Yellen, thechair of the Federal Reserve, for feel-

ing peeved. With unemployment at just4.2%, and inflation at1.6%, she is close toachieving the Fed’s two goals ofcurbingjoblessness and pinning price rises at 2%.Ms Yellen is a Democrat appointed byBarackObama in 2014. The tenures ofpast three Fed chairs were all extended bypresidents from the other party. Yet as wewent to press, President Donald Trumpwas expected to nominate Jerome Pow-ell, a Republican on the Fed’s board, toreplace Ms Yellen.

Ifpicked, Mr Powell—also an Obamaappointee—would stand out from recentincumbents. He would be the first Fedchairman since William Miller, who leftoffice in 1979, with no formal economicstraining; and, according to the Washing-ton Post, the richest since the 1940s.

Mr Powell, who is 64, is a lawyer-turned-banker. His first role in Washing-ton was at the Treasury during the presi-dency ofGeorge Bush senior. He hadresponsibility for financial institutionsand helped deal with the collapse of theBankofNew England, then the third-largest bankfailure in American history.

On leaving government, Mr Powelljoined the Carlyle Group, a private-equ-ity firm, before starting his own business.From 2010 to 2012 he worked for theBipartisan Policy Centre, a centrist think-tank. There, he made a name by warningRepublicans about their threats not toraise the limit on government borrowing.

At the Fed, Mr Powell has occasionallysided with hawks. But recently, his viewson monetary policy have hewed close toMs Yellen’s. In June he stressed the need

to tighten monetary policy only slowly.He also mounted a robust defence of theFed’s loose monetary policy after thefinancial crisis. Mr Powell has, however,recently suggested that there is someroom to improve the financial regu-lations imposed after the crisis.

Critics of the Fed’s recent monetarypolicy include rivals for the chairman-ship, such as John Taylor, an economist atStanford University. The question iswhether Mr Trump might appoint hawkslike Mr Taylor to other open seats on theFed’s board, ofwhich there are three,including that ofvice-chair. One moreslot would open should Ms Yellen resignfrom the board, as is normal but notrequired for departing chairs. The bal-ance of the committee will give a cleareridea ofhow much a Powell Fed woulddiffer from the Yellen one.

NEW YORK AND WASHINGTON, DC

Change at the top of the Fed

Heir to the chair?

KEEN, no doubt, to stay alive, drug traf-fickers tend to be prompterpayers than

most. For software firms, this is just one ofmany clues that may hint at the launderingof ill-gotten money. Anti-money-launder-ing (AML) software, as it is called, monitorsfinancial transactions and produces lists ofthe people most likely to be transferringthe proceeds ofcrime.

Spending on this software is soaring.Celent, a research company, estimates thatfinancial firms have spent roughly $825mon it so far this year, up from $675m lastyear. Technavio, another research firm,reckons the market is even bigger and willgrow at more than 11% annually in comingyears. This is partly because authorities areincreasingly quick to punish institutionsthat let down their guard. Deutsche Bank,for example, has been hit with fines worthat least $827m this year alone. Govern-ments, eager to appear tough on crime, areurging prosecutors to go after not just insti-tutions, but also their employees.

The number of anti-laundering regula-tions is climbing yearly—by nearly 10% inAmerica, Canada and the EU, and byroughly 15% in Australia, Hong Kong, Ma-laysia and Singapore, says Neil Katkov, aregulatory analyst at Celent. Even the red-tape-slashing administration of PresidentDonald Trump is unlikely to cut regulationin this area.

David Stewart, head of anti-money-launderingsystemsatSAS, a software giantbased in North Carolina, reckons that ef-forts to abide bysuch rulesnowtake from a

half to about 70% of most banks’ entirespending on compliance. A survey thisyear by Duff & Phelps, an advisory group,found that financial firms typically spendabout 4% of revenue on compliance, a fig-ure expected to reach 10% in 2022.

Manyclues that lead software to block atransaction, or to flag it for a human to in-vestigate, are straightforward. Round sumsare more suspect than jagged ones. Spikesin transaction volumes and amounts aresuspicious. So is cash deposited in an ac-count via multiple branches. An area’s cul-ture also matters. Sasi Mudigonda, of Ora-cle, says its software considers transactionslinked to eastern Ukraine riskier than thewest of the country, where Russian influ-ence is weaker. Even age counts—crookswho move money disproportionately

steal the identitiesofold people and youngadults, says Michael Kent, chief executiveofAzimo, a remittances firm.

Software also hunts forclues that some-one on one of hundreds of watch lists hasconcocted a fake identity—the giveawaycould be the opening of an account with apassword or phone number once used bya corrupt official. ComplyAdvantage, afirm based in London, licenses softwarethat generates long lists ofsuspected crimi-nals by sifting through hundreds of mil-lions of articles, including those in TheEconomist, and then determines whichtransactions may benefit one of them.

Moving the proceeds ofbig-ticket crimeconventionally involves disguising themas legitimate trade payments. Softwarefrom a Singaporean firm, AML360, is de-

Anti-money-laundering technology

Washing whiter

Software is patrolling the financialsystem, looking forcrooks

2

74 Finance and economics The Economist November 4th 2017

2 signed to flag instances of this. Daniel Rog-ers, the company’s boss, says it monitors “ajigsaw puzzle” offactors such as ship itiner-aries, the locations of commodity produc-ers and fluctuations in their prices. Thesoftware notices if a firm imports expen-sive stainless steel when a cheaper sourceofthe material is closerathand, say, or ifanimporter’s spending on copper rises as itsprice falls.

The next step for AML software is a bigleap in the amount and types of data itcrunches. LastyearSAS launched Visual In-vestigator, developed at a cost of about$1bn. It links financial transactions withtext and even imagery in reams of socialmedia. This could reveal, for example, thata restaurant’s cash deposits appear toolarge for the amount of online “buzz” thebusiness generates; or that a payment re-cipient skis with a kleptocrat.

With SAS software, rather more thanhalf of flagged transactions lead to the fil-ing of a suspicious-activity report (SAR)with authorities. Monique Melis, head ofregulatory consulting at Duff & Phelps inLondon, argues that, to reduce “false posi-tives” further, regulators should begin sys-tematically to disclose the SARs that lead toa discovery of crime. Software could thenbe bettercalibrated to withstand a growingproblem highlighted by Sophie Lagoua-nelle ofFircoSoft, a Paris developer ofAMLtechnology: savvy launderers are learninghow the software works to slip past it.

Should human analysts fear for theirjobs? Probably not. They will still be need-ed to follow up on many flagged transac-tions. Business has not slowed for BerlinRisk, a German consultancy that discreetlyinvestigates the nature of a person’s char-acter and earnings by talking to as many as20 people who know him. As its seniorpartner, Carsten Giersch, puts it, “You willnever see a robot interviewing sources.”Or is that the next step? 7

ONE of the more persistent beliefsabout the global economy is that

Asians are more frugal than others. Expla-nations have drawn on culture (the self-discipline of Confucianism), history(memories of privation) and public policy(flimsy social safety-nets forcing people tosave). For Lee Kuan Yew, the founding fa-ther of Singapore, and other theorists of“Asian values”, thrift was one of them.Whatever the true reason, data long sup-ported the basic claim that Asian house-holds were indeed careful with their cash.But over the past few years consumersacross the region have done their best toprove that prudence was perhaps just apassing phase.

Household debt in advanced econo-mies has generally declined as a percent-age of GDP since the 2008 global financialcrisis, according to the Bank for Interna-tional Settlements. In a number of Asiancountries, however, ithasbeen going in theopposite direction (see chart). The biggestincrease has been in China, where house-holds have borrowed about $4.5trn overthe past decade. But Chinese householdswere starting from an extremely low base.Relative to income levels, South Korea,Thailand and Malaysia have reachedmuch loftier heights. Over the same per-iod, consumer borrowing has also risen inHong Kong and Singapore.

The increase in debt is, to a certain ex-tent, healthy. An oft-heard criticism ofAsian economies is that, in terms of globalgrowth, they have been punching belowtheir weight. They produce lots of stuff butrely on profligate Westerners to buy it. Therise in debt has, so far at least, helpedchange that dynamic, fuelling more con-sumption. Retail spending in Asia, exclud-ing Japan, has grown by about 10% a yearover the past half-decade. Greater access tocredit has made it easier to buy homes, carsand clothes.

But debt can also be dangerous. A re-cent paper by the IMF observed that, in theshort term, an increase in household bor-rowing props up economic growth andkeeps unemployment down. After awhile, though, these gains are reversed.The IMF study found that a five-percent-age-point increase in the household debt-to-GDP ratio over three years tends to resultin a 1.25-percentage-point decline in realgrowth three years in the future. And an in-crease of a single percentage point inhousehold debt increases the likelihood of

a banking crisis by a similar percentage.In Asia financial fragility isnot the main

worry. Even if households have been in-dulging themselves more freely, most regu-latorshave remained prudent. In South Ko-rea they mandate that mortgages cannotexceed 70% ofa property’svalue. Singapor-ean homebuyers who borrow from banksmust make downpayments of at least20%—and potentiallymuch more if they al-ready have outstanding loans. Asian banksare also reluctant to pursue the kind ofsub-prime lendingthatmade consumerdebt sotoxic in America a decade ago.

The bigger risk in Asia is interest rates,says Frederic Neumann, co-head of Asianeconomic research at HSBC. He notes thatfixed long-term rates are rare in the region.Most consumer loans have shorter dura-tions, so if central banks start to increaserates, debt-servicing costs for householdswill quickly rise. That will eat into incomesand act as a drag on consumption.

It is already possible to detect head-winds. Mortgage payments in China havereached about 4.5% of total annual house-hold income, up from 3.6% in 2015, accord-ing to Ernan Cui of Gavekal Dragonomics,a research firm. That, in turn, is beginningto weigh on consumption. For the govern-ment thisentailsa trade-off. The increase inmortgages has helped reduce a glut of un-sold homes, which posed a graver dangerto the economy than does consumer debt.

There is also an uglier side to the rise inhousehold borrowing. As in other parts ofthe world, unscrupulous lenders prey onthe most vulnerable. In South Korea theshare of low-income households strug-gling under heavy debt burdens has beencreepingup. Choi Pae-kun, an economist atKonkuk University in Seoul, points outthat poorer people may have no choiceother than to borrow to cover living andmedical costs. In China online lendershave been involved in a series of scandals.Some have demanded exorbitant interestrates and, in a number of cases, forced stu-dents to post as collateral naked selfies,with the threat they could be distributed ifdues are not paid. Debt can undermineAsian values in more ways than one. 7

Household debt in Asia

Mutable values

Asian consumers shed theirprudenceand buy on credit

Something borrowed, something new

Source: BIS

Household debt as % of GDP

2000 05 10 15 170

20

40

60

80

100South Korea

Malaysia

Thailand China

Advancedeconomies

76 Finance and economics The Economist November 4th 2017

Trade deals

Jolly good

SUPERLATIVES surrounded the Gen-eral Agreement on Tariffs and Trade

(GATT) when it was signed on October30th 1947. A press release heralded it as“the most far-reaching negotiation[s] everundertaken in the history ofworldtrade.” The Economist grumbled it was“one of the longest and most complicatedpublic documents ever issued—and oneof the hardest to comprehend.” The DailyExpress, a British newspaper, growled:“The big bad bargain is sealed.”

The agreement’s complexity matchedthe tangle ofglobal trade affairs. In thepreceding decades a thicket ofprotection-ism had strangled commerce and slowedrecovery from the Depression of the1930s. The GATT’s length matched itsscope. It included both tariffcuts andpromises to forswear new duties. Cov-ering 23 countries responsible for 70% ofworld trade, it came to embody the rules-based multilateral system.

After 48 years as a provisional ar-

rangement, the GATT has since 1995 beenthe World Trade Organisation (WTO).But, 70 years on, some of the GATT’soriginal challenges still loom large. Thefirst is the trade-offbetween ambitionand practicality. In 1947 American negoti-ators had a grand vision for a biggerInternational Trade Organisation, withmore members and more areas of regu-lation. Eventually that plan collapsedunder the weight of its own ambition.Today, given the challenge ofgettingconsensus among164 signatories, WTOmembers are increasingly turning tonarrower, plurilateral agreements.

A second trade-offis between controland co-operation. Today British Brexi-teers want to “take backcontrol” andPresident Donald Trump thinks pastdeals have not put America first. Whilethe GATT was brewing, John MaynardKeynes, an influential economist,doubted that Britain should spurn theoption ofusing tariffs to control the levelofemployment—though he did acceptthat the benefits ofeveryone forgoingtariffs could outweigh the costs.

Some trials are new. Today, as theWTO gears up for its11th ministerialconference, American leadership isabsent. Instead, the Trump administra-tion is obsessed with promoting exports.Will Clayton, an American negotiator in1947, was similarly preoccupied withgetting a good deal for American produc-ers. He proposed walking away fromtalks with the British after they refused togive up lower tariffs for their dominionsand colonies. But his political mastersstopped him, and compromised. Theysaw the wider benefits of the GATT,including its effect on European recon-struction and America’s geopoliticalalliances. They could see that trade dealsare about much more than tariff lines.

The global system of trade enjoys its 70th birthday

Britain signs up

BIC CAMERA, a Japanese electronics re-tailer, accepts payments in so many

ways that the list nearly obscures the till:credit, debit and pre-paid cards; mobilewallets; ApplePay and Alipay; and, insome stores since April, bitcoin too.

Efforts are under way to wean Japan offgenkin, or cash. Handling notes and coinsis expensive for businesses; many operateon tight margins because a persistent lackof inflation has inhibited price rises. Thegovernment reckons more cashless pay-ments could help the economy, too, en-couraging people, including a growingnumber of tourists, to spend more. (Andhelp it collect more tax.) Entrepreneursthink the data that come with cashlessmethods could promote new business.

Yet cash still dominates. Thank a pre-ponderance ofATMs in ubiquitous konbini(convenience stores), safe cities where peo-ple are happy to carry wads of cash, andwariness about handing over personaldata. Last year cash accounted for 62% ofconsumer transactions by value, accordingto Euromonitor, a market-research firm.That is down from 65% in 2015, but com-pares with just 22% in Britain, 34% in Amer-ica, 10% in South Korea and 50% in China.

Of the other methods, pre-paid cardsare increasingly popular. They covered 12%more transactions by value in 2016 thanthe year before, despite mainly being usedfor payments under ¥3,000 ($26). Retailerssmall and large, such as Rakuten, a giant ofe-commerce, have launched their owncards. Transport companies’ cards arewidely used, too.

Tsuneharu Miyake, head offinancial re-search atMizuho Research Institute, arguesthat this proliferation ofplastic can in largepart be attributed to companies wanting tokeep their customers. Most cards offer bo-nus schemes. But because they cannot beused in every outlet, this trend means theslow shift from cash has not brought theconvenience and lower costs that werehoped for. Ryosuke Izumida, author of abook on the future of banking, says it is a“real hassle” for businesses to have to forkout for hardware for each system or risklosing customers. Consumers may benefitfrom this competition for their custom. Butthere are drawbacks for them, too. Somecomplain that their favoured card is not ac-cepted universally and, says Mr Miyake,the cost of installing multiple devices ispassed on to them.

Meanwhile many businesses still re-

fuse credit cards. That is a problem for tour-ists—and for the 2020 Olympics in Tokyo.In McDonald’s fast-food outlets in Japan,for example, 13 different pre-paid cards areaccepted, but not Visa or MasterCard. (It isplanning to change that this winter.)

The fragmentation of the paymentsmarket may get worse as Japan continuesto move away from cash. Companies out-side the financial sector, such as social-me-dia apps, may launch payment arms, asTencent’s WeChat has done in China. For-eign companies are coming in, too. Someshops accept Alipay, a Chinese e-paymentsystem that can be used by a retailer who

simply downloads an app. Reports suggestit will launch a Japanese version next year.

Banks, fearful of losing out to newcom-ers, are also working on e-payments. Aconsortium (including Mr Miyake’s parentcompany, Mizuho Financial Group) is de-veloping JCoin, a digital currency. It hopesto have the scale needed to squeeze othersout. If the government is to fulfil its aim ofdoublingcashlesspayments in the next de-cade, itmayhave to regulate to curb the useof cash. Back in Bic Camera, that goalseems a long way off, as customers riflethrough their purses and wallets for hard-copy yen. 7

Payments in Japan

A yen for plastic

TOKYO

A slow, awkward shift from cash

78 Finance and economics The Economist November 4th 2017

POPULISM is the weapon not just of the downtrodden. As thecrisis in Catalonia demonstrates, the rich have economic anxi-

etiesoftheirown. Catalonia hasan identitydistinct, in importantways, from that of the rest of Spain. But the recent drive for inde-pendence has been energised by anger over the flow of fiscal re-distribution from rich Catalans to theircountrymen: people seen,in parts of the restless north-east, as thankless and lazy as well asalien. Paradoxically, globalisation has inflamed separatismaround the world by raising the question Catalans now confront:to whom, exactly, do we owe a sense ofsocial responsibility?

Every country or restive region has its own idiosyncratic his-tory. Yet over the long run national borders are surprisingly mal-leable. Some circumstances offer better prospects for the smalland newly independent than others. The smaller the country, themore easily itsgovernmentcan satisfy itspeople’spolitical prefer-ences. A broadly satisfying compromise is easier among 300,000people than 300m. But as Alberto Alesina and Enrico Spolaorenote in their book, “The Size of Nations”, smaller countries alsoface hardships. They sacrifice economies of scale—they need, forexample, to operate their own state agencies, rather than spreadthe expense of government across a larger population. Bordersare bound to add to trading costs, leaving countries with smallerinternal markets at an economic disadvantage. At times of for-eign-policy tension, smaller countries, with correspondinglyconstrained armies and defence budgets, are easier to bully.

So the world is more likely to sprout new countries when it isrelatively peaceful, and when technology and global co-opera-tion reduce international barriers to trade. Although moves to-wards independence in East Timor, Kosovo and South Sudanwere accompanied by appalling bloodshed, it is no coincidencethat over the past half-century the numberofsovereign states hasincreased in tandem with a decline in global violence and an in-crease in trade. For Catalonia’s residents, membership of theKingdom of Spain brings sacrifices, like the need to share deci-sion-making on some matters with millions of other Spaniards.Were Catalonia able to secede from Spain yet keep its existingtrade relationships, leaving would lookquite attractive.

Smaller regions’ motives for seeking independence are not al-ways high-minded. In rich economies, the better-off subsidise

the poor through an array of welfare programmes. That meansricher regions support poorer ones financially. Geographical re-distribution isnotalwaysa source oftension. Residents ofMassa-chusetts rarely moan about the flow of their federal-tax dollars toMississippi. Wealth divisions that coincide with starkcultural dif-ferences, however, can be more contentious. The financial crisisand its aftermath, by swelling the ranks of the unemployed (andthus of those dependent on government help), was ammunitionfor politicians in regions keen to cut ties with their national econ-omies. Catalansbridle at the fiscal dragplaced on them bythe restof Spain, but they are not alone; just last month, Italians in thericher north also voted to demand greater autonomy.

Fearing dismemberment, national governments often use fis-cal decentralisation to reduce separatist pressures. Nationalistsentiment lies along a spectrum, and giving unhappy regionsmore say over their taxing and spending can deflect moderatesfrom a pro-secession stance. Decentralisation has been a part ofBritain’s (so farsuccessful) strategyformanagingScottish separat-ism, for example.

Delegating greater authority to regions, however, brings risks.As the capacityofregional governmentsgrows, citizens mightbe-come more confident in their prospects as truly independentcountries. So governments will sometimes instead tighten thescrewson the disgruntled region in order to limit its ability to gov-ern itself. Madrid has used such tactics at times, most recently in2010, when Spain’s right-leaning Popular Party succeeded in roll-ing back rights previously granted to Catalonia. Similarly, the EUhas said that seceding regions will have to reapply for member-ship—implying a damaging period ofeconomic impairment.

Decentralisation is not a costless concession by the nationalgovernment. In the short run, it clearly exacerbates inequalitywithin the affected country, since fewer resources flow to poorerpeople and places. Some economists, like Jason Sorens of Dart-mouth College, argue that, over longer periods, by encouragingregional competition for mobile people and capital, decentralisa-tion leads to better economic performance. But if rich places tendto stay rich, because productive firms and people benefit fromproximity to other such firms and people, then decentralisationcan create lasting hardship for poorer places. Rich regions cansupport high-quality public goods at low cost because a larger taxbase can be tapped to manage fewer of the social ills associatedwith poverty. In poorer ones the reverse is true, as more health,education and otherneedsmustbe met from a smaller tax base. Itis just that the alternative—the abrupt, possibly extra-legal seces-sion of the unhappy region—often looks worse.

Closerand closerFor liberals, it ishard to knowhowto viewseparatism. Democrat-ic self-determination seems a laudable principle. The threat ofse-cession may even act as a check on the temptation among apoorer majority to saddle a richer minority with economicallystifling levels of taxation. But cultural identity is a fuzzy, mutablething. When it becomes an excuse for dodging responsibilitieswhile enjoying the benefits of open markets, it endangers bothsocial harmony and openness. The geographical scope of redis-tribution will inevitably be limited by popular ideas about whotrulybelongswithin the national fold. But it isbetter foreveryoneif that circle expands over time, rather than shrinks. 7

Who is my neighbour?

When disputes overredistribution fuel separatism, thorny issues arise

Free exchange

Economist.com/blogs/freeexchange

The Economist November 4th 2017 79

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Mercury Venus

Asteroid dips belowthe plane of Earth’s orbit

Sep 9th 2017Closest approach to the sun

Oct 14th 2017Closest approach to Earth

Sep 9th 2017Closest approach to the Sun

(Mars)

Sun

Path of the interstellarobject A/2017 U1

Source: NASA/JPL-Caltech

Earth

AEONS ago, perhaps long before Earth it-self existed, a hunk of rock circling a

star somewhere in the Milky Way wasthrown out of its orbit so violently that itwas ejected from its natal system. Thus be-gan a journey that would, in time, take itwithin an astronomical hair’s breadth ofhumanity’s home planet. On October 19ththis visitor was spotted by Rob Weryk ofthe University of Hawaii in pictures pro-duced by Pan-STARRS 1, a telescope on Ha-leakala. It thus became the first interstellarinterloper into Earth’s solar system to bespied by astronomers.

Its origin is clear from its speed. Whenspotted, it was travelling at 25.5km per sec-ond. That is too fast for it to have a closed,elliptical orbit around the Sun. Nor couldits velocity have been the result of an en-counter with a planet giving it an extragravitational kick, for it arrived from wellabove the ecliptic plane, close to which allthe Sun’s planets orbit. Dr Weryk’s object,now named A/2017 U1 (the “A” stands forasteroid), thus almost certainly arrivedfrom interstellar space.

Observations from other telescopeshave confirmed A/2017 U1’s extrasolar ori-gins. After swinging around the Sun, as thediagram shows, it passed about 25m kmbelow Earth on October 14th, beforespeeding backabove the ecliptic plane. It isnow heading out of the solar system to-wards the constellation of Pegasus, at aspeed of44km per second.

been boiled offby previous stellar encoun-ters. Or it could be that the object actuallywas dry to begin with—perhaps once orbit-ing itsparent star in an equivalentof the so-lar system’s asteroid belt and then havingbeen ejected by an encounter with a Jupi-ter-like planet.

Another puzzle is why nothing likeA/2017 U1 has been seen before. Theoriesof planet formation suggest such objectsshould be a reasonably common sight. Per-haps the theories are wrong. Or it could bethat these interstellar visitors have beenoverlooked in the past, and that there willbe a spate ofsuch sightings in future.

The proof that interstellar wandererslike A/2017 U1 really do exist also toucheson the question of how life got going onEarth in the first place. Though most re-searchers think it evolved in situ from non-living chemicals, a few favour the idea thatthis evolution happened elsewhere andthat living things, in the form of bacteria,were carried to Earth fully formed, insideobjects of this sort.

Whether life could survive such a jour-ney ismoot. Outerspace hasa temperatureclose to absolute zero, is full of harmful ra-diation and is of course a vacuum. Butsome forms of life are remarkably resilient,even to these sorts of extremity. Experi-ments that may shed some light on thematter are being planned as part of effortsto send unmanned, miniature spaceprobes to stars close to the solar system(see next article).

As to the rock itself, it surely deserves amore memorable name than the one itsports at the moment. And a quick look atthe list of existing asteroid names instantlysuggests one. Perhaps in expectation of adiscovery like this, the International Astro-nomical Union, which approves suchnames officially, has not yet called an aster-oid “Rama”. How about it, chaps? 7

Sci-fi buffs may find this tale familiar.One of the great works of20th-century sci-ence fiction, “Rendezvous with Rama”, byArthur C. Clarke, starts similarly. Rama, asthe object in the novel is dubbed, turns outto be an uncrewed alien spacecraft, 54kmlong. It, too, arrives from the void, loopsaround the Sun, and vanishes into the dis-tance again. Sadly, A/2017 U1 is no space-craft. It is a rock about 400 metres across.But it still has an interesting story to tell.

Hello and goodbyeModelsofplanet formation suggest that in-terstellar objects such as A/2017 U1 are like-ly to be icy rocks known as comets, formedon the periphery of distant solar systems,rather than dry rocks, known as asteroids,dislodged from such systems’ interiors,which are places where any comet-like vo-latiles will have been driven offby the heatof their parent stars. Indeed, A/2017 U1wasfirst classified as a comet. But the absenceof a tail of gas and dust, produced whencomets fly close to the Sun, and analysis byAlan Fitzsimmons of Queen’s Universityin Belfast of sunlight reflected from its sur-face, suggest that surface is mostly rock.

One explanation is that over many mil-lennia cosmic rays have transformed theicy, volatile chemicals that would be ex-pected to stream off a comet into more sta-ble compounds. Another is that the Sun isnot the first star A/2017 U1 has chancedupon, and that the volatile materials have

Interstellar travel (I)

Rendezvous with Rama

The first visitorfrom anothersolarsystem has just been spotted

Science and technologyAlso in this section

80 The first interstellar astronauts?

80 A new chamber in the Great Pyramid

81 Mammoth behaviour

82 Robot military helicopters

80 Science and technology The Economist November 4th 2017

1

SPACE is cold. So, when launching dogsfor early space missions, Soviet rocket

scientists chose strays like Laika that hadsurvived on the streets during Moscow’sfreezing winter. Today, in contrast, some re-searchers working on an ambitious effortto dispatch craft to Alpha Centauri, thenearest solar system to Earth’s, see the chillof space not as a hindrance to sending lifefrom one such system to another, but rath-er as a way to do just that.

Alpha Centauri is an attractive target. Itis a cluster of three stars and at least oneplanet that is only about four light-yearsaway. With money from NASA, America’sspace agency, and others, the Experimen-tal Cosmology Group at the University ofCalifornia, Santa Barbara, is designing asystem, called Project Starlight, that pro-poses to use a powerful laser beam to pushfleets of lightweight spacecraft, each thesize ofa DVD, to a fifth of the speed of light.

Even at that blistering velocity, though,a journey to Alpha Centauri would lastmore than 20 years. And, with a maximumweight of no more than a small coin, thesestarchips, as they have been dubbed, couldnot carry enough food, oxygen and waste-removal apparatus to keep even minus-cule creatures alive that long. Unless, thatis, those creatures could travel in suspend-ed animation, frozen by the chill of space.

This looks possible. A microscopicnematode worm, Caenorhabditis elegans,which is much studied and well under-stood by biologists, can be frozen for yearsand yet, within minutes of thawing in adrop of warm water, begin to squirm, eatand reproduce as ifno time had passed.

If people are going to send spacecraft tothe nearest stars, then Philip Lubin, who isin charge of Project Starlight, would likesome living creatures to go along for theride, Laika-like, to see what happens tothem. Dr Lubin’s team has begun design-ing miniature chambers in which the fro-zen worms could travel, be revived withheat from plutonium, a starchip’s source ofpower, and be monitored with tiny cam-eras and other sensors, data from whichwould be beamed back to Earth. Joel Roth-man, who is in charge of this part of theproject, which is called Terrestrial Biomesin Space, points out the advantages forsuch work that C. elegans possesses.

For a start, the worms are hardy. Someof the specimens in Dr Rothman’s labora-tory have been in suspended animation at-70°C for 33 years. Others are descendants

of animals that orbited Earth as part of Co-lumbia’s last, fatal, mission, in 2003.Though this space shuttle’s disintegrationon re-entry killed its human crew, the nem-atodes survived.

On top of this, for a creature composedof fewer than 1,000 cells, C. elegans canmanifest quite complex behaviour. Indi-viduals will, for example, wriggle towardgood smells and away from unpleasantones. They can, like rats and pigeons, betrained to turn left (or right) in a maze ifthatis the path that leads routinely to food. Andsuch learned behaviours continue evenafteran animal has been in suspended ani-mation for decades.

As a backup to C. elegans Dr Rothman’slaboratory is also studying another groupof potential starchip travellers—water-borne micro-animals called tardigrades(pictured) that, when cold and dehydrated,can withstand suspended animation for atleast a century and perhaps millennia.

These “water bears”, as they are alsoknown, resist radiation as well as tempera-tures and pressures, low and high, thatwould kill nearly all other animals.

The Terrestrial Biomes in Space teamthus hopes, if starchips ever do fly, to learnhow years of travel through cosmic coldand radiation, and acceleration to a signifi-cant fraction ofthe speed oflight, affect life.Once awoken near Alpha Centauri, willthe creatures recall behaviour learned onEarth? Will they reproduce, hatch, growand die differently from their Earth-boundcounterparts? The answers may help re-veal what might happen to bigger crea-tures, such as humans, on long star treks.

Some worry about these aims. Theyfear earthly organisms might contaminatealien worlds. Catherine Conley, in particu-lar, is critical of the idea of putting them onstarchips, lest they damage another realm.Dr Conley is the head of NASA’s PlanetaryProtection Office. In light of her concerns,and those of others, NASA’s bounty doesnot extend to paying for the Terrestrial Bi-omes in Space side ofProject Starlight.

In truth, animals are unlikely to con-taminate anything. They have to eat, andunless their destination is furnished withliving creatures made of molecules moreor less identical to those of life on Earth,they will starve. Moreover, if a starchip didencounter a planet, then its near-luminalimpact velocity would create an explosionwith a yield of about a kilotonne, blastingit into plasma in nanoseconds.

Dr Conley’s fears, however, are not un-warranted in the case of creatures that donot need to eat other living things—bacte-ria that can photosynthesise or extract en-ergy from minerals, for example. Some, in-deed, think that life itself may spreadaround the universe in this way, on rocksthat travel from one star system to another.Until recently, there has been no sign ofsuch rocks. But (see previous story) one hasjust entered the solar system. 7

Interstellar travel (II)

Life in the fast lane

SANTA BARBARA

The first voyager to anotherstarmay bea nematode ora tardigrade

An ambassador to aliens?

ANCIENT Egypt has held the world inthrall for so long that some of those

once enthralled are now ancient historythemselves. Well-to-do Romans of the ear-ly Empire, for instance, would tour theplace to look at antiquities older to themthan the Colosseum is to a tourist today.Yet Egypt keeps secrets still. Its royal tombs,both those underground and the skyward-reaching pyramids, are rife with stories of

hidden chambers. And, in the most fam-ous tomb of all, the Great Pyramid of Giza,one such has just been shown to be real.

It was discovered by Kunihiro Morish-ima ofNagoya University, in Japan, and hiscolleagues. They searched not by the time-honoured archaeological techniques ofdigging with trowels and knocking downwalls with hammers, but by muon tomog-raphy—an esoteric way of looking inside

Egyptology

Pyramid selling

Anew chamberhas been detected in the Great Pyramid ofGiza

The Economist November 4th 2017 Science and technology 81

2 things using the fallout from cosmic raysthat have hit Earth’s atmosphere. Muonsare heavy kin to electrons. They are able topenetrate solid matter to some degree, butare eventually absorbed by it. By measur-ing the absorption rate ofmuons travellingin different directions through a large ob-ject, such as a pyramid, it is possible toworkout if there is an empty space within.By suitable triangulation, it is then possibleto work out where that empty space is.And this, as they describe in a paper in Na-ture, is what Dr Morishima and his col-leagues have done for the Great Pyramid.

The pyramid itself, the last-standing ofthe Seven Wonders of the Ancient World,was built around 2560BC by Khufu, a pha-raoh betterknown in the WestbyhisHelle-nised name, Cheops. Several of its internalchambers, includingthe Queen’schamber,the King’s chamber and the Grand Gallery,were robbed in antiquity, and excavatedmore systematically in the 19th and 20thcenturies by various archaeologists. Butthere has always been a suspicion that, insuch a huge pile of stone, more chambersexist—perhaps unplundered.

To look for such chambers Dr Morish-ima and his colleagues deployed threesorts of muon detector in various places inand around the pyramid. One type werenuclear emulsion films. These are photo-graphic films which capture the tracks ofmuons passing through them. The secondwere scintillator hodoscopes. These aremade of material that gives off light as amuon passes—again allowing its path to befollowed. The third type of instrument, micropattern gaseous detectors, follow thepassage ofmuons from the trails of ionisedgas they leave behind.

Combining the results of these ap-proaches revealed a void inside the pyra-mid some 30 metres long, with about thesame volume (800 cubic metres or so) asthe Grand Gallery. Its centre is 40-50 me-tres north of the Queen’s chamber. Muontomography is a low-resolution technique,so the exact shape of this void—or evenwhether it is actually several smaller voidsin proximity to one another—remains to bedetermined. But it is clearly a large space.

How to examine it in more detail alsoremains to be determined. Drilling intosuch an important monument to get at thenewly discovered void is out of the ques-tion. Camera probes inserted into shaftswithin the pyramid that are unsafe for hu-man entry have found things that may ormay not be unopened doors, but nonewould debouch directly into the newlydiscovered space. Muon tomography isnot, at the moment, sensitive enough tosee such shafts, so unknown ones wouldnot have shown up on DrMorishima’s sur-vey. Presumably there is, somewhere in thepyramid, a corridor of some sort that leadsto the newvoid. But that is still on the listofunrevealed Ancient Egyptian secrets. 7

ELEPHANTS live in social groups ofup toa dozen, led by a matriarch. At least,

they do if they are not mature males. Butonce a male becomes sexually potent, heleaves his native band and sets up shop byhimself. The only males present in thesegroups are therefore juveniles. This ar-rangement is common to all living speciesof elephant (of which there are either twoor three, depending on which taxonomistyou ask). But elephant biologists wouldlike to know if it was also true of extinct el-ephant species. And for one of those, themammoth, this week sees the publicationofdata suggesting that it was.

One advantage elephants gain from liv-ing together is that the groups are reposi-tories of information that gets handeddown the generations—for example, whatparts ofa home range are best avoided, be-cause they are dangerous. Males may nothave time to learn of all these hazards (forelephants may range over tens of thou-sands of square kilometres) before theystart living alone. It is no surprise, there-fore, that males are much more likely thanfemales to fall victim to natural traps, suchasboiling-hot springsand sinkholes. Ifthatwere also true of mammoths, it would beevidence that they had a similar social sys-tem to that of modern elephants. PatriciaPecnerova and Love Dalen of the Museumof Natural History in Stockholm, Sweden,therefore decided to investigate the matter.

They have published their results in Cur-rent Biology.

Ms Pecnerova and Dr Dalen knew frompast work that some of the best-preservedmammoths in the world’s fossil collec-tions were thought to have died in mud-flows or fallen into pools where theydrowned. Moreover, when the skeletonsof these beasts were studied, their mor-phology suggested that almost all of themwere male. Paired with studiesoffossilisedfootprints leftbehind bymammothswhenthey walked over soft ground, this evi-dence suggested that female mammothsdid, indeed, travel in groups with theiryoung, while adult males were solitary.But, though suggestive, these studies werenot large enough to be compelling. Thetwo researchers therefore sought to collectfurther evidence.

They worked with a team of colleaguesto examine the remains of as many mam-mothsas theycould get theirhandson. Thespecimens they looked at came from riverbasins, coastlines and lake shores, wherethey had been redeposited after beingeroded from frozen sediments and thenwashed downstream. Though not pristine,these fossils were numerous. In total, theteam obtained the remains of98 animals.

Rather than guess from the bones whatsex their owners had been, Ms Pecnerovaand Dr Dalen turned to DNA analysis. Thisshowed 66 specimens to be male and 29 tobe female (three were unsexable). Thatclearly suggests a preservation bias in thefossil record—and, since animals that getburied in hot springs, marshes, crevassesand sinkholes are much more likely to bepreserved for posterity than those that diein the open air, the data confirm the infer-ence drawn from the well-preserved speci-mens, that male mammoths walked alone,and suffered as a result. 7

Palaeontology

Mother knowsbest

Mammoth society seems to have beenlike that ofmodern elephants

All for one and one for all

82 Science and technology The Economist November 4th 2017

IN THE future, the skies of cities may be-long to aerial drones. These are spider-

like devices with four or more propellers(thus often known as quadcopters, hexa-copters, octocopters and so on) that pro-vide both lift and thrust. The hope is thatautonomous, self-guided versions of thesewill deliver anything from pizzas to pas-sengers from door to door without beingheld up by terrestrial traffic jams.

Delivering goods, and particularly peo-ple, to and from a battlefield is, though, abit different. Aircraft have to be hardenedagainst enemy action, and also need thecapacity to transport large payloads. A fly-ing spider is unlikely to cut the mustard. In-stead, Lockheed Martin, the maker of oneof the world’s best-known military heli-copters, the Black Hawk, is working on adrone with those specifications—madefrom a BlackHawkhelicopter.

Turningexistinghelicopters into dronesis not a new idea. Northrop Grumman’sRQ-8 Fire Scout, used for reconnaissance inAfghanistan by America’s navy, and nowbeing developed for mine hunting andfighting off swarms of small boats, is amodification of the Schweizer 330SP light-utility helicopter. The Kaman K-MAX, aheavy-lifting drone which the country’smarine corps tested in Afghanistan for de-livering cargo, is a modified version of theKaman K-1200. A civilian version is nowavailable, for firefighting. And since 2004Boeing has been flying an unmanned de-monstrator version of its H-6 Little Bird, amilitary-reconnaissance helicopter.

All these aircraft, however, are con-trolled by ground-based pilots. Lockheed’sintention is to build an autonomous craft—one that can sense and avoid obstacles andidentify safe landing sites without humanassistance. The project, sponsored byDARPA, America’s main military-researchagency, is known as Matrix. So far, Matrixhas been used only as a co-pilot. But, if allgoes well, the first helicopter able, in the-ory, to fly by itself will take off early nextyear. Though it will not be put to such a testimmediately, the intention is that Matrixwill eventually take over everything.

Matrix includes several sorts of sensor,so the helicopter can see for itself. It haswhat Lockheed describes as a supercom-puter to interpret input from these sensorsand to make decisions based on that input.It also has servo-controlled devices whichoperate the machine’s flight controls.

The main sensor is a form of LIDAR, the

laser equivalent of radar. LIDAR is part ofthe equipment of driverless cars, but theMatrix version is more powerful. It can de-tect objects hundreds ofmetres away. Also,as Chris Van Buiten, vice-president of Si-korsky Innovations, the part of Lockheedrunning the project, observes, a helicoptermust deal with three dimensions, not two,and is likely to be travelling faster than acar. It may, for instance, be flying at over250kph at low level in what he terms “ob-stacle-rich terrain”, with trees, power linesand buildings, as well as other aircraft toavoid—not to mention enemy fire.

BlackHawk upMrVan Buiten is cagey about the other sen-sors Matrix uses, but says they include va-rious cameras and conventional radars.Presumably, the system will also have dig-itised terrain maps that will both assistnavigation and permit it to spot changes ingeographical features that may be the re-sult of enemy activities. As to the flight-controlling servos, these are built into theaircraft itself. Matrix is not like PIBOT, a hu-manoid robotic flight-control system beingdesigned by engineers in South Korea,which sits in an unmodified pilot’s seatand manipulates unmodified controls.

The sensors’ rapid reactions—millisec-onds rather than the two seconds or so ahuman pilot takes to assess and respond toan unexpected hazard—should make theunmanned system safer than such a pilot.It will take time to reach that level, but Ma-trix should, almost from the beginning, beable to take the aircraft over and fly it solo

in case ofan emergency. If the engine wereto fail, for example, it would scan theground belowfor the best landingspot andtouch down there without human assis-tance. It will also be able to detect whetherthe pilot has fallen unconscious and, if so,fly the helicopter safely.

The plan is to expand these sorts of fea-tures, moving steadily from assisting thepilot to flying the aircraft autonomously.And though there are what Mr Van Buitencalls “gnarly technical problems” to beovercome, he says the biggest challenge isbuilding trust. Not only passengers, butalso pilotsand regulatorsneed to have con-fidence in the safety of Matrix before it canbe fully autonomised.

MrVan Buiten citesa precedent for suchtrust-building—a recovery system whichLockheed installed in F-16 fighter jets. If anF-16 pilot passes out during a violentmanoeuvre, this automatically brings theaircraft into a straight and level flight path.That has already prevented several crash-es, shifting pilots’ attitudes from indiffer-ence to “I want that on board my fighter”.

The airframe being used for the firsttests is one of the oldest models of BlackHawk, a UH-60A from 1980. This was cho-sen to demonstrate the ease with which anaircraft can be upgraded. Once the modi-fied aircraft is airborne, it will be a matterof accumulating thousands of hours of re-liable operation while steadily expandingthe range of tasks that the automated con-trols can carry out unaided in increasinglychallenging environments. Then, fromLockheed’s point of view, it will be readyfor testing by the armed forces.

Warfare, however, isnot the only poten-tial market for Matrix. Mr Van Buiten saysthe technology may also see early use ser-vicing offshore oil and gas platforms, per-mitting them to be resupplied in all weath-er conditions, without risking pilots.Fortunately for those who find even quad-copters noisy and irritating, pizza deliveryis not on Lockheed’s menu. 7

Military drones

Back to the unicopter

Why design an unmanned helicopterfrom scratch, when you can adapt an existing,manned one?

Look! No hands...

The Economist November 4th 2017 83

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1

JOSEPH CONRAD was a phenomenon.Born to Polish parents in 1857 in a part ofthe Russian empire that is now Ukraine,

he was christened Jozef Teodor KonradKorzeniowski. French was his second lan-guage, and he did not come to England (orspeaka word ofEnglish) until he was 21. Yetsuch was his eventual mastery of the lan-guage that he has come to be regarded asone of the greatest writers in English.

In 1948 F.R. Leavis, a well-known liter-ary critic at Cambridge University, listedhim in “The Great Tradition” as being upthere with Jane Austen, George Eliot andHenry James. Eight years later Walter Al-len, another critic, wrote that “Nostromo”was arguably “the greatest novel in Englishof this century”. “Heart of Darkness”gained a new audience through “Apoca-lypse Now”, Francis Ford Coppola’s epicwar film of1979.

Yet readers today are often deterred byConrad’s convoluted, prolix style. This is apity. Many of his novels and short storiesrichly reward perseverance. As Maya Jasa-noff, professor of British and imperial his-tory at Harvard University, argues in a newbook that blends history and literary criti-cism, Conrad wrote “at the turn of the 20thcentury” of many of the global forces andperils that afflict the world today.

The novelist was orphaned at11, his par-ents having succumbed to illness after be-ing exiled for revolutionary activity to “the

In “The Dawn Watch” Ms Jasanoff de-scribes her own journeys in search of Con-rad—four weeks on a French cargo shipacross the Indian Ocean and a complicatedtrip to the Democratic Republic of Congo.She skilfully integrates details of Conrad’slife and accounts ofhis fourgreatest works,linking the challenges and forces that liebehind and within the novels to those ofthe 21st century.

Ifnot as cosmopolitan as today, Londonin the 1890s contained 50,000 continentalEuropeans—“more than all the populationof Krakow”. (Conrad might be curious toknow that Poles are now the largest for-eign-born group in Britain.) Russian revo-lutionaries and militant Irish nationalistsinspired “The Secret Agent”, set in a grimy,Dickensian London, an ironic treatment ofplotting and terrorism and a bomb thatgoes off at the wrong moment, killing aninnocent simpleton. Then, as now, thethreats of anarchism and terrorism fuelledanti-immigrant feeling. As Ms Jasanoffwrites: “When you think a foreigner mighttake your job, you protest. When you thinka foreigner might kill you, you panic.”

If “The Secret Agent” is told in an easilyreadable manner, “Lord Jim”, which hadcome out seven years earlier, is altogethermore exotic and demanding. Captain Mar-low, Conrad’s recurrent narrator, describeshow in a moment of confusion a “power-fully built” young Englishman abandons aship loaded with pilgrims that appears tobe sinking. Conscience-stricken andhaunted, Jim repeatedly tries to make anew start, but just when he appears to beprospering he is destroyed. This meander-

gates of Siberia”. At 16 he ran away to sea.For nearly 20 years he worked as an ordin-ary seaman from Marseille where, suffer-ing from debt and despair, he appears tohave attempted suicide. Later he became afully qualified British master mariner, andtravelled the world, particularly the archi-pelagoes and peninsulas of South-EastAsia, where many of his tales are set. Con-rad, Ms Jasanoff writes, “belonged to thelast generation of seafarers who workedprimarily on sailing ships”, which hecalled “the aristocracy”. In his writings he“transformed the British sailing ship into agold standard for moral conduct”.

Sailing to Australia as first mate on theTorrens, he befriended John Galsworthy, ayoung lawyer who went on to write “TheForsyte Saga”, which eventually won hima Nobel prize. Then, in 1894, with no com-mand in view, Conrad abandoned the seaand published his first novel, “Almayer’sFolly”. The journey from native-born Poleto sailor to writer was complete. Two yearslater, after a short, awkward courtship, hemarried the seemingly unsuitable JessieGeorge, settled contentedly in Kent, fathered two sonsand dedicated the rest ofhis life to writing.

Literary biography

Restless soul

The first novelist ofglobalisation

Books and artsAlso in this section

84 Vladimir Putin’s Russia

85 Javier Cercas’s Catalonia

85 Living with gods

The Dawn Watch: Joseph Conrad in aGlobal World. By Maya Jasanoff. PenguinPress; 400 pages; $30. William Collins; £25

Correction: Following our review of Ian Black’s book,“Enemies and Neighbours” (“1917 and all that”, October28th), the author informs us that the MP who proposedtearing down the Ottoman walls of Jerusalem was notShimon Peres but David Ben-Gurion.

86 Johnson: We was and it ain’t

84 Books and arts The Economist November 4th 2017

2 ing narrative, Ms Jasanoffwrites, “spoke ina metaphor [that] imperialists could appre-ciate”, in particular about the moraluprightness of “the right sort” of English-man. It was recognised as having greatoriginality and inspired many youngerwriters, though not everyone was con-vinced. For E.M. Forster, “the secret casketof his genius contained a vapour ratherthan a jewel.” But Ms Jasanoff states that“for Conrad, the vapour was the jewel.”

“Heart ofDarkness”, which came out in1902, two years after “Lord Jim”, arose fromConrad’s briefand sickening experience ofBelgian exploitation of the then BelgianCongo. He was appalled by the treatmentof the Africans and the ivory trade, as exemplified in the novel byKurtz, the agentwho came promising civilisation butturned to vile savagery and eventually expired, uttering the words, “The horror!The horror!”

Conrad expressed similar concerns inthe more substantial “Nostromo” of 1904.For the first time he wrote about an imagi-naryplace, the South American republic ofCostaguana, but it was “a novel aboutevery place he’d been”. It projected all hispolitical cynicism, his nostalgia for a pre-technological age and his fears for a futuredominated by “material interests”.

Ms Jasanoff says she set out to exploreConrad’sworld “with the compassofa his-torian, the chart of a biographer, and thenavigational sextant of a fiction reader”,and these have served her well. AnthonyPowell, a novelist, once described Conradas “an enigmatic figure. The more we readabout him, the less we seem to know him.”This biography may not fully reveal themystery behind the man, but it is a power-ful encouragement to read his books. 7

HANNAH ARENDT, in “The Origins ofTotalitarianism”, cautioned against

the glib application of the T-word. The dis-tinction between totalitarianism and au-thoritarianism in political theory is notone of degree—with totalitarianism at thetop of an ascending scale of evil—but oneofkind. Totalitarianism combinesa systemof terror, single-party rule, a centrallyplanned economy, command over thearmy and the media, and an all-encom-passing ideology. Such states exercise totalcontrol of their citizens’ lives, whereas au-thoritarian ones stipulate the observance

ofcertain rulesand allow limited liberty aslong as it does not challenge political pow-er. Where totalitarianism mobilises thepeople, authoritarianism breeds passivity.

Despite quoting Arendt extensively,Masha Gessen, a Russian-American jour-nalist, seems not to have taken her warn-ing to heart, arguing in a provocative newbook that totalitarianism has “reclaimed”Vladimir Putin’s Russia. She effectivelydemonstrates how Mr Putin restored theSoviet-era apparatus of police control, re-newed state domination of media and theeconomy, and resurrected one-party rule.Terror, she claims less convincingly, maybe necessary only to establish a totalitar-ian foundation, and can be “maintainedby institutions that carry within them thememoryofterror”. She argues that the con-servative nationalism of Mr Putin’s thirdterm has become a powerful ideology.

For all the book’s genuine emotionalforce, its main argument rings hollow. MrPutin’s regime is sinister, as this newspaperhas long documented. To say that he is anautocrat rather than a totalitarian is not toexcuse his methods or misdeeds, but to ad-vocate a clear-eyed assessment of reality.

The insistence on invoking totalitarian-ism obscures Ms Gessen’s more insightfulobservations about how Russians contin-ue to be shaped by the trauma ofthe Sovietpast. A fluent storyteller, she follows fourmain characters and three intellectual he-roes from perestroika to the present day,tracing the sweep of contemporary Rus-sian history through their eyes. This tacticproves effective for showing how politics,with time, consumed individuals who hadinitially been more concerned with theirpersonal lives. The sample of characters,frustratingly, consists almost entirely ofliberals and intelligentsia types from theelites, yet Ms Gessen ably weaves theirlives into a gripping, if grim, tapestry.

Her narrative climaxes with the annex-ation ofCrimea, the moment that she iden-tifies as the crystallisation of Russia’s newtotalitarianism. “Crimea was Russia’s ide-ology,” she writes. “Crimea mobilised thenation.” Although the annexation, and thenoxious cocktail of nationalism, conserva-tism and Orthodoxy that went along withit, did consolidate society, any mobilisa-tion proved illusory. Though many Rus-sians gladly cheer the Kremlin’s wars,whether in eastern Ukraine or Syria, asseen on the television screen, they largelydo not aspire to become martyrs for thecause. (In fact, the Kremlin has gone togreat lengths to hide news of soldiers’deaths, in contrast to the glorification offallen heroes during the Soviet era.) Facedwith a passive population, the Kremlinnow frets about low turnout at pro-formaelections. The defining features of Russianpolitical life are not mobilisation and poli-ticisation, but apathy and apoliticism.

Nor is state control quite as total as Ms

Gessen makes it seem. Mr Putin has em-ployed coercion, intimidation and selec-tive political violence, but he has stoppedshort of unleashing a bloody reign of terror. The state exudes an inordinate influ-ence over the economy, yet people are freeto consume, earn and travel in waysunthinkable under Stalin, Hitler or Mao.Civil society, embattled though it is, canstill push backagainst the country’s radicalOrthodox activists. (Public protests haltedrecent attempts to transfer the famed StIsaac’s Cathedral in St Petersburg back tochurch control.)

Alternative sources of information canbe found online. And state control is not socomplete that opposition has become un-thinkable—as shown by the thousands ofyoung people attending the recent ralliesof Alexei Navalny, an anti-corruption cam-paigner. Even Mr Navalny, who hasoften faced arrest, has seen his brother imprisoned in Siberia and nearly lost hiseyesight after being splashed with acid,contends that “despite the curtailing of po-litical and civil freedoms, the past 25 yearshave been the freest in Russian history.”

Distinguishing between different typesof regimes is important. Language, as MsGessen has argued elsewhere, matters.Sloppy use robs terms of their meaning. Italso shapes perceptions. Ms Gessen, whohas a wide following, has become a respected voice on Russia in the era of Donald Trump. Herbookhasbeen warmlywelcomed in an America that is keen toknow more about Mr Putin’s country andinclined to see it as the reincarnation of theEvil Empire. As the American public andpolicymakers grapple with the threat fromRussia, they would be wise to seek a fullerpicture than this bookalone offers. 7

Vladimir Putin’s Russia

Degrees andperception

The Future is History: How TotalitarianismReclaimed Russia. By Masha Gessen. River-head Books; 528 pages; $28. Granta; £20

Strutting his stuff

The Economist November 4th 2017 Books and arts 85

AS MINISTERS in Madrid and national-ists in Catalonia swap rival narratives,

events in Spain confirm, as Javier Cercaswrites, that “the past ismerelya dimensionof the present.” No Spanish writer hasprobed the unhealed wounds of the coun-try’s history with more subtlety and rigourthan Mr Cercas. In the wake of his prize-winningbook, “Soldiers ofSalamis” (2001)and “The Anatomy of a Moment” (2009),he returns to the Spanish civil war and itsdisputed aftermath in another “strangenovel-without-fiction”, as he calls it, a truestory thateven the most fanciful yarn-spin-ner would blush to invent.

Its subject is Enric Marco: an actual per-son, now close to 100. In the 1980s, as new-ly democratic Spain began to recover itspublic memory of civil war and dictator-ship, this Catalan trade unionist emergedas the charismatic spokesman for Spanishsurvivors of deportation to German con-centration camps. In countless talks, MrMarco brought tragic history to life, bear-ing witness to Nazi barbarism. Then, in2005, a historian unmasked him as an im-postor, “a compulsive, barefaced liar”. MrMarco had gone to Germany, but as a vol-unteer worker, not an inmate. He fabricat-ed his anti-Franco exploits. Yet, after expo-sure, the “shameless charlatan” justifiedhis pretence as a “noble, altruistic lie” thatopened youngereyes to the evilsofthe Ho-locaust. Unabashed, this “novelist of him-self” continued to “gild his biography withan epic lustre”.

Mixing dogged research and testy, spar-ring interviews with the charming pre-tender, Mr Cercas scrupulously tracks MrMarco’s big lie. As an author who jugglesreality and fiction, he interrogates his ownattraction to this saga of deceit: “Perhapsonly an impostor could tell the story of animpostor.” As he peels away the “onionskin” around this “peerless trickster”, doesthe narrator also create a saintly fiction ofhimself as the fearless slayer of false-hoods? Mr Cercas links Mr Marco’s impos-ture to the “industry of memory” in post-Franco Spain, as “the entire countrywas re-inventing itself.” He shows this contestedpast, and his interpretations of it, as a playofmasks and myths built around “an enor-mous collective lie”. No heroic rebel, theconformist Mr Marco “always sides withthe majority”. Indeed, his “narcissistic andkitsch” hoaxes reveal nothing less than“the true history ofSpain”. 7

Writing from Catalonia

Fake man

The Impostor. By Javier Cercas. Translatedby Frank Wynne. MacLehose Press; 432pages; £20

THE modern human is by turns in-trigued, bewildered, horrified and en-

raptured by religion. In a world wheremany people look to science to decipherthe universe, there is something fascinat-ing, and a bit frightening, about spiritualsystems and codes which have command-ed passionate loyalty among millions ofpeople for millennia, but which are still impenetrable to outsiders.

It follows that any successful effort toexplain or even just describe religion inbroad strokes may be on to a winningstreak. With a landmark exhibition, a BBCradio series and a forthcoming book thatwill sum up both, the British Museum anditscollaboratorsare risingto thatchallenge.

It promises to be far more successfulthan any attempt to address the subject ina single medium could be. The project ap-peals, as most popular forms ofreligion do,to the mind, the eye and the ear.

A prime mover in this initiative is NeilMacGregor, the institution’s former direc-tor whose didactic skills as a lecturer andbroadcaster have already redefined therole of great museums. It follows on from“AHistory ofthe World in 100 Objects”, hisgroundbreaking 20-week-long series of ra-dio stories that went out in 2010. Now theBBC has started transmitting his reflectionson religious culture in 30 new radio talks of

15 minutes each. The talks draw in part on“Living with Gods”, an exhibition at theBritish Museum that uses objects to portray the transcendent as it has beenconceived throughout human history.

The oldest item, and the subject of MrMacGregor’s opening talk, is a mammoth-tusk sculpture called the Lion Man datingback to the Ice Age. Even among hunter-gathererswho were struggling to survive, itwas worthwhile for someone to spend upto 400 hours fashioning an object thatserved nothing but a talismanic purpose,connecting people to invisible worlds. Thenewest object is a cross made by an Italiancarpenter from bits of a ship that was car-rying refugees when it foundered in theMediterranean near Lampedusa (pic-tured). As part of his broadcast, Mr Mac-Gregor goes to the cave where the LionMan was found and talks to a Germanscholar. With a remit to travel wherever heneeds and speak to anyone who can help,his enquiries take him to, among otherplaces, the Ganges river in India and theStone Age tomb ofNewgrange in Ireland.

Listeners are invited to follow his wan-derings, to take jumps between culturesand historical eras and even to leap between the here-and-now and the tran-scendent. In the same few minutes, MrMacGregor describes a coat made fromseal-gut by the Yupik people of Alaska anda figure of Osiris, an Egyptian deity that isconnected with life, death and the under-world. The coat speaksofindigenoushunt-ers’ sacramental relationship with theirprey, the Osiris figure of the new life engendered by the Nile.

It takes a deft communicator to pull offsuch verbal pirouettes. What holds the ma-terial together, though, is Mr MacGregor’sinterest in the role of religion and ritual inhuman society. He speaks compellingly ofthe human mind’s need to find patterns inthe universe and to situate itself withinthose giant matrices.

Jill Cook, who curated an importantshow at the British Museum in 2013 that ex-plained how the Ice Age made the modernmind, is also the curatorofthis new exhibi-tion. She shares Mr MacGregor’s desire topresent religion as a social phenomenonthat has been present in every age of his-tory, cementing and expressing socialbonds, and also violently dividing people.By including exhibits related to the com-munist cult of atheism, she shows that at-tempts to squeeze religion out of societyhave sometimes dramatically misfired:anti-religion can easily become a cult.

Mr MacGregor is a social anthropolo-gist on a vast plane, whereas Ms Cookleans more to the neuroscience of religion.By including sounds, such as softly heardbells and flutes, she draws attention to theaural stimuli that can arouse people’s spiri-tual antennae.

However, they have a common pur-

Living with gods

Transcendentalmeditation

Whymany humans need a spiritualdimension in their lives

1

86 Books and arts The Economist November 4th 2017

2

“LET’S talk properly.” Tom Sherringtonhad little reason to think that his

blog post, so titled, would cause contro-versy. A British consultant and formerhead teacher, he had called on educatorsto work harder at getting their students tostop saying things like “We done lots ofgreat activities” and “I ain’t done noth-ing.” He recycled the blog post recently onTwitter—to a fierce and (to him) surprisingbacklash from linguists.

Led by Rob Drummond, a linguist atManchester Metropolitan University, andjoined by OliverKamm, a journalist at theTimes, critics focused in particular on theword “properly”, along with relatedwords like “correct”. The ding-dong per-fectly encapsulates the way academic lin-guists (especially sociolinguists, who fo-cus on things like class) see standardEnglish, and how teachers do.

The biggest misunderstanding isabout the nature ofdialects, especially ur-ban ones. (Country dialects get a pass, forbeing quaint.) Teachers see “I ain’t donenothing” as simply wrong. But linguistshave found that dialects are rule-gov-erned, coherent and fully expressive, andhave written extensive grammars ofthem. They sound “broken” only to out-siders who don’t know their rules.

The debate, of course, also has a politi-cal dimension. The London teens whosay “We done lots of great activities” arelikely to have other social strikes againstthem, especially beingpoorornon-white,with parents who themselves are nothighly educated. Poverty and lack of for-mal education are behind the mistakenbelief that these dialects themselves aresomehow defective. If the people whospeak them are poor, goes the faulty rea-soning, their impoverished and fracturedlanguage must be part of what holdsthem back.

In a long follow-up, Mr Sherrington re-framed “proper” as “appropriate”: childrenmust speakand write the correct variety ofEnglish for school. For their part, Mr Drum-mond and Mr Kamm agree that of course“standard English” exists, that it is valuableand that children need to learn it—poorchildren most of all. All sides agree thatalthough it can be spoken with any accent,it does not permit “I done” or “he ain’t”.

What is at issue is how to teach the stan-dard kind ofEnglish to children who speaksomething else at home. For the sociolin-guists, there certainly is a place for dialect,even if it ain’t in the job interview or thelecture hall. All language varieties are valu-able to their speakers; they give a sense ofcommunity and belonging. For a child tocome to school and be told that how hespeaks and how his parents speak is em-barrassing—something he must aban-don—is more likely to make him thinkschool isnot forhim than it is to get him hit-

ting the books trying to learn to speak likeHenry Higgins in Shaw’s “Pygmalion”(“My Fair Lady” on the big screen). As inthat story, contempt for other people’sspeech only tends to drive them away.

But a change of mentality can removea lot of the tension in the debate. All chil-dren in Britain and America do need stan-dard English. But they do not need it allthe time. Indeed, there is absolutely noneed for them to abandon their homespeech; people are perfectly able toswitch speech varieties. Watch the manytalented black American comedians,from Richard Pyror to Eddie Murphy tothe duo of Keegan-Michael Key and Jor-dan Peele, whose effortless swapping be-tween a buttoned-up English and blackvernacular isplayed for laughs. For plentyof people this is a survival skill, one thatdeserves respect. Fortunately, it can alsobe taught.

The core of doing so is recognisinghow language varies naturally by occa-sion. Both teachers and students shouldbe taught to think about this variationwith curiosity. If both dialects and thestandard are valuable, what is interestingis just when, and how, people switch be-tween them. Children can learn to recog-nise the differences, and even translatefrom one to the other. One classic study inChicago of “contrastive analysis”—essen-tially ofblackstudents trained to translatetheir native “we was” into the standard“we were”—found a 59% reduction in theusage of the “we was” style. (A controlgroup drilled in traditional methodsshowed a slight increase.) The group withcontrastive analysis not only discoveredsomething about English. In learning tonavigate race, class and the importance ofthe right words at the right time, they alsolearned something deeper about theworld where they will grow up to use it.

We was and it ain’tJohnson

What not speaking properEnglish teaches you about language—and about life

pose: to bring home the ubiquity, and thesocial character, of religion to a mainly sec-ular public. To the modern mind, speculat-ing about moral and philosophical ques-tions is something people engage inindividually. In most eras of history, and inmany parts of the world today, such free-dom would be inconceivable.

As the exhibition and the radio seriesboth proclaim, religion has generally beenan activity, not a set of true-or-false propo-sitions, and above all a collective activityin which the tribe or nation finds meaning.

Some of the objects that are highlightedhave been considered sacred in them-

selves, such as a copy of the Kazan icon ofthe Mother ofGod. This depiction ofMary,deemed to have played a role in protectingMoscow from foreign invaders, is creditedwith such holiness that it can extend to reproductions. Others are spectacular re-minders ofwhat has been considered holy,and the efforts which have been made toconvey sanctity from one place to another.Forexample, the radio series ponders giantsilver vessels in which a Victorian-era ma-harajah brought water from the Ganges toLondon, and the exhibition includes amore modest receptacle in which pilgrimsto Mecca gathered water from a sacred

spring and brought it to their families.Mr MacGregor and Ms Cook do justice

to these marvellous objects, at the sametime driving home the point that humansare “hard-wired” for religion, a conceptthey both use. But that well-made pointleads on to another one.

Whatever sociologists may say aboutfootball as a cult, many people alive todayare not religious in the way their forebearswere. The hard-wiring seems to have beenloosened, even among those who formal-ly adhere to a faith. For anyone interestedin the broad sweep of human history, thattoo is something rather mysterious. 7

87

The Economist November 4th 2017

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Economic data% change on year ago Budget Interest Industrial Current-account balance balance rates, % Gross domestic product production Consumer prices Unemployment latest 12 % of GDP % of GDP 10-year gov't Currency units, per $ latest qtr* 2017† latest latest 2017† rate, % months, $bn 2017† 2017† bonds, latest Nov 1st year ago

United States +2.3 Q3 +3.0 +2.2 +1.6 Sep +2.2 Sep +2.0 4.2 Sep -460.9 Q2 -2.5 -3.4 2.40 - -China +6.8 Q3 +7.0 +6.8 +6.6 Sep +1.6 Sep +1.7 4.0 Q3§ +155.3 Q2 +1.4 -4.3 3.92§§ 6.62 6.77Japan +1.4 Q2 +2.5 +1.5 +2.5 Sep +0.7 Sep +0.5 2.8 Sep +192.2 Aug +3.6 -4.5 0.07 114 105Britain +1.5 Q3 +1.6 +1.5 +1.6 Aug +3.0 Sep +2.7 4.3 Jul†† -128.9 Q2 -3.6 -3.3 1.37 0.75 0.82Canada +3.7 Q2 +4.5 +2.8 +5.6 Aug +1.6 Sep +1.7 6.2 Sep -45.0 Q2 -2.6 -2.0 1.95 1.29 1.34Euro area +2.5 Q3 +2.4 +2.1 +3.8 Aug +1.4 Oct +1.5 8.9 Sep +376.4 Aug +3.1 -1.3 0.38 0.86 0.91Austria +2.6 Q2 +0.4 +2.3 +4.0 Aug +2.4 Sep +2.1 5.6 Sep +6.1 Q2 +2.1 -1.0 0.53 0.86 0.91Belgium +1.7 Q3 +1.2 +1.6 +5.0 Aug +2.0 Oct +2.1 7.1 Sep -5.3 Jun +0.6 -2.0 0.67 0.86 0.91France +2.2 Q3 +1.9 +1.7 +1.1 Aug +1.1 Oct +1.1 9.7 Sep -26.0 Aug -1.3 -3.0 0.76 0.86 0.91Germany +2.1 Q2 +2.5 +2.1 +4.5 Aug +1.6 Oct +1.7 3.6 Sep‡ +274.6 Aug +8.0 +0.7 0.38 0.86 0.91Greece +0.7 Q2 +2.2 +1.0 +5.7 Aug +1.0 Sep +1.2 21.0 Jul -1.3 Aug -1.3 -1.4 5.27 0.86 0.91Italy +1.5 Q2 +1.4 +1.4 +5.7 Aug +1.0 Oct +1.3 11.1 Sep +51.2 Aug +2.5 -2.3 1.80 0.86 0.91Netherlands +3.3 Q2 +6.3 +2.7 +3.9 Aug +1.5 Sep +1.3 5.7 Sep +76.0 Q2 +10.0 +0.6 0.47 0.86 0.91Spain +3.1 Q3 +3.2 +3.1 +2.2 Aug +1.5 Oct +2.0 16.7 Sep +23.1 Aug +1.4 -3.3 1.47 0.86 0.91Czech Republic +3.4 Q2 +10.3 +4.5 +5.8 Aug +2.7 Sep +2.4 2.7 Sep‡ +1.7 Q2 +0.9 -0.1 1.57 22.0 24.5Denmark +1.9 Q2 +2.8 +2.2 +2.1 Aug +1.6 Sep +1.0 4.4 Aug +25.8 Aug +8.2 -0.6 0.48 6.41 6.74Norway +0.2 Q2 +4.7 +1.8 +5.7 Aug +1.6 Sep +2.0 4.1 Aug‡‡ +16.6 Q2 +5.4 +4.2 1.66 8.16 8.20Poland +4.6 Q2 +4.5 +4.3 +4.3 Sep +2.1 Oct +1.9 6.8 Sep§ -1.3 Aug -0.4 -2.0 3.44 3.65 3.89Russia +2.5 Q2 na +1.8 +0.8 Sep +3.0 Sep +4.0 5.0 Sep§ +36.9 Q3 +2.5 -2.1 8.13 58.2 63.1Sweden +3.0 Q2 +5.2 +3.1 +7.3 Aug +2.1 Sep +1.9 6.2 Sep§ +22.5 Q2 +4.4 +0.9 0.80 8.40 8.95Switzerland +0.3 Q2 +1.1 +0.9 +2.9 Q2 +0.7 Sep +0.5 3.1 Sep +68.9 Q2 +9.9 +0.7 -0.04 1.00 0.98Turkey +5.1 Q2 na +4.9 +3.8 Aug +11.2 Sep +10.7 10.7 Jul§ -37.0 Aug -4.5 -2.0 11.85 3.82 3.11Australia +1.8 Q2 +3.3 +2.4 +0.8 Q2 +1.8 Q3 +2.1 5.5 Sep -21.8 Q2 -1.5 -1.7 2.70 1.30 1.31Hong Kong +3.8 Q2 +4.1 +3.1 +0.4 Q2 +1.5 Sep +1.6 3.1 Sep‡‡ +15.0 Q2 +4.2 +0.9 1.82 7.80 7.76India +5.7 Q2 +4.1 +6.7 +4.3 Aug +3.3 Sep +3.5 5.0 2015 -29.2 Q2 -1.4 -3.2 6.89 64.6 66.7Indonesia +5.0 Q2 na +5.2 +2.3 Aug +3.6 Oct +3.9 5.3 Q1§ -14.2 Q2 -1.7 -2.6 6.46 13,582 13,042Malaysia +5.8 Q2 na +5.5 +6.8 Aug +4.3 Sep +3.9 3.4 Aug§ +8.1 Q2 +2.7 -3.0 3.94 4.23 4.18Pakistan +5.7 2017** na +5.7 +8.5 Aug +3.8 Oct +3.9 5.9 2015 -14.1 Q3 -4.5 -5.9 8.20††† 105 105Philippines +6.5 Q2 +7.0 +6.6 +2.7 Aug +3.4 Sep +3.2 5.6 Q3§ -0.8 Jun +0.3 -2.7 4.80 51.6 48.4Singapore +4.6 Q3 +6.3 +2.9 +14.6 Sep +0.4 Sep +0.6 2.1 Q3 +59.0 Q2 +19.6 -1.0 2.16 1.36 1.39South Korea +3.6 Q3 +5.8 +2.8 +8.4 Sep +1.8 Oct +2.0 3.4 Sep§ +83.1 Aug +5.6 +0.8 2.55 1,115 1,140Taiwan +3.1 Q3 +7.4 +2.2 +5.2 Sep +0.5 Sep +0.6 3.7 Sep +70.7 Q2 +13.2 -0.1 1.05 30.2 31.6Thailand +3.7 Q2 +5.4 +3.5 +4.2 Sep +0.9 Oct +0.7 1.2 Sep§ +46.9 Q3 +11.6 -2.5 2.31 33.1 35.0Argentina +2.7 Q2 +2.8 +2.7 -2.5 Oct +24.2 Sep +25.2 8.7 Q2§ -19.7 Q2 -3.4 -6.3 5.83 17.6 15.1Brazil +0.3 Q2 +1.0 +0.7 +2.5 Sep +2.5 Sep +3.5 12.4 Sep§ -12.6 Sep -0.8 -8.0 9.00 3.27 3.23Chile +0.9 Q2 +3.0 +1.3 +1.0 Sep +1.4 Sep +2.2 6.7 Sep§‡‡ -5.6 Q2 -1.7 -3.0 4.47 635 651Colombia +1.3 Q2 +3.0 +1.7 -3.1 Aug +4.0 Sep +4.3 9.2 Sep§ -12.4 Q2 -3.7 -3.3 6.65 3,039 3,024Mexico +1.6 Q3 -0.8 +2.2 -0.5 Aug +6.3 Sep +5.9 3.3 Sep -17.6 Q2 -1.8 -1.9 7.26 19.1 19.1Venezuela -8.8 Q4~ -6.2 -9.3 +0.8 Sep na +720 7.3 Apr§ -17.8 Q3~ -1.2 -19.5 9.51 10.9 9.99Egypt +4.9 Q2 na +4.1 +23.8 Aug +31.6 Sep +26.9 12.0 Q2§ -15.6 Q2 -6.6 -10.8 na 17.6 8.88Israel +4.0 Q2 +2.4 +3.4 -0.7 Aug +0.1 Sep +0.4 4.1 Sep +10.7 Q2 +3.5 -1.9 1.76 3.52 3.81Saudi Arabia +1.7 2016 na -0.7 na -0.1 Sep -0.3 5.6 2016 +7.6 Q2 +2.5 -7.2 3.68 3.75 3.75South Africa +1.1 Q2 +2.5 +0.7 +1.4 Aug +5.1 Sep +5.3 27.7 Q3§ -7.9 Q2 -2.9 -3.3 9.03 14.1 13.6Source: Haver Analytics. *% change on previous quarter, annual rate. †The Economist poll or Economist Intelligence Unit estimate/forecast. §Not seasonally adjusted. ‡New series. ~2014 **Year ending June. ††Latest 3 months. ‡‡3-month moving average. §§5-year yield. †††Dollar-denominated bonds.

88 The Economist November 4th 2017Economic and financial indicators

The Economist November 4th 2017 Economic and financial indicators 89

Indicators for more countries and additionalseries, go to: Economist.com/indicators

Othermarkets

Other markets % change on Dec 30th 2016 Index one in local in $ Nov 1st week currency termsUnited States (S&P 500) 2,579.4 +0.9 +15.2 +15.2United States (NAScomp) 6,716.5 +2.3 +24.8 +24.8China (SSEB, $ terms) 350.6 -1.0 +2.6 +2.6Japan (Topix) 1,786.7 +2.0 +17.7 +20.3Europe (FTSEurofirst 300) 1,559.6 +2.5 +9.2 +20.2World, dev'd (MSCI) 2,036.8 +0.7 +16.3 +16.3Emerging markets (MSCI) 1,119.1 +0.4 +29.8 +29.8World, all (MSCI) 496.6 +0.6 +17.7 +17.7World bonds (Citigroup) 935.3 nil +5.8 +5.8EMBI+ (JPMorgan) 837.7 +0.3 +8.5 +8.5Hedge funds (HFRX) 1,262.4§ +0.2 +4.9 +4.9Volatility, US (VIX) 10.1 +11.2 +14.0 (levels)CDSs, Eur (iTRAXX)† 49.7 -8.9 -31.1 -24.1CDSs, N Am (CDX)† 52.6 -0.9 -22.3 -22.3Carbon trading (EU ETS) € 7.5 +1.6 +14.1 +25.7Sources: IHS Markit; Thomson Reuters. *Total return index. †Credit-default-swap spreads, basis points. §Oct 30th.

The Economist commodity-price index

The Economist commodity-price index2005=100 % change on one one Oct 24th Oct 31st* month year

Dollar IndexAll Items 148.7 147.6 +1.4 +6.4

Food 150.5 150.2 +0.5 -3.9

Industrials

All 146.9 144.9 +2.4 +20.2

Nfa† 131.2 131.3 +1.7 +3.8

Metals 153.6 150.8 +2.7 +27.8

Sterling IndexAll items 206.2 202.1 +1.2 -2.1

Euro IndexAll items 157.2 157.5 +2.3 +0.9

Gold$ per oz 1,275.0 1,269.5 -0.4 -1.5

West Texas Intermediate$ per barrel 52.5 54.4 +7.9 +16.5Sources: Bloomberg; CME Group; Cotlook; Darmenn & Curl; FT; ICCO;ICO; ISO; Live Rice Index; LME; NZ Wool Services; Thompson Lloyd & Ewart; Thomson Reuters; Urner Barry; WSJ. *Provisional †Non-food agriculturals.

Markets

Markets % change on Dec 30th 2016 Index one in local in $ Nov 1st week currency termsUnited States (DJIA) 23,435.0 +0.5 +18.6 +18.6China (SSEA) 3,556.4 nil +9.4 +15.0Japan (Nikkei 225) 22,420.1 +3.3 +17.3 +20.0Britain (FTSE 100) 7,488.0 +0.5 +4.8 +12.5Canada (S&P TSX) 16,029.3 +1.1 +4.9 +9.1Euro area (FTSE Euro 100) 1,264.2 +2.7 +13.7 +25.2Euro area (EURO STOXX 50) 3,697.4 +2.9 +12.4 +23.8Austria (ATX) 3,406.1 +1.3 +30.1 +43.3Belgium (Bel 20) 4,116.5 +1.7 +14.1 +25.7France (CAC 40) 5,514.3 +2.6 +13.4 +24.9Germany (DAX)* 13,465.5 +4.0 +17.3 +29.2Greece (Athex Comp) 767.1 +4.0 +19.2 +31.3Italy (FTSE/MIB) 22,992.0 +2.4 +19.5 +31.7Netherlands (AEX) 554.5 +2.4 +14.8 +26.4Spain (Madrid SE) 1,060.4 +3.6 +12.4 +23.8Czech Republic (PX) 1,067.7 +0.3 +15.9 +34.8Denmark (OMXCB) 952.5 +1.5 +19.3 +31.2Hungary (BUX) 39,611.6 -0.6 +23.8 +35.4Norway (OSEAX) 900.1 +2.3 +17.7 +24.2Poland (WIG) 64,866.6 +2.7 +25.3 +43.5Russia (RTS, $ terms) 1,126.4 +0.7 -2.2 -2.2Sweden (OMXS30) 1,672.0 +1.4 +10.2 +19.1Switzerland (SMI) 9,267.8 +2.0 +12.7 +14.4Turkey (BIST) 113,024.3 +4.3 +44.6 +33.1Australia (All Ord.) 6,005.5 +0.5 +5.0 +11.4Hong Kong (Hang Seng) 28,594.1 +1.0 +30.0 +29.2India (BSE) 33,600.3 +1.7 +26.2 +32.6Indonesia (JSX) 6,038.1 +0.2 +14.0 +13.1Malaysia (KLSE) 1,743.9 +0.3 +6.2 +12.6Pakistan (KSE) 40,453.6 -2.7 -15.4 -16.2Singapore (STI) 3,391.6 +1.4 +17.7 +25.0South Korea (KOSPI) 2,556.5 +2.6 +26.2 +36.7Taiwan (TWI) 10,806.4 +0.5 +16.8 +24.8Thailand (SET) 1,714.6 +0.3 +11.1 +20.1Argentina (MERV) 27,979.8 +0.4 +65.4 +48.3Brazil (BVSP) 73,823.7 -3.7 +22.6 +22.0Chile (IGPA) 28,028.4 +1.7 +35.2 +42.5Colombia (IGBC) 10,763.2 -1.8 +6.5 +5.2Mexico (IPC) 48,334.5 -1.1 +5.9 +14.0Venezuela (IBC) 695.5 -2.2 -97.8 naEgypt (EGX 30) 14,277.3 +2.7 +15.7 +19.0Israel (TA-125) 1,317.1 +0.5 +3.1 +12.9Saudi Arabia (Tadawul) 6,948.5 +0.6 -4.0 -4.0South Africa (JSE AS) 59,514.1 +2.4 +17.5 +14.1

Indicators for more countries and additionalseries, go to: Economist.com/indicators

Doing business

Source: World Bank

Number of business reformsYear ending June 1st 2017Selected countries

0 1 2 3 4 5 6 7 8

Brunei

Thailand

India

Indonesia

Saudi Arabia

Kenya

Rwanda

Vietnam

Nigeria

Lithuania

El Salvador

Georgia

Ease of doingbusiness ranking

out of 190, 1=best

56

26

100

72

92

80

41

68

145

16

73

9

The World Bank calculates that in the 12months to June 2017, 119 countries imple-mented at least one positive reform tomake it easier for entrepreneurs to dobusiness. In all, 264 regulatory reformswere carried out. The greatest number ofreforms were designed to help peoplestart a business and get credit. Asiancountries have been particularly busy:Brunei, India and Thailand each imple-mented eight reforms. Among otherthings, Brunei and Thailand bothstrengthened the rights of borrowers andcreditors by introducing new secured-transaction laws; India reduced border-compliance costs. Rwanda has imple-mented the most business-friendlyreforms over the past 15 years: 52 in all.

90 The Economist November 4th 2017

THE fact that Fats Domino in 1957 played355 shows in America, travelling13,000

miles, was misleading. He never left NewOrleans, or rather New Orleans never lefthim. The fact that he was praised by ElvisPresley as the real king of rock ’n’ roll,named aschiefinspiration byPaul McCart-ney, Led Zeppelin, John Lennon and NeilYoung, and hailed as the man who starteda cultural revolution deemed so danger-ous, in some parts of America, that bottlesflew and fights started, was pretty mystify-ing to him. When the rage took off in theearly1950s, he had been playing that musicin the honky-tonks and bars ofthe Big Easyfor fully15 years.

He was New Awlins through andthrough, beginning with his girth and therolling, languid gait it gave him. Bothshowed such a love of red beans, gumboand jambalaya that he couldn’t find foodworth eating anywhere else, but took hisown pots, pans and hot sauce to cookthemup wherever he was. One ofhis stunts wasto play standing and, with his belly, gradu-ally push his piano into the wings. At 21,when he was playing at the HideawayClub on Desire Street for $3 a week, he al-ready weighed 200lb. His first big hit, cut in1949 after Dave Bartholemew, a talentscout, had discovered him, was “The FatMan”. But fat men had fun. All the Creole

girls loved him, he sang, on Rampart andCanal. And together “women and a badlife/They’re carryin’ this soul away.”

There was never any question of leav-ing. He was born in the Lower Ninth Ward,the youngest of eight children of Creole la-bourers, and would have stayed put thereif Hurricane Katrina in 2005 had not de-stroyed his house. The house got fancierwith his success, but he had no wish tomove with the well-to-do. He was satisfiedto staywhere he had firstheard radio songsand copied them for hours on the family’sbeaten old upright; on the same streetswhere, once rid of school, he delivered iceto the people without refrigerators, stop-ping in their houses, if they had pianos,and practising again. He had a good ear forcatching notes, he felt then. He neverdreamed ofmuch more.

Ithappened because ofthe wayhe sangand played, so full of joy that everyone justhad to dance. Once he started those big fin-gers diving flat and fast to the keys and thatright leg stamping to the beat, once hebeamed that thousand-watt smile to theaudience on every phrase, no one couldstay still. What he thought he was playingwas rhythm and blues, though there wasnot much blue about it: only he, on “Ain’tThat a Shame”, could make “my tears felllike rain” sound like the best thing that had

happened all week. But that R&B was alsosaturated with his home town, from theromping, rolling, accelerating beat to fla-vours ofMardi Gras bands, Cajun chank-a-chank, Latin rhythms and his own patois.He added his special groove, right-handtriplets on every beat, a hook white folksseemed to like; the drummer gave theback-beat, the horns made bass riffs, andout ofthat rich pot au feu rock ’n’ roll some-how emerged. Between 1950 and 1963 hehad more hits than ChuckBerry, Little Rich-ard and Buddy Holly combined.

His songs were not often original. Even“Blueberry Hill”, hisbiggest hit, which sold5m copies, had been done before by LouisArmstrong. But he thought they would fithim fine, so he sang them in his own style.As he borrowed, so he was borrowedfrom; it didn’t matter to him, even whenwhite crooners in those segregated timescovered his songs and sold more of them.Rock ’n’ roll was the first music that crossedfrom blackto white worlds, from the “race”Billboard chart to the pop one, but he wasno civil-rights campaigner. He let others dothat, far too shy to speakout much. (“Ifyou’scuse me, I’ll just go back to practisin’,OK?”) He stuck to what he did best, musicthat made people happy.

It made him happy, too. He could nowbuy two Cadillacs and a Rolls-Royce in oneafternoon, and enough jewellery to lightup a stage: a star-shaped diamond watchbigger than a silver dollar, diamond clipsfor his silk ties and chunky gold-and-dia-mond rings for every finger. He travelledwith 30 suits and 200 pairs of shoes, espe-cially fancy two-tones to thump the beat.His only long spells out of New Orleanswere spent in Las Vegas, where he wasted$2m on the slots before he was cured. Hecould have saved it for his wife and hiseight children, but whatever went up hadto come down some way. He still had morethan enough. As he sang on his favouritedisc, “Blue Monday” (referring, though, toSaturday), “Got my money and my honey/And I’m out on the stand to play.”

Red-bean stewAfter 1963 the hits dried up, eclipsed byBeatlemania. He kept performing for de-cades, though, buoyed up by the homageof those who stormed past him. High hon-ours came, and he sometimes left NewOrleans to fetch them, but not often. In hisclubhouse annexe in the LowerNinth, nextto hishouse with hisname in lightsoutsideand marble and chandeliers inside, hewould cook up red-bean stew for theneighbours, then invite them in to eat,have a few little beers and watch a Saintsgame. When Katrina trashed it all, includ-ing 20 gold discs and his grand pianos, “Iain’t missed nothing, to tell you the truth.”It sounded like another Fats number, to besung on a cloud of joy. 7

On Rampart and Canal

Antoine “Fats” Domino, pioneerofrock ’n’ roll, died on October24th, aged 89

Obituary Fats Domino

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