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Theworldthis
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Politicsthisweek
[Thu,29Oct18:57]
Businessthis
week
KAL’scartoon
[Thu,29Oct18:57]
[Thu,
29Oct18:57]
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Politicsthisweek
Oct31st2015|Fromtheprint
edition
AnAmericannavalshiphas
sailedwithin12nautical
milesofareefintheSouth
ChinaSea,oneofseveral
whereChinahasbeen
buildingartificialislands
(pictured).TheChinese
governmentcalledthe
manoeuvre“illegal”.America
wantstoshowthatallships
havearighttopassthrough
thewaters.
Morethan360peopleare
knowntohavediedandmore
than2,000othersinjuredina
7.5-magnitudeearthquake
centredinAfghanistan.
Manyofthecasualtieswere
inneighbouringPakistan.
NepalelectedBidhyaDevi
BhandariastheHimalayan
country’sfirstfemale
president.MsBhandari
replacesRamBaranYadav,
whowasthecountry’sfirst
electedheadofstatein2008
afterNepalabolishedits
monarchy.Thenewpresident
facesseveralproblems,
includingarowoverthe
constitutionandadispute
withIndiaoverfuel
deliveries.
JokoWidodo,Indonesia’s
president,cutshortastate
visittoAmericatohandlean
air-pollutioncrisiscausedby
firesusedtoclearfarmlandin
ruralareas.Theannualhaze
isoneoftheworstin
memory.Withthisyear’s
rainyseasondelayedbythe
ElNiñoweathercycle,it
couldtakemonthstodouse
theflames.
SaudiArabiaandIransaid
theywouldholdtheirfirst
face-to-facetalksonSyriain
ViennaonOctober30th,ata
multilateralmeetinginwhich
AmericaandRussiaarealso
takingpart.Thisisthefirst
timeIranwillhaveattended
suchaforum,aimedat
bringinganendtoaconflict
thathaslastedalmostfive
yearsandclaimed250,000
lives.
Fuellingcontroversy
SaudiArabia’soilminister
saidthathisgovernmentis
consideringanincreasein
domesticenergyprices,inan
attempttoreininabudget
deficitthatisapproaching
20%ofGDP.Thelowoil
pricearoundtheworldhas
causedgovernmentrevenues
tofall.
Tanzaniaheldalargely
peacefulpresidentialand
parliamentaryelection,albeit
tarnishedbyreportsof
fistfightsinsomepolling
stations.Earlyresultsshowed
winsfortherulingparty,but
theoppositionisdemandinga
recount.Localelectionsin
Zanzibar,apro-opposition
island,havebeenannuled,
butthegovernmentsaidthis
hadnoeffectonthenational
poll.
IvoryCoastelectedits
president,AlassaneOuattara,
toasecondtermbya
landslide,whileinCongoBrazzavilletheincumbent,
DenisSassouNguesso,easily
wonareferendumona
constitutionalamendment
thatwillallowhimathird
consecutiveterm.
VotingforChristmas
AsTurksprepared,amid
rancourandviolence,tovote
inanelectiononNovember
1st,theauthoritiesmuzzled
potentialcriticsbysending
policetotakeovera
broadcastingfirmlinkedtoan
Islamicpreacherwhohas
fallenoutwiththe
government.Theruling
JusticeandDevelopment
partyisdeterminedtoregain
itsparliamentarymajorityand
seeoffachallengefromthe
pro-KurdishHDP.Seehere
andhere.
InPortugal,PresidentAníbal
CavacoSilvaaskedtheleader
oftherulingcentre-right
ForwardPortugalAlliance
(PAF)toformagovernment,
eventhoughitlostits
majorityinparliamentearlier
inOctober.Seearticle.
InPoland,theconservative
LawandJusticeparty,which
isalliedintheEuropean
Parlia-mentwithBritain’s
ConservativeParty,wonan
unexpectedlyimpressive
victoryinelectionson
October25th.Seearticle.
AlloverEurope,relations
betweenneighbouring
countrieswerestrainedas
govern-mentsstruggledto
copewiththeever-increasing
influxofrefugees.Germany
criticisedAustriaasthe
numbersenteringBavaria
rosesharply.Austriasaidit
wouldbuildafenceonits
borderwithSlovenia.See
article.
Dealornodeal
BarackObamaandJohn
Boehner(pictured),the
outgoingSpeakerofthe
HouseofRepresentatives,
struckadealtosuspend
America’sdebtceiling—and
thusallowthegovernmentto
goonborrowingmoney—a
fullweekbeforethedeadline
onNovember3rd.Thedealis
muchclosertowhatthe
presidentwantedthantowhat
HouseRepublicanshad
hopedfor,infuriatingmany
withinthealreadyfractious
party,andpromisingtrouble
aheadfortheincoming
Speaker,PaulRyan.
ThePentagonannouncedthat
NorthropGrumman,makerof
theB-2bomber,haddefeated
arivalbidbyBoeingand
LockheedMartintodevelop
andbuildanext-generation
long-rangestrikebomber.
Theordercouldbeworthup
to$80billioniftheUnited
StatesAirForcebuysall100
stealthbombersitsaysit
needs.
Don’tcryforme,Argentina
Argentina’spresidential
electionwillgotoasecond
roundonNovember22nd
afteranunexpectedlyclose
contestinthefirst.Daniel
Scioli,thePeronistcandidate
backedbythecurrent
president,CristinaFernández
deKirchner,finishedinfront.
Thesurprisewasthat
MauricioMacri,themayorof
BuenosAires,whowantsto
breakwithMsFernández’s
populistpolicies,wasclose
behind.Hehasagoodchance
ofwinningtherun-off.See
article.
JimmyMorales,acomedian
whohasneverbeforeheld
politicaloffice,won
Guatemala’spresidential
election,onaplatform
againstcorruption.Ascandal
atthecustomsagencyhad
forcedthepreviouspresident,
OttoPérezMolina,toresign
inSeptember.Seearticle.
Colombia’spresident,Juan
ManuelSantos,hasoffered
theFARC,aguerrillaarmy
thathasfoughtthe
governmentformorethan50
years,abilateraltruce.It
woulddependonreaching
agreementontheFARC’s
disarmamentand
demobilisation.
AVenezuelanprosecutor
whohelpedjailLeopoldo
López,aleaderofthe
oppositiontothecountry’s
left-winggovernment,has
fledtotheUnitedStatesand
declaredthatMrLópezis
innocent.MrLópezwas
sentencedtonearly14years
inprisoninSeptemberon
chargesthatheincited
violenceduringprotests
againsttheregimelastyear.
Peeringintotheabyss
Britain’sHouseofLords
votedtodelayanunpopular
plantocuttaxcredits,a
welfarepaymentforthelowpaid,anembarrassingdefeat
forGeorgeOsborne,the
chancelloroftheexchequer.
Thegovernmentplansto
reviewtheproposal—aswell
asthefutureoftheunelected
Lords,whichitsayshasno
righttovetofinancial
measures.Seehereandhere.
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Businessthisweek
Oct31st2015|Fromtheprint
edition
TheWorldHealth
Organisationsaidthat
processedmeatcauses
cancer.Afterassessingthe
evidence,theWHO
categorisedham,sausages,
baconandthelikeas“Group
1”carcinogens,alistof
thingscertaintobe
dangerous.OtherGroup1
substancesincludealcohol
andtobacco,althoughtherisk
posedbyprocessedmeatis
muchlower.TheWHOalso
saidthatredmeatwas
probablycarcinogenic.
Therewasadoubleblowfor
embattledVolkswagen.First,
theGermancarmakerlostits
positionastheworld’s
biggestcar-producerto
Toyota.AlthoughVW
outsolditsJapaneserival
duringthefirsthalfof2015,
Toyotasold7.49mvehiclesin
theninemonthstoSeptember
comparedwithVW’s7.43m.
Thenthefirmreportedanet
lossof€1.7billion($1.9
billion)forthethirdquarter,
itsfirstlossfor15years.VW
hasputaside€6.7billionto
dealwithcarsthatcheated
emissionstests,althoughitis
tooearlytosaytheextentto
whichthescandal,which
cametolightlastmonth,has
hitsales.
Britain’sGDPfiguresgave
somecauseforconcern.They
showthatinthethirdquarter
Britain’seconomygrewby
just0.5%,downfrom0.6%
lastyearinthesameperiod.
Theeconomyissuffering
fromthestrengthofthe
pound,whichhashitthe
country’smanufacturing
exports.Thenewscould
meanadelaytothefirst
interest-raterisesince2007.
TheFederalReservedeclined
toraiseinterestratesin
America.However,itmade
explicitreferencetothe
possibilityofraisingratesat
itsnextmeetinginDecember.
WheninRome,roam
TheEuropeanParliament
votedtobandata-roaming
chargesformobilephones
withintheEU.Thebanwill
comeintoeffectfromJune
2017.Separately,internet
providerswillbebarredfrom
chargingextrafor“fast
lanes”,exceptforcertain
specialisedservices,afterthe
parliamentvotedtoprotect
“networkneutrality”—equal
treatmentforallinternet
traffic.
BP’sprofitsfellby40%in
thethreemonthstotheendof
September,comparedwith
thesameperiodlastyear.The
firmblamedthelowpriceof
gasandoil.BP,whichhas
alreadyslasheditscosts,said
itwouldfindbillionsof
dollarsmoresavingsinthe
comingyear.Shell,another
oilfirm,reportedalossof
$6.1billioninthesame
quarter,comparedwitha$5.3
billionprofitlastyear.
Square,apaymentscompany
runbyJackDorsey,whois
alsobossofTwitter,reported
alossof$53.9minthethree
monthstotheendof
September.Theresultsare
expectedtobethelastitwill
publishbeforeaninitial
publicoffering.Squarewill
beoneofthefirst
“unicorns”—startupsvalued
atover$1billion—togo
public.
DeutscheBanksaiditwould
cut9,000full-timejobsand
pulloutoftencountriesafter
announcinga€6billionthird-
quarterloss.Itwillalso
suspenddividendsfortwo
years.
Theranos,oneofSilicon
Valley’smostprominent
start-ups,withavaluationof
around$9billion,faceda
barrageofnegativepress
reportssuggestingthefirm’s
blood-testingtechnologyis
notallitpurportstobe.
Theranosclaimsitcandoa
widevarietyofhealthtestsby
drawingafewdropsofblood
fromthefinger.However,the
WallStreetJournalclaimed
thatitstestsarenotreliable.
Everythingremainsrosyat
Apple,afterthefirmreleased
strongfourth-quarterresults.
Thefirmsold48miPhones
duringthelastthreemonths
ofitsfiscalyear,withsales
particularlystronginGreater
China.Apple’snetincome
was$11.1billion,compared
with$8.5billionduringthe
samequarterlastyear.
Americanregulatorssaidthey
wouldbelookinginto
accountingpracticesatIBM
andthewayitrecognised
revenue.Thenewscameas
thecomputerfirmsaidit
wouldbuyback$4billionof
itsshares. TwoofAmerica’sbiggest
pharmacychainslooksetto
merge.WalgreensBoots
Alliancesaysithasagreedto
buyRiteAidfor$17.2
billion.Thedealislikelyto
needapprovalfrom
competitionauthorities.
Pfizer,anAmerican
drugmaker,wasreportedto
beintalkstobuyAllerganto
createahealth-caregiant
worthmorethan$300billion.
Adrugproblem
ValeantPharmaceuticals
triedtorebutclaimsitwas
massagingitsfigures.Shares
inthedrugmakerhadfallen
afteritwascriticisedby
AndrewLeft,atrader,over
itsaccountingrelationship
withspecialistpharmacies.
Valeantdeniedwrongdoing.
Seearticle.
Financialregulatorsin
Nigeriaorderedthe
suspensionoffourpastand
presentdirectorsofStanbic
IBTC,adivisionofStandard
Bank,afteritaccusedthemof
accountingirregularities.
Stanbicdeniesthecharge.
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KAL’scartoon
Oct31st2015|Fromtheprint
edition
MoreKAL’scartoons
Thisarticlewasdownloadedby
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Leaders
Thepromiseof
theblockchain:
Thetrust
machine
Britain’sHouse
ofLords:Right
[Thu,29Oct18:57]
answer,spoken
outofturn
[Thu,29Oct
18:57]
Democracyin
Myanmar:Still
thegenerals’
election
Turkey’selection:
Sultanatbay
[Thu,29Oct18:57]
[Thu,29
Oct18:57]
Endingawar:
Lessonsfrom
Colombia
[Thu,29Oct
18:57]
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Thepromiseoftheblockchain
Thetrustmachine
Thetechnologybehind
bitcoincouldtransform
howtheeconomyworks
Oct31st2015|Fromtheprint
edition
BITCOINhasabad
reputation.Thedecentralised
digitalcryptocurrency,
poweredbyavastcomputer
network,isnotoriousforthe
wildfluctuationsinitsvalue,
thezealofitssupportersand
itsdegenerateuses,suchas
extortion,buyingdrugsand
hiringhitmenintheonline
bazaarsofthe“darknet”.
Thisisunfair.Thevalueofa
bitcoinhasbeenprettystable,
ataround$250,formostof
thisyear.Amongregulators
andfinancialinstitutions,
scepticismhasgivenwayto
enthusiasm(theEuropean
Unionrecentlyrecognisedit
asacurrency).Butmost
unfairofallisthatbitcoin’s
shadyimagecausespeopleto
overlooktheextraordinary
potentialofthe“blockchain”,
thetechnologythatunderpins
it.Thisinnovationcarriesa
significancestretchingfar
beyondcryptocurrency.The
blockchainletspeoplewho
havenoparticularconfidence
ineachothercollaborate
withouthavingtogothrough
aneutralcentralauthority.
Simplyput,itisamachine
forcreatingtrust.
Theblockchainfoodchain
Tounderstandthepowerof
blockchainsystems,andthe
thingstheycando,itis
importanttodistinguish
betweenthreethingsthatare
commonlymuddledup,
namelythebitcoincurrency,
thespecificblockchainthat
underpinsitandtheideaof
blockchainsingeneral.A
helpfulanalogyiswith
Napster,thepioneeringbut
illegal“peer-to-peer”filesharingservicethatwenton
linein1999,providingfree
accesstomillionsofmusic
tracks.Napsteritselfwas
swiftlyshutdown,butit
inspiredahostofotherpeerto-peerservices.Manyof
thesewerealsousedfor
piratingmusicandfilms.Yet
despiteitsdubiousorigins,
peer-to-peertechnology
foundlegitimateuses,
poweringinternetstartups
suchasSkype(fortelephony)
andSpotify(formusic
streaming)—andalso,asit
happens,bitcoin.
Theblockchainisaneven
morepotenttechnology.In
essenceitisashared,trusted,
publicledgerthateveryone
caninspect,butwhichno
singleusercontrols.The
participantsinablockchain
systemcollectivelykeepthe
ledgeruptodate:itcanbe
amendedonlyaccordingto
strictrulesandbygeneral
agreement.Bitcoin’s
blockchainledgerprevents
double-spendingandkeeps
trackoftransactions
continuously.Itiswhat
makespossibleacurrency
withoutacentralbank.
Blockchainsarealsothe
latestexampleofthe
unexpectedfruitsof
cryptography.Mathematical
scramblingisusedtoboil
downanoriginalpieceof
informationintoacode,
knownasahash.Anyattempt
totamperwithanypartofthe
blockchainisapparent
immediately—becausethe
newhashwillnotmatchthe
oldones.Inthiswaya
sciencethatkeeps
informationsecret(vitalfor
encryptingmessagesand
onlineshoppingandbanking)
is,paradoxically,alsoatool
foropendealing.
Bitcoinitselfmayneverbe
morethanacuriosity.
Howeverblockchainshavea
hostofotherusesbecause
theymeettheneedfora
trustworthyrecord,something
vitalfortransactionsofevery
sort.Dozensofstartupsnow
hopetocapitaliseonthe
blockchaintechnology,either
bydoingcleverthingswith
thebitcoinblockchainorby
creatingnewblockchainsof
theirown(seearticle).
Oneidea,forexample,isto
makecheap,tamper-proof
publicdatabases—land
registries,say,(Hondurasand
Greeceareinterested);or
registersoftheownershipof
luxurygoodsorworksofart.
Documentscanbenotarised
byembeddinginformation
aboutthemintoapublic
blockchain—andyouwillno
longerneedanotarytovouch
forthem.Financial-services
firmsarecontemplatingusing
blockchainsasarecordof
whoownswhatinsteadof
havingaseriesofinternal
ledgers.Atrustedprivate
ledgerremovestheneedfor
reconcilingeachtransaction
withacounterparty,itisfast
anditminimiseserrors.
Santanderreckonsthatit
couldsavebanksupto$20
billionayearby2022.
Twenty-fivebankshavejust
joinedablockchainstartup,
calledR3CEV,todevelop
commonstandards,and
NASDAQisabouttostart
usingthetechnologyto
recordtradinginsecuritiesof
privatecompanies.
Thesenewblockchainsneed
notworkinexactlytheway
thatbitcoin’sdoes.Manyof
themcouldtweakitsmodel
by,forexample,finding
alternativestoitsenergyintensive“mining”process,
whichpaysparticipants
newlymintedbitcoinsin
returnforprovidingthe
computingpowerneededto
maintaintheledger.Agroup
ofvettedparticipantswithin
anindustrymightinstead
agreetojoinaprivate
blockchain,say,thatneeds
lesssecurity.Blockchainscan
alsoimplementbusiness
rules,suchastransactions
thattakeplaceonlyiftwoor
morepartiesendorsethem,or
ifanothertransactionhas
beencompletedfirst.Aswith
Napsterandpeer-to-peer
technology,acleverideais
beingmodifiedand
improved.Intheprocess,itis
fastthrowingoffits
reputationforshadiness.
Newchainsontheblock
Thespreadofblockchainsis
badforanyoneinthe“trust
business”—thecentralised
institutionsand
bureaucracies,suchasbanks,
clearinghousesand
governmentauthoritiesthat
aredeemedsufficiently
trustworthytohandle
transactions.Evenassome
banksandgovernments
exploretheuseofthisnew
technology,otherswillsurely
fightit.Butgiventhedecline
intrustingovernmentsand
banksinrecentyears,away
tocreatemorescrutinyand
transparencycouldbenobad
thing.
Drawingupregulationsfor
blockchainsatthisearlystage
wouldbeamistake:the
historyofpeer-to-peer
technologysuggeststhatitis
likelytobeseveralyears
beforethetechnology’sfull
potentialbecomesclear.In
themeantimeregulators
shouldstaytheirhands,or
findwaystoaccommodate
newapproacheswithin
existingframeworks,rather
thanriskstiflingafast-
evolvingideawithoverly
prescriptiverules.
Thenotionofsharedpublic
ledgersmaynotsound
revolutionaryorsexy.Neither
diddouble-entrybookkeepingorjoint-stock
companies.Yet,likethem,
theblockchainisan
apparentlymundaneprocess
thathasthepotentialto
transformhowpeopleand
businessesco-operate.
Bitcoinfanaticsareenthralled
bythelibertarianidealofa
pure,digitalcurrencybeyond
thereachofanycentralbank.
Therealinnovationisnotthe
digitalcoinsthemselves,but
thetrustmachinethatmints
them—andwhichpromises
muchmorebesides.
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Britain’sHouseofLords
Rightanswer,spoken
outofturn
Aslongasitremains
unelected,thesecond
chambercannotbea
seriouscheckon
government
Oct31st2015|Fromtheprint
edition
RETURNEDtopowerwitha
surprisemajorityinMayand
nowfacingaweakLabour
opposition,Britain’s
Conservativegovernmenthas
foundeverythingalmosttoo
easy.Sureenough,on
October26thcamethe
bananaskin:aflailingdefeat
intheHouseofLords,the
drowsybutoccasionally
deadlyupperchamber,which
votedtodelayabigwelfare
cut.
Theslip-upwasrichly
deserved.Thescotchedplan,
totake£4.4billion($6.7
billion)intaxcredits,mostly
fromthelowest-paid,would
haveinflictedhardshiponthe
country’spoorestchildren
andreducedincentivesfor
theirparentstowork.Britain
isbetteroffwiththemeasures
onice.Yetthedefeatbythe
Lordspresentsabigger
problem.Unelectedand
unaccountable,thepeers
treadondangerousground
whentheyslapdownthe
plansofanelected
government.IftheHouseof
Lordsistoserveasacheck
onpower—which,asthis
weekshowed,isneeded—it
mustundergoafewreforms
ofitsown.
Peerpressure
Thetax-creditplansdeserved
atrashing.Thepeoplethey
affectedwouldnot,asthe
governmentclaimed,befully
reimbursedbyothertweaks
totaxpolicyandahigher
minimumwage(seearticle).
Farfromnudgingmore
peopleintoemployment,the
cutswouldreducethe
incentivetoworkformostof
them,raisingtheeffective
marginalrateoftaxtoas
muchas80%.Thehigher
minimumwagewilladdto
themessbyreducingthe
incentiveforemployersto
createjobs.
Followingthedefeatinthe
Lordsthechancellor,George
Osborne,haspromisedto
softenthereform’simpact,
perhapsbyraisingthe
thresholdfornationalinsurancecontributions.That
wouldn’twork:taxcreditsare
aimedatpoorfamilies,
whereashigherthresholds
wouldbenefitabroader,
richergroup.Theonlywayto
canceltheeffectsofthis
flawedpolicyistojunkit—or
takelessmoneyoutofthe
system.
SotheLordsareright.But
theyarealsowrong,having
oversteppedtheir
constitutionallimit,insofar
asanyonecantellwhereit
lies.A300-year-old
convention—formalised,sort
of,inacentury-oldlaw—
holdsthattheLordscannot
scupper“moneybills”(see
article).Thetax-credit
measureisastatutory
instrument,notabill,sosome
argueitisopentoscrutiny
(theToriesonlyhave
themselvestoblameforthis
doubt:theychoseastatutory
instrumenttocurbdebatein
theCommons).Butthe
billionsinplaymakeita
moneybillinallbutname.
Everytimetheunelected
Lordsflextheirmuscles
Britainislessdemocratic.
LabourandtheLiberal
Democratshandily
outnumbertheToriesthere,
thoughLabourwas
pummelledintheMay
election,andtheLiberal
Democratswerealmost
wipedout.Peersalmostnever
retire—evenafterearning
criminalconvictions—
meaningthechambertakesa
lifetimetooverhaul.Unlike
ministersofotherreligions,
26ChurchofEngland
bishopsgetaplace,though
onlyoneinsixBritonsis
Anglican.Thebishops
anointedtheirfirstwoman
onlythisyearandstill
exclude“practising”
homosexuals.Badasthetaxcreditplanis,itishardto
cheeritsdefeatbyachamber
oflosers,crooksandselfappointedholymen.
WithLaboursoweakinthe
Commons,analternative
checkonthegovernmentis
morevaluablethanever.The
Lordshavedefeatedthe
government19timessince
May,oftenwithgoodreason.
But,toactasabrake,they
needclarityandamandate.
Thatmeansawritten
constitutiontocodifytheir
powers,andelectionofits
members.TheCommons
resistsLordsreformforfear
ofarivalchamberwiththe
legitimacytochallengeit—
andthenproceedstoscream
illegitimacywheneverthe
Lordsblockslegislation.If
thetax-creditsdebacle
provokesarethink,itwillbe
longoverdue.
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DemocracyinMyanmar
Stillthegenerals’
election
Myanmar’spollwillbeless
riggedthanpreviousones,
butmilitaryruleisfarfrom
over
Oct31st2015|Fromtheprint
edition
ONNOVEMBER8th
Myanmarwillholdageneral
election(seearticle).Itwill
notbecompletelyfreeand
fair,butitwillbecompetitive
—thefirstin25yearsnotto
beboycottedbythemain
oppositionparty,ledbyAung
SanSuuKyi,whowonthe
Nobelpeaceprizein1991.
Foracountrythathas
sufferedsixdecadesof
militaryrule,albeitinrecent
yearsamuftiandslightlyless
thuggishformofit,thiswill
bearemarkablestep.
In1990MissSuuKyi’s
party,theNationalLeaguefor
Democracy(NLD),wona
landslidevictoryattheballot
box.Itshouldhaveformed
thegovernment,butthe
generalsignoredtheresult
andkeptherunderhouse
arrest(whereshealready
was)formostoftheensuing
twodecades.Fiveyearsago
theyconcoctedasham
election,whichtheNLD
boycotted.Nowthesignsare
morepromising:MissSuu
Kyiisfreeandtheopposition
willcertainlywinagain.The
armywillprobablykeepits
wordandaccepttheresult.
Thisishappeningbecauseof
twoimportantchanges.First,
in2011,anewreforming
governmentledbyaformer
general,TheinSein,cameto
power.Itsetaboutloosening
theshacklesthatthemenin
uniformhadwrappedaround
Myanmar,freeingmost
politicalprisonersandlifting
censorship.Second,MissSuu
Kyirespondedbychanging
tacticsandtakingpartin
electionsagain.In2012she
becamealegislatorafter
remarkablyfairby-elections.
TheWestrejoiced,andlifted
almostallofthesanctionsit
hadimposedontheold
militaryregime.
Butmilitaryruleisnotyet
over.Theelectionistaking
placeonthearmy’sterms.It
willprobablynotstuffballot
boxesorfalsifytheresults,
butonlybecauseitdoesnot
haveto.Underthe
constitution,foistedon
Myanmarbyarigged
referendumin2008,onequarterofMPsaredirectly
appointedbytheheadofthe
armedforces.Thevotesof
morethanthree-quartersof
MPsareneededtochangethe
constitution,whichempowers
thearmytooperatevirtually
asastatewithinastate—its
tentaclesreachintoalmost
everyaspectoflife,from
businesstowritingschool
textbooks.Nomatterhow
manymillionsofBurmese
voteagainsttheUnion
SolidarityandDevelopment
Party,whichrulesthecountry
andisbackedbythearmy,
thearmywillremainthereal
powerinMyanmar.
Whatismore,nomatterhow
manyvotesMissSuuKyi’s
partyreceives,shecannotbe
president.Thegeneralsmade
sureofthatwhentheywrote
intheirself-serving
constitutionthatnoonewith
aforeignhusbandor
offspringmayholdthat
office.(Thelatehusbandof
MissSuuKyiwasBritish,as
areherchildren.)Legislators
electthepresident;wereitnot
fortheconstitution,MissSuu
Kyiwouldbeashoo-infor
thejobiftheNLDwereto
winbyalandslide.Thusthe
electionwillneitherhelpto
bringabouttheconstitutional
changethatmostvoterswant
—andwhichthecountry
badlyneeds—norwillitgive
Myanmarthepresidentthat
itspeoplewouldchoose.
Myanmaringraphics:An
unfinishedpeace
Westernnaivetyhasnot
helped.Richdemocracies
weretooquicktoassumethat
Myanmarwassafelyonthe
roadtopluralism,andlost
bargainingpoweroverthe
generalswhentheylifted
mostoftheirsanctionsin
2012.Withtheendof
Myanmar’sisolation,foreign
investmentpouredin,
spurringeconomicgrowth.At
thesametime,however,
politicalreformstalled.The
armyresistedfurther
liberalisationbecauseithad
alreadygotmostofwhatit
wantedfromtheWest.The
NLDcollectedmillionsof
signaturesinaneffortto
persuadethegovernmentto
endtheeffectivemilitaryveto
onconstitutionalchange.The
generalssaidno.
Notimetorelax
Myanmar’scitizensdeserve
better.Thenewlegislature
willassumeitsdutiesin
March.TheWestshouldcall
forittochangethe
constitutionsoastobanish
thearmyfrompolitics.This
shouldalsohelptosecurea
lastingpeacebetweenthe
centralgovernmentand
minorityethnicgroupswhich
havelongchafedat
repressiverulebythearmy.
Itwillnotbeeasy.Buta
strongshowingbytheNLD
willsignalthatvoterswant
politicalchangeaswellasthe
economicsort.Perhapsthe
armywillbowtothewillof
thepeopleitsupposedly
protects,andreturnto
barracks.ButtheWestwould
beunwisetowait
indefinitely,ortokeep
grantingfavourstothearmy
forfearthatsulkygenerals
willturninsteadtoChinafor
support.Thearmymayresent
beinglecturedabout
democracyandhumanrights,
butitwouldratherdealwith
theWestthanbeinthrallto
Myanmar’sgiantneighbour
totheNorth.Ifthearmy
refusestobowout,America
andtheEuropeanUnion
shouldreimposetargeted
sanctions.Thatwouldgive
thegeneralscauseto
reconsider.
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Turkey’selection
Sultanatbay
Turksshouldvoteagainst
therulingJusticeand
Developmentpartyon
November1st
Oct31st2015|Fromtheprint
edition
DONOTunderestimatethe
importanceofTurkeytothe
West.Inthecoldwaritwasa
NATObulwarkagainstthe
SovietUnion.Thenitwasa
modelofathrivingMuslim
democracyontheedgeofan
oppressiveandviolently
chaoticArabworld.More
recentlyTurkeyhas
admirablytakenin2m
refugeesfleeingfighting
acrosstheborderinSyria.
ButthesedaysTurkey’s
reputationistarnished.An
electiononNovember1st
takesplaceatatimeof
renewedwaragainstKurdish
PKKguerrillas,suicidebombingsathome,assaults
onafreemedia,the
sideliningofindependent
prosecutorsandjudges,anda
sensethatTurkeyhas
sometimesbeenworryingly
indulgenttowardsthe
jihadistsofIslamicState(IS).
Theblameformuchofthis
lieswiththecountry’s
imperiouspresident,Recep
TayyipErdogan.Theelection
hehasengineered,thesecond
infivemonths,isanattempt
toentrenchhimselfinpower.
Turksshouldrebukehimby
votingforhisopponents,and
puthimbackinthe
ceremonialboxhe
supposedlysteppedintowhen
hebecamepresidentayear
ago.
Thesignsarethatmany
Turksareindeedtiringofthe
anticsoftheirformidablebut
increasinglyautocraticand
intolerantpresident.InJune
theJusticeandDevelopment
(AK)partythathecofounded14yearsagolostits
majorityinageneralelection.
Thepropercoursewouldthen
havebeenfortheparty’s
leader,AhmetDavutoglu,to
formacoalitiongovernment,
ortoletotherpartieshavea
shot.Yeteventhough,as
president,MrErdoganis
meanttostandabovethefray,
heintervenedtoscupperall
effortsatcoalition-building.
Hisplanwastoforcea
secondelectionthathehoped
wouldnotjustrestoreAK’s
majoritybutmightevenwin
itthethree-fifthsofseatsit
needsifitistopropose
constitutionalchange—and
therebycreateapresidential
systeminwhichhewould
haveextrapowers.
Worsestill,tomaximise
AK’schances,MrErdogan
hastorpedoedthepeace
processwiththecountry’s
Kurdsinthehopethatthis
willpushdownthevotefor
thepro-KurdishPeople’s
DemocraticParty(HDP).
Thisisespeciallysadsince,
asprimeminister,Mr
Erdoganwasabrave
proponentofapeace
settlementwiththeKurds.
Nowthearmyisonceagain
atwarwithKurdishPKK
fighters.Turkishwarplanes
havestruckKurdish
strongholdsinSyriaandIraq,
eventhoughKurdshave
provedtobeamongthemost
effectiveopponentsofboth
Syria’spresident,BasharalAssad,andIS.InsideTurkey
astringofshootingsand
bombings,includinga
horrificdoublesuicide-
bombinginAnkaraon
October10th,widely
attributedtoIS,whichkilled
102people,havemadeit
almostimpossibleforthe
HDPtoholdelectionrallies
aroundthecountry.Its
membershavealsobeenkept
offtheairwaves,asmedia
intimidationhasbeenusedto
hobbleoppositionparties(see
article).
Fortunately,mostTurkish
votersseemnottohavebeen
swayedbyMrErdogan’s
cynicalmanoeuvring.Most
opinionpollssuggestthatthe
HDPwillonceagaingetover
the10%thresholdofthevote
neededtowinseatsinthe
grandnationalassembly.That
meansthereislikelytobe
anotherhungparliament.This
timethepresidentmustnot
sabotagethetaskofforminga
coalitiongovernment.
ErodingErdogan’spower:
OurguidetoTurkey’s
generalelections
Asteadyandreliable
governmentisespeciallyvital
justnowbecauseTurkey
facesbigchallengesathome
andabroad.Theeconomyhas
slowed,inflationand
unemploymenthaverisenand
thelirahastumbled.The
countryneedsdetermined
liberalisationtoincrease
labour-andproduct-market
flexibilityandimprove
competitiveness.The
breakdownoftheKurdish
peaceprocessandtherisein
violencehascastapallnot
justoverthesouth-eastof
Turkeybutalsooverthe
wholecountry’stourist
industry.
Thentherearethetroublesin
theregion,mostnotably
Syria.MrErdoganwentout
onalimbfouryearsagoin
demandingthatMrAssadhad
togo.Hehasbelatedly
allowedtheAmericanstouse
theirIncirlikairbasetobomb
IStargets,yethisownair
forcehasdirecteditsattacks
mostlyagainsttheKurds.
Turkeyhastakeninmore
Syrianrefugeesthanother
countries,butithasalso
becomethemainmigrant
routetoEurope.Anew
governmentwillhaveto
reassessitsapproachtoSyria
andtothehandlingof
refugees—anditshoulddo
thisinco-operationwithits
EuropeanandNATOallies,
notagainstthem.
Theadviceoffriends
Turkey’salliesshouldnot
tonedowntheircriticismsof
MrErdogan.SomeEuropean
Unionleadershaveshown
worryingsignsofdoingthis
topersuadehimtobemore
helpfulinstemmingtheflow
ofrefugeesandother
migrantstoEurope.This
year’sEuropeanCommission
annualassessmentofTurkey,
whichwasexpectedtobe
highlycriticalofthe
government’sundemocratic
habits,hasbeenquietly
postponed.Aftertheelection,
anynewgovernmentislikely
totrybothtoreinvigorate
Turkey’sstalledEU
accessiontalksandtowin
visa-freeaccesstoEuropefor
itscitizens.TheEUshould
makeclearthatprogresson
thesewilldependonmoves
torestorefullerdemocratic
freedomsinTurkey.
MrErdoganandhisAK
governmentdidmuchto
reformTurkeyandto
improveitseconomyinthe
2000s.Butafterovera
decadeinpower,heisno
longergoodforhiscountry.
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Endingawar
Lessonsfrom
Colombia
Outsidersshouldnotunpick
ahard-woncompromise
betweenpeace,truthand
justice
Oct31st2015|Fromtheprint
edition
FORbetterandforworse,
Colombiaisanexceptionto
theruleinLatinAmerica.
Thethird-most-populous
countryintheregion(with
50mpeople)hasseensteady
economicgrowthby
eschewingpopulism,
hyperinflationanddefault.It
canclaimtobetheregion’s
oldestdemocracy.Yetits
guerrillawarshavelastedhalf
acentury,killingmorethan
220,000peopleand
displacing6.5m.Now,atlast,
theconflictisclosetoending
(seeourspecialreport).That
mattersnotjustforColombia,
butalsoforitsneighbours
andtheworld.
Forthepastthreeyearsthe
FARC,thebiggestofthe
illegalarmies,hasbeenin
peacetalkswiththe
governmentofJuanManuel
Santos.Lastmonthproduced
abreakthrough:anoutline
accordon“transitional
justice”—orthepenaltiesthat
guerrillacommanders
accusedofcrimesagainst
humanityshouldface.Having
thusagreedonthetrickiest
itemofthesixontheagenda,
MrSantoscoaxedtheFARC
intoacceptingasix-month
deadlinetowrapupthetalks.
TheFARC’sleaderswould
havetoconfesstheircrimes
toatruthcommissionand
submittoaspecialtribunal.If
theydothis,anddisarm,they
willbeeligibleforalternative
sentences—uptoeightyears
ofcommunityserviceina
facilitythatisnotaprisonbut
isnothome,either.Army
officersguiltyofcrimeswill
begivensimilarleniency,as
willthosewhofinanced
formerright-wing
paramilitaries.
ManyColombians,ledby
ÁlvaroUribe,MrSantos’s
predecessor,areoutragedthat
FARCcommanderswho
orderedkidnapsand
bombingswillnotbejailed.
Theyabhortheideathatfor
legalpurposesthearmywill
bebracketedwiththeFARC.
Theyareright:thedealis
hardtostomach.Butitisthe
bestcompromiseonoffer.
TheFARCwillnotreceive
theblanketamnestygranted
toallpreviousLatin
Americanguerrillaswho
disarmed;thesentencesare
longerthanexpected;andthe
guiltywillhavetoconfessall.
Thiscanhelpanationheal,as
SouthAfrica’s(muchless
rigorous)truthcommission
showed.Toopposethisdeal
istoargueforprolongingthe
war.Solongasamajorityof
Colombianssupportthedeal,
internationallawyersshould
nottrytounpickit.
Alastpushforpeace
Therearestillmanyloose
ends.TheELN,asmaller
guerrillagroup,isnotmaking
peace.ManyFARCleaders
seemfarfrombecoming
democrats.Thegovernment
mustactfasttoorganise
internationalmonitoringof
theFARC’sdisarmament,to
providesecurityinareas
wheretheconflicthasbeen
mostintenseandtopromote
ruraldevelopmentsothatexguerrillascanfindjobs.
Cuttingtheflowofdrug
moneythatfundstheFARC
isalsoimportant—though,as
longascocaineisillegal
aroundtheworld,thetrade
willremainsoprofitablethat
thiswillbehard.Colombia
mustavoidwhathappened
aftercivilwarsinCentral
Americainthe1980sand
1990s,wherepeaceledtoan
explosionofviolentcrime.In
allthisitwillneedthe
understandingandsupportof
theoutsideworld.
Fifteenyearsagomany
outsidersfearedthat
Colombiawouldbecomea
failedstate.Insteadthe
governmentunderMrUribe
drovetheguerrillasbackand
persuadedtheFARCthatit
couldnotwinpowerbyforce.
Crushingthe6,000remaining
FARCfighterswouldtake
decadesmoreofbloodshed.
MrSantoswasrightto
negotiatewiththem;Mr
Uribeshouldsupporthim.If
Colombiaistomakepeace,
itsleadingpoliticiansmust
worktogether.
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Letters
OnAsianAmericans,
malaria,Iraq,
Canada,
Scotland,the
SouthChinaSea,
AngusDeaton,
HillaryClinton:
Letters
[Thu,29Oct18:57]
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OnAsian-Americans,malaria,Iraq,
Canada,Scotland,theSouthChina
Sea,AngusDeaton,HillaryClinton
Letters
Oct31st2015|Fromtheprint
edition
Lettersarewelcomeviaemailto
[email protected]
Thebambooceiling
Weenjoyedyourbriefingon
discriminationagainstAsianAmericans,especiallyin
academia(“Themodel
minorityislosingits
patience”,October3rd).As
immigrantsfromChina,we
arewillingtoputintheextra
efforttoovercomebarriers.
Wearecontentwiththatand
havebeen“quiescent”,asyou
say.However,mywifeandI
feelbitterwhenlookingatthe
futureforournine-year-old
son.Heislikelyto
experiencemore
disappointmentsinlife
becauseofhisChinese
heritage,despitebeingborn
inAmerica.Asfaras
universityadmissionsare
concerned,Asian-Americans
aresqueezedontwofronts:
affirmativeactionthat
favoursotherminority
groups,andadmissions
policiestailoredtothe
descendantsofalumniand
bigdonors.
Comparetwominoritygroups
inAmerica,Chineseand
Jewishpeople.Wehave
manyJewishfriends,andsent
oursontoapre-schoolrunby
thelocalJewishcommunity
centre.Therearemany
similaritiesbetweenthetwo
groups,andyet,duringevery
presidentialelectionweare
struckbyhowdifferently
theyaretreated.Nocandidate
caneverdoenoughtopraise
IsraelandIsraelis,andatthe
sametimebashingChinaand
theChinese.CarlyFiorina,
forexample,saidtheChinese
can’tinnovate:“They’renot
terriblyimaginative.They’re
notentrepreneurial…That’s
whythey’restealingour
intellectualproperty.”
HUICAI
CYNTHIAJU
Denver YourlamentthatAsiansare
underrepresentedatthetopis
misleadingbecauseitdoesn’t
controlforage.Partnersin
lawfirms,electedlegislators
likeyour“SenatorKim”,
executivesofbigcompanies
andotherleadersinsociety
areusuallyintheir50sand
60s.Butthesharpriseof
Asiansasapercentageofthe
totalpopulationisafairly
recentphenomenon.
AccordingtoCensusBureau,
theirrelativenumbersgrew
bymorethan46%from2000
to2010.Likemost
immigrants,thosenew
arrivalsaremainlyyoung
people.Givethemtime.
DAVIDBOOK
Monterey,California
Oneimportantreasonwhy
Asian-Americansarefinding
ithardertogetintotheIvy
Leagueandotherhighly
selectiveuniversitiesisthe
riseininternationalstudents,
includingfromAsia.The
shareofinternational
admissionshasnearly
doubledinselectivecolleges
anduniversitiesinthepast20
years,andthistrendhas
acceleratedinrecentyearsas
universitiesseekgreater
internationalprestige.
PROFESSORKARTHICK
RAMAKRISHAN
SchoolofPublicPolicy
UniversityofCalifornia,
Riverside
*YourbriefingonAsianAmericanswasvery
interestingandrefreshingfor
itscoverageofagroupthat
getsrelativelylittlemedia
attention.However,itis
worthmentioningoneareaof
academiathatwasn’tcovered
indetail.Artschools—
specificallyfashionschools—
attractalargenumberof
Asianstudents:theFashion
InstituteofTechnologyin
NewYorkhasmoreSouth
Koreanstudentsamongits
internationalstudent
populationthanthenextfive
countriesoforigincombined,
threeofwhicharealsoin
Asia.Dao-YiChow,an
Asian-AmericanandNew
Yorknative,wasjustnamed
co-creativedirectorofDonna
Karan,aflagshipAmerican
fashionhouse.Inanindustry
thatservesasanindicatorof
futuretrendsinart,culture
andsociety,Asian-Americans
andAsianpeopleingeneral
haveaprominentpresence.
NICHOLASPAGANELLI
NewYork
“Tigerancestors”(October
3rd)reckonedthat“the
bloodiestsingleepisodeof
mobjustice”inAmerica’s
historytookplaceinLos
Angelesin1871,when17
Chinesewerelynched.In
fact,theworstmassacreof
ChineseoccurredinRock
Springs,Wyoming,in1885,
when28Chinesewere
murdered.
MERVINBLOCK
NewYork
Sciencevmalaria
Thenumbersyoucited
regardingtheinvestmentfor
researchingmalariaandother
diseasessuggestthatfunding
isontherighttrack
(“Breakingthefever”,
October10th).Unfortunately,
therecenttrendbehindthe
figuresisadifferentone.
AccordingtoPolicyCures,an
organisationwhichtracks
globalinvestmentsinR&D
onpoverty-relateddiseases,
theglobalfundinginresearch
intomalariadroppedfrom
$656min2009to$549min
2013.
Thiscomesatacriticaltime.
Manyoftheinnovative
productsunderdevelopment,
novelvaccinesanddrugsin
particular,arenowreadyto
entermid-tolate-stage
clinicaldevelopment,in
whichtheefficacyofthese
productswillbetestedinvery
expensivelarge-scaleclinical
trialsinareaswherediseaseis
endemic.
Theshortageinfunding
seriouslydelaysand
jeopardisesthesefinalstages
ofdevelopment.
ODILELEROY
Executivedirector
STEFANJUNGBLUTH
Headofbusiness
development
EuropeanVaccineInitiative
Heidelberg,Germany
ChristiansinIraq
Oneshouldnotforgetwhen
describingthepost-Bush
harassmentofChristiansin
IraqthatSaddamHussein’s
long-servingforeignminister,
TariqAziz,wasaChristian
(“Nour’slist”,October17th).
Also,twoofHussein’stop
scientists,RihabRashidTaha
al-Azzawial-TikritiandHuda
SalihMahdiAmmash,were
womenandcoulddressas
theypleased.Noneofthisis
possibleinthenewand
improved,liberatedIraq.
ANDRZEJDERKOWSKI
Oakville,Ontario
MeanwhileinCanada
StephenHarper’santiMuslimtacticsinthe
Canadianelectionwere
ineffectiveand
counterproductive(“Veiled
attack”,October10th).You
onlyhavetolookatthe
failureofMrHarper’s
ConservativePartytore-elect
evenaminoritygovernment
andthestunningsuccessof
JustinTrudeauandthe
LiberalPartyinachievinga
majoritygovernment.
DAVIDALLMAN
Vancouver
Education,education,
education
*Bagehot(October17th)
comprehensivelyhighlighted
thecontrollingzealofthe
ScottishNationalParty(SNP)
governmentinScotland.
Nothingbetterillustratesthis
thantheirdesiretoerase
centuriesofautonomyat
venerableScottish
universitieswiththeir
proposedhighereducation
governancebill.Freedomof
thoughtisoneofthebest
attributesofanycivilised
societyanddiverse
universitiesexemptfromstate
controlprovidethis.The
Scottishgovernmentneedsto
understandthatwithpower
comesgreatresponsibility
whichtranscendsgeographic
borders.Ifeartheymaybe
slowlearners.
NIGELMORECROFT
Non-executivememberof
court
UniversityofStAndrews
Great-powerpolitics
“Whorulesthewaves”
(October17th)correctly
highlightedtheshortcomings
ofChinesenavalstrategy:the
Chinesepolicyofincreasing
itsmilitarypresenceinthe
islandsintheSouthChina
Seaisabsurd.Controlofthe
SouthChinaSeaisabout
controlofthechokepoints
aroundthesea—theMalacca,
LuzonandTaiwanStraits.
ThecurrentChinesemilitary
build-upwillpushthose
countriesaroundthechoke
pointstobuilduptheir
militarystrength,thus
entrenchingtheircontrol.For
example,thePhilippinescan
outflankcurrentChinese
manoeuvresbybuildingup
itsmilitarypresenceinthe
islandsitpossessesinthe
LuzonStrait.Anygainsthe
Chinesemakewouldbe
entirelyphyrricifother
countriescanshutdownthe
seatoChinesevessels.
IVANYUEN
HongKong
Wonkery
YoudescribedAngus
Deaton’searlyworkasan
economistas“wonky”(Free
exchange,October17th).Are
yousureyoudon’tmean
“wonkish”?ForMrDeaton’s
sake,onewouldhopeso.
Thenagain,giventhe
lamentablerecordof
policymakersingeneral,it
doesraisethequestion:are
thesewordsperhaps
synonymsafterall?
DAVIDCHAPLIN
CapeTown
Mediabias
Perhaps,ifthemediahadn’t
writtenoffthethree
candidatesintheDemocratic
primaryracewho“…
matteredhardlyatall”,there
wouldbemoreemphasison
actualdebating(Lexington,
October17th).
Toooftenothercandidates
arecutoffinfavourof
providingHillaryClinton
withapulpittofurtherher
campaign.
Itwillcertainlybeaonehorseraceiftheotherrunners
areprovidedmulestorideon.
FRANCISCOSILVA
Oceanside,NewYork
*Lettersappearonlineonly
Thisarticlewasdownloadedby
calibrefrom
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Briefing
Blockchains:The
greatchainof
beingsureabout
things
[Thu,29Oct18:57]
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Blockchains
Thegreatchainof
beingsureabout
things
Thetechnologybehind
bitcoinletspeoplewhodo
notknowortrusteach
otherbuildadependable
ledger.Thishas
implicationsfarbeyondthe
cryptocurrency
Oct31st2015|Fromtheprint
edition
WHENtheHonduranpolice
cametoevictherin2009
MarianaCatalinaIzaguirre
hadlivedinherlowlyhouse
forthreedecades.Unlike
manyofherneighboursin
Tegucigalpa,thecountry’s
capital,sheevenhadan
officialtitletothelandon
whichitstood.Butthe
recordsatthecountry’s
PropertyInstituteshowed
anotherpersonregisteredas
itsowner,too—andthat
personconvincedajudgeto
signanevictionorder.Bythe
timethelegalconfusionwas
finallysortedout,Ms
Izaguirre’shousehadbeen
demolished.
Itisthesortofthingthat
happenseverydayinplaces
wherelandregistriesare
badlykept,mismanaged
and/orcorrupt—whichisto
sayacrossmuchoftheworld.
Thislackofsecureproperty
rightsisanendemicsourceof
insecurityandinjustice.It
alsomakesithardertousea
houseorapieceoflandas
collateral,stymying
investmentandjobcreation.
Suchproblemsseemworlds
awayfrombitcoin,acurrency
basedonclevercryptography
whichhasadevoted
followingamongmostly
well-off,oftenanti-
governmentandsometimes
criminalgeeks.Butthe
cryptographictechnologythat
underliesbitcoin,calledthe
“blockchain”,has
applicationswellbeyondcash
andcurrency.Itoffersaway
forpeoplewhodonotknow
ortrusteachothertocreatea
recordofwhoownswhatthat
willcompeltheassentof
everyoneconcerned.Itisa
wayofmakingand
preservingtruths.
Thatiswhypoliticians
seekingtocleanupthe
PropertyInstitutein
HondurashaveaskedFactom,
anAmericanstartup,to
provideaprototypeofa
blockchain-basedland
registry.Interestintheidea
hasalsobeenexpressedin
Greece,whichhasnoproper
landregistryandwhereonly
7%oftheterritoryis
adequatelymapped.
Aplaceinthepast
Otherapplicationsfor
blockchainandsimilar
“distributedledgers”range
fromthwartingdiamond
thievestostreamlining
stockmarkets:theNASDAQ
exchangewillsoonstart
usingablockchain-based
systemtorecordtradesin
privatelyheldcompanies.
TheBankofEngland,not
knownfortechnological
flightsoffancy,seems
electrified:distributed
ledgers,itconcludedina
researchnotelatelastyear,
area“significantinnovation”
thatcouldhave“far-reaching
implications”inthefinancial
industry.
Thepoliticallymindedsee
theblockchainreaching
furtherthanthat.Whencooperativesandleft-wingers
gatheredforthisyear’s
OuiShareFestinParisto
discusswaysthatgrass-roots
organisationscould
underminegiantrepositories
ofdatalikeFacebook,the
blockchainmadeitinto
almosteveryspeech.
Libertariansdreamofaworld
wheremoreandmorestate
regulationsarereplacedwith
privatecontractsbetween
individuals—contractswhich
blockchain-based
programmingwouldmake
self-enforcing.
Theblockchainbeganlifein
themindofSatoshi
Nakamoto,thebrilliant,
pseudonymousandsofar
unidentifiedcreatorofbitcoin
—a“purelypeer-to-peer
versionofelectroniccash”,as
heputitinapaperpublished
in2008.Toworkascash,
bitcoinhadtobeableto
changehandswithoutbeing
divertedintothewrong
accountandtobeincapable
ofbeingspenttwicebythe
sameperson.TofulfilMr
Nakamoto’sdreamofa
decentralisedsystemthe
avoidanceofsuchabuseshad
tobeachievedwithout
recoursetoanytrustedthird
party,suchasthebanks
whichstandbehind
conventionalpayment
systems.
Itistheblockchainthat
replacesthistrustedthird
party.Adatabasethat
containsthepaymenthistory
ofeverybitcoinin
circulation,theblockchain
providesproofofwhoowns
whatatanygivenjuncture.
Thisdistributedledgeris
replicatedonthousandsof
computers—bitcoin’s
“nodes”—aroundtheworld
andispubliclyavailable.But
forallitsopennessitisalso
trustworthyandsecure.This
isguaranteedbythemixture
ofmathematicalsubtletyand
computationalbruteforce
builtintoits“consensus
mechanism”—theprocessby
whichthenodesagreeon
howtoupdatetheblockchain
inthelightofbitcoin
transfersfromonepersonto
another.
LetussaythatAlicewantsto
payBobforservices
rendered.Bothhavebitcoin
“wallets”—softwarewhich
accessestheblockchainrather
asabrowseraccessesthe
web,butdoesnotidentifythe
usertothesystem.The
transactionstartswithAlice’s
walletproposingthatthe
blockchainbechangedsoas
toshowAlice’swalletalittle
emptierandBob’salittle
fuller.
Thenetworkgoesthrougha
numberofstepstoconfirm
thischange.Astheproposal
propagatesoverthenetwork
thevariousnodescheck,by
inspectingtheledger,whether
Aliceactuallyhasthebitcoin
shenowwantstospend.If
everythinglookskosher,
specialisednodescalled
minerswillbundleAlice’s
proposalwithothersimilarly
reputabletransactionsto
createanewblockforthe
blockchain.
Thisentailsrepeatedly
feedingthedatathrougha
cryptographic“hash”
functionwhichboilsthe
blockdownintoastringof
digitsofagivenlength(see
diagram).Likealotof
cryptography,thishashingis
aone-waystreet.Itiseasyto
gofromthedatatotheirhash;
impossibletogofromthe
hashbacktothedata.But
thoughthehashdoesnot
containthedata,itisstill
uniquetothem.Changewhat
goesintotheblockinany
way—alteratransactionbya
singledigit—andthehash
wouldbedifferent.
Runningintheshadows
Thathashisput,alongwith
someotherdata,intothe
headeroftheproposedblock.
Thisheaderthenbecomesthe
basisforanexacting
mathematicalpuzzlewhich
involvesusingthehash
functionyetagain.This
puzzlecanonlybesolvedby
trialanderror.Acrossthe
network,minersgrind
throughtrillionsandtrillions
ofpossibilitieslookingforthe
answer.Whenaminerfinally
comesupwithasolution
othernodesquicklycheckit
(that’stheone-waystreet
again:solvingishardbut
checkingiseasy),andeach
nodethatconfirmsthe
solutionupdatesthe
blockchainaccordingly.The
hashoftheheaderbecomes
thenewblock’sidentifying
string,andthatblockisnow
partoftheledger.Alice’s
paymenttoBob,andallthe
othertransactionstheblock
contains,areconfirmed.
Thispuzzlestageintroduces
threethingsthataddhugely
tobitcoin’ssecurity.Oneis
chance.Youcannotpredict
whichminerwillsolvea
puzzle,andsoyoucannot
predictwhowillgettoupdate
theblockchainatanygiven
time,exceptinsofarasithas
tobeoneofthehardworking
miners,notsomerandom
interloper.Thismakes
cheatinghard.
Thesecondadditionis
history.Eachnewheader
containsahashofthe
previousblock’sheader,
whichinturncontainsahash
oftheheaderbeforethat,and
soonandsoonalltheway
backtothebeginning.Itis
thisconcatenationthatmakes
theblocksintoachain.
Startingfromallthedatain
theledgeritistrivialto
reproducetheheaderforthe
latestblock.Makeachange
anywhere,though—even
backinoneoftheearliest
blocks—andthatchanged
block’sheaderwillcomeout
different.Thismeansthatso
willthenextblock’s,andall
thesubsequentones.The
ledgerwillnolongermatch
thelatestblock’sidentifier,
andwillberejected.
Isthereawayroundthis?
ImaginethatAlicechanges
hermindaboutpayingBob
andtriestorewritehistoryso
thatherbitcoinstaysinher
wallet.Ifshewerea
competentminershecould
solvetherequisitepuzzleand
produceanewversionofthe
blockchain.Butinthetimeit
tookhertodoso,therestof
thenetworkwouldhave
lengthenedtheoriginal
blockchain.Andnodes
alwaysworkonthelongest
versionoftheblockchain
thereis.Thisrulestopsthe
occasionswhentwominers
findthesolutionalmost
simultaneouslyfromcausing
anythingmorethana
temporaryforkinthechain.It
alsostopscheating.Toforce
thesystemtoaccepthernew
versionAlicewouldneedto
lengthenitfasterthantherest
ofthesystemwas
lengtheningtheoriginal.
Shortofcontrollingmore
thanhalfthecomputers—
knowninthejargonasa
“51%attack”—thatshould
notbepossible.
Dreamsaresometimes
catching
Leavingasidethedifficulties
oftryingtosubvertthe
network,thereisadeeper
question:whybothertobe
partofitatall?Becausethe
thirdthingthepuzzle-solving
stepaddsisanincentive.
Forginganewblockcreates
newbitcoin.Thewinning
minerearns25bitcoin,worth
about$7,500atcurrent
prices.
Allthisclevernessdoesnot,
initself,makebitcoina
particularlyattractive
currency.Itsvalueisunstable
andunpredictable(seechart),
andthetotalamountin
circulationisdeliberately
limited.Buttheblockchain
mechanismworksverywell.
Accordingtoblockchain.info,
awebsitethattrackssuch
things,onanaverageday
morethan120,000
transactionsareaddedtothe
blockchain,representing
about$75mexchanged.
Therearenow380,000
blocks;theledgerweighsin
atnearly45gigabytes.
Mostofthedatainthe
blockchainareaboutbitcoin.
Buttheydonothavetobe.
MrNakamotohasbuiltwhat
geekscallan“open
platform”—adistributed
systemtheworkingsofwhich
areopentoexaminationand
elaboration.Theparagonof
suchplatformsistheinternet
itself;otherexamplesinclude
operatingsystemslike
AndroidorWindows.
Applicationsthatdependon
basicfeaturesofthe
blockchaincanthusbe
developedwithoutasking
anybodyforpermissionor
payinganyoneforthe
privilege.“Theinternet
finallyhasapublicdata
base,”saysChrisDixonof
AndreessenHorowitz,a
venture-capitalfirmwhich
hasfinancedseveralbitcoin
start-ups,includingCoinbase,
whichprovideswallets,and
21,whichmakesbitcoinmininghardwareforthe
masses.
Fornowblockchain-based
offeringsfallinthreebuckets.
Thefirsttakesadvantageof
thefactthatanytypeofasset
canbetransferredusingthe
blockchain.Oneofthe
startupsbettingonthisideais
Colu.Ithasdevelopeda
mechanismto“dye”very
smallbitcointransactions
(called“bitcoindust”)by
addingextradatatothemso
thattheycanrepresentbonds,
sharesorunitsofprecious
metals.
Protectinglandtitlesisan
exampleofthesecond
bucket:applicationsthatuse
theblockchainasatruth
machine.Bitcointransactions
canbecombinedwith
snippetsofadditional
informationwhichthenalso
becomeembeddedinthe
ledger.Itcanthusbea
registryofanythingworth
trackingclosely.Everledger
usestheblockchaintoprotect
luxurygoods;forexampleit
willstickontotheblockchain
dataaboutastone’s
distinguishingattributes,
providingunchallengeable
proofofitsidentityshouldit
bestolen.Onenamestores
personalinformationinaway
thatismeanttodoawaywith
theneedforpasswords;
CoinSparkactsasanotary.
Note,though,thatforthese
applications,unlikeforpure
bitcointransactions,acertain
amountoftrustisrequired;
youhavetobelievethe
intermediarywillstorethe
dataaccurately.
Itisthethirdbucketthat
containsthemostambitious
applications:“smart
contracts”thatexecute
themselvesautomatically
undertherightcircumstances.
Bitcoincanbe“programmed”
sothatitonlybecomes
availableundercertain
conditions.Oneuseofthis
abilityistodeferthepayment
minersgetforsolvinga
puzzleuntil99moreblocks
havebeenadded—which
providesanotherincentiveto
keeptheblockchainingood
shape.
Lighthouse,aprojectstarted
byMikeHearn,oneof
bitcoin’sleading
programmers,isa
decentralisedcrowdfunding
servicethatusesthese
principles.Ifenoughmoney
ispledgedtoaprojectitall
goesthrough;ifthetargetis
neverreached,nonedoes.Mr
Hearnsayshisschemewill
bothbecheaperthannonbitcoincompetitorsandalso
moreindependent,as
governmentswillbeunable
topulltheplugonaproject
theydon’tlike.
Energyiscontagious
Theadventofdistributed
ledgersopensupan“entirely
newquadrantof
possibilities”,inthewordsof
AlbertWengerofUSV,a
NewYorkventurefirmthat
hasinvestedinstartupssuch
asOpenBazaar,amiddleman-
freepeer-to-peermarketplace.
Butforallthattheblockchain
isopenandexciting,sceptics
arguethatitssecuritymayyet
befallibleanditsprocedures
maynotscale.Whatworks
forbitcoinandafewniche
applicationsmaybeunableto
supportthousandsofdifferent
serviceswithmillionsof
users.
ThoughMrNakamoto’s
subtledesignhassofar
provedimpregnable,
academicresearchershave
identifiedtacticsthatmight
allowasneakyandwell
financedminerto
compromisetheblockchain
withoutdirectcontrolof51%
ofit.Andgettingcontrolof
anappreciablefractionofthe
network’sresourceslooks
lessunlikelythanitusedto.
Oncethepurviewof
hobbyists,bitcoinminingis
nowdominatedbylarge
“pools”,inwhichsmall
minerssharetheireffortsand
rewards,andtheoperatorsof
bigdatacentres,manybased
inareasofChina,suchas
InnerMongolia,where
electricityischeap.
Anotherworryistheimpact
ontheenvironment.Withno
otherwaytoestablishthe
bonafidesofminers,the
bitcoinarchitectureforces
themtodoalotofhard
computing;this“proofof
work”,withoutwhichthere
canbenoreward,insuresthat
allconcernedhaveskininthe
game.Butitaddsuptoalot
ofotherwisepointless
computing.Accordingto
blockchain.infothenetwork’s
minersarenowtrying450
thousandtrillionsolutionsper
second.Andevery
calculationtakesenergy.
Becauseminerskeepdetails
oftheirhardwaresecret,
nobodyreallyknowshow
muchpowerthenetwork
consumes.Ifeveryonewere
usingthemostefficient
hardware,itsannual
electricityusagemightbe
abouttwoterawatt-hours—a
bitmorethantheamount
usedbythe150,000
inhabitantsofKing’sCounty
inCalifornia’sCentral
Valley.Makereally
pessimisticassumptions
abouttheminers’efficiency,
though,andyoucangetthe
figureupto40terawatthours,almosttwo-thirdsof
whatthe10mpeopleinLos
AngelesCountygetthrough.
Thatsurelyoverstatesthe
problem;still,themore
widelypeopleusebitcoin,the
worsethewastecouldget.
Yetforallthisprofligacy
bitcoinremainslimited.
BecauseMrNakamoto
decidedtocapthesizeofa
blockatonemegabyte,or
about1,400transactions,it
canhandleonlyaroundseven
transactionspersecond,
comparedtothe1,736a
secondVisahandlesin
America.Blockscouldbe
madebigger;butbigger
blockswouldtakelongerto
propagatethroughthe
network,worseningtherisks
offorking.
Earlierplatformshave
surmountedsimilarproblems.
Whenmillionswentonline
aftertheinventionoftheweb
browserinthe1990spundits
predictedtheinternetwould
grindtoastandstill:eppursi
muove.Similarly,thebitcoin
systemisnotstandingstill.
Specialisedminingcomputers
canbeveryenergyefficient,
andlessenergy-hungry
alternativestotheproof-ofworkmechanismhavebeen
proposed.Developersarealso
workingonanadd-oncalled
“Lightning”whichwould
handlelargenumbersof
smallertransactionsoutside
theblockchain.Faster
connectionswillletbigger
blockspropagateasquickly
assmallonesusedto.
Theproblemisnotsomucha
lackoffixes.Itisthatthe
network’s“bitcoin
improvementprocess”makes
ithardtochooseone.Change
requirescommunity-wide
agreement,andthesearenot
peopletowhomconsensus
comeseasily.Considerthe
civilwarbeingwagedover
thesizeofblocks.Onecamp
fretsthatquicklyincreasing
theblocksizewillleadto
furtherconcentrationinthe
miningindustryandturn
bitcoinintomoreofa
conventionalpayment
processor.Theotherside
arguesthatthesystemcould
crashasearlyasnextyearif
nothingisdone,with
transactionstakinghours.
Abreakinthebattle
MrHearnandGavin
Andresen,anotherbitcoin
grandee,areleadersofthe
big-blockcamp.Theyhave
calledonminingfirmsto
installanewversionof
bitcoinwhichsupportsa
muchbiggerblocksize.Some
minerswhodo,though,
appeartobesufferingcyberattacks.Andinwhatseemsa
concertedefforttoshowthe
needfor,orthedangersof,
suchanupgrade,thesystem
isbeingdriventoitslimitsby
vastnumbersoftiny
transactions.
Thishasallgivennew
momentumtoeffortstobuild
analternativetothebitcoin
blockchain,onethatmightbe
optimisedforthestoringof
distributedledgersratherthan
fortherunningofa
cryptocurrency.MultiChain,
abuild-your-own-blockchain
platformofferedbyCoin
Sciences,anotherstartup,
demonstrateswhatis
possible.Aswellasoffering
thewherewithaltobuilda
publicblockchainlike
bitcoin’s,itcanalsobeused
tobuildprivatechainsopen
onlytovettedusers.Ifallthe
usersstartofftrustedtheneed
forminingandproof-of-work
isreducedoreliminated,and
acurrencyattachedtothe
ledgerbecomesanoptional
extra.
Thefirstindustrytoadopt
suchsonsofblockchainmay
wellbetheonewhose
failingsoriginallyinspiredMr
Nakamoto:finance.Inrecent
monthstherehasbeenarush
ofbankerlyenthusiasmfor
privateblockchainsasaway
ofkeepingtamper-proof
ledgers.Oneofthereasons,
ironyofironies,isthatthis
technologybornofantigovernmentlibertarianism
couldmakeiteasierforthe
bankstocomplywith
regulatoryrequirementson
knowingtheircustomersand
anti-money-launderingrules.
Butthereisadeeperappeal.
Industrialhistorianspointout
thatnewpowersoften
becomeavailablelongbefore
theprocessesthatbestuse
themaredeveloped.When
electricmotorswerefirst
developedtheywere
deployedlikethebighulking
steamenginesthatcame
beforethem.Ittookdecades
formanufacturerstoseethat
lotsofdecentralisedelectric
motorscouldreorganise
everyaspectofthewaythey
madethings.Initsreporton
digitalcurrencies,theBankof
Englandseessomething
similarafootinthefinancial
sector.Thankstocheap
computingfinancialfirms
havedigitisedtheirinner
workings;buttheyhavenot
yetchangedtheir
organisationstomatch.
Paymentsystemsaremostly
stillcentralised:transfersare
clearedthroughthecentral
bank.Whenfinancialfirms
dobusinesswitheachother,
thehardworkof
synchronisingtheirinternal
ledgerscantakeseveraldays,
whichtiesupcapitaland
increasesrisk.
Distributedledgersthatsettle
transactionsinminutesor
secondscouldgoalongway
tosolvingsuchproblemsand
fulfillingthegreaterpromise
ofdigitisedbanking.They
couldalsosavebanksalotof
money:accordingto
Santander,abank,by2022
suchledgerscouldcutthe
industry’sbillsbyupto$20
billionayear.Vendorsstill
needtoprovethattheycould
dealwiththefar-higher-thanbitcointransactionratesthat
wouldbeinvolved;butbig
banksarealreadypushingfor
standardstoshapethe
emergingtechnology.Oneof
them,UBS,hasproposedthe
creationofastandard
“settlementcoin”.Thefirst
orderofbusinessforR3
CEV,ablockchainstartupin
whichUBShasinvested
alongsideGoldmanSachs,
JPMorganand22other
banks,istodevelopa
standardisedarchitecturefor
privateledgers.
Thebanks’problemsarenot
unique.Allsortsof
companiesandpublicbodies
sufferfromhard-to-maintain
andoftenincompatible
databasesandthehigh
transactioncostsofgetting
themtotalktoeachother.
Thisistheproblem
Ethereum,arguablythemost
ambitiousdistributed-ledger
project,wantstosolve.The
brainchildofVitalikButerin,
a21-year-oldCanadian
programmingprodigy,
Ethereum’sdistributedledger
candealwithmoredatathan
bitcoin’scan.Anditcomes
withaprogramminglanguage
thatallowsuserstowrite
moresophisticatedsmart
contracts,thuscreating
invoicesthatpaythemselves
whenashipmentarrivesor
sharecertificateswhich
automaticallysendtheir
ownersdividendsifprofits
reachacertainlevel.Such
cleverness,MrButerinhopes,
willallowtheformationof
“decentralisedautonomous
organisations”—virtual
companiesthatarebasically
justsetsofrulesrunningon
Ethereum’sblockchain.
Oneoftheareaswheresuch
ideascouldhaveradical
effectsisinthe“internetof
things”—anetworkof
billionsofpreviouslymute
everydayobjectssuchas
fridges,doorstopsandlawn
sprinklers.Arecentreport
fromIBMentitled“Device
Democracy”arguesthatit
wouldbeimpossibletokeep
trackofandmanagethese
billionsofdevicescentrally,
andunwisetototry;such
attemptswouldmakethem
vulnerabletohackingattacks
andgovernmentsurveillance.
Distributedregistersseema
goodalternative.
Thesortofprogrammability
Ethereumoffersdoesnotjust
allowpeople’spropertytobe
trackedandregistered.It
allowsittobeusedinnew
sortsofways.Thusacar-key
embeddedintheEthereum
blockchaincouldbesoldor
rentedoutinallmannerof
rule-basedways,enabling
newpeer-to-peerschemesfor
rentingorsharingcars.
Furtherout,sometalkof
usingthetechnologytomake
by-then-self-drivingcarsselfowning,toboot.Such
vehiclescouldstashaway
someofthedigitalmoney
theymakefromrentingout
theirkeystopayforfuel,
repairsandparkingspaces,all
accordingtopreprogrammed
rules.
WhatwouldRousseauhave
said?
Unsurprisingly,somethink
suchschemesoverly
ambitious.Ethereum’sfirst
(“genesis”)blockwasonly
minedinAugustand,though
thereisalittleecosystemof
start-upsclusteredaroundit,
MrButerinadmittedina
recentblogpostthatitis
somewhatshortofcash.But
thedetailsofwhichparticular
blockchainsendup
flourishingmattermuchless
thanthebroadenthusiasmfor
distributedledgersthatis
leadingbothstart-upsand
giantincumbentstoexamine
theirpotential.Despite
society’sinexhaustibleability
tolaughataccountants,the
workingsofledgersreallydo
matter.
Today’sworldisdeeply
dependentondouble-entry
book-keeping.Its
standardisedsystemof
recordingdebitsandcreditsis
centraltoanyattemptto
understandacompany’s
financialposition.Whether
moderncapitalismabsolutely
requiredsuchbook-keeping
inordertodevelop,as
WernerSombart,aGerman
sociologist,claimedinthe
early20thcentury,isopento
question.Thoughthesystem
beganamongthemerchants
ofrenaissanceItaly,which
offersaninteresting
coincidenceoftiming,it
spreadroundtheworldmuch
moreslowlythancapitalism
did,becomingwidelyused
onlyinthelate19thcentury.
Butthereisnoquestionthat
thetechniqueisof
fundamentalimportancenot
justasarecordofwhata
companydoes,butasaway
ofdefiningwhatonecanbe.
Ledgersthatnolongerneed
tobemaintainedbya
company—oragovernment
—mayintimespurnew
changesinhowcompanies
andgovernmentswork,in
whatisexpectedofthemand
inwhatcanbedonewithout
them.Arealisationthat
systemswithoutcentralised
record-keepingcanbejustas
trustworthyasthosethathave
themmaybringradical
change.
Suchideascanexpectsome
eye-rolling—blockchainsare
stillanoveltyapplicableonly
inafewniches,andthe
doubtsastohowfartheycan
spreadandscaleupmay
provewellfounded.Theycan
alsoexpectresistance.Some
ofbitcoin’scriticshave
alwaysseenitasthelatest
techyattempttospreada
“Californianideology”which
promisessalvationthrough
technology-induced
decentralisationwhile
ignoringandobfuscatingthe
realitiesofpower—and
happilyconcentratingvast
wealthinthehandsofan
elite.Theideaofmakingtrust
amatterofcoding,rather
thanofdemocraticpolitics,
legitimacyandaccountability,
isnotnecessarilyan
appealingorempowering
one.
Atthesametime,aworld
withrecord-keeping
mathematicallyimmuneto
manipulationwouldhave
manybenefits.EvictedMs
Izaguirrewouldbebetteroff;
sowouldmanyothersin
manyothersettings.If
blockchainshavea
fundamentalparadox,itis
this:byofferingawayof
settingthepastandpresentin
cryptographicstone,they
couldmakethefutureavery
differentplace.
Thisarticlewasdownloadedby
calibrefrom
http://www.economist.com/news/brief
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Thefederalbudget
Alllatestupdates
Cleaningthebarn
Adealkeepstheincoming
Speakeroutofthemire—
fornow
Oct28th2015|UnitedStates
AMERICANbudget
showdownsusuallyfollowa
familiarpattern.
Confrontationalrhetoric
blazesintherun-uptoa
deadlinetoavertsomecrisis
—eitheragovernment
shutdown,oradefaulton
debt—withDemocratsand
Republicanseachblamingthe
other’sintransigencefora
lackofprogress.Then,atthe
lastminute,anarrow
agreementisreachedtoavoid
disaster—atleast,forafew
months.Thisdramaplayed
outasrecentlyasSeptember.
Itwasasurprise,then,when
onOctober26thPresident
BarackObamaandJohn
Boehner,theoutgoing
SpeakeroftheHouse,struck
adealtosuspendthedebt
ceiling,alimitongovernment
borrowing,afullweekbefore
thedeadline.Stillmore
surprising,thedealwaswide-
ranging,coveringnotjustthe
debtceilingbutalsospending
limitsfor2016and2017—
numberswhichdidnothave
tobesettleduntilDecember,
attheearliest.
Thatthedebtceilingwas
suspendedwasnotitselfa
shock;thealternativewas
catastrophe.Thegovernment
waspoisedtoexhaustits
funds—anditsaccounting
manoeuvres—onNovember
3rd.Thatwouldhaveledtoa
chaoticdefaultonits
obligations,eitherto
bondholdersortowelfare
recipients.Marketsnever
reallydoubtedthatCongress
wouldcometoitssenses.It
hasturnedbackfromthe
cliff-edgeseveraltimesinthe
pastfiveyears.
Abudgetdealwasalso
necessarybeforethenewyear
tostopdramaticspending
cuts.In2011,afteranearlier
showdown,Congressplanned
almostadecadeofdeepand
indiscriminatecuts—thesocalled“sequester”—which
couldbeavertedonlyby
passingamorepalatableplan
tobringdownAmerica’s
federaldeficit.(In2015,
borrowingislikelytobea
tolerable2.5%ofGDP,
thoughitfacesupward
pressureinfuturefroman
ageingpopulation.)The
sequesterwasdesignedtobe
sopainfulthatitwouldforce
along-termdeal,butno
agreementwasreached.A
sticking-plasterbillin2013,
devisedbyPaulRyan,now
theincomingSpeaker,and
PattyMurray,aDemocratic
senator,bluntedthesequester
fortwoyears.Butthecuts
weretomakeasharp
comebackin2016.Mr
Obamadecriedtheprospect
offurther“mindless
austerity”,whilehawks
lamentedareal-termscutof
1.5%inthedefencebudget.
Theearlytimingofthedeal
sprangfromtheRepublicans’
tumultuousinternalpolitics.
MrBoehner,having
abandonedhislongbattle
withhisparty’struculent
right-wingersandannounced
hisresignationinSeptember,
wantedto“clearthebarn”for
hissuccessor.This
agreement,likeseveralofMr
Boehner’sdealsbeforeit,was
slammedbytheparty’srightwing.TedCruz,afirebrand
candidateforpresident,
describeditas“aslapinthe
facetoconservatives”.Mr
Ryan,whowouldcertainly
havestruckasimilarbargain
himself,hasbeensparedthis
revoltearlyinhistenure.As
itwas,hemutteredfromthe
sidelinesthatthesecretive
goings-onbehindsuchdeals
“stink”.
Theremaybesomethingto
conservativecomplaints.The
deallookslikeawinforMr
Obama.Ifpassedbythe
Senate—whichlookedlikely
asTheEconomistwentto
press—itwillsparethe
presidentfurtherbattleswith
Congressoverthedebt
ceiling,whichhasbeenlifted
untilMarch2017.Thatmay
reflectadesireonthepartof
MrBoehnertokeephisparty
fromembarrassmentina
presidentialelectionyear;in
thepast,votershavetended
toblameCongress,notthe
WhiteHouse,forgridlock.
Moresignificant,thebudgets
agreedfor2016and2017are
closertoMrObama’s
proposalthanthatof
Congress(seecharts).
Spendingwillbe$50billion
higherin2016,and$30
billionhigherin2017,than
thesequesterallowed.That
reliefisspreadequally
betweendefenceandnondefencespending,with
defencegettingafurther
boostfromanoff-budgetwar
fund.Republicans,by
contrast,wantedtokeepthe
sequesterinplacefor2016
andthencutnon-defence
spendingdramatically.
Democratswillalsorejoiceat
arescueoftheSocial
Securitydisabilityfund,and
theavoidanceofsteep
premiumincreasesforsome
recipientsofMedicare
(federalhealthinsurancefor
over-65s).
Thedeal’srevenue-raising
partsaremostly
unconvincing.Deepercuts
arepromisedinfutureby
extendingthelifeofpartsof
thesequesterbyonemore
year,to2025.MrRyan’sdeal
in2013pulledoffasimilar
trick;budgethawkscomplain
thatsuchpostponements
couldgoonindefinitely.The
dealalsoauthorisesthesale
of58mbarrelsofoilfromthe
strategicpetroleumreserve,a
fuelstockpile,between2018
and2025.Reducingthese
reserves—arelicofthe1970s
oilshortage—makessense,
nowthatthereisplentyof
shaleoilaround.Butthesales
willflatterthedeficit
numbers,astheycannotgo
onforever.
Oneaspectoftheagreement
issuretoplease
conservatives:therepealof
partoftheAffordableCare
Act,betterknownas
Obamacare,whichCongress
spendsmuchofitstime
tryingtogut.Firmswith
morethan200employees
whoofferhealthinsuranceto
atleastoneworkerwillno
longerautomaticallyhaveto
enrolnewstaffintoaplan,
too.TheCongressional
BudgetOfficereckonsthis
savesabout$8billionovera
decade,mainlybecausewhat
workersdonotreceivein
healthinsurance,theywill
insteadgetinwages,which
aretaxable.Inthecontextof
thenewspending,though,
thisisatweak.
Thedealisarelief.Butitis
yetanotherstopgap,forboth
MrRyanandthepublic
finances.Theincoming
Speakercannotbespared
fromtoxiccongressional
politicsforever,especiallyif
aDemocratiselected
presidentin2016.And
America’srealfiscalproblem
isswellingentitlement
spendingasthepopulation
agesinthecomingdecades.
Thedealdoeslittleabout
that.Soonerorlater,MrRyan
willneedtogethishands
dirty.
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PoliticsinKentucky
Theoutsider
Agovernor’srace
encapsulatestheadvantages
anddrawbacksofpolitical
novices
Oct31st2015|BEREA,
LEXINGTONAND
LOUISVILLE,KENTUCKY
|Fromtheprintedition
Bevintrieshissofterside
SELF-MADEbusinessman,
armyveteran,fatherofnine:
onpaperMattBevin,the
Republicancandidateinthe
electionforgovernorof
KentuckyonNovember3rd,
looksideal.Intheflesh,too,
hehasstrengths,telling
rousingstoriesabouthis
impoverishedchildhood
(albeitinNewHampshire)
where,attheageofsix,he
soldpacketsofseedsfora
quartertopayforsummer
camp.Inthiscantankerous
age,andinhispitch,Mr
Bevin’smainassetiswhathe
hasnotdone:heldpolitical
office.BycontrastJack
Conway,hisDemocratic
opponent,hasservedtwo
termsasthestate’sattorneygeneraland—asoneinsider
observesofhissometimes
turgidremarks—mayknow
toomuchaboutgovernment.
WhereMrBevinliststhe
firmshehasrevitalised,Mr
Conwaytallieshislegislative
successes.AtaRepublican
peptalkinthetownofBerea
onOctober26th,asupporter
pertinentlyaskedMrBevin:
“CanIputyourbumpertickeracrossfromthe
[Donald]Trumpstickeronmy
truck?”
Yetquickandwittyasheis
onthestump,MrBevincan
belesspersonablewith
adversariesandcritics,
includingsomeinhisparty.
Thathehasn’theldofficeis
notforwantoftrying:he
rashlychallengedMitch
McConnell,theSenate
majorityleader,inabitterif
lopsidedprimaryfightlast
year.MrBevindescribesthe
campaignagainsthimthenas
“$20mofblowtorchtothe
face”,muchofwhichisnow
beingrecycledbythe
Democrats.Inremarkshe
saysweremisconstrued,he
seemedtoslightRandPaul,
Kentucky’sothersenator
(whomMrConway
challengedin2010),by
praisingBenCarson,arival
fortheRepublican
presidentialnomination.He
hasseemedinconsistenton
otherissues,too,“flipp[ing]
aroundlikeabassontheend
ofafishingline”,MrConway
toldaunionaudiencein
LouisvilleonOctober27th.
MrBevindeniesreportsthat
heshoutedatareceptionistat
theDemocrats’HQ,buthis
hostilitytoMrConwaycan
seemintemperate.Intheir
finalteleviseddebate,Mr
ConwaypraisedMrBevin’s
adoptionoffourEthiopian
children;MrBevincouldn’t
thinkofanythingnicetosay
aboutMrConway.
And,whileheacknowledges
thatpoliticsis“awholeother
culture”,likeother
entrepreneur-insurgentsMr
Bevinseemstoplacetoo
muchfaithinthemethods
andblessingsofbusiness.
Theseshortcomingsthreaten
toneutralisehisnoveltyvalue
andhisothermainadvantage:
thetoxicityofBarackObama
andallhisworks.Asaresult,
ofthethreegovernor’sraces
thisyear,Kentucky’sisthe
mostcompetitive.In
Mississippi,thetoken
Democraticcontenderisa
truckdriverwhomaypartly
havewontheparty’s
desultoryprimarybecausehis
nameappearedfirstonthe
ballot.Meanwhile,in
Louisiana’snon-partisan
“jungle”primary,Senator
DavidVitter(asexpected)
sawofftwofellow
Republicansandtheghostof
aprostitutionscandaltoclaim
aspotintherun-offon
November21st.
Kentucky’sraceisalsothe
mostrevealing.Forthe
Republicans,MrBevin
representstheironlyprospect
ofgainingagovernor.Forthe
Democrats,retainingthe
governorshipwouldhelpto
demonstratethattheycan
competeinthesouth
(Kentucky’sHouseof
Representativesisthesole
southernlegislativechamber
theycontrol).Atthesame
timetheracewillshow
whethersomevoters,atleast,
remainabletomakedifferent,
discerningchoicesinstate
andfederalelections—a
phenomenonthathaswaned
asAmericanpoliticshas
becomerancorously
polarised.Anditisusefully
testingtheelectoralviability
ofmaverickoutsiders.
Kentuckyisarural,religious
place.MrConwayhasfaced
criticismfordeclining,as
attorney-general,toappeal
againstacourtruling
overturningthestate’sbanon
same-sexmarriage—a
prudentdecision,itturned
out,sincetheincumbent
governor,SteveBeshear,
appealedanywayandlost.Mr
Conway’sbestdayinthe
campaign,reckonsAlCross
oftheUniversityof
Kentucky,waswhenKim
Davis,alocalcountyclerk
dramaticallyifbrieflyjailed
fordefyingajudgeovergay
marriage,wasreleased.
Moreover,alongwiththe
usualgripesagainstMr
Obama,Kentuckians,
especiallyintheAppalachian
east,arecrossaboutthe
impactofenvironmentalrules
oncoal-mining(evenif,in
truth,marketforcesarea
biggerfactorinitstravails).
Allthisimpliesthat,inthis
election,theywillemulate
MsDavis’srecentdefection
fromtheDemocratstothe
Republicans.
ButKentuckyisalsoapoor
state;andforalltheirdistaste
forthepresident,itsvoters
havebeenamongtheleading
beneficiariesofObamacare,
withoneofthecountry’s
sharpestdeclinesinthe
proportionofuninsured
citizens.(Explainingthat
discrepancy,MrConwaysays
that“WelikeourDemocrats
Kentucky-fried,”ie,
conservativeandindustryfriendly.)MrBevinthinksthe
state’shealth-care
arrangementsaretoo
generousandunaffordable.
Hewouldrevisethem,getting
morepeopletocontributeto
thecostofcare.Forhimmore
jobs—securedbycutting
regulation—arethesolution
tomostills.
MrBeshear,thesavvy
outgoinggovernor,navigated
thesecross-currentstowin
twoterms.MrConwayisa
lesstactilepolitician.Still,if
MrBevinscaresenough
Democratstothepolls—and
ifhisspikinesskeepsenough
Republicansathome—this
particularoutsiderwillstay
out.
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Policing
Paralysedby
YouTube
Policechiefsattheirannual
gatheringfeelbesiegedand
frustrated
Oct31st2015|CHICAGO|
Fromtheprintedition
Areyoufilmingme?
AWALKaroundthemany
standsinoneofthehallsof
McCormickPlace,agigantic
conventioncentreinChicago,
duringtheannualconference
oftheInternational
AssociationofChiefsof
Police(IACP),showedhow
thedebateonpolicinghas
changedinAmerica.The
PeerlessHandcuffCompany
wasstillhawkingitswares,
aswasPeacekeeper,which
sellsbatonsandlets
prospectivecustomersbash
“NumbJohnXT”,adummy,
totrythemout.Butthebuzz,
helpedbyacohortofforceful
public-relationsexecutives,
wasaroundvendorsofbody
cameras,datacollectionand
information-sharing
technologieswithsnazzy
namessuchasVievu,
BodyWornorSceneDoc.
CopsinAmericahavehada
toughyear.Videosof
perceivedorrealpolice
brutalityhavegoneviralat
regularintervals,causing
loudpublicoutcryand
leadingtodemandsthatall
policeofficersshouldwear
bodycameras.Thesetroubles
arenotgoingaway.Violent
crimeisontheriseinnearly
allbigcities,andthelevelof
trustbetweenpoliceandthe
public,andminority
communitiesinparticular,is
atanall-timelow.In
Milwaukee,agenteel
midwesterntown,104people
havebeenmurderedinthe
firsteightmonthsoftheyear,
morethanthe86whodiedin
thewholeof2014.StLouis
reporteda60%riseinkillings
overthesameperiod.Andin
Chicagosixpeoplewere
killedand28woundedover
justtheweekendbeforethe
conference.
Henceheateddiscussions
thereaboutthereasonsforthe
suddenincreaseinviolent
crimeandthetense
relationshipbetweenthe
policeandcivilians.Ina
speechonOctober26th
JamesComey,thebossofthe
FBI,saidhehadno
conclusiveanswer.But
“somethinghaschangedin
policing”,hesaid.Officers
feelbesiegedbyvideosof
arrestsandotherprocedures
proliferatingonYouTube,a
video-sharingwebsite.Cops
gettauntedbyyouthsholding
uptheiriPhones.Sometimes
theyjustdon’twanttogetout
oftheircarsanymoretoaska
groupofyoungmenwhythey
arestandingaroundonadark
streetcorneratoneinthe
morning.Itfeelstoorisky.
MrComeyseemedtobe
sayingthatpoliceofficers
cannotdotheirjobproperlyif
theyareunderconstant
scrutiny.Thisimpliesthat
theysometimesneedtoactin
waysthatseembrutalor
unfairinordertobeeffective.
Similarviewshavebeen
heardfromChicago’smayor,
RahmEmanuel,whosaid
recentlythatworriesabout
beingfilmedhadprompted
policeinChicagoandacross
thecountrytobecome“fetal”
andshyawayfromtangling
withsuspects.Somecrime
expertsdisagree.“It’soverly
simplistictoblame
YouTube,”saysBrett
Goldstein,aformerofficer
whonowteachesatthe
UniversityofChicago.He
thinksthatjustasno-one
couldfindagoodreasonfor
thedecreaseincrime—over
thepast25yearscrimerates
havefallenalmostbyhalf—
thereisnownoonereasonto
explainitsrise.Crimerates
aredrivenbyallkindsof
trendsandevents,from
shiftinggangdynamicsand
thespreadofcheapherointo
asuddenchangeinthe
weather.
BarackObama,thefirst
presidentinmorethan20
yearstospeakatthe
conference,alsoindirectly
castdoubtonalinkbetween
viralvideosandtheriseof
violentcrime.Herejectedthe
divisivenotionof“usv
them”,communitiesagainst
thepolice.Healsopromised
toensureproperfundingfor
policing,tocontinuehisfight
forreformofthecriminaljusticesystem—inparticular
strivingtoreducethehigh
rateofincarceration—andto
backofficers’demandsfor
universalbackgroundchecks
ongun-buyers.Buthealso
warnedthatlawenforcement
wasnotalwaysdonefairly,
andthatracialbiasexistedin
thesystem.Beforehehada
motorcade,hesaid,hewas
sometimespulledoverby
policeontheroadforno
apparentreason.Andhe
rejectedasa“falsechoice”
anytrade-offbetween
fairnessandeffective
policing.
MrObamastartedhisspeech
bymentioningRandolph
Holder,aNewYork
policemanrecentlykilled
whileinpursuitofagunman.
MrHolderwasblack,a
dedicatedmemberoftheNew
YorkPoliceDepartment
(NYPD),whichhashada
tougheryearthanmanyother
forces.InDecemberlastyear
aderangedmanshotand
killedtwoofficers,astheysat
intheircareatinglunch,in
apparentrevengeforthe
deathofEricGarner,ablack
manwhodiedwhilebeing
arrestedwithachokehold.
MoraleamongtheNYPD’s
rankandfilewasalreadylow.
Inaninternalsurveyofthe
departmentin2014,around
70%ofrespondentssaidthat
fearofbeingsuedheldthem
backfrominterveningtocurb
criminalactivityonthe
streets.Manyofthe35,000strongforcesaidtheyfeltillpreparedandundervalued.
SincethenNewYorkhas
unveiledacommunitypolicingplan,improved
officertrainingandrevised
theirBible,thePatrolGuide,
tosaywhattheymaydoas
wellaswhattheymaynot.
PolicechiefsleftChicago
buoyedbythepresident’s
thanks.MrObamaaffirmed
thatofficersrisktheirlivesin
thelineofduty,andthatMr
Holder“rantowarddanger
becausehewasacop”.But
alongsidethat,chiefswill
havetoconveytotheir
underlingstheneedtorebuild
trustwithminoritygroups.As
MrObamasaid,the
impressionthatsomepolice
areraciallybiased“doesnot
comeoutofnowhere”.
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Thevalueofuniversity
Where’sbest?
Newfederaldatareveal
whichcollegesdomostfor
theirgraduates’paypackets.Theyarenotthe
onesyoumightexpect
Oct31st2015|
PHILADELPHIAANDLOS
ANGELES|Fromtheprint
edition
ASTHEdeadlineloomson
November1stforthefirst
roundofcollegeapplications,
America’sannualadmissions
hysteriaisreachingitspeak.
Itisthefirstbigfinancial
decisionyoungpeoplemake,
andarguablythemost
important.ThePewResearch
Centrefindsthatemployed
collegegraduatesaged25-32
earn63%morethanthose
withonlyhigh-school
degrees.Butsuchreturns
comewithever-greater
financialrisk:since1978,
tuitionfeeshaverisenthree
timesasfastasinflation.
Collegeisstillthoughttobe
thebestinvestmentin
America.Butthatviewis
basedonbroadaverages,
whichobscurethedifferences
amongthecountry’s7,800
higher-educationinstitutions.
Sadlyforeconomists,
studentsarenotassignedto
collegesrandomly,which
makesitdifficultto
determinewhichschoolsare
worththecost.AreHarvard
graduatesrichbecausethey
wenttoHarvard,orwould
suchbrightyoungthingshave
succeededregardlessof
wheretheystudied?
Thisinformationvoidhas
severeconsequences.
Americancollegesare
churningoutmoredegrees
thanever,buttheirgraduates
donotseemtohavetheskills
employerswant.SinceJuly
2009,growthinjobopenings
hasgreatlyoutpacedthe
increaseinnewhires,
suggestingthatfirmsare
strugglingtofindtheright
workers.Andrealhourly
wagesforrecentgraduates
haveactuallyfallensince
2000,showingthathigher
educationinAmericatodayis
nocure-allforthepressures
ofglobalisationand
automation.
Forindividuals,uncertainty
aboutthevalueofspecific
collegescanberuinous.
Somefor-profitinstitutions
spendasmuchas$100ma
yearonadvertising.Luredby
vagueclaimsthatare
impossibletorefute,students
atunderperforming
universitiesfinancetheir
tuitionwithpricey
governmentloanswhich,
eveniftheygobust,theystill
havetopayback.
BarackObamahastriedto
crackdownonbottomfeedingcolleges.In2013he
unveiledplanstocreate
nationalratingsandto
withholdpublicfundsfrom
institutionsthatflunked.
Universitiesprotestedatthe
reductionoftheirmissiontoa
singlenumber—asone
officialtoldcollege
presidents,“It’slikeratinga
blender.”Therankings
projectnowappearsdormant.
However,onSeptember12th
theDepartmentofEducation
unveileda“scorecard”
websitewiththedataitwould
haveusedtoproducethe
ratings,compiledby
matchingstudent-loanfilesto
subsequenttaxreturns.
Thenewlongitudinal
numbershaveseriousflaws.
Theylistsalariesonlyforten
yearsafterstudentsenter
college—tooshortaspanto
capturealifelongearnings
trajectory,yettoofarinthe
pasttogiveanaccurate
pictureofuniversitiesin
2015.Theycoveronly
studentswhogotfederal
financialaid,excludingthose
frommostwell-offfamilies.
Andtheydonotdistinguish
peoplewhochoosenotto
workfromthosewhocannot
findajob.Yettheystilloffer
preciousdataforstudents
whowanttoknowwhich
collegetogoto,andwhy.
Gettheetoapharmacy
Forreadersusedtorankings
dominatedbyHarvard,Yale
andPrinceton,sortingthe
scorecardbymedianearnings
ofemployedgraduatesa
decadeafterenrolmentmay
causemilddisorientation.
Threeinstitutionsare$20,000
ayearabovetherestofthe
pack,andfewpeoplehave
heardofthem.Thatis
becausetheytrain
pharmacists:the
Massachusetts,StLouisand
AlbanyCollegesof
Pharmacy.Manyother
collegeswithunexpectedly
highalumnisalaries,likethe
UniversityofthePacificin
California,alsooffer
pharmacydegrees.
Thescorecard’sagelimit
stacksthedeckinthe
pharmacists’favour:whereas
28-year-oldsurgeonsare
poorlypaidhospitalresidents,
28-year-oldpharmacistsare
neartheirpeakearning
potential.Nonetheless,filling
prescriptionsbehindadrugstorecounterisperhapsthe
safestroutetotheupper
middleclassinAmerica
today.Pharmacyschoolstake
nearlyallcomers—MCPHS,
inBoston,accepted89%of
applicantslastyear—and
offernearlyguaranteedsixfigurewageswithinafew
years.
Anotherlucrative,littleknowngrouparethe
maritimecolleges,which
trainengineersforcareersin
thenavy,shippingand
energy.Theycombine
rigorousmathswitha
militaristiclifestyleand
hands-onmachinework:at
SUNYMaritimeinNew
York,“cadets”spendatleast
50dayseachsummerona
freightship.Thecollege
acceptstwo-thirdsof
candidates,yetitsalumnion
thescorecardearnedhigher
salariesthanthoseofCaltech,
whichadmitsjust9%.
Afterexcludingtradeand
vocationalcollegeslikethese,
twovauntednames,MITand
Harvard,risetothetopofthe
earningsrankings.Yetmost
studentswhogetintosuch
placesendupwell-paidno
matterwhat.Twoeconomists,
AlanKruegerandStacyDale,
havefoundthatgraduatesof
selectiveuniversitiesdonot
out-earnthosewhowere
acceptedbythesamecolleges
butchosea“lesser”
institution.Tomeasurea
university’seconomicvalue,
youneedtocomparethe
salariesofitsgraduateswith
thewagestheymighthave
earnedhadtheystudied
elsewhere.
Thatfigurecannotbeknown
forsure,butthescorecard
makesitpossibletoproduce
anestimate.TheEconomist
hasbuiltamodelthat,for
eachof1,308colleges,
predictsthemedianearnings
in2011ofemployedformer
studentswhoappliedfor
federalloansin2001,based
onthecharacteristicsofeach
institutionanditsintake.The
modelbothidentifiesthe
attributessharedby
universitiesthatproducelots
ofrichgraduates,andpredicts
alumniwagesforeach
college.Actualearningscan
thenbeassessedagainstthis
benchmark.
Thebestpredictorofthe
salariesacollege’sgraduates
willearnisprevious
academicachievement,as
measuredbyresultsonthe
SATaptitudetest.Theexam
isscaledfrom400-1,600,but
aggregatescoresforcolleges
rangefromaround700to
1,500,becausetheyare
averagesofhundredsof
individualmarks.Allelse
beingequal,workerswho
attendedaninstitutionwith
averagescoresof1,210,the
90thpercentileamong
colleges,make$11,700more
peryearthanthosefrom
universitiesinthe10th
percentile(920).However,
mostoftherewardsaccrue
onlytotip-topperformers.
Thegapinalumniearnings
betweencollegesinthe99th
percentileofSATscores
(1,415)andthe99.9th(1,485)
is$4,600ayear,asbigasthe
gapbetweenthefirst
percentile(800)andthe20th
(962).
Thenext-most-important
factoristhefieldofstudy.
ForallthehypeoverSTEM
(science,technology,
engineeringandmaths),only
collegespackedwith
engineersandcomputer
scientiststendtohave
unusuallyrichgraduates.
Alumniofinstitutionswith
lotsofmajorsinmathsor
physicalsciences,andfew
engineers,donottendto
outperformfinancially.But
universitiesthatarestrongin
engineeringprovidesimilar
economicreturnstothoseof
pharmacyormaritime
colleges.Althoughmanyare
selective,ahandful,suchas
CapitolTechnology
Universityoutside
Washington,DC,accepta
majorityofapplicantswhile
stilldeliveringtop-decile
salaries.
Theotherfieldofstudythat
boostssalariesisbusiness.
Althoughitisnoguaranteeof
wealth,themorebusiness
studentsauniversityhas,the
moremoneyitsalumnimake.
TwoBoston-areabusiness
collegesstandout:median
earningsatBabson,which
requiresundergraduatesto
startacompany,trailedonly
MITandHarvardamong
non-vocationalplaces,while
Bentleyboastedthebestmark
amongcollegeswithSAT
scoresbelow1,150.For
studentswhowantabroader
curriculum,Villanova,which
acceptshalfitsapplicants,has
mandatorycourseson
professionaldevelopment,
closetiestobigaccounting
firmsandtop-tiergraduate
salaries.“Jobsarewhatyou
getforyourmoneyat
Villanova,”saysPatrick
Maggitti,theprovost.
Asforsubjectstoavoid,
aggregateresultsfrom
collegesdonotbackup
warningsaboutstudyingthe
humanities.Graduatesfrom
collegeswithlotsofmajorsin
English(suchasSUNYAlbanyinNewYork)or
history(likeHampdenSydney,inVirginia)donot
earnanomalouslylow
salaries.However,religious
andartschoolsdominatethe
bottomrungsoftheearnings
table.Althoughahandful
offergoodvalue—theOtis
CollegeofArtandDesignin
LosAngeles,forexample,
feedsgraduatestotoy
companies,fashionbrands
andfilmstudios—borrowing
moneytoattendBibleorart
institutionsisusuallyabad
idea.
Thesamecaveatappliesto
eliteliberal-artscolleges
(LACs),knownfortheir
focusonteaching
undergraduates,whose
alumnimakelessmoneythan
thoseofsimilarlyhighlyrated
researchuniversities.This
patternmaynotstemfrom
employerbiasagainst
graduatesofLACs,butrather
fromtheaversionofthose
graduatestoWallStreet:the
PrincetonReview’stop-20
listsforpoliticalleftismand
“reefermadness”,awho’swhoofeconomic
underperformers,arefilled
withLACs.AtWarren
WilsonCollegeinNorth
Carolina,forexample,
studentsrunafarmand
garden,andflocktomajorsin
environmentalscienceand
creativewriting;itsmedian
earningsarejust$25,500.
Thenagain,evenstudents
whoweresetonGoldman
Sachsat18mightoptforthe
PeaceCorpsafterspending
fouryearsabsorbingthe
worksofKarlMarxandBob
MarleyataLAC.
Youmightexpectgraduating
studentstomigratetowards
thebestjobopportunities.
However,thedatashowthat
whereundergraduatesstudy
mattersasmuchaswhatthey
study.Boththestateacollege
sitsin,anditsnearestcity,are
relevant:theformerreflects
theareatowhichalumnican
easilymove,andthelatterthe
strengthofauniversity’sties
withlocalemployers.The
importanceofplaceishardto
overstate:movingacollege
fromruralMississippitoSan
Franciscowouldincreaseits
graduates’expectedearnings
by$14,800.
Demographymakesupmost
oftheremainderofthe
model.Predictably,colleges
withmoremenandstudents
withrichparentstendtohave
higheralumniwages.Less
intuitively,Catholiccolleges
dobetterthanaverage,and
Protestantonesworse—a
reversalofMaxWeber’s
thesisaboutthe“Protestant
ethic”underlyingthe“spirit
ofcapitalism”.Andina
reflectionofAmerica’s
rainbowfuture,graduatesof
diverseresearchuniversities
—thosewithanevensplitof
higher-(whiteandAsianAmerican)andlower-earning
racialgroups—tendto
outperformbothblack
collegesandlily-whiteones.
Mixingwithmanyraces
appearstobegoodforthe
wallet.
Justgivemethedamn
rankings
Together,thesefactors
explainthevastmajorityof
thegapsbetweencolleges’
alumniearnings.However,
outliersremainwhere
graduatesalariesdiverge
fromexpectations.Ordering
institutionsbyhowwellthey
transformtheir“raw
material”(studentsandsite)
into“finishedproducts”
(workers),thetopperformer
isWashington&Lee(W&L),
whosemedianearningsof
$77,600exceedthemodel’s
forecastby$22,000.Itis
perhapsthecountry’sleast
left-wingLAC:theLeeinits
nameistheConfederate
general,anditflewthe
Confederateflaguntillast
year.IthasAmerica’shighest
shareofmalestudentsin
fraternities,andranksnear
thebottominreceiving
federalPellgrants,givento
childrenfrompoorfamilies.
W&Lorganisesregulartrips
toNewYorkfromitshome
inruralVirginia,sothat
studentscanbeinterviewedat
banksandprofessionalfirms.
Noothercollegecombines
theintimateacademicsetting
andbroadcurriculumofa
LACwithapotentold-boy
network.
Amongselectiveuniversities,
themediansalaryofHarvard
graduates($87,200)beatsthe
model’salreadylofty
expectationby$13,000a
year,andtheUniversityof
Pennsylvaniaoutperformsit
by$10,000.However,elite
collegeswithmerelyaboveaverageearningspepperthe
bottomoftherankings.The
mostsurprisingisYale,
whichcomesthirdinthe
popularUSNewsrankings
butseventhfromthebottom
bythismeasure.Yale’s
studentsarestatistically
identicaltotheirHarvard
counterparts.Yetitsalumni
made“just”$66,000ayear—
$4,000lessthanthoseof
LafayetteCollegeinEaston,
Pennsylvania.Another
laggardisPomona,aLACin
LosAngelesrankedby
ForbesasAmerica’sbest
college.
Harvardstudentsmaywellbe
morecareer-driventhan
cerebralYalies.And
acquisitiveapplicantsmight
passoverPomona—whose
president,DavidOxtoby,says
itsstudentsfocus“on
changingtheworld,affecting
people’slives,andhavinga
fulfillingcareer[morethan]
onbeingcompensatedfor
thatwork”—foritssister
colleges,whichfocuson
STEM(HarveyMudd)and
economics(Claremont
McKenna).Still,gapsthisbig
arehardtoexplainaway.
Perhapsthemostusefulpiece
ofdatainthescorecard,
however,isthelistof
institutionsthatlift
disadvantagedstudentsinto
themiddleclass.Manyof
themfunnelgraduatesinto
union-friendlypublic-sector
jobs.Forexample,Texas
A&MInternational
Universitysitsonthe
MexicanborderinLaredo,
America’sthird-poorest
metropolitanarea.Itsstudents
are90%Hispanic,andhave
bottom-tierSATscores.
Nonetheless,itslistedmedian
earningsare$45,000ayear—
slightlyabovethenational
average,andpreciselyequal
tothecurrentfirst-yearsalary
forteachersinthelocal
schooldistrict,afrequent
employerofthecollege’s
graduates.Another
outperformerisPennsylvania
StateUniversity’sSchuylkill
campus,whichaccepts81%
ofapplicants.Its
administration-of-justice
programmeoffersinternships
withstatepoliceandfeeds
jobcandidatestotheFBI.
Themoral?State
governmentscouldmakefew
betterinvestmentsthan
expandingthese
overperformingpublic
universities.Thatwouldput
evenmoreoftheirstudents
onthepathtoupward
mobility.
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Lexington
Acitythatwants
morerefugees
HardscrabbleBaltimore
findsthatkindnessbrings
itsownrewards
Oct31st2015|Fromtheprint
edition
INCOMMONwith
colleaguesacrosstherich
world,themayorof
Baltimore,Stephanie
Rawlings-Blake,worries
aboutrefugeessenttohercity
byfederalofficials—aquota
thatthisyear,forthefirst
time,mayincludehundreds
ofSyrians.Lesstypically,a
biganxietyforMsRawlingsBlakeisthattoofewrefugees
willsettleinherhometown.
Baltimore,aonce-thriving
portandfactorytown,has
lostathirdofitspopulation
since1950,droppingtoabout
622,000souls.Likeother
north-easterncities,ithas
grappledwitheconomic
decline,shrinkingtaxrolls
andthetoxiclegacyofrace
lawswhichcorralledblack
residentsindistrictsblighted
bybadschoolsandcrime.
Urban-renewalprojectshave
broughttouristsand
professionalsbacktosome
districtsafterdecadesof
whiteflight.ButoneofMs
Rawlings-Blake’sfavourite
projects—toattract10,000
newfamiliestoBaltimore—
remainsafar-offdream.
Formorethanadecade,
Maryland’slargestcityhas
beenusedasanentrypoint
forrefugees,withfederal
agenciesledbytheState
Departmentsending700-800
thereeachrecentyearfrom
suchtroubledplacesas
Nepal,IraqandEritrea.
Abouttwo-thirdsmovedon
afterafewyears,guidedby
networksofrelativesand
compatriotswhobuiltlivesin
otherplaces.Themayor
wantsmoretostayput.In
Septembershejoined17
othermayorsincommending
PresidentBarackObamafor
hisdecisiontoadmitatleast
10,000Syrianrefugeesnext
year(upfromfewerthan
2,000thisyear),andurged
himtoacceptstillmore.She
makesclearthatwelcoming
outsidersismorethana
questionofcharity.Refugees
areanexceptionally
“resilient”bunch.“Theywant
abetterlifeforthemandtheir
children,andtheyarewilling
toworkforit,”themayor
says.
In2014MsRawlings-Blake
setupaMayor’sOfficeof
ImmigrantandMulticultural
Affairs,withthecloutto
rescueincomersfrom
bureaucraticmazes:for
instance,bytellingcity
agenciesthatrefugeesmay
havegoodreasonstolacka
birthcertificate.Thecity
offersrefugeesspecialhelp
withjobtraining.Thisyear
theInternationalRescue
Committee(IRC),acharity
paidbythegovernmentto
helprefugeessettlein26
Americancities,launcheda
schemetohelpclientsbuy
homesinBaltimore.
AdoteAkwei,ahuman-rights
activistfromTogowho
soughtasylumin2005,was
oneoftheIRC’sfirst
homebuyers.MrAkweiisa
humandynamo.Afteryears
drivingataxiheiswriting
children’sbooks,workingfor
aprogrammethatteaches
immigrantsaboutrecycling
rubbish,andsettingupa
communitygrouptoimprove
relationsbetweenblack
AmericansandAfrican
incomers.Hehasapatent
pendingonanewschoolcrossingsign(itboastslights
andabuzzer).Tofindhis
newhome—whichliesona
quietstreetinthegritty
Frankfordneighbourhood—
MrAkweitookfreebustours
laidonbyCityHall,designed
toshowwould-beresidents
overlookedcornersof
Baltimore.Thecityoffereda
granttowardshisdeposit,as
itdoestoallqualifying
incomerswhopromisetostay
foratleastfiveyears.After
MrAkweishowedarecordof
savingmoney,theIRC,with
fundingfrombusinessand
charitablefoundations,
offeredaseparategrant
towardshistransactioncosts,
aswellasfinancial-literacy
lessons.
Inall,MrAkweireceived
$16,000tohelpbuyhis
house,forwhichhepaid
$155,000.Butcashisnotthe
mainlureforrefugeeswho
reachAmerica.Thegreatgift
istheimmediaterightto
work,followedbyalegal
pathwaytopermanent
residencyandeventually
citizenship.Actualwelfare
paymentsaresmall:asingle
adultrefugeecomingto
Baltimoremayreceive
$1,125fromthefederal
governmentonarrival,then
short-termstatebenefitsof
$288amonth.Those
benefits,whichinclude
temporaryhealthinsurance,
mostlystopaftereight
months.Refugeesareeven
askedtorepayloanscovering
theirtraveltoAmerica.
Themessageis“hammered
home”thatrefugeesmust
findjobsandpaytheirbills,
saysRubenChandrasekar,
headoftheIRC’sBaltimore
office.Fewneedtelling.
Refugees“knowwhatitis
liketoloseahome”,sorent
isthefirstbilltheypay,he
notes.They“pennypinch”to
buildupsavings.Muchtalent
goestowaste:refugeeswith
advanceddegreesworkas
car-parkattendantsor
wheelchair-pushersat
Baltimoreairport.Butstillthe
cityhasmuchtooffer.
Housesarecheaperthanin
Washington,anhourtothe
south.Unlikemanysuburbs,
thecityofferspublic
transportandadiverse
population.Suchdiversityis
aneconomicboonaswellas
acomfort,providingniche
marketsforsmallbusinesses.
Baltimoreisnowhometo
Nepalesegroceryshopsand
toacarservicethattakes
Darfurirefugeestowork.
Silencingthescaremongers
ThisisnottopaintAmerica
asaparadiseforasylumseekers.Thecountryhas
acceptedjust70,000refugees
annuallyinrecentyears.To
putthatinperspective,1.5m
refugeesmayreachGermany
thisyear.NorisAmerica’s
welcomeuniform.Ifmany
Europeansfretaboutsharing
generouswelfaresystems,
lotsofAmericansfear
infiltrationbyterrorists.
Someconservativestates,
suchasSouthCarolina,have
seenangrypublicmeetings
aboutSyrianrefugeesin
townsthathavereceived
none.
Atrophyforscaremongering
goestoDonaldTrump,the
businessmanandRepublican
presidentialcandidate.If
elected,hepromisestoexpel
allSyrianrefugeesincase
Islamicextremistslurkin
theirmidst,suggestingthat
asylum-seekersmaybe“the
greatestTrojanhorseofall
time”.Infact,refugeesare
screenedbyseveral
intelligenceandsecurity
agenciesfor18monthsor
more.DavidMiliband,a
formerBritishforeign
secretarywhoheadstheIRC,
jokesthatsecuringrefugee
statusisthemostarduous
routetoAmericathatdoes
notinvolveswimmingthe
Atlantic.
Baltimoreandotherpostindustrialcitiescannotabsorb
everywould-berefugee.Yet
suchhardscrabbleplaces
showthatwelcoming
outsidersisnotjustaquestion
ofkindness.Doneright,
offeringahavencanbeanact
ofenlightenedself-interest.
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TheAmericas
Argentina’s
elections(1):A
bigsurprise
[Thu,29Oct
18:57]
Argentina’s
elections(2):
Macri-economics
[Thu,29Oct18:57]
Guatemala’snew
president:No
joke
Bello:Bringing
upbetterbabies
[Thu,29Oct18:57]
[Thu,29Oct18:57]
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Argentina’selections(1)
Abigsurprise
Thefirstroundofvoting
shakesupthepresidential
race
Oct31st2015|BUENOS
AIRES|Fromtheprint
edition
HOURSbeforetheofficial
resultsbegantocirculateon
October25th,campaign
workersforDanielScioli,the
front-runnerinArgentina’s
presidentialelection,handed
outorangeT-shirts,baseball
capsandpensemblazonedin
capitalletterswiththelegend
“president”.Pollsterswere
notsurewhetherMrScioli,
whoisrunningastheheirof
thePeronistpresident,
CristinaFernándezde
Kirchner,wouldwinoutright
inthefirstroundormoveon
toarun-offagainstMauricio
Macri,themayorofBuenos
Aires.Noonedoubtedthathe
wouldbewellahead.
Theresultsarethereforea
shock.With97%ofthevotes
counted,MrScioli,the
candidateofthePeronist
FrontforVictory(FPV),has
36.9%ofthevote,whichputs
himbarelyinfrontofMr
Macri,whohas34.3%.There
willbearun-offon
November22nd.MrMacri,
whoiscampaigningunderthe
bannerofCambiemos(Let’s
Change),anallianceofnonPeronistpartiesthatpromises
tobreakwiththedivisive
populismofMsFernández,
nowseemstohaveagood
chanceofwinning.
Ifhedoes,hewillseta
differenttoneforthecountry.
UnlikeMsFernándezandher
latehusband,Néstor
Kirchner,whoprecededher
aspresident,MrMacri
favoursmarketsinsteadof
statecontrols,isfriendlyto
theoutsideworldandan
advocateofstronginstitutions
ratherthanobedientones.Mr
Macriwouldundomuchof
theKirchners’legacy,though
hehaspromisedtokeepparts
ofit(seearticle).Hewould
bethefirstpresidentsince
Argentinareturnedto
democracyin1983whois
neitheraPeronistnora
memberofthemovement’s
lesssuccessfulrival,the
RadicalParty.Thefinancial
marketscheeredthat
prospect.Thestockmarket
roseby4.4%onnewsofthe
first-roundresultsandthe
pesostrengthenedinthe
unofficial“blue-dollar”
market.
AlthoughMrScioliis
nominallyahead,thevote
lookslikearepudiationofhis
thesisthatvotersjustwant
judiciousmodificationstoMs
Fernández’spolicies.Her
expansionofwelfareand
defianceofforeigncreditors
werepopular,butshealso
pushedupinflationevenas
theeconomystartedtostall.
Themiddleclassistiringof
restrictionsonbuyingdollars.
Asurveyconductedbefore
theelectionbyManagement
andFit,aconsultancy,found
thataquarterofArgentines
wantthenextpresidentto
continueMsFernández’s
interventionism,athirdwant
limitedchangestoher
approachand40%wanta
radicaloverhaul.Votersmay
beeagerformorechange
thanMrScioliisproposing.
Thesetbacktohiscandidacy
isevenbiggerthanitlooks.
Partofhispitchtovotershad
beenthatasaPeronisthe
representsArgentina’s
dominantpoliticalforceand
wouldthereforeguarantee
stablegovernment.“The
governorsarewithme,the
presidentsoftheregionsare
withme,themayorsarewith
meandthelegislatorsare
withme,”hetoldThe
Economistbeforethe
election.
Thatislesstruethanhe
thought.Thepartiesthat
makeupCambiemosgained
29seatsinthelowerhouseof
Congress,whiletheFPVlost
26(seechart).Ifunited,the
partiesarrayedagainstthe
FPVanditsalliescannow
outvotetheminthelower
house,thoughtheFPVretains
itsamplemajorityinthe
Senate.
Cambiemoswonthe
governorshipoftheProvince
ofBuenosAires,hometo
nearly40%ofthepopulation,
whichhadbeeninPeronist
handsfor28yearsandinMr
Scioli’sforthepasteight.
Thatmayhavelesstodowith
himthanwithhisparty’s
candidate,AníbalFernández,
whowasbackedbythe
president(butisnotrelatedto
her).Hiscandidacyrevived
rumours(whichhedenies)
thathehadbeeninvolvedina
drug-traffickingring.Twothirdsofvoterssurveyedsaid
theywouldneverbackhim.
Evenso,thelossofthe
governorship,thesecondmostpowerfulelectedoffice
inthecountry,isablowto
MrScioli.Now,“whoever
winsthepresidencycould
haveagovernability
problem,”saysJoaquín
MoralesSolá,acolumnistat
LaNación,anewspaper.
INTERACTIVE:Aguideto
Argentina’spresidential
elections
Muchnowdependsonwho
canwinoverthesupporters
ofthethird-placedcandidate,
SergioMassa,aPeronist
congressmanwhowon21.3%
ofthevote.MrMassahad
beenMsFernández’scabinet
chiefbutstruckoutonhis
ownbeforethelegislative
electionsin2013andbegan
criticisinghisoldboss.He
hasbeenthelaw-and-order
candidate,callingfora
crackdownondrug
traffickingandharsher
penaltiesforcorruptpublic
officials.Oneconomicpolicy
headvocatesamiddleway
betweenthe“gradualism”
proposedbyMrScioliand
themorecomprehensive
changesespousedbyMr
Macri.
IndicationsarethatMrMassa
willsupportMrMacri,even
ifhedoesnotmakeaformal
endorsement.Thefirst-round
resultsshowthatpeople
“don’twantcontinuity”,he
saidinatelevisioninterview.
MrSciolimustnowdistance
himselffromMsFernández
withoutalienatingArgentines
whobenefitfromher
government’slavishspending
andcheerherpugnacious
attitudetowardforeign
creditors.Ifhegetsthe
balancewrong,hemayfind
himselfstuckwithalotof
uselessorangemerchandise.
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Argentina’selections(2)
Macri-economics
Aprofileofapossible
president
Oct31st2015|BUENOS
AIRES|Fromtheprint
edition
MAURICIOMACRI’Spath
topoliticswasanunusual
one.Onawinter’snightin
1991,ashewaswalking
throughhisposh
neighbourhoodinBuenos
Aires,hewasattackedby
threemen.Theassailants—
corruptpoliceofficers,
perhaps—punchedhiminthe
face,boundhishandswith
wireandshovedhimintoa
coffininthebackofa
Volkswagenvan.MrMacri
washeldfortwoweeks
beforehisfather,aprominent
Argentinebusinessman,paid
a$6mransom.
MrMacrisaysthatthis
traumaledhimtoacareerin
publicservice.Hegained
famebyrunningBoca
Juniors,afootballteam,fora
dozenyearsuntil2007,was
electedtoCongressandis
nowmayorofBuenosAires,
Argentina’srichestandmost
populouscity.Hestandsa
goodchanceofwinning
Argentina’spresidential
electioninNovember.
Hissuccessdoesnotcome
frompersonalmagnetism.He
rarelysmileswhencameras
arenotpresent.Inmeetings
hecomesacrossasaloof,
evenapathetic.Hisspeeches
lackzestandoriginality.
Perhapsrealisinghewill
neverinspireacultof
personality,heoptedtobea
consensus-forgerandteambuilder.Thepartyhefounded
andleads,Republican
Proposal(PRO),startedout
ontherightbuthasbecome
moreinclusive.ItisnonPeronist—thepolitical
currenttowhichhis
presidentialrival,Daniel
Scioli,belongs—butisnot
anti-Peronist;manyexPeronistsworkalongsidethe
party’sconservativefounders.
Asmayor,MrMacri
improvedinfrastructure,
especiallytransport,and
developedpoor
neighbourhoodsthathis
predecessorshadignored.
Colleaguessayheencouraged
themtoinnovate.Banco
Ciudad,themunicipalbank,
beganhiringonmeritrather
thanconnections,says
FedericoSturzenegger,a
PROcongressmanwhoran
thebank.
INTERACTIVE:Aguideto
Argentina’spresidential
elections
Tosecurethepresidency,Mr
Macriwillneedtochangethe
perceptionthatheisacoldheartedcapitalist,bornto
privilege.“Heseemsto
favourbusinessesover
people,whereasIwanta
moreinclusivegovernment,”
saysMarielGarcía,who
worksatacornershopin
Palermo,aleafy
neighbourhoodinBuenos
Aires.
Whilepromisingchange,Mr
Macriassuresvotersthatit
willnotbetooabrupt.He
wouldendexchangecontrols
andallowthepesotofloat,
buthaspromisednottoundo
thenationalisationofpension
fundsorofYPF,anoilgiant.
Hewouldleavegenerous
welfareprogrammes
untouched.Voterswanta
presidentwhowillfixthe
economywithoutleaving
anyonebehind.MrMacri
maybetheonetoconvince
them.
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Guatemala’snewpresident
Nojoke
Theelectionofacomedian
isagamble
Oct31st2015|Fromtheprint
edition
Didyouheartheoneabout
thefriskybull?
JIMMYMORALES’S
previouspoliticalcampaign
endedindisappointment.In
2011hefinishedthirdina
racetobecomemayorof
Mixco,winningjust13,000
votesinatownof700,000
people.Hislatestattemptwas
moresuccessful:onOctober
25thhewaselected
Guatemala’spresident,
trouncinghisrival,Sandra
Torres,inarun-offwith
nearly70%ofthevote.
Untilrecently,MrMorales
(pictured)wasknownasa
televisioncomedian,nota
politician.Alongsidehis
brotherSammy,hewasthe
starof“Moralejas”
(“CautionaryTales”),a
weeklyshowlampooning
Guatemalanstereotypes.In
oneepisodeMrMorales
playedNeto,acountry
bumpkinwhoinadvertently
becomespresident.Inanother
sketch,heandSammytellof
crossingtheUnitedStates
borderdressedasacow,but
turningthemselvesinto
escapeanamorousbull.“I’ve
madeyoulaughfor20
years,”herecalledduringhis
real-lifecampaign.“Ipromise
thatifI’mpresident,Iwon’t
makeyoucry.”
Guatemalanshavereasonsto
beupset.InAprildetails
emergedofaracketatthe
customsagency,inwhich
officialsreceivedkickbacks
inexchangeforreducing
importdutiesforcompanies.
Thescandaltriggeredmonths
ofdemonstrationsagainstthe
government,which
culminatedinSeptemberin
theresignationandarrestof
thepresident,OttoPérez
Molina.Guatemalaalso
suffershighratesof
malnutritionandcrime,and
itsschoolsarelousy.
MrMorales,whoproclaimed
himselftobe“neithercorrupt,
norathief”,oweshiselection
torevulsionagainstthe
politicalelite.Whenrivals
tauntedhimforhis
inexperienceherepliedthat
hislackofpolitical
connectionsmadehimthe
rightpersontotackle
corruption.Hepromisedto
extendfromtwoyearstosix
themandateofthe
InternationalCommission
AgainstImpunityin
Guatemala,aUnitedNationsbackedinvestigativeteam
thatuncoveredthecustoms
scandal,andsaidhewould
retaintheattorney-general,
ThelmaAldana,whohasled
theprosecutionoftheexpresident.MrMoralesalso
pledgedtoprovidemore
fundingforthejustice
ministry,makegovernment
spendingmoretransparent
andauditgovernment
agencies.
Beyondthat,hisplansare
vague.Hismanifestowasa
scantsixpageslong.Inplace
ofaprogramme,heoffered
votersfolksycharm.He
beganstumpspeecheswitha
booming,“Howareyou
doing,Guatemala?”androde
aVespatohisfinalrally.
A“Christiannationalist”,he
opposesabortion,same-sex
marriageandthelegalisation
ofnarcotics,asdomany
Guatemalans.Someofhis
otherideasarejustwacky:he
wantstogiveasmartphoneto
everychildandtooutfit
teacherswithGPStrackersto
ensuretheyturnuptowork.
MrMoraleshaspromisedto
cutredtapeandtaxes,though
lowerratesseemlessurgent
thananoverhaulofhowtaxes
arecollected.(Often,theyare
not.)AsashareofGDP,
revenuesfromtaxareamong
thelowestintheworld.
Thecompositionofhis
cabinetwillsuggestwhat
kindofpresidentheintends
tobe.Willhehiretechnocrats
withtheexpertisehelacks,or
surroundhimselfwith
cronies?Heissaidtobe
soundingoutfourmain
groups:evangelicalchurches,
bigbusiness,academicsfrom
theUniversityofSanCarlos
(whoseex-chancellor,Jafeth
Cabrera,willbethenewvicepresident)andformer
membersofthearmy.
MrMorales’stiestothe
military,whichcommitted
atrocitiesduringadecadeslongcivilwarthatendedin
1996,worrysome
Guatemalans.Hisparty,the
NationalConvergenceFront
(FCN),wasformedin2008
byformerofficers.Retired
generalscouldsoonbe
pullingthegovernment’s
strings,saysAnitaIsaacs,
professorofLatinAmerican
politicsatHaverfordCollege
inPennsylvania.The
president-electdeniesthatthe
militaryhashadany
influenceonhiscampaign.
Howeverheformulateshis
policies,hewillhavetrouble
pushingthemthrough
Congress,wheretheFCN
wonjust11of158seats.That
willforcehimtoseeksupport
fromotherparties,whichmay
belesskeenthanheison
stampingoutcorruption.His
honeymoonwithvoterswill
beshort.“Theywilldemand
resultsfromthefirstmonth,”
saysEduardoStein,aformer
vice-president.Protestgroups
haveorganiseda
demonstrationforJanuary
14th,thedayMrMorales
takesoffice.Ifthecomedianturned-presidentfailstoclean
upgovernment,laughterwill
quicklyturntotears.
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Bello
Bringingupbetter
babies
Governmentprogrammes
maybeharmingrather
thanhelpingtheyoungest
LatinAmericans
Oct31st2015|Fromtheprint
edition
JORGE,whoiseight,lives
withhismotherinacrowded,
semi-finishedhouseofmud
andcementinCantoGrande,
aformershantytownon
Lima’seasternoutskirts.
Whenhewassmaller,heand
hismotherwerebeatenbyhis
father,fromwhomtheyare
nowseparated.Thoughshe
didn’tfinishsecondary
school,Jorge’smothertriesto
helphimwithhishomework.
ButJorgehaslearning
difficulties,findsithardto
makefriendsandavoidseye
contactwhenhetalks.
Meanwhile,acrossPeru’s
capital,intheprosperous
districtofMiraflores,the
HumptyDumptyprivate
nurseryoffers32hoursof
trainingin“earlystimulation”
forparentsofbabiesfor
around$100.Manyofthe
childrenwilldoubtlessgoon
totopprivateschoolsand
lucrativecareers.
Inequalitystartsatbirth.
Muchresearchfromaround
theworldfindsthatchildren
whoarepoorlynourishedand
poorlyparentedintheir
earliestyearswillsufferthe
consequencesfortherestof
theirlives.Theywilllearn
lessatschoolandbeless
productiveasadults.So
investinginearlychildhood
makessenseongroundsboth
offairnessandeconomic
efficiency,arguesanew
study*publishedbytheInterAmericanDevelopmentBank
(IDB).
Yetpublicspendinginthe
regionisskewedawayfrom
theveryyoung.Latin
Americangovernmentsspend
just0.4%ofGDPonchildren
undersix,comparedwith
1.6%onthoseagedsixto12,
accordingtotheIDB.They
typicallyspendmorethan
seventimesasmuchper
persononover-65sason
under-sixes.Whatisworse,
thequalityofsomeofthe
publicservicesdirectedat
youngchildrenisso
“dismal”,especiallyinday
care(ie,daynurseries),that
“theymayharm—ratherthan
help—thechildrenwhouse
them,”theIDBconcludes.
Onthebrightside,the
region’syoungestare
healthierthantheyusedtobe.
Overthepast50yearsinfant
mortalityfellby75%ormore
in15ofthe17countriesfor
whichtherearedata.Whereas
ittooktheUnitedStateshalf
acentury(from1935to1985)
tocutinfantmortalityamong
African-Americansfrom80
to25per1,000livebirths,
Perumanagedthesame
reductionforitsAmerindian
populationinlessthan15
years,from1995to2008.
LatinAmericanbabiesare
betterfedthaninthepast,or
thanthoseinother
developingcountries.
Theregionhasbeenmuch
lessgoodatnurturingthe
mentalandemotional
developmentofitsyoung
children,especiallythose
borntopoorerandless
educatedmothers.
Governmentshaveexpanded
daycare,mainlywiththe
laudableaimofhelping
motherstoworkoutsidethe
home.BrazilandChilehave
doubledtheproportionof
childrenindaycareinthe
pastdecade,whileinEcuador
ithasincreasedsixfold.Much
oftheprovisionisinbignew
centres,withupto300
infants.Butstaffaretoofew,
ill-trainedandpoorlypaid.In
Colombia,forexample,such
centres,whichcost$1meach,
arenobetterforchildrenthan
theverybasiccommunity
caretheyreplacealthough
theirrunningcostsaremore
thanfourtimeshigher,
accordingtoNorbertSchady,
aco-editorandauthorofthe
IDBreport.
LatinAmericaisalsotrying
toexpandpre-primary
education,whichshouldhelp
childrentolearnmorewhen
theygettoschool.Again,
qualitycanvarywidely.
Ecuadorrecentlyallowed
researchersfromtheIDBto
assignrandomly15,000
kindergartenpupilsto
differentteachersandtrack
theirprogressinlanguageand
cognitiveskills.Theyfound
someteachersweretwiceas
effectiveasothersinthesame
pre-school,saysMrSchady.
Someofthebestchilddevelopmentschemesarethe
simplest.Inapioneering
studyinJamaica,cashstrappedmothersreceived
weeklyvisitsfromhealth
workerswhogavethembasic
parentinglessonsand
encouragedthemtoplaywith
theirbabies.Twodecades
latertheirchildrenhadhigher
IQs,werebettereducated,
lessviolentandonaverage
earned25%morethana
controlgroupwhosemothers
didnotreceivethevisits.
Whatallthismeansisthat
governmentsneedtorethink
howtheytrytohelptheir
youngestcitizens,especially
aspublicmoneyistighter
nowthateconomicgrowth
hasslowed.Theywillgeta
muchbetterreturnfromhome
visits,pre-schooland
childmindersthanfrombig,
expensiveday-carecentres.
Aboveall,theyneedtofocus
onquality,throughbetter
stafftrainingandsupervision.
Sincesuchinvestmentsare
invisibleandtheirbenefits
willonlybefeltyearslater,
thismaybeunattractiveto
politicians.Butfuture
generationsofLatin
Americansmaythankthem.
*TheEarlyYears:ChildWell-Being
andtheRoleofPublicPolicy.Editedby
SamuelBerlinskiandNorbertSchady.
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Asia
Anelectionin
Myanmar:
Changeintheair
[Thu,29Oct18:57]
Politicsinthe
Maldives:
Dodgingdeathin
paradise
Religionin
Japan:Temples
ofdoom
Banyan:Hot
water
[Thu,29Oct18:57]
[Thu,29Oct18:57]
[Thu,29Oct18:57]
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AnelectioninMyanmar
Changeintheair
Thefirstproperelectionin
agenerationisastepping
stonetoanuncertainfuture
Oct31st2015|TAUNGUP|
Fromtheprintedition
THOUSANDSwaitedfor
hoursunderablazingsunon
thefootballfieldinTaungup,
asmalltownneartheBayof
BengalinRakhinestatein
Myanmar’swest.Mostwore
theredT-shirtsofthe
NationalLeaguefor
Democracy(NLD)and
wavedflagsemblazonedwith
theparty’sstar-and-peacock
symbol(pictured).One
teenagercarriedarose,
intendingtopresentit“tomy
leader,tomypresident”.
WhenAungSanSuuKyi’s
four-wheeldrivebumpedinto
view,thecrowdchanted
“MaaSuu!”—MotherSuu.
Onthefaceofit,the
campaigningacrossMyanmar
aheadofageneralelectionon
November8thmightseem
nothingexceptional.Yetthe
sceneinTaungupwouldhave
beenunthinkablefiveyears
ago—notleastbecausethe
NLDwasbanned,MissSuu
Kyiwasunderhousearrest
andadowntroddenpeople
wereunderthearmy’sboot.
TodayMissSuuKyisitsin
parliament.HerNLDissetto
reapthemostvotesinthe
election.Tomanyinthe
West,itlookslikeahappy
endtoMyanmar’slongand
darkjourney.Infact,the
electionisbutonestepping
stonetoanuncertainfuture.
Manyquestionsremain
unanswered,including
whethertheBurmesecanpull
themselvesoutofpovertyand
whenethnicconflictsthat
haveragedfordecadeswill
end.
Themostimmediatequestion
ishowmuchpower
Myanmar’sarmedforces,
whohavebeenincharge
since1962,arewillingto
cede.Thearmywrote
Myanmar’sconstitution,
whichashamreferendumput
intoeffectin2008.Twoyears
laterafewgeneralstradedin
theiruniformsforlongyisand
setuptheUnionSolidarity
andDevelopmentParty
(USDP).Togetherwiththe
quarterofseatsreservedby
theconstitutionforthearmy,
ithasacomfortable
parliamentarymajority.
Unlikein1990,whenthe
armyignoredtheelection
result,atleasttheoutcomeof
thisoneappearslikelytobe
respected.Butthesoldiersare
takingnochances.However
wellorbadlytheUSDPdoes
intheelection,thearmy’s
25%blocwillremainin
place.Theopeningthat
Myanmarhaswitnessedover
thepastfiveyearsis
astonishingincomparison
withwhatwentbefore.Butit
istakingplaceonthearmy’s
terms.
Theelectionisnotentirely
fair.Voterlistsareinaccurate
andripeforabuse.Insome
violentareasvotingwillnot
takeplaceatall.Meanwhile,
perhaps1mMuslim
Rohingyasinalargely
Buddhistcountryhavebeen
deemedstateless—nonpersonsineligibletovoteat
all(seemap).Threeyearsago
Taungupwasatthecentreof
communalmayhemthat
quicklyflaredintoapogrom
carriedoutbyBuddhist
Rakhinesagainstthe
Rohingyapopulation.Tensof
thousandsofRohingyasfled
abroadonricketyvessels.
ButMissSuuKyi,aNobel
peace-prizewinner,isturning
ablindeyetosomeofthe
election’sblemishes,
believingtheprocessstill
marksabigstepforward.Her
visittoRakhinewasnota
gestureofsympathywiththe
Rohingyas.Shehasbeen
shamefullysilentonthetopic.
Muslimsmakeuponly4%of
Myanmar’spopulation,but
beingaccusedofsupporting
themisafastwaytolose
Buddhistvotes.
ThatmatterstoMissSuuKyi.
Sheshowsasteely
determinationtohelpher
partywin.Wirathu,avitriolic
Buddhistmonk,andmembers
ofapressuregroupcalling
itselftheAssociationforthe
ProtectionofRaceand
Religion,betterknownasMa
BaTha,havebeen
campaigningagainsttheNLD
inruralareas.Theyaccuse
theNLDofbeingproMuslim.MissSuuKyisays
shedeploressuch
chauvinism.ButtheNLDhas
noMuslimcandidates.In
Rakhine,Muslim
shopkeeperscomplainthat
Buddhistsboycotttheirshops
andbusstationsrefusethem
tickets.Yetonthecampaign
trailMissSuuKyioffersonly
bromides.
Therealprize
Inby-electionsin2012the
NLDwon43outof44seats.
Thistimeitcouldwintwothirdsofthe75%ofseatsthat
areupforgrabs,whichit
wouldneedfora
parliamentarymajority.Buta
landslideisnotguaranteed.
DespiteMissSuuKyi’s
popularity,andhoweverhard
itistomeetanyonewho
claimstobeaUSDP
supporterinthebigcities,the
army-backedpartyisawellfinancedmachineabletoget
outthevote.Meanwhile,over
90otherparties,manyethnicbasedones,arealsofielding
candidates.Notallsupport
theNLD.
Thepartieshavetheireyeon
whowillsucceedPresident
TheinSein,aformergeneral.
Hissuccessorwillbeelected
bythenewparliamentwhen
itconvenesearlynextyear.
Legislatorswillchoosefrom
amongthreecandidates—one
eachnominatedbytheupper
house,thelowerhouseand
thearmy.Thetwolosers
automaticallybecomevicepresidents,whilethewinner
selectsthecabinet.
Thenewpresidentmaynotbe
knownuntilFebruaryoreven
March.Butonethingis
certain:howeverwellthe
NLDdoes,MissSuuKyiwill
notgetthetopjob.Thearmywrittenconstitutionbans
anyonewithaforeignspouse
orchildrenfromthe
presidency.MissSuuKyi’s
latehusbandwasBritish,as
arehertwosons.The
provisionseemsdesigned
specificallytoblockher.Miss
SuuKyisaystheNLDwill
nominate“acivilianmember
ofourparty”tobepresident.
Butthereisnodoubtshe
wouldbetheoneeffectively
incharge.Thatwouldleadto
opaquedecision-makingand
alackofaccountability.
Worryingly,MissSuuKyi
evinceslittleinterestinpolicy
detail.
AsfortheUSDP,atussle
withinthepartytocurbthe
army’sinfluenceseemsto
haveended,atleastfornow
—tothebenefitofthe
generals.InAugust,helped
bytroopswhoshutdownthe
capital,Naypyidaw,MrThein
Seinsuddenlyorderedthe
removalofhiscolleague,
ShweMann,the
parliamentaryspeaker.That
ambitiouspolitician,alsoa
formergeneral,was
rumouredtohaveforgeda
workingrelationshipand
perhapsafuturepowersharingdealwithMissSuu
Kyi.
Forthenewpresident,an
urgenttaskwillbetofind
peacewithethnicgroupswho
resentBurmandominance.
Myanmarisakaleidoscopeof
ethnicities.Fordecadesthe
armyjustifieditsrepression
byclaimingthat,withoutit,
thecountrywould
disintegrate.Bycontrast,
ethnicgroupssaythatthe
autonomytheywere
promisedin1947inthe
Panglongagreement(signed
forthegovernmentbyMiss
SuuKyi’slatefatherand
independencehero,Aung
San)hasyettomaterialise.
Theshadyjadetrade
OnOctober15ththe
governmentannouncedthatit
andseveralethnicarmieshad
reacheda“nationalceasefire
agreement”.MrTheinSein
calledita“historicgift”to
futuregenerations.Infact,it
looksrathertrifling.The
agreementcoveredjusteight
ofdozensofrebelgroups,all
ofwhichhadalreadyagreed
bilateralceasefireswiththe
government.Itomitted
groupsthatarestillinconflict
withthegovernment,
includingtheUnitedWa
StateArmy,theShanState
ArmyNorthandtheKachin
IndependenceArmy(KIA).
Anditneglectedthethorniest
issuesofall—sharing
resourcesanddevolving
power.
Increasingly,drugsand
naturalresources—notably
gemstonesandtimber—are
fuellingtheconflicts.Much
oftheworld’sjadeismined
inKachinstate.Anewreport
byGlobalWitness,anNGO,
estimatesthat$31billionof
Burmesejadewassoldin
2014,mostlyontheblack
market.Ifthisextraordinary
figureistrue,itwouldbe
morethan60timeswhatthe
governmentspendsonhealth
care.
Thejadetradeunderwrites
theKIA.Italsoenrichesnot
onlytheKIA’sleadersbut
alsoashadyallianceofhighrankingarmyofficers(who
aresupposedtobefighting
theKIA),USDPbigwigs,
cronycompaniesandthe
kingpinswhocontrolboththe
gemstoneanddrugtrades.
Thispatternisreplicated
acrossseveralconflictzones.
Anycomprehensivepeace
dealwouldrequireregionsto
sendatleastsomerevenues
backtothecentral
governmentintheformof
taxes,whilethearmywould
havetoreturntoitsbarracks.
However,powerfulpeopleon
allsidesdoverywelloutof
thefighting.Andevenifthe
issuessurroundingresources
canberesolvedbetween
regionsandthecentre,then
thereisthematteroftrust.
Manyethnicgroupssimply
donotbelievethe
government’spromisesof
federalism.Pastpromises,
whichcametolittle,give
themgoodgroundsfor
scepticism.Somerebel
groupswillwaitandseewhat
clouttheNLDandMissSuu
Kyihaveaftertheelection.
Giventhearmy’scontinuing
role,theyareunlikelytobe
impressed.
Myanmaringraphics:An
unfinishedpeace
Untilthecountryisatpeace
withitself,itspeoplewill
struggletoescapefrom
poverty.Takeastriking
exampleofmultinationals’
newpresenceinMyanmar:
twopipelinesthatemerge
fromtheseaandrunupthe
beachnotfarfrom
Kyaukphyu,some50miles
(80km)north-westof
Taungup.Thesecomefrom
offshoreoilandgas
concessionsthatforeign
energycompanieshavebid
for.Thegovernmentsaysthat
itwantstobuildaroundthese
pipelinesanindustrialzone,a
deep-seaport,hotelsandnew
homes.Yetthepipelinesrun
straightintotheRohingyaRakhineconflictzoneand
thennorthintorestiveShan
state.Itishardlyaneasy
placetobuildon,andplans
forthezonehavesofarcome
tolittle.
Indeed,onlyoneofthree
proposedspecialeconomic
zonesintendedtojump-start
growthseemstobegetting
anywhere.TheThilawazone
nearYangon,thehectic
commercialcapital,isbacked
bytheJapanesegovernment.
Roadsarebeingbuilt,a
containerportonthe
Irrawaddyriverisgoingup,
andfactoriesarebeinglaid
out.Yet,South-EastAsian
entrepreneurssay,thepace
couldbemuchfaster.
Amongotherthings,theysay,
themoneyoftheBurmese
elites,muchofitill-gotten,is
chasingupthepriceofland
forfactoriesatThilawa.That
underminesthechiefthing
Myanmarhasgoingforit,as
adestinationforlow-cost
manufacturingchurningout
clothes,shoes,cheap
electronicsandthelike.
Thoughforeigninvestment
hasgoneintotelecomsand
explorationforoilandgas,
whatMyanmarnowbadly
needsarefactoriesthatmight
employlow-skilledBurmese
currentlylivinghardscrabble
livesontheland.The
country’sgarmentssector
employsamere260,000
peopleinapopulationof
53m,comparedwiththemore
than4mtextileworkersin
neighbouringBangladeshand
2.2minVietnam.
Thechallengesaredaunting.
Thegovernmentisvaliantly
tryingtoimproveadecrepit
civilservice.Commercial
regulationsareoutdatedand
haphazardlyapplied.
Transportinfrastructureis
woeful.Inrecentyearsthe
economyhasgrown
impressively(seechart)—but
fromaverylowbase.
Myanmarremainspoor:GDP
perpersonisjust$1,270,
comparedwith$1,670in
Laos,$5,370inThailandand
$7,380inChina.Visitorsto
Yangonseldomseethis.The
city’sskylineisdottedwith
cranes,itsstreetsareclogged
withnewcarsandachicbar
oreateryseemstoopenevery
week.KyaukphyuinRakhine
statehasitstrafficjams,too.
Buttheyarecausedby
bullockcarts.Ifanewdawn
isbreakinginMyanmar,and
itisfarfromclearthatoneis,
itisnotevidentthere.
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PoliticsintheMaldives
Dodgingdeathin
paradise
Turmoileruptsinthe
Maldivesafterthearrestof
thevice-president
Oct31st2015|MALE|From
theprintedition
OVERtheyearsthecrystal
watersoftheMaldives,an
IndianOceanarchipelago
belovedofhigh-spending,
beach-lovingtourists,have
oftenbeenmuddiedby
internecinepoliticking.But
evenjadedMaldiveswatchersarealarmedbythe
arrestofthecountry’svicepresident.Thatisbecause
AhmedAdeebisaccusedof
conspiringinlastmonth’s
apparentattemptonthelifeof
PresidentAbdullaYameen.
OnOctober24th,after
touchingdownatIbrahim
NasirInternationalAirportin
thecapital,Male,MrAdeeb
wastakentoDhoonidhoo,a
detentionfacility.Whilehe
hadbeenawayonbusinessin
China,theauthoritieshad
searchedthehomesofseveral
ofhiscloseassociates.The
dramaofMrAdeeb’sarrest
wascapturedbythetoneofa
tweetfromthehomeminister,
UmarNaseer:“Charges:High
Treason”.
MrAdeebisaccusedof
involvementinanexplosion
onthepresident’syachton
September28th,whichleft
MrYameenunharmedbut
injuredhiswife,Fathimath
Ibrahim.Journalistscrowding
aroundthecapital’smain
jetty,awaitingMrYameen’s
returnfromtheairportonhis
yacht,afterapilgrimageto
MuslimholysitesinSaudi
Arabia,sawabriefflashof
flameandheardaloudcrack
asthereardoorwasblown
fromtheboat.
Governmentsourcessay
suspicionssoonfocusedon
theyouthfulMrAdeeb,who
hasenjoyedameteoric
career:hewaslittle-known
beforehisappointmentas
ministerfortourism,aposthe
heldforthreeyearsbeforehe
waspromotedtothevicepresidencyinJuly.
Withindaysofhisarrest,Mr
Adeeb—whohasdeniedany
involvementintheexplosion
—wasdumpedbyhisparty.
Formercolleaguesmoved
quicklytobegin
impeachmentproceedings.At
initialcourthearings,Mr
Adeebappearedbyashaky
videolink;hislawyer
questionedtheevidence
againsthim.
MrAdeeb’sarrestisevidence
ofthefrailtyoftheMaldives’
seven-yearexperimentwith
democracy.Afteritwas
announced,MrYameensaid
inatelevisedaddressthathe
hadallowedMrAdeebto
amasstoomuchpower.He
alsocommentedpubliclyfor
thefirsttimeonthemany
controversiesthathave
cloudedhistwo-year
presidency.Theseincludethe
jailingofthedefence
minister,MohamedNazim,
forattemptingtoharmthe
president;theimpeachment
ofhisfirstvice-president,Mr
Adeeb’spredecessor;andthe
controversialsentencingofa
formerpresident,Mohamed
Nasheed,to13years’
imprisonmentonterrorism
charges.Newanti-terror
legislationwasadoptedon
October27th.Ostensiblyitis
aimedatcombatingthe
Maldives’growingproblem
withhome-grownjihadis.But
oppositionpoliticianssayone
purposeofitistointimidate
thegovernment’scritics.
ThecaseofMrNasheedhas
attractedglobalattention.He
hadbeenanoutspoken
campaigneragainstglobal
warming,whichthreatensthe
islands.Histenureasthe
country’sfirstdemocratically
electedleaderwascutshort
whenoppositionpoliticians
androguepoliceofficers,
whohadrefusedtocurbantigovernmentprotests,
combinedtoforcehis
resignationin2012.Mr
Nasheed’slegalteam
includesAmalClooney,
whosemarriagetoGeorge
Clooney,aHollywoodactor,
ensuresextrapublicityforthe
case.AUNbodyruledin
SeptemberthatMrNasheed
hadbeendetainedarbitrarily.
Thismostrecentroundof
intrigueisominously
reminiscentofthedaysof
coups,conspiraciesand
arbitrarydetentionsthat
characterisedtheruleof
MaumoonAbdulGayoom,
MrYameen’shalf-brother,
whowaspresidentfrom1978
to2008.Thegovernmenthas
repeatedlytriedtoreassure
scepticsabroadthatitis
helpingtostrengthen
democracy.Thattaskhasjust
gotalotharder.
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ReligioninJapan
Templesofdoom
Japan’sBuddhisttemples
aregoingoutofbusiness
Oct31st2015|TOKYO|
Fromtheprintedition
Wherearethepilgrimsand
punters?
FARfrompreaching
abstinencefromearthly
pleasures,theBuddhist
priestsbehindthecounterof
Vowz,aTokyobar,
encouragetheopposite.There
aredifferentpathstoBuddha,
saysYoshinobuFujioka,the
headpriest,ashepoursagin
andtonicforacustomer.
“Spiritualawakeningcan
comeinanyconversation.
Weprovidethatopportunity.”
Sucharethedoctrinal
contortionsthatBuddhistsin
Japansometimespractisein
theirstruggletoremain
relevant.Someofthenation’s
77,000Buddhisttemplesrun
cafés,organisefashionshows
orhostfuneralsforpets.Still,
hundredscloseeveryyear.By
2040,40%mayhavegone,
lamentsHidenoriUkai,the
authorofanewbookonthe
crisisinJapaneseBuddhism.
In1950theTempleofthe
GoldenPavilioninKyoto
wasburneddownbya
schizophrenicmonkwho
adoredtheplace.Today’s
temples,bycontrast,are
fadingawayinapuffof
indifference.Japanesepeople
aregrowinglessreligious,
andlessnumerous,every
year.
Youmightthinkthatfunerals
wouldkeepmoderntemples
busy.Nearly1.3mpeople
diedlastyearinJapan(a
post-warrecord);Buddhism
hasforcenturiesbeenthe
religionofchoiceatfunerals
andinspiritualcareforthe
bereaved.Butwithcosts
oftenintheregionof¥3m
($24,700),funeralsinJapan
areamongthepriciestinthe
world.Cremationisfollowed
byaritualinwhichthe
bereavedusechopsticksto
pluckthecharredbonesof
theirlovedonesfromatray
andplacetheminanurn.A
priestmumblesincantations
andbestowsaposthumous
name.It’sallratherelaborate.
Socheaperalternativesare
becomingincreasingly
popular.Overaquarterof
funeralsinTokyoarenow
non-religious,saysMark
Mullins,anexperton
Japanesereligion.Many
familiesareoptingtoscatter
ashesinforestsoroceans,or
evensendthembypostto
collectivegraves.The
KoukokujiBuddhistTemple
inTokyorunsanautomated
indoorcemeterypackedwith
over2,000smallaltars
storingtheashesofthe
deceased.Thathelpstheir
familiesavoidtheexpense
andinconvenienceofa
remotecountryplot.A
websitelistsprices,options
andwalkingdistancestolocal
trainstations.
Inthecountryside,millionsof
Japanesestillmaintainfamily
grave-sitesattachedtorural
temples,payingasmuchas
¥20,000fortheirannual
upkeep.Butthetemplesneed
supportfrom200familiesto
breakeven,saysociologists.
Ageing,withering
communitiescannolonger
sustainthem.
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Banyan
Hotwater
AsAmericachallenges
China,thetemperature
risesintheSouthChinaSea
Oct31st2015|Fromtheprint
edition
YOUmighthavethoughtan
AmericaninvasionofChina
wasunderway.Awarship
had“illegallyentered”waters
intheSouthChinaSea
threatening“China’s
sovereigntyandsecurity
interest”,declaredLuKang,a
Chinesespokesman.Infact,
allthathadhappenedwasthat
adestroyer,USSLassen,had
peacefullysailedwithin12
nauticalmilesofSubiReef,
oneofsevenspecksofrock
andcoralinthemuchdisputedSpratlyarchipelago
whereChinahasbeen
engagedinfrenetic
constructionoverthepasttwo
years,creatingartificial
islands.
Chineseadmiralsmaybe
fuming,butnobodyexpectsa
warovertheincident.
America,however,hassaidit
willnotbethelastsuchsail-
by.SotensionintheSouth
ChinaSeaislikelytomount;
relationsbetweenAmerica
andChinawillbeunderstrain
astheirleadersmeetata
seriesofmultilateralsummits
inNovember;andthe
unspokenstrategicrivalry,as
Chinaseekstodisplace
Americaasthepredominant
militarypowerinthewestern
Pacific,willcomeinto
sharperfocus.
AmericacalledUSSLassen’s
patrolaroutine“freedomof
navigation”operation
(FONOPinthejargon),ofa
typeitconductsalloverthe
world“inaccordancewith
internationallaw”.Infact
Americahasneverratifiedthe
relevanttreaty,theUnited
NationsConventiononthe
LawoftheSea(UNCLOS),
despiteeffortsbysuccessive
presidentstopersuade
Congresstodoso.Asthe
namesuggests,thepointofa
FONOPistoprotectthe
freedomoftheseas.No
governmentisthreatening
thatfreedomintheSouth
ChinaSea,avitalarteryfor
maritimetrade.ButAmerica
hasbeenalarmedbyChina’s
buildingspree,seeingthe
artificialislandsasmilitary
basesinthemaking.
Beforethisincident,China
seemedtohavedecidedthat
theUnitedStateswasallbark
andnobiteoverthisissue.
AmericastoppedFONOPs
aroundChinese-occupied
featuresin2012;itdidno
morethanmakeverbal
protestswhenChinathatyear
evictedthePhilippinesfrom
theScarboroughShoaltothe
northoftheSpratlys,justasit
didwhenChinasentanoilrig
todrilloffVietnamlastyear,
andwhenChinabegan
buildinglongairstripsandbig
harboursontheartificial
islandsitwasbuilding.
ButinrecentmonthsAmerica
hasbeenlosingpatience.
Pentagonofficialsbegan
recommendingFONOPsasa
wayofconveyingannoyance
atChina’smoves.The
administrationapparently
delayedmakingafirm
decisiononthisuntilafter
PresidentXiJinping’sstate
visittoAmericalastmonth.
Duringhistrip,MrXi
promisednotto“militarise”
thenewislands,butwas
otherwisedismissiveof
Americanconcerns.Barack
Obamadecidedtoauthorisea
FONOPalmostassoonasMr
Xileft.Butbyrefrainingfor
solonghehadshownthathe
understooditwouldprovoke
China.WhateverAmerican
officialspubliclyinsist,thisis
notbusinessasusualorno
bigdeal.
TheaimofthisFONOPisnot
totakesidesinasovereignty
disputeoverSubiReef,which
isalsoclaimedbythe
Philippines,Taiwanand
Vietnam.Americais
officiallyneutralontherival
claims—andsaysitwillalso
carryoutFONOPsnear
featuresbuiltonbyother
countries.Thelimitedpoint
thepatrolmadewasthat,
whoeverownsSubi,
UNCLOSwouldnotgrantthe
island“territorialwaters”.
UnderUNCLOS,habitable
islandsareentitledto
territorialwatersextending12
nauticalmilesaroundtheir
periphery,aswellasa200nautical-mile“exclusive
economiczone”(EEZ).
Uninhabitablerocksgetthe
territorialwatersbutnotthe
EEZ.“Low-tideelevations”,
ie,reefslikeSubithatbefore
thebuildingwerewholly
submergedathightide,get
neither.
ChinahasratifiedUNCLOS,
buthasnotspelledouthow
itsclaimsintheSouthChina
Seaaccordwithit.Insteadit
resortstovagueandsweeping
historicalassertions—in
AmericaMrXisaidthatthe
islandsandreefshadbeen
Chineseterritory“since
ancienttimes”.China’smap
ofitsclaimshowsavastand
mysteriousU-shaped“nine-
dashedline”aroundvirtually
theentiresea.
Chinaalsoseemsambiguous
aboutUNCLOS’sArticle17,
onthe“rightofinnocent
passage”,whichallows
warshipstopassfreelyeven
throughterritorialwatersif
theydosowithoutany
menacingbehaviour.Tono
Americanprotestsatall,five
Chinesenavalshipssailedin
AmericanwatersoffAlaska
inAugust—justasMrObama
wasvisitingthestate.Soitis
unreasonablethatChinaisso
infuriatedbyAmerica’s
sailinginapartofthesea
Chinahasnotevenformally
claimedasitsterritorial
watersunderUNCLOS.
Chinaseemsneither
embarrassedbythe
inconsistencynorinterested
inexplainingit.
Partofthereasonliesin
differentinterpretationsof
UNCLOSasitrelatestowhat
foreignnaviescangetupto.
Inthepasttheargumenthas
centredoverEEZs.America
thinksithastherightto
conductmilitaryexercises
andsurveillanceinthem.
China,likesomeother
countries,disagrees.Several
timesChinahasharassed
Americanshipsandplanes
engagedinwhatitseesas
espionage.(AnAmerican
defencesecretaryonce
claimedAmericawasmerely
investigating“mysteries”,
whichheblamedonChina’s
lackofopenness.)Chinanow
thinksitispowerfulenough
toenforceitsinterpretation.
Americaispushingback.
Perverseincentives
America’sfriendsinSouthEastAsiawillberelievedthat
itisbelatedlystandingupon
theirbehalftoChina’s
bullying,andreassertingthe
navaldominancethathas
underpinnedaPax
AmericanaunderwhichAsia
hasthrivedfordecades.With
apparentlylittleriskofactual
conflict,itseemsAmerica
canonlygainfromthe
FONOPs.Butiftheydo
indeedcontinue,thereare
otherrisks.OneisthatChina
eventuallysucceedsin
portrayingAmericaasthe
destabilisingforceinthesea.
Anotheristhatituseswhatit
callsAmericanaggression
(andChinesepublicanger
aboutit)asapretextto
militarisethenewislandsjust
asAmericaanditsfriends
fear.Itlooksalmostasif
Americahasbeentrickedinto
givingChinatheexcuseit
wanted.
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China
Ruralpoverty:
Ham-fisted
handouts
IfChina’s
provinceswere
countries…:
[Thu,29Oct18:57]
Noodlesof
longevity
Golf:Bunkers,
banquetsand
bribes
[Thu,29Oct18:57]
[Thu,29Oct18:57]
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Previoussection|
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Ruralpoverty
Ham-fistedhandouts
China’sbiggestantipovertyprogrammeisn’t
working
Oct31st2015|
DAYINGHANVILLAGE,
SHANXI|Fromtheprint
edition
ACONCRETEtrack
meanderspastnurseriesof
pinesaplingsandsheep
grazingonstubble,petering
outatDayinghan,thepoorest,
mostremotevillageinthe
stonyhillsofcentralShanxi,
anorthernprovince.Someof
thevillagersliveincaves.A
fewchickensandducks
scratchforfoodamidthe
rocks.ZhangErping’sfamily
isoneofabout100that
remain,halfthenumberof
tenyearsago.Heandhiswife
eatmeatacoupleoftimesa
month;theybuyitatGujiao,
thenearesttown,buteventhe
1.4yuan(20cents)busfareis
usuallytoomuchforthe
householdtoafford.
MrZhangusedtodrivethere
inadilapidatedthree-wheel
truck,haulingsurpluscrops
tomarket.Butthecity
governmentbanssuch
vehiclesforsafetyreasons,so
hehastwoyears’worthof
potatoesandbeansrotting
away,unsellable.Whenhe
reaches60hewillgetastate
pensionof1,200yuan($190)
ayear,butthatistwoyears
awayand,anyway,isbarely
halftheofficialpovertyline.
Thecityhaspromisedhim
350yuantoheathistworoomhome,andhalf-price
medicines.Butwhenhis
grandsonfellillrecently,he
hadtoborrow1,000yuanto
paythebills.Twomassive
debtsarescrawledinpencil
onacalendarhangingonthe
wall:2,500yuanand6,400
yuan.“We’vealwaysbeen
poorinthisvillage,”hesays.
OnOctober16thPresidentXi
JinpingsaidChinawould
eradicatepovertyby2020.
Thatwouldmeanthat70m
peoplemustriseabovethe
officialpovertyline,whichis
2,300yuanayear(the
equivalentofabout$2aday
atpurchasing-powerparity,
slightlyhigherthantheWorld
Bank’sglobalstandard).This
issupposedtobeapriorityin
thenextfive-yearplan,which
wasbeingdiscussedbythe
CommunistParty’sCentral
CommitteeasTheEconomist
wenttopress.
Between1980and2010
Chinacutthenumberliving
belowthepovertylineby
around600m,byfarthe
biggestreductioninasingle
countryever.Itdidthis
indirectly—bybuilding
everythingfromroadsand
factoriestoschoolsand
hospitals,thusboosting
employmentandincomes.
Thecountryhasallbut
eradicatedextremepovertyin
cities(thoughthemuchhighercostoflivinginurban
areasmeansthatmanycity-
dwellersabovethepoverty
linearestilllivinghandto
mouth).Thosestillliving
belowthelinearealmost
entirelyruralpeoplewho
cannotworkforreasonssuch
asage,disabilityorbecause
theirvillagesareremoteand
inhospitable.Helpingthem
willrequiremoredirect
measures,notleastgiving
cash.
Thegovernmentmainlydoes
thisthroughits“subsistence
guarantee”programme,often
knownbyitsChinese
shorthand,dibao.In
principle,thosewhose
incomeisbelowthe
minimumneededtokeep
theminadequatecomfort(the
levelisdecidedbylocal
governments)getapayment
tobringthemuptothatlevel.
Thedibaoprogrammebegan
asapilotschemeincitiesin
1994,spreadtothe
countrysideinthemid2000s
andwentnationwideafter
2007.Ithasgrownfast:the
numberofruralrecipients
morethantrebledbetween
2006and2013;spendingon
itroseeightfold(seechart).
Two-thirdsofthosewhowere
belowthepovertylineon
joiningtheschemearenow
aboveit.
MostofChina’spoorest,
however,arenotinthe
programme.Astudy
publishedbytheWorldBank
inAugustfoundthatin200709only10%ofthosebelow
thepovertylineinthe
countrysidegotdibao
payments.(MrZhangdoes
notgetany.)Aroundthreequartersofthosewhodidget
paymentswereabovethe
line.Dataarepatchy,butitis
clearthatalotofdibao
spendinggoesawry.
Thedibaosystemwassetup
bythecentralgovernmentbut
isimplementedbylocal
authoritieswhichcanlimit
thesizeofpayouts.Thestudy
foundthatinruralareaslocal
thresholdsforreceivingdibao
paymentsrangedfrom500
yuanto3,000yuanayear(ie,
fromabovethenational
povertylinetofarbelowit).
Spendingperheadvaried
fromalmostnothinginsome
placesto4,000yuanayearin
others.Cost-of-living
differencesaccountedfor
someofthisvariationbutnot
all.Inpractice,richervillages
tendtobemoregenerous.
Widespreaddiscretionbreeds
widespreadcorruption.In
Dayinghana68-year-old
neighbourofMrZhangsays
thatonlytenhouseholdsin
thevillagegetdibao
payments,allofthemfriends
ofthevillage’spartychief.
“It’scompletelyunfair,”he
says.Itisalsocommon.In
2012HeGuoqiang,thenone
ofChina’shighest-ranking
leaders,saidofvillage
bosses:“Theydon’tdotheir
jobs…theydon’treally
understandwhichhouseholds
areindifficulty…andthey
givedibaobenefitsto
relatives,friendsoreven
themselves.”
Theprogrammeisthusdoing
littletohelpliftmorepeople
abovethepovertyline.The
WorldBankstudysayseach
tenyuanspentonthedibao
systemnarrowedthegap
betweenapoorperson’s
incomeandthelocaldibao
thresholdbyonlyoneyuanto
2.4yuan,amiserableresult.
Recently,mattershavebegun
toimprove.Thegovernment
hassetupasystemofcrosscheckingapplicationswith
otherofficialdocuments
(suchasmedicalrecords)to
limitfraud.Itisstreamlining
bureaucracyandcreatinga
databaseofallthoseinthe
countrysidebelowthe
povertyline.Localauthorities
usedtobearmostofthecost
ofthedibaosystem.Nowthe
centralgovernmentpaystwothirds.Thisshouldgiveit
morecloutinitsattemptsto
improvetheprogramme.
Butmoreneedstobedone.
“Weneedtoimprovethe
qualityofourdataandreally
solvetheissueofwhoweare
supporting,”saysLiu
Yongfu,asenioranti-poverty
officialinBeijing.Thetarget
ofeliminatingruralpoverty
by2020isunlikelytobemet
withoutfurtherreformof
dibao.
BackatDayinghan,farmers
arenotoptimistic.Asked
abouttheideaoflifting
everyoneoutofpoverty
withinfiveyears,MrZhang
andhisneighbourlookat
eachotherquizzically,and
thensmile.
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IfChina’sprovinceswere
countries…
Noodlesoflongevity
Anewstudycastsanew
lightonChina’sprogress
Oct31st2015|Fromtheprint
edition
China’seconomicriseis
well-known.Butthevast
improvementinthehealth
andlongevityofitspeople—
despiteappallinglevelsof
pollution—islessso.Anew
studypublishedintheLancet
forthefirsttimeoffersa
province-by-province
breakdownofChina’shealth.
Ourmapdisplayslife
expectancyatbirthforeach
ofthe33provincial-level
regions,matchedwiththe
countrythatismostsimilar
bythismeasure.
Thestudy*showsthatababy
borninChinain1990would
liveonaveragetotheageof
68.Onebornin2013could
expecttoreach76,beyond
theageatwhichConfucius
said“onecanfollowone’s
heart’sdesires—without
crossingtheline.”Thereisa
largedisparitybetween
provinces,butthegapis
narrowing.InShanghailife
expectancyisnow83—as
goodasSwitzerland.People
insixareaslivelongerthan
Americans.Themost
impressiveprogresshastaken
placeinthemostbenighted
regions:achildinTibetborn
in1990hadalifeexpectancy
of56,akintooneofthe
poorestAfricancountries.
Thishasrisento70,roughly
thesameasMoldova,oneof
Europe’spoorercountries.
Thecausesofdeatharealso
changing.Therehasbeen
muchprogressinreducing
infectiousdiseases(albeitless
forHIV/AIDS).Butdiseases
associatedwithlifestyle—
suchasstrokesandheart
disease—arenowthebiggest
killers.
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Golf
Bunkers,banquets
andbribes
Whybanninggolfwon’t
curbcorruption
Oct31st2015|BEIJING|
Fromtheprintedition
GOLFclubsareplaceswhere
powerfulmeninhideous
clotheshatchshadydeals.So
China’sCommunistPartyhas
bannedits88mmembers
fromplayingthegame.The
orderwasmadepublicon
October21stafterapproval
bytheparty’sCentral
Committeeandendorsement
byWangQishan,thehatchet
manforPresidentXi
Jinping’santi-corruption
campaign.Itsaimisto
“upholdtheprinciplethat
Partydisciplineisstricter
thanthelaw”—thatis,to
showthatpartymembersare
selflesssortswhowould
rathersitthroughafour-hour
meetingaboutraisingcrop
yieldsthandoanything
bourgeoisorfun.Thenew
rulesalsobarpartymembers
from“excessiveeatingand
drinking”and“improper
sexualrelationships”.
Golfandgrafthavegone
togetherinmodernChinalike
tartantrousersanddull
anecdotes.MaoZedongis
saidtohavedenounceditasa
“sportformillionaires”.But
sincehisdeath,thewealthy
andpowerfulhavefallenin
lovewithit.Inthe1990sthe
constructionofnewcourses
boomed.Itwasbannedinthe
early2000s,butmany
developerssimplyrelabelled
theirprojects“natureresorts”.
Peasantswhosepaddyfields
werebulldozedtomakeway
forfairwaysoftenhadno
choiceandwereinadequately
compensated.
Nonetheless,somesaythe
party’swarongolfmissesthe
pointaswoefullyasa
weekendhackermightmissa
three-footputt.Ifyouare
lookingforaclubinChina
wherepowerfulpeoplemeet
behindcloseddoorstocarve
upthecountry,themost
obviousoneisfullofcadres,
notcaddies.Officialsarenot
corruptbecausetheyplay
golf;theycanaffordtoplay
golfbecausetheyarecorrupt.
Banningthesymptomsof
graftisnosubstitutefor
addressingitsrootcauses,
anymorethanananti-slice
drivercanfixyourfaultygolf
swing.
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Previoussection|
MiddleEastand
Africa
Iraq:Onestep
back,twosteps
forward
Iraq’stroubled
[Thu,29Oct18:57]
politics:Uneasy
liesthehead
[Thu,29Oct
18:57]
Studentprotests
inSouthAfrica:
Boilingover
[Thu,29Oct
18:57]
Reclaiming
Nigeria:After
BokoHaram
[Thu,29
Oct18:57]
TheInternational
CriminalCourt:
Thebattleagainst
impunitygoeson
[Thu,29Oct18:57]
|Nextsection|Mainmenu|
Previoussection|
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|
Iraq
Onestepback,two
stepsforward
AmericaandIranare
competingtoshowwhichis
thestrongerallyinthefight
againstIslamicState.That
shouldbegoodnewsfor
Iraq
Oct31st2015|Fromtheprint
edition
SYRIAgetsthelion’sshare
oftheworld’sattention,but
inIraq,aftermonthsof
stalemate,thebattleagainst
IslamicState(IS)isatlast
hottingup.OnOctober7th
theIraqiarmy,localpolice
andsometribalfighters,
supportedbybothcoalition
andIraqiairstrikes,launched
abigpushtoencircleand
eventuallyretakeRamadi,the
capitalcityofmainlySunni
Anbarprovincewestof
BaghdadwhichfelltoISin
May.AsTheEconomistwent
topress,theefforttocut
Ramadioffappearednearly
complete,withthe10,000strongIraqiforceincontrol
ofthecriticalAlbuFarraj
bridgeovertheEuphratesand
preparingtotakeonthe1,000
orsoISfightersstillleft
insidethecity.
OnOctober15tharound
5,000Iraqisoldiersand
armednationalpolice
workingalongside10,000
Iranian-supportedShiamilitia
fighters(knownasHashidalShabiorPopularMobilisation
Units),withsomehelpfrom
coalitionairstrikes,beganan
assaulttorecapturetheBaiji
oilrefinery.Aftermonthsof
inconclusivefighting,victory
wasdeclaredonOctober
24th.Therefinery,oncethe
country’sbiggest,isdamaged
beyondrepair.Butsinceit
sitshalfwaybetween
BaghdadandIS-occupied
Mosulinthenorth,holdingit
andthenearbytownis
strategicallyvital.Controlof
theroadsouthwillmakeit
harderforIStothreaten
Tikrit,retakenbythe
governmentinApril,orto
funnelreinforcementsinto
Anbar.
Thesetwinoffensivescame
afterseveralmonthsofdrift.
Thedelaywascausedbythe
intensesummerheatandthe
timeitistakingto
reconstitutetheIraqiarmy
aftertwoofitsdivisions
collapsed18monthsago
whenISrampagedthrough
northernandwesternIraq,
seizingMosul,thecountry’s
secondcity(witha
populationofnearly2m),and
comingclosetoBaghdad.
Thenewpushinvolvesnew
tactics:bigsimultaneous
attacksinplacesnearly
250kmapartwillstretchIS.
Andthedeliberatedivisionof
labourbetweentheHashidalShabimilitiasandthe
government-controlledIraqi
SecurityForces(ISF)maybe
evenmoresignificant.
SincelateMay,theIranianbackedmilitiashavebeen
concentratingtheireffortson
Salahuddinprovince,northof
Baghdad,inamoreorless
independentoperationthat
keepsthemawayfromAnbar
tothewest,wheretheprime
minister,Haideral-Abadi,
underpressurefromthe
Americans,istryingtolimit
theirrole.SomeSunnitribes
havelinkedupwiththe
Hashidal-Shabithere,buttoo
oftenwhenShiafighters
driveISoutofSunniareas,
theirmaininterestisin
carryingoutreprisalsagainst
localssuspectedof
collaboration.
TheAmericansarekeento
chalkupamilitarysuccess
thatowesnothingtoIran,and
haveconsequentlybeen
uppingthetempoofair
sortiesinAnbar.(The
Pentagonclaimsabout150in
thepastthreeweeks,mostly
aroundRamadi.)The
Americansarealsosupplying
armouredbulldozerstocarve
apaththroughbooby-trapped
defences.
Inaseparateoperationon
October22ndAmerican
specialforcesjoinedwith
Kurdishpeshmergaunitsina
daringraidtohelpfree69
prisonersheldbyISnearthe
northerntownofHawija.The
Pentagonsaidthatthe
mission,whichcostthelifeof
anAmericansoldier,wasa
responsetointelligence
receivedbytheKurdsthatthe
captiveswereabouttobe
murdered.America’sdefence
secretary,AshtonCarter,in
testimonytoCongressthis
week,suggestedthatBarack
Obama’s“nobootsonthe
ground”promisewasunder
revision.Hesaidthat
Americanforces“won’thold
backfromsupportingcapable
partnersinopportunistic
attacksagainstIS…or
conductingsuchmissions
directly,whetherbystrikes
fromtheairordirectaction
ontheground”.
Thestakeshavebecome
muchhighersincethe
unwelcomearrivalofthe
RussiansinBaghdadlast
monthtoestablishamilitary
intelligence“co-ordination
cell”withIranandSyria.
Suchistheconcernin
Washingtonaboutwhat
RussiamaybeuptoinSyria
thatAmerica’smostsenior
officer,MarineGeneralJoe
Dunford,wasdispatchedto
IraqonOctober20th.In
meetingswithMrAbadiand
thedefenceminister,Khaled
al-Obeidi,hewarnedthat
Americacouldnotcontinue
itspresentlevelofmilitary
supportiftheRussiansstart
carryingoutairstrikesof
theirown.
Rememberwhoyour
friendsare
Itwasaremindertothe
Abadigovernmentthatthe
American-ledcoalitionisthe
essentialallyagainstIS.But
toshowIraqisthatheiswise
topreferanalliancewiththe
Americans,whatMrAbadi
mostneedsisaspeedyand
conclusivevictoryinRamadi.
PatrickMartinoftheInstitute
fortheStudyofWar,a
Washington-basedthink-tank,
notesthatthemorethe
Iranianproxymilitiassucceed
inBaijiwithoutanISF
breakthroughinRamadi“the
morepressurethereison
Abadi”.
GeneralDunfordappearsto
havebeenheeded.Yetmany
Iraqisarestilldisappointed
aboutthelevelofAmerica’s
commitment.WhenMr
Obamadeclaredjustovera
yearagothathisstrategywas
to“degradeandultimately
destroy”IS,theexpectation
inBaghdadwasthathewould
attacktheso-calledcaliphate
farmoreenergeticallythanhe
has.
MrObamaacceptedthatit
wouldtaketime“toeradicate
thecancer”ofIS.Buthewas
wrongaboutmuchelse,in
particularhisassertionthatIS
“isaterroristorganisation,
pureandsimple”.ThatISis
spectacularlybrutalisnotin
doubt,butitalsoholds
territory,administersitandis
preparedtodefendit.About
10mpeopleliveintheareas
IScontrols,thevastmajority
ofthemintherelatively
populoustownsoftheSunnimajoritypartsofIraq.
AlthoughISrulesbyfear,it
alsoattemptstoprovidebasic
administrationand
rudimentaryservices,which
somemayfindpreferableto
themalignneglectofthe
previousShia-dominated
governmentinBaghdad.
Militarily,althoughISuses
terroristtactics,suchas
suicidebombs,theseareonly
oneaspectofitsformidable
combatpower.MrObama
misjudgedthenatureofan
adaptableenemyandthe
environmentinwhichit
operates.
Theinitialobjectiveof
haltingtheadvanceofISand
pushingitoutofmainlyShia
areas,suchasSamarra,
Karbalaandtheoutskirtsof
Baghdad,wasfairlyswiftly
achieved.Theincreasingly
autonomousterritory
controlledbytheKurdish
RegionalGovernment,based
inErbil,lookssecuretoo.Its
peshmergafightershave
establishedstrongdefensive
linesthatextendacrossmost
ofthemulti-ethnic,oil-rich
provinceofKirkuk.The
liberationofJurfal-Sakhar
andTikritalsoshowedthat
Sunnitownscouldberetaken
fromIS,albeitathugecostto
theinhabitants.
Butsincethoseearlygains,
whichsawISloseabout15%
oftheterritoryithadcaptured
earlierintheyear,anuneasy
stalemateensued.Thiswas
interruptedbytheshocking
lossofRamadiinMay,which
scupperedover-optimistic
plans,drawnupbyAmerican
militaryadvisersandthe
governmentinBaghdad,for
anassaultonISinMosul
laterthisyear.
Therearenowsignsthatthe
Iraqiforcesareimproving
aftertheirearlierwoeful
performance.Butthe
governmentinBaghdad
remainsover-reliantonthe
Hashidal-Shabi,overwhich
itexercisesonlypatchy
controlandwhichhavelittle
inclinationtoworkwithIraqi
Sunnis.Attemptstocreatea
nationalguardbasedon
SunnitribalmilitiasinAnbar,
somethingtheAmericans
havebeenurginginthehope
ofestablishingasecond
“SunniAwakening”,have
collapsed.Forthis,blamelies
withShiapower-brokers,
closetotheIranians,whoare
underminingtheeffortsofthe
well-meaningMrAbaditobe
moreinclusive.Unlessthe
Sunnitribescanbeorganised
intoaneffectivefighting
force,theprospectoffreeing
allofAnbarprovincefrom
thegripofISwillremain
remote.
ToosoftonIran
Americahasnotonlyfailed
topushBaghdadtoengage
constructivelywiththe
Anbaritribes.Somesayithas
alsocededtoomuchswayto
Iran,whichhasprovided
militaryassistancemore
rapidlyandwholeheartedly
thanthecoalition.Many
peoplesuspectthatMr
Obamawasreluctanttopush
backhardagainstIranian
influenceinIraqforfearof
derailinghisnuclear
negotiationswithTehran.
Thatmaynowbechanging,if
onlygradually.Yetwithouta
lessrisk-averseAmerican
train-and-assistmissionto
improveIraq’ssecurityforces
andamuchmoreaggressive
aircampaign,thereisstilla
dangerthatpeoplewillaccept
thestatusquo.Thatimplies
acceptingthatIraqhasno
futureasaunitarystate—an
outcomethatwouldsuitboth
IranandIS.
Thereareabout3,500
Americanmilitarytrainersin
Iraqbut,underMrObama’s
orders,theyhavebeenlargely
confinedtotheirownbases.
AmongcriticsofAmerica’s
tentativestrategyfor
defeatingIS,Anthony
CordesmanoftheCentrefor
StrategicandInternational
StudiesinWashington
observes:“Generatingor
rebuildingforcesintherearis
notenoughandisanalmost
certainrecipeforfailure.New
orweakforcesneedforward
deployedteamsofadvisersto
helpthemactuallyfight.”
TheISmediamachine:
TrackingIslamicState’s
mediaoutput
TheIraqisarealsofrustrated
byrestrictiverulesof
engagementlaiddownbythe
WhiteHouseaimedat
minimisingtheriskto
civilians.AhmedAli,an
analystbasedinIraqi
Kurdistan,arguesthat“the
currentruleshave…
hamperedgroundforcesfrom
beingmoreeffective”.Mr
Martinsaysitisvitaltohave
Americanforwardair
controllerstodirectstrikeson
IStargets.MrCordesman
describestheaircampaignso
faras“weak”.Amore
aggressiveonecouldboost
Iraqimorale,destroykeyIS
unitsinIraqandSyriaand
giveIraqiforcestimeto
rebuildtheirstrength,he
argues.Thismayatlastbe
happening.GeneralDunford
saidthisweekhewasnow
opentoembeddingAmerican
troopswithIraqicombat
forcestohelpprovidethem
withintelligenceandtodirect
airstrikesandartilleryfire.
Doubtswilllingerabout
whetherMrObamahasthe
willtosucceedinIraq.But
somethingisshiftinganditis
nottoolate.Alesscautious
coalitioneffortwouldalso
bolsterMrAbadi,whoneeds
allthehelphecanget(see
article).ConvincingIraq’s
SunnisthatBaghdad
genuinelycaresabouttheir
fateandwantsthemtoremain
partofIraqistheonlywayto
defeatISinthelongterm.
Iraqisstillamess,butunlike
Syria,itisnotyetbeyond
salvation.
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Iraq’stroubledpolitics
Uneasyliesthehead
Iraq’sprimeministerhas
beeninpowerbarelya
year,butisfloundering
Oct31st2015|BAGHDAD|
Fromtheprintedition
Inofficebutnotinpower
ATANYtime,HaideralAbadiwouldhavemadean
unusualMiddleEastern
leader.Buthisappointmentin
August2014asprime
ministerandheadofthe
armedforcesjusttwomonths
afterMosul,Iraq’ssecond
city,hadfallentothe
fearsomenewarmiesof
IslamicState(IS)seemed
especiallyperverse.Hehad
heldnopreviousmilitary
post,andinhisyouthhad
dodgedthedraft.AsaBritish
exile,hefixedliftsforthe
BBC.ButwhileIraqis
seemedcontenttoleavethe
battleagainstIStoothers,
particularlytheIranianbackedShiamilitias,they
lookedtohimtorightIraq’s
woefullycorruptstate,which
isdivviedupbetween
sectarianandKurdish
politicalblocs.
Fifteenmonthsintothejob,
hehasmademanyofthe
rightnoises.Incontrasttohis
megalomaniacpredecessor,
Nurial-Maliki,hegoes
walkabout,brushingasidehis
fewguardssothatpeoplecan
takeselfieswithhim.He
handedtheplaneIrangave
MrMalikitothestateairline.
“We’vestartedblowingsome
bigfishoutofthewater,”he
promised.Andhispolitical
reformplans,unveiledin
September,initiallywent
downverywell.Throughout
thesummer,hundredsof
thousandsofprotestershad
takentoIraq’sstreets,
demandingthathedismissa
cabinetselectedbythe
politicalblocswhotreat
ministrieslikecashmachines,
handingcontractstotheir
chumsandpocketingsalaries
forlegionsofghostworkers.
“Thepartieshaven’tcometo
buildthestate,”says
Baghdad’sgovernor,whose
religiousShiaparty,Sadr,
lookedtogarnerpublic
supportbybackingthe
protests.“They’vecometo
buildthemselvesandtheir
bankaccounts.”
Thecountry’sShia
ayatollahs,manybasedinthe
cityofNajaf,joinedthe
chorus.MrAbadishould
strikethecorruptwithan
“ironfist”,saidtheGrand
Ayatollah,Alial-Sistani.The
WestapplaudedwhenMr
Abadiproducedhisreforms,
hopingtheyheraldedamore
technocraticgovernment.The
collapseoftheoilprice
furtherstrengthenedthecase
forreform,tocurbthe
country’sbudgetdeficit.
ButMrAbadihassquandered
hisopportunitywithhalfstepsandtokenism.Hetook
toFacebooktoannouncethe
openingtotrafficofthe
GreenZone,thechunkof
centralBaghdadthe
Americansturnedintoa
governmentenclavein2003
andwhichhasbungedupthe
capitaleversince.Buthe
onlyopenedasingleone-way
road,disruptedbysomany
checkpointsthattheold
routesarestillfaster.
Hecuthiscabinetfrom33to
22,butallbarfouroftheold-
timersgotnewgovernment
titles.Hegavethreevicepresidents,MrMaliki
included,48hourstoleave
theirofficialresidencesinthe
GreenZone;butdidnothing
whentheystayed.On
October18thhisprosecutor
saidthatthetrademinister
wouldstandtrialfor
corruption.ButMrAbadihas
kepthimon.Ratherthancut
thebloatedpublicsector,he
hasaddedhalfamillionto
thepayrollinthenameofthe
wareffort.Hisadvisers
despair.
Ofcourse,changeisnoteasy.
Theyouthandsports
minister,fromanotherShia
religiousfaction,ISCI,
decriesthecumulative$900
billionofgovernmentmoney
spentsincetheAmericans
gavethefactionsministriesin
2003,including$75billion
onanelectricitysystemthat
isstillplaguedbyblackouts.
Buthebridlesatthe
suggestionthathemightstart
bycullinghis8,000
employees,toomanyof
whom,whentheyshowup,
slouchatemptydesks.
AndMrAbadi’shandis
weak.Asamemberofthe
IslamicDawaParty,heowes
hisjobtothepartysystem,
butremainsabit-partplayer
init.Theformerprime
minister,MrMaliki,remains
Dawa’shead,andhis
loyalistsarenowthreatening
towithdrawtheirsupportfor
MrAbadiifhedoesnotdo
theirbidding.“Ifhe’dhave
touchedthepartysystem,
we’dprobablyhaveshot
him,”saysamiddle-ranking
Dawahand.Manyresentthe
systemwhichhasseenthe
factionsturnBaghdad’s
primepropertyinto
compoundsanddistributethe
oilwealthtomilitias.But
livelihoodsdependonit,and
manymorefearwhatwould
happenshoulditcrash.When
MrAbadihalvedthemonthly
expensesMPsgetfortheir
securityteams,parliament
overruledhim.
Unabletosacknon-existent
workers,MrAbadiinsteadis
seekingtocutsalaries.Senior
civilservantsandpolicemen
haveseentheirwagesand
expensessharplypruned.
Manylower-tierstaffare
monthsinarrears.Struggling
topayhisrent,anofficialin
theprimeminister’soffice
complainedthathehashadto
movebackwithhisparents.
Thecircleofmalcontentsis
growing.“There’sastrong
Baghdadundercurrenttrying
tobringhimdown,”says
Mowaffakal-Rubaie,a
formernationalsecurity
adviserstillclosetoMr
Abadi.Dawaisconsidering
replacingitsownman,
perhapswithMrMaliki,or
Alial-Adib(anotherDawa
stalwart)orHadial-Amiri(a
militiachiefwhoisleading
thecurrentattackonIS).
Fearfulthatsuchstrongmen
wouldbolsterIran,Western
powershavebeeneyeing
theirowncandidates,too.
Somelooktooldsurvivors
whoareatarm’slengthfrom
thereligiousblocs,including
thecurrentheadofthe
financecommittee,Ahmed
Chalabi.Electionsareduein
2017,butmanynowdoubt
MrAbadi’sfuturewillbe
settledattheballotbox.
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StudentprotestsinSouthAfrica
Boilingover
TheANCfacesperhapsits
biggestchallengeyet
Oct31st2015|
JOHANNESBURG|From
theprintedition
Bornfreebutreallyannoyed
PROTESTERSsettyres
ablaze.Policesprayedrubber
bulletsandteargason
universitycampuses.Angry
studentschantedstruggle
songsanddancedthe“toyitoyi”,aknees-highjogmade
famousduringprotests
againstapartheid.Itwaslike
ascenefromSouthAfrica
duringthechaoticyearsof
the1980s;instead,itwasthis
week.
Theechoesofthestruggleera
werestriking:white
universitystudentseven
movedtothefrontofprotests
inthebeliefthatpolicewould
belesslikelytoopenfireon
themthanonblackstudents.
Yetthedifferencesarealso
striking:theseprotestsarenot
directedataparliament
devotedtoupholdingwhite
supremacybutata
democraticallyelected
governmentcontrolledbythe
AfricanNationalCongress
(ANC),thepartythatushered
innon-racialdemocracy
underNelsonMandela.
Theprotestsstartedas
scatteredmarchesagainst
planstoincreasetuitionfees
by10%attheUniversityof
theWitwatersrandandthe
UniversityofCapeTown,
twoofthecountry’sbest.
Troublehadbeenbrewingon
campusesformonthsas
studentactivistsmarched
againstracism—realor
perceived—whiledemanding
the“transformation”of
universities.Theycomplain
thatuniversitieshavetoofew
blackstafforstudents.Thisis
true,butlargelybecause,
thankstoterribleschools,
blackSouthAfricansstilldo
muchworseinexamsthan
whites,somethingtheANC
hasfailedtofix.Untiluntil
thefeeincreasewas
announcedtheprotestsdrew
littlesupportfromthewider
studentbody.Nowtheyhave
grownintoanationwide
movementthathasshut
almostallthecountry’s
universitiesfortwoweeks.
Theprotestsareaboutfar
morethanfees.Many
students,andthosewho
supportthem,complainabout
theANC’scorruptionandits
inabilitytodeliveronmany
ofthepromisesitmade
beforeassumingpowerin
1994,amongthemtoprovide
freeeducation.“Ourparents
weresolddreamsin1994.
We’rejusthereforarefund,”
readoneplacardheldby
studentsinamarchtothe
UnionBuildingsinPretoria,
theofficialseatof
government.
Somelocalpunditslikenthe
proteststotheSoweto
uprisingof1976,when
schoolchildrenprotested
againstapartheid,ortalkofa
“SouthAfricanSpring”,
alludingtotheproteststhat
sweptawayrepressive
dictatorsintheMiddleEastin
2011.Bothanalogiesseem
implausible.Yettheprotests
domarkapolitical
awakeningforagenerationof
youngpeoplewhowereborn
aftertheendofapartheidand
areknowninSouthAfricaas
the“bornfrees”.
Theborn-freesarenumerous:
almostathirdofSouth
Africansareagedbetween
tenand24.Manyexpected
thattheseyoungpeople
wouldbecrucialswingvoters
inthe2014elections,because
youthunemploymentisas
highas50%andthosewho
donotrememberapartheid
wereassumedtofeelless
gratitudetothepartythat
endedit.Infact,youngSouth
Africanslargelystayedaway
fromthepolls.
Nowthatyoungpeoplehave
takentothestreets,however,
thegovernmentisshaken.
Onlyafewdaysago,the
educationminister,Blade
Nzimande,dismissedthe
students’slogan(“feesmust
fall”)withaghoulishjoke:
“studentsmustfall.”Nowhis
cabinetcolleagueshavetaken
totheairwavestosaythat
theysalutethestudents’
struggle,neglectingto
mentionthatitisagainsttheir
government.JacobZuma,the
president,swiftlygaveinto
theprotesters’demandsthat
universityfeesbefrozenin
2016.Itisnotclearwherehis
embattledfinanceminister
willfindtheadditional2.6
billionrand($190m)topay
forthis.Thebudgetdeficitis
expectedtobe3.8%ofGDP
thisyear—pushing
governmentdebtclosetoits
50%ceiling.
Thestudents’successseems
tohavedonelittletoquieten
them.Activistsnowpatrol
campusentrancesturning
awayfacultymembers,
promptingsometofretthatif
examsarenotheldsoonno
onewillgraduateandfinal-
yearstudentswillhavelostan
entireyear’sstudy.
Theirprotestshavealso
inspiredothers.OnOctober
27thsome30,000supporters
oftheEconomicFreedom
Fighters,arowdynewultra
left-wingpartythatwon6%
ofthenationalvotein2014,
marchedthrough
Johannesburgdemanding,
amongotherthings,thatthe
governmentnationalisebig
companiesandthatthe
centralbankshouldscrapits
inflationtargetsandinstead
startprintingmoney.South
Africa’ssummerislikelyto
beahotone,inmoreways
thanone.
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ReclaimingNigeria
AfterBokoHaram
Pushingbacktheslavegrabbingrebelsisonlythe
start
Oct31st2015|YOLAAND
ABUJA|Fromtheprint
edition
THEmarksofterroristrule
starttoappearacoupleof
hundredkilometresnorthof
Yola,capitalofNigeria’s
Adamawastate.Bombed
churchesandburnt-out
politicalofficessitdecaying
inHong,oneofthe
southernmosttownstakenby
BokoHaram.Broken-down
tanksadornedwiththe
jihadists’emblemlitterthe
road.Deepintheself-
proclaimedcaliphate,signs
advertisingun-Islamicgoods
andserviceshavebeen
blottedoutinblack.Inshaky
Arabic,thewords“Thereis
nogodbutAllah”are
tattooedonwalls.
Nigeriahasmadegains
againsttheIslamicStateaffiliatedinsurgency,which
attheheightofitspower
occupiedanareaofthenortheastroughlythesizeof
Belgium.Pushedoutofmost
majorsettlementsnow,its
fightersarehidinginthe
scrublandsoftheSambisa
forestandacrosstheborderin
Cameroon.Moraleamong
Nigeria’ssoldiershassoared.
Theyarebetterequipped,and
betterliked,thaninyears.
Childrensmileandsalute
theminthestreets.“They
broughtthislandbacktous,”
saidonewomanfarmer,who
losttwochildrenwhenthe
insurgentstookMichika,a
towninAdamawa,in2014.
Inthesaferreclaimedspotsin
thisstate,lifeisimproving.
Torchedfarmsarebeing
replanted,marketshave
reopenedandcarshave
returnedtotheroads.Citizens
arerebuildingbridges
bombedbyBokoHaram.
Shatteredbanksareopening
newbranchesinbigger
settlementslikeMubi,re-
establishingexactlythekind
of“Western”economythat
theinsurgentsrevile(the
nameBokoHarammeans
roughly“Westerninfluenceis
forbidden”).
Flyersdistributedin
AdamawabyNigeria’sarmed
forcestelllocalstotakeheart.
“Yourvillagesaresafenow,”
readthepamphlets,which
weredropped(withnohintof
irony)fromhelicopters.
Authoritiesacrosstheregion
promisetocloserefugee
campsinthecomingmonths.
InBorno,theworst-affected
state,thegovernorsayshe
hasbegunrebuilding
propertiesin“accessible”
townssuchasBama.
Non-profitorganisationsare
worried,though.They
complainthatleadershave
downplayedthescaleofthe
humanitariancrisis.Theyalso
worryaboutsending
displacedpeoplebackto
unsecuredtowns.Militants
stillstagemurderousraidson
villageswherevigilantesare
morevisiblethanthemilitary,
andsuicidebombersattack
marketsornon-extremist
mosqueswithterrifying
regularity.Almost50people
diedintwinattacksonthe
capitalsofAdamawaand
Bornostateslastweekend
alone.“Mostlocationsarenot
‘safe’fromBokoHaram,”
oneAbuja-baseddiplomat
says.“TheNigerianarmyhas
notfinishedoperations,andis
farfromdoingso.”
Thenorth-eastisamong
Nigeria’spoorestregions,and
manyreturneesareafraidto
gobacktofarming,whichis
theonlyworkmanycanfind.
Instead,theyrelyon
overburdenedreliefagencies
forfood.Themostrecent
countsfromtheInternational
OrganisationforMigration
suggestthatpeoplearestill
fleeingtheirhomesin
Nigeria’snorth-east.A
“conservative”tallyputthe
numberofdisplacedat2.15m
inAugust,andrising.Nowis
notthetimetoforcethem
backintovillages
beleagueredbyBokoHaram.
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TheInternationalCriminalCourt
Thebattleagainst
impunitygoeson
DespiteAfricanleaders’
brickbats,thecourtisstill
fightingforjustice
Oct31st2015|Fromtheprint
edition
ThefightoverRuto
EVERsinceanincumbent
president,Sudan’sOmaralBashir,wasindictedin2008
forgenocideandother
allegedcrimes,thependulum
begantoswingagainstthe
InternationalCriminalCourt
(ICC),atleastinAfrica.
Somepeople,especially
Africanleaders,thinkit
biased,sinceallthosesofar
convictedhavebeenAfrican.
EarlierinOctoberaSouth
Africandeputyministersaid
hisgovernmentwasplanning
toleavethecourt.Kenya’s
parliament,nettledbythe
indictmentofthetwomen
laterelectedpresidentand
deputypresidentforcrimes
againsthumanityfollowinga
murderouslydisputed
election,haspreviously
calledforKenyatoquittoo.
Uganda’spresidenthasurged
Africancountriestoleaveen
masse.
Eventhoughmorethanhalf
ofthecountriesintheAfrican
Union(AU)aresignatoriesto
theICCstatuteandwereonce
itskeenestbackers,theAU
hassetuparivalcourt.Under
aprotocolproposed(butnot
yetratified)lastyearthisnew
courtmayexemptincumbent
leadersandseniorofficials
frombeingcharged.That
wouldmakeitafeeble
substitutefortheICC,which
aimstotryeventheloftiestof
leadersiftheyslaughtertheir
people.Bearinginmindthe
carnageinsuchplacesas
Rwanda,Darfurandformer
Yugoslavia,theICCinsists
thatnooneshouldhave
impunity.
Butinmid-OctobertheAU
calledfortheICCtointerpret
oneofitsrulesinsuchaway
thatitscaseagainstKenya’s
deputypresident,William
Ruto,wouldbeweakenedand
evenscuppered;thecharges
againstPresidentUhuru
Kenyattaweredroppedlast
year.SouthAfrica’s
governmentalsoseemsbent
onpokingthecourtintheeye
byinvitingSudan’spresident,
MrBashir,toattendaChinaAfricasummitin
JohannesburginDecember,
eventhoughSouthAfricais
boundbyinternationallawas
aresultofitsICC
membershiptoarresthimand
sendhimtoTheHague,
wherehehasbeenindicted
fororchestratingmassmurder
andrapeinDarfur.IfSouth
Africawelcomeshimagain,
asitdidinJune,itwouldbe
anothersetbackforthecourt.
YettheICCisnotgivingup,
inAfricaorelsewhere.For
onething,itisuncertainthat
SouthAfricawillleaveit.
PresidentJacobZumahas
beenmoreequivocalonthe
matterthanhisdeputy
minister.SouthAfrica’sown
judges,nottomentionits
civilsociety,stillintendto
meetitsgovernment’s
obligationstothecourt.They
guess—anddoubtlesshope—
thatthegovernmentwillnot
intheendriskthedamageto
thecountry’sreputationfor
upholdinginternationallaw
thatanexitfromtheICC
mightentail.
TheAU’sstandontheRuto
caseiscomplicated,too.It
restsontheinterpretationofa
rulethatallowsevidenceto
betakenintoaccountevenif
thepersonwhooriginally
provideditlaterwithdrawsit,
ashasbeenthecasein
Kenya,whereaclutchof
witnesseshaverecanted;
othershavediedor
disappeared.TheICC’schief
prosecutor,FatouBensouda,
believestheywereall
interferedwith.TheKenyan
governmentandtheAUboth
saythatthecourtagreednot
toapplytheruleinMrRuto’s
case.Notso,saysthe
prosecutor.
MsBensouda,aGambian,is
particularlykeentorejectthe
chargethatthecourtisbiased
againstAfricans.Shenotes
hopefullythatmostAfrican
governmentscontinuetocooperatewithit.InSeptember
thecourtsetaprecedent
whenNigerarrestedAhmad
al-Faqial-Mahdi,aMalian
jihadist,andsenthimtoThe
Hague,wherehewascharged
withthewarcrimeof
orderingmonumentsand
shrinesinthecityof
Timbuktutobesacked.
October’sopeningofafull
investigationintocrimes
committedbyRussiaand
Georgiaduringtheirwarin
2008lendsweighttoMs
Bensouda’sassurancethatthe
courtisnotfocusedjuston
Africa.Infact,thoughher
teamisinvestigatingcrimes
ineightAfricancountries—
theCentralAfricanRepublic,
theDemocraticRepublicof
Congo,Kenya,theIvory
Coast,Libya,Mali,Sudan
andUganda—itisalso
conductingpreliminary
examinationsinAfghanistan
(whereAmericanscouldin
theorybecharged),
Colombia,Honduras,Iraq
(whereBritishsoldiers’
conductisbeinglookedat),
Palestine(whereIsraelias
wellasPalestinianbehaviour
isbeingscrutinised)and
Ukraine.Thatishardlyan
exclusivelyAfricantallyof
wickedness.
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Europe
Turkey’selection:
Votingtothe
soundof
explosions
[Thu,29Oct
18:57]
Polandturns
right:A
conservative
enigma
Portugal’s
doomed
government:
Short-termism
[Thu,29Oct18:57]
[Thu,
29Oct18:57]
The2006football
WorldCup:Fair
playorfoul?
[Thu,29
Oct18:57]
Bavariaand
migration:When
migrantsspoilthe
joke
Charlemagne:A
taskforTusk
[Thu,29Oct18:57]
[Thu,29
Oct18:57]
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Turkey’selection
Votingtothesound
ofexplosions
Inacountrylongadmired
forcombiningdemocracy
andIslam,anelectionis
marredbyviolenceand
recrimination
Oct31st2015|
DIYARBAKIRAND
ISTANBUL|Fromtheprint
edition
ELECTIONcampaignsin
Turkeyaresometimes
exuberantaffairs,withthe
streetsdeckedoutwith
buntingandresoundingwith
jingles.Butthemoodwas
mostlysubduedasvoters
preparedtocasttheirballots
onNovember1st.
Witheverypassingdaysince
thepreviouspollinJune,a
countrylongseenasamodel
ofMuslimdemocracyhas
grownmorepolarised.
Politicalfeudsandreal
bloodshedhavebecome
horriblyintermingled,
especiallysincethereopening
inJulyofconflictbetween
thestateandtheguerrillasof
theKurdistanWorkers’Party
(PKK).Duringthecurrent
electoralcontest,aproKurdishmovement,the
Peoples’DemocraticParty
(HDP)hasdenouncedits
terribletreatmentbythe
rulingIslamistJusticeand
Development(AK)party.AK
isinturndeterminedto
recouplostgroundafter
losingitsparliamentary
majoritybecauseofthe
HDP’sunexpectedlyhigh
scoreof13%inJune.
PresidentRecepTayyip
Erdogan,whoseceremonial
positionissupposedtoput
himabovepolitics,accuses
theHDPofbeingaproxyfor
thePKK,whichtheHDP
stronglydenies.Hehasurged
citizensto“teachthepeople
whogetbackingfromthis
terroristorganisationthe
lessontheyneed”:animplied
calltovoteforAK,whichhas
dominatedTurkeysince
2002.
ItwasMrErdoganwhorolled
theelectoraldiceasecond
timeafterthefailureof
coalitiontalksinvolvingthe
fourpartiesinparliament:
AK,theHDP,theRepublican
People’sParty(CHP),which
speaksforTurkey’sonce
dominantseculartradition
andtheright-wingjingoists
oftheNationalActionParty
(MHP).ButtheHDPsaysthe
tablesaretilted.Theyhave
reported200attacksontheir
offices.Sinceviolence
resumed,22mayorselected
onanHDPtickethavebeen
removed,andanother20
arrested.Theauthoritieshave
been“creatingpsychological
pressureandmakingpeople
feelasiftheyaredoing
somethingillegalby
attendingourgatherings”,
saysAyseAcarBasaran,an
HDPcandidate.
Mediaaccesshascertainly
beenskewed.Inthefirst25
daysofOctober,MrErdogan
appearedonthestate-runTV
channelfor29hours,while
coverageofhispartyranfor
30hours,saystheSupreme
CouncilforRadioand
Television.TheCHPand
MHPwereonairforfive
hoursand70minutes,
respectively,whiletheproKurdishHDPgotamere18
minutes.
Apartfromcrimpingits
obviousrivals,the
governmentisalsocracking
downonformerfriends.On
October28thpolicewielding
watercannonandteargas
burstintoamediacompany
andsilenceditsbroadcasts.
Thiswaspartofadrive
againstfirmslinkedto
FethullahGulen,an
American-basedIslamic
preacherwhousedtoback
MrErdoganbutisnowa
bitingcritic.Itfollowedthe
government’stakeover,with
aprosecutor’sblessing,ofthe
broadcaster’sparentwhich
alsoownsnewspapersand
miningandenergyfirms.
Oddly,thisbehaviourmay
nothaveaffectedvoters’
feelingsthatmuch;polls
suggestanoutcomenotmuch
differentfromlasttime.But
insomepartsofthecountry,
theclimateissotensethat
therearequestionsoverhow
fairtheelectionwillbe.
AntagonismbetweenKurds
andethnicTurksissoaringto
levelsnotseensincethe
1990s.Whenevertelevision
showsthefuneralsofTurkish
soldiersorpolicekilledin
clasheswiththePKK,antiKurdishsentimentsurges;
andthegovernmentseems
proudofthefactthatitis
fightingtheKurdsbeyondthe
bordersaswellas
domestically.
AhmetDavutoglu,theprime
minister,confirmedon
October26ththatTurkish
forceshadhitKurdish
militiasinsideSyria,although
thoseforcesaretheWest’s
alliesagainstthejihadistsof
IslamicState(IS).The
Turkishgovernmentclaimsto
befightingatwo-pronged
waragainstKurdishforces
andIS.Ithasshowngreater
zealinbattlingtheKurds,but
thisweekitreportedseveral
domesticoperationsagainst
IS.Ashootoutwithsuspected
ISmilitantsinthesoutheasterncityofDiyarbakirleft
twopoliceofficersandseven
fightersdead.Securityforces
thensaidtheyhadarrested30
peopleinraidsaroundKonya.
TheAnkaraprosecutor’s
officehasblamedISforan
explosioninthecapitalon
October10ththatkilled102
peaceactivists.(The
governmenthasmadethe
weirdchargethatISandthe
PKKcolludedintheoutrage.)
Criticsfromtheleftistand
pro-Kurdishcampretortthat
whoeverplantedthebombs,
peopleintheirideological
cornerwerethemainvictims
—aswasthecasewitha
bombinJulyintheborder
townofSuruc,inwhichmore
than30youngpeopledied.
Thereisevidenceofalink
betweenthetwoblasts:one
oftheperpetratorsofthe
Ankarablastwasabrotherof
abomberinvolvedinthe
Surucone.
Besidesviolence,voters
worryaboutbread-and-butter
issues.AKboaststhatthe
economyhasgrownalot
sinceittookpower(thoughit
hasslowedoflate).Turkey’s
hopesofjoiningtheEuropean
Unionroseagainthismonth
whenAngelaMerkel,
Germany’schancellor,vowed
toreviveentrytalksinreturn
forhelpwithrefugees.
Erdoganexpectscompliance
ToordinaryTurks,whoselife
isgettingharder,AKhas
promisedtoraisethe
minimumwage.Italsooffers
achildbonusformothersand
supportforstudents,young
entrepreneursandnewly
weds.MrDavutoglueven
madeabizarrepledgetohelp
youngpeoplefindspouses.
ErodingErdogan’spower:
OurguidetoTurkey’s
generalelections
Noelectionresultwill
automaticallybringstability.
IfAKrevertstosingle-party
rule,itwillfacebitter
opposition.Ifitfailstowina
majorityandteamsupwith
theMHP,suchagovernment
wouldbefuriouslyantiKurdish.Abroadcoalitionof
theAKandtheCHPmight
pullthecountryfromthe
brink.Butthatwouldrequire
somethingunlikely:Mr
Erdogangivingupdreamsof
anall-powerfulpresidency.
ManyTurksyearntoseean
inclusivegovernment;butthe
prospectsforgettingoneare
poor.
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Polandturnsright
Aconservative
enigma
Astherightsavoursvictory,
peoplewonderhowfarit
willgo
Oct31st2015|WARSAW|
Fromtheprintedition
ONLYonethingisgenerally
agreedabouttheresultof
Poland’selectionheldon
October25th;forthevictors,
itwasatriumphonascale
thatnobodyelsehasmanaged
toachieveduringthequartercenturysincemulti-party
democracywasusheredin.
JaroslawKaczynski,the
veteranleaderofPoland’s
right-wingLawandJustice
party(PiS),isthearchitectof
thatsuccess.Hispartycame
firstwith37.6%ofthevote,
givingit235outof460seats
inthelowerchamberof
parliament(theSejm)andthe
firstindependentmajorityin
post-communistPoland.The
centristCivicPlatform(PO)
party,inpowersince2007,
finishedwith24.1%ofthe
vote.AsPiSsavoursits
victory,peopleathomeand
abroadarewonderingwhere
itsideologicalheartlies.
Onthepessimisticside,
liberalsathomeandabroad
arewarningofthe
“Orbanisation”ofPoland;
theyfearthecountrymight
nowfollowtheexampleof
ViktorOrban,theHungarian
primeministerwhoisseenby
criticsasacurberofliberty
andaxenophobicnationalist.
PiSpoliticiansmuchprefer
comparisonswiththeBritish
ConservativeParty,with
whichtheyarecloselyallied
intheEuropeanParliament.
Asisemphasisedby
ZdzislawKrasnodebski,aPiS
memberofthatassembly,the
partyconsidersitselfmuch
moremoderatethanFrance’s
NationalFrontoreventhan
theChristianSocialUnion
whichdominatesBavaria.
ThePiScertainlytakesa
traditionallineonsocial
issueslikegaymarriageand
abortion.Butcallingit
“conservative”ismisleading,
arguesRadosławMarkowski,
apoliticalscientistatthe
PolishAcademyofSciences.
Poland’snewrulersare
definitelynotbelieversin
smallgovernment,asmany
peoplepointout.
Onthecontrary,Mr
Kaczynskihasbeentryingto
carryouta“continuous
revolutionaimingtobuilda
strongstate,evenatthe
expenseofcertainliberaland
democraticprocedures”,in
thewordsofJanKubik,
directoroftheSchoolof
SlavonicandEastEuropean
StudiesatUniversityCollege
London.
MrKaczynskihasapenchant
forgrandprojects.Asprime
ministerin2006-07heand
hislatetwinbrotherLech,
whowaspresidentwhenhe
diedinaplanecrashin2010,
spokeoffoundinga“fourth
republic”,toreplacewhat
theysawasthemorally
corruptthirdPolishrepublic,
inexistencesince1989.(A
largephotographofLech
bearingthewords“President
oftheFourthRepublic”
hangsinthePiS’s
headquartersinWarsaw.)
JaroslawKaczynski,who
holdsadoctorateinlegal
studies,spokeinOctoberof
theneedfora“reconstruction
ofthestate”.
SomepeopleworrythatPiS
couldtryandchangethe
constitution,strengthening
theroleofthepresident,as
setoutinadraftconstitution
whichwasdrawnupbythe
partyin2010(butrecently
disappearedmysteriously
fromtheparty’swebsite).
Suchapresidentialsystem
wouldbea“catastrophefor
Polishdemocracy”,saysMr
Markowski.
ComparisonswithHungary
arenotunfounded.Mr
KaczynskiadmiresMr
Orban.WhenPiSlostthe
previousgeneralelection,
2011,MrKaczynskisaidby
wayofself-consolationthat
hewas“deeplyconvinced
thatthedaywillcomewhen
wewillhaveBudapestin
Warsaw”.
Thatdayisnigh,Polish
liberalsnowfear.PiS’s
opponentsareindisarray
aftertheelection.Inthe
defeatedCivicPlatform,Ewa
Kopacz,theoutgoingprime
minister,maysoonfacea
leadershipcontest.The
centre-leftSocialDemocrats
didnotevenmakeitinto
parliament,aftertheyfailed
tocrossthe8%thresholdfor
coalitions.Hopemaylieina
newparty:Nowoczesna
(literally:“Modern”),an
economicallyandsocially
liberalgroupledbyRyszard
Petru,aneconomistwhohas
workedattheWorldBank,
whichgot7.6%ofthevote.
Yetalthoughpowerremains
concentratedroundMr
Kaczynski,LawandJusticeis
notamonolithicparty.Itwon
byreachingouttoavarietyof
groups,fromfarmersto
youngurbanvoters,andfrom
theCatholicrighttomore
moderatevoterswhowere
simplytiredofPO.
Somearereassuredbythe
factthatMrKaczynskiwill
nottakethejobofprime
ministerhimself;heisgiving
thatjobtohispartycolleague
BeataSzydlo,inkeepingwith
apromisehemadelast
summer.Yetcriticswonder
howlongitwillbebeforehe
findsapretexttotakeover
andstarttryingtobuilda
strongerstatewithhimselfat
thehelm.
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Portugal’sdoomedgovernment
Short-termism
Aftersomemessy
manoeuvres,thereislikely
tobealeft-wingcoalition
Oct31st2015|LISBON|
Fromtheprintedition
ANTÓNIOCOSTA,leader
ofPortugal’sSocialistParty
(PS),maysoonbeabletotell
thecuriousstoryofhowto
loseavoteandyetstill
becomeprimeminister.After
theelectiononOctober4th,
farfromwinningamajority
ashehadhoped,hisPSwas
noteventhebiggestparty.
ThattitlewenttothecentrerightallianceledbyPedro
PassosCoelho,theincumbent
primeminister.Many
expectedMrCostatoresign
aspartyleader.
Yetwithinweeks,MrCosta
expectstobecomeprime
ministerofan“anti-austerity”
government.Thisistheresult
ofabold—andperhaps
historic—compromise
betweenhisownmoderate
partyandthefarleft.Before
then,MrPassosCoelhowill
besworninasprime
minister,buthisminority
governmentseemsdoomed
fromtheoutsettolastlittle
morethanafortnightbefore
losinga“motionof
rejection”.
ThedemolitionofwhatMr
CostacallsPortugal’s“Berlin
Wall”,a40-yearideological
dividewithintheleft,hasas
muchtodowithhisinstinct
forsurvivalaswithanynew
politicalvision.Theformer
mayorofLisbonfoughta
knives-outbattletobecome
PSleaderlastyear,accusing
hispredecessoroffailingto
capitaliseonthehardships
inflictedonordinary
Portuguesebyfouryearsof
austerityunderMrPassos
Coelho.Afterlosingthe
election,MrCostarejected
thehumiliatingoptionof
backingthecentre-right
governmentinreturnfor
vagueconcessionsand
insteadbegantryingtoforge
analliancethathad
previouslybeenseenas
impossible:betweenthePS,
theradicalLeftBlocandthe
hardlinePortuguese
CommunistParty.
Althoughnosuchcoalition
wasofferedtovotersbefore
theelection,the62%share
takenbythethreeparties(and
smalleropponentsofMr
PassosCoelho)representsa
voteforchangeandforan
endtoausterity,arguesMr
Costa.AníbalCavacoSilva,
Portugal’sconservative
president,isnotconvinced.
Constitutionalprecedentmust
prevail,thepresidenthas
ruled.SohehasgivenMr
PassosCoelho,asleaderof
thelargestpoliticalgroup,the
firstchancetoforma
government,eventhoughthe
combinedleftispoisedto
bringitdownalmost
immediately.More
controversially,thepresident
hasuttereddirewarnings
againstanygovernmentthat
reliesonsupportfromthetwo
far-leftparties,whichfavour
debtrestructuringandare
opposedtothefiscal-compact
treaty’srules.
InspiteofMrCosta’s
guaranteethatany
governmentthatheforms
wouldrespectPortugal’s
euro-zonecommitments,Mr
CavacoSilvasaysthathehas
notseenanyevidencethatit
wouldbe“stable,lastingor
credible”.Hehasapoint.
Morethan70%ofvoters
backedmainstreamparties
(includingthePS)that
stronglyfavourkeeping
Portugalintheeuro.“People
arewearyofausterity,”
commentsPauloBaldaia,
directorofTSFradio.“Buta
largemajorityalsowantthe
bookstobalance.”
MrCavacoSilva’shighhandedapproachand
disparagingremarksaboutthe
anti-euroleftmayhave
closedmoredoorsthanthey
haveopened.Butthatdoes
notmean,asEurosceptics
outsidePortugalhave
concluded,thatheisbenton
keepingtheleft-wingparties
outofoffice.IfMrCosta
succeedsinsealingapact
withthetwofar-leftparties
andbringingdownMrPassos
Coelho’sminority
government,MrCavaco
Silva’sfinalreluctantact,
afteradecadeinoffice,is
likelytobetopresideovera
newexperiment:aleft-wing
coalitiongovernment,withall
theeconomicuncertaintythat
mightbring.
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The2006footballWorldCup
Fairplayorfoul?
Sweetmemoriesofacontest
turnsour
Oct31st2015|BERLIN|
Fromtheprintedition
HardquestionsforaKaiser
WHATPeleistoBrazil,
FranzBeckenbaueristo
Germany.“TheKaiser”,as
Germanscallhim,so
dominatedGermanfootballin
the1970sthathecreateda
newpositionforhimself:
“Libero”,afree-ranging
defenderwhoplannedattacks
outofmidfield.Mr
Beckenbauerledhiscountry
towintheWorldCupin1974
asaplayerandin1990as
coach.Andasthebossofthe
relevantcommitteeofthe
GermanFootballAssociation
(DFB),hehelpedGermanyin
2000tobecomehostofthe
2006cup.
Thattournamentwasa
turning-pointinmodern
Germany’sself-image.
Dubbeda“summerfairy
tale”,itwasamonth-long
festivalofgoodfeelings.It
wasthefirsttimesincethe
secondworldwarwhen
Germansenthusiastically
wavedtheirflagwithout
provokingbadreactionsat
homeorabroad.Germans
showedthemselvestobefun,
optimistic,tolerantandeven
(onthepitch)elegant.
SotheycringedonOctober
26thastheyreadastatement
fromMrBeckenbauerabout
thathappytale;itwasissued
afterhisquestioningbyalaw
firmhiredbytheDFB.He
hadmadea“mistake”all
thoseyearsago,hesaid,in
agreeingtoacomplexand
opaquetangleoffinancial
flowsbetweentheDFBand
FIFA,thesport’sglobal
governingbody(whichis
underinvestigationin
Americaforcorruption
involvingotherWorldCups).
But,MrBeckenbauer
averred,“novoteswere
bought”in2000when
GermanybeatSouthAfricato
becomethe2006hostcountry
inthelastroundofvoting.
YetMrBeckenbauer’sdenial
won’tputtorestallegations
madebyDerSpiegel,a
Germanweekly,thataslush
fundwasindeedusedforjust
thatpurpose.Wolfgang
Niersbach,presidentofthe
DFBnowandamemberof
MrBeckenbauer’scommittee
in2000,hadalreadydenied
briberyonOctober22nd,but
hisnervous,confusing
answerstofollow-up
questionsatthatpress
conferenceclarifiednothing.
TheoZwanziger,his
predecessorandrival,says
therewasa2000slushfund
thathadtoberepaidin2005.
Becausesomeofthecentral
figuresintheeventshave
died,thefulltruthmaynever
comeout.ButforGermans,
thesuggestionofimpropriety
comesasthelatestofseveral
reputationalblows.Scandals
haveinrecentyearsdented
twooftheircorporate
bellwethers,Siemensand
DeutscheBank.Nowthe
mosticonicGermanbrandof
all,VW,issulliedafter
revelationsthatthecarmaker
cheatedonemissionstestsin
Americaandothercountries.
Cheerfulflag-waversthe
Germansmayhavebecome.
Butmanynowfretabouttheir
traditionalclaimstobeseen
asreliableandconscientious.
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Bavariaandmigration
Whenmigrantsspoil
thejoke
Asrefugeesstreamin,some
oldinter-Germanrivalries
resurface
Oct31st2015|PASSAU|
Fromtheprintedition
Lesswelcomethantheywere
BAVARIAhaslongtaken
prideinbeingdifferentfrom
otherTeutonicplaces:warm,
flamboyantandhostileto
anybodywhotriesto
incorporatetheregionintoa
bigger,centralisedrealm—
fromCharlemagneinthe
eighthcenturytoOttovon
Bismarckinthe19th.At
certaintimes,includingmost
ofthepastfewdecades,its
idiosyncrasywasaharmless
culturaljoke;atothers,ithas
hadrealpolitical
consequences.Thisweekfelt
likeamomentoftransition
fromtheformersituationto
thelatter,asthemigration
crisisthreatenedtoballoon
outofcontrolnotjustinthe
Balkansbutinthecontinent’s
German-speakingcentre.
SomehotBavariantempers
startedrisingthisweekinthe
bordertownofPassau,a
picturesquespotatthe
confluenceofthreerivers,
whereahithertoorderly
influxofrefugees,entering
fromAustria,suddenly
becamealmost
unmanageable.Astentsand
receptioncentresoverflowed,
somenewcomersfromplaces
likeSyriaandAfghanistan
foundthemselvessleeping
outdoorsinicytemperatures:
asituationthatembarrassed
andfrustratedpeopleonboth
sidesoftheborder.
Onthewhole,peoplein
Passauhavebeenresponding
withgenerositytotheadvent
ofmigrants.Bakerswork
overtimetoprovidethem
withfood,well-wishershave
donatedmountainsofclothes,
volunteersocialworkershave
takenspecialcareofthe
newcomers’children.But
unhappinessgrewinrecent
dayswhenanimportant
bridgehadtobeclosedto
bringrefugeesacross,
virtuallyparalysingtraffic.
Policemen,whetherlocalor
speciallydeployed,havebeen
working15-hourdays;even
well-intentionedlocals
wonderoutloudhowlongthe
altruismcangoon.
HorstSeehofer,whoheads
Bavaria’sregional
government,blamestwo
parties.First,the
irresponsiblemastersof
neighbouringAustria,whose
“behaviour[infunnelling
refugeesnorthwards]is
hurtingourneighbourly
relations”,andsecond,the
federalgovernmentledbyhis
notionalpoliticalfriend,
ChancellorAngelaMerkel,
whichshouldhaveputmore
pressureontheAustrians.
MrSeehoferleadsthe
ChristianSocialUnion
(CSU),theregionally
dominantpartywhichfor
decadeshasbeenyokedwith
MrsMerkel’sChristian
DemocraticUnion(CDU)in
aclosepoliticalalliance.But
therehavealwaysbeen
differencesofstylebetween
thetwoparties:theCSUabit
moreconservative,closeto
itshomeregion’sCatholic
roots,andgiventoplain
speaking.
Thatcontrastinoutlooksgoes
backatleasttothedaysof
FranzJosefStrauss,the
earthycharacterwhobefore
hisdeathin1988was
Bavaria’suncrownedkingas
premierforadecadeand
leaderoftheCSUforthree
decades.Astaunchanticommunist,hewasamoreor-lessloyalcoalitionpartner
toChancellorHelmutKohl;
butheusedtodeclare,
mischievously:“Idon’tmind
whoservesaschancellor
underme.”
Bavariabristles
MrSeehoferlacksMr
Strauss’slarger-than-life
personalitybuthehasbeen
appealingatleast
subliminallytotheGerman
south’soldresentmentofthe
country’snorthernmasters.
HedeemsMrsMerkelwildly
over-optimisticinher
assessmentofhowmany
migrantsthecountrycan
absorb.Heisthreateningto
takethefederalgovernment
totheconstitutionalcourtto
challengeherpolicy,
claimingthatitviolates
legallybindingborder
regulations.
Morebroadly,conservatively
inclinedBavariansresent
liberalBerlinerstellingthem
whattodowhenthelargest
shareofmigrantsarriveinthe
south.Whentensof
thousandsofrefugeesturned
uponeweekendinSeptember
atMunich’scentralstation,
theyweremetwithflowers
andgifts;sincethenthemood
hassomewhatsoured.Local
authoritiesareunderhuge
strain.Parentsgrumbleabout
schoolgymsbeingusedas
dormitories.
Bavariaisfarfromalonein
suchnervyreactions;Mrs
Merkelfacesplentyof
criticismwithintheCDUof
hergenerousstancetowards
newcomers.ButwhenMr
Seehoferraiseshisvoice,it
evokesoldinter-regional
rivalries;andhehasalso
broughtupamoreserious
argument.
INTERACTIVE:European
asylum,acceptanceand
denial
Allowinginanunlimited
numberofasylum-seekers,
MrSeehoferclaims,will
boostmovementsonthe
fringeofGermanpolitics,
fromthexenophobicantimigrantprotestmovement
knownasPegida,which
holdsweeklymarchesin
Dresden,tothemorecerebral
Euroscepticsofthe
AlternativefürDeutschland
(AfD)partywhichwas
planningaprotestmeetingin
Passau.TheBavarianleader’s
clearimplicationisthatby
takingatougherstance
againstrefugees,heispre-
emptingtheemergenceof
harder-lineresponses.
Thisargumentchimesclosely
withsomethingMrStrauss
usedtosay,inatone
somewherebetweenjestand
seriousness.Oneofhismost
famousstatementswasthat
“totherightofmethereis
onlythewall”—inother
words,hissharp-tongued
conservatismwasasfarright
asonecouldgowhilestill
remainingrespectable.
MrSeehoferhasissueda
mysteriouswarningthatifthe
federalauthoritiesdonot
stemrefugeenumbersatthe
borderwithAustriaby
November1st,his
governmentwillpursue
“othercoursesofaction”.
Peoplewonderwhathecan
mean.Afterall,Bavaria
(whichisboundbythe
constitutioneventhoughit
hasneverratifiedthe
document)hasnopowerto
closeaborder,norisit
entitledtoaseparate
immigrationpolicy.Butithas
amindofitsown.
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Charlemagne
AtaskforTusk
Poland’sformerprime
ministerdesperatelyseeks
toensurethatEurope’s
centrecanhold
Oct31st2015|Fromtheprint
edition
MOVINGtoBrussels,says
DonaldTusk,thepresidentof
theEuropeanCouncil,was
likereaching“paradise”.
True,thathadmoretodo
withtheabundanceof
Flemishmasterpiecesinlocal
museumsthanthedelightsof
coaxingcompromisefromthe
EuropeanUnion’s28
disputatiousleaders.MrTusk
hastheunenviabletaskof
managingtheEuropean
responsetoanendlessseries
ofcriseswithoutanyreal
powerofhisown.Yetalmost
ayearintothejobhehas
foundwaystomanage,and
sometimestosurpass,its
limitations.Ashespeaksin
hisBrusselsoffice,youget
thesensethathemighteven
beenjoyinghimself.
FewEurocrats’eyebrows
remainedunraisedwhenMr
Tuskwonhisappointment.
Poland,thecountryhehad
runforsevenyears,had
barelyadecade’sexperience
ofEUmembershipand
remainedoutsidetheeuro,the
union’ssignatureproject.Mr
Tusk’sabrasivestyle,honed
intherough-and-tumbleof
Poland’syoungdemocratic
politics,seemedanillfitwith
theconsensualmethods
preferredinBrussels.He
workedtoimprovehis
Englishbut,somesniff,still
cannotspeakFrench.
MrTuskhasnotswayedall
hiscritics,thoughtheir
numbersaredwindling.
Europe’scrisis-manager-inchiefhasweightierproblems
onhismind.Hereturns
repeatedlytoasingletheme:
theneedtoshoreupEurope’s
liberalvaluesagainstthe
threatfrompopulism.Thisis
hardlyanoriginalthoughtin
acontinentafflictedby
MarineLePenandViktor
Orban,butMrTuskhashis
owntakeonit.Theliberal
centremustbe“toughand
determined”,hesaidrecently
intheNetherlands,“notto
becomemoreliketherightwingpopulists,buttoprotect
Europeagainstthem.”
Thus,forexample,hismantra
thattheEUmustregain
controlofthebordersthrough
whichhundredsofthousands
ofrefugeesandother
migrantshaveflowedthis
year.Hehascalledforanend
tothepolicyof“opendoors
andwindows”,aremark
somesawasajabatAngela
Merkel,theGerman
chancellor.Ifvoterscannot
beassuredthatEurope’s
frontiersaresecure,fearsMr
Tusk,thentheywillturnto
nastierleaders.(Hementions
Poland,wherenationalists
havejustejectedCivic
Platform,thecentre-right
partyMrTuskfoundedand
ledtotwoelectionvictories.)
Thatwillmakeithard,ifnot
impossible,topursuethe
moreliberalpolicies,suchas
sharingoutasylum-seekers
acrossEurope,thatMrTusk
sayshebacks.Henotesthe
paradox:topreserveits
openness,Europemust
countenanceadegreeof
closure.
MrTuskisnogentlerwhen
hediscussesBritain’s
positionintheEU.Inearly
NovemberDavidCameron,
theprimeminister,willsend
MrTuskaletteroutlininghis
requestsfora“renegotiation”
ofBritain’smembership.It
willfalltoMrTusktoseek
thecommongroundbetween
whatMrCameronneedsand
whathis27counterpartscan
accept,particularlyon
Britain’sdemandstoreduce
welfarepaymentstoEU
immigrants(MrCameron’s
foot-draggingcouldpostpone
serioustalksuntilnextspring,
possiblypushingBritain’s
promisedin/outreferendum
into2017).MrTusksaysthat
hisroleisclear:tohelpMr
CameronkeepBritaininthe
EU.Butheworriesthatthe
processcouldencourage
othercountriestodemand
theirownopt-outsand
exemptions.ForBritaintobe
a“rolemodel”foreveryone,
hewarns,wouldmean“the
endoftheEU”.
BeyondtheEU’sborders,the
limitsofhispowerare
becomingclearer.With
fightingraginginUkraine,
MrTusktookofficevowinga
toughlineonRussia.His
opinionshavenotchanged,
buthenowacceptsthatthe
EUcandolittleforCrimeaor
theDonbas.WhileGermany
andFrancehavetakenthe
politicalleadintalkingto
RussiaaboutUkraine,the
challengefortheEU,saysMr
Tusk,isinternal:todefy
VladimirPutin’sattemptsto
fosterdivisioninEurope.So
fartheEUhasheldtheline
onsanctions(whichrequire
unanimousbacking,andmust
soonberenewed).Passing
thistest,whichMrTusk
describesasEurope’sfirstbig
challengesince1989,bodes
wellforfuturecrises,hesays.
Perhapsthenewjobhas
mellowedthepresident:his
happinessnowrestsonthatof
theleaderswhosemeetings
heoversees.Ataeuro-zone
summitMrTuskchairedin
July,forexample,ittook17
hourstofindadealthatkept
Greeceinsidethecurrency.
Thisisadrasticchangefrom
histimeinPoland,when,he
acknowledges,hehad“very
limited”tolerancefor
politicalwrangling.Still,
unlikethemanyEurocrats
whoseemtohavespenttheir
wholelivesintheEU’s
unlovelybureaucratic
buildings,MrTuskretainsa
whiffoftheoutsider.His
approachhasnotbeento
everyone’staste:hehas
prickedtheegosof
ambassadors,forexample,by
decliningtomeetthemas
oftenashispredecessordid.
Butmostadmitthatheis
warmingtohisrole.
Avoiding“nomoreEurope”
MrTuskdescribeshimselfas
an“obsessivepro-European”
ratherthanafederalist.That
distinctionmightoncehave
beendifficulttoparse.Not
today:theEU’sproblems,
fromtheintegrityofitssingle
currencytothesecurityofits
borders,cuttotheheartof
nationalsovereignty—but
theyalsoleadirresistiblyto
thelogicofco-operation,if
notitspractice.
ThecreationofMrTusk’sjob
intheprelapsarianLisbon
treatyof2007wasforsome
thefirststeptowardsa
“presidentofEurope”.That
thetaskshouldnowfallto
onewhoacceptstheprimacy
ofnationalgovernmentsisno
surprise.MrTusk,never
havingsuccumbedtothe
dreamofafederalEurope,
doesnotregretitsdemise.He
acceptsGermanleadership,
withthecaveatthat“not
everythingthatisgoodfor
Germanyisgoodfor
Europe.”Instead,hehasset
himselfahumblertask:to
ensurethatEurope’sstream
ofcrisesdoesnotentirely
washawaytheoldorder.
Unlikethesermonisersof
yore,whopreachedMore
Europeandpredictedtheend
timesfornation-states,Mr
Tuskismorelikealifecoach,
gentlyurgingEurope’s
anxiousleaderstofindthe
couragetofaceuptohardbut
unavoidablechallenges.
OthersmaybuildEurope;he
willtrytokeepitfromfalling
apart.
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Previoussection|
Britain
Welfare:Credit
crunch
TheHouseof
Lords:Crisis?
Whatcrisis?
[Thu,29Oct18:57]
[Thu,29Oct
18:57]
Electoralreform:
Castout
Freespeechat
university:
Intoleranceof
intolerance
[Thu,29Oct18:57]
[Thu,29Oct
18:57]
Scottishjustice:A
healthierbrand
ofporridge
[Thu,29Oct
18:57]
Small-business
lending:Where
it’sdue
Mining:An
industryexhumed
[Thu,29Oct18:57]
[Thu,29Oct18:57]
Bagehot:The
spectreofpast
glories
[Thu,29Oct18:57]
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Welfare
Creditcrunch
Aplantocuttaxcreditsis
defeated,fornow.Coming
upwithaface-saving
alternativewillbehard
Oct31st2015|Fromtheprint
edition
GEORGEOSBORNE,the
Conservativechancellor,isin
abind.Whatseemedlikea
pieceofcleverpoliticsinhis
Julybudgetpartially
unravelledonOctober26th,
whentheHouseofLords
rejectedhisplantolop£4.4
billion($6.7billion)offthe
billfortaxcredits,income
top-upsforthelow-paid.
Afterthevote,MrOsborne
emergedfromtheTreasuryto
reportthroughgrittedteeth
thathewould“listen”to
criticismandfindwaysto
softentheblow.Hehasno
goodoptions;barringaUturnthepolicywilldo
damagetosomeofBritain’s
mostvulnerable,andtohis
reputation.
BackinJulythegovernment
claimedthebudgetwasa
boonfor“strivers”,whomit
haspreviouslycontrasted
withnon-working“skivers”.
IainDuncanSmith,thework
andpensionsminister,
pumpedhisfistswithdelight
asMrOsbornerevealedabig
riseintheminimumwage.
Butcloserinspectionrevealed
aharshersettlement.Afterthe
governmentfailedtopublish
itsusualdistributional
analysis,theInstitutefor
FiscalStudies(IFS),athinktank,helpfullyobliged.Its
figuresrevealedhugelosses
forthepoorest,inadequately
offsetbytheminimumwage
andothertaxtweaks(see
chart).
Taxcreditsaredesignedto
bustpoverty,whilenudging
peopleintowork.The
governmentsupplementslow
wages,thengraduallyteases
thebenefitsawayasincome
rises.MrOsbornehadtwo
optionsforreducingthe
system’scost:cuttingthe
initialbenefitpayment;or
increasingtherateatwhichit
isyankedback.
Inhissummerbudget,the
chancellorpulledeverylever
hehad.Heannounceda
freezeonthegenerosityof
tax-creditpaymentsuntil
2020,andnewrulestotake
themawaymorequickly.But
whereasthefreezewould
creepingradually,thefaster
withdrawalswouldwallop
peopleallatoncenextApril.
TheResolutionFoundation,a
think-tank,estimatedthat
3.3mfamilieswouldloseon
average£1,100ayear,
throwing200,000children
intopoverty.Asinglemother
oftwoworking40hoursa
weekontheminimumwage
wouldseeherweeklyincome
dropfrom£417inMarchto
£391inApril.TheLords
balked,andpushedbackthis
proposal.
Back-pedalling,MrOsborne
hasvowedtohelpthose
familiesaffected.Butforthis
delicatetaskhehasonlyblunt
instruments.Afasterincrease
intheminimumwagemight
forceemployerstosoftenthe
blowofbenefitcuts.But
whereastaxcreditsand
minimumwageshavesimilar
income-boostingeffects,they
haveoppositeeffectson
employers’eagernesstohire.
Theofficialindependent
forecasteralreadysaysthe
higherminimumwagewill
mean4mfewerhoursofwork
perweekwillbeofferedby
2020;raisingitorbringingit
forwardwoulddomoreharm
still.
Analternativewouldbetotry
tocushionthefamilies
throughthetaxsystem.But
thiswouldbebothineffective
andverycostly.Whereas
incometaxesandnationalinsurancecontributionsare
designedtosqueezemost
fromtherich,taxcredits
targetpoorfamilies(43%of
householdsreceivingthem
haveearningsbelow£10,000,
meaningtheyalreadypayno
incometax).Themismatch
meansthatanytaxcutthat
gotclosetocompensatingthe
tax-creditloserswouldalso
beahuge,expensive
giveawaytothewell-off.
MrOsbornecoulddelaythe
painbyphasingitin
graduallyorinflictingitonly
onnewclaimants.Wage
growthinthemeantime
mightmakethecutsa
fractioneasiertobear.Butit
wouldmakelittledifference
intheend—anddrawingout
thecutsovertwoorthree
yearswouldleavethem
dangerouslyfreshinvoters’
mindscomethegeneral
electionin2020.
Norwouldthesesticking
plasterssolveamore
fundamentalproblemwiththe
proposal:itseffecton
incentivestowork.By
clawingbacktaxcreditsmore
quicklyasincomerises,the
governmentrisks
encouragingshirkingrather
thanworking.Currently,
familiesearningbetween
£3,850and£6,420ayearcan
keepeveryextra£1theyearn.
Thereformwouldclawback
48pofeveryextra£1.Alone
parentearningabove£11,000
andstillreceivingtaxcredits
wouldfaceaneffectivetax
rateof80%.
Thegovernmentisona
broadermissiontosimplify
welfare,removingsomeofits
perverseincentives.Butthe
newplansunderminethat
aim.Underearlierproposals,
asinglemotheroftwowould
havebeenabletoworkfor22
hoursontheminimumwage
beforeherbenefitsstarted
falling.WithMrOsborne’s
changesthiswouldfalltoten
hours.“Thereisaprettybig
riskthatbecauseofthese
changespeoplearegoingto
cuttheirhours,”saysTorsten
BelloftheResolution
Foundation.
Painwithnogain
Arethecutsworthallthis
painanddistortion?Mr
Osborne’smotivefortaking
theaxetotaxcreditswasthat
theyhadbecometoocostly.
Inhisbudgetspeechhenoted
thattheycost£1.1billionin
1999andwillcost£30billion
thisyear.Althoughhis
figuresaremisleading(£1.1
billioncoversonlyhalfa
year’sspendingandignores
otherbenefitsthattaxcredits
graduallyreplaced),onafair
comparisonreal-terms
spendinghasquadrupled
since1999.Asashareof
GDP,taxcreditscostmore
thanthreetimesasmuchas
America’sEarnedIncome
TaxCredit(EITC),which
inspiredthem.Inall,Britain
spent4.3%ofGDPonfamily
benefitsin2011,farmore
thantherich-countryOECD
averageof2.6%.
Yetitisnotquitethe
mindlesssplurgethe
governmentmakesout.
HerwigImmervoll,an
employmentexpertatthe
OECD,pointsoutthat
spendinginBritainisclosely
means-testedandtherefore
sensitivetotheeconomic
cycle:in2011taxcredits
cushionedthehittowages
fromtherecession.Andtax
creditshavebroader
ambitionsinmitigatingchild
povertythanAmerica’s
EITC.TheIFSreckonsthat
in1997-2010changesto
Britain’staxandbenefits
system,ofwhichtaxcredits
werethecentrepiece,kept
1.8mchildrenoutofpoverty
andraisedthehousehold
incomeofthepooresthalfof
childrenby28%.
Moreover,MrOsbornehas
£11.6billionoffiscal
wriggle-roomtoplaywith.
Reininginthepolicyor,more
sensibly,abandoningit
altogether,wouldnotbe
difficult.Evenwithoutthe
blockedreforms,the
chancellorwillhavechiselled
thecostofthesystemdown
from1.8%ofGDPin2010–
11to1.4%by2020-21.
Cynicssuggestthatthe
promisetocut£12billion
fromthewelfarebillwasonly
includedintheConservative
manifestoasachiptobe
bargainedawayincoalition
negotiations.Intheabsence
ofacoalitionpartner,the
HouseofLordsmightjust
havetodo.
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TheHouseofLords
Crisis?Whatcrisis?
Thetax-creditrowhasput
reformoftheupperhouse
backontheagenda
Oct31st2015|Fromtheprint
edition
Lordsa-voting
WHENBenjaminDisraeli
waselevatedtotheHouseof
Lordsin1876,hesaid:“Iam
dead:dead,butintheElysian
fields.”Thechamberhasits
Elysiantouches,witha
glitteringthroneoverlooking
red-leatherbenches.Their
occupantsmaynotbedead,
buttheyarecertainlyold:
Toryex-ministersunder
MargaretThatcher,former
LabourMPs,Liberal
grandeesand,inaspecial
section,aclutchofChurchof
Englandbishopscladin
black,whiteandpurple.
Itseemsastrangesettingfor
aconstitutionalwar.Yetthat
iswhattheupperhouse
startedonOctober26th.At
issuewasaseemingly
mundanestatutoryinstrument
containingthegovernment’s
plannedcutstotaxcredits
nextApril.Fourmotions
wereproposed:onetokillit,
twotodelayituntilcertain
conditionsweremetandone
toacceptitwithregret.Inthe
endpeersvotedforthe
delayingmotions.Yet,asthe
governmentswiftlypointed
out,theeffectwastoblockits
plans.
Theodditywasthatlittleof
thedebatewasabouttax
credits.Labour’sBaroness
Hollistuggedheartstringsby
readingoutlettersfrompoor
workingpeoplefearfulof
losingthehandouts.The
ArchbishopofYork,John
Sentamu,madeastrong
moralcasefornotleaving
peopleinthehandsofloan
sharks.EvenTorypeers
urgedthechancellor,George
Osborne,tosoftenhisplans.
AsLordLawson,aformer
Torychancellor,putit,“itis
notjustlisteningthatis
required.Changeisrequired.”
Yetwhatgotthepeersmost
excitedwastheconstitutional
questionofwhethertheyhad
arighttointerfere.Beforethe
debate,thegovernmentsaid
thatrejectionbytheunelected
Lordswouldinfringethe
prerogativeoftheelected
HouseofCommonsover
taxesandspending.Thetaxcreditcuts,worth£4.4billion
($6.7billion)tothe
exchequer,areclearlya
budgetarymatter.
Conventionsdatingtothelate
17thcenturyorearlier
providethatsuchmatters
shouldbedecidedbythe
lowerhouse,whichhasvoted
forthecutsnofewerthan
threetimes.LordButler,a
formercabinetsecretary,
firmlysupportedthisline.
Yetmanypeersdisagreed.
Theypointedoutthata
statutoryinstrumentlinkedto
awelfareactwasnota
moneyorfinancebill,and
thusnotcoveredbythe1911
ParliamentActthatstopsthe
Lordsrejectingsuchbills.
Theysaidthegovernment
couldhaveputthechangesin
afinancebill,buthadchosen
thesneakyrouteofastatutory
instrumentpreciselytoavoid
debateandamendment.And
theyclaimedtheLordshad
everyrighttoinvitethe
governmenttothinkagain,
especiallywhenmanyofits
ownbackbenchMPshad
doubts.MrOsborneisindeed
thinkingagain.
Talkofaconstitutionalcrisis
akintothatof1909-11thus
seemsoverblown.Yetthe
challengetotheelected
government’spowersisstill
serious.DavidCameronisin
theuniquepositionforaTory
primeministerofnot
commandingamajorityinthe
HouseofLords.The
ConstitutionUnitat
UniversityCollegeLondon
saysthat,sinceMay,the
governmenthasbeen
defeated19timesintheupper
house.Itisnosurprisethatit
shouldnowbethreateningto
floodtheLordswithmore
Torypeersorcliptheirwings
insomeotherway.
MrCameronhasresponded
tothelatestdefeatsbysetting
upareviewoftheHouseof
Lordstostopitblocking
budgetarymatters.Yet
Britain’shistoryislittered
withlong,painfulandmostly
failedattemptstoreformthe
upperhouse.Thereasonwhy
theTorieshavelosttheir
previousmajorityisthata
1999reformthrewoutmost
(butnotall)hereditarypeers.
Butthatreformkeptthe
upperhouseasaverylarge
yetstillunelectedbody.
In2011MrCameron’s
coalitiongovernmenttriedto
bringinamostlyelected
HouseofLords.Butthat
measurefailedin2012aftera
rebellionbyConservative
backbenchers.Thisyear’s
Torymanifestodeclaredthat
reformoftheupperhouse
was“notapriority”.Yetthe
government’srepeated
defeatsthere,culminatingin
thelatest,constitutionally
questionable,rejectionofits
tax-creditcuts,haveputthe
issueofLordsreformfirmly
backontheagenda.Thenice
ironyinMrCameron’s
positionisthatheshould
havechosentoleadhis
reviewoftheHouseofLords
anunelectedhereditarypeer,
LordStrathclyde.
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Electoralreform
Castout
Anupdateoftheelectoral
registercouldmiss2m
votersoff.Whobenefits?
Oct31st2015|Fromtheprint
edition
AMIDthekerfuffleoverthe
rejectionoftax-creditreform
bytheHouseofLords,
anotherstatutoryinstrument
slippedthroughthechamber
onOctober27th,byjust11
votes.Themotionwasa
seeminglyhumdrumbitof
administration,swappingthe
responsibilityforsigningup
tovotefromhouseholdsto
individuals.Westminster’s
unelectedmembersmayhave
beenpickingtheirbattles.But
timingisimportant,andsome
nowfearthatdamageto
Britain’sdemocracymaybe
onthehorizon.
AccordingtotheElectoral
ReformSociety,a
campaigningorganisation,the
forthcomingswitchoverwill
bethebiggestchangein
electoralregistrationsince
womengotthevote,and
generallyagoodthing.
Today’ssystemisarelicofa
timewhendemocracyapplied
onlytopropertyowners,can
sometimesbepronetovoter
fraud,andoccasionallyputs
peopleontheballottwice.
Almosteveryoneagreesthat
itistimeforachange.
Thetroublecomesingetting
there.Althoughthe
governmenthasalreadyused
paperrecordstomoveabout
90%ofpeoplefromone
systemtotheother,officials
mustharasseveryoneelseto
re-register.InJunethe
ElectoralCommission,the
officialelectionwatchdog,
announcedthatsome1.9m
peoplehadfallenthroughthe
cracks.Theyaremadeup
mostlyofstudents(untillast
yearuniversitiescouldblockregisterstudenthalls),people
inbigcities,andthosewho
movefrequentlyorlivemany
toahouse.Inotherwords,
theytendtobeLabourvoters.
InHackney,aninner-London
borough,23%ofvoterswere
lostaroundthetimeofthe
2015generalelection,
comparedwithanaverageof
3.5%insouth-eastEngland.
Thechangeoverwasdueto
happeninDecember2016:
timeenoughforLabourto
bombarditselectoratewith
letters,e-mailsand
unexpectedvisits.Butthe
Conservativegovernmenthas
decidedtobringtheplan
forwardbyayear—theold
listwillnowbewipedthis
December—inthekindof
rushedjob,theElectoral
ReformSocietyhaswarned,
thatcouldbe“hugely
damagingtoourdemocracy”.
TheElectoralCommission,
unusually,expressedits
“disappointment”atthe
decision.
Labourisfurious.Unlessthe
missing1.9msignup
sharpishitcouldfacea
disadvantageinseveral
importantelectionsdueto
takeplacenextyear:thoseof
London’smayor,theScottish
ParliamentandtheWelsh
NationalAssembly,aswellas
variouselectionsoflocal
policecommissioners.Andif
thelostvotersnevergetthe
memo,itwillalsohamperthe
partyinelectionstocome.
Labourhasanotherworry:a
forthcomingconstituencyboundaryreview.Aspartofa
changethatwillseethe
numberofMPsreducedfrom
650to600,constituency
mapsareduetoberedrawnin
ordertomakethemfairer(at
themomenttheyarethought
toadvantageLabour,though
thereissomedebateabout
this).Butthechangewillbe
basedonasnapshotofthe
votingregisterinDecember,
aftertheoldelectoralrollhas
beenbinned.Thenew
boundarieswillleaveout
thosewhohavefailedtosign
upbythatpoint,leavingthem
under-representedin
Parliament.
ItwillbehardfortheTories
towriggleoutofaccusations
thatthemoveisrather
ruthless.JohnPenrose,the
ministerforconstitutional
reform,hasarguedthatitis
importanttoeliminatefraud
beforeboundarylinesare
redrawn.Yetresearchbythe
ElectoralCommissionhas
foundthatfraudtendstobe
limitedandlocalised,andthat
itisrootedoutfairlysmartly.
Astudyofpollingstationsby
theUniversityofEastAnglia
foundthatonlyaround1%of
pollworkershadconcerns
aboutvoterfraud,butthat
two-thirdsofpollingstations
hadturnedawayatleastone
voterwhowasnotregistered.
Inotherwords,missingreal
votersoffthelistseemstobe
abiggerproblemthanbogus
onesslippingontoit.
Therushed-throughchanges
willwintheToriesfewfans,
butthenextgeneralelection
isstillfiveyearsaway,and
thosewhoareangriestabout
thechangesmayfindthey
cannotexpresstheir
frustrationattheballotbox.
Labourmustfinditsmissing
votersbeforeitistoolate.
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Freespeechatuniversity
Intoleranceof
intolerance
Studentsareeverquickerto
labeloffensivematerialas
hatespeech
Oct31st2015|Fromtheprint
edition
Greerongender:notso
germane
“JUSTbecauseyoulopoff
yourdickandthenweara
dressdoesn’tmakeyoua
fuckingwoman,”believes
GermaineGreer,an
Australian-bornfeministand
controversialist.Herviewson
transsexualshavepersuaded
morethan2,800peopleto
signapetitioncallingforher
tobebannedfromgivinga
talk(onadifferentsubject)at
CardiffUniversitynext
month.OnOctober26thMs
Greerindicatedthatshe
wouldcancelherappearance
ratherthanbe“screamedat
andhavethingsthrownat
me”.
Ithasbeenabusytermfor
studentcensors.Oxford’s
studentunionbannedNo
Offence,amagazinefeaturing
storiesdefendingcolonialism
andothercontroversies,from
beingdistributedatits
freshers’fair.Manchester’s
unionbannedtwojournalists
fromtakingpartinadebate
onfreespeechbecauseof
theirown“transphobic”
views.AndtheCambridge
Union,adebatingsociety,
heldamembers’referendum
(successful,intheend)onits
planstoallowJulianAssange
ofthewhistle-blowing
WikiLeakssitetospeakvia
videolink.
Suchchallengestodebateare
nowcommon.Afree-speech
indexcompiledinFebruary
bySpiked,anonline
magazine,foundthat135
bansofvarioussortshadbeen
imposedwithinuniversity
campusesintheprevious
threeyears:onsongswith
offensivelyrics;newspapers
thatprinttoplessphotoson
pagethree;andspeakers
whoseviewsoneverything
fromabortiontoZionism
wereconsideredbeyondthe
pale.
Themostzealouscensorsare
nottheuniversityauthorities
butstudentsthemselves.
Manyunionsnowoperate
“safespace”policies,
importedfromAmerican
universities,whichaimto
createenvironmentsinwhich
nostudentfeelsthreatenedby
ideasdeemedharmful.The
mereactofinvitingMr
Assange,whoisaccusedof
rapeinSweden,toappearvia
videohastakena“visceral,
physicaltoll”onvictimsof
sexualviolencein
Cambridge,saysCharlotte
Chorley,thestudentunion’s
women’sofficer.
Otherssaythecomplainants
aremerelyoffended,not
harmed.“Offenceisanatural
partofaliberalsociety,”
arguesEdgarHäner,an
organiseroftheManchester
eventthatwasshutdown.
“Sayingthatfresherscan’t
handle[our]materialis
patronising,”saysLulie
Tanett,aco-editorofNo
Offence.
Thegovernmentiscurbing
speechonanotherfront.New
rulescameintoeffectin
Septemberrequiring
universitiesthathostspeakers
“withextremistviewslinked
toterroristgroups”toensure
thattheyarechallengedby
others.If“inanydoubtthat
theriskcannotbefully
mitigated[universities]
shouldexercisecautionand
notallowtheeventto
proceed,”officialguidelines
say.Theoriginalbill,watered
downintheHouseofLords,
hadproposedthatuniversities
banallspeakerswith
extremistviews,onpainof
contempt-of-courtcharges.
TheNationalUnionof
Students,perhaps
surprisingly,isdeadagainst
thecrackdown.
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Scottishjustice
Ahealthierbrandof
porridge
Scotland’sprisonsare
becomingmoreprogressive
thanEnglishorWelshones
Oct31st2015|Fromtheprint
edition
INJULYMichaelGove
outlinedaplanforprisonsin
EnglandandWales:they
wouldgetmoreprogressive.
Educationwouldflourish,
governorswouldbegiven
morecontrol,andshining
newjailswouldbebuilt,
displacingcrumbling
Victorianconfections,with
their“darkcorners”and
attendantdarkdeeds.A
welcomeaim,butalsorather
costlyandcomplicated.
Instead,thejusticeminister
mightlooktoScotland’s
prisonservicewhich,despite
itshotch-potchofoldand
newinstitutions,andlimited
spending,hasbeengetting
quietlymoreprogressivefor
years.
Scotlandismorereluctantto
lockupminoroffendersthan
therestofBritain.Itdoesnot
jailpeoplefordefaultingon
fineslessthan£500($765);
EnglandandWalesstillput
peoplebehindbarsforfailing
topayfinesoverunpaid
televisionlicences.And
whereasScottishcourtsused
tohandoutalotofshort
sentences,inrecentyears
theyhaveusedthemless;in
SeptemberScottishministers
proposeddoingawaywith
shortsentencesaltogether.
Thisissensible:inEngland
andWalesaroundthree-fifths
ofthosewhohavebeeninjail
forlessthan12months
reoffendwithinayearoftheir
release.
Instead,Scotsoftenserve
theirtimepaintingwallsor
shovellingleavesinthe
community,asentencethatis
reckonedtoleadtolower
reoffendingratesthanjail.In
2009-13,asthenumberof
peoplesentencedto
communityworkfellbyone-
fifthinEngland,itincreased
byaboutone-tenthin
Scotland.RichardGarsideof
theCentreforCrimeand
JusticeStudies,athink-tank,
pointsoutthatwhereas
Englishprobationisrunby
theprisonservice,Scotland’s
isunderthecontrolofsocial
workers.Thisdemonstrates,
hesays,Scotland’s“more
holistic”approachto
criminals.
Scotlandisalsoalighter
touchwiththelight-fingered
young.Since2008the
numberofjuvenilesin
Scottishjailshasalmost
halved:anentirebuildingat
Polmontyoungoffenders’
institutionstandsempty.
Womenarealsogettingsofter
treatment.Whereasa
damningreportin2007on
thetreatmentofBritish
femaleprisonerswaslargely
ignoredinEnglandand
Wales,Scotlandseemstobe
followingits
recommendations.Itis
closingitslargewomen’s
prison,CorntonVale,and
willreplaceitwithanumber
ofsmaller,more
rehabilitationfocused
institutions,spreadaroundthe
countrysothatinmatescan
beclosertotheirfamilies.
Allthismayexplainwhythe
Scottishsystem’sresultshave
beenimprovingfasterthan
thoseofHerMajesty’sPrison
Service,itsEnglishand
Welshequivalent.In2004-13
therateofrecidivismfellby
4.1percentagepointsin
Scotland,comparedwith0.9
percentagepointsinEngland
andWales;forjuvenilesit
fellby7.6percentagepoints
inScotlandandroseby3.8
percentagepointsinEngland
andWales.Anddespitethe
stereotypes(“Glaswegian”
beingpracticallyasynonym
for“violent”,asfarasmany
Englishpeopleare
concerned)Scottishprisoners
seemtobegettinggentler.In
EnglishandWelshprisons
seriousassaultsrecently
spikedtotheirhighestlevelin
tenyears;inScotlandthey
havebroadlybeenfalling
since2004.
Scotland’sprogressive
policiesarenottheresultofa
sweepingGovianvision,but
havegraduallycomeabout
throughthenudgesof
Scotland’scompetingleftwingparties(eachofwhich
nowtakesfullcreditfor
them).Yettheyaresimple,
cheapandseemtobe
working.Thejusticeminister
shouldtakeheed.
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Small-businesslending
Whereit’sdue
Britain’ssmallfirmsare
notascredit-starvedasthey
mayseem
Oct31st2015|Fromtheprint
edition
INTHEdepthsofthe
financialcrisis,barelyaweek
wentbywithoutsome
politicianbemoaningthelack
oflendingtosmalland
medium-sizedenterprises.As
risk-aversebankscutthe
amountofcredittheyissued,
SMEsstruggledtofind
moneytoinvest,thus
constrainingtheir
productivitygrowth.Inturn,
thisdraggeddownwages
acrossthecountry:firmswith
fewerthan250workers
accountfor60%ofprivatesectoremploymentinBritain.
Sevenyearsonfromthe
crisis,atfirstglancethings
seemtobeevenworse.Data
releasedonOctober29th
revealedthattheoutstanding
stockofsmall-businessloans
inSeptemberwas20%lower
inreal(ie,inflation-adjusted)
termsthanitwasfouryears
earlier,whentheBankof
England’srecordsonsmallbusinesslendingbegin(see
chart).Thestockof
overdraftstoSMEshasfallen
evenmorerapidly,though
overdraftsmakeuponlyonetenthofthefirms’total
financing.
Butdigdeeperandthe
situationdoesnotlookquite
sobad.Thedeclineinthe
loanstockinrecentyearsis
largelybecausefirmshave
beenrepayingloansfaster
thannewonesareissued.
NewlendingtoSMEshas
beenrising:inSeptemberit
was60%higherthanitwasat
itsnadirthreeyearsbefore.
Mutedduringthecrisis,
demandforcredithasbeen
increasinginrecentmonths,
accordingtothelatestBank
ofEnglandsurveys.Thatmay
bedowntodecenteconomic
growth—lastyearBritain’s
economygrewfasterthan
thatofanyothermemberof
theG7—whichmakes
businesspeoplemore
optimisticaboutthefuture
andthusmorewillingto
invest.
Risingloanrepayments
suggestthatSMEsarenot
strugglingtoobtainfinance.
Firmsthatrepaydebtearly
arelikelytohaveamplespare
cash,whichimpliesthattheir
saleshavebeenbetterthan
expected.Suchfirmsarealso
unlikelytofeelcreditconstrained,arguesAlan
ClarkeofScotiabank.
Businesspeoplehappyto
repayaloanearlyprobably
feelconfidentabouttheir
chancesofgettinganewone
iftheneedarises,hesays.
Indeed,surveysfromthe
BankofEngland,which
madeforunpleasantreadinga
fewyearsago,nowshowthat
SMEsrarelystruggletoget
creditiftheywantit.
Whatliesbehindthe
improvementinconditions?
Healthierbankscertainly
help.Sodoesthe“fundingfor-lending”scheme(FLS),
whichwaslaunchedbythe
TreasuryandtheBankof
Englandin2012.TheFLS
offerscheapmoneyto
participatingbanksifthey
boostcredittothe“real
economy”—thatis,firms
devotedtomakinganddoing
tangiblestuff,asopposedto
fancyfinance.Lastyearthey
weregivenextraincentivesto
lendtoSMEsatlowrates.
Theschemeisnowpaying
off,saysSamuelTombsof
PantheonMacroeconomics,a
consultancy.Followingthe
introductionofthenew
incentivestolendtosmall
firms,theaverageinterest
rateonsmall-businessloans
hasfallenrapidly.
TheBankofEnglandfigures
donottellthewholestory.
Afteraharrowingexperience
duringthecrisis,manysmallbusinessownerswanttobe
shotoftheirbank.Instead
theyareraisingcashin
unusualplaces.Withreal
housepriceshavingincreased
by12%since2012,
remortgagingahomecanbe
onegoodsourceofcredit,
pointsoutNealHudsonof
Savills,anestateagent.
SomeSMEsarealsoturning
totherapidlygrowing
alternative-financemarket,
whichincludesthingslike
peer-to-peerlending
(platformswhichmatch
borrowersandlenders
directly,viatheinternet).The
Britishalternative-finance
marketisprobablyworth
about£4billion($6billion),
accordingtoareportby
NESTA,acharity,anda
researcheratCambridge
University.EastLondon,
whichisstuffedwithwhizzy
tech-firmsthatusethissortof
unconventionalfinancing,has
seenthebiggestdropinSME
creditofanyareainBritain
since2013.
Allthismeansthatsmall
firms’financingneedsarenot
asbadasheadlinedata
suggest.Butthingscould
change.TheFLSisdueto
expireinJanuary;smallfirms
hopethatGeorgeOsborne,
thechancellorofthe
exchequer,willextendit(as
hehasdonetwicebefore)as
partoftheautumnstatement,
anannualmini-budget,which
hewilldeliveronNovember
25th.Thirdtime,though,may
notbelucky:somebelieve
thattheFLSisforthechop.
Inaddition,theBankof
Englandislikelytoincrease
interestratesnextyear,even
thoughGDPgrowthinthe
thirdquarterfellto0.5%.All
thiscouldhitlendingtosmall
firms,justasitwasgetting
going.
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Mining
Anindustryexhumed
Britain’sfirstnewminein
nearlyhalfacenturymakes
abigbetontungsten
Oct31st2015|Fromtheprint
edition
Fromsunsettosunrise
MOSTofBritain’smining
industrywasburiedlongago.
YetonSeptember17tha
smallpartofitwas
disinterredwhenthe
Drakelandspit,nearthe
sleepyDevonvillageof
Hemerdon,becamethefirst
newminetoopensince1969.
Tungstenwasdiscoveredon
thesitein1867,butuntilthis
yearnoextractionhadtaken
placetheresince1944,apart
fromanabortivepilotscheme
thatraninthe1980s.
AnAustraliancompany,
WolfMinerals,hasinvested
around£140m($215m)inthe
sitesinceobtaininga40-year
leasein2007.Ithopesto
extract3,500-5,000tonnesof
tungsteneveryyear,which
wouldmakeDrakelandsone
oftheworld’sfivebiggest
producersofthemetal;the
minewillalsoyieldaround
350tonnesoftinayear.The
siteisbelievedtocontain
enoughmetalfor20yearsof
mining.
Thepriceoftungsten,which
ismostcommonlyusedin
industrialmachinery,doubled
atthebeginningofthedecade
buthastumbledbackagainin
thepastthreeyears.Wolf
MineralssellsitsDevon
tungsteninconcentrateform
for$14,500pertonne;it
expectsitsaveragecostwill
beabout$12,500pertonne
oncetheminehasbeen
runningforafewyears.
RussellClark,thefirm’s
managingdirector,believes
thattungstenpriceswill
rebound,inpartbecause
minesinChinaandAmerica
arerunninglow.Ifthatdoes
happen,“we’llbeinthe
absoluteboxseat,”hesays.
TheauthoritiesinDevon,
wherewagesare13%below
thenationalaverage,areglad
toseetheopeningofthe
mine,whichemploys200
people.Originallyithad
permissiontooperateforonly
five-and-a-halfdaysaweek,
butthecountycouncilhas
recentlyagreedtoletthepit
runeverydayaspartofasixmonthtrial.
Someinnext-doorCornwall
aredrawinginspirationfrom
thereopeningofthe
Drakelandssite.George
Eustice,theMPfor
CamborneandRedruth,a
formermininghubwhosepits
haveallbeenshutsince1998,
believesthereis“areal
prospectthattinminingcould
return”.Tin’spricesurgedat
theturnofthecenturybuthas
beenfallingforthepastfive
years.CelesteMiningCorp,a
Canadianfirm,haswrittenoff
itsinvestmentinSouthCrofty
Mine,inwestCornwall.But
MarineMinerals,aCornish
firm,hasdrawnupplansto
beginatin-extractionproject
inHayleHarbour,onthe
county’snorthcoast,in2018.
MikeProudfoot,Marine
Minerals’chiefexecutive,
expectstinpricestobounce
backinthecomingyears;he
anticipatesthatothermines
willopenacrossCornwall
beforetheendofthedecade.
MrClarktalksof“the
beginningofarevival”in
miningintheregion.Thetin
andtungstenfeverisindeed
infectious—butinternational
priceswillhavetorisebefore
manymoreofthesouthwest’sdesolateminescan
turnfrompicturesqueto
profitable.
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Bagehot
Thespectreofpast
glories
HowBritainturnedthe
ruinsofitsempireintoa
mightyentertainment
imperium
Oct31st2015|Fromtheprint
edition
WASeveracinematichero
lessofhistimethanJames
Bondistoday?“Spectre”,the
24thfilmintheseries,exudes
nostalgiaforwhenmenwere
men,Britainwasa
superpowerandpolitical
correctnesshadsomethingto
dowithErskineMay’s
treatiseonparliamentary
procedure.Itisterrificfun:a
giant,boozy,explosion-filled
convulsionofinsecurityon
behalfofthecountrythat,as
DeanAchesonputit,“has
lostanempireandhasnotyet
foundarole”.Britainmaybe
adiminishedpower,but
DanielCraig’ssnarlingspy
hastheworldviewofasnugbarreactionaryandthemoral
credoofanalcoholicsex
tourist:JamesBondasthe
geopoliticalequivalentofa
Napoleoncomplex.
Themoviewillmakestinking
quantitiesofmoney.For
althoughthesunsetlongago
ontheBritishEmpire,that
power’srain-soddenrump
hasinrecentdecadesfounda
newsourceofclout:itstirs
theglobalimaginationlike
fewothernations.“Skyfall”,
thepreviousBondfilm,broke
box-officerecordsandtook
over$1billion
internationally.“TheLordof
theRings”istheworld’s
second-bestsellingnovel
(pippedby“ATaleofTwo
Cities”).Britishmusicians
havetoppedglobalchartsfor
sixofthepastsevenyears.
VisitingAngkorWat,Jim
Carter,whoplaysthebutler
in“DowntonAbbey”,was
mobbedbyChinesefans.
DominicSandbrook,a
historian,recentlypublisheda
studyoftherootsofthispreeminence.In“TheGreat
BritishDreamFactory”he
enumerateseverythingfrom
theroleoftheEnglish
languagetothatoftheBBC
(whichhasnevercarried
commercials,forcingBritish
admentobecomemore
creativethantheirforeign
counterparts).Most
intriguingly,hedetectsa
commonVictorianancestry
tothecountry’spastand
presentmass-entertainment
triumphs.Thankstoitsearly
industrialisation,Britainhas
beenurbanandliteratefor
longerthanmost:ithasan
unusuallydeepwellof
entertainmenttraditions
encompassingPunch
magazine,themusichalland
theseasidepier.Thanksto
thepompandderring-doof
itsimperialzenith,italso
possessesarichstockof
novelistictropesandsettings
—thecountryhouse,theclass
system,theboardingschool,
theself-reliantadventurer—
availabletoitscreativetypes
andrecognisedworldwide.
Theempirelaidthecultural
tracksonwhichAndrew
LloydWebber,J.K.Rowling
andSimonCowellnowrun
theirtrains.
Therearetwowaysof
lookingatthis.Thefirstisto
situatetherootsofBritain’s
entertainmentboomfarinthe
past;intheIndustrial
Revolutionandthe
colonisationofNorth
America,Indiaandpartsof
Africa.YetBagehotspiesa
morerecentturningpoint:
Britonssuccessfullyexport
theirfilms,musicandbooks
totheworldnotthankstothe
empireperse,buttothe
natureofitsdeclineandtheir
subsequentreaction.
Consider,forexample,the
country’shappyrelationship
withitspast.Mostbig
EuropeanandEastAsian
nationswentthrougha
violentchangeoftheir
establishmentinthe20th
century.Americahasits
forward-lookingfrontier
spirit.ButBritainremains
fascinatedbyandinmost
casesuncomplicatedlyfond
ofitsrecenthistoryandold
order.HenceBond,whomMr
Sandbrookdescribesas
“presentinganonlyslightly
modernisedvisionof
Victoriangentlemanly
values”.Hence,too,
traditionalisticonslikeDr
Who(withitsnodstoH.G.
Wells),HarryPotter(“Tom
Brown’sSchooldays”)and
DamienHirst(theVictorian
neo-gothic).
Theexperienceofdeclineis
anotherexplanation.
Deprivedoftheircolonial
marketsandfacingnew
competitors,manyBritish
citiesdevelopedapostindustrial,highunemploymentgrimnessthat
functionedasacultural
Miracle-Gro.Fromtheirrich
soilemergedthelikesof
“BillyElliot”,“TheFull
Monty”,theSmithsand
Oasis;allexamplesofa
struttingdefianceborneofits
circumstances(itishardto
imagineanotherNoel
Gallagheremergingin,say,
Baden-Württemberg)yetalso
utterlymarketable.Moreover,
Britainhasembracedits
culturalachievementsas
substitutesforitsoldimperial
glory:asearlyas1964the
DailyExpressranacartoon
showingtheUnionJack
beinglowered—Maltahad
justbecomeindependent—
whileanadjacentflag,
adornedwiththefacesofthe
Beatles,continuedtofly
proudly.Noindividual
embodiesthisshiftlikeJ.
ArthurRank,whobuiltthe
post-warBritishfilmindustry
outofafearthatAmerica’s
burgeoningcinematicexports
wouldaddtohiscountry’s
humiliation.
Ifproud,Britonsarealso
pragmatic.Here,too,Rank
standsformany.In1943he
wrote:“Itisallverywellto
talkofbeingabletomake
goodpicturesherewithout
botheringaboutAmericanor
worldmarkets,butinall
honestythecontinued
existenceofBritishfilm
productiondependson
overseastrade.”Britain’s
post-warentertainers—
generationsofJamesBond
starsamongthem—have
willinglytailoredtheiroutput
toaworldaudience.Mr
Sandbrookcitesthenovelist
ColinMacInnesgrumbling
aboutpopstars“speaking
Americanattherecording
sessionandEnglishinthe
pubroundthecorner
afterwards”andnotesthatthe
BeatlesandRollingStones
thrivedbywritingforan
internationalmarket(unlike
theKinks,whodronedon
aboutSouthend).Thelikesof
OneDirectionandAdele
perpetuatethisuniversalist
tradition,absorbing
influencesfromandsellingto
othercountries.
Britain’squantumofsolace
Hereinliesalessonfor
policymakers.Withits
debatesonEurope,nuclear
deterrence,immigrationand
relationswithChina,Britain
isgoingthroughapostimperialidentitycrisis.Often
thisisportrayedasachoice
betweenbeingaprim
Europeannation,amuscular
geopoliticalpivot,amercurial
tradingpostorthe51ststate
ofAmerica.YetBritain’s
culturalsuccessilluminates
analternativetobeinga
biggerNetherlands,aricher
Turkey,acolderSingaporeor
aPuertoRicoonsteroids.It
suggeststhecountrycan
forgeanewrole:postimperialnotjustbychance
butbychoice;acurious
hybridofpowerand
deference,protectionismand
internationalism,selfconfidenceandcuriosity.
Britainhaslostitsempire.
Butitsquestforarolemay
justprovearoleinitself.
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International
Thefutureof
nuclearenergy:
Half-death
[Thu,29Oct
18:57]
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Thefutureofnuclearenergy
Half-death
Nuclearpoweremitsno
greenhousegases,yetitis
strugglingintherichworld
Oct31st2015|Fromtheprint
edition
PENNSYLVANIAhas
playedabigroleinthe
historyofAmericanenergy.
Coalhasbeenminedthere
sincethe1760s(Pennsylvania
issometimescalled“thecoal
state”).In1859EdwinDrake
drilledaricketywellthatset
offAmerica’sfirstoilrush.
Morerecentlyithasproduced
morenaturalgasthanany
otherstateexceptTexas,
thankstothevastMarcellus
shalethatrunsbeneathit.
Andthoughitbarely
advertisesthefact,
Pennsylvaniaisalso
America’ssecond-largest
providerofnuclearenergy—
despitethenear-disasterat
ThreeMileIsland,anuclear
plantthatsufferedapartial
meltdownofoneofits
reactorsin1979(pictured,
right),killingnoonebut
scaringmillions.
TodayPennsylvaniaisagain
atthecentreofashiftinthe
energyindustryandThree
MileIslandiscaughtupinit.
Anabundanceofnaturalgas
pipedoutoftheMarcellus
shaleinrecentyearshas
helpedpushpowerprices
downsosharplythatnuclear
energyhasstruggledto
competeinsomepartsof
America.ThreeMileIsland’s
remainingreactor,UnitOne,
isoneofmanyfightingto
survive—butthistimeits
troublesareaboutcosts,not
safety.
InAmericaandEurope
slumpingcommodityprices
areaddingtotheburdenon
nuclearpowerthatwas
alreadygrowingafterthe
2011FukushimaDai-ichi
nucleardisasterinJapan.
America’sshalerevolution,
Europe’sgrowingsupplyof
subsidisedrenewableenergy
andsluggishelectricity
demandinbothmarketshave
sharplycutwholesalepower
prices.
Thatmakesitharderfor
manynuclearplantstocover
theirrunningcosts,leading
theirownerstoshutthem
down.Perversely,atatime
whencountriesaroundthe
worldarepledgingtocut
carbonemissions,such
closuresoftenleadtothe
burningofmorefossilfuels.
Addingrenewable-energy
capacitydoesnotsolvethe
problem:whenthewind
doesn’tblowandthesun
doesn’tshine,nuclearenergy
stillprovidesthebestlowcarbonsourceofreliable
“baseload”electricity.
Itisnotallgloominthe
nuclearindustry.Chinaplans
almosttotripleitsnuclear
generatingcapacityby2020,
andotheremergingmarkets
arealsobuildingnewplants.
ButsinceFukushima,allbut
twoofJapan’s43reactors
havebeensuspended,
Germanyisphasingout
nuclearpowerandFrance
intendstoscaleitback.
MycleSchneider,co-author
oftheWorldNuclear
IndustryStatusReport,says
thataglobaltotalof394
nuclear-powerplantsare
operating,downfrom431in
thepre-Fukushimayearof
2010(seechart1).
Moreclosuresarecoming,
particularlyofoldersinglereactorplantsthatneedlotsof
workerseventhoughthey
generateonlymodest
amountsofpower.In
Americathemostvulnerable
plantsareinderegulated
marketssuchastheNortheast
andMidwest,wherenuclearpowerprovidersmust
competetoprovidethe
cheapestelectricityagainst
rivalsthatuseotherfuels.
Thoseinmoreregulated
southernmarkets,suchas
Georgia,farebetterbecause
electricitypricesare
guaranteedtocovertheir
costs.Withsuchan
assurance,onOctober22nd
theWattsBarplantin
Tennesseebecamethefirst
newnuclearfacilitytobe
licensedinAmericain20
years.(Similarly,theoperator
ofBritain’sproposedHinkley
PointCnuclearplantwillsell
electricityathighfixed
prices.)
Wheremarketsarefreer,itis
harderfornuclear-power
operatorstomakemoney,and
tooriskyforthemtobuild
plantsfromscratch.Exelon,
basedinChicagoandthe
largestoperatorofnuclear
plantsinAmerica,saysthat
fiveofits14plantsare
vulnerablebecauseof
economicfactors,including
ThreeMileIsland’sUnitOne,
whichitowns.“It’sironic.
Peopleaskwhywestill
operateareactorthere.Butif
gaspriceswerenot[solow],
itwouldbemakingmoney,”
saysDavidBrownofExelon.
OnOctober13thEntergy,
Exelon’srival,whichisbased
inNewOrleans,saiditwould
closeitsPilgrimnuclearplant
inMassachusetts,partly
becauseitscosts,atabout$50
amegawatt-hour(MWh),are
higherthanelectricityprices
inthestate,whichhavefallen
toabout$45/MWh.AsThe
Economistwenttopress,it
wasduetodecidewhetherto
closeathird,Fitzpatrick,in
NewYorkState.In
Decemberitclosedonein
Vermont,thefourth
Americannuclearplantto
shutinthepasttwoyears.
TheNuclearEnergyInstitute,
anindustrybody,saysthat
lastyeargeneratingelectricity
fromanuclearplantin
Americacostonaverage2.40
centsperkilowatt-hour
($24/MWh).Thatisstill
cheaperthangas-orcoalfiredpower(seechart2),but
thenuclearaveragedisguises
widevariations.Theleast
efficientnuclearplantshave
higheroperatingcostsper
unitofelectricitythaneither
coalorgas.Sincethemain
costofnuclearpoweris
buildingthereactorinthe
firstplace,thenarrowinggap
inoperatingcostsisominous
fortheindustry.And
Americangaspricesarestill
plunging.
InEurope,wherethe
generationandsupplyare
mostlyderegulated,pricesof
coalandnaturalgashavealso
comedown,loweringthecost
ofelectricity.RolandVetter
ofCFPartners,afinancialresearchfirm,saysthatin
Germanyandpartsofthe
Nordicregion,anincreasein
renewablesgeneration(see
chart3)hasalsopusheddown
wholesaleprices.Supported
bysubsidies,windandsolar
plantsearnmoremoneythan
nuclearonesfromgenerating
powerwhenpricesarelow.
Asaresult,Sweden’snuclear
industryisinparticular
trouble.Onthebanksofa
forestedNorthSeainlet,the
Ringhalsnuclearplanthas
beenpartofthesceneryinthe
westerntownofVarberg
since1969.Asifina
promotionalfilmforthe
industry,localsboatandfish
insightoftheplant’sfour
reactors,whilevisitorstothe
plant’sinformationcentre
enjoyitscollectionofkitsch
publicart.Itisoneofthe
biggestemployersinthearea,
with1,600membersofstaff.
YetVattenfall,thestateownedutilitythatownsmost
ofitsshares,saidonOctober
15ththatitwouldretireits
twooldestreactorsin2019
and2020.Inthesameweek
E.ON,aGermanutility,said
itwouldshuttheoldesttwo
unitsoftheOskershamnplant
onSweden’sBalticSea.
MrVettersaysthatelectricity
pricesinSwedenhave
sometimesfallenbelow
nuclearoperatingcosts.In
addition,aleftistgovernment,
includinganti-nuclear
Greens,hasimposed
additionaltaxesonnuclearpowerplants.“Theyarebeing
squeezedbetweenrevenues
goingdownandcostsgoing
up,”saysMrVetter.
Theclosuresonbothsidesof
theAtlanticrepresentablow
toanindustrythatforyears
talkedabouttheprospectofa
“nuclearrenaissance”based
onthemeritsoflargescale,
low-carbonenergy.They
showhowWestern
governmentshavewaffledin
theirsupportforthe
technology,optingto
subsidiserenewablesrather
thanputtingarealpriceon
carbonemissionsthatwould
moreheavilypenalisedirtier
fuels,suchascoalandgas,
andtherebypromotenuclear
energy.Theclosuresalso
highlighthowgreenNGOs,
manyofwhichwerecreated
toopposebothmilitaryand
civilianuseofatomicenergy,
haveinfluencedthedebateon
nuclearpower.Manygreens
stillseeitasanevilakinto
globalwarming.
Theirbiggestsuccesshas
beeninGermany,already
busywithazealoustransition
torenewableenergythatit
callstheEnergiewende.Four
yearsagoGermany
announcedthatitwouldclose
all17ofitsnuclearplantsby
2022;ithasalreadyshutnine.
France,longEurope’snuclear
champion,passedabillin
Julymandatingthattheshare
ofnuclearpowerinthe
country’selectricitymixbe
cutfrom75%to50%within
tenyears.Bothcountries
promisethatthenuclear
shortfallwillbemadeupwith
renewablesources,mainly
windandsolar.
Yetwhennuclearplants
close,thatpromiseisnot
necessarilykept.Germany’s
nuclearplantsonceproduced
over20%ofitspower.Asit
hasbeguntoshutthem,the
proportionofelectricity
producedbycoal-firedplants
hasincreased,whichhas
pushedupcarbonemissions.
Sweden’sgovernmentclaims
thatnuclearplants,which
provide50%ofthecountry’s
baseloadelectricity,will
quicklybereplacedwith
renewableenergy,mostly
fromwindfarms(more
hydroelectricdamsareoutof
thequestion).ButYvonne
Fredriksson,aformer
director-generalofthe
SwedishEnergyMarkets
Inspectorate,dismissesthatas
a“naive1980sidea”.
INTERACTIVEMAP:Our
guidetotheworld’snuclearpowerproducers
InAmerica,too,thequestion
ofhowtoreplacelostnuclear
capacityiscausingalarm.
Gridoperatorsworrythat
theirdependenceonnaturalgas-firedelectricitycould
leadtopowercutsandwildly
fluctuatingpeakprices,
especiallyduringfreak
weatherconditions,because
oftheshortageofstorageand
pipelines.Onthecoldestday
ofa“polarvortex”stormthat
lashedtheeasternUnited
Statesin2014,PennsylvaniabasedPJM,America’slargest
gridoperator,founditself
22%shortofgenerating
capacity.Toavoidthis
happeningagain,some
operators,suchasPJM,have
thrownthenuclearindustrya
lifelinebypayingaquasiinsurancepolicytoproviders
whocanguaranteesupplyat
peaktimes.Exelonsaidthat
theselargeadvancepayments
haveenabledittodefer
decisionsontheclosureof
twoofitsnuclearplantsin
Illinois.
Cheeredbythese“capacity
auctions”,theindustryhopes
thatBarackObama’sClean
PowerPlan,launchedthis
summertoreduceAmerica’s
carbonemissions,willbolster
recognitionofthevalueof
nuclearpower.Infact,the
nuclearindustryisunlikelyto
benefitmuch.TheNuclear
EnergyInstitute,alobby
group,complainsthatthe
plandoesnotgivecreditto
nuclear-powercompaniesthat
gothroughthecostlyprocess
ofrenewingtheirlicences,
allowingthemtoextendtheir
operationsbeyondthe40
yearsoriginallyallottedto
them.
AreportbyThirdWay,a
climateNGO,estimatedthat
evenifallthe100orso
reactorsinAmericawere
grantedextensionsto60
years(morethan70ofthem
havealreadybeenapproved),
emissionswouldgoup
becausegrowthinelectricity
demandwouldspurmoreuse
ofnaturalgas.“IfAmerica’s
nuclearplantsbeginretiring
indroves,achievingthe
CleanPowerPlanemissions
reductionscouldbe
impossible,”itsaid.
Theloomingclosuresbringa
furtherheadache:the
uncertaintyover
decommissioningoldplants.
Nuclear-powercompaniesset
asidelargesumsforthis,but
thechallengeiscomplicated
bythefactthatneither
AmericanormostEuropean
countrieshavefound
adequatesitesfor
permanentlystoringnuclear
waste.Uncertaintieslikethis
addtotheprohibitivecostof
buildingnewnuclear-power
plants.Theyalsohighlight
whygovernmentsshould
shapeenergypoliciestokeep
existingreactorsrunning:
theyprovideareliablesource
oflow-carbonenergy,and
decommissioningthemisas
likelytocreatesafety
problemsasleavingthem
running.
Instead,Western
governmentstendtotiltthe
groundagainstnuclearplants
bysubsidisingthealternatives
orimposingheavytaxes.That
meanstheirnuclearindustries
willcontinuetoebb.More
thanthree-quartersofnuclear
plantsintherichworldare25
yearsoldormore.Inthe
comingyearsthenumberof
themshuttingdownisonly
likelytoaccelerate.
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Specialreport:
Colombia
Colombia:The
promiseofpeace
[Thu,29Oct18:57]
Theroadto
peace:Thistime
isdifferent
[Thu,29Oct
18:57]
Theaftermath:A
nationofvictims
[Thu,29Oct18:57]
Theurban-rural
divide:Ataleof
threecountries
[Thu,
29Oct18:57]
Theeconomyand
business:Timeto
branchout
[Thu,29Oct
18:57]
Thefuture:
Halfwayto
success
[Thu,29Oct18:57]
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Colombia
Thepromiseofpeace
Colombiaisclosetoa
historicpeaceagreement
thatwilltransformits
prospects.Buttorealiseits
fullpotential,itwillneedto
makebigchanges,argues
MichaelReid
Oct31st2015|Fromtheprint
edition
LIKEMUCHELSEinthe
ColombiaofPresidentJuan
ManuelSantos,theceremony
onSeptember23rdstarted
late,byanhourand37
minutes.Butitwasworth
waitingfor.Negotiatorsfrom
thegovernmentandthe
FARCguerrillasunveiledan
agreementonthethorniest
issuetheyhadhadtoresolve:
transitionaljustice,orwhat
sortofpenaltiesthe
perpetratorsofcrimesagainst
humanityinColombia’slong
armedconflictshouldface.
Thisbreakthroughhasopened
thewaytoaswiftconclusion
ofthepeacetalksinCuba
thatbeganthreeyearsago.
Shortlybeforetheceremony
inHavanaMrSantoshadhis
firstofficialmeetingwith
RodrigoLondoño,better
knowntoColombiansas
“Timochenko”,theFARC’s
topcommander(thisreport
willusetheguerrillas’noms
deguerre).Thetwopledged
tosignafinalagreement
withinsixmonths,andthe
FARCundertooktostart
disarmingwithin60days
afterthat.Despitesome
subsequentbickering,these
deadlineslookplausible.
MrSantos(pictured,left)was
visiblyuncomfortablewhen
RaúlCastro,Cuba’s
president,encouragedhimto
shakehandswith
Timochenkoinfrontofthe
cameras.Colombiansseethe
FARCasnarco-terroristswho
bomb,kidnapandextort.Mr
Santosknowsthatmanyof
hiscountrymenwillbe
angeredbyanagreementthat
willallowmostFARC
commanderstoescapegoing
tojail.Buthealsoknowsthat
peacerepresentsahugeprize
forColombia.Andbecause
theFARCwillbeheldto
accountfortheircrimesinthe
country’sowncourts,the
agreementwilloffera
potentialmodelforother
conflict-riddencountries.
Colombia’sarmedconflict
hasbeenremarkablybloody,
complicatedandlongrunning.Accordingtothe
NationalCentreforHistorical
Memory,apublicbodysetup
byMrSantosin2011,
between1958and2012
around220,000peopledied
asaresultoftheclash
betweenguerrillas,right-wing
paramilitarygroupsand
securityforces.Ofthese
about80%werecivilians.
Theconflictalsofacilitateda
surgeincriminalviolence
(seechart).Andviolence,or
thefearofit,dislodgedsome
6mColombiansfromtheir
homes,mainlyinthe
countryside.
Overandabovethesavingin
humanlife,MrSantoshas
saidthatpeace,togetherwith
hisinfrastructureprogramme,
couldaddmorethantwo
percentagepointsayearto
hiscountry’seconomic
growthratefrom2018.In
2014theeconomygrewby
4.6%.Inamorecautious
assessmentlastyear
FranciscoRodríguez,an
economistatBankof
America,puttheboostto
growthatonly0.3percentage
points.Whatevertheprecise
figure,peaceshouldhelp
Colombiarealiseits
considerablepotentialin
manyfields.Sothestakesin
Havanacouldhardlybe
higher.
Thebreakthroughin
Septemberfollowedanearcollapseinthetalksearlierin
theyear.InAprilaFARC
columnbrokeaunilateral
ceasefire,ambushinganarmy
platoon,killing11soldiers
andsettingofftwomonthsof
tit-for-tatattacks.That,and
thelackofprogresswiththe
talks,promptedHumbertode
laCalle,thegovernment’s
chiefnegotiator,towarnthe
FARCinJulythat“oneday
theycouldwellfindthatwe
arenotatthetable.”
Thisservedtoconcentratethe
FARCleaders’minds,butthe
attackunderminedpublic
confidenceinthepresident
andthetalks.Atthestartof
thenegotiationsinOctober
2012thepresidenthadsaid
hehopedforanagreement
“withinmonths”.Ina
nationalpollpublishedin
MayMrSantos’sapproval
ratingfellto29%,and69%
ofrespondentsexpressed
doubtthatthenegotiations
wouldsucceed.
InsomewaysColombians’
pessimismissurprising.
Muchofthecountryhas
alreadybenefitedfroma
steepreductioninviolence
andcrimeinthepast15
years.TheFARC’sunilateral
ceasefire,resumedinJuly—
andmatchedbygovernment
“de-escalation”—hasbrought
downconflict-related
violencetothelowestlevel
since1975,accordingto
CERAC,athink-tankin
Bogotá.
Itdoesnothelpthatthe
economyhasslowedsharply
afteradozenyearswhen
incomesroseby7%annually
indollarterms,thepesohas
depreciatedsteeplyandthe
fallintheoilpricehas
knockedabigholein
governmentrevenues.
Exceptionalviolence
Withalmost50mpeople,
ColombiaisLatinAmerica’s
thirdmostpopulouscountry,
afterBrazilandMexico.In
manywaysitisexceptional.
ItclaimstobeLatin
America’soldestdemocracy,
withjustonefour-year
militarydictatorshipinthe
20thcentury.Geographyput
strongbarriersinthewayof
itsdevelopment:theAndes
splitintothreechainsthere,
withtwolongvalleys
betweenthem;thecountry’s
Pacificcoastisoneofthe
wettestplacesonEarth;tothe
south-east,almosthalfthe
totalareaismadeupofthe
llanos(remotetropical
lowlands)andacornerofthe
Amazonrainforest.Thestate
hasneverbeenabletocontrol
orintegratesuchdifficult
territoryanditspeople
developedadeepmistrustof
stronggovernment.
Areverencefortheruleof
lawwenthandinhandwith
lawlessness,unequalland
ownershipandatraditionof
politicalviolenceand
guerrillawarfare.Fora
centurythispittedLiberal
againstConservative
politiciansuntiltheyagreed
tosharepowerin1956.The
Cubanrevolutionandthe
coldwarbredguerrilla
movementsoftheleft.The
FARCwasfoundedin1964
bytheColombianCommunist
Partyandtheremnantsof
Liberalpeasantguerrillas,to
befollowedayearlaterby
thesmallerNational
LiberationArmy(ELN).
Colombiaisexceptional,too,
foritsavoidanceofpopulism.
Itseliteshavefavoured
responsibleeconomic
policies.Inthe50yearsto
1995theeconomygrewata
steadyaverageofalmost5%
ayear,avoidingtheLatin
Americanillsof
hyperinflationanddebt
default.Anewconstitutionin
1991dismantledpowersharing,deepeneddemocracy
andstrengthenedthecourts.
Althoughseveralsmaller
guerrillaoutfitsmadepeace,
theFARCandtheELNdid
not.Theyhadtakento
organisedcrimesuchasdrug
trafficking,kidnapsand
extortioninthe1980s,and
beleagueredlandownershad
respondedbysponsoring
right-wingparamilitary
vigilantegroups,withthe
complicityofsomearmy
officers.Bythelate1990s
Colombiawasonthevergeof
becomingafailedstate,with
theworld’shighestmurder
rateandtenkidnappingsa
day.Thegovernment’swrit
extendedtoonlyhalfthe
country.TheFARChad
about20,000fightersandthe
ELNanother5,000.They
attackedvillages,engagedin
urbanterrorism,sowed
landminesandrecruitedchild
soldiers.Theirparamilitary
foesmassacredwhole
villagesthoughtto
sympathisewiththe
guerrillas.Theeconomy
plungedintoadeeprecession,
contractingby4.5%in1999.
Severalbanksfailedand
unemploymentclimbedto
over20%.
Indesperation,Colombians
brokewiththeirtraditionsof
self-reliance,anti-militarism
andmoderate,consensual
politics.AndrésPastrana,
whowaspresidentfrom1998
to2002,soughtoutsidehelp.
Aspartofaprojectcalled
PlanColombia,theUnited
Statesprovidedthecountry
with$1.2billionin2000and
thenaroundhalfthatamount
eachyearuntil2006,mainly
inmilitaryaid.Themoney
wasmorethanmatchedbya
bigincreaseinthe
government’sowndefence
spending.In2002
ColombianselectedÁlvaro
Uribe,acattlerancherfrom
Antioquia.Hisfatherhad
beenmurderedbytheFARC.
Anaustere,intensefigure,he
campaignedonaplatformof
“democraticsecurity”.He
increasedthesecurityforces
byhalfandtookthewarto
theFARC,killingseveraltop
commanders.Atthesame
timehepersuadedthe
paramilitariestodemobilise.
MrUribe’sconquestofthe
FARCtransformed
Colombia,reducingthe
guerrillasfromadeadly
threattothestatetoatactical
irritant.Buttherewerestains
onhisrecord.Hisobsessive
insistenceonkillingrebel
fighterspromptedsomearmy
unitstomurderciviliansand
passthemoffascombatants
killedinbattle.SeveralofMr
Uribe’saidesandallieshad
linkstotheparamilitaries,
andhisgovernmentspiedon
seniorjudgesandpolitical
opponents.Hebroughtina
constitutionalchangesohe
couldsecureasecondterm,
buthisattempttoabolish
termslimitsandrunagainin
2010wasstruckdownbythe
ConstitutionalCourt.
MrSantos,whohadbeenMr
Uribe’sdefenceminister,got
hispredecessor’sreluctant
backing,butthetwoquickly
fellout.WhereasMrSantos
iscool,patricianand
managerial,MrUribeis
volatile,aconsummate
politicianwhohasarapport
withordinaryColombians.
LargelybecauseofMr
Uribe’sopposition,Mr
Santosonlynarrowlywona
secondtermlastyear.
Thisspecialreportwill
celebrateColombia’s
transformationoverthepast
15years.Butthejobisonly
halfdone.Toachievelasting
peace,thecountryneedsto
bringsecurity,theruleoflaw
andpublicservicestorural
areas,reformthejustice
systemandrestorepolitical
consensus.Itmustalsoopen
uptheeconomyand
internationaliseadeeply
introvertedcountry.Butfirst
itmustclinchthedealwith
theFARC.
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Theroadtopeace
Thistimeisdifferent
Apeaceprocessthatcould
becomeanexampletothe
world
Oct31st2015|Fromtheprint
edition
Soonthearmymayhave
betterthingstodo
COLOMBIANSHAVEHAD
goodreasontobesceptical
aboutthepeacetalks.The
FARChavenegotiatedwith
governmentsonthree
previousoccasions,andeach
timetheoutcomehasbeena
bitterdisappointment.Inthe
firstattempt,in1984,the
guerrillasdeclaredaceasefire
andlaunchedalegalpolitical
party,theUniónPatriótica
(UP),butitturnedoutthat
theyplannedtousethetruce
tobuildalargearmyand
politicalbase.Intheevent
some1,500UPmembers,
manyoftheminnocent
idealists,weremurderedby
paramilitaries.Thenextsetof
talks,in1991-92,got
nowhere.MrPastranatried
againin1999-2002,butonce
againtheFARCuseda
ceasefiretobuilduptheir
forces.
Evenbeforethebreakthrough
inSeptember,thereweretwo
setsofreasonstobelievethat
thistimewouldbedifferent.
First,theFARC’sleaders
nowadmitthattheir50-year
dreamoftakingpowerby
forceisover.Thatispartly
becauseofMrUribe’s
militarybuild-up,butalso
becauseconditionsinthe
regionhavechanged.
Venezuela’sregime,which
hasofferedthemsanctuary
andhelpedthembuyarms,is
deeplyunpopularanditshold
onpowerisuncertain.Mr
Castro’sgovernmentsees
diplomaticbenefitsinhelping
tobrokerpeace.
TheFARChavealsonoted
thatacrossLatinAmerica
formerguerrillashavewon
powerthroughelections.That
messagehasbeenreinforced
byBernardAronson,aformer
diplomatwhomBarack
ObamaappointedinFebruary
astheUnitedStates’
representativeforthe
Colombianpeaceprocess.
“Oncetheydisarm,take
responsibilityfortheir
crimes,acceptjusticeand
becomealegalpolitical
entity,theUnitedStateshas
noideologicaloppositionto
them,”hesays.
Second,MrSantosis
determinedtoavoidrepeating
themistakesofearliertalks.
Thesoleaimofthecurrent
negotiationsisa“final
agreementfortheendofthe
conflict”.Theagenda
containsjustsixtightly
definedpoints.Meanwhile
thepresidenthasrefusedto
declareaceasefire.Thathas
entailedrisks,butitwas“the
shortestandmosteffective
route”,MrSantosinsists.
Meettheteams
Thegovernment’snegotiating
teamcommandsrespect.
HumbertodelaCalleisa
formervice-presidentanda
shrewdandmoderateLiberal
politician.SergioJaramillo,
MrSantos’speace
commissioner,isacerebral
strategist.Othermembers
includeGeneralJorgeMora,
aformerarmycommander
whoistrustedinthebarracks,
andGeneralÓscarNaranjo,
whowasanoutstanding
policecommander.
AcrossthetablesitsIván
Márquez,theFARC’s
numbertwo,anideologue
saidtopossessacertain
personalcharm(theFARC
declinedtobeinterviewedfor
thisreport).Mostofthe
guerrillas’seniorleadersnow
rotateinandoutofthetalks;
Timochenkolivesmainlyin
Venezuela,buthasbeento
Havanathreetimes.
UntilSeptemberthetwosides
hadreachedagreementon
onlythreeofthesixagenda
items.Firstcameanaccord
onruraldevelopment,
includingmeasuresto
broadenaccesstolandandto
issuelegaltitletoallrural
properties.This,saysMr
Santos,is“whatthe
countrysideneeds;wehaveto
dothiswithorwithoutthe
FARC.”Nextwasan
agreementonpolitical
participationandsecurity
guaranteesfortheopposition.
Then,inMay2014,thetwo
sidesagreedtoajointeffort
totackledrug-traffickingand
avoluntary,communitybasedprogrammefor
substitutingcocawithlegal
alternatives,backedupby
manualeradication.Thatwas
moreorlessMrSantos’s
policyanyway;earlierthis
yearhisgovernmentdecided
tohalttheaerialsprayingof
cocawithglyphosateafterthe
WorldHealthOrganisation
classifiedtheweedkillerasa
probablecarcinogen.
Afterthatthetalksgot
boggeddownformorethana
yearoverthemostdifficult
issues:whethertheFARC’s
leaderswillfacepunishment
ofsomekind,andonwhat
termstheywillgiveuptheir
weaponsandbecomealegal
politicalparty.Many
Colombiansbelievedthatthe
negotiationswereinessence
abouttheguerrillas’
surrender,buttheFARCdo
notseeitthatway.They
presentthemselvesas
undefeatedrebelspitted
againstanunjustoligarchyin
thecauseofsocialjustice.Mr
Márquezhaspointedoutthat
previousinsurgentsin
Colombiaweregranted
amnesties.
Buttwothingshavechanged.
Thefirstisthatinternational
lawnolongeracceptsblanket
amnestiesforcrimesagainst
humanity(whicharenow
heldtoincludeactssuchas
murder,kidnapping,rapeand
theforcedrecruitmentof
children,notjustby
governmentsbutby
insurgentswithdefacto
authority).Suchcrimesmust
nowbedealtwithundera
processthatlawyerscall
“transitionaljustice”.The
generalideaisthattherank
andfileareamnestiedbutthe
leadersfacetrialand
sentence.
Thatprinciplewasapplied,
albeitclumsily,inthe
demobilisationofthe
paramilitaries:morethan100
oftheirleaderswerejailedfor
uptoeightyears.Severalof
themcontinuedtorundrug
businessesfromprison,soMr
Uribesummarilyextradited
severalofthemtotheUnited
States,wheretheywere
wantedfordrug-trafficking.
Theyarenowservinglife
sentencesin
maximumsecurityprisons.
Thesecondconstraintonthe
governmentisthatpublic
opinionhashardenedagainst
theFARCbecauseoftheir
terroristbombingsand
kidnappings.Hostageswere
treatedappallingly,
sometimesspendingyears
chainedtotrees.Inapollin
August,morethan90%of
respondentswantedthe
FARC’sleaderstogotojail.
MrUribeleadsavocal
oppositiontothepeace
process.Agovernment
supporterlamentsthat
“Colombiansdon’tbelieve
MrSantosevenwhenhe’s
tellingthetruthyetbelieve
MrUribewhenhe’slying.”
Asubcommitteeoflawyers
namedbybothsides
eventuallythrashedoutthe
outlineagreementon
transitionaljusticeinAugust
andSeptember.A“special
jurisdictionforpeace”will
investigate,tryandsentence
the“mostseriousand
representativecrimes”
committedduringthe
conflict.Thespecialtribunal
willincludeaminorityof
foreignjudges.Thosewho
confesstotheircrimesand
collaboratewithatruth
commissionwillbenefitfrom
lightsentences:fivetoeight
yearsofcommunitywork
with“effectiverestrictionson
liberty”,butnotjail.Those
whodonotconfesswillface
upto20yearsinjail.Similar
procedureswillapplyto
militaryofficerswhohave
committedwarcrimes,as
wellastothosewhofinanced
theillegalarmies.
MrUribe,whodeclinedtobe
interviewedforthisreport,
denouncedtheagreementas
toolenient.Healsoobjected
tothearmedforcesbeing
judgedonthesamebasisas
theFARC.MartaLucía
Ramírez,aConservative
leader,wouldhavelikedMr
Santostohavecontinued
fightingtheFARCfor
anothertwoyearsinorderto
extracttougherterms.That
mighthaveworked.But
continuingtheconflictwould
havecostlivesand
destruction.
JoséMiguelVivancoof
HumanRightsWatch,aNew
York-basedadvocacygroup,
arguesthattheInternational
CriminalCourt(ICC)willnot
besatisfiedwithan
arrangementthatallowsthose
responsiblefortheworst
abusestoavoidprison.The
ICC,stungbycriticismthat
itsonlytargetssofarhave
beenAfrican,iswatching
Colombiaclosely.Butmany
lawyerssaythatunder
internationallawtransitional
justicedoesnothaveto
involveprison.Theoutline
agreementdoesholdthe
FARCtoaccountinwhat
promisestobeathoroughand
rigorousprocessoflaw,and
thealternativesentencesare
longerthanmanyexpected.
Theagreementalsolinks
justicewithdisarmament.
Onlythosewhohavegiven
uptheirarmswillbeeligible
foralternativepenalties.The
FARCnowhaveonlyaround
6,000armedtroops(plusa
similarnumberincivilian
militias).Agovernment
negotiatorsaysthatthetroops
mustplacetheirweaponsin
sealedcontainersunder
internationalsupervision.The
governmentacceptsthatit
mustprovidesecurity
guaranteestotheguerrillas,
whowillrememberthefate
oftheUP.
TheFARCalsowant
guaranteesthattheywillnot
endupinAmericanjailslike
theparamilitaries(aswellas
oneoftheirownleaders),and
thatthegovernmentwill
shelvearound70extradition
requestsfromtheUnited
States,fordrug-trafficking
andothercrimes.“We’renot
goingtogiveextraditionup,”
insistsMrAronson.Butthen
headds:“It’suptothe
Colombiangovernment
whetherithonoursthese
requestsornot.Colombiaisa
verycloseallyandpartner.
TheUnitedStateswouldnot
wanttobeanobstacletoa
finalpeaceprocess.”
Getajobandalife
“Thecountdowntopeacehas
begun,”saysMrdelaCalle.
ButLuisCarlosVillegas,the
defenceminister,cautions
thatagovernmentceasefire
“canonlyhappenwhenwe
havenegotiatedthedetailsof
demobilisationand
cantonment”oftheFARC.
Therearestillplentyofother
looseendstobetiedup.
Importantpoints,suchaswho
choosesthejudgesforthe
specialtribunalandwhat
“effectiverestrictionson
liberty”willmeaninpractice,
haveyettobeagreedon.
MeanwhiletheELN,withits
1,500fighters,hasspentmore
thanayearintalksabout
talksbutshowslittledesireto
giveupitslucrativebusiness
ofextortion.
Next,thepeaceagreement
needstobewrittenintolaw.
InSeptemberthegovernment
sentaconstitutional
amendmenttoCongressthat
wouldgiveaspecial
committeeofthelegislature
andthepresidenttemporary
powerstodothis.Thisshould
beapprovedbynextJune.Mr
Santosmaybeunpopularin
thecountry,butheretainsa
disciplinedmajorityin
Congress.
Inmanywaysthispeace
processcouldbecomean
exampletotheworld.Unlike
manyAfricancountries,
Colombiahasmadeagreat
effortoverthepastdecadeto
trytopunishthose
responsibleforviolence,first
theparamilitaries,then
politicianslinkedtothemand
armyofficersguiltyof
crimes,andnowtheFARC.It
isalsogoingoutofitswayto
recogniseandcompensatethe
victims(seearticle).
MrSantoshaslongpromised
thatColombianswillhavethe
chancetoapproveorreject
anyfinaldeal.His
governmenthasnotyet
decidedwhetherthiswillbe
donethroughareferendumor
insomeotherway.Provided
thedealislinkedtoacredible
disarmamentprocessandthe
looseendsaretiedup,the
peoplewillprobablysupport
it,butmeetingthose
conditionswillrequire
continuedfirmnessfromMr
Santos.Pollsshowthatsince
thenadirreachedinMay
2015supportforthepeace
processhasbeenrisingagain.
Officialsoftensaythatthe
taskofbuildingpeacein
Colombiawillbegintheday
afteranagreementtoendthe
conflictissigned.“These
negotiationsare
extraordinarilydifficult,but
notremotelyasdifficultas
implementationwillbe,”
warnsMrJaramillo.Building
peacewillmeantackling
someofColombia’sdeeprootedproblems,startingwith
thedividebetweenamodern,
mainlyurbancountryandan
archaic,poor,conflict-ridden
mainlyruralone.
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Theaftermath
Anationofvictims
Comingtotermswiththe
legacyofviolence
Oct31st2015|Fromtheprint
edition
LOOKWESTWARDS
FROMthepubliclibraryat
SanJaviermetrostationin
Medellín,builtbySergio
Fajardo,aformermayorof
thecity,andyouwillseetwo
greentarpaulinsspreadhigh
onthemountainsideopposite.
TheymarkLaEscombrera,a
rubbishdumpusedbythe
paramilitariesandthearmyin
theearly2000stodisposeof
bodiesastheyexpelledthe
FARCandtheELNfrom
Comuna13,oneofthecity’s
poorestneighbourhoods.
Whentheparamilitaries
demobilisedandconfessedto
theircrimes,theysaidthatup
to300bodieswereburied
there.
AníbalGaviria,thecurrent
mayor,ispayingforafivemonthdigbyforensic
anthropologistsatoneofLa
Escombrera’sthreesites.“I
thinkit’simportantthatthe
stateshouldshowit’snotin
agreementwithwhat
happenedthere,”heexplains.
RosaCadavid,anunwho
leadsanNGOthathas
pressedforthedig,saysthat
“thefirstpriorityistofind
lovedones,toknowthetruth,
whytheytookthem,what
happenedtothem.”Forthe
womenshesupports,the
excavationofferssome
comfort,buttheirtorment
willstaywiththem.Rubella
Tejada,wholivedinComuna
13,lostasonin2001,seized
fromtheirhousebyhooded
men.Tenyearslateranother
sonwastakenoffabusand
murdered.SisterCadavid’s
groupisprovidingherwith
psychiatrichelp.
Colombiaisanationof
victims.MrGaviriahimself
lostabrotherwhowas
kidnappedandkilledbythe
FARC;AlanJara,the
governorofMeta,was
kidnappedbytheguerrillas
andheldforeightyears.Mr
Santos’sgovernment
recognisestheplightofthe
victimsandhasmadeagreat
efforttoputthemattheheart
ofthepeaceprocess.
Thecountry’svictims’
programmeistheworld’s
largestbyfar.Some7.5m
people—aroundasixthofthe
population—haveregistered
withtheVictimsUnit,a
governmentagencywith800
staffandanother3,000under
contract.Theunitsaysithas
providedreparationsfor
around500,000peoplesofar,
intheformofcash,rehousing
and/orpsychologicalsupport.
Almost6.5mofthevictims
wereforcedoutoftheir
homes.Thetrickiestpartof
thereparationsisthe
restitutionoflandseizedby
paramilitariesorguerrillas.
Peacewillmakethattask
easier.Thegovernmenthas
secured2,000judicialrulings
forlandrestitution;alltold,
some60,000familieshave
returnedtotheirland,
accordingtoIrisMarínofthe
VictimsUnit.Butthereisa
bigbacklog,andsome
activistscallingforland
restitutionhavebeenkilled.
Mostofthosewhowere
drivenoutwillneverreturn.
Asurveyof27,000displaced
familiesfoundthat78%
wantedtostaywherethey
were.
Manywomenweresubjected
tosexualviolence.Matilde
Cardoso,asmartlydressed
38-year-oldAfro-Colombian,
ownsasmallfurnitureshop
intheCaribbeancityof
Barranquilla.Some19years
ago,whenshewasliving
withherparentsontheir
smallfarm,shewasrapedby
fourguerrillas.Thatnightthe
familypackedwhatthey
couldandfledto
Barranquilla.Thegovernment
paidher18.5mpesos(now
around$6,000)in
compensation,whichshe
usedtosetuphershop,butit
isnotdoingwell,sosheis
planningtoreturnto
hairdressing.Hereldest
daughter,conceivedinthe
rape,ispreparingtostudy
medicine.MsCardoso
supportsthepeaceprocess:
“Violencebegetsviolence,”
shesays.
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Theurban-ruraldivide
Ataleofthree
countries
Securityanddevelopment
arecrucialtoachieving
peaceontheground
Oct31st2015|Fromtheprint
edition
THEHOMEOFRutaNisa
strikingfive-storeyL-shaped
buildingcladincoppercolouredconcretepanelsthat
projectlikewind-filledsails.
Justacrosstheroadfromthe
campusoftheUniversityof
Antioquiaandnextto
Hewlett-Packard’sbusinessprocessoutsourcingcentrefor
LatinAmerica,RutaNaims
toturnMedellín,Colombia’s
secondcity,intoahubof
technologicalinnovation.Its
104staffaretryingtodo
threethings:workwith
schoolstoboosttheteaching
ofscienceandtechnology;
conductappliedresearchin
fieldssuchasnanotechnology
andadvancedmaterials;and
createaninnovation
ecosystemlinking
universities,startupsandthe
privatesector.Inthepastyear
aloneRutaNhashelped
generate1,800jobs,says
JuanCamiloQuintero,the
project’smanagingdirector.
Theideaistoboostboththe
supplyofhighlyskilled
workersandthedemandfor
them.Financedbyprofits
fromMedellín’smunicipally
ownedutilitiescompany,
RutaNisanindicationof
howfarMedellín,and
Colombia,havecomeinthe
pasttwoorthreedecades.
AgenerationagoMedellín
wastheworld’smostviolent
city,with386murdersper
100,000peoplein1991.
Todaythatfigureisdownto
18,whichthemayor,Aníbal
Gaviria,describesas“still
veryhigh”.Todriveitdown
further,hehasworkedwith
thepoliceandprosecutorsto
createwell-equipped
specialisttaskforcesto
investigatemurders.Mr
Gaviriaisbuildingonthe
workofSergioFajardo,a
mathematicianwhoservedas
mayorin2003-07andbegan
thetaskofturningMedellín
around.Heinvestedinurban
projectsdesignedtobridge
thecity’ssocio-economic
divide,suchascablecars
connectingshantytownsto
themetroandtonewpublic
librariesinpoorerareas.As
governorofAntioquia,
Colombia’smostpopulous
department,hehastriedtodo
thesamethingthere.
Thetask,hesays,istotackle
violenceandinequality.Then
hebreaksintoEnglish:“The
violentonestakeawayour
abilitytodream.”Governors
haverelativelysmallbudgets,
soMrFajardohas
concentratedonhelping
mayorsdrawupsecurityand
developmentplans.His
flagshipprojectinvolves
building“educationparks”in
eachmunicipality:
emblematicbuildings
designedasteachers’centres
butalsomeanttomobilise
communitiestoimprovethe
qualityofschooling.
Theproblemisthatmuchof
ColombialacksMedellín’s
andAntioquia’sresources
andleadership.Income
distributionforthecountryas
awholeisamongthemost
unequalinLatinAmerica,
behindonlyHaitiand
Honduras.WhenMrSantos’s
governmentrecentlycarried
outthefirstagricultural
censusfor45years,itfound
thattwo-thirdsofallfarms
havelessthan5hectares
(12.4acres)andtogether
occupylessthan5%ofall
agriculturalandgrazingland.
Still,theproportionofpeople
livinginpoverty(definedas
incomeperheadof$4aday
orlessinpurchasing-powerparityterms)fellfromalmost
50%in2002to29.5%in
2014,andincomesofthe
poorest40%havegrown
fasterthanaverage,according
totheWorldBank.Many
morechildrennowbenefit
fromeducation,though
Colombiastillhoversnearthe
bottomoftheOECD’sPISA
rankingsthattestchildrenin
65economiesforreading,
mathsandscience.
Underthe1991constitution
thegovernmentmust
guaranteeuniversalhealth
care,andonlyhalfthe
populationareableto
contribute;thegovernment
hastopayfortheotherhalf.
AlejandroGaviria,thehealth
minister,saysthatforthe
bulkofthepopulationthe
Colombianschemeprovides
thebesthealthcareinLatin
America,butheacceptsthat
regionalinequalitiesremain.
Thereare“threeColombias”,
arguesSimonGaviria(no
relationofthehealthminister
orthemayorofMedellín),
theheadoftheNational
PlanningDepartment.One,in
themaincities,isa
sophisticatedplacewithrapid
economicgrowthandfirstworldsocialindicators.A
secondhasseensocial
improvementsbutlacksgood
jobs.Athird,madeupof3m
people,lacksevenbasic
services.Notcoincidentally,
thisthirdColombiaiswhere
theconflicthaspersisted.
TakethePacificcoast,home
to1mpeople,90%ofwhom
areAfro-Colombians.In
Quibdó,thecapitalofChocó
department,“youmightthink
you’reinHaiti,”saysPaula
Moreno,aformerculture
ministerwhonowheads
ManosVisibles,anNGO
workingtoreducepoverty
andviolence.Unemployment
inthecityis70%.Lastyear
thearmyoccupied
Buenaventura,Colombia’s
mainPacificport,but
criminalgangsstillexercisea
murderousgriponpartsof
thecity.TheFARCruns
Tumaco,farthersouth.
Reclaimingparadise
VistaHermosa,asmall
farmingtowninthe
departmentofMeta,inthe
llanos,showshowdifficultit
canbetojointhe“first
Colombia”.Forseveral
decadesafteritwasfounded
inthelate1940sbyrural
dwellersfleeingpolitical
violenceincentralColombia,
thiswasFARCterritory.
AlongwiththeFARCcame
cocaandcocaine.Bythestart
ofthe21stcenturythearea
aroundVistaHermosawas
growingaquarterof
Colombia’scocacrop.
In2004MrUribedeployeda
jointtask-forcenamed
Omega,madeupof18,000
cracktroops,toretakethe
areafromtheFARC.Intheir
wakecameaplanconceived
byMrJaramillo,thenMr
Santos’sdeputyatthe
defenceministry,meantto
winthetrustofthepopulation
andconsolidatesecuritygains
byexpandingthepresenceof
thestateandpayingoutaid
moneyquickly.Itspent
$250minfouryears,mainly
onextendingthepaved
highwayfromVillavicencio
toVistaHermosabutalsoon
thingslikeelectrification,
drinkingwaterandsewerage.
ThedirtroadfromVista
Hermosatothevillageof
SantoDomingohugsthe
SerraníadelaMacarena,a
majesticandgeologically
ancientoutcropoftheAndes.
Waterfallsscorethesierra’s
near-verticalslopes.Atits
foot,kingfishersflashabove
streams,hoatzins,hawksand
parrotsflitbetweencopseand
fieldandiguanassun
themselvesbytheroad.
InSantoDomingo
theFARCstilllevy
taxesoneverything
fromcowstobeer
Nearlyallthecocahasgone
now.Inthevillagesconcrete
hallsmoulder,theghostsof
thediscotheques,brothelsand
supermarketsthatcateredto
thedrugsindustry.Thesmall
farmersinSantoDomingo
andthenearbyhamletof
CañoAmarillonowproduce
milk.Eachhasacommunity
depotwithstainless-steel
tanksprovidedbyAlquería,a
Bogotá-baseddairycompany.
“There’sbeenchange,butit’s
beenaslowprocess,”says
GilbertoOlaya,alocal
councillorinSantoDomingo.
“Peoplearestartingtobuy
twoorthreemorecows.”He
thinksthefutureliesin
commercialcropsaswellas
moreintensivecattle-rearing.
Butthreethingsarestill
missing.
Thefirstisbetterroads.The
38km(24mile)journeyfrom
SantoDomingotoVista
Hermosatakesmorethantwo
hoursalongaruttedtrackthat
fordsseveralrivers.Mr
Santos’sgovernmenthas
embarkedonanambitious
infrastructureprogramme,but
itisconfinedtothemain
nationalroutes.Metahasonly
500kmofpavedroadsand
7,000kmofunpavedones,
accordingtoAlanJara,its
governor.
Second,security,though
muchimproved,stillneedsto
getbetter.Thepolicedonot
patroloutsidethetown.In
SantoDomingotheFARC
stilllevytaxesoneverything
fromcowstobeer.Butsince
thepeacetalksbegan,the
guerrillas“knowtheycan’t
imposethemselvesasthey
didinthepast”,saysMr
Olaya.
Task-forceOmegamade
mistakesatthestartofits
operations.“Theideawas
thatwewereallguerrillas,”
saysRosaArnaldo,Mr
Olaya’swife.TitoGarzón,a
communityleaderinVista
HermosawhowasaUP
memberinthe1980s,thinks
that“Colombiahasagood
future,butonlyifthelawis
appliedtoeveryoneequally.”
Hewasrecentlyclearedafter
animprisonmentthatlooked
likescore-settling.
Third,iffarmersarenottogo
backtococa,theyneedcredit
andtechnicaladvice.“We
triedplantingyuccabutthe
creditcametoolatetobuy
fertilisers,”saysMrOlaya.
ThemainlessonfromVista
Hermosaisthatswiftaction
isvital.“Peoplehavethe
illusionthatwithpeace
everythingwillbesorted,”
saysMrJara.“Therehaveto
beimmediateresults.”Thatis
echoedbyFabrizio
Hochschild,theUN’s
representativeinColombia.
Internationalexperience
shows,hesays,that
“immediateactioninthefirst
yearafterthesigningofa
peaceagreementcanmake
thedifferencebetween
successandfailure.”Insome
ways,Colombiaisquitewell
prepared.Programmesfor
compensatingvictimsand
restitutinglandarealreadyup
andrunning.Butthereis
confusionoverwhowillbein
chargeofarapid-reaction
planandhowitwillbe
implemented.
ThecurseoftheBacrims
Thefirstprioritywillbe
security,whichwasneglected
afterColombia’sparamilitary
demobilisation.Thechiefs
werejailed,butthemid-level
commandersweresparedand
turnedtodrug-traffickingand
othercriminalrackets.These
Bacrims(criminalbands)
nowhavesome5,000-6,000
members,accordingtoMr
Villegas,thedefence
minister.Onefearisthat
renegadeFARCunitswill
reinforcethem.Theillegal
economyinColombia,
thoughproportionately
smallerthanitwas,remains
substantial;thelocalvalueof
drugproductionisabout
$240mayear.Illegalmining,
chieflyofgold,andextortion
addfurtherrevenuestreams.
Mosturgently,the
governmentwillhaveto
providesecurityforthe
FARCastheydemobilise.
Emergencyteamsof
prosecutorsandjudgeswill
alsobeneeded“toruleon
whoownswhat”inconflict
areas,saysMrVillegas.In
thelongertermColombia
willneedfewertroops
(currently270,000)andmore
police(200,000atpresent).
Localpoliticalandstate
institutionswillalsoneedto
bestrengthened.Inconflict
areasthesesuffer“chronic
deficiencies”suchas
corruptionandlackof
technicalcompetence,
democraticaccountabilityand
budgetresources,astheUN
statedinareportlastyear.On
thePacificcoastthe
governmentdecidedtostart
moreorlessfromscratch.It
issettingupa$400mfund
withmoneyfromtheWorld
BankandInter-American
DevelopmentBanktoinstall
drinkingwaterandsewerage
inthecoast’sfourmaincities.
Nationalministrieswill
controlacommittee
disbursingthemoney.“We’re
notgoingtohandoverthe
resourcesviamayorsand
governors,”saysLuis
GilbertoMurillo,thedirector
ofMrSantos’sPacificPlan.
Similarly,thegovernmentin
Bogotáhasappointedhealth
andeducationmanagersin
eachofthosecities.
Theruraleconomywillneed
moreattentiontoo.SinceMr
Uribe’ssecuritypushthe
violencehasbeen
concentratedlargelyoutside
thecities.Theguerrillasand
theircivilianfollowersneed
tobeofferedlegaleconomic
opportunities.Alarge
proportionofthepoorarein
ruralareas,notesAnaMaría
Ibáñez,aneconomistatthe
UniversityoftheAndesin
Bogotá.Asishiswont,Mr
Santossetupacommissionto
considerwhattodowiththe
countryside.Itshead,José
AntonioOcampo,aformer
financeandagriculture
minister,saysthestate
agriculturalagenciesneeda
completerevamptobeableto
expandcreditandtechnical
helptosmallfarmers.
Togetherwithchangesto
socialpolicies,thiscould
closetherural-urban
developmentgapwithin20
years.
Thegovernment’spromiseto
theFARCtosetupafundto
distributelandtothelandless
andtosmallfarmersisa
politicalnecessity,butit
couldendupswallowingtoo
muchofthemoneyavailable
forruraldevelopment.The
mostcontroversialissueis
large-scaleagribusiness,
whichcanplayacrucialrole
inhelpingColombiadiversify
itseconomy,asitmust.
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Theeconomyandbusiness
Timetobranchout
Aneconomicslowdown
highlightstheneedfor
structuralchange
Oct31st2015|Fromtheprint
edition
Theroadtoriches
ONONESIDEofVia40in
Barranquilla,afreewheeling
industrialcityonthe
Caribbeancoast,flowsthe
broad,muddyMagdalena
river.Ontheotherstandsa
lineoffactories.Inthe
temperature-controlled
bowelsoftheanonymous
buildingthathousesProcaps,
apharmaceuticalcompany,
womenarehand-checkinga
streamofparacetamol
capsulesforthetiniestfault.
Foundedandownedby
RubenMinsky,whosefather
fledfromPolandto
BarranquillatoescapeHitler,
Procapsisamultinational.
Halfitssalesofaround
$500mlastyearwereoutside
Colombia,asareseveralof
itsfactories.Athirdofits
businesscomesfromcontract
manufacturingofpillsforthe
bigpharmacompanies,butit
alsomakesgenerics,itsown
over-the-countermedicines
andinjectabledrugsforsale
tohospitals.Itisaknowledge
business,makingor
customisingitsown
machines,investing3.5%of
itssalesinresearchand
developmentandholding24
patents(with16pending)
worldwide.
Notfaraway,inasprawling
industrialcomplex,is
Tecnoglass,whichmakes
aluminium,glassandsealed
windows.Reversingthe
typicalLatinAmerican
pattern,Tecnoglassimportsa
commodity—plainglass—
fromtheUnitedStates,adds
knowledgeandvaluetoitin
theformofenvironmentally
efficientcoatingsandexports
finishedwindowsbacktothe
Americanmarket.Businessis
booming:thefirmexpectsits
salesof$197mlastyearto
morethandoubleby2016.
FoundedbyaLebanese
immigrantfamily,in2014it
floated12%ofitsshareson
theNASDAQexchangefor
around$52m.
“We’restrategicallylocated
toservetheUSmarket,with
LatinAmericancostsina
labour-intensiveindustry,”
saysRodolfoEspinosa,one
ofthecompany’smanagers.
Thefree-tradeagreement
(FTA)betweenColombiaand
theUnitedStatesthatcame
intoeffectin2012“isa
blessingforus”,headds.
“Withnomoreredtape,we
gettoFloridaquickerthan
ourcompetitorsinTexas.”
Butmostoftheimpressive
growthinColombia’s
economyoverthepastdecade
hasbeenduetoa
combinationofcommodity
exports(mainlyoilandcoal),
constructionanddomestic
consumption.Colombiaisfar
frombeingapetro-state;its
outputof1mbarrelsperday
lastyearmadeitonlythe
world’s19th-biggestoil
producer,anditsproven
reservesaresmall.Butthe
plungeintheoilpricehas
neverthelesshititsexport
earningsanditsgovernment
revenueshard.Thecurrentaccountdeficitclimbedto7%
ofGDPinthefirstquarterof
thisyear.Investorstook
fright;thepesolost38%of
itsvalueagainstthedollarin
the12monthstoJuly,much
thesameastheBrazilianreal
overthatperiod.Thecentral
banknowexpectsthe
economytoexpandbyonly
2.8%thisyearand3%in
2016;ANIF,aprivate-sector
think-tank,forecasts2.5%
thisyearand2%next.
Thepesohadbeen
overvaluedforseveralyears,
sothedepreciationwas“a
blessingindisguise”,says
MauricioCárdenas,the
financeminister.The
economywassufferingfrom
“incipientDutchdisease”,in
whichcommodityexports
strengthenthecurrency,
makingnon-commodity
businessesuncompetitive.
Colombia’smacroeconomic
managementhasbeenmuch
moreresponsiblethan
Brazil’s,buttheauthorities
facetwobigchallenges.The
firstisthataweakerpesohas
pushedupinflation,which
reached5.4%intheyearto
September,wellabovethe
centralbank’stargetof3%.
Thatpromptedthebankto
raiseitsbenchmarkinterest
rateonSeptember25th,from
4.5%to4.75%.Higher
inflationcouldincreasethe
nationalminimumwagebyas
muchas6%,meaningthatthe
centralbank“willhaveto
workveryhard”toget
inflationbackontarget,says
RobertoSteiner,an
economistatFedesarrollo,a
think-tank.
Second,oilwasprovidingthe
governmentwitharounda
fifthofitsrevenues,andits
plummetingpricemeansa
fiscalshortfallof1.7%of
GDP.Thiscomesatan
awkwardtime.Totaltax
revenueslastyearaddedupto
onlyaround17%ofGDP,
wellbelowtheLatin
Americanaverage.Many
economistshadbeenarguing
thatColombianeededtoraise
anotherthreepointsofGDP
intaxtocoverdeficitsin
pensionsandhealthcare,
fundinfrastructureandpay
forpeace-relatedinvestments.
Theprivatesectoriscross
withMrSantosbecauseinhis
twoprevioustaxreformshe
raisedbothcorporatetaxes
andawealthtaxthat,oddly,
ispaidbyfirmsaswellas
individuals.Theeffectivetax
rateonbiggerfirmsis53%of
income,accordingtoSergio
ClavijoofANIF.And
revenueishighly
concentrated:60%ofthetotal
comesfromjust3,556
taxpayers.
Intelligentausterity
MrCárdenasdescribeshis
responseas“intelligent
austerity”.Hehascut
spending(mainlyonpublic
investment)byaround1%of
GDPandhopestoraise
revenueworth0.5%ofGDP
fromacrackdownontax
evasion.Hesaystherules
allowforsomeincreaseinthe
fiscaldeficit(whichthisyear
willbe2.4%ofGDP).Mr
Santoshaspledgedareform
ofthetaxstructurethatwould
raiseanextra2%ofGDPby
2018.Thegovernment
acceptsthatbusinesstaxes
aretoohigh.Mosttaxexperts
thinktheshortfallcanbemet
onlybyraisingpersonal
incometaxandvalue-added
taxandeliminating
exemptions.Thepoliticalrisk
forMrSantosisthat
Colombianswillthinkthey
arebeingmadetopayhigher
taxestosatisfytheFARC.
Successivegovernmentshave
beenslowtotacklethe
structuralfactorsthatmake
manyColombianbusinesses
uncompetitive.Oneisarigid
labourmarket.MrSantos’s
taxreformdidreducepayroll
taxes,from60%to47%of
salaries,whichseemstohave
encouragedanincreasein
formalemployment.Butthe
informaleconomystill
accountsforaroundhalfofall
jobs.Unemploymenthas
beenfallingsteadilybut
tickedupto9.1%inAugust,
asignoftheslowdowninthe
economy.Thebiggest
bottleneckisthelackof
transportinfrastructure.
Connectingthedots
Itis8.30amonaSunday
morning,and150metres
insideamountaininthe
easterncordilleraofthe
Andesamachineispreparing
toinjectcementintotheroof
ofTunnelnumber2of18ina
29kmstageofthenew
highwayfromBogotáto
Villavicencioandthellanos.
Theexistingtwo-laneroadis
aslowanddangerouscrawl
ofoiltankers,cattletrucks,
pick-upsandcarsevenatthis
timeoftheweek.Workto
addanothercarriageway
beganin2010,butitis
extraordinarilydifficultand
costly.Theeasterncordillera
isgeologicallytheyoungest
andmostunstablepartofthe
Andes.Theroaddropsby
morethan2,000metresin
just90km,inthenarrow
gorgeoftheriverNegro.But
by2021andatacostof$3
billion,thewholeroadshould
beamotorway,cuttingan
hourfromthejourneytime.
Thehighwaytothellanosis
partofavastinfrastructure
programme—thebiggestin
LatinAmerica—thatisatlast
gettingunderway.Lastyear
thegovernmenttendered
projectsworth$5billion,up
from$2.6billionin2010;if
allgoestoplan,by2018the
annualfigureisduetoreach
$9.9billion.MrSantosspent
thewholeofhisfirstterm
preparingthelegaland
financialground.The
programmerequiresthe
governmenttocontribute
almost$1billionayearover
thenext20years.MrSantos
maywellberememberedfor
roadsandrailwaysaswellas
peace.
Theproblemisthattheymay
notbecomingalongfast
enough.Industrygrewup
aroundthecitiesofthe
interior.Takingacontainer
fromBogotáorMedellínto
theCaribbeanportscosts
around$2,000,ortwiceas
muchasexportersinPeruor
Chilehavetopay,saysMr
Clavijo.Thedepreciationhas
sofarreducedimportsrather
thanboostedexports.When
thepesowasstrong,
Colombiancompanies
withdrewfrommarketsin
EuropeandAsia,saysBruce
MacMasterofANDI,the
industrialists’lobby.Theyare
nowtryingtorebuild
relationshipswithcustomers,
butittakestime.
OthersblameANDIandfarm
lobbiesfortheir
protectionism.Colombiahas
some60tradeagreements,
butitislessopenthanit
looks.WhenCésarGaviria
waspresidentin1990-94he
slashedtariffsandother
protectionistbarriers,opened
uptheeconomyand
privatisedtheports.Those
portsarenowhighlyefficient,
buta16-foldincreasein
customsregulationshas
slowedthemdown,he
explains.“Colombian
industryfacesexpensive
inputsbecauseofthe
complexityofimporting,
whichincreasesthecostof
bothimportsandexports.”
ThatviewisechoedbyDavid
Bojanini,thechiefexecutive
ofGrupoSura,abigfinancial
conglomerate.“Wewantthe
countrytobemuchmore
international,we’reagainst
protectionism,”hesays.
BasedinMedellín,Surais
oneofthreecloselylinked
companiesknownasthe
GrupoEmpresarial
Antioqueñowhichhavebeen
goingformorethan80years
buthavebranchedoutabroad
inthepastcoupleofdecades.
TheothersareNutresa,abig
foodcompanywithfactories
inseveralcountriesinthe
Americas,withsalesof$3.4
billionin2013(ofwhich$1.4
billionwereabroad);and
Argos,aconglomerateof
cement,electricityand
infrastructurebusinesses,
whichgenerates60%ofits
$2.9billionsalesindollars;it
isthethird-biggestmakerof
ready-mixedconcreteinthe
UnitedStates.
Colombianeedstogenerate
moresuchinternationally
competitivebusinessesfrom
scratch.Onepromising
possibilityistourism,which
isalreadybenefitingfromthe
improvedsecuritysituation.
In2014thecountryreceived
4.2mvisitorsfromabroad,
morethantwiceasmanyas
in2010.Colombialacksan
iconicdestinationsuchas
Peru’sMachuPicchu,butit
makesupforthatindiversity
oflandscapeandwildlife.
Perhapsthebiggest
opportunitythatpeacecould
bringisinagribusiness.The
llanoshavethepotentialto
becomeColombia’scerrado,
thehomeofBrazil’s
agriculturalmiracle.The
Altillanura,alowtablelandin
MetaandVichada,hasat
least10mhectaresthatcould
beusedforgrowingcrops
suchassoya,maize,riceand
palm.Thiswouldmorethan
doublethecountry’sland
undercultivation.Someleftwingersthinklandinthe
Altillanurashouldbegivento
thelandless,butthree
previouslandreformsin
Colombiafailedtoestablish
thrivingsmall-scalefarming.
TheAltillanuraisbetter
suitedtolarge-scale
commercialfarms.Heavy
capitalinvestmentisneeded
tomakeitspoor,acidicsoils
fertile,andtheregion’s
remotenessaddstocosts.
Inthepasttenyearsorso
commercialfarminghas
arrivedinthellanos,butit
facesalegalobstacle.Under
a1994lawdrawnupbyMr
Ocampo,allvacantlandwas
tobeusedforfamilyfarming.
Inthellanosthatwasdefined
asupto1,700hectares,but
investorshaverecently
assembledlargerholdings,
whicharenowbeingdeclared
illegal.Landtransactionsin
thewholeregionhavebeen
suspended.
Congressisdebatingabill
thatallowslong-termrental
contractsforlargeholdingsin
thellanos.Butasonelocal
farmerputsit,“ifyou’re
goingtotakethetroubleto
investinimprovingland,you
havetoownit.”Abetter
solutionwouldbealandtax.
Amongotherthings,itwould
encourageranchersto
becomemoreefficient.As
thingsstand,40mhectaresof
landacrossthecountryare
devotedtoextensivecattleraising,witheachcow
grazingmorethanahectare.
Taxinglandmightfreeup
someforsmallfarmersin
centralColombiawhilestill
givinglarge-scale
agribusinessitsheadinthe
llanos.
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Thefuture
Halfwaytosuccess
Colombianeedstoclimb
outofitsshell
Oct31st2015|Fromtheprint
edition
CanUribe(left)andSantos
makepeacetoo?
MORETHAN20YEARS
afterhisdeath,PabloEscobar
hasbecomeanobjectof
fascination.“Narcos”,anew
seriesfromNetflix,isjust
oneofacropoffilms,books
andtelevisionshowsabout
Colombia’smostnotorious
drug-trafficker,thecauseof
somuchviolenceinMedellín
inthe1980sand90s.
Escobarwasaruthlessmass
murderer.Foranyonewho
livedthroughthosedays,the
attentionheisreceivingis
distasteful.Butifhecannow
beseenasamerehistorical
curiosity,thatmaybean
indicationofhowfar
Colombiahasmovedon.
Outsidershaveoftenfastened
onthecountry’sfailures.But
overthepastquarter-century
ithasbeensurprisingly
successfulintacklingsomeof
itsbiggestproblems.Escobar
andhislikeweretakendown;
theirsuccessorstodayare
“unknown”,notesMr
Gaviria,Medellín’smayor.
“Theydon’tlastmorethan
threeorfouryearsandcan’t
consolidatetheirpower.”
Colombia’sresponsetothe
drugmafiaswastoreform
andstrengthenanational
policeforcethat,alongwith
Chile’s,iswidelyregardedas
themostprofessionalinLatin
America.The1991
constitutiongavenewpowers
tothecourts,aswellas
promotingmoreinclusive
politicsandheraldingsocial
advances,suchasthe
provisionofuniversalhealth
care.
Progresshasnotalwaysbeen
linear.TenyearsagoBogotá
wasabeaconofsuccessful
urbanmanagement,butunder
threemediocremayorsfrom
theleftithasbecomemore
congestedandlessefficient.
Toooftenlocalpoliticsis
financedbycorrupttiesto
constructioncompanies.Yet
othercities,suchas
Barranquilla,arerising.
Thejudiciary,too,has
achievedsomesuccesses.The
removalofparliamentary
immunitybythe1991
constitution,combinedwith
powerfulnewlegal
instrumentsthatallowthe
seizureofillegallyobtained
assets,hascurbedthe
infiltrationofpoliticsbydrug
money.Thecourtsjailed32
nationallegislatorsandfive
regionalgovernorsfortheir
linkswiththeparamilitaries.
Andinademonstrationof
politicalindependence,the
ConstitutionalCourtblocked
MrUribe’sre-electionbid.
Judgingthejudges
Butthejudiciaryhasitself
becomepoliticisedand
taintedbycorruption,despite
—orperhapsbecauseof—a
proliferationofbusybodies:
aswellasitsfiscal(attorneygeneral),Colombiahasa
procurador(inspectorgeneral),anauditor-general
andanombudsman.Allare
chosenbythehighercourts.
Theofficeofthefiscalhas
becomeanempirewith
29,000staff.Insteadof
dedicatingthemselvesto
applyingthelaw,both
EduardoMontealegre,the
fiscal,andAlejandro
Ordoñez,theprocurador,
offeralmostdailyopinionson
politicalissues.
Asidefromsuchflaws,
though,Colombia’spolitical
systemanditsinstitutions
haveprovedcapableof
meetingmanyofthe
challengesposedbythecrises
ofthe1980sand90s.Above
all,thestatewasableto
extenditswritoveramuch
biggerswatheofthenational
territory,offeringgreater
securityandopeningtheroad
topeace.Thebitterrivalry
betweenMrUribeandMr
Santoscouldyetderailpeace,
butthatlookslesslikelynow.
Still,agovernmentinwhich
manyministersharbour
presidentialambitionswill
becomeincreasingly
distractedasthe2018
electionapproaches.The
hatredandmistrustleftby50
yearsofconflictwillnot
dissipatequickly,evenif
Colombianscometoaccept
MrSantos’scompromise
betweenpeaceandjustice.
Anotherunknownconcerns
theFARC’sentryinto
politics.Notwithstandingits
recentelectoralsuccessin
Bogotá,theleftinColombia
hasbeenextraordinarilyweak
politicallybecausepartofit
embracedviolence.That,
alongwiththeeffectofthe
conflictitself,helpsexplain
thecountry’syawningsocioeconomicinequalities.
Despiteitsdeepunpopularity,
theFARCwilldoubtlessget
togovernsome
municipalities.Thequestion
iswhetheritwillcometo
termswithdemocracyandthe
modernworld.
Colombiawasforcedto
engagewiththeworldwhen
itfounditselfatthecentreof
theinternationalillegal-drug
business.PlanColombiawas
oneresult.Ithassincesigned
tradeagreementswithEurope
aswellastheUnitedStates,
anditrecentlyformedthe
PacificAlliancewithChile,
MexicoandPeru,countries
unitedbyacommitmentto
freetradeandfree-market
economies.
ButmostColombian
politiciansandbusinesses
remainintroverted,andthe
countryisstilldiplomatically
isolatedinitsregionand
beyond.Itfailedtojointhe
Asia-PacificCo-operation
Forumbeforethatbody
closeditsdoorstonew
members;thusitisnotpartof
theTrans-PacificPartnership
tradedeal.Andithasyetto
takefulladvantageofsuch
tradedealsasithasstruck.
Admittedly,Colombiahas
beenunluckywithits
immediateneighbours.
Ecuadorhaserected
protectionistbarrierstoits
exports.Underthechavista
regime,Venezuelahas
harbouredguerrillas,served
asaconduitfordrugexports
andshutdownwhatwasonce
abigmarketforColombian
manufacturers.InAugust
Venezuela’spresident,
NicolásMaduro,closedthe
borderandsummarily
expelled1,000Colombians,
causinganother20,000to
flee.Heaccusedthemof
smuggling,abusiness
boostedbyVenezuela’sprice
andexchangecontrols,and,
withoutevidence,ofbeing
“paramilitaries”.Yet
Venezuelaalsoplayedapart
ingettingtheFARCtothe
table,andColombiahas
benefitedfromtheflightof
Venezuelantalentandcapital.
Therecentborderfracaswith
Venezuelahighlighted
Colombia’sisolation:it
narrowlyfailedtowinthe18
votesneededforadebateon
theexpulsionsatthe
OrganisationoftheAmerican
States.Colombia’slackofa
professionaldiplomatic
servicecomesatahighprice.
Thecountry’sproblemsand
achievementsarelittle
understoodeveninitsown
region,whichofferedscant
solidarity,letalonehelp,in
thestrugglewithillegal
armies.
Colombiawillneedthe
world’ssupportforwhatever
peacedealitstrikes.Itwill
alsoneedtheworld’shelpto
monitortheFARC’s
disarmament,andaidfor
ruraldevelopment.Butit
mustdoitsbit,too.For
example,itwillneverbecome
properlydevelopedandsafe
untilitsmiddleclasseslearn
topaytaxes.
ButColombia,too,has
somethingtooffertheworld.
Italreadyprovidessecurity
adviceinCentralAmerica.
Withluck,itshouldsoonbe
abletoprovidelessonson
howtoendseemingly
intractableconflicts.
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Previoussection|
Business
Container
shipping:The
big-boxgame
[Thu,29
Oct18:57]
Dry-bulkcargo
shipping:Hitting
thebottom
[Thu,29Oct
18:57]
Network
neutrality:A
multi-speed
Europe
Theranos:The
fableofthe
unicorn
Multinationalsin
[Thu,29Oct18:57]
[Thu,29Oct18:57]
China:Aharder
roadahead
[Thu,29Oct
18:57]
Recruitment:No
names,nobias?
[Thu,29Oct18:57]
Schumpeter:The
storyandthe
numbers
[Thu,29Oct18:57]
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|
Containershipping
Thebig-boxgame
Thelargestcontainerlines
arebulkinguptotryto
withstandafreshdownturn
Oct31st2015|Fromtheprint
edition
SINCEthefinancialcrisis,
thetideofrecoveryhasnot
liftedallboatsequally.Butin
fewindustriesisthatmore
truethaninshipping.
Demandforoiltankershas
boomed:acombinationof
weakspotpricesandhigher
futuresprices,drivenbythe
assumptionthatsupplyand
demandforcrudewill
eventuallyrebalance,has
encouragedtraderstohire
tankerstostoreoilatseaand
cashinonthepricegap.
Meanwhile,bulkcarriers,
whichcarrysuchthingsas
ironoreandcoal,havebeen
hitbymassiveovercapacity,
asChinesedemandforsuch
commoditieshascollapsed
(seearticle).
Untilthestartofthisyear,the
container-shippingbusiness
—whichcarriesaround60%
byvalueofallseabornetrade
ingoods—lookedmorelike
thatforoiltankers.Rising
globaltradevolumes,and
firmsteelpricesthatmadeit
worthwhileforownersto
scrapoldships,hadkept
capacityincheck,and
container-freightratesseemed
tobesteadying.Asrecently
asAugustlastyear,demand
forcontainershippingwasso
highthatBIMCO,anindustry
association,waswarningofa
capacityshortage.Andatthe
startofthisyearDrewry,a
shippingconsultant,forecast
abumperyear:ownersof
boxshipswouldrakein
profitsofupto$8billionin
2015,theythought,helpedby
lowfuelcosts.
Butsincethentheindustry
hasbeenrattledbyrenewed
weaknessinfreightrates,
promptedbyafallinthe
volumeofseabornetrade.
Thecostofsendinga
containerfromShanghaito
Europe,forinstance,has
almosthalvedsinceMarch,
accordingtotheChinese
city’sshippingexchange(see
chart).Andtheabsenceofthe
usualpre-Christmaspick-up
isworryingbothanalystsand
investors,accordingtoRahul
KapoorofDrewry.On
October23rdMaersk,the
world’slargestcontainerline,
toldinvestorstobrace
themselvesforafallinprofits
whenitannouncesitsthirdquarterfiguresonNovember
6th.
Someoftheshippinglines’
problemsareduetofactors
beyondtheircontrol.Ata
timewhenweaktrade
volumesshouldbeprompting
themtoscrapmoreold
vessels,thesteelpricehas
slumped.So,60%fewer
boxshipshavebeenscrapped
sofarthisyearcompared
withthesameperiodlast
year.However,some
shippinggroupshavemadea
rodfortheirbacksbytaking
ontoomuchdebt.Thisalso
makesithardforthemto
scrapunprofitablevessels,
sincetheirbalance-sheets
wouldstruggletocopewith
theresultingwritedowns.
Worsestill,criticssay,isthat
shipownershaveembarked
uponabuildingboom.Orders
fornewcontainershipswere
60%higherinthefirstfive
monthsofthisyear,thanin
thesameperiodin2014,
accordingtoAlphaliner,a
dataprovider.InJuneMaersk
ordered11shipsthatcaneach
carryupto20,000standardsizedcontainers,inadeal
worth$1.8billion.Nextweek
Hapag-Lloyd,another
operator,planstoraise
$300mbyfloatingon
Frankfurt’sstockexchange,
tohelppayforsixgiantnew
ships,ensuringthatitstaysin
thegame.
Hapag-Lloydhashadtodelay
itsIPOaweekbecause
demandfortheshareshas
beensoweak.Andinvestors
havegoodreasonstobe
hesitant.Alltheextra
capacityshoulddepressrates
further,addingtothe
industry’sproblems.Butfor
thoselinesthatcanaffordit,
orderingbig,newshipsmay
beasensiblereactionto
fallingfreightrates.Thereare
stillsizeableeconomiestobe
gainedfromincreasingthe
sizeofvessels.AsHapagLloyd’sboss,RolfHabbenJansen,recentlypointedout,
ashipcapableofcarrying
19,200containersneedshalf
asmuchfueltoshifteachbox
byonemileasavesselwitha
capacityof4,900.
Asaresult,thecapacityof
thelargestcontainerships
afloathasrisenfromaround
14,000beforethefinancial
crisistojustunder20,000
today—andboxshipsare
takingtheplaceofoil
supertankersasthegiantsof
theseas(seediagram).
Amongthewinnersfromthis
flighttoscalewillbethe
world’slargestthreelines—
Maersk,Mediterranean
ShippingCompany(MSC)
andCMACGM.Theyhave
theindustry’slowestcosts,
becausetheyhavethebiggest
shipsandthecheapest
financecosts.Theyalsohave
theadvantageofbeingbased
inEurope:demandto
transportgoodsacrossthe
Atlantichasremainedstrong.
Analystsexpectthebigthree
tostayprofitableoverthe
nextfewtoughquarters,even
astheirrevenuesfall.
MaerskandMSChavealso
formedanalliance,2M,to
savemoremoneybysharing
spaceontheirshipson
transatlanticandtranspacific
routes.Asthestrongestlines
getstronger,throughfleet
renewalandalliance-
building,smallerlinesthat
cannotcuttheircostsquickly
enoughorobtaincheaper
financetobuildbiggerships
willsuffer.China’stwo
biggestlines,ChinaShipping
GroupandCosco,were
losingmoneybeforethe
currentdownturnstarted.
Theyhaverecentlyswung
backintoprofit,butonly
thankstogenerousstateaidto
helpthemscrapoldvessels.
Thegovernmentregardsitas
vitaltohaveanational
merchantfleet,soitwillnot
letthetwogotothewall.But
itplanstomergethemtosave
money,andtostampout
corruptionatCoscowhich,
accordingtointernal
documentsleakedthisweek,
isanotherreasonforitspoor
performance.
Thehardesthit,however,will
bethesmallestcontainerlines
thatdonotenjoystate
backing.Severalsmaller
JapaneseandSouthKorean
operators,inparticular,are
sailingclosetobankruptcy,
analystssay.Thepressureto
cutcostsisalsohitting
containerlines’suppliers;
severalshipping-services
firmsinDenmarkand
container-logisticsfirmsin
Britainhavegonebustinthe
pastyear.
Themovetowardsever
biggervesselsposesariskto
portswhichlackthecapacity
tohandlethem.International
tradeisshiftingtowardsbig,
centralisedhubs.Andsmaller
ports,somewhatlikesmaller
airportswhenthehub-andspokemodelforlong-haul
flightsbecamedominant,are
losingmanyoftheirdirect
connections.Thishasalready
happenedatPortlandon
America’swestcoast,which
isnolongerservedbyany
regularcontainerroutes.
Toavoidthisfate,port
authoritiesinsomecountries
arenowinvestingheavilyin
upgradingtheirinfrastructure,
tohandlelargervessels.
Recentdevelopmentprojects
inLiverpoolandLondon
havealreadybroughttraffic
backtothoseBritishports.In
asimilarvein,Indonesia
announceddetailsofa$3.6
billionprojecttoupgradeits
containerportsearlierthis
month,toensureitdoesnot
loseroutestoSingapore,the
nearestbighub.
Asfallingvolumesandweak
shippingratesforcethe
industrytoconsolidate,with
fewer,biggerlinessailing
ever-largershipstofewer,
biggerports,theresulting
gainsinefficiencyshould
meancheapertransportcosts,
bringingbenefitsfor
consumersinmanyplaces.
Thatis,unlessthe
consolidationgoestoofar,
andthesurvivinglinesare
abletojackuptheirrates.
The2Malliancenowcontrols
morethan28%ofglobal
container-shippingcapacity,
andalmostathirdonthe
Europe-to-Asiaroute.
Regulatorsarealready
worriedabouttheimpacton
competition:inJunelastyear,
theChineseauthoritiesvetoed
plansforalargeralliance,
calledP3,thatwouldhave
involvedallthreeofthe
world’sbiggestlines.
Cheapercontainerratesarea
boonforfirmsengagedin
internationaltrade,andtheir
customers.Butthereisarisk
thatthebenefitswillnotlast.
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Dry-bulkcargoshipping
Hittingthebottom
Worseisstilltocomefor
manybulkcarriers
Oct31st2015|Fromtheprint
edition
HOWlowcantheBalticDry
Indexgo?Thatisthequestion
theownersofbulkcarriers—
shipsthatcarryloose
commoditiessuchascoaland
ironore—areasking
themselves.Betweenthestart
ofthefinancialcrisisand
Januarythisyear,theindex—
ameasureofbulkfreight
rates—hadfallenby95%.
Manyintheindustryhad
hopeditwouldstartto
recoverthisyear.Butthereis
notmuchsignofthat—andit
looksasifmorepainisstillin
storeforshipowners.
Overcapacityisthemain
reasonforsuchlowrates.
Whentheindexapproached
aneye-wateringfigureof
12,000in2008,shipyards
couldnotkeepupwiththe
ordersfornewbulkcarriers.
Butthenthebubblepopped,
asdemandforcommodities
collapsedduetothefinancial
crisis,andChineseeconomic
growthunderwentastructural
shiftawayfromheavy
industry.Theindexfelltoa
30-yearlowofaround500in
February.Therewasamodest
reboundinthesummer,butit
didnotlast.
Sharesindry-bulkshipping
lineshavetankedasaresult.
TheGuggenheimShipping
ETF,aweightedindexof
suchshares,lost23%ofits
valueinthefirstninemonths
oftheyear.Somehighly
indebtedoperators,suchas
DryShips,anAthens-based
outfit,haveperformedeven
worse:itsshareshavefallen
byabout80%sofarthisyear.
Asabriefsummerrecovery
hasfizzledout,andassome
firmshavestartedtorunout
ofcash,therehasbeenaspate
ofbankruptcies.Several
Asianbulkcarriers,suchas
DaeboInternationalofSouth
KoreaandDaiichiChuo
KisenofJapan,havebeen
forcedtoseekbankruptcy
protection.InJuly,
Lithuania’sgovernment
pulledtheplugonitsstateownedbulk-carrierline,so
badwasitsprognosisforthe
industry.
Moredry-bulklines,
especiallysmallerones,are
likelytogobankruptinthe
monthstocome,says
AngelinaValavinaofFitch,a
credit-ratingagency.Thisis
becausebankshaveslashed
theirlendingtothesector.
Therearefewlinesthatcould
affordtotakeonanymore
debt.
Andunlikeinthecontainershippingbusiness,thedrybulklinesarenotcutting
costsandcapacitythrough
consolidation.Thatispartly
becauseofalackofcooperationbetweencarriers,
butalsobecausethereare
hardlyanyprofitablefirms
withthefinancialstrengthto
takeoverthestragglers.
Withoutasustainedincrease
infreightrates,more
bankruptciesmaybethe
sector’sonlywaybackto
profitability.
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Networkneutrality
Amulti-speed
Europe
TheEU’snewinternetrules
willhurtthecontinent’s
startups
Oct31st2015|Fromtheprint
edition
INTERNETproviderswillbe
barredfromchargingonline
businessesfor“fastlanes”—
thatis,givingprioritytotheir
traffic—exceptforcertain
specialisedservices,suchas
videoconferencingor
telesurgery.Theyalsomust
notblockorslowtrafficother
thanreasonablytomanage
theirnetworks,suchasto
avoidcongestion.
Thisistheessenceofalaw
theEuropeanParliament
passedonOctober27th,after
monthsofargy-bargywith
theEU’sexecutive,the
EuropeanCommission,and
nationalgovernments.For
thoseunfamiliarwiththe
debateover“network
neutrality”,theprincipleof
treatingallinternettraffic
equally,therulesmayseem
muchthesameasthose
approvedbyAmerica’s
FederalCommunications
Commission(FCC)in
February.Butalthoughthe
wordingissimilar,thedetails
varyenoughthattheymay
produceaverydifferent
outcome—onethatcould
furtherweakenEurope’s
smallishonlineindustry.
Tounderstandthedifferences
ithelpstocomparethe
telecomsmarketsonboth
sidesoftheAtlantic.America
hasbig,profitablefixed-line
andmobileoperators,suchas
AT&T,Comcastand
Verizon,whichwanttobe
freeofregulation.Theymay
notbeverypopularwiththeir
customers,butcompetition
betweenthemislimitedand
theywieldgreatlobbying
power.However,theyhave
foundtheirmatchin
America’sinternetgiants,
includingGoogleand
Facebook,whichhavean
interestinkeepinginternet
trafficuntrammelled,and
haveformedastrongpact
withthecountry’svocal
internet-policycampaigners.
InEuropethebalanceof
powerbetweenthetwo
industriesismoreuneven.
Activistsandpoliticianshave
pushedforstricternetneutralityrules,buttheyhave
nothookedupwiththe
continent’sinternetindustry,
whichanywaylackspolitical
heft.Incontrast,Europe’s
telcos,oftenformer(and,in
somecases,stillpartially)
state-ownedfirms,havekept
adirectlinetotheir
respectivegovernments.And
theyhavetwoargumentsin
particularthatcarryweightin
nationalcapitalsand
Brussels:loosernet-neutrality
ruleswouldallowthemto
introducenewservicesand
makethemoneytheyneedto
improvetheirnetworks;and
suchruleswouldalsolet
themchargeAmerica’s
mightyonlinefirmsforusing
theirnetworks.
Unsurprisingly,then,
Europe’snewruleshave
biggerloopholesthan
America’s,evenifthelaw
justpassedismuchstricter
thanthecommission’sfirst
proposals.America’srules
alsoallow“reasonable”
networkmanagement,for
instance,butbanoperators
fromdiscriminatingagainst
certaintypesofservice,such
asvideoorfile-sharing—
whichtheEU’slawallows.
Similarly,Americaninternet
providerscanoffer
specialisedservices,butthe
FCCcaninterveneifitthinks
theyareusingthisexception
tounderminethespiritofnet
neutrality.InEuropethe
exceptionissobroadthat
internetproviderscouldbring
inpaid-forfastlanessimply
bylabellingthemas
specialisedservices,reckons
BarbaravanSchewickofthe
CentreforInternetand
SocietyatStanford
University.
Althoughthedifferingsmall
printofEurope’sand
America’srulesmaynothave
dramaticeffectsintheshort
term,“thereisareasonable
chancethatnetneutralityin
practiceintheEUwillbe
muchweakerthanintheUS,”
writeStefanHeumannofthe
StiftungNeue
Verantwortung,athink-tank
inBerlin,andothersina
recentreport.
Thisisgoodnewsforfixedlineandmobileoperators,but
islikelytohurtEuropean
internetstartupsbecauseit
createsbarrierstomarket
entry,arguesMrHeumann.
Onlinefirmswillfaceextra
feesfortelecomsservicesand
extrabureaucracy—no
problemforthemostly
Americanfirmsthatdominate
theinternetbusiness,but
unhelpfulforsmaller
Europeancontenders.Or
indeedAmericanones.
Interestingly,anopenletter
expressingconcernaboutthe
loopholes,intherun-uptothe
EuropeanParliament’svote,
wassignedbysomesmaller
Americanonlinefirmssuch
asEtsy,Kickstarterand
Tumblr,thoughnotby
FacebookorGoogle.
Muchdependsonhow
nationalregulatorsinterpret
thenewrules.Somecountries
havealreadypassedstricter
laws.TheNetherlands,for
instance,bans“zerorating”,
inwhichamobileoperator
strikesadealwith,say,
Facebook,inwhichpeople’s
useofthesocialnetworkon
theirphonesdoesnotcount
towardstheirmonthlydata
allowance,potentially
discouragingthemfrom
switchingtoFacebook’s
rivals.TheEU’snewlaw,in
theory,allowszerorating;in
AmericatheFCCsaysitwill
judgeonacase-by-casebasis.
IfEuropeendsupwitha
patchworkoflocalrules,that
willmakeitharderstillforits
onlinestartupstogainscale.
Somuchforthe
commission’sgrandtalkofa
“digitalsinglemarket”.
Thatsaid,America’snew
rulesarealsofarfromsetin
stone.Republicansarestill
tryingtostoptheFCCfrom
enforcingthem.Severalof
theirpresidentialhopefuls
havesaidtheywouldgetrid
ofthem.AndinDecembera
courtinWashington,DC,
willhearlegalchallenges
againstthembytelecoms
firms.Therulesofthedigital
roadswillbeinfluxforthe
foreseeablefuture,butin
Europetollbooths,fastlanes
andanassortmentoftraffic
signsarelikelytobemore
frequentthaninAmerica.
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Theranos
Thefableofthe
unicorn
Amuch-hypedmedical
startupissuddenlyplagued
withdoubts
Oct31st2015|SanFrancisco
|Fromtheprintedition
“FIRSTtheythinkyou’re
crazy,thentheyfightyou,
andthenallofasuddenyou
changetheworld,”Elizabeth
Holmes,thebossof
Theranos,saidrecently.Ifshe
istochangetheworld,first
MsHolmes(pictured)will
havetochangeminds.Inthe
pastfortnightshehasfaced
anonslaughtofnegative
pressreportssayingthather
blood-testingfirm’s
technologyisnotallit
purportstobe.
TheranosisoneofSilicon
Valley’smostprominent
“unicorns”,orunlisted
startupsvaluedatmorethan
$1billion.Itsaimistodisrupt
amarketforbloodteststhat,
inAmericaalone,isworth
$75billionayear.Arecent
injectionof$400mfrom
investorsgaveitanimplied
valueof$9billion.Inearly
October,justbeforethebad
headlinesbegan,31-year-old
MsHolmes,whoissaidtobe
theworld’syoungestfemale
self-madebillionaire,was
featuredonthecoverofInc.
magazineinablack
turtleneck,withtheheadline
“TheNextSteveJobs”.
Opinioncanchangeas
quicklyasapinprick.Soon
after,theWallStreetJournal
ranareportthatTheranoshas
overstateditstechnology’s
reachandreliability.
Theranoshasattractedgreat
acclaimbecauseitclaimsto
beabletoperformawide
varietyoftestsbydrawinga
fewdropsofbloodinsteadof
usingafull-sizedneedleto
takelargersamples;and
becauseofitspromisesto
makeitcheaperandeasierfor
consumerstogetbloodtests
withouthavingtogothrough
adoctor.However,the
Journal’sarticlearguedthat
itstestsarenotreliable,and
revealedthatitdoesonlya
fewtestswithitsown
devices,usingotherfirms’
technologyformostofthem.
MsHolmessaidtheJournal’s
reportwas“false”,and
defendedthereliabilityof
Theranos’stests.Butthathas
notquelledthestormof
scepticism.Indeeditgathered
forceonOctober27th,when
America’sFoodandDrug
Administrationpublished
reportsonitsinspectionof
Theranos.Theseaccuseditof
distributingan“uncleared
medicaldevice”,and
registeredafewother
objections,includingthatthe
firmlackedanadequate
systemforrespondingto
complaints.Separately,
GlaxoSmithKline,agiant
drugmakerforwhich
Theranoshasclaimedtohave
donetests,saidthatithasnot
doneanybusinesswiththe
startupinthepasttwoyears.
Thebest-casescenarioisthat
Theranoshassimply
experiencedmoresetbacks
thanonlookershadexpected,
andthatitstechnologywill
eventuallycatchupwithits
loftyvaluation.Everystartup
hasdifficulties,especiallyin
highlyregulatedindustries
likehealthcare.Somewomen
workinginthetechindustry
questionwhetherayoung
mantryingtooverthrowan
establishedindustrywould
faceasmuchcriticismasMs
Holmeshasinrecentdays.
Butiftheallegationsproveto
betrue,attheveryleast
Theranos’svaluationmay
neveragainreachtheheights
seensofar.
Inseveralrespects,Theranos
ishighlyunusualinthetech
industry.Formedtwelve
yearsagoafterMsHolmes
droppedoutofStanford
University,thefirmhasnot
raisedcapitalfromtheusual
suspectsinthetechor
medicalbusinesses.Onlyone
prominentventure-capital
firm,DraperFisherJurvetson,
hasinvested,alongwith
LarryEllison,oneofthe
foundersofOracle,anIT
giant.Severalofitsinvestors
aresmall-timeplayerswith
noknownexpertiseinthe
industry.Itsten-member
boardboastsGeorgeShultz
andHenryKissinger,two
formersecretariesofstate,
butonlytwopeoplewith
medicaltraining.Theaverage
ageofboardmembersis
nearly76.
YetinotherwaysTheranos
evokesacentralthemein
today’stechindustry:startups
whichpromisetodisrupt
lucrativebusinessesand
becomevaluedonthebasisof
fantasiesabouttheirpotential,
ratherthanpresentreality.
Investorsaresokeentogeta
pieceofanysexy-sounding
startupthattheylapup
entrepreneurs’hype—and
anyonewhoasksawkward
questionsrisksbeingcutout
ofthefundingroundin
favourofsomeonemore
trusting.
Allthishelpstoexplainthe
inflationofvaluationsamong
unlistedtechnology
companies.Todaythereare
142unicorns,morethanthree
timesasmanyasin2013.
Manyofthemaregrowing
quickly.Butintermsof
reachingprofitability,they
areoftenfarbehindthe
stockmarket-listed
competitorstheyareseeking
todisplace,andthusare
burningthroughcash.
Theranos,forexample,isnot
believedtohaveany
significantrevenuesor
profits,yetitisvaluedabout
ashighlyasQuest
Diagnostics,alisted
laboratorycompany,which
lastyearachieved$7.4billion
inrevenuesandnearly$600m
innetprofits.
Manyunicornshavebeen
insulatedfromscrutiny,
becausetheyhaveno
obligationtopublishfigures
orprovideprogressreportson
theirtechnology.Nothaving
toworryaboutafluctuating
sharepricefreestheir
founderstothinklong-term,
butalsomakesiteasierfor
themtobrushasidesearching
questions.However,intime
SiliconValley’sgrowingherd
offabledcreatureswillhave
theirencounterwithreality.If
theydonotliveuptotheir
promise,theirvaluationswill
slump,eitherattheirnext
fundingroundorwhenthey
finallygopublic.Manyvials
ofbloodmayspill.
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MultinationalsinChina
Aharderroadahead
Lifeisgettingtougherfor
foreignfirms,butthefittest
canstillflourish
Oct31st2015|SHANGHAI|
Fromtheprintedition
FORtwodecadesChinawas
alandofseeminglylimitless
opportunityfor
multinationals.Japanand
SouthKoreahadshutout
foreignfirmsduringtheearly
phaseoftheireconomic
development.Bycontrast,
China’sleaders,afterDeng
Xiaoping’sreformsinthe
early1990s,madethem
welcome.Providedfirms
broughtworld-class
technologies,andagreedto
jointventureswithlocalsin
certainstrategicindustries,
theywerefreetotakea
generoussliceofChina’s
growingeconomicpie.But
nowacombinationoffactors
ismakinglifemuchmore
difficultforthem.
Evenforeignfirmsthat
lookedliketheymight
dominatetheChinesemarket
aregettingarudeawakening,
asitseconomyslowsandas
competitionfromlocalrivals
intensifies.Earlierthisyear
DouglasMcMillon,
Walmart’sboss,declaredthat
Chinawasvitaltothe
Americanretailgiant’sfuture
growthandvowedtoadd
morethan100newstoresin
thenexttwoyearstoits
currenttallyof400-plus
there.Walmartdoesnotgive
muchdetailonhowthose
outletsareperforming.Buta
filingthismonthbyitslocal
joint-venturepartnerat21of
thestoresrevealedthatthose
outlets’saleshadfallen6%
lastyearcomparedwiththe
yearbefore.
Oneofthegreatsuccess
storiesofmultinationalsin
ChinahasbeenYumBrands.
Itwasthefirstbigforeign
fast-foodfirmtoenterthe
country.ItsthousandsofKFC
restaurantsbecamehugely
popularwithlocalfamilies.
Evenopeningarestauranta
day,thefirmcouldnotkeep
pacewithdemand.In2011
Yum’sChinadivisionwas
providingmorethanhalfof
itsglobaloperatingprofits.
Butthedaysoffinger-lickin’
goodperformancenowseem
tobeover.KFC’ssales
growthinthemostrecent
quarterwasdowntoa
plodding3%,andonOctober
20th,shortlyaftercuttingits
globalprofitforecastbecause
ofweaknessinChina,Yum
saiditwouldspinoffthe
Chinadivisionintoaseparate
companynextyear.
Insomecasestheauthorities
seemtobecomingdownhard
onforeignfirmswhilegoing
easierontheirChinese
competitors.State-runChina
CentralTelevision(CCTV)
hasbroadcastharshcriticisms
ofsomemultinationals,
includinganabsurdharangue
overStarbucks’prices—asif
Chineseconsumerswere
incapableofdecidinghow
muchtheywantedtopayfor
acoffee.Newruleson
internetsecurityhavea
techno-nationalistbent,which
mayhelplocaltechnology
firmslikeHuaweiand
Lenovogainanedgeover
IBMandCiscoin
governmentprocurement
(althoughtheseAmerican
firmscanhardlycomplain,
sincetheirgovernmenthas
blacklistedHuaweifromits
officialcontracts).
China’santitrustlawshave
beenusedtobullyforeign
carmakersintocuttingthe
priceofspareparts,whereas
legionsofstate-ownedfirms,
ineverythingfromtelecoms
totobacco,havebeenleftto
enjoytheirmonopoliesand
oligopolies.
GlaxoSmithKline,aBritish
drugmaker,wasfinedheavily
underanti-corruptionlaws,
oversalespracticesthatlocal
analystssaywerecommon
acrossChina’shealth-care
industry.Arecentreportfrom
theEUChamberof
CommerceinChina,
representingEuropeanfirms
operatingthere,lamentedthe
lackofalevelplaying-field.
Forallthattheyhavesome
legitimategripes,notallof
themultinationals’problems
canbeblamedonan
obstructivegovernment.In
Yum’scase,food-safety
scaresin2012and2014left
consumerswiththe
impressionthatitwasnot
keepingacloseenougheye
onitssuppliers.Inthe2014
case,forexample,
investigativereportersfound
thatonesupplierhadsentoutof-datemeattoKFCoutlets
inChina.Yum,likeforeign
restaurantgroups,had
hithertobenefitedfrom
Chineseconsumers’
assumptionthatitsquality
controlswerehigherthan
thoseoflocalrivals,an
advantageitseemstohave
squandered.
Inothercases,foreignfirms’
travailshavemoretodowith
thematuringoftheChinese
market.Growthisslowing.
Wagecostsarerisingbecause
broaderdemographictrends
aremakinglabourscarcer.
Thegovernmentis
introducinghigher
environmentalstandards,not
topunishmultinationalsbut
becausewealthier,more
educatedcitizensnow
demandcleanerairandwater.
Thosecitizensarealso
becomingmoresophisticated
asconsumersandwillno
longerpayhugepremiums
forbrandsjustbecausethey
areforeign.
Themostpotentchallengeof
allformultinationalsinChina
comesfromlocalupstarts.
WhenChina’seconomic
openingbegantherewerefew
domesticbrandsofanynote.
Multinationalshadsuperior
technologyaswellasslicker
marketing.Butlocalfirmsare
catchingupfast,andare
winningoverChinese
shoppers.
AstudybyBain,aWestern
consultingfirm,lookedat26
categoriesofconsumer
products,fromconfectionery
tocosmetics,withcombined
salesof542billionyuan($85
billion)lastyear.Invalue
terms,theyfoundthatlocal
brandsgainedmarketsharein
18categorieslastyear,and
nowcommand70%oftheir
combinedmarkets.Asoverall
salesgrowthofsuchgoodsis
falling,Westernfirms’share
isdeclining(seechart).The
hottestbrandsonChinese
highstreetsaresuchthingsas
Huiyuan’sfruitjuicesand
Galanz’sdomesticappliances
ratherthanWesternrivals’
offerings.
Frustratingthoughthisisfor
foreignconsumer-goods
firms,theycannotclaimthat
itisbecausethegameis
rigged.Foronething,thereis
littlestateinvolvementin
theirindustry:the
competitioncomesfrom
private-sectorChinesefirms.
Foranother,theriseoflocal
brandsisaglobal
phenomenon.Arecentstudy
byJoséSantosofINSEAD
andPeterWilliamsonof
CambridgeUniversity’s
JudgeBusinessSchoolshows
thatforeignmultinationalsare
losingouttolocalfirmsin
otheremergingmarketstoo,
acrossarangeofproducts.
Nowhereisthismoreevident
thaninChina,though.After
yearsofinvestmentinthe
country’sice-creammarket,
Unileverhadwonamarket
shareofjust7%by2013;
Nestlé’ssharewasamere
5%.ButYiliandMengniu,
twolocalfirms,enjoyed
sharesof19%and14%.
UnileverandProcter&
Gamblewerebestedin
laundrydetergents,their
traditionalstrongsuit,bytwo
Chineserivals,Guangzhou
LibyandNice.
Foolsrushin,orout?
Iflifehasbecomesohardfor
foreignfirmsinChina,why
notquit?Afewhavedoneso
—prominentexamples
includeRevlon,anAmerican
cosmeticsfirm;andBestBuy
andMediaMarkt,an
AmericanandaGerman
electronicsretailer.Butfew
othersarefollowing.Others
arestillrushingin,or
doublingdownonexisting
betsonChina.Itreceived
morethan$120billionin
foreigndirectinvestmentlast
year,doubleBrazil’stotal,
andfourtimeswhatIndiagot.
Therearestillplentyof
multinationalsdoingnicelyin
China.OnOctober27th
Appleannouncedsparkling
quarterlyresults,boostedby
an87%year-on-yearrisein
salesofiPhonesinChina.
Samsonite,anAmerican
makerofluggage,enjoyeda
30%riseinsalesinthefirst
halfofthisyear,compared
withayearearlier.Adidas,a
Germansportswearfirm,had
a20%riseinfirst-halfsales.
Surveysofthemembersof
foreignbusinesschambersin
Chinaoftenhighlightthe
problemsthatsomefirmsare
having.Butreadon,beyond
theexecutivesummaries,to
thefiguresbelow,andthey
showthatamajorityarestill
makingmoneyandstillsee
thecountryasaleading
investmentdestination.
Chinamaystruggleto
achieveeventhereduced
targetof6.5%annualGDP
growththatitisexpectedto
setsoon.Evenso,thatmuch
growthinaneconomy
alreadysobigisnottobe
sniffedat—andafairchunk
ofitwilltranslateinto
increasedspendingon
consumergoods.TheBoston
ConsultingGroupexpects
urbanprivateconsumptionin
Chinatogrowbymorethan
$2trillionby2020.However,
astherecentstockmarket
panicmakesclear,thisisnot
amarketforthefaintofheart.
Therefore,multinationals
mustworkouthowtoput
theirbusinessesonastronger
footing.
First,theyneedtoshiftfrom
amindsetofgrowthatall
costs.Oneimplicationofthis,
arguesNigelKnightofEY,
anotherconsultingfirm,isthe
needtoboostproductivity.
EYsurveyedmorethan1,700
firmsacrossvarious
industriesinChinalastyear.
Itfoundthatmanywerebeing
squeezed(duetorising
wages,higherinputprices
andtoughercompetition)or
hadgotbloated(through
acquisitions)butthatfew
couldpassoncostincreases.
Multinationalsmusttherefore
makethesameeffortsto
enhancecompetitivenessthat
theyareusedtomakingin
matureeconomies.ButMr
Knightsaysmanylocal
managersaretoo
“accustomedtoagrowth
agendaandlackthe
experience,expertiseor,tobe
blunt,desiretocarryout
majorefficiencyimprovementprogrammes.”
Anotheristheneedtoput
moreeffortintomarketing.In
thepast,suggestsAnilGupta
oftheUniversityof
Maryland’sSmithSchoolof
Business,manyindustries
weresoundevelopedin
Chinathatallabusiness
neededtomakesaleswas
somepeopletotakedown
customers’orders.Now,with
overcapacityineverything
fromsteeltocars,
competitionhasintensified;
andwithrisingsophistication
amongshoppersevenin
smallercities,brandingand
differentiationarevital.
RachelDuan,whoruns
GeneralElectric’sbusinesses
inChina,saysitismore
importantthanevertoalign
thefirm’sstrategywiththe
government’sgoals.Thedays
whenofficialscourtedforeign
firmswithtaxbreaksand
otherincentivesarelargely
over.Buttheyareputting
morepressureonthefirmsto
investinareasthe
governmentseesaspriorities.
ThatiswhyGEisploughing
billionsintohealthcare,civil
aviationandenergy,
includingintocutting-edge
localresearch.Thestrategyis
startingtopayoff.InJanuary,
thefirm’swind-turbine
divisionwonitslargest
Chinesecontracttodate.
Awillingnesstolearnfrom
mistakesalsohelps.Yonghui,
asupermarketchainthat
startedinFujianprovince,has
grownintooneofChina’s
mostsuccessfulbystaying
focusedonafewprovinces.
Walmart,incontrast,spread
itselftoothinlyandhitsnags
indistributionandquality
control.SeanClarke,thehead
ofitsChinaoperations,has
revisedhisexpansionplans,
realisingthat,“Tobe
successfulinChinayoudon’t
havetobeineverycity.”
Anothertacticistofinda
powerfullocalpartner,even
inindustriesinwhichthe
governmentdoesnotrequire
this.JeffreyTowsonand
JonathanWoetzel,authorsof
“OneHourChina”,abusiness
book,pointtobasketballas
anexample.Football(soccer)
hasafarlongerhistoryin
China,buthasfallenflat
commercially.Incontrast,
America’sNational
BasketballAssociation
(NBA)hasmadeChinaits
biggestforeignmarket.Four
orfiveNBAgamesare
broadcastweeklyonCCTV,
andbiggamesattract200m
viewers.IthelpedthatYao
Ming,aChineseplayer,
becameaglobalsensation,
butMessrsTowsonand
Woetzelbelievethereal
secretlayintheNBA’s
partnershipwithCCTV.
ToseehowtogetChina
right,considerL’Oréal,a
Frenchbeautyfirmwhichhas
enjoyed18yearsof
uninterruptedsalesgrowth
there.Thecountry’s
cosmeticsmarket,nowthe
world’ssecondlargest,is
brutal.Customersare
extremelyfickle,andswitch
brandsoften.Chineserivals
attackforeignfirmsboth
frombelow,onprice,and
fromabove,usingtraditional
medicineandherbstosell
premiumproducts.Butunlike
Revlon,theFrenchfirm
stayed,andadaptedtolocal
conditions.
AlexisPerakis-Valat,
L’Oréal’sChinaboss,whips
outhissmartphonetogivean
example.Sinceearlier
generationsofChinese
womenrarelyusedmake-up,
fewgirlslearnhowtoapply
cosmeticsfromtheirmothers.
Theyareoftentooshyto
experimentinfrontoffriends
oratshopcounters,he
explains.Millionsnowdoso
inprivateusingMakeup
Genius,anappthatshows
them,likeamagicmirror,
whattheywouldlooklikein
variousstylesoflipstick,
eyelinerandblusher.
Thefirmhasinvested2
billionyuaninthepast
decadeonagleaming
researchcentreinShanghai,
whichhascreatedwinning
productstailoredtolocal
tastes.Apriceyrangeof
cosmeticsandcreamstofight
skindamagefromair
pollution,abigconcernfor
Chineseconsumers,has
flownofftheshelves.But
whenitmakessense,thefirm
haspulledback—for
example,lastyearityanked
Garnier,amiddlingbrand
thatdidnotsellwell,outof
thecountry.
Inall,mostmultinationals
wouldbewisetotoughitout
inChina,andadapttoits
changingmarkets.Those
whichdosowillfindthere
arestillfortunestobemade.
Andthoughtheiradvantages
overlocalfirmsare
diminished,theystillhave
somestrengths,intechnology
andmarketing,thattheycan
exploit.AsXiangBing,dean
ofBeijing’sCheungKong
businessschool,putsit,
multinationalsarenolonger
sittingcomfortablyatthe
veryfrontoftheplane,but
comparedwithChinesefirms,
theyare“stillflyingin
businessclass.”
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Recruitment
Nonames,nobias?
Anonymisingjob
applicationstoeliminate
discriminationisnoteasy
Oct31st2015|Fromtheprint
edition
AndIstilldidn’tgetthejob!
“IFYOU’VEgotthegrades,
theskillsandthe
determination,this
governmentwillensureyou
cansucceed,”trumpeted
DavidCameron,theBritish
primeminister,onOctober
26th,asheunveiledplansto
tacklediscriminationinthe
workplace.Tenbig
employersinthepublicand
privatesectors—includingthe
civilservice,HSBCand
Deloitte—haveagreedtostart
recruitingona“name-blind”
basisinBritain;othersmay
alsofollowsuit.Insuch
schemes,thosedrawingup
shortlistsofapplicantscannot
seetheirnames,withtheaim
ofreducingracialandsexual
bias.Butdotheywork?
Severalcountrieshave
experimentedwithnameblindapplications.In2010
Germany’sAntiDiscriminationAgency,an
advisorybody,sponsoreda
voluntaryschemetoget
businessestotryit.InFrance
alawpassedin2006made
theanonymisingof
applicants’CVscompulsory
forfirmsofover50
employees.Butthe
governmentwasslowin
layingdowntheconditions
forhowthelawwould
operate,andonlystarted
enforcingitlastyear.In
SwedenandtheNetherlands
therehavebeensometrials.
Discriminationagainstjob
applicantsbasedontheir
namesiswelldocumented,
particularlyamongethnic
minorities.Anexperimentin
Germanyfoundthat
candidateswithGermansoundingnameswere14%
morelikelytobecalledforan
interviewthancandidates
withTurkishones.Areview
ofvariousstudies,bythe
InstitutefortheStudyof
Labour(IZA),aGerman
outfit,foundthatanonymised
jobapplicationsboostthe
chancesofethnic-minority
candidatesbeinginvitedtoan
interview.ASwedishstudy
foundthatitledtomore
ethnic-minoritypeoplebeing
hired.
However,theresultsfrom
othertrialsarelessclear.A
secondSwedishexperiment
foundthatonlywomen,not
immigrants,wereboostedby
anonymousrecruitment.
AccordingtotheIZA,
experimentsinthe
Netherlandsshowedno
increaseinthelikelihoodof
ethnic-minoritycandidates
beingofferedajobiftheir
CVswereseenanonymously,
suggestingthatdiscrimination
hadcreptinattheinterview
stage.
Ensuringthatacandidateis
completelyanonymousisalso
tricky.A2012Frenchstudy
foundthatforeign-born
candidatesandthosefrom
poordistrictswerelesslikely
tobecalledforinterview
whenapplicationswere
anonymised.Itsauthors
suggestedthatrecruitersmay
haveusedotherindicators,
suchasknowledgeofArabic,
toidentifyrace.Inplaces
fraughtwithreligioustension,
suchasNorthernIreland,the
nameofaschoolcanreveala
candidate’sfaith,whileafew
yearsmissingonaCVmay
suggestmaternityleave,and
thusthatthecandidateis
female.Goingname-blind
whenshortlistingcandidates
maybeasensiblestart,butit
islikelytobejustasmallstep
towardsendinghiringbias.
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Schumpeter
Thestoryandthe
numbers
ThemeaningofValeant’s
accountingtroubles
Oct31st2015|Fromtheprint
edition
ITISfashionabletolament
thevapidityandshorttermismofinstitutional
shareholders.Withoutthem,
itisargued,companieswould
investforthelongterm,run
bytheirenlightened
managers.Butarashof
creative-accountingincidents
isareminderthatfirmsmay
goastray.OnOctober26th
ValeantPharmaceuticals,a
drugscompany,triedtorebut
claimsitwasmassagingits
figures.AdaylaterIBMsaid
regulatorswereinvestigating
howitbooksitssales.Tesco,
aBritishgrocer,isontherack
afteradmittinginflatingits
profits.SharesinNoble
Group,aSingapore-listed
commoditiesfirmaccusedof
questionablebook-keeping,
havecollapsed.InMayHong
Kong’sregulatorssuspended
tradinginHanergy,asolarpanelfirm.Theseepisodes
havehadabrutalimpacton
shareholderwealth,witha
totallossof$80billion.
Thelastoutbreakofoutright
book-cookingwasin2001-03
whenEnron,MCI-WorldCom
andParmalatwerefoundto
beengagedinfraud.Together
theyhad$170billionof
assetsandallwentbankrupt.
Sofar,today’sscandalsare
different:thefirmsare
accusednotofbreakingthe
lawbutofcreative
accounting,orstretchingthe
rulestopaintanoptimistic
picturetooutsideinvestors.
Thespecifictransactions
underthemicroscopeare
mostlysmall.ForValeant,
TescoandNoblethey
accountedforlessthan10%
oftotalsales,profitsorassets.
Despitethis,theyhaveledto
anoutsizedslumpinmarket
values.Themagnified
reactionbetraysthemistrust
inwhichmanybigfirmsare
held.
Afirm’smarketvalueis
supposedtoequalthenet
presentvalueofitsfuture
cashflows.Inpracticeit
reflectsanunstablebalance
betweentwoversionsofthe
truth.First,thestory
managerstell,whichis
usuallyself-servingand
emphasisestheirbrilliance.
Second,thenumbers.They
canbemanipulatedbutare
opentoscrutiny.Overthe
yearsthegapbetweenthese
twoversionsofrealityhas
grown.Manybossesofbig
listedfirmsarenowpractised
propagandists,inthesame
waycampaigningpoliticians
are,probablybecausetheir
payislinkedtotheshare
price.Plaintalkersstruggle.
Lawyersscriptfirms’every
utterance,makingithardto
havefrankdiscussionswith
outsiders.Investorshave
growncynicalandtriggerhappy.
Anextremesymptomofthese
tensionsistheadventoffirms
whoseintegrityiscontinually
contested,justlikethe
characterofapresidential
candidate.Valeantisbacked
bytworespectedhedge
funds,ValueActandPershing
Square,whoseboss,William
Ackman,haspublicly
celebratedit.ButValeanthas
beenaccusedofcreative
accountingbybothJames
Chanos,afamedshort-seller,
andAllergan,arivaldrugs
firmittriedtobuyin2014.
Herbalife,adirect-salesfirm,
hasalsobeenthesubjectofa
warofwordsonWallStreet.
Noble,whenattackedbyan
ex-employeeandshort-sellers
overitsaccounts,adoptedthe
Americantacticsofindignant
rebuttalsandlegalthreats.
Althoughcouchedinthe
politicallycorrectlanguageof
transparency,theimpression
leftbysuchcasesisofa
bunkermentality.
Thatsomecommunicationby
bossesandbigfirmsisnow
guff,orworse,isahuge
regret.Rule-setterscanonly
dosomuch,leavingcreative
accountantsalwaysastep
ahead.Inthe1980sand
1990sthemostcommon
rusesweretheuseof
provisioningandcapitalised
coststounderstateexpenses
intheprofit-and-lossaccount,
anddodgypension
accounting.Oncethesewere
stampedout,thegameshifted
toissuingdebtdisguisedas
equity,aspractisedbymost
banksin2003-08to
disastrouseffect.Today,four
ofthefivecasesinthenews
involvedealingswith
notionallyarm’s-length
entities—perhapsthisisthe
latestareaofinnovation.
WithhalfofAmerica’sbig
firmsexperiencingshrinking
profits,theurgetojuicethe
numbersmayberising.The
boominunlistedtechnology
firmswithbillion-dollar
valuations,the“unicorns”,is
alsoaworry.Lackingoutside
scrutiny,showeredwith
praiseandsupposedlyworth
acombined$200billion-plus,
therewillsurelybeafew
spectacularfrauds.
Youcanhandlethetruth
Yetdespairisthewrong
reaction,forthreereasons.
First,notallfirmsaregoing
backwards.America’sbig
listedtechnologyfirmshave
longbeencriticisedfortheir
opacityandindiscipline.
Someareresponding.In
AprilAmazonrevealed
figuresforitscloud-hosting
division,AWS,andithasput
moreemphasisoncashflow.
Inearly2016Alphabet
(formerlyknownasGoogle)
willseparatetheresultsofits
searchbusinessfromits
empireofexperiments,which
rangefromvirtual-reality
gogglestoautonomouscars.
Bothfirmshaveseenajump
intheirsharepricesas
investorsgrowmore
confidentthatthey,andthe
managers,understandhow
capitalisbeingallocatedand
costscontrolled.
Second,therearestillreliable
waystoidentifyproblem
firms.Short-sellerssuchas
MrChanosplayavitalrole.
Anditremainsmuchharder
forfirmstofluffupthe
auditedcash-flowfigures—
whichmeasurethecash
cominginlessthecashpaid
out—thanprofitsorthe
balance-sheet.Fourofthe
fivefirmsintroubletoday
havehadweakcashflow.
Otherwarninglightsinclude
repeatedchangestotheway
thebusinessisdivviedupin
theaccounts,lowlevelsof
cashtaxpaid,regulatory
investigations,theuseof
second-tierbanksas
underwriters,anemphasison
“adjusted”resultsand“proforma”numbers,payments
madetootherfirmswithlinks
totherelativesofexecutives,
highdebtandserial
acquisitions.Valeantis
givingoffworryingsignals
onallcounts.
Lastly,companies’booksare
notbeingcooked
systematically:theaggregate
auditedcashflowsofthe
S&P500indexofbigfirms
(excludingfinancial
companies)mirrortheir
reportedprofits.America’s
governmentstatisticianssay
thatlistedfirms’aggregate
reportedprofitsbroadly
reconcilewiththose
computedbythetax
authoritiesandthoseinthe
nationalGDPaccounts.There
willbesomeaccounting
implosions.Butcapitalism,
especiallyinAmerica,suffers
fromanepidemicofpublicrelationsdrivelandlegalese,
notanepidemicoffraud.
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Financeand
economics
Brazil’seconomy:
Brokenlever
[Thu,29
Oct18:57]
Buttonwood:
Takeiteasy
[Thu,29Oct
18:57]
Bankregulation
inChina:Letting
go
Robo-advisers:
Doesnotcompute
[Thu,29Oct18:57]
[Thu,29Oct18:57]
Cashpoints:The
eyeshaveit
[Thu,29Oct
18:57]
Private-debt
investing:
Lendersoffirst
resort
Creditunions:
Winningconverts
[Thu,29Oct18:57]
[Thu,29Oct18:57]
Freeexchange:
Keepingupwith
theKarumes
[Thu,29
Oct18:57]
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Brazil’seconomy
Brokenlever
Aredirepublicfinances
hinderingthecentralbank
fromtacklinginflation?
Oct31st2015|Fromtheprint
edition
BRAZILdoesnotlooklike
aneconomyonthevergeof
overheating.TheIMFexpects
ittoshrinkby3%thisyear,
and1%next.(Thecountry
hasnotsufferedtwostraight
yearsofcontractionsince
1930-31.)Fully1.2mjobs
vanishedintheyearto
September;unemployment
hasreached7.6%,upfrom
4.9%ayearago.Thosestill
inworkarefindingitharder
tomakeendsmeet:real(ie,
adjustedforinflation)wages
aredown4.3%year-on-year.
Despitetheweakeconomy,
inflationisnudgingdouble
digits.Thecentralbank
recentlyconcededthatitwill
missits4.5%inflationtarget
nextyear.Marketsdon’t
expectittobemetbefore
2019.
Iffast-risingpricesaresimply
apassingeffectofthereal’s
recentfall,whichhaspushed
upthecostofimported
goods,thentheyarenottoo
troubling.Butsome
economistshaveamore
alarmingexplanation:that
Brazil’sbudgetarywoesare
soextremethattheyhave
underminedthecentral
bank’spowertofight
inflation—aphenomenon
knownasfiscaldominance.
Theimmediatecausesof
Brazil’stroublesareexternal:
theweakworldeconomy,and
China’sfalteringappetitefor
oilandironoreinparticular,
haveenfeebledbothexports
andinvestment.Butmuchof
thecountry’spainisselfinflicted.Thepresident,
DilmaRousseff,couldhave
usedthecommoditywindfall
fromherfirsttermin2011-14
totrimthebloatedstate,
whichswallows36%ofGDP
intaxesdespiteofferingfew
decentpublicservicesin
return.Instead,shesplurged
onhandouts,subsidisedloans
andcostlytaxbreaksfor
favouredindustries.These
fuelledaconsumptionboom,
andwithitinflation,while
hidingtheeconomy’s
underlyingweaknesses:thick
redtape,impenetrabletaxes,
anunskilledworkforceand
shoddyinfrastructure.
Thegovernment’sprofligacy
alsoleftthepublicfinancesin
tatters.Theprimarybalance
(beforeinterestpayments)
wentfromasurplusof3.1%
ofGDPin2011toaforecast
deficitof0.9%thisyear.In
thesameperiodpublicdebt
hasswollento65%ofGDP,
anincreaseof13percentage
points.Thatislowerthanin
manyrichcountries,but
Brazilpaysmuchhigher
interestonitsdebt,thevast
majorityofwhichis
denominatedinreaisandof
relativelyshortmaturity.It
willspend8.5%ofGDPthis
yearservicingit,morethan
anyotherbigcountry.In
Septemberitlostits
investment-gradecredit
rating.
StagflationofthesortBrazil
isexperiencingpresents
centralbankerswitha
dilemma.Raisinginterest
ratestoquellinflationmight
pushtheeconomydeeperinto
recession;loweringthemto
fostergrowthmightsend
inflationspirallingoutof
control.BetweenOctoberlast
yearandJulythisyear,the
country’srate-settersseemed
toprioritisepricestability,
raisingthebenchmarkSelic
ratebythreepercentage
points,to14.25%,whereit
remains.
Thealluringrealratesof
almost5%oughttohave
madereaisattractiveto
investors.Instead,the
currencyhaslosttwo-fifthsof
itsvalueagainstthedollar
overthepast12months.Itis
thispatternofaweakening
currencyandrisinginflation
despitehigherinterestrates,
combinedwithadoublingof
debt-servicingcostsinthe
pastthreeyears(seechart),
thathasledtothediagnosis
offiscaldominance.Thecost
ofservicingBrazil’sdebts
hasbecomesohigh,
pessimistsfear,thatrates
havetobesettokeepit
manageableratherthanto
reininprices.That,inturn,
leadstoaviciouscircleofa
fallingcurrencyandrising
inflation.
MonicadeBolleofthe
PetersonInstitutefor
InternationalEconomics
reckonsthattheSelicshould
be2-3percentagepoints
higherthanitisinorderto
anchorinflationexpectations.
Iftheselicrosebythatmuch,
however,itmightactually
stokeinflation,byaddingto
thegovernment’salready
heftyinterestbillandthus
raisingtheriskofdefault—a
prospectthatwouldcausethe
realtoslumpandinflationto
jump.Alternatively,the
centralbankcouldprint
moneytobuygovernment
bonds.Butsuchmonetisation
woulditselffuelinflation.
Eitherway,spookedinvestors
wouldsurelydump
governmentbondsforforeign
assets,speedingthe
currency’sfallandinflation’s
rise.
Brazilhasbeencaughtin
suchatrapbefore,most
recentlyjustoveradecade
ago.Inapaperpublishedin
2004OlivierBlanchard,the
formerchiefeconomistofthe
IMFwhoisnowatthe
PetersonInstitute,found
evidencethatraterisesin
Brazilin2002-03spurred
inflationratherthanreiningit
in.Priceswerebroughtunder
controlonlyowingtothe
fiscalrestraintofMs
Rousseff’spredecessorand
patron,LuizInácioLulada
Silva,whotookofficein
2003.
Thesituationtodayis
different,MrBlanchard
stresses.Realratesareless
thanhalfwhattheywerein
theearly2000sandonly
about5%ofgovernmentdebt
isdenominatedindollars,
comparedwithnearlyhalf
backthen.Thecentralbank’s
reluctancetoraisetheSelic
furthermayhavemoretodo
withtheimpactonoutput
thanwithfiscalconcerns.
Currencydepreciation,too,
couldbedowntogeneral
gloomabouttheeconomy
ratherthanfearofdefaultor
money-printing.Ithasalso
madeBrazil’s$370billionin
foreignreservesmore
valuableindomesticcurrencyterms—ahandy
cushion.
Waxingandwaning:Brazil’s
economicwoes,incharts
Thereisnoquestion,
however,thatBrazilian
monetarypolicyisatbest
hobbled.State-ownedbanks
haveextendednearlyhalfthe
country’screditatlow,
subsidisedratesthatbear
littlerelationtotheSelic—at
acostofmorethan40billion
reais($10billion)ayearto
thetaxpayer.Asprivate
bankshavecutlendinginreal
termsinthepastyear,public
oneshavecontinuedto
expandtheirloanbooks.All
thishampersmonetary
policy,saysMarcoBonomo
ofInsper,auniversityinSão
Paulo.Ifleftunchecked,this
spurtoflendingmayitself
threatenpricestability.
JoaquimLevy,thefinance
minister,hasordereda
spendingreview.Butunlike
Lulain2003,MsRousseff
hashardlyanypolitical
capitallefttopushthrough
painfulreforms.The
downturnisnowdeeper,too;
taxreceiptsarefalling
sharply,makingitharderto
trimthedeficit.MrLevy’s
(modest)fiscalmeasureshave
facedstiffoppositionfrom
Congress,wheremuchofMs
Rousseff’scoalitionis
embroiledinabribery
scandalandfearfulof
angeringvotersfurtherwith
spendingcutsortaxrises.
Fiscaldominancemaybeno
morethanatheory,butthe
politicalburdenthatis
draggingBrazildownisplain
foralltosee.
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Buttonwood
Takeiteasy
Economiesaretooweakfor
normalmonetarypolicyto
resume
Oct31st2015|Fromtheprint
edition
THISwassupposedtobethe
yearwhenmonetarypolicy
startedtogetbacktonormal.
SevenyearsafterLehman
Brotherscollapsed,central
bankswereexpectedtoedge
awayfromapolicyofnearzerointerestrates.Butnow,
withtheyearalmostover,the
FederalReservehasyetto
pushuprateswhileother
rich-worldcentralbanksare
focusedmoreoneasingthan
ontightening.
Sweden’sRiksbankextended
itsquantitativeeasing(QE)
programmeonOctober28th.
MarioDraghi,thepresident
oftheEuropeanCentral
Bank,hasindicatedthat
furthereasingmaycomein
December,probablyby
adjustingthepace,scaleor
typeofassetpurchasesinits
QEregime.Morethantwofifthsofeconomistspolledby
Bloombergforecastthatthe
BankofJapanwouldpickup
thepaceofitsmonetary
easingonOctober30th,after
TheEconomistwenttopress.
Evenifpolicyiskept
unchanged,thebankplansto
expandthemoneysupplyat
anannualrateof¥80trillion
($664billion).
Thepictureintheemerging
marketsismoremixed.
CapitalEconomicscalculates
that,onbalance,slightly
moreemergingcentralbanks
havebeentighteningthan
cutting.ButChinacutinterest
ratesonOctober23rd,the
sixthreductioninthelast
year.Indiaunveiledahalfpercentage-pointratecutin
lateSeptember.
Theattitudeofcentralbanks
reflectstheirworriesabout
economicgrowth.TheIMF
justlowereditsglobalgrowth
forecastto3.1%for2015,
withcutsapplyingtoboth
advancedanddeveloping
economies.Inflationisalso
lowinEurope,North
AmericaandAsia,giving
centralbanksmorefreedom
tobesupportive.
Thebenigninterest-rate
outlookisonereasonwhy
equitieshaverecoveredfrom
thewobblestheysufferedin
AugustandSeptember.Asof
October28th,theS&P500
indexhadregainednearlyall
thegroundlostinthe
previoustwomonths(see
chart).Futuresmarkets
indicatethatinvestorsdonot
expectthefirstFedhikeuntil
nextyear,althoughthatmay
changeaftertheFed’sopen
marketcommitteeremoveda
previousreferencetoglobal
economicrisksinitsOctober
statement.
Theothermainreasonwhy
marketshaveralliedisamore
sanguineviewoftheChinese
economy.Officialfiguresfor
third-quarterGDPshowed
growthof6.9%and,although
somehavedoubtsaboutthe
data,itwasnoticeablethat
theIMFdidnotdowngrade
itsforecastforChinese
growthinitslatestglobal
outlook.
Buttheoptimismshouldnot
betakentoofar.Othermarket
indicatorsstillsuggest
investorsareworriedabout
sluggishgrowthand
deflation.Bloomberg’s
commodityindexisdownby
morethanaquarteroverthe
past12months.Theyieldon
theten-yearTreasurybondis
hoveringaround2%,nota
levelthatsuggestsinvestors
expectnormallevelsof
economicgrowthtoreturn
anytimesoon.
Americancompaniesarealso
strugglingtomaintainthe
robustprofitgrowththey
haveshownsince2009.
Whilethird-quarterprofitsfor
S&P500companiesare
marginallyaheadof
expectations(asisusuallythe
case),theyarestilllikelyto
be4%lowerthantheywerea
yearago;saleswillprobably
fallby3%.
Itissimplyhardtokeep
pushingupprofitswhen
globalGDPgrowthis
subdued.Thenumberof
Americancompaniescitinga
slowingglobaleconomyas
affectingtheirprofitsand
revenuesismorethan50%
higherthanayearago,
accordingtoThomson
Reuters.Thenewsisno
betterinEurope,wherethirdquarterprofitsareexpectedto
bedown5.4%ontheyear,
withrevenuesdropping7.9%.
Sotheequitymarketsare
caughtinsomethingofan
awkwardequilibrium.
Positiveeconomicnewswill
maketheoutlookforprofits
morerosybutwillalsomean
thattheFedismorelikelyto
pushuprates.Andbad
economicnewsmaymeana
respitefrommonetary
tighteningbutisstillbad
news.
Thisexplainstherather
bumpyridethatstockmarkets
havehadin2015.Thelackof
profitgrowthmakesithard
formarketstosurgeahead
(theMSCIworldindexis
backarounditsend-2014
level).Butwithouthigher
interestrates,orevidencethat
bigeconomiesareslipping
intooutrightrecession,share
pricesareunlikelyto
collapse.
Equitiesmaybefollowingthe
pathofgovernmentbonds,
whichhavebeenstuckina
narrowtradingrangefora
while.Centralbanksmay
havehelpedstockmarketsin
aneraoflowgrowthby
makingotherassetsless
attractive;theresultwasa
positiveshiftinshare
valuations.Butslowgrowth
hasn’tgoneaway.Forequity
investors,itwasbetterto
travelhopefullythanto
arrive.
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BankregulationinChina
Lettinggo
Chinaliberalisesinterest
ratesatlast
Oct31st2015|Shanghai|
Fromtheprintedition
Therearestringsattached
YIGANG,adeputygovernor
ofChina’scentralbank,
musedthisweekabout
shoppinginMoscowinthe
1980s.Inthestreetsaround
RedSquare,hesaid,visitors
couldfindmanybigshops
withidenticallow-quality
goods.Butamongthedrab
displayswereafewYugoslav
andPolishstoreswithbetter
selections.Thesecountries
hadexperimentedwith
competitionearlierthanthe
SovietUnionandtheresults
werevisibleontheshelvesof
theiroutpostsinMoscow.
Banks,MrYisuggested,are
nodifferentfromstores.If
governmentscontrolthemtoo
tightly—asChinahaslong
donebydictatingtheinterest
ratestheypayandcharge—
banksdonotcompetewith
eachotherandthusfailto
developtherangeoffinancial
productstheircustomerswant
andneed.SoonOctober
23rd,atthesametimeas
cuttinginterestratesto
supportstutteringgrowth,the
People’sBankofChina
(PBOC)announcedthatit
wassettingbanksfree.They
cannowofferdepositors
whateverinteresttheylike,at
leastintheory.Thatremoves
thelastformalrestrictionon
rates.
Chinahasbeenslowly
liberalisingratesforwellover
adecade.First,itallowed
bankstosetlendingrates
aboveitsbenchmark.Then,it
eliminatedtheflooron
lendingratestoo.Inrecent
years,itstartedraisingthe
ceilingondepositrates.
Thefullliberalisationof
interestratesshould,in
theory,changethefaceof
China’sfinancialsystem.By
keepingrateswellbelow
wheretheywouldhave
settledinafreemarket,the
governmenttransferred
wealthfromsaverstobanks
andtoborrowers.Banks
benefitedbecauseregulators
createdalargegap,about
threepercentagepoints,
betweensavingsandlending
rates,guaranteeingthemeasy
profitswhenturningdeposits
intoloans.Thismadethem
richbutlazy.Borrowersdid
wellbecauselendingrates
werealsoheldartificially
low,providingthemwith
cheapcredittofuelChina’s
investmentboom.Butsavers
—workersstashingashareof
theirhard-earnedwagesin
theiraccounts—earnedpaltry
returns.
Rateliberalisationpromises
toreverseallthis.Bankswill
havetoworkhardertomake
profits.Borrowers,facing
higherrates,willhavetobe
morediscerningabouttheir
investments.Long-suffering
householdswillstarttoreap
biggerincomesfromtheir
savings.Thereformsthat
havealreadybeen
implementedhavesetthis
processinmotion.Aftera
decadeofdouble-digitgrowth
inprofits,banksarebarely
makinganymoneythisyear.
Savers,meanwhile,havea
greaterarrayofoptionsthan
ever,fromcertificatesof
deposittowealthmanagementproducts.
Progresswillbegradual,
however.Thecentralbank
willcontinuetopublish
benchmarkdepositand
lendingrates.Althoughbanks
arenolongerobligedtostick
tothem,thebig,state-owned
onesthatdominatethe
financialsystemtendtohew
closelytoofficialguidance.
Eventually,thePBOCsays
(withoutspecifyingwhen),it
willstoppublishing
benchmarkrates.Itsapproach
wouldthenresemblethatof
itscounterpartsindeveloped
countries,whichseekto
influenceratesthroughtheir
ownborrowingandlending,
ratherthanbydecree.
Indeed,thePBOCisalready
movinginthatdirection.The
seven-daybondrepurchase
rate(ineffect,theinterestit
chargesfinancialinstitutions
thatborrowcashforaweek,
usingbondsascollateral)
usedtobeveryvolatile.
Recently,thecentralbankhas
managedtoflattenitout(see
chart),creatingwhatappears
tobeananchorforshort-term
rates.ThePBOCiscertainly
notbowingoutaltogether.
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Robo-advisers
Doesnotcompute
Thegrowthoffirmsselling
computer-generated
financialadviceisslowing
Oct31st2015|Fromtheprint
edition
GIVENthemanymistakes
thathumaninvestorsare
proneto—sellingaftera
markettumble,tradingtoo
often,believingtheycanbeat
thestockmarket—dealing
withmoneyisperhapsbest
lefttocomputers.Thatisthe
premisebehindahostof
firmssellingcomputergeneratedfinancialadvice,
whichassistsaverstiredof
payingforpriceyhuman
counsel.Thelowcostof
these“robo-advisers”had
helpedthemgrowrapidly,to
thehorrorofconventional
money-managers.Butgrowth
inassetsundermanagement
(AUM)atthebiggestoutfits
hassaggedrecently,andwith
ittheupstarts’prospects.
Itusedtobeonlythosewith
hundredsofthousandsof
dollarstoinvest,ifnot
millions,whocouldafford
adviceaboutwheretoput
theirmoney.Humanscharge
1-3%oftheirclients’
portfolioseveryyear,simply
torebalanceamongasset
classeseverysooftenanddo
cleverthingstominimise
taxes.Robo-advisers,ledby
Wealthfront,aCalifornian
outfit,andBetterment,based
inNewYork,domuchthe
same,butforamere0.25%
orsoayear.
Largelybecausetheysquash
fees,robo-servicesdoagood
jobforanyonebarthevery
richwithcomplexfinancial
arrangements.Abasic
questionnaire—age,salary,
investmentaimsandthelike
—helpsestablishrisk
appetite.Moneyisthen
allocatedtolow-costfunds
providedbythirdparties.For
thosewhobelieve,correctly,
thatfeesandhumanerrorare
themainpitfallsofinvesting,
theapproachishardtobeat.
Otherfeaturesincludesnazzy
smartphoneapps(customers
tendtobeontheyounger
side),transparentpricingand
lowornominimum
investment.Wealthfront
describesitselfastheCharles
Schwabofthemillennial
generation,wideningaccess
toinvestingbycuttingcosts,
justasthediscount
stockbrokerhasdonefor
baby-boomerssincethe
1970s.
Butbeingverycheapmeans
BettermentandWealthfront
needlotsofassetstoturna
profit.TheirAUMofroughly
$2.9billioneach,
accumulatedlargelyinthe
pasttwoyears,delivers
revenuesof$7morsoayear.
Thatisnotenoughtosustain
around100staffeachaswell
asheftymarketingbudgets.
Totalcostsarelikelytobe
$40m-50mayear,according
toonefintechgrandee
(neitherfirmdisclosesthe
data).
Scaleisvital,aseverynew
clientbringsfreshrevenueat
littleextracost.AUMinthe
tensofbillionsofdollars,if
nothundreds,willbeneeded
tobreakeven.Thetwofirms’
venture-capitalbackers,
whichhavepouredover
$100mintoeach,expect
initiallosses.Buteventhey
willhopeforprofitsinyears,
notdecades.
Lastyearthetwofirms’
AUMgrewbyover10%a
month,sodoublingevery
sevenmonths.Growthhas
sincefallentolessthan5%
(seechart).Wealthfrontused
totrumpetitsAUM,butnow
revealsitonlyinregulatory
filings.InAugustitwas$2.6
billion;assumingitisnow
$2.9billion(itsaysonlythat
itislessthan$3billion),it
willtakeayearandahalfto
doubleatitsrecentrateof
growth.Bettermentisfaring
onlyslightlybetter.
AdamNash,Wealthfront’s
boss,saysAUMisa
misleadingmeasure,asitis
affectedbyasset-price
swings,suchasthe
stockmarketslideofthelate
summer(largelyreversed
since).Itmightbethat
volatilityhasspooked
potentialinvestors.Both
firmssaycustomersare
joininginbignumbers,and
thatAUMwillgrowwith
theirsavings.
Competitionfromincumbent
wealthmanagerswillhave
hurttheroboticduo.
Vanguard(whichputs
togethermanyofthefunds
BettermentandWealthfront
recommendtoclients)and
Schwabhavebothrecently
launchedrobo-advisory
services.Thesehavegrown
quickly—Schwab’snowhas
$4.1billioninAUM—ifonly
bypoachingexisting
customers.Robo-purists
decrypotentialconflictsof
interest.
Indollarterms,both
BettermentandWealthfront
arestillattractingover$100m
amonth—itisthesecond
$100mthatisproving
elusive.Yetfintechfirms
usuallycountontheircustom
growingatexponential,not
arithmetic,rates.IfAUM
growthdoesnotpickup,both
firmswillhavetoraise
prices,expandtheirofferings
orputthemselvesupforsale.
InAugustBlackRock,agiant
assetmanager,bought
FutureAdvisor,asmaller
robo-rival.Thatrobotsofthe
sortdevisedbyBetterment
andWealthfrontwilldirectan
ever-largerchunkof
investors’cashseems
inevitable.Whethersuch
productscanbesold
profitablybystartupsremains
indoubt.
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Cashpoints
Theeyeshaveit
Whowouldn’tlovea
machinethatspewsout
cash?
Oct31st2015|NewYork|
Fromtheprintedition
Noteworthy
THEYare,intheviewof
PaulVolcker,aformer
chairmanoftheFederal
Reserve,theonlyuseful
financialinnovationofrecent
decades.Betteryet,
cashpoints(ATMs,to
Americans)arestillevolving.
ThisweekCitibankunveiled
onethatcanidentifyaccountholdersbyscanningtheir
irises,thusdoingawaywith
codes—andwithcards,for
thatmatter.Customers
requestfundsviatheirphones
beforeconfirmingtheir
identitywithascan.
Nearlyhalfacenturysince
thecashpointcameinto
service,itsoriginisstill
disputed.Barclays,aBritish
bank,oftengetsthecreditfor
installingthefirstone,atits
Enfieldbranchin1967.Its
futureisjustasuncertain:
thosewhothinkplasticand,
increasingly,mobilephones
aredisplacingcashone
transactionatatimeseelittle
needforeitherpapermoney
orthemachinesthatdispense
it.
Infact,cashpointsarestill
multiplying.Nearly200,000
wereinstalledin2014,taking
theglobaltotaltoover3m,
saysRBRLondon,aBritish
consultancy.Muchoftherise
isinemergingmarkets;
EuropeandAmericaare
barelygrowing.Dieboldand
NCR,bothAmericanfirms,
andWincorNixdorfof
Germany,stillmakemostof
them,however.
Afewdonovelthings,such
assellinggoldorticketsto
footballmatches.Some
doubleasshare-trading
machines,orallowusersto
withdrawbitcoin.Airports
havecashmachinesthatspew
holidaymoney,usuallyat
lousyrates.AbakeryinNew
York,Sprinkles,hasbuilt
whatitcallsacup-cake
ATM.Butcashisstillking
whenitcomestodispensers.
Mostcashpointsdoalimited
numberofthingsin
increasinglysophisticated
ways,whetheritbeswitching
languagesorletting
customerspickthenotesthey
want.
Inretrospect,cashpointshave
typicallyrevealedpreferences
thatonlyseemobviouslater
on.InAmerica,manybanks
initiallyoperatedATMsonly
duringnormalbusinesshours,
muchassupermarketsuse
self-checkoutmachines
today.Butablizzardin1978
promptedCitibanktokeep
themopenaroundtheclock
ashumantellersstruggledto
gettowork.Thesloganit
launchedthatyear,“TheCiti
neversleeps”,underscored
howthedemandsof
customershadceasedto
coincidewiththehours
bankerskept.Williris
scanningcatchon?Citibank
istakingthelongview.
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Private-debtinvesting
Lendersoffirst
resort
Investorsareincreasingly
eagertolendtoEuropean
firmsdirectly
Oct31st2015|Fromtheprint
edition
EAT,aBritishsandwich
chain,waslookingfor£13m
($20m)lastyeartotartupits
stores.Itknewconventional
bankswouldbehesitantto
providesuchaloan,givenits
existingdebt.Worse,itwould
soonneedtoborrowmore,to
fundarapidexpansion.Soit
turnedtoArdian,an
investmentfirm,whichlentit
£40m,notjustforthe
refurbishments,butalsoto
refinanceitsexistingdebtand
toopen90newstores.
AlthoughArdianischarging
aheady15%interestrate,
saysStrahanWilsonofEAT,
itismuchlessbureaucratic
andmoreflexiblethana
bank.ThathasallowedEAT
toexpand12-18months
fasterthanitotherwisecould
have.Whatismore,headds,
“Nowthatwe’veestablished
thisrelationshipwithArdian,
ifweneedmorecapitalwe
needonlyask.”
Theeasiestwayfor
institutionalinvestorstolend
tocompaniesistobuybonds.
Manyalsobuyloans
originatedbybanksand
repackagedintosecurities,or
investinfundsthatpurchase
non-performingloansfrom
banks.Beforethefinancial
crisisAmericanfundsbegan
investinginprivatedebt,as
opposedtothesortavailable
publiclyonthebondmarkets.
Thisinvolvesprovidingcredit
directlytofirmsthateither
cannotborrowfrombanks
andbondmarketsordonot
liketheterms.
ItisinEuropethatprivate
debtfundshavebeen
proliferatingrecently(see
chart).Europeanbusinesses
dependheavilyonbanks,but
changesincapitalruleshave
madeitrelativelyexpensive
forbankstolendtothem.
Securitisation,meanwhile,
earnedabadnameduringthe
financialcrisis.S&P,arating
agency,estimatesthat
middlingEuropeanfirmswill
needaround€3trillion($3.3
trillion)innewloansoverthe
nextfiveyears.
Moneymanagersareeagerto
fillthegap:$70billionhas
alreadybeenraisedfor
privatedebtthisyear,says
Preqin,adataprovider($2.2
billionofitbyArdian).
Pensionfundsandinsurers
likeprivatedebtbecause
returnstendtobemuch
higherthaninthebond
markets;Pitchbook,adata
provider,saysyieldsof912%havebeentypicalin
recentyears.
Thatcannotlast.Forone
thing,themarkethasyettobe
testedbywidespreaddefaults.
Interestinprivatedebtin
Americahaswanedinrecent
yearsasintensecompetition
hasdrivendownreturns.
“We’regettingbetterreturns
inEuropethaninAmericafor
takingonthesamerisks,”
saysJimBlakemoreof
GreenOak,whichlendsto
propertydevelopers.But
Europeseemstobeheading
thesameway.Theaverage
fundraisedthisyearisthree
timesbiggerthanin2008.
Smaller,specialistfundsare
alsospringingupinniches
suchashealth-careor
aeroplanefinance.
Itdoesnothelpthatmost
lendingsofarhasbeento
firmsbackedbyprivate
equity,suchasEAT.Manyof
theconservative,familyownedEuropeancompanies
thatareshortofcreditstill
wouldnotdreamof
borrowingfromanythingbut
abank.Howfastthatchanges
willdeterminetheindustry’s
fortunes.
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Creditunions
Winningconverts
Avenerableformof
bankingcomesbackinto
fashion
Oct31st2015|Fromtheprint
edition
THEREisaproselytisingfeel
tothecredit-union
movement.Believerstalkofa
“socialmission”:toserve
communities,notthefalse
godsofthestockmarket.
Today,thiscreediswinning
moreconvertsthanever
before.Globally,thenumber
ofpeopleincreditunionshas
doubledsince2000,from
108mto217m.Savingsare
upby130%inrealterms(see
chart).
Creditunionsfirstappeared
in19thcenturyGermany.
Likebanks,theytook
depositsandmadeloans.But,
crucially,theywereownedby
theirmembers,whoshareda
“commonbond”,suchasa
professionorplaceof
residence.Earningswere
returnedtomembersinthe
formofbetterinterestrates.
InEurope,mostoftheseearly
institutionsevolvedintocooperativenetworks,suchas
DZBankinGermanyand
RabobankoftheNetherlands,
whicharestillownedby
membersbutnolongerserve
aparticulargroup.Elsewhere,
therequirementfora
commonbondendures:
PartnersFederalCredit
Union,forexample,isopen
onlytoemployeesofWalt
Disneyandtheirfamilies.
Fully39%ofAmerican
adultsbelongtoacredit
union,upfrom36%adecade
ago—anincreaseof14m.In
Australia,anotherstronghold,
24%do.
Threeforcesaredrivingthe
growthofcreditunions.The
firstissimple:theyoffer
higherratesthanbanksto
saversandlowerratesto
borrowers.Americancredit
unionschargeanaveragerate
of2.66%onathree-year
used-carloan,against5.13%
forbanks,accordingtoSNL
Financial,aresearch
company.Creditunionsalso
outscorebanksincustomer
satisfactionsurveysin
America,Canadaand
elsewhere.
Asecondfactoristhe
financialcrisis.Somecredit
unionsfailed;“corporate”
ones,whichpoolandreinvest
thefundsofindividualcredit
unions,wereespeciallybadly
hit.But,ingeneral,credit
unionsweremoreresilient
thanbanks,saysareport
publishedin2013bythe
InternationalLabour
Organisation.Withoutthe
samepressuretochaseshorttermprofit,theytookfewer
risks.Asthebigbankswere
hitbyfailureandscandal,
creditunionspresented
themselvesasamore
wholesomealternative.That
boostedmembership,
especiallyamongtheyoung.
Thethirdcauseofgrowthis
morelasting,arguesBill
HampeloftheCreditUnion
NationalAssociation,an
Americanindustrygroup.In
America,legalchangeshave
allowedformultiple
“commonbonds”,helping
creditunionstomerge.Big
creditunionsarenow
professionaloperationswith
nationwideATMnetworks
andawiderangeofproducts:
theNavyFederalCredit
Union,whichserves
Americansailorsand
soldiers,hasnearly6m
members.Allthismakes
creditunionseasiertojoin,
andmoreconvenienttouse.
Thisbringsthemintocloser
competitionwithbanks.In
America,bankerscomplain
loudlyaboutcreditunions’
exemptionfromfederal
incometax.Butevenin
Australia,wheretheydon’t
enjoythesametaxbreaks,
creditunionsstilloffer
competitiverates,according
todatafromCanstar,a
researchcompany.Happily
forbanks,though,thevery
thingthatmakescreditunions
differentalsohamperstheir
growth:theycannotraise
equity.
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Freeexchange
Keepingupwiththe
Karumes
Anewstudyshowsthat
moneycanbuyyou
happiness—butonly
fleetingly,atothers’
expense
Oct31st2015|Fromtheprint
edition
“WHENyouopenthe
window,bothfreshairand
fliescomein,”saidDeng
Xiaoping,describingthe
goodandbadconsequences
oftheopeningofChina’s
economy.Mostpeoplesee
economicgrowthandrising
incomesasdesirable,butthey
havetheirdisadvantages.
Familiesbreakapart,as
youngpeoplemovetothe
cities.Jobsbecomemore
insecureifthelabourmarket
isliberalised.Rising
inequalitymayupseteven
thosewhoarebecoming
richer.Smallwonder,
perhaps,thatthesatisfaction
ordinaryChineseexpressed
withtheirlotfellatthestart
oftheeconomicboom
sparkedbyDeng’sreforms,
beforerisingagainasgrowth
accelerated.So,atanyrate,
concludedastudypublished
in2012byRichardEasterlin
oftheUniversityofSouthern
Californiaandcolleagues.
MrEasterlinisbestknown
forahotlycontestedpaper
publishedin1974,which
arguedthatrisingincomesdo
notmakepeoplehappier.
Eversince,inspiteofthe
obviousbenefits,economists
havedebatedwhethergetting
richerisallit’scrackedupto
be.Themostcomprehensive
study,publishedin2012,
lookedatarangeofcountries
overtime,andconcludedthat
thereisapositiverelationship
betweenincomegrowthand
satisfaction.
Thatstudydidnotmake
clear,however,whether
moneyleadstohappinessor
happinesstomoney.Andrew
Oswald,EugenioProtoand
DanielSgroiofthe
UniversityofWarwickhave
positedthathappinesscomes
first.Depressedworkersare
lessproductive,afterall,and
soearnless.Inaddition,high
incomesandhappinessmay
haveacommoncause.Those
withabignetworkoffriends
arebothmoresatisfiedinlife
andbetteratfindingwellpaidjobs.
Onewaytoanswerquestions
aboutcausalityistolookat
evidencefromrandomised
trials.Lotteriesrandomly
allocateextrawealth,andso
couldserveasafocusof
study,butinmostcountries
onlyasmallproportionof
peoplebuytickets.The
behaviourofthosehavinga
fluttermaynotbetypicalof
peopleingeneral,skewing
theresults.Thesolution
wouldbeforeconomiststo
runtheirownexperiments,
dolingoutbigjackpotsat
randomamongthe
population.Inrichcountries
itistooexpensivetomimica
lottery.Butinpoorerplaces
somecharitiesalreadydo.
TheBusaraCentrefor
BehaviouralEconomicsin
Nairobi,Kenya,runs
experimentswithparticipants
fromslumsandruralareas.
Itsresearcherslookedatthe
resultsofalottery-like
schemeinruralKenya,in
whicharandomsampleof
503householdsspreadover
120villageswaschosento
receivecashtransfersofupto
$1,525.Theaveragetransfer,
$357,wasalmostenoughto
doublethewealthofatypical
villager.Theresearchers
measuredthewell-beingof
villagersbeforeandafterthe
transfer,usingarangeof
differentmethods:
questionnairesaboutpeople’s
lifesatisfaction,screeningfor
clinicaldepressionandsaliva
testsforcortisol,ahormone
associatedwithstress.
Sincenotallthevillagers
receivedatransfer,the
experimentshedsnolighton
whatwouldhappenif
everyone’swealthincreased
equally.Butthestudydoes
mimicthedistributional
resultsofeconomicgrowth,
whichtendstoallotgains
unevenly.Asexpected,those
whoreceivedtransfers
reportedgreatersatisfaction
withtheirlotafterthemoney
arrived.Cortisollevelsand
theincidenceofdepression
felltoo.
However,thesatisfactionof
thosewhodidnotreceive
anythingfellsharplyastheir
neighbours’fortunes
improved.Thedeclinein
satisfactionpromptedby
seeingone’speersget$100
richerwasbiggerthanthe
increaseofsatisfactionfrom
gettingahandoutofthesame
size.Thebiggerthehandouts
toothersintheirvillage,the
greaterthedissatisfactionof
non-recipients.(Thehandouts
didnotseemtohaveany
impactcortisollevelsorthe
prevalenceofdepression
amongnon-recipients.)
Boththebitternessandthe
joythatthewindfalls
producedwerepassing.The
effectsofchangesinpeople’s
circumstanceswearoffas
theygetusedtothem—a
phenomenoneconomistscall
“hedonicadaptation”.The
largeswingsinsatisfaction
werefoundinthemiddleof
thetransferscheme.Within
aboutsixmonths,allthe
transfershadbeenmade(if
theyhadbeenspreadovera
longerperiod,asusually
happenswhenacountry
develops,theoutcomemay
havebeendifferent).Ayear
laterthehappinessofboththe
recipientsandthosewhodid
withouthadreturnedcloseto
itsinitiallevel.
Moreover,itwasnot
inequalityingeneralthat
botheredtheunlucky,so
muchasadeclineintheir
ownwealthrelativetothe
mean.Participantsinthe
experimentshruggedoff
changesintheGini
coefficientoftheirvillage,
whichmeasuresoverall
inequality.Taketheexample
ofavillageinwhichone
persongetsricher,and
anothergetspoorer.The
villageislessequal,butthe
meanincomeisunchanged.
IntheKenyanexperiment
thisdidnotmattertotherest
ofthevillage.Instead,
participantscomparedhow
welleveryoneelsewasdoing
(thevillagemean)to
themselves.
Blindedbyaspiration
AstudybyAdaFerrer-iCarbonelllookingatdataon
lifesatisfactionfrom
Germanymighthelpexplain
theKenyans’reactions.She
concludesthatthereisan
asymmetryinthewaypeople
comparethemselveswith
others.Wetendtolook
exclusivelyatthosebetteroff
thanus,ratherthan
contemplateourposition
withinthefullrangeof
outcomes.Whenthelotof
othersimproves,wereact
negatively,butwhenourown
lotimproves,weshiftour
referencegrouptothosewho
arestillbetteroff.Inother
words,weareneversatisfied,
sincewequicklybecome
accustomedtoourown
achievements.Perhapsthatis
whatspurspeopletoearn
more,andeconomiesto
grow.
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Scienceand
technology
Evolution:
Greaterthanthe
sumofitsparts
[Thu,
29Oct18:57]
Financialtime
machines:Stamp
collectors
Malaria:One
morepunch
[Thu,29Oct18:57]
[Thu,29Oct
18:57]
Dentistry:Tooth
fairy-dust
[Thu,29Oct
18:57]
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Evolution
Greaterthanthesum
ofitsparts
Itisrareforanewanimal
speciestoemergeinfrontof
scientists’eyes.Butthis
seemstobehappeningin
easternNorthAmerica
Oct31st2015|Fromtheprint
edition
LIKEsomepeoplewho
mightrathernotadmitit,
wolvesfacedwithascarcity
ofpotentialsexualpartners
arenotbeneathloweringtheir
standards.Itwasdesperation
ofthissort,biologistsreckon,
thatleddwindlingwolf
populationsinsouthern
Ontariotobegin,acenturyor
twoago,breedingwidely
withdogsandcoyotes.The
clearanceofforestsfor
farming,togetherwiththe
deliberatepersecutionwhich
wolvesoftensufferatthe
handofman,hadmadelife
toughforthespecies.That
sameforestclearance,
though,bothpermitted
coyotestospreadfromtheir
prairiehomelandintoareas
hithertoexclusivelylupine,
andbroughtthedogsthat
accompaniedthefarmersinto
themix.
Interbreedingbetweenanimal
speciesusuallyleadsto
offspringlessvigorousthan
eitherparent—iftheysurvive
atall.Butthecombinationof
wolf,coyoteanddogDNA
thatresultedfromthis
reproductivenecessity
generatedanexception.The
consequencehasbeen
boomingnumbersofan
extraordinarilyfitnewanimal
(seepicture)spreading
throughtheeasternpartof
NorthAmerica.Somecall
thiscreaturetheeastern
coyote.Others,though,have
dubbeditthe“coywolf”.
Whatevernameitgoesby,
RolandKaysofNorth
CarolinaStateUniversity,in
Raleigh,reckonsitnow
numbersinthemillions.
Themixingofgenesthathas
createdthecoywolfhasbeen
morerapid,pervasiveand
transformationalthanmany
oncethought.JavierMonzón,
whoworkeduntilrecentlyat
StonyBrookUniversityin
NewYorkstate(heisnowat
PepperdineUniversity,in
California)studiedthe
geneticmake-upof437ofthe
animals,intennorth-eastern
statesplusOntario.He
workedoutthat,though
coyoteDNAdominates,a
tenthoftheaverage
coywolf’sgeneticmaterialis
dogandaquarteriswolf.
TheDNAfrombothwolves
anddogs(thelattermostly
largebreeds,likeDoberman
PinschersandGerman
Shepherds),bringsbig
advantages,saysDrKays.At
25kgormore,many
coywolveshavetwicethe
heftofpurebredcoyotes.
Withlargerjaws,more
muscleandfasterlegs,
individualcoywolvescan
takedownsmalldeer.Apack
ofthemcanevenkilla
moose.
Coyotesdislikehuntingin
forests.Wolvespreferit.
Interbreedinghasproduced
ananimalskilledatcatching
preyinbothopenterrainand
denselywoodedareas,says
DrKays.Andeventheircries
blendthoseoftheirancestors.
Thefirstpartofahowl
resemblesawolf’s(witha
deeppitch),butthisthen
turnsintoahigher-pitched,
coyote-likeyipping.
Theanimal’srangehas
encompassedAmerica’s
entirenorth-east,urbanareas
included,foratleasta
decade,andiscontinuingto
expandinthesouth-east
followingcoywolves’arrival
therehalfacenturyago.This
isastonishing.Purebred
coyotesnevermanagedto
establishthemselveseastof
theprairies.Wolveswere
killedoffineasternforests
longago.Butbycombining
theirDNA,thetwohave
givenrisetoananimalthatis
abletospreadintoavastand
otherwiseuninhabitable
territory.Indeed,coywolves
arenowlivingeveninlarge
cities,likeBoston,
WashingtonandNewYork.
AccordingtoChrisNagyof
theGothamCoyoteProject,
whichstudiestheminNew
York,theBigApplealready
hasabout20,andnumbers
arerising.
Evenwilier
Somespeculatethatthis
adaptabilitytocitylifeis
becausecoywolves’dog
DNAhasmadethemmore
tolerantofpeopleandnoise,
perhapscounteractingthe
geneticmaterialfromwolves
—ananimalthatdislikes
humans.Andinterbreeding
mayhavehelpedcoywolves
urbaniseinanotherway,too,
bybroadeningtheanimals’
diet.Havingversatiletastesis
handyforcityliving.
Coywolveseatpumpkins,
watermelonsandothergarden
produce,aswellasdiscarded
food.Theyalsoeatrodents
andothersmallishmammals.
Manylawnsandparksare
keptclearofthick
underbrush,socatching
squirrelsandpetsiseasy.
Catsaretypicallyeatenskull
andall,withcluesleftonlyin
thedroppings.
Thankstothisbounty,an
urbancoywolfneedoccupy
onlyhalftheterritoryit
wouldrequireinthe
countryside.Andgettinginto
towniseasy.Railways
providecorridorsthatmake
thetripsimpleforanimalsas
wellaspeople.
Survivingoncethere,though,
requiresalowprofile.As
wellashavingsmall
territories,coywolveshave
adjustedtocitylifeby
becomingnocturnal.They
havealsolearnedthe
HighwayCode,lookingboth
waysbeforetheycrossa
road.DrKaysmarvelsatthis
“amazingcontemporary
evolutionstorythat’s
happeningrightunderneath
ournose”.
Whetherthecoywolfactually
hasevolvedintoadistinct
speciesisdebated.Jonathan
Way,whoworksin
Massachusettsforthe
NationalParkService,claims
inaforthcomingpaperthatit
has.Hethinksits
morphologicalandgenetic
divergencefromitsancestors
issufficienttoqualify.But
manydisagree.Onecommon
definitionofaspeciesisa
populationthatwillnot
interbreedwithoutsiders.
Sincecoywolvescontinueto
matewithdogsandwolves,
theargumentgoes,theyare
thereforenotaspecies.But,
giventhewaycoywolves
cameintoexistence,that
definitionwouldmean
wolvesandcoyotesshould
notbeconsidereddifferent
specieseither—andthatdoes
notevenbegintoaddress
whetherdomesticdogsarea
species,orjustanaberrant
formofwolf.
Inreality,“species”isa
conceptinventedbyhuman
beings.And,asthisargument
shows,thatconceptisnot
clear-cut.Whattheexample
ofthecoywolfdoes
demonstrate,though,isthat
evolutionisnotthesimple
processofonespecies
branchingintomanythatthe
textbooksmighthaveyou
believe.Indeed,recent
geneticresearchhas
discoveredthatevenHomo
sapiensispartlyaproductof
hybridisation.Modern
EuropeanscarryNeanderthal
genes,andmodernEast
Asiansthegenesofanewly
recognisedtypeofearlyman
calledtheDenisovans.
Exactlyhowthishappenedis
unclear.Butmaybe,aswith
thewolvesofsouthern
Ontario,itwastheonlyway
thatsomeoftheearlysettlers
ofthoseareascouldgeta
date.
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Financialtimemachines
Stampcollectors
Book-keepingwillsoon
requireatomiclevelsof
precision
Oct31st2015|Fromtheprint
edition
“IFEVERyouwantedtoset
yourwatch,nowisthetime.”
LeonLobo,ofBritain’s
NationalPhysicalLaboratory
(NPL),standsbeforearack
ofserversnearCanaryWharf,
London’seasternfinancial
outpost.Therackholdsa
high-precision,caesium
atomicclock—themost
accuratesortontheplanet—
andtwootherdigital
timepieces,called
“grandmasterclocks”,that
workalongsideit.Tickingin
synchrony,allthreedisplay
thetimetowithinawhisker
ofco-ordinateduniversaltime
(UTC),theworld’sabsolute
standard.
Thepurposeofthishigh-tech
horologicaltrioistotell
banksandtradingservices
exactlywhatthetimeis,so
thattheycancomplywitha
newsetofaccountingrules,
calledtheMarketsin
FinancialInstruments
DirectiveII,whicharebeing
promulgatedbytheEuropean
Commissionandwillcome
intoforcein2017.Among
manyotherthings,this
directivedrasticallytightens
rulesonthetime-stampingof
transactions.Thattightening
isneededtogiveabetter
accountofwhodidwhatand
wheninaworldwhere
marketcrashescanhappenin
aflash.DrLoboandhis
colleaguesthereforemet,on
October28th,withregulators,
banksandtradebodiesfrom
alloverEurope,todiscuss
howtoimplementthe
directive.
AtthemomentEuropean
rulesdemandaccuracyto
withinonesecond(other
jurisdictionsvary;in
America,forexample,itis50
milliseconds).Many
companiescomplybyusing
signalsfromsatellites
belongingtotheGlobal
PositioningSystem(GPS).
Othersbuycheapatomic
clockstodotheirtiming.But
neitherrouteoffersa
guaranteedlinktoUTC.GPS
signalscanbejammed,and
evenatomicclocksmaydrift.
Suchdiscrepanciesmake
forensicaccountinga
nightmare.
Thoseproblemswillget
worsewhenthedirectiveis
implemented.Forstandard
electronictransactions,the
newrulessayaccuracymust
improveathousandfold,to
withinonemillisecond.For
so-calledhigh-frequency
traders(firmsthatcarryout
severaltradesasecond),the
rulesareevenstricter.They
callforaccuracywithin100
microseconds.Onlyforoldfashionedvoicetradingwill
theruleremainafullsecond.
Butallrecordedtimes,
whateverdegreeoflatitude
theyarepermitted,mustalso
betraceabletoanational
standard.InBritaintheNPL
isresponsibleforimposing
thisstandard,sothelabis
goingintothebusinessof
pipingitstimingpipstodata
centresliketheoneinCanary
Wharf—ineffect,selling
certifiedtime-stamps.
Theprocessoftime-stamping
startswithasignalcarrying
thepipstravellingovera
dedicatedoptical-fibrelink.
Thistrip’sdurationmust
thereforebedetermined.To
doso,acaesiumatomicclock
issynchronisedwiththemain
standardattheNPLandthen
carriedtotheplacewhereit
willbeinstalled.Onceitis
there,thepips’journeytime
throughthefibre-opticcable
canbeworkedout,by
loggingthediscrepancy
betweenwhatthepipssay
andwhatthecaesiumclock
says.Oneofthetwo
grandmasterclocksthen
subtractsthatdelayfromthe
pipsitisreceivingfromthe
NPL(theotherservesasa
fail-safe).Relativedriftsof
thetimetoandfroare
monitoredandcorrectedonce
asecond.Andifthefibre
connectionbringingthepips
shouldbecut,thecaesium
clocktakesoveruntila
connectionisrestored.
Allofthisisjustwhatthe
directiveordered:faulttolerantprecision,certified
rightattheserverswhereso
muchoffinancenow
happens.But,saysIan
Salmon,aconsultantat
AccedianNetworks,itleaves
unansweredmanyquestions
aboutwhattotime-stamp,
andhow.Asharestransaction
isnotjustatriptoatillthat
spitsoutareceipt.Orders
comein,areroutedtothis
serverorthat,trading
algorithmsdotheir
crunching,decisionsare
madeandsentofftotheback
officeforsettlement,andso
on.Itisadecisiontreethat
mightsplithundredsoftimes,
withatransactiontakingas
muchasafewmilliseconds.
Determiningwhichtimestampstocollect,and
ensuringthatallthetraders
settheirproprietarysystems
todosointhesameway,will
takesomedoing.Themeeting
thisweekhasbeencalledin
parttostarttacklingthese
thornyquestions.Frankly,it’s
abouttime.
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Malaria
Onemorepunch
Adrugusedtoridpeopleof
wormsmaybeanew
weaponagainstmalaria
Oct31st2015|Fromtheprint
edition
IVERMECTIN,amedicine
employedforthetreatmentof
nematode-worminfections,
hasaside-effect.Ithasbeen
knownsincethe1980sthat
thedrugkillsarthropods
(ticks,mites,insectsandso
on)foolishenoughtobite
someonetreatedwithit.That
hasledsomeresearchersto
wonderifitmightbe
deployeddeliberatelyagainst
themosquitoeswhich
transmitmalaria.Preliminary
studiessuggestedso.
Mosquitoesdo,indeed,get
poisonedwhentheybite
peoplewhohavetakenthe
drug.Moreover,evenifa
mosquitodoesnotsuccumb,
ivermectinimbibedthisway
isoftenenoughtokillany
malarialparasitesitis
carrying.And,since
ivermectinisroutinely
deployedenmassetodeal
withlymphaticfilariasis(a
nastydiseasethatcanleadto
extremeswellingoflimbs
andgenitalia),riverblindness
andsoon,itmightalreadybe
expectedtobehavingan
effect.Whatnoonehad
measured,though,wasthe
sizeofthateffect.
ApaperpresentedbyBrian
FoyofColoradoState
University,tothisyear’s
meetingoftheAmerican
SocietyofTropicalMedicine
andHygiene,inPhiladelphia,
haschangedthat.DrFoyand
hiscolleaguesranasmall
clinicaltrialinBurkinaFaso
thatisthefirsttomeasurethe
drug’simpactonratesof
malaria.Infourvillages
includedinthetrial,everyone
exceptpregnantwomenand
youngchildrenreceivedfive
dosesofivermectin,atthreeweekintervals.Peopleina
comparisongroupofvillages
gotjustthefirstdose—which
istheroutineannualmasstreatmentforwormdiseases.
Theextraroundsof
ivermectin,DrFoyfound,cut
thenumberofmalarial
episodesamongchildren
underfiveby16%,even
thoughthesechildrenwere
not,themselves,receivingthe
drug.Thatequatestoabout
oneepisodeperchildbeing
avertedoverthecourseof
twoyears.
Asecondstudypresentedto
themeeting,whichwas
conductedinThailandby
KevinKobylinskiofthe
WalterReedArmyInstitute
ofResearch,inMaryland,
broughtfurthergoodnews.It
wasthefirsttotest
ivermectin’seffecton
Plasmodiumvivax,the
predominantparasiteinAsia
(theAfricanparasiteis
Plasmodiumfalciparum).Dr
Kobylinskiandhiscolleagues
fedmosquitoesmalariainfectedhumanbloodmixed
withthedrug.Theyfound
thatadoseofivermectin
whichkilled25%of
mosquitoesalsoclearedthe
parasitein45%oftheir
survivingsisters.Andevenin
thosesurvivinginsectsthat
remainedinfected,thedrug
cutthenumberofparasitesin
half.
InThailand,acountrywell
onitswaytoeliminatingthe
scourgeofmalaria,oneline
ofattackismass-treatment
withdrugsthatcanclearthe
parasitefromitshumanhosts.
Unfortunately,thoseinfected
withP.vivaxoftenhaveno
symptoms.Convincingthe
asymptomatictotake
antimalarialdrugscanbe
tricky.Indeed,theymaynot
evenrealisetheyareinfected.
Butthetaskmaybeeasierif
themixincludesivermectin,
sincethisisalreadyafamiliar
treatmentforcommon
problemslikescabies.
Thediscoverersof
ivermectin’spredecessor,
avermectin,wereamongthe
winnersofthisyear’sNobel
prizeformedicine.Byanodd
coincidence,thethirdwinner
wastheinventorof
artemisinin,whichisnowthe
mosteffectiveantimalarial
drugaround.Ifivermectin
canbepressedintoserviceas
anantimalarialagent,too,it
willincreasethechancethat
thediseasecanbeknockedon
theheadonceandforall.
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Dentistry
Toothfairy-dust
Addingtinygemsmay
makeroot-canaltreatment
moreeffective
Oct31st2015|Fromtheprint
edition
Atooth’sbestfriend?
TIMEwaswhenthepreferred
materialforfillingsuperficial
dentalcavitieswasgold.
Often,itstillis,although
cheapermaterialsare
frequentlyusedinstead.But,
forthedeepestsortoffilling,
root-canaltreatment,another
substancefamiliarfromthe
jeweller’sshopisaboutto
jointhedentists’
armamentarium—diamond.
Root-canalfillingsreach,as
theirnamesuggests,rightto
thebottomofatooth.They
areneededwhenbacterial
infectionhaspenetratedboth
atooth’sprotectiveenamel
andthesomewhatsofter
dentinelayerthatunderlies
this,andhasgotintothe
nutrient-rich,nervecontainingpulpinatooth’s
centre.Unfortunately,such
fillingsarecomplex,painful
andtrickytopulloff—andit
iscommonfortheinfection
toreturn,eitherbecausethe
voidleftwhenthepulphas
beenremovedhasnotbeen
clearedproperlybythe
dentistperformingthe
operationorbecausegutta
percha,thegumusuallyused
tofillthatvoid,doesnot
createagoodenoughseal,
permittingbacteriatocreep
backin.Theideaofchanging
thisbymixingdiamondsinto
theguttaperchaisthe
brainchildofDeanHo,a
bioengineerattheUniversity
ofCalifornia,LosAngeles.
Heoutlinesitinthismonth’s
editionofACSNano.
Thediamondsinquestionare
4-6nanometres(billionthofa
metre)across.Geometrically,
theyaretruncated
octahedrons—meaningthey
have14facets.Theedges
wherethefacetscome
togetheraresharp,andthe
facetsthemselvesarecovered
withchemicalgroupssuchas
amines,carboxylsand
hydroxyls.Theseproperties
grantnanodiamondsabilities
thataredesirablefromDr
Ho’spointofview.
Theirgeometrymeansthey
aregoodatdiggingintoand
thusadheringtosurfaces—
includingthedentinelining
ofanevacuatedrootcanal.
Andtheirsurfacechemistry
meansthattheirfacetsare
perfectforattractingand
holdingontomoleculesof
antibiotics.Incontrast,
antibioticsmixedintopure
guttaperchamigraterapidly
outofthematerial,leaving
theplugvulnerableto
bacterialcolonisation.A
bonusisthatdiamonds,
whichare(surfacegroups
aside)crystalsofpurecarbon
andthuschemicallyinert,are
unaffectedbytheharsh
chemicalenvironmentthatis
themouth.Asecondbonusis
thatnanodiamondsarecheap,
becauseconventionalmining
andrefiningtechniques
generatethemasby-products.
Totesthisidea,DrHomixed
nanodiamondswith
amoxycillin,acommon
antibiotic,andletthemixture
sitforfivetosevendaysat
roomtemperature.Thisgave
theantibioticplentyoftime
toadheretothediamonds.He
andhiscolleaguesthenadded
thepepped-updiamondsto
someguttaperchaandshook
theresultwithsoundwaves
todistributethediamonds
evenly.Thisdone,they
measuredtheirnew
compositematerial’stensile
strengthandelasticity(both
ofwhichwereaboutthree
timesthatofguttapercha
alone),anditsabilityto
withstandavarietyofstresses
(betterthanguttapercha’s,
too).Theyalsomonitoredthe
rateatwhichtheantibiotic
leakedfromthediamonds.
Theanswertothatwas,not
toobadly.Thetinygemsshed
only13-17%oftheirload
duringthecourseofaweek’s
monitoring.Withsuch
encouragingfindings,DrHo
reckonsthatclinicaltrialson
patientsarenowjusttwo
yearsaway.
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Booksandarts
Espionagein
fiction:Thespy
whocameinfrom
thecold
Englishfiction:
Womanof
[Thu,29Oct18:57]
substance
[Thu,29Oct
18:57]
Economic
history:FDRfor
beginners
[Thu,29Oct
18:57]
Americanfiction:
Hottown
Ottomanhistory:
Alltheworld’sa
stage
[Thu,29Oct18:57]
[Thu,29Oct18:57]
Contemporary
architecture:A
lifeinshapes
[Thu,29
Oct18:57]
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Espionageinfiction
Thespywhocamein
fromthecold
Asecretivelifebecomesan
openbook
Oct31st2015|Fromtheprint
edition
JohnleCarré:The
Biography.ByAdam
Sisman.Harper;651pages;
$28.99.Bloomsbury;£25.
JOHNLECARRÉ’Snovels
studyhumantreachery,
ideologicalconflictand
geopoliticalupheavalwitha
rareintelligenceand
sympathy.Oftheauthor
himself,whoserealnameis
DavidCornwell,notmuchis
knownbeyond(sometimes
contradictory)snippets
offeredininterviewsand
factsmasqueradingasfiction
inhismostautobiographical
novel,“APerfectSpy”
(1986).Now,AdamSisman,
theauthorofacclaimed
biographiesofA.J.P.Taylor
andHughTrevor-Roper,has
gotbehindMrleCarré’s
masktounraveltheenigma.
MrSismanmakesitclearat
theoutsetthatheisan
admirerandthatMrleCarré
(whomherefersto
throughoutas“David”)
wishedhimtowrite“without
restraints”.Whatcouldhave
beenacloyinghagiography
oraluridwarts-and-all
exposéisinsteadabalanced,
focusedandcompellingstudy
ofamanofdepthand
individuality.
MrleCarré’schildhoodwas
markedbyheartacheand
disruption.Hismotherleft
whenhewasfive.The
following“16huglessyears”
consistedofaseriesofprep
schools,bouncedchequesand
brokenpromises.Ronnie,his
flamboyantcon-manfather,is
everywhere,seeminglya
lovableroguewiththegiftof
thegabwholivedbeyondhis
meanswithavarietyoflady
friends,executingone
elaboratescamafteranother.
Beneaththeglitzyexterior
wasacoresotawdryattimes
itwasdownrightsinister.
Ronniewasinandoutof
prisonforfraud.Hebeathis
wife,gropedhischildrenand
scammednotonlystrangers,
butfriendsandrelativestoo.
Yearslater,onepartnerin
crimetoldMrleCarréthat
hisfatherwas“very,very
bent”.
MrleCarréspentlarge
chunksofhislifeappalledby
Ronnie’sdeeds,humiliated
byhispresenceandhaunted
byhismemory.At16hefled
toBerntoimmersehimselfin
Germanliterature.Afterhe
returnedtoEnglandand
whilestudyingatOxford,he
wasapproachedbyMI5and
giventhetaskofinfiltrating
left-wingstudentgroupsto
identifycommunists.When
hewaseventuallyrecruitedas
afull-timespyheleftMI5(“a
dead-endsortofplace”)for
themoreglamorousMI6,the
secretintelligenceservice
(SIS),andapostinginBonn,
“anestofspies”.To
supplementhisincome,Mrle
Carrébegantowriteand,
aftertwomodestsuccesses,
histhirdnovel,“TheSpy
WhoCameinfromtheCold”
(1963),launchedhisliterary
career.Itwaswritteninjust
fiveweeks.
Readersgotaglimpseofthe
real,murkyworldof
espionage,theflipsidetoIan
Fleming’sglossy,soft-focus
artifice,withtheflawedand
jadedAlecLeamasmore
victimthanhero.Further
bleakness,moraluncertainty
andanti-Bondprotagonists
followed,in“Tinker,Tailor,
Soldier,Spy”(1974),which
featuredMrleCarré’smost
famouscreation,George
Smiley.“TheSecretPilgrim”
(1990)wasSmiley’s
swansong,appearingayear
afterthefalloftheBerlin
Wall.Somepeoplethought
thatMrleCarréhadlosthis
subject;thespynovelwas
dead.MrSismandisagrees.
“Communismmighthave
beenvanquished,”hewrites,
“butotherenemies
remained.”Inhispost-coldwarnovelsMrleCarréhas
tackledRussianmafiasin
“Single&Single”(1999),the
pharmaceuticalindustryin
“TheConstantGardener”
(2001)andeventhe
Americangovernmentinhis
moststridentnovel,
“AbsoluteFriends”(2003).
MrSismanrevealsthe
inspirationforMrleCarré’s
plotsandcharacters,finding
realexamplesforthose
perennialthemesof
abandonmentandbetrayal,
andofferingilluminating
accountsoffact-findingfield
trips.However,readers
hopingforpagesofunlocked
statesecretsandcold-war
exploitswillbedisappointed,
asMrleCarréexplainedto
hisbiographerthathewas
bound“legallyandmorally”
tostaysilentabouthisSIS
work.
MrSismanretreadsold
groundwithMrleCarré’s
friendshipwithAlec
Guinnessandhisfeudwith
SalmanRushdieoverthe
publicationof“TheSatanic
Verses”.“NobodyhasaGodgivenrighttoinsultagreat
religionandbepublished
withimpunity,”MrleCarré
asserted.ButMrSismanalso
exploresnewterrain,
includingabouttheauthor’s
manyextramarital
adventures.Atonelowpoint,
whenMrleCarréfeltchoked
bydomesticity,miserablein
hisdead-endmarriageand
afraidthathistalenthadrun
dry,heembarkedon“six
months’madness”,sleeping
withanywomanwhowanted
him.WhenMrleCarré’s
recollectionsarehazyor
contradictoryMrSisman
singlesthemoutas“false”or
“imagined”memoriesand
strivestocorrectthem.After
locatingoneinconsistency,he
notesthat“fictionmayhave
replacedreality.”Itisupto
thereadertodecideifthese
aremereslip-upsand
oversights,orwhetherthe
formerspookhasadeceiver’s
heart.
MrleCarréalwaysfelt
himselftobeanoutsiderat
school.MrSismanargues
thatthissenseofnot
belonging“woulddoghimall
hislife”.MrleCarréhas
gonefrombeingunabletofit
intoactivelypreferring“to
stayoutsidethetent”—
shunningandscorning
literaryLondonfromhis
Cornishredoubt,andrailing
againstAmericanforeign
policyandthe
“corporatisation”ofBritain.
Thisbiographyexpertly
showshowdistance,distrust
andevendisillusionment
haveinformedMrleCarré
andinfluencedhisbestselling
fiction.
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Englishfiction
Womanofsubstance
Avividportraitofanangry
writer
Oct31st2015|Fromtheprint
edition
AnEyreofimportance
CharlotteBrontë:ALife.
ByClaireHarman.Viking;
446pages;£25.Tobe
publishedinAmericaby
KnopfinMarch2016,$30.
“MISSAUSTENand
Thackerayhaveadmirers;
CharlotteBrontëhas
worshippers.”Soitseemedto
onecritichalfacenturyafter
herdeath.Butitwaslessthe
novelsthanthelifeitselfthat
stirredthepublicimagination.
Thelonelygeniusofthe
Yorkshiremoorsandher
doomedsisters,Emilyand
Anne,touchedaromantic
nerve.SomuchsothatHenry
Jameswasdriventocomplain
thattheBrontëlegendhad
“fairlyelbowedout”“Jane
Eyre”and“Wuthering
Heights”.Aphotographin
ClaireHarman’sexcellent
newbicentennialbiography,
ofacrowdjostlingtowards
theBrontëparsonagewhenit
firstopenedtothepublicin
1928,seemstobearhimout.
MsBrontëwouldhave
despaired.Notthatshewasa
shrinkingviolet.Aged20,she
sentapoemtoRobert
Southey,theBritishpoet
laureate,withaletter
declaringherdesire“tobe
foreverknown”.Butitwasas
anauthorthatshewanted
fame,andeventhenshe
clungtoanonymity—hence
herpseudonym,CurrerBell:
“Whatauthorwouldbe
withouttheadvantageof
beingabletowalkinvisible?”
shewrote.Ofcourse,
“advantage”meantmorethan
justprivacy.Itwasprotection
fromthedoublestandard.
Speakingforhersisterstoo,
sherealisedthattheir“mode
ofwritingandthinkingwas
notwhatiscalled
‘feminine’”.Shewasright.
When“JaneEyre”cameout
in1847,onecriticfoundthe
novelpraiseworthyifwritten
byaman,but“odious”from
awoman.
Nowonder,then,thatMs
Harman’sCharlotteBrontëis
angry.Angerexplodesfrom
herearlyjournalsandanger,
shesays,isthepredominant
emotionof“JaneEyre”,the
pennilessorphanwhoishired
asgovernesstothewardof
themysteriousMrRochester.
CharlotteandJane
representedanewkindof
woman.“Womenare
supposedtobeverycalm,”
saysherheroine;butneither
shenorherauthorcouldkeep
quiet.Utterancewasa
necessity:“somethingspoke
outofme”,saysJane,“over
whichIhadnocontrol”.
MsHarmantellsastoryabout
a“bogburst”,amethane
explosiononthemoorswhen
MsBrontëwaseight.The
senseofaverbalsubstratum
burningunderthe“feminine”
crustrunsthroughthis
biography,asitdidthrough
LyndallGordon’sbrilliant
study,“CharlotteBrontë:A
PassionateLife”(1994).Ms
Harmanislessinwardthan
MsGordon,butshebringsto
thethemeaneloquenceofher
own—mostmovinglywhen
MsBrontëfindsalanguage
forthemansheloved,
ConstantinHeger,the
marriedFrenchliterature
masterattheBrusselsschool
whereshetaught:“theunion
shecravedwithHegerwas
oneofsouls;apossession,a
haunting,aliving-through,a
sharingofideas,intensely
verbal,profoundlysilent…”
MsHarmanwriteswith
warmthandafine
understandingofMsBrontë’s
literarysignificance.Above
all,sheisastoryteller,witha
senseofpaceandtiming,
relishforagoodsceneanda
wrysenseofhumour.Hereis
thewriter,butalsothe
womanpeopleknew—thick
spectacles,badteeth,slipping
hairpieceandall.
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Economichistory
FDRforbeginners
Anexcellentprimeron
FranklinRoosevelt’s
economics
Oct31st2015|Fromtheprint
edition
TheMoneyMakers:How
RooseveltandKeynes
EndedtheDepression,
DefeatedFascismand
SecuredaProsperous
Peace.ByEricRauchway.
BasicBooks;305pages;
$28.99.
OLD-FASHIONED
historiansrecoilattheideaof
learningfromthepastto
informthepresent.Butin
“TheMoneyMakers”,Eric
Rauchway,ahistorianatthe
UniversityofCalifornia,
Davis,triestodojustthat.
Hisbooklooksatthe
economicpolicyofFranklin
DelanoRoosevelt,afourtimeAmericanpresidentfrom
1933to1945,andhowhe
wasinfluencedbyJohn
MaynardKeynes,aBritish
economist.MrRauchway
arguesthatpolicymakers
todaycouldlearn“valuable
lessons”fromRoosevelt,who
shookuptheeconomic
orthodoxytorescueAmerica
fromtheGreatDepressionof
the1930sandtokeepthe
Alliesgoingduringthe
secondworldwar.
InwhatwayswasRoosevelt
soradical?Forone,inthe
depthsoftheDepressionhe
launchedaseriesofpublic
works—buildingbridges,
dams,highwaysandschools
—toputpeopleinjobs.
(Studiesshow,however,that
themacroeconomiceffectof
theseeffortswasslight.)
Moreimportant,saysMr
Rauchway,in1933hetook
Americaoffthegold
standard,asystemwhereby
theamountofdollarsin
circulationwasdeterminedby
thecountry’sgoldreserves.
Despitevocaloppositionby
bankers,whoseinterestlayin
preservingthegoldstandard,
Rooseveltensuredthatthe
moneysupplyrose,thereby
wardingoffdeflationand
encouragingAmericansto
spend.
NeitherwasRooseveltafraid
torufflefeathersduringthe
secondworldwar.In1941he
pushedthe“lend-lease”
programmethrough
Congress,wherebyAmerica
wouldsupplyitsallieswith
oil,foodandweaponry
withoutdemandinggoldin
return.SinceBritainwasfast
runningoutofbullion,
Rooseveltpromisedonlyto
askforcompensation,in
someform,oncethewarhad
ended.Theplaninfuriated
some—CharlesLindbergh,
theaviationentrepreneurand
activist,thoughtAmerica
shouldkeepoutofworld
affairs—butthisfinancial
helpwascrucialtoBritain’s
sustainingthewareffort.
MrRauchwayarguesthat
policymakershavealotto
learnfromFDR.Sincethe
financialcrisisa“terrorof
inflation”hasgrippedthe
world,hesays;unlike
Roosevelt,thoseinpower
todayhaverefusedtouse
radicalpoliciestorescuethe
economy.Butthis
comparisonisquestionable.
CentralbanksinAmerica,
Britain,EuropeandJapan
havealldeployedquantitative
easing(printingmoneytobuy
governmentbonds).Like
Roosevelt,theyhaverightly
ignoredthoseeconomists
whowarnedtheiractions
wouldleadtorunaway
inflation.Andinanycase,
copyingallofRoosevelt’s
policiesisneitherrealisticnor
desirable;afterall,he
implementedthemasthe
worldwasdescendinginto
war.
Thisflawaside,thisworkis
impressive.MrRauchway
combinesthreethingsthat
youseldomseeineconomichistorybooks:sufficient
attentiontocomplexity;a
solidgraspoftheeconomics;
andwritingthatisenjoyable
toread.Barelyapagegoesby
withoutsomelovelydetail:
forinstance,aformaldinner
withsevenwinecoursesthat
FelixFrankfurter,aprofessor
atHarvard,sharedwith
KeynesatKing’sCollege,
Cambridgein1933,the
conversationatwhich
ultimatelyledtothefirst
meetingbetweenthe
economistandRoosevelt.
Thetitleofthebookoversells
itslightly.TheBritish
economistandthepresident
werenotequalinthetask,nor
wasKeynesreally
Roosevelt’sadviser,asis
implied;indeedMr
Rauchwayhimselfshowsthat
theymetonlyoccasionally.
Nonetheless,asan
introductiontotheeconomic
debatestakingplacein
LondonandWashingtonin
the1930sand1940s,Mr
Rauchway’sworkcouldnot
bebettered.
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Americanfiction
Hottown
NewYorkisbroughttolife
inasprawlingdebutnovel
Oct31st2015|Fromtheprint
edition
CityonFire.ByGarthRisk
Hallberg.Knopf;944pages;
$30.JonathanCape;£20.
NEWYORKinthelate
1970swascomingapartat
theseams.Peoplewouldbe
strungoutinbroaddaylight,
totteringdownstreetsstrewn
withspentPallMallsand
“nickelbagslikepunctured
lungs”.TheBronxwas
burning,graffitispreadlike
kudzuandmuggersowned
theparksafterdark.Donna
Summeroozedoutofradios
(“Lovetoloveyou
babeee…”)whilePatti
Smith’spunksermonsdrew
acolytesdowntown.
Thecitywasbrokeandonits
waytohell.Ormaybeitwas
alreadythere.
ThisistheNewYork—vital,
homicidalandseedy—of
“CityonFire”,GarthRisk
Hallberg’sdizzyingly
ambitiousdebutnovel.Like
thecityitself,thebook
sprawlsunapologetically,
teemingwithpunks,suits,
cops,junkies,hacks,strivers,
losersandartists.Itis
crammedwithtattooed
nihiliststalkingNietzschein
theVillage,uptownmoguls
writingtenderlydefensive
letterstosons(“whatyousee
isnotthewholeofme”),
scrawnypaintersstumbling
intoConeyIslandmethadone
clinics,singleBrooklyn
mothershidingtheir
hangovers,blockedwriters
envyingTrumanCapoteand
closetedmendiscoveringa
worldofunspeakable
pleasure.Itwouldbeeasy
enoughforthesesoulsand
theirstoriestoorbiteach
other,proximatebutapart.
YetMrHallbergmanagesto
tiethemupinawhodunitof
sorts,revolvingaroundthe
mysteriousshootingofa17year-oldgirlinthefirstfrigid
hoursof1977.
Knottingthesestoriesintoa
singlethicktapestrymight
seemanactof“literary
wishfulthinking”,inthe
wordsofoneofMr
Hallberg’screations(alanky,
hard-drinkinginvestigative
journalistnamed
RichardGroskoph).Butitis
easytoforgivetheauthorhis
Dickensianaffectionfor
coincidence.Readerswillbe
sweptalongbythe
suspensefultale,whizzing
throughpageswithoutspeed
bumps.Alas,MrHallberg’s
colourfulparadeofcharacters
includessomearchetypes,
suchasanevilstepmother
andhercunningbrother.But
mosthavethefleshinessof
realpeople,whetherheis
describingtheheartacheofan
earnestblackteacher
abandonedbyhisboyfriend
orthenear-titillatingthrillof
bulimia(“thehotacid
swoon”)foraprofessional
womanwhoseself-possession
isatrickofself-erasure.With
achronologythatwhips
forwardandbacklikea
yellowcabinrushhour,the
booktreatsnearlyevery
charactertoaback-storyand
somepersonalmythology,a
particularlanguageof
experience.
IttakescheekforMr
Hallbergtoburstontothe
literaryscenewithabackbreakingnovelsetinawidely
rememberederathatpredates
hisbirth,inarelentlessly
observedcityheadoptedas
anadult.Thathehaswritten
somethingasconvincingas
“CityonFire”istobe
applauded.Somemight
quibblewiththefactthathe
neverseemsquitereadytolet
goofhischaracters.Likea
protectiveparent,heisrather
tooeagertosolveeverylast
mystery,tieupeveryloose
end.Butafterspendingso
muchtimewiththisurban
chorus,readersmayshareMr
Hallberg’sunwillingnessto
lettheseNewYorkersgo.
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Ottomanhistory
Alltheworld’sa
stage
Asubtleaccountofthe
powerstrugglesthatended
theOttomanempire
Oct31st2015|Fromtheprint
edition
TheOttomanEndgame:
War,Revolutionandthe
MakingoftheModern
MiddleEast,1908-1923.By
SeanMcMeekin.Penguin
Press;576pages;$35.Allen
Lane;£30.
FEWinternational
relationshipsareasvolatile
andimportantasthatbetween
theRussiansandtheTurks.
Althoughtheywerea
formidablecombinationwhen
theyoccasionallyteamedup
(againsttheFrenchin179899,forexample),thetsars
andthesultansweremore
oftenatloggerheads.Infact
theyclashedin12wars
betweenthe16thandthe
early20thcentury.Notmuch
haschangedsince.Inthe
early21stcenturyTurksand
Russianshaveveered
betweenwarmcommercial
relationsandwarbyproxy
overSyria.
ThelastbigRusso-Turkish
war,whichformedoneofthe
frontsinthefirstworldwar,
isasourceofcontinuing
fascinationtoSean
McMeekin,ahistory
professoratBardCollege
northofNewYorkwho
previouslytaughtattwo
universitiesinTurkey.In
“TheOttomanEndgame”,a
sweepingaccountofthelast
15yearsoftheOttoman
empire,themostoriginaland
passionatelywrittenparts
concernthefightbetween
RussiansandTurksineastern
AnatoliaandtheCaucasus.
TwothingsdistinguishMr
McMeekinfrommanyother
writersinEnglishaboutthis
period.First,hehasadeep
empathywithTurkish
concerns,andhehewscloser
totheofficialTurkishline
thantotherevisionist,selfcriticalapproachtakenby
somecourageousTurkish
liberals.Second,hehassome
unusualinsightsintoimperial
Russianthinking,basedon
studyofthetsaristarchives.
MrMcMeekinfindsiteasyto
imaginetheworldasit
appearedtotheyoung
mastersoftheOttoman
realm,astheyandtheir
Teutonicalliesfacedthe
combinedforcesofRussia,
BritainandFrance;andhe
bringsalivethememoryof
tsaristcommanderslike
NikolaiYudenichandthe
titanicbattlestheyfoughtin
wildplaceslikeVanand
Erzurum,withghastly
consequencesforcivilianson
thewrongside.
Theauthorhasawellfoundedsensethattraditional
theocraticpowerswhichlook
ramshackleorevenmoribund
toWesterneyescanstillact
withruthlesseffectiveness
whenthestrategicstakesare
reallyhigh;andheapplies
thatpointinequalmeasureto
thelateOttomanempireand
tothelatetsaristone.
Usingthislens,hebrings
someusefulcorrectivesinto
focus.Ithasbecomea
commonplacetosaythatthe
MiddleEasternboundaries
nowbeingchallengedby
IslamicStatearetheoneslaid
downbyanAnglo-French
deal,struckin1916and
knownastheSykes-Picot
agreement.Actually,Mr
McMeekininsists,itwasan
Anglo-Franco-Russiandeal;
andheargues,
controversially,thatthe
Russianswereseniorpartners
inthebargain.
Manystudentsoftheperiod
willseeinMrMcMeekin’s
approachabarelyhidden
agenda.Hestressesthe
fightingspiritofalltheforces
battlingforthetsar,a
coalitionwhichatcertain
timesandplacesincluded
localArmenians.Whether
withdisgustorapproval,that
emphasiswillcertainlybe
interpretedasawayof
vindicatingorexplaining
awaythemassdeportationof
Armenians,decreedin1915,
whichwasreallyadeath
march.
Infact,MrMcMeekindoes
notplaydownthefactthat
manyhundredsofthousands
ofArmeniansperished“…
whetherthroughstarvation,
thirst,disease,simple
exhaustion,oratthehandsof
executionsquads.”Ashe
delicatelyputsit,thechoice
ofaparchedstripofSyrian
desertastheuprooted
Armenians’destination
suggeststhat“thesurvivalof
thedeporteeswasnot…[the]
firstpriority”ofTalaatPasha,
theOttomanofficialwhom
Armeniansregardasthemain
perpetratorofgenocide.
Tomany,suchcautiousturns
ofphrasewillamountto
praising,oratleastexcusing,
byfaintdamnation.ButifMr
McMeekin’spurposewas
merelytoexonerateall
Ottomanbehaviourandplay
downArmeniansuffering,he
wouldnothaveincludedthe
observationofaVenezuelan
soldieroffortunewhosawon
amountainside“thousandsof
half-nudeandbleeding
Armeniancorpses,piledin
heapsorinterlacedindeath’s
finalembrace.”
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Contemporaryarchitecture
Alifeinshapes
Aretrospectiveandanew
biographyshedfreshlight
onanoldarchitect
Oct31st2015|Fromtheprint
edition
Completewithperiod
features
FRANKGEHRY’Sbuildings
oftencometodefinethecities
wheretheyarebuilt.Thinkof
Bilbao,adown-at-heel
northernSpanishsteeltown
untilMrGehry’sconfection
ofbeatenmetal,which
openedin1997asthe
GuggenheimMuseumBilbao,
changedthewaypeople
thoughtofarchitectureand
collecting—andputthecity
ontheculturalmap.Mr
Gehryhelpedcreatetheeraof
big-name“starchitects”and
hehasbecomeafrequent
lightningrodforsociety’s
mixedfeelingsabouturban
spectacleandcelebrity.
Noneofthiscouldbe
predictedearlyon,forhis
careerdidnottakeoffuntil
middleage.Heisnow86,
andshowslittlesignof
slowingdown.“Igetexcited
aboutworkingonnew
things,”hesaidrecently.On
thelistisashimmeringtower
thatheiscreatinginArles,
France,tomarkalushly
fundedprivateartscomplex
calledLUMAandaseriesof
wrigglingslabsforthevast
BatterseaPowerStationin
Londonwhichisbeing
convertedintoluxuryflats.
Heisaddingtothequartermile-longbuildinghe
recentlycompletedfor
FacebookinCalifornia.And
heissupportingarts
educationinlow-performing
LosAngelesschools.Mr
Gehryishardonhimself,
neversatisfiedthatagiven
designisright.“AllIseeis
whatIcouldhavedone
better.Ican’thelpit.”
Withthepassingoftheyears,
though,alook-backhas
becomeunavoidable.
“BuildingArt:TheLifeand
WorkofFrankGehry”
(Knopf)byPaulGoldberger,
acritic,isthefirstbiography
writtenwiththearchitect’s
acquiescence.Atthesame
timeanexpandedversionofa
retrospectivethatbeganatthe
PompidouCentreinParishas
nowopenedattheLos
AngelesCountyMuseumof
Art(LACMA)inMrGehry’s
homecity.
Thearchitectgrewupin
Torontoinstraitened
circumstances,andhislong
climbtothepinnacleof
architecturewasarduous.Mr
Goldbergershowshimnotto
beflamboyantandarrogant,
asmanypeoplethink,but
unassumingandeasytolike.
Therewasmuchsoulsearchingintheearlyyears
aboutwhetherherisked
eternalpenurybytakingthe
harderpathofdoingonlythe
workhewantedtodo.After
all,hewasgoodatdrawing
upinexpensiveandordinary
designsforflatsandshopping
centres—justwhathisclients
andcollaboratorssought.
Theexhibitiondoesagood
jobofdocumentingMr
Gehry’sartisticevolutionas
consistentthemesbeginto
emerge.In1978hecreated
theFamilianhouseinwhich
off-kiltercubesofexposed
woodframingpokedoutfrom
tidywhiteboxes.Hethen
wentontowraphisown
stolidDutchcolonialhouse
(pictured)inSantaMonica
withchain-linkfencing,
corrugatedmetalsidingand
tiltingplanesofglass,riffing
ontherapidlyageing,fast
andflimsycityscapesthatthe
rapidgrowthofCalifornia
hadproduced.Hethoughtof
hishouseasalaboratoryof
ideas.Neighbourstookitas
anattackontheirdreamofa
tidyMediterraneanparadise.
AlthoughMrGehry’sbold
designsemergedfroman
individualisticCalifornia
ethos,aconservativecivic
establishmentgreetedhis
designfortheWaltDisney
ConcertHallwith
consternationwhenitwas
unveiledin1987.Itwasan
awkwardcollisionofboxy
auditoriumandgreenhouse-
stylelobby,whichMrGehry
wouldrapidlyrefineintothe
unfurlingleaflikeexteriorthat
wasultimatelybuilt.Itwould
take16longyearsofcost
overruns,fundingshortfalls
andconstructiondelays
beforethehallopened—to
extraordinaryacclaim.Mr
Gehrywasawarded
architecture’sNobel,the
Pritzkerprizein1989,when
hewas60.Yethismost
admiredworklayahead.The
VitraMuseumforaSwiss
furniture-maker,inparticular,
introducedthelyrical
interlockingcurvesthathe
hasusedwithever-greater
freedomandwhichhave
becomehissignature.
TheprocessbywhichMr
Gehryworksisalmost
entirelyintuitive,whichplays
intothehandsofsceptics,
becauseitsubvertstheideaof
architectureasmainlya
practicalart.Whatisoften
overlooked,though,amidthe
sculpturalfireworksishis
clearandpragmatic
organisationofspaceandan
unerringsenseofproportion.
Manyarchitectsstrugglewith
both;forMrGehrytheycome
easily,leavinghimfreeto
developelaboratespatial
dramaandsculpturalform
that,atitsbest,looks
inevitablyright.
Hehasnotshiedfrom
controversy.Hehas
attemptedtoengage
protestersoverlabourrights
inAbuDhabi,wherethe
designhecompletedin2006
foranotherGuggenheim
Museumremainsunbuilt.He
relishesworkonavisionto
makethe51miles(82
kilometres)oftheconcretelinedLosAngelesriveran
urbanamenityaswellasa
modeloffloodcontrol,even
ascriticsseehispresence
muddlinganundertakingthat
hadlanguishedfordecades.
MrGehry’sbestprojectsare
almostuniquely,engagingly
lyrical:theflutteringsurfaces
andgorgeouslyballooning
spacesseemunboundby
eithergravityorthelimitsof
constructiontechnology.The
“sails”—theascending,
curvingpanelsofglassthat
formthecarapaceofthe
FondationLouisVuitton
whichopenedintheBoisde
BoulogneinwesternParisa
yearago—appeartobillow
abovethetreeline.Itisafeat
thatwasthoughtnotworth
attempting—beforeMrGehry
madeithappen.
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Obituary
IrwinSchiff:The
manwhosaidno
[Thu,29Oct18:57]
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IrwinSchiff
Themanwhosaidno
IrwinSchiff,America’s
loudesttaxprotester,died
onOctober16th,aged87
Oct31st2015|Fromtheprint
edition
THEadagethatoneman’s
heroisanotherman’s
scoundrelwasseldomtruer
thaninthecaseofIrwin
Schiff.From1974hestopped
payinghisfederalincometax,
onthechiefgroundthatit
wasunconstitutional;and
neverpaiditthereafter.Not
onlydidherefusetopayit
himself,butheencouraged
thousandsofotherAmericans
towrite“zero”ontheirtax
returns,sellingbooksand
adviceandrunninganoisy
nationalcampaignoutofhis
baby-blueofficeinLas
Vegas.Hespentmanyhours
incourtand17yearsinjail,
andasaresultbecamea
martyrofthefarlibertarian
rightandthescourgeofIRS
agentseverywhere.
Whathadsuddenlymoved
himtodefythegovernment
withsuchabidingfury?
Friendscouldnotsay.The
familyhadbeenardentNew
Dealers.Ataccountancy
collegehehadingestedalot
ofHayek:toomuch,perhaps.
Laterhewasasmallgovernmentconservative,
quietlymanaginginvestments
inConnecticut:nothing
rebelliousthere.Butallhis
moneywentsouthin1968,
whenacon-manpersuaded
himtoinvestinagoldmine
thatwasagiantPonzi
scheme,andpossiblythiswas
thefusefortheexplosionthat
followed.
TheFoundingFathers,he
declared,hadneverdevised
anincometax.Itfirst
appearedin1861asawar
levy,meetingsuchresistance
thatrepealcame11years
later.In1894itrearedits
uglyheadagain,andaman
calledPollockchallengedit
intheSupremeCourt—which
struckitdown.Congressstill
beingdesperatetohaveone,
in1913itwasenshrinedin
the16thAmendment.Since
then,nolegalchallengetothe
federalincometaxhadever
beensuccessful,butthatdid
notdeterMrSchiff;forhe
hadthebitbetweenhisteeth
and,besides,thePollock
decisionhadneverbeen
overturned,remaining“good
lawtothisday”.
Thatcomposedthemain
threadofhisargument.It
thengotmuchmore
rabbinicalandetymological.
Theconstitutionalsenseof
theword“income”,he
argued,didnotmeanwages,
commission,interest,alimony
orcapitalgains;only
corporateprofit,andtherefore
nothingreceivedbyan
individualcouldbetaxedat
all.Theconstitutionalso
assumedthat“income”was
solidgoldandsilvercoin,not
thoseflimsybitsofpaper
whosedetachmentfromthe
goldstandardhad,inhis
view,ruinedthecountry.
Compliance,heargued,was
inanycasevoluntary;if
compulsory,hebecameno
morethanaserfofthe
government.Sincethetax
wasunlawful,anincome-tax
“declaration”was,infact,a
“confession”offactsthatthe
governmenthadnorightto
know.UndertheFourth,
Fifth,Sixth,Seventh,Eighth,
Ninth,Tenthand13th
Amendments,especiallythe
Fifthagainstselfincrimination,hehadnoduty
toco-operateandtaxagents
hadnopowertomakehim.
Heknewthelawupand
down,forwards,backwards
andsideways,anddefended
himselfvolublyincourt,
thoughhewasnolawyer.
Cases,clausesandcodicils
tumbledfromhislips.
Nonetheless,becausethere
wasamonumentalcriminal
conspiracyofthe
government,thejudiciaryand
theIRSagainsthim,his
argumentsweredismissedas
frivolousandhealwayslost.
Onmultipleoccasionsfrom
1978onwardshewas
convictedforwilfulfailureto
filereturns,fortaxevasion
andforconspiracytodefraud
theUnitedStatesofan
amountthatrosesteadilyto
$4.2mby2005.Inthatyear
hewasalsoconvictedof
helpingtofalsifythereturns
of3,100otherfolkwho
owed,intotal,$56mtothe
government.Butnoneofthis
waswilful,hesaid;sincehis
argumentswerealways
dismissedasDeadWrong,he
wasprobablydelusionaland
couldnothelphimself.
Injailandouthewrote,and
self-published,astackof
books.“TheBiggestCon:
HowtheGovernmentis
FleecingYou”(1976)gota
glowingreviewintheWall
StreetJournal;“HowAnyone
CanStopPayingIncome
Taxes”(1982)becameaNew
YorkTimesbestseller.“The
FederalMafia”(1992)
broughtdownafederal
injunction,thefirstbook
bannedfromsaleinAmerica
since“FannyHill”(for
obscenity)in1821.Unfazed,
MrSchiffgaveitawayonhis
websiteassoonastechnology
allowed.Helikedtopose
outsidehisoffice,incheck
shirtandjeans,withhis
thumbsstuckinhiswide
leatherbelt:acowboyaiming
tosmash,withhislegal
acuity,everybottleofsnakeoilonthegovernment’sshelf.
Heroofzero
Itmightallhavebeenfunif
hehadbeenmorecrazyand
lesscalculating;buthewas
movingassetsaround
betweenseveralbank
accounts,thebetterto
confusetheissueofwhatwas
incomeandwhatwasn’t.And
itmighthavebeenmore
heroic,thoughstilldoomed,
ifothershadnotbeenhurt.
Butthehundredswho
followedhimanddeclared
theirincome“zero”soon
foundthemselvesintrouble,
withathreateningletterfrom
theIRSoralienontheircar
ortheirhouse.Hecouldthen
offerthem,foraprice,advice
todealwiththattoo,upto
$1,000fora“tax-court
toolkit”.Nowonderheliked
todobusinessinNevada,
wheregamblingwasawayof
life.
Thefactthathespenthisfrail
lastyearsinfederalprison
madehimamartyrtothetaxprotestcause.Hewouldhave
madeabetteroneifthe
pleasantopenfacilitieswhere
heresided,andallmealsand
servicesthereinprovided,had
notbeenpaidforbyUncle
Sam;orrather,bythosewho
uncomplaininglystumpedup
theirfederalincometaxes,
unlikehimself.
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Economicand
financial
indicators
Interactive
indicators
[Thu,29Oct
18:57]
Output,prices
andjobs
Trade,exchange
rates,budget
balancesand
interestrates
[Thu,29Oct18:57]
[Thu,29
Oct18:57]
TheEconomist
commodity-price
index
Startinga
[Thu,29Oct18:57]
business
Markets
[Thu,29Oct18:57]
[Thu,29Oct18:57]
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Interactiveindicators
Oct31st2015|Fromtheprint
edition
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Output,pricesand
jobs
Oct31st2015|Fromtheprint
edition
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Trade,exchange
rates,budget
balancesandinterest
rates
Oct31st2015|Fromtheprint
edition
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TheEconomist
commodity-price
index
Oct31st2015|Fromtheprint
edition
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Startingabusiness
Oct31st2015|Fromtheprint
edition
TheWorldBank’s“Doing
Business”reporthasfound
thatduringthepastyear45
economies,ofwhich33were
developing,introduced
reformstomakeiteasierfor
entrepreneurstogetstarted.
InNewZealandasimple
onlineproceduremeansthat
ittakesonlyafewhoursto
setupabusiness.Bycontrast,
inHaitiittakesmorethan
threemonthsandinvolvesa
complexlegalprocess.Spain
hasimproved:in2005
startingabusinesstookmore
than130days,nowittakes
14.Mauritaniahaseliminated
aminimumcapital
requirementforestablishing
anenterprise.Although
Singaporewasonceagain
rankedfirstforeaseofdoing
business,itimplementedno
reformsoverthepastyearin
theareasmeasured.
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Markets
Oct31st2015|Fromtheprint
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