don't ban, don't rush Bangladesh's grotesque politics Tencent

NOVEMBER 10TH–16TH 2018

Reflections on Armistice Day

Gene drives: don’t ban, don’t rush

Bangladesh’s grotesque politics

Tencent at 20

Where next?

The Economist November 10th 2018 3

Contents continues overleaf1

Contents

The world this week

6 A round-up of politicaland business news

Leaders

11 America after themid-termsWhere next?

12 European defenceEU and whose army?

12 BangladeshElectoral troll

14 Gene drivesOn the extinction ofspecies

16 Video gamesThe price of free

Letters

20 On gender identity, NewZealand, California,Brexit, “In Our Time”

Briefing

22 Gene drivesExtinction on demand

Britain

25 Universities’ iffy finances

26 Did Leave cheat?

28 Military recruitment

28 Jeremy Heywood, masterservant

30 Profitable care homes

30 Knife crime spikes

31 Parties pinch policies

31 Cryptic crosswords

32 Bagehot Peterloo vWaterloo

Europe

33 NATO revs up

34 French labour-marketreform

35 Germany’s next leader?

35 Greece’s licensedanarchists

36 Rostov-on-Don

37 Charlemagne Reflectionson the Armistice

United States

38 The House turnsDemocratic

39 The Senate

40 Ballot initiatives

41 Governors’ races

41 Sessions sacked

42 Organising elections

43 Lexington Immigrationand the Democrats

The Americas

48 The Latinobarómetrosurvey

49 The tequilisation ofmezcal

50 Bello Judges turnpolitical

Middle East & Africa

51 Africa’s urban opposition

52 Repression in Tanzania

53 Elections in Madagascar

53 Chinese medicine inAfrica

53 Libya’s peace process

54 Films about jihadists

Schumpeter The world’ssecond-most-populouscountry has been flirtingwith a Lehman moment,page 70

On the cover

Divided government for adivided country: leader, page 11.Democrats end unifiedRepublican government andwill provide a check on thepresident, page 38. AsDemocrats improve in thesuburbs, they grow evenweaker in rural states, page 39

• Reflections on Armistice DayNo continent, even one as old asEurope, can truly master itshistory: Charlemagne, page 37.Partially democratic countriesfight in wars most often: Graphicdetail, page 89

• Gene drives: Don’t ban, don’trush Research into gene drivesshould continue. But the worriesthey raise must be addressed:leader, page 14. The promise andperil of a new genetic-engineering technology, page 22

• Bangladesh’s grotesquepolitics A poster-child fordevelopment is disfigured by itspolitics: leader, page 12. Theruling party appears to be easingup ahead of an impendingelection, page 55

• Tencent at 20 A Chineseinternet titan shakes things upafter a singularly bruising year,page 65. The rush to extractmoney from video-game playersrisks a regulatory backlash:leader, page 16

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4 Contents The Economist November 10th 2018

Volume 429 Number 9117

Asia

55 Election season inBangladesh

56 Banyan Pakistan’sindecisive authorities

57 Robots in Japan

57 China and New Zealand

58 Forced labour inUzbekistan

59 Ageing Vietnam

China

60 Mapping Xi Thought

61 Language in Macau

62 Chaguan Japan’s softpower in China

International

63 Pope Francis on the ropes

Business

65 Tencent’s annus horribilis

66 Amazon’s headquarters

67 Booming billboards

67 The rise of biosimilars

68 European firms and Iran

69 The growth ofmicrobrands

70 Schumpeter India’sshadow-banking crisis

Finance & economics

71 American farmers’ woes

72 Buttonwood Housing inglobal cities

73 Hester Peirce at the SEC

74 1MDB and GoldmanSachs

74 Naughty banks and IPOs

75 Non-wage compensation

75 Topping the diaspora

76 Free exchange TheItalian budget showdown

Science & technology

79 Deep-sea mining

80 Reopening flooded mines

81 Spiders and streetlights

82 How to join art’s elite

Books & arts

83 A critique of atheism

84 The new geneticrevolution

85 A novel of Americanturmoil

85 Chopin’s life and times

86 The puppet-mistress ofMali

Economic & financial indicators

88 Statistics on 42 economies

Graphic detail

89 Partially democratic countries fight in wars most often

Obituary

90 Whitey Bulger, South Boston’s mobster-in-chief

6 The Economist November 10th 2018

1

The world this week Politics

In America’s mid-term elec-tions, the Democrats won theHouse of Representatives forthe first time in a decade. Theygained a firm majority, helpedby a surge in support fromwhite women and from votersaged under 30. Just under aquarter of the new House willbe female. Two Muslim womenand two Native Americanwomen won seats, a first forboth groups. Nancy Pelosi saidshe would stand for Speaker,again, but has said she wouldbe a “transitional” figure.

A good night for the Democratsin the House wasn’t replicatedin the Senate, where theRepublicans increased theirmajority by picking up Indi-ana, Missouri, North Dakotaand probably Florida. MittRomney will embark on a newcareer after winning a Senateseat in Utah. Beto O’Rourke,the darling of the Democrats,narrowly failed to unseat TedCruz in Texas.

The Democrats also won sevengovernorships, which includ-ed the defeat of Scott Walker,public-sector unions’ bêtenoire, in Wisconsin. AndrewGillum fell just short in his bidto become the first blackgovernor in Florida. StaceyAbrams was reluctant to con-cede in a tight race in Georgiain which she hoped to becomethat state’s first black governor.Colorado elected the country’sfirst openly gay governor.

Among the many ballotinitiatives in the states,Florida’s voters passed a lawthat restores voting rights toformer prisoners. Coloradoand Michigan approved in-dependent commissions thatwill be responsible for drawingcongressional districts.

Donald Trump sacked JeffSessions as attorney-general.Mr Sessions had attracted thepresident’s ire for recusinghimself from overseeing thespecial counsel’s investigationinto Russian meddling inelections. Mr Trump replacedhim on an interim basis withMatt Whitaker, a critic of thatinvestigation.

Penalty kicksAfter pulling out of a nucleardeal with Iran earlier in theyear, America’s most punish-ing sanctions on the countrycame into effect, aiming tocripple its already strugglingeconomy. Hassan Rouhani, theIranian president, called it anact of “economic war”. Francevowed to help European firmsdefy the sanctions.

Saudi members of a teamassisting the Turkish authori-ties investigate the killing ofJamal Khashoggi inside theSaudi consulate in Istanbul lastmonth were accused of tryingto remove evidence.

Despite America’s call forpeace talks, the war in Yemenescalated, as forces backed by aSaudi-led coalition advancedon rebel positions in the portcity of Hodeida. More than 150people are reported to havebeen killed in the past week.Hodeida’s port is critical forfeeding millions of Yemenis atrisk of famine.

Dozens of schoolchildrenkidnapped in north-westCameroon were freed. Theschool’s headmaster and ateacher are still being held. Thegovernment blamed Anglo-phone separatists in the Eng-lish-speaking region, whichthe separatists denied.

un investigators found morethan 200 mass graves in Iraqcontaining between 6,000 and12,000 bodies. The graves datefrom 2014 to 2017, when thejihadists of Islamic State ranthe territory that is underinvestigation.

From judge to politicianSérgio Moro, a Brazilian judgewho has been leading the LavaJato (Car Wash) investigationsof corruption among poli-ticians, accepted an offer fromthe country’s rightist presi-dent-elect, Jair Bolsonaro, tolead a new “super-ministry” ofjustice and public security. MrMoro had ordered the jailing ofLuiz Inácio Lula da Silva, aleft-wing former president.

A jury was selected for the trialin New York of Joaquín Guz-mán, also known as El Chapo(Shorty), the former leader ofMexico’s Sinaloa drug gang.Mr Guzmán escaped twicefrom prison, most recently in2015, when he tunnelled out ofa maximum-security jail. Hewas recaptured and extraditedto the United States.

Ecuador’s supreme courtordered the country’s formerpresident, Rafael Correa, tostand trial on charges that heparticipated in a failed plot tokidnap an opposition con-gressman in 2012. Mr Correahas been living in Belgiumsince he left office in 2017. Hedenies wrongdoing.

Caving in to violenceThe government of Pakistangave in to mass protests byIslamist agitators and barredAsia Bibi, a Christian womanrecently acquitted of blasphe-my, from leaving the country. Afew days later, however, itordered her release fromprison. Her precise where-abouts are unknown.

Voters in New Caledonia chosefor the Pacific island to remainpart of France, rather thanbecome independent. But themargin was narrower thanexpected; there may be anotherreferendum in two years.

Australia’s government bowedto criticism from human-rights groups and said it wouldmove refugee children andtheir families from a detentioncentre it operates in Nauru toAustralia itself. But it also saidit would not allow them toremain permanently.

Myanmar’s ruling party, theNational League for Democra-cy, lost by-elections in severaldistricts inhabited mainly byethnic minorities that it hadwon at the most recent nation-al election, in 2015.

China’s president, Xi Jinping,and his American counterpart,Donald Trump, held their firstpublicly disclosed telephoneconversation in six months. MrTrump described it as “longand very good”, and said it hadcovered the two countries’trade conflict as well as NorthKorea. China’s foreign ministrysaid the call was “positive”.

Army dreamers

Emmanuel Macron used aspeech at Verdun, part of theextensive commemorativeevents surrounding the 100thanniversary of the armisticethat ended the first world war,to call for the creation of a“true European army”. Com-mentators scrambled to deci-pher exactly what the Frenchpresident meant by that.

A former Nazi concentration-camp guard went on trial inGermany at the age of 94.

A 69-year-old Dutchmanlaunched a legal case to changehis age to 49, arguing that thelaw already allows him tochange his name and gender.He apparently wants to im-prove his dating prospects.

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8 The Economist November 10th 2018The world this week Business

Robyn Denholm was named asthe new chairman of Tesla, aspart of a deal with regulatorsunder which Elon Musk isrelinquishing the role at theelectric-car manufacturer. MsDenholm is the chief financialofficer at Telstra, an Australiantelecoms firm. She will be thefirst person at Tesla other thanMr Musk, who remains chiefexecutive, to sit at the apex ofthe company since its veryearliest days.

Citigroup also appointed anew chairman. John Dugan,who takes over from MikeO’Neill in the new year, is aformer banking regulator.

Active consumersAs it prepares for Singles’ Day,the world’s biggest shoppingevent, on November 11th,Alibaba posted a solid rise inquarterly net profit, to 20bnyuan ($2.9bn). The Chinesee-commerce company nowboasts 601m “active consum-ers”. Amazon reported a muchlower customer base the lasttime it released such figures.

SoftBank reported a big jumpin quarterly net profit, to¥526.4bn ($4.6bn). That wasmostly due to returns fromtechnology investments in itsVision Fund. The Japaneseconglomerate has had to facesome awkward questionsabout the Saudi money that isbacking the fund since themurder of Jamal Khashoggi. Itsshare price has fallen by a fifthfollowing the killing of theSaudi journalist, allegedly bySaudi government operatives.

The political manoeuvringcontinued in the trade warbetween America and China.Wang Qishan, a senior Chineseofficial, indicated that Beijingwas ready for a discussionabout “mutual concerns” withWashington. That came afterPresident Xi Jinping lashed outat what he described as inter-national trade’s “law of thejungle”. Mr Xi and DonaldTrump are expected to discusshow they might end theirstand-off when they meet atthe g20 summit this month.

American prosecutors broughtcriminal charges against twoformer bankers at GoldmanSachs and a Malaysianfinancier in connection withthe alleged misappropriationof funds from Malaysia’s 1mdb

development fund (one of thebankers has pleaded guilty).Goldman said it was co-operat-ing with the Department ofJustice’s continuing investiga-tion and acknowledged thatthe proceedings could result insignificant fines or sanctionsagainst the bank.

Berkshire Hathaway revealedthat it had repurchased $928m-worth of its shares in August,its first buy-back in six years.Warren Buffett’s investmentcompany has not completed atakeover in nearly three years.Spotify, a music-streamingservice, announced a $1bnbuy-back of its own.

The share prices of Italianbanks came under renewedpressure, ahead of a deadlinefor the Italian government tosubmit a revised budget thatmeets eu rules. Italy’s bigbanks did better than many oftheir European counterparts inthe recent stress tests conduct-ed by the European BankingAuthority. But questionsremain about how tough thosetests really are.

On the other handA remark by the governor of theBank of Japan, HaruhikoKuroda, that it was no longerappropriate to implement “alarge-scale policy to overcomedeflation” was taken as theclearest indication yet that heis minded to move on from thecentral bank’s enormous stim-ulus programme and starttightening monetary policy. MrKuroda hedged his comments,however, and said he wouldkeep interest rates extremelylow for the foreseeable future.

American employers added250,000 people to the payrollsin October, the 97th consec-utive month of jobs growth.The unemployment rate heldsteady at 3.7%, the lowest it hasbeen since the late 1960s. Paygrew at the fastest pace, year onyear, since April 2009, thoughthat was in part because itbounced back from a low base

in October 2017, when wageswere unusually depressedfollowing a big hurricane.

Buoyed by higher oil prices,Rosneft reported a 150% rise innet profit for the third quartercompared with the same threemonths last year, to 142bnroubles ($2.2bn). Russia’sbiggest oil company also bene-fited from being able toincrease production, owing toan agreement between opec

and Russia in June that easedrestrictions on output.

Quality, not quantityApple’s share price struggledto recover from the drubbing itreceived after it downgradedits outlook for the all-impor-tant final three months of theyear, which includes theChristmas shopping season.The company also said it wouldstop reporting the number ofiPhones, iPads and Maccomputers it sells, unsettlinginvestors who have come torely on those figures as a gaugeof Apple’s health. It says unitsales are less relevant. In thelatest quarter, for example,Apple sold 47m iPhones.Although that was similar tothe same period last year,revenue from iPhone salessoared by 29% because it wasshifting dearer devices.

United States

Source: Bureau of Labour Statistics

Unemployment rate, %

1969 80 90 2000 10 18

0

3

6

9

12

Leaders 11

For once, the outcome that was predicted actually occurred.

Democrats took the House of Representatives in America’s

mid-term elections on November 6th, and will provide some

welcome oversight of the White House when members of the

new Congress take their seats in January. Republicans held the

Senate—with a bigger majority, which will make presidential ap-

pointments easier to confirm. Both sides declared victory. A

starkly divided country now has a divided government. Under-

pinning the results, though, is the deepening of a structural shift

in American politics that will make the country harder to govern

for the foreseeable future. Democrats represent a majority of

America’s voters, but Republicans dominate geographically.

Democrats won the popular vote for the House of Representa-

tives by a comfortable margin. Their position as the party that

enjoys most support among Americans, thanks to its strength in

urban centres, was reinforced by a surge in support from the sub-

urbs, where revulsion with President Donald Trump was evi-

dent. Meanwhile Republicans tightened their grip on less popu-

lous, more rural states, easily beating Democratic senators in

Indiana, Missouri and North Dakota. In a country where one

chamber of the legislature is based on population and the other

on territory, this division is a recipe for gridlock, poor gover-

nance and, eventually, disenchantment with the political sys-

tem itself.

The breadth of the divide is striking. Ten

years ago there were 17 states with one Republi-

can senator and one Democratic one. From Jan-

uary 2019 there will be just seven. In federal elec-

tions hardly any candidates seem able to survive

in opposition-party territory. Only six Demo-

cratic senators won their elections in states car-

ried by Mr Trump in 2016. The picture is less

stark for governors, but in statehouses the pattern reasserts it-

self. From January Minnesota will be the only state where one

chamber is controlled by Democrats and the other by Republi-

cans. The last time that was the case was back in 1914.

This equilibrium may be stable, but it is damaging for the

country and for both parties. For the Republicans, the danger is a

long-term one. For now, they hold the White House and have an

increased majority in the Senate. But in a two-party system, a

party that prevails while consistently failing to capture a major-

ity of votes will one day find it is no longer seen as exercising

power legitimately by a majority of voters. For the Democrats,

the challenge is immediate. They may rail against a system that

disadvantages them in structural ways, but cannot change that

system until they can work out how to win within it. Running up

vast vote shares in New York and California is all very well, but on

its own will not deliver a governing majority.

What is the way out of this impasse? The main onus is now on

the Democrats. For their own good, not to mention the country’s,

they have to find ways to appeal in America’s heartland.

That starts with exercising restraint. Yes, they should use

their majority in the House to scrutinise a president who shows

contempt for the norms that have constrained past presidents.

They should look carefully at what has been going on in federal

agencies, and investigate possible presidential abuses of power

or misuse of the office for personal aggrandisement. But Demo-

crats should resist the urge to use their majority in the House to

take revenge, hounding the president in the way that Newt Ging-

rich and his Republican colleagues once hounded Bill Clinton.

Prosecution should be left to prosecutors. It is not obvious, for

instance, that there would be much to gain by investigating the

circumstances of Justice Brett Kavanaugh’s confirmation to the

Supreme Court. There is certainly no ground to impeach him, as

some Democrats want.

A second Democratic priority should be to show that they

have the ideas and capacity for governing that can appeal to a

broader swathe of voters. One way to do so is to make a good-

faith effort to work with the president and the Republicans.

There are deals to be done on infrastructure and on drug prices.

They also need to make immigration less toxic (see Lexington).

In 2010, when Republicans won the House during Barack

Obama’s presidency and proceeded to block everything Demo-

crats wanted to do, the White House argued that it was unjust for

half of one branch of the federal government to stand in the way

of everything else. That was right then and it is right now. House

Democrats should not declare, as Mitch McConnell once did,

that they will oppose everything the president does. There

should be no repeat of the hostage-taking that

saw the Republican House flirt with a sovereign

default during Mr Obama’s second term.

Plenty of Democrats will counsel against

holding back, arguing that the scorched-earth

strategy that the Republicans used when they

had a majority in the House worked perfectly

well for them. Why, they will ask, should Demo-

crats be the party of compromise in the name of

better government, when their opponents have so often refused

to give an inch?

For two reasons. First, it might just yield results. Admittedly,

Mr Trump’s recent behaviour does not bode well. Accusing

Democrats of facilitating the murder of policemen, as he did in

the closing stages of the campaign, is not the best way to foster

bipartisan spirits. Mr Trump could give up on the idea of signing

any legislation in the next two years, preferring to rule by exec-

utive order, while ranting against the opposition.

But he may also surprise, proving more willing to deal with

Democrats than other Republican presidents have been. The

Trump motivating principle is self-interest rather than party loy-

alty. He has proved willing to discard some long-standing party

positions, for good and ill. The role of dealmaker-in-chief could

rather suit his ego.

Second, even if bipartisan efforts fail, behaving responsibly is

in Democrats’ long-term interests. By and large, Democrats want

the federal government to work well. Republicans, by contrast,

still consider the words “I’m from the government and I’m here

to help” to be a micro-aggression. Gridlock does nothing for con-

fidence in government, which is something Democrats need if

they are to win more voters’ confidence. Like it or not, they have

more to lose from dysfunction than Republicans do. 7

Where next?

Divided government for a divided country

Leaders

12 Leaders The Economist November 10th 2018

1

Norway’s countryside teemed with European soldiers in

the past two weeks. A Montenegrin platoon drilled within a

Slovenian company, which was wrapped in a Spanish battalion,

which in turn was inside an Italian brigade. All were part of

nato’s biggest exercise since the cold war (see Europe section).

Yet this is not quite what President Emmanuel Macron had in

mind when he called for a “true European army” on November

6th. Striking a Gaullist pose, Mr Macron urged Europe to free it-

self from military dependence on America.

Mr Macron did not say precisely what he meant. Even so, his

loose talk of a Euro-army is confused, quixotic—and reckless at a

time of growing transatlantic uncertainty.

European federalists have long dreamed of

defence integration, but they have had little to

show for it beyond some joint equipment pro-

jects and anti-piracy operations. The most am-

bitious plan for a common army collapsed in the

1950s because of French opposition. Since then,

however, France has pushed lesser schemes to

develop autonomous European forces. These

were mostly blocked by Britain, which feared

splitting nato (whose integrated military command France left

in 1966 and then rejoined in 2009).

European defence has returned to the fore for three reasons:

Brexit will remove its most dogged opponent within the Euro-

pean Union; Donald Trump has shaken European faith in the

nato alliance; and France and Germany have been desperate to

find common cause. But European leaders cannot agree on its

aims: should it be a symbol of ever-closer union, a roving gen-

darmerie to police the continent’s periphery or, as Mr Macron

implied this week, a force that could beat off the very biggest

powers, such as Russia and China?

Germany is keen on using eu defence schemes, like Perma-

nent Structured Co-operation, a cluster of eu projects launched

with fanfare last year, to bind big and small European countries

closer together. Mr Macron, irked that this gives priority to poli-

tics over firepower, proposed a European Intervention Initiative:

a smaller club of more ambitious powers, open to non-eu mem-

bers, who would jointly plan future expeditionary campaigns.

Germany saw this as an attempt to drag others into France’s Afri-

can wars, but grudgingly signed up anyway.

For all these plans, Europeans would struggle to wage even

medium-sized wars without extensive help from America, as

they discovered during their air campaign in Libya in 2011.

Though their defence spending is growing, there are still large

gaps in their arsenals. In Norway, Europeans flaunted their ar-

moured vehicles, air-refuelling tankers and

transport aircraft. But data collected by the Ger-

man Council on Foreign Relations, a think-tank,

shows that their stock of equipment in all these

areas has been shrinking. The eu will be weaker

still when Britain leaves.

So what if some fantasise about Euro-forces?

If that pushes them to equip their armies prop-

erly, and stop duplicating capabilities, so much

the better. The merging of Dutch, Romanian and Czech units into

the German army is promising. The danger is that little new

fighting strength will be created, giving America yet more rea-

sons to feel exasperated with its allies. European leaders rebuked

America for pulling out of the inf treaty, a cold-war nuclear pact,

but until recently kept silent about Russia’s brazen violation of

the accord. Mr Macron was crass in talking of the need to “protect

ourselves” from America, in effect comparing Europe’s awkward

but indispensable ally to Russia and China.

Europeans must do more to defend themselves, but the only

effective European “army”—or armies—are forces that plug

firmly into nato. Anything else would be good only for ceremo-

nial parades, not real wars.7

EU and whose army?

Emmanuel Macron’s call for a European army is misguided

European defence

In many ways, Bangladesh is a role model for South Asia. Its

economy grew by an average of 6.3% a year over the past de-

cade. Last year it expanded by 7.3%—faster than India’s or Paki-

stan’s. Once the region’s poorest big country, its gdp per head is

now higher than Pakistan’s, when measured at market exchange

rates. Better yet, it boasts lower infant mortality, higher school

enrolment and longer life expectancy than its peers. With 165m

citizens, it is the world’s eighth-most-populous country. But its

fertility rate is lower than that of the region’s other giants.

No one, however, would envy Bangladesh’s politics. They are

characterised by an all-or-nothing, no-holds-barred aggression

between two parties, the ruling Awami League and its main rival,

the Bangladesh Nationalist Party (bnp). Disputes are most com-

monly settled not in parliamentary debate or at the ballot box,

but through paralysing hartals—strikes-cum-blockades en-

forced by partisan thugs. At the most recent election, in 2014,

clashes claimed 18 lives on election day alone. More than 100

polling stations were set ablaze.

This week the Election Commission is expected to set a date

for the next parliamentary vote, probably in late December.

Things look calmer this time around. There have been no hartals;

instead, the government has met with an alliance of opposition

parties to discuss ways to improve the political climate. Even so,

there is little hope the election will be fair (see Asia section). The

Electoral troll

A poster-child for development is disfigured by grotesque politics

Bangladesh


1

2 Awami League has spent its ten years in power systematically co-

opting state institutions and hobbling the opposition. It has

locked up hundreds of opposition activists, including Khaleda

Zia, the leader of the bnp. Others have been executed, in the

name of righting the wrongs of Bangladesh’s war of indepen-

dence from Pakistan in 1971. Jamaat-e-Islami, a religious opposi-

tion party allied to the bnp, has been banned altogether.

The press has been cowed with a barrage of lawsuits. Critics of

the government on social media are hounded. Unco-operative

judges have landed in legal trouble. In 2011 the Awami League

abolished the system whereby a neutral caretaker government

presided over elections—one of the causes of the furious prot-

ests at the subsequent ballot. The fact that the opposition has

been relatively quiet in the run-up to the coming vote is not a re-

flection of greater harmony, but of the government’s iron grip.

Pick your poison

Even if the opposition were to have a chance in the vote, it would

be unlikely to govern better than the Awami League. The army

was so appalled by the corruption of the bnp’s last stint in gov-

ernment, which ended in 2006, that it briefly seized power in an

attempt to weed out crooked politicians before allowing an elec-

tion to go ahead in 2008. (It tried to shunt aside both Mrs Zia and

Sheikh Hasina Wajed, the current prime minister and leader of

the Awami League—to no avail.) In a leaked internal memo, an

American diplomat described Tarique Rahman, Mrs Zia’s son

and now the bnp’s acting leader, as “a symbol of kleptocratic gov-

ernment and violent politics” who is “notorious for flagrantly

and frequently demanding bribes”. (His defenders say wayward

hangers-on were responsible for misdeeds blamed on him.)

There is no easy way out of this mess. In an ideal world,

Sheikh Hasina would call off politically motivated prosecutions,

stop meddling in institutions that are supposed to be indepen-

dent and reinstate the system of caretaker governments before

elections—things she shows no sign of doing. But there is scope

for both sides to back away from their maximalist positions.

Sheikh Hasina could appoint a few bnp leaders as ministers

in a multi-party government in the lead-up to the vote, giving the

opposition some purchase on the process of voting and count-

ing. That would also give the bnp a reason not to boycott the elec-

tion, as it did last time and threatens to do again. The boycott was

self-defeating: it left the bnp with no voice in parliament, and

gave the government unfettered power to legislate as it liked. But

it also left Sheikh Hasina’s government looking illegitimate.

There would be advantages to both sides, in other words, in al-

lowing the opposition to function. Bangladesh deserves better

politics. That would be the best way of preserving its admirable

economic progress. 7

Extinctions are seldom cause for celebration. Humans are

wiping out species at a frightening rate, whether hunting

them into history or, far more threateningly, damaging the habi-

tats on which they depend. But occasionally, the destruction is

warranted. Smallpox was officially eradicated in 1980, and no

one laments the fate of the virus that caused it; campaigns to

save the virus that causes polio are thin on the ground. How,

then, to think about a new technology that will make driving a

species to extinction far easier?

That technology is known as a gene drive, so called because it

uses genetic engineering to drive certain traits

through a population. Those characteristics

need not be deleterious: they might include

greater resilience to disease among crops or,

perhaps, greater tolerance to warming waters on

the part of corals. But if the desired trait were

harmful, gene drives could in theory make a spe-

cies extinct. And if the species in question were

the three types of mosquito responsible for

transmitting malaria, proponents reckon it could save close to

half a million lives a year, many of them children. The same ap-

proach could be used against other vector-borne diseases such

as Lyme disease, Zika and dengue fever. Gene drives also offer

conservationists a potential weapon against invasive species

such as foxes, mice, rabbits and rats, whose proliferation threat-

ens native species in some parts of the world. (Humans are un-

suited to gene drives, which work best in species that reproduce

quickly, with many offspring.)

Normally genes have a 50:50 chance of being passed on dur-

ing reproduction. Gene drives tilt the evolutionary scales. One

area of research focuses on genes that can copy themselves to the

second in a pair of chromosomes, ensuring that they will be in-

herited by all offspring. Biasing inheritance in this way is what

makes it possible to push a desired mutation, whether harmful

or beneficial, through a population—controlling its level, and

potentially wiping it out altogether (see Briefing).

Like many technologies, however, gene drives may lead to

bad outcomes as well as good. Opponents think the technology

is simply too dangerous to contemplate using. Some worry about

playing God—though discarding an opportuni-

ty to save millions of lives in order to defend a

principle is itself unethical. Others warn that

the technology could entrench the power of big

agritech firms. But that is an argument for en-

suring competition, not for ending research.

Three other concerns are less easily handled.

One is practical: removing a species from the

food chain could have unintended conse-

quences, particularly if gene drives can move to a closely related

species. Another relates to governance. Genetically modified

crops can be kept relatively contained; animals carrying gene

drives could be mobile and respect no borders. One country’s de-

cision to use gene drives will have consequences for its neigh-

bours. A third worry concerns nefarious uses of the technology,

and not only by states. A mosquito, engineered to inject toxins,

could be used as a weapon.

Faced with such risks, some want simply to call a halt. An at-

tempt to impose a moratorium on gene drives was rejected by

On the extinction of species

Research into gene drives should continue. But the worries they raise must be addressed

Gene drives


2 governments in 2016 at a United Nations meeting on biodiver-

sity. Another such meeting, which takes place this month, will

debate proposals that could hinder field trials. But putting the

brakes on research may impose real costs: not just the annual toll

taken by malaria and other killers before an answer is found, but

also slower progress towards making gene drives safer. Since the

decision in 2016 researchers have made advances on drives that

die out over time, for example. That sort of approach could go

some way to solving the practical concerns. Given that it will be

eight years or so before a gene drive is expected to be ready for

field trials, more can be done in the interim to minimise its po-

tential to cause harm.

That will require a more robust approach to governance, too.

The ideal would be a set of norms for states and funders to adhere

to. These might include rules on the mandatory registration of

gene-drive trials; on stringent sequencing of gene-drive tests, as

they progress from laboratory environments to field trials; on

ways for neighbouring states to monitor standards in any coun-

try that wanted to use gene drives; and on agreed criteria for the

approval of any release, such as the existence of an unmodified

population in captivity.

Rules or not, rogue states and other malevolent actors may

still want to use gene drives for malicious purposes. And, like

many new technologies, gene drives do not require big organisa-

tions in order to be made to work. Prudent countries ought to

plan accordingly. America’s government, rightly, justifies some

of its gene-drive research as a way to develop better defences

against harmful uses. In the future, improved gene-sequencing

technologies should make it easier to spot species carrying ma-

levolent drives.

These risks underline why gene drives must be managed

carefully. They ought not, however, to obscure the prize on offer

if the technology can be made to work well. Humans are already

radically and heedlessly reshaping the planet. Gene drives would

further enhance humanity’s ability to shape nature—but with

the potential to do so precisely, efficiently and for the better. 7

Moral panics over new media are old hat. The social effects

of novels, films, comic books and pop music were con-

demned by the grumpy reactionaries of the time. In recent years

video games have been a popular villain. Exasperated parents

and opportunistic politicians have long fretted that they make

players lazy and listless, or else unpredictable and violent. Those

concerns turned out to be largely misplaced. But new worries

about the addictiveness of games, and the danger that poses to

children in particular, have more substance to them and are al-

ready prompting a regulatory crackdown. The industry would be

wise to get ahead of the problem.

China, the world’s biggest video-game market, is leading the

charge. The government clamped down on the approval of new

games earlier this year, and stopped approvals

altogether in October. Shares in Tencent, which

built its business on video games and is one of

the world’s largest internet companies, have

fallen by 28% since the start of the year (see Busi-

ness section). China is an authoritarian state

prone to overreaction. But it is not the only

country that is worried. Japan and South Korea,

both liberal democracies, have passed laws de-

signed to regulate a video-gaming industry whose products are

increasingly seen as addictive and harmful. And as business

models refined in Asia have come to the West, lawmakers in Eu-

rope and America are becoming more concerned, too.

Such concerns feel more credible than prior panics, for two

reasons. The first is that much gaming now happens online, and

generates reams of behavioural data. This allows publishers to

monitor exactly how customers are playing games, and fine-

tune them to make them as compelling as possible.

The second is the realisation that players will happily pay real

money for virtual goods. These can be upgrades, costumes or

weapons for their in-game characters, or (more cynically) a lot-

tery-style “loot box” whose contents are unknown in advance,

but might prove valuable enough to resell to other players. Since

the marginal cost of creating virtual items is zero, they are very

profitable for developers. That has given rise to a “freemium”

business model, of which Tencent was a pioneer, whereby games

are given away cheaply or free but players are constantly nagged

to spend money on in-game items. All this has been super-

charged by smartphones, which mean people can keep playing—

and paying—at all hours of the day.

The result is an unhealthy loop. Firms strive to keep players

hooked, because the more time they spend in a game, the more

money they will spend on baubles within it. Whizzy data analyt-

ics let developers tweak their products to do just that, using psy-

chological tricks and nudges familiar from social-networking

sites and the gambling industry. All this can be

extremely lucrative. Sensor Tower, an analysis

firm, reckons that “Candy Crush Saga”, a popular

game in the West, made $930m last year. The

keenest gamers, known as “whales” (a term

coined by casinos to describe high-rolling cus-

tomers), can spend thousands of dollars a year.

Tencent is trying to placate the Chinese gov-

ernment. It is expanding its age-verification

scheme and limiting screen time for children. Its counterparts

in other countries should take note. This newspaper does not

generally believe governments should tell adults how to spend

their money. But the industry could do more to protect children

and addicts from its increasingly sophisticated products.

It is in its own long-term interests to do so. Video games now

rival the film industry for clout. Gaming is thought to be worth

around $140bn annually worldwide, and is growing at 13% a year.

But society’s attitude towards technology is hardening. In a

world of fake news and hyper-targeted advertising, voters and

politicians have awoken to the danger that devices and data may

be manipulating people in harmful ways. A little voluntary for-

bearance now could save a lot of regulatory pain later.7

The price of free

The rush to extract money from players risks a regulatory backlash

Freemium gaming revenuesEstimated, $bn

0 20 40 60 80

2016

2018 Asia

North America Europe

Video games

Common challenges

uncertainties to global governance.

Chinese insight

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globalization and regional economic integration.

economic integration and contribute to an

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environment.

Beijing Review


Letters are welcome and should beaddressed to the Editor atThe Economist, The Adelphi Building,1-11 John Adam Street, London WC2N 6HT

E-mail: [email protected] letters are available at:Economist.com/letters

Letters

The gender agendaI was disappointed by yourarguments against the case forgender self-identification, andwas particularly baffled whysuch a staunch defender ofclassic liberalism would sup-port such a heavy, and vaguelydefined, state role in such apersonal matter (“Who decidesyour gender?” October 27th).You are concerned about thepotential threat from malesself-identifying as females inorder to prey on women andchildren in restrooms andother gender-segregatedspaces (the absence of evi-dence of trans people attackingpeople in such spaces notwith-standing). However, the lawalready covers such eventual-ities; it is already illegal toassault people in those places.

The policies you are push-ing essentially criminalise theability of trans people to use apublic bathroom that matchestheir identity until they jumpsome state-imposed hurdle.Until then, trans people whoseek to work, shop, or basicallydo anything outside theirhome face a cruel and danger-ous dilemma: break the law, orface ridicule, threats, andviolence when using a bath-room that does not match theirgender identity. diana maurer

Alexandria, Virginia

As the parent of a transgenderchild, I want to offer only a fewclarifications. You are quitecorrect that making gender amatter of pure self-identifica-tion, with no processes orguidelines, hinders trans-gender acceptance. The per-ception that people just “de-cide” to change genders iswrong. Establishing medicaland legal processes that sup-port and confirm transgenderindividuals would help themgain validation. Moreover,until we can separate genderstereotypes from gender iden-tity, we will keep pushingpeople into corners they areultimately uncomfortable in.

Most of all, however, I haveto say that the fears of losingsafe spaces for women is themost absurd of all concerns.

This fear can only possiblyexist in the complete igno-rance of what transgendermeans, and is often based onconfusions with cross-dress-ing or drag. If anyone hasactually met a transgenderwoman, they would clearly seethat forcing them into men’sspaces would be awkward foreveryone. In fact, many womenhave probably already shared asafe space with a transgenderwoman, and not noticed.chris hoyt

Westfield, Indiana

I am a 70-year-old gay man. Inthe 1950s I might have beenconsidered gender dysphoric. Icried easily. I asked my parentsto buy me a style of shoes wornonly by girls, and I preferredcooking to rough-and-tumbleplay. In my 30s I reacted againstmany of my early inclinations.I learned martial arts andworked in masculine profes-sions. I recently retired from acareer as a therapist where Ispent much of my time work-ing with gang members.

If some well-meaningperson had convinced me as achild that I was female it wouldhave short-circuited a life-longprocess of discovery and self-transformation. Early genderidentifications are often basedon partial information. Basinglife-long identities on theseearly traits is a serious mistake.john dury

San Rafael, California

A learning curve in economicsAlthough New Zealanddeserves praise for the way itmonitors the financial perfor-mance of state assets, it isworth pointing out that thisdoes not automatically lead tosensible decisions (“How tospend it”, October 20th). A fewmore economic principles mayneed to be incorporated intothe toolkit for this to happen.

In particular, the publicwould benefit from lessons on“opportunity costs”. Attemptsat asset reallocation inevitablylead to accusations that thegovernment in New Zealand isselling the family silver, withvery little thought to thequality of that silver. Not

quantifying what else could bedone if assets were managedmore effectively limits theimpetus for action in this area.

The public may also needreminding that there is nosuch thing as a free lunch. Forexample, New Zealand hasbeen reasonably successful inimplementing market forces inthe electricity industry, butthere are complaints thatprices are higher than when itwas under government own-ership. Although it is possiblethat private electricity-provid-ers are fleecing customers, it ismore likely that the industrywas previously subsidisedthrough higher taxes or un-counted environmental costs.

It is also worth pointing outthat dividends received fromstate-owned enterprises areessentially a regressive tax.justin stevenson

Christchurch, New Zealand

The not-so-golden stateThere is another factor thataccounts for California’salarming poverty rate (“Amidplenty, want”, October 27th).Access to affordable housing isimpeded by Proposition 13.Passed by the state’s voters in1978, it freezes the property taxat 1%. This has distorted thehousing market as the ownersof expensive homes pay lesstax than they should on theirproperty. An enormous proper-ty-, income- and sales-taxburden has been shifted ontothe shoulders of new propertyowners and those who rent.Only 55% of Californians canafford to own a home.shruti sridhar

Sunnyvale, California

Outside inPermit a Norwegian to reflecton Britain’s Brexit negotiations(“Out of reach”, October 20th).No country adheres morefaithfully to the eu’s manyrules and regulations thanNorway, despite having anamount of wriggle room in ourEuropean Economic Areaagreement. That is because theeu might not renew our agree-ment if we do not behave.

Compare that with Hungary

or Italy. They cannot be kickedout, hence they have morefreedom to misbehave. If Brit-ain leaves, it will find itself in asimilar position. That is notnecessarily bad. We get toimplement all these eu rulesand regulations, and we saveall the costs of making them.einar overbye

Professor in political science Oslo Metropolitan University

Sour grapes were not staples ofThe Economist’s diet before2016, but have become a com-mon dish since the Brexitreferendum went against itswishes. Your sourness hasstretched in recent articles toaccusing Brexiteers of vanity,rage and being fantasists.

As a recent arrival to Brit-ain, this isn’t my observation atall. One encounters far moreeye-rolling and grumpinessfrom Remainers than Leavers.Attacks on Brexit theoriesfollow a familiar pattern:ignore the more difficult-to-refute arguments and attackonly specific statements by thethree or four Tory politicianswho are most disliked by theRemain masses. Isn’t this justanother form of the kind ofpolitics that The Economistdislikes, namely populism? nicolas groffman

London

Thought for the dayI suspect there is anotherreason why bbc Radio 4’s “InOur Time” is such a success: itsvalue to frequent flyers(Bagehot, October 13th). Itworks like this. Either MelvynBragg and his guests make youbrainier, or they send you tosleep. On a long-haul flight,you win either way. After sevenattempts, I still haven’tconsciously reached the end ofthe episode on the PauliExclusion Principle. mark jones

Hong Kong

21

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The Agency is looking for its next:

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ACER is seeking an experienced senior manager to be the legalrepresentative and the public face of the organisation. S/he willprovide strategic vision and lead a dynamic international team ofcirca 110 experts. Based in Ljubljana, Slovenia, the Director willdevelop, communicate and implement ACER’s work programme.

For a full description of the position, eligibility and selection criteria,and of the application process, visit ACER’s website:

www.acer.europa.eu

Closing date for applications is 26 November 2018.

Executive focus


1

“I think i got it,” says Alekos Simoni with a grin, returning an electronic fly

zapper called “The Executioner” to a near-by metal shelf. With a deft flick of his wristhe has done away with a genetically modi-fied mosquito that was making a bid forfreedom. There are many levels of contain-ment to ensure such creatures do not leavethis basement laboratory at Imperial Col-lege, London. But none, perhaps, quite sosatisfying as The Executioner.

The extermination that the creatures inMr Simoni’s lab are designed to take part inis less viscerally gratifying—but far moreconsequential. The mosquitoes are beingfitted with a piece of dna called a genedrive. Unlike the genes introduced intorun-of-the-mill genetically modified or-ganisms, gene drives do not just sit stillonce inserted into a chromosome. They ac-tively spread themselves, thereby reachingmore and more of the population with eachgeneration. If their effect is damaging, theycould in principle wipe out whole species.

To engineer an extinction is quite a step.But it is not unprecedented. In 1980 Variola,the smallpox virus, was exterminated from

the wild. That marked the eradication of adisease which, from 1900 to 1980, killedaround 300m people. If gene drives likethose being worked on at Imperial andelsewhere were to condemn to a similarfate the mosquitoes that spread malaria, asecond of humankind’s great scourgesmight be consigned to history.

It need not stop with malaria. Genedrives can in principle be used against anycreatures which reproduce sexually withshort generations and aren’t too rooted to asingle spot. The insects that spread leish-maniasis, Chagas disease, dengue fever,chikungunya, trypanosomiasis and Zikacould all be potential targets. So could crea-tures which harm only humankind’s domi-nion, not people themselves. Biologists atthe University of California, San Diego,have developed a gene-drive system forDrosophila suzukii, an Asian fruitfly which,as an invasive species, damages berry andfruit crops in America and Europe. IslandConservation, an international environ-mental ngo, thinks gene drives could offera humane and effective way of reversingthe damage done by invasive species such

as rats and stoats to native ecosystems inNew Zealand and Hawaii.

Needless to say, the enthusiasm is notuniversal. Other environmental groupsworry that it will not prove possible to con-tain gene drives to a single place, and thatspecies seen as invasive in one place mightend up decimated in other places wherethey are blameless, or even beneficial. Ifdrives are engineered into species that playa pivotal but previously unappreciatedecological role, or if they spread from a spe-cies of little ecological consequence to aclose relative that matters more, they couldhave damaging and perhaps irreversible ef-fects on ecosystems.

Such critics fear that the laudable aim ofvastly reducing deaths from malaria—which the World Health Organisation putsat 445,000 a year, most of them children—will open the door to the use of gene drivesfor far less clear-cut benefits in ways thatwill entrench some interests, such as thoseof industrial farmers, at the expense of oth-ers. They also point to possible military ap-plications: gene drives could in principlemake creatures that used not to spread dis-ease more dangerous.

Thinking nothing’s wrongAlthough allegations of playing God aretwo a penny in debates about breakthroughtechnologies, with gene drives they do feelbetter-founded than usual. The ability toremove species by fiat—in effect, to getthem to remove themselves—is, like theprospect of making new species from

Extinction on demand

The promise and peril of a new genetic-engineering technology

Briefing Gene drives

The Economist November 10th 2018 Briefing Gene drives 23

2

1

scratch, a power that goes beyond the pastambit of humankind.

Gene drives are, at heart, a particularlyselfish sort of gene. Most animals have twocopies of most of their genes, one on the setof chromosomes they got from their moth-er, one on those from their father. But theyput only one version of each gene—eitherthe maternal one or the paternal one, atrandom—into each of their own gametes(sperm or eggs). Some genes, though, seekto subvert this randomising in order to getinto more than 50% of the gametes, andthus more than 50% of the next generation.

In 1960 George Craig, an American ento-mologist, suggested that such subversivegenes might be a way of controlling thepopulations of disease-carrying mosqui-toes, for example by making them morelikely to have male offspring than femaleones. In 2003 Austin Burt, at Imperial Col-lege, described how a gene drive that couldcut a place for itself in a chromosome andcopy itself into the resulting gap could, inthe right circumstances, drive a species toextinction.

A fascinating idea, but one hard to putinto practice—until, in 2012, a powerfulnew gene-editing tool called crispr-Cas9became available. Gene drives based oncrispr-Cas9 could easily be engineered totarget specific bits of the chromosome andinsert themselves seamlessly into the gap,thus ensuring that every gamete gets a copy(see diagram). By 2016, gene drives hadbeen created in yeast, fruitflies and twospecies of mosquito. In work published inthe journal Nature Biotechnology in Sep-tember, Andrea Crisanti, Mr Burt and col-leagues at Imperial showed that one oftheir gene drives could drive a small, cagedpopulation of the mosquito Anophelesgambiae to extinction—the first time agene drive had shown itself capable of do-ing this. The next step is to try this in a larg-er caged population.

This drive disrupts a gene called double-sex that controls the differentiation of thesexes. Mosquitoes with one copy of thedrive pass it on to all of their offspring. Fe-males with two copies—which crop upmore and more often as the gene spreadsthrough the population—are sterile. Usingsterile insects to control disease is not, initself, a novel technique. Swamping a pop-ulation of disease-spreading insects withindividuals that cannot reproduce can bean effective way to limit numbers; lots ofthe fertile wild ones breed fruitlessly withthe sterile interlopers. What is new here isthat a gene drive can actively spread steril-ity through a population.

Evolution can be expected to take a dimview of such an affront. Mutants whichlack the dna sequence that the drive tar-gets, and which can thus escape its distort-ing effects, will be hugely favoured in thepopulation that the drive is attacking. The

cleverness of the Imperial scheme lies inchoosing doublesex as its target. Without afunctional copy of doublesex, mosquitoescannot reproduce. Mutations which stopthe gene drive from targeting it are alsolikely to stop the gene working properly—itis unusually sensitive to change. So a mos-quito in which doublesex is sufficientlymessed up by random mutation that thegene drive no longer has a target will be un-able to reproduce anyway.

The scientists at Imperial are part ofTarget Malaria, a research alliance sup-ported by the Bill & Melinda Gates Founda-tion and the Open Philanthropy ProjectFund to the tune of around $5m a year sinceit started in 2005. Target Malaria is alreadyworking in Burkina Faso, Mali and Ugandato prepare the way for a release of a genedrive. It would be introduced on top of a re-gime that includes bed nets, insecticidesprays and drugs for those infected (whichkill the malaria parasites in the blood andthus stop them from hitching a lift in thenext mosquito to stop by for a drink). Withthat amount of back-up, even a gene driveto which resistance evolves could break thecycle of malaria transmission definitively,wiping it out in the trial area. If thatworked, the rest of Africa—home to 90% ofthe world’s malaria cases—could soon fol-low suit.

Pay attention to your dreamsThe Imperial team thinks that, scientifical-ly, they might have drives able to make adifference in about three years. But theGates Foundation is talking about 2026 as apossible date for trials that involve a re-lease in the wild. Margret Engelhard, a bio-safety expert at the German federal agencyfor nature conservation, points out someof the challenges ahead. These includeevaluating the gene drives before release,predicting how the modified mosquitoeswill behave in the wild and working outwhether there will be knock-on effects on

other species. Tilly Collins at the Centre forEnvironmental Policy at Imperial says thatpublished ecological studies of A. gam-biae—one of three mosquito species thatcarry malaria, and by far the most impor-tant vector for the disease in Africa—haveturned up nothing that preys on them tothe exclusion of other foods. There is avampire spider that lives around the shoresof Lake Victoria that has a fondness for thefemales when full of human blood, but itwill readily eat other mosquito species.

Work is under way to validate thesefindings in the field, and to discoverwhether the mosquito’s larvae are similarlydispensable. At present, it looks unlikelythat removing one or two of over 3,000mosquito species will have any significanteffect on the ecosystems in which they live.

What, though, of the risk that a drivemight spread beyond its target species? Intheory, because gene drives require theirbearers to have offspring if they are tospread, they should stay in a single species;distinct species cannot, in general, repro-duce through sex. However in the case ofdoublesex the target gene sequence is foundacross all 16 species of Anopheles analysedso far—this is the flipside of it being so re-sistant to mutation. And there is a smallbut measurable rate of hybridisation be-tween some of those species. That probablywould not allow a lot of spread: but the pos-sibility needs examining.

The New Partnership for Africa’s Devel-opment, an organ of the African Union, hasrecommended that the Union’s memberstates support studies to verify the technol-ogy in African settings—including con-ducting a thorough investigation of therisks and looking for measures that maymitigate any negative impacts. Target Ma-laria is trying to get locals used to the ideaof working with, and releasing, mosqui-toes that have been genetically engineeredby scientists. The next step will be the re-lease, in Burkina Faso, of male mosquitoes

A gene added to only one chromosomegets into half of ofspring

Wild-typemosquito

Wild-typemosquito

Mosquito withmodified gene

Ofspring have a 50% chance of inheritingthe modified gene

Nearly 100% of ofspring inheritthe modified gene

A gene driveinserted intoone chromosomecopies itselfinto the other

Gene driveNormal genetic modification

Drive-by killingHow gene drives can quickly change whole populations

Repair

Cut

Source: Nature

Mosquito withgene drive

24 Briefing Gene drives The Economist November 10th 2018

2 genetically engineered to be sterile. Thatwill help the scientists understand popula-tion dynamics, but with no gene drive topush the sterility into the population it willhave no effect on malaria per se.

The Target Malaria gene-drive projectcarries the prospect of huge humanitariangains. It is carefully designed, supported bydeep-pocketed philanthropists and beingcarried out under a fair level of interna-tional scrutiny. It is gaining political sup-port and inspiring a generation of re-searchers. It is hard to see it grinding to ahalt in the absence of massive opposition,a currently unheralded alternative or pro-found technical failure. As Jim Thomas ofthe etc Group, an ngo that opposes genedrives, says, malaria is the “best possibleuse-case scenario” for the technology.

The worry of the etc Group and its fel-low travellers is that the use of gene drivesagainst malaria will open the door to moretroubling, slipshod and exploitative appli-cations. Many may sound good: some ofthe $70m that Tata Trusts of Mumbai, a phi-lanthropy group, has given to the Universi-ty of California, San Diego, is for exploringways of using gene drives to make cropsmore resistant to drought. If the technol-ogy were predictable, controllable andwell-regulated, the potential for raisedcrop yields in the face of climate change,and perhaps reduced use of pesticides andherbicides, might be huge. But experienceshows that few technologies make it intothe world in a predictable, controllable andwell-regulated form. Mr Thomas sees araising of the stakes from a world in whichbusinesses modify seeds crop by crop toone where they modify whole populations,indeed all of nature. “It is a pretty auda-cious switch,” he says.

In a report published in 2016, America’sNational Academies of Science highlightedthe possibility of drives introduced for ag-ricultural reasons damaging people’s wel-fare. Excoriated as “pigweed” in the UnitedStates, related species of the plant are culti-vated for food in Mexico, South America,India and China. American farmers mightlike a gene drive to eradicate pigweed,which has become resistant to the herbi-cide glyphosate, which is widely used inconjunction with today’s genetically mod-ified crops. But they would not necessarilybear the risks, or liability, of a release thatwent on to do damage to food crops in oth-er countries.

There are also worries about how genedrives might be used to create a weapon.Humans are an unlikely target; a weaponthat acts over generations seems ill-suitedto war or terror, and the idea that futuregenerations will not have their genomessequenced in a way that shows up such at-tacks feels far-fetched. But they might con-ceivably be used to make small and rapidlyreproducing insect and rodent species

more objectionable or pathogenic. Theneed to find ways to guard against such at-tacks is one of the reasons that the Penta-gon’s Defence Advanced Research ProjectsAgency (darpa) gives for its work on genedrives. Renee Wegrzyn, programme man-ager for darpa’s “Safe Genes” project, saysthe work is to prevent “technological sur-prise”, whether in the form of an unintend-ed consequence or nefarious use. One ofthe academic teams she funds has madeprogress in developing anti-crispr en-zyme systems that one day might be able toinhibit a drive’s operation.

Many groups are working on ways ofmaking gene drives more controllable andless risky. One option is to create “immu-nising” drives that could spread resistanceto a drive gone rogue. Another is to limitthe drive’s power to spread. Current genedrives are self-driving: the cutting mecha-nism and the thing that gets spread are oneand the same. But that is not the way thingshave to be. In the “daisy chain” drive de-signed by Kevin Esvelt of the Massachu-setts Institute of Technology, gene drivesare linked up in sequence, with the firstcreating the space for the second to copy it-self into, the second creating the space forthe third, and so on, until you finally get tothe gene that you want to drive through thepopulation. Because the upstream drivesdo not copy and spread themselves, theydrop away, generation by generation, untilonly the last gene remains.

Think of it like the stages of a rocketlaunching a satellite—or warhead. Eachstage gets the gene of interest further intothe population before falling away. Butonce the last stage has burned out, the pay-load just goes where gravity takes it, power-less to push itself further. Such a self-limit-ing system might have a big effect over theshort term, but vanish in the long term.

These developments make it easier toimagine gene drives being used with mini-mal risk. But it is still the case that withoutcare some gene drives might have the po-tential to trigger irreversible ecologicalshifts before countermeasures could be de-ployed. That is clear from decades of workon invasive species that are released eitherdeliberately or accidentally. And becausethe effects of each drive will be unique, de-pending on the design of the drive, the geneor genes that it targets, the population it isintroduced into and the ecosystem inwhich that population sits, the technologycalls for a sort of joined-up regulation thatdoes not yet exist. In 2014 Kenneth Oye ofmit and his colleagues pointed out in thejournal Science the many gaps in America’spatchwork of regulatory frameworks rele-vant to gene drives.

Oversight needs not just to bring to-gether a range of government agencies; itrequires co-operation between govern-ments, too. The Cartagena Protocol on Bio-safety, which entered into force under theun Convention on Biological Diversity(cbd) in 2003, provides controls on thetransfer of genetically modified organ-isms. But how it applies to gene drives isunclear—and besides, America has neverratified the convention. An attempt to bangene-drive research through the cbd,which was backed by the etc Group andother ngos, failed at the convention’s bien-nial meeting in Cancún in 2016.

A less ambitious call for restraint infield tests is likely to suffer the same fatelater this month in Egypt. At present thereis no consensus on what level and distribu-tion of risk humankind is willing to acceptfrom such technologies, nor what loss ofwildness it is willing to accept. Like the re-introduction of vanished species advocat-ed by the rewilding movement, gene-drivetechnology will provide new arenas for thefight between those who wish to defendnature and those who wish to tame it.

There is still time for such debate. TheGates Foundation does not expect to beready for field trials for at least eight years.And the debate may be more fruitful if re-search continues to open up new optionsfor better-designed interventions. If gene-drive research had been banned under thecbd two years ago, various self-limiting ex-otica currently under development mightnot have been dreamt up.

For malaria, at least so far, the case formoving towards tests in the field is a strongone. That does not mean that other useswill be as compelling down the line, or thatthere is no need for vigilance. And none ofthis will, in practice, be as neat as a swipewith an electronic tennis racquet. But formillions of Africans living with the burdenof malaria, the idea of never needing to fearthe bite of another mosquito could changethe world. 7


1

English universities have long beendefined by their architecture, from the

dreaming spires of Oxford, to the red-brickuniversities built after the Industrial Revo-lution, to the concrete polytechnics thatsprouted everywhere after the 1960s. Thosewho visit a campus today are likely to seeanother big round of building in progress.This time glass and steel are the main me-dia, sometimes accompanied by claddingin garish colours.

The rush to build reflects a battle to at-tract students, which is putting a growingstrain on universities’ finances. Universi-ties receive twice as much money per stu-dent as they did two decades ago. But an in-crease in spending means that they arenonetheless racking up debt. Britain’s 130-odd universities owe nearly £12bn ($16bn),up from less than £5bn in 2012, accordingto estimates collated by Reuters. In 2016-17,the most recent year for which data areavailable, 19 universities ran deficits, com-pared with six the year before. A few aresaid to be near bankruptcy. Some in betterhealth are considering whether they wouldtake over a neighbour if the option arose.

The competition for students is the in-tended consequence of a series of reformsintroduced by the Tory-Lib Dem coalition

in 2010-15, which aimed to get more peopleinto higher education while pushing uni-versities to pay more attention to teaching.The headline reform was to nearly triplethe fees that universities were allowed tocharge students, to £9,000 a year. One rea-son for lifting the cap was to provide in-come for universities to borrow against.David Willetts, the universities minister atthe time, has written that “financiers al-ways used to advise us that university bal-ance sheets were very conservative.”

A less noticed but more importantchange was to remove limits on the num-ber of students that universities could ad-

mit. Since they now rely on students’ feesfor much of their income, universities arekeen to attract them. And since there are nolonger restrictions on admissions, themost attractive universities can suck stu-dents away from the rest. This explainswhy borrowing has mostly been spent onsprucing up campuses. On an open day,“how do you judge whether a university isgood or bad?” asks one university official.“You can’t judge course content, so you uselecture halls or sports facilities as proxies.”

Since the financial crisis, bank lendinghas dried up. So universities have turned tocapital markets. The universities of Leeds,Liverpool, Cardiff, Manchester, Cambridgeand Oxford have all taken advantage of lowinterest rates by issuing public bonds, rais-ing £250m-750m each. Less prestigiousuniversities have looked to private inves-tors, such as insurers and pension funds,in deals with shorter maturities.

The lowest-ranked universities struggleto find any lenders. It is also they who arerunning the biggest deficits (see table onnext page). Some institutions acknowledgethat conditions are difficult: higher educa-tion “has become market-driven and in-creasingly competitive,” says the Universi-ty of Bradford. Others point to particularcircumstances. St Mary’s University, for in-stance, says its deficit “was planned and fo-cused on investment in areas of growthand student experience.”

The squeeze is about to tighten. An un-explained fall in the birth rate at the turn ofthe millennium means that between 2017and 2020 the number of 18- to 20-year-oldswill drop by 150,000, meaning fewer poten-tial customers. The government’s efforts to

Universities’ finances

After the boom, the bust

Britain may soon have a bankrupt university. Will the government let it go under?

Britain

26 Did Leave cheat?

28 Military recruitment

28 Jeremy Heywood, 1961-2018

30 Profitable care homes

30 Knife crime spikes

31 Parties pinch policies

31 Cryptic crosswords

Also in this section

32 Bagehot: Peterloo v Waterloo

26 Britain The Economist November 10th 2018

2 cut migration will make it hard to recruitstudents from overseas to make up theshortfall. A forthcoming review of higher-education funding may recommend re-ducing tuition fees. On top of this, univer-sities expect to have to increase their con-tributions to pension schemes. Some will“reach a point where it is difficult to makemore efficiency savings,” says Steven West,vice-chancellor of the University of theWest of England. “A shock is about to hit.”

Most universities will ride it out. JasonRothenburg of MetLife Investment Man-agement, part of an American pensionfund, says one attraction of lending to Eng-lish universities is good government over-sight from a new regulator, the Office forStudents (ofs). It ought to be aware of anydifficulties before they emerge, since itchecks on the finances of all institutionsthat register with it. University boards arealso meant to monitor the finances of theirinstitution. But some in the sector admitthat small, undistinguished universitiesmay struggle to attract board members ofsufficient calibre to do the job.

The assumption among some universi-ties and lenders has been that if a universi-ty gets into trouble, the government willbail it out. On November 6th Sir MichaelBarber, the chairman of the ofs, said itwould not. “This kind of thinking, not un-like the ‘too big to fail’ idea among thebanks, will lead to poor decision-makingand a lack of financial discipline, is incon-sistent with the principle of university au-tonomy and is not in students’ longer-terminterests,” he cautioned. The regulator’saim will be to protect students, not the uni-versity, perhaps by moving them to anoth-er institution or by arranging a takeover oftheir existing one. Sam Gyimah, the uni-versities minister, said this week that itwas not the government’s job “to bail uni-

versities out when they make reckless fi-nancial decisions.”

He is surely right. But will the govern-ment have the stomach to let a universitygo under? It would face accusations that ithad allowed mis-selling to students. Someof the most vulnerable universities are inparts of the country where good jobs arescarce. Nevertheless, one of the require-ments imposed by the ofs is that universi-ties make plans for what would happen totheir students in the event of the universi-ty’s bankruptcy. So far, too many haveviewed it as a bureaucratic exercise, saysSir Michael. In fact, he warns, “it is an es-sential element of the system.”7

Finance lessons

Sources: HESA; Oice forStudents; The Economist

*Teaching ExcellenceFramework ranking, 2017

England, universities with largest deficitsAcademic year ending 2017

Deficit as % of No. of Teaching University income students quality*

St Mary’s 8.8 5,535 Silver

East London 8.2 13,215 Bronze

Cumbria 7.3 8,635 Bronze

Kingston 7.1 19,470 Bronze

Plymouth Marjon 5.4 2,415 Silver

Sunderland 4.9 13,020 Silver

London Metropolitan 3.9 12,145 Bronze

Bradford 3.0 10,960 Silver

Buckinghamshire New 2.3 8,870 Silver

Bolton 1.8 6,425 Silver

With less than five months beforeBrexit is due, debate over possible

deals is hotting up. Revelations of law-breaking by Leave campaigns in 2016 arenow adding fuel to the fire. The focus is onArron Banks, an ebullient insurer whodubs himself the “bad boy of Brexit”. MrBanks, whose gift of £8m ($12m) to Lea-ve.eu, an unofficial Brexit campaign, wasBritain’s biggest-ever political donation,has been having a busy time with officialwatchdogs. He has been referred by theElectoral Commission to the police. His in-surance firm, Eldon, and Leave.eu havebeen fined £135,000 by the InformationCommissioner’s Office for misuse of perso-nal data. And the Financial Conduct Au-thority is looking into Eldon’s practices.

Mr Banks denies any wrongdoing. Heclaims to be a victim of hardcore Remain-ers bent on overturning the Brexit vote. Yetthe evidence is against him. The ElectoralCommission declares baldly that it has rea-son to believe that the source of the £8mwas impermissible because it was foreign.Mr Banks says the money came from a Brit-ish-based firm, Rock Services. But thissmall service group is owned by Rock Hold-ings, registered in the foreign jurisdictionof the Isle of Man. And the £8m was record-ed in the accounts of Rock Holdings, notRock Services.

The Electoral Commission has called inthe cops partly because it has few resourcesand no foreign jurisdiction. But it is alsobecause its maximum fine is just £20,000,a trivial amount for potentially criminal of-fences. The Information Commissioner’sOffice also has few resources and insuffi-cient powers to deal with what it calls a dis-

turbing disregard for voters’ personal pri-vacy. Insurance clients and Brexitsupporters were bombarded with mes-sages pushing each other’s interests. Thereare also claims that Eldon employeesworked for Leave.eu. Yet Mr Banks’s re-sponse to the fines imposed for misuse ofdata was to tweet “so what?”

This sorry tale raises concerns overelectoral laws besides the perennial worryof regulators with too few powers. Socialmedia and targeted campaigns have be-come newly significant in politics. The il-licit harvesting of personal data during theBrexit campaign by the likes of CambridgeAnalytica, a defunct data firm that the In-formation Commissioner’s Office says itmay yet prosecute, was huge and sophisti-cated. Many countries now fear foreign in-trusion, especially from Russia. Inter-viewed on television, Mr Banks oddlydenied that Russian money was involvedeven before being asked. He has a Russianwife and business interests and has admit-ted to extensive contacts with Russian offi-cials during the referendum.

Remainers are up in arms over whatmany claim was a stolen vote. But it is hardto assess the effects of careful selection ofsocial-media targets for pro-Brexit propa-ganda. Vote Leave, not Leave.eu, was the of-ficially designated campaign organisation.Although it too was fined for overspend-ing, the two groups hated each other. The52%-48% Leave victory in 2016 was narrowbut clear-cut. And the government itselfspent £9m on a leaflet promoting Remain.

The Banks affair has strengthened thosecalling for a fresh vote on a Brexit deal.Ironically, Mr Banks himself now says itmight have been better to back Remain.This week a Survation poll for Channel 4found a 54%-46% majority agreeing. Brexitmay not be done yet. 7

Evidence of Leavers’ rule-breakingboosts calls for a second referendum

Brexit and electoral law

Arron’s golden calf

Prophet of exodus


Britain is at peace and unemploymentis down. Good news for most, but not

for its armed forces. They are struggling toattract recruits, owing to fierce competi-tion for workers and a lack of exciting over-seas action. Mid-career squaddies are leav-ing, lured by juicier wages and betterprospects for promotion in the private sec-tor, particularly for those with skills in ar-eas like cyber-security or engineering. Sal-aries in the ranks start at just £15,230($20,030). As a result, the forces are losingtroops faster than they can replace them.The Ministry of Defence (mod) fell 24%short of its recruitment target last year.

To plug this gap, it is widening the poolfrom which it recruits. Last month all roleswere opened to women, who were previ-ously barred from positions involvingclose combat. This week the mod said itwould start accepting applications fromcitizens of all 53 countries of the Common-wealth. That decision waived a require-ment imposed in 2013 that such recruitsmust have lived in Britain for five years be-fore they could join up. It is hoped that theCommonwealth will provide 1,350 newtroops a year, equivalent to more than 10%of the number currently recruited.

Recruiting foreign folk who have neverlived within the country’s borders is un-usual, says Jack Watling of rusi, a defencethink-tank. Other European countriesseeking to bolster their ranks are turning toconscription, which has been reintro-duced in Sweden and Lithuania amidheightening tensions with Russia. Somecountries recruit foreigners directly fromoverseas, but they are usually put in segre-gated units like France’s Foreign Legion. InBritain they will join mainstream ones,with squaddies from Scunthorpe fightingalongside farmhands fresh from Fiji.

The idea may yet catch on elsewhere.Facing similar shortages, Germany isweighing up whether to offer citizenship inreturn for military service to people fromelsewhere in the European Union. But itcould also arouse post-colonial prickli-ness. Commonwealth governments mayresent their citizens joining a foreign army,especially if they start seeing their best sol-diers leave to seek better pay, says PaulSchulte, a former official at the mod.

Women and foreigners alone are un-likely to fill the recruitment gap. Many spe-cialist roles with shortages are alreadyopen to female troops. And once trained,

foreign troops are no less likely to defect tothe private sector than the current lot.

The branch facing the worst shortfall isthe army. In 2012 it handed its recruitmentoperation to Capita, an outsourcing firm.By subcontracting tasks such as securityvetting, the company has created a bureau-cratic tangle, with some recruits waiting 18months to get onto a training course. Manydrop out. Capita insists that the worstkinks are being ironed out, but it is on

course to meet just 50% of this year’s quota.The firm will be responsible for recruitingmost of the new Commonwealth troops,who will be harder to vet than locals.

The promise of action is the best re-cruiting sergeant, says Mr Schulte. Withoutwar, soldiering involves a lot of sittingaround in tents. Unless it is forced to spendblood overseas, the government may haveto spend treasure on higher pay at home ifit wants to keep the numbers up. 7

The armed forces call on women andforeigners to ease troop shortages

Military recruitment

Your countryneeds… someone

Jeremy heywood was “in the roomwhere it happens”, to borrow a phrase

from “Hamilton”, for the most importantdecisions of Britain’s past quarter-cen-tury. He was at the Treasury on BlackWednesday in 1992, when the pound wasforced out of the European exchange-ratemechanism, and in Downing Street in2001 when the aeroplanes hit the twintowers and the decision was taken toinvade Iraq. After a spell in banking hereturned to the civil service in time to seethe global financial system collapse.When he was given a peerage last monthhe fittingly chose the title of Lord Hey-wood of Whitehall.

In all his many roles Lord Heywood(whose wife, Suzanne, is on the board ofThe Economist Group) was a model ofcalm efficiency. He quelled a panic dur-ing the Maastricht negotiations when hefound John Major’s talking points lostamong a stash of papers. He kept lines ofcommunication open between 10 and 11Downing Street during Tony Blair’s pre-miership, holding secret powwows withGordon Brown’s team in a greasy-spooncafé. He helped to form the Tory-Lib Demcoalition in 2010. It is Britain’s ill fortunethat cancer has deprived the country ofhis skills in the past year of Brexit talks.

His detractors accused him of cross-ing the line that divides administrationfrom politics, particularly when he failedto produce sensitive letters on prep-arations for the Iraq war (“Sir Cover-Up”,the Daily Mail dubbed him). Somethought his view of his job was summedup when he put on a blue tie when DavidCameron became prime minister in 2010.Yet nobody impugned his neutrality. Heworked equally ferociously for Tory andLabour prime ministers, implementingthe government’s agenda rather thaninsinuating one of his own.

Lord Heywood’s adamantine commit-ment to getting things done was notalways obvious at first. He was so quietly

spoken that it was difficult to hear him,and so boyish-looking that it was pos-sible to mistake him for an intern. Hehovered rather than dominated. But hehad a genius for making himself indis-pensable; one colleague likened him to adrug that people get addicted to quickly.The result was that he kept accumulatingjobs, adding the roles of cabinet secretary(2012) and head of the civil service (2014)to his position as chief adviser to theprime minister.

He had a surprisingly raffish side. AtOxford he socialised with anarchists andpunk rockers, rather than the Bullingdonset. He formed a radical discussion groupcalled the Apostates. Both as a rising civilservant and an establishment grandee hewas a great party-giver, and was extreme-ly charming. Politicians of all persua-sions have gone out of their way to praisehim. Indeed, the most surprising thingabout the tributes is not the admiration,but the affection.

Whitehall’s mover and shakerJeremy Heywood, 1961-2018

The deftest operator of the government machine died on November 4th

Lord Heywood, master servant

Mix business with pleasure.


On november 6th the Care QualityCommission (cqc), which regulates

health and social care, took the unusualstep of warning local authorities that a carecompany was at risk of collapse. AlliedHealthcare, which provides services suchas washing and meals to 9,300 elderly peo-ple in their own homes, insists there isnothing to worry about. Yet councils arepreparing for the worst.

Allied’s difficulties are a reminder of thepressure on the care sector. A higher mini-mum wage and tighter regulations haveadded to care providers’ costs. At the sametime their main customers, local authori-ties, are facing funding cuts and are reluc-tant to pay more for services.

This disjuncture is most evident in carehomes, a business worth about £16bn($21bn) a year, with over 400,000 resi-dents. The number of people over 85 is ex-pected to increase by 36% by 2025. Yet carehomes have been closing, unable to makeends meet. By one estimate England haslost 3,700 beds since 2012.

It hardly looks like a promising market.But one corner of the industry has attractedthe attention of investors, including for-eign funds, which have been snapping upBritish care homes. By changing the waysuch homes operate, and rethinking whotheir customers are, investors see a way tomake a good return. But with this changecomes a widening gap between north andsouth, as well as between rich and poor.

Take Skylark House in Horsham, Sus-sex. The spotless, two-year-old facility has82 bedrooms, each with an en-suite we-troom and most with a balcony. It is ownedby Care uk, the fourth-largest provider inthe country, which has built 40 homessince 2011 and has 33 more in the pipeline.

Care uk’s boss, Andrew Knight, arguesthat the only way to provide this sort of careis to take more residents who pay their ownway. Councils in England are obliged to payfor anyone with assets of under £14,250.But often the council’s contribution doesnot cover the full cost. In Care uk’s homes,councils pay about £650 a week, whereas“self-funders” pay £900. Care uk used towork mostly for local authorities. Now halfits residents are self-funders. Mr Knightsays he will no longer provide beds at be-low cost. That will rule out most local-au-thority customers, but means the companycan operate with margins of about 10%.

The self-funding market has caught the

eye of American investors, primarily real-estate investment trusts (reits). The big-gest in Britain is Welltower, which has 107care homes with 7,500 beds, worth £2.2bn.Only a few of its homes take council-fund-ed residents, as the firm prefers to “avoidthe risks of dealing with the governmentpay sector,” says Justin Skiver, an executive.Other reits buying homes include TargetHealthcare and Impact Healthcare.

The care-homes market is still frag-mented, with about 5,500 operators. Thefive biggest have just 15% of the market be-tween them. Some see scope to grow by ac-quisition, gaining economies of scale.

The investments will increase capacityand may spur innovation. But the price is abigger divide between those who can payand those who cannot. And there may be ahidden cost to the taxpayer. As providersfocus on self-funders and council-fundedbeds dry up, hospitals could find them-selves taking up the slack.7

H O R S H A M

A troubled industry is an unlikely hitwith investors

Care homes

Growing oldprofitably

Across the country, some children arebecoming victims, others perpetrators.

On November 3rd a 15-year-old was stabbedin the chest in Swindon. Two days later, an18-year-old was knifed in the leg outside aschool in Bedford. On November 6th twoteenagers suspected of stabbing a youngerboy in Manchester were arrested. The boywas struck several times in front of otherchildren out for Halloween.

But the media has focused on London,where there have been 119 murders thisyear, about the same as the number killedin the whole of 2017, excluding terrorist at-tacks. Four in ten victims were 24 or youn-

ger. In the six days from October 31st, therewere five fatal stabbings in the capital. Thehosts of “Good Morning Britain”, a televi-sion programme, berated Sadiq Khan, themayor of London. “Sort it out, Mr Mayor!”one said.

This narrow focus is partly justified.Stabbings are far more common in Londonthan anywhere else in the country, and notonly because it is so much bigger: it seesmore violence per person than less popu-lous areas. In 2017-18 it accounted for 22%of all murders and 36% of knife crime inEngland and Wales, though Londonersmake up 15% of the population. Attacks inthe capital also appear to be more ferociousthan those elsewhere. Its murder count hasrisen more sharply than the country’s.

Yet the biggest increases in knife crimehave been outside London (see chart).Since 2010-11 it has risen by a tenth in thecapital, and by a third in the rest of Englandand Wales. During the same period, knifecrime leapt more sharply than the nationalaverage in the patches around Sheffield,Leeds and Liverpool. The number of stab-bings began to tick up in North Wales, Nor-folk and Essex well before they did in Lon-don. Jacqueline Sebire, assistant chiefconstable of Bedfordshire Police, recentlydealt with four stabbings in 24 hours. “It’swrong that people are placing the sole fo-cus on London,” she says.

Some think the capital dominates cov-erage because of its concentration of jour-nalists and politicians. They are “seeing itmore visibly than the trends outside Lon-don,” says Harvey Redgrave of Crest Advi-sory, a consultancy. Mr Khan and CressidaDick, commissioner of the MetropolitanPolice, are well known and so more likely tobe held to account than a provincial policechief or politician. Others suspect politics.Tory-supporting newspapers have beenquick to criticise Mr Khan, a Labour mayorwho will have to fight an election campaignin a little over a year.

The best explanations for the surge arenational. Labour blames spending cuts: thenumber of policemen has fallen by 15%since 2010. Meanwhile new demands onofficers, such as a recent run of accusationsof decades-old sex abuse, take up theirtime. Another plausible explanation is ashift in the drugs market. A boom in thesupply of crack cocaine has encouragedcity gangsters to expand into towns oncedominated by small-time dealers. Compe-tition has sparked violent turf wars.

Misdiagnosing the spread of the pro-blem could frustrate attempts to tackle it.“A lot of police forces just want to deal withproblems on their own patch,” says RickMuir of the Police Foundation, a think-tank. “You need to look at it as a nationalproblem.” Mr Khan might be feeling theheat, but responsibility ultimately restswith the Home Office. 7

London’s knife-crime spike has hit theheadlines, but the big rise is elsewhere

Violent crime

Capital offences

Cutting, rising

Source: ONS

Police-recorded crimes involving a knife, ’000

0

10

20

30

40

2010 11 12 13 14 15 16 17

London

England and Walesexcluding London

The Economist November 10th 2018 Britain 31

Britain’s pop-guzzlers are a surpris-ingly health-conscious lot. Earlier this

year the country became the first wheresugar-free versions of Coca-Cola outsoldthe real thing. Whether Britons follow sim-ilar principles when it comes to imbibingtheir politics will dictate the fortunes of La-bour and the Conservatives.

“Diet” policies have become the norm inBritish politics, with both main partiespromising a healthier version of the other’splatform. In last month’s budget the Con-servative chancellor, Philip Hammond, an-nounced that austerity was “coming to anend”, in what amounted to a toned-downversion of Labour’s promise to open thespending taps. Meanwhile his oppositenumber, John McDonnell, surprised manyin his party by saying that Labour wouldsupport the Tories’ plan to give a tax breakto the well-off, by raising the threshold atwhich the higher rate of income tax is lev-ied. The Tories have previously stolen La-bour ideas such as a cap on energy prices,while Labour has adopted a law-and-orderpolicy that would fit snugly into the Con-servatives’ manifesto, with its call for morepolice and border guards.

Whether parties benefit from apingtheir opponents depends on the policyarea, argues Margit Tavits of WashingtonUniversity in St Louis. She examined vot-ers’ behaviour in 23 countries over 40years. On issues that are seen as pragmatic,such as the economy, voters are happy for aparty to change its tune. But when it comesto so-called principled policies, includingimmigration, voters will punish a partythat strays from its beliefs. This is the caseeven when the party is shifting towards themedian voter’s views. Both Labour and theConservatives lost ground to the uk Inde-pendence Party when they mimicked itshard line on immigration, offering stiffrhetoric but few policy changes. This pat-tern repeated itself across Europe.

But what works on the pages of an aca-demic journal is messier in real life, arguesTim Bale of Queen Mary University of Lon-don. Deciding whether a policy area ispragmatic or principled is more art thanscience. The National Health Service, forexample, bestrides both. And nabbing toomany of an opponent’s policies may annoya party’s core supporters, whatever the is-sues in question. Mr McDonnell facedgrumbles from Labour mps (includingthose usually well to the right of him) for

supporting the Tories’ tax break. SomeConservative mps complain that TheresaMay spends too much time talking aboutwhat they see as Labour issues, like nhs

funding, and not enough on traditionallyTory concerns, such as lower taxes.

Labour aides are confident that the To-ries’ “Diet Corbynism” is no match for thereal thing. After all, the government’smooted plan to reduce tuition fees for

some subjects pales in comparison to La-bour’s promise to abolish them (as well assmacking of hypocrisy, since the Tories in-troduced the higher fees only six yearsago). Conservative wonks insist that votersdo not care where a policy came from. Thenext election will depend on whether vot-ers find Labour’s full-fat politics moretempting than the Tories’ offering of Cor-bynism without calories. 7

Does offering a “lite” version of anopponent’s policies actually work?

The politics of theft

Full-fat politics

“You have the most peculiar ideas ofrelaxation,” Laura Jesson tells her

aloof husband in the film “Brief Encoun-ter”, when he suggests that she unwindwith a cryptic crossword. Some of thecontestants at the annual Times Cross-word Championship, held on November3rd, might agree that crosswording canbe anything but relaxing. Neil Talbott, aprogrammer, was among many to fall bymisspelling iguanodon (the clue: “Oldanimal droppings gathered by a singlelecturer”). “It can be savage,” he says.

Cryptic crosswording was developedin Britain in the 1920s. It has become astaple of British culture, celebrating themessy ambiguities of English with itscomplex riddles and wordplay. AgathaChristie was a fan. Crosswords were usedto recruit codebreakers in the secondworld war. But some fear for the puzzle’ssurvival. Newspapers, where most cross-words are printed, are in decline. And ayounger audience is put off by the puz-zle’s impenetrable rules.

Yet technology is offering solutions toboth of these brain-teasers. The cross-word has transitioned remarkably well

from paper to digital platforms, saysDavid Parfitt, the Times’s puzzles editor.His newspaper has introduced a “quin-tagram”, tailored to smartphones, whichhas no grid and just five clues, making itquicker to complete and easier to navi-gate on a morning commute.

Technology can also help the unini-tiated, via “hint” buttons and the optionto check answers. (We ran a cryptic cross-word in 2016’s Christmas issue, withonline explanations of the clues.) Crack-ing a cryptic puzzle requires awarenessof various conventions. For example, theword “regularly” signals using everyother letter of the word it accompanies:“Part of foot, regularly stroked” is toe.

Though the best competitive cross-worders are a greying lot, moving thecrossword online gives newcomers achance. And for the first time since 2008,the Times competition has a new cham-pion. Mark Goodliffe, the 11-time victor,was disqualified after a late error, soRoger Crabtree, a former pensions clerk,took the trophy. Congratulating Mr Crab-tree, a woman was heard to mutter,“You’ve given us all hope.”

Hip to be squareCrosswords

Technology arrests the decline of a great British pastime

Article, once moist, ruined the newspaper (3, 9)


The centenary of the armistice on November 11th is a welcomereminder that historical memories can unite the country. It is

an unfortunately rare one. These days history is more commonlyused to divide and inflame. The right of the Conservative Party andthe left of the Labour Party—the ideologically ascendant factionsin their respective worlds—are wedded to sharply contrasting in-terpretations of British history, which focus on very differentevents and freight them with very different emotions. Let us callthem the Waterloo and the Peterloo interpretations.

Waterloo was one of Britain’s greatest victories over the French.In 1815 the Duke of Wellington ended Napoleon’s career for goodand inaugurated a long period in which Britain could play Europe’sleading powers off against each other, to make sure that no newNapoleons could emerge. Peterloo, in 1819, was one of the worstpeacetime massacres in British history. Troops charged into100,000 peaceful protesters, who had gathered to demand morepolitical rights in St Peter’s Field, near Manchester. Fifteen peoplewere killed and hundreds injured.

The Labour left is obsessed with Peterloo. Jeremy Corbyn, theparty’s leader, highlighted the massacre in his speech to Labour’sannual conference in September. The demonstrators were killedby “troops sent in by the Tories to suppress the struggle for demo-cratic rights,” he noted, adding that Labour’s slogan, “For the manynot the few”, was coined by Percy Shelley in a poem commemorat-ing the massacre. Mike Leigh, one of Britain’s leading film direc-tors, has recently released a film about the massacre called “Peter-loo”. The two-and-a-half-hour epic is not up to the standards of“Life is Sweet” and “Topsy-Turvy”. But, partly because it is so cari-catured, it provides a good view of the Corbynite historical imagi-nation. The established rich guzzle food and drink, the new richgrind the poor with the help of dark Satanic mills and job-destroy-ing machines, the poor try to improve their dismal lot throughpeaceful protest, and the establishment responds by crushingthem. Maxine Peake, one of the leading actresses, has driven thefilm’s message home by comparing Peterloo to the more recent di-sasters at Hillsborough stadium and Grenfell Tower.

The Peterloo interpretation sees British history as a story ofruthless exploitation and intermittent resistance. What few rights

the workers enjoy, they have as the result of heroic struggles led bya vanguard of activists who must fight against both the rulingclass, who try to suppress them, and class traitors, who don’t un-derstand the true meaning of history. Mr Corbyn is much happiertalking about history than economics. His favourite historical fig-ure is John Lilburne, a 17th-century Leveller who devoted his life toagitation. (“If the world was emptied of all but John Lilburne, Lil-burne would quarrel with John and John with Lilburne,” one con-temporary said.) He is fond of Marxist historians like ChristopherHill, author of “The World Turned Upside Down”, and E.P. Thomp-son, who wrote “The Making of the English Working Class”.

The Waterloo interpretation of history is the opposite. It cele-brates our island story rather than lamenting it (and frequentlyslips into calling that island England). This school reveres the roleof great men, particularly great military commanders, rather thanagonising about the labouring masses. It also focuses on constitu-tional innovations rather than economic struggles. For Water-looists, England’s unique achievement was to limit the power ofthe over-mighty state through constitutional reforms such asMagna Carta, the establishment of Parliament and the commonlaw. These innovations made British history fundamentally differ-ent from continental history. Whereas the continent had absolut-ist rule, the Napoleonic code and endless internecine wars, Britainhad peaceful constitutional evolution, protection of individualrights and a globalised economy.

A striking number of the leading Brexiteers are either historygraduates or history buffs. Sir William Cash, Jacob Rees-Mogg andDaniel Hannan all read history at Oxford. Mr Rees-Mogg has ar-gued that Britain’s vote to leave the European Union is “as worthyfor celebration as victory at Waterloo or the Glorious Revolution”,and defined Brexit as “a victory of British liberty over Bonapartistautocracy, and for free nations over foreign tyranny”. Mr Hannanhas written a book called “How We Invented Freedom and Why ItMatters”. Michael Gove, the environment secretary, is an omnivo-rous reader of history books who, in an earlier role as educationsecretary, tried to refocus the history syllabus on teaching factsabout British history.

These polarised views leave a lot to be desired on the scholarlyfront. The Peterloo interpretation ignores the role of judicious re-form. The British ruling class did terrible things but it was re-strained compared with its continental counterparts. “Only inEngland do they call that a massacre,” sneered one French dip-lomat. The Waterloo view downplays the role of imperialism andplunder in the making of Britain. (It also downplays the fact thatWaterloo was “the nearest-run thing you ever saw in your life”, asWellington put it, and would not have been won without the helpof the Prussian army.) Both views ignore the importance of entre-preneurial innovation and free trade in raising living standards.The starvation that Mr Leigh decries in “Peterloo” was eventuallyalleviated by the repeal of the Corn Laws and the import of grain.

Couldn’t escape if they wanted toThe clash of historical visions will remain at the heart of politicsfor some time. During the Blair-Cameron years, when policymak-ers all accepted the virtues of market liberalisation and quarrelledabout means rather than ends, economics had a good claim to bethe queen of the sciences. Today the crown has been passed to his-tory. Economics has lost much of its lustre since the financial cri-sis. History, by contrast, appeals to people’s quest for meaning andidentity in a world that too often deprives them of both. 7

Peterloo v WaterlooBagehot

British politicians are divided by two very different views of history


1

The spanish armoured vehicles weredug into the side of the road into Opp-

dal, a mountain village some 300km northof Oslo, cannons pointed across the snowyvalley. Their task was to defend the localairport from the might of the “NorthForce”, played mostly by American ma-rines, whose fleet of tanks assembled at anearby petrol station. Rifle-wielding ma-rines decked in snow camouflage preparedfor battle with cups of hot chocolate, the at-tendant unfazed by the firepower massingon her forecourt. Yellow-jacketed umpiresfollowed the war games, decreeing wheth-er a tank had strayed into a notional mine-field or been struck by hypothetical artil-lery. “It’s pretty much like battleships,” saidSecond-Lieutenant Larry Boyd.

The mock combat was part of TridentJuncture 2018, nato’s biggest military exer-cise since the cold war, lasting from Octo-ber 25th to November 7th. The alliance isflourishing on the ground, building upforces, transforming its institutions andsquaring up to Russia with confidence. Thequestion is whether this progress can bequarantined from the transatlantic squab-

bling between political leaders.The very premise of the exercise—an in-

vasion of Norway, causing the alliance toinvoke its Article 5 mutual-defenceclause—was a signal that, after decades offighting ragtag Balkan armies and Afghanguerrillas, nato is back in the business ofdefending its home territory. The exercise,officials coyly insisted, was “not directedagainst any country”. But Lieutenant Boydwas clear that his marines were preparingto fight a “near peer” adversary. He did not

have to spell out whom he had in mind.A second message lay in the exercise’s

scope, stretching from Iceland in the westto the airspace of non-nato Finland in theeast. The last big war game was held threeyears ago in Spain, thousands of kilo-metres from Russian soil. Norway, by con-trast, is not only a front-line ally, sharing a200km border with Russia, but has alsowatched nervously as Russia’s NorthernFleet, headquartered across the Barents Seaon the Kola Peninsula, has piled up newships and increased submarine patrolstenfold. That has forced nato to reacquaintitself with cold-war concepts like the “giuk

gap”, a maritime choke-point betweenGreenland, Iceland and Britain that is Rus-sia’s principal outlet to the Atlantic. Russiahas also reoccupied seven former Sovietbases in the Arctic region and launched itsfirst military icebreaker in 40 years. Inturn, America has doubled the number ofmarines based in Norway, and on October19th sent an aircraft-carrier into the ArcticCircle for the first time in almost 30 years.

A third distinctive element of TridentJuncture was its size: 65 ships, 250 aircraft,10,000 vehicles and 50,000 personnel.This was a test of nato’s ability to pump re-inforcements over the oceans, teemingwith Russian submarines, and then acrossthe continent. This has proven tricky. Lieu-tenant-General Ben Hodges, who retired ascommander of American forces in Europein December 2017, recalls his surprise atlearning that Europe’s Schengen area,which has abolished border controls, did

NATO

War in a cold climate

O P P DA L

nato holds its biggest exercises since the cold war

Oslo

Oppdal

Severomorsk

BRITAIN

ICELAND

GERMANY

POLAND

EST.LAT.

LITH.

RUSSIA

UKRAINE

Greenland

KolaPen.

BarentsSea

A r c t i c C i r c l e

NO

RW

AY

SWED

EN

FINLAN

D

ATLANTICOCEAN

750 km

NATOmembers

Europe

34 French labour-market reform

35 The rise of Germany’s Friedrich Merz

35 Greek anarchists

36 Russia’s tenth city, Rostov-on-Don

37 Charlemagne: Reflections onArmistice Day


34 Europe The Economist November 10th 2018

2 not extend to the free movement of arms.Others point to problems with infrastruc-ture, such as incompatible railway gaugesand weak bridges.

nato’s response to the new threats hasbeen the biggest overhaul of its commandstructure in a generation. Two new head-quarters, one focused on the Atlantic,based in America, and another on logistics,in Germany, will be established over thenext three years, adding 1,200 personnel.Generals are also getting chummy with Eu-rocrats. eu-nato relations were once“trench warfare”, says Sir Adam Thomson,Britain’s envoy to nato from 2014 to 2016.Now there is “unprecedented practical col-laboration”. The eu published its own ac-tion plan on military mobility in Marchand sent the head of its military staff on ajoint tour of Washington with his nato

counterpart last week.nato’s renaissance should cheer fans of

the beleaguered liberal order. In recentyears the alliance has deployed four battle-groups (up to 1,400 troops each) to Polandand the Baltic states as tripwire forces;created a rapid-response brigade (about5,000-strong) that can mobilise within twodays; and committed to having 30 battal-ions, 30 warships and 30 air squadronsready to fight at 30 days’ notice. America isspending $6bn a year on its European De-terrence Initiative, lavished on everythingfrom Hungarian air bases to exercises suchas Trident Juncture. Russia’s spree of inva-sion, intimidation and assassination hasroused the alliance from its slumber.

Yet this military revival is accompaniedby political malaise. For one thing, no onethese days is quite sure whether the alli-ance’s principal member would actuallyshow up to fight in a crisis. The platoon ofMontenegrin infantrymen at Trident Junc-ture, part of the Spanish battalion defend-ing Oppdal, might reasonably have recalledPresident Donald Trump’s scorn for their“very aggressive” country during this year’snato summit, and asked how it squaredwith the transatlantic spirit on display inthe Norwegian hills.

On November 6th France’s president,Emmanuel Macron, lamented the absenceof a “true European army” to “protect our-selves against China, Russia and even theUnited States”. Yet despite the eu’s new de-fence schemes, which cover everythingfrom joint arms production to co-opera-tion on military radios, its ambition is farlower than Mr Macron’s language wouldsuggest. Far from supplanting America’smilitary capabilities, Europe’s national ar-mies are only just getting around to re-building their own, hollowed out after thecold war. The eu’s central and eastern Euro-pean allies, like Poland and Estonia, arehorrified by Mr Macron’s talk of protectionagainst America. For all its troubles, nato

remains the only game in town. 7

When gerhard schröder launched aseries of German labour-market re-

forms in 2003, his country’s unemploy-ment rate stood at just under 10%. This wasalso the rate inherited by Emmanuel Mac-ron, who signed his own labour-market re-form into law in September 2017. TheFrench president’s version is more modestthan the Schröder package, not least be-cause the bits already enacted touch onlythe labour code and not yet the unemploy-ment-benefit and vocational-training sys-tems. But Mr Macron’s hopes to curb un-employment are no less ambitious. A yearon, has the French reform had any effect?

At first glance, not much. The numberof jobseekers edged up again slightly in thethird quarter, by 0.5%, after a tiny rise inthe second quarter, according to Pôle Em-ploi, the unemployment agency. There hasbeen a steep increase, of 8%, in the numberof people out of work for between one andtwo years. France’s overall unemploymentrate in the second quarter stood at 9.1%,still well above the 7% he has promised toachieve by 2022.

Part of this is unsurprising. Labour re-forms obviously take time to feed throughinto durable job creation. It was not until2008, five years after its reforms, that Ger-many’s unemployment rate fell to 7%, anda further four years before it reached 5%,thanks in part to the creation of low-wage“mini-jobs”, which the French governmentdoes not seek to copy. “France will not be acountry of low-cost work,” declared MurielPénicaud, the labour minister, last year.

Moreover, the second element of MrMacron’s three-part labour reform—a re-

vamp of vocational-training schemes onwhich France spends €32bn ($37bn, or 1.4%of gdp) a year—has only just gone into ef-fect. This is designed to improve results byhanding choice to employees in the form oftraining credits they can choose how tospend. A further €15bn over five years is go-ing into training for the unemployed. Itwill take much longer for such measures toimprove skills and job prospects.

The third and final part—a reform of so-cial protection—will be unveiled only nextyear. Whereas Mr Schröder began with ben-efit reform, Mr Macron has left this untillast. During his campaign, he promised toextend unemployment benefit to all (cur-rently it depends on accumulated insur-ance rights), in order to adapt the Frenchwelfare state to a world in which work isless regular and people change jobs moreoften. Such ambitions may now be scaledback, because of their cost. Plans to clampdown on those who refuse job offers re-main on the table.

Nonetheless there are some indicationsthat French employers are starting to re-spond to the labour reforms. One seems tobe an improvement in the quality of jobscreated. For example, in the third quarter of2018 the number of firms reporting an in-tention to hire on permanent (rather thantemporary) contracts was 10% higher thana year earlier, according to Acoss, the so-cial-security agency. Figures also show arise in the overall share of those aged 15-64employed on permanent contracts over thepast three quarters and a recent drop inthose on short-term contracts (see chart).

Another measure is how many cases forunfair dismissal end up in the labourcourts. French courts have until recentlybeen free to award damages without limit,and these varied wildly. Mr Macron’s la-bour law capped such awards, therebyminimising the financial risk of lay-offs(and so of hiring) to firms. In 2017 the num-ber of such cases going to court fell by 15%on the previous year. One director of a ser-vices firm, which employs 40 people in itscall centre, says that he usually hiresaround five people each month, and usedto put them all on short-term contracts.Now at least two of those will be permanentjob offers. “It’s better to have motivated em-ployees, but in the past it was a risk,” hesays. “Now I feel it’s a gamble I can take.”

Such trends are new, and yet to be con-firmed. Much will depend on the economicoutlook beyond France. But, says LudovicSubran, chief economist at Euler Hermes, aFrench credit insurer, “the trajectory isright, and we should see results by 2020.”Mr Macron has urged people to be patient.The trouble, of course, is that politicianswho introduce reforms are often not thosewho benefit from them. Just as his last la-bour reforms came into force, in 2005, MrSchröder lost his job, to Angela Merkel. 7

P A R I S

Tentative signs that EmmanuelMacron’s labour reforms are working

France

Bearing fruit?

Green shoots

Source: Insee *15- to 64-year-olds

France, % of workforce*By employment contract type

Permanent Temporary

2015 16 17 18

47

48

49

50

2015 16 17 18

7

8

9

10

The Economist November 10th 2018 Europe 35

1

“Friedrich the great” roared oneheadline. The hype that attended the

surprise declaration by Friedrich Merz, apolitician-turned-businessman, that hewould run for the leadership of Germany’sChristian Democratic Union (cdu) mayhave been a trifle overdone. But as AngelaMerkel’s long reign as chancellor draws to aclose, Mr Merz’s gambit has exposed theparty’s thirst for political novelty. Mrs Mer-kel’s decision on October 29th to vacate thecdu leadership, a position she has held for18 years, has unleashed passions that someGermans had forgotten they had. “The cdu

lives!” gushed a party vice-chairman. At first blush, the 62-year-old Mr Merz

seems a curious agent of renewal. A long-time cdu man from a small town near Dort-mund, in Germany’s west, he earned hisspurs as a fearsome parliamentarian in the1990s. But in 2002 he was felled as floorleader of the parliamentary party by MrsMerkel, whose ambition he had underesti-mated. He left the Bundestag in 2009 for alucrative career in law and finance, al-though he kept one foot in politics, notablyas chairman of Atlantic Bridge, a body thatfosters links between Europe and America.Over the years, as frustration with Mrs Mer-kel spread inside the cdu, Mr Merz grewused to batting away questions on his po-litical ambitions.

Yet for many in the party’s conservativebase, says Ruprecht Polenz, a former cdu

general secretary, he remained a “projec-tion screen”. Where Mrs Merkel was cau-tious and consensual, he is spiky and com-bative. Her gestures to the left won votesfrom Germany’s Social Democrats (spd) butirritated many in her own camp; Mr Merz

once claimed Germany’s tax code should besimple enough to fit on a beer mat. Hiscomment, in 2000, that immigrantsshould adapt to German Leitkultur (leadingculture), is fondly recalled by conserva-tives who have not forgiven Mrs Merkel forletting in over 1m migrants in 2015-16. Someof the 1,001 delegates who will gather inHamburg to elect Mrs Merkel’s successornext month may even secretly feel that 18years of being led by a woman is enough.

Yet for all that, Mr Merz is unlikely topresent himself as the candidate of rup-ture. Despite the sense of torpor under MrsMerkel, it remains a minority view in thecdu that renewal demands a sharp right-ward turn. (Jens Spahn, a young rival to MrMerz who best represents that camp, hasalready been written off by many commen-

tators.) At a press conference announcinghis candidacy, Mr Merz seemed more inter-ested in attacking the fringes of Germanpolitics than in bolstering his conservativebona fides.

Mr Merz also raised eyebrows by sug-gesting that Germany should have provid-ed a more constructive response to theEuropean reforms proposed by EmmanuelMacron, France’s president. That followedhis decision to sign an open letter by agroup of German dignitaries urging suchEuropean reforms as a common army andan unemployment-insurance fund. Someof these ideas may alienate precisely thoseparty members who have supported MrMerz’s candidacy most vocally.

His cv presents a second potential diffi-culty, notes one cdu deputy. Unlike Mr

B E R LI N

Friedrich Merz stakes out his claim tosucceed Angela Merkel

German politics

Back from the dead

The down-at-heel neighbourhood ofExarchia in central Athens, known for

its lively bars and tavernas, has long beenhome to a small but disruptive commu-nity of self-described anarchists. Violentstreet battles take place at weekends:extremists throw Molotov cocktails atpolice, who respond with tear gas. Long-suffering residents say their complaintsare routinely ignored by the authorities.

One anarchist group, Rouvikonas(Rubicon), uses more sophisticatedtactics to make its presence felt. Based ina cinema-cum-bar close to Exarchia’scentral square, populated with drugpushers and sellers of bootleg cigarettes,Rouvikonas stages nuisance attacksagainst embassies, government build-ings and the offices of multinationalcompanies. Its members are not usuallyarrested. Prosecutors dismiss theiractions as “too insignificant” to justifyfull-fledged investigation.

Rouvikonas’s victims would disagree.In recent months, its activists have firedpaintballs at the Turkish, French andAustrian embassies; destroyed newlyinstalled electronic ticket barriers atAthens metro stations; and smashedglass doors at the offices of Novartis, aSwiss pharmaceuticals firm. Many ob-servers believe the Syriza government ofprime minister Alexis Tsipras toleratesRouvikonas’s activities, hoping to reas-sure left-wing voters that despite car-rying out harsh austerity policies pre-scribed by Greece’s internationalcreditors, the party is still at heart aradical movement. When police officersarrested several Rouvikonas members

who broke into parliament last year,Nikos Voutsis, the Speaker, called up thecitizens’ protection minister and orderedtheir immediate release on the groundsthat “it was a simple act of protest”.

Counter-terrorism experts worry,however, that the group is becoming atraining school for extremists. Somemembers of Rouvikonas have connec-tions with the Conspiracy of Fire Cells, agroup that in 2010 sent a clutch of letter-bombs addressed to European poli-ticians, among them Angela Merkel, theGerman chancellor. Its leaders are nowserving long jail terms, but anotheralleged member is awaiting trial oncharges of sending a booby-trappedparcel in 2017 to Lucas Papademos, atechnocrat who was also briefly primeminister during the euro crisis. Mr Papa-demos was seriously wounded whileopening the package in his car.

Licensed anarchy?Greece

AT H E N S

A group of troublemakers seem to operate with impunity

36 Europe The Economist November 10th 2018

2 Spahn, who has served in the finance andhealth ministries, or Annegret Kramp-Kar-renbauer, the other leading candidate, whohas run one of Germany’s states, Mr Merzhas no administrative experience to speakof. That counts against him. Few observersbelieve Mrs Merkel’s stated wish to serveout her term as chancellor until 2021will begranted should Mr Merz become partyleader. If she goes early, the fraying co-alition could collapse, leaving Mr Merzscrambling to form a new government orholding an early election.

The three leading candidates, plus asmattering of also-rans, will make theircase to the cdu rank-and-file at eight re-gional gatherings over the next month.Plenty could happen in that time. In acountry that retains an instinctive streak ofsuspicion towards finance, Mr Merz’smoneymaking past could throw up diffi-culties, for instance. But he is probablymore likely to be concerned with how tolead a party that wants continuity whilepretending that it doesn’t.7

Apungent odour of dried fish and thecries of merchants fill the cavernous

central market, which locals in this south-ern Russian city still lovingly refer to as“the old bazaar”. Commerce is in the bloodhere. “If a man doesn’t want to earn money,then what is he doing on this earth?” guf-faws Galya, who hawks pork. Rows of sell-ers reflect a multicultural history: Arme-nians, Georgians, Greeks, and even Koreanwomen peddling kimchi. Down the hillfrom the market, the river Don beckons; onthe city’s left bank, barges with piles ofgrain await their departure for foreignshores. “The south is more alive,” saysInna, a fishmonger. “It’s like the fish: whenshe swims in clean water, her eyes sparkle.”

A city with roots as a trading hub, Ros-tov-on-Don has preserved its entrepre-neurial spirit. “The Russian south is themodel of a future Russia,” argues SergeiSmirnov, ceo of Center-Invest, the largestregional bank. “We don’t have oil, but wedo have agriculture, tourism, transport andsmall business.” Although Russia’s gdp

growth is slow at around 1.5% a year, theRostov region is humming along at twicethat pace, powered by booming farming,retooled manufacturing and an active citi-zenry. In Rostov-on-Don, the regional capi-tal known simply as “Rostov” (or “Rostov

Papa”, a name from its days as a criminalcapital), “people bustle about and try tomake things happen, which is a very bigdifference” from other similarly sized cit-ies, says Natalia Zubarevich, an expert onRussia’s regions.

The combination of geography, tradi-tion and mild weather makes Rostovamong Russia’s most entrepreneurial cit-ies. As Yuri Bogdanov, Center-Invest’s di-rector of innovation, says: “Cities devel-oped around these southern markets.”Even 70 years of Soviet life could not snuffout the instinct: when Mikhail Gorbachevlegalised co-operatives as part of peres-troika, Gloria Jeans, Russia’s first producerof blue jeans and one of its largest clothingfirms to this day, opened in Rostov. In Ros-tov, 44% of the workforce is employed insmall and medium-sized businesses, com-pared with a dismal 25% nationally.

The regional governor, Vasily Golubev,also has a business-friendly message.“We’re open for investors, including for-eigners,” he declares, a statement thatmight seem discordant in an era of sanc-tions and with a war simmering just acrossthe border in eastern Ukraine. It helps thatRostov’s main industries largely lie outsidethe purview of Western sanctions, whichhave focused on energy, finance and thearms trade. A further boost comes from agleaming new international airport and anetwork of refurbished roads, built aheadof last summer’s World Cup, when Rostovwas one of 11 host cities.

Rostov’s pitch includes a mix of old andnew. Rather than dying, some Soviet giantshere retooled. Industrial production in theregion was up by 7% last year. Ms Zubarev-ich calls it “a new post-Soviet re-industrial-isation”. Take Rostselmash, a hulking agri-cultural-equipment producer founded bythe Bolsheviks in the 1920s. On the brink offailure in the 1990s, these days Rostsel-mash has been enjoying a revival. Agricul-ture is one of the rare bright spots in the

Russian economy, helped along by govern-ment subsidies and counter-sanctions thatbanned food imports from the West. In2016 Russia became the world’s largestwheat exporter. Rostselmash now sells tomore than 35 countries and opened its firstoffice in Germany last year. When VladimirPutin gathered his advisers for a meetingon the development of regional industryearlier this year, they met at Rostselmash.

Beyond the old industry, a youngerpost-Soviet generation hopes to reorientRostov. The c52 creative cluster, an aban-doned factory transformed into a hipmulti-use space, offers a glimpse of the vi-sion. Now streetwear shops and a yoga stu-dio fill the first-floor retail space. A centralhall for events and film screenings featuresa “third-wave brew bar”, where a drea-dlocked barista pontificates on the particu-larities of Ethiopian and Guatemalan cof-fee blends. Young programmers anddesigners sit hunched over laptops in theupper-floor offices. Alexander Kuleshov,c52’s owner, has been shifting towards it

and design firms with global client bases:following the devaluation of the Russianrouble in 2014, such outsourcing becamegood business. Like many of his tenants,Mr Kuleshov is determined to stick aroundtown. “I’m proud that I’m not leaving, thatI’m doing something here,” he says.

Ultimately Rostov remains subject tothe same challenges that plague Russia atlarge. Overzealous inspectors squeezebusiness. Mr Kuleshov laments a fine he re-ceived for painting his residents’ logos on awall facing the street, which the policeclaimed was illegal graffiti. Exporters gripeabout the chilling effect of sanctions onbusiness relationships. At the central mar-ket, Galya grumbles about rising petrolprices. Inna rues that in recent years hercustomers have been buying fewer cray-fish, the local delicacy. “Times are toughand people are in debt,” she says. “In theend we all live in one country.” 7

R O STO V - O N - D O N

The second in an occasional series onEurope’s second-tier cities

Russia

The tenth city:Rostov-on-Don

Old habits die hard

The Economist November 10th 2018 Europe 37

Shortly after 2am on November 11th 1918 a train came to a haltin a wood in Compiègne, near Paris. A second train pulled up on

a nearby track. After four years of fighting, delegates of the Germangovernment sought an armistice from Ferdinand Foch, the com-mander of the French forces. Rare photos of the scene, hazy as amemory, show engine smoke twisting between the twiggy trees,makeshift boardwalks across the leaf-strewn ground and clustersof soldiers by the rails. At 5.15am the Germans signed the peace inthe light of brass lamps in a teak-lined dining car. At 11am the gunsfell silent along the 400km (250 mile) front, their thunder replacedby the pealing of church bells.

This peace ended a collective nightmare of hitherto unrivalledintensity and volume. The first world war was not just a grand trag-edy. For the 67m who fought, it was a sordid hellscape. Few of the10m killed in combat died from a “bullet, straight to the heart”, aspro forma telegrams to relatives put it. Many more bled to death inno-man’s land, their wails lingering for days like “moist fingers be-ing dragged down an enormous windowpane”, as a British lieuten-ant wrote of the Battle of the Somme. Traumatised survivors some-times slept in open sewers, and begged for their mothers assuperiors ordered them over the top.

They guarded what slivers of humanity and dignity they could.At Compiègne today visitors can view silver rings from the trench-es bearing initials (LV, MJ, SH or G) or four-leaf clovers; pipes withmarks worn where teeth once clenched; a tube of insect-bitecream; letter-openers fashioned from shell casings, the names ofyearned-for correspondents etched into their blades (“Margue-rite”, “Mlle Rose-Marie”). A certain stoic humour also played itspart. “I was hit. I looked round and saw that my leg had shot outand hit the fellow behind me (who got rather annoyed about [it])”wrote Charlemagne’s great-grandfather in his diary in 1915, justoutside Ypres.

The memorial at Compiègne focuses on the leaders, the“switchmen of history” as Geert Mak, a Dutch historian, callsthem. A replica carriage is the star artefact, name cards markingwhere the German and French delegates sat. Outside, a statue ofFoch keeps vigil over the clearing. On November 10th EmmanuelMacron and Angela Merkel will visit the site. As they enter the

room where the carriage stands they will pass under a quote byWinston Churchill: “Those who do not learn from history are con-demned to repeat it.”

Pondering the exhibits, that apophthegm seems at once trueand yet hopelessly hubristic. The first world war happened be-cause a generation of Victorian leaders took for granted the stableorder that had prevailed in most of Europe for decades. Theyshould have read their history books. Yet the war was also a tale offorces beyond the power of any leader, however well-read; of na-tions and continents not as trains on history’s railway lines, run bydrivers and switchmen, but as rafts tossed about on history’socean, dipping at most an occasional oar into the waves. Fate wasthe real grand homme of the “Great War”. The assassination of Arch-duke Franz Ferdinand in 1914 would not have happened had hisdriver not taken a wrong turning in Sarajevo. The German army’sinitial advance was halted at Nieuwpoort by a Belgian lock-keeperwho flooded the surrounding marshlands. Political twists in Ber-lin, not crushing defeat on the battlefield, pushed Germany to suefor peace in 1918.

The raftsmen also lacked maps. Across the continent, the armi-stice was greeted with relief. Newspapers announced it with aretrospectively stomach-churning sense of finality. “The war isover” cried Londoners as ceremonial gunfire broke the news. Thenightmare seemed to have passed, but it had not. The armisticeand the peace treaties that followed in 1919 and 1920 reshaped themaps of Europe and the Middle East, and imposed vengeance onthe defeated, seeding future conflicts. Millions returned from thefront angry, traumatised, wounded, resentful or all four. Gueulescassées (broken faces) the French called them. One such, an Austri-an-born lance-corporal, would take Germany to war again two de-cades later, and in 1940 would have the French sign their own sur-render in the same railway carriage at Compiègne.

The power of nightmaresMemories are everywhere. Two plaques in Compiègne’s stationlist the 23 locals killed in the first world war and the 20 killed in thesecond. Engraved brass cobblestones glint from German streetsmarking the addresses where Holocaust victims once lived. Recol-lections live on in diaries or passed through families orally. Thepast summer’s hot weather exposed shells and bullets in dried-uprivers. Other artefacts remain hidden: the original French versionof the Treaty of Versailles went missing and probably rests, forgot-ten, in some German attic or cellar. “Europe is a continent in whichone can easily travel back and forth through time,” writes Mr Mak.The eu, forged from the rubble of the two wars, knits the continenttogether in the spirit of lessons learned: peace, fraternity, unity indiversity. The pedagogical value of the past is to today’s Europeanestablishment what the uninhibited pursuit of freedom is to theAmerican one, a foundational story, an essence.

Long may that learning continue. Yet modesty is also due,about forces greater than the wits and power of even historicallyaware societies are able to contain. National chauvinisms live ondespite the Somme. Anti-Semitism lives on despite the Holocaust.Societies’ capacity to imagine collapse and barbarism in visceralterms fades with time. All Europeans can do is be vigilant andhumble before these forces, dip their oars into the waves of historywhen possible, hold tight to their humanity and be grateful thattheir continent’s past and present are now broadly in harmony, theformer educating and civilising the latter, for now at least. Liketrain lines running together in a wood. 7

Between the tracksCharlemagne

No continent, even one as old as Europe, can truly master its history


1

Tucked away on a side street, in a stripmall between a barber and a couple of

empty storefronts, Panadería Oaxaqueña, amodest bakery that smells of yeast and cin-namon, is a hub for Columbus’s growingLatino population. For 20 years, the Cruz-Santos family has been baking conchas, bo-lillos, and pan de yema; some of their cus-tomers, says Alfa Cruz-Santos, the 22-year-old daughter of the owners, stop in twice aday, every day. But after the 2016 election,their customers began calling them to askif they would deliver bread instead. “Peoplewere asking if it was safe to go out,” says MsCruz-Santos. Over the course of those anx-ious conversations, the Cruz-Santos familybegan encouraging their customers, manyof them first-generation Americans, to dosomething that they had not previouslydone: vote. Precise turnout figures will notbe known for weeks, but the New YorkTimes estimates that more than 114m peo-ple cast ballots—fewer than the 138m peo-ple who voted in the 2016 presidential elec-

tion, but well over the 83m who turned outfor the last mid-terms, in 2014.

In some House districts, turnout ap-proached presidential-year levels. TheDemocratic Party did especially well inswing districts. Twenty such places backedBarack Obama in 2012 and Donald Trump in2016; the Democrats won 13 of these. Thir-teen districts went from backing Mitt Rom-ney, Mr Obama’s opponent in 2012, to Hilla-ry Clinton in 2016. The Democrats won ten.They flipped 17 of the 24 districts that

backed Mrs Clinton in 2016 but also votedfor a Republican congressman. Most ofthese were in wealthy, suburban areaswhere Mr Trump has grown unpopular.Barbara Comstock, a two-term Republicanrepresentative in a suburban Virginia dis-trict abutting Washington, was thwackedby her Democratic challenger by 12 points.

Compared with the previous mid-termsin 2014, Democrats gained most votes inwhiter areas that had backed Mr Trump—perhaps because they campaigned primar-ily on health care. They now hold three ofIowa’s four congressional seats. Steve King,a white nationalist, fended off a toughchallenge in the state’s rural west. Depend-ing on the outcome in Maine, where the in-troduction of ranked-choice voting makesresults slow to count, Bruce Poliquin couldwind up as the sole Republican congress-man from New England.

Among the new entrants in January willbe the first Muslim women to serve in Con-gress—Rashida Tlaib from Michigan andIlhan Omar from Minnesota—and the firstNative American women: Sharice Davidsfrom Kansas and Deb Haaland from NewMexico. A majority of voters were women.At least 100 will serve in the next House ofRepresentatives, exceeding the previousrecord of 84.

How will this change the way the federalgovernment operates? Democrats are un-likely to obstruct everything. Nancy Pelosi,

The House of Representatives

Long division

CO LU M B U S , O H I O A N D WA S H I N GTO N , D C

With a strong showing in the suburbs, Democrats end unified Republicangovernment and will provide a check on the president

United States

39 The Senate

40 Ballot initiatives

41 Governors’ races

41 Farewell, Jef Sessions

42 Running elections


43 Lexington: Immigration politics

The Economist November 10th 2018 United States 39

2

1

who will probably return as Speaker, hasexpressed interest in co-operating with MrTrump in three areas: infrastructure, re-ducing the price of prescription drugs andcleaning up Washington. “It was CandidateTrump’s plan to address all three of thesethings, but he’s failed to deliver on them,”says Cheri Bustos, a congresswoman fromIllinois who co-chairs the House Demo-cratic Policy and Communications Com-mittee, which refines the party’s message.

Infrastructure seems the likeliest tocome to something. The White House andSenate Democrats have already releasedcompeting infrastructure proposals. MrTrump likes putting his name on bigthings, and his base is less doctrinaireabout bridges than about birthright citi-zenship. Yet the scale of the Republican re-versal in the House may make this ap-proach harder. The Republicancongressmen who lost were mainly moder-ates from swing districts who might havebacked bipartisan legislation.

And though Mr Trump may have en-tered office as a dealmaker, as president hehas shown little interest in working withthe other side. He considers base-rallyingmore important. House Democrats couldtry to match him. They believe health care,more than any other issue, won them a ma-jority. They might propose bills shoring upthe Affordable Care Act, and challenge MrTrump to block them. They could revive thedream Act, a broadly popular measure toprotect illegal immigrants brought toAmerica as children from deportation,again forcing Republicans to respond in away that is unpopular with their base or amajority of the public. Legislation to pro-tect voting rights or raise the federal mini-mum wage might be tempting.

But the real prize of a majority is con-trolling congressional committees and theinvestigatory and subpoena powers that gowith it. Republicans have shown little in-terest in overseeing the administration.Democrats will launch a salvo of probes.

The House Ways and Means Committeewill want to see the president’s tax returns.Democrats hope this may shed light on as-pects of the president’s murky affairs rele-vant to national security. It might also re-veal potentially embarrassing things—such as whether Mr Trump is as rich as heclaims to be. If so, they would soon leak.

Three other committees will play amore conventional oversight role: theHouse oversight and government reform,judiciary, and intelligence committees.Elijah Cummings, prospective chairman ofthe oversight committee, says he wants toinvestigate weighty issues, such as the sup-pression of minority voting rights and highcost of prescription drugs. He will also lookat scandal-plagued Trump officials, such asRyan Zinke, secretary of the interior.

The judiciary committee’s likely chair-

man, Jerry Nadler, a New Yorker who hascrossed swords with Mr Trump over real-estate disputes, will also be assertive. Heand fellow Democratic committee-mem-bers have shown an interest in probingcontroversial policies such as the separat-ing of migrant families.

How hard Adam Schiff, next chairmanof the intelligence committee, presses theadministration on Russian election-hack-ing and the Trump campaign team’s al-leged co-operation with it, may depend onwhat happens to Robert Mueller. If the spe-cial counsel’s grander investigation intoMr Trump’s dealings with Russia iscurtailed, as the president’s decision onNovember 7th to force out his attorney-general, Jeff Sessions, suggests it could be,Mr Schiff will play a more important role.He might become the last hope that thetruth of Mr Trump and Russia will emerge.

The election also revealed much aboutthe state of politics. Far more voters castballots for Democrats than for Mr Trump’sparty. Yet Democrats saw a reversal in theSenate, and captured only a narrow major-ity in the House. Mr Trump rallied histroops by sowing fear of a few thousand be-draggled Central Americans hundreds ofmiles from America’s border. That rally didnot extend much beyond his existing sup-porters. But arguably it did not need to. Theodds of the Republicans holding the Senatein 2020 have now shortened considerably.

“You can’t win a country by being preju-diced,” said Cassandra Thomas, voting at aColumbus precinct a few miles from Pana-dería Oaxaqueña. “You can’t keep peopledown who helped build the country.” Thatis one reading of the mid-term results. An-other is that fear and loathing are powerfulcampaign tools. 7

Sherrod brown stood before a lecternin downtown Columbus, as gravelly-

voiced and rumpled as ever, and celebrat-ed. He had just handily dispatched his op-ponent, the perpetually befuddled Jim Re-nacci, to win a third term representingOhio in the Senate. “You showed the coun-try”, he told the cheering crowd, “that pro-gressives can win, and win decisively inthe heartland…We carried a state that Do-nald Trump won by almost double digits.”

Mr Brown’s victory was one of the fewclouds amid generally sunny news for Re-publicans in the upper chamber. On No-vember 6th Republicans flipped at leastthree seats, expanding their Senate major-

ity and highlighting Democratic weakness-es in rural America.

In their defence, Democrats faced a dif-ficult map this year. They had to defend 24seats, including ten in states that MrTrump won. And their candidate in Texas,Beto O’Rourke, came closer to winning aSenate seat than any Democrat in decades.He waged a tireless, positive campaign thatcould become a model for Democrats run-ning in Republican states. But he still lost,against a candidate many Texan Republi-cans regard as weak.

On January 3rd 2019 Senate Democratswill go to work in a chamber controlled,once again, by Mitch McConnell of Ken-

CO LU M B U S A N D YO U N G STO W N , O H I O

Republicans grow even stronger in rural states

The Senate

Where the wave breaks

How it went downMid-term elections results, 2018*

Senate, winning party House of RepresentativesShare of popular vote, %

Democrats

No election

Republicans

Changed hands Ind.

ME

VT NH

WA ID IL NY MA

OR WY SD IA

MN

CT RI

CA UT CO KY MD DE

NM KS NC SC DC

AL GA

HI

Sources: Brookings Institution; Press reports *At November 8th, 0900 GMT †Republicans lead

FL†

AK

NE VA

OK

AR

NJ

LA MS

MT ND

OH PA

WV

TN

WI

AZ†

TX

NV IN

MO

MI

Specialelection

Specialelection

44

42

46

50

48

52

54

2008 10 12 14 16 18*

40 United States The Economist November 10th 2018

2 tucky, in which they will hold a deficit of atleast six seats. That will leave them unableto block Mr Trump’s appointees. The presi-dent will also be able to continue, unim-peded, his transformation of the federal ju-diciary. He has already appointed morefederal appellate judges than any otherpresident in his first two years, as well astwo Supreme Court judges. He may furthertransform the bench: two of the court’s lib-eral justices are in their 80s. Republicangains in the Senate will insulate the partyagainst losses in 2020, a presidential elec-tion year in which the map will be favour-able to Democrats.

Some of the seats that Democrats lostwere held by near-perfect candidates forthose states. Heidi Heitkamp was so popu-lar in North Dakota that her opponent, Ke-vin Cramer, admitted in his final campaignad, “We all like Heidi.” Claire McCaskill is amoderate pragmatist who won tough state-wide races in 2006 and 2012. But during her12 years in the Senate, Missouri grewsteadily more Republican. So did Indiana,where Joe Donnelly, a rare pro-gun, anti-abortion Democrat, lost to Mike Braun, ahard-edged Trumpist who stoked fear of il-legal immigrants in his campaign ads. TheRepublican candidate, Martha McSally,won a seat in Arizona that the Democratsthought was there for the taking. And inFlorida, Rick Scott looks to have edged outthe Democratic incumbent.

It was not all gloom and doom forDemocrats. They flipped a seat in Nevada.Pennsylvania, which Mr Trump won, of-fered perhaps the purest contest of Trum-pism versus a standard Democrat: Lou Bar-letta, an ur-Trump anti-immigrationhardliner, faced off against Bob Casey, acompetent but unremarkable incumbentDemocrat. Mr Casey won easily. And Demo-crats showed renewed strength across theMidwest. Not only did they hold Ohio, butMinnesota and Wisconsin re-elected theirDemocratic senators, one of whom,Tammy Baldwin from Wisconsin, is as pro-gressive as Mr Brown.

The difference between these states andIndiana, North Dakota and Missouri,where Republicans did even better than ex-pected, may be the existence of strong tra-ditions of organised labour. Mr Trump didanomalously well, for a Republican candi-date, among union households. Strongshowings from Senate candidates have leftDemocrats convinced they can win backsome of these Trump voters in 2020.

Rocco DiGennaro, who heads the La-bourers International Union Local 125 inYoungstown, Ohio, says that many of hismembers who voted for Mr Trump also vot-ed for Mr Brown. “Everyone knows SherrodBrown,” he explains. “Everyone knows he’sa fighter.” But they supported Mr Trump in2016 because they saw him as a fighter,too—and they could do so again. 7

“Democracy is the art of running thecircus from the monkey cage,” the

American satirist H.L. Mencken oncequipped. Usually this is done by delegatingresponsibility, but occasionally the frus-trated monkeys decide matters for them-selves. In this mid-term election, theyopted for electoral reform, expanded medi-cal programmes and once again reached forthe marijuana.

Start with the election tweaking. InMichigan 61% of voters chose to end parti-san gerrymandering. Instead—in a touch-ing show of everyman populism—the lineswill have to be approved by a 13-membercommission of randomly selected voters.Citizens in Utah, Missouri and Coloradoalso decided to divest elected officials ofthe power to draw their own electionlines—moves that will be hard to undo inthe future. Michigan and Maryland also ap-proved same-day registration for voters(rather than requiring it weeks ahead oftime), which will remove one barrier tovoting, and Nevada opted to register votersautomatically when they turn 18. Conserva-tive voters in Arkansas and North Carolinawent in the other direction—approvingballot measures that would require photoidentification before votes could be cast.Because actual incidents of voter imper-

sonation and fraud are so rare, Democratssee the laws as thinly-veiled attempts tosuppress their voters.

Voting rights of a different sort were onthe ballot in Florida. There, 65% of votersapproved a ballot initiative automaticallyrestoring voting rights for felons once theyhave served their sentences, provided theywere not convicted of murder or sexcrimes. Though Andrew Gillum, a progres-sive darling running for governor, narrow-ly fell short, the move could benefit Demo-cratic candidates in future. Nearly 9% ofFloridians and a remarkable 18% of blackvoters have been disenfranchised becauseof past felony convictions. Campaignersaiming to restore rights to “returning citi-zens” emphasised Christian ideals of re-demption and the notion that punishmentshould not continue after a person hadserved his or her time. The message ap-pears to have worked.

Perhaps the most astonishing ballot re-sults came from the heart of Trump coun-try, where three deeply conservative states,Idaho, Utah and Nebraska, all voted to ex-pand Medicaid, the government health-in-surance programme for the very poor. Thiswas surprising because Medicaid expan-sion is a pillar of Obamacare, which is notthe most highly regarded law in any ofthese states. A Supreme Court decision leftthe decision on expansion to the states,and half of Republican-governed states de-clined, leading to higher shares of resi-dents without health insurance. In Idaho,where voters went for Donald Trump by 32percentage points in 2016, voters over-whelmingly approved the measure. ForDemocrats, the success is a sign that healthcare, more than any other issue, wins votesin white, rural America.

For the second time in two years, citi-zens in Washington state rejected a tax oncarbon dioxide emissions by a decisivemargin. The measure would have been thefirst of its kind for a state (though nearbyCalifornia may now take that up as a chal-lenge). By 2023, the tax would have raised$1bn annually. For that reason, it attractedthe deep-pocketed opposition of the oil in-dustry, which spent a record $31m oppos-ing the referendum. Even in boom eco-nomic times and in a fairly Democraticstate, concerted opposition and the unpop-ularity of energy taxes make carbon tax-ation a tough sell.

Instead, voters opted to go green in an-other way: by decriminalising marijuanause in three states. That now makes 33states where the stuff is legal to some de-gree, and ten where devotees can go thewhole hog. Utah and Missouri approvedthe drug for medicinal use. Michigandersopted to go fully recreational. Which couldresult in some interesting map-makingfrom the 13 regular Joes who will be draftedto scrutinise the state’s election lines.7

WA S H I N GTO N , D C

When representative democracy flops,there is always the direct kind

Ballot initiatives

Referenda-rama


Funky music blared as balloons and sil-ver ticker-tape tumbled over a ballroom

of gyrating Democrats. J.B. Pritzker, Illi-nois’s new governor, declined to strut as hegreeted members of a noisy crowd. He hadthe air of a jovial, portly uncle presidingover a family gathering. Had his party out-done expectations? “We’ve had an excel-lent night,” he said. “I’m happy.”

He toppled an unpopular, one-term Re-publican governor, Bruce Rauner, thanks,in part, to dropping over $170m of his ownmoney on the race. That is a remarkable(and record) sum even for an heir to the Hy-att hotel fortune whose assets exceed $3bn.Mr Pritzker’s largesse helped Democratsreach beyond urban strongholds to com-muter suburbs such as Naperville, anhour’s drive from Chicago. Democrats wona super-majority in the Illinois legislature.

His efforts are emblematic of a wider,and belated, push by Democrats. For muchof the past decade the party neglected racesfor state legislatures and governors’ man-sions (see charts). “We were asleep at thewheel,” concedes an activist. In contrast,Republicans grasped the strategic impor-tance of state legislatures, which in manyplaces have the power to gerrymander. Re-publican candidates ground out state-levelvictories in Wisconsin, Ohio and Michiganthat prefigured Republican national gainsin such places in 2016.

The Democrats’ neglect is over, judgingby spending on state-level races this year.Local parties reportedly devoted over$2.2bn to such races, not far off the $2.4bnfor congressional campaigns. Democratswon solid returns: seven new governor-

ships, for a total of 23 states.That matters for three reasons. First, be-

cause governors shape policy. Some newones will now roll out expanded Medicaid,adding to the 33 states that already took ex-tra federal money under the AffordableCare Act (aka Obamacare). Tony Evers, whosqueaked to victory in Wisconsin, JanetMills in Maine, and Laura Kelly, who deliv-ered a shock win in usually RepublicanKansas, have all vowed to do so.

The effects of this will be far-reaching.Figures from the Kaiser Family Foundationsuggest that in these three states, plus Ida-ho, Nebraska and Utah (where votersbacked referendums on expanding healthcare) an extra 424,000 people will becomeeligible for insurance. If all were to sign up,the average (non-elderly) adult populationwithout insurance would fall in thosestates to just 6.5%, from over 11% today.Democrat-run states are also likely to re-think prison policies and boost educationspending, not least where new governorslike Mr Evers, or Tim Walz in Minnesota,are ex-teachers.

Second, the governors’ races point towhich figures might prosper in future, na-tional elections. Rich, moderate and fe-male candidates did well for Democrats. InColorado, Jared Polis became the firstopenly gay governor. Andrew Gillum, theAfrican-American mayor of Tallahassee,ran a strong, left-leaning campaign in Flor-ida focused on young, urban and minorityvoters. But he lost to Ron DeSantis, whocalled him a radical socialist. The Republi-can’s crude comments, such as warningthat his opponent would “monkey this up”,

did not backfire. Many voters, in Florida atleast, warm to a conservative.

Last, the new crop of governors will in-fluence how future elections are run. InGeorgia, Kansas, North Dakota and else-where, state governments were accused oftrying to suppress minority votes. Thatshould now be less likely, at least in Kan-sas. And after the census in 2020 state leg-islatures will draw up plans for redrawingcongressional districts. Governors, whohave veto powers, in theory could insist onfairer voting. More probably they willprove partisan, making Florida redder andIllinois more resolutely blue. 7

CH I C A G O

Democrats gain several governorships, perhaps shaping future elections

Governors’ races

Waking up behind the wheel

10

20

30

40

052002 10 15 18

State of the statesUnited States, party control of governorships and state legislative chambers post-2018 election

Chambers Governors

Democrats Democrats

RepublicansRepublicans

20

40

60

80

052002Source: National Conference of State Legislatures

10 15 18

Before Donald Trump became presi-dent, Democrats would have struggled

to name a Republican they disliked morethan Jeff Sessions. The then senator fromAlabama is an ultra-restrictionist on immi-gration and opposes changes to sentencingthat would lock fewer people up. As MrTrump’s attorney-general, he championedseparating migrant children from theirparents, among other terrible ideas. Yet hisremoval on November 7th, after the presi-dent demanded his resignation, hascaused a rare spasm of bipartisan concern.

That is because Mr Sessions, despite hisflaws, believes in the rule of law. He wasalso willing to defy Mr Trump to defend it.His decision to recuse himself from theJustice Department’s probe into allega-tions of collusion between the Trump cam-paign and Russian election-hackers wasforced upon him by his own lying aboutRussian contacts. But after Mr Trumpturned on Mr Sessions, apparently in fearof the investigation under Robert Muellerthat his recusal unleashed, he stood firm.

Mr Trump calls Mr Mueller’s investiga-tion, which has so far indicted or securedconvictions against four members of hiscampaign team and 26 Russians, a “witch-hunt”. He blames it on Mr Sessions, and of-ten demanded he close it down. He alsourged him to launch diversionary probesinto his political rivals, including HillaryClinton. Mr Sessions refused to be “im-properly influenced by political consider-ations.” That was more spine than other se-nior Republicans have shown Mr Trump.

The charitable view of his removal—theday after the mid-terms, apparently be-cause Mr Trump feared it might have costhim votes—is that the president wanted a


The president removes hisattorney-general

The rule of law

Magoo to a goose

1

42 United States The Economist November 10th 2018

more pliant attorney-general. He simplyrefuses to accept that, as the boss of law en-forcement agencies such as the fbi that op-erate at a remove from the executive, the at-torney-general is more than the president’slegal fixer. His model for the job, accordingto a former Trump confidant, is Roy Cohn,the late mob lawyer who advised him in hisearly real-estate days. His appointee to re-place Mr Sessions on an acting basis, MattWhitaker, the former attorney-general’schief of staff, should please him.

He is a highly partisan Republican whohas insisted that judges take a “biblicalview of justice”. His own view appearsmainly to track Mr Trump’s. Mr Whitakerhas attacked the fbi for failing to indict MrsClinton. He has been a fierce public critic ofMr Mueller’s investigation, which heseems to think is a “lynch mob”. He hassaid, falsely, that the former fbi directorhas no mandate to investigate Mr Trump’sbusiness interests—something the presi-dent had described, with no authority, as a“red line”. Mr Whitaker has also suggestedthe investigation could be killed by cuttingits budget. He is now in charge of it.

A darker view of Mr Sessions’ removal isthat it is a means of bringing about what MrTrump and Mr Whitaker both want, the endof the Mueller investigation. This wouldrepresent by far the biggest rule-of-law cri-sis of Mr Trump’s presidency—perhapssince Watergate. A sitting president wouldhave shut down a counter-espionage in-vestigation into a hostile state’s attack, be-cause it threatened to implicate himself orhis children. Would he get away with it?

The incoming Democratic leaders of theHouse of Representatives were swift to de-nounce Mr Sessions’ removal. Nancy Pe-

losi, the likely next Speaker, called it “an-other blatant attempt” by Mr Trump to endthe Mueller probe. Democratic-led com-mittees would investigate him if he did.But there is a limit to what they could dowithout fulsome backup from Republi-cans, and there is little sign of that.

Republican Senate leaders have refusedto vote on a bill to protect Mr Mueller. Onlya few expressed concern at Mr Sessions’ re-

moval. Last year Senator Lindsey Grahamof South Carolina, once known as a princi-pled conservative, said there would be“holy hell to pay” if Mr Trump sacked hisformer Senate colleague. Shortly after he ineffect did so, Mr Graham tweeted that helooked “forward to working with President[Trump] to find a confirmable, worthy suc-cessor so that we can start a new chapter atthe Department of Justice.”7

Sessions, rule-of-lawman

The unsung hero of election nightmay have been a two-word website:

polls.pizza. As the name suggests, itsends pizzas to polling places with longqueues. On November 6th it dispatched10,000 pizzas to 576 polling places in 43states. And queues were indeed long. InNew York people waited more than twohours; in metropolitan Atlanta the aver-age voter waited around three. If the firstreaction to such news is gratitude for thegenerosity of strangers, the secondshould be bafflement. Why, in one of theworld’s richest, oldest democracies,should it take that long to vote?

One reason, says Lawrence Norden, avoting-technology expert at the BrennanCentre at New York University LawSchool, is that most states are usingvoting machines at least a decade old.“These are computers,” explains MrNorden, “and after ten years, you shouldbe looking to get new machines.” Forty-three states are using machines so oldthat spare parts are no longer made.

Across the country, equipment mal-functioned. Scanners failed. Alarmingly,some electronic voting machines

changed people’s votes. Precincts ran outof ballots and were unprepared for therelatively high turnout. In Phoenix onepolling place was foreclosed on the nightbefore the vote, leaving ballots and vot-ing machines locked inside.

Some see a dark purpose behind thechaos. In Georgia the Republican nomi-nee for governor was also secretary ofstate, charged with overseeing elections,in which capacity he faced multiplelawsuits and allegations of attemptedvoter suppression. On election night thelongest queues were said to be in the partof the state friendliest to his opponent.Voter suppression need not entail, as itonce did in the South, naked intimida-tion. Capricious enforcement of oth-erwise pointless rules leading up to achaotic election day can do the trick, too.

Attempted voter suppression can alsobackfire. North Dakota passed a lawrequiring voters to present a street ad-dress, which many of the state’s manyNative Americans do not have. Criticssaid it was intended to keep them fromthe polls. On November 6th they turnedout in record numbers.

Stand and eventually deliverVoting

Some states are really bad at running elections

A ruf day

2


When opposing political parties both think they are winning,one of them is usually wrong. This is the quandary America

finds itself in, after the Democrats won the House of Representa-tives in the suburbs, while the Republicans tightened their grip onthe Senate in the sticks. It also describes the attitudes of both par-ties towards the most divisive issue of the Trump era: immigra-tion. Whipped up by a frenzied nativist intervention by PresidentDonald Trump, including a closing tv ad so racist that even FoxNews would not air it, most Republicans ran on the issue in themid-terms. Democrats mostly tried to ignore it. Who was right?

The picture, again, looks mixed. The most virulent nativistslost, including a trio of Trump wannabes, Lou Barletta and CoreyStewart, Senate candidates in Pennsylvania and Virginia, and KrisKobach, the Republican running for governor in Kansas. So didprominent Democrats who took the opposite tack—including An-drew Gillum and Beto O’Rourke, liberal darlings in Florida and Tex-as, both of whom wanted to rearrange the Immigration and Cus-toms Enforcement (ice) agency. But all had tough races. Thebroader conclusion from the mid-terms is that, on immigrationand otherwise, both parties turned out their voters, extendingtheir territory a bit, without taking from the other. It is tempting tosee this as a validation of both their immigration strategies.

Exit polls, which suggested about half of voters liked MrTrump’s immigration policies or wanted tougher ones, also sup-port that. So do interviews with Democratic strategists. Nonethought Mr Trump’s late onslaught, which also included dispatch-ing a small army to defend America against a weary column ofHonduran asylum-seekers, had hurt their party. Several noted thathis immigration policies, including his putative border wall, cag-ing of migrant children and threat to deport 800,000 immigrants,known as dreamers, who were brought to America illegally aschildren, are all unpopular. Such complacency, on the issue thatfuelled Mr Trump’s rise, on which Democrats remain most vulner-able to him and, for that matter, on which liberals are falling acrossthe Western world, feels like a death-wish.

It ignores how asymmetrically the two parties are affected bypartisanship, in which attitudes towards immigration, the mostpolarising issue, play a big part. The bumper representation given

to small states in the Senate means Democrats need to win moreconservative places than Republicans need to win progressiveones. And they cannot win there on scrapping ice. The harder linetaken by Democratic senators running in such states illustratedthat. In Indiana Joe Donnelly declared himself a fan of the wall; inMissouri Claire McCaskill said she liked the sound of “OperationFaithful Patriot”, as Mr Trump’s fatuous troop deployment wascalled. Yet both lost, because in the end voters reckoned they wereDemocrats—the party, according to Mr Trump, of open borders.

It is not possible to say this was the reason for their defeat. But itis likely, because of another sort of immigration-related asymme-try. Only a handful of voters understand the details of immigrationpolicy. Why otherwise do voters in West Virginia, where immi-grants are rarer than millionaires, worry about them so much?Rather, as that example suggests, the issue is a repository forbroader anxieties and allegiances. Even conservatives who thinkMr Trump’s promised wall is nuts are keen on the sense of security,nationalism and contempt for liberal feelings it is meant to im-part. Democratic opposition to Mr Trump’s draconian measures,which conservatives hear as the bleating of a party weak on securi-ty and captured by Hispanic activists, makes them even more ap-pealing. In the hands of a skilled opportunist like Mr Trump, im-migration is scarcely a policy problem at all. It is a means to rallynativist sentiment to win power.

Republicans maintain that, to the contrary, it is the Democratswho have commandeered the issue for political purposes. They areright to a degree. As the Democrats have become more dependenton Hispanic voters, they have become much keener to discuss mi-grant rights than border enforcement. Hillary Clinton barely men-tioned it in 2016. And the fact that few Democratic mid-term candi-dates would say how many Hondurans should be allowed, ordenied, entry revealed the same failing. Yet the conspiracy theorythis has fuelled on the right—that Democrats are trying to boost il-legal immigration to swell their electorate—is a fantasy.

Recent Democratic administrations have built as much borderfortification as Republican ones. Barack Obama, the symbol of hisparty’s non-white coalition, deported more illegal immigrantsthan his predecessors. Last year Chuck Schumer, the Democraticleader in the Senate, offered to secure $25bn for Mr Trump’s borderwall in return for protection for the dreamers. The Democrats’main error on immigration is not to have been too political aboutit, but the opposite. They have primarily viewed immigration as apolicy problem, to be unpicked through bipartisan compromise.Mr Trump’s response to Mr Schumer, which was to demand moredraconian restrictions, including a cut in legal immigration andno more “shithole” Africans, should have disabused them of that.The president does not want a big bipartisan deal on immigration.He wants to keep it as a campaign issue.

Sandbagged by unrealityBy ignoring immigration, the Democrats will let him have it—andwhen his name is on the ballot, in 2020, the onslaught will be fierc-er. They need to redefine the issue, to draw some of its poison. Thatshould start with a realisation that a party unwilling to speak ofimmigration as a security issue, as well as a humanitarian one, isunacceptable in much of America. A statement of zero tolerancefor illegal immigration and a willingness to accelerate the process-ing of asylum claims could help relay that. Democrats need to takethe politics of immigration more seriously. Mr Trump has sand-bagged them with it once—and could easily do so again.7

The artifice of immigrationLexington

Donald Trump sees immigration as a campaign issue, not a policy. Democrats should view it similarly

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1

Democracy in latin america is introuble. That is the message of this

year’s survey of opinion in 18 countries byLatinobarómetro, a pollster based in Santi-ago, Chile. The proportion of people whoare dissatisfied with how democracy workshas jumped from 51% in 2009 to 71%. Theshare that is content has dropped from44% to 24%, its lowest level since the sur-vey began more than two decades ago (seechart 1 and chart 2 on next page).

That does not mean most Latin Ameri-cans are ready to dump democracy, whichhas become the norm across the regiononly since the 1980s. More than half saythat it is better than any other system,though that has dropped by 13 percentagepoints over the past eight years. Disillu-sioned democrats lean towards indiffer-ence. The share who are neutral has risenfrom 16% in 2010 to 28%, while support forauthoritarian government is steady, atabout 15%. “People don’t like the democra-cy they are experiencing,” says Marta La-gos, the head of Latinobarómetro.

In Latin America’s two biggest coun-tries, Brazil and Mexico, that sentiment hasresulted in the election of presidents thisyear who until recently would have been

widely considered too radical to lead theircountries. If disillusionment deepens, fu-ture elections could bring presidents whotest the region’s democratic norms.

Since last November nine countrieshave either re-elected presidents or chosennew ones. Most of these elections were freeand fair but there were notable exceptions.Venezuela’s president, Nicolás Maduro,had his term in office extended in a riggedvote in May. Juan Orlando Hernández’s re-

election in Honduras last November waswidely seen as flawed. Cuba simply trans-ferred power from one dictator to anotherin April. Most Latin Americans, though,live in countries where their votes arecounted accurately. That does not meanthey are happy, as Latinobarómetro’s20,000 interviews, conducted from mid-June to early August this year, make clear.

Voters have many reasons to grumble.Growth in gdp per person has droppedsharply since the global financial crisis in2009. Venezuela’s economy has implodedand Brazil’s suffered its worst-ever reces-sion from 2014 to 2016. The perception thatincome is distributed justly has plungedfrom 25% in 2013 to 16%. That belief may bewrong; the Gini coefficient, a measure ofinequality, has been dropping in the big-gest countries. But, at an individual level, aperson’s perception of inequality is amongthe strongest predictors of his or her dis-satisfaction with democracy.

Economic worries are at the top of citi-zens’ concerns in most countries. Only inVenezuela do more than half the people saythey do not have enough to eat. The region-al average, though, is a still startling 27%.Crime is the second main gripe, leading thelist of worries even in some relatively safecountries, such as Chile and Uruguay. Cor-ruption is another big complaint. Eighteenformer presidents and vice-presidentshave been implicated in corruption scan-dals, including in Argentina, Brazil, Ecua-dor and Peru. The share of Latin Americanswho think their countries are going in thewrong direction exceeds the proportionwho think they are progressing by eight

The Latinobarómetro survey

Dejected about democracy

Latin Americans are increasingly dissatisfied with politics in their countries. Thatis cause for worry

1Broken promise

Source: Latinobarómetro

Latin America, share of respondents agreeing, %

0

10

30

70

50

20

40

60

1995 2000 05 10 15 18

Democracy is preferredform of government

Satisfied withdemocracy

The Americas

49 Messing with mezcal

50 Bello: Blurring the lines betweenjudges and politics


The Economist November 10th 2018 The Americas 49

2

1

One’s eyes are drawn to the agave planttowering over the man who grew it,

Juan Pacheco, but the secret to its flavour isin the ground. For eight years the plant hasabsorbed minerals from the soil of Oaxaca,a mountainous state in southern Mexico.Mr Pacheco alternates agaves with maize toenhance the taste that the soil imparts tothem. His father taught him how to makemezcal, the smoky spirit made from aga-ves, a type of succulent. Mr Pacheco’sgrandfather and great-grandfather weremezcaleros, too. But his children are thou-sands of miles away, studying medicine inthe United States. Mezcal’s growing globalpopularity helps him pay for that.

Such prosperity is new for practitionersof a painstaking craft. Mezcaleros toss ma-ture agave hearts weighing 50kg (110pounds) apiece into pits of fire, where theyburn for days. A donkey then walks aroundin a circle, pulling a large stone wheel thatcrushes the burnt plant, readying it for fer-mentation, which takes ten days.

These artisanal techniques havebrought glamour to a drink once sold inplastic bottles, sometimes containing aworm-like moth larva. Now bartendersfrom Los Angeles to Berlin expound on theterroir of the nine mezcal-producing statesin Mexico and the subtleties of flavour thatcome from various types of agave. In2017 some 5m litres of mezcal were sold inMexico and abroad, a fivefold rise from2011.

With popularity comes anxiety. In Au-gust the Mexican Institute of IndustrialProperty, a government body, expand-ed mezcal’s “denomination of origin”, thearea in which makers of a product are al-lowed to give it a certain name, which wasalready the world’s largest. It now includes

E J U T L A , O A X AC A

The world’s fastest-growing spirit riskslosing its mystique

Messing with mezcal

The worm turns

points, the largest negative gap since 1995. This has battered the credibility of insti-

tutions. Only the armed forces and thechurch, powerful institutions before theadvent of mass democracy, retain much re-spect (see chart 3). Half of Latin Americansbelieve that all or almost all presidents andlegislators are involved in corruption. Theshare of people who think the elites governfor their own benefit has risen steadily overthe past decade; nowhere does it fall below60%. Increasingly, voters are disengagedfrom politics. For the third year running,the number who say they will vote for nopolitical party is bigger than the numberwho say they will vote for one.

Poor people are more alienated than therich and middle class. People who are badlyoff lag behind prosperous folk by morethan ten percentage points in their level ofsupport for democracy. The young are

more sceptical than the old, which bodes illfor democracy’s future. Some 200m LatinAmericans with low levels of education,about 30% of the total, are the voters mostprone to lash out at established politiciansand parties, and to choose leaders who pro-mise to solve problems with a “magicwand”, writes Latinobarómetro in an ana-lytical note accompanying the results. Thesurvey, which has a margin of error of 3%per country, is published exclusively byThe Economist.

In Brazil, where satisfaction with de-mocracy is lowest among the 18 countries,disillusionment opened the way for JairBolsonaro, a former paratrooper who ex-tols the dictatorship of 1964-85, to win thepresidency last month. He had strong sup-port from well-educated Brazilians.

In July Mexico elected Andrés ManuelLópez Obrador, a populist of the left whoseMorena party fought its first election in2015. No fan of dictatorship, he proposes tochange the way democracy works by hand-ing more decisions to voters through refer-endums. Ms Lagos worries that democracyin Argentina is vulnerable. Its economy isheading into recession and the share ofpeople who call themselves middle classdropped by 14 points from 2013 to 2018, thebiggest such decline in the region.

In countries whose leaders are disman-tling democracy, citizens appreciate itmore. Although just 12% of Venezuelansare happy with how their “democracy”functions, 75% prefer democracy to anyother system. In Nicaragua, where the in-creasingly dictatorial regime of Daniel Or-tega has been repressing protests sinceApril, satisfaction with democracyplunged from 52% last year to 20%, butmore than half of the people still supportthe system. Encouragingly, good gover-nance also bolsters support for democracy.Prosperous Uruguay, Costa Rica and Chile,where the rule of law is relatively well es-tablished, are the countries most satisfiedwith how democracy works

The best hope for shoring it up restswith leaders who do not claim to possess

magic wands. Several have recently takenoffice. They include Lenín Moreno in Ecua-dor and Martín Vizcarra in Peru, who haveembarked on campaigns against corrup-tion. Sebastián Piñera, Chile’s centre-rightpresident since March, is trying to reformthe economy and social programmes. Thecentre-left president of Costa Rica, CarlosAlvarado, defeated a fundamentalist Chris-tian and is trying to fix the tax system. IvánDuque, Colombia’s conservative president,is just getting started. If they are success-ful, they will boost democracy’s approvalratings as well as their own. 7

2You can’t always get what you want


Share of respondents agreeing, 2018, %

0 25 50 75

Uruguay

Costa Rica

Chile

Ecuador

Argentina

Honduras

Bolivia

Colombia

Paraguay

Dom. Rep.

Panama

Nicaragua

Guatemala

Mexico

Venezuela

Peru

El Salvador

Brazil

Democracy is preferred form of governmentSatisfied with democracy

“How much confidence do you have in yourcountry’s institutions?”, % responding “a lot” or “some”

In God they trust


Latin America

“How many members of the following groups doyou think are involved in acts of corruption?”2018, % responding

3

0 10 20 30 40 50 60

Parliament

President/oicials

Local government

Police

Judges/magistrates

Religious leaders

None or few All or most

0

20

40

60

80

1996 2000 05 10 15 18

Church

Armed forces

Justicesystem

Politicalparties

50 The Americas The Economist November 10th 2018

2

Bello Battles in and out of court

From the viewpoint of Jair Bolsonaro,Brazil’s president-elect, it was an

inspired appointment. On November 1sthe announced that Sérgio Moro, the mostprominent judge in the long-runningcorruption investigation known as LavaJato (Car Wash), had agreed to serve as hisjustice and security minister. “His anti-corruption, anti-organised-crime agen-da, as well as his respect for the constitu-tion and the laws, will set our course,” MrBolsonaro tweeted. But there is a snag inMr Moro’s appointment. It appears toconfirm the claims of the left-wingWorkers’ Party (pt) that the judge’s mo-tive earlier this year for jailing its leaderand putative presidential candidate, LuizInácio Lula da Silva, was more politicalthan judicial.

Whether or not that is true, Mr Moro’snew job (which he will take up on Janu-ary 1st) is only the most dramatic ex-ample of an increasingly activist judicia-ry playing a more political role in LatinAmerica. In Peru on October 31st, JudgeRichard Concepción sent Keiko Fujimori,the leader of the opposition, to jail forthree years without charge while heinvestigates claims that she received $1mfor her presidential campaign in 2011from Odebrecht, a Brazilian constructioncompany. Her supporters say the judge isin cahoots with the government.

Many see such cases as an overdueclean-up of Latin American political lifeby newly emboldened judges and prose-cutors. The powerful, be they politiciansor businessmen, historically had little tofear from a biddable judiciary. Citizensnow know much more about corruptionand are much less tolerant of it. Anger atthe pt and its attempt to game the politi-cal system through graft was a big factorin the unlikely victory of Mr Bolsonaro, afar-right former army captain. Tarred in

the minds of many Peruvians because herfather ruled as an autocrat, Ms Fujimorihas played a destructive role in the coun-try’s politics, organising the censure bycongress of competent ministers.

Yet there are risks. José Domingo Pérez,the prosecutor in Ms Fujimori’s case,claims that she headed a “criminal organi-sation” within Popular Force (fp), herparty, which “laundered” the Odebrechtmoney by registering fake donations. Iftrue, this was a breach of political financ-ing rules. But was it a crime? There is noevidence that Ms Fujimori, who lost in 2011and 2016, offered padded contracts toOdebrecht. Mr Pérez claimed that if freeshe might destroy evidence (though shehad not done so previously).

When Miguel Torres, an fp congress-man, complained that “they have takenaway [Ms Fujimori’s] right to an impartialjudge, due process and the presumption ofinnocence”, he had a point. Happiest aboutall this will be Alejandro Toledo, a formerPeruvian president, who is accused oftaking $20m in bribes (which he denies).His lawyers have new arguments to resist

his extradition from the United States.As for Mr Moro, some of his judicial

acts now look questionable. Lula wasleading the opinion polls when he wasjailed. The sentence—of more than nineyears for receiving a flat worth$600,000—looked disproportionate.Days before the election, Mr Moro re-leased plea-bargaining testimony fromAntonio Palocci, a former pt minister,which incriminated the party. It nowtranspires that Mr Moro was alreadytalking to Mr Bolsonaro’s people. All thisundermines trust.

Mr Moro said his appointment“means consolidating the progressagainst crime and corruption of recentyears and preventing risks of backslid-ing”. That is possible. He may also re-strain Mr Bolsonaro in his policy ofegging on police to shoot criminals.

But Mr Moro had insisted that hewould never enter politics. How hisbreaking of that pledge comes to beviewed depends not just on how success-ful he is in his new role, but also onwhether judges and prosecutors pursuewrongdoers in parties allied with thegovernment as vigorously as he did Lula.

Whereas corruption remains largelyunpunished in places like Mexico andArgentina, Brazil and Peru have gonefurthest in investigating the sprawlingOdebrecht scandal. There are somesafeguards in both countries. Lula’sconviction was upheld by an appealcourt (which increased his sentence),and his case will reach the supremecourt. Peru’s constitutional tribunal thisyear freed Ollanta Humala, yet anotherformer president, and his wife from whatit said were “arbitrary detentions” with-out charge by Mr Concepción. Holdingthe powerful to account is a step forward,but justice must be seen to be fair.

Blurring the line between judges and politics

three more states: Morelos, Aguascalientesand the State of Mexico. Alejandro Murat,the governor of Oaxaca, where 87% of mez-cal is made, joined protests by mezcale-ros in Mexico City. His government saysthat “poor-quality” mezcal from “distantplaces, devoid of tradition” could sully thedrink’s handcrafted image.

Connoisseurs fret about the “tequilisa-tion” of mezcal. Mexico produces50 times more tequila, a type of mezcalmade only from blue agaves, than it doesmezcal, which can use any kind of agave. InJalisco, the source of 90% of tequila, mak-

ing the spirit is an industrial process.Drones hover above agave fields, checkingwhich plants are ripe. Agave hearts roll onconveyor belts into electric ovens. Chemi-cals speed up fermentation.

The origins of this factory approach arein the mid-19th century, when a few richfamilies acquired vast estates in Jalisco, onwhich they grew agave. In Oaxaca, by con-trast, land ownership is mainly communaland individuals work small plots. Todaythere are thought to be 57 makers of mezcalfor every tequila distillery.

The mezcal boom is already changing

the production process. A third of the mez-cal sold in Mexico is no longer deemed “ar-tisanal” by the Mezcal Regulatory Council.The price of espadín agave, the most com-mon source of mezcal, has quadrupled be-cause of rising demand. Some makers haveresorted to plucking wild agaves, which arenot then replaced, from Oaxaca’s yellowhills. The growth of supply is slowing, evenas demand for mezcal continues to in-crease. The squeeze will last for a while.Agaves planted today will ripen by the endof 2026. That may protect mezcal’s mys-tique for a little while longer. 7


1

“Free bobi wine!” say the graffiti out-side his recording studio in Kamwo-

kya, a poor district of Kampala, Uganda’scapital. On August 13th the pop star-turned-politician (pictured above) was arrestedand, he says, beaten and tortured by sol-diers. Though he was released after twoweeks, treason charges still hang over him.

His real crime is being popular. BornRobert Kyagulanyi, Mr Wine speaks formany of Kampala’s roughly 1.5m slumdwellers. “If parliament cannot come to theghetto,” he said after his election as an mp,“the ghetto will come to the parliament.”

Mr Wine is part of a broader trend inwhich upstart politicians with supportamong the urban poor are rattling govern-ments. They include Kenya’s main opposi-tion leader, Raila Odinga, and Nelson Cha-misa of Zimbabwe’s Movement forDemocratic Change (mdc). In South AfricaJulius Malema of the Economic FreedomFighters has been gaining ground by pro-mising to seize white-owned land.

The past few years have also seen wide-

spread protests by city folk. Witness the“Black Friday” demonstrations in Lusaka(Zambia’s capital) in 2013 and “Red Friday”marches in Accra (Ghana’s) in 2014, or thepost-election riots in Kenya last year.

The rise of urban discontent and youngopposition leaders partly reflects a youthbulge. The median age in Africa is 19.5,whereas its leaders’ average age is 62. It alsoarises from Africa’s idiosyncratic urbanisa-tion, whereby cities are growing fast butopportunities in them are not.

In 1960, 15% of Africans lived in cities,about the same as in Europe in the 1600s.

Today the share is 38%. By 2030 it will sur-pass 50%. Africa’s urban population is ex-panding at a rate of 4% per year, twice theglobal average. Yet urbanisation is notbringing Africa the prosperity it brought toother continents. In Europe and East Asiathe growth of cities was driven by migra-tion from the countryside, as workersswapped fields for factories. African ur-banisation is mostly a result of naturalpopulation growth. For example, in Ma-puto, Mozambique’s capital, just 12% of thepopulation rise is accounted for by migra-tion from rural areas. Since there are fewmanufacturing jobs, most of the growingurban labour force is absorbed by the infor-mal economy. That is one reason why ur-banisation in Africa does not reduce pover-ty as much as it does in other continents.

Another reason is the woeful way citiesare organised. More than 50% of urbaniteslive in slums. Fully 40% lack flushing toi-lets. Many capitals still rely on out-of-dateplanning laws, leading to haphazard build-ing and needlessly expensive rent.

The neglect, paradoxically, is rooted indemocracy. From the end of colonial ruleuntil 1991 no incumbent government wasreplaced via a peaceful election. Policy-making had an “urban bias”. Since thegreatest threat to autocrats was a coup, andmost coups started in cities, leaders tried tobuy off urbanites. This meant, for example,favouring (urban) consumers of food over(rural) producers by keeping prices low.

The politics of urbanisation

Vexed in the city

H A R A R E A N D K A M P A L A

Africa’s growing cities are inspiring protest and opposition parties

Middle East & Africa

52 Repression in Tanzania

53 Elections in Madagascar

53 Needling Africans

53 Libya’s peace process

54 Films about jihadists


52 Middle East & Africa The Economist November 10th 2018

2 Much changed as democracy floweredin the 1990s, and rulers switched to win-ning support in the populous countryside.In a study of 27 countries, Robin Harding ofthe University of Oxford found that the ad-vent of democratic elections is associatedwith increased access to primary schooland healthier children, but only in rural ar-eas. Other studies show skewed spendingon rural roads and on farm subsidies.

Urbanites have many reasons for beingless likely than rural voters to back those inpower. They have better access to news andcan be organised more easily by activists.Using polls taken in 28 countries Mr Har-ding has found that city dwellers are on av-erage five percentage points more likely tooppose the government than rural votersare. This is true even after controlling forage, gender, education and whether votersshare the ethnicity of the country’s leader.

Politicians mindful of urban unhappi-ness perhaps stand a better chance of suc-cess. Mr Wine’s music evokes slum life. Inone song he protests against the heavy-handed arrest of street traders. In anotherhe sings about kikomando, a humble snackof chapati and beans eaten by the poor. Heslips naturally into Luyaaye, a street slang.By contrast, Yoweri Museveni, the 74-year-old Ugandan president who won just 31% ofthe vote in Kampala in 2016, sprinkles hisspeech with rustic idioms. Young urba-nites call him “Bosco”, after a character inan advert, a country bumpkin who comesto the city and stumbles down escalatorswith his bicycle.

Such politicians hope to emulate Mi-chael Sata, perhaps the most successful Af-rican populist. Sata, who was Zambia’spresident from 2011 until his death in 2014,coupled an appeal to his ethnic Bembagroup in the countryside with a pro-poormessage in cities. During electioneering hespoke in the vernacular. He launched cam-paigns from informal markets, not plushhotels. One of the first things he did in of-fice was to order town clerks to stop harass-ing street vendors.

Elsewhere vendors have been less lucky.Some of the most violent incidents havetaken place in Zimbabwe, where thousandsof street traders in mdc strongholds havebeen arrested in operations co-ordinatedby the ruling party, Zanu-pf.

Incumbents are also trying more subtleways to quell urban unrest. In Mozam-bique cities run by opposition parties arestarved of public funds. In Botswana theruling party has appointed extra unelectedcouncillors to cities where the oppositionhas polled well. In Uganda Mr Musevenihas transferred many powers from the op-position-led city council to his appointees.

Yet at some point the size of the urbanvoting bloc will become too big to ignore.In countries where more than half the peo-ple live in cities, urbanites are only a little

less satisfied with democracy than ruralvoters are (see chart), suggesting that poli-ticians do eventually take more notice ofcity dwellers’ interests. But for now, incountries such as Uganda, where three-quarters of people still live in rural areas,politicians will make mainly half-heartedattempts to please those in cities.

In October Mr Museveni toured down-town Kampala, promising to shower trad-ers’ associations with cash. Mechanics atKisekka market, an unruly hub for spareparts, waved dutifully. “He’s the best presi-dent in the world,” gushed one man in aruling-party t-shirt. Then he leaned closer,whispering: “Actually we hate Museveni.We love Bobi Wine.”7

-20

-30

-10

0

10

10 20 30 40 50 60

Source: “Rural democracy: Elections anddevelopment in Africa”, by Robin Harding

Slickers in a twistLikelihood that urban residents are moresatisfied with democracy than rural residentsSub-Saharan Africa, selected countries,

percentage points, 2005-15

Urban population, % of total

Burundi

NigerUrbanites less satisfied

Urbanites more satisfied

Paul makonda seems a lot more like aflailing moral crusader than the region-

al commissioner of Dar es Salaam, Tanza-nia’s commercial capital. The 36-year-oldhas come up with a variety of schemes tocatch the eye of his patron, President JohnMagufuli. One is clamping down on sup-posed vices such as smoking shisha andsleeping in past 8am. His latest pledge, toset up a homophobic “surveillance squad”to track down those guilty of homosexual-ity, which is illegal, is by far his nastiest.

It has also alarmed the West. On No-vember 5th, the eu recalled its ambassador,citing a deterioration in human rights andthe rule of law. The rot began soon after MrMagufuli was elected in 2015 and has re-

cently worsened. Today Tanzania is on thedescent from patchy democracy towardsslapdash dictatorship.

Barely a week passes without brazendisplays of arbitrary power. On November1st Mr Magufuli appeared at what was billedas a “public debate” on his record afterthree years in office. It was no such thing.The president sat on a stately chair in theaudience at the University of Dar es Salaamwhile sycophantic academics praised histenure. Conveniently for Mr Magufuli, anopposition mp, Zitto Kabwe Ruyagwa, wasarrested the night before and charged withsedition, so could not attend.

Other foes have met similar fates. Oppo-sition members of parliament who refuseto accept bribes (the going rate is 60m shil-lings, or $26,200) to cross the aisle and joinChama Cha Mapinduzi (ccm), the rulingparty, are arrested. According to a lawyerwho has represented opponents of the re-gime, every opposition mp who has reject-ed a bung has a charge against them. Lastyear Tundu Lissu, an mp, was shot and in-jured outside his home. This makes peoplescared to hold the president to account.

So too does legislation that outlaws thedissemination of any “statistical informa-tion” that may “invalidate, distort, or dis-credit official statistics”. The change fol-lows the publication of an annual surveyinto political attitudes by Twaweza, a localresearch group. In 2016 it found that 96% ofTanzanians approved of Mr Magufuli. In2017 the share was 71%; in July it was 55%.That is a poor showing in a country whereccm has never lost an election. Aidan Eya-kuze, the group’s director, has yet to getback his passport, which was confiscateddays after publication of the survey.

Another reason for the law concernseconomic data. Tanzania’s gdp grew on av-erage by about 6.5% per year over the pastdecade. But under Mr Magufuli the privatesector has been subject to relentless shake-downs by tax collectors. Several prominentbusinessmen have been arrested ontrumped-up charges of money-launder-ing, which is ineligible for bail. Though thegovernment insists the economy is still ex-panding at its former pace, other economicdata, such as slowing credit growth and ris-ing bad debts, suggest otherwise.

Some worry that a slowing economymay lead to further repression and obfus-cation of data, causing yet more economicharm. Though the eu has raised an alarm,other international institutions, such asthe World Bank, are staying quiet. Tanza-nia, the third-largest aid recipient in sub-Saharan Africa, has been a darling of do-nors since the 1990s, when it seemed to beconsolidating its democracy and also re-ducing poverty. Now, after a decade or soduring which freedoms began to flourish,Tanzanians are facing both economichardship and repression. 7

DA R E S S A L A A M

Under John Magufuli fear is envelopingthe country

Repression in Tanzania

The big squeeze

The Economist November 10th 2018 Middle East & Africa 53

1

In a house in central Dakar three Chi-nese men stand behind a glass screen.

The wall is stacked high with pills, teasand powders covered with Chinesesymbols and pictures of healthy models.There is something for everyone. Teas forkidney problems, creams for aches, pillsfor infertility and four claiming to helpmen with impotence.

“It’s a revolution,” proclaims AliouNdiaye, who started working at the Chi-nese medicine shop three years ago. Itnow has four branches in Dakar. Sene-gal’s capital also has several smalleroutlets and practitioners. “Many peopleare curious but I’m still sceptical,” saysIbrahim Sy, a taxi driver, who says hismother was cured of leg pain with tea.

Senegal’s experience is part of a widertrend of traditional Chinese health cen-tres opening across Africa. Clusters canbe found in Nairobi and Dar es Salaam.Others have opened in Uganda, IvoryCoast and Congo.

Their spread underlines China’s

growing soft power in Africa. In 2000when China held its first-ever Forum onChina-Africa Co-operation, a summitheld every three years, traditional reme-dies were on the agenda. Two years laterit hosted a conference in Beijing to dis-cuss the topic. Many of China’s 48 Confu-cius Institutes in Africa teach courses intraditional medicine.

Moreover, as many as 50,000 youngAfricans are studying in China, many onscholarships provided by the host gov-ernment. Although only a small share areat medical school, many students returnwith a taste for acupuncture and herbs.Demand is also buoyed by China’s largediaspora in Africa, which some reckonhas grown to 1m people.

One practitioner, Mame Awa Diop,studied traditional medicine in Chinabefore the Confucius Institute in Dakarasked her to set up a clinic. Businessstarted slowly, she says. But outside herroom several people sit in an orderlyqueue. “Oh, they’re coming,” she says.

La Clinique ChinoiseNeedling Africans

DA K A R

Chinese medicine is on the rise in Africa

If the health of a democracy were mea-sured only by the number of candidates

contesting a presidential election, Mada-gascar’s would be flourishing: a total of 36were on the island state’s ballot on Novem-ber 7th. Yet politics in Madagascar, beset bycorruption, is far from healthy. Voters hop-ing for a change from the old elite may besorely disappointed by the outcome of arace that has been completely dominatedby two former presidents.

The most visible contender is Andry Ra-joelina, who led a coup in 2009 and ruleduntil 2014. Morondava, a big city in south-west Madagascar, is a sea of posters and t-

shirts emblazoned with Mr Rajoelina’s faceand sporting his signature bright orangecolours. Lorries blaring out his campaignmessages are ubiquitous.

Even with such a well-funded cam-paign, Mr Rajoelina faces stiff competitionfrom Marc Ravalomanana, the president heoverthrew in 2009 and who is fondly re-membered for a tenure marked by eco-

nomic growth and investment. The yearsthat followed the coup, by contrast, werecatastrophic: the economy dived and pov-erty shot up. About three-quarters of thepopulation live on less than $1.90 a day.

The results of the first round will not beannounced until later this month. ButMessrs Rajoelina and Ravalomanana seemlikely to face each other in a run-off on De-cember 19th. Hery Rajaonarimampianina,the incumbent, does not worry them. He

lacks the popular appeal of his rivals andhas been criticised for failing to revive theeconomy since he took elected office in2014. Almost all the other candidates, nick-named les zéros virgule, or “nought point”,after the results they are likely to get, ranwith no prospect of winning. They hopedinstead to negotiate plum positions in thenext administration.

The outcome of the second round isharder to predict. Mr Rajoelina, who is 44and once worked as a disc jockey, is popularwith the young and with women. “I’m go-ing to vote for Rajoelina because he ishandsome, cute and young,” says an enthu-siastic female voter. But many urbanitesderide his madcap schemes, complete withglossy artists’ impressions, to rebuild thecountry. One proposes making Tamatave,the second-largest city, a new “Miami”.

Mr Ravalomanana may lack some of theappeal of his main rival, not to mention hislavish campaign budget, but he is seen as asafer pair of hands. One voter from Tsima-fana, a village north of Morondava plaguedby cattle rustlers and illegal deforestation,says he will vote for “Dada” (Mr Ravaloma-nana’s affectionate nickname) because thecountry felt safer during his term in office.

Yet few will feel safe until the run-off isover and the count is done. Madagascar hasrarely enjoyed a smooth political transi-tion. Many of its people fear that trouble isonce again around the corner. 7

M O R O N DAVA

Voters hoping for a fresh start may besorely disappointed

Elections in Madagascar

Many candidates,little choice

Ravalomanana, a safe pair of hands?

For once Italy’s populist governmentwill be pleased to see a group of Africans

cross the Mediterranean. On November12th the leaders of Libya’s warring factionswill gather in Palermo, the capital of Sicily,for a two-day peace conference.

Italy has an interest in bringing order toits former colony. Libya is an importantsource of fossil fuels. Its Greenstream pipe-line carries gas from western Libya to Sici-ly. Less welcome are the 647,000 migrantswho are thought to have crossed the Medi-terranean to Italy since 2014. Most set offfrom Libya. Their numbers have recentlyplummeted—just 22,000 arrived in thefirst ten months of this year, an 80% dropfrom last year. But they still rile Matteo Sal-vini, Italy’s de facto leader.

Mr Salvini will have his work cut out.The situation in Libya is bleak, with thecountry split between rival militias andun-led peace talks bogged down. One of

C A I RO

Italy’s conference on Libya is mostlyabout France

Libya’s peace process

Too many cooks

54 Middle East & Africa The Economist November 10th 2018

2 the dignitaries in Palermo will be Fayez al-Serraj, head of the un-backed government.Despite his lofty title, in practice he is littlemore than the mayor of Tripoli, the capital,which he controls only with the help of al-lied militias. One of them, from the nearbytown of Tarhouna, attacked Tripoli in Au-gust over an economic dispute. More than100 people were killed before the un nego-tiated a ceasefire.

Things are little better in the east, ruledby a general-turned-warlord called KhalifaHaftar. Islamist militants still carry outcar-bombings and assassinations, whileGeneral Haftar undermines state institu-tions in Tripoli. He controls the strip ofcoast near Sirte, where Libya’s main oil ter-minals are located (see map). They aremeant to be operated by the Tripoli-basedNational Oil Corporation. In June, how-ever, the general’s men seized them and an-nounced that revenues would be sent to arival oil corporation in the east. They with-drew only after America threatened to im-pose sanctions. In the south, meanwhile,ethnic Tuareg and Toubou militias are bat-tling for control, and criminal gangs fromneighbouring Chad prey on civilians.

So, to put it mildly, things in Libya arenot conducive to a peace conference—butItaly is more concerned with the situationin France. Both countries are jockeying forinfluence. Italy’s interests lie in westernLibya, where both the gas pipeline and themigrant boats enter the Mediterranean. Itsees Mr Serraj as an ally and has reportedlypaid western warlords to stop migrantboats from setting sail. France is happier towork with General Haftar, whom it sees asmore likely to stabilise the country. TheFrench army has deployed thousands of itstroops to fight jihadists in five former colo-nies in the adjacent Sahel region.

In May France’s president, EmmanuelMacron, hosted the Libyan rivals for hisown summit. They agreed to hold electionsby December 10th. That deadline was al-ways delusional—even ignoring the vio-lence, Libya lacks an electoral law. It alsoundermined the un envoy, Ghassan Sa-lamé, who wants Libyans to hold a nationalconference and draft a new constitutionbefore holding elections.

Both Italy and France have commercialmotives as well. Libyan oil is cheap to ex-tract and easy to export to Europe. Eni andTotal, the Italian and French energy giants,have long competed to produce it. Eni is thelargest foreign producer in Libya, but Totalis starting to catch up. In March it acquireda 16% stake in the Waha concession in theSirte basin. If the deal goes through, itcould produce 400,000 barrels per day intwo or three years. Eni’s ceo, Claudio Des-calzi, says he welcomes the “healthy” com-petition. “[Libya] benefits from this,” hesays. The Italian government is less san-guine. It resents French involvement in a

country that it sees as in its sphere of influ-ence. Italian politicians accuse Mr Macronof helping General Haftar for Total’s sake.

Other foreign powers are pushing theirinterests in Libya, too. Egypt and the Un-ited Arab Emirates have given military sup-port to General Haftar, whom they view asan ally in their fight against political Islam.Russia, eager to expand its influence, hashosted the general in Moscow, treating himlike a head of state. Now Mr Macron and MrSalvini are using Libya as part of their owncompetition for leadership in Europe. Theun-led process has been agonisingly slow.But it remains the closest thing Libya has toa way forward. 7

Serraj and Haftar do Paris

TURKEY

EGYPTL I B Y A

NIGER CHAD

ITALY

FRANCE

ALGERIA

TUNISIA

SUDAN

SA H E L

Cairo

Tripoli

GREECE

Med. Sea

Benghazi

TobrukSirte

TarhounaSirtebasin

Greenstreampipeline

Palermo

UN-backedgovernment

Tuareg/Toubou

Libyan NationalArmy (Haftar)

Libya, areas of controlNovember 7th 2018

Source: Liveuamap.com

750 km

Tunisia is perhaps best known asthe lone Arab-spring success story, a

democracy in a region full of autocrats.But it is also one of the world’s biggestexporters of jihadists. Some 6,000Tunisians are thought to have joinedIslamic State at its height. Hundreds ofthese men are now coming home.

“I wanted to look at the emotionalconsequences of that,” says MeryamJoobeur, the director of a short filmcalled “Brotherhood”. She is not alone.This year’s Carthage Film Festival,which runs from November 3rd toNovember 10th in Tunis, features sever-al Tunisian films that tackle radical-isation. In “Brotherhood”, a youngTunisian man returns from Syria to hisparents’ farm with a fully veiled Syrianwife. His mother is happy to see him,but his father is suspicious. After a fewdays he reports his son to the police(though he later regrets his decision).

The Tunisian government’s policy isto arrest returning jihadists immedi-ately. “There is no rehabilitation at all,”says Messaoud Romdhani of the Tuni-sian Forum for Economic and SocialRights, an ngo. More than 1,500 Tuni-sians have been jailed on terrorismcharges, according to his group. “Prisonis a very good place to become moreradicalised,” he says.

But so is the neighbourhood. Anoth-er film, “Fatwa”, follows a father’s ef-forts to figure out how his recentlydeceased son fell in with radical Islam-ists. He discovers that the area of Tuniswhere his son lived has been trans-formed by Salafism, a puritanical ver-sion of Islam. The old imam, a devoteeof Sufi mysticism, has been replaced bya more conservative preacher; thecinema has closed. “It’s the type ofconversation we’ve been having inprivate for years,” says Zakia Hamda, anactivist and filmgoer from Tunis. “Ourtraditional values were snatched awayby fundamentalists. It was traumatic.”

On October 29th a woman, who mayhave been radicalised online, blewherself up not far from cinemas takingpart in the festival. That did not scareaway audiences. At a screening of“Fatwa” cheers rang out when thefather pinned an extremist against thewall. “We work for Allah to promotevirtue and eliminate vice,” says theradical. “Go get yourself a job and Allahwill look after himself,” says the father.

Radical film-makingTunisia

T U N I S

A cinematic look at jihadism


1

Like the great, restless rivers that snakeacross Bangladesh, the country’s de-

mocracy seems to change shape with everyseason. Its people have voted in ten nation-al elections since independence in 1971, buton each occasion the political landscapehas looked radically different. There havebeen times of single-party dominance, ofarmy rule, of fiery protest and boycott, andalso times when, after millions of votershave peacefully cast their ballots, partieshave politely alternated in power.

One constant, since the 1990s, has beenthe bitter rivalry between two powerfulwomen, Sheikh Hasina Wajed, the leader ofthe Awami League and current prime min-ister, and Khaleda Zia, a two-time formerprime minister and head of the BangladeshNationalist Party (bnp), who is now in pri-son. Another constant is that when theelectoral game has appeared to be fair, vot-er turnout has been strong. When it haslooked tilted, voters have stayed at home.

Only weeks ago it seemed a safe bet thatthe 11th election to the 350-seat parliament,which is due to be held some time in thenext three months, would be of the low-turnout, low-credibility sort. The Awami

League, which came in on a landslide in2008 but has grown fat and bossy after solong in power, seemed determined to se-cure a third consecutive five-year term byhook or by crook. All of a sudden, however,the mood has changed. The country’s 165mpeople might just get a competitive—al-though certainly not fair—election.

Changing tideOctober brought not one, but two big sur-prises. In mid-month the bnp, which hadappeared to be on the ropes, dropped itslong-standing alliance with far-right Is-lamists and instead joined a coalition ofsmaller, secular parties to form a broad op-position group. Known as the Jatiya OikyaFront, its figurehead is 82-year-old KamalHossain, a widely respected constitutionallawyer. More surprising still was that theincreasingly authoritarian Awami League,which has relentlessly hounded the bnp,turned suddenly sweet. The police (who,like the country’s army and courts, are be-holden to the government) took a pausefrom arresting bnp activists by the van-load, and instead granted permission forOikya rallies, even in the capital, Dhaka. As

Awami League thugs stopped ripping downevery rival election poster, Sheikh Hasinaherself invited the new front’s leaders fortalks, promising to consider their demandsfor guaranteeing fair elections.

With both big parties scrambling to luresmaller players, and the contest shapinginto a rivalry between big coalitions, tworounds of these talks have been held, themost recent on November 7th. Althoughsignalling graciousness, Sheikh Hasinashows little inclination to meet Oikya’s de-mands. These include ending the trials andimprisonment of her political opponents,among them Ms Zia (pictured), who wasjailed in February and is serving a ten-yearsentence on charges of embezzling from anorphanage; dissolving parliament andforming a neutral caretaker governmentduring the election period; and ensuringsecurity for and oversight of the voting.

The Awami League has suggested that itmay consider releasing prisoners and thatit intends to shrink its own government toan election-period skeleton administra-tion. But it says it will not bend the consti-tution to suit opposition demands—de-spite the fact that, from 1996 until 2011,when the Awami League itself changed therules, the constitution required caretakergovernments to oversee elections.

The Oikya Front has hinted that it maycall for street protests if there is no accom-modation, yet it is clearly also hesitant toprovoke a clampdown or declare a boycott.The bnp still has a strong grass-roots fol-lowing, and by all accounts the relentlesspersecution of recent months has stirred a

Politics in Bangladesh

Eddy or current?

D H A K A

The ruling party appears to be easing up ahead of an impending election

Asia

56 Banyan: Pakistan’s indecisive rulers

57 The slow spread of robots in Japan

57 Chinese influence in New Zealand

58 Ending forced labour in Uzbekistan

59 Vietnam’s premature ageing


56 Asia The Economist November 10th 2018

2

1

Banyan Part-time spine

When a panel of three judges onPakistan’s Supreme Court over-

turned a poor Christian woman’s convic-tion for blasphemy, which carries amandatory death sentence, it was, as onecommentator, Zahid Hussain, put it, as ifthey had at last broken the country’s“ring of fear”. Nine years ago in the fields,Asia Bibi, a mother of five, had taken a sipof water before passing the jug on tofellow (Muslim) fruit-pickers. They saidthey could not share a drinking vesselwith an “unclean” Christian, and de-manded she convert to Islam. She re-fused, and soon a mob was accusing herof insulting the Prophet Muhammad.

Pakistan’s main blasphemy law isbreathtakingly sweeping. Anyone whodefiles Muhammad’s name, even if “byimputation, innuendo or insinuation”,faces death. Since its introduction in1986, several hundred people have beencharged, with a disproportionate num-ber either non-Muslims or Ahmadis, apersecuted sect who revere both Muham-mad and a 19th-century prophet—some-thing many other Muslims considerabominable. No one has yet been execut-ed. But more than 50 people accused ofblasphemy have been murdered. Twopoliticians were assassinated just forspeaking up for Ms Asia. One of them,Salman Taseer, the governor of Punjabprovince, was shot by his bodyguard.

So the judges’ decision was brave. Thecharges against Ms Asia, they said, were“concoction incarnate”. The reaction ofhard-core Islamists, meanwhile, waspredictable. Muhammad Afzal Qadri, afounder of Tehreek-e-Labbaik Pakistan(tlp), a fast-expanding political partyformed in response to the hanging of MrTaseer’s bodyguard, called for the threejudges to be killed. Supporters pouredonto the streets, bringing cities to a halt

with blockades of burning tyres and shut-ting down the motorway between Islam-abad, the capital, and Lahore, the country’ssecond-biggest city.

It was enough for Ms Asia’s defencelawyer to flee the country. Yet the judges’courage, for one gripping moment, wasbacked up in an unlikely quarter—by theprime minister himself. Campaigningbefore the election in July that broughthim to power, Imran Khan and his party,Pakistan Tehreek-e-Insaf, had voicedsupport for the blasphemy laws. Yet onstate television, Mr Khan, while on a beg-ging trip to China, warned the protestersthat “the government will not stand asideand see property and livelihoods beingdestroyed. Do not force us to take action.”It was assumed that Mr Khan, whose riseto power came with the army’s support,had the generals’ backing to take on groupsthat hold the country hostage.

Alas, the resolve seemed to disappearalmost as soon as it was broadcast. To getthe tlp off the streets, the governmentpromised to put Ms Asia on the list ofpeople forbidden to leave the country

while a review of the judges’ ruling takesplace. It said arrested tlp agitators wouldbe freed. And it conspicuously refused tocriticise Mr Qadri and his toxic fellow-leader, Khadim Hussain Rizvi, a preach-er. Ms Asia, meanwhile, remained inprison. As well as the judges’ murder, thetlp has called for the army to mutiny. Yetfor the umpteenth time, the state wasappeasing extremists, supposedly in thename of avoiding bloodshed.

The capitulation won not just MrKhan but the army, under General QamarJaved Bajwa, a barrage of brickbats. Thefailure to prevent mayhem made themlook weak. Back in 2014 the army at lastturned on armed extremists whom it hadonce fostered as a useful tool foreign-policy tool, after a horrific attack by thePakistani Taliban on an army school. Butthe army has been reluctant to confrontthe (unarmed) tlp. Its roots are in theBarelvi movement of Islam, which thegenerals cultivate as a counterbalance tothe even more doctrinaire Deobandis ofthe Pakistani Taliban. Besides, GeneralBajwa is on the defensive after Mr Qadriaccused him of being a closet Ahmadi.

Apparently stung by the criticism, theauthorities may now be acting. As TheEconomist went to press, Ms Asia hadbeen freed. Her whereabouts are un-known, although the government insist-ed she was still in the country. Mean-while, the authorities warned the tlp’sleaders that they would be put underhouse arrest if they called out the mob.For now, Mullah Rizvi has merely said hewill “consult” his followers on what next.Most Pakistanis are fed up with zealotsblocking roads and burning cars. Even aninexperienced government appears torealise this. If the state is at last findingsome backbone, it will be a triumph ofhope over experience.

Is the Pakistani state capable of standing up to blackmail?

surge of sympathy for it. Moreover, aggres-sive tactics backfired on it in the election of2014 when, angered by the Awami League’srule changes, it first sponsored violentstreet protests, then boycotted the polls.

The experience of being excluded fromparliament has been a bitter one for Ms Ziaand her followers. Their absence allowedthe Awami League not just to extend tenta-cles of influence throughout the state andto threaten the business interests ofwealthy bnp loyalists, but also to clobberthe bnp rank and file. By the bnp’s count,the Awami League has instigated no fewer

than 90,000 lawsuits against it, entanglingsome 2.5m party workers in endless litiga-tion. During the month of Septemberalone, the party reckons that more than4,500 of its members were arrested ontrumped-up charges. Ms Zia herself isfighting 34 separate cases; her son Tarique,the party’s acting chairman, lives in exile inLondon. He is sentenced to life imprison-ment at home.

But for all Sheikh Hasina’s polite talk,the Awami League may be less inclined tocompromise than the bnp. Like the bnp

leader, who is the widow of a murdered for-

mer president, the Awami League’s boss is asurvivor of tragedy. Her father, Sheikh Mu-jibur Rahman, who led the country to inde-pendence from Pakistan, was murderedalong with most of his family in 1975. Inpower, Sheikh Hasina has appeared in-creasingly vindictive not just towards po-litical rivals, but towards a growing rangeof perceived enemies. “She has lost hermoral compass,” whispers a middle-agedwriter in a noisy café, reflecting fears feltbroadly across Bangladeshi society.

Four decades after Bangladesh’s libera-tion war, the Awami League pushed

The Economist November 10th 2018 Asia 57

2

1

through constitutional changes allowingfor the trial and execution of old men whohad fought against Sheikh Hasina’s father.Since May police have been licensed toshoot suspected drug dealers on sight. Thetally of extra-judicial killings so far standsat 264. When students in Dhaka protestedin August against lawless driving, the partysent club-wielding thugs to quell them.When a prominent photojournalist docu-mented the attacks live on Facebook he wasdragged from his house by an anti-terrorsquad. Now in prison, he was derided bySheikh Hasina in an interview as “mentallysick”. Besides, she noted, his great-unclehad been a pro-Pakistan minister. “Some-times blood speaks, you understand that,”she said, as if in explanation.

But the Awami League does not have torely on ruthlessness. Under its rule theeconomy has enjoyed unprecedentedgrowth. Last year gdp expanded by 7.3%,faster than India or Pakistan. Opinion pollsshow broad satisfaction with the govern-ment. A decade of assiduous pampering ofpolice and army officers has bought loyalty,and put paid to fears of coups. The coun-try’s most powerful neighbour, India,tends to support the Awami League. Anddespite her 71years Sheikh Hasina is clearlycapable of change: ignoring her party’sstaunchly secular roots, she has lately out-flanked the bnp by winning over the Hefa-jat-e-Islam, an organisation of arch-con-servative clerics. Will these advantagespersuade her to let democracy run its natu-ral course, or will she instead keep trying totame the current?7

Hotel receptionists are rarely this in-timidating. Yellow eyes glare as the

room number is snarled through razor-sharp teeth. The mechanical T-Rex behindthe counter is one of nine types of robotwhirring and clicking through the build-ing, from the silicon fish that swim arounda tank in the lobby to the egg-shaped con-cierge that controls the lights and heatingin each of the 100 rooms. There is not a hu-man in sight.

Machines already do much of the dan-gerous and repetitive work in Japanese fac-tories, which have one of the highest densi-ties of industrial robots in the world: 303per 10,000 employees. As the populationdeclines, Japan’s vast service industry willalso automate, predicts Hiroshi Ishiguro, a

roboticist at Osaka University. Robots willlook after the elderly, teach children andread the evening news. Television anchorsresemble androids anyway, he jokes.

Yet the future has been slow to arrive.Japanese hotels and banks are, by globalstandards, heavily overstaffed despite thecountry’s demographic crunch. Most su-permarkets have not embraced the auto-mated checkouts common elsewhere, norairlines self-service check-ins. The officesof Japan’s small and medium-sized enter-prises are among the most inefficient inthe developed world, chides McKinsey, amanagement consultancy.

Japan has an elaborate service culture,which machines struggle to replicate. Japa-nese customers, especially the elderly,strongly prefer people to machines, saysYoko Takeda of Mitsubishi Research Insti-tute, a think-tank. Employment practicesmake it difficult to replace workers. Andwhile gimmicky robots abound, Japanstruggles to develop the software and artifi-cial intelligence needed to enable them toperform useful tasks, says a report by theMinistry of Economy, Trade and Industry(meti), the cockpit of Japan’s post-war mir-acle. So while the reception at the robot ho-tel is automated, seven human employeeslurk out of sight to watch over customersand avoid glitches. Robots still cannotmake beds, cook breakfast or deal with adrunken guest who will not pay his bill.

Ever fretful about declining competi-tiveness, meti is calling for ideas for robotsto help run “department stores, beauty sa-lons, hotels and restaurants.” There issome urgency. At 2.3%, the unemploymentrate is at its lowest since 1993; in some in-dustries there are seven vacant jobs for ev-ery applicant. Shinzo Abe, the prime minis-ter, wants to admit 500,000 guest workersby 2025. But it is a hard sell. Conservativenewspapers rail against the prospect of aChinese immigrant on every street; a re-cent tv show about police hunting down il-

legal immigrants was a hit. The shortage of workers, local and for-

eign, may at last force companies to auto-mate, says Ken Ogata, president of Kou-reisha, a dispatch company whoseemployees are all over 60. Insurance firmshave begun replacing clerks with software.A driverless taxi service is planned for To-kyo in time for the Olympics in 2020. Lastyear Japan’s three biggest banks an-nounced that they will close hundreds ofbranches and eliminate 32,000 jobs in thecoming decade. A report published in 2015by Nomura Research Institute, anotherthink-tank, says half of Japan’s workerscould be replaced by robots within 20years. The most vulnerable professions, itsays, are those dominated by systematic,repetitive tasks, such as train drivers andsecurity guards.

By 2030, as robots and ai eliminate suchjobs, Ms Takeda forecasts, Japan will have asurplus of lowlier workers. She still be-lieves immigrants will be needed, but onlyin certain skilled professions. Hotel recep-tionists, a colleague predicts, will havegone the way of the dinosaur. 7

TO KYO

A country obsessed with robots is alsooddly resistant to them

Automation in Japan

Human endurance

Jurassic clerk

“We are free from political interfer-ence,” protests New Zealand’s

prime minister, Jacinda Ardern. A scandalin the National Party, the main opposition,suggests otherwise. Last month an embit-tered National mp, Jami-Lee Ross, accusedthe party’s leader, Simon Bridges, of break-ing campaign-finance laws. He claims MrBridges deliberately disguised a donationof NZ$100,000 ($67,000) orchestrated by abusinessman with links to the Chinesegovernment. In a phone conversation thatMr Ross taped of him and Mr Bridges dis-cussing the donation, neither makes anyexplicit reference to concealment. MrBridges calls Mr Ross’s allegations “base-less”. But whether the law was broken ornot, the saga has stoked concerns aboutChinese meddling.

Zhang Yikun, the man behind the dona-tion, is a resident of New Zealand, but hasheld positions in several official Chineseorganisations, according to Chen Weijian,a dissident journalist from China who alsolives in New Zealand. Mr Ross’s recordingsuggests the money was divided intosmaller parcels, which meant it did nothave to be declared. (Donations of less thanNZ$15,000 can be kept anonymous, pro-

Hints that the Chinese government ismeddling in politics cause a stir

China and New Zealand

Party to party

58 Asia The Economist November 10th 2018

2 vided the benefactor lives in the country.)But on the call Mr Ross also presented thedonation as an amalgam of smaller giftsfrom associates of Mr Zhang. Police are in-vestigating whether the donation wasproperly disclosed. Mr Ross, meanwhile,has been expelled from his party. Whateverthe outcome, the row suggests munifi-cence can win influence. In the call, MrRoss and Mr Bridges discuss whether theparty should respond by adding a businessassociate of Mr Zhang’s to the list of mps ap-pointed by the party under New Zealand’ssystem of proportional representation.

This is not the first controversy sur-rounding Chinese interference. Last year itemerged that another conservative politi-cian, Jian Yang, had worked for 15 years inChinese military academies and been amember of the Communist Party beforeemigrating to New Zealand. He did not dis-close this on his residency application, butdenies being a spy and remains a memberof parliament. China-born mps belongingto the governing Labour Party and theright-wing act have also been linked to or-ganisations peddling China’s agenda.

It is impossible to work out how manydonations come with Chinese strings at-tached, because so many are made anony-mously. Simon Chapple of Victoria Univer-sity of Wellington calculates that theNational Party received handouts worthNZ$4.5m in 2017. Three-quarters camefrom unnamed sources. At a fundraisingauction in 2016 for Labour’s Phil Goff, nowthe mayor of Auckland, New Zealand’s big-gest city, an anonymous bidder in Chinapaid NZ$150,000 for a book written andsigned by Xi Jinping, China’s president.

Several former politicians have takenjobs with Chinese firms. The Chinese gov-ernment keeps tabs on Chinese students atlocal universities and has co-opted mostChinese-language media. Last year Anne-Marie Brady of the University of Canter-bury alleged that a Chinese-owned dairyhad been used to launch a scientific devicethat could help China develop long-rangemissiles. A report published recently byCanada’s intelligence agency complainsthat New Zealand is a “soft underbelly”through which China might gain access tointelligence shared by America, Australia,Britain and Canada.

In Australia, similar scandals haveprompted the passage of new laws aimed atcrimping foreign influence. The Greens,part of New Zealand’s ruling coalition,want to lower the threshold for anony-mous donations to NZ$1,000 and outlawgifts from foreigners. A petition calling foran inquiry on foreign influence has beenlodged in parliament. Publicly, Ms Ardernmaintains that New Zealand’s laws are fineas they are. But her government does seemto be considering how to respond—with-out jeopardising trade with China. 7

In some ways, there is nothing surprisingabout the videos that have been doing the

rounds on social media in Uzbekistan. Inone, farmers and local officials in a districtnear Tashkent, the capital, were made tostand in a watery ditch, heads bowed, toshow contrition for failing to irrigatewheat fields properly. In another, officialswere made to heave heavy clods of clay intothe air repeatedly as punishment for allow-ing such impediments to farming to accu-mulate on land they are in charge of. Suchritual humiliation is rife in Uzbekistan,where nearly three decades of dictatorshipunder Islam Karimov, the strongman whodied in 2016, bred a culture of bullying andsubservience.

What was unusual was the govern-ment’s response to these abuses. ShavkatMirziyoyev, Mr Karimov’s reforming suc-cessor, fired Zoyir Mirzayev, the deputyprime minister responsible for both inci-dents. Upholding the rule of law and pro-tecting human rights are Mr Mirziyoyev’spriorities, his office huffed, as a criminalinvestigation was opened.

Under Mr Karimov, netizens wouldhave faced reprisals for discussing such asensitive topic. But in the current, moreforgiving climate they rushed to post pho-tos of themselves in soggy locations strik-ing the same poses the farmers were forcedto adopt—at the beach, in the bath and soon. A wag quipped that the sacked officialwould soon get another job, as coach of thenational synchronised-swimming team.

The scandal broke at an awkward timefor Mr Mirziyoyev, who wants to shed Uz-bekistan’s pariah status. Central to his “Uz-bek spring” is a campaign to eliminateforced labour. Under Mr Karimov the gov-ernment required many adults (and somechildren) to help harvest cotton. The stateenjoys a monopoly over the crop, which isso lucrative that Uzbeks dub it “white gold”.But some big Western retailers are boycott-ing cotton from Uzbekistan because of thegovernment’s taste for slave labour.

The authorities do seem to have suc-ceeded in stamping out child labour. As aresult, America has removed Uzbekistanfrom a blacklist it keeps on the subject. Lastyear the government recalled students,teachers, doctors and nurses from the cot-ton fields. This year it hopes to go further.Wages paid to pickers have risen by a thirdor more to encourage voluntary workers toreplace forced labourers.

The government has invited both theInternational Labour Organisation and lo-cal activists—who used to be arrested fordocumenting misdeeds in the cottonfields—to monitor the harvest, alongside300 of its inspectors. It has also set up tele-phone hotlines and social-media channelsfor reporting abuses. These have received1,700 complaints; 120 punishments, fromfines to dismissal, have been meted out.

Some observers argue that it will be im-possible to root out coercion without abol-ishing the state’s monopoly on cotton anddoing away with production quotas onwhich officials are judged. All parties agreethat forced labour will not disappear over-night. Last year some 336,000 of the 2.6mpeople involved in the harvest, in a countryof 33m, were involuntary workers, the ilo

estimates. Mr Mirziyoyev is clearly hopingto reduce that number this year. But ifthings do not improve, he will presumablyresist the urge to punish those responsibleby forcing them to stand in a ditch. 7

A reforming government tries to endforced labour in the cotton fields

Human rights in Uzbekistan

Boll and chain

Cotton shift

The Economist November 10th 2018 Asia 59

As dawn breaks in Hanoi the botanicalgardens start to fill up. Hundreds of old

people come every morning to exercise be-fore the tropical heat makes sport unbear-able. Groups of fitness enthusiasts prolif-erate. Elderly ladies in floral silks do tai chiin a courtyard. In the shade of a tall tree,dozens of ballroom dancers sway to sambamusic. Others work up a sweat on an out-door exercise-machine. Tho, an 83-year-old with a neat white moustache, says hecomes to walk round the lake every day,rain or shine.

In the next few decades the gardens willbecome busier still. Vietnam has a medianage of only 26. But it is greying fast.Over-60s make up 12% of the population, ashare that is forecast to jump to 21% by2040, one of the quickest increases in theworld (see chart). That is partly because lifeexpectancy has increased from 60 years in1970 to 76 today, thanks to rising incomes.Growing prosperity has also helped bringdown the fertility rate in the same periodfrom about seven children per woman toless than two. In the 1980s the ruling Com-munist Party started to enforce a one-childpolicy. Though less strict than China’s, ithas hastened the decline.

Demography is changing in similarways in many Asian countries. But in Viet-nam it is happening while the country isstill poor. When the share of the popula-tion of working age climbed to its highestin South Korea and Japan, annual gdp perperson (in real terms, adjusted for purchas-ing power) stood at $32,585 and $31,718 re-

spectively. Even China managed to reach$9,526. In Vietnam, which hit the samepeak in 2013, incomes averaged a mere$5,024. Indonesia and the Philippines areexpected to reach the turning-point in thenext few decades, with an income level sev-eral times higher than Vietnam’s.

This shift brings headaches. First, willthe government be able to support millionsmore Vietnamese in old age? Only the ex-tremely poor and people over 80 (togetheraround 30% of the elderly) get a state pen-sion, which can be as little as a few dollars aweek. The most recent survey of the old, in2011, found that 90% of them had no sav-ings worth the name. Debt was common.Supporting them will become ever moreexpensive. The imf predicts that pensioncosts, at the present rate, could raise gov-

ernment spending as a share of gdp byeight percentage points by 2050. That isfaster than in any of the other 12 Asiancountries it examined.

The problem is worse in the country-side, where most old folk live. Previouslythe young cared for their parents in old age.Today they tend to abandon village life toseek their fortune in the city. Surveys sug-gest that the share of old people livingalone is rising, especially in villages. Manywork until they die. Around 40% of ruralmen are still toiling at 75, twice the rate ofcity-dwellers. In Britain that figure is 3%.Often they do gruelling manual jobs, suchas rice farming or fishing.

Providing health care for millions moreold people is another worry. Alzheimer’s,heart disease and age-related disability aregrowing. In the botanical garden Toau, a 78-year-old in a white sports t-shirt, says he isthere on doctor’s orders, before taking a pillfor his bad heart and joining an exercisegroup. About a third of over-60s do nothave health insurance, which is costly.Many provinces still have no proper geriat-ric departments in hospitals. Informalhealth-insurance groups have popped upto fill the gaps. For a fee, members get exer-cise classes and free check-ups. But fewdoctors are trained or equipped to treatmore serious conditions.

The government is starting to imple-ment policies to reduce the fiscal burdenand improve the lot of the elderly. Last yearit relaxed the one-child policy. In May itsaid it would increase the retirement agefrom 55 to 60 for men and 60 to 62 for wom-en, and reform the pension scheme to pro-vide wider coverage. Next year it plans tobegin revamping the health-insurance andsocial-assistance systems.

But none of that will change the struc-ture of the economy. Usually as countriesclimb the income ladder they shift fromfarming to more productive sectors, likeservices. By this yardstick, Vietnam is lag-ging behind its neighbours. When theworking-age population peaked in 2013, ag-riculture accounted for 18% of the econ-omy. At the same juncture in China, agri-culture was just 10% of gdp. Worse,farmers’ output tends to decline with age,unlike, say, that of managers. This over-re-liance on agriculture partly explains whythree-quarters of Vietnam’s workers are injobs where they become less productive asthey get older. In Malaysia that is the casefor only about half the labour force.

Boosting productivity will be tricky. Thegovernment is still wedded to statism.State-owned enterprises dominate manyindustries. Most university students,meanwhile, waste at least a year learningMarxist and Leninist theory. Many coun-tries in Asia are ageing fast. But growing oldbefore it becomes rich makes Vietnam’sproblems all the greater. 7

H A N O I

The country is ill-prepared to look after its rapidly greying population

The demography of Vietnam

Destitute dotage

Old before its time

Source: UN Population Division

Old-age dependency ratio, forecastPeople over 64 per 100 people aged 15-64

0

10

20

30

40

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2015 20 25 30 35 40 45 50 55 60

IndonesiaMalaysia

Vietnam

World

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1

The institute of Xi Jinping Thought onSocialism with Chinese Characteristics

for a New Era occupies several rooms in theMarxism department of Renmin Universi-ty in north Beijing. Qin Xuan, the institute’sdirector, says it is one of ten similar centresfor the study of the philosophy that is at-tributed to China’s president. The institutehas only a small administrative staff butabout 70 affiliated academics. It producesresearch, offers advice to policymakers andorganises seminars.

Mr Qin says that part of his team’s job isto explain Xi Thought to journalists, for-eign diplomats and Chinese youngsters. InOctober he and researchers at other suchinstitutes, all founded in the past year, ap-peared as judges and commentators on ayouth-targeted game-show called “Study-ing the New Era”. It involved students whostood on the bridge of a starship and an-swered questions, posed by an animatedrobot, about Mr Xi’s speeches and biogra-phy. The show was part of an unusuallylively series of programmes about ideologycalled “Socialism is Kind of Cool”, pro-duced by a provincial television station.

A year has passed since Mr Xi, at a five-yearly Communist Party congress, de-clared that China had entered a “new era”

and outlined how the party should managethis. The congress gave its rubber-stampapproval and revised the party’s charter toenshrine Mr Xi’s thinking on the topic asone of its guiding ideologies (he and Maoare the only ones named in the documentas having Thought with a capital T—a mereTheory is ascribed to Deng Xiaoping).

Since Mr Xi took power six years ago, hisaim has been fairly clear: to boost theparty’s control over China’s fast-changingsociety while enhancing the country’s in-fluence globally. But his Thought is woolly:a hodgepodge of Dengist and Maoist ter-minology combined with mostly vagueideas on topics ranging from the environ-ment (making China “beautiful”) to build-ing a “world-class” army.

Cartographic contortionsXi Thought is now being “hammered homeharder” than any set of ideas since Denglaunched his “reform and opening” policynearly 40 years ago, says Kerry Brown ofKing’s College, London. Most universitieshave incorporated lectures on the topicinto the basic-level ideology courses whichall Chinese students are required to take.Some have created additional electivecourses for undergraduates. This academic

year high schools have been supplied withnew materials to help them teach it, too.

The indoctrination effort extends wellbeyond academia. In May the party’s pro-paganda department published a 355-page,30-chapter book which it said provided an“in-depth” understanding of Xi Thought. Itsaid every party cell must study the work.Last month the party’s mouthpiece, thePeople’s Daily, published on social media alabyrinthine mind-map based on the book(see next page). It is so packed with ideasand quotations that much image-expand-ing effort, as users complained, is requiredto make it legible. The map’s complexityconveys the ordeal that those trying tomaster the Thought are facing.

To help them, some big firms have setup Xi Thought “study rooms”. So too havelibraries and community centres. In JulyGlobal Times, a tabloid owned by the Peo-ple’s Daily, crowed that the Thought was be-ing “studied in all corners of society, fromlocal governments to media outlets, fromuniversity students to street cleaners”.

One purpose appears to be to enhanceMr Xi’s stature as a leader comparable inpower to Mao. Deng Theory is less oftenmentioned these days. Last month Mr Ximade his first publicised trip in six years toGuangdong, the southern province wheremany of Deng’s reforms first took hold.During his tour Mr Xi did not even mentionthe architect of those reforms—a strikingomission given that next month China willmark the 40th anniversary of their launch.

In April Qian Xian, a party journal, saidthere had been continual debate over themeaning of “socialism with Chinese char-acteristics”, the concept at the heart of

Ideology

Mind-boggling

B E I J I N G

The Communist Party is trying to explain Xi Jinping Thought

China

61 Language in Macau

62 Chaguan: Respecting their elders


The Economist November 10th 2018 China 61

2 Deng Theory. In an apparent dig at a weak-ness of the Theory, the article said “somepeople” thought the phrase was anotherway of saying “capitalism with Chinesecharacteristics”. This, it said, had created“theoretical chaos”. Mr Xi stresses that so-cialism with Chinese characteristics is infact about “socialism and not any otherkind of –ism” (point two, subsection threeon the mind-map).

Deep understanding is not required.The party has a long history of requiringpeople to mouth leaders’ slogans as a wayof showing loyalty. Research on Xi Thoughtis mostly banal. Kevin Carrico of Macquar-ie University in Australia studied theThought through a distance-learningcourse run by Tsinghua, one of China’s bestuniversities. He wrote in Foreign Policy thatthe video lectures repeated platitudes thatwould be “familiar to anyone who hasspent time in Beijing in the last 40 years”.They offered, he said, “an unprecedentedopportunity to observe the poverty of Chi-na’s state-enforced ideology”.

Xi Thought is formally described as asummary of the “collective wisdom” of theparty, and to some degree it is. In additionto borrowing from his predecessors, it islikely that Mr Xi relied heavily on the workof Wang Huning, a former academic whohas played an important behind-the-scenes role in devising party-think sinceearly this century, including Mr Xi’s notionof a “Chinese dream” (number three on themind-map, with numerous subordinatepoints). Last year Mr Wang joined the sev-en-member Politburo Standing Commit-tee, the pinnacle of party power.

Yet promoting Mr Xi as China’s thinker-in-chief could put him at risk. The more he

is linked to China’s “new era” the harder itwill be for him to deflect criticism for any-thing that goes wrong. A speech late lastmonth by Deng Pufang, one of Deng’s sons,gave a hint of dissent within the elite. In itMr Deng appeared to criticise Mr Xi’s asser-tive foreign policy. China, he said, should“keep a sober mind and know our ownplace”. That idea is not on the map.7

A slog, but it’s the thought that counts

................................................................For a high-resolution image of this map, seeeconomist.com/xismind

These days Manuel Machado has aspring in his step. The school of which

he is headmaster, Escola Portuguesa de Ma-cau, is the only one in the southern Chi-nese city that still follows the curriculumtaught in Portugal, which until 1999 hadheld sway in Macau, more or less, for nearlyfour-and-a-half centuries. What gives MrMachado cheer is that enrolment has beenrising for the past three years. The schoolnow has more than 600 pupils. He predictsthe trend will continue.

There is certainly plenty of room forcatch-up growth. When the school wasfounded in 1998, a year before Portugal

handed Macau back to China, it had nearlytwice as many students (and there were atleast three other such schools throughmuch of the 1990s). The vast majority of pu-pils were children of Portuguese expatri-ates, who then dominated the senior ranksof Macau’s public sector. Today the school’sfastest-growing ethnic group is Chinese.

Only 2.3% of the city’s 660,000 peopleclaim fluency in Portuguese (about 1.8% ofthem are wholly or partly ethnic Portu-guese). But the language is still in officialuse, along with Chinese, of which the localspoken form is Cantonese. In recent yearsinterest in Portuguese has surged. The

number of students taking courses in it atInstituto Português do Oriente, a Macau-based cultural centre backed by the Portu-guese government, was around 5,000 lastyear, more than double the figure in 2012.Many are officials who want to “reach thetop” of Macau’s government, says JoaquimRamos, the centre’s director. In its eco-nomic plan for 2016-20, Macau’s govern-ment pledged to “give priority to guaran-teeing employment” for “talented peoplewho are bilingual in Chinese and Portu-guese”. It promised to boost subsidies forthose studying Portuguese at university.

At present most civil servants canspeak good English, but few have evenpassable Portuguese. That is partly becausePortuguese was never a compulsory sub-ject in most schools. So why the growth ofinterest in it? The answer lies in China’sburgeoning trade with the Lusophoneworld, about three-quarters of which iswith Brazil. In 2003 the central governmentfounded an organisation called Forum Ma-cau to boost such commerce. Every three orfour years government ministers frommember countries gather in the epony-mous city, which like nearby Hong Kong—aformer British colony—is now a “specialadministrative region” of China. Last yearChina traded goods worth $118bn with theforum’s foreign participants (eight ofthem, since the African state of São Toméand Príncipe joined in 2017, having severedits ties with Taiwan). This amount was stillrelatively small—only 3% of China’s totaltrade in goods. But it was nearly 30% higherthan in the previous year.

A young native of Macau who prefers tobe identified by his surname, Ho, says hewants to be an interpreter for a Chinesecompany with interests in Portugal or Lu-sophone Africa, such as Mozambique orAngola. Perhaps anticipating the needs ofpeople like him, the University of Macaurecently opened, to much fanfare, a “bilin-gual teaching and training centre”. It offersPortuguese-language workshops tailoredfor professionals.

For Mr Ho, the decision to take up Por-tuguese is also a personal matter. The lan-guage is “part of Macau’s identity”, henotes. Since around 2011residents have rat-ed their identity as citizens of Macau as be-ing stronger than their Chinese identity,according to annual surveys by the Univer-sity of Hong Kong (the year 2015 was an ex-ception). Native-born youngsters, whohave no memory of Portuguese rule, are es-pecially proud of Macau’s Portuguese heri-tage, Mr Ho says. A similar kind of “local-ism”, as it is often described, is also on therise in Hong Kong. There, however, it is in-termingled with demands for greater de-mocracy or even outright secession fromChina. Happily for the government in Bei-jing, the people of Macau show little inter-est in pushing the case for either. 7

M A C A U

In the former Portuguese enclave, the colonial tongue is back in vogue

Identity in Macau

The other official language

62 China The Economist November 10th 2018

Amid the stress and sadness of choosing an old-age home forher husband, it took Li Wangke, a retired academic, a while to

realise why one facility was so good at reawakening his playful,chatty side. She had visited other homes that had fine food and lav-ish amenities, reflecting the affluence of the couple’s southernChinese home town, Guangzhou. But one newly opened homestood out for easing—at least somewhat—the symptoms of the dis-ease ravaging his brain. Rather than pampering her 83-year-oldhusband, its staff assessed his rare neuro-degenerative illness,then with warmth and firmness pushed him to do as much forhimself as possible. They cajoled him to talk, exercise and evenplay ping-pong. He seems a “different person”, says Ms Li.

After several visits she discovered that the home’s methods hadbeen imported from Japan, a former wartime foe that older Chi-nese are commonly thought to detest. Her husband, also a retiredacademic, moved in full-time in late October. “It’s from here that Ilearned that Japan takes really good care of its elderly,” she says.

The home is a joint venture between a Chinese state-owned in-vestor and Medical Care Service (mcs), Japan’s largest operator ofdementia-care homes. mcs opened its first Chinese facility inNantong, a city near Shanghai, in 2014. A third opened in thenorthern port of Tianjin last month. It has plans for more in Bei-jing, Xi’an and even in Nanjing, the site of a Japanese wartime mas-sacre, memories of which plague the relationship to this day.

China’s needs are vast. Degenerative brain diseases are too of-ten confused with mental illness. Sufferers are shut away in familyhomes with unskilled helpers, typically migrant women from thecountryside. Some families share guilty tales of sending relativesto psychiatric wards, where they are strapped to beds and fed pills.More than 10m Chinese are estimated to have some form of de-mentia. “That is a big, almost frightening number,” says AkiraWate, the general manager of mcs’s home in Guangzhou.

By 2030 China is projected to have 23m dementia sufferers—al-most the population of Australia. During a visit to China lastmonth by Shinzo Abe, Japan’s prime minister, the two govern-ments named old-age care as an area for co-operation. China andJapan are trying to edge closer in these stormy, Trumpian times.One bond involves demographics. With almost one in nine citi-

zens over 65, China is at the point on the ageing curve that Japan hitin 1987. It has a lot to learn from its Asian rival’s experience.

Chinese old folk and Japanese care-home operators have dis-covered revealing things about each other. mcs was full of confi-dence when it opened its 106-bed home in Nantong. Half a year lat-er, just six beds were filled. For Asian neighbours that revere theold, China and Japan turn out to differ—a lot. Notably, China is anexceptionally low-trust society. But bonds of family duty are stron-ger than in Japan, say mcs’s bosses, noting the frequency of visitsand the solicitude of residents’ children.

In orderly Japan, entering a home is straightforward, says MrWate. An older person shows signs of dementia, facilities are rec-ommended, their child might visit one, admission follows. In Chi-na, suspicion is the starting-point, with the domestic news full ofstories of fatal fires or bullying at nursing homes. Unprompted, MsLi relates how her daughter, a banker, warned her against takingprivate firms’ promises at face value.

Chinese customers worry constantly about being ripped off.When it entered China, mcs set its prices high and built single-bedrooms to Japanese standards, offering the privacy and calm thatpensioners in Japan demand. But Chinese clients wanted com-pany and the lively din known as renao, relates Grace Meng, mcs’sboss in China. They questioned the emphasis on doing things forthemselves, grumbling that, “I paid money, so you have to doeverything for me,” Ms Meng says. Her firm changed its model,building shared rooms, lowering prices and offering day rates todemonstrate its methods. The home in Nantong is now profitable.

Historical distrust of Japan has not been a big problem. mcs

neither boasts of nor hides its origins. As well as a Chinese schol-ar’s study and mahjong tables, its home in Guangzhou has a Japa-nese roof garden with benches, stone lanterns and an artfullytrained pine. A few residents refuse to speak to visiting Japaneseexecutives, admits Mr Wate, who is of mixed Chinese and Japaneseancestry. Most are pragmatic, associating Japan with good service.

Family dynamics cause more headaches than nationalism. InJapan, generous government insurance covers most care-homecosts, giving old folk much autonomy. In China many in need ofcare must either sell property or ask children for help. Averagemonthly fees at mcs’s home in Guangzhou are 14,000 yuan($2,224)—more than a typical pension. That makes entering ahome a collective decision by as many as four or five family mem-bers. The elderly also need convincing. Many want to preservetheir savings to help the young. Because trying to stay at home isthe norm, the average age of mcs’s residents in China is 85, about adecade older than at its dementia-related facilities in Japan.

The best sort of technology transferStill, China is quicker to embrace change than outsiders mightsuppose. Ms Li recalls the traditional line: “Raise children to carefor you when you get old.” But her children have demanding jobs,and she hates asking them to take too much time off. Nor are hiredhelpers the solution. When her husband loses control of his bow-els, no hired helper will clean him, she says matter-of-factly. Suchhelpers are “very impatient”. The Chinese once believed that onlybad children send their parents to care homes, she concedes. “Wedon’t think that way anymore.”

Rather few Chinese will ever be able to afford Japanese-stylehomes, it is true. That does not make their expertise irrelevant. IfChina’s old enemy can raise the profile of kindly, attentive demen-tia care, that alone would be a historic, neighbourly act. 7

Respecting their eldersChaguan

Japan’s expertise in old-age care becomes a source of soft power in China


1

As an fbi agent for 29 years, Philip Scalaled the operation that jailed John Gotti

of Cosa Nostra and raided an al-Qaedabomb factory. Mr Scala, now a private in-vestigator, took on Hells Angels, riotingprisoners and Russian mobsters. Next onhis list? The cardinals of the Roman Catho-lic church.

A new lay group, Better Church Gover-nance (bcg), has hired Mr Scala to probe thelives of the 224 men who advise Pope Fran-cis (including their sex lives, if any). Hisparticular focus will be the 124 who, werethe pontiff to die tomorrow, would elect hissuccessor. Mr Scala’s team of up to ten in-vestigators will publish their findings on awebsite, alongside carefully screened in-formation from the public. Philip Nielsen,bcg’s executive director, hopes the web-site, dubbed the Red Hat Report after thescarlet zucchetti (skullcaps) worn by cardi-nals, will be online within a month.

Though apparently well funded, thebcg is a tiny fragment of Christianity’s big-gest church. Catholicism claims 1.3bn fol-lowers and wields vast, global influence. Itsreport would have seemed unthinkablydisrespectful—almost sacrilegious—even

a year ago. But in the Catholic world muchthat was once inconceivable is now tran-spiring. The Red Hat Report is a sign of howmuch many Catholics have come to mis-trust their leaders and how far some will goto hold them accountable.

The loss of confidence stems from anenduring scandal over the molestation,and sometimes rape, of children by priests.It is unstoppable, since most of the revela-tions concern wrongdoing years or evendecades ago. And it is seemingly inexora-ble: after the first disclosures in Ireland inthe 1990s, the scandal spread through west-ern Europe and North America; it has sincereached South America and eastern Europeto assail erstwhile bastions of the faithsuch as Poland and Chile. In the ten years to2010, the Vatican sifted through around3,000 cases dating back to the middle of theprevious century. Increasingly, however,attention has shifted to the role of bishopsin covering up for clerics, often by postingthem to other dioceses where they contin-ued to abuse minors.

The bcg’s founding was inspired by thepublication in August of a document inwhich Archbishop Carlo Viganò, a former

papal nuncio (ambassador) in America, ac-cused some of the church’s most powerfulmen of ignoring repeated warnings thatTheodore McCarrick, a former cardinal,was a serial seducer of seminarians whenhe was archbishop of Newark.

Archbishop Viganò said the previouspope, Benedict XVI, had imposed restric-tions on Cardinal McCarrick, but that PopeFrancis, despite knowing of the cardinal’sbehaviour, eased them and made him atrusted adviser. He implied this was be-cause the cardinal had helped Francis be-come pope in 2013. In an appeal unpreced-ented in modern times, he called on thepope, whom Catholics believe is chosenwith God’s aid and whose pronouncementson some issues are infallible, to quit.

Betrayal of the innocentsAlso in August, a grand jury in Pennsylva-nia accused some 300 priests of molestingmore than 1,000 children over seven de-cades. “Priests were raping little boys andgirls, and the men of God who were respon-sible for them not only did nothing; theyhid it all,” the grand jury wrote.

In September the archbishop of SanFrancisco, Salvatore Cordileone, told anItalian newspaper, La Verità, there was “al-most a sense of panic” in the Americanchurch. A Pew Research poll in Septemberfound that 62% of American Catholics dis-approved of the pope’s handling of the cri-sis, up from just 46% in January. AmericanCatholics make up a bit more than 5% ofthe global total. But their church, thefourth-biggest, matters far more than its

The Catholic church

A pope on the ropes

VAT I C A N CI T Y

Launched in optimism, Francis’s papacy is bogged down in infighting and clericalsexual-abuse scandals

International

64 International The Economist November 10th 2018

2 size suggests. The Vatican needs its dollars,and its media-savvy cardinals often leadCatholic debate and innovation.

After initially refusing to comment onArchbishop Viganò’s claims, Francis hassince agreed to convene a global meeting ofbishops in February to discuss clerical sexabuse. The Argentine pontiff, who had en-deared himself to Catholics and non-Cath-olics alike with his benign informality andascetic lifestyle, is on the defensive. “It’sabout as serious as it can get,” says AustenIvereigh, one of Francis’s biographers.

Archbishop Viganò was a controversialfigure even before his J’accuse appeared.The so-called Vatileaks scandal in 2012 cen-tred on letters he wrote to Pope Benedictcomplaining of financial corruption, whenhe was a high-ranking official in the Vati-can City’s government. Theologically con-servative, he spectacularly wrong-footedFrancis on his visit to America in 2015 bygetting him to meet Kim Davis, a clerk inKentucky jailed for refusing to issue mar-riage licences to gay couples.

A two-pronged attackVatican officials say the archbishop wascalled to Rome and rebuked for that. Criticsdepict him as a man with a grudge becausehe was not made a cardinal. But his docu-ment poses a unique threat to the pope. Itembodies the concerns of two groupsalarmed at his stewardship: traditionalistsof various stripes who resent his reformistagenda; and Catholics dismayed by hishandling of clerical sex abuse.

First, the traditionalists. Some of the la-ity, notably in America, are appalled byFrancis’s economic and political ideas, setout in 2013 in his apostolic exhortation,Evangelii Gaudium. After the papacy’s longyears of hostility to communism, manyforgot that Catholic social doctrine op-poses capitalism too. They were left aghastby a pope who could write that “an econ-omy of exclusion and inequality…kills”.

In many (but not all) cases Francis’sneo-conservative foes line up with his doc-trinal critics, whose wrath was kindled byanother papal document, Amoris Laetitia,from 2016. In it Francis tackled the hotly de-bated issue of a ban preventing divorcedCatholics from receiving communion. Hiscritics were incensed not just that he re-laxed a ban they thought central to thechurch’s teaching on marriage, but that hedid so in what seemed an underhand way,in a footnote. In the first open sign of muti-nous sentiments in parts of the hierarchy,four cardinals put their names to a list ofdubia or doubts, challenging Francis todeny that he was twisting settled doctrine.

The affair highlighted a fundamentaldivision among Catholics, which centreson the buzzwords “clarity” and “accompa-niment”. Many, particularly in eastern Eu-rope, where believers suffered for their

faith under communism, and in Africa,where they are nose-to-nose with funda-mentalist Islam, crave clarity—a religionoffering straightforward, immutable guid-ance on what is right and wrong. In westernEurope and Latin America, priests andbishops are instead contending with grow-ing secularism. They are more ready to ac-cept accompaniment, ie, compromise withthe realities of the 21st century. This meansaccepting that many Catholics live withtheir partners before marrying, use artifi-cial contraception, form same-sex rela-tionships and get divorced.

Francis has never responded to the du-bia. For his conservative detractors, thatproves he cannot give plausible answers.For Francis’s supporters, it is a way of re-minding the traditionalists that, howevervociferous, they remain a minority. That isprobably also still true of the second groupof his critics: those appalled by his inept re-sponse to clerical sex abuse. But this groupis growing fast. Again, there is a geographi-cal division. Few allegations of Catholicpriests abusing the young have surfaced inAfrica or Asia (though history suggests it isonly a matter of time before they do).

Francis’s shortcomings were exposedwhen he visited Chile in January. A localbishop, Juan Barros, had been accused ofcovering up for a predatory priest in the1980s. The pope called the claims slander-ous. After Cardinal Sean O’Malley, the headof his own commission for the protectionof minors, publicly disagreed, the popeapologised. But on his flight home he re-peated the charge of slander. In April, aftera Vatican investigation into Bishop Barros,the pope admitted he had made “grave er-rors”. But rather than have the bishop triedin an ecclesiastical court, he allowed himto resign. He has since accepted the resig-nation of seven more Chilean bishops anddefrocked a number of priests.

Has Francis finally got it? Cardinal BlaseCupich, the archbishop of Chicago, says hebelieves so, and that the turning-point forthe pope was an encounter in the Vatican inApril with three Chilean victims. “Whenyou sit across from a victim you can’t helpbut be affected unless you have a heart ofstone,” says the cardinal.

On the defensiveNot everyone is so confident that Francishas turned a corner. Anne Barrett Doyle ofBishopAccountability.org, a campaigningwebsite, notes the pope “still spends a lot oftime talking about calumny”. She points toa homily in September, describing Satan asthe Great Accuser, who “has been un-chained and is attacking bishops”. It wasthe latest of many instances when Francishas taken the side of his fellow prelates.That may be because he finds it hard to be-lieve them capable of covering up forpriests who preyed on the young. Or per-haps he feels a duty to afford his bishopsthe presumption of innocence. Or it mayreflect unease over his own record: a docu-mentary by a French filmmaker, MartinBoudot, claims that as archbishop of Bue-nos Aires, Francis defended a priest whowas later imprisoned for 15 years for sexu-ally abusing children.

The meeting in February is expected todiscuss possible reforms. Much could bedone. Francis could overturn a veto on aplanned Vatican tribunal to try bishops ac-cused of shielding predatory priests. Hecould set up an inquiry into the use of the“pontifical secret”. A decree issued in 1922still obliges bishops not to report certainoffences, including child sex abuse, to thecivil authorities unless they are in jurisdic-tions where reporting is mandatory.

Particularly among conservatives, how-ever, there is a growing feeling that Cathol-icism most needs, in the words of JohnMeyer of the Napa Institute, a lay group, “arenewal of holiness”. Mr Meyer argues thatit is not only the priests and bishops whomust examine their consciences, but laybelievers who have grown used to floutingthe church’s teaching on, for example, arti-ficial contraception. “We have fallen intothe traps of the sexual revolution,” he says.“We need to take seriously our sins and re-alise our faults rather than just be angry atour bishops.”

Such talk, however, is anathema to lib-eral Catholics disgusted by the clergy’s re-cord, but with no sympathy for the conser-vatives’ wider agenda. Cardinal Cupich,from the church’s liberal wing, argues thatthe clergy’s abuse of its power is more seri-ous. He sees a parallel with the #MeToomovement. If, he says, the unending scan-dal “frees victims of abuse of all kinds tocome forward, then I think we should bewilling to pay the price. Maybe it is in God’sown providence for us to suffer.” 7Pondering the cardinal sins


1

“Who is killing Tencent?” was theheadline of an article on a Chinese

business news site this autumn. Thosesharing the link on WeChat, a social-mediaand payments service that is the crownjewel of the Chinese technology giant, seesomething else: “This title contains exag-gerated and misleading information”. Theswap is ostensibly the result of a move byTencent in April to sanitise content, after acrackdown on popular online platforms bygovernment regulators, but is also self-serving. Scoffing WeChat users circulatedthe article just to highlight the switch.

It would be no surprise if Tencent werefeeling touchy as it approaches its 20th an-niversary on November 11th. Its shares,traded in Hong Kong since 2004, have fall-en by 28% in 2018 (see chart). This time lastyear it was the first Asian company to beworth half-a-trillion dollars, hitting a re-cord valuation in January of $573bn. It hassince shed $218bn, roughly equivalent invalue to losing Boeing or Intel. Other Chi-nese internet stocks have fared worse thanTencent, among them NetEase, a gamingrival, and jd.com, an e-commerce firm. Buteven so, the drop stands out.

The company posted its first quarterlyprofit decline for nearly 13 years in thethree-month period ending in June. A regu-latory hold-up that was blocking it from

charging for new video games was the chiefculprit, it explained. Although it hassprawled into all sorts of areas, from onlinelending (WeBank) and insurance (WeSure)to offline medical clinics (Tencent Doctor-work), the company still derives over two-fifths of its revenue from gaming. Its latestbig bet in mobile games, “PlayerUn-known’s Battlegrounds”, has accrued ahuge audience of some 50m Chinese gam-ers who play daily, but because of the mo-netisation freeze, Tencent cannot cash in.

The government suspension, which be-gan in March without explanation, had

been expected to ease in the autumn. An-alysts now assume that Tencent will needto tough it out until the second half of 2019.Even once game approvals start up again,the government has said that their numberwill be limited. To allay Communist Partyconcerns about the mental and physicalhealth of young gamers, Tencent is alsohaving to curb gaming time and set up asystem of user-identity checks.

Capricious regulators may not be whol-ly to blame for the slowdown in onlinegames, says Steve Chow of AgriculturalBank of China International (abci), a Chi-nese investment bank. Users may simplybe spending less time on Tencent’s onlineentertainment, as other players eat into itsmarket share. For its flagship game, “Hon-our of Kings”, for example, the averagenumber of daily active users has droppedby a fifth in the past year or so, to 54m inSeptember.

For skittish investors, all this has con-centrated minds on whether the giant canmaintain its momentum as it enters itsthird decade. Most agree that gaming willremain an important part of the company,but not its chief driver of revenue growth.

Two concerns are particularly acute. Be-cause its games have done so well, Tencenthas been lackadaisical in monetising otherparts of its business. It has rightly been ner-vous about expanding advertising withinWeChat, though the service sees unrivalledChinese mobile traffic of over 1bn monthlyactive users. Last year Tencent took aboutone-tenth of total third-party spending ondigital ads in China. But Baidu, China’sleading search engine, took 19% and Ali-baba, a giant in e-commerce, drew in al-most a third.

A second worry is that crimped profits

Tencent at 20

WeFlat

S H A N G H A I

A Chinese internet titan shakes things up after a singularly bruising year

Not so happy returns

Source: Datastream from Refinitiv

Share prices, January 1st 2018=100, $ terms

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

2018

60

70

80

90

100

110

120

Tencent

Baidu

Alibaba

Business

66 Amazon’s choice of headquarters

67 Outdoor advertising

67 The rise of biosimilar drugs

68 Doing business with Iran

69 The growth of microbrands

70 Schumpeter: India’s banking crisis


— Bartleby is away

66 Business The Economist November 10th 2018

2 will make it harder for the firm to keep in-vesting heavily in areas outside its corebusiness. Tencent has been backing pro-mising startups in a race with Alibaba tofind new users and sources of growth, bat-tling indirectly in areas as varied as fooddelivery and online education. In some,such as cloud computing, the pair competedirectly. Although Tencent’s investors aresupportive of this approach, Jerry Liu ofubs, a bank, says the wider tech sell-offstems from a recognition that China’s ma-turing internet sector is becoming “a zero-sum game”: dominant platforms are hav-ing to invest more to stay ahead and sotheir margins are shrinking.

Tencent’s first internal-restructuringplan since 2012, announced in September,offers a clue to the company’s thinking. Init Tencent set out a long-term shift awayfrom the consumer internet towards busi-ness services, marking “a new beginningfor the company’s next 20 years”. It has setup a new unit for cloud and “smart” indus-tries, combining all its on-demand soft-ware and online services for firms that seekto go digital. Pony Ma, Tencent’s boss, saidthe “main battlefield” for mobile internetis moving from consumers to companies.

Alibaba, born to bring businesses on-line through its virtual emporia, has astrong lead in this arena. Last year it took45% of China’s fledgling cloud-computingmarket, worth 69bn yuan ($10bn), com-pared with 10% for Tencent, according toidc, a research firm. Still, Tencent doubledrevenue in cloud services in the secondquarter compared with the same periodlast year. Earnings from “other businesses”(ie, payments and cloud) overtook thosefrom its social networks for the first time.

Mr Chow reckons that Alibaba and Ten-cent can both create large businesses incloud computing since the market has lotsof room to grow. And Tencent boasts pow-erful assets. WeChat is on over four in everyfive Chinese smartphones, so offers a mas-sive market for firms. Last year it intro-duced a cloud-based platform that allowscompanies to offer services to users in We-Chat via “mini programs” (ie, tiny apps).There are more than 1m mini programs,used by over 200m people every day.

For now, however, its revenue fromsuch mini programs and other built-in ser-vices is still “close to zero”, notes David Daiof Sanford C. Bernstein, a research firm.Meanwhile rivals have introduced theirown offerings of mini programs. Amongthem is Bytedance, a newish giant that hasyoung Chinese hooked on its flawlessly ad-dictive video and news offerings, curatedwith artificial-intelligence technology. It isa thorn in Tencent’s side.

In particular, the way in which Byte-dance is capturing very young users, aswell as young talent, makes Tencent lookincreasingly grizzled. To increase its ap-

peal to youngsters, Tencent in April reviveda short-video app it had shut down, calledWeishi, and made it a near-copy of Byte-dance’s wildly popular Douyin app.

Pan Luan, a former tech journalist whopublished a widely-read essay in May con-tending that Tencent had “no dream”, saysthe giant looks lumbering at times because“its whole structure is ageing”. Young staffsay they have few channels for promotionto decision-making positions, says Mr Pan,and few opportunities to build sparky pro-ducts, as Tencent spends on stakes in othercompanies. A young Tencent employeewho left to work for a newer tech firm saysthat pay at firms like Bytedance andKuaishou, a short-video app (in which Ten-cent has a stake), is “in another band”, and

that they feel more like foreign startups. Tencent’s outsize influence in China’s

online world is ballast that should steady itas it targets business customers. For sheerscale, WeChat seems likely to hold its own.It has given Tencent a powerful distribu-tion channel for its own games, and has al-lowed it to stymie new rival products, in-cluding Douyin, by blocking them from itsplatform. But the giant is under pressure,and seems to know it. “We have to stayawake,” urged its president, Martin Lau,last month. Such introspection is neces-sary. Mr Chow says it was thought until thisyear that “Tencent could win every battle”.With more formidable competitors on thescene, the company will need to pick itsfights more carefully. 7

Not for the first time, The Onion, asatirical website, got it right. “‘You

are all inside Amazon’s second head-quarters,’ Jeff Bezos announces to horri-fied Americans as massive dome envel-ops nation.” That headline captured boththe American e-commerce goliath’sendless expansion in recent years andthe stratospheric level of hype around itsquest to find a second headquarters.

Fourteen months ago Mr Bezos, Ama-zon’s boss, announced that he was look-ing for a city in North America in whichto invest over $5bn building a campusthat would create 50,000 high-qualityjobs. The firm vowed that this new loca-tion, “hq2”, would be no mere satellite,but a “full equal” to its Seattle campus.

A beauty pageant among cities en-sued. Over 200 made proposals; in Janu-

ary, 20 were chosen as finalists. Chicagoreportedly offered $2bn in incentivesranging from tax breaks to subsidies forworker training. Andrew Cuomo, re-elected New York’s governor this week,promised to change his name to AmazonCuomo “if that’s what it takes”.

It now appears that Amazon playedcities like so many fiddles. According tomultiple reports this week (Amazon hasnot confirmed its plans), it intends tosplit its investment between two bases.One is Long Island City (lic) in New YorkCity’s Queens and the other is likely to beCrystal City, a part of Virginia next toWashington, dc. Amazon does lots ofwork for the federal government, sobeing close should help. And a base inlic, just across the East River from Man-hattan, means it would be able to tap thelatter’s big tech and media workforce.

Workers in the two locations focusedon the effect on their commute. Addingeven 25,000 workers would furtherchoke the subway system, complains anemployee at an education-tech firm inlic. If logistics are a priority for Amazon,Dallas may still be a contender given itscentral location in North America.

Critics of Amazon accuse it of a bait-and-switch; cities were promised a trueheadquarters on a par with Seattle, but ifthe split of hq2 is confirmed, it willcreate much smaller offices. Anotherobjection is that the firm will have col-lected a boatload of local data it can usein future business decisions. Yet thewinners are unlikely to complain, andcities would probably have surrenderedtheir data even for a biggish Amazonsatellite office. The dome is taking over.

HQ2 times 2Amazon

N EW YO R K

Amazon’s “second headquarters” may be no such thing

Prime property

The Economist November 10th 2018 Business 67

1

“It’s the prices, stupid.” That simple as-sessment of America’s wildly expen-

sive health-care system was made 15 yearsago by Uwe Reinhardt, a health economistwho died last year. Health costs as a propor-tion of America’s economic output havesoared since, from 14.5% in 2003 to over17% in 2017, with drug-price inflation a bigculprit. Less than 2% of Americans aretreated with specialty biotech drugs, butthese account for as much as 35% of totaldrug spending.

The good news is that cheaper biotechdrugs are coming. Known as biosimilars,these complex copycat drugs (which are abit like generics) have been allowed in Eu-rope since 2004 and in America since 2010.At first, owing to policy roadblocks andanti-competitive tactics by incumbents,only a few came to market. But the firms

N EW YO R K

Biosimilar drugs promise to cuthealth-care costs in rich countries

Pharmaceuticals

Pill bills

Pedestrians strolling down 8th Ave-nue in Manhattan’s Hell’s Kitchen

neighbourhood will be struck by the cast-limestone façade of the Hearst MagazineBuilding. Commissioned by William Ran-dolph Hearst in 1926, the 40,000-square-foot (3,716-square-metre) art deco buildingis adorned with fluted columns and statuesand topped by a 600-foot (183-metre) glassand steel skyscraper. Another conspicuousfeature is a vast digital screen transmittingadvertisements from BuzzFeed, espn andVice. This blend of history and modernityis emblematic of the outdoor-advertisingbusiness itself, which, despite being one ofthe world’s oldest forms of marketing isembracing digital technologies.

Most forms of conventional advertis-ing—print, radio and broadcast televi-sion—have been losing ground to onlineads for years; only billboards, dating backto the 1800s, and tv ads are holding theirown (see chart). Such out-of-home (ooh)advertising, as it is known, is expected togrow by 3.4% in 2018, and digital out-of-home (dooh) advertising, which includesthe lcd screens found in airports andshopping malls, by 16%. Such ads drawviewers’ attention from phones and cannotbe skipped or blocked, unlike ads online.

Billboard owners are also making hayfrom the location data that are pouring offpeople’s smartphones. Information abouttheir owners’ whereabouts and onlinebrowsing gets aggregated and anonymisedby carriers and data vendors and sold tomedia owners. They then use these data towork out when different demographicgroups—“business travellers”, say—walkby their ads. That knowledge is added to in-sights into traffic, weather and other exter-nal data to produce highly relevant ads.dooh providers can deliver ads for coffee

when it is cold and fizzy drinks when it iswarm. Billboards can be programmed toshow ads for allergy medication when theair is full of pollen.

Such targeting works particularly wellwhen it is accompanied by “programmat-ic” advertising methods, a term that de-scribes the use of data to automate and im-prove ads. In the past year billboard ownerssuch as Clear Channel and jcDecaux havelaunched programmatic platforms whichallow brands and media buyers to select,purchase and place ads in minutes, ratherthan days or weeks. Industry boosters sayoutdoor ads will increasingly be boughtlike online ones, based on audience andviews as well as location.

That is possible because billboard own-ers claim to be able to measure how welltheir ads are working, even though no“click-through” rates are involved. Datafirms can tell advertisers how many peoplewalk past individual advertisements atparticular times of the day. Advertisers canestimate how many individuals exposed toan ad for a Louis Vuitton handbag then goon to visit a nearby shop (or website) andbuy the product. Such metrics make out-door ads more data-driven, automated andmeasurable, argues Michael Provenzano,co-founder of Vistar Media, an ad-tech firmin New York.

As the outdoor-ad industry becomesmore data-driven, tech giants are amongthose to see more value in it. Netflix recent-ly acquired a string of billboards along Hol-lywood’s Sunset Strip, where it will startadvertising its films and tv shows. Techfirms, among them Apple and Google, areheavy buyers of ooh ads, accounting for 25of the top 100 ooh ad spenders in America.

The outdoor-ad revolution is not pro-blem-free. The collection of mobile-phone

data raises privacy concerns. And criti-cisms of the online-ad business for beingopaque, and occasionally fraudulent, mayalso be lobbed at the ooh business as it be-comes bigger and more complex. The in-dustry is ready to address such concerns,says Jean-Christophe Conti, chief execu-tive of viooh, a media-buying platform.One of the benefits of following the on-line-ad trailblazers, he notes, is learningfrom their blunders. 7

N E W YO R K

Innovations from online advertisersare being adapted to billboards

Outdoor advertising

Sign of the times

The great outdoors

Source: Credit Suisse *Excluding the internet

United States, advertising revenues*1995-2016, annual average % change

-6 -4 -2 0 2

Outdoor

Television

Radio

Magazines

Newspapers

Times Square pre-neon


2 that make them, which range from biotechgiants to scrappy upstarts, are turning thetrickle into a torrent.

Consider Humira, a biotech drug madeby America’s AbbVie that treats rheumatoidarthritis, psoriasis, Crohn’s disease andother maladies. It is the world’s top-sellingdrug; annual sales of $20bn are more thandouble that of the next two top sellers com-bined. The annual cost (after rebates) ofHumira in America has shot up from about$19,000 a patient in 2012 to some $38,000 apatient. David Maris of Wells Fargo, a bank,calculates that a 9.7% price increase im-posed earlier this year by AbbVie on Hu-mira could add $1.2bn to America’s health-care costs in 2018.

Such sums explain why the launch ofseveral biosimilar rivals to Humira in Eu-rope in October is being watched closely.Five copycats, which regulators have veri-fied are safe and effective, have been ap-proved and three have launched. One ofthem is Amjevita, which is made by Am-gen, a giant American biotech firm withpricey branded drugs of its own to defend.AbbVie confirmed in an earnings call onNovember 2nd that rivals are undercuttingHumira’s list price by up to 80% in someEuropean countries. This has forced Abb-Vie to cut prices steeply.

In America a similar battle is brewingover Neulasta, a biotech cancer drug madeby Amgen with global sales of some $3.7bnthis year. On November 2nd America’sFood and Drug Administration approved abiosimilar rival to Neulasta developed byCoherus BioSciences, a biotech firm basedin California. Its pricing is unknown butthis time it seems likely to be Amgen thathas to lower prices.

Makers of biosimilars do face hurdles.The owners of branded biologic drugs havebeen known to put out misleading adver-tising that casts doubt on the copycats’safety. Denny Lanfear, boss of Coherus, be-moans the fact that firms typically file doz-ens of patents on old drugs to extend theirmonopolies. He notes that AbbVie’s “pat-ent thicket” means Humira will not facebiosimilar competition for years to comein America. Also, nobody knows whetherPresident Donald Trump will follow up onhis recent praise for biosimilars with prac-tical policies on reimbursement for themin the Medicare system.

Yet overall the future looks bright.McKinsey, a consultancy, estimates thatthe global market for biosimilars could tri-ple, to $15bn, by 2020. That is tiny com-pared with overall health spending. But be-cause the new drugs lead to price-cuttingby incumbents, the systemic benefitscould be far bigger. The rand Corporation,a think-tank, says that biosimilars couldreduce American health-care spending by$54bn over the next decade. Biosimilarscould prove to be the mouse that roars. 7

Whatever you do if you are a Euro-pean company pulling out of Iran, do

not mention the sanctions. On November5th America re-imposed an embargo onIran, aimed at blocking its supposed nuc-lear ambitions. Its restrictions to trade donot apply directly to European companiesbut bosses fear being banned from theAmerican market if they keep doing busi-ness in Iran. Yet obeying America’s sanc-tions is itself illegal under rules devised byEurope, whose leaders want to keep Iran inthe global trade fold.

Firms opting to bow to America havethus devised a ruse: blame unspecified is-sues of “commercial viability” for their de-cision to leave Iran. This is what British Air-ways and Air France both did when theyrecently stopped flying to Tehran. Most bigfirms have announced that they are leav-ing, including Total, a French energygroup, and Siemens, a German engineeringgiant. (American firms were banned evenbefore, though with occasional exemp-tions, such as Boeing selling Iran aircraft.)

The exodus is perhaps inevitable. “Any-one doing business with Iran will NOT bedoing business with the United States,”President Donald Trump blasted on Twitterwhen the sanctions were further ratchetedup in August. Few think America will act onthe threat of imposing “secondary sanc-tions” on defiant firms, but even fewer careto find out whether Mr Trump is bluffing.

bnp Paribas, a French bank, was fined near-ly $9bn in 2015 for doing business with em-bargoed countries, including Iran.

European policymakers think this un-fair. They have alighted on two potentialsolutions. The first is to threaten Europeanfirms with being liable for any costs in-curred by other companies as a result oftheir compliance with the sanctions. Butthis seems, by all accounts, to be a politicalstatement, not a genuine policy: in practiceno firm pulling out of Iran is going to getpunished, officials admit.

The second is a mechanism that wouldact as a state-owned buffer between Irani-an firms and European ones. The financeministries of Britain, France and Ger-many—the European parties to the Iran nu-clear trade deal that America is pulling outof—want to set up a “special purpose vehi-cle” (spv) to intermediate trade. The idea isthat European companies buying from andselling to Iranian counterparts would nothave to send or receive money from Iran,but would pay each other instead.

Under the mechanism an Italian im-porter of Iranian pistachios, for example,would settle the tab of an Iranian firm buy-ing German machinery through a ledgerorganised by European governments(these payments would be mirrored inIran). No money would enter or leave Iran,many of whose banks are being cut off fromthe international financial system (on No-vember 5th swift, the Brussels-based in-ternational financial messaging system,said it would comply with American sanc-tions and suspend some Iranian banks’ ac-cess). Firms from third countries might beable to participate in the spv, too.

As a plan it has two big flaws. One isthat, despite America announcing sanc-tions six months ago, the spv is still on thedrawing board. No country has volun-teered to host it. Officials vaguely recall asimilar system of formalised barter allow-ing access to the Soviet Union, but can offerno firmer blueprint for now.

The second defect is that the proposedspv only resolves the issue of payments.Companies trading with Iran could still bedesignated as societas non grata by Ameri-ca. “At the end of the day, you are still en-gaging in trade with Iran,” points out MayaLester, a sanctions expert at Brick CourtChambers in London, and so still poten-tially liable for secondary sanctions.

Michael Tockuss, head of the German-Iranian Chamber of Commerce, says thatsome smaller German firms will continueexporting to Iran if they have no businessin America. Workarounds of sanctions de-vised for an embargo imposed by Europeand the United Nations in 2012-2015 arestill fresh in the minds of compliance de-partments. Some big firms might find waysof keeping a presence there, he suggests,but in a far more discreet manner.7

P A R I S

Europe is struggling to find ways forfirms to defy America on Iran

Trade with Iran

Risky business

The Economist November 10th 2018 Business 69

Companies such as Casper, which sellsmattresses, Warby Parker, a spectacles

brand, and Glossier, a cosmetics firm, wereonce seen as interesting curiosities. Tout-ing their products online, luring custom-ers with digital advertising and eschewingconventional retailers and marketers, theywere anomalies shaking up small seg-ments of retail. In fact, the growth of mi-crobrands—or direct-to-consumer (dtc)brands—represents a profound shift in theconsumer-goods sector.

Industry giants took time to begin wor-rying about the arrival of game-changingnewcomers; barriers to entry in their busi-ness are high. But by now the incumbentsare stagnating. According to Nielsen, a con-sultancy, the biggest 25 food-and-beveragecompanies, for example, generated 45% ofsales in the category in America but droveonly 3% of the total growth in the industrybetween 2011 and 2015 (see chart). A longtail of 20,000 companies below the top 100produced half of all growth.

Imagine, 25 years ago, coming up withthe idea for a radically better toothpaste,suggests Randall Rothenberg, the boss ofthe Interactive Advertising Bureau (iab), atrade organisation for digital advertisers,who studies microbrands. Raw materialswould only be available by the tonne. Nofactory would produce toothpaste for a tinynew player. Ads would be hopelessly ex-pensive so driving demand would be im-possible. No large retailer would stock it.

That is no longer true, thanks to shiftsin supply chains and data. The growth of“just-in-time” manufacturing means start-ups no longer need to splurge on inventory.The surge in food startups meant factorieshad confidence to let him start with a smallorder, on the condition that future oneswould be bigger, says Blake Sorensen,founder of Blake’s Seed Based, whichmakes allergy-friendly snacks.

Other service providers can pass oneconomies of scale once available only toconsumer-goods giants. Lumi, a packagingfirm, uses a network of factories to designand produce packaging for small brands. Itrepresents thousands of brands so can getbetter prices.

Businesses such as ShipBob, a Chicagostartup, do something similar with ship-ping, allowing small brands to offer faster,cheaper deliveries. E-commerce compa-nies such as Shopify provide turnkey on-line shops from as little as $29 a month.

Shopify handles the back-end infrastruc-ture that would have cost hundreds ofthousands of dollars to build, says StevenMazur, one of the founders of Ash & Erie, abrand of clothing for short men. Assem-bled Brands provides funding specificallyto microbrands. It will invest in any kind ofmanufactured consumer-goods product aslong as the company has started trading.

Microbrands can also sell their pro-ducts through Amazon. The costs are highbut it gives them access to the onlinegiant’s shipping services and huge userbase. Many of the big firms have, by con-trast, been reluctant to sell on the giant’swebsite, so feature low in search rankings.More of them have started selling on Ama-zon in recent years, says R.J. Hottovy ofMorningstar, a research firm, but it stillrepresents a small slice of their sales.

Selling directly to consumers meansthat microbrands boast a wealth of data. MrSorensen launched his business online inJanuary 2018. He sold $50,000 of snacksand then, on the basis of data gleaned,Blake’s Seed Based changed its recipe andrelaunched in September. m Gemi, an on-line seller of posh shoes, offers new de-signs weekly so can respond precisely toconsumer demands. Their giant rivals, bycontrast, use data filtered by retailers.

Online advertising, using platformssuch as Facebook, allows brands to targetcustomers with great accuracy. The vastmajority of growth in advertising is com-ing from the digital kind, and a large pro-portion of this is from small advertisers,says Jonathan Barnard of Zenith, a mediaagency. Meanwhile many big companies,especially the consumer-goods firms, are

keeping their spending flat or reducing itin view of pressure on margins.

Consumer-goods behemoths are wellaware of the threat posed by microbrandankle-biters. One response is to buy them.Unilever bought Dollar Shave Club, a sub-scription service for razor blades and now-canonical microbrand, for $1bn in 2016,grabbing the market share the upstart haditself snatched from Gillette. The biggestten consumer-goods firms have all recent-ly invested in direct-to-consumer startups.Nestlé’s acquisition in 2017 of Blue Bottle, ahip Californian coffee brand, bought it ex-posure to new market segments.

Competition is fierce to buy the best mi-crobrands so big firms may overpay fortheir acquisition, says Mr Hottovy. Ex-plaining its purchase last year of Native, asmall deodorant brand, Marc Pritchard, thechief brand officer of Procter & Gamble, ex-plicitly referred to its dtc model, saying itis “where things are going”. Other big firmsare trying to grow their own brands. Earlierthis year Kraft Heinz launched Spring-board, an incubator for small, disruptivefood and drink brands.

In the long term some small brands willbe swallowed up but others will be encour-aged, argues Sonali De Rycker of Accel, aventure-capital firm. More will want to re-main independent for longer, or entirely,which will mean larger deals or ipos.

To flourish, incumbents will not onlyhave to acquire these new brands or starttheir own; they will have to learn fromthem. And instead of having a discrete setof multi-billion-dollar brands, soldthrough third-party retailers, they willhave to come up with larger portfolios ofsmaller, more transitory ones, argues MrRothenberg. Scale still matters, but it willhave to be used more shrewdly. 7

The growth of microbrands is challenging the business of consumer goods

Retailing

A handmade tale

Warby Parker had vision

Small is beautiful

Source: Nielsen *Retailers’ own brand

United States, food and beverage manufacturersRevenue, 2011-15 annual average % increase

0

2

6

4

0 20 40 60 80 100Share of industry revenue increase, %

Smallmanufacturers

Mid-tier Privatelabel*

Large


When narendra modi was elected prime minister of India in2014, his plan was to revive its gdp growth rate back to the

near-double-digit figures seen in the mid-2000s. Few would haveguessed that the biggest threat to that goal was the financial indus-try. For several years state-run banks have failed to get to grips witha $100bn mountain of dud loans. Now panic has seized parts of theprivately run system. One bank boss says the situation is as bad asthe Asian crisis of 1998 or the global crash of 2008.

In September il&fs, a financial firm that owns and financesroads and power plants, defaulted on some of its $13bn of debt. Thecontagion has struck India’s shadow banks, which rely on$250bn-300bn of borrowing to fund themselves. Their market val-ue has collapsed by a median of 40% this year. A bitter row abouthow to respond has erupted between the government and the Re-serve Bank of India (rbi), the largely independent central bank.Over a billion people depend on an emergency being avoided.

India’s financial system has both Chinese and American char-acteristics; it faces a blend of a slow-motion banking crisis at gov-ernment-run lenders, plus a high-speed liquidity run of the kindthat hit Wall Street in 2008. That the industry has taken on a hybridcharacter over time reflects the conflicting aims of the forces thatshaped it. The state wants pliant banks, ready to lend to the ruralpoor and to infrastructure projects, and that will buy governmentbonds. The rbi emphasises stability, so is paranoid about wheeler-dealers taking risks or ripping off the vulnerable. Entrepreneurswant capital and to start financial-services firms themselves. Andconsumers want loans and whizzy new banking technologies.

About half the system, measured by loans, consists of state-runbanks. They are usually listed but the government appoints theirtop brass and often influences them to disastrous effect. Another25% comes from private banks; some of which are among Asia’sbest-run lenders—hdfc Bank and Kotak trade on about four timestheir book value, compared with below one times for the zombiestate banks. The other quarter is from a motley crew of 50-oddshadow banks that have expanded quickly. They are less heavilyregulated and lend in particular areas such as housing. They areusually prohibited from taking deposits so fund themselves withdebt. Last, there are innovative digital firms, such as Paytm, a mo-

bile-payments firm. Overall, the system straddles the 19th and 21stcenturies, featuring subsiding bank branches protected from themonsoon by tarpaulins, but also virtual mobile chatbots.

The present troubles have their roots in 2005-12, when statebanks went on a lending bender, extending credit to dubious ty-coons and to infrastructure projects. Net bad debts are 9% of statebanks’ loan books. The government has not properly recapitalisedthese zombies and the flow of credit from them has slowed. Acci-dents keep happening. In February pnb, the second-biggest statelender, disclosed a $2bn fraud involving diamond merchants.

A second phase began after 2012. Between 2012 and 2017 morecapital flowed into India than flowed out. In 2015 interest rates be-gan to fall and in November 2016 the government replaced thestock of bank notes overnight, leading savers to switch from physi-cal money into deposits with banks, and into debt mutual funds.Flush with cash, and with rates low, they looked for ways to lendthe money out again and part of the answer was to fund the shad-ow banks, which went on a binge—the top 50 have doubled theirdebts and assets in the past five years. Perhaps as much as$50bn-100bn of their debts comes due within 12 months.

Borrowing short and lending long is a high-stakes game. Afterthe il&fs collapse, confidence has evaporated. The group has 348opaque subsidiaries, including India’s longest tunnel. It has nowbeen taken over by the government, which indirectly owned 40%of it. Mutual funds and banks are reluctant to lend to other shadowbanks—most report solid capital ratios, but can anyone be surethey do not have time-bombs buried in their balance-sheets? Forweeks the shadow banks have faced a liquidity crunch.

They are big enough to damage India’s entire financial system.Mutual funds, which are sold to the public, have $55bn of exposureto them, or 11% of total assets under management. Conventionalbanks have loaned $70bn to shadow banks, the equivalent of two-fifths of the former’s core capital. Among private lenders the moodis already jittery: icici’s boss has just departed after claims of con-flicts of interest (which she denies). Yes Bank is replacing its bossafter the rbi refused to approve an extension of his term. Even if afull crisis does not erupt shadow banks may be forced to shrink.When combined with the rotten state banks, that would mean that75% of India’s financial system is on crutches.

Bazooka timeA sell-off in global markets could easily trigger a new wave of pan-ic. The government, facing a general election next year, wants thecentral bank to lend more freely to the shadow banks. But the rbi

does not want to reward failure and has so far injected liquidityonly indirectly, by buying government bonds and allowing banksto guarantee some new bonds issued by shadow banks. It blamesthe government for its endless meddling in state-run lenders andfor its failure to recapitalise them, despite years of warning signs.

In the short term the government is right—unless the liquiditysqueeze abates soon, the central bank will need to set aside its nat-ural reluctance and act boldly. In the long term the rbi is right. A“big bang” reform is needed to privatise the state banks and extractthem from the government’s tight grip. India also must end theregulatory arbitrage that allows shadow banks to raise most oftheir funds from retail investors and deposit-taking banks. Eithershadow lenders should come out of the dark and be turned intobanks, or a firewall will have to be erected around them to protectthe rest of banking. And if India does not get its financial systemback on its feet, the economy will not grow fast. It is that simple.7

India’s shadow-banking crisisSchumpeter

The world’s second-most-populous country has been flirting with a Lehman moment


1

Acalm usually descends on America’sfarm belt in November. Combines have

mostly finished churning across fields;trucks have hauled crops to grain elevators;and farmers retreat to their living rooms torest. This year, at least by one measure, theyshould feel particularly content. RandySims, a hog-and-grain farmer in western Il-linois, produced 75 bushels of soyabeansper acre, a third more than in the past. In-deed American soyabean production in2018 is expected to reach 4.69bn bushels, arecord. But it is unclear who will buy them.

America’s farmers are at the centre ofPresident Donald Trump’s trade war. Morethan a fifth of agricultural exports face newtariffs. From January to September pork ex-ports to Mexico and China fell by 31% and36%, respectively. Sales of soyabeans,America’s biggest farm export, to Chinahave plunged by 98% since January (seechart). “It’s a big concern,” says David Wil-liams, who farms 3,800 acres in Michigan.He flew to Shanghai for a conference in ear-ly November with a group of soyabeangrowers keen to maintain ties with Chineseimporters, in the hope that the trade stand-off ends soon. In the meantime America’sagriculture department expects farm in-comes to drop by 13% this year. The ratio of

farm debt to assets is forecast to rise to itshighest level since 2009.

It is all reminiscent of the 1980s, whenAmerica suspended grain sales to the Sovi-et Union, interest rates rose, incomes sankand many farmers left the business. Fornow debt levels are climbing but still man-

ageable. But much depends on how long ta-riffs persist. By the time the trade war ends,they may have caused enduring harm.

American farmers are titans of interna-tional commerce. From 2000 to 2017 thevalue of agricultural exports nearly tripled.Exports comprise more than a fifth of farmoutput. Grain gushes abroad in the highestvolumes. As the world eats more meat, live-stock producers need more animal feed,raising demand for soyabeans. Exports lastyear reached $21.6bn, more than double thevalue of corn, the next largest export.

These successes are due in part to gov-ernment subsidies that incentivise pro-duction, such as farm payments that risewhen commodity prices fall. These mainlysupport big operations: farms with in-comes of $167,000 or more received nearly70% of commodity payments in 2016, ac-cording to the Heritage Foundation, athink-tank.

Productivity-boosting measures havehelped, too. Mr Sims, for instance, nowuses data on yields to fine-tune the appli-cation of fertiliser. He flies drones to in-spect crops for insect damage. Farmers of-ten coat seeds before planting to fend offrot and pests. Environmentalists worryabout the impact on water and bio-diversity. But production has boomed.

This has helped depress prices for cornand soyabeans in recent years, even asland, fertiliser and seed have remained rel-atively expensive. So a trade war is particu-larly ill-timed. Mr Trump announced ta-riffs on steel and aluminium imports inMarch, and extended them to Mexico, Can-ada and Europe in May. In retaliation Mexi-co, the second-largest importer of Ameri-

Farming in America

Tough row to hoe

LI B E RT Y, I LLI N O I S

Donald Trump’s trade war will make American agriculture less competitive andmore distorted

Reaping what you sow

Source: United States Department of Agriculture

Soyabean exports to:

United States, 2018, $m

Pork exports to:

Jan Feb Mar Apr May Jun Jul Aug Sep

0

300

600

900

1,200

MexicoJapan

China

Jan Feb Mar Apr May Jun Jul Aug Sep

0

50

100

150

Mexico

Japan

China

Finance & economics

72 Buttonwood: Where the hurt is

73 Hester Peirce at the SEC

74 1MDB and Goldman Sachs

74 Banks behaving badly

75 Non-wage compensation

75 Crowdfunding development

76 Free exchange: Rome alone


72 Finance & economics The Economist November 10th 2018

2

1

can pork by value, raised tariffs to 20%.China’s tariffs of up to 70% on pork, and25% on soyabeans, hurt even more.

Mr Trump is due to meet Xi Jinping, Chi-na’s president, at the g20 summit later thismonth, but neither man may concedemuch. In September Mr Trump agreed on anew deal to replace the North AmericanFree Trade Agreement with Canada andMexico. But it does not affect America’s ta-riffs on steel and aluminium, so Mexico’spork tariffs remain in place. Indeed Cana-dian and Mexican retaliatory tariffs wipeout the modest gain in exports from the

new deal, according to analysis from Pur-due University, leading to a $1.8bn net lossin farm exports.

When one export market shuts, it can behard to divert goods elsewhere. Pork, forinstance, can be transported to Mexico inrefrigerated trucks. It is more expensive tofreeze and ship it across an ocean.

Soyabean farmers fear that demand andtrade flows will shift permanently. China’sappetite for imports would wane if produc-ers lower the soya protein in pig feed or if,as some traders fear, the government urgesconsumers to switch to chicken or beef,

which require less soya than pork does.What demand remains may increasinglybe met by Brazil and Argentina. WallaceTyner of Purdue University estimates thatBrazil has another 9m acres of farmlandthat it could convert to soyabeans relative-ly quickly. “The market loss that we face inthe short run really opens the door to com-petitors,” says Jim Sutter of the UnitedStates Soybean Export Council.

The price of American soyabeans is nowdepressed, compared with that of Brazilianbeans. Many farmers must accept an evenlower price than that published on the

Buttonwood Where the hurt is

Prime suspectsCities house-price indexReal terms, Q1 2012=100

Overvalued againstincome*, %

+94.1

+49.0

+61.4

+2.7

+73.8

+47.1

+60.6

+75.3

Sources: Economist Intelligence Unit;Thomson Reuters; Zillow; nationalstatistics; The Economist

*Relative to long-run mediandisposable household income

Hong Kong Auckland

Toronto Sydney

London Amsterdam

New York Paris

2012

100 100

200 200

2018 2012 2018

Centre point, a tower that looms overcentral London, was empty for so

long in the 1970s that it lent its name to ahomelessness charity. Recently it wasconverted from offices to flats. Half areyet to find buyers. So the developer hastaken them off the market pending aclearing of the political fog over Britain.Its boss complained to Estates Gazette, atrade paper, of bids that were “detachedfrom reality”. One-bedroom flats were onsale for £1.8m ($2.4m).

Even flats with less hefty price tagshave been hard to shift lately. Propertyprices in London are falling. Sellers arewaiting for better prices. It is tempting toput all the blame on Brexit, but thatwould ignore the broader picture. Houseprices in big global cities increasinglymove together. What happens in Londonhas a growing influence on what hap-pens in New York, Toronto and Sydney—and vice versa. And trouble is brewing insome of these other markets, too.

Property used to be thought of as aninflation hedge. But in recent years it hasbecome a substitute for low-yieldingTreasury bonds—a safe asset in whichthe globally mobile can store theirwealth. After years of rapid price rises,houses in the most favoured markets areovervalued. Rising bond yields, tightermortgage credit and shifting politics arenow combining to push prices down.

The value of homes in the posherparts of global cities move in sync be-cause they have become a distinct assetclass. Private-equity firms and invest-ment trusts, not just individuals, ownthem. Prices in such cities are explainedmore by global factors, such as the yieldson the safest government bonds, than bylocal conditions. This global influence isparticularly marked in financial centresthat are open to capital flows, such as

London, New York, Toronto and Sydney. Ithas extended into smaller European cities,such as Amsterdam.

Demand from emerging markets suchas China and Russia has been growing.Buyers are willing to pay steeply to securea safe place for their savings—or a boltholefor themselves. Cristian Badarinza of theNational University of Singapore andTarun Ramadorai of Imperial CollegeLondon have shown that political troublein Russia, parts of Africa and the MiddleEast predicts a rise in the price of primeLondon property. The same sort of influ-ence is also found in less ritzy neigh-bourhoods, says Mr Ramadorai. For in-stance, property prices in Hounslow andSouthall, which have lots of settlers fromSouth Asia, picked up in the early 2000s, aperiod of political tensions in India.

Foreign demand has spillovers. If anoligarch buys a house, it drives up theprices of smaller properties nearby. Apaper by Dragana Cvijanovic of the Uni-versity of North Carolina and ChristopheSpaenjers of hec Paris finds similareffects in Paris’s property market. For-eign buyers, mostly from China, havebeen a force behind booms in the bigcities of Australia and Canada.

But the tide has changed. Global citieslook awfully dear. The rental yield oninvestment homes worldwide fell below5% for the first time ever in 2016, accord-ing to msci ipd, a financial-informationfirm. House prices relative to incomesare well above their long-run average inAmsterdam, Auckland, London, Paris,Sydney and Toronto (see chart).

And prices are falling in some of thedearer cities, in response to a variety offorces. The yield on Treasury bonds, theworld’s benchmark safe asset, is rising. Atightening of credit standards on mort-gages in Australia and Canada hassqueezed housing in cities there. Uncer-tainty about Brexit has made London aplace of political risk rather than a refugefrom it. Meanwhile, capital is movingless freely. Governments are charier ofRussian money. China is shaking downits super-rich for taxes and is zealous inits policing of capital outflows.

A corollary of stronger links betweenglobal cities is a kind of “waterbed”effect. For instance, when taxes werelevied on foreign homebuyers in Van-couver in 2016, the market cooled, butToronto took off. There are buyers whowill compare prices in, say, Mayfair inLondon and Park Avenue, New York.They look for value. But it is vanishinglyscarce. The market is turning. Those whobought at the peak, or are hoping to sell,will slowly adjust to a new reality.

Why house prices in global cities are falling

The Economist November 10th 2018 Finance & economics 73

2 Chicago Board of Trade, as elevators strug-gle to store and transport grain for whichthere are few buyers. Mr Williams has hadto sell his soyabeans at a discount. In NorthDakota, which usually sends soyabeans toships in the Pacific Northwest, some eleva-tors have stopped buying them altogether.

Economists at the University of Illinoisexpect the average farm in central Illinoisto make an overall loss of $70,000 nextyear. A recent survey from the Kansas CityFederal Reserve found that farm lendingfrom July to September was a third higherthan in the same period last year. Most ofthe increase was not to buy new machinerybut to support the basic business of farm-ing. Farmers may plant more corn nextyear, rather than soyabeans, but that is nota permanent solution. Continuouslyplanting corn, rather than rotating crops,lowers yields.

In 2015, 51% of output came from farmswith sales of at least $1m, compared with

31% in 1991. The trade dispute may speedconsolidation. Bigger farms have morecash to invest in yield-boosting technologyand the scale to win better terms from buy-ers. Mr Sims is one of many large farmers toinvest in bigger silos, in order to store cropswhile waiting for better prices.

The government may also become evenmore involved in agriculture, to muddledeffect. Mr Trump, having disrupted globaltrade flows, is now using $12bn of taxpay-ers’ money to offset some of farmers’losses. Concern for their welfare may buoysupport for a new farm bill—but the ver-sion favoured by Republicans in the Houseof Representatives would make even richerfarmers eligible for payments. Mr Sims ishopeful that Mr Trump will win bettertrade terms for farmers. “I am willing toweather the storm,” he says. But by the timethe president strikes a deal, whatever it is,American farming is likely to have becomeless competitive and more distorted.7

For all the talk about deregulation un-der President Donald Trump, when it

comes to the financial industry the wordused by many is “tailoring”—meaningtrimming the loose threads of tangledrules, rather than unpicking them. An ex-ception is Hester Peirce, who in January be-came one of the five commissioners at theSecurities and Exchange Commission(sec), America’s most important financialregulator. Since her appointment she hasgiven a series of speeches with a polite tone

and blunt message about the downsides ofgovernment intervention.

Though she has yet to gain a large fol-lowing, her words have not gone unre-marked. Her “arrival at the sec is genuinelyexciting”, writes Steven Lofchie, a securi-ties lawyer who runs a popular (within thesmall world of regulation) blog. It is proba-bly the first time the word has been used inconnection with the sec in years.

Ms Peirce is not partisan, criticisingboth the centralising trend under Presi-

dent Barack Obama and structural aspectsof equity markets which date from Repub-lican administrations. A common theme isthe harms of over-regulation. She cites No-buchika Mori, until recently Japan’s top fi-nancial regulator, on the proliferation ofinternational financial overseers. Survey-ing 140 projects by the Basel Committee onBanking Supervision, the International Or-ganisation of Securities Regulators, the Fi-nancial Stability Board and the Interna-tional Association of Insurance Super-visors, Mr Mori warned that “too muchmedicine might make the patient sick”.

Her first speech, in March, concernedthe impact of a rule drafted by the FinancialStability Oversight Council, which was setup in 2009. Its aim was to improve mutualfunds’ liquidity; in reality, she says, it hasincreased providers’ costs and requiresthem to produce numbers that are useless,even misleading. She is similarly critical ofthe “fiduciary” rule, another Obama-eraregulation intended to ensure that finan-cial advisers act in their clients’ interests.The reams of legalese required to producean operable definition, she says, are “won-derful for marketing purposes but poten-tially misleading for investors”, and pro-vide “a false sense of reassurance”.

In May she took issue with the Obamaadministration’s conception of the sec asprimarily an enforcement agency. That en-couraged it to bring as many cases as possi-ble—indeed to inflate their number bydouble-counting. The increasingly opaquestructure of America’s equity markets, withtheir stew of dark pools and bilateral trad-ing platforms, has also drawn her atten-tion. In another speech she noted “thestrange role that the commission plays indirecting—and often determining” thisstructure, and asked if it had “lost its way”.

In September she took issue with thenotion that governments should mandaterepresentation of certain groups, such aswomen, on company boards. “Policymak-ers might be tempted to get this or that fa-voured group included,” she said, thus in-troducing “uncertainty and politicalinfluence into corporate operations”. Andin a talk to law students at the University ofMichigan, she challenged them to includein their concept of the “public interest”helping companies in the “hunt for profit”,which drives them to “meet people’s needsusing as few resources as possible”.

Such positions may seem radical. In factthey would mean the sec refocusing on itsmain historical role, says Mr Lofchie,namely to ensure disclosure of materialfacts and then to step aside. When MrTrump took office, the sec had only twocommissioners. It now has a full comple-ment and a mixture of views is starting toemerge. A debate about its purpose—andthat of financial regulation more broad-ly—is overdue. 7


A new commissioner at America’s main securities regulator causes a buzz

The SEC

Peircing remarks

Not your regular regulator


Public opprobrium ought to be some-thing to avoid. It has laid low mighty

men in Hollywood accused of sexualmisdeeds and sporting heroes caughtpumping drugs. But it is not bad foreveryone: for some populist politicians itcan be fuel to their supporters’ fire. And anew study* suggests that Wall Street’ssins have a surprising side-effect: pressreports of bad behaviour by investmentbanks during and after the financialcrisis were good for business.

Thomas Roulet, of Cambridge Univer-sity’s Judge Business School, sifted all theeditorial and opinion articles about thefinancial industry in the New York Times,Wall Street Journal and Washington Postpublished between 2006 and 2011. He

built a list of 204 terms of reproach,signifying greed (eg, “avarice”), violence(“rapacity”), extreme risk-taking (“gam-bling”) or opacity (“manipulation”). Hethen searched the whole of those news-papers for uses of the words applying to28 investment banks. During the periodbanks were roundly chastised, for ex-ample in reports by Andrew Cuomo, NewYork’s attorney-general, in 2009, and bythe Senate in 2011.

Mr Roulet found that the more disap-proval a bank earned—measured by thedensity of reproachful words in articlesabout it—the more fees it earned too.Specifically, it was likelier to overseeinitial public offerings of Americancompanies’ shares between 2007 and2011. Of course, bigger banks attract morecoverage; Mr Roulet controls for that,partly by using the density of criticalwords, not the total. And other factorsalso matter: the more shares a bank hadplaced in the past year, say, or the more“bookrunners” an ipo had, the better itschances of being hired.

A finer analysis shows that adversereports in the Journal gave a bank by farthe biggest boost. What the media, andhence the public, found disreputable, MrRoulet concludes, potential clients sawas evidence of professional prowess.Banks don’t revel in being cast as villains.It may help them just the same.

When vice is virtueBanks behaving badly

Naughty investment banks win more IPO business

.............................................................* “Sins for some, virtues for others: banks’misconduct and adherence to professional normsduring the financial crisis”, by Thomas Roulet.Forthcoming in Human Resources.

In 2010 goldman sachs created a “busi-ness standards” committee to try to re-

pair the reputational damage the financialcrisis had done. Clients and transactionswere to be screened for ethical shortcom-ings. Charges of money-laundering andbribery filed by federal prosecutors in aBrooklyn court on November 1st suggestthat the investment bank had diagnosed areal problem, if not found the solution.

The allegations relate to work done byGoldman for 1Malaysia Development Ber-had (1mdb), a sovereign-wealth fund set upin 2009, shortly after Najib Razak becameMalaysia’s prime minister. Since 2015 in-vestigators in various countries, includingAmerica, Singapore, Switzerland and lat-terly Malaysia itself, have been trying totrace the money it raised and channelledthrough a maze of financial institutionsand shell companies. According to the fil-ing in New York, funds were misappropri-ated to buy paintings, luxury propertiesand jewellery (including a necklace costing$27m), and to pay for parties attended bymusicians, actors and models, and even amovie, “The Wolf of Wall Street” (fittingly,about financial sleaze).

Goldman’s role was to underwrite threebond offerings together worth $6.5bn,from which it earned $600m. That juicy cutdrew accolades from the firm’s senior man-agement, even as those who expresseddoubts about why the client was willing topay so much were overruled. According tothe indictment, $2.7bn of the money raisedwent astray.

According to the filings, Goldman’s for-mer chairman for South-East Asia, TimLeissner, has pleaded guilty to bribery andmoney-laundering. He is due to be sen-tenced in December, though that may bedelayed. One of his associates at Goldman,Roger Ng, was indicted on similar chargesand arrested on an American warrant inMalaysia shortly before the documentswere filed. Also indicted was Jho Low, a Ma-laysian who allegedly masterminded theplot. Goldman has beefed up its legal team,hiring a former deputy us attorney-gen-eral, as it seeks to persuade prosecutors notto bring criminal charges against the firm.

The indictment acknowledges thatGoldman’s compliance department hadblocked Mr Low from doing direct businesswith it and that its controls were “knowing-ly and wilfully” circumvented. But it alsosays that the firm’s “business culture”, par-

ticularly in South-East Asia, was “highly fo-cused on consummating deals, at timesprioritising this goal ahead of the properoperation of its compliance functions”.

Some of the diverted money was alleg-edly used to support Mr Najib’s re-electionin 2013. Until this year’s election, which helost, the Malaysian authorities continuedto insist that there was nothing to investi-gate—even as America’s justice depart-ment sought to recover what it regarded asill-gotten gains. But the new administra-tion, which campaigned against kleptok-rasi, is bent on prosecutions. Malaysianregulators are working with American in-vestigators to locate and recover assets.

Mr Najib, who faces more than 30 char-ges, including of money-laundering andabuse of power, will go on trial next year. Inthe weeks after he lost power, boxes stuffed

with designer handbags, jewellery andcash were recovered from his residences.The publisher of the Edge, a newspaperwhich gave 1mdb heavy coverage, was ar-rested under Mr Najib. He has now beenknighted. No one in Malaysia will workwith Goldman again for a “long, long time”,says a prominent official.

Mr Low has vanished. He is thought tobe in China, though Chinese officials denyit. If he is, he may be hard to get back, sinceChinese state firms may have been used tolaunder money from 1mdb. But there isspeculation that Chinese authorities mayhand him over if Malaysia agrees to honourbig contracts that Mr Najib signed withChinese companies, some of which thenew government has already suspended.Mr Low could turn out to be more valuableas a fugitive than he was as a financier. 7

N E W YO R K A N D S I N G A P O R E

Criminal charges for Goldmanemployees and a Malaysian financier

1MDB

Start casting themovie

The Economist November 10th 2018 Finance & economics 75

“Isee patients every day who are goingto have babies because they work at

Facebook,” says Peter Klatsky of Spring Fer-tility clinic in Silicon Valley. Tech giantsnow include egg-freezing and in vitro fertil-isation in their employees’ health cover-age. But even as high-earning Americanshave the cost of making a baby covered bytheir companies, many low earners cannotget paid leave to look after theirs.

Since the end of the first world war,American workers have seen a steady risein benefits. According to the Bureau of Eco-nomic Analysis, “supplements” to wages,which include most of today’s benefits butexclude performance bonuses, rose from1.4% of total compensation in 1917 to 17.5%in 2000. Using a broader measure that in-cludes performance bonuses as well aspaid leave, overtime, health insurance andcontributions to retirement plans, thatshare has risen further since: from 27% ofcompensation in 2000 to 32% now.

When growth in wages slowed after thefinancial crisis, so did growth in benefits.Another trend also became apparent: awidening gap between rich and poor.Workers at the tenth percentile for wagessaw benefits fall by around 2% in real termsbetween 2009 and 2018. Those at the 90thpercentile saw a rise of 17% (see chart).

Wage growth has picked up recently asthe labour market has tightened. Figuresreleased on November 2nd showed that250,000 jobs were added across Americaduring October, and that average wagesgrew at an annual rate of 3.1%, the fastestsince the financial crisis. By the end of thesummer, there were over a million moreunfilled positions than jobless Americans.

But growth in benefits for lower earnershas remained sluggish. One reason is thatfew get employer-provided health insur-ance, which has accounted for about a thirdof the increasing cost of employers’ bene-fits since 2000. Just one in four of those inthe bottom 25% by earnings are covered,compared with three in four in the top 25%.Those working in the gig economy lose outon conventional benefits such as pensioncontributions. Meanwhile, at the top end ofthe labour market, bonuses are increasing-ly being used to retain the most prizedworkers. Aon Hewitt, a human-resourcesconsultancy, finds that over four decadesbonuses have grown to a record high,reaching 12.8% of payroll in 2014.

The gap is likely to be wider still when

intangible benefits are included. The shareof Fortune 1,000 companies with shorterhours on “summer Fridays” has doubled, to42%, since 2015. Salesforce, a softwaregiant, gives employees several paid days offper year for volunteering, and $1,000 to do-nate to a cause of their choice. Since suchperks are more common at tech firms andin offices, low-paid workers often miss out.Unionised workers, who have more lever-age with employers, choose to receive a no-tably larger share of their compensation asbenefits than non-unionised ones. In asurvey of American workers by fractl, acontent-marketing firm, 88% said theywould sacrifice a higher wage for betterhealth insurance and more flexible hours.

The hope for low earners lies in the factthat they are often the last to gain from ex-pansions. As the labour market has tight-ened, their wage growth has acceleratedsharply. They may soon start to feel thebenefit beyond their pay cheques, too.7

The benefits gap between high and lowearners is widening

Non-wage compensation in America

Time to perk upFringe on top

Source: Bureau ofLabour Statistics

*10th percentile†90th percentile

United States, real earningsMarch 2009-March 2018, % change

-5 0 5 10 15 20

Low earners*

Median

High earners†

Wages Benefits

In 2016 ayo adewunmi, a Nigerian-bornagricultural trader living in London,

bought a five-hectare farm in his home-land. It has produced little since. “I am notin the country, so I have to rely on third par-ties. It’s just not good enough,” he says.

Mr Adewunmi has since discovered an-other, potentially more satisfactory way tomake such investments: through Farm-Crowdy, a crowdfunding platform thatlends to Nigerian farms and provides tech-nical assistance to their owners. The two-year-old startup, which is considering ex-panding into Ghana, places high hopes inthe African diaspora as a source of funds.

The case for such platforms goes be-yond agriculture. Global remittances are

expected to soar from $468bn in 2010 to$667bn in 2019. They are among the top twoforeign-currency sources in several coun-tries, including Kenya and the Philippines.Yet hardly any of the money is invested.

In part, this is because recipients usethree-quarters of the money for basicssuch as food and housing. But it is also be-cause emigrants who want to invest backhome have few options. New investmentchannels could attract lots of extra cash—about $73bn a year in Commonwealthcountries alone, according to research bythe 53-country grouping.

Crowdfunding platforms would enableinvestors to put modest sums directly intosmaller businesses in developing coun-tries, which are often cash-starved. Yet ofthe emerging world’s 85 debt- and equity-crowdfunding ventures, only a handfulraise money abroad. Several platforms setup in rich countries over the past decade toinvest in developing countries, includingEmerging Crowd, Homestrings and EnableImpact, quickly folded.

A big problem is that few developingcountries have rules about crowdfunding.Many have allowed activity so far chieflybecause the industry is so small, says An-ton Root of Allied Crowds, a consultancy.Cross-border transfers using such plat-forms easily fall foul of rich countries’rules intended to stop money-launderingand the financing of terrorism.

Some developing countries have real-ised that they need to act. Thailand, Malay-sia, Singapore and Indonesia have all re-cently passed regulations on equitycrowdfunding or peer-to-peer lending. Butfrom a cross-border perspective, Africaseems most inventive, owing to active en-trepreneurs and Western help.

Last month the British government ap-proved a grant of £230,000 ($300,000) tothe African Crowdfunding Association tohelp it craft model accreditation and inves-tor-protection rules. Elizabeth Howard ofLelapaFund, a platform focused on east Af-rica, is part of an effort to see such rulesadopted across the continent. That wouldhelp reassure sending countries that trans-fers do not end up in the wrong hands, shesays. She hopes to enlist the support of theCentral Bank of West African States, whichoversees eight Francophone countries, at agathering of crowdfunders and regulatorssponsored by the French government inDakar, in Senegal, this month.

Thameur Hemdane of Afrikwity, a plat-form targeting Francophone Africa, saysthe industry will also study whether pros-pective laws could be expanded to the Cen-tral African Economic and Monetary Com-munity, a grouping of six countries.Harmonised rules will not guaranteecrowdfunders’ success, but would be a use-ful step towards raising the amount of dias-pora capital that is put to productive use. 7

Investment platforms are vying tocapture a share of global remittances

Crowdfunding development

It’s coming home


The fate of the euro was always going to depend on Italy. Withannual gdp of more than €1.6trn ($1.9trn), about 15% of euro-

area output and debt of nearly €2.3trn, it poses a challenge to thesingle currency that Europe seems unable to manage but cannotavoid. Matters are now coming to a head, as Italy’s new coalitiongovernment instigates a showdown over the European Union’s fis-cal rules. The disagreement might well become disastrous. But it isalso an opportunity for the euro zone to begin building a better,more durable approach to fiscal policy.

Trouble began earlier this year when the populist Five Starmovement, led by Luigi Di Maio, formed a government with theright-wing Northern League, led by Matteo Salvini. Both promisedbudget goodies: Mr Salvini a hefty tax cut and Mr Di Maio a basicminimum income. Such largesse may test the deficit limit of 3%set by the eu’s stability and growth pact. And it seems certain tobreak other fiscal rules set by the bloc: the government’s initialbudget plan is forecast to raise borrowing to 2.4% of gdp in 2019,above the 0.8% target to which Italy previously committed itselfand enough to reverse recent, modest declines in its debt burden.

The eu did not take the news well. On November 5th othercountries’ finance ministers warned that failure to revise the bud-get would lead to an “excessive deficit procedure”, and possiblesanctions. But Italians are unbowed. Mr Di Maio, now deputyprime minister, argued in comments to the Financial Times that It-aly’s fiscal expansion will prove so successful that other Europeanleaders will clamour to follow, citing, somewhat dubiously, fastergrowth in America after a budget-busting Republican tax cut.

Both sides have their points. Italians are frustrated. Real in-comes in Italy have fallen since joining the euro area; inequalityand poverty have risen. Economic growth briefly rose to almost 2%in mid-2017 but has since slipped back to close to zero. At 10.1%, theunemployment rate is well above the pre-crisis low of 5.8%. Eco-nomic weakness is re-emerging even as the European CentralBank reduces its stimulative asset purchases and prepares foreventual interest-rate rises. Recent indicators of service-sectorand manufacturing activity suggest that the economy is at risk offalling back into contraction. A return to recession would provedisastrous for Italy’s politics and its long-run budget position. Anda bit more spending now would probably not spark a bond-marketpanic, since the government’s debt has an average maturity ofnearly seven years and most is held domestically. A little forbear-ance on the part of the eu might therefore enable a dangerous po-

litical moment to be defused at little economic cost.Yet it is hard to fault the eu for its wariness. Italy’s slow growth

reflects serious structural problems. The European Commissionestimates that the country’s natural unemployment rate has risenfrom about 8% in 2007 to 10% now, suggesting that boosting em-ployment is a matter more of reform than stimulus. The oecd esti-mates that Italy’s output gap, the shortfall between an economy’sactual and potential output, will have closed by next year. Potentialoutput—ie, what an economy can sustain without inflation accel-erating—is easy to underestimate. But some variables suggest thatlabour-market slack is disappearing. For example, after a long per-iod of decline year-on-year wage growth roughly doubled over thesummer, to 2%. Nor have Italians been deeply mired in austerity inrecent years. Italy’s structural budget deficit has nearly doubledsince 2015. Its pensions remain among the euro area’s most gener-ous, a perversity given the disproportionate economic pain borneby young Italians over the past decade.

Tight budget rules were, moreover, the price of the extraordi-nary measures that saw the euro area through its crisis earlier thisdecade. A bail-out programme for Italy could well prove fatal to thecurrency bloc; a showdown might be worth provoking to keep Ita-ly’s debt manageable and the euro area viable. Each side has its rea-sons for fighting all the way.

Ciao timeThere is a path through this impasse. The euro zone shares a mone-tary policy but lacks a correspondingly coherent fiscal approach.The Italian dispute offers a timely opportunity to address that.Across the euro area as a whole, fiscal policy is arguably too tight.The ratio of debt to gdp is a relatively modest 86.3% and fallingfast, by three percentage points in the past year alone. In countrieswith big budget surpluses, such as Germany and the Netherlands,higher spending on growth-boosting investments would slow theshrinking of debt burdens, but not stop it altogether. Some of theresulting fiscal boost would spill over into Italy through increasedtourism and consumption of its exports, boosting demand with-out straining the Italian public purse. In exchange, the eu couldask Italy to moderate its fiscal plans.

Though it would be anathema to northern Europeans, a furthersweetener, in the form of limited debt mutualisation, should alsobe considered. Italy’s debt is an old problem. It reached 100% ofgdp almost three decades ago; but the country has run a primarysurplus every year for the past quarter-century, except for the twoyears immediately after the financial crisis. Taking a hard line withItaly today does nothing to discipline the governments of the 1980sbut adds to the bitterness felt by young people, who have faredworst under the euro and must accept towering budget surplusesin perpetuity or face ejection from the single currency. A plan toswap some national bonds for Eurobonds backed by all euro-areagovernments might be pie-in-the-sky, politically. Yet that policywould acknowledge that euro-area countries share a fiscal fate, re-lieve young Italians of doing penance for their forebears’ sins andmake fiscal probity for Italy a less Sisyphean task—and, perhaps,more politically tolerable.

European integration is meant to build a whole greater than thesum of its parts. The euro area could wield its combined fiscal ca-pacity to deal with the Italian threat while building a sense ofshared fiscal responsibility. Instead, Europe and Italy are headingtowards confrontation. The euro zone’s greatest weakness is notits spending, but its politics. 7

Rome aloneFree exchange

An Italian budget showdown underlines the need for the euro area to reform

Tragedia all’italiana

Source: Haver Analytics

GDPQ1 2007=100

General government debt% of GDP

2007 10 15 18

90

95

100

105

110

115

Euro area

France

Germany

Italy

Spain

2007 10 15 18

0

30

60

90

120

150

Euro area

France

Germany

Italy

Spain

77Property

78 Property


1

Diva amon, a researcher at the NaturalHistory Museum in London, spotted

her first whale skull in 2013, during an ex-pedition to the Clarion Clipperton Zone(ccz) in the tropical Pacific. It sat on beigesilt, some 4,000 metres beneath the sea’ssurface, and was entirely covered in a blackcoating. Her find was twice notable. First,the skull’s coating meant it was millions ofyears old, for it was made of the same slow-ly accumulating metallic oxides as the po-tato-like ore nodules that are drawing min-ers to the area. Second, the discoveryhighlighted how little is known about thedeep ocean. Dr Amon’s whale skull, andothers like it, raise questions about thetrade-offs between the economic gains ofmining the seabed and that mining’s envi-ronmental consequences.

Those involved in deep-sea mininghope it will turn into a multi-billion dollarindustry. Seabed nodules are dominated bycompounds of iron (which is common-place) and manganese (which is rarer, butnot in short supply from mines on dryland). However, the nodules also containcopper, nickel and cobalt, and sometimesother metals such as molybdenum and va-nadium. These are in sufficient demandthat visiting the bottom of the ocean to ac-quire them looks a worthwhile enterprise.

Moreover, these metals seldom co-occur interrestrial mines. So, as Kris Van Nijen,who runs deep-sea mining operations atGlobal Sea Mineral Resources (gsr), a com-pany interested in exploiting the nodules,observes: “For the same amount of effort,you get the same metals as two or threemines on land.”

Hades’ hallThough their location several kilometresbeneath the ocean surface makes the nod-ules hard to get at in one sense, in anotherthey are easily accessible, because they sitinvitingly on the seabed, almost begging tobe collected. Most are found on parts of theocean floor like the ccz, outside the 200-

nautical-mile exclusive economic zones oflittoral countries. They thus fall under thepurview of the International Seabed Au-thority (isa), which has issued 17 explora-tion licences for such resources. All but oneof these licences pertain to the ccz, an areaof about 6m square kilometres east-south-east of Hawaii.

The licensees include Belgium, Britain,China, France, Germany, India, Japan, Rus-sia, Singapore and South Korea, as well asseveral small Pacific island states. Ameri-ca, which is not party to the United NationsConvention on the Law of the Sea that es-tablished the isa, is not involved directly,but at least one American firm, LockheedMartin, has an interest in the matterthrough a British subsidiary, uk Seabed Re-sources. And people are getting busy. Sur-veying expeditions have already visited theconcessions. On land, the required miningmachines are being built and tested. Whatworries biologists is that if all this busy-ness does lead to mining, it will wreck hab-itats before they can be properly cata-logued, let alone understood.

The first task, therefore, is to establishwhat exactly lives down there. At firstglance, the ccz’s abyssal plain does notlook of much interest. It is a vast expanse ofmud, albeit littered with nodules. But,though life here may not be abundant, it isdiverse. Craig Smith, an oceanographer atthe University of Hawaii, Manoa, whostudies the ocean’s abyssal plain, says thatthe ccz contains a greater variety of speciesthan the deep seas off the coasts of Califor-nia and Hawaii.

Some of the ccz’s creatures stretch theimagination. There is the bizarre, gelati-nous, yellow “gummy squirrel” (pictured),

Conservation and deep-ocean mining

The seas are lovely, dark and deep

Soon, human machinery will open Davy Jones’s locker and begin extracting themineral riches therein. What will that mean for existing denizens of the abyss?

MEXICOHawaii

GalapagosIslands PERU

UNITED STATES

PeruBasin

Clarion Clipperton Zone

P A C I F I C O C E A N

Britishconcession

2,000 km

Exploration areasAreas of particularenvironmental interest

Source: International Seabed Authority

Science & technology

80 Underwater mining on land

81 Spiders and streetlights

82 How to join art’s elite


80 Science & technology The Economist November 10th 2018

2

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a 50cm-long sea cucumber with a tall, widetail that may operate like a sail. There aregalloping sea urchins that can scurryacross the sea floor on long spines, atspeeds of several centimetres a second.There are giant red shrimps, measuring upto 40cm long. And there are “Dumbo” octo-puses, which have earlike fins above theireyes, giving them an eerie resemblance to awell-known cartoon elephant.

Every expedition brings up species thatare new to science, many of them belong-ing to biological families that are also nov-el. At a conference in Monterey, California,in September, Dr Smith presented resultsof a biodiversity survey carried out in theBritish concession, which sits at the east-ern end of the ccz. Of 154 species of bristleworms the surveyors found, 70% were pre-viously unknown. Dr Smith says the con-cession may be part of a biodiversity hot-spot, one which would not be representedin the nine protected areas of environmen-tal interest that have been set aside in theccz. He therefore argues for the establish-ment of a tenth such area, on the marginsof the concession.

A whale of a taleThe ocean’s largest inhabitants may also bevisitors to the ccz. This summer LeighMarsh of Britain’s National OceanographyCentre, in Southampton, described morethan 3,000 large depressions in the mudthere. These formed a series of curvedtracks. Similar tracks elsewhere have beenlinked to whales scraping themselvesagainst the seafloor. Dr Marsh and her col-leagues suggest that deep-diving whalesmay be foraging on the ccz seafloor, usingit as a giant loofah to scrape parasites fromtheir skins or even ingesting the nodules asballast. If true, this would significantly ex-tend the depth to which whales are knownto dive.

The only direct evidence of whales inthe ccz, though, comes in fossil form. InMonterey, Dr Amon set the audience buzz-ing when she presented preliminary datasuggesting that the region contains largedeposits of fossil whale bones. Such fossilswere first noted by the Challenger expedi-tion, a world-spanning investigation of thedeep ocean conducted in the 1870s by a Brit-ish naval research vessel. Dr Amon’s findback in 2013 prompted her and her col-leagues to go through tens of thousands ofimages gathered by various explorationsubmarines. These recorded 548 cetaceanfossils from a range of species. Among theoldest was Choneziphius, an extinct animalthat lived more than 10m years ago.

Although this work was a study of pho-tographs, rather than of the remains di-rectly, which could cast doubt over some ofthe identifications, the metallic-oxidecoating of many of the bones gives a senseof how old they are. Because of the density

of fossils, Dr Amon says the ccz may be apreviously undiscovered, and rare, subma-rine fossil bed.

Why whale fossils would accumulate inthis particular spot is unknown. Possibly,those elsewhere are simply buried. The ccz

sits beneath the ocean’s clearest waters, soits sediments accumulate extremely slow-ly. But it may be that some as-yet-unknownphysical process is keeping the fossils and

the (equally old) nodules at the surface ofthe silt. Indeed, why the nodules are ex-posed is one of the great mysteries of theregion. Regardless, Dr Smith, Dr Amon andothers hope the bones’ presence will be tak-en into account as the isa drafts the rulesand regulations for exploitation of the ccz.

Whale fossils, sea cucumbers andshrimps are just the stuff that is visible tothe naked eye. Adrian Glover, one of Dr

The idea of underwater mining is notrestricted to the ocean floor (see

previous piece). High water tables sub-merge many terrestrial deposits, too. Atminimum, this means doing a lot ofpumping to make them workable. Some-times, it makes those deposits altogetherinaccessible. Flooding also adds to thecost of re-opening closed mines. Theteam behind vamos hopes to do some-thing about this.

The Viable Alternative Mine Operat-ing System, to give its full name, is beingdeveloped by a consortium of 16 Euro-pean firms and research institutes. It iscurrently on trial at Silvermines, Ire-land—which, as its name suggests, wasonce home to workings for silver andother metals. They are now closed andflooded. But one of them, a source ofbaryte, the principal ore of barium, hasbeen repurposed as vamos’s test bed.

The core of vamos is a pair of remote-ly controlled vehicles. These are floatedon-board a special platform into placeover the site to be mined, and thendropped through the water (to a depth of57 metres in this case) by a crane.

The larger vehicle is a 25-tonnetracked robot (pictured) with a powerfulrock-cutting head at one end and, at theother, a hydraulic gantry that can carrytools such as drills and grabs. Crushedore-bearing rock is pumped to the sur-face through a flexible pipe, and a cablecarries power and data between the robotand an onshore control centre.

The smaller vehicle is called eva. Ithas neutral buoyancy and swims aroundthe mining site. It was designed at theInstitute for Systems and ComputerEngineering, Technology and Science, inPortugal. eva first makes, and thencontinually updates, a 3d map of thearea—transmitting this cartography tothe main vehicle, to assist navigation.

Both vehicles use sonar, cameras andlaser rangefinders to work out wherethey are. They send these data to a pilotin the control centre, who sees themdisplayed on a multi-screen console ofthe sort gamers can only fantasise about.A future version may also be able toanalyse the ore spectroscopically as it ismined, enabling rich seams to be pur-sued and poor ones abandoned.

Waste not, want notUnderwater mining on land

S I LVE R M I N E S

A new robot system will reopen abandoned, flooded mineral workings

The Economist November 10th 2018 Science & technology 81

2

1

Amon’s colleagues at the Natural HistoryMuseum, and his collaborators spentweeks peering down microscopes, inspect-ing every nook and cranny of the surfacesof some of the nodules themselves. Theydiscovered a miniature ecosystem com-posed of things that look, at first sight, likeflecks of colour—but are, in fact, tiny cor-als, sponges, fan-like worms and bryozo-ans, all just millimetres tall. In total, theteam logged 77 species of such creatures,probably an underestimate.

Out of sight. Out of mind?Inevitably, much of this life will be dam-aged by nodule mining. The impacts arelikely be long-lasting. Deep-sea miningtechnology is still in development, but thegeneral idea is that submersible craftequipped with giant vacuum cleaners willsuck nodules from the seafloor. Those nod-ules will be carried up several kilometres ofpipes back to the operations’ mother ships,to be washed and sent on their way.

The size and power of the submersiblesmeans that they will leave large tracks intheir wake. These are likely to persist for along time. Evidence for this comes from va-rious decades-old disturbance experi-ments. In 2015 an exploratory expeditionby ifremer, a French government agencyresponsible for oceanography, noted thateven mobile animals like sea urchins were70% less abundant within 37-year-old ex-perimental tracks than outside them.

The largest disturbance experiment sofar was carried out in 1989 in the Peru Basin,a nodule field to the south of the GalapagosIslands. An eight-metre-wide metal framefitted with ploughs and harrows wasdragged back and forth repeatedly acrossthe seabed, scouring it and wafting a plumeof sediment into the water. In 2015 a re-search vessel returned to the site. Downwent the robots, samplers and submarineswith their scanners and cameras. The bigquestion was, 26 years after the event,would the sea floor have recovered? The an-swer was a resounding “no”. The robotsbrought back images of plough tracks thatlooked fresh, and of wildlife that had notrecovered from the decades-old intrusion.

Another concern, in the wake of thePeru Basin experiment, is sediment. Thiswill be both stirred up during collection, asthe robots crawl across the sea floor andhoover it, and washed off the nodules at thesurface when they are cleaned. Ideally, asecond pipe would deliver those washingsdirectly back to the seabed, in order to keepdisruption in the water column to a mini-mum. In practice, dumping silt overboardwill be much easier. Decades of failure topolice overfishing demonstrate how hard itis to regulate activity on the high seas.

If silt were dumped in this way it couldbe disastrous. A steady stream of the stuffraining down from the surface would affect

everything along the way, especially filter-feeding animals such as sponges and krill,which make their livings by extractingsmall particles of food floating in the water.The effect both in the water column and onthe sea floor might not be so great in otherparts of the oceans, say biologists, but lifein the crystalline ccz is wholly unadaptedto murky waters.

All of this needs to be balanced againstthe impacts of mining the equivalentamounts of minerals on land, however.The ccz covers about 2% of the deep ocean.A 20-year operation within it would affectof the order of 10,000 square kilometres—about a six-hundredth of its area—accord-ing to Mr Van Nijen. And, unlike miningdevelopments in virgin areas of dry land,which tend to bring other forms of devel-opment in their wake by creating transportlinks that encourage human settlement, noone is going to follow the nodule-hooversand actually live on the abyssal plain.

In the end, the only way to measure howmining would change the bottom of theocean may be to conduct small-scale pilotoperations. The first will take place next

April, when gsr will lower Patania II, anenormous green tractor, to the bed of theccz. Patania II is a prototype nodule collec-tor. It will clear areas roughly 300 by 100metres, leaving them nodule-free, so thatfuture expeditions can return and study re-colonisation rates. An array of sensors sus-pended in the nearby water will monitorthe resultant silt plume, which the com-pany’s models suggest could travel up to5km—not the hundreds of kilometres thatsome have suggested.

To scrutinise this trial independently,jpi Oceans, an intergovernmental researchbody, has paid for the Sonne, a German re-search vessel, to sail alongside gsr’s. As MrVan Nijen puts it, “We need to validate ourequipment, but from an environmentalperspective, the world’s first mining test atdepth is a unique opportunity for scien-tists to study the impacts. If we don’t dothis in a transparent manner, it will go no-where.” That sounds like a promising start.But however careful the miners are, life forthe inhabitants of the ccz is about to get alot less peaceful than it has been for mil-lions of years.7

Most spiders avoid light because, be-sides being predators, they are also

potential prey. But there is a set of circum-stances in which living beside a powerfullight is an advantage. This is when you are aweb-weaving spider. Moths and other in-sects are attracted to sources of illumina-tion such as streetlights. Those are foundpredominantly in cities. It would thereforemake sense if urban web-spinning spiders

had lost their photophobia, so that theycould more easily set up shop beside suchlights. And an experiment by TomerCzaczkes of the University of Regensburg,in Germany, suggests that for at least onespecies this has happened.

Dr Czaczkes’s interest in whether citylife shapes spiders’ behaviour began whenhe saw lots of fat, happy arachnids buildingwebs near Regensburg’s streetlamps. Delv-ing into the academic literature, he discov-ered that urban moth populations havebeen shown to be less attracted to lightsthan are their rural relatives. Presumably,this is because, besides any webs involved,the whole business of flying round andround such lights is a fitness-reducingwaste of time and energy. He reasoned thata similar but reverse sort of logic—result-ing in their being more attracted to lights,or at least less afraid of them—should ap-ply to town spiders versus country ones.And, as he reports this week in the Scienceof Nature, it does.

He and his colleagues collected eggsacks laid by their chosen animal, Steatodatriangulosa (the triangulate cobweb spi-der—selected because it is commonthroughout Europe and thrives in both ur-

Town-dwelling spiders prefer their parlours illuminated

Evolution

Underneath the lamplight

Lover of the light

82 Science & technology The Economist November 10th 2018

2 ban and rural environments), from twosites in the Italian countryside, and alsofrom Milan, Munich and Nice. The result-ing 783 spiderlings were placed individual-ly into boxes that had a dividing boardthrough the centre. One side of each boxwas lit by a lamp that shed no heat. The oth-er side was left dark. Two tiny gaps in thedividing boards permitted the spiderlingseasy access to both sides of the box. Spider-lings were placed at random in the light or

the dark at the start of their time there, andthen monitored to find out where theybuilt their first web.

Almost two-thirds of rural spiderlingsbuilt their webs in the dark part of the box,but only half of their urban cousins did so.That suggests rural spiders are indeed pho-tophobic while urban spiders, though notactually attracted to the light, have ceasedto be afraid of it—not so much Steatodatriangulosa, then, as Steatoda luminosa.7

Well begun, half done. That proverb,ascribed to Aristotle, seems an apt

description of the art market—at least it isif a study of artistic careers, published thisweek in Science, is to be believed. In thisstudy Albert-László Barabási, a physicist atNortheastern University in Boston, andSamuel Fraiberger, a data scientist at theHarvard Institute for Quantitative SocialSciences, deconstruct almost half a millionartistic careers. They conclude that for art-ists, professional success seems often todepend on an early endorsement by theright set of galleries.

Dr Barabási and Dr Fraiberger used datafrom Magnus, a firm that collects informa-tion about the art market, such as auctionsales and exhibitions, to build a picture ofhow works of art flow around the world’sthousands of galleries and museums. Theresearchers’ thinking was that the moreplaces an artwork has been exhibited, themore demand there is for it—and the moresuccessful that artwork (and its creator)might reasonably be thought to be. This, inturn, by a process of feedback, permits amap to be made showing which are themost prestigious and important art institu-tions in the world.

The feedback mechanism Dr Barabásiand Dr Fraiberger used was inspired byPageRank, the algorithm at the heart ofGoogle’s search engine. PageRank deter-mines a web page’s importance not by look-ing at the contents of the page itself butrather by counting how many other pageson the web link to it, and how importantthose other pages are themselves deemed,by the same iterative process, to be. Dr Ba-rabási and Dr Fraiberger arrived similarlyat a prestige rating for each gallery or muse-um, by counting how many other muse-ums and galleries sent artworks to it, andthen giving due account to how prestigiousthose places were themselves.

The algorithm showed, to nobody’s sur-prise, that the art world’s biggest nodes area group of European and North Americanpowerhouses that include the Museum ofModern Art, the Gagosian Gallery and theGuggenheim in New York, the Tate Galleryin London, and the Pompidou Centre inParis. These places had the highest prestigeratings, and most of the world’s most suc-cessful art had, at some point, ended up be-ing exhibited in one or more of them.

Just below the top tier, and less well-known outside the art world, were a set ofinstitutions that also acted as importantpaths to artistic success—being those thatmost frequently feed works into the toptier. They include the Leo Castelli and PaulaCooper galleries in New York, GalerieKrinzinger in Vienna, Galerie ThaddaeusRopac in Paris and London, and GalerieMax Hetzler in Berlin.

Their mapping exercise also permittedDr Barabási and Dr Fraiberger to follow in-dividual artists’ careers. They were able tocreate an early-success score for each artistby averaging the prestige ratings of the mu-seums or galleries which showed that art-ist’s first five exhibitions. Remarkably, thissimple early-career score gave the two re-searchers all they needed to predict an art-ist’s future success.

Elite artists—those whose score at thestart of their careers was in the top 20%—had only a 0.2% chance of ending their ca-reers in the bottom 20%. Almost 60%maintained their elite status throughout.

At the other end of the scale it seems ex-tremely hard to join the elite if you did notbegin there. Of those artists who started byexhibiting in the bottom 20% of institu-tions, only 10% eventually made it into theelite group—and around 16% stayed at thebottom. These figures actually under-rep-resent the scale of the struggle that suchartists face, since most in this initial groupdid not stick it out for long. Of those whostarted at the bottom of the success scale,only 14% remained in the industry tenyears after their fifth exhibit. For the elitegroup that figure was almost three timeshigher, 39%.

The financial consequence of all this isthat elite artists’ work sells 4.7 times moreoften at auctions than that of those at thebottom end, with maximum prices 5.2times higher. Which could, of course, beevidence of a meritocratic system workingperfectly. After all, for a young artist to beatthe competition for wall space in a top gal-lery suggests he or she is producing work ofgreat quality. Cynics might be forgiven,however, for wondering whether talent isthe only factor involved in getting thosecrucial early shows. A topic, perhaps, forfurther research.7

To get to the top of the art world, it helps to start there in the first place

Success in art

Only connect


1

Ever since the Enlightenment, Chris-tianity has been exposed to rigorous ex-

amination that has contributed to the de-cline of organised faith. Though Christianteaching is at the heart of the Western aca-demic tradition, atheism has long been thenew gospel for many intellectuals. Someauthors have tried to subject it to the samescrutiny that religion has received. But, aspolytheistic Romans found in the fourthcentury, challenging rampant orthodoxiescan be tough.

Alister McGrath’s “The Twilight of Athe-ism” and Nick Spencer’s “Atheists: The Ori-gin of the Species” are excellent critiques;but both writers are Christians, so theyhave been relatively easy for unbelievers todismiss. It has taken a prophet seated firm-ly in an atheist pew to publicise the creed’scontradictions more widely. That prophetis John Gray, a retired professor of philoso-phy at the London School of Economics. Inseveral books published over 15 years, MrGray has reasserted his belief that there isno God, while also attacking the liberal hu-manism that has emerged in God’s stead—which, he thinks, is as flaky as the religionit has replaced.

At the centre of his argument, in bookssuch as “Straw Dogs” and “The Silence ofAnimals”, is the assertion that humans are

no different from other creatures. Chris-tianity’s “cardinal error” is to say that theyare. Yet dispensing with the teachings ofmonotheism leaves no coherent concept ofhumanity, nor of human dignity. Mr Grayuses this observation as a launch-pad tocriticise “New Atheists” such as RichardDawkins, and to point out that most mod-ern atheists do not follow their reasoningto its logical conclusion. They may have re-jected monotheist beliefs, but they havenot shaken off a monotheistic way ofthinking, and “regurgitate some secularversion of Christian morality”. Mr Gray hasa much bleaker view of atheism’s implica-tions: “A truly naturalistic view of the worldleaves no room for secular hope.”

In “Seven Types of Atheism” Mr Grayneatly recapitulates his arguments, com-bining them with a whistle-stop tour ofmodern unbelief from the Marquis de Sadethrough to Friedrich Nietzsche and JosephConrad. He gives Christianity its due, con-ceding that not all enlightenment began atthe Enlightenment and pointing out theimperfections of that era’s heroes—the rac-

ism of Hume, Kant and Voltaire, for in-stance. Many of the saints of modern liber-alism were not as secular as they mightseem, he suggests. John Locke’s liberalismis indebted to Christianity at every point;John Stuart Mill’s insistence that moralsdid not depend on religion “invoked anidea of morality that was borrowed fromChristianity”. The new orthodoxy Millfounded was deeply rooted in Christianity,Mr Gray says: “the belief in improvementthat is the unthinking faith of people whothink they have no religion.”

He is as exasperated with knee-jerk un-belief as he is with unthinking devotion,and has no time for several of the types ofatheism he enumerates. All of them look toreplace God with some form of secular hu-manism, science or politics. Their highpriests tend to be just as blinkered as theecclesiastics they abjure, Mr Gray com-plains: “While atheists may call them-selves freethinkers, for many today athe-ism is a closed system of thought.” Hedecries a rising intolerance in academia,where free expression is jeopardised by “afrenzy of righteousness” that recalls theiconoclasm of Christianity when it came topower in Rome. “If monotheism gave birthto liberal values,” he says of today’s illiberalliberalism, “a militant secular version ofthe faith may usher in their end.”

Instead, he is drawn to the more bracingdenominations of the new church, such asthose espoused by Spinoza and Schopen-hauer, “atheisms that are happy to live witha godless world or an unnameable God”.These varieties reject the idea of a creatorand dispense with all pieties regarding hu-man nature. They have truly emerged fromthe shadow of Christianity: “Not looking

Atheism

The valley of the shadow

A philosopher subjects the atheist creed to the sort of scrutiny normally reservedfor religion

Seven Types of Atheism. By John Gray.Farrar, Straus and Giroux; 176 pages; $25.Allen Lane; £17.99

Books & arts

84 The genetic revolution, continued

85 Barbara Kingsolver’s new novel

85 Chopin’s life and times

86 Art, gender and conflict in Mali


84 Books & arts The Economist November 10th 2018

2

1

for cosmic meaning, they were contentwith the world as they found it.”

Mr Gray’s provocative, frank approachhas three main drawbacks. The first is thatthe God he says does not exist cannot be re-cognised as the Christian God. He suggeststhat it was the apostle Paul and Augustineof Hippo who invented Christianity, turn-ing a local Jewish movement into a univer-sal one that Jesus never intended, and turn-ing Jesus himself from a prophet into “Godon earth”. Naturally this disregards the Bi-ble’s account of Christ’s teaching about hisidentity and purpose. But it also contra-dicts recent scholarship that sees Paul lessas a Roman who created a new faith than asa Jew who thought he was witnessing thelong-expected fulfilment of Judaism. It isironic that, having spent his career de-nouncing outmoded orthodoxies, Mr Grayrests his critique of Christianity on outdat-ed perceptions.

The forsakenThe second weakness lies in his view thatprogress is an illusion: “you will find ithard”, he contends, “to detect any continu-ing strand of improvement” in humansociety. You don’t have to be Pangloss (orSteven Pinker) to demur; a glance at thehistory of medicine is ample evidence tothe contrary. But the biggest problem is thevoid to which his skilful demolitions lead.What ought to be the basis for Western civi-lisation after the decline of religious faith?Mr Gray never proposes nihilism, hedo-nism or suicide, and seems (like Mr Daw-kins) to believe that peace, prosperity, hon-esty and common decency are good things.

He ended “Straw Dogs” by asking, “Canwe not think of the aim of life as being sim-ply to see?” This might sound profoundover port at high table, but may be less per-suasive to people mired in abject poverty. Itis not a premise on which to build a society.His new book is similarly lacking in con-structive proposals.

Yet its reflections on the future are in-sightful. Looking beyond the squabblesover science and God, Mr Gray sees thechallenges implicit in abandoning themetaphysical and moral order that Chris-tianity once provided. Like Nietzsche, hesays the West cannot ditch the faith and ex-pect to retain congenial Christian ethics. Itwill be difficult, he predicts, for modernliberalism to ground a universal moral lawon non-theistic foundations.

Relieved as they are by the weakening ofthe church’s oppressive aspects, many sec-ularists have missed the flipside of Chris-tianity’s decline. In the absence of a singlemoral code mandated by God, says Mr Gray,people must accept a spectrum of moral-ities, palatable or otherwise: “Anyone whowants their morality secured by somethingbeyond the fickle human world had betterjoin an old-fashioned religion.” 7

Hubris winds through the history ofgenetics like a double helix. “We used

to think our fate was in our stars,” JamesWatson, one of the scientists behind thediscovery of dna, declared in 1989. “Nowwe know, in large measure, our fate is inour genes.” The implications were clear.Unravelling the genetic code would bringan exquisite understanding of bodies andtheir afflictions but also of minds. After thecompletion of the human genome project,which Watson initially led, such hopes fad-ed. Individuals’ physical or mental charac-teristics, and their susceptibility to dis-eases, turned out to be extraordinarilycomplex. Some of the swagger went out ofgenetics. Now it is back.

In “Blueprint” Robert Plomin, a psy-chologist and geneticist, explains the ad-vances behind this resurgent optimism—and their consequences for the science ofhuman behaviour and psychiatric illness.He is well placed to do so: for more than 30years he has studied the interplay of genesand the environment and their effects onpersonality. But Mr Plomin’s enthusiasmfor his subject—he calls himself a “cheer-leader”—means the ramifications are notexplored even-handedly. “Blueprint” is ab-sorbing. For those with a disposition lesssunny than Mr Plomin’s, it is also alarming.

For much of the 20th century, psycholo-gy was dominated by the idea that humannature is a blank slate embellished by up-bringing and environment. “Blueprint” be-gins by describing how Mr Plomin and oth-ers have demonstrated that, on the

contrary, behavioural differences arestrongly influenced by genetics. Studies ofadopted children indicate that in disposi-tion they more closely resemble their ge-netic parents than their adoptive ones.Even when they are reared apart, identicaltwins are more alike than the non-identi-cal kind (who are as genetically different asany brother or sister).

Such research shows that, on average,dna accounts for about half of the psycho-logical differences between people, withthe remainder due to environmental fac-tors; the actual proportion varies with thecharacteristic in question. More recentlyscientists have combed through human ge-nomes to identify thousands of geneticvariants associated with particular traits,from height and weight to educational at-tainment and neuroticism. Tests costingless than £50 ($65) can measure geneticpropensity to different outcomes—to beoverweight, or to go to university.

For those who imagine all that leavesenough wriggle room for benevolent par-ents or teachers to exert an influence, MrPlomin has bad news: these environmentalfactors are themselves substantially influ-enced by genes. For example, his workshows that genes account for about a thirdof the differences between the televisionviewing habits of children. Worse, the re-maining tranche of environmental influ-ence appears to be mostly attributable tounpredictable events rather than, say, be-ing brought up in a house full of books.

These findings, says Mr Plomin, implythat “parents don’t make much of a differ-ence in their children’s outcomes beyondthe genes they provide”; dna is a “fortuneteller” that “makes us who we are”. Envi-ronmental effects are “important”, but“there’s not much we can do about them”.

Mr Plomin insists that, armed withtheir genetic test scores, individuals cantake action to counter or augment their in-nate proclivities; but they are hardly likelyto succeed if their psychology is as delim-ited by genes as he suggests. An equallyplausible possibility is that these scoreswill be used to stigmatise genetic “have-nots” or to justify discrimination. This isthe high road to eugenics, about which MrPlomin is largely silent.

Instead he advocates the use of suchscores when choosing between candidatesfor a job. Yet a person with high scores fortraits associated with coding skills is notnecessarily a good programmer—theymerely have a higher likelihood of beingone. A candidate who had demonstratedtheir aptitude for the job would feel rightlymiffed to be passed over in favour of a ge-netically gifted incompetent. Likewise,though doctors may find it useful to knowthat a patient is genetically predisposed tobe obese, the best way to establish theirweight is to ask them to step on the scales.

The new genetic revolution

Destiny’s child

Blueprint: How DNA Makes Us Who WeAre. By Robert Plomin. The MIT Press; 280pages; $27.95. Allen Lane; £20

Nature not nurture

The Economist November 10th 2018 Books & arts 85

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Only a novelist, it might seem, couldconjure up a figure like Mary Treat. A

stalwart 19th-century scientist, shetramps the Pine Barrens of New Jersey insearch of wax myrtle, swamp pinks andVenus flytraps. Her husband has left herfor Victoria Woodhull, a suffragist whoran for president in 1872. Her intellectmakes her the valued correspondent ofCharles Darwin and his Harvard-basedchampion, Asa Gray.

Treat plays a central role in BarbaraKingsolver’s engrossing new novel “Un-sheltered”, but she is no more an in-vention than are Woodhull, Darwin andGray. She made her home in Vineland,New Jersey, a place that became a classicAmerican manufacturing town butoriginated in the Utopian vision of a mancalled Charles Landis. He envisioned anagrarian community of homeownerswhose lives would be untainted by theevils of alcohol. Half of “Unsheltered” isgiven over to Treat and her friendshipwith Thatcher Greenwood, a fictionalteacher struggling to spread Darwin’snew doctrine.

Their story alternates with that ofWilla Knox and her family, who wash upin Vineland in 2016. When the universityat which her husband taught went bank-rupt, he and Willa lost not only a salarybut their home. By lucky chance theyinherit a house in Vineland from Willa’saunt; unfortunately, the place is a wreck.And in the novel’s first chapter the joyousarrival of a grandchild turns to tragedywhen the baby’s mother commits sui-cide. The easeful middle age the coupleimagined for themselves is upended.Meanwhile an unnamed, blusteringcandidate seems alarmingly likely to winthe highest office in the land.

Ms Kingsolver knits these two narra-

tives together masterfully. The finalwords of each chapter become the titlefor the next, a pattern expressed in thelives of the characters too. A Vinelandhouse is crumbling in storylines nearly150 years apart; relationships in bothtime-frames are unsettled by change;in-laws prove awkward. The novelist’sstitching is never visible, only the beauti-ful cloth that results.

What 1871 and 2016 have in common isa mood of revolutionary change. Willabecomes fascinated by Treat, her era andhow frightening Darwin’s work seemedto many: “A great shift was dawning, withthe human masters’ place in the king-dom much reduced from its formerglory.” In the present, Willa and herfamily must learn to make new lives in aworld of warming seas and melting ice.“We can’t afford to stop doing the shitthat’s screwing up the weather, and can’tafford to pick up the pieces after we doour shit,” she reflects.

If that sounds gloomy, “Unsheltered”never is. We got through this once before,Ms Kingsolver’s echoes seem to say; we’llget through it again, somehow.

What goes aroundAmerican fiction

Unsheltered. By Barbara Kingsolver.Harper; 480 pages; $29.99. Faber & Faber;£15.99

The lineaments of Chopin’s short, dra-matic life are familiar to most classical-

music enthusiasts. Born in 1810 in Warsawto a middle-class family, he was a child pro-digy and became a noted pianist and com-poser of small-scale but exquisite Roman-tic pieces of music, such as ballades,études, impromptus, mazurkas, nocturnesand polonaises. He was mostly based inFrance, mingling with the cream of Pari-sian society and the arts and playing foraristocrats and royalty. The German poetHeinrich Heine reverentially called him“the Raphael of the piano”.

In 1838 he absconded to Majorca withthe feminist novelist George Sand, whoscandalised French society by wearingtrousers and smoking cigars, and subse-quently carried on a long and stormy affairwith her. Having suffered since adoles-cence from a wasting disease, probably tu-berculosis, he died tragically young, aged39. By then he was, as he remains, one ofPoland’s best-known sons. His music isstill played and enjoyed all over the world.

Since his life was almost a Romanticwork of art in itself, he has had no shortageof biographers, starting immediately afterhis death with his fellow composer andfriend of sorts, Franz Liszt, and continuingin a steady trickle ever since. So was there aneed for another one? Having previouslyproduced a magisterial three-volume bio-graphy of Liszt, Alan Walker has searchedfor new primary sources from Warsaw toWashington, shed new light on many as-pects of Chopin’s life and cleared away athicket of myths. He has much to say, too,about the political, military and social as-pects of the age, including two revolutions,various wars, epidemics and natural disas-ters; he vividly brings to life the delights ofParis salons and French country-house liv-ing, as well as the discomforts of 19th-cen-tury long-distance travel and the horrors ofthe era’s medicine.

How far studying a composer’s life elu-cidates the music is an old and vexed ques-tion. Mr Walker identifies two schools ofthought. One is that the music could nothave existed without the life, “with all itsjoys and sorrows”, so they are inextricablyentwined. The other is that art must alwaysbe assessed in “splendid isolation”.

In Chopin’s case, the issue seems moot,because the life and the music are quite un-

Lives of the composers

Piano forte

Fryderyk Chopin: A Life and Times. ByAlan Walker. Farrar, Straus and Giroux; 768pages; $40. Faber & Faber; £30

These are problems of emphasis ratherthan accuracy. But in a field as ethicallyfraught as genetics, even that can be trou-bling. For instance, as Mr Plomin notes, thesize of the genetic component of a particu-lar trait—its “heritability”—varies betweendifferent populations. The heritability ofeducational attainment in Norway has in-creased since the second world war as thecountry widened access to health care andschools, flattening out environmental ef-

fects. That trend seems, worryingly, to havereversed in America in the 21st century. Theirony is that the heritability of many traitsrises if states do more to provide for alltheir citizens equally.

You might conclude that without broadmeasures to tamp down inequalities of op-portunity, genes have fewer opportunitiesto shine. “Blueprint” instead touts the im-portance of dna in shaping the individual.Hubris indeed. 7

86 Books & arts The Economist November 10th 2018

2 related. At times when his experienceswere dark, he might write a brilliantlysunny piece, and vice versa. Chopin had notruck with programme music (the sort thattries to conjure up images or tell stories), inwhich other Romantic composers de-lighted. He laughed at some of his contem-poraries’ attempts to ascribe non-musicalmeanings to his pieces. Mr Walker’s bookcontains plenty of analysis of specificworks, but he is careful not to suggest anylink between music and events.

Scrupulous as it is, this monumentalbiography is deeply engaging and enjoy-able. Chopin mostly comes out of it well,and on closer examination seems a less ex-otic figure than his reputation suggests. Hewas a kindly man with a good sense of hu-mour. Despite being something of a loner,

he was able to maintain long and strongfriendships, many with fellow Poles. Heproved surprisingly adept, almost withouttrying, at attracting the financial and prac-tical support he needed to keep on compos-ing even as his health failed.

And even though he was lionised formost of his life, he never took his gift forgranted, agonising over each composition,crossing out, reinstating and crossing outagain. However long it took, he laboureduntil each piece was exactly right. Becauseof this perfectionism, and the brevity of hislife, his oeuvre is relatively small. Before hedied, he asked for all his unpublishedmanuscripts to be destroyed. His sister,who oversaw his estate, demurred, thussaving a few dozen extra works for posteri-ty. The world should be grateful to her.7

Each morning, Maoua Koné (pictured)wakes beneath the black-eyed gaze of

masks and marionettes on the walls of hercramped one-room flat in Bamako. WhenMs Koné, Mali’s only female marionettist,manipulates the shiny forms, her malecounterparts tremble. “The men are scaredof me because they think I have a lot ofmagical powers,” she says. “They think it isnot possible for a woman to be a marionet-tist.” Her career has overcome chauvinism,only to be stifled by another stubborn ob-stacle: violent conflict.

Mali’s marionette theatre originatedcenturies ago in the villages of Bozo fisher-men and Bambara hunters in southern andcentral regions. The custom co-existedwith Islam, the main religion, which hashistorically forbidden figurative represen-tation of human beings. Performances ex-plore communities’ histories, tell moralitytales and limn the roles of men and wom-en. They celebrate the coming of the rainsand of the harvest. Masks and puppetsstand in for people and animals, but alsocharacter traits, spirits and ancestors.

The country’s rich cultural life has al-ways been segregated by gender. In the re-nowned music scene, for example, womenrarely play the djembe, a kind of drum, orthe kora, a lute-like instrument. Womenhave traditionally been forbidden from op-erating marionettes, or even making them,a craft that entails complex rituals, con-ducted under cover of night and involvingkola nuts and roosters. In these ceremo-nies, says Broulaye Camara, a fellow mario-

nettist, male initiates determine whether apuppet’s spirit will be benevolent. Womenare barred, Mr Camara maintains, becausethey have not been initiated, and becausethey are gossips. “Women talk too much,”he says. “They don’t keep secrets.”

Ms Koné, a tall 60-year-old withcropped greying hair, says the men havenothing to worry about. Her marionettesdo not have spirits or powers because theyare “modern”, made of clay and papier-mâché rather than wood. She abjures theold-fashioned kind. “I would never touch

them,” she says. “The marionette itselfcouldn’t do anything, but the men aroundit could do very bad things.”

She grew up in Koulikoro, about an hourfrom Bamako on the banks of the Niger riv-er, a town known for its marionettes,masks and unique, sacred statuettes thatrepresent the dead. She was born into a no-ble family in Mali’s complex caste system,rather than an artistic one, and her parentsdid not support her ambitions. “It was diffi-cult for my family to accept,” she says. Of 12siblings, she is the only artist, and the onlydaughter who chose not to have children,believing they would hamper her career.

Coming of age in the early decades of in-dependence, she was a beneficiary of theinvestment in the arts made by ModiboKeïta, Mali’s first president (from 1960-68).His government “understood that the artswere a very important part of creating a na-tional identity and bringing people togeth-er,” says Mary Jo Arnoldi, a curator at theNational Museum of Natural History inWashington and an expert on marionetteculture. Ms Koné was educated at the Na-tional Institute of the Arts (ina), a cutting-edge college that, says Ms Arnoldi, “brokedown gender and caste boundaries” andproduced some of Mali’s finest artists.

Ms Koné has broken many taboos her-self. She made sculptures of torn vaginas toillustrate the harm of genital cutting, stat-ues depicting domestic violence and satiri-cal figurines of women wearing fullveils—a burgeoning practice in Mali, ofwhich she disapproves. For all his scepti-cism, Mr Camara performed with her in thenational marionette troupe in the 1990s,when urban companies educated Malianson subjects such as hiv and child labour.

This artistic progress has been violentlyinterrupted. After a partial jihadist occupa-tion in 2012, followed by a coup d’état, for-eigners no longer attend Ms Koné’s perfor-mances and workshops. Invitations fromEuropean festivals and schools have driedup. Donors have diverted funds to the secu-rity services. (Around 14,000 un peace-keepers remain in Mali; ethnic strife stillbubbles.) “Europeans are frightened to in-vite us,” Ms Koné says; and “because thereare explosions and people are being killedhere, they won’t come.”

Fodé Sidibé, director of Mali’s annualmarionette festival, thinks the current gov-ernment and donors should sponsor thearts to promote peace in a divided country.“The political establishment don’t under-stand the value of culture,” Mr Sidibé says.“The security problem will not be solvedwith arms, but with arts.”

These days, though, Ms Koné’s avant-garde troupe—named “Torch of Liberty”—rarely have a chance to perform. But theystill meet every evening in the ina’s court-yard, where they mould marionettes for ashow they may never stage. 7

B A M A KO

The struggles of the only female practitioner of a venerable art form

Art, gender and conflict

The puppet-mistress of Mali

The show must go on

87Courses

Economic data

Gross domestic product Consumer prices Unemployment Current-account Interest rates Currency units % change on year ago % change on year ago rate balance 10-yr gov't bonds change on per $ % change latest quarter* 2018† latest 2018† % % of GDP, 2018† latest,% year ago, bp Nov 7th on year ago

United States 3.0 Q3 3.5 2.9 2.3 Sep 2.5 3.7 Oct -2.6 3.10 78.0 -China 6.5 Q3 6.6 6.6 2.5 Sep 2.1 3.8 Q3§ 0.5 3.35§§ -62.0 6.93 -4.3Japan 1.3 Q2 3.0 1.1 1.2 Sep 0.9 2.3 Sep 3.8 0.13 11.0 113 0.6Britain 1.2 Q2 1.6 1.3 2.4 Sep 2.4 4.0 Jul†† -3.4 1.49 18.0 0.76 nilCanada 1.9 Q2 2.9 2.3 2.2 Sep 2.3 5.8 Oct -2.6 2.54 65.0 1.31 -2.3Euro area 1.7 Q3 0.6 2.1 2.2 Oct 1.7 8.1 Sep 3.4 0.45 12.0 0.87 -1.1Austria 2.3 Q2 -4.0 2.9 2.0 Sep 2.1 4.9 Sep 2.2 0.57 -5.0 0.87 -1.1Belgium 1.7 Q3 1.6 1.5 2.8 Oct 2.2 6.3 Sep -0.3 0.89 28.0 0.87 -1.1France 1.5 Q3 1.7 1.7 2.2 Oct 2.1 9.3 Sep -0.9 0.79 4.0 0.87 -1.1Germany 1.9 Q2 1.8 1.9 2.5 Oct 1.8 3.4 Sep‡ 7.9 0.45 12.0 0.87 -1.1Greece 1.8 Q2 0.9 2.0 1.1 Sep 0.8 19.0 Jul -1.3 4.30 -78.0 0.87 -1.1Italy 0.8 Q3 0.1 1.1 1.6 Oct 1.4 10.1 Sep 2.4 3.35 165 0.87 -1.1Netherlands 3.1 Q2 3.3 2.8 2.1 Oct 1.7 4.7 Sep 10.1 0.55 10.0 0.87 -1.1Spain 2.5 Q3 2.4 2.7 2.2 Oct 1.8 14.9 Sep 1.1 1.45 -2.0 0.87 -1.1Czech Republic 2.7 Q2 2.9 3.0 2.3 Sep 2.3 2.2 Sep‡ 0.8 2.12 52.0 22.6 -2.1Denmark 1.5 Q2 1.0 1.3 0.6 Sep 1.1 3.9 Sep 7.2 0.40 -2.0 6.50 -1.1Norway 3.3 Q2 1.5 1.6 3.4 Sep 2.9 4.0 Aug‡‡ 8.5 2.00 41.0 8.32 -1.6Poland 5.1 Q2 4.1 4.6 1.7 Oct 1.8 5.7 Sep§ -0.6 3.21 -20.0 3.74 -1.9Russia 1.9 Q2 na 1.6 3.6 Oct 2.9 4.5 Sep§ 5.1 8.80 117 66.2 -10.6Sweden 2.4 Q2 3.1 2.7 2.3 Sep 2.0 6.0 Sep§ 3.8 0.66 -12.0 9.00 -6.4Switzerland 3.4 Q2 2.9 2.7 1.1 Oct 1.0 2.5 Sep 9.9 0.09 15.0 1.00 nilTurkey 5.2 Q2 na 3.8 25.2 Oct 15.3 10.8 Jul§ -5.7 16.7 448 5.40 -28.0Australia 3.4 Q2 3.5 3.2 1.9 Q3 2.1 5.0 Sep -2.6 2.73 15.0 1.37 -4.4Hong Kong 3.5 Q2 -0.9 3.4 2.7 Sep 2.2 2.8 Sep‡‡ 3.7 2.44 61.0 7.83 -0.4India 8.2 Q2 7.8 7.4 3.8 Sep 4.6 6.9 Oct -2.4 7.80 91.0 73.1 -11.0Indonesia 5.2 Q3 na 5.2 3.2 Oct 3.4 5.3 Q3§ -2.6 8.60 194 14,580 -7.3Malaysia 4.5 Q2 na 5.0 0.3 Sep 0.9 3.4 Aug§ 2.6 4.15 14.0 4.16 1.7Pakistan 5.4 2018** na 5.4 7.0 Oct 5.4 5.9 2015 -5.8 12.0††† 380 132 -20.4Philippines 6.1 Q3 5.7 6.2 6.7 Oct 5.2 5.4 Q3§ -1.5 7.87 254 53.0 -3.1Singapore 2.6 Q3 4.7 3.5 0.7 Sep 0.6 2.1 Q3 17.4 2.52 39.0 1.37 -0.7South Korea 2.0 Q3 2.3 2.8 2.0 Oct 1.6 3.6 Sep§ 4.5 2.27 -27.0 1,123 -1.0Taiwan 2.3 Q3 1.9 2.6 1.2 Oct 1.7 3.7 Sep 12.9 0.91 -10.0 30.8 -1.9Thailand 4.6 Q2 4.1 4.1 1.2 Oct 1.2 1.0 Sep§ 9.6 2.57 25.0 32.8 1.1Argentina -4.2 Q2 -15.2 -2.3 40.3 Sep 33.6 9.6 Q2§ -4.3 11.3 562 35.9 -50.7Brazil 1.0 Q2 0.7 1.5 4.6 Oct 3.8 11.9 Sep§ -1.0 8.14 -100 3.76 -12.8Chile 5.3 Q2 2.8 3.9 3.1 Sep 2.5 7.1 Sep§‡‡ -2.0 4.50 5.0 677 -6.3Colombia 2.5 Q2 2.3 2.7 3.3 Oct 3.3 9.5 Sep§ -2.7 7.05 33.0 3,141 -3.3Mexico 2.6 Q3 3.6 2.1 5.0 Sep 4.8 3.3 Sep -1.8 8.67 146 19.8 -3.4Peru 5.4 Q2 12.5 4.1 1.8 Oct 1.4 6.1 Sep§ -1.8 5.81 79.0 3.36 -3.6Egypt 5.4 Q2 na 5.3 16.0 Sep 17.0 9.9 Q2§ -2.0 na nil 17.9 -1.5Israel 3.9 Q2 1.8 3.6 1.2 Sep 0.8 4.0 Sep 1.7 2.45 77.0 3.67 -4.1Saudi Arabia -0.9 2017 na 1.5 2.1 Sep 2.6 6.0 Q2 8.0 na nil 3.75 nilSouth Africa 0.4 Q2 -0.7 0.7 4.9 Sep 4.8 27.5 Q3§ -3.5 9.08 -15.0 14.0 1.9

Source: Haver Analytics. *% change on previous quarter, annual rate. †The Economist poll or Economist Intelligence Unit estimate/forecast. §Not seasonally adjusted. ‡New series. **Year ending June. ††Latest 3 months. ‡‡3-month moving average. §§5-year yield. †††Dollar-denominated bonds.


Commodities

The Economist commodity-price index % change on2005=100 Oct 30th Nov 6th* month year

Dollar Index

All Items 137.4 134.9 -3.5 -8.0Food 142.7 137.7 -4.7 -9.1Industrials

All 131.9 132.1 -2.1 -6.7Non-food agriculturals 120.5 122.6 -2.2 -7.4Metals 136.7 136.2 -2.1 -6.4

Sterling Index

All items 196.3 187.6 -3.4 -7.6

Euro Index

All items 150.3 147.0 -3.0 -6.7

Gold

$ per oz 1,224.4 1,228.0 3.3 -3.6

West Texas Intermediate

$ per barrel 66.2 62.2 -17.0 8.8

Sources: CME Group; Cotlook; Darmenn & Curl; Datastream from Refinitiv; FT; ICCO; ICO; ISO; Live Rice Index; LME; NZ Wool Services; Thompson Lloyd & Ewart; Urner Barry; WSJ. *Provisional.

Markets % change on: % change on:

Index one Dec 29th index one Dec 29th Nov 7th week 2017 Nov 7th week 2017

United States DJIA 26,180.3 4.2 5.9United States NAScomp 7,570.8 3.6 9.7China Shanghai Comp 2,641.3 1.5 -20.1China Shenzhen Comp 1,340.4 3.6 -29.4Japan Nikkei 225 22,085.8 0.8 -3.0Japan Topix 1,652.4 0.4 -9.1Britain FTSE 100 7,117.3 -0.2 -7.4Canada S&P TSX 15,369.4 2.3 -5.2Euro area EURO STOXX 50 3,246.2 1.5 -7.4France CAC 40 5,137.9 0.9 -3.3Germany DAX* 11,579.1 1.1 -10.4Italy FTSE/MIB 19,540.9 2.6 -10.6Netherlands AEX 528.6 1.9 -2.9Spain IBEX 35 9,167.9 3.1 -8.7Poland WIG 57,818.4 4.5 -9.3Russia RTS, $ terms 1,164.3 3.4 0.9Switzerland SMI 9,050.5 0.3 -3.5Turkey BIST 95,493.3 5.9 -17.2Australia All Ord. 5,982.0 1.2 -3.0Hong Kong Hang Seng 26,147.7 4.7 -12.6India BSE 35,237.7 2.3 3.5Indonesia IDX 5,939.9 1.9 -6.5Malaysia KLSE 1,714.9 0.3 -4.6

Pakistan KSE 41,544.0 -0.3 2.7Singapore STI 3,065.4 1.5 -9.9South Korea KOSPI 2,078.7 2.4 -15.8Taiwan TWI 9,908.4 1.1 -6.9Thailand SET 1,675.3 0.4 -4.5Argentina MERV 31,404.7 6.5 4.5Brazil BVSP 87,714.3 0.3 14.8Mexico IPC 46,917.4 6.8 -4.9Egypt EGX 30 13,615.9 2.8 -9.3Israel TA-125 1,488.1 3.6 9.1Saudi Arabia Tadawul 7,792.6 -1.4 7.8South Africa JSE AS 54,700.6 4.4 -8.1World, dev'd MSCI 2,084.4 3.1 -0.9Emerging markets MSCI 997.9 4.4 -13.9

US corporate bonds, spread over Treasuries

Dec 29thBasis points latest 2017

Investment grade 154 137High-yield 413 404

Sources: Datastream from Refinitiv; Standard & Poor's Global Fixed Income Research. *Total return index.

For more countries and additional data, visitEconomist.com/indicators

Economic & financial indicators

The Economist November 10th 2018 89Graphic detail

When the first world war ended onNovember 11th 1918, David Lloyd

George, Britain’s prime minister, told Par-liament: “I hope we may say that thus, thisfateful morning, came to an end all wars.”History proved him wrong. But 100 yearson, the world is far more peaceful. Fewerthan one in 100,000 people have died incombat per year since 2000—one-sixth therate between 1950 and 2000, and one-fifti-eth of that between 1900 and 1950. Why?

The simplest explanation is the adventof nuclear weapons, which deter majorpowers from fighting each other. But warshave declined among non-nuclear states,

too. Another reason might be the spread ofdemocracy and global norms. Bruce Rus-sett and John Oneal, two academics, havefound that countries that are democratic,trade heavily and belong to lots of interna-tional bodies fight each other less oftenthan authoritarian, isolationist states do.

The Economist has analysed all interna-tional and civil wars since 1900, along withthe belligerents’ wealth and degree of de-mocratisation (assigning colonies to theirown category). We counted all conflicts in-volving national armies in which at least100 people per year were killed, excludingdeaths from terrorism, massacres of civil-ians outside combat, starvation or disease.

The data show a strong correlation be-tween democracy and peace, with a few ex-ceptions. (The United States has been quitebellicose, and its advanced democracy didnot prevent a civil war in 1861 that claimedmore American lives than any conflictsince.) Moreover, the relationship does notseem to be linear. The countries mostprone to wars appear to be neither autocra-

cies nor full democracies, but rather coun-tries in between. A similar finding appliesto prosperity. Middle-income countries aremore warlike than very poor or rich ones.

What causes such states’ belligerence?Warfare is expensive, and citizens in tyran-nies struggle to organise uprisings. Somestudies find that civil wars are more com-mon after sudden regime changes, whichcause instability. Perhaps a little politicalcompetition or wealth make it easier totake up arms. All this might explain whythe bloodiest battles since 1900 have shift-ed from Europe, to Asia, to the Middle Eastand Africa. If partial democracy is linked toconflict, recent backsliding in countrieslike Turkey looks even more worrying.

Even a bit of democracy, however, saveslives overall—because empires and dicta-tors are more likely to starve and slaughtertheir subjects. Counting man-made fam-ines and genocides, colonial and undemo-cratic powers have caused 250m prematuredeaths since 1900—five times the death tollfrom combat in all wars combined. 7

Partially democratic countries fight inwars most often

Conflict and development

No man’s land

Combat deaths per 100,000 people worldwideBy nationality, grouped by region

Sources: Peace Research Institute Oslo; Uppsala Conflict Data Program; Centre for

Systemic Peace; Maddison Project Database; iCasualties.org; World Bank; The Economist

→ These three charts count the deaths of soldiers and civilians caused by weapons, in

conflicts involving at least one state army and 100 fatalities. The data include interstate

and civil wars. They exclude deaths from genocide, terrorism, starvation and disease,

such as the 500,000-800,000 people who died in the Rwandan genocide of 1994 and the

1m-5m who died in the Congo war of 1998-2003.

0

50

100

150

25

75

125

Algeria

First world war

Iraq-Iran war

Korea

Mexicanrevolution

Second world war

Sino-Japanese war

Chinese civil warSoviet-Afghan war

Syria

US-Vietnam war

Chance of fighting in a conflict

By regime typePolity scale

By GDP per person

$’000, 2011 prices

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

Colonies(no regime

score)

0.50 -10 101 2 4 8 16 32 64

2010 2017

DemocraticAutocraticRicherPoorer

Countries with a GDP per person of $4,000-

8,000 have fought in conflicts in 12% of years

Examples: Britain in 1914, Russia in 1941,

Algeria in 1954, Iran in 1980, Syria in 2011

Partially democratic countries have

fought in conflicts in 18% of years

Examples: Germany in 1914, Japan in

1941, Uganda in 1980, Yemen in 2015

Europe

Africa Middle East

Americas Asia

0

3

6

9

12%

0

5

10

15

20%

Share of years in which a country sufered at least 100 combat deaths, 1900-2017

Europe Asia


When the manhunt was on for Whitey Bulger, on the lam for16 years and the fbi’s second-most-wanted after Osama bin

Laden, officers would often check bookshops. He liked books. Inhis shabby apartment in Santa Monica, California, where heturned up living as Charlie Gasko behind thick black curtains, hehad 200 books. True, they hid the holes in the walls where hestashed guns and $800,000 in cash. But he read them, too.

Words entertained him, and they plagued him in a way. Likepeople calling him “Whitey” from his blond hair, which infuriatedhim, when he should have been “Jimmy”, or “Boots”, from the cow-boy boots he wore. Or like the words “good” and “bad”. Clearly hewas bad, because he was a racketeer, an extortionist (though “rentcollector” was the term he preferred), an arms trafficker and amobster. His first spree of robberies in 1955 was bad in the classicHollywood style, bursting into banks with a pistol in each handand fleeing with his girlfriend in a getaway car. James Cagney wasin his mind then. Later he wore with pride his belt buckle from Al-catraz. As crime became his fixed career, from the 1970s to the1990s, no one in eastern Massachusetts dared cross him.

Yet in Southie, home turf, he bought turkeys for the poor atThanksgiving and held open doors for women. By day at least, hewas still that neat well-mannered boy from the Mary Ellen McCor-

mack housing project who would sort out local bullies withthreats, or lightning fists, to help the weak. The rockiness hap-pened outside home. Some of the money he made went on weap-ons for the ira, a good cause, as many in Southie saw it. As he toldsome federal drug agents once, as they were frisking him and strip-ping his car, they were the good-good guys, and he was bad-good.

“Crime” and “business” were another slippery pair of words. Hedespised stimulants of any kind: seldom sipped wine, neversmoked. But for more than a decade, as boss of the Winter HillGang, he controlled the drug trade in the city and, to a large extent,horses, dogs, loan-sharking and the liquor trade. All the vices.Power was wrested from other mobsters, especially from Italian-American gangs, as any enterprises might outdo each other. If li-quor retailers got successful they soon fell foul of his protectionrackets, as did the owner of the store that became the South BostonLiquor Mart, the favourite hangout of his political allies. If drugdistributors wanted to operate on his territory, he shook themdown, making $30m at it by one estimate. This criminal behaviourwas obviously business, too. And there were rules. Heroin wasbanned in South Boston because it was a dirty drug, stuck in yourarm with a needle that gave you aids. Instead, he dealt with a doz-en big cocaine distributors all over the state. Cocaine was taken so-cially and cleanly. Dirty, clean—a thin line, again.

The word that bugged him most was “informant”. A snitch, arat. While he was “in retirement” in California the story got out thathe had been recruited by John Connolly of the fbi, in 1975, to in-form on the Patriarca crime family and on rival Irish gangs. Hehelped the agency well into the 1990s, getting in exchange free reinfor his business activities and immunity from arrest. Since hisbrother Billy, who always looked out for him, was at the time presi-dent of the state Senate, the most powerful politician in Massachu-setts and a fount of patronage, it was a cosy arrangement both forlocal fbi field officers and for him. The agents even bought theirChristmas wine at the South Boston Liquor Mart.

Nonetheless he denied it passionately. Among the Irish inSouthie there was nothing worse you could be called, than a rat. Heinsisted he had never been one. As a thief from the age of 13 he’d hadmany a beating in police stations, but had not cracked. In prison hehad been put in solitary for months, but told them nothing. Hewould go to hell before he did. The way he saw it, Connolly, whowas a rogue agent anyway, had given him useful business informa-tion and he had paid him for it; it was that way round. He insistedfrom the very start, sitting in Connolly’s car that night, that his roleand title would be “strategist”. Any ratting had been done by others,including his chief associate, Steve Flemmi, not by him. That word“associate”, too, had a business ring to it. And it preserved the dis-tance he liked to keep from almost everyone, in case they were nolonger his friend and, with eyes cold as marble and that hair-trig-ger violence he was famous for, he had to kill them.

That last was a word he avoided altogether. At his trial in 2011on32 counts of racketeering, extortion and weapons possession hewas also charged with complicity in 19 killings, and was convictedtwo years later of 11 of them. He said he was not guilty, though theevidence was heard in court, clearly enough. How he had chainedBucky Barrett and tortured him into handing over the proceedsfrom a bank robbery, then shot him in the head anyway. How hehad stabbed Louie Litif with an ice pick, and gunned down EddieConnors in a phone booth; how he had joked about his victims, ashe drove past the spots where he had buried them.

When he first killed a man, shooting him point-blank betweenthe eyes, he picked the wrong, innocent brother of a pair of twins.His then-boss told him not to worry; the man smoked too much,and would die soon anyway. It was a lesson in callousness he didnot forget. He occasionally regretted the shame he had brought onhis family, but for his victims and their relatives he felt nothing.Most, as he saw it, had been informants. And if you silenced an in-formant, was that not good? 7

James “Whitey” Bulger, South Boston’s mobster-in-chief,was beaten to death on October 30th, aged 89

The business of crime

Whitey BulgerObituary

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