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The world this week

Politics
Business
KAL’s cartoon
The world this week

Politics
May 14th 2022

Mahinda Rajapaksa resigned as prime minister of Sri Lanka amid a wave of

violence, as the country endures its worst ever economic crisis. Gotabaya
Rajapaksa, the president and Mahinda’s younger brother, also came under
pressure to step down. Protesters burned down politicians’ houses and a
museum dedicated to the Rajapaksas, whom they blame for crippling
shortages of food and fuel and for runaway inflation. Gotabaya called for the
opposition to join a government of national unity and ordered the army to
shoot rioters on sight.

Ferdinand Marcos junior, better known as “Bongbong”, won the Philippines’

presidential election. The son of a former dictator, who was overthrown by
the “People Power” revolution in 1986, Mr Marcos asked not to be judged
by his ancestors but by his actions. One of his first actions was to visit his
father’s grave in Manila. Sara Duterte, the daughter of the outgoing
president, Rodrigo Duterte, won the vice-presidency.

The Taliban issued a decree that in effect requires women in Afghanistan to

wear a veil in public whenever they leave their homes.
The authorities in Shanghai tightened covid restrictions. A weeks-long
lockdown has pushed daily new cases well below their recent peak, but
China’s biggest city is still struggling to extinguish an outbreak. Food
deliveries have been banned in some areas and hospital visits must be
approved. Neighbours of anyone infected are often being forced into
quarantine.

North Korea ordered cities to lock down after admitting to its first covid
infections since the pandemic began more than two years ago.

John Lee was chosen to lead Hong Kong by a 1,500-member committee

packed with Communist Party loyalists. He was the only candidate. Mr Lee
oversaw the crackdown on pro-democracy protesters in 2019. He has
embraced a draconian national-security law that the central government
imposed on the territory in 2020. Meanwhile, Cardinal Joseph Zen, an
outspoken advocate of democracy, who is 90, was arrested in Hong Kong for
allegedly colluding with foreign forces.

A new Helsinki accord

Finland’s president and prime minister recommended that the country
formally join NATO, a potential reversal of 80 years of neutrality. Before
Russia’s invasion of Ukraine only about 20% of Finns supported
membership; that figure is now around 70%. Sweden is also expected to say
it will join. One of the supposed goals of Russia’s invasion was to stop
NATO’s expansion; if the two countries’ parliaments approve the change, it
will have achieved the opposite.

Vladimir Putin, Russia’s president, announced no new initiatives in the war

in Ukraine in a speech on May 9th to commemorate victory in the second
world war. He declared neither victory, as some had expected, nor an
escalation of the war. The conflict is becoming more static, with intelligence
analysts in America and elsewhere now predicting a stalemate. Ukrainian
troops have succeeded in driving Russia back from Kharkiv. The last
defenders of the city of Mariupol continue to resist a Russian siege. But
Russia has made small territorial gains in the Donbas region and still seems
to be aiming to cut off Ukrainian forces there.
America’s House of Representatives approved an extra $40bn in military
and humanitarian aid for Ukraine. There was some resistance from
Republicans, which could slow the bill’s passage in the Senate. America
imposed more sanctions on Russia, and the G7 made a commitment to ban
Russian oil imports “in a timely and orderly fashion”.

Jill Biden, Joe Biden’s wife, visited a border town in Ukraine, where she met
Olena Zelenska, the wife of Ukraine’s president. It was Mrs Zelenska’s first
public appearance since the Russian invasion began in February.

In Northern Ireland the nationalist Sinn Féin party took the most seats in
assembly elections. It is the first time since Ireland’s partition in 1921 that
unionists have not been the biggest party in the province. Disagreement over
the Northern Ireland protocol, a post-Brexit deal which creates a customs
barrier with the rest of the United Kingdom, is proving to be an obstacle to
restoring the government in Belfast.

Shireen Abu Aqleh, a prominent Palestinian journalist for Al Jazeera, was

shot dead while reporting on a clash between Israeli forces and Palestinians
in the restive West Bank town of Jenin. Colleagues at the scene blamed the
Israeli army, which said she may have been shot by Palestinian gunmen.
Israel’s foreign minister offered a joint Israeli-Palestinian inquiry. A few
days earlier, three Israelis were killed by two Palestinians wielding axes, the
latest in a wave of terrorist attacks in Israel.

The IMF resumed lending to Mozambique, having suspended it six years

ago after it emerged that the country had $2bn in undisclosed debts. Credit
Suisse, which arranged the loans, was fined last October for failing to carry
out due diligence; its bankers pocketed some of the cash.

Islamic State West Africa Province, a Nigerian terrorist group, released a

video purporting to show the murder of 20 Christians in the north-eastern
state of Borno.

Colombia sent 2,000 members of the security forces to deal with a spate of
violence by the Gulf Clan, a criminal gang, in reprisal for the extradition to
America of its leader, Dairo Antonio Úsuga, known as Otoniel. President
Iván Duque claims that Otoniel is the world’s most dangerous drug-
trafficker.

The outsiders
Andrés Manuel López Obrador, the president of Mexico, visited Cuba and
praised his communist counterpart there. Mr López Obrador threatened to
skip a gathering in Los Angeles in June of governments from across the
Americas unless the United States also invites Cuba, Nicaragua and
Venezuela.

A 28-year-old woman in El Salvador was sentenced to 30 years in prison for

the death of her unborn child following an obstetric emergency. Abortion is
illegal in the country.

Republicans in America’s Senate blocked a bill that would override state

laws and give women a right to abortion. The legislation was never expected
to pass but marks the first attempt by Democrats to enact such a right
following the leak of a draft decision of the Supreme Court that would, if
adopted, return abortion policy to the states. Some Republicans would like
to go further still and try to impose an outright national ban.
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The world this week

Business
May 14th 2022

Stockmarkets endured another punishing stretch, as investors fretted about

the Federal Reserve’s aggressive moves to tighten policy, high inflation and
slowing growth. After its longest weekly losing streak since 2011 the S&P
500 closed below the 4,000 mark for the first time in 14 months. The Nasdaq
Composite plummeted to its lowest finish since November 2020. Apple’s
share price dropped by 12% over five days. The sell-off extended to stocks
in Europe and Asia.

What goes up…

Cryptocurrencies took a pummelling amid the commotion, as investors
pulled back from speculative assets. Bitcoin shed 30% of its value over a
week. Coinbase, the biggest crypto-exchange in America, lost more than 2m
users in the second quarter, a fifth of its customer base.

More data pointing to a worse slowdown in China than expected also

spooked investors. With supply chains disrupted and factories closed
because of covid lockdowns, the country’s exports grew by 3.9% in April,
year on year, the slowest pace since June 2020.

America’s annual rate of inflation as measured by the consumer-price index

fell to 8.3% in April, from 8.5% in March, the first drop in eight months. But
most economists had been expecting April’s figure to fall to 8.1%.

Christine Lagarde, the president of the European Central Bank, gave the
clearest signal yet that it will raise interest rates in July or September when
she suggested that she expects such a move in the third quarter. The bank
has maintained a negative rate on its deposit facility since 2014.

Hong Kong’s central bank stepped in to protect the Hong Kong dollar’s peg
to the greenback for the first time since 2019. Investors have been shedding
assets denominated in Hong Kong dollars as the local economy suffers from
covid lockdowns and crackdowns on Chinese tech firms.

BlackRock, which two years ago warned about the risks of climate change
to investments and pushed for green-friendly shareholder proposals at
company meetings, said it would support proportionately fewer of them this
year because they are not consistent with its clients’ interests. The world’s
biggest asset manager gave several reasons, including a regulatory change in
America that has increased the number of proposals of “varying quality” and
the impact of the war in Ukraine on energy markets. And it won’t support
shareholder votes that are intended to micromanage companies.

FIFA, football’s global governing body, and Electronic Arts, a video-game

publisher, announced an end to a three-decade deal by which FIFA lent its
name to an annual series of games. The deal had brought in $150m a year
for FIFA, making it the organisation’s biggest commercial venture besides
the World Cup.

SoftBank said its tech-focused investment funds posted a loss of ¥3.7trn

($33bn) for the year ending March 31st, pushing the Japanese conglomerate
to an overall annual loss of ¥1.7trn. The value of SoftBank’s stakes in
companies such as Coupang, Didi Chuxing, DoorDash and Grab have
plummeted over the year, as their share prices have tumbled.
The magic kingdom
Disney allayed fears that it would follow Netflix by losing subscribers from
its streaming service, when it reported that an additional 7.9m customers had
signed up to Disney+ in the first quarter, taking its subscription base to
137.7m. That is still some way behind Netflix’s 222m, but Disney+ is
sticking to its goal of reaching up to 260m users by 2024.

With sales from its covid vaccine set to dip in coming years, Pfizer shored
up its future revenue stream by agreeing to acquire Biohaven
Pharmaceuticals, which develops drugs for neurological disorders, for
$11.6bn. Separately, BioNTech, the German drug company that collaborated
with Pfizer to produce their vaccine, said revenue and profit more than
tripled in the first quarter, year on year, though it expects sales will slow.
There is now a huge glut of covid vaccines in the market.

Building on its pledge of “delivering a smoke-free future”, Philip Morris

International, which makes Marlboro cigarettes, struck a deal to buy
Swedish Match for $16bn. Swedish Match’s smoke-alternative products
include a type of snuff called “snus”, tobacco pouches that are placed behind
the upper lip.
Andy Warhol’s silk-screen portrait of Marilyn Monroe, “Shot Sage Blue
Marilyn”, was sold for $195m at Christie’s in New York. That was a record
price at auction for a work by an American artist and also for a piece of
20th-century art; the previous record was the $179.4m paid for Pablo
Picasso’s “Les Femmes d’Alger (Version O)“ in 2015. The super-rich are
itching to splash out after covid suppressed demand. “The expensive stuff
got more expensive,” said Christie’s head of 20th-century art.
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KAL’s cartoon
May 14th 2022

Dig deeper into the subject of this week’s cartoon:

Britain’s security deals with Finland and Sweden shine a light on Boris
Johnson
Finland is hurtling towards NATO membership
Podcast: Will Finland and Sweden join NATO?

KAL’s cartoon appears weekly in The Economist. You can see last week’s
here
This article was downloaded by calibre from https://www.economist.com/the-world-this-week/2022/05/14/kals-cartoon
Leaders

India: India’s next decade

Financial markets: Grisly reality
Surveillance at work: The professional panopticon
Sri Lanka’s crisis: Gota go
Genetic screening: Private letters, public promise
India

The Indian economy is being rewired. The

opportunity is immense
And so are the stakes
May 13th 2022

OVER THE past three years India has endured more than its share of bad
news and suffering. The pandemic has killed between 2.2m and 9.7m
people. Lockdowns caused the economy to shrink temporarily by a quarter
and triggered the largest internal migrations since partition in 1947, as city
workers fled to their villages. Religious tensions have been simmering,
stoked by the anti-Muslim chauvinism of the Bharatiya Janata Party (BJP),
in power since 2014 under the strongman prime minister, Narendra Modi.
Now a heatwave is baking the north of the country and the global oil- and
food-price shock is battering the poor.

Yet as our Briefing explains, if you take a step back, a novel confluence of
forces stands to transform India’s economy over the next decade, improving
the lives of 1.4bn people and changing the balance of power in Asia.
Technological leaps, the energy transition and geopolitical shifts are creating
new opportunities—and new tools to fix intractable problems. The biggest
threat to all this is India’s incendiary politics.

Since India opened up in 1991, its economy has prompted both euphoria and
despair. One minute it is the next China: a rising superpower bursting with
enterprising geniuses. The next it is a demographic time-bomb unable to
generate hope for its young people; or a Wild West where Vodafone and
other naive multinationals are fleeced. Over the past decade India has
outgrown most other big countries, yet this has been overshadowed by a
sense of disappointment. It has not engineered the manufacturing surge that
enriched East Asia nor built enough big companies to marshal capital for
development. Its fragmented markets and informal firms create few good
jobs.

As the country emerges from the pandemic, however, a new pattern of

growth is visible. It is unlike anything you have seen before. An indigenous
tech effort is key. As the cost of technology has dropped, India has rolled out
a national “tech stack”: a set of state-sponsored digital services that link
ordinary Indians with an electronic identity, payments and tax systems, and
bank accounts. The rapid adoption of these platforms is forcing a vast,
inefficient, informal cash economy into the 21st century. It has turbocharged
the world’s third-largest startup scene after America’s and China’s.

Alongside that, global trends are creating bigger business clusters. The IT-
services industry has doubled in size in a decade, helped by the cloud and a
worldwide shortage of software workers. Where else can Western firms find
half a million new engineers a year? There is a renewable-energy investment
spree: India ranks third for solar installations and is pioneering green
hydrogen. As firms everywhere reconfigure supply chains to lessen their
reliance on China, India’s attractions as a manufacturing location have risen,
helped by a $26bn subsidy scheme. Western governments are keen to forge
defence and technology links. India has also found a workaround to
redistribute more to ordinary folk who vote but rarely see immediate gains
from economic reforms: a direct, real-time, digital welfare system that in 36
months has paid $200bn to about 950m people.

These changes will not lead to a manufacturing boom as big as those in

South Korea or China, which created enough jobs to empty the fields of
farmers. They do not solve deep problems such as extreme weather or
clogged courts. But they do help explain why India is forecast to be the
world’s fastest-growing big economy in 2022 and why it has a chance of
holding on to that title for years. Growth generates more wealth to invest in
the country’s human capital, particularly hospitals and schools.

Who deserves the credit? Chance has played a big role: India did not create
the Sino-American split or the cloud, but benefits from both. So has the
steady accumulation of piecemeal reform over many governments. The
digital-identity scheme and new national tax system were dreamed up a
decade or more ago.

Mr Modi’s government has also got a lot right. It has backed the tech stack
and direct welfare, and persevered with the painful task of shrinking the
informal economy. It has found pragmatic fixes. Central-government
purchases of solar power have kick-started renewables. Financial reforms
have made it easier to float young firms and bankrupt bad ones. Mr Modi’s
electoral prowess provides economic continuity. Even the opposition expects
him to be in power well after the election in 2024.

The danger is that over the next decade this dominance hardens into
autocracy. One risk is the BJP’s abhorrent hostility towards Muslims, which
it uses to rally its political base. Companies tend to shrug this off, judging
that Mr Modi can keep tensions under control and that capital flight will be
limited. Yet violence and deteriorating human rights could lead to stigma
that impairs India’s access to Western markets. The BJP’s desire for
religious and linguistic conformity in a huge, diverse country could be
destabilising. Were the party to impose Hindi as the national language,
secessionist pressures would grow in some wealthy states that pay much of
the taxes.

The quality of decision-making could also deteriorate. Prickly and

vindictive, the government has co-opted the bureaucracy to bully the press
and the courts. A botched decision to abolish bank notes in 2016 showed Mr
Modi’s impulsive side. A strongman lacking checks and balances can
eventually endanger not just demo cracy, but also the economy: think of
President Recep Tayyip Erdogan in Turkey, whose bizarre views on inflation
have caused a currency crisis. And, given the BJP’s ambivalence towards
foreign capital, the campaign for national renewal risks regressing into
protectionism. The party loves blank cheques from Silicon Valley but is
wary of foreign firms competing in India. Today’s targeted subsidies could
degenerate into autarky and cronyism—the tendencies that have long held
India back.

Seizing the moment

For India to grow at 7% or 8% for years to come would be momentous. It
would lift huge numbers of people out of poverty. It would generate a vast
new market and manufacturing base for global business, and it would
change the global balance of power by creating a bigger counterweight to
China in Asia. Fate, inheritance and pragmatic decisions have created a new
opportunity in the next decade. It is India’s and Mr Modi’s to squander. ■

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the-opportunity-is-immense
Financial markets

A new bear market in American shares

Could the sell-off raise the danger of a recession?
May 14th 2022

AMERICA’s BEAR season, when hikers are advised to stay on their trails
and carry pepper spray, runs for two months from September. It has come
early for investors. The S&P500 index of leading American stocks has fallen
by 18% from its all-time high in January, ten percentage points of which was
in the past month alone. The index is flirting with bear-market territory, a
20% decline. The NASDAQ, a tech-heavy benchmark, has plunged well
past that level. Since November it has shed 29%.

For 18 months or so, since inflation began to climb, investors have fretted
over how much the Federal Reserve would tighten policy, and how painful
that would be for asset prices. The latest rout, which followed a meeting of
the Fed on May 4th at which America’s central bank raised rates by 0.5
percentage points, offers an answer: very painful.
The market expects the Fed to raise interest rates by another 1.9 percentage
points this year, even as it shrinks its balance-sheet fast. And the more
entrenched inflation becomes, the more aggressive the Fed will have to be.
Worryingly, American households expect inflation to be above 6% a year
from now and almost 4% in three years, according to a survey from the
Federal Reserve Bank of New York on May 9th.

Higher real interest rates erode the present value of future cashflows. The
sell-off has been vicious for technology stocks whose valuations rest on
expectations of much larger earnings far in the future (see Business section).
For the same reason, prices of bonds with long maturities have fallen
heavily. Many speculative assets without cashflows have done even worse.
Bitcoin is trading at about $27,000, half its value in November.

One question is whether the market slump signals deeper trouble in the
economy. America’s unemployment rate is just 3.6% and more than 11m
jobs remain unfilled. But the more zealous the Fed has to be, the more likely
it is to cause a recession. Meanwhile, war in Ukraine has stoked energy
prices. And China’s zero-covid policy is damaging its economy and adding
to supply-chain snarl-ups around the world.
The other question is whether financial-market turmoil may eventually
amplify economic problems, rather than merely reflect them. Over the past
decade debt and equity markets have played a bigger role in finance, in part
owing to tighter regulation that has inhibited risky lending and trading by
banks. Most household mortgages now originate outside the banking system,
and are issued as securities and held by investors. American companies get
57% of their debt funding from investors in bond markets, up from 45% in
2007. Banks play a smaller role as the middlemen in financial markets, their
place taken by computers and specialist trading firms.

These structural changes in the way finance works may mean that markets
are more prone to bouts of erratic trading and nervous breakdowns.
Regulators, as well as plenty of investors, have worried that the new-look
Treasury market could seize up in times of stress, causing strains in the real
economy. Violent moves in asset markets may have more of an effect not
only on people’s retirement accounts and firms’ share prices, but also on
their ability to borrow.

As ten-year Treasury yields have climbed from 1.6% in January to 3% now,

mortgage rates in America have shot up from 3.0% to 5.3%. Risky firms are
beginning to find it hard to issue debt. The first quarter of 2022 was the
slowest for high-yield issuance since 2016. When it tried to sell $3bn-worth
of bonds in late April, Carvana, a second-hand-car retailer, struggled to
attract investors even at double-digit yields. Unfortunately, the hikers are far
from being out of the woods just yet. ■

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Employee surveillance

How a new age of surveillance is changing work

Look out: your boss may be watching you
May 14th 2022

WORKPLACE SURVEILLANCE is nothing new. The dark Satanic mills of

18th-century Britain had supervisors to crack the whip. Shops have long
used CCTV to monitor customers and staff, and some factory and warehouse
workers have had to face the humiliation of timed toilet breaks. Still, if you
enjoy the comfort of a white-collar job, you may be stunned to learn just
how much you are being watched.

Calls and emails are monitored using ever more advanced software.
Artificial intelligence (AI) is taking the snooping to new levels, tracking
everything from Zoom-call rictus and twitchy keyboard strokes to the
consistent note of irritation in your voice, in an attempt to assess your
productivity and judge your state of mind.

Surveillance is rising because work-from-home policies mean that

employers are keen to keep tabs on their remote workforce. Before the
pandemic, around one in ten of the large businesses asked by Gartner, a
research firm, had spying software. Within three years it expects the share to
reach 70%.

Bosses also have ever-expanding amounts of data at their disposal, enlarging

the digital footprint that can be monitored. Widely used software such as
Google Workspace, Microsoft Teams or Slack can tell managers what time
you clock in or how many calls you join on their platforms. Employee
badges fitted with motion sensors and microphones can alert bosses if
someone is loafing about. The blurring boundaries between work and home
mean that video surveillance and other intrusive tools are barging into
workers’ personal lives, social-media accounts and private devices at all
times of the day.

The law is scrambling to adjust. In the state of New York employees subject
to electronic monitoring must be told in advance, under a new law
introduced on May 7th. Connecticut and Delaware require similar
disclosures. California is considering new laws to strengthen privacy
protections for workers, including a ban on digital monitoring without prior
notice. The European Union’s General Data Protection Regulation
establishes some basic rights for staff. Yet it is still early days and the
technology is advancing fast. As a result, most firms are only just getting
their heads around how much remote work is likely to remain permanent. A
clear boundary between embracing new technologies on the one hand, and
protecting workers on the other, has still to be drawn.

There are perfectly legitimate reasons for surveillance at work. Many jobs
require monitoring for safety, security and compliance. Investment banks’
traders are tracked to prevent insider dealing, and the decisions of social-
media moderators are traced and recorded to ensure consistency and
accountability. In the same way that companies collect data on customers’
behaviour in order to improve their products, so professional employers are
using monitoring tools to measure the productivity and engagement of their
most important resource: their people. In the future such tools could help
spot bad posture, root out bullying, and identify and share best practice
among staff.

Yet it is easy to see the pitfalls. There is a long history of those with power
abusing those without in the name of compliance and efficiency. In the most
extreme cases, 20th-century despots ran vast informant networks, and some
slave plantations in America and the West Indies kept tyrannical work
records.

Today’s workers are not indentured, obviously. But many studies link
excessive individual surveillance to higher levels of stress. And if algorithms
trained on biased data are used to make more decisions, the odds of
discrimination will rise. One analysis found that AI systems consistently
interpret black faces as being angrier than white ones.

What to do? As law and practice evolve, some principles should govern
workplace surveillance. Individuals must be fully informed, as the New
York law provides. Some firms now disclose monitoring methods in the fine
print of their employee handbooks, and specify what data managers have
access to. But that is no substitute for consistent, easily understood
information for staff—so they can decide how to behave at work, and whom
they choose to work for.

Employers should have a legitimate reason for surveillance. Although the

boundary will take time to establish through case law and precedent, this is
vital to ensure that monitoring is proportionate. Firms should not have
access to employees’ private devices, provided they are not used for work.
And significant decisions made by algorithms should be subject to appeal
and review by human beings. Establishing clear guidelines is not easy, but
qualms over the potential abuse of surveillance will grow. It’s time to start
drawing some lines. ■

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markets, sign up to Money Talks, our weekly newsletter.
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changing-work
Gota must go

The president should resign to save Sri Lanka

from collapse
But opposition politicians must also do their part
May 14th 2022

ON PAPER, AT least, Sri Lanka is one of the wealthiest countries in South

Asia, ranked by the UN on a par with much of eastern Europe in terms of
development. Yet the country of 22m people is suffering severe food
shortages, locked petrol pumps and power cuts lasting as long as 13 hours a
day. The currency has lost nearly half its value against the dollar over the
past two months. Foreign reserves stand at $50m, too little to cover even a
day’s worth of imports and down from about $9bn in 2019. Last month Sri
Lanka admitted it could no longer service its foreign debts. The country is
broke.

Sri Lankans are furious. On May 9th protesters torched dozens of homes,
most belonging to politicians, precipitating the resignation of Mahinda
Rajapaksa, the once-beloved prime minister. Security forces evacuated him
and his family to a naval base as a mob tried to storm his official residence.
Vigilantes have set up checkpoints outside the country’s airports to prevent
him and other officials from fleeing. A state of emergency is in force. The
army has been ordered to shoot rioters and looters on sight.

How did it come to this? For an answer, look back to late 2019, when Sri
Lanka was still picking itself up after a devastating set of terrorist attacks on
Easter Sunday. Home-grown Islamists had targeted three churches and three
luxury hotels, killing more than 250 people. Tourism, a big source of foreign
exchange, took a hit, with arrivals falling from 244,000 the month before the
attacks to 38,000 the month after.

It was against this backdrop that Sri Lankans chose as president a man
known for an iron-fisted approach to security: Gotabaya Rajapaksa, who had
brought to an end a 26-year civil war as head of the ministry of defence a
decade earlier. Mr Rajapaksa, in turn, appointed as prime minister his older
brother, Mahinda, who had been president from 2005 to 2015. The pair were
seen as vigorous, can-do types, unlike the vacillators of the opposition. Their
party won parliamentary elections by a landslide.

Untrammelled authority seems to have gone to the Rajapaksas’ heads. A

two-thirds majority in parliament meant that they could have their way with
the constitution—and they did, creating an executive presidency that granted
Gota control over the appointment of ministers, judges and the heads of
various nominally independent commissions. Many top jobs went to
assorted brothers and nephews; others to retired or serving soldiers.

But even as the Rajapaksas appeared to be entrenching themselves in power,

they were actually undermining their own authority through ill-conceived
policies. They slashed taxes as the pandemic brought tourism to a screeching
halt, which together clobbered the economy and severely reduced
government revenue and precious inflows of foreign exchange. Downgrades
from ratings agencies underlined the deteriorating economic picture and in
effect closed the door to fresh borrowing abroad.

Instead of admitting their errors, the Rajapaksas pretended things were under
control. They continued to defend the rupee and service Sri Lanka’s external
debts of 44% of GDP, even as foreign reserves dwindled. A ban on imported
fertiliser, to save dollars, was dressed up as a boost to organic farming—but
had to be scrapped when crop yields plunged, threatening a further decline
in exports. The war in Ukraine was the final straw, pushing up the prices of
imported oil and food and prompting the government to resort to rationing
for lack of foreign exchange.

The Rajapaksas and the country are now out of options. The government
will have to slash spending and raise taxes, further eroding Sri Lankans’
standard of living even as inflation bites. The plunge in the rupee’s value
will eventually boost tourism and other exports, bringing some desperately
needed dollars. But Gota no longer has the credibility to negotiate with the
IMF for fresh loans to tide over the country until that point, nor the authority
to impose painful austerity. Opposition politicians, meanwhile, have no
desire to take responsibility for a mess of the Rajapaksas’ making or to
associate themselves with the unpopular remedies to come. And no
economic repairs are possible while bands of arsonists roam the capital.

Put the country first

To calm the mobs and pave the way for a government of national unity, Gota
must go. But the opposition should put the people before politics, too, and
take some responsibility for extricating Sri Lanka from its predicament. The
outlook may be bleak, but voters will reward the politicians who find a way
out of the present impasse. It was by ending a seemingly endless war, after
all, that the Rajapaksas first won the popular devotion that they have now
betrayed. ■
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from-collapse/21809255
Genetic screening

Whole-genome sequencing of newborn babies

presents ethical quandaries
It can bring medical benefits—but it could also reveal bad news
May 14th 2022

IMAGINE FOR a moment that your unborn child has a rare genetic
disorder. Not something at least vaguely familiar, such as sickle-cell
anaemia or cystic fibrosis, but rather a condition buried deep within the
medical dictionary. Adrenoleukodys trophy, maybe. Or Ehlers-Danlos
syndrome.

Would you, when your child is born, want to know about it? If effective
treatments were available, you probably would. But if not? If the outcome
were fatal, would your interest in knowing about it depend on whether your
newborn had five years of life to look forward to, or ten? Or 30?

Today these questions are mostly hypothetical. Precisely because they are
rare, such disorders are seldom noticed at birth. They manifest themselves
only gradually, and often with unpredictable severity. But that may soon
change. Twenty years after the first human genome was mapped, the price of
whole-genome sequencing has fallen to a point where it could, in rich
countries at least, be offered routinely to newborns. Parents will then have to
decide exactly how much they want to know.

Early diagnosis brings with it the possibility of early treatment. Moreover,

sequencing the genomes of newborns could offer a lifetime of returns. A
patient’s genome may reveal which drugs will work best in his or her
particular case for conditions such as ADHD, depression and cancer.
Combined with information about someone’s way of life, it could highlight
easily discounted health risks such as cancers and cardiovascular disease,
leading to better preventive measures. A database of genomes, matched to
living people, would be a boon for medical research. The fruits of that
research, in turn, would make those genomes more useful to their owners as
time goes on.

Sequencing children’s genomes at birth would also create opportunities to

develop treatments for rare conditions that are typically discovered too late
and in small numbers. There are reckoned to be about 7,000 rare diseases in
the world, affecting 400m people, and most are genetic. At the moment they
are so unusual as to be unattractive targets for big pharmaceutical firms.
With more and earlier diagnoses, that might change.

Such a powerful new technology creates new dangers. Widespread screening

for thousands of potentially harmful genes may be counterproductive: some
results may worry parents unnecessarily, because some genetic variations,
though occasionally indicative of disease, are not strongly so. Parents may
not want to unlock all the secrets that their newborn’s genome might reveal.
Some may indeed prefer not to know about conditions that cannot be treated.
Adult-onset illnesses pose a different dilemma—a reasonable position is that
it should be up to the children themselves, once grown, to decide whether
they want to look at their genomic information. A further concern is that
data will not be kept secure, and may be leaked or otherwise misused at
some point in the future.

In Britain, where a large project to sequence the genomes of newborn babies

is planned to start next year, a consultation process is already grappling with
these questions. Some of the broad principles emerging may be applied to
similar projects in a number of other European countries, and in America,
Australia, China and Qatar. One lesson is to start conservatively. The British
project is likely to begin with a small number of extremely reliable tests that
will improve the way children are treated. This ensures the testing is for the
benefit of the child. Tests that are not firmly diagnostic, or which involve
much follow-up work, are not a priority. Control of the data should be
passed on to children at adulthood. Finding the time to educate parents, so
they can make good decisions, is essential.

It remains to be seen whether the economics of this sort of testing make it

feasible on a national scale. These days the cost has less to do with the
technical expense of sequencing than with the salaries of those providing the
services. But countries that can make this work will be able to start to
harness the full potential of the genomic revolution. It began 20 years ago.
Soon, it will become part of everyday health care. ■
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babies-presents-ethical-quandaries
Letters

Letters to the editor: On central banks and inflation, China,

Ronald Fisher, ketamine, granny flats, email sign-offs
On central banks and inflation, China, Ronald Fisher, ketamine, granny
flats, email sign-offs

Letters to the editor

A selection of correspondence
May 14th 2022

Letters are welcome via email to [email protected]

Zero tolerance on inflation

You correctly noted that there is “nothing special” about the Federal
Reserve’s 2% average target for inflation, except that it “has promised it in
the past” (“The Fed that failed”, April 23rd). Indeed, when Anthony
Diercks, an economist on the central bank’s board, reviewed every optimal
monetary-policy paper made available to the public since the mid-1990s, he
was unable to identify a single one citing 2% as the ideal. Most papers—and
the most highly cited ones—recommend an inflation rate of around 0%.

WILLIAM LUTHER
Associate professor of economics
Florida Atlantic University
Boca Raton, Florida
The stern warning in your special report on central banking (April 23rd)
against overburdening central banks is appropriate. Taking on too many
tasks, such as focusing on inequality and other social ills, risks undermining
their independence by drawing them into politics. After his retirement from
the Bank of England, Mervyn King wrote that, “the biggest threat to the
future and independence of central banks comes from… promising too
much.” The Fed and others have already gone a fair way in informally
taking into account income distribution and other matters of an essentially
political nature into consideration.

An early example of inserting politics into the Fed’s remit, and a root cause
of many of its later problems, is the Humphrey-Hawkins Act of 1978, which
introduced a dual mandate of price stability and maximum employment. The
Fed has the unenviable task of trying to balance these two macroeconomic
outcomes. Like others it seems that the Fed has over time favoured low
unemployment (running the economy red hot) rather than having been
sufficiently alert to early signs of inflation.

ONNO WIJNHOLDS
Washington, DC

Tell it how it is
A letter from the Chinese embassy’s spokesperson referred to the war in
Ukraine as “an international dispute between two sovereign nations” (April
30th), as if it were some sort of mundane trade spat, rather than unprovoked
and brutal military aggression by Russia. She wouldn’t have had to hunt far
to find a precedent. Xi Jinping has described China’s response to invasion in
the 1930s as a “war of resistance…where China resisted the invasion of a
foreign enemy”. This is cited in “China’s Good War” by Rana Mitter, who
notes that the Chinese government “has promoted the new collective
memory” of the second world war “as a way to create a morally weighted
narrative about China’s role in the global order”.

That moral narrative would be more consistent, and that role in the global
order greatly more effective, if Mr Xi, his embassy spokesperson and their
colleagues were to call out the situation in Ukraine for what it truly is.

ANDREW KORNER
Port William, Galloway

Cambridge’s cancel culture

As an alumnus of Gonville & Caius college in Cambridge I have watched its
contortions about Ronald Fisher with dismay (“Window pains”, April 23rd).
If the fellowship truly wanted to take a principled stand about its
predecessors, it could do no better than start with John Caius himself, a man
who wanted to bar scholars who were "deformed, dumb, blind, lame,
maimed, mutilated (or) a Welshman" from entry to the college. For more
contemporary relevance it could turn to Jimmy Carr, a graduate of Caius,
who thinks that the Nazi genocide of the Roma is amusing.

To pick on Fisher, who held views fairly unremarkable for his time, is
simply giving in to those wishing to indulge in some virtue-signalling.
Raking through the historical record for dead people who held views we
now find unacceptable is a fool’s game. Both Churchill and Gandhi would
fall foul of such a process. It consumes energy that would be best directed
towards ongoing injustices.

PAUL WATSON
Cambridge

Drug lows
The use of ketamine to treat depression is being promoted in certain quarters
(“Special K”, April 23rd). In Canada, several medical specialists have touted
its effectiveness. Some are almost delirious in their enthusiasm. I received
ketamine as an anaesthetic for surgery, after being assured of its safety. They
said I would experience a nice little "trip". I have never used recreational
psychedelic drugs. What a trip it was. I awoke in a severe and prolonged
tearful state, with profoundly suicidal thoughts. Two years later the images
and sounds remain vivid and can trigger those same thoughts.

This cavalier use of ketamine is a modern iteration of the psychiatric

experiments carried out in the 1950s at the Allan Memorial Institute in
Montreal.

ASTRID AHLGREN
Ottawa

Housing attachments
“Cottage industry” (April 23rd) pointed out that granny flats, or Accessory
Dwelling Units as they are known, “have taken off in California…as house
prices have soared”. We have a long tradition of these dwellings here. Allen
Ginsberg’s poem, “A Strange New Cottage in Berkeley”, described the one
on Milvia Street where he and Jack Kerouac lived in the mid-1950s.
Unfortunately, it is long gone.
Cottages used to be available for short-term rentals to students and artists,
but landlords are now unwilling to take the risk of expropriation by tenants
who won’t pay, won’t leave, and who are supported by an autocratic rent
board.

TOM BURNS
Berkeley, California

Kind regards
I would have enjoyed Bartleby’s advice on “How to sign off an email” more
had I not been conscious of having committed pretty much every epistolary
sin listed (April 16th). One sin omitted was the sad line that often precedes a
sign-off. “No worries if not” negates everything that has gone before, and
always make me cringe for the writer’s lack of self-worth. Anyway, thank
you in advance for planning to print my letter. Although no worries if not.

LUCY BERESFORD
London

Automated corporate sign-offs can be a bore, especially when they include

legal shields, equivalent to “by reading this message you implicitly agree not
to use it as a reason to sue us”. More interesting is the signature that all
employees at the International Institute for Management Development
(IMD) are encouraged to use: “I am sending this email at a time that suits
me. Please feel free to respond at a time that suits you.” It is a clear
expression of respect for the notion of work-life balance that our hyper
connected lives tend to disregard much too often.

BRUNO LANVIN
President, Smart City Observatory
IMD
Lausanne, Switzerland

Bartleby’s sign-off is oh-so 2010s. Today it is also necessary to state your

preferred pronoun (she/her) and that the message was sent from the
traditional, ancestral and unceded territory of the (fill in the blank) people.

BRENT SUTTON (HE/HIM)

West Vancouver, Canada
The traditional, ancestral and unceded territory of the Squamish people
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By Invitation

Energy and climate: Yemi Osinbajo on the hypocrisy of rich

countries’ climate policies
Russia, Ukraine and China: Senior Colonel Zhou Bo says
the war in Ukraine will accelerate the geopolitical shift from
West to East
Russia and Ukraine: Moritz Schularick argues that
Germany should immediately cut off Russian gas
Energy and climate

Yemi Osinbajo on the hypocrisy of rich countries’

climate policies
Nigeria’s vice-president says they cannot demand more stringent actions
than they will commit to themselves
May 14th 2022

AFRICA NEEDS more energy. Total electricity use for more than a billion
people, covering all 48 sub-Saharan African countries except South Africa,
is less than that used by Spain (home to just 47m). The dearth of power hurts
livelihoods and destroys the dreams of hundreds of millions of young
people.

We must close the global energy inequality gap. Africans need more than
just lights at home. We want abundant energy at scale so as to create
industrial and commercial jobs. To participate fully in the global economy,
we will need reliable low-cost power for facilities such as data centres and,
eventually, for millions of electric vehicles.

If our continent’s unmet energy needs are already huge, future demand will
be even greater as populations expand, urbanisation accelerates and more
people move into the middle class. By 2050, Nigeria will surpass America in
population with over 400m people on current forecasts, with the vast
majority of citizens in cities. Lagos’s population alone will surpass 30m
people.

The Nigerian government remains committed to universal energy access,

and all Nigerians deserve to enjoy the benefits of modern energy that are
taken for granted in the rich world. We should aim to generate a national
average power output of at least 1,000 kilowatt-hours per person which,
combined with population growth, means that by 2050 we will need to
generate 15 times more electricity than we do today. That ambitious goal
will require vast resources.

President Muhammadu Buhari has also pledged that Nigeria will reach net-
zero emissions by 2060. We are currently implementing power sector
initiatives and reforms focused at expanding our grid, increasing generation
capacity, and deploying renewable energy to rural and underserved
populations. We aim to end wasteful gas flaring by 2030, instead leveraging
this domestic resource for our own economic growth. Reaching both our
development and climate ambitions, however, will require far more external
support and the same policy flexibility that rich nations claim for themselves
in the energy transition. We cannot achieve our goals otherwise.

Despite the tremendous energy gaps, global policies are increasingly

constraining Africa’s energy technology choices. Rich countries, especially
in Europe, have repeatedly called for African states to use only renewable
power sources. This is partly because of a naive belief in leapfrogging, the
assumption that, like skipping landlines for mobile phones, Africa can ‘leap’
to new energy technologies. The renewables-only mantra is also driven by
unjustified fears of the continent’s future emissions. Yet under no plausible
scenario is Africa a threat to global climate targets. Such demands extend
even to cooking, where some funders will not support any gas projects
although they bring immediate and substantial benefits. The vast majority of
Africans still use charcoal or wood to cook, leading to deforestation, early
death from indoor air pollution and avoidable carbon emissions.

Instead of viewing Africa’s emergence as a threat to be blocked, the

continent should be seen as a tremendous opportunity. The challenge for the
continent is to transition to net-zero emissions while at the same time
building sustainable power systems to drive development and economic
opportunity. The EU’s recent decision to label natural gas and nuclear power
as green investments recognises a critical truth: different countries will
follow different paths in the energy transition. If this is true for Europe, it’s
even more true for diverse African nations.

A promising step was announced last year in Scotland at COP26, the annual
UN climate talks, when South Africa received an $8.5bn package to
accelerate its energy transition. It is high time to extend that kind of support
to the rest of the continent. Nigeria has four times South Africa’s population
and yet uses just one-eighth as much electricity. COP27 will be held in
Egypt in November. Now is the ideal time to reset global policy so as to
bolster Africa’s plans for producing clean energy. Wealthy countries have
contributed the most to climate change, and they cannot demand more
stringent actions than they will commit to themselves.

First, developed nations should commit to funding in full Africa’s energy

transition. This is both a moral imperative and an environmental necessity.
We estimate that Nigeria requires $400bn of new investment above
business-as-usual spending to meet its net-zero pledge. A green energy
package, akin to South Africa’s, should offer at least $10bn per year over the
next two decades. Investments would cover not only new renewable
generation projects, but also transmission infrastructure, smart grids, data
management systems, storage capacity, electric vehicles, clean cooking, and
the costs of integrating new distributed energy systems.

Second, there must be a hiatus on blanket bans for fossil-fuel financing in

developing countries. Coal investment is already dead in most of Africa and
any future oil investment will come from private sources. But financing
rules on natural gas will greatly affect our development and our energy
transition to net zero. Though solar will provide most of our power in the
future, we still need natural gas for baseload power and balance. We insist
that liquefied petroleum gas (LPG) be included as a clean cooking
alternative to save the lives of our women and girls and to protect our own
natural environment. Europe says it needs a decade more of gas investment
to meet its 2050 climate targets. Africa—with our greater challenges—
should have at least two more decades in order to meet our climate targets.
The world cannot tackle collective challenges if poor nations are treated as
second class, or their aspirations are ignored. After enduring colonialism,
decades of unfair economic practices and covid-19 vaccine apartheid, we
cannot accept regressive climate policy as another injustice. Tackling the
dual crises of poverty and climate change can only succeed if all countries
play their fair part–and all of humanity is lifted up together.

Yemi Osinbajo is the vice-president of Nigeria.

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of-rich-countries-climate-policies
Russia, Ukraine and China

Senior Colonel Zhou Bo says the war in Ukraine

will accelerate the geopolitical shift from West to
East
The more popular it becomes to join NATO, the more insecure Europe will
be
May 14th 2022

IF THE ENEMY of my enemy is my friend, is the enemy of my friend also

my enemy? Not necessarily. Or so China’s thinking goes when it comes to
the raging Russian-Ukranian war. On the one hand China is Russia’s
strategic partner. On the other, China is the largest trading partner of
Ukraine. Beijing therefore tries painstakingly to strike a balance in its
responses to the war between two of its friends. It expresses understanding
of Russia’s “legitimate concerns” over NATO’s expansion, while
underlining that “the sovereignty and territorial integrity of all countries
must be respected”.

Such carefully calibrated neutrality may not be what the warring parties
really want, but it is acceptable to both. If China joins the West in
condemning Russia, it will be much applauded in Washington and most
European capitals. But it will lose Russia’s partnership. And it is only a
matter of time before America takes on China again. The Biden
administration’s policy towards my country is “extreme competition” that
stops just short of war.

Obviously, the conflict in Ukraine has done tremendous damage to Chinese

interests, including its Belt and Road initiative in Europe. But Beijing
sympathises with Moscow’s claim that the root cause of the conflict is
NATO’s inexorable expansion eastward after the fall of the Soviet Union.
All Russian leaders since Mikhail Gorbachev have warned of the
consequences of such expansion. Russia feels that it cannot allow its
Ukrainian brethren to leave Russkiy mir—the Russian world—to join
another camp. If NATO looks like Frankenstein’s monster to Russia, with
new additions here and there, Vladimir Putin probably believes he must slay
the creature.

The future of Europe is not hard to fathom. Mr Putin’s all-out war against
Ukraine has failed. Precisely because of that, he will fight until he can
declare some sort of “victory”. Presumably this will involve Ukraine’s
acceptance that Crimea is part of Russia, its promise not to join NATO and
the independence of the two “republics” of Donetsk and Luhansk. The
challenge is whether Russian troops are able to control Donbas after
occupying it.

A protracted war looks probable, if not inevitable. The situation bears

similarities to the one in Afghanistan during Russia’s war there in the 1980s.
An American-led alliance sent endless weapons to the mujahideen who
managed to bog down and exhaust the invading Soviet soldiers.

Thanks to the crisis, a brain-dead NATO has revived. In February Germany’s

chancellor, Olaf Scholz, created a special €100bn ($105bn) fund for defence
and announced that his country would spend 2% of its GDP on defence
every year—a NATO guideline. It will beef up the alliance and bolster the
idea of European “strategic autonomy” (little more than a French slogan
until now).

The irony is that the more popular NATO becomes, the more insecure
Europe will be. If Finland joins NATO, as looks likely, the alliance’s troops
would be a stone’s throw from St Petersburg. The Kremlin has warned that
such a move would end the “non-nuclear status of the Baltic Sea”. This
could be a bluff. But who knows? If NATO’s worst fear is that Russia might
launch a tactical nuclear attack, then why keep poking Mr Putin in the eyes?
Europe’s security, now as in the past, can only be achieved with Russia’s co-
operation.

In recent months speculation abounded that Beijing and Moscow’s

“unlimited” partnership—announced during Mr Putin’s visit to China in
February for the Winter Olympics—might usher in a military alliance. But
the war in Ukraine has inadvertently proved that Beijing and Moscow’s
rapprochement is not an alliance. China didn’t provide military assistance to
Russia. Instead it provided humanitarian aid and money to Ukraine twice,
including food and sleeping bags, and has pledged to continue to “play a
constructive role”.

One reason behind the Sino-Russian non-alliance is that it allows a

comfortable flexibility between two partners. And in spite of the fact that
China and Russia both call for a multipolar world, a non-alliance suits them
because they see such a world differently. Mr Putin’s Russia is nostalgic for
the heyday of the Soviet empire. (He lamented its demise as “the greatest
geopolitical catastrophe” of the 20th century.) Russia sees itself as a victim
of the existing international order. By contrast China is the largest
beneficiary of the rules and regulations of global commerce and finance
made by the West after the second world war. China has a huge stake in
safeguarding the existing international order. This is why, despite ideological
differences and even tensions sometimes, China has at least maintained
robust economic ties with the West. Neither side wishes to sever them.

How America can focus simultaneously on two theatres—the Indo-Pacific

and war in Europe—remains to be seen. Joe Biden had hoped to put Russia
policy on a “stable and predictable” footing in order to focus on America’s
Indo-Pacific strategy. The war in Ukraine undoubtedly will distract
America’s attention and syphon away resources. It will further hollow out
Mr Biden’s Indo-Pacific strategy, which already has too many aims and too
few tools and not enough supporters. The question is for how long Mr Biden
will allow Ukraine to remain a distraction. In a region where China is the
largest trading partner of most countries, even America’s greatest allies
wouldn’t wish to sacrifice their relationship with China for the benefit of
America.

Is the Russia-Ukraine war a turning point that heralds new global disorder?
Rumour has it that when China’s Premier Zhou Enlai was asked what he
thought of the French Revolution of 1789, he supposedly said that it was too
early to tell. But perhaps it isn’t too early to say that the war in Ukraine will
accelerate the geopolitical and economic shift from the West to the East.
China standing in the centre matters all the more, and it should stand firm as
a stabiliser.
_______________

Senior Colonel Zhou Bo is a retired officer of the People’s Liberation Army

and a senior fellow at the Centre for International Security and Strategy at
Tsinghua University, Beijing and a China Forum expert.
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war-in-ukraine-will-accelerate-the-geopolitical-shift-from-west-to-east
Russia and Ukraine

Moritz Schularick argues that Germany should

immediately cut off Russian gas
The economist and academic says the country can survive more easily
than some people think
May 14th 2022

WHEN GERMAN diplomats in Brussels recently tried to convince their

Hungarian counterparts to sign up to the European Commission’s plan for an
embargo on Russian oil, they heard arguments that must have sounded
familiar. Until recently, Germany also rejected such calls as unrealistic and
economically disruptive. “Geht nicht” (“Can’t do”) was the mantra from the
chancellor’s office.

But on April 26th Robert Habeck, Germany’s economy minister, declared

that the country could stop all Russian oil imports “within a few days”. What
happened? The problem turned out to be less intractable than many had
assumed. Mr Habeck’s team had secured alternative supplies of crude for
two east German refineries that process Russian oil.
Germany has been too cautious on nearly everything about the Russian
attack on Ukraine. It was slow to recognise the imminence of the invasion
and slow to fall in line during the debate about excluding Russian banks
from SWIFT, an international payment network. It was late in supplying
weapons to Ukraine when it mattered most, during the initial Russian attack.
And it was slow on oil, until Mr Habeck’s U-turn.

A similar shift may follow when Germany confronts a yet more important
decision: what to do about Russian gas. Over the past two decades, Russia
won over substantial parts of the German political and business elite with the
promise of cheap gas as the basis for the competitiveness of German
industry. Close ties to and dependence on Vladimir Putin’s Russia were
dismissed by alluding to the success of German “Ostpolitik” since the 1970s.
Now as then, economic integration would reduce the risk of confrontation
and eventually lead to political rapprochement. In the process, dependence
on Russian gas imports increased until they were meeting 55% of
Germany’s needs in 2021. That share has dropped to less than 40% this year.
Gas is now Russia’s second-biggest source of export revenues.

For now, Germany remains staunchly opposed to imposing an immediate

gas embargo. Government talk of “mass poverty” raised the spectre of a
major economic downturn should the country lose Russian supplies. In a
tight corporatist embrace, industry and unions supported the government’s
“can’t do” attitude.

But here, too, the wind is changing. It is increasingly clear that the German
economy could weather the shock of an immediate cut-off of Russian gas.
Even the government’s most pessimistic scenarios are not far worse than the
original 3% drop in output that an international team of researchers (of
which I was part) estimated in March. These costs are substantial, not unlike
those during the covid-19 pandemic, but would be manageable—especially
since Germany has ample fiscal space to compensate workers in energy-
intensive industries, such as chemicals and glass production, over the winter.
Not pushing for a faster cut-off from Russian gas is a political choice, not an
economic one. Yet for now, Berlin sticks to its 2024 target of becoming
independent from Russia.
Whether such costs are worth it is for elected politicians to decide. But
economics has something to say on the potential trade-offs. To start with,
doing nothing also carries considerable costs—not least to Ukrainians in
bomb shelters. The flow of gas money allows Mr Putin to press ahead with
his war. The longer it lasts, the worse the downgrades to European growth.

It is difficult to quantify what contribution a full energy embargo would

make to ending the war. The sanctions imposed on Iranian oil and gas
exports in the past decade have crippled Iran’s economy. In Russia’s case,
the effect on the state budget would be particularly big. About 40% of
Russian government revenues are linked to commodity exports. Although
Mr Putin could fix a budgetary hole by printing money, the ensuing inflation
could weaken his control over the country and limit his ability to grease
allies’ palms.

Yet whatever the exact cost of a gas embargo, it would be far greater for
Russia than for Germany. As an open economy Germany, unlike Russia, has
access to an insurance mechanism to cushion the effects: trade. Take the
example of energy-intensive glass production, a sector that features
prominently in the German debate (although it accounts for only about 0.1%
of GDP). An interruption of gas supplies in the winter would be bad for
German producers. But German consumers of glass could still buy products
from other countries—just as they can with energy. The German trade
balance would deteriorate, but openness to trade gives the country the ability
to import energy indirectly at various points in the value chain. Some
particularly energy-intensive industries could face more permanent
challenges to maintain domestic production without cheap Russian gas. But
this fate is in the cards anyway over the next decade, as the green
transformation of the German economy picks up speed.

By contrast, Russia’s gas pipelines mainly go west to Europe. Rerouting gas

to Asia is impossible in the short run, especially if sanctions also cover the
shipping sector and maritime insurance. Russian liquefied natural gas
capacity is limited, as is storage. All of this means the gas must keep
flowing. Otherwise Russia will have to burn off the excess gas, or seal the
fields. Within a short time, Germany, not Russia, would have the upper
hand.
The main risk for Germany is not turning off the Russian gas taps
prematurely, but to delay doing so. The summer months offer a chance to
pivot away from Russian gas. If German industry is not forced to begin the
adjustment soon, Mr Putin will be in an even stronger position come winter.
It is time to break with the habit of “geht nicht”, and for the country to step
up.
_______________

Moritz Schularick is a professor of economics at Sciences Po in Paris and

the University of Bonn.
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germany-should-immediately-cut-off-russian-gas
Briefing

India’s economy: A new formula

A new formula

India is likely to be the world’s fastest-growing big

economy this year
Can the expansion continue?
May 14th 2022 | BANGALORE, DELHI AND MUMBAI

THE TRIALS and transformation of India’s economy have an epic quality,

reminiscent of 19th-century America. A vast national market is being
created, allowing firms to grow from economies of scale. Internal migration
is shifting tens of millions of desperately poor people; a brash new consumer
class is proliferating and empires are being built on new technologies.
Tycoons unleashing vast investments are happy to debate if they are India’s
Rockefeller or its Carnegie.
In 2014, when Narendra Modi began his first term as prime minister, India
was the world’s tenth-largest economy. In the following seven years it grew
by 40% (see chart 1); of big economies only China did better, with 53% over
the same period. Growth this year of 8% will be the highest among big
countries, according to the IMF. It predicts that by 2027 India will be the
world’s fifth-largest economy, with a GDP of roughly $5trn at market prices.
In terms of the size of its stockmarket it has already reached the number-four
spot, behind only America, China and Japan (see chart 2). And with a herd
of about 100 unicorns (unlisted startups worth over $1bn), India is third only
to America and China.
Behind those figures lie ups and downs and bitter controversy. Mr Modi’s
decision to void high-denomination banknotes in 2016 saw growth drop
from 10% to 5% over the following nine months. A crisis at shadow banks
led to a financial scare in 2018, slowing growth again. The lockdowns in the
first half of 2020 saw GDP temporarily drop by a quarter.

Yet, as the pandemic recedes, four pillars are clearly visible that will support
growth in the next decade: the forging of a single national market; an
expansion of industry owing to the renewable-energy shift and a move in
supply chains away from China; continued pre-eminence in IT; and a high-
tech welfare safety-net for the hundreds of millions left behind by all this.

Mr Modi was elected on a platform of “minimum government, maximum

governance”. That is not really what he has served up. There is still a lot of
government in India, and the threat that Mr Modi poses to its democratic
nature worries observers inside and outside the country. Indeed, one of the
reasons India’s performance is less admired than it might be is that people
are reluctant to highlight it lest they be seen as endorsing Mr Modi.

But a realistic approach to things which government can and cannot do has
paid dividends—despite being based on truths which Mr Modi would never
publicly affirm. His government sees that second-best policies forcefully
implemented are better than immaculate plans that never happen. It acts on
the basis that the country can industrialise, but not as fast as East Asia did.
Though it sees the potential in the rise of tech platforms, the shift to clean
energy and the redesign of the world’s supply chains, it appreciates that the
age of open globalisation that China exploited in the 1990s and 2000s is
over. And it knows that if it is to win a continual cycle of elections (the next
national poll is in 2024), economic disruption must be combined with instant
gratification for the mass of voters.

The first and most important pillar of India’s new growth pattern is the
emergence of a single national market in which more firms and consumers
use the modern financial system. This is fast superseding regional markets
and informal businesses using mainly cash, which accounted for two-fifths
of output and 87% of jobs five years ago. Much of the reform and
investment underpinning this change predate Mr Modi, but he has expedited
them.

Infrastructure is crucial. The national highway network is over 50% longer

than it was in 2014 (it also uses a digital tolling system to avoid queues).
The number of domestic air passengers has doubled; air-freight volumes are
up by 44%. There are more than three times as many mobile-phone base
stations, supporting 783m broadband subscribers. Wall Street private-equity
firms are competing to create networks of warehouses across India.
In addition to all this tarmac and concrete is the “India stack”, a unitary
national digital infrastructure created by the state and championed by Mr
Modi. This includes Aadhaar, a biometric identity system for all Indians; a
push to make sure everyone has a bank account; and a national payments
system known as UPI. A huge obstacle to trade between states has been
removed by the adoption of a nationwide goods-and-services tax (GST) in
place of umpteen local levies. As a result, more businesses are being
dragged into the daylight, using modern banking and perhaps paying taxes.
Payments via UPI have risen from the equivalent of 13% of monthly GDP in
January 2020 to 50% in April 2022. Receipts from GST reached the
equivalent of 8% of monthly GDP in April (see chart 3). Tax evasion is
getting harder.

Competition in a national marketplace has been bad news for smaller firms
that were reliant on tax-dodging and captive markets. The covid-19 slump
hit them badly, too: by some estimates, 10-20% have failed during the past
few years. Investment by households, which operate lots of tiny informal
businesses, has dropped from 16% of GDP a decade ago to 10%. Bigger
firms that have brands, scale and technological perspicacity have grown. For
example, Titan, the leading firm in the jewellery trade, boosted sales by a
third and floor space by a fifth during the pandemic. A new bankruptcy code
that makes it harder for zombie firms to stagger on is also spurring
consolidation. Formalisation and consolidation, in turn, presage a leap in
productivity. McKinsey, a consultancy, reckons India’s top 600 firms are 11
times more productive than the average.

The second pillar of India’s new growth concerns industry. India has long
dreamed of becoming a factory for the world. But manufacturing’s share of
output has remained stuck at 17-18% over the past decade as corporate
investment by all firms has idled at the equivalent of 9-12% of GDP. The
country accounts for a paltry 1.9% of global exports of goods.

Bigger and bigger business

Big companies with large cashflows are looking to change this. Saurabh
Mukherjea of Marcellus, an asset manager, calculates that India’s top 20
firms earn 50% of corporate India’s cashflows. They are making money fast
enough to take risks with their earnings instead of having to borrow to
excess. The ambitious giants include conglomerates—Adani (energy,
transport), Reliance Industries (telecoms, chemicals, energy, retail), Tata (IT,
retail, energy, cars)—and more focused giants such as JSW (mainly steel).

Those four firms alone plan to invest more than $250bn over the next five to
eight years in infrastructure and emerging industries; in doing so they intend
to develop local supply chains, which fits with government goals. Mukesh
Ambani of Reliance says he will cut the price of green hydrogen to $1 per
kilogram by 2030, for instance, from about $5 today. Tata is rolling out
battery plants, electric vehicles and semiconductors. These are huge, risky
bets that few other firms would dare take.

There are worries about excessive corporate power, monopolies and, in

some cases, cronyism. If the firms accrue yet more economic power through
their investments, such concerns will surely grow. At the moment, though,
the ratio of those four firms’ profits to national GDP is 0.7%, half the
equivalent ratio for the four tech giants which are currently America’s
biggest companies. The government seems happy with big business, given
its high reinvestment rates.

Hoping to benefit from multinationals’ efforts to diversify away from China,

Mr Modi’s lieutenants are also handing out $26bn in subsidies over the next
five years for investment in 14 industries. These “production-linked
incentives” (PLIs) pay out as firms’ revenues expand in such fields as solar
panels, batteries and pharmaceuticals. Samsung from South Korea and
Foxconn from Taiwan are using PLIs to make more mobile phones in India.
Local companies, such as Ola Electric, an affiliate of a big ride-hailing firm,
are also taking advantage of them. Ola has built a large e-scooter factory
90km from Bangalore with the goal of becoming a global force.

The government wants to catalyse manufacturing. The danger is that benign

intentions degenerate into cronyism and protectionism. Still, although $26bn
amounts to only roughly 1% of all expected corporate investment over the
next five years, in the short run the policy is having the intended effect.

The new edifice’s third pillar is founded on a long-standing strength:

technology. India’s IT-services and outsourcing industry has doubled in size
over the past decade. Its annual revenues are now $230bn. That has made
India the world’s fifth-biggest exporter of services, despite being only 16th
in goods. A global shortage of software engineers, and the fact that software
is increasingly supplied as a service from the cloud, mean that the trend is
likely to continue. India’s biggest difficulty is now finding talent. Some 5m
people already work in tech and there is a red-hot market for new workers.

The combination of engineering skills, mobile data and a national tech stack
has created lots of startups. They have gone from providing e-commerce,
delivery and ride-sharing services for the 10m-20m richest Indians to
seeking opportunities further down the economic pyramid. And Bangalore’s
low-key tech culture is fostering a new generation of firms that are closer to
the global frontier of innovation, for example in space, drones and batteries.
Four such “deep-tech” firms that spoke to The Economist all use domestic
research and development and are targeting exports for over half of their
sales. A rich venture-capital system can finance firms throughout their life-
cycle, from angel funding to public offerings (which financial reforms have
made easier). A local venture capitalist reckons there is a pipeline of 10,000
plausible startups created each year.

The single market, industrial policy and technology seem likely to bring
about a pick-up in growth from the 5.4% year-on-year rate reported in the
final quarter of 2021. A mortgage banker says, “I have never seen this kind
of demand for loan applications in 40 years.” Demand for electric vehicles is
booming, a manufacturer exults. Capital spending is starting to revive,
according to an index compiled by CMIE, an analysis firm. Exports are
rising.

What, though, of jobs? Formal employment is rising: enrolment in the

national social-security scheme for formal blue-collar workers has risen by
19m, to 56m, since early 2020. But that reflects the formalisation of the
economy. The share of Indians aged over 15 in work of any sort was 55% in
2012 but only 51% in 2020. Sluggish jobs growth, with a paucity of women
in work, are long-standing problems. The jobs that exist are often miserable.

Hence the fourth pillar, digital welfare, with payments for some 300
schemes for needy Indians, from job support to fertiliser subsidies, sent
straight to people’s bank accounts. This cuts out bureaucrats and allows
spending on a staggering scale. In the year to March, payments reached
$81bn, or 3% of GDP, up from 1% four years earlier. Payments have totalled
$270bn since 2017. Roughly 950m people have benefited, at an average of
$86 per person per year. That makes a difference to struggling households:
India’s extreme poverty line is about $250 per person per year at market
exchange rates. Mr Modi has not managed to initiate a national jobs boom,
but he has created a national safety-net of sorts.

Money for the masses

These four pillars could sustain a transformation of India’s economy over
the next decade. It would have a core of highly productive firms. Digital
services would mean most people’s consumption took place efficiently in the
formal economy (even if their jobs remained informal), raising productivity
and channelling funds into the banking system. All this would be taxed,
allowing the government to pay for redistribution, using the direct welfare
system to placate a great mass of underskilled and under employed people.

One risk to this vision is economic instability. India is dependent on inflows

of capital to finance its current-account deficit. Though it uses almost a fifth
less oil per unit of GDP than it did a decade ago, almost all of that oil is
imported. When interest rates and commodity prices rise, it tends to suffer.
Welfare spending has helped push the budget deficit to 10% of GDP and
public debt to 87% of GDP. On May 4th India’s central bank raised interest
rates from 4% to 4.4% in response to inflation and the global tightening of
monetary policy.

That said, the financial system is more resilient than it was. Banks’ bad
debts have at last been cleaned up. A growing pool of domestic investors
offer resilience should foreigners feel forced to flee. And formalisation of
the economy gives the government more tax-raising clout.

Another danger is Mr Modi’s style of rule. Businesspeople know he is not

the progenitor of all that is working well; he did not invent the tech stack,
road-building or unicorns. But they see a government that is more consistent
and less corrupt than its predecessor. What is more, his political dominance
provides continuity. “They are not ideas guys, but they are open,” says one
company founder. “Modi puts the full weight of the system behind it. They
are able to kick butt, to get it done.”

A penchant for quick, second-best decisions has costs, though. Intractable

problems fester. Despite surging private investment in renewable energy, the
state-owned firms that distribute electricity are bankrupt and supply is
unreliable. Education remains terrible. Although school enrolment has risen
to over 90% for children under 16, many leave barely literate. More efficient
welfare is not a substitute for a system in which people are more fully able
to realise their potential, rather than be left on tiny farms as automated
factories pass them by. Too little is being done to prepare such farms, or the
country as a whole, for the ravages of climate change.

There are other disturbing aspects to the mindset of Mr Modi’s BJP. The
ideology of self-reliance and habit of tinkering with tariffs could yet morph
into full-blown protectionism. The culture of intimidation it fosters in the
political world could become a bigger feature of the business world, too. It
has already bullied the press and eroded judicial independence.

So far the economy seems to be insulated from the religious tensions that the
BJP continuously heightens to sustain itself in power. This is not new. In
2002, in the last big bout of religious violence, over 1,000 people, most of
them Muslims, were killed in riots in the state of Gujarat. But the economy
shrugged off the horror: the national stockmarket dipped by 4% for a day
and then recovered. Gujarat’s GDP grew by 8% the following year, twice as
fast as the national economy—growth which helped Mr Modi, then the
state’s chief minister, rise to his current office.

Unlike, say, ethnic Chinese in Indonesia, India’s persecuted Muslim

minority does not have a disproportionate role in business. Their exclusion
reflects discrimination. It also limits the potential scale of any capital flight
should things deteriorate further. But there is a chance that sectarian violence
could return on a large scale. And Mr Modi’s chauvinism could also damage
the economy by destabilising the federal system. Promoting Hindi as a
national language goes down badly in the south and Maharashtra, which
have disproportionate economic weight. A potential redrawing of India’s
parliamentary seats could heighten regional tensions. The government’s
sinister tendency to undermine rival sources of power could obfuscate
problems and promote cronyism.

Mr Modi wants to restore Indian greatness. For him, that seems to involve
not only bolstering Hindu pride at the expense of minorities, but also
building a large, integrated, high-tech economy. So far the two ambitions
have gone together, but that may not always be so. India’s Rockefellers and
tech stars are hoping that the country’s economic modernisation and
unification will survive his divisive politics. ■
This article was downloaded by calibre from https://www.economist.com/briefing/2022/05/14/india-is-likely-to-be-the-worlds-
fastest-growing-big-economy-this-year
Asia

India: Saffron nation

Crisis in Sri Lanka: The morning after
Australian politics: For whom the teals poll
North Korea and the virus: State of emergency
Banyan: One-way street
Japan’s far-flung islands: Base case
Saffron nation

How Narendra Modi is remaking India into a

Hindu state
The prime minister and his party are laying waste to the secular
underpinnings of the constitution
May 14th 2022 | DELHI

THE PATTERN is plain to see. On the occasion of a religious festival,

youths affiliated to the sangh parivar, or the Hindu-nationalist “family of
organisations”, march through a densely packed slum. When the rowdy
young men, sporting saffron-coloured clothes or flags and brandishing
swords, reach a mostly Muslim neighbourhood, their chants turn to taunts
and insults. Muslim boys start throwing stones. In the ensuing fight shops
get looted, houses burned and lives lost. Reporters tally the damage. This is
typically lopsided, inverting the proportions of India’s 79% Hindu majority
and 15% Muslim minority. No matter. The sangh gleefully choruses its
mantra: “Hindus are in danger! Unite!”

Over the past 50 years, Indian governments have repeatedly dampened such
local eruptions by mouthing words of regret, paying a bit of compensation
and tapping some retired worthy to write a soon-forgotten report. No longer.
The Bharatiya Janata Party (BJP) which rules both at the centre in Delhi, the
capital, and in about half of India’s states, is itself a child of the sangh. Many
of its top leaders started as foot soldiers in just the sort of gangs that so
predictably spark trouble.

Small wonder that as a bigger-than-usual spate of nasty communal clashes

broke out across a swathe of central India during this spring’s festival
season, BJP officials made scant effort to calm things. Instead they loudly
invoked the right of Hindus to “practise their faith”, blamed Muslims for the
violence and demanded exemplary punishment. Following a mini-riot in
Delhi on April 16th, provoked once again by sword-waving youths
menacing a mosque, Kapil Mishra, a local BJP leader, quickly spun the
events as a Muslim conspiracy. “They should be identified and their homes
should be bulldozed,” he declared. A few hours later bulldozers duly rolled
in, smashing Muslim property for alleged building-code violations.

The increasing use of summary collective punishment is disturbing enough

—the demolitions in Delhi followed identical post-pogrom targeting of
Muslims in three other BJP-ruled states. More telling still has been the
response from higher up in the party, and in particular from Narendra Modi,
India’s prime minister. The leader’s reaction to months of sporadic
communal violence and rising social tension, and to loud calls from
activists, politicians and even retired civil servants for him to do something
has been absolute silence.

To many Indians and in particular to the country’s 200m Muslims, the

world’s biggest religious minority, the government’s shrug of indifference to
growing distress is deeply ominous. It does more than offer tacit approval to
mob violence and mob justice. It suggests that in the emerging Hindu
rashtra (state) envisioned by the sangh, some will always be more equal
than others, with religious identity becoming a measure of citizenship. It
also suggests that what lies in India’s future may not merely be further
sporadic, localised troubles, but something wider and more painful.

India has long stood out proudly in Asia, precisely because of its success in
building a nation from an extraordinary diversity of religions and ethnicities.
It has enjoyed both democracy and relative peace, even as its neighbours
succumbed to majoritarianism. Pakistan tried to shove the Urdu language
down Bengali throats, sparking a bloody war that gave birth to Bangladesh.
Sri Lanka’s Sinhala majority sought to lord it over the island’s ancient Tamil
minority, triggering a 26-year civil war that left 300,000 dead. Even tiny
Buddhist Bhutan hounded out its entire Nepali Hindu minority—a sixth of
its population—in the 1990s. Majority muscle-flexing has reduced all too
many Asians from citizenship to tenuous subjecthood.

With its robust democracy, independent courts, noisy press and fissiparous
diversity even within big categories such as Hindus, could India really
embrace majoritarian rule? Surely this goes against the grain of its own
history. In the messy partition at the end of British rule in 1947, Muslims
who feared Hindu majoritarianism created the new state of Pakistan, while
those who hoped for an all-embracing, secular country remained with India.

White flags
Over time, however, the secular notions enshrined in India’s constitution
have decayed. In 1992, when Hindu extremists demolished a 16th-century
mosque, which they claimed was built on the site of the god Ram’s birth in
the northern town of Ayodhya, they sparked a decade-long cycle of
bloodshed. India’s establishment was, by and large, appalled. Yet in 2019,
when the Supreme Court ruled that although the demolition was a crime, the
property should be given to a Hindu trust, the same establishment cheered.
During this period the institutional vigilance needed to sustain pluralism had
slowly eroded, with police, courts and the press across much of India
growing partisan. The global wave of Islamist terror in the 2000s, which also
struck India hard, did not help. The use of disparaging language about
minorities was long shunned in polite society. It is now increasingly
acceptable. Even as Muslims grew as a share of population, their numbers in
Parliament, the civil service and security forces did not (see chart).

Hindu-nationalist dogma has filtered into mainstream discourse by a slow-

drip process. This has been propagated by the Rashtriya Swayamsevak
Sangh or RSS, a volunteer service corps founded in 1925 and once regarded
by many Indians as cranks. Myriad affiliated groups (including the BJP)
with tens of millions of members, amplify the word. Their main message,
that Hindus must unite to face imminent danger, may sound absurd in a
country with an unassailable preponderance of Hindus. But the urgency and
passion of the cry, set against the heroic narrative of a Hindu reconquista
after centuries of Muslim and European rule over Mother India, is
irresistible for many.

And as the BJP has found, promoting “Hindu consolidation” by pointing to a

common enemy—generally Muslims—is electoral magic. It erases the
divisions of caste and ethnicity that for decades fragmented the Hindu
electorate, and in doing so gave minorities some weight in the game. Again
and again the BJP has entered a contest, stirred up hatred, and walked off
with victory. That success has brought more power and more money in a
self-reinforcing cycle, such that even Mr Modi’s political rivals now
compete in burnishing their pukka Hindu credentials rather than in
defending secular ideals, let alone defending actual Muslims.

In this way, a narrative of the awfulness of Muslims has grown increasingly

entrenched, and is all the more easily exploited by the sangh’s zealots. In
states ruled by the BJP this shows in policies to counter such imagined
abuses as “love jihad”, “land jihad” and “job jihad”, supposed campaigns to
usurp Hindu women, property and opportunities. Petty rules are imposed to
ban veils in schools, ban public prayers, ban the Muslim call to prayer and,
in the BJP-ruled state of Karnataka this year, even to ban Muslim street
traders from plying their wares near Hindu temples. Tightened restrictions
on cattle slaughter, violently enforced in many parts by vigilantes tacitly
supported by the state, have recently been followed by efforts to proscribe
halal butchery of any kind. Yet another campaign seeks to delete Muslim-
sounding names from Indian maps.

At the most extreme end of the Hindu-nationalist spectrum, speakers at

public rallies across northern India in recent years have launched bidding
wars of threats against Muslims, from mass rape to mass expulsion. On May
7th Hari bhushan Thakur Bachaul, a BJP politician in Bihar, in eastern India,
declared that Muslims should be burned alive just like effigies of the Hindu
demon Ravana.

All but a tiny portion of Hindus regard such talk as madly over the top. Yet
in part because of the reluctance of either Mr Modi or his RSS mothership to
intervene, the demonising tone has become commonplace, and not just
regarding the Muslims minority. Other groups such as Dalits, leftist activists
(dismissed as “urban Naxalites”) and liberal do-gooders (smeared as
“libtards” and “pseudo-seculars”) have become the targets of digital troll
armies and, dismayingly often, of the law.

The large Christian (35m) and Sikh (25m) minorities are not spared, either.
False rumours of conversion, in many cases fanned by BJP-appointed
officials, have led to mob attacks on priests and church-run schools. When
farmers, many of them Sikhs from Punjab, protested against farming reforms
last year, the BJP tried to link them to Sikh separatist groups that mounted
an armed insurgency in the 1980s.

Green light
Such charges carry ominous echoes. In 1984, angered by military operations
in Punjab, Sikh bodyguards assassinated Indira Gandhi, the prime minister
of the day. Anti-Sikh pogroms erupted in some 40 cities, with police often
failing to intervene. The death toll is estimated at 10,000-17,000. Given the
mounting drumbeat of intimidation against the far bigger Muslim minority,
it is frightening to think what spark it might take to set off a similar
conflagration today. And Mr Modi’s record as chief minister in Gujarat,
where his government did nothing to prevent bloodshed during anti-Muslim
rioting in 2002, does not offer reassurance in case it does.

So far, India’s Muslims have responded to the accumulating humiliations

with remarkable cool. When the city’s bulldozers growled into a Muslim
part of Delhi on May 9th for more punitive “enforcement of building codes”,
residents simply surrounded them in such numbers that they could not move.
But it would be foolish of Mr Modi to imagine that more and more wood
can be piled on a pyre, without risk of burning the whole village down. ■
This article was downloaded by calibre from https://www.economist.com/asia/2022/05/14/how-narendra-modi-is-remaking-india-into-
a-hindu-state
The morning after

Sri Lanka has no money and no government.

What now?
The prime minister and the cabinet are gone but the president clings on
May 14th 2022 | COLOMBO

FOR MORE than a month the anti-government protesters camped along

Galle Face, the seafront in the Sri Lankan capital of Colombo, had been
mostly peaceful. They were demanding the departure of the president,
Gotabaya Rajapaksa, and the prime minister, Mahinda Rajapaksa, his
brother. There were tents, stages for political plays, and singing. “Go home
Gota!” their signs read, using the name by which the president is commonly
known. He did not budge. Neither did the protesters.

All that changed on May 9th when hundreds of government supporters

descended on the camp at Galle Face and other protest sites in the city.
Unmolested by police, they attacked the demonstrators and burnt down their
tents. Many had come straight from a meeting at the residence of the prime
minister, who had hosted them in a bid to cling to his job. As anti-
government protesters counter-attacked and the violence began to spiral out
of control, the prime minister at last heeded calls to resign, in the process
triggering the dissolution of his cabinet.

In theory, that should pave the way for a new government of national unity
led by a prime minister who enjoys cross-party support, and made up of
representatives of all the main parties and perhaps some technocrats. But
unity is the last thing on the minds of many Sri Lankans, who are enraged to
find themselves demoted from relatively well-off by South Asian standards
to begging for handouts from India. The protesters responded to the attacks
on them by burning down the homes of many cabinet ministers and a
museum dedicated to the Rajapaksas. The buses that had carried government
supporters into Colombo were also set ablaze. A minister’s car was dumped
in a lake.

Hundreds of people were injured as the violence continued into the next day.
Several died, including a member of parliament who shot and killed a
protester as a crowd surrounded his car, according to police reports.
Mahinda and his family were airlifted to safety by security forces on May
10th after an angry mob surrounded his residence. Troops were deployed
across the country and ordered to shoot on sight anyone seen damaging
property or attacking people. The following afternoon, police told protesters
at the Galle Face encampment to clear the area to comply with an island-
wide curfew, though they did not immediately enforce the order. The
governor of the central bank said he would resign unless political stability
was restored.

Perhaps it was this threat that cured the president of the temptation to rule by
decree, as he would have been entitled to do following the dissolution of the
cabinet. Late on May 11th Mr Rajapaksa addressed the nation, promising to
appoint a new government. He appeared to agree to most of the conditions
outlined by the opposition, including a reduction in the powers of the
presidency, which he had boosted by amending the constitution in 2020.

All-party talks to choose ministers for an interim cabinet were under way as
The Economist went to press. Ranil Wickreme singhe, a veteran lawmaker,
looked set to be sworn in as interim prime minister. But his putative
government faces obstacles, not least the fact that many MPs do not want to
sabotage their careers by associating themselves with Mr Rajapaksa. The
president’s refusal to step down may damage the credibility of any interim
government from the start. A way forward will require balancing the
necessary political stability with enough accountability to command public
support.

That is particularly important given the daunting task facing any new
government. Sri Lanka must implement a series of painful economic reforms
—a tall order in such a febrile atmosphere. A combination of bad policy and
external shocks, notably a collapse of tourism during the pandemic and
spiking commodity prices following Russia’s invasion of Ukraine, have
depleted Sri Lanka’s foreign-currency reserves and raised consumer-price
inflation to almost 30% year-on-year in April, from 19% in March (see
chart). For nearly two months, Sri Lankans have had to live with long power
cuts, soaring prices for staples such as rice, and shortages of essentials as
petrol—largely a function of the lack of currency with which to pay for
imports.

The government’s foreign reserves are down to $50m—nothing, in effect. It

burned through all its cash in recent months in a doomed effort to prop up
the currency and service its foreign debts. On April 12th it conceded defeat
and said it would stop paying interest, seek a bail-out from the IMF and ask
creditors, including China and India, to restructure their loans. Since then the
government has relied on temporary credit, mostly from India, to import
essentials such as food and fuel. Even if the political class gets its act
together, turning Sri Lanka’s economy around is getting harder by the day. ■
This article was downloaded by calibre from https://www.economist.com/asia/2022/05/14/sri-lanka-has-no-money-and-no-government-
what-now
For whom the teals poll

Australians are fed up with their two main parties

They may turn to independents in record numbers in elections this month
May 14th 2022 | SYDNEY

AUSTRALIANS DISAGREE on much when it comes to politics. Left-

leaning parties hold sway in cities and conservatives in the countryside.
Voters in resource-rich states worry about the future of mining. Urbanites
want to cut emissions. Yet they will be in agreement about one thing when
they vote in a federal election on May 21st: disillusionment with their
political system. “Too much rubbish goes on,” grumbles a voter in
Wentworth, a wealthy constituency in Sydney. “It’s just a whinge- and bitch-
fest. No one is actually getting the job done,” concludes another in Hunter, a
coal-rich seat in New South Wales.

Their frustrations are not as loud as Britain’s or America’s (nor are their
electoral choices as self-harming), but that does not make their politics
healthy. In 2019 only a quarter of Australians said they trusted “people in
government”, down from 43% in 2007, according to polling by the
Australian National University (ANU). Turnout should be plummeting. But
voting in Australia is compulsory. Citizens face a familiar choice between
the incumbent Liberals, who govern in a permanent conservative coalition
with the smaller National Party, and the opposition, Labor.

Big ideas tend not to win elections in Australia, so neither side has put
forward many. Both are led by “uncharismatic middle-aged white males who
are not exactly inspiring”, says Paul Williams, a political scientist at Griffith
University in Brisbane. Many Australians find their prime minister, Scott
Morrison, cringe-inducing. He is accused of lying and bullying by members
of his own party. Yet he still ranks above Labor’s gaffe-prone leader,
Anthony Albanese, in polls of Australia’s preferred prime minister. Mr
Albanese has been pilloried for forgetting basic numbers including the
unemployment rate.

Still, Mr Morrison’s coalition seems unlikely to return for a fourth term. It

has been in government since 2013, and unless opinion polls are
spectacularly wrong, Australians want it gone. (Mr Morrison confounded
expectations at the previous election in 2019, winning a “miracle” victory.
Pundits insist that will not happen twice.) One national count predicts a
swing against the coalition of more than 5%, enough to lose 13 seats in the
House of Representatives, where it has a majority of one. No government
has had a majority in the Senate, which is elected on a system of
proportional representation, for years.

To many, the government’s successes against covid-19 feel like ancient

history. Inflation is rising and so are interest rates. Mr Morrison’s odds have
not been helped by successive scandals. His government has been buffeted
by two separate allegations of rape, against a former minister and a political
staff member. It has pumped grants into marginal constituencies, feeding
complaints about corruption.

Labor, for its part, is “packed with politicians who stuffed up in its last
government”, argues John Wanna of ANU. It lost the election of 2019 after
proposing reforms to taxes on housing and investment. Its promises now are
less controversial. Mr Albanese wants cheaper child care, better nursing
homes and a commission to investigate federal corruption. On climate
change, he would set a goal to slash emissions by 43% by 2030, from 2005
levels—a big improvement on the coalition’s 26-28%. On the economy,
some of his ideas seem likely to fan inflation: he wants to raise minimum
wages by over 5%.

Australians are deserting both main parties in growing numbers. Support for
them is at historic lows, says William Bowe, a political analyst. Perhaps a
third of voters will back minor parties and independent candidates this time.
Few of those will win seats. But a new set of climate-focused independents
stands a chance.

These “teal” candidates—so-called for the colour of their campaign

materials—are vying for wealthy Liberal seats, where voters are fed up with
the government’s dismal efforts on climate change and want to clean up
politics. Their campaigns are heavy on vision and light on detail: they would
strive for stiffer emissions cuts and “integrity” in politics. Their supporters
have built enthusiastic grassroots movements around them. One independent
candidate, Zali Steggall, ousted a former Liberal prime minister, Tony
Abbott, in 2019. The Liberals could lose at least two more seats to
independents in this election, Mr Bowe predicts. They are bankrolled, in
part, by Climate 200, a political action group established by Simon Holmes à
Court, the son of a mining billionaire.

A hung parliament, in which independents and minor parties hold the

balance of power is possible, believes Kosmos Samaras, a former Labor
strategist. That would give them leverage to pursue their lofty goals, their
fans say. It would also cause “chaos and instability”, Mr Morrison argues.
The latest polls, however, show Labor extending its lead. It could win
enough seats to form a respectable majority in the lower house. That would
boost the strength of government. But it is unlikely to lighten Australians’
dour mood. ■
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main-parties
State of emergency

North Korea admits it has an outbreak of covid-19

An unvaccinated population and minimal health infrastructure spell
disaster
May 13th 2022 | SEOUL

FOR MORE than two years, North Korea insisted that its border controls
had kept covid-19 out of the country even as it devastated most of the rest of
the globe. No longer. On May 12th state media said that the country had
recorded its first cases of the Omicron variant a few days earlier. Pyongyang
was locked down on May 10th.

Even for a country accustomed to bad news, the outbreak is disastrous.

North Korea’s response to the pandemic was to close itself off from the
world, reduce imports to a trickle and impose domestic travel restrictions.
While other countries rushed to vaccinate their people, North Korea
gambled that it could ride out the storm. It repeatedly declined offers of
vaccines from China, Russia and COVAX, a UN-backed global effort to
supply shots to poor countries. The leadership was reluctant to allow health
workers into the country, for fear they might spread the virus or gather
information about the dire conditions inside the closed dictatorship. It may
have been spooked by rumours of doubts about the safety of the vaccine
made by AstraZeneca, offered through COVAX.

Whatever the reasons for the vaccine hesitancy, the approach always looked
dubious. There was no guarantee that the virus would evolve to be less
dangerous over time, rather than become more infectious and harder to
manage, as turned out to be the case. China’s pursuit of a zero-covid strategy
was designed to buy time while it vaccinated its population. Though the
North Korean leadership blamed those tasked with keeping the virus out for
their “carelessness, laxity, irresponsibility and incompetence”, the real folly
was the leadership’s failure to set up a vaccination programme in the time it
had bought.

North Koreans will now suffer the consequences. Omicron is not especially
dangerous in vaccinated populations, but still deadly for the
immunologically naive. Hong Kong, which had a poor vaccination rate
among the elderly when the variant hit, is a case in point. In late January its
death toll stood at 205. Within two months it had climbed to nearly 8,000
after an Omicron outbreak spread like wildfire.

North Korea is likely to do even worse. The impoverished dictatorship lacks

the testing and tracing infrastructure that other countries have built over the
past two years. Its health-care sector suffered from serious underinvestment
even before the pandemic. It does not have enough equipment and medical
staff. Hospitals do not have regular power, clean water or proper sanitation.
Two years of closed borders have depleted supplies of medicine, much of
which is imported. It is unclear how much oxygen or how many ventilators
the country has available. And pre-existing conditions make North Koreans
especially susceptible to covid-19. Tuberculosis, which worsens the effects
of the virus, is rampant. So is malnutrition.

North Korea may turn to China, but its patron is already busy struggling to
salvage its own failing zero-covid policy. If North Korea can be convinced
to accept help from South Korea, the new president, Yook Suk-yeol, could
make good on his promise that he would provide humanitarian aid
“regardless of the circumstance”. North Korea has in the past organised
successful mass-vaccination campaigns, notably against measles in 2007,
and it has the cold-chain distribution infrastructure necessary to keep
vaccines from spoiling. If enough doses were offered and allowed to be
administered, many lives could be saved.

The irony is that North Korea might have been better off had it let covid
spread early in the pandemic when the virus was less infectious (while also
jabbing people). Had it done so, the curve of the epidemic would have been
flatter and less hard to cope with today. The best-case scenario would be if
there have been far more cases in the country than the government has
previously admitted, meaning that there is some immunity in the population.
For once, North Koreans should hope that their leaders have been lying to
them. ■

Dig deeper

All our stories relating to the pandemic can be found on our coronavirus
hub. You can also find trackers showing the global roll-out of vaccines,
excess deaths by country and the virus’s spread across Europe.
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covid-19
Banyan

The Taliban crave recognition but refuse to do

anything to earn it
Afghanistan’s neighbours are wondering how on earth to deal with it
May 14th 2022

BEFORE THEIR rout by American-led forces in 2001, the Taliban and their
rule in Afghanistan were bywords for medieval violence, bigotry and
misogyny. When they swept back to power in August as America effected a
calamitous withdrawal, their leadership promised that a new and improved
Taliban had come to run the country. Peace and harmony would prevail.
They would show mercy to enemies and concern for the vulnerable. They
would manage the economy well. And they would engage with other
countries, including their former enemy.

Instead, the Taliban are reverting to form. In March teenage girls returning
to class for the first day of the school year found the gates closed to them,
guarded by armed men. On May 8th the Ministry for the Propagation of
Virtue ordered all Afghan women to cover themselves from head to toe on
(discouraged) trips outside the home.
Violence against the Hazaras, a Shia Muslim ethnic minority, is mounting;
the Taliban, who are Sunni, do not care to protect them. Political opponents
are being assassinated. Meanwhile, Taliban administrators are studies in
incompetence, having never managed water supplies or power plants. The
economy has collapsed. Nine out of ten households are facing hunger, and
UN agencies estimate that over half the population of some 40m will need
food aid this year.

All of which sharpens questions about how other countries should deal with
the government in Kabul. None has yet offered full diplomatic recognition.
Western countries defined early on the prerequisites of engagement with the
Taliban: improvements in human rights and governance. These parameters
have appealing clarity; equally clear is that the Taliban have fallen short. In
the West scepticism about engagement runs deep. But as the EU’s special
envoy to Afghanistan, Tomas Niklasson, argues, to cut and run would be
worse. Afghans badly need humanitarian aid and the Taliban are, in this
respect, pragmatic enough to allow it.

Among Afghanistan’s neighbours, Iran welcomed the American withdrawal

and accredited Taliban officials performing consular duties in Tehran. But
distrust of the Taliban goes back decades, and irritation has grown over the
group’s mistreatment of Shias and its failure to prevent fatal bombings at
several Shia mosques. Clashes between security forces at the border have
alarmed both countries.

The Taliban’s relations with Pakistan are deteriorating, too. The army-led
establishment in Pakistan had, after all, nurtured the Taliban for decades, and
expected gratitude. Instead, the Taliban have been contesting the border line
and give shelter to Tehreek-e-Taliban Pakistan (TTP), a terrorist group that
has been stepping up its attacks on the Pakistani security forces. Last month
cross-border air strikes by Pakistan on supposed TTP camps killed dozens of
Afghan civilians.

Uzbekistan, to the north, faces perhaps the greatest challenge from an

intransigent Taliban, with which it has sought a working relationship. In the
short term its efforts have paid off, with the border crossing at Termez now
the main supply route for humanitarian aid to flow into Afghanistan.
Without such aid, Afghans would be in even worse shape. Uzbekistan is also
supplying much of the impoverished country’s electricity, though it gets paid
irregularly.

Uzbekistan’s desire for an open, prosperous Afghanistan is almost

existential. It is one of only two countries in the world that is not only
landlocked itself, but surrounded by landlocked countries, too. Its chief trade
routes run via Russia to Europe. But with war in Ukraine and sanctions on
Russia, that outlet will be fraught if not impassable for years. Uzbekistan has
drawn up plans for a trans-Afghan railway linking to Pakistan’s ports, but
the Taliban’s misrule makes crucial support from the World Bank and others
inconceivable.

As well as hosting the TTP, the Taliban are presiding over a resurgence of al-
Qaeda on Afghan soil—the very group that triggered the American invasion
two decades ago. Riven by factions and with a shaky grip on some parts of
the country, the Taliban have also failed to suppress the Afghan affiliate of
Islamic State, a violent rival. Afghanistan is ripe for the wholesale export of
terrorists again.

Last month Haibatullah Akhunzada, the de facto head of state, called on

countries to engage with Afghanistan on the basis of “mutual respect.” He
seeks formal recognition and diplomatic relations. That is not going to
happen until other states get a bit of respect back.

Read more from Banyan, our columnist on Asia:

Russia's war is causing hunger in Asia (May 7th)
Sri Lanka’s ruling family is running out of road (Apr 30)
Lawrence Wong is Singapore’s presumptive next prime minister (April 23rd)

This article was downloaded by calibre from https://www.economist.com/asia/2022/05/14/the-taliban-crave-recognition-but-refuse-

to-do-anything-to-earn-it
Base case

Fifty years after America returned Okinawa to

Japan, it still feels cut off
No one listens to the islanders’ complaints about American bases
May 14th 2022 | KUNIGAMI, OKINAWA

FLAMES LICKED the sky over Cape Hedo on the northernmost tip of
Okinawa’s main island, burning bright enough to be seen from the nearby
island of Yoron. After the second world war, when Yoron belonged to Japan
but Okinawa was under American occupation, locals lit bonfires as signals,
as if to say “Hi, we’re still here” to their brethren. When the fire burned
again in late April, it was to mark the 50th anniversary of Okinawa’s return
to Japan. Politicians waxed lyrical about peace, occasionally interrupted by
American military aircraft overhead. An old protest song blared from a tinny
speaker: Okinawa wo kaese! (Give back Okinawa!)

Yet for Okinawans the anniversary, on May 15th, is less cause for
celebration than for sober reflection on unfulfilled hopes—and on new
threats to their islands from tensions between America and China. “It’s been
50 years but so many issues remain,” laments Miyagi Hisakazu, a former
mayor of Kunigami, Cape Hedo’s district.
When Japan took back control of Okinawa and the rest of the Ryukyu
Islands, locals expected the government in Tokyo to help stimulate the
economy and reduce the American footprint (see map). Living standards
have improved, but Okinawa is still the poorest of Japan’s 47 prefectures.
Some American facilities have closed, but more than 250,000 American
troops remain on Okinawa, which is home to 70% of American bases in
Japan by area. Those installations would play a big role in any conflict with
China.

The Ryukyus have often been caught between great powers. For most of
their history, they formed an independent kingdom, balanced between Japan
and China. Japan annexed it only in 1879, during a period of imperial
expansionism. Roughly a quarter of the civilian population perished in the
second world war.

After the war, the Americans stayed, making Okinawa a de facto colony and
expropriating land for military bases to support operations in the Korean and
Vietnam wars. Cars drove on the right. Okinawans used dollars, and needed
passports to visit mainland Japan. Violent crimes by American soldiers were
common. By the late 1960s, the occupation had come to threaten the alliance
between America and Japan. When America returned Okinawa, it insisted
on keeping the bases. In return, it agreed to remove nuclear and chemical
weapons located there.

The government lavished Okinawa with subsidies and helped build

infrastructure such as ports and roads (Okinawa also receives money for
hosting the bases). Before the pandemic hit, the islands had developed a
booming tourism industry. Tamaki Denny, Okinawa’s 62-year-old governor,
recalls that in his youth “there were mainland bars that said, ‘No Okinawans
allowed.’” Now, being Okinawan is cool.

The relationship with America has evolved too. Generations have grown up
alongside American soldiers, forming lasting bonds and even families.
Memories of the occupation have faded: many young Okinawans know little
of the hardships endured before the reversion. Younger Okinawans are
“becoming more pragmatic and less ideological”, says Mike Mochizuki of
George Washington University, leading to greater acceptance of the
American presence. Chinese aggression has convinced more Okinawans of
the logic of deterrence.

Even so, a majority would still like to see the American bases shrink. For
pacifists, Ukraine’s misfortune is proof not of the need for more powerful
defences, but of the risks of entanglement in great-power competition. Even
supporters of the alliance fret that large concentrations of troops and
materiel, and with them ordinary Okinawans, are vulnerable to Chinese
missiles. During a crisis, China might also seek to exploit division between
the mainland and Okinawa.

What unites Okinawans across the political spectrum is the sense that the
government in Tokyo ignores them. Hawks would like it to think more about
their local residents’ safety. Many others feel that its intransigence on the
subject of bases is proof of lingering colonial attitudes: mainlanders have
been spared the problems, such as noise, accidents and crime, that come
with hosting bases.

A particular irritant is Futenma, a base in a densely populated area. After the

rape of a 12-year-old Okinawan girl by three American soldiers in 1995, the
Japanese government promised to move it. But engineering problems have
hobbled its plan to build a replacement off the coast of a quieter part of the
island. Most Okinawans oppose that plan anyway. Mr Tamaki has petitioned
the authorities in Tokyo to call it off. Doing so, he says, “would show they
have listened to our feelings”. The government is bent on pushing ahead. ■
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okinawa-to-japan-it-still-feels-cut-off
China

Hong Kong’s civil service: Stay neutral, love the party

Covid-19 in Shanghai: The never-ending lockdown
The Grand Canal: Taming the waters
Covid-19 and the homeless: Victims, not vectors
Chaguan: A self-repressing society
Stay neutral, love the party

China is wary of Hong Kong’s bureaucratic elite

The city’s leader-in-waiting has a civil-service background, but he has a
redeeming feature: he’s a cop
May 14th 2022

HAVING TAKEN 99.2% of the vote as the sole candidate in an election

from which an even higher proportion of Hong Kong’s people were
excluded, the territory’s next chief executive, John Lee, made clear why
China’s Communist Party engineered his victory. “Protecting Hong Kong
from internal and external threats and ensuring its stability”, he said, would
be of “paramount importance” under his leadership. Mr Lee is a former
policeman. The party trusts him to keep Hong Kong in line.

Trust is something that the party does not have in abundance as it surveys
the city’s elite. Since the territory was handed back to China by Britain in
1997, that elite, minus the British, has remained largely the same. China has
relied heavily on two types of people to do its bidding there: businesspeople
(the first and third chief executives had such backgrounds) and members of
the bureaucratic aristocracy (the second chief executive and the current one,
Carrie Lam, once belonged to this group—the crème de la crème of the civil
service known as administrative officers, or AOs). Both types have proved
underwhelming. The eruption of months of turmoil on Hong Kong streets in
2019, on Mrs Lam’s watch, convinced the party that it needed to tighten its
grip. It concluded that Hong Kong’s traditional elite should be kept on a
shorter leash.

The 180,000-strong civil service is in the party’s sights. As a policeman, Mr

Lee belonged to it, too. But he was not one of the 700 or so AOs. He is a
security specialist who only branched out of his area of expertise in 2021
when he became Mrs Lam’s chief secretary (ie, deputy). He may appoint
fewer AOs to his cabinet than his predecessors did, says John Burns of the
University of Hong Kong. Behind the scenes, the party’s outpost in Hong
Kong, the Liaison Office, will be more hands-on.

It is striking how much the party has trusted civil servants nurtured by the
British. The territory’s first post-colonial chief secretary, Anson Chan, was
an AO. She had also served in that capacity under Hong Kong’s last colonial
governor, Chris Patten, who was much despised by China. Mrs Chan later
became a pro-democracy politician and critic of the party (she is now
retired). Donald Tsang, the second chief executive, had been knighted by the
British. Even Mr Lee only gave up his British citizenship when he became
under-secretary for security in 2012. He, Mrs Lam, Mr Tsang and Mrs Chan
are all Catholics—another attribute to which the party is not, by nature,
drawn. (Cardinal Joseph Zen, an outspoken advocate of democracy who is
90 years old, was arrested on May 11th by Hong Kong’s national-security
police for alleged collusion with foreign forces.)
The upheaval in 2019 stoked the party’s anxieties about the loyalty of
government officials. Mrs Lam, with Mr Lee as head of security, proved
their toughness, cracking down on demonstrations triggered by profound
public distrust of the party. China, though, saw disturbing signs of cracks in
the establishment. They included anonymous petitions, purportedly signed
by hundreds of civil servants (including about 100 AOs), calling on the
government to make concessions to the protesters. Thousands of civil
servants staged their own demonstration and some went on strike.
Participants said they served the public, not the territory’s leaders.

Party-controlled newspapers in Hong Kong fumed. “Insider devils”, a

commentary in one of them called the dissenting officials. To prevent further
unrest, China imposed a harsh national-security law on Hong Kong in June
2020 and moved to bar those deemed “unpatriotic” from public office. This
included purging the legislature—and the election committee that chooses
the chief executive—of opposition politicians (both were already stacked
with the party’s supporters).

The party’s press grumbled that requirements that civil servants be

“politically neutral” were inadequate. They were being used by bureaucrats
as an excuse to snub the party. In 2020 Hong Kong began requiring all civil
servants to pledge allegiance to the Basic Law, the city’s post-colonial
constitution. From this year civil-service recruits must pass a test on the
contents of the security law, in addition to a previously required one on the
Basic Law.

Such requirements, and Hong Kong’s lurch towards a style of rule more like
the mainland’s, appear to be deterring young people from applying for civil-
service jobs. In 2021 the number of applicants for AO positions dropped to
about 9,700, down from 14,000 in the previous year. These are normally
highly coveted slots, offering handsome pay (HK$55,995, or about $7,133, a
month for new recruits) and a high level of job security. But the impact may
be hard to discern. Only about 45 such posts are available each year; the
government will still have a large pool of talent from which to fill them.
“The government can control my actions, but cannot control my mind,” says
an applicant, professing not to be worried about the new emphasis on
loyalty.

Mr Lee has promised to introduce yet more legislation relating to political

crimes. He may also implement long-mooted plans to add a new government
bureau (ministry, in effect) to look after culture, sport and tourism. In the
past some politicians have winced at this, fearing it might be used to
promote only culture approved by the party. But with the Legislative
Council now shorn of filibustering democrats, there will be no opposition.
Last year’s change of leadership of the government’s once feisty
broadcasting wing, RTHK, does not augur well. Former employees say the
new boss is focused on making propaganda.

Such work may be helped by the opening in December of a training college

for Hong Kong’s bureaucrats. It “should strive to nurture civil servants in
their sense of patriotism”, said a senior mainland official who joined the
launch ceremony by video link. Newspapers controlled by the party have
published calls for more instruction of AOs at mainland academies as well.
One article, by Andrew Fung, a former senior press handler in the office of
the chief executive, said this should include a “short period of military
training”. That, no doubt, would help to boost recruitment. ■
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elite
All the way to zero

Shanghai’s covid-19 lockdown is not even close to

over
Don’t believe what you read in the papers
May 14th 2022 | Shanghai

THE 25M RESIDENTS of Shanghai could be forgiven for not recognising

their own city in the pages of the local press. Most have been locked in their
homes for weeks because of an outbreak of covid-19. Yet an article
published on May 9th in a state-owned rag noted how residents in some
districts are happily returning to their local markets. Another explains that,
with covid on the wane, interest in Shanghai from global investors is picking
up again. The People’s Daily, a mouthpiece of the Communist Party,
referred to the long lockdown as a “pause”.

It is true that the number of new cases in Shanghai has fallen from more than
25,000 a day in mid-April to fewer than 2,000 recently. But restrictions in
the city are being tightened. Areas that were slowly reopening have closed
again. New barriers seal off housing compounds that were accessible days
earlier. Residents may be carted off to a quarantine facility if an infection is
found on a nearby floor. Food-delivery services, crucial to keeping Shanghai
fed, have been barred from some areas.

The moves have baffled residents. They are reminded of the earliest days of
the lockdown, when fresh meat and vegetables were hard to come by.
What’s worse is that the new restrictions have come without any official
explanation.

The government has issued guidelines for moving out of lockdown. The
plan, which does not include a timeframe, divides communities into three
categories depending on how recently new cases have been found there. The
first category is the strictest: residents are unable to step outside their homes,
which may be barricaded. The second level allows residents to walk around
their housing compound, but not on the street outside. The third allows for
residents to be issued passes to walk around their neighbourhoods.

But these guidelines have been widely disregarded by district-level

authorities. On May 9th officials in central Shanghai roamed the streets with
bullhorns, warning that walking outside was no longer permitted. The
tightening of restrictions comes after President Xi Jinping called for stronger
anti-covid measures. Officials refer to the stricter regime as a period of
jingmo, or silence. One in Huangpu district says it is a short-term experiment
to see if less freedom of movement leads to a rapid reduction in cases. But
there has been no citywide announcement of such a policy.

The authorities’ haphazard approach is stirring anger. Community-level

committees, called juweihui, have been given broad powers to control the
movement of people. But committee members are accused of incompetence.
Some have been caught hoarding government rations. They often keep
people locked down longer than required in order to avoid being blamed if
new cases are found. Videos on social media show angry residents yelling at
juweihui members, who are often separated from the crowds by fences or
gates.

Elsewhere in China, the authorities are similarly cautious. Enforcing the

zero-covid strategy, which aims to crush outbreaks before they can spread, is
seen as proof of ideological fitness. Restrictions have been placed on
Beijing, the capital, in order to stem a small surge in cases. Officials in the
city of Jilin continue to keep a tight grip on things a month after claiming to
have cut off community transmission, following a long lockdown. That
bodes ill for the residents of Shanghai. It is hard to imagine life in the city
returning to normal soon, no matter what the papers say. ■

Dig deeper

All our stories relating to the pandemic can be found on our coronavirus
hub. You can also find trackers showing the global roll-out of vaccines,
excess deaths by country and the virus’s spread across Europe.
This article was downloaded by calibre from https://www.economist.com/china/shanghais-covid-19-lockdown-is-not-even-close-to-
over/21809221
Taming the waters

China’s Grand Canal is full for the first time in

decades
Is that a good thing?
May 14th 2022 | BEIJING

WHEN KUBLAI KHAN tired of spending winters at his pleasure-dome in

Xanadu, the Mongol overlord of China, who ruled during the 13th century,
built a new capital in what is now Beijing. In order to feed the city, he
launched a decade-long hydrological project, extending the Grand Canal,
which already snaked through much of eastern China. The oldest sections of
the waterway had been constructed centuries before. Kublai Khan was
hardly the first ruler to demand that China’s waters do his bidding.

Nor was he the last. “To rule a country, first rule its waters,” says Xi Jinping,
China’s current overlord. In a country where floods have wiped out cities
and toppled dynasties, this isn’t a bad credo. The canal, in particular, has
drawn Mr Xi’s attention. Much of its northern reaches were disconnected or
had run dry by the time the Communist Party took power in 1949. Mr Xi
called for the waterway to be “reborn”. And indeed it has been: in April
water flowed along the canal’s entire length for the first time in a century,
according to the party.

This is largely a result of the South-to-North Water Diversion Project,

which, as the name suggests, aims to pump southern water to northern
provinces. In operation for nearly a decade, it is one of the most expensive
engineering projects in the world and the largest-ever transfer of water
between river basins. It involves two main channels: one in the east, along
the Grand Canal, and another that runs through central China (see map).
These bring water from the Yangzi river and its tributaries to the north. A
third channel, farther west, is in the planning stage.

The north, where around 40% of the population lives, desperately needs
water. Beijing is not far from the desert; camel caravans plodded its streets
not too long ago. The city can go for months without rain. Thirsty factories
and farms add to the strain. The UN sets the threshold for water scarcity at
an annual 1,000 cubic metres per person. Most northern provinces fall below
that. Some don’t even reach 200 cubic metres per person in a dry year.
Transfers from the south have “averted a water crisis”, says Ma Jun, an
environmentalist. Around 75% of Beijing’s tap water arrives after a two-
week journey north.
With more southern water sloshing around, water sources in the north are
recovering. Fishermen have returned to the banks of the Grand Canal in
Beijing, catching silver carp that were not there a few years ago.
Groundwater levels have stabilised after falling for decades. Sitting in a
slightly damper, greener Beijing, China’s governing elite is happy. The
decision to move the water was “completely correct”, Mr Xi said last year.

But look south and the picture is grimmer. The project displaced hundreds of
thousands of people—and there are more evictions planned. Rivers in the
south have been depleted. Pollution was always a problem, but now there is
less water to dilute and wash away contaminants. Toxic algal blooms, more
often found in ponds, are forming on the Han river, the main source of
Beijing’s water. Another megaproject, which aims to replenish the Han, will
break ground this year. That project will also take water from the Yangzi,
further diminishing its flow.

China’s engineered fixes to water scarcity are “more like a band-aid”, says
Britt Crow-Miller of the University of Massachusetts-Amherst. “They’re not
actually going to solve the problem.” It would be better if China used water
more efficiently, she says. To start, the government could make it more
expensive. Industrial users pay more than they used to, but still much less
than the scarcity of the resource warrants, says Mr Ma. Farmers pay even
less and often waste water. The price for domestic use in Beijing has risen to
5 yuan ($0.74) a cubic metre, from 4 yuan a decade ago. That is still only a
third of the average price in American cities, where water is more plentiful.
Mr Ma hopes that when residents of the capital turn on the taps, they realise
the real cost is much higher. ■
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time-in-decades
Victims, not vectors

The pandemic has made life harder for China’s

homeless
When covid-19 spreads, they are often blamed
May 14th 2022 | BEIJING

SPARE A LITTLE pity for a Chinese beggar called Mr Jiang. Last month he
was blamed for a small covid-19 outbreak in the city of Haining. The media
labelled him “patient zero”. The authorities noted his “super-strength
infectiousness”. Samples from the public toilets and empty shops where Mr
Jiang slept came back positive for the virus. He tested positive, too. The
authorities are prosecuting him for allegedly not co-operating with contact-
tracers.

The pandemic has made life even harder for the millions of people who
sleep on the streets of China’s cities. Most come from the countryside in
search of work. Lacking a local hukou, or household-registration permit,
they cannot obtain benefits. Officials see them as eyesores. Government
shelters are obliged to “persuade” them to leave. Now they are seen as
vectors of covid.
Anyone who catches covid in China faces social stigma, as a single infection
can lead to a lockdown. But it is worse for the homeless. There is no
evidence that Mr Jiang caused the outbreak in Haining, yet people called
him the “poison king”. Researchers at Sun Yat-sen University, in
Guangzhou, found that efforts to drive the homeless out of that city
intensified during covid surges. People sleeping on the streets said the police
would douse their resting spots with water. “Everyone was fearful of us
because they thought we were spreading the virus,” said one.

The pandemic has affected the homeless in other ways, too. Many make
their living looking through rubbish for recyclables to sell. But local
governments, believing refuse spreads covid, have cracked down. Odd jobs,
such as unloading trucks, become scarcer when covid controls are tightened.
During surges there are also fewer people on the street who might spare
some change.

Covid restrictions have decreased the help which is available. An NGO in

locked-down Shanghai had to close its drop-in centre, which offered food,
showers and legal advice. A charity in Beijing, which is battling an
outbreak, had to stop giving out porridge.

There are no official data, but the pressure seems to have pushed some of the
homeless out of cities. A worker at a rescue centre in Beijing says the
number of people using its facilities has dropped sharply. City officials and
covid-cautious Chinese will see no problem with that.

Dig deeper

All our stories relating to the pandemic can be found on our coronavirus
hub. You can also find trackers showing the global roll-out of vaccines,
excess deaths by country and the virus’s spread across Europe.
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chinas-homeless
Chaguan

China builds a self-repressing society

Xi Jinping sees strengths in Maoist tools of social control
May 14th 2022

FOR FOUR decades China has defied received wisdom about the
institutions that countries must build to become rich and strong. After the
Communist Party’s bosses embraced market forces in 1979, many foreign
observers predicted that political reforms had to follow, such as the
emergence of more independent courts to sustain the rule of law and uphold
property rights. In time, the optimistic foreigners ventured, most advanced
economies realise that they need democratic—or at least accountable—
political systems. Societies with such “inclusive institutions” enjoy both
stability and broad-based prosperity, Chinese officials were told.

China’s leaders heeded something less than half this advice. Over 40 years
successive leaders have tolerated only as much economic and social
openness as is compatible with unchallenged party authority. President Xi
Jinping, the party chief since 2012, has broken even more decisively with
norms that hold sway in much of the rich world. He has explicitly
condemned the separation of powers and an independent judiciary as
unwelcome Western notions. His China is proud to offer not the rule of law
but “law-based governance” via party-controlled courts.

There have been changes at the grassroots, too. In Mr Xi’s China, ever more
power, including coercive power, is wielded by party members and
volunteers with fuzzy legal mandates. During the covid-19 pandemic many
residents of locked-down cities have been forced into squalid quarantine
sites or sealed inside housing compounds by pandemic workers, swaddled in
the anonymous full-body suits that explain their nickname, “Big Whites”. A
few are police officers or local officials. But others are zealous volunteers,
imposing house arrest without a warrant. Even before covid emerged,
Chinese leaders had called for citizens to take more disputes to mediation by
unpaid local worthies, rather than to law courts. In recent years private
companies, including joint ventures with foreign firms, have been pressed to
form or revive party cells made up of employees with party membership,
enjoying ill-defined authority.

Scholars of authoritarian politics have taken note of this trend. Two recent
books take complementary looks at how the party embraces ambiguity as it
controls the masses—or rather, encourages citizens to control one another.
By way of case study, both books examine the same area of public policy,
namely urbanisation schemes that have displaced many tens of millions of
Chinese. Often the land that they farmed was requisitioned and sold to
developers or their homes were demolished, by force and with paltry or no
compensation. At the root of such schemes is an institutional void: in China
property rights are anything but secure. As Daniel Mattingly of Yale
University estimates in “The Art of Political Control in China”, published in
2019, land requisitions have in effect redistributed property worth trillions of
dollars from rural collectives to the state. Yet as Lynette Ong of the
University of Toronto describes in her new book, “Outsourcing Repression,
Everyday State Power in Contemporary China”, resistance to violent land-
grabs in China has been fragmented and easily squelched.

One reason, both books suggest, is a tradition of delegating dirty work to

non-official agents. These include hired thugs lacking uniforms or badges,
sent to wreck homes, cut power and water supplies, or beat up those who try
to petition higher authorities. Their links to local officialdom are unprovable
but blatant. One gambit involves thugs bulldozing communal lavatories,
allowing bureaucrats to declare a village unsanitary and so fit only for
demolition, records Ms Ong. Even a threadbare cover for official brutality is
useful, though. Drawing on a data set of over 2,000 cases of forced land-
taking or demolition recorded by news outlets and rights groups, as well as
on hundreds of her own field interviews conducted from 2011 to 2019, Ms
Ong finds that citizens were more likely to resist when police acted brutally
or officials led thugs into battle in person. Citizens were more fatalistic when
attacked by anonymous toughs. The public expects nothing better from
them, but is indignant when the state breaks laws, she suggests.

The tyranny of the majority, plus bulldozers

Recorded incidents of violence declined but did not end after 2013, as
national leaders urged campaigns of “harmonious demolition”, moved in
part by nationwide outrage over citizens killed or driven to suicide during
violent land-grabs. In the Xi era anti-corruption campaigns have ensnared
some local tyrants who razed scores of villages for profit. Harmonious
demolitions may be achieved by recruiting village elders or volunteers with
deep community ties to press their own neighbours to sign demolition
papers. Some involve the setting-up of zigaiwei, or “Autonomous
Redevelopment Committees”. Guided by unseen officials, these are not as
benign as they sound. Ms Ong describes local power-brokers spying on
households that refuse to comply, setting family members against each other,
or hunting for individuals vulnerable to pressure, such as public employees
who can be threatened with the sack. Hold-outs are publicly shamed for
resisting the majority’s will. Talk of the majority reveals the Maoist roots of
outsourced repression. Mr Xi’s China is reviving the “mass line”: a strategy
of using rewards and punishments, but also ideological “thought work”, to
mobilise the many and ostracise the dissenting few.

Conventional wisdom holds that a strong civil society gives citizens leverage
over governments. In fact, co-opted clan leaders and village elders can serve
autocrats well, writes Mr Mattingly. Indeed, official biographies of Mr Xi
record how, as a young village party secretary in rural Shaanxi, he recruited
a local clan leader to help him confiscate land for a dam, including a clan
cemetery.
Party bosses grow impatient when foreigners question China’s autocratic
politics, pointing to years of growth. But economies can also slow. When
they do, inclusive institutions offer legitimacy that arm-twisting and opaque
power-structures cannot match. ■

Read more from Chaguan, our columnist on China:

China unveils its vision of a global security order (May 5th)
Why some Chinese are angry about covid (Apr 30th)
China’s harsh and elitist covid rules (Apr 23rd)
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United States

The mid-terms: Voting wars

Forced assimilation: Stolen children
Conservation: The concrete jungle
Educating the undocumented: Meanness to migrants
Wrongful convictions: Delayed justice
California cannabis: High maintenance
Lexington: Donald Trump’s brutal turn
America’s mid-term elections

Georgia will again be at the centre of fights over

electoral fairness
The state is perhaps the most important case of Republicans’ intra-party
struggle, nationwide
May 14th 2022 | ATLANTA

THE CENTRAL schism of the Republican Party is not particularly well-

concealed. In the first primary debate to be the party’s nominee for governor
of Georgia, held on April 24th in Atlanta, it came into stark relief from the
opening sentence. “First off, let me be very clear tonight. The election in
2020 was rigged and stolen,” said David Perdue.

The ex-senator, who lost a pivotal run-off election in January 2021, is now
trying to resurrect his fortunes by playing Donald Trump’s anointed avenger
against Brian Kemp, the incumbent governor. Mr Kemp is hardly a weak-
wristed moderate. In 2018 he was the politically incorrect (and Trump-
endorsed) candidate who won his primary by running ads pledging to gather
up “criminal illegals” in his pickup truck and exhibiting an impressive gun
collection to a nervous suitor of his daughter. Yet in 2022 he is being
denounced by Mr Trump as a “ RINO [Republican in name only] sell-out”.
His sin: not overturning the 2020 election after the former president’s
spurious claims of voter fraud.

Mr Trump’s pre-eminence in the party is clear, even in the aftermath of the

attack by his supporters on Congress on January 6th 2021. But the extent of
his kingmaking powers is being closely scrutinised in the mid-term party
primaries. Among Republicans, the main prerequisite for securing Mr
Trump’s approval is not any policy commitment but perceived fealty to him
and his lost cause. He has solicited primary challengers against many of the
ten Republican members of the House of Representatives who voted to
impeach him after the January 6th attack—most will probably be out of
office by year’s end. In Michigan, acolytes of his “stop the steal” faction
have already won the party’s nomination to be attorney-general and
secretary of state (the chief elections officer).

Georgia is perhaps the most important case of the nationwide intraparty

struggle. In 2020 the presidential-election results were the tightest in the
country. Just 0.24% of the vote separated President Joe Biden from Mr
Trump, a remarkable upset in a state which no Democrat had won since
1992. Mr Trump and his proxies waged an intense pressure campaign on
fellow Republicans like Mr Kemp and Brad Raffensperger, the secretary of
state, to manufacture evidence to overturn his loss. When multiple audits
failed to turn up any such evidence, Mr Trump, in a now infamous phone
call, asked for Mr Raffensperger to help “find 11,780 votes”.

For refusing his overtures, the president placed both men on his enemies list.
As early as December 2020, Mr Trump was encouraging primary challenges
to Mr Kemp. Defying the president was thought to have doomed both as
dead men walking, politically speaking. In the immediate aftermath, state
and local Republican committees booed both and passed resolutions of
censure. And yet, remarkably, both are standing again—and have a
reasonable chance of survival. The polls show Mr Kemp leading by enough
to win an outright majority on May 24th and avoid a run-off.

“My job is to make sure that Brad can look in the mirror every day, knowing
that I fought for integrity. And I have walked the line to make sure that I
followed the constitution,” says Mr Raffensperger, sitting in the headquarters
of the engineering-design firm he founded in a town called Suwanee.
(Before the hoopla of 2020, he was a little-noticed and soft-spoken structural
engineer.) He is hoping to stave off a Trump-endorsed, stop-the-steal
enthusiast, Jody Hice, a congressman who aims to “to stop Democrats
before they rig and ruin our democracy for ever”. The two are in a tight race
that is likely to require a run-off on June 21st.

Neither Mr Raffensperger nor Mr Kemp is adopting the position of Never

Trumper or party dissident, however. Asked why he is standing for re-
election, Mr Raffensperger replies that, “for Georgia voters, the number-one
issue is to make sure that only Americans vote in our elections”. When
asked why he does not make much of the stand that made him a (relatively
hard to pronounce) household name, Mr Raffensperger says that is “because
America always looks forward”. His references to it are unmistakable but
oblique: “History has shown that good always triumphs over evil. And truth
always triumphs over untruth…I don’t mean to be philosophical about it,”
he says, almost apologetically.

Both Mr Kemp and Mr Raffensperger prefer to spend their time criticising

Stacey Abrams, a progressive icon who will again be the Democratic
nominee for governor. Mr Kemp argues that he is the best placed to spoil her
chances of becoming governor—or even president after that. Mr
Raffensperger claims she is agitating for changes to election administration
that will leave it susceptible to fraudulent votes by non-citizens. Ms Abrams
narrowly lost her election in 2018 to Mr Kemp, but refused to concede,
blaming voter suppression for her loss and firing off a federal lawsuit, which
is still ongoing. In his book, Mr Raffensperger writes about his “unshakable
sense of déjà vu” in 2020 after his experience of the 2018 election.

Controversial new rules are in place, too. In 2021 the Republican-controlled

Georgia legislature passed SB202, a law making changes to rules on drop
boxes for absentee ballots, early voting and mail-in voting. It also,
seemingly punitively, removed Mr Raffensperger as chair of the state
elections board, and made it easier for the state to take over county election
boards it deemed to be failing.

Progressive legal groups are arguing in court that the tactics amount to voter
suppression. “ SB202 has made it worse in my mind because one tactic of
voter suppression that has been effective is confusion,” says Nsé Ufot, chief
executive officer of the New Georgia Project, a voter-registration outfit
founded by Ms Abrams. The organisation has set ambitious aims for itself:
to register 55,000 new young and minority voters and turn out an additional
150,000 citizens who have not voted before. For Ms Ufot, the stakes feel
downright existential. “There’s a clarity among people who run elections
about what is at stake,” she says. “Trying to avoid a constitutional crisis
focuses the mind in a real way.”

The bad blood between old rivals and the bipartisan tradition of crying foul
augur a particularly contentious general election in Georgia. The primary
may be more important still: Republicans who believe, against all available
evidence, that the past election was stolen because their champion did not
win are vying to be in place to certify the next presidential vote. Not long
ago, a rematch between Mr Kemp and Ms Abrams might have been seen as
a fiendishly fraught outcome. Somehow, it now appears to be the tamer
option. ■

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correspondents in America, sign up to Checks and Balance, our weekly
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fights-over-electoral-fairness/21809216
Forced assimilation

A report on Native American boarding schools

shows their horrors
Some of the children never returned home
May 14th 2022 | CARLISLE, PENNSYLVANIA

SOPHIA TETOFF was 12 years old in 1901 when she was sent 4,000 miles
from her island home in the Bering Sea to Carlisle, an Indian boarding
school in Pennsylvania. Sophia was a member of Alaska’s Unangax people.
Five years later, she died from tuberculosis. She was buried in the school’s
cemetery and largely forgotten. Her name on her headstone was misspelt.
Her tribe’s name was incorrect. Sophia was one of thousands of children
separated from their communities, often forcibly, and sent to Indian boarding
schools.

Last summer Deb Haaland, the secretary of the interior, whose department
manages the Bureau of Indian Affairs, announced the Federal Indian
Boarding School Initiative, a comprehensive review of the troubled legacy
of such policies. On May 11th Ms Haaland, the first Native American
cabinet secretary, released the first volume of the review. The investigation
found that from 1819 to 1969, the federal Indian boarding-school system had
408 schools across 37 states or territories. Burial sites were identified at 53
schools (as the investigation continues that number is expected to rise). The
Indian children who died at schools far from their families could number in
the tens of thousands.

“The consequences of federal Indian boarding-school policies…inflicted

upon generations of children as young as four years old are heartbreaking
and undeniable,” said Ms Haaland. Forced-assimilation practices included
cutting off the children’s long hair, and stripping them of their traditional
clothing, language and culture. The government mixed children from
different tribes to disrupt connections and force the use of English. There
was rampant physical, sexual and emotional abuse as well as
malnourishment, disease and overcrowding. Many children were sent out to
farms and businesses for months of manual labour. The schools often
pocketed their wages.

Ms Haaland was moved to shed light on these traumas by the discovery of

hundreds of unmarked graves connected to Indian residential schools in
Canada. The review found much evidence of intergenerational trauma
caused by family separation and cultural eradication. Ms Haaland’s own
grandparents were stolen from their families and sent away to school. Her
great-grandfather was taken to Carlisle.

Carlisle was used as a model for other schools. Its founder, Richard Henry
Pratt, infamously said in 1892, “Kill the Indian in him, and save the man.”
His outlook was not novel. As far back as George Washington it was part of
federal policy. Indian territorial dispossession and assimilation through
education was considered a cheap and safe way of subduing Native
Americans. By 1926, 83% of Indian school-age children were attending
boarding schools.

The initiative will continue its search for burial sites. It also intends to
identify surviving boarding-school pupils to document their experiences.
And it will explore the potential repatriation or disinterment of children’s
remains. Sophia’s remains, along with those of nine Rosebud Sioux children,
returned to Alaska and South Dakota last summer, where they were
welcomed home by their communities. At the review’s unveiling Deborah
Parker, head of the National Native American Boarding School Healing
Coalition, said: “Our children deserve to be brought home.” ■

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boarding-schools-shows-their-horrors
The concrete jungle

How Los Angeles hopes to save its endangered

mountain lions
High above Route 101, the city is building the biggest wildlife corridor in
the world
May 14th 2022 | SANTA MONICA MOUNTAINS, CALIFORNIA

LOS ANGELES, as everyone knows, is a noodle bowl of highways. As

everyone may not know, it is also one of only two cities in the world where
big cats roam wild inside the city boundaries (the other is Mumbai). One
even took up residence near the Hollywood sign. But big cats and highways
do not mix, which is why Los Angeles will soon be home to one of the
world’s biggest wildlife corridors.

The cats in question are mountain lions. They live in the Santa Monica
Mountains. Their numbers are stable. Their habitat is mostly pristine
wilderness, full of deer, the lions’ prey. The ecology of their range, the
largest urban national park in the world, is healthy, thanks in part to their
presence as an apex predator. Yet animals can come under threat without
habitat loss. Genetic degradation can be just as deadly.
Slicing through the mountains is Route 101, carrying up to 10,000 vehicles
an hour. It cuts the Santa Monica range off from a larger wilderness to the
north. The southern tract is not big enough for all the lions, which each
require hunting grounds of 60-150 square miles (160-390 square
kilometres). The result is a population trapped on an environmental island,
with inbreeding and genetic degradation. A study in 2016 found that, given
their environment, the Santa Monica mountain lions’ chances of extinction
in 50 years would be 15-22%; because of their genetic deterioration, the
chance of extinction was more like 99.7%.

Four years after that study came the first evidence that the big cats were
suffering physical damage: a young male was found with a 90-degree kink
in his tail and with only one testicle descended. Researchers had seen that
before. In the early 1990s biologists studying the Florida panther, a closely
related animal, found that many of the males had the same genetic flaws.
The Florida panther escaped extinction only thanks to the introduction of
females brought from Texas to refresh the gene pool.

California does not need to go that far. There are healthy mountain-lion
populations north of the Santa Monica range, separated by the ribbon of
road. Hidden cameras show the animals crouched at the side of the highway,
not daring to cross. The solution is a 165-foot-wide (50-metre) dirt bridge
which would allow them to pad high over the traffic.

Such corridors have worked elsewhere, from large spans for elk over the
Trans-Canada Highway to a dinky clawbridge for migrating red crabs on
Christmas Island. Angelenos raised money for theirs in a campaign that
dubbed the animal in the Hollywood Hills the “Brad Pitt of mountain lions”
(handsome, ageing, single). Last month the governor, Gavin Newsom,
launched construction.

The animals become sexually mature at 2½ to 3 years and have cubs every
other year. So within ten years of the corridor’s completion the great-
grandchildren of the first mating beyond the mountains could have cubs.
Genetically, even a few matings would make a difference. “We’ll definitely
save the mountain lion,” thinks Paul Edelman of the Mountains Recreation
and Conservation Authority. “It’s just a matter of how long it takes.”
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its-endangered-mountain-lions
Meanness to migrants

Texas’s governor wants to deny education to

undocumented migrants
How serious is Greg Abbott about challenging a 40-year-old federal
precedent?
May 14th 2022 | Washington, DC

AMERICA GUARANTEES every child living within its borders a free

public education. This could change if Greg Abbott, Texas’s Republican
governor, has his way. He has said he intends to challenge a Supreme Court
ruling that obliges states to provide free schooling to undocumented
immigrants. Perhaps as many as 183,000 pupils are currently in Texas’s
schools.

For nearly a century every state has required children to attend school.
Compulsory-education laws began in colonial days. The rationale was that
an educated citizenry was needed for a democracy.

In 1975 Texas revised a law to prevent undocumented children from

enrolling in public schools and to allow the state to withhold state funds
from districts that educated them. A class-action lawsuit was filed on behalf
of Mexican children in Texas who were unable to prove they had come to
America legally. Texas lost in the district court, appealed, and the case
(called Plyler v Doe) was argued before the Supreme Court in 1981. The
state lost again: in 1982 the court ruled 5-4 that undocumented children had
a right to attend free public school under the Equal Protection Clause of the
Fourteenth Amendment. But in a radio interview on May 4th, Mr Abbott
said that he plans to challenge this ruling.

About 1.7m undocumented immigrants live in Texas, estimates the

Migration Policy Institute, a think-tank in Washington, DC. Texas
experienced the second-largest absolute growth of immigrants (after Florida)
between 2010 and 2019. Mr Abbott may see an opportunity for his
upcoming gubernatorial race. According to polling by The
Economist/YouGov, 95% of Republicans say that the issue of immigration is
important. Appearing tough on immigrants could be politically
advantageous.

The controversy over a leaked Supreme Court draft opinion to overturn the
constitutional right to abortion established in Roe v Wade may also provide
an opening. “Conservatives have long wished to get out of providing state
services of all kinds to illegal immigrants,” says Geoff Kabaservice, a
historian at the Niskanen Centre, a centre-right think-tank. Given the likely
reversal of 50 years of settled law, Mr Kabaservice reckons, Mr Abbott
thinks now is a good time to “overturn as many of these kinds of precedents
that apply to public services as he can”.

Undocumented immigrants have continued to face barriers in education. A

study from Stanford University found that local police partnerships with
Immigration and Customs Enforcement, America’s immigration-
enforcement agency, reduced school enrolment within two years among
Hispanic pupils by nearly 10% compared with districts without such
policies. The programme displaced over 300,000 Hispanic pupils in America
between 2005 and 2011. In 2011 a new law in Alabama required public
schools to determine the citizenship and immigration status of children
enrolling in school. (It was eventually blocked.) The Trump administration
sought ways to prevent undocumented children from enrolling in school, but
gave up on the effort.
Mr Abbott thinks Texas spends too much educating such children. Rice
University’s Baker Institute for Public Policy estimates the cost at $1.5bn in
2018 (less than 3% of the state’s outlays on education). This may be an
overestimate. “Marginal cost might be a better way to look at it,” notes Alex
Nowrasteh of the Cato Institute, a libertarian think-tank. “Adding one more
student does not increase cost very much…It’s not like they are going to
shut down a school.” A full calculation should also consider tax revenues.
The Baker Institute estimates that revenue collected from undocumented
immigrants exceeds state expenditures on them by $421m.

How serious is Mr Abbott’s intent? A successful challenge to Plyler would

take years, from passing state legislation to the subsequent legal challenges
and an eventual Supreme Court decision. “This is a 40-year-old precedent at
this time on the federal level. I don’t think there’s a lot of appetite to pursue
this,” says Mr Nowrasteh. Maybe, but there is appetite for the politics of it—
and conservatives have Supreme Court precedents in their sights. ■

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education-to-undocumented-migrants
27,080 years of lost freedom, and counting

Exonerations in America have risen, and their

pattern is revealing
“Professional exonerators” were responsible for 60% of overturned
convictions last year
May 14th 2022 | New York

IN THE AUTUMN of 2006, two teenage girls were sexually assaulted in

Detroit. Within weeks, the police had their man. Terance Calhoun, a local
19-year-old, was spotted in a liquor store nearby and appeared to match the
composite sketch the police had produced. He pleaded no-contest in
February 2007 and was dispatched to prison.

There was just one problem: he didn’t do it. A follow-up investigation in

2019 found a litany of red flags in how the case was handled, including an
unrecorded police interrogation and the fact that Mr Calhoun, who was
found to be cognitively deficient, had been questioned without a lawyer
present. On April 27th, after 15 years behind bars, he was exonerated.
He was not alone. The government does not record figures, but in 2012 a
pair of professors founded the National Registry of Exonerations (NRE) to
keep track. It counted 161 exonerations last year, up more than sixfold
compared with 1989, when there were just 24 (see chart). These shed light
on weak spots in America’s justice system.

An exoneration “doesn’t just happen on its own”, says Barbara O’Brien of

Michigan State University, who runs the NRE. A crucial development has
been the rise of “professional exonerators”. These were spurred by
improvements in DNA testing, which spread public awareness of mistakes,
and can take two forms. First, advocacy groups such as the Innocence
Project play a role in lobbying for individual cases. The WMU-Cooley
Innocence Project, a part of Western Michigan University’s law school, was
a critical component in Mr Calhoun’s case. Second, and perhaps more
important, are Conviction Integrity Units (CIUs), branches of prosecutors’
offices tasked with investigating possible miscarriages of justice. Together,
these professional exonerators were responsible for 60% of overturned
convictions last year.

Some CIUs require cases to be DNA-based; a few consider only cases which
have been tried (as opposed to ones with guilty pleas); others look at every
application. Once it takes on a case, a CIU combs through police files, court
transcripts and lab results, in search of flaws. The CIU in Wayne County,
Michigan, pieced together the alarming story of Mr Calhoun’s conviction. It
found that the DNA analysis of a condom at the second crime scene,
completed just three months after his conviction, had excluded him as its
potential donor. This result was apparently never shown to Mr Calhoun’s
lawyers. Other discoveries included the fact that one of the victims had
clearly described a perpetrator with “braids” and a distinctive “puzzle
tattoo”, neither of which Mr Calhoun had.

Since the first CIUs were established in the early 2000s, 93 other
jurisdictions have followed. Last year 16 were formed, from Bessemer,
Alabama, to Monterey, California. Minnesota set up a statewide CIU last
August. Yet many are understaffed and under funded, and they remain few
in number relative to the more than 2,400 elected prosecutors across the
country.

Official misconduct is the main reason behind most exonerations: it played a

role in 102 of the 161 cases last year. In 2012, for example, Ronald Watts, a
Chicago police sergeant, was arrested for stealing federal funds from an
undercover FBI informant. It gradually emerged that he had been planting
drugs and extorting victims over the course of a decade, stitching them up on
bogus charges if they refused to pay. Starting in 2016, the CIU in Illinois’s
Cook County began identifying and tossing out all convictions linked to
him. So far over 100 have been overturned.

Mistaken eyewitness identification accounts for about a third of

exonerations. Misleading forensic evidence is relatively rare, responsible for
roughly 20% of wrongful convictions. Other factors include perjury and, as
in Mr Calhoun’s case, false or coerced confessions. Nearly three-quarters of
the exonerated who falsely confess have been found to be mentally ill or
intellectually disabled.

Since 1989 the NRE has recorded more than 3,000 exonerations in America,
amounting to 27,080 years of lost freedom. That is just the tip of the iceberg.
Samuel Gross, one of the project’s co-founders, estimates that the wrongful-
conviction rate may be as high as 2%, or some 20,000 false felony
convictions a year. Finding and overturning those injustices is essential work
—for Mr Calhoun, now in his mid-30s, and the many others like him. ■
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risen-and-their-pattern-is-revealing
High maintenance

In California, the world’s largest legal weed

market is going up in smoke
The state’s pot industry hopes federal legalisation will help. It may instead
be its death knell
May 14th 2022 | Eureka, California

KAREN AND TOM HESSLER moved to their remote corner of Humboldt

County, California, in 1971. Distrust of the government during the Vietnam
war and a desire to live off the land drove them to settle in Ettersburg, some
225 miles (360km) north of San Francisco. “We thought we’d come out into
the wilderness, and we could just do our thing,” Mrs Hessler says. The only
way to get to the Hesslers’ farm is to navigate miles of serpentine dirt roads
through northern California’s towering redwoods. The isolation that so
intrigued “back to the land” hippies like the Hesslers also turned Humboldt
County into the cannabis capital of California—and, therefore, America.

Humboldt, Mendocino and Trinity counties make up the “Emerald

Triangle”, an area roughly the size of Massachusetts famous for growing
weed. Locals say the dense forests act as a “redwood curtain”, affording
farmers seclusion when cannabis was still illegal. For decades cannabis
farmers were seeing green. Johnny Casali, a small farmer in Humboldt
County, says he remembers selling some of his crop for $5,800 a pound
($2,600 a kg) in 1990.

California legalised medical marijuana in 1996 and recreational cannabis in

2016. The state is now the largest legal weed market in the world, raking in
$5.2bn in sales in 2021. Proposition 64, the ballot measure that allowed
recreational weed, was heralded as a way to shrink the illicit market, and
give those harmed by the war on drugs a chance to join the legal economy.
Some of that has happened. Mr Casali was released in 2004 after serving
eight years in prison. He now runs a legal cannabis farm.

However, many cannabis businesses in California are floundering. Supply

surged as more growers entered the legal market. In 2017 ERA Economics,
a consultancy, estimated that California consumes 2.5m pounds of the
13.5m-15.6m pounds of weed produced there each year. Farmers and shop
owners complain that onerous taxes and rules make running a profitable
legal weed business nearly impossible. Last autumn was “a perfect storm of
everything that could have gone wrong”, says Nicole Elliott, California’s top
pot regulator. Prices fell to $400 a pound; the cultivation tax, of $161 a
pound for buds, was raised because of inflation; and labour was scarce.

The price has recovered somewhat; in April it was about $800 a pound. But
the legal framework set up by Proposition 64 spells long-term trouble. It
gave local municipalities the power to decide whether they would allow
cannabis to be grown and sold. In their forthcoming book “Can Legal Weed
Win?” two economists, Robin Goldstein and Daniel Sumner, argue that local
control ensured that the illegal market would continue to flourish in places
where legal weed was banned. Local control also helps explain why
California lags behind nine states in weed shops per person. By comparing
sales figures with drug-use surveys, Messrs Goldstein and Sumner estimate
that only about 25% of the weed sold and consumed within California is
legal. Many pot farmers in Humboldt say that some of their fellow growers
have gone back underground to make a profit.

One way to try to stamp out the illegal market, including the organised-
crime groups which have set up shop in the Emerald Triangle, is to ramp up
enforcement. But that is not popular among officials who want to make up
for the trauma inflicted during the war on drugs. In the 1980s, “it was like
the military coming in,” says William Honsal, Humboldt County’s sheriff.
“A lot of the old farmers still have PTSD based upon the helicopters flying
low.” He says his department doesn’t have the resources anymore to go after
illegal farmers even if it wanted to. Of the 120 deputies that roam Humboldt,
only four are devoted to smoking out illegal cannabis.

Programmes to help former offenders have fallen short. An investigation by

the Los Angeles Times, published in January, found that at least 34,000 old
drug charges for marijuana had yet to be cleared.

Wake up and smell the weed

Chipping away at local control by incentivising—or compelling—cities to
join the legal market might help the industry. But the change farmers want
most is tax reform. Some cities and counties have suspended local taxes on
cannabis. Gavin Newsom, California’s Democratic governor, has promised
to “look at tax policy to stabilise the market”. Meanwhile, Humboldt farmers
are getting crafty to keep their businesses afloat. Some take part in cannabis
tours, where Bay Area potheads are whisked to different farms to see what
happens behind the redwood curtain.

Humboldt farmers hope federal legalisation will save them by creating a

national market. “When California cannabis becomes legal”, says Mr Casali,
“the Emerald Triangle will be the Napa Valley of weed.” They might be
disappointed. Because interstate commerce is banned, states that might have
bought California pot have instead built their own industries. If and when
weed is legalised, these states may strive to prop up their local businesses.

California may also have trouble competing with lower-cost states.

Industrial, indoor farms have proliferated as the cannabis industry has begun
to resemble Big Ag. But the state’s high energy costs make growing pot
indoors expensive. In future farmers may choose to grow in somewhere like
Oklahoma—a medical-only state that licenses new businesses quickly—
rather than California, where they must also contend with high taxes and
burdensome regulations. “People gotta wake up in California, man,” warns
Mr Hessler, “before it’s way too late.” ■
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legal-weed-market-is-going-up-in-smoke
Lexington

Donald Trump’s accommodation with violence

Mark Esper’s memoir of the dying months of the Trump administration is
a frightening read
May 14th 2022

AHEAD OF THE mid-terms in 2018, the New York Times published a

sensational piece from a “senior official” in Donald Trump’s administration
who claimed to be “working diligently from within to frustrate parts of [the
president’s] agenda and his worst inclinations”. After it emerged that the
author was Miles Taylor, a little-known staffer in the Department of
Homeland Security, the Times was accused of mis-selling. Yet it turns out
Mr Taylor’s words were before long equally true of the secretary of defence.

In his much more lurid confessional, “A Sacred Oath”, Mark Esper

describes his tenure at the Department of Defence as an 18-month white-
knuckle effort to prevent Mr Trump starting “unnecessary wars”, launching
“strategic retreats” and causing “politicisation of the DOD” and “misuse of
the military”. And to do so while avoiding getting sacked, because that
would probably lead to Mr Trump replacing him with one of the sycophants
and crazies the president was increasingly surrounding himself with.
On the plus side, Mr Esper, a former defence-industry lobbyist, claims to
have helped persuade Mr Trump not to shoot Black Lives Matter protesters
(“Can’t you just shoot them. Just shoot them in the legs or something?” the
president asked the chairman of the joint chiefs of staff); or to withdraw
American troops from Afghanistan and Germany; or launch “missiles into
Mexico to destroy the drug labs”. Yet Mr Esper, by his admission, could at
best mitigate the damage Mr Trump did. He was fired in November 2020,
after which the president carried out the feared purge of senior Pentagon
staff and their replacement with some of the most malign or inept
individuals in his coterie.

Hair-raising accounts of the Trump presidency are now so familiar it is easy

to become complacent about them. Mr Trump’s authoritarian instincts and
lack of principle are a matter of record. Even so, Mr Esper’s memoir stands
out for a few reasons.

One is the credibility of his revelations. A stolidly partisan establishment

conservative, plucked from relative obscurity by Mr Trump, he owed him
everything, resented his left-wing critics, got along with many of his
henchmen and took a fairly relaxed view of the president’s foul-mouthed
eccentricities. He appears to have taken such little note of Mr Trump’s
behaviour in the first three years of his presidency that Mr Esper was
surprised the first time he heard Mr Trump announce a sudden withdrawal
from South Korea and call Vice-President Mike Pence and other members of
his top team “fucking losers”. (The Pence incident “really caught my
attention”, Mr Esper writes in wonder.) Having risen higher than he could
have expected to, he is also eager to see the upside in whatever he did. He
claims to have run an unusually harmonious Pentagon leadership team, to
have overseen a golden age of co-operation between the Defence and State
Departments, to have moulded Mr Trump’s wild orders into all manner of
policy successes. “Judgments should be made…on the lemonade that was
made, rather than the lemons that were handed to us.”

That, importantly, chimes with a common defence of Mr Trump which

Republican politicians are already starting to dust off, as the prospects of his
running again in 2024 increase. He was unconventional, but had great and
successful policies, it is said. Yet, as Mr Esper makes clear, unwittingly at
times, that was not true. The Trump administration did a lot of solid work, as
all governments do (and, who knows, perhaps the changes Mr Esper made to
defence recruitment and spending programmes were as groundbreaking as
he claims). But such progress was generally made despite Mr Trump, often
surreptitiously. And much of what the president touched directly was a
disaster.

He was the biggest leaker in the leakiest of administrations. He was unable

to make decisions, unable to maintain a consistent policy, was forever
wasting his cabinet members’ time with meetings that would turn, no matter
the subject under discussion, into extended presidential rants on “his greatest
hits of the decade: NATO spending, Merkel…closing our embassies in
Africa”. He badgered Mr Esper obsessively about the ugliness, in Mr
Trump’s view, of American battleships (“He wanted to see ships that looked
more like yachts”). He claimed to be tough on China but, according to Mr
Esper, was inconsistent, weak and pandering until, seeking a distraction
from his mismanagement of covid-19, he started talking tough ahead of the
2020 election.

Describing the changes that Mr Trump and his White House team underwent
in the late stages of his term is Mr Esper’s other big contribution. The
president’s demands—motivated entirely by personal political calculation,
the former defence chief says—grew more outlandish and brutal. Mr Trump,
for all his thuggishness, had had a long-standing distaste for violence. But
over the final 18 months of his term, Mr Esper writes, “the president or some
of his top White House aides proposed to take some type of military action
in or against other nations on multiple occasions…Other recommendations
were so careless that they easily could have provoked a conflict.” Including
at home, given Mr Trump’s frenzied demand for violence against racial-
justice protesters in the wake of George Floyd’s murder. His late-stage cast
of sycophants, led by Mark Meadows and Robert O’Brien (both of whom
Mr Esper despised), encouraged his worst instincts.

Esper-sensory perception
It is a chilling account, which has elicited not a breath of concern from Mr
Trump’s party. The large majority of Republicans who did not break with
him over the deadly Capitol riot will not leave him now. Whether Mr Trump
will be the next Republican presidential nominee appears to be largely for
him to decide. Yet it is already clear, from Mr Esper’s and other accounts,
that if he does return to the White House Mr Trump and his cabinet will be
very different from their earlier versions. Trump II would be more reckless
and aggrieved, and probably much less restrained. ■

Read more from Lexington, our columnist on American politics:

Evan McMullin’s run against extremism in Utah is working, so far (May 5th)
Kevin McCarthy’s accidental truthfulness (Apr 30th)
James Madison and his slaves (Apr 23rd)

For exclusive insight and reading recommendations from our

correspondents in America, sign up to Checks and Balance, our weekly
newsletter.
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violence
Middle East & Africa

Zimbabwe: Savings and groan

Financial innovation in Zimbabwe: Heiferinflation
Zambia: Copper-bottomed promises
Palestine and Israel: A death in Jenin
Algeria and Morocco: The danger of lighting a gas fire
Savings and groan

Zimbabwe’s president orders banks to stop

lending
It is an odd way to prevent hyperinflation
May 14th 2022 | HARARE

“NEITHER A BORROWER nor a lender be” may occasionally be the right

answer in a quiz about Shakespeare. It is no way to run a bank. Nonetheless,
on May 7th President Emmerson Mnangagwa decreed that Zimbabwe’s
banks should cease lending indefinitely. Whether he means it, and how this
rule will be enforced, “I have no idea,” says a banker. She and her
colleagues are desperately trying to find out.

The rationale appears to be that people have been borrowing money to bet
against the Zimbabwe dollar. Others suspect that Mr Mnangagwa wants a
scapegoat for the mess his country is in, and bashing bankers pleases voters.
“It is absolute madness,” says Tendai Biti, an opposition politician and
former finance minister. “Finance is the oxygen of industry. The business of
banking is lending.” Banning it is unconstitutional, he adds.
“It’s a crazy environment,” says a local economist. Inflation is 152%,
estimates Steve Hanke of Johns Hopkins University. In February 2019 an
American dollar was officially worth 2.5 Zimbabwe dollars. Now the main
official rate is around 160 and the black market rate is between 350 and 450.
No one trusts the local currency. Many expect a return of hyperinflation,
which ravaged the country between 2007 and 2009. Prices were rising so
quickly in 2008 that statisticians could not keep up, but by one estimate
inflation peaked at a mind-boggling 231,000,000%.

The president’s response has been erratic. He blames “economic hitmen”

and “saboteurs” for the country’s distress. He has slapped fines on firms that
refuse to accept the local currency, and sometimes says he will ban the use
of the American dollar entirely. Now he is imposing currency controls, and a
confusing list of other rules, to “stabilise” the economy. None of this has
persuaded Zimbabweans to embrace the Zimbabwe dollar.

A farm worker called Jealous is on strike. He has one demand: to be paid in

US dollars. Asked why, he gives a simple explanation: “When we go to the
shops, they ask for dollars.” Nearby, a field of ripe blueberries sits unpicked
in the sun. A refrigerated building that should be buzzing with people
packing fruit into boxes for export is empty and silent. If the strike is not
resolved, the fruit may rot. Similar stoppages have afflicted farms across the
country.

If hyperinflation returns, it will be the government’s fault. Mr Mnangagwa,

who seized power in a coup in 2017 and won a dodgy election the next year,
has been spending far more than Zimbabwe can afford and ordering the
central bank to print money to plug the gaps. Much of this goes on
infrastructure—some of Zimbabwe’s roads have improved on his watch. But
a hefty share is stolen.

Money-printing drives inflation, which saps the Zimbabwe dollar’s value.

Meanwhile, Mr Mnangagwa insists on skewed exchange rates. Exporters
must typically surrender 40% of their proceeds at the confiscatory official
rate. A lucky few can buy these dollars for less than half what they are
worth. In theory, they go to importers of essential things such as fuel,
medicine and farm supplies. But a fat chunk goes to well-connected types. A
local parliamentary report in 2019 found that $3bn disbursed for a
government agriculture programme was not properly accounted for. Another
report by The Sentry, a watchdog in Washington, DC, detailed how one of
the prime movers of that programme, a crony of the president, had amassed
a fortune from privileged access to hard currency and state contracts.

For ordinary Zimbabweans, life is a furious scramble for dollars. Percy

Msona was a maths teacher, but found it hard to survive on the equivalent of
$30 a month. Now he trades currency in the street. “It’s not good for
Zimbabwe that teachers like me are quitting,” he sighs. Perhaps a fifth of the
population has emigrated. Nurses, accountants, waiters and farmhands flock
to Britain and South Africa.

Shopping in Zimbabwe is an obstacle course. Informal street vendors

display prices in US dollars. Anyone who pays in local currency must do so
at the black market rate. Formal shops, such as supermarkets, must price
goods in Zimbabwe dollars and use the official rate if customers pay in
greenbacks. Since no customer would accept such terms, they offer a huge
“discount” for such purchases. Petrol stations are allowed to insist on US
dollars. Attendants laugh at anyone who asks to pay in local currency.
Saving Zim dollars is pointless, since their value rapidly shrinks. Saving
hard currency is not simple, either. Many Zimbabweans receive remittances
from relatives abroad, but few feel safe putting their greenbacks in banks. It
is often hard to get them out again, and the government has in the past
forcibly converted dollar accounts into local money at a grabby rate. Hence
the proliferation of safety-deposit-box firms, which let people store their
savings away from the state’s greedy eyes. Many people stash cash under the
bed. “The living room is Barclays, the bedroom is Standard Chartered,”
jokes a Zimbabwean about her mother’s squirrelling of savings around the
house.

Others who want to save must be creative. Bricks are stacked in many a
backyard. Perched on the roof of a half-built house near Harare, the capital,
Munyaradzi Dombojena explains why. Every time his family has spare cash,
they buy building materials. In time, they will have a house.

Zimbabwe has enormous potential. Its soil is fertile and studded with gold,
at a time when both food and minerals fetch high prices. Its people were
until recently among the best educated in Africa. Yet their rulers keep them
down. A general election is due next year. The government will surely print
more money to buy food for ruling-party supporters and truncheons for
opposition-party skulls. Mr Biti says the opposition would win a fair contest,
but it won’t be fair. “We’re run by a phalanx of thugs and gangsters,” he
says. ■
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orders-banks-to-stop-lending
Heiferinflation

Why a Zimbabwean firm offers pensions

denominated in cows
Ruminants are inflation-proof
May 14th 2022 | SELOUS

KELVIN CHAMUNORWA’S mother was a middle manager at a bank in

Zimbabwe. She worked there for 25 years, steadily contributing to a
pension. But horrendous inflation, which reached an annual rate of
231,000,000% in mid-2008, wiped out her savings. When she retired, her
pension was so small it was barely worth collecting.

So Mr Chamunorwa, an actuary trained in Britain, started a company, Nhaka

Life Assurance, to sell inflation-proof pensions to Zimbabweans. The
pensions are not denominated in Zimbabwe dollars, since they quickly
evaporate, nor in American dollars, since many Zimbabweans are struggling
to obtain any.

Instead, they are denominated in cows, which the government can’t print.
Savers, typically wage-earners such as teachers, chip in cash, which Nhaka
immediately turns into cattle. The assets grow by breeding. When a policy
matures, clients can demand payment in cows or the cash equivalent.

Zimbabweans have long seen cattle as a store of wealth. Mr Chamunorwa

jokes that he has merely updated an old idea and added livestock insurance.
His scheme is especially suited to a country where savers have lost all
confidence in conventional finance. The only way to rebuild trust is to offer
people “things they can touch and see”, he says. Nhaka holds viewing days
when some of its 70,000 clients can visit the cows.

Mr Chamunorwa also likes to get away from his office in Harare, the capital,
and visit them. At Nhaka’s farm in Selous, 75km away, he watches newly
weaned calves hungrily munching hay, and offers his actuarial opinion.
“Most of these, we’ll be putting a bull on them in 12 months’ time,” he says.
That will be “a compounding of the investment return”.
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offers-pensions-denominated-in-cows
Copper-bottomed promises

Zambia wants to be a model for resolving Africa’s

debt crises
President Hakainde Hichilema tells The Economist that China is “on
board”
May 14th 2022 | CAPE TOWN

AFTER FIVE unsuccessful attempts and a spell in prison on trumped-up

charges of treason, Hakainde Hichilema was elected president of Zambia in
August. The businessman’s victory was due to voters’ anger at the
corruption and collapsing economy overseen by his predecessor, Edgar
Lungu. The West was cock-a-hoop. So too were mining firms, which had all
but stopped investing in Africa’s second-largest copper producer because of
high taxes and threats of expropriation.

Nine months later, is Mr Hichilema enjoying the job he craved? “It’s not fun
trying to rebuild a damaged economy,” he tells The Economist, “but
someone has to do it.”

The job starts with restructuring Zambia’s unsustainable public debt, which
is above 100% of GDP. Since the country defaulted in 2020 it has not
serviced most of its external borrowing. As is the case with many of the 23
sub-Saharan countries the IMF deems to be in debt distress, it owes money
to a more diverse group of creditors than African borrowers did in the 2000s,
when loans were forgiven by rich countries and Western-dominated
international institutions. Of its $17.3bn in external debt, only about half is
owed to outfits like that. The rest is to Chinese entities ($5.5bn) and Western
fund managers ($3.3bn), according to Bloomberg. Zambia is trying to
persuade its creditors to take losses. The rest of Africa is watching closely.

Many African countries are sceptical of the “Common Framework”, a set of

loose principles for resolving debt crises launched in 2020 by the G20, a
club of big economies. It is meant to bring China and commercial creditors
to the table, yet no country has gained debt relief this way. Mr Hichilema
insists the common framework will work and that “China is on board”: it
will co-chair, with France, a committee of Zambia’s creditors. At least 18
Chinese entities have lent money to Zambia; some should expect to lose part
of their principal, not just see the loans extended, says Situmbeko
Musokotwane, the finance minister. That would be unusual for China, which
prefers to reschedule debts.

Mr Hichilema does not completely rule out a deal linking debt-restructuring

to proceeds from copper mining. But he is aiming for one without “new
liabilities” or a reduction in the mining revenues that could be used to invest
in Zambia’s economy. He is optimistic about striking a deal with
bondholders. He says Zambia has restored good faith with these creditors by
making clear the true scale of its debts to China, which were about double
what Mr Lungu’s government had admitted.

The IMF’s board will want to see progress on debt-restructuring before it

approves a loan of $1.4bn. Mr Musokotwane is “very confident” this will
happen next month. The fund has also endorsed a series of reforms, which
will probably include cuts to fuel and electricity subsidies worth about
$800m a year.

“We told the voters that we would deliver change,” says Mr Hichilema. “The
type of change that would bring back economic growth.” Won’t some of
these policies hurt Zambians? Voters don’t want to pay higher prices, he
concedes, but “it’s a necessary process to rebuild our economy.”
There are encouraging signs. First Quantum Minerals, a Canadian miner,
will expand a huge copper mine with an investment of $1.3bn—the largest
in Zambia in a decade. Mr Hichilema wants to increase annual copper
production from 800,000 to 3m tonnes over ten years. Zambia would then
overtake Congo as Africa’s largest producer. To do so he will also need to
resolve the future of other mines that were under utilised during Mr Lungu’s
reign, largely because of disputes with the government.

Mr Hichilema’s free-market instincts are in welcome contrast, not just to

those of his predecessor, but to those of many African leaders. Yet there is a
risk Zambians will see IMF-endorsed reforms as inflicting pain of the sort
that Mr Hichilema vowed to end rather than as necessary medicine. He says
he is working “to restore the credibility of the country”. That means wooing
friends abroad. But he must keep an eye on what happens at home, too. ■
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model-for-resolving-africas-debt-crises
A death in Jenin

Shireen Abu Aqleh was killed covering an Israeli

raid
A Palestinian journalist who reported on the Israeli-Palestinian conflict
becomes its latest casualty
May 14th 2022 | DUBAI

LIKE SO MUCH of her life, Shireen Abu Aqleh’s final moments were
captured in the stark style of news footage. Seven shots ring out. The
cameraman creeps around to show a woman, clad in a flak jacket labelled “
PRESS”, lying prone in the dirt. A young man tries to help her, only to
retreat after another shot. When he finally manages to lift her limp body, it is
clear she is beyond help: one of the most recognisable faces in Arab media
has been reduced to a bloody pulp.

Ms Abu Aqleh, a correspondent for Al Jazeera, a news channel based in

Qatar, was killed on May 11th. She was in Jenin, in the West Bank, to cover
a raid by Israeli soldiers. Several witnesses, her employer and the Palestinian
health ministry say it was those soldiers who shot her.
Naftali Bennett, Israel’s prime minister, said it “appears likely” she was
killed by Palestinian gunmen. By way of evidence his foreign ministry
shared a 15-second clip showing a masked man shooting down an alley.
Nothing indicates when it was filmed or what he was aiming at. Benny
Gantz, Israel’s defence minister, later sounded less sure. B’ Tselem, an
Israeli human-rights group, found where the clip was recorded—300 metres
away and out of sight of the spot where Ms Abu Aqleh fell.

Ali al-Samoudi, a colleague at Al Jazeera who was also shot, says no armed
Palestinians were nearby. Mr Bennett says the shooting that killed her was
“indiscriminate and uncontrolled”. In raw footage, volleys of gunfire can be
heard in the distance. The shots aimed at the journalists, louder and closer,
sound controlled and seem to come from a single gun.

Ms Abu Aqleh, 51, started at Al Jazeera in 1997 and became one of its best-
known reporters. Many young Arab journalists, especially women, cite her
as an inspiration. A Christian Jerusalemite, she was omnipresent in the West
Bank. That meant regular trips to places like Jenin. For the past six weeks
Israeli soldiers have conducted almost nightly raids to nab suspects there,
following a series of deadly attacks inside Israel, at least two of which were
carried out by Palestinians from the area.

Since March, 19 Israelis and 30 Palestinians have been killed. Ms Abu

Aqleh was the eighth Palestinian to die in the recent raids on Jenin’s refugee
camp. Among the other victims was Muhammad Zakarneh, a 17-year-old
shot by soldiers looking for his mother and brother.

Unsurprisingly, anti-Israel sentiment in the camp has soared. Fighters are

celebrated as heroes. Alleyways are coated in the flags and graffiti of Islamic
Jihad, the camp’s dominant militant group. Makeshift barricades guard its
entrances.

This latest killing will rattle Israel’s unwieldy eight-party coalition. The
government lost its majority last month when a member of Mr Bennett’s
own party defected. Ra’am, a conservative Islamist party, is on the brink of
bolting over clashes between Israeli police and worshippers at the al-Aqsa
mosque in Jerusalem.
Mansour Abbas, the party’s pragmatic leader, would like to remain in the
coalition to secure gains for his Arab-Israeli constituents. On May 11th he
said his party would not back an opposition bid to dissolve Israel’s
parliament. But events like Ms Abu Aqleh’s killing make staying in
government ever trickier for him. ■
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killed-covering-an-israeli-raid
Gas fires in the Sahara

Algeria’s ailing rulers stir tension with Morocco

They may hope that a crisis with the neighbours will distract from
problems at home
May 14th 2022 | DUBAI

THESE SHOULD be heady times for the world’s tenth-largest producer of

natural gas. Russia’s invasion of Ukraine has sent European governments
scrambling for new supplies. Algeria sends more than 80% of its gas exports
to Europe. Most is piped to Spain and Italy (see map). As the continent’s
third-biggest supplier, it should be investing in new capacity to produce and
transport more of the stuff. Instead it is threatening to send less.
Last year Algeria shut a pipeline that runs to Spain via Morocco. The closure
was an act of pique towards Morocco, which takes 7% of the flow as a
royalty and gets almost all of its natural gas from Algeria. Spain still
receives Algerian exports through a smaller undersea pipeline that bypasses
Morocco. However, last month Algeria threatened to close that, too, after
Morocco asked Spain to send it gas by reversing the flow of the now-idle
Morocco-Spain pipeline. Algeria said it would stop all gas exports to Spain
if it did so.

That may well be bluster: Algeria does not want to lose Spanish cash. In any
case, Algeria’s inflammatory talk has much to do with its troubled domestic
politics. But the threats are exacerbating Algeria’s long feud with Morocco.
Well-connected Algerians say the stand-off with their neighbour could even
tip into war.

Tensions between the two countries date back to 1963, when they fought a
brief “sand war” over a strip of borderland a year after Algeria had won
independence from France. Since then, ideological rivalry has deepened.
Morocco is a conservative, pro-Western monarchy, whereas Algeria was a
prominent member of the Non-Aligned Movement and friendly to the Soviet
Union. The land border between the two has been closed since 1994, to the
joy of smugglers and the annoyance of everyone else.
In the 1970s Algeria began backing the Polisario Front, a guerrilla group
seeking independence for Western Sahara, which Morocco grabbed in 1975
after the departure of Spain, its colonial ruler. The decision to close the
pipeline is linked to events in Western Sahara, where Morocco has been
gaining ground both militarily and diplomatically.

It may not mean immediate pain for Morocco’s economy. About 60% of its
energy comes from oil. Two gas-fired plants are switched on only to handle
peak demand. Officials have discussed buying cargoes from Qatar, the
world’s largest exporter of liquefied natural gas. Morocco has issued tenders
for a regasification plant. It is also pushing ahead with renewables.

Lately Algeria’s grievances have grown. International news organisations

reported last year that Morocco had used Pegasus, a powerful spyware tool
made by Israel’s NSO Group, to snoop on the phones of some 6,000
Algerians, including politicians and generals. Morocco denies this.

Mindful of Algeria’s support for Polisario, Morocco’s ambassador at the UN

has called for self-determination in Kabylie, a restive mainly Berber region
of northern Algeria. Algeria saw this as a threat. It even blamed Morocco for
devastating wildfires last summer. King Mohammed of Morocco tried to
lower the temperature last year, calling for dialogue in his annual speech
from the throne. But Algeria seems less keen on reconciliation.

Algeria is in a bad way. A movement called the hirak led protests that
resulted in the overthrow three years ago of Abdelaziz Bouteflika after 20
years in power. The protesters had hoped that a new generation of leaders
would emerge. Instead his fall only formalised the rule of Le Pouvoir, a
clique of grey men who ran the show from the shadows throughout
Bouteflika’s long rule. They have done little to reform a hidebound economy
or clean up corruption. Unemployment is around 12%, and higher for the
young. Inflation hit 8.5% last year.

A crisis with Morocco is a way to rally increasingly frustrated Algerians.

Both sides seem geared up for conflict. Algeria and Morocco have the
second- and third-largest armies in Africa. With a defence budget of $9.1bn,
Algeria is the world’s sixth-biggest arms importer. Morocco spent $5.4bn on
its armed forces last year, up by about a third from 2019. It ranks in the
world’s top ten for military spending as a share of GDP; Algeria’s is 5.6%
versus 4.2% for Morocco. Algerians, however, sound less keen on conflict
than their leaders do. Younger ones may prefer their government to focus on
jobs and the economy rather than rattle sabres at its neighbour.

Europeans, too, are wary of events across the Mediterranean. Last year
Spain got more than 40% of its natural-gas imports from Algeria. A rupture
would hit hard, just when energy prices are already sky-high. The Ukrainian
war has prompted Spain to forswear Russian gas. It cannot afford to lose
another supplier. On top of that, a conflict between nearby Arabs could mean
a wave of migrants. In short, nobody would benefit. ■
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stir-tension-with-morocco
The Americas

Brazil: The cross on the ballot

Crime: Crack on
Bello: Staying alive
The cross on the ballot

Evangelicals are key to Brazil’s upcoming election

But they are not necessarily going to vote for Jair Bolsonaro
May 14th 2022 | BELO HORIZONTE

POLITICAL HOPEFULS always cast doubt on the abilities of their

competitors. But when Luiz Inácio Lula da Silva finally confirmed on May
7th that he would be running in Brazil’s presidential election in October, his
campaign speech included attacks which were more moralistic than most.
Lula, as he likes to be known, was scathing about Jair Bolsonaro, the
incumbent, arguing that a president who does not cry for those rummaging
for food in rubbish or for the 660,000 Brazilians dead from covid-19 is not
worthy of the title. “He may call himself a Christian, but he has no love for
his neighbour,” he said.

Lula, who was president from 2003 to 2010, has much to gain by doing
down his rival’s godliness. Evangelical or born again Christians make up
around a third of Brazil’s electorate. In 2018 seven out of ten of them chose
Mr Bolsonaro over Fernando Haddad, the candidate from Lula’s Workers’
Party, according to one poll. (Lula was not on the ballot.) In April another
pollster found 52% of evangelicals would vote for Mr Bolsonaro in the first
round, compared with 30% for Lula. “[Evangelicals] are going to decide the
elections,” says Victor Araújo, who writes about the politics of Brazilian
Christians.

That the presidency of Brazil, which has more Roman Catholics than any
other country, would be determined by evangelicals would have been hard to
believe half a century ago. Then they made up just 5% of the population;
Catholics, by contrast, accounted for 92%. Evangelicals look set to become
the biggest religious group in Brazil within a decade. In São Paulo, the
biggest city, the number of evangelical churches increased by a third
between 2011 and 2020, to over 2,000.

This shift is already transforming society. Brazilians listen to gospel music

more than samba. Members of the Seleção, Brazil’s revered football team,
frequently praise God on the field. Bigger churches, which often operate as
multinational companies, report profits touched by the divine. Church
revenues almost doubled between 2005 and 2013, to over $11bn.

Evangelicals are also changing Brazilian politics. Since the 1990s they have
sought to elect local representatives who can protect their churches’
interests. Today, these interest groups are national. In Congress, 195 of the
lower house’s 513 deputies belong to the evangelical caucus.

Mr Bolsonaro is Catholic but his wife, Michelle, is evangelical. The family

enjoys the support of the country’s most powerful pastors, such as André
Valadão, who once shared a pulpit with one of Mr Bolsonaro’s sons. On
Instagram, a social-media app, Mr Valadão puts up posts explaining to his
5m followers why it was acceptable for Cain to marry his sister and why
Christians should not vote for the left. Edir Macedo, a billionaire bishop who
owns Brazil’s second-largest TV station, backed Lula in 2002 but Mr
Bolsonaro in 2018. Lula does have the support of Paulo Marcelo, a left-
leaner in the Assembly of God, Brazil’s biggest church. But that is one
person against “an army” of pastors, says Juliano Spyer, an academic.

The megachurches do not represent all believers. Brazil has thousands of

smaller churches, and many different versions of evangelicalism. More
middle-class types are less likely to vote for Mr Bolsonaro. Pentecostals,
who make up around two-thirds of evangelicals, are more so. But while their
highest-profile leaders often resemble the white, affluent men who form Mr
Bolsonaro’s core support, most rank-and-file members are poor and black. It
is their votes that the candidates will be battling for in October.

Some will plump for Mr Bolsonaro because they believe he is upright and
pious. In Belo Horizonte, a city in the bellwether state of Minas Gerais,
Carlos, a Pentecostal pastor, sports straightened Afro hair and a grey
pinstripe suit. Standing in front of a golden pulpit with “JESUS” written in
large black letters down the front, he explains that church is “a hospital for
the soul”, which he claims saved him from a life of crime. Mr Bolsonaro, as
“a man of God”, is the person to defend it.

Others simply like the ideas that Mr Bolsonaro champions. “Evangelicals

are not voting for him as a person, they are voting for principles,” says
Isnard Araújo, a councilman and pastor, of the thrice-married president.
These include protecting “family values” such as marriage, “manly”
behaviour and opposition to abortion. Evangelicals are not the only voters
who find these ideas appealing, says Fábio Baldaia of the Federal Institute of
Bahia, but they respond to them more than most.

Evangelicals may also be more exposed to fake news on social media, which
in turn could influence how they vote. The WhatsApp messaging service is
used by 145m people in Brazil, the second-largest number of users in the
world. A recent poll found that 92% of evangelicals belong to religious
WhatsApp groups, compared with 71% of Catholics. In the same survey,
half of evangelicals said they had received fake news from such chats.
Others are told more explicitly by their pastors how to cast their vote. “This
is the person who marries you, buries your father, baptises your kids, and
visits you when you are sick,” says Fillipe Gibran, a pastor in Belo
Horizonte.

But not all churchgoers embrace the politics of their pastors, warns Vinicius
do Valle of the University of São Paulo. Many are tired of the politicisation
of their faith. Evangelicals “have a thousand other identities”, he says. In
Salvador in north-eastern Brazil, Mr Bolsonaro got less than a third of votes
cast in 2018, despite the city’s fast-growing Pentecostal population. This
may be because Salvador is 80% brown and black. Mr Bolsonaro has made
derogatory remarks about black people; he once said that members of a
quilombo (a community descended from runaway slaves) “don’t do
anything” and were fat. Many in Salvador consider the president racist, says
Cláudio Almeida, a researcher from the city.

Poverty also plays its part. Almost a third of Pentecostals have a monthly
income of half the minimum wage or less (ie, less than $118 at current
exchange rates). While some will be swayed by otherworldly promises of
rewards in heaven, others will vote based on their rising bills.

Possibly the most decisive votes will come from women, who make up 58%
of evangelicals. A recent survey showed that while men clearly prefer Mr
Bolsonaro, among evangelical women, Lula leads by nine percentage points.
This is in keeping with broader surveys which show Mr Bolsonaro trailing
Lula with women of all religions. “In some ways, gender is more important
than faith,” says Cláudio Couto, a political scientist. (In 2018 poor women
helped elect Mr Bolsonaro.)

Many evangelicals will never vote for Lula. He was convicted of corruption
after leaving office, although the conviction was later overturned. His recent
comments that abortion should be treated as a public-health issue worry
many religious types. But his critiques of Mr Bolsonaro’s presidency may
resonate with enough of them to swing the vote in his favour.

“What do you want me to do?” Mr Bolsonaro asked critics of his slow

response to the virus and anti-vaxxer statements at one point during the
pandemic. “I’m Messiah [his middle name] but I can’t do miracles.” For
Alex, an evangelical bus driver who spent two weeks hospitalised with
covid, such an attitude was inexcusable. “God saved me, but if the
government had secured vaccines, thousands of people would not have
died,” he says. He voted for Mr Bolsonaro in 2018. This time, he says, he
will not do so again. ■
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upcoming-election
Crack on

South America’s biggest gang has immense sway

in Brazil
First Capital Command seems to run a shadow state in parts of the
country
May 14th 2022 | São Paulo

BOMBS AND bullets could not remove cracolândia, the largest open-air
drug market in South America, from the heart of São Paulo. When violence
failed, the police took away the black tents in which women weighed
packages of powder. They raided the surrounding hotels, where customers
ordered food on delivery apps while waiting for their illicit orders. Still, the
business flowed. The dealers merely put up umbrellas and sold drugs from
backpacks.

But in March cracolândia emptied. Hundreds of dealers and addicts

dispersed without any sign of violence. The police initially claimed credit,
but whispers said that the move had instead been orchestrated by First
Capital Command (PCC), South America’s largest gang, on the orders of its
imprisoned leadership. The drug-sellers, in cahoots with the PCC, are
pitching up elsewhere in smaller groups.
That a gang could do what the Brazilian police could not is perhaps not
terribly surprising. In some ways the PCC has set itself up as an alternative
form of government, according to Gabriel Feltran, a sociologist who has
studied the group for decades. Many poorer Brazilians “feel they can trust
the PCC more than the state”, he says.

Last year the US Treasury named the PCC as one of the most powerful
criminal organisations in the world. The group is now involved in everything
from petty crime to international drug-smuggling. It first formed in São
Paulo’s overcrowded prisons in the 1990s, and still counts many thousands
of inmates as its members. In 2017 the PCC was behind the beheading and
killing of dozens of inmates in various prisons. The group is thought to
control the trade in stolen phones that plagues São Paulo, Brazil’s biggest
city, where a mobile phone is reported stolen every 3.5 minutes—and, with
it, access to the owner’s banking app. On April 25th a young man was shot
for his phone by a fake delivery driver. After the phones have been hacked
to gain access to the banking app Pix, they are sold.

But the group has pretensions to be greater. It loftily claims to be motivated

by a desire to help the “oppressed of the system”, rather than just to make a
juicy profit. The gang’s rules are designed to benefit a “fraternity of crime”:
it provides loans, weapons and a network of contacts to help illicit
enterprises flourish. It acts like a “government of the crime world”, says
Bruno Paes Manso, who co-wrote a book on it.

Indeed some think the group is behind the dramatic fall in crime in the state
of São Paulo. Since 1999 its homicide rate has plunged by 80%. It has gone
from being one of the most dangerous places in Brazil to one of the safest.
Although police take credit for the decline, academics point out that the
biggest falls occurred in the most violent suburbs, at around the time that the
PCC began to make its presence felt in such places. To end the gang wars of
the 1990s, the group created its own parallel court system in which to settle
disputes, says Mr Feltran. It mediated among gang members’ families,
churches and other members of civil society.

Today order is maintained by members known as disciplinas who hand out

punishments, such as beatings, to those who break their rules. Many
residents find them less threatening than the police, who killed 6,000
Brazilians in 2020. (Police in the United States, by contrast, killed 1,000
people that year.) One of the group’s maxims is, “Crime strengthens crime.”
It pays to be strong where the state is weak. ■
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immense-sway-in-brazil
Bello

The front-runner for Colombia’s election faces

death threats
The country has a long history of political murder
May 13th 2022

FOR MONTHS opinion polls have made Gustavo Petro, a leftist populist,
the front-runner in Colombia’s presidential election, which is due to take
place on May 29th. But Mr Petro’s challenge is not just to defeat his rivals,
chief among them Federico Gutiérrez, a centre-right former mayor of
Medellín. It is also to stay alive. Earlier this month Mr Petro cancelled a
two-day campaign trip, for reasons of security. His team said it had
information that La Cordillera, a paramilitary group, was planning to kill
him.

This threat conjures up ghosts from Colombia’s past. In 1989 Bello spent a
day in the southern city of Palmira watching César Gaviria campaign. He
was followed by three ambulances, one equipped with an intensive-care bed.
He spoke from behind a bullet-proof rostrum, surrounded by a huddle of six
policemen clutching Uzi submachineguns. Mr Gaviria had replaced Luis
Carlos Galán, a Liberal reformer who was gunned down at a rally three
months before. By the time Mr Gaviria was elected president in 1990, two
more candidates, both left-wingers, had been shot dead.

Those were the days when Pablo Escobar, the boss of the Medellín drug
mob, had declared war on Colombia’s political establishment. The country is
much improved since then, thanks first to a security build-up, though one not
free of abuses, by Álvaro Uribe, president from 2002 to 2010, and then a
peace agreement with the FARC guerrillas in 2016 by his successor, Juan
Manuel Santos. The murder rate fell by almost two-thirds between 2002 and
2017.

But security has deteriorated since then. Iván Duque, the current president,
has failed to make the most of the peace agreement. In November he
claimed to have dismantled the Gulf Clan, the largest paramilitary drug-
trafficking organisation, when troops arrested its boss, Dairo Antonio Úsaga.
But this month, hours after Mr Úsaga was extradited to the United States,
the Clan shut down a large swathe of north-western Colombia with a four-
day “armed strike”.

Mr Duque has politicised the security forces, naming as commanders people

close to Mr Uribe. According to prosecutors, several retired officers have
links to the Gulf Clan. When Mr Petro alluded to that in a tweet after six
soldiers were killed by drug-traffickers in April, General Eduardo Zapateiro,
the army commander, attacked him for using their deaths for “campaign
narratives” and offered other criticisms of the candidate. Many opposition
figures saw this unusual political intervention as unconstitutional, and called
for General Zapateiro to be sacked. But Mr Duque defended him.

If Mr Petro wins, he would be Colombia’s first avowedly left-wing

president. He was once a member of M-19, a nationalist guerrilla group. But
that is not the reason he alarms many Colombians. Rather it is because until
recently he was an enthusiastic supporter of the late Hugo Chávez,
Venezuela’s elected autocrat. He now presents himself as a moderate and has
pledged not to expropriate any businesses. But some of his proposals still
seem quite extreme. He promises, for example, to guarantee public
employment to all the jobless (unemployment stands at 12%) and to
persuade the central bank to print money to finance the government. He
wants to re-establish diplomatic relations with Venezuela. Other proposals
are opposed by reactionary landowners and cattle-farmers, such as a plan to
tax idle land.

Colombia is a country of checks and balances. The powerful constitutional

court thwarted Mr Uribe’s attempt to turn himself into president for life. The
central bank is independent. Mr Petro would lack a majority in the Congress,
although he might secure one eventually.

Mr Petro wears a bulletproof vest and does not announce his venues until the
last minute. If he were to be killed it would be a moral indictment of
Colombian democracy that would risk a downward spiral into violence. In
1948 Jorge Eliécer Gaitán, a demagogic populist who like Mr Petro was a
crowd-puller, was shot dead in Bogotá, the capital. He had said,
paraphrasing the Gospel of St Luke, “If they kill me, there will not be left
one stone upon another”. And so it came to pass: the centre of Bogotá was
almost destroyed in days of rioting. Colombia was plunged into ten years of
violence in which perhaps 180,000 people died.

That should be a warning to any would-be assassins and their sponsors. If he

is elected Mr Petro may prove to be a bad president. But it is up to
Colombia’s institutions to restrain him and only they can do so peacefully.

Read more from Bello, our columnist on Latin America:

Brazil’s presidential election in October will be about the economy (Apr
2nd)
Cuba’s dictatorship has a cultural opposition that it can’t tolerate (Mar
26th)
Chile’s new president won from the left. Can he govern like that? (Mar 19th)
This article was downloaded by calibre from https://www.economist.com/the-americas/2022/05/13/the-front-runner-for-colombias-
election-faces-death-threats
Europe

Ukraine: No ports in a storm

Russia: Putin’s parade
Germany: A portent or a blip?
The French left: NUPES and dupes
Danish TV: Back to “Borgen”
Charlemagne: Fifth time lucky
No ports amid the storm

It will be hard for Ukraine’s economy to sustain a

long war
The suspension of all maritime exports is a critical blow
May 14th 2022 | KYIV

FOR SOMEONE trying to run an economy in the middle of an invasion,

Serhiy Marchenko is oddly upbeat. The Russians may have occupied or
blockaded his country’s main ports and forced the shutdown of most of its
businesses, but Ukraine’s finance minister radiates calm. “The situation is
very difficult, I am not going to minimise that,” he says over a latte in a slick
café near his ministry. “But we can manage it.” When an air-raid siren
interrupts the interview, he simply ignores it.

Reasons not to panic are quite numerous. Ukraine went into the war in good
shape, with its economy growing at an annualised quarter-on-quarter pace of
almost 7%; strong prices for its exports of grain, iron and steel; a well-
regulated banking industry and a government deficit of less than 3% of GDP
last year. Its debt stood at just under 50% of GDP, a number that many
finance ministers can only dream of. An impressively digitised tax and
benefits system means that revenues are still coming in smoothly from the
parts of the economy that are still functioning. Pensions and government
salaries are all still being paid, even in areas that are now under Russian
occupation, thanks to resilient digital systems and a surprisingly unscathed
internet. Most businesses, for now, are still paying their employees, even if
they cannot operate as normal, or at all. Amazingly, payroll taxes are down
by only 1%, the minister says.

But it isn’t easy. The World Bank has predicted that Ukraine’s GDP will
shrink by perhaps 45% in 2022. (“Our estimate is 44%,” Mr Marchenko
grimaces.) And both estimates are, of course, hugely uncertain. Customs
revenues, a significant part of the government’s tax take, have crashed to
around a quarter of their pre-war level thanks to lower imports and the
suspension of many duties. Military salaries are another big burden. It all
adds up to a financing gap of around $5bn every month, he says. That is
roughly 5% of Ukraine’s depleted GDP for every month that the war goes
on.

How to fill that? In part, Mr Marchenko says, by having the central bank
print more money. In part, too, by issuing war bonds, on which the
government currently is paying around 11% interest, which is less than the
inflation rate. But the main source will need to be foreign. And that, the
finance minister says, is how he spends most of his day, lobbying foreign
governments for help. America is where he has the highest hopes. On April
28th President Joe Biden said he was asking Congress to authorise a further
$33bn in new funds for Ukraine, since a previous facility is almost
exhausted. The House of Representatives has voted to raise the amount to
$40bn. Most of the money will be for arms, but at least $8.5bn is for
economic support. “It’s good news, but what will the American package
look like, and when will it arrive? We don’t know,” says the minister.
The IMF has helped as well. It has encouraged America and other countries
to take over part of Ukraine’s allocation of special drawing rights at the
fund, in effect channelling hard currency to the government in Kyiv. But the
end result of all these appeals is that, for the second quarter of this year,
Ukraine has so far totted up grants totalling only about $4.5bn, against a
fiscal shortfall of $15bn.

This is not sustainable, admits Mr Marchenko, who fears that if the war lasts
more than another “three or four months”, painful measures will be needed,
involving huge tax rises and swingeing spending cuts. The real fear is that
what has become in recent years a fairly market-driven, freewheeling
economy might see a wave of nationalisations, undoing years of hard-fought
progress.

An even more immediate problem is already, literally, sprouting. Across the

country, the sowing season for this year’s crop of wheat, barley, sunflowers
(for oil) and other grains and staples has been completed. Astonishingly,
roughly 80% of the usual crop has gone into the ground, sometimes planted
by brave farmers wearing bulletproof vests. But what to do with it?
Harvesting should be no great problem, since the frontlines have been
pushed back and Russia looks unlikely to make further gains. The hard part
is shipping the stuff out of the country.
The presence of the Russian navy in the Black Sea, as well as the defensive
deployment of mines by Ukraine’s navy, means that Odessa, Ukraine’s
principal port, is shut down completely. The same goes for its second and
third ports, located nearby. Berdyansk and Mariupol, the fourth and fifth, are
under Russian control. Nor can much grain be stored; the country’s grain
silos are mostly full of the recently harvested winter crop, which would
normally have been sent abroad by now.

Mustafa Nayyem, a former journalist and protester turned Ukraine’s deputy

infrastructure minister, is in charge of solving the problem. If the grain
cannot get out by sea, it will have to travel by road and rail, via Poland,
Romania and Hungary. But problems abound, he says. The roads cannot
handle that much heavy traffic; the alternative ports have limited spare
capacity.

Worst of all, crossing Ukraine’s frontiers with the EU is arduous. Customs

and phytosanitary checks are already causing 10km tailbacks at entry points.
The club’s rules say that, since Ukraine is not a member, only a limited
number of its lorries can enter. Bureaucracy is gumming up the works, and
unless they are unblocked Ukraine, Europe and indeed the world will face
severe food shortages after the harvest in September. “We need every
country in Europe to allow free access to our trucks,” says the minister.
“They don’t seem to understand the sheer amount of wheat that is about to
hit them.” ■

Read more of our recent coverage of the Ukraine crisis

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long-war/21809222
Putin’s parade

What Russia’s Victory Day celebrations say about

the war in Ukraine
The absences and omissions were the most notable part of the festivities
May 14th 2022

THE RULE of Vladimir Putin, a former KGB operative turned dictator, rests
on lies, violence and militarism. And on May 9th, the day marking the
Soviet Union’s victory in the second world war, all three of those traits were
paraded on Moscow’s Red Square. Mr Putin has long hijacked the victory
over Nazi Germany and built it into something resembling a religious cult to
serve his regime. Now he is invoking it as he fights his war against Ukraine
and anyone inside Russia who stands in his way. As Ben Wallace, the British
defence secretary, said in a speech of his own on the same day, Mr Putin and
his generals “are now mirroring the fascism and tyranny of 77 years ago…
resplendent in their manicured parade uniforms, weighted down by the gold
braid and glistening medals.”

Just as the Nazis justified their unprovoked attacks on Poland in 1939 and
the Soviet Union in 1941 by claiming to be acting in pre-emptive self-
defence, so did Mr Putin claim in his speech at the parade that Russia had
launched a pre-emptive strike against Ukraine and NATO. “An absolutely
unacceptable threat to us was steadily being created right on our borders…
[the invasion] was forced, timely and the only correct decision.”

The parade was more notable for its absences and omissions than for its
pageantry. The reduced number of troops marching in Red Square showed
the lack of spare capacity. The usual airforce flypast was scrapped.
Ostensibly that was because of low clouds, but some intelligence sources
suggested it was really because of security concerns. A low-flying military
plane being shot down by a Stinger missile over Red Square would not have
made good publicity for the regime. Such concerns would not be outlandish.
A series of mysterious fires and explosions have struck strategic sites across
Russia in recent weeks. The latest occurred on May 1st at a military plant in
Perm in the Urals, where propellant for Grad and Smerch missiles is made.

Also missing from the parade was Valery Gerasimov, the chief of the general
staff. Russia’s top soldier was spotted on May 1st near Izyum, the site of the
fiercest fighting in eastern Ukraine, and has not been seen since. Ukrainian
intelligence sources believe he was wounded there. But perhaps the most
notable absence from the Victory Day parade was the victory itself. After
more than two months of fighting even Mariupol, a port city that has been
pounded by every conventional weapon imaginable, is not entirely in
Russia’s hands.

Having lost more men and equipment in two months than the Soviet Union
lost in the ten years of its war in Afghanistan, Mr Putin, an ageing dictator,
cut a defensive and frustrated figure, as though trying to make excuses for
what may well rank as the biggest military blunder in Russia’s history. His
final “For Russia! For Victory! Hurray!” seemed strangely downbeat.

But this does not mean Mr Putin will be stopping soon. As he laid flowers
on a series of war memorials and firework displays lit the skies over Russian
cities, the skies over cities across Ukraine were lit up by Russian missiles.
Although Russia now controls the majority of the eastern Donbas region, its
offensive to take the rest of it is proceeding slowly. A Ukrainian counter-
offensive around Kharkiv has almost pushed Russian forces back over the
border there, showing that Russia’s grip on its newly acquired territory is
precarious.
Ukrainian forces, newly confident, are also hoping to liberate Kherson
province, where the invaders are stealing grain and shipping it back to
Russia. Russian forces are also trying to impose the ruble as the local
currency. Yet Russia’s hold is so shaky that Russian collaborators are said to
be asking the Kremlin to annex the territory without attempting a
referendum of the sort that was used to justify the annexation of Crimea in
2014.

Dmytro Kuleba, Ukraine’s foreign minister, says that Ukraine’s vision of

victory has now changed from pushing Russia back to its pre-war positions
to liberating all of its territory, including areas seized in 2014. To do so will
require a lot more manpower and equipment than Ukraine currently has. Mr
Putin’s plan is to dig in, wear out Ukraine militarily and strangle it
economically, by blockading its ports.

To sustain a long war, Mr Putin could yet declare martial law to justify a
wider mobilisation. This would not only produce more soldiers to fight in
Ukraine, but could also be a tool for even more repression. But how far Mr
Putin goes and how long he can sustain his offensive depends not only on
the strength of the Ukrainian army and the resolve of its allies, but on Mr
Putin’s situation at home. As Oleksiy Danilov, Ukraine’s national security
adviser, told The Economist, without instability in Russia, it will be hard for
Ukraine to succeed.

Mr Putin has met fierce resistance in Ukraine; but he has so far been much
more successful in his offensive against Russia, demoralising its elite,
silencing any criticism and isolating the country from the world. A degree of
resistance to the war has continued. In the run up to May 9th the Russian
security services pre-emptively detained a number of anti-war activists. On
the day itself, some 125 people were detained for carrying signs like “No to
New War” or “My Grandfather Fought Against Fascism”. In another act of
defiance, two editors of Lenta.ru, a pro-Kremlin news website, took over
their own home page with the headlines “Vladimir Putin lied about Russia’s
plans in Ukraine”, “The Russian army turned out to be an army of thieves
and looters” and “Russia abandons the dead bodies of its troops in Ukraine.”

Yet the Russian elite has remained pliant, and much of the population is
cowed. “The passive silence of the median Russian voter and the
conformism of the elite is the main resource in this war,” says Kirill Rogov,
a political analyst. The technocratic elite, once deemed liberal, is paralysed
by fear of reprisals. As Petr Akopov, a Kremlin propagandist, wrote this
week, “Offshore oligarchs and thieving officials, incompetent generals and
cowardly Russophobes, ‘showbiz stars’—we now have to purge ourselves of
all these. Without [purification] we cannot win. Not in Ukraine, but in that
battle for Russia that has just begun.” ■
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say-about-the-war-in-ukraine
A portent or a blip?

The Social Democrats suffer crushing defeat in

Schleswig-Holstein
Will it be repeated in crucial elections in North Rhine-Westphalia?
May 14th 2022 | BERLIN

“OF COURSE THE result is bitter,” said Saskia Esken, putting it mildly
after the cataclysmic defeat of her Social Democratic Party (SPD) at a state
election in Schleswig-Holstein on May 8th. Yet the co-chair of the party
insisted that despite the worst score in its history in a place that was once a
stronghold, the SPD can still win the vote that really counts, in North Rhine-
Westphalia (NRW), Germany’s most populous state, on May 15th.

The centre-right Christian Democratic Union (CDU) of Daniel Günther, the

incumbent state premier, won 43.4% of the vote in Schleswig-Holstein, up
more than 11 percentage points on the previous election. The SPD got only
16%, down about the same amount. The Free Democrats, who are in
coalition with the SPD at the national level, also had a poor night. But the
worst reverse was suffered by the far-right AfD, which was kicked out of a
state parliament for the first time in its history (which admittedly dates back
only nine years), as it failed to meet the 5% threshold for gaining any seats.
It was a happier day for the Green Party, also in the ruling national coalition,
with 18.3%, a gain of 5.4 points.

The CDU had one great advantage: polls show that Mr Günther is the
country’s most popular state premier. The 48-year-old is very different from
Friedrich Merz, the spiky and conservative national leader of the CDU. Mr
Günther is a centrist who was nicknamed Genosse (comrade) Günther
because he once said he understood CDU politicians in eastern Germany
who are co-operating with the far-left Linke party. He has governed his state
in coalition with both the free-market FDP and the Greens. He did not back
Mr Merz’s campaign to become national leader of the CDU in 2018 (when
he failed) or 2021 (when he won). So a big success for Mr Günther does not
necessarily indicate that Mr Merz is doing well.

Still, the impressive win in Schleswig-Holstein undoubtedly gives the CDU

a dollop of precious momentum as it heads into the eagerly watched NRW
vote at the weekend. With its 18m inhabitants (over a fifth of Germany’s
total population), NRW is home to 37 of Germany’s top 100 companies. Its
poll is sometimes called the “little federal election”; with a high proportion
of immigrants and a mix of thriving and struggling districts, it is seen as a
miniature Germany. Whoever can run NRW has a good shot at running the
country.
North Rhine-Westphalia used to be the heartland of the SPD, which
governed there continuously for 39 years, from 1966 until 2005. Since then
it has been a swing state. In 2017 the CDU’s Armin Laschet beat the SPD’s
Hannelore Kraft, the incumbent. But Mr Laschet stepped down as state
premier last year after his resounding defeat in the general election, in which
he was the CDU’s candidate for the chancellorship. He picked Hendrik
Wüst, his transport minister, as his successor. A lawyer by training, Mr Wüst
is closer to Mr Merz’s conservative camp than is Genosse Günther.

Mr Wüst is now neck-and-neck with Thomas Kutschaty, the largely

unknown SPD candidate whose main claim to fame is that he is a former
state justice minister. Mr Kutschaty is betting on support from Olaf Scholz,
the chancellor, but that strategy might backfire. Mr Scholz’s popularity has
slumped in recent weeks because of his hesitant response to Russia’s
invasion of Ukraine. In a poll last month in Der Spiegel, a weekly, fully 65%
of those surveyed said they thought Mr Scholz was not a strong leader.

If Mr Wüst can pull off a win for the CDU, he will probably remain in
coalition with the FDP. But if that combination does not yield a majority, he
will need to persuade the Greens, who are forecast to get around 18% of the
vote, to join his government, too. They might prefer to join forces with the
SPD, in which case Mr Wüst could lose his job even if the CDU gets more
votes than any other party.

Mr Wüst’s political career is of course at stake on May 15th. But Mr Merz,

who himself hails from NRW, badly needs a second win. The CDU lost a
state election in Saarland at the end of March. The CDU’s leader recently
visited Kyiv to meet Volodymyr Zelensky, Ukraine’s president, hoping to
gain an advantage over Mr Scholz, who has yet to visit the Ukrainian
capital. Mr Merz received non-stop coverage in the media during his visit,
but also a lot of criticism. The trip, most pundits reckoned, was an obvious
attempt to score points off Mr Scholz ahead of the two state elections rather
than, as he claimed, a show of solidarity with Ukrainians. ■
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defeat-in-schleswig-holstein
Mélenchon dreaming

A new alliance boosts the left ahead of France’s

parliamentary elections
But its firebrand leader is unlikely to become prime minister
May 14th 2022 | PARIS

IN A POLITICAL takeover that upends the past half-century’s political

order, the radical French left has swallowed the centre-left. Jean-Luc
Mélenchon, a 70-year-old firebrand with a gift for oratory and a fondness for
Latin American autocrats, launched on May 7th an electoral alliance ahead
of next month’s parliamentary elections. Snappily named the “New Popular,
Environmental and Social Union”, or NUPES, its main purpose is captured
in his election poster: “Mélenchon, prime minister”. To the dismay of old-
time moderates, the Socialists and Greens (as well as the Communists) have
officially signed up.

Mr Mélenchon has pulled off this coup thanks to his 22% of the vote, and
third-place finish, in the first round of last month’s presidential election. The
anti- NATO Eurosceptic, who is against arming Ukraine, vastly
outperformed all other left-wing candidates, including those of the Greens
(4.6%), Communists (2.3%) and the once-mainstream Socialists (just 1.8%).
This has enabled Mr Mélenchon more or less to dictate terms. His party’s
candidates will stand in 328 of France’s 577 constituencies; the Socialists in
just 70.

The terms of the alliance include pledges to lower the pension age from 62
years to 60, impose rent controls and price controls on basic goods, put
unionists on company boards and bring back the wealth tax. The pro-nuclear
Communists have accepted its anti-nuclear stance. The centrepiece, though,
is “disobedience” of the European Union’s rules on deficits, competition and
farm support, among others. A former Socialist senator, Mr Mélenchon quit
the party in 2008 partly due to his Euroscepticism. He once published a book
about “the German poison”, in which he called Angela Merkel’s Germany “a
monster”. To win over the pro-European Socialists, the joint agreement
speaks of their promise to “derogate” from certain rules rather than to
“disobey” them. But nobody is fooled as to whose version would ultimately
prevail.

Mr Mélenchon’s deal has raised hopes in some quarters on the left that it
could now take over the National Assembly at elections on June 12th and
19th. If so, this would not only block almost all of President Emmanuel
Macron’s planned reforms for his second term but also undo those he has
implemented. “Everything is becoming possible” ran the front page of
Libération, a left-leaning newspaper. Thomas Piketty, a French economist,
welcomed “the return of social and fiscal justice”, noting that this left-wing
alliance is less ambitious than the one that came to power in 1936 (under
Léon Blum) or 1981 (under François Mitterrand). On his blog on May 10th,
Mr Mélenchon referred jauntily to Mr Macron’s (as yet unidentified) new
prime minister as “my predecessor”.

The pact has stunned many on the centre-left, however. François Hollande, a
Socialist former president, called it “unacceptable” and the new alliance
unelectable. Ten years ago his party held the presidency, both houses of
parliament, and a majority of regions and big cities. This agreement gives
them just two constituencies in the whole of Paris, and—pointedly—not
even Mr Hollande’s former constituency in Corrèze. Bernard Cazeneuve, Mr
Hollande’s former prime minister, quit the party in sorrow.
Can Mr Mélenchon really grab the prime ministership? He certainly has
momentum. Young voters are drawn to his strong green policies. He has
become the second-most popular politician in France, according to one poll.
Yet under the country’s two-round, first-past-the-post voting system, he will
struggle if voters on the right swing behind Macron-backed candidates in
second-round run-offs. A new poll suggests that Mr Mélenchon could secure
135-165 seats, which would make his alliance the second-biggest force in
parliament. But it still projects 310-350 seats for Mr Macron’s coalition of
centrist parties, a comfortable presidential majority. ■
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frances-parliamentary-elections
Coping in Copenhagen

“Borgen” returns after a decade to a pessimistic

Europe
A new season of the beloved Danish political series has a darker tone
May 14th 2022

THE DANISH TV series “Borgen” introduced Europe’s madly intricate

coalition politics to viewers in simpler lands such as America and Britain.
The show’s first three seasons, which aired in 2010-13, followed Birgitte
Nyborg (played by Sidse Babett Knudsen), leader of the fictional Moderates,
as she became Denmark’s first female prime minister, then resigned and
founded a new party. Striking compromises and pursuing liberal values,
Nyborg was a heroine for her time. American Democrats wishing for
Danish-style health care (or at least hygge and cardamom buns) fell in love.
Soon Denmark had a real female prime minister, Helle Thorning-Schmidt.

Nine years later “Borgen” is back, and its fourth season shows how
Denmark and Europe have changed. Nyborg is now foreign minister in a
government in which the leaders of the main parties are women (as in most
Nordic countries). This has not rendered politics less vicious. She is
exasperated by the radicalism of today’s youth, notably her own son. In a
side plot, the white head of news at the national broadcaster and a non-white
anchor, both women, get into a feud over political correctness.

The more pervasive change is in global politics. The season’s main plot
imagines oil discovered off Greenland. This pits two of Nyborg’s principles
against each other: indigenous self-determination and fighting climate
change. Russia, China and America get involved to pursue their strategic
interests. A bossy American secretary of state is a familiar stereotype of
European film. But the Chinese ambassador who scolds a Nordic minister in
aggressive “Wolf Warrior” style is new.

Like today’s Europe, the season has an overarching tone of pessimism. A

decade ago it portrayed a messy but enviable Denmark, where responsible
politics meant bickering and back-stabbing to achieve social goals. Now
those goals seem out of view. The earlier seasons’ fantasies of Denmark and
Europe’s global relevance are harder to sustain. In the Obama era, Nyborg
was a role model for the frustrated centre-left because, in an impasse, she
always asked, “What are my options?” Since then her options, like Europe’s,
have narrowed.
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pessimistic-europe
Charlemagne

Europe’s handling of war on its doorstep breaks a

decade-long streak of fumbled crises
It is fifth time lucky for the EU
May 14th 2022

IT TOOK FOUR horsemen to mete out God’s apocalyptic punishment. The

biblical wrath conveyed by two of them will sound familiar to Europeans
worn down by disease and now war in Ukraine. But a mere quartet of steeds
would not have sufficed to deliver the calamities the EU has had to contend
with in the past decade or so. No fewer than five crises have befallen the
continent in that time: in addition to covid-19 and fighting on its doorstep,
Europe has been visited by the protracted euro-zone slump, soon followed
by a migration emergency and then Brexit. Any normal polity would be
worn down by living in near-perpetual crisis mode for so long—not least
since the episodes rarely showed the EU at its best. It is only the war in
Ukraine that the bloc has handled remotely deftly. Is it possible that the EU
has learned how to avoid turning problems into existential dramas?

Crisis holds a special place in the hearts of believers in the European project.
Jean Monnet, one of the EU’s founding fathers and the nearest thing
Brussels has to a patron saint, thought the continent’s political arrangements
would be “forged in crises, and will be the sum of the solutions adopted for
those crises”. Like most religious parables, this is not wholly true. The
bloc’s most notable shunts towards ever-closer union, from the euro to the
single market by way of open borders, were agreed on without the spectre of
impending meltdown. But crises help to disrupt the status quo. The
temporary chaos they bring about allows new ideas to emerge. Apply
enough pressure—and in Europe that can mean the prospect of the entire
edifice of the EU collapsing—and what was politically unthinkable
yesterday becomes inevitable tomorrow.

Thus it was that the euro-zone crisis resulted in once- verboten sovereign
bail-outs and a souped-up central bank. In 2015 a surge of migrants crossing
the Mediterranean prompted the EU to recruit its own gun-toting officers to
patrol its external borders. The economic rout brought by covid-19 saw the
creation of a jointly guaranteed recovery fund of the sort even the protracted
euro-zone mess had not made possible. In each instance the lurch to “more
Europe” came after new circumstances made business-as-usual unpalatable.
In the corridors of Brussels Eurocrats bemoaned the crisis of the day, all the
while knowing it represented an opportunity to deepen integration. In what
other circumstances than an all-night summit could leaders breach their own
red lines and agree some federalising leap in the hope of being released to
their hotel rooms?

If a trend can be spotted, it is of Europe dealing with crises rather better over
time. Nobody these days boasts about how the euro was saved, ruing instead
the many missed opportunities to avert a meltdown in the first place. The
migrant surge in 2015 was no better: squabbles over how to treat refugees
from war-torn countries showed Europe at its most divided and unkind.
Brexit was, relatively speaking, a triumph of EU co-ordination. No doubt
preserving a unified Brit-bashing front reduced the risk of other countries
leaving—but at the expense of a still noxious relationship with an important
neighbour. Europe’s covid-19 response is touted as a success in Brussels, yet
many citizens will not forget the delays in the arrival of vaccines the EU was
asked to buy for them.

For the current batch of EU leaders and bureaucrats who are handling
Ukraine, in other words, the bar is low. On the whole they have done a
creditable job. Wave upon wave of sanctions have hurt Russia enough for it
to squeal. Weapons, some of them paid for with EU money, have found their
way east, along with cash to keep the government in Kyiv going. Refugees
were welcomed with open arms. Ukraine’s electricity grid was hurriedly
plugged in to Europe’s to free it from Russia’s—a fiddly operation that
would normally have taken a year but was pulled off in a fortnight. America
has pitched in lots, too, as has Britain. But Europe has little to blush about
thus far.

Why the improvement? The nature of the situation is part of it. War is the
very thing the European project was designed to make impossible. Its
resurgence nearby has helped to forge unity. Nor does armed conflict lend
itself to kicking the can down the road, a habitual European sin. By all
accounts the EU’s institutions have done a good job of paving the road for
national capitals to approve sanctions. That every package has been a slog—
a sixth one, focused on Russian oil, was being hammered out as The
Economist went to press—shows that Brussels is pushing as hard as the
EU’s various member-states are willing to go. Could Europe have done
more? Certainly, but it could also have done less.

Apocalypse later
A striking feature of this crisis is the lack of a grand federalising scheme of
the sort predicted by Monnet, which helped stem previous calamities. A plan
to repeat the joint borrowing of the post-covid stimulus was floated by
France’s President Emmanuel Macron in March, but has gone nowhere. His
call on May 9th to revise the EU’s founding treaties, for example to get rid
of national vetoes that have slowed down sanctions, has been greeted coolly.
Mr Macron thinks the EU should strive for “strategic autonomy”, but if any
institution gets a refresh as a result of this crisis it is likelier to be NATO,
which Sweden and Finland are now set to join.

All that may change as the war unfolds. Grand, crisis-defying schemes are
usually concocted by the EU’s dominant duo, Germany and France. Both
have been on the back foot over Ukraine. Neither is trusted in eastern
European capitals when it comes to dealing with Russia. Both Olaf Scholz in
Berlin and Mr Macron in Paris have had plenty on their plates domestically.
Maybe as they regain their European footing a bold new apocalypse-defying
plan of the sort Monnet would have cheered will be on the cards. Some
would see that as a sign of further progress in the crafting of the union. The
real breakthrough, in fact, would be if the EU could handle crises without
needing to rewire itself every time. ■

Read more from Charlemagne, our columnist on European politics:

France’s re-elected President Emmanuel Macron wants to govern differently
(May 7th)
Emmanuel Macron is now Europe’s standard-bearer (Apr 30th)
Tariffs on Russian energy are a smart way to hobble Vladimir Putin (Apr
23rd)

Read more of our recent coverage of the Ukraine crisis

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breaks-a-decade-long-streak-of-fumbled-crises
Britain

An interview with Boris Johnson: A hawk on the wing

Partygate 2: Sir Beer Starmer
Northern Ireland: Protocol harm
The cost of doing business: Confidence stick
Slimmed pickers: Ukrainian seasonal workers pick much of
Britain’s fruit
Driving: Codes of conduct
Premier League owners: Fall of the Roman empire
Bagehot: A progressive prisoner’s dilemma
A hawk on the wing

Britain’s security deals with Finland and Sweden

shine a light on Boris Johnson
An interview with the British prime minister
May 14th 2022 | Over the North Sea

Read a transcript of our interview with the prime minister

“THE INVASION of Ukraine by Vladimir Putin was a massive punctuation

point in post-war history,” says Boris Johnson, the British prime minister.
“We are now in a new era.” One sign of this new age came on May 11th,
when Mr Johnson travelled first to Sweden and then to Finland to sign
“solemn declarations” with the leaders of both countries; in each case the
signatories affirmed that should either one be attacked, the other would be
ready to respond with military aid. Another sign came the next day, when
Finland’s leaders announced they favoured joining NATO.

The events of this week underscore the dramatic changes in Europe’s

security landscape since Mr Putin’s decision to invade on February 24th.
They also shed light on Britain’s place in Europe and illustrate Mr Johnson’s
frustrating duality—bold abroad and timid at home.
Start with the pacts. Finland was neutral in the cold war, and Sweden hasn’t
fought a big conventional war in 200 years. With both countries now moving
swiftly towards NATO membership, the agreements with Britain offer
particular reassurance against Russian attack during the “grey-zone period”
between applying to join and ratification of their membership. If they do join
the alliance, “it would be a complete repudiation of Putin’s assumptions,”
says Mr Johnson, speaking to The Economist on the plane back to London.

Sceptics might say that making commitments is easy when the risk of a
conventional assault is low, at least in the immediate future. Russia’s army is
bogged down in Ukraine and barely has the manpower to advance in the
Donbas region, let alone turn its attention to Finland and Sweden. “Looking
at Russian military forces right now, they are rather occupied in Ukraine,”
noted Magdalena Andersson, the Swedish prime minister.

Finnish and Swedish officials think that a far bigger risk is a prolonged and
intense campaign of “hybrid” warfare—meaning cyber-attacks on critical
infrastructure, incursions by Russian warplanes, disinformation campaigns
and the like. The agreements cover closer co-operation in areas such as
intelligence-sharing and cyber-security, and are meant to stand in perpetuity.
“Are we safer with this agreement? Yes, we are. Of course this means
something,” Ms Andersson concluded.

The deals fit with Britain’s evolution over the past decade into one of the
most active defenders of NATO’s northern flank and eastern front. It is
central to a network of bilateral pacts and groupings, including the Joint
Expeditionary Force, a cluster of ten states around the Baltic and the North
Sea. Britain shunned a treaty on foreign policy and security when it left the
EU. As a result, says Richard Whitman of the University of Kent, its policy
in Europe resembles a “Polo mint”: it has a hard outer rim, and a hole in the
middle.

Hard-edged is a good way of describing Mr Johnson’s view of the war in

Ukraine. Dmytro Kuleba, Ukraine’s foreign minister, has raised the
country’s goals to nothing less than the liberation of the territories invaded
by Russia in 2014. Ukraine’s war aims are a matter for them, but that
aspiration is “entirely logical”, Mr Johnson says. Ukrainians feel they cannot
“negotiate sensibly with someone who is in the process of trying to devour
their country. And I have to say I agree with them. So everyone is then
forced into the same logical position, which is the only answer is to keep
going until Putin is back to the status quo ante of February 24th—at least.”

In the long run, he says, the West must help Ukraine through a “doctrine of
deterrence by denial. So that even without invoking the question of NATO
membership, Ukraine is being given NATO-compatible weaponry, training
and intelligence sharing of such quality and quantity that no one will ever
invade Ukraine again.”

Mr Johnson’s hawkish tone is not shared by other European leaders. In a

speech on May 9th President Emmanuel Macron of France suggested a
means must be found to spare Russia “humiliation”. Mr Johnson discounts
this concern. “It is one of the paradoxical advantages of the situation that the
strength of Putin’s popular support gives him the opportunity actually to be
completely flexible. And to say, for instance, that certain objectives have
been achieved, ‘denazification’, whatever, and that’s why the operation is
over.”

Mr Macron’s idea of a community of EU and non-EU states that co-operate

on security, migration and more is also likely to fall on stony ground. “I
think most fair-minded observers would say that after some sort of initial
anxieties and hesitations, an independent UK foreign policy has really been
important,” says Mr Johnson. “I think that our ability to take decisions at
speed, to be out in front, to campaign for outcomes that we want, that we
think are right has been very valuable…we are able to give a lead in a
different way.”

Fair-minded observers might also point out that Britain has been far from the
biggest donor to Ukraine, in cash terms or as a share of GDP, and not
particularly generous in taking refugees. But its policy has had a nimbleness
which has won Mr Johnson a genuine and widespread gratitude in Ukraine
itself. Britain was dispatching anti- tank weapons before the invasion began;
Mr Johnson was the first western European leader to walk the streets of
Kyiv after the repulse of the Russian assault, and the first to address its
parliament.
Mr Johnson is hardly the architect of Britain’s policy in Ukraine, notes
Robin Niblett of Chatham House, a think-tank. Rather, he has been
following a trajectory, largely shaped by the Ministry of Defence, of
preparing Ukraine against Russian aggression that has been in place since
2015. But the prime minister deserves credit for not recoiling as the crisis
emerged, says Mr Niblett. “He’s been looking for a bigger purpose for
British policy. Sometimes history throws you a card, and your positioning
could be just right.”

The contrast with Mr Johnson’s timidity at home is striking. A fear of

aggravating his backbench MPs and core voters was on full display on May
10th in a safety-first Queen’s Speech, which laid out the government’s
legislative programme for the coming parliamentary session. His bombast
often seems clownish, his character questionable, and his judgment weak:
threats to rip up Britain’s deal with the EU over trade arrangements in
Northern Ireland are deeply wrong-headed.

But on Ukraine at least, and in his commitments to Sweden and Finland,

flourish and boldness have served Mr Johnson well. His predecessor,
Theresa May, flew on a plane decked in dull air-force grey. These days it is
liveried in red, white and blue, with gold lettering down the fuselage. ■

Read more of our recent coverage of the Ukraine crisis

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and-sweden-shine-a-light-on-boris-johnson
Partygate 2

Sir Beer Starmer

A late-night beer and curry may end the Labour leader’s career
May 12th 2022

ON FRIDAY APRIL 30TH 2021, at around 10pm, a £200 ($248) order of

takeaway curry arrived at a Labour Party constituency office in Durham. A
year on, the circumstances surrounding the delivery are subject to a police
investigation that will decide the future of Sir Keir Starmer, the Labour
leader.

Last year’s local elections took place during a partial lockdown. After a day
of campaigning in north-east England, Sir Keir was recorded through a
window drinking a beer while waiting for the fateful curry. The Labour
leader insisted that since this was a work event, it was legal. After finishing
his bottle of beer, he returned to the political coalface, firing off missives
about the following day.

But one witness claims no work was done and that it was, in effect, an end-
of-week bash. After complaints from a local Conservative MP, Durham
police decided to examine the case. And on May 9th Sir Keir pledged to step
down if fined by the police for breaking lockdown rules.
Sir Keir’s curry is the latest twist in a long-running scandal. For the past six
months, British politics has largely been shaped by who drank what, where
and when during a series of lockdown-busting parties in 2020 and 2021.
Anger rose after it emerged that Downing Street and parts of Whitehall had
hosted a series of soirées throughout the peak of lockdown. Juicy details,
such as civil servants smuggling a suitcase full of wine into Downing Street,
triggered apoplexy among voters and a slump in Boris Johnson’s poll
ratings.

In April the prime minister became the first holder of that office to be fined
for breaking the law. However, his £50 penalty was related to the least
egregious event, in June 2020, when officials gathered to sing Mr Johnson
“Happy Birthday” in the middle of the working day. Rishi Sunak, the
teetotal chancellor, who was there because he had arrived early for a
meeting, was also fined. Far worse allegations, including an ABBA-inspired
party in Mr Johnson’s private Downing Street flat, still hang over the prime
minister. But because Sir Keir called on both to resign over the birthday-
party fines, the Labour leader has pledged to do the same if he gets one.

Sir Keir’s decision to stake his political career on a decision by a regional

police force is risky. But he would have faced pressure to quit in the event of
a fine, or look a hypocrite. Sir Keir, a former director of public prosecutions,
has pitched himself as a man who follows rules, unlike Mr Johnson, who
revels in breaking them.

This is not a new strategy. Sir Tony Blair employed a similar tactic in the
middle of the cash-for-peerages scandal, when Labour donors were pledged
seats in the House of Lords, in the final years of his tenure. Advisers let it be
known that the then prime minister would resign if interviewed under
caution. The upshot was that police skipped over Sir Tony in their inquiries.
Sir Keir has some wriggle-room, too: if police say he broke the rules but
choose not to fine him, he will stay in office.

“Beergate”, as the scandal is lazily known, is the Labour leader’s first taste
of a Fleet Street monstering. Photos of the event first appeared in the Sun, a
tabloid, at the start of 2022. Conservative MPs recirculated them as a cheap
hit ahead of local elections on May 5th. From there things snowballed into a
fortnight of stories that repeatedly graced the front pages of pro-government
newspapers such as the Sun and the Daily Mail. If Sir Keir steps down, it
would show that these papers still have a lot of clout, even if they have
fewer readers than of old. ■
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The aftermath of Brexit

The Northern Ireland protocol could soon spark a

new row between Britain and Europe
Boris Johnson prepares to renege on the Brexit treaty
May 14th 2022

MOST OF THE excitement over Northern Ireland’s assembly election on

May 5th focused on Sinn Féin becoming the largest party, and on the
prospects of a united Ireland. But talk of reunification is speculative. The far
more pressing concern is the Northern Ireland protocol, part of the Brexit
withdrawal treaty that keeps the province (but not Great Britain) in the EU’s
single market for goods, thereby creating a customs border in the Irish Sea.

The Democratic Unionist Party (DUP), which came second to Sinn Féin,
dislikes the protocol for undermining Northern Ireland’s ties with “the
mainland”. It is refusing to rejoin the executive until the protocol is scrapped
or radically altered. In response Liz Truss, the foreign secretary, reportedly
plans to put forward a new bill to ditch most of the protocol within days.
That would be a terrible idea.
First, it would be an undemocratic response to a new assembly that, says
Katy Hayward of Queen’s University Belfast, has a 54-36 majority of
members in favour of keeping a tweaked protocol. This is not a body that
will vote down the protocol when the treaty allows it to in 2024. Second,
disowning a treaty that Boris Johnson himself negotiated, signed and
triumphantly ratified 30 months ago would break international law (though
Suella Braverman, the attorney-general, apparently thinks differently).
Claims that he was forced into it or that the protocol was always meant to be
temporary are false.

Third, unilateral suspension of the protocol cannot solve the trilemma that
led to the protocol’s creation: the impossibility of leaving the single market
but having no border controls either north-south with Ireland or east-west
with Great Britain. By further undermining mutual trust, unilateral action
would also squash any chance of successful negotiations to moderate the
protocol’s application.

For despite Ms Truss’s impatience after months of such talks, they could yet
help. The EU offered concessions last October that it said would eliminate
up to 80% of checks at the sea border. It has accepted free movement of
medicines. More could be done to reduce customs inspections and facilitate
freer transport of pets and online deliveries. And the government could
move towards closer alignment with EU food-safety standards, pleasing
British farmers. But it would be nigh-on impossible for any of this to be
agreed if one side forfeits trust by reneging on the treaty.

Worse, scrapping the protocol unilaterally could spark a legal battle with the
EU that might spiral out of control. Mujtaba Rahman of the Eurasia Group, a
consultancy, thinks the EU will be cautious before starting a trade war, not
least because it knows any bill may be blocked in the House of Lords. But
the bloc will not renegotiate the withdrawal treaty and it will resume legal
action against Britain for failing to implement the protocol in full. Controls
at Calais may be tightened, lengthening queues at Dover. When there is a
premium on Western unity against Russia’s invasion of Ukraine, and the
economy is in trouble, confrontation is especially misconceived.

Even the domestic politics look poor. Ms Truss may gain kudos with
hardline Tory Brexiteers, boosting her chances of leading the party. And Mr
Johnson may hope that voters will always back him in any dispute with
Brussels. But having won the 2019 election on the promise of getting Brexit
“done”, another huge row would remind people that it really isn’t. ■

For more coverage of matters relating to Brexit, visit our Brexit hub
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new-row-between-britain-and-europe/21809226
The cost of doing business

Businesses in Britain are not as gloomy as

consumers. Yet
Prices and interest rates are rising, so why hasn’t corporate confidence
fallen more?
May 12th 2022

SIMON BOYD of REIDsteel, an engineering firm, is haunted by rising

taxes, high energy prices and expensive raw materials. He complains of
“scary spikes” in the firm’s costs. Over the past two years he has seen steel
almost quadruple in price, and in October he expects energy bills to double
—at least. (There is no energy-price cap for companies, unlike households.)

Mr Boyd is not suffering alone. In March manufacturers’ input prices were

19% higher than a year earlier, the sharpest increase since records began in
1997. Service providers are reporting record-breaking rises in costs, too.
After dipping during 2020, the rate of corporate insolvencies is now higher
than in 2019. The British Chambers of Commerce, a business association,
wants an emergency budget to provide tax relief. On March 12th it emerged
that the economy had contracted in March.
Yet for all the bad news, business confidence in Britain is a puzzle. Though
falling (see chart), it has not plummeted in the way it has for consumers,
among whom confidence is at its lowest since the financial crisis. In March
the OECD, a club of mostly rich countries, recorded the largest gap between
business and consumer confidence since records began in 1977. Why?

Anna Leach of the Confederation of British Industry, a business association,

thinks that the relatively gradual creep of businesses’ costs has normalised
their pain. Paul Dales of Capital Economics, a consultancy, also suggests
that the energy-price increases could be concentrated in a few industries.
According to calculations by The Economist, businesses accounting for
around a quarter of private-sector output consume as much as half of its gas
and electricity (excluding firms that produce and distribute energy
themselves).

Businesses are still feeling relatively optimistic about their ability to pass on
price rises to their customers. A survey run by the Bank of England
suggested that in April managers expected prices to grow by a little over 6%
over the next year, and for revenue to grow by over 9%. All the attention on
inflation may be making it easier for businesses to push climbing costs onto
their customers. Whereas companies may be in a position to negotiate
inflation ratchets into their contracts, households are less able to protect
themselves.

For now firms are still hoping to hire more people than average, and
redundancy notifications remain low. But there is a strong chance that the
corporate mood will become as dark as that of consumers. The Bank of
England is trying to curb inflation by raising interest rates: that means higher
corporate borrowing costs. Soggy consumer spending will dampen revenue
projections. A row with the EU over the Northern Ireland protocol would
add uncertainty.

On May 5th the Bank of England predicted that growth would slow sharply,
partly because of the decline in households’ real incomes but also because of
squeezed profit margins. Those with an eye on Britain’s longer-term growth
will be studying both investment intentions and investment itself.
Uncertainty over the macroeconomic environment could weigh on both, in
which case productivity will suffer. If so, an acute problem would compound
a chronic one. ■
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gloomy-as-consumers-yet
Berry big problem

Ukrainian seasonal workers pick much of Britain’s

fruit
That points to a labour crunch this year
May 14th 2022

NEARLY ALL of the berries eaten in Britain between May and October are
home-grown. Of roughly 30,000 seasonal-work visas issued to workers to
pick the 2021 harvest, 67% went to Ukrainians and 8% to Russians. This
year, many will stay away, not least because most Ukrainian men have been
forbidden to leave the country since the Russian invasion. Recruiters are
struggling to fill the gap, which means fruit is bound to be wasted. Nearly
8,000 tonnes of berries rotted in 2021 because of a shortage of pickers.
This article was downloaded by calibre from https://www.economist.com/britain/2022/05/14/ukrainian-seasonal-workers-pick-much-
of-britains-fruit
Codes of conduct

The Highway Code tops the bestseller lists, again

One of the most-read books of the 20th century is reissued
May 14th 2022

LAST MONTH a slim volume rose to the top of British bestseller lists. It
outsold Kazuo Ishiguro, trounced Julian Barnes and outstripped Richard
Osman. It deserved its place: its illustrations are iconic; its prose as familiar
and powerful as poetry. Few who have read it could forget the lapidary
simplicity of its most famous line: “Remember: Mirrors-Signal-Manoeuvre.”
It is “The Official Highway Code”.

Few cultural critics spend much time thinking about the Highway Code.
They should. It is arguably one of the most influential British books of the
20th century—and certainly one of the most read. Some 24m copies of the
1959 edition were printed, and 14m of them were distributed free. It has
topped the bestseller lists repeatedly, and over the past 20 years has outsold
Jo Nesbo, John le Carré and William Shakespeare. The latest edition,
published in April, sold 19,000 copies in a single week. As the Bible was in
another era, it is a staple of British bookshelves.
The Bible and the Code share other qualities. Both issue large numbers of
commandments. Both are obsessed by mortality, albeit in rather different
ways. Where the Bible observes that we walk in the valley of the shadow of
death, the Highway Code notes that the shadows are darker and death more
probable when cars speed, since “At 40mph your vehicle will probably kill
any pedestrians that it hits.”

The frail flesh of man was the genesis of the Code. Britain’s first victim was
killed on the roads in 1896. The coroner hoped that “such a thing would
never happen again”. It did. By the time the first edition of the Code was
printed in 1931, Britain’s fleet of motorised vehicles had risen to 2.3m and
the annual total of those killed on the road had risen to over 7,000. (Today
Britain has over ten times as many vehicles but around a quarter as many
deaths.) A code of conduct was needed.

Whether or not it instantly improved safety is not clear, for the instructions
contained within early editions could be eccentric. The 1931 edition told
drivers that to indicate a “TURN to my RIGHT” they should extend their
right arm out of the car and hold it “ rigid in a horizontal position straight”.
To indicate a “TURN to my LEFT” they had to repeat the procedure, but
flap their arm up and down while “keeping the wrist loose”. To overtake, a
driver should first sound his horn; perhaps to allow other drivers to retract
their arms first.

The Code was a product of its time. Its pages accept that other users of the
road might include sheep, herds of cattle and even “a pack of hounds”, but
absolutely nowhere does it indicate that any of those other users might be
women. All the drivers are, without exception, “he”. Children appear, to be
told to stay out of the way: they are to be warned “of the dangers of the
road” and how to avoid them. And though the Code lacks women, it does
contain instructions on how to drive a horse-drawn carriage on the road (for
right turns, first, “Rotate the whip above the head…”).

Its editions chronicle a changing world. In the first, its drivers wear cravats,
panama hats and an imperious air. Like “Brideshead Revisited” and “The
Wind in the Willows”, it evokes an era when cars were roofless, driving was
glamorous and roads largely lawless. In an opening scene in Brideshead,
Charles Ryder and Sebastian Flyte set off with “a motor-car and a basket of
strawberries and a bottle of Chateau-Peyraguey”, drive to the country and
drink till “the golden wine seemed to…hold us suspended” above the turf.
By later editions, the Code included other kinds of suspension for drinking.
The 2022 edition warns, bluntly: “Do not drink and drive”.

Later editions of the Code show a country metamorphosing as driving

became more popular. From the 1950s motorways unspooled and old road
signs were redesigned. In Hyde Park graphic designers drove repeatedly past
boards of different colours to see which were most readable at speed. They
chose bright blue for motorways and green for A-roads. A new, sans-serif
font—”Transport”—was created. The designer Margaret Calvert came up
with the “Men at Work” sign (people told her it looked more like “Man
having difficulty with a large umbrella”). Her “School Children Crossing”
sign, based on her as a child, may be the best-known self-portrait in the
country.

Cultural indicator
The Code kept on changing. The 1968 edition was welcomed by a speech in
Parliament noting the tightening of laws on seat belts and speed limits,
breathalysers and road markings. “Semaphore signals,” one politician
observed with pleasure, “are almost a thing of the past.”

Progressive editions hint at the democratisation of driving, and of Britain.

The 1968 edition was rewritten in part because the previous one had “used
too many long words”. The most recent Code involved a consultation of
almost 21,000 people, who were asked whether its wording was clear. It
offers absolutely no guidance on what do when you meet “a pack of
hounds”—but does include large numbers of images of women using the
roads.

Above all, the Code chronicles the demise of the golden age of motoring. In
its pages, driving changes from glamorous, to dangerous, to a chore that
many would rather avoid. Plans are already being made for a new version
that will allow for driverless cars and watching films at the wheel. And it
chronicles a world that is ceasing to capitulate to the car. No longer must
children avoid cars: cars must avoid them. The latest Code has a hierarchy of
road users: pedestrians are at the very top; motorised vehicles are at the
bottom. And no one is wearing a cravat. ■
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lists-again
Fall of the Roman empire

Chelsea is the latest Premier League club to fall

into American hands
Roman Abramovich’s exit underscores big changes in English football
May 14th 2022

THE EFFECTS of war are rarely confined to the battlefield. Sport felt the
ripples from Russia’s invasion of Ukraine almost at once, with the banning
of the country’s football team from the World Cup and its athletes from the
Paralympic Games in Beijing. Now the forced sale of Chelsea, a west
London football club owned since 2003 by Roman Abramovich, an oligarch
under British government sanctions, is about to transfer a prestigious
Russian asset into American hands.

On May 7th a consortium headed by Todd Boehly, owner of the Los Angeles
Dodgers baseball team, and including Clearlake Capital, a Californian
private-equity firm, agreed to buy Chelsea for £2.5bn ($3.1bn). Mr
Abramovich, his British assets frozen, will not see a penny. (He had
promised to give the proceeds to “all the victims of the war in Ukraine”, but
what happens to the money is for the government to decide.)
The sum, thought to be the highest yet paid for a sports team, reflects not
only Chelsea’s stature in the game (lying third in the Premier League, and
last year’s European champions) but the commercial appeal of English
football. Chelsea will be the eighth of the league’s 20 clubs in which
Americans have a meaty stake. Whereas some club owners, like the Middle
Easterners in charge at Manchester City and Newcastle United, are also
interested in football’s soft power, American investors tend to be focused on
the bottom line.

Other owners from across the pond have similarly added Premier League
teams to broad portfolios of sports assets. Arsenal’s Stan Kroenke also has
American football, “soccer”, ice hockey and basketball franchises. The
Glazer family, who control Manchester United, own the Tampa Bay
Buccaneers, an American football team. For American investors, says Simon
Chadwick of Emlyon Business School, “it’s often all about selling”
(Manchester United has even had an official paint partner). The Premier
League, he says, has a global appeal that US sports cannot match.

Television is clubs’ main source of income. An annual survey of European

football finance by Deloitte, a firm of consultants, indicates that in the three
full seasons before covid-19 struck, England’s six leading clubs by revenue
got 45% of their income, or €4.3bn ($4.9bn), from broadcasting—which
depends partly on league position and on participation in European
competition. A further 38% came from commercial sources (such as
sponsorship and merchandise) and the rest from match days. Even when
income falls short, as happened during the pandemic, investors in big
football clubs have still seen their assets rise in value, rather like houses in a
booming property market.

Chelsea’s weakest link is its match-day revenues. As well as buying out Mr

Abramovich, Mr Boehly and his colleagues have promised to invest in an
upgrade of Stamford Bridge, Chelsea’s ageing stadium. Its age and size—it
holds around 40,000 people—limit the club’s earning power. Chelsea’s
match-day revenues trail those of other top clubs, notably its north London
rivals, Arsenal and Tottenham Hotspur, which both have newer stadiums
holding more than 60,000.

Redevelopment will be tricky, however. Stamford Bridge is hemmed in, and

London land is pricey. How Mr Boehly and Clearlake must envy John
Henry, the American owner of Liverpool football club (and the Boston Red
Sox baseball team). To modernise its Anfield stadium, Liverpool bought and
demolished neighbouring streets of terraced houses. Next year capacity at
the ground will exceed 60,000, a third more than in 2016.

Mr Abramovich’s purchase of Chelsea marked the start of a new era in the

game: of foreign owners, big-name managers and lavish spending. He
bankrolled an extraordinary run of success, which brought five domestic
championships (Chelsea’s only previous win was in 1955) and two European
ones. But he regarded the club as an expensive toy as much as a commercial
proposition; the club lost hundreds of millions, which he covered with
interest-free loans. The new owners will be of a different stripe. ■
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bought-by-americans/21809218
Bagehot

Labour and the Liberal Democrats are learning to

play nicely with each other
Escaping the progressive prisoner’s dilemma
May 14th 2022

A HIERARCHY OF hate exists on the progressive wing of British politics.

True, Labour wallahs may not like their Conservative colleagues. But they
save their real contempt for the Liberal Democrats, whom they deride as
spineless cynics and dirty campaigners. In a feat of projection, the Lib Dems
detest the Greens because it is annoying to have a small party with no
chance of power snatch precious votes. Meanwhile, everyone loathes the
Scottish National Party (SNP) to the point that, when its Westminster leader,
Ian Blackford, rises to speak in the House of Commons, an audible groan
often echoes around the chamber.

Progressive parties in Britain struggle to work together, which keeps them

out of power. That is not because of a lack of voters. Surprisingly, for a
country that usually elects Conservative governments, the bulk of British
voters support progressive parties. In every post-war election bar 2015, more
voters supported progressive parties (Labour, the Liberal Democrats, the
SNP and the Greens) than conservative ones (the Conservative Party and its
cousins on the radical right). Yet, owing to the iniquities of Britain’s first-
past-the-post electoral system, the government usually has a conservative
bent.

In effect, Britain’s progressive parties are stuck in a prisoner’s dilemma. Co-

operation would be better for all, yet they never quite manage it. Signs are
emerging, however, that the dilemma has been solved. Changing electoral
geography, a shift in Labour’s politics and canny voting behaviour suggest
that Britain’s progressive parties could, for once, be more than the sum of
their parts. Although Labour are only slightly ahead of, or level with, the
Conservatives in most polls, progressive parties have a 20-point lead over
their conservative rivals. A happy equilibrium has been reached. The
prisoners could soon escape.

For starters, there is less incentive to fight each other. Progressive parties no
longer tread on the turf of their peers. Sheffield Hallam, a leafy suburb of the
Yorkshire city, is the only marginal constituency where Labour faces off
against the Lib Dems. The Lib Dems predominantly battle the Conservatives
in tighter races: around 70 of their 90 winnable target seats are Tory-held. As
a result, peace has broken out in recent by-elections. Labour barely put up a
fight in North Shropshire, when the previously safe Conservative seat fell to
the Lib Dems. A similar strategy will be employed in forthcoming by-
elections. A new era of non-aggression between the two parties, similar to
one in the 1990s, is under way.

There is also less to scrap over in terms of ideology. Politics has settled
down after a frenzied period, when both Labour and Conservatives dabbled
in populism on the left and right. Brexit is no longer the be-all-and-end-all of
British politics. Jeremy Corbyn, the fomer, hard-left Labour leader, made
those wavering between the Lib Dems and the Conservatives nervous about
not plumping for the Tories. Now, Labour is a more centrist option. Sir Keir
Starmer was elected to lead the party on a soft-left ticket, and has since
dragged Labour even more to the right. A mushy consensus blurs the lines
between Labour, the Lib Dems and the SNP.

That means progressive parties can focus on their target voters. If there is no
challenge from rival parties for their metropolitan base, Labour can focus on
winning seats that turned Tory at the last election. Likewise, the Liberal
Democrats have previously been an incoherent mixture of low-tax liberals
and disaffected social democrats. Now the party can focus on well-off,
liberal Conservative voters in southern England. Call them Tesla Tories:
those voters who were happy under David Cameron but chafe at the populist
diet of illiberalism and tax rises served up by Boris Johnson.

Across southern England, Conservative MPs are nervous. Councils such as

Somerset fell to the Lib Dems in local elections on May 5th. Talk of
“levelling up” northern England sounds a lot like taking tax revenues raised
in the south and spending them in the north. If Conservative voters in the
Home Counties wanted that, they would have voted Labour in the first place.
To placate them the Conservatives could admit that levelling up involves
little money actually being spent. But that would upset their new supporters.
Clinging on to both sets of voters, without the centripetal force of Brexit, is a
tricky task.

It is one made harder by the efficiency of the Conservative vote. British

politics follows the same principles as Wilkins Micawber’s finances.
Theresa May managed 42.4% of the vote in 2017. Result: misery, and a
hung parliament. In 2019 Mr Johnson won an extra 300,000 votes, hitting
43.6%. Result: happiness, and an 80-seat majority. A small swing has a big
effect. British politics obsesses over the newest marginal voter—the extra
shilling in Mr Micawber’s formula. It was new voters across the Midlands
and northern England that won Mr Johnson his majority. It is forgotten
Conservative voters in the south of England who stand to take it away.

Knight, knight Boris

A formal deal between progressive parties would either be pointless or
harmful. Scottish independence would become a live issue if the SNP were
involved in a pact. Oliver Dowden, part Conservative Party chairman and
part political Rottweiler, accused Labour and the Liberal Democrats of a
secret stitch-up ahead of the local elections. By causing a fuss, the hope is
that a Tesla Tory in Winchester may still blanch at voting Lib Dem because
of the thought of a Labour-led government. The truth is that there is no need
for a formal pact when a tacit one is already in place.
Breaking out of jail will be the easy bit. Even pollsters optimistic about
Labour’s chances think that a governing coalition of opposition parties is
likely to be a total mess. Any such coalition would probably consist of three
parties, or a complicated confidence-and-supply deal, in which junior parties
support a Labour government on specific votes. The progressive parties do
still hate each other, after all. But being in power beats being in prison. ■

Read more from Bagehot, our columnist on British politics:

British politics is stuck in a 1990s time-warp (May 7th)
Sir Keir Starmer, the cynical leader (Apr 30th)
Why Boris bashes the archbishop (Apr 23rd)

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learning-to-play-nicely-with-each-other
International

International relations: Connective action

Connective action

The war in Ukraine is spurring transatlantic co-

operation in tech
Talks are bound to get trickier once attention turns back to China
May 14th 2022 | BERLIN AND SAN FRANCISCO

A COMMAND CENTRE to scan the digital realm for global disinformation

campaigns. Standardised plugs for electric cars that will work both in
America and in the European Union (EU) and so lower the cost of building
the infrastructure needed to decarbonise. A transatlantic team to scout for
attempts by China and others to manipulate global technical standards in
their favour. These sorts of initiatives sound like common sense, but they are
difficult in a world where even allies have competing regulators, vying for
technological dominion. Happily, a transatlantic diplomatic undertaking that
most people have never heard of is trying to change all that.

The group in question, called the “Trade and Technology Council” (TTC),
will convene in Saclay, a suburb of Paris, on May 15th and 16th. A
constellation of grand officials from either side of the Atlantic—including
America’s secretary of state, commerce secretary and top trade negotiator,
and the EU’s commissioners for trade and competition—will be meeting for
the second time. Whereas their first meeting in September in Pittsburgh was
mainly meant for participants to get to know each other, the gathering in
France will assess progress on their work so far and set goals for the next
two years.

It is a momentous task. The TTC is the West’s response to efforts by China

and others (notably Russia after its invasion of Ukraine) to build an
autocratic digital world and bring the physical supply-chains that underpin it
under their control. “The big question is whether democratic governments
can develop a meaningful alternative,” explains Marietje Schaake of the
Cyber Policy Centre at Stanford University. If America and the EU resolve
their differences in tech, other countries are bound to follow their lead: the
pair account for 55% of the global market for information technology, whose
value is expected to reach a staggering $4.4trn this year, according to
Gartner, a consultancy.

The TTC was set up last year as a “transatlantic inter-agency”, in the words
of Paul Triolo of the Albright Stonebridge Group, a foreign-policy
consultancy. It is supposed to be the main venue in which America and the
EU co-ordinate policy for the digital realm. The two sides have created ten
working groups, ranging from “technology standards” and “secure supply
chains” to “investment screening” and “climate and clean tech”.

The structure of the TTC allows the relevant agencies and experts in
Brussels and Washington to develop working relationships that go beyond
ad hoc encounters that have long dominated transatlantic policymaking. It is
a practical forum in which they can resolve their digital differences.
Officials once barely knew who was in charge of a given topic on the other
side of the Atlantic. Now they can just jump on a video call. “The TTC has
become the conduit for much of the US-EU co-operation,” explains the chair
of one of the council’s working groups.

The TTC has already helped move negotiations along in several areas,
particularly with regard to a new version of “Privacy Shield”, an agreement
to create a clear legal basis for flows of personal data across the Atlantic.
The original was struck down by the European Court of Justice in 2020. It
ruled that the agreement did not sufficiently limit American law-
enforcement agencies’ access to the personal data of European citizens.
Although talks to reform “Privacy Shield” are not officially on the TTC’s
agenda, they involve many of the same officials. Their familiarity with each
other was one big reason why President Joe Biden and Ursula von der
Leyen, the president of the European Commission, were able to announce in
March that both sides had finally agreed on a deal “in principle”. This will
provide the basis for more progress in the TTC. If America and the EU had
not even been able to agree on data flows, says another official, other
attempts at transatlantic co-operation in tech policy would have been futile.

Another project that has benefited from the TTC is the “Declaration for the
Future of the Internet”, which was announced on April 28th and signed by
more than 60 countries. Complementing the TTC, this document lays out the
priorities for an “open, free, global, interoperable, reliable, and secure”
internet—describing in effect an alternative to China’s and Russia’s
increasingly autocratic technosphere. Yet it is not aimed mainly at those two
powers, both of which are certain to ignore it. It serves instead as a warning
to other countries tempted to copy some of the pair’s authoritarian ways.

Russia’s invasion of Ukraine has both spurred the council’s efforts and
proved their usefulness. Officials had, among other things, to decide which
technology exports to block, how to strengthen cyber-security defences and
what to do about Russia’s online disinformation campaigns. “That has given
us something to co-operate on,” says another TTC participant.

Unsurprisingly, in light of the war, the beefiest proposals in a leaked draft of

the “joint statement” to be published at the end of the meeting in Saclay
relate to security. Both sides wish to share more information and harmonise
regulations, a step which could one day lead to a common list of sensitive
technologies to be kept out of the hands of autocratic regimes. As for supply
chains, the idea is to develop, among other things, an early-warning system
to avoid the sort of bottlenecks that have led to the current shortage of
microchips. The two sides will also vow to refrain from further “subsidy
races”, a clear danger in the semiconductor industry.

But in most areas, the council’s woolly pledges hint at the difficulty of the
task ahead. In AI, the EU and America aim to “develop a shared
hub/repository of metrics and methodologies for measuring AI
trustworthiness and AI risks”. In climate and clean tech, both “work towards
a common methodology for joint EU-US recommendations on selected
carbon-intensive products”. In tech investment, the pair are thinking about
holding a “tabletop exercise” to learn how the other side reacts when a
Russian or Chinese firm comes knocking to acquire a local company. In
other words, officials still are trying to find a common language.

If concrete “deliverables” are few and far between, it is because America

and the EU still live on different digital planets when it comes to regulating
big online platforms like Facebook and Google. The EU is putting the
finishing touches on a series of sweeping laws, including the Digital Markets
Act, meant to increase competition, and the Digital Services Act, to control
harmful content. No equivalent bills are likely to make it through America’s
Congress. Optimists note that ordinary Americans, if not their elected
representatives, seem open to the idea of such rules: they trust tech
companies even less than Europeans do (see chart).

That is partly a function of America’s political gridlock, but partly also

economic nationalism, in that far more of the firms to be regulated are
American than European. The EU is guilty of similar protectionism:
America’s negotiators want the TTC to speed up the deployment of two new
ways of building mobile networks called Open RAN (short for Open Radio
Access Network) and “virtualisation”. These should make it easier for new
providers of telecommunications gear to emerge, which would provide more
competition for Huawei, a Chinese information-technology giant which is
accused of working closely with spooks in Beijing. But Open RAN and
virtualisation also weaken two big European firms, Ericsson and Nokia,
which are in the same business as Huawei. And they create opportunities for
America’s big cloud providers, in particular Amazon Web Services and
Microsoft, to get involved in telecoms.

More such squabbles are likely to emerge once the TTC focuses more
narrowly on its original purpose: challenging China. “It’s one thing to
negotiate export controls for Russia, where the economic impact is quite
small, but things become much more difficult to do this for a giant like
China,” says Martijn Rasser of the Centre for a New American Security, a
think-tank. China is central to most tech supply chains. Many firms from
both America and the EU have big investments there.

Another problem is that neither side can really be trusted to keep its
promises. If Donald Trump is re-elected in 2024, or another Trump-like
president enters the White House, the TTC may soon be forgotten. As for the
EU, the European Court of Justice may yet strike down the new version of
“Privacy Shield”, too. Similar lawsuits are possible in America as well. “It’s
a legal Rubik’s Cube,” says Peter Swire of the Georgia Institute of
Technology, who helped develop the new agreement, which has not yet been
made public.

Counting your chips

The TTC’s admirers argue that the logical response is for the council to be
more ambitious while it still can. They applaud its bolder aims, such as
creating common rules for AI and increasing transatlantic co-operation on
cyber-security. Another way to strengthen the group would be to invite other
like-minded countries, such as Japan and South Korea, or even large
companies and other organisations, to join its deliberations. (Big tech firms
and other entities will attend the pow-wow in Saclay on an informal basis.)

Some would even like the TTC to evolve into a “tech alliance” of
democracies, the digital NATO called for when Mr Biden was elected in late
2020. Recent developments suggest a more probable outcome will be a
network of bilateral undertakings. In April the EU agreed such a deal with
India and has embarked on a similar process with Japan. Tech is also being
discussed in the Quad, the security dialogue between America, Australia,
India and Japan. “Just as regulation tends to mirror the industries that it’s
regulating, the international system is starting to mirror the industries that
they’re trying to address,” says Tyson Barker of the German Council on
Foreign Relations, another think-tank. “Expect an ecosystem of alliances.” ■

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transatlantic-co-operation-in-tech
Business

The tech crunch: Pop!

The tech crunch (2): Can Coupang deliver?
The zero-covid industrial complex: Acing the test
The future of work: Big Brotherly boss
Bartleby: The woolliest words in business
Schumpeter: Where the wild things were
Pop!

Tech bubbles are bursting all over the place

Some more loudly than others
May 14th 2022

A FAVOURITE PASTIME in Silicon Valley, second only to inventing the

next new thing, is bubble-spotting. Even industry insiders tend to get these
things spectacularly wrong. “You’ll see some dead unicorns this year,” Bill
Gurley, a noted venture capitalist, predicted in 2015, the year that incubation
of these startups worth more than $1bn really got going.

The game has just become much easier: the sound of bubbles popping can
be heard all over the place. Tech shares, initial public offerings (IPOs),
blank-cheque companies (known as SPACs), startup valuations and even
cryptocurrencies: all the assets that climbed to dizzying heights over the past
few years are now coming down to earth. It is harder to say how loudly they
will burst—and which might still reflate.

The decline of tech shares is the most spectacular. The NDXT, the index of
the 100 largest tech firms on the Nasdaq exchange, is down by a third since
its peak in early November. Firms in this index have lost a combined $2.8trn
in market value.
High-flying startups that went public in recent years have been hit hard, too.
The shares of Robinhood are 80% below the level at which the retail-trading
app went public in July 2021. Those of Peloton, which makes internet-
connected exercise bikes, have lost over 90% of their value from their peak.
As a group, the largest newly listed firms are worth 38% less than at the start
of the year (see chart).

Small wonder that IPOs have dried up. From January to April 2021 some
150 companies went public in America, most of them techie. This year only
30 have done so. The boom in SPACs, which go public and then find a
startup with which to merge, has imploded. Of the more than 1,000 such
firms that have floated in America since 2018, only a third have merged with
a target. Many of those that have done deals have lost their shine. According
to an index that tracks the 25 largest de- SPACed vehicles, they have lost
56% of their value since the beginning of the year.

As tech shares crash, they are pulling valuations of private firms down with
them. CB Insights, a research firm, reckons that tech startups raised $628bn
globally in 2021 in more than 34,000 deals. Between January and March this
year the number of transactions fell by 5% compared with the previous
quarter. The amount of capital invested dropped by 19%, the biggest
quarterly decline since 2012. The unicorn boom’s superstar investors have
been walloped. On May 12th SoftBank, a Japanese tech investor with a
penchant for risky bets, most of which are private, reported that its flagship
funds lost an eye-watering $33bn in the past 12 months.

Although they were meant to reach the Moon no matter what,

cryptocurrencies are also coming a cropper. Even some hardened “hodlers”
have been getting cold feet. On May 12th bitcoin, the largest cryptocurrency,
was trading below $26,000, less than half its peak in early November. Other
digital monies have shed even more value. The next four biggest coins have
lost more than 70% since their peak. Non-fungible tokens (NFTs), even
more speculative titles to digital assets such as art that can be traded, have
been hammered, too. Sales of NFTs in ether, another big cryptocurrency,
have dropped by more than half in recent weeks on OpenSea, a big NFT
marketplace.

The industry has suffered from an abrupt reversal of fortunes, explains Mark
Mahaney of Evercore ISI, an investment bank. In recent years more than one
factor gave tech a boost: the coronavirus pandemic pushed life and work
online; government stimulus programmes further increased demand; and
super-loose monetary policy made tech’s long-term growth more attractive
to investors. Now people are turning away from screens and leaving home
again; the war in Ukraine is creating paralysing uncertainty; and economies
around the world are suffering from inflation and soon, perhaps, recession.

Then there are rising interest rates. Besides possibly triggering a downturn,
they reduce the present value of tech companies’ profits, most of which lie
far in the future. If inflation does not come down, central banks will pile on
more rate rises, putting further pressure on risky tech stocks.

How bad will things get? Although stockmarkets have stabilised a bit in
recent days, no one is ready to call the bottom. Just as markets have overshot
in the past few years, they can undershoot. There is more of a consensus
over what could happen when the dust has settled. According to Daniel Ives
of Wedbush, another investment bank, the tech industry is at a “fork in the
road”. As interest rates go up, he argues, investors will turn their back on
more speculative growth stocks and focus on the quality names in tech.

No prizes for guessing which ones. Although the combined market value of
America’s tech titans—Alphabet, Amazon, Apple, Meta and Microsoft—has
dropped by nearly 25% since November and their latest results were less
stellar than in earlier quarters, they remain safe bets. Together they booked
$359bn in quarterly sales and $69bn in net profits. Their core businesses are
still growing—in particular cloud computing. Collectively, Alphabet,
Amazon and Microsoft, the world’s three biggest cloud providers, took in
$43bn of sales for such services in the first three months of 2022, up by 33%
from a year earlier.

More unexpectedly, older tech and hardware stocks seem in decent nick, Mr
Ives notes. Intel, a veteran chipmaker, is down by a relatively modest 13%
since November. IBM, a software icon, is up by 12%. Makers of business
software with steady sales and high margins, such as Adobe, Oracle and
Salesforce, may rebound fast. Hard though it may seem given Coinbase’s
crash on May 11th, so may payments and crypto platforms, which have
joined the financial mainstream. Cyber-security firms, such as CrowdStrike
or Palo Alto Networks, could see their fortunes return thanks to fears of
Russian and Chinese cyber-attacks. Geopolitical rifts may even lift Palantir,
a secretive analytics firm that works with security services, whose share
price plunged by 20% on May 9th after it disclosed slowing sales growth.

Persistently unprofitable gig-economy firms look shakier. Uber, the ride-

hailing and delivery champion which reported on May 4th that trips and
users rose by nearly a fifth year on year in the first quarter, still lost nearly
$6bn. The heavy repricing of video-streamers, with multibillion-dollar
content expenses and reversing (Netflix) or even steady (Disney) subscriber
growth, may be permanent. The same may be true for second-tier firms in
areas such as social media (Snap) or e-commerce (Shopify), which are
dominated by Meta and Amazon, respectively.

It would be wrong to compare the current tech slump to the bursting of the
dotcom bubble two decades ago. Back then companies had neither healthy
balance-sheets nor promising business models. Nowadays many of them
have both. The stomach-churning market gyrations are unpleasant to a
generation of tech founders, workers and investors who have lived a long
bull run. But they are unlikely to stop digital technology eating the world. ■

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the-place
Baby Amazons

Coupang’s high hopes of overcoming high hurdles

South Korea’s e-commerce darling sure knows how to deliver shopping.
And returns?
May 14th 2022 | SEOUL

COUPANG’S OFFICES in Seoul afford a view of the South Korean e-

merchant’s promise. Every dawn the forest of high-rise apartment blocks
teems with its vans dropping off orders made the night before. This self-
styled “rocket delivery”, and Koreans’ love of it, fuelled Coupang’s
stratospheric rise. When it debuted on the New York Stock Exchange in
March 2021, its shares nearly doubled in value in an instant. It closed its first
trading day with a market capitalisation of $80bn. It was the biggest non-
American initial public offering (IPO) since Alibaba, a Chinese e-commerce
behemoth which listed in 2014.
Things have gone downhill from there. Coupang’s share price is around
three-quarters below its peak. In March SoftBank, a Japanese tech-investor
and Coupang’s largest shareholder, offloaded 50m shares for $1bn, having
sold a tranche of the same size for $1.7bn six months earlier. The firm has
been caught up in a broader sell-off in volatile tech stocks, especially in
unproven companies. The rise of e-commerce may be easing off as the
pandemic sales boom fizzles, just as interest rates rise to contain inflation.
This has hurt the world’s Amazon wannabes (see chart) and made investors
less tolerant of heavy losses in the pursuit of growth—$1.5bn last year in
Coupang’s case.

The firm remains confident. On May 11th it reported buoyant first-quarter

results. Sales rose by 22% year on year, to $5.1bn. Although it booked
another net loss, its core business actually turned profitable on an adjusted
basis, earlier than expected. Its shares looked set to start trading a fifth
higher the next day, after The Economist went to press.

Nearly half its net loss last year was explained by reinvestment, especially in
its infrastructure. Some 70% of South Koreans now live within 10km of one
of its warehouses. E-commerce rivals such as Naver and eBay Korea lack its
footprint. Traditional retailers with established logistics networks are less
technologically sophisticated. Its workforce is made up of employees rather
than gig workers, making it less prone to a regulatory backlash. As for
SoftBank’s divestment, it may have had more to do with the Japanese group
attempting to lock in profits as its other risky tech investments sour than
with concerns about Coupang, thinks Park Eun-kyung of Samsung
Securities, a broker.

To shore up its dominance, Coupang is getting into food and grocery

delivery, video-streaming and fintech, with a “buy-now-pay-later” scheme to
complement its own e-payment system. That has helped it draw more people
into its empire. In the first quarter the number of active customers grew by
13% year on year, to 18m, having risen by double digits in previous
quarters. Last year it launched in Japan and Taiwan. Like South Korea, those
countries have high smartphone penetration, ingrained online-shopping
habits and dense cities—in other words, Coupang’s rocket fuel. ■

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high-hurdles
Acing the test

China’s zero-covid industrial complex

The biggest corporate winners from the country’s draconian pandemic
strategy
May 14th 2022 | Shanghai

PRESIDENT XI JINPING’S zero-covid policy has been a plague on China’s

firms and a headache for Western ones reliant on its suppliers and
consumers. The 25m residents of Shanghai, the country’s commercial hub,
have been confined to their homes since April 1st. Beijing, the capital, is
teetering on the edge of lockdown. Rail and air travel on a recent national
holiday were, respectively, 80% and 75% below the level during last year’s
festivities. Retail spending has crashed. GDP may shrink in the second
quarter.

Regardless, on May 6th the Politburo’s Standing Committee doubled down.

China’s highest decision-making body vowed to fight against “any words or
actions that distort, doubt or negate” Mr Xi’s crusade to quash covid-19.
Gone was language like “reconciling zero-covid with growth” and
“minimising the impact of the pandemic on the economy”, which sought to
balance covid-control with economic growth. The stockmarket shuddered.
Except, that is, for one industry. The market value of Dian Diagnostics
Group, a maker of PCR tests, soared by more than 10% after the Politburo’s
pledge. Daan Gene, another big test-maker, and Yiling Pharmaceutical,
which produces traditional Chinese medicine that has been heavily promoted
as a covid treatment since 2020, also made gains.

Prospects for this zero-covid industrial complex indeed look bright. Covid
testing is moving from makeshift tents on street corners into a network of
semi-permanent kiosks where residents will be tested regularly for the
foreseeable future; Shanghai alone will build 9,000 of them. In big cities
tens of millions of people may have their throats or nasal passages swabbed
every 48 hours. An analyst at Soochow Securities, a local broker, says that
testing at this pace will cost China about 1.7trn yuan ($254bn) this year, or
around 1.5% of GDP.

The amount firms can charge for tests has fallen since 2020, when a single
swab could cost more than 350 yuan. The government, which pays for most
mass-testing, has ordered the 20 or so listed makers of test kits to lower the
price to around 20 yuan. The test-makers have nevertheless continued to
rake in cash. Dian Diagnostics’ net profit increased by more than 120% year
on year in the first quarter, before testing intensified. Guangdong Hybribio
Biotech, another test provider, reported a jump of almost 200%.

The testing frenzy is minting covid tycoons. Liang Yaoming, founder of

Guang zhou Kingmed Diagnostics, which also makes tests, has become a
billionaire during the pandemic. The value of shares in BGI, a $4bn
biosciences darling, held by its founder, Wang Jian, has shot up by more
than $300m since 2019 to about $2bn. Chen Haibin’s 26% stake in Dian
Diagnostics is worth just shy of $1bn.

Some voices have raised concerns about the rise of covid-related big
business. Guan Qingyou, an economist at the Xinrui School in Beijing,
recently warned of the risk of special-interest groups “misleading and
kidnapping” public policy on the pandemic. They could eventually create
something akin to America’s military-industrial complex, he said in a post
on Chinese social media, which has since been deleted.
Mr Guan may be on to something. Zhong Nanshan, China’s leading
respiratory-disease expert, has promoted Yiling’s traditional Chinese
medicines used to treat covid-19 while maintaining undisclosed links to the
company, the Financial Times has reported. More egregiously, the chief
representative of a subsidiary of Guang zhou Kingmed Diagnostics was
arrested earlier this year on suspicion that he was trying to spread covid in
order to benefit his business. Not quite what the Politburo ordered. ■

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Snooping at work

Welcome to the era of the hyper-surveilled office

The Big Brotherly boss will see you now—and always
May 14th 2022

BOSSES HAVE always kept tabs on their workers. After all, part of any
manager’s job is to ensure that underlings are earning their keep, not
shirking and definitely not pilfering. Workplaces have long been monitored,
by inspectors, CCTV cameras and more recently all manner of sensors, to
check how many widgets individual workers are assembling or whether
anyone is dipping too liberally into the petty-cash box. In the past few years,
however, and especially as the pandemic has forced work from the
controlled enclosure of the corporate office to the wilderness of the kitchen
table, both the scope and scale of corporate surveillance have ballooned.

A study by the European Commission found that global demand for

employee-spying software more than doubled between April 2019 and April
2020. Within weeks of the first lockdowns in March 2020 search queries for
monitoring tools rose more than 18-fold. Surveillance-software makers’
sales jumped. At Time Doctor, which records videos of users’ screens or
periodically snaps photos to ensure they are at their computer, they suddenly
trebled in April 2020 compared with the previous year. Those at DeskTime,
which tracks time spent on tasks, quadrupled in that period. A survey of
more than 1,000 firms in America in 2021 found that 60% of them used
monitoring software of some type. A further 17% were considering it.

In an acknowledgment that snooping is on the rise—and raising eyebrows—

on May 7th a New York state law kicked in requiring firms to tell staff about
any electronic monitoring of their phone, email and internet activity.
Corporate scofflaws can be fined between $500 and $3,000 per violation.
New York joins Connecticut and Delaware, which have mandated similar
disclosures since the late 1990s and early 2000s, respectively, and Europe,
where companies have had to prove that monitoring has a legitimate
business basis—such as preventing intellectual-property theft or boosting
productivity—since 1995. More such rules are poised to emerge. They are
unlikely to deter more offices from embracing Big Brotherliness.

Smile, you’re on candid webcam

Firms have valid reasons to monitor workers. Safety is one: tracking staff’s
whereabouts in a building can help employers locate them in case of
emergency. Another is to keep money and data safe. To ensure employees
are not sharing sensitive information, banks such as JPMorgan Chase trawl
through calls, chat records and emails, and even track how long staff are in
the building. In 2021 Credit Suisse, another lender, began requesting access
to personal devices used for work.

Startups are offering more sophisticated threat assessments. One, Awareness

Technologies, sells software called Veriato, which gives workers a risk
score, so that the employer can assess how likely they are to leak data or
steal company secrets. Another, Deepscore, claims its face and voice-
screening tools can determine how trustworthy an employee is.

A further big reason for companies to surveil workers is to gauge—and

enhance—productivity. The past couple of years have seen an explosion in
tools available to managers that claim not just to tell whether Bob from
marketing is working, but how hard. Employers can follow every keystroke
or mouse movement, gain access to webcams and microphones, scan emails
for gossip or take screenshots of devices—often, as with products such as
FlexiSPY, leaving the surveilled workers none the wiser. Some monitoring
features are becoming available on widely used office software like Google
Workspace, Micro soft Teams or Slack.

Many surveillance products are powered by ever cleverer artificial

intelligence (AI). Enaible claims its AI can measure how quickly employees
complete tasks as a way of weeding out slackers. Last year Fujitsu, a
Japanese technology group, unveiled AI software which promises to gauge
employees’ concentration based on their facial expression. RemoteDesk
alerts managers if workers eat or drink on the job.

Collected responsibly, such data can boost a firm’s overall performance

while benefiting individuals. Greater oversight of workers’ calendars can
help prevent burnout. Technology can empower employees facing bias or
discrimination. Parents and other staff with caring duties can show they are
as productive as their office-dwelling colleagues. And people tend to tolerate
bag checks and CCTV cameras, which they see as legitimate ways to
improve security. Likewise, many accept that their work calls and email are
fair game.

Cflritics of surveillance nevertheless fear that firms are not to be trusted. In

2020 a staff backlash forced Barclays, a British bank, to scrap software that
tracked the time employees spent at their desks and nudged those who spent
too long on breaks. That year Microsoft came under scrutiny for a feature it
rolled out to rate workers’ productivity using measures including how often
they attended video meetings or sent emails. The software giant apologised
and made changes to avoid identifying individuals. On paper, the goal was
to provide detailed insight into how organisations work. In practice, it pitted
employees against each other.

That points to another problem: many surveillance products aimed at

boosting productivity are not well tested. Some risk being
counterproductive. Research has associated monitoring with declines in trust
and higher levels of stress, neither of which is conducive to high
performance. In one study of call centres, which were early adopters of
surveillance tech, intensive monitoring of performance contributed to
emotional exhaustion, depression and high employee turnover. In a separate
survey of 2,000 remote and hybrid workers in America by Express VPN, a
virtual private network, over a third faced pressure to appear more
productive or to work longer hours as a result of being monitored. A fifth
felt dehumanised, nearly half pretended to be online and almost a third
employed anti-surveillance software, specifically designed to dodge online
monitoring.

Add concerns about privacy—especially as the snooping shifts from the

office to the home—and no wonder that workers are wary. According to a
survey in 2018 by Britain’s Trades Union Congress, an umbrella group, only
one in four workers thought monitoring offered more benefits than
downsides. Three in four viewed facial-recognition software as
inappropriate. They had similar concerns about the monitoring of their
social-media use outside work hours and using webcams to spy on them.
Gartner, a consultancy, last year found that employees in nine large
economies consistently favoured non-digital monitoring, such as in-person
check-ins by managers, to the digital sort. Only 16% of French workers felt
that any form of digital surveillance was acceptable.

With laws like New York’s coming into force, lots of employees are about to
learn that their employers’ views on the appropriateness of such methods
may be quite distinct from their own. Employers, for their part, may need to
temper their enthusiasm for snooping on staff. Most companies will
probably arrive at a sensible compromise. Those that don’t may find that too
much knowledge is a dangerous thing. ■

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Bartleby

The woolliest words in business

Innovation. Sustainability. Purpose. Yuck
May 14th 2022

FIRE-FIGHTING FOAM starves the flames of oxygen. A handful of

overused words have the same deadening effect on people’s ability to think.
These are words like “innovation”, “collaboration”, “flexibility”, “purpose”
and “sustainability”. They coat consultants’ websites, blanket candidates’
CVs and spray from managers’ mouths. They are anodyne to the point of
being useless.

These words are ubiquitous in part because they are so hard to argue against.
Who really wants to be the person making the case for silos? Which
executive secretly thirsts to be chief stagnation officer? Is it even possible to
have purposelessness as a goal? Just as Karl Popper, a philosopher, made
falsifiability a test of whether a theory could be described as scientific,
antonymy is a good way to work out whether an idea has any value. Unless
its opposite could possibly have something to recommend it, a word is too
woolly to be truly helpful.
Woolliness is the enemy of accuracy as well as utility. A word like
“sustainability” is so fuzzy that it is used to encompass everything from a
business that thinks sensibly about the long term to the end of capitalism.
This column may well count as sustainable because it keeps recycling the
same ideas. The lack of precision opens the door to grandstanding and
greenwashing. Earlier this year Morningstar, a data provider, culled 1,200
funds from its European sustainable-investment list after a closer review of
their prospectuses and annual reports. Regulators in America and Europe
have been scrambling to define standards of sustainability disclosure.

Woolliness also smothers debate about whether you can have too much of a
good thing. Take “innovation”, for example. Too much innovation can be a
turn-off for customers. A recent paper from Yingyue Luan and Yeun Joon
Kim of the Judge Business School at the University of Cambridge looks at
the effect of perceived novelty on the response of audiences to films. The
researchers find that there is a sweet spot in experimentation, where films
are distinctive enough to pique curiosity but not so radical that they up-end
expectations. In that space between “Home Alone 4” and “Tenet” lie the real
moneymaking opportunities.

Innovation can also be trying for employees. Researchers at the

Massachusetts Institute of Technology (MIT) recently looked at factors that
predicted high levels of attrition among companies’ workforces. To their
surprise, they found that employees were more likely to leave firms—like
Tesla and Nvidia—with high levels of innovation. The authors hypothesise
that the long hours and high pressure that typify innovative cultures can lead
to higher staff turnover.

“Collaboration” is another word that repays closer scrutiny. It can be

marvellous: boundaries dissolved, expertise and ideas flowing. But
collaboration can also run wild. It often means having more and more people
on every email thread and in every meeting. It can paralyse decision-
making, as everyone and their dog gets to weigh in with their view. (To be
fair, the dog often makes the most useful points.)

And the rewards that flow from collaborativeness are uneven. “The No
Club”, a new book by Linda Babcock, Brenda Peyser, Lise Vesterlund and
Laurie Weingart, examines the disproportionate amount of “non-promotable
work” done by women—tasks like covering absences, organising logistics
and mentoring. Collaboration is a much less attractive proposition if helping
others means spending less time on the sort of work that gets recognised
when it is time to hand out actual promotions.

A host of other woolly words also mask genuine trade-offs. The supremely
fluffy notion of “purpose” disguises hard-edged questions of how managers
should balance the interests of multiple stakeholders. “Flexibility” sounds
like a boon to workers, but the reality for employees of coping with last-
minute changes to schedules is often very different. The MIT study found
that having a regular schedule was six times more powerful as a predictor of
blue-collar-employee retention than having a flexible schedule.

Traits like innovativeness or collaborativeness are still qualities for firms to

aspire to. And this is not an argument for constant qualification of what is
meant: the one way to make “purpose” more annoying is to put the word
“smart” in front of it. But it is a plea for managers to use woolly words
thoughtfully. They are not going away, but they do not have to suffocate
mental activity.

Read more from Bartleby, our columnist on management and work

Why working from anywhere isn’t realistic (May 7th)

The case for Easter eggs and other treats

(Apr 30th)

Startups for the modern workplace (Apr 23rd)

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Schumpeter

Activist investors are becoming tamer

They must not become extinct
May 14th 2022

“WHEN WE GO at ’em,” Carl Icahn growls, proudly, “we go at ’em.” After

decades as chief executives’ number-one tormentor, the 86-year-old’s
disdain for them has softened only a tad. “I wouldn’t call them buffoons,” he
told Schumpeter recently, “but, with many exceptions, they are in way over
their heads.” Mr Icahn continues to browbeat managers for poor
performance. As The Economist went to press he was in the final throes of a
fight with Southwest Gas, a utility. His gripes are broadening, too. This
month and next he will seek to oust directors at McDonald’s and Kroger
over the treatment of sows. Yet Mr Icahn also considers himself a vanishing
breed. “Activism is dying,” he laments.

Not on paper. In the first quarter of the year activists launched 73

campaigns, the busiest three months since Lazard, an advisory firm, began
keeping track in 2014. This week Bluebell, a newish activist fund based in
London that made its name last year by ousting the boss of Danone, a
struggling French yogurt-maker, set its sights on Saint-Gobain, another icon
of France SA. Still, Mr Icahn has a point. Activism isn’t what it used to be.

Activist investing, simply defined, involves buying a stake in a company,

then pushing for change. Activists might urge a firm to boot out its boss or
sell a subsidiary, say, in the hope of driving up the share price. Mr Icahn
became an activist to correct what he deems a broad failing of corporate
boards to oversee management. “I’m no genius,” he says, “but I made
billions and billions of dollars from this crazy system.”

In making their billions and billions, activists would pair financial acumen
with ferocious insults, hurled mostly at companies but sometimes also at
each other. After Bill Ackman of Pershing Square, a hedge fund, bet against
Herbalife, Mr Icahn invested in the multilevel marketing firm. In a notorious
televised spat between the two of them in 2013, Mr Icahn called Mr Ackman
a “crybaby” and declared, “I wouldn’t invest with you if you were the last
man on Earth.” Activists’ open letters to firms are only slightly more
temperate. “Years of value destruction and strategic blunders”, Daniel Loeb
of Third Point, another fund, wrote to one boss in 2005, “have led us to dub
you one of the most dangerous and incompetent executives in America.” In
2018 Third Point’s quest to sack the board of Campbell Soup included a
video in which the company’s famous jingle morphed from “mmm, mmm,
good” to “mmm, mmm, BAD”.

For CEOs, such antics pose a headache at best, requiring expensive lawyers,
bankers, proxy advisers and public-relations gurus. Targeted bosses have
occasionally struggled to keep their cool. In 2017 Arconic, an industrial
firm, faced a campaign from Paul Singer’s Elliott Management. Klaus
Kleinfeld, Arconic’s chief executive, wrote a letter alluding to a raucous trip
to the World Cup and suggesting that Mr Singer might have performed
“Singin’ in the Rain” in a fountain. Mr Kleinfeld resigned soon after.

In the past few years such altercations have grown rarer. That is partly
because there are plenty of newcomers who lack the old guard’s abrasive
ways—even if some, such as Politan or Mantle Ridge, were founded by
alumni of the veteran funds. First-time activists accounted for 25% of the
campaigns launched in the first quarter, according to Lazard, up from 17%
in 2019. But some veterans, too, are mellowing with age. In March Mr
Ackman declared that his firm had retired permanently from activist short-
selling, which he called the “noisiest form of activism” (unsurprising,
perhaps, given his volatile record on such gambles). Elliott has built a buy-
out arm, so it can take companies private rather than simply badgering them
in public. In March it helped lead a consortium to acquire Nielsen, a data
company, for $16bn.

Activism is, in other words, becoming if not dull, exactly, then more subtle.
Many activists are choosing to operate quietly, pushing a company’s board
in private and preserving the ability to grumble in public if the board resists.
“Several years ago, when activism was a narrow asset class, the personalities
were as big a focus as the actual substance of the campaigns,” says Avinash
Mehrotra of Goldman Sachs. Now Mr Mehrotra reckons that for every
public campaign on which the investment bank advises a company, it is
working on four to five times as many private ones. Politan’s campaign last
year at Centene, a health insurer, had little press coverage before an
agreement was announced to replace the firm’s boss and add new board
members. In quiet campaigns, says another activist investor, the public sees
no engagement followed by the “kumbaya” result. Even Mr Loeb has
adopted a new tone. He wants Amazon to spin off its cloud business; in a
letter in February he praised “Amazon’s talented and focused new CEO
Andy Jassy”, seeming less inclined to kick Mr Jassy’s backside than to kiss
it.

The risk of rewilding

Just as activists are becoming less confrontational, though, regulators are
turning more so. Although America’s Securities and Exchange Commission
(SEC) is making it easier for investors to elect their candidates to corporate
boards, in other ways the stock market watchdog is making activism harder.
A new definition of a “group” would limit activists’ ability to make their
case to other shareholders. Another rule would require quick disclosure of
ownership of derivatives, which could push up the target’s share price,
sapping the incentive to build a large stake. Tellingly, the proposals are
supported by corporate lobbies such as the Business Roundtable. Elliott, in
comments filed to the SEC, warned that the rules would “virtually shut
down activism”.
That would be too bad. Research shows that activism lifts returns for
activists and long-term value for other shareholders. Robert Eccles of Saïd
Business School and Shivaram Rajgobal of Columbia Business School have
told the SEC its rules would lead to “less value creation, worse governance,
and more acrimony at public companies”. No one wants that—least of all
the gadflies. ■

Read more from Schumpeter, our columnist on global business:

Facebook’s retirement plan (May 7th)
The weird ways companies are coping with inflation (Apr 30th)
Elon Musk’s Twitter saga is capitalism gone rogue (Apr 23rd)

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markets, sign up to Money Talks, our weekly newsletter.
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Finance & economics

Global housing: Braced for a storm

Global trade: A slow train from China
Russia’s economy: Bearing up
Consumer prices: Public enemy
Buttonwood: The Italian sob
Cashlessness: Pix perfect
Free exchange: Engine repair
House of cards

Which housing markets are most exposed to the

coming interest-rate storm?
The pain of rising mortgage repayments will be harder to bear in some
places than in others
May 14th 2022

STOCKS ARE sinking, a cost-of-living crisis is in full swing and the spectre
of global recession looms. But you wouldn’t know it by looking at the rich
world’s housing markets, many of which continue to break records. Homes
in America and Britain are selling faster than ever. House prices in Canada
have soared by 26% since the start of the pandemic. The average property in
New Zealand could set you back more than NZ$1m ($640,000), an increase
of nearly 46% since 2019.

For more than a decade homeowners benefited from ultra-low interest rates.
Now, however, changes are brewing. On May 5th the Bank of England,
having forecast that inflation in Britain could exceed 10% later this year,
raised its policy rate for the fourth time, to 1%. The day before America’s
Federal Reserve had increased its benchmark rate by half a percentage point,
and hinted that more tightening would follow. Investors expect the federal
funds rate to rise above 3% by early 2023, more than triple its current level.
Most other central banks in the rich world, ranging from Canada to
Australia, have either started pressing the monetary brakes, or are preparing
to do so.

Many economists believe that a 2008-style global property crash is unlikely.

Households’ finances have strengthened since the financial crisis, and
lending standards are tighter. Scarce housing supply together with robust
demand, high levels of net household wealth and strong labour markets
should also support property prices. But the rising cost of money could make
homeowners’ existing debt burdens difficult to manage by increasing their
repayments, while putting off some prospective buyers. If that hit to demand
is big enough, prices could start to fall.

Homeowners’ vulnerability to sharp rises in mortgage payments varies by

country. In Australia and New Zealand, where prices jumped by more than
20% last year, values have got so out of hand that they may be sensitive to
even modest rises in interest rates. In America and Britain, where markets
are a little less torrid, interest rates may have to approach 4% for house
prices to fall, reckon analysts at Capital Economics, a consultancy.

Alongside price levels, three other factors will help determine whether the
housing juggernaut simply slows, or comes crashing to a halt: the extent to
which homeowners have mortgages, rather than own their properties
outright; the prevalence of variable-rate mortgages, instead of fixed-rate
loans; and the amount of debt taken on by households.

Consider first the share of mortgage-holders in an economy. The fewer

homeowners who own their properties outright, the greater the impact of a
rate rise is likely to be. Denmark, Norway and Sweden have relatively high
shares of mortgage-holders (see table). A relaxation of lending standards in
response to the covid-19 pandemic turbocharged borrowing. In Sweden tax
breaks for homeowners have further fuelled the rush to secure mortgages,
while a dysfunctional rental market, characterised by overpriced (and illegal)
subletting, has pushed more tenants into home ownership. All this puts
Nordic banks in a tricky position. In Norway and Sweden housing loans
make up more than a third of banks’ total assets. In Denmark they account
for nearly 50% of lenders’ books. Sharp falls in house prices could trigger
losses.

Home and dry

By contrast with the Nordics, where home ownership has been fuelled by the
growth of mortgage markets, many households in central and eastern
European countries bought homes without taking on debt in the 1990s
because property was so cheap. In Lithuania and Romania more than four-
fifths of households are outright owners. Mortgage-free households are also
more prevalent in southern Europe, notably Spain and Italy, where
inheritance or family support is a common route to home ownership.
Germans, for their part, are more likely to rent than own their homes. Rate
rises will consequently have less direct impact on prices.

The structure of mortgage debt—the second factor—also matters. Rising

interest rates will be felt almost instantly by borrowers on variable rates,
which fluctuate with changes in policy rates; for those on fixed rates, the
pain will be delayed. In America mortgage rates tend to be fixed for two or
three decades. In Canada nearly half of home loans have rates that are set for
five or more years. By contrast lending in Finland is almost entirely priced at
floating rates. In Australia around four-fifths of mortgages are tied to
variable rates.

Just looking at the proportion of borrowers on fixed versus variable rates can
mislead, however. In some countries mortgage rates may often be fixed, but
for a period that is too short to protect borrowers from the interest-rate
storm. In New Zealand fixed-rate mortgages make up the bulk of existing
loans, but nearly three-fifths are fixed for less than a year. In Britain nearly
half the fixed-rate stock is for up to two years.

Resilience to rising rates will also depend on the quantum of debt taken on
by households—our third factor. High indebtedness came into sharp focus
during the global financial crisis. As property prices fell, households with
towering mortgage repayments relative to their incomes found themselves
squeezed. Today households are richer—but many are saddled with more
debt than ever. While Canadians added C$3.6trn ($2.8trn) to their combined
pile of savings during the pandemic, buoying their net wealth to a record
C$15.9trn at the end of 2021, their ravenous appetite for homes has pushed
household debt to 137% of income. The share of new mortgages with
extreme loan-to-income ratios (ie, exceeding 4.5) has also risen, prompting
Canada’s central bank to issue a warning about high levels of indebtedness
in November last year.

Financial regulators in Europe are equally worried. In February the

European Systemic Risk Board warned of unsustainably high mortgage debt
in Denmark, Luxembourg, the Netherlands, Norway and Sweden. In
Australia, homeowners’ average debt as a share of income has swollen to
150%. In all these countries households will face heftier monthly
repayments just as soaring food and energy costs eat into their incomes.

All shapes and sizes

Bring this together, and some housing markets seem set for more pain than
others. Property in America, which bore the brunt of the fallout from the
subprime-lending crisis, appears better insulated than many large economies.
Borrowers and lenders there have become more cautious since 2009, and
fixed rates are much more popular. Housing markets in Britain and France
will fare better in the short term but look exposed if rates rise further.
Property in Germany and southern and eastern Europe appears less
vulnerable. By contrast, prices may be most sensitive to rate rises in
Australia and New Zealand, Canada and the Nordics.

One floor for house prices is that, in most countries, demand still vastly
outstrips supply. Strong job markets, hordes of millennials nearing home-
buying years and a shift to remote working have all increased the demand
for more living space. New properties remain scarce, which will sustain
competition for homes and help keep prices high. In Britain there were 36%
fewer property listings in February compared with the start of 2020; in
America there were 62% fewer listings in March than the year before.

Nor does the alternative to owning a home—renting—look particularly

attractive. Across Britain average rents were 15% higher in April than in
early 2020. In America they rose by a fifth in 2021, with bigger rises in
hotspots, such as Miami, where they jumped by almost half. Rent controls
cause a different sort of pain. Prospective tenants of such properties in
Stockholm face an average waiting time of nine years.

As the era of ultra-cheap money comes to an end, then, demand for housing
is not about to collapse. Yet one way or another, renters and homeowners
will face an intensifying squeeze. ■

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exposed/21809217
A slow train from China

China’s extraordinary export boom comes to an

end
Covid-related supply bottlenecks meet slowing foreign demand
May 14th 2022 | HONG KONG

LAST MONTH a yellow-striped freight train rumbled into Budapest

carrying solar-power equipment, air-conditioning kit and other bits and
pieces. It had travelled for 16 days, all the way from Shandong, a province
in eastern China. As part of China’s Belt and Road Initiative, freight trains
now serve more than 50 cities in Europe and Asia from Shandong. They are
called “Qilu” trains, a nod to the ancient Qi and Lu kingdoms that flowered
in that part of China in the Confucian era.

China’s exports, whether by rail, road, sea or air, have made rapid progress
in the past two years. They rose by almost 30% in dollar terms in 2021. Over
5,000 Qilu trains have left the station since 2018. But in April, China’s
export growth slowed to a desultory chug. In dollar terms, exports were only
3.9% higher than a year earlier.
Even that modest increase was something of a miracle. It came despite
China’s increasingly surreal battle against covid-19, which has locked down
Shanghai, one of the country’s biggest trade hubs, and imposed onerous
restrictions on mobility elsewhere. According to Nomura, a bank, stringent
limits remain in 41 cities, accounting for almost 30% of GDP. Towns have
been so anxious to avoid outbreaks that officials have sealed lorry drivers
into their cabs while they wait to pick up cargo at motorway checkpoints.
These kinds of precautions have also gummed up international trade. In mid-
April, 506 vessels were waiting outside Shanghai’s port, according to
Windward, a shipping-analytics firm, compared with 260 in February.

Optimists had hoped that China’s export machine could weather occasional
outbreaks of the Omicron variant. Workers, they pointed out, could isolate
themselves on the job, living where they work in a so-called “closed loop”.
But no modern factory is entirely self-contained; every “closed” loop must
remain open to its suppliers. And if any loop in the supply chain succumbs
to the virus, it can disrupt production in all of them. Tesla’s car production in
Shanghai has, for example, been hampered by a shortage of wiring harnesses
from a virus-hit supplier, according to Reuters, a news agency.

To increase trade by any amount in these conditions is impressive. But the

headline 3.9% expansion reported by China’s customs agency on May 9th
was more nominal than real. More detailed statistics, published later in the
month, are likely to show that the price of China’s exports rose by perhaps
8% or more in April, compared with a year earlier, according to UBS, a
bank. If so, the volume of China’s exports must have shrunk last month.

These price increases have raised fears that a locked-down China will
exacerbate inflation in its trading partners, particularly America. The alarm
is often exaggerated. Goods made (in whole or in part) in China made up
less than 2% of American personal consumer spending in 2017, according to
economists at the Federal Reserve Bank of San Francisco. China’s covid-
related bottlenecks could have larger ripple effects, say by allowing rival
manufacturers to raise their prices. Most American inflation, however, is
made in America.

Indeed, China’s exports may be more a victim of America’s woes than a

cause of them. America’s slowdown is contributing to weaker demand for
China’s goods on top of self-inflicted disruptions to their supply. Surveys of
purchasing managers have revealed falling export orders every month so far
this year. And China’s official statistics showed declining exports last month
of the computers and household appliances that were in such high demand
when the West too was locking itself down.

Not everything is slowing, however. China’s imports from Russia have

continued to grow since Vladimir Putin’s invasion of Ukraine, as sanctions
have hindered Russia’s access to Western markets. The offerings included 50
carriage-loads of barley, carried to Shandong province on a Qilu train. ■

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export-boom-comes-to-an-end
Bearing up

Russia is on track for a record trade surplus

Imports have collapsed, but exports are holding up
May 13th 2022

WITHIN DAYS of Vladimir Putin’s invasion of Ukraine, Russia’s financial

system seemed on the verge of collapse. The West imposed a range of
financial sanctions, notably on the Russian central bank’s foreign-exchange
reserves, that sent the rouble plunging and led citizens to withdraw cash
frantically. Then the central bank raised interest rates, imposed capital
controls and injected liquidity into the banking system, and some of these
misfortunes reversed. Although a chunk of Russia’s currency reserves
remains frozen, the country still generates about $1bn a day from its energy
exports.

Russia has stopped publishing detailed monthly trade statistics. But figures
from its trading partners can be used to work out what is going on. They
suggest that, as imports slide and exports hold up, Russia is running a record
trade surplus.
On May 9th China reported that its goods exports to Russia fell by over a
quarter in April, compared with a year earlier, while its imports from Russia
rose by more than 56%. Germany reported a 62% monthly drop in exports to
Russia in March, and its imports fell by 3%. Adding up such flows across
eight of Russia’s biggest trading partners, we estimate that Russian imports
have fallen by about 44% since the invasion of Ukraine, while its exports
have risen by roughly 8%.

Imports have collapsed partly because sanctions on the Russian central bank
and the expulsion of some lenders from the SWIFT interbank messaging
network have made it harder for consumers and firms to buy Western goods.
Elina Ribakova of the Institute of International Finance (IIF), a bankers’
group, says that regulatory uncertainty was also a big factor at first, as
Western firms were unsure which Russian banks came under sanctions.
Logistical disruptions, including decisions by Western firms to suspend
deliveries to Russia, mattered, too. The early depreciation of the rouble also
dampened Russian demand for imports, says Claus Vistesen of Pantheon
Macroeconomics, a consultancy.

Russia’s exports, meanwhile, have held up surprisingly well, including those

directed to the West. Sanctions permit the sale of oil and gas to most of the
world to continue uninterrupted. And a spike in energy prices has boosted
revenues further.

As a result, analysts expect Russia’s trade surplus to hit record highs in the
coming months. The IIF reckons that in 2022 the current-account surplus,
which includes trade and some financial flows, could come in at $250bn
(15% of last year’s GDP), more than double the $120bn recorded in 2021.
That sanctions have boosted Russia’s trade surplus, and thus helped finance
the war, is disappointing, says Mr Vistesen. Ms Ribakova reckons that the
efficacy of financial sanctions may have reached its limits. A decision to
tighten trade sanctions must come next.

But such measures could take time to take effect. Even if the EU enacts its
proposal to ban Russian oil, the embargo would be phased in so slowly that
the bloc’s oil imports from Russia would fall by just 19% this year, says
Liam Peach of Capital Economics, a consultancy. The full impact of these
sanctions would be felt only at the start of 2023—by which point Mr Putin
will have amassed billions to fund his war. ■

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record-trade-surplus
Baked in

Even outside America, inflation is starting to look

entrenched
Five indicators suggest Anglophone countries are suffering the most
May 14th 2022 | SAN FRANCISCO

INFLATION DOMINATES the American popular psyche to an extent not

seen since the 1980s, when prices were last rising at the current pace. Much
like complaining about the weather or last night’s basketball play-offs,
moaning about higher prices has become a conversation starter. According
to figures published on May 11th, consumer prices rose by 8.3% in April,
compared with the previous year. A day earlier, President Joe Biden called
fighting inflation his “top domestic priority”. Newspapers are publishing
four times as many stories mentioning inflation as they did a year ago;
several polls suggest that Americans believe inflation is a bigger problem for
their country than the war in Ukraine. But America is not alone. Inflation is
also becoming baked into everyday life in other parts of the rich world.

The Economist has gathered data on five indicators across ten big economies
—”core” inflation, which excludes food and energy prices; the dispersion in
inflation rates for the sub-components of the consumer-price index; labour
costs; inflation expectations; and Google searches for inflation. To gauge
where inflation has become most pervasive, we rank each country according
to how it fares on each measure, and then combine these ranks to form an
“inflation entrenchment” score.

Continental Europe, so far at least, seems to have escaped the worst of the
scourge. Inflation is leaving barely a trace on Japan. But it is entwining itself
around Anglophone economies. Canada is faring slightly worse even than
America. Britain has a big problem on its hands (see chart).

A few factors explain the differences. Total fiscal stimulus across

Anglophone countries in 2020-21 was about 40% more generous than in
other rich places, according to our estimates. It was also more focused on
handouts to households (such as stimulus cheques). That may have further
stoked demand. Monetary policy in the euro area and Japan was already
ultra-loose before the pandemic, limiting the amount of extra stimulus
central banks could provide. Britain’s inflation may also reflect an
idiosyncratic factor: Brexit. It turns out that breaking with your largest
trading partner causes costs to rise.

The simplest component of our ranking is the rate of core inflation. This
measure gives a better sense of underlying price pressure. Among our ten
countries, America leads the pack (though core inflation is above average
pretty much everywhere).

A second measure, of dispersion, helps capture how broadly based price

pressures are. Headline inflation being driven by one or two items—say, the
cost of a restaurant meal—is less worrisome than if the price of everything is
going up quickly. We divide a country’s consumer-goods basket into as
many as 16 components, then calculate the share where the inflation rate
exceeds 2%. In Japan just a quarter cross that threshold. But in Australia
more than two-thirds do. JPMorgan Chase, a bank, breaks down Britain’s
consumer-price index into 85 components, and finds that inflation rates for
69% of them are running above their 1997-2019 averages.

Inflation could also spiral if workers demand higher wages to compensate

them for rising prices (and firms raise their prices in turn). Unit labour costs,
which measure the relationship between what workers are paid and the value
of what they produce, are rising far faster than their long-run average in
many countries. On May 5th America’s statisticians revealed that these rose
by 7% in the first quarter, compared with a year ago, up from a pre-
pandemic average of around 2%. Michael Saunders of the Bank of England
has noted that with pay deals being struck at up to 5% a year, but
productivity growth of only around 1%, Britain’s unit-labour-cost growth is
probably “well above the pace consistent with the inflation target [of 2%]”.
Our last two measures assess households’ expectations. The higher these
remain, the more likely it is that inflation becomes embedded. One
proprietary data set, provided to The Economist by researchers at the Federal
Reserve Bank of Cleveland, Morning Consult, a consultancy, and Raphael
Schoenle of Brandeis University, is a rare reliable cross-country gauge of
public inflation expectations. In May 2021 a respondent in the median rich
country thought inflation over the next 12 months would be 2.3%. Now they
expect a rate of 4.5%; Canadians, an even higher 6%. A measure of Google
searches also suggests the subject is weighing on people’s minds. Britons
now search more frequently for “inflation” than they do for Taylor Swift. ■

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starting-to-look-entrenched/21809225
Buttonwood

Why Italy’s borrowing costs are surging once

again
Despite all the euro zone’s crisis-proofing, Italy remains a worry
May 14th 2022

A SURE WAY to cause shudders in Italian economic-policy circles is to talk

up the prospect of higher inflation. For years subdued price pressures were
the rationale for the European Central Bank’s super-lax monetary-policy
stance. They provided necessary cover for an array of ECB bond-buying
schemes that covertly but effectively bailed out Italy’s huge public debts.
Just now nerves in Rome are a little jangled. Annual inflation across the euro
zone rose to 7.5% in April. ECB officials have been warming up markets for
a possible interest-rate rise as soon as July. That would first require an end to
the central bank’s main bond-buying programme. The yield on ten-year
German bunds has surged in anticipation. So has the excess yield between
riskier sorts of government bonds, notably Italy’s BTPs, and bunds. Italian
bond spreads rose above two percentage points earlier this month (see chart).

Looked at one way, this rise is eye-catching, though not yet alarming. Italy’s
spreads are not obviously out of line with those of corporate bonds of a
similar credit rating, allowing for differences in maturity. Looked at another
way, it is disappointing. After all the efforts over the past decade to make the
euro zone crisis-proof, a BTP behaves not like a bund but like an
investment-grade corporate bond—with spreads narrowing in calmer times
but blowing out at the whiff of trouble.

Italy has long been the weakest big link in the euro-zone chain. It has
emerged from the pandemic with government debt of 151% of GDP, the
highest of any large economy bar Japan (where inflation is still quiescent).
In the right conditions, such debts are manageable. Indeed, if Italy’s nominal
GDP growth rate can stay ahead of the interest rate it pays, the debt burden
would fall—as it did last year, when the economy bounced back from
recession. Mario Draghi, the former ECB chief who is now Italy’s prime
minister, has been following what might be called a “denominator” strategy
with regard to the debt-to- GDP ratio. He has tapped the EU’s recovery fund,
a €750bn ($790bn) pot financed by common bonds, to finance an investment
splurge with the intention of lifting Italy’s GDP. These funds are conditional
on reforms, which Mr Draghi has set in motion.

Inflation has upset this strategy in two ways. First, it puts a big dent in real
output. The sharp rise in energy prices following the invasion of Ukraine
makes Italians poorer and less able to spend on other things. Italy’s GDP
shrank in the first quarter. Growth forecasts have been slashed. Second, the
inflation shock has prompted a global rethink of monetary policy and
widespread risk aversion in financial markets. The widening in Italian
spreads is a consequence. With interest rates rising and central banks ceasing
bond-buying, capital is being rationed more carefully. The safest credits get
first call. Riskier borrowers get what’s left.

If sustained, higher yields will over time raise the cost to Italy of servicing
its debts. Borrowing costs of 3% are not ideal. But Italy has locked in low
interest rates on the stock of its existing debt, which has an average maturity
of seven years. Over the longer haul Italy should be able to manage nominal
GDP growth of at least that 3% rate—1% real GDP plus 2% inflation, say.
Indeed, the current surge in prices, while deadly to real output, is adding to
the inflation part of nominal GDP.

A big worry is that spread-widening gains momentum. Andrew Balls of

PIMCO, an asset manager, detects a “cuspiness” to BTP yields—meaning
that when they rise beyond a certain threshold, they tend to attract more
panicky sellers than bargain-hunting buyers, leading to even higher yields.
Anxieties about Italy’s politics are never far from the surface. Mr Draghi is
trusted in Berlin and Brussels, but he is due to stand down before elections
next spring. He may not last even that long, since cracks are emerging in his
coalition over the war in Ukraine.

In those circumstances, the instinct is to look to the ECB to check the

widening in spreads. But with inflation where it is, the central bank’s
continued use of tools such as negative interest rates and asset purchases
looks improper—hence the scramble to “normalise” monetary policy. Yet
inflation seems less entrenched in the euro area than in, say, America. Wage
growth is still fairly modest, for instance. The ECB, therefore, may not have
to raise interest rates quite as much as financial markets are pricing in.
Nervous technocrats in Rome will be keeping their fingers crossed.

Read more from Buttonwood, our columnist on financial markets:

Who wins from carnage in the credit markets? (May 7th)
Slow pain or fast pain? The implications of low investment yields (Apr 30th)
A requiem for negative government-bond yields (Apr 23rd)

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markets, sign up to Money Talks, our weekly newsletter.
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costs-are-surging-once-again
Pix perfect

Digital payments have gone viral in Brazil

Why the central bank’s instant-payments platform, Pix, has been a smash
hit
May 14th 2022 | SÃO PAULO

FOR YEARS Brazilians had little incentive to abandon cash. Wiring 50

reais ($10) to a friend would set you back an extra 16; swiping a credit card,
2% of the cost of your purchase. For e-commerce firms this made doing
business particularly cumbersome. Customers wanting to buy something
online, but not wanting to incur the costs of a digital payment, could choose
instead to print a payment slip (boleto), take that slip to a shop or post office,
and hand over the cash. The problem for e-commerce firms, however, was
that not everyone who printed a boleto ended up going to a shop to fork over
the cash—meaning that many transactions were never completed.

Then came Pix, an instant-payments system operated by the central bank.

Launched in November 2020, it has transformed the way Brazilians make
payments. The platform allows consumers and merchants to send and
receive money via a QR code, without having to share details of their wallet,
fintech provider or bank. In April around 118m people used the platform—
or more than two-thirds of Brazilian adults. In the last quarter of 2021 they
made a staggering 3.9bn payments. Already Pix has surpassed debit and
credit cards as the most popular method of payment in Brazil. One in five
transactions now takes place on the platform’s mobile app.

As an idea, Pix is not new or unique. India’s Unified Payments Interface

(UPI) began life in 2016. Other countries have established similar schemes.
Nonetheless, Pix has been a remarkable success. For years the central bank
sought to make Brazil’s financial system more competitive, digital and
inclusive. Pix has helped achieve those aims. Its rapid adoption could also
contain lessons for others.

Several factors explain why Pix has been so popular. For a start, it is easy to
use. Setting up an account takes a matter of minutes. A user’s identifying
“key” can be a CPF (a sort of tax ID), a phone number or a randomly
generated string of digits. Sending money to recipients at another bank is
quick and painless.

Policymakers also acted to encourage adoption. Unlike its Mexican

counterpart, whose Pix equivalent has been less successful, Brazil’s central
bank compelled big banks and fintech firms to join its platform. During the
covid-19 pandemic it mandated that emergency payments made by the
government should also be available through the app. In this way, up to 30m
unbanked Brazilians received a cashless payment for the first time.

Most payments are of small value and take place between individuals. The
ubiquity of Pix is such that beggars often ask for money with a QR code.
These transactions are possible because they are so cheap. Pix is free to use
for individuals, and is by far the lowest-cost option for firms.

The introduction of Pix has had a mixed effect on the country’s banks.
Current-account service fees charged by Brazil’s five biggest lenders were
almost 2.7bn reais lower in 2021 than the year before. But banks insist that
Pix also presents them with opportunities. For one thing, as society goes
cashless, they are spending less on transporting lorryloads of banknotes. And
although it is not necessary to have a bank account to use Pix, the platform
seems to encourage people to open one. According to Mastercard, a credit-
card giant, Brazil reduced its unbanked population by as much as 73%
during the pandemic. There are now more potential customers to sell credit
products to, says Julio Paixão of Bradesco, one of the big five banks.

One of the biggest surprises is that despite the astronomical success of Pix,
the number of credit-card transactions has continued to grow. Pix is not just
serving as a substitute for other cashless payment methods, but increasing
them.

There have been some unforeseen problems. Since Pix has been introduced,
the number of “lightning kidnappings” has surged, as criminals forced users
to transfer large sums of money. In response, Pix has introduced a night-time
limit on transactions. Staff at the central bank have been on strike, on and
off, since early April, raising concerns about the operability of the system.
Others worry about the possibility of a data breach (though so far there do
not seem to have been any). By and large, however, shortcomings are being
rapidly addressed.

The central bank has plans for further expansion. By the end of this year Pix
should be available offline and further integrated into open banking, a
system that allows customers to share their transaction data with fintechs.
Soon there will be an option to pay for things in instalments. And in the
coming years, there are plans to make the app available abroad, which would
facilitate remittances and other cross-border payments.

The success of platforms such as Pix may have far-reaching implications.

Hyun Song Shin of the Bank for International Settlements, the central bank
for central banks, considers them “a huge leap” towards the adoption of
central bank digital currencies (CBDCs). A retail CBDC requires a register
of users and their real names, and a full record of who pays what to whom
and when, he explains. With Pix, you have all that already, as well as the
technical standards that govern the exchange of information; it is 80% of the
way to a CBDC, he reckons. Brazil’s central bankers, who are working on a
CBDC of their own, seem inclined to agree. The Pix revolution could be just
the beginning. ■

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gone-viral-in-brazil
Free exchange

The world needs a new economic motor. Could

India fit the bill?
The shifting structure of the global economy will make that hard
May 14th 2022

THE WORLD could use more economic hope. The war in Ukraine has dealt
a heavy blow to global growth prospects. Lockdowns and a property
slowdown have sapped China, the erstwhile growth engine, of its vim. Given
its size and potential, it seems reasonable to ask if India could be the world’s
next economic motor. In April the IMF reckoned that Indian GDP might
grow by more than 8% this year—easily the fastest pace among large
countries. Such a rapid expansion, if sustained, would have a profound
impact on the world. But, in large part because of the shifting structure of
the global economy, things are not as simple as India taking up China’s
mantle.

In the 2000s China accounted for nearly a third of global growth—more than
America and the European Union combined—adding new productive
capacity, each year, equivalent to the present-day output of Austria. By the
2010s China’s contribution had roughly doubled, such that each year of
expansion was worth an additional Switzerland. From the turn of the
millennium to the eve of the pandemic, China grew into the largest
consumer of most of the world’s major commodities, and its share of global
goods exports rose from 4% to 13%.

Could India replicate such feats? It is the world’s sixth-largest economy—as

China was in 2000. And its output today stands broadly where China’s stood
two decades ago. China went on to manage an average annual growth rate of
about 9%. India grew by just under 7% per year over the same period. It
might easily have done better, though, were it not for policy mistakes—such
as Prime Minister Narendra Modi’s shock decision to withdraw some
banknotes in 2016—and macroeconomic vulnerabilities, including an
overextended financial sector. The government may have learnt from the
first; both policymakers and the banks have worked to address the second.
Before the war in Ukraine the IMF had reckoned that India might grow by
9% this year. Some optimists argue that, in the right circumstances, India
could manage such rates on a sustained basis.

A closer look, however, suggests that India is not a substitute for China. One
problem is that the world economy is much larger than it used to be, such
that a given rise in India’s GDP raises global growth by less. Sustained
annual growth of 9% would vastly improve the lives of Indians, and
meaningfully tilt the balance of global economic and political power. But it
would not mean that the world economy would revolve around India, as it
did around China over the past two decades. India’s contribution to global
growth would remain smaller than that of America and Europe combined,
for example.

Perhaps more important, global economic conditions may be considerably

more forbidding than those that enabled China’s rise. From 1995 to 2008,
the value of world trade rose from 17% of global GDP to 25%. The share of
goods exports participating in global value chains rose from about 44% of
world exports to 52%. China was at the forefront of both trends. It was the
most dominant trading country since imperial Britain, according to an
analysis of “hyperglobalisation” published in 2013 by Arvind Subramanian
of Brown University and Martin Kessler of the OECD, a rich-country think-
tank.
India, by contrast, is a trade minnow. On the eve of the pandemic it
accounted for less than 2% of global merchandise exports. It hopes to raise
that share by investing in infrastructure, providing public subsidies to
manufacturers and negotiating trade deals with uncharacteristic enthusiasm.
But times have changed. World trade has fallen as a share of global GDP
since the early 2010s. Economic nationalism could stymie a recovery. India
may nonetheless hope to increase its exports by capturing market share from
other economies—including China. But businesses and governments that
were once willing to rely heavily on China in the name of efficiency have
become more cautious. Their reluctance to become too dependent on any
one source of supply could check India’s ambitions.

Dominating global supply chains may not be the only route to economic
influence. India is a precocious exporter of tech and business services;
though its GDP is only one-sixth that of China’s, its services exports only
just lag behind the latter’s. Research published in 2020 by Richard Baldwin
of the Graduate Institute in Geneva and Rikard Forslid of Stockholm
University argues that technological change is expanding the range of
exportable services, and providing more opportunities for workers in poor
countries to compete with services workers in the rich world. But while tech
and business services may continue to thrive in India, their expansion may
be limited by an inadequate system of education, which performs well on
measures of enrolment but not of learning outcomes, and by the protected
nature of rich-world service sectors, which may be better insulated against
foreign competition than were industrial workers against Chinese imports.

Subcontinental surge
Even if India manages a growth rate of nearer 6% than 9%, that would be
nothing to sneeze at. It would make India the world’s third-largest economy
by the mid-2030s, at which point it would contribute more to global GDP
each year than Britain, Germany and Japan combined. Indian demand for
resources would then drive commodity prices; its capital markets would
tantalise foreign investors. A large English-speaking population and a
democratic political system, if India can keep it, may allow Indian tech and
cultural exports to wield more global influence than did China’s at similar
income levels.
But the world by then will have recognised, if it has not already, that the rise
of China was a unique event. Indian growth will be world-changing. But you
should neither hope for, nor fear, a reprise of the Chinese experience. ■

Read more from Free Exchange, our column on economics:

Why long-term economic growth often disappoints (May 7th)

How would an energy embargo affect Germany’s economy? (Apr 30th)
Does high inflation matter? (Apr 23rd)

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markets, sign up to Money Talks, our weekly newsletter.
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economic-motor-could-india-fit-the-bill
Science & technology

Genetic disease: Building the future of screening

Immunology: Fed by the hand that should bite it
Animal behaviour: Buzz off!
Science and international politics: Frozen
Genetic disease

Full-genome screening for newborn babies is now

on the cards
A boon for medicine. But it raises questions of privacy
May 13th 2022

OVER THE years, doctors have described more than 7,000 rare diseases,
generally defined as those affecting fewer than one in 2,000 people. So,
though individually unusual, such illnesses are collectively a serious
problem—a long-tail of need which is hard to treat because patients are few
in number and their symptoms often picked up too late. Three-quarters of
rare diseases are genetic, and Global Genes, an American advocacy group,
reckons 400m people around the world are affected by them. For medicine
to do better, people with them need to be noticed earlier, preferably in the
first days of their lives.

To that end, doctors in many places want to sequence and screen babies’
entire genomes at birth. In America there are projects to do just that at
Boston Children’s Hospital, Columbia University and Rady Children’s
Hospital in San Diego. A pioneering group at Harvard, known as BabySeq,
has recently received money to expand its small-scale work to include 1,000
babies. In Europe, a five-year project called Screen4Care is starting. And
efforts are also under way in Australia, China and Qatar. But the project to
watch is in Britain. There, a government-owned company called Genomics
England, originally set up to run a study called the 100,000 Genomes
Project, which investigated genetic diseases and cancer in adults, will soon
start a pilot project intended to sequence the genomes of 200,000 babies.
That could presage a national programme.

Screen saver
Screening babies for genetic diseases is not a novel idea. Across North
America, Europe and the Middle East, in particular, newborns are often
checked at birth for a handful of common heritable illnesses, such as sickle-
cell anaemia, thalassaemia and cystic fibrosis. But a whole-genome
sequence offers the prospect of spotting thousands of disorders rather than
the few which are currently searched for.

Early diagnosis means earlier treatment. This, in turn, means that children’s
lives will be improved and even saved. But the power of the technology also
means it is possible, in theory, to screen for conditions that would occur later
in life, or even to help parents avoid having other children with the same
genetic mutation.

Just how many risk-associated variants it is appropriate to screen for is an

open question. BabySeq, which was the first project of its kind, tested for
about 1,000. It found that 11% of the 159 infants it looked at harboured at
least one variant associated with a child-onset disorder.

While techno-utopians might think it a good idea to test for everything,

parents of newborns are more cautious. On May 4th, at a meeting held in
London by Genomics England, Rick Scott, the organisation’s chief medical
officer, said discussions with parents and doctors had led his team to
conclude that people want any genomic-screening programme for newborns
to look for a far narrower set of conditions than BabySeq sought. The most
appealing tests were for variants associated with a high probability of
childhood illness, and which would benefit from early treatment.
The set of variants Genomics England will seek is therefore being decided
“cautiously”, says Dr Scott. At the moment, the proposed list has several
hundred items on it. If implemented in toto, this would result in about one
baby in 200 receiving a diagnosis of a rare genetic disorder. That list would
be likely to grow as understanding improves and new treatments arrive.

This public consultation has shown that some parents want to know
everything possible about their child while others very definitely do not. One
particular finding, according to David Bick, a clinical geneticist who advises
Genomics England, is that parents want certainty. They feel it is no use
being told that a child is “fairly likely” to have a condition. Rather, they
want a pretty clear “yes” or “no”.

Many also do not want to know of adult-onset illnesses that their children
may one day suffer. This means rejecting tests which might indicate a
newborn’s risk, later in life, of contracting cancer, diabetes or Alzheimer’s
disease. That information would bring with it the burden of deciding what to
tell their child, and when. Rather, these parents feel, it should be up to the
children themselves, if they so wish, to seek that information when they are
older—which would be easy if their genomes were already on file.

There are, however, still some conundrums. For example, Pompe’s disease is
a disorder in which a carbohydrate called glycogen builds up in the body's
cells. The infant-onset form of this illness must be treated straight away. The
adult-onset form can be left until those with it are in their 30s. The current
genetic test cannot distinguish between these forms. The cost of prompt
treatment for youngsters is therefore that some parents must carry the
knowledge that their offspring will suffer eventually, though not
immediately.

Tay-Sachs disease, an illness fatal in childhood, causes another dilemma.

Some parents absolutely do not want to know about it, because that would
spoil their experience of the early years they have with their child. Others
feel knowledge is power, and so do wish to know.

One of the trickiest questions of all concerns Duchenne muscular dystrophy,

a degenerative illness that starts in childhood. Screening for this would find
it in six of every 100,000 children tested. But only a small number of these
have forms of the disease that can currently be treated, and the drugs needed
are not widely available. However, learning that one’s child has this disease
could also allow children to join trials of new drugs.

Over the coming year Genomics England, along with doctors, patients and
the wider public, will wrangle with such questions, armed with a set of
principles (which are themselves up for discussion) about what tests should
be done. These principles include the idea that screening should lead to
improved outcomes in those it is applied to; that this should not involve
many invasive follow-up tests; and that there is strong evidence the genetic
variant being tested for does indeed cause the condition in question.

And there is one other thing. This is the tricky question of how to ensure that
the data are kept safe for a lifetime. Properly informed consent for all the
various uses such data might be put to is central to the British plan. Other
places may not be so scrupulous. Moreover, things change. The temptation
to crack open genetic databases for police investigations might prove
irresistible. Insurance firms would surely be delighted to snoop as well, if
they were allowed to.

Most important, such data are a veritable Aladdin’s cave for medical
researchers—a cave to which only some parents will be prepared to add their
children’s sequences. (Informed consent means data should not be used in
this way unless parents have explicitly agreed to it.)

Combining the fruits of future scientific advances with people’s full DNA
sequences, collected at birth, could bring huge medical benefits. But it might
also be a double-edged sword. Current knowledge of how genomes work is
primitive. There is also a lot of so-called dark genetic matter in them, which
does things currently unknown. Genomes may conceal secrets of, say,
potential mental illness, or of behavioural predispositions that a genome’s
owner would rather stayed private. Current rules say that they should. But
for those who have opened the door to doctors and scientists to look at their
data, the question of whether those data will remain secure for a lifetime
may be a gamble. ■

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is-now-on-the-cards/21809246
Bacterial cunning

A bacterium that tricks the immune system into

nurturing it
The discovery may usher in new approaches to treating infections
May 14th 2022

THE IMMUNE system has many weapons with which to counter hostile
incomers. But what works against one may not be effective against another.
An interloper can take advantage of this by misdirecting the system into
thinking it is fighting an enemy that it is not. This buys time for that
interloper to become entrenched. That is sneaky. Sneakier still, though, is the
approach just discovered by Ruslan Medzhitov of Yale University. As he and
his colleagues report in Immunity, they have found a bacterium that induces
its host’s immune system to release compounds on which it can then feed.

Mammalian immune systems have two modes of attack. Type-1 is used

against bacteria and viruses; type-2 against multicellular parasites such as
worms. Some invading bacteria, however, provoke a type-2 response when
type-1 would be appropriate. Dr Medzhitov decided to take a closer look.
He and his colleagues studied the behaviour of Pseudomonas aeruginosa, a
bacterium which causes stubborn infections in people with cystic fibrosis.
They suspected it was leading the body to mount an ineffective type-2
response against it and wanted to know how it was doing this.

To explore the matter, they grew laboratory cultures of the sorts of epithelial
cells that line human airways and monitored their gene-expression profiles
when exposed to LasB, a toxic enzyme produced by the bacterium. They
found that LasB activated signalling pathways which drove the epithelial
cells to make a protein called amphiregulin. This forms the basis of a thick
mucus that excels at ensnaring parasitic worms. It also recruits immune cells
called eosinophils, which are adept at attacking multicellular parasites.

A type-2 error
That finding alone is interesting, because it helps explain why cystic-fibrosis
patients with bacterial infections often develop copious mucus in their lungs,
even though this does nothing to counter the bacteria. More intriguing,
though, was what happened when the researchers tried growing P.
aeruginosa on samples of this mucus. So long as LasB was present, the
bacteria did not merely thrive, but actually consumed the mucus. Not only is
P. aeruginosa tricking the immune system into an inappropriate response, it
is also feeding on the result. And to make things worse still, Dr Medzhitov
also discovered that all this immune manipulation makes the surrounding
tissues prone to allergy.

Allergic reactions are, essentially, exaggerated and inappropriate type-2

immune responses. The researchers therefore wondered whether the
reactions being created by LasB could cause lasting allergies to develop. To
find out, they sprayed mice infected with P. aeruginosa with egg-white
protein (often used as an experimental allergen) on the first and seventh days
of a four-week experiment. As a control, they did the same with some mice
genetically engineered to lack the ability to produce amphiregulin when
exposed to LasB.

They theorised that, in the absence of worms, the inflamed epithelial tissues
in normal mice might instead identify the egg-white protein as an intruder.
This is exactly what happened. When injected with a small amount of egg-
white protein two and three weeks after the start of the experiment, the
normal mice showed a strong allergic response to it. In contrast, the
amphiregulin-free mice showed little.

These discoveries, fascinating in and of themselves, also pave the way for
new approaches to treating infections in those with cystic fibrosis.
Moreover, if one bug has thus evolved a way to milk the immune system,
the chances are good that others have done so too. Thus alerted, researchers
will be on the lookout for similar cases. ■

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system-into-nurturing-it/21809237
Buzz off!

Bats mimic hornets when owls are nearby

It is their way of spooking predators
May 14th 2022

IN THE ANIMAL kingdom, mimics are a dime a dozen. Stick insects

pretend to be twigs. Hawk-moth caterpillars resemble venomous snakes.
Edible heliconid butterflies disguise themselves with the wing patterns of
noxious ones, and noxious ones copy each other to make it easier for
predators to learn what not to eat.

All these examples, though, are visual. Auditory mimicry is rarer. But, as he
describes in Current Biology, Danilo Russo of the University of Naples
Federico II thinks he has found a novel case of it. Some bats, he believes,
mimic angry bees, wasps and hornets in order to scare away owls that might
otherwise eat them.

Dr Russo first noticed the propensity of greater mouse-eared bats to buzz a

few years ago, when he was collecting them in mist nets to study their
ecology. The noise struck him as similar to the sound of hornets that
inhabited the area of southern Italy he was working in. That led him to
wonder whether bat buzzing was a form of mimicry which helped its
practitioners to scare off would-be predators.

To test this idea, he and Leonardo Ancillotto, a colleague at Federico II, first
recorded the buzzing that captured bats made when handled. Then, having
donned suitable protective clothing, they embarked on the more dangerous
task of recording the buzzing made, en masse, by four different species of
hymenoptera: European paper wasps; buff-tailed bumblebees; European
hornets; and domestic honeybees. Computer analysis revealed that
chiropteran and hymenopteran buzzes were, indeed, similar.

For the next part of their experiment Dr Russo and Dr Ancillotto recruited
the services of 16 captive owls—eight barn and eight tawny. Both of these
species are known to hunt bats.

The researchers put the owls, one at a time, in an enclosure equipped with
branches for them to perch on, and also two boxes with holes in them. The
boxes resembled the sorts of cavities in trees that owls would explore in the
wild for food. They placed a loudspeaker alongside one of the boxes and,
after the birds had settled in, broadcast through it five seconds of
uninterrupted bat buzzing and a similar amount of insect buzzing three times
in a row for each noise. As a control, they broadcast in like manner several
non-buzzing sounds made by bats.

During the broadcasts (which occurred in random order) and for five
minutes thereafter, they videoed the owls. The videos were then analysed, by
an independent observer, without benefit of their soundtracks. The results
were unequivocal. When they heard both the bat buzzings and the hornet
buzzings the owls moved as far from the speakers as they could manage. In
contrast, when the non-buzzing bat sounds were played, they crept closer.

Dr Russo and Dr Ancillotto believe this is the first reported case of a

mammal using acoustic mimicry to scare away a predator. They strongly
suspect, however, that it is not unique. Anecdotes suggest several birds and
also small mammals, such as dormice—particularly species that dwell in
trees and, like dormice, in rock cavities—make buzzing noises when their
hidey-holes are disturbed. This has not yet been documented formally as
acoustic mimicry. But, given the propensity for venomous buzzing insects to
dwell in those sorts of places too, and also the fear that these insects
generate in other species, human beings included, Dr Russo thinks this may
well be what is going on. He therefore predicts that when these other buzzes
are recorded and analysed the results will show that acoustic mimicry by
vertebrates of stinging insects is far more widespread than currently realised.
■

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nearby/21809235
Science and international politics

Russian and Western scientists no longer

collaborate in the Arctic
That is bad, not least for climate research
May 14th 2022 | The valley of the Pasvik, Norway

KNEE-DEEP in the rushing waters of a creek in the valley of the Pasvik

river, Paul Aspholm of the Norwegian Institute of Bioeconomy Research is
trying to prevent a lifetime’s work from being washed away by politics.
Wading into the frozen stream, he peers through a water visor and tots up
how many mussels he can spot in an area recently exposed by thawing ice.
He would normally compare these numbers with similar data gathered by
Russian counterparts splashing likewise in rivers a few kilometres farther
east. But all contact with them has stopped.

Dr Aspholm has spent 30 years studying the wildlife that inhabits the Arctic
lands where Norway and Russia march. He has needed Russian scientists’
assistance for almost everything he has done. Together, they have kept track
of species ranging from the area’s native brown bears to the invasive pink
salmon that are driving out local trout and salmon, and which die in such
numbers when they spawn that bacteria feeding on their corpses turn the
rivers toxic and so kill other animals which live in or drink those waters.
They had planned this autumn to start tracking the migration of elk along a
narrow “superhighway” through the tundra, but the war has put paid to that.

Since the invasion of Ukraine in February, ties between Russian and Western
scientists have frozen. Hundreds of long-standing partnerships like Dr
Aspholm’s have been put on indefinite hold and projects involving Russian
researchers have either suspended their participation or been put on ice
entirely.

This has thrown Arctic science into chaos. More than half the Arctic’s
coastline is Russian. Information from stations in Siberia and buoys in the
Arctic Ocean provide irreplaceable data on climate change. Fieldwork in the
Russian Arctic gives snapshots of how animals, plants and soils are
responding to this change. The Arctic Council, an intergovernmental forum
which promotes research in the area, has been on pause since early March.

In northern Norway, Dr Aspholm is making a leap of faith. Later this month

he will take his team back to the Pasvik, which forms part of Norway’s
border with Russia, for a bird-counting expedition that has happened every
year since 1995. “We will try and do it just like last time,” he says, “and
hope that the Russians show up at the same time and do it the same way on
their side.” If the Russians do not appear, he worries, there is a good chance
any data his team gather will be incomplete nonsense.

On its own, a gap in knowledge of the peregrinations of waders might not

matter much. But such lacunae add up. And for data that feed into research
on climate change, which the timings of bird migrations do, such losses are
important.

Sanctions, says Dag Rune, rector of the Arctic University, in Tromso, “will
have devastating consequences for Arctic research, and the consequences for
climate change are obvious. Projects in the Arctic”, he observes, “are major
operations that involve money, equipment, travel, and this is exactly the kind
of research that is being most affected by sanctions.”

Sander Veraverbeke, a climate scientist at the Vrije Universiteit in

Amsterdam, is another whose work is threatened. He studies fires in the
Arctic, and had been planning to resume fieldwork in northern Siberia after
two years lost because of covid-19. Since he was last in Russia, Siberia has
been ablaze. The past three years have seen record numbers of fires in the
east of that vast expanse of land: not a good time, then, for there to be gaps
in the data.

Some work can be done using satellites, or by studying comparable sites in

Canada and Alaska. But this gets you only so far. Permafrost research,
crucial for understanding where climate projections will end up, is likely to
suffer in particular. Two-thirds of Russia is covered by permafrost, and this
frozen ground locks up huge amounts of organic material. As it melts and
that organic material decays, greenhouse gases in the form of methane and
carbon dioxide are released into the atmosphere. Without good data on these
emissions, understanding about their contribution to climate change will
decline.

Something even more destructive than a further year of lost fieldwork,

however, is the damage to networks that have been knitted painstakingly
together since the cold war. Levels of formal communication between
Western and Russian scientists have declined to a point far worse, even, than
during the late 1970s and 1980s. Russian researchers have, for example,
been “disinvited” from academic conferences, such as the Arctic science
summit week held at the end of March, where scientists gather to present
research, compile and assess data, and discuss research priorities.

Climates of opinion
Isolating Russia this way creates a dilemma. Losing Russian contributions to
climate science in order to punish the place for invading Ukraine might be
seen as cutting off noses to spite faces. “We are missing out on almost two-
thirds of the Arctic now,” explains Dr Veraverbeke. “We have a lot of good
colleagues that we need to be in touch with and collaborate with to have an
understanding of what is going on in Siberia. It is really impacting our
understanding of one of the most dramatically changing areas on Earth.”

Russian science will suffer too. Russian researchers rely on the West not just
for collaboration, but also for the money that comes with it. Of Russia’s top
ten scientific collaborators, according to publication statistics from Nature
Index, a database that tracks scientific output, only China has failed to
impose post-invasion academic sanctions on Russia. There is thus a looming
funding crisis for dozens of Russian research and data stations that were
maintained by Western support.

Even if things start to normalise soon, it might be difficult to snap back to

how it was. “It will not be easy,” says Dag Olsen, at the Arctic University.
“There is absolutely no trust.” In March 200 of his Russian counterparts,
including the rector of the Northern Arctic Federal University in
Arkhangelsk, signed a letter supporting the invasion of Ukraine. In Pasvik
valley, meanwhile, the only contact Dr Aspholm has had with the Russian
scientists on the other side since the academic curtain fell was an email from
a colleague in Karelia. “It was an opinion about mussel distribution,” he
laughs. “I am not able to reply.” ■

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longer-collaborate-in-the-arctic/21809236
Culture

The infrastructure of rock: Thank you for the music

World in a dish: Made right for Iowa
Imperial nostalgia: The sun never sets
Eternal life: Who wants to live for ever?
Tricksy fiction: Her story, and his
Back Story: The editor in the Kremlin
Putting the show on the road

Welcome to the unlikely capital of rock’n’roll

It is a small town in the Amish country of Pennsylvania
May 14th 2022 | LITITZ

TO WALK AROUND Lititz on a perfect spring day is to see small-town

America at its picture-postcard best. Pensioners stroll along the main street,
looking in the windows of gift shops, stopping at the tea shops. With around
10,000 residents, the town in Pennsylvania’s Amish country is so pristine
that if you saw it in a film you might assume it was a set. You almost
certainly wouldn’t guess it was the rock’n’roll capital of the world.

Yet about a mile north of the town centre is an unremarkable industrial park
in which the world’s biggest pop and rock shows are made. The boxy
buildings on the Rock Lititz campus house around 40 companies, which
between them supply everything a touring artist requires. The firms that
founded Rock Lititz, Clair Global and Tait Towers, take care of the two
staples, amplification and set-building. Others fill in the gaps. One makes
only the motors to drive the hoists that pull PA systems into the rafters of
arenas; another makes only stage pyrotechnics. There are two huge rehearsal
spaces in which the shows can be assembled and road-tested.
Rock Lititz takes artists from the first glimmerings of an idea to the final
production rehearsal. There is nothing quite like it anywhere else in the
world. And it happened by accident.

In the 1960s two brothers from the town, Gene and Roy Clair, had a hobby
supplying PA systems for local shows. In 1966 Frankie Valli and the Four
Seasons played Franklin & Marshall College in nearby Lancaster, and the
Clairs lent a hand. According to Clair Global’s creation myth, the band
members’ wives noticed subsequent shows didn’t sound as good, and the
brothers were brought on the road with their own bespoke system. “There
you go,” says Troy Clair, son of Gene and now the firm’s CEO. “That was
the beginning of a sound company travelling with the band.”

A dozen years later an Australian called Michael Tait—who had been

designing lighting and staging for Yes, a prog-rock band—came to Lititz
following immigration difficulties in Britain, and set up Tait Towers. The
town’s reputation began to spread. But it was not until 2014, when the two
companies established Rock Lititz, that it turned from a small hub into the
fulcrum of rock.

Put another dime in the jukebox, baby

It is an extraordinary place: part manufacturing centre (Clair Global, for
example, still makes its own PA systems, and sends teams on tour with
artists), part R&D paradise and part logistics operation (a visit to Rock Lititz
reveals just how many moving parts are required to put a show on the road).
The attention to detail is staggering. Clair Global monitors all its tours so
closely that on its screens you could see that in Tulsa, Oklahoma, the yellow
ink in the singer Dua Lipa’s printer was down to 17%.

Two decades ago Rock Lititz might not have thrived in the same way. When
artists could make money from recorded music, there was less need to sell
tickets to live events at premium prices. After the internet caused a crash in
revenue from recordings, that changed. Then came the rise of social media,
which had two effects, according to Adam Davis, boss of Tait Towers. It
showed there was a global demand for these big shows—and provided the
ideal tool to market them.
“We’re making these moments that people will remember for ever,” Mr
Davis says. He notes that promotion of these events happens largely through
pictures on social media, so a dazzling production is “almost a marketing
expense”, which allows for higher ticket prices. Tait Towers’ shows are
designed to look as spectacular to the Instagrammer in the back row as to the
punters at the front. Simple human vanity takes care of the rest. “I’ve spent
$1,000 to come to a sold-out event. Next thing I do is brag about the fact I
was there, right? And so I’m going to send you this incredible picture of me
being amazing.” Even if the music disappoints, Mr Davis says, the photos
will look wonderful.

Amish country turned out to be the ideal location for businesses that are
dependent on bespoke parts and custom manufacturing, in which the local
Amish and Mennonite communities specialise. When other commercial
outfits have struggled to make the items that big shows needed, say both Mr
Clair and Mr Davis, adaptable Amish craftsmen have done so with ease. One
of Tait Towers’ regular suppliers has been a Mennonite-run company that
makes cattle grids: the precision in cutting metal is a transferable skill.

The Pennsylvania countryside has another unanticipated advantage: because

it is more conducive to getting things done than distracting big cities, bands
themselves have descended on it, too. When The Economist visited, a
stadium act was in secret session in a giant rehearsal studio (originally built
to test shows before the artists got involved). Musicians and crews stay at
the on-site hotel. Lititz may be the only small town where you might see
Justin Bieber or Ariana Grande popping out to buy a toothbrush—and
bumping into an Amish craftsman on the way.

Covid-19 brought the live-music industry to a halt. Now business is back,

and Rock Lititz is busier than ever. But rising demand—up 30% on pre-
pandemic levels, estimate Mr Clair and Mr Davis—and varying coronavirus
protocols have brought their own difficulties. Getting missing parts from one
side of the world to the other overnight is harder than it was. There are
shortages of all the things tours need, from trucks to screws. “Things as
simple as a stock three-quarter-inch nut: the world is running out,” Mr Davis
says.
But Rock Lititz rolls on. By the loading docks of Clair Global’s factory, the
flight cases were piling up. When everything had been tested, they were
shipped out to the annual Coachella festival in California. Rock just doesn’t
happen without Lititz. ■
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rocknroll
World in a dish

Regional foods can contain multitudes of

memories
The Maid-Rite sandwich, popular in Iowa, is a prime example
May 14th 2022 | NEWTON

THE SANDWICH goes by several names, including “canteen”, “tavern”

and, most descriptively, “loose meat”. First sold in Muscatine, Iowa, nearly a
century ago, it is now popular across the state. Like a hamburger, a Maid-
Rite—as the dish is known at Dan’s Sandwich Shop in Newton, Iowa—is
made from ground beef. But instead of a patty flipped off a grill, diners get a
scoop of loose, pebbly, well-done meat dug out of a cooking trough and
dumped onto a bun, typically topped with mustard, ketchup and pickles.

Mike Brown, the restaurant’s proprietor since last year, proudly notes that he
cuts the beef fresh every day, adding nothing, not even salt. (Before him Dan
Holtcamp ran the place for half a century with his wife, Pam, and
bequeathed it his name.) To non-Iowans, the sandwich can seem a
perplexingly austere creation. It offers neither the compact, car-friendly
convenience of a burger—the meat in a Maid-Rite, being loose, tends to spill
out—nor the saucy comfort of a Sloppy Joe. But it says much about the
charm and persistence of regional cuisine.

If a Maid-Rite were merely a disintegrating, suboptimal burger, Iowans

would have long stopped eating them. They do not lack for choice; like most
small American towns, Newton abounds in familiar burger-slinging
franchises. Yet Mr Brown estimates that on most days, he cuts and cooks up
to 150 pounds (68kg) of beef, enough for a few hundred sandwiches: not bad
for a town of 15,000 people.

Asked why the Maid-Rite has not found a wider market, Mr Brown says
“the right person” hasn’t come along to champion it. That may not be the
whole story; the sandwich is probably too bland and beefy for an
increasingly multicultural America. But as a general comment on regional
foods that are handed down through generations of locals, his rationale
stands.

They are as much the product of savvy marketing, an affable restaurateur or

chance—“the right person” in the right place and time—as of recipes or
terroir. Meat, bread and cheese are not unique to Philadelphia, but the
cheesesteak is. Someone experimented, people liked it, and a regional food
was born. Other, less serendipitous dishes perish with their creators, not
always because they are inferior.

If they endure, regional foods become artefacts of habit and memory. When
out-of-towners sit down at Dan’s lunch counter and eat a Maid-Rite, as
Barack Obama once did (pictured), they indulge in something new and
exotic. They may find it delicious or unremarkable, but unless they return to
rural Iowa, they may not eat another.

But a local who eats a Maid-Rite is not just eating beef on bread. He is
ordering what he ate with his father after Little League games, what his
mother brought home from work when she was too tired to cook, or what he
longed for in the army. She is eating what she ate with her friends after
school or on prom night. Regional food does not have to be superior or even
comprehensible to outsiders to help devotees, wherever they are, deepen
their connections to the past, and to themselves. ■
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of-memories
Imperial nostalgia

Empires and emperors are things of the past—in

theory
In his new book, Dominic Lieven says understanding them remains
important
May 14th 2022

In the Shadow of the Gods. By Dominic Lieven. Viking; 528 pages;

$40.Allen Lane; £35.

FROM THE decorative sovereigns of Europe to the more potent ones of the
Gulf, monarchs still abound in the 21st century. But none of them is a real
emperor. That is to say, there is no modern ruler who wields personal
authority over a huge, diverse range of polities, thanks to a distinctive,
mysterious swirl of dynastic and spiritual credentials.

That is the observation, delivered with a near-audible sigh of regret, of a

historian who has devoted a professional lifetime to one empire in particular,
that of Russia under the Romanovs, and to imperial regimes in general.
Dominic Lieven brings to his latest work a striking, informed empathy for
the dilemmas of mighty sovereigns, from Britain’s Queen-Empress Victoria
to galloping lords of the steppes.

As his narrative whirls through the realms of Rome, India, the various
Islamic caliphates (including the Ottoman one), the tsarist autocracy and
colonial systems commanded from western Europe, he demonstrates an
unmistakable soft spot not only for most of the empires of the past, but for
their masters and mistresses too. Few readers will share that sentiment, but
most will enjoy the journey.

Mr Lieven offers especially vivid portraits of some great empresses, from

China’s Wu Zetian (who ruled from 690 to 705AD) to Russia’s Catherine
the Great (1762-96), both of whom made shrewd use of their status as
outsiders in male-dominated worlds. With verve, he describes the good-
cop/bad-cop games played by imperial strategists: that mixture of light-
touch suzerainty through local proxies, and occasional ruthlessness, which
often let a handful of individuals hold sway over vast and scattered
populations.

He presents empires as systems in which disparate cultures and technologies

could co-exist creatively. He sees ethno-nationalism—the emergence of
small and sharply defined states that slip the imperial bonds—as a
destructive force. He is disarmingly frank about the personal history that
colours this approach. His academic home is in Britain but he descends from
Baltic-German nobles who served Russia; he grew up among Anglo-Irish
folk in the twilight of British domination, and spends many months with his
in-laws in Japan.

The title promises a focus on imperial claims to divinely ordained

legitimacy, or to the plain divinity asserted by the rulers of ancient Rome
and nearly modern Japan. And Mr Lieven does say a lot about the unifying
and legitimising role played by religion in various empires, from Buddhism
and Confucianism in China to Russian Orthodoxy. He writes well about the
stark, compelling simplicity of Islam, which galvanised a previously
unremarkable group of middle Arabians to overwhelm more sophisticated
places.
But religion is only one of his themes. He is no less fascinated by the
disproportionate role in history played by the fighting horsemen who, as he
recounts, held sway over the north Eurasian grasslands for about 2,500 years
—until well into the second Christian millennium. As Mr Lieven notes, the
dynastic realms that once extended from modern China can be divided into
those dominated by the Han Chinese (the Song and Ming), and the much
larger territories governed by the Mongol, Qing and Tang dynasties, whose
origins can be traced to “the nomadic warrior world of the Eurasian steppe”.

Both the Ottomans and (less obviously) the Russians, especially those of
Moscow, could claim similar roots. Russians are taught at school that in
1480 their forebears threw off the yoke of their so-called Tatar-Mongol
masters. This falsely conflates two peoples; it also understates the deep
symbiotic link between the Slavic rulers of the Muscovy region and their
overlords.

Having said that real empires are a thing of the past, Mr Lieven rather shyly
makes the case that understanding them is still important. As he puts it,
“most large countries in Asia remain more like empires than the European
model of the ethno-national polity.” If the continent “catches the disease of
European ethno-nationalism the planet might well not survive the resulting
chaos.”

Modern India, he writes provocatively, is the product of the Mughal and

British empires, which used divide-and-rule tactics, along with pomp and
ceremony, to knit the subcontinent together. Having lost its anti-colonial
legitimacy, Mr Lieven says, the Indian state is now succumbing to the
plague of ethno-nationalism, and seems to be locked in an ever-more
dangerous stand-off with Pakistan.

That analysis will be controversial in India. In any case, the argument for
studying empires can be made more simply. Recall that since 2017
American strategy has avowedly been based on great-power competition,
which means vying with Russia and China. Officially, neither is now an
empire in the sense of being ruled by a sovereign. Vladimir Putin and Xi
Jinping are depicted as emperors in cartoons, but both emerged from an
ideology that in theory abhorred inherited privilege.
What matters most, though, is not what they are, but what they think they
are. Regardless of their differences from the old imperial despots, both men
see themselves as heirs, in important ways, to the monarchic realms of
yesteryear. Mr Putin has drawn on tsarist history to make his case for
subordinating Ukraine. He has encouraged his bureaucrats to study the work
of Ivan Ilyin, who saw royal imperialism, not liberal democracy, as the way
to hold Russia and its dominions together. For his part, Mr Xi has led an
energetic effort to rehabilitate the Qing dynasty, which ruled from 1644 to
1912, and has persecuted historians who take a different line.

In a sense, Russia and China have followed similar paths: first a communist
revolution, which led to a rejection of almost all the religious and
ideological trappings of the regimes that went before; eventually, a gradual
reclaiming of the imperial heritage. The era of crowned despots who
personify the divine will may be over, but the age of self-conscious imperial
calculus is not. ■
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past-in-theory
Eternal life

Who wants to live for ever? Quite a lot of people

In “The Price of Immortality”, Peter Ward shows how they are going
about it
May 14th 2022

The Price of Immortality. By Peter Ward. Melville House; 288 pages;

$28.99 and £20

ETERNAL LIFE, in heaven or through reincarnation on Earth, is promised

by many faiths. For a simple reason: it eases the fear of death. The idea of
living for ever has other devotees, too. It is now pursued by a motley crew of
fringe scientists, cultish groups and tech billionaires, united by a conviction
that a way to make humans immortal will eventually be found. Meanwhile
they pin their hopes on experimental, often fraudulent therapies that promise
rejuvenation.

In “The Price of Immortality”, Peter Ward, a journalist who has written for
The Economist, delves into the origins of these beliefs and the science of
purported cures for ageing. He spends time with groups such as the Church
of Perpetual Life in Florida, where congregants discuss food supplements
and cryonics (the freezing of bodies at death in the hope that they can be
revived later).

America’s “immortalists”, he discovers, are inspired by the dreams of

futurists such as the science-fiction writer Isaac Asimov. Another influence
is Nikolai Fedorov, a 19th-century Russian philosopher who thought all
living beings could, one day, be resurrected using traces of them floating
around in the cosmos—a vision that brings to mind modern DNA cloning.

“Longevity escape velocity” is one of the immortalists’ central tenets. This

notion holds that if science manages to extend the human lifespan by 20 or
30 years—to around 110 or 120—it will then rise exponentially as new
techniques are developed in time to keep the wizened going longer and
longer. The hypothesis was floated in 2004 by Aubrey de Grey, a British
scientist prominent in the field of age-reversal, whose work caught the
attention of Silicon Valley moguls.

This is not all pure fantasy. Gene and stem-cell therapies and other types of
regenerative medicine can tackle some of the ways in which ageing causes
natural deterioration—though these methods are yet to be turned into proven
and safe treatments. That may not take long, though. Tech magnates such as
Sergey Brin and Larry Page, the co-founders of Google, and Jeff Bezos of
Amazon have been pouring money into longevity research. Some of the
startups conducting it have billions of dollars at their disposal and are
poaching leading scientists. As an investor tells Mr Ward, the goal is
extending healthy life spans, not freezing decrepit bodies that might “wake
up in 200 years from now and commit suicide if they can”.

Some immortalists back an even more radical aim: doing away with the
body and resurrecting a dead person’s mind in a robot or through some form
of digital alternative reality. The theory is that this could be accomplished
using scans of brain tissue, or by applying artificial intelligence to
reconstruct a personality from “mindfiles”—vast amounts of digital data
accrued during the subject’s life. Tech titans are bankrolling this moonshot,
too. Digital immortalists, like adherents of cryonics, accept that the chances
of success are slim; but they are willing to put in the work and money
anyway.
Mr Ward combines thorough reporting and lucid scientific explanations in a
fluent and balanced account of a diverse movement. From the tragicomedies
of cryonics’ early years, to tales of scam artists and reckless zealots, he is a
vivid storyteller. And he ponders a world in which people do indeed live a
lot longer. Even if old age is made healthier, drastic new kinds of inequality
—and political strife—could result. If scientists succeed in making death
optional, concludes Mr Ward, resolving such issues will be a prerequisite for
a “world worthy of a longer stay”. ■
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people/21809231
Tricksy fiction

“Trust” explores the power of money, and of

storytelling
Hernan Diaz’s new book is a matryoshka doll of a novel
May 14th 2022

Trust. By Hernan Diaz. Riverhead Books; 416 pages; $28. Picador; £16.99

WHO WAS Mildred Bevel? According to Andrew Bevel, a “legendary”

Wall Street tycoon, his late wife was gentle, frail and kind, with a taste for
pretty music and the “innocent wisdom” of a child. But in a thinly veiled
novel about her life, published soon after her death in the mid-1930s, she
shimmers as a brilliant loner and astute philanthropist who dies of madness
in a Swiss sanatorium.

Who gets to tell Mildred’s story now that she is not around to tell it for
herself? How accurate are any of the stories people tell about themselves and
others anyway? These questions animate “Trust”, Hernan Diaz’s clever
puzzle of a new novel.
As he demonstrated in 2017 with “In the Distance”, a debut which
chronicled the rough and tumble of 19th-century America through the eyes
of a young Swede with no English, Mr Diaz is not afraid to disorientate
readers. In “Trust” he creates a kind of narrative matryoshka doll, nesting
what may be the truth about Mildred within obfuscating layers of story.

He begins with a novel within the novel about a childless couple who live
contentedly amid obscene wealth—“the obvious Dutch oil paintings, the
constellations of French chandeliers, the Chinese vases mushrooming in
every corner”—until the wife’s grip on reality starts to slip, “the mind
becoming the flesh for its own teeth”. This detached, third-person yarn,
reminiscent of the work of Henry James, is followed by a somewhat
bombastic autobiography-in-progress by Bevel. He touts the patriotism of
his enormous success, maintaining that “self-interest, if properly directed,
need not be divorced from the common good”. Then there is a memoir from
a writer called Ida Partenza who helped Bevel sculpt his legacy in print.
Finally come some unpublished pages, seemingly by Mildred herself.

The title is a nod to Bevel’s wealth. But it also evokes the fragile feeling that
is frequently missing from relationships, including between storytellers and
audiences. As Bevel gamely admits, self- interest nudges people to “bend
and align reality” to accord with needs or desires.

“Trust” dramatises the way such truth-bending often accompanies tales of

wealth. “What I’ve made, I’ve made on my own,” says Bevel, who inherited
a fortune. The novel also highlights the way history’s dominant storytellers
—mostly white and male—have tended to sideline the narratives of others,
such as women. As Partenza writes of her affinity with Mildred: “We both
were young women trying to grow in narrow crevices, hoping to break and
expand them in the process.”

Mr Diaz shifts elegantly between styles, but saves the most engaging voices
for the novel’s second half. Partenza’s memories of being cowed by Bevel’s
money and authority, and her nostalgia for her “overbearing and
dysfunctional” father, inject depth, momentum and clarity. The only shame
is Mr Diaz’s pat ending, which gives too much of the game away. ■
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of-storytelling
Back Story

“Navalny”, “Tango with Putin” and the editor in

the Kremlin
Tyranny is the enemy of storytelling, as two profiles in courage
demonstrate
May 14th 2022

“LET’S MAKE a thriller,” Alexei Navalny tells Daniel Roher, and the
Canadian film-maker tries to oblige. “Navalny” has many of the genre’s key
elements—a hero, villains, skulduggery—but runs into an obstacle. “Tango
with Putin”, a documentary by Vera Krichevskaya about Dozhd (also known
as TV Rain), a gutsy Russian news channel, faces the same problem. It lies
not in the directors’ craft, still less in the merits of their subjects, but
something deeper: the throttling of narrative in a dictatorship.

His eyes are a reproach. Piercingly blue, they peer from the screen as Mr
Navalny exhorts his compatriots not to give up. Mr Roher filmed the
Russian opposition leader as he recovered from a poisoning in Siberia in
2020 (old footage shows Yulia, his indomitable wife, struggling to get into
his hospital room, lest his assailants finish the job). Recuperating in
Germany, the patient links up with Christo Grozev, whom he describes as a
“very kind Bulgarian nerd”; the investigator uses data from the dark web to
track down the failed assassins.

Mr Navalny is a social-media maestro—barred from campaigning in other

ways, he has had to be—and some viewers may already know of the phone
calls he made to the goons who allegedly tried to kill him. The sequence is
still gripping. One falls for his impersonation of a Kremlin official and spills
the details of the botched hit, including the smearing of Novichok in Mr
Navalny’s underwear. “He’s a dead man,” the team pityingly conclude of the
unwitting informant.

If “Navalny” elucidates the workings, and incompetence, of Vladimir

Putin’s death squad, the source of its subject’s amazing courage remains
something of a mystery. By contrast, “Tango with Putin” (also called “F@ck
This Job”) shows how bravery can be nurtured by circumstance.

When Natalia Sindeeva launched Dozhd in 2010, she envisaged an upbeat

lifestyle channel, not a crusading news outlet. By her own account, she
previously had more interest in partying than in politics: the news imbued
her with principles, rather than the other way round, beginning with a
bombing at a Moscow airport in 2011. A four-way split screen—a repeated
device in Ms Krichevskaya’s film—contrasts Dozhd’s coverage of the
aftermath with the tranquillising pap being aired by state-controlled
channels.

Another motif is Dozhd’s journalists calling in from the back of police vans.
As the repression worsens, reporting becomes riskier, from the rigged
Russian elections and protests of 2011-12, to the crisis in Ukraine and
eruption of war in the Donbas region in 2013-14. The channel becomes a
beacon of integrity less by design than by observing elementary journalistic
principles. To be good, in this telling, is simply to obey your conscience.
(Mr Navalny turns up in this film, too, giving advice on lighting for an
interview.)

These documentaries chart different genealogies of heroism, seemingly

innate in Mr Navalny’s case, accidental in Ms Sindeeva’s. Yet their outlines
overlap. Both dramas are powered by exceptional, against-the-odds defiance
of a crushing system. Ultimately, in both, that system bends and flattens the
story arc.

Totalitarianism, noted George Orwell, forces storytellers to falsify facts and

feelings. In a tyranny, he concluded, literature is doomed. In Mr Putin’s
Russia, censorship is tightening anew. The squeeze is not just on the stories
Russians can watch and read. It extends to the stories they can live—and
thus, the tyrant hopes, even imagine.

In these films, the authoritarian ratchet is inexorable. Dozhd endures

harrumphs from the Kremlin, then cyber-attacks, boycotts by cable
providers, eviction from its studio, harassment and police raids. For his part,
Mr Navalny is assaulted and imprisoned before being poisoned. “I’m not
scared of anything,” he says when, in a classic act of Russian valour, he flies
back from Germany to Moscow. “And I ask you not to be scared either.”
This is the climax of “Navalny”.

Russia’s rulers have other ideas. Like most despots, they are philistines as
well as brutes. But they understand the rudiments of narrative. They know a
drama needs a denouement—in which the hero vanquishes the villain, or
goes down in a blaze of glory—and see to it that there won’t be one. In the
film, Mr Roher speculates that Mr Navalny may now be murdered; instead
he is detained on arrival at the airport, then dispatched to a penal colony.
Dozhd, meanwhile, is driven off the air. Their stories flatline in the
bureaucratic vice of the police state. It is hard to make a thriller when
someone else is writing the ending.

Read more from Back Story, our column on culture:

Philip Guston’s paintings are controversial. But here they are (Apr 30th)
“Atlanta” matches method with message to sensational effect (Apr 16th)
Ukraine’s most famous rock star is singing for victory (Apr 2nd)
This article was downloaded by calibre from https://www.economist.com/culture/navalny-tango-with-putin-and-the-editor-in-the-
kremlin/21809227
Economic & financial indicators

Indicators: Economic data, commodities and markets

Indicators

Economic data, commodities and markets

May 14th 2022
This article was downloaded by calibre from https://www.economist.com/economic-and-financial-indicators/2022/05/14/economic-
data-commodities-and-markets
Graphic detail

War and social media: Under the radar

Under the radar

Russia is swaying Twitter users outside the West to

its side
An army of suspicious accounts began churning out pro-Russian content
in March
May 14th 2022

UKRAINE AND Russia are fighting mainly in eastern Ukraine, but they are
courting allies around the globe. Ukraine needs other countries to abide by
Western sanctions. That means winning hearts and minds in places like India
and Turkey.

To Western ears, Russia’s portrayal of Ukraine’s leaders as Nazis sounds

absurd. But just as Ukraine’s military strength surprised the Kremlin, the
effectiveness of Russian propaganda might also be underestimated. An
analysis of recent Twitter posts suggests that Russia’s online information
operations may be focused outside the West—and already bearing fruit.

To measure the impact of Russia’s online influencers, we studied 7,756

Twitter accounts identified by CASM Technology, a British analytics firm.
All used the #IStandWithPutin or #IStandWithRussia hashtags at least five
times in the war’s first 12 days.

CASM has divided these accounts into clusters (see diagram above). Each
dot represents one user. Accounts that sent similar messages appear close
together, whereas those that behaved differently are far apart. For example,
accounts in South Africa often emphasised anti-colonial solidarity, whereas
many in South Asia focused on Russia’s diplomatic support for India.

Such groupings leave a key question unanswered. How many of these users
genuinely back Russia, and how many are bots or paid trolls? To find out,
we collected 3.7m tweets by these users and their followers, and produced
versions in English using Google Translate. We then read 2,211 of these
posts; classified them as supporting Russia, Ukraine or neither; and used
these data to train an algorithm, which applied these labels to all remaining
tweets.

Next, we tried to work out which users could be acting on behalf of the
Kremlin. Nearly half of the accounts were no longer accessible, because
they were deleted, made private or banned by Twitter. Of the remainder, an
estimated 7% churned out pro-Russian tweets in a suspicious manner. Some
were created early in the war; others rarely mentioned Russia before early
March. Many acted in concert by posting identical messages. Unlike
automated bots, most of these accounts varied the wording and emphasis of
their content. This supports many analysts’ hunch that real people are being
paid for such posts, either by Russia or by its proxies.
The suspicious accounts succeeded in injecting these views into online
conversation. On average, their pro-Russian messages were retweeted 61
times. Moreover, they seem to be winning converts. After suspicious
accounts posted pro-Russian content, the share of their followers’ tweets
favouring Russia also tended to rise. In contrast, the suspicious accounts’
activity did not change in response to posts by their followers or by users
they followed.

Because this activity is concentrated in Asian and African online networks,

it is largely invisible to Western Twitterati. But if countries like South Africa
help Russia weather the sanctions, #IStandWithPutin may be partly
responsible. ■

Sources: CASM Technology; Twitter; Google Translate; The Economist

This article was downloaded by calibre from https://www.economist.com/graphic-detail/2022/05/14/russia-is-swaying-twitter-users-
outside-the-west-to-its-side
Obituary

Ron Galella: Starstruck

Obituary: Ron Galella

Ron Galella, the original paparazzo, died on April

30th, aged 91
The snapper to the stars was best known for his run-ins with Jackie
Kennedy
May 14th 2022

SOME PHOTOGRAPHERS use studios, and assistants to help with the

lighting. Ron Galella had a method, a method he believed in so deeply it
amounted to a creed: learn to crash events, find out where the kitchen is
(useful for sneaking in), never check your coat, shoot fast and always hold
the camera in front of your chest. If you hold it up and look through the lens,
you don’t see the eyes. What you need is eye contact. Eye-to-eye, person to
person, he liked to say, that’s how you get the real McCoy.

He wasn’t always so confident. He grew up in the North Bronx, with an

accent as thick as provolone. From his father, an immigrant from Italy who
made coffins and piano cases and never really learned to speak English, he
learned to be tight with money. His American-born mother longed for the
glamour she saw in the movies, and named her son after a film star. Both
chippy in their own way, his parents fought all the time. His main comfort
was a pet rabbit, until his father cooked it in a stew.

It was the air force that give him his first break, during the Korean war,
when he signed up for photography lessons while learning about camera
repair. Soon he was shooting visiting celebrities for the base newspaper.
After he was discharged in 1955 the GI Bill helped him through art school in
California. He began photographing actors at premieres and parties in his
spare time to make extra money.

He was lucky with timing. In 1960 Federico Fellini’s “La Dolce Vita”
introduced the world to a photographer named Paparazzo. The filming of
“Cleopatra” in Rome shortly afterwards fuelled demand for celebrity snaps
as its two stars, Elizabeth Taylor and Richard Burton, embarked on an
adulterous affair that scandalised the Vatican and made headlines across the
Atlantic. The young camera repairer, fresh out of the air force, quickly
learned that his part-time gig could become a lifelong career.

He became adept at catching stars with their guard down: Greta Garbo
coming out of her apartment, face hidden in a handkerchief; John Lennon
and Mick Jagger sharing a smoke; Mick Jagger again, Bob Dylan and Bruce
Springsteen sharing a mic; Gina Lollobrigida coming profile-to-profile with
Michelangelo’s David. He bribed a watchman to lock him in a ratty
Thameside warehouse one weekend so he could spy on Taylor and Burton
squabbling over breakfast aboard their yacht, Kalizma, after they put up
gauze curtains around the deck to ensure their privacy. What made him
famous wasn’t his photographs, but the subjects he photographed. Andy
Warhol, who saw him in the same way he saw himself, as a lonely outsider
craving to be let in, called it “being in the right place at the wrong time”.

Some didn’t mind being caught at the wrong time or having their privacy
invaded. It gave them exposure and meant they were on the up. But many
did. Elaine, a famed New York restaurateur, tried to hit him with a dustbin
lid. Sean Penn spat at him. Marlon Brando punched him in the jaw, knocking
five of his teeth out.

There was no one he pursued like he pursued Jackie Kennedy. She was
mysterious, elusive—and gloriously photogenic. He hid behind the coat-
check when she went to a restaurant and followed her to her seat when she
was at the theatre, he boasted in “Smash His Camera”, a documentary.
Almost every day he lurked outside her apartment building at 1040 Fifth
Avenue, and once even followed her to a Greek island where, dressed up as
a sailor, he took pictures of her on holiday. He dated her maid to pump her
for information, until she got the sack. Asked about the Jackie fixation, he
said he was unattached at the time and saw her as his golden girl, his girl
friend (in a way). When he did eventually marry, it was to a woman whose
voice reminded him of Jackie’s.

In all the years he shot Kennedy, he always said his best streak came in early
October 1971. On October 4th he snapped her watching her daughter
playing tennis in Central Park. The next day she went shopping at Bonwit
Teller. On October 6th he caught her at the corner of 85th Street and Fifth
Avenue and later at the New York Public Library. On October 7th he’d just
finished some portfolio shots for a model when he saw her coming out of the
side entrance of her building. It was late in the afternoon, with a blue sky
and a light breeze. Perfect soft Manhattan light, he called it. As she turned
onto Madison Avenue, he hopped in a cab. At the honk of a horn she
suddenly looked up, and he got what he would always call his Mona Lisa
shot, “Windswept Jackie”, with her hair blowing across her face and just the
beginnings of a smile.

The smiling didn’t last, of course. As soon as she recognised him, she hid
behind her sunglasses. Two months later she sued him. Life magazine ran a
cover story with the headline, “Jackie and the Jackie-Watcher”. He was
ruining her life, she told the court. She had no peace, no peace of mind, she
said. She was always under surveillance, imprisoned in her own house. The
judge agreed, and ordered that he respect a no-go zone around the former
First Lady and her children. When he broke the embargo repeatedly, the
court threatened him with jail.

His pictures, and the way he got them, spawned an industry that came to see
celebrities as prey to be hounded. His photographs are now in the Museum
of Modern Art. “Windswept Jackie” is his most popular, and most
expensive, print. The trial made him famous—and rich enough to build a
mansion in New Jersey with a photo gallery covering one entire floor, a
basement archive for the 3m pictures taken over half a century and a
cemetery in the garden for the pet rabbits he still loved from childhood.

If before the trial he was regarded as a gadfly, afterwards many saw him as a
pest. When it ended he received an anonymous letter: “You are a rat...I pray
that you get paid back for the misery you are causing a woman who has
gone through hell, a hell caused by another maniac like you. You are stupid,
monstrous and slimy. You should be deported to an island to rot.” When
Kennedy died, he headed one last time to 1040 Fifth Avenue. He took no
pictures that day; just paid his respects. ■
This article was downloaded by calibre from https://www.economist.com/obituary/2022/05/14/ron-galella-the-original-paparazzo-
died-on-april-30th-aged-91
 Table of Contents
TheEconomist.2022.05.14 [Fri, 13 May 2022]
The world this week
Politics
Business
KAL’s cartoon
Leaders
India: India’s next decade
Financial markets: Grisly reality
Surveillance at work: The professional panopticon
Sri Lanka’s crisis: Gota go
Genetic screening: Private letters, public promise
Letters
Letters to the editor: On central banks and inflation, China,
Ronald Fisher, ketamine, granny flats, email sign-offs
By Invitation
Energy and climate: Yemi Osinbajo on the hypocrisy of rich
countries’ climate policies
Russia, Ukraine and China: Senior Colonel Zhou Bo says the
war in Ukraine will accelerate the geopolitical shift from
West to East
Russia and Ukraine: Moritz Schularick argues that Germany
should immediately cut off Russian gas
Briefing
India’s economy: A new formula
Asia
India: Saffron nation
Crisis in Sri Lanka: The morning after
Australian politics: For whom the teals poll
North Korea and the virus: State of emergency
Banyan: One-way street
Japan’s far-flung islands: Base case
China
Hong Kong’s civil service: Stay neutral, love the party
Covid-19 in Shanghai: The never-ending lockdown
 The Grand Canal: Taming the waters
Covid-19 and the homeless: Victims, not vectors
Chaguan: A self-repressing society
United States
The mid-terms: Voting wars
Forced assimilation: Stolen children
Conservation: The concrete jungle
Educating the undocumented: Meanness to migrants
Wrongful convictions: Delayed justice
California cannabis: High maintenance
Lexington: Donald Trump’s brutal turn
Middle East & Africa
Zimbabwe: Savings and groan
Financial innovation in Zimbabwe: Heiferinflation
Zambia: Copper-bottomed promises
Palestine and Israel: A death in Jenin
Algeria and Morocco: The danger of lighting a gas fire
The Americas
Brazil: The cross on the ballot
Crime: Crack on
Bello: Staying alive
Europe
Ukraine: No ports in a storm
Russia: Putin’s parade
Germany: A portent or a blip?
The French left: NUPES and dupes
Danish TV: Back to “Borgen”
Charlemagne: Fifth time lucky
Britain
An interview with Boris Johnson: A hawk on the wing
Partygate 2: Sir Beer Starmer
Northern Ireland: Protocol harm
The cost of doing business: Confidence stick
Slimmed pickers: Ukrainian seasonal workers pick much of
Britain’s fruit
Driving: Codes of conduct
Premier League owners: Fall of the Roman empire
 Bagehot: A progressive prisoner’s dilemma
International
International relations: Connective action
Business
The tech crunch: Pop!
The tech crunch (2): Can Coupang deliver?
The zero-covid industrial complex: Acing the test
The future of work: Big Brotherly boss
Bartleby: The woolliest words in business
Schumpeter: Where the wild things were
Finance & economics
Global housing: Braced for a storm
Global trade: A slow train from China
Russia’s economy: Bearing up
Consumer prices: Public enemy
Buttonwood: The Italian sob
Cashlessness: Pix perfect
Free exchange: Engine repair
Science & technology
Genetic disease: Building the future of screening
Immunology: Fed by the hand that should bite it
Animal behaviour: Buzz off!
Science and international politics: Frozen
Culture
The infrastructure of rock: Thank you for the music
World in a dish: Made right for Iowa
Imperial nostalgia: The sun never sets
Eternal life: Who wants to live for ever?
Tricksy fiction: Her story, and his
Back Story: The editor in the Kremlin
Economic & financial indicators
Indicators: Economic data, commodities and markets
Graphic detail
War and social media: Under the radar
Obituary
Ron Galella: Starstruck