Turkey torn apart

Theresa Maybe, Britain’s indecisive PM

Nestlé goes on a health kick

Meet China’s Shakespeare

JANUARY 7TH– 13TH 2017

Now we’re
talking

Voice computing
comes of age
 The Economist January 7th 2017 5
Contents
7 The world this week Asia
28 Ageing in Japan
Leaders Cities vie for the young
9 Voice technology 29 Japan’s elderly workers
Now we’re talking Keep on toiling
10 Japan’s economy 29 Alcohol in Indonesia
The second divine wind Calls for a ban
10 Trumponomics 30 New Zealand’s national
Men of steel, houses of parks
cards Lord of the ker-chings
31 Banyan Theresa Maybe It is still
11 Fixing failed states
Selling Malaysians down unclear what Britain’s new
First peace, then law
the river prime minister stands
12 British politics for—perhaps even to her:
On the cover Theresa Maybe leader, page 12. The making
Voice technology is making China and meaning of a prime
computers less daunting and Letters 32 Selection year minister, pages 18-20. The
more accessible: leader, page A reshuffle looms sudden departure of Britain’s
13 On China, management,
9. Computers have got much 33 Literature man in Brussels lays bare the
elections, nuclear power,
better at translation, voice Meet China’s Shakespeare lack of Brexit plans, page 35.
Japan, the elderly,
recognition and speech The “WTO option” for Britain is
economists
synthesis. But they still far from straightforward: Free
don’t understand what Britain exchange, page 58. The first
language means: Technology Briefing 34 Crime crop of Brexit books includes
Quarterly, after page 36 18 Theresa May How low can it go? entries rich in detail and
Steering the course 35 Brexit preparations analysis, page 63
Rogers and out
The Economist online 35 Foreign aid
United States
Daily analysis and opinion to A stingy new year
supplement the print edition, plus
21 Inequality
Fat tails 36 Bagehot
audio and video, and a daily chart Pierogi and integration
Economist.com 22 Congressional ethics
E-mail: newsletters and Old bog, new tricks
mobile edition 23 Recruiting police officers Technology Quarterly:
Economist.com/email The force is weak Language
Print edition: available online by 23 Gun laws Finding a voice
7pm London time each Thursday Still standing After page 36
Economist.com/print 24 Charleston
Audio edition: available online Cobblestones and bones Middle East and Africa Turkey torn apart
to download each Friday 24 Markets for tickets 37 South Africa’s schools The murderous Islamic State
Economist.com/audioedition Battling bots Bottom of the class attack on a nightclub widens
the secular-religious divide,
25 Lexington 38 Astronomers v sheep page 42
Learning to love Trumpism farmers in South Africa
Stars and baas
The Americas 38 Zimbabwe’s sex trade
Volume 422 Number 9022
Less stigma, more
26 Brazil’s prisons competition
Horror in the jungle
Published since September 1843 39 Iraq’s long war
to take part in "a severe contest between 27 Bolivia A goody and Abadi
intelligence, which presses forward, and
an unworthy, timid ignorance obstructing
Run, Evo, run
our progress."
40 America and Israel
Unsettled by Trump
Editorial offices in London and also:
Atlanta, Beijing, Berlin, Brussels, Cairo, Chicago, 41 Israel’s divisions
Lima, Mexico City, Moscow, Mumbai, Nairobi,
New Delhi, New York, Paris, San Francisco,
Convicting a soldier
São Paulo, Seoul, Shanghai, Singapore, Tokyo,
Washington DC
Failed states How to save
nations from collapse: leader,
page 11. The lessons from
Afghanistan and South Sudan,
page 46. Why South Africa has
one of the world’s worst
education systems, page 37

1 Contents continues overleaf

6 Contents The Economist January 7th 2017

Europe 57 Anthony Atkinson

For poorer, for richer
42 Terror in Turkey
From celebration to 57 Insuring talent
carnage Death Star
43 Obama sanctions Russia 58 Free exchange
Putin gets the last laugh Brexit and the WTO option
43 Bavaria’s angry drivers
Taking their toll Science and technology
44 Spain and Catalonia 60 Medicine and computing
Catalexit? The shoulders of gAInts
Ageing Japan An older 45 Charlemagne 61 Olfactory medicine China’s Shakespeare Officials
population is changing Martin Luther’s Germany Whiff of danger have been using the 400th
suburbia, page 28. Japan’s 62 Atmospheric physics anniversary of Shakespeare’s
workforce is ageing, too, page The storm before the calm death to promote a Chinese
29. Toshiba, an enfeebled International bard who they claim stands
Japanese giant, faces a 46 Fixing fragile nations 62 Palaeontology shoulder to shoulder with the
multi-billion-dollar write- Conquering chaos Cracking a puzzle Swan of Avon, page 33
down, page 50. The strong
dollar has given Abenomics Books and arts
Business Subscription service
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corporate Japan must do its 49 Nestlé For our latest subscription offers, visit
A life less sweet Why Brexit won Economist.com/offers
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© 2017 The Economist Newspaper Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or
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 The Economist January 7th 2017 7
The world this week
Barack Obama expelled 35 Amazonas left 56 inmates The European Central Bank raise tariffs, portending what
Russian diplomats and im- dead. Some were decapitated; raised its estimate of the capi- may be one of his biggest fights
posed new economic sanc- severed limbs were stacked by tal shortfall at Monte dei with Mr Trump.
tions in retaliation against the entrance. Paschi di Siena to €8.8bn
Russian hackers’ interference ($9.1bn). The troubled Italian Luis Videgaray was rehabilitat-
in America’s election. Ameri- Odebrecht, a Brazilian con- bank has requested a bail-out ed in Mexico’s government by
can intelligence agencies say struction company, and Bras- from the government after being appointed foreign min-
that Russia released stolen kem, a petrochemical firm in running out of time to raise ister. Mr Videgaray resigned as
e-mails of Democratic Party which it owns a stake, pleaded new capital privately. finance minister after suggest-
officers in order to aid the guilty to bribing officials and ing that Donald Trump visit
campaign of Donald Trump. political parties to win con- Shortly before Christmas, Mexico last year, a hugely
Vladimir Putin declined to tracts in Latin American and Deutsche Bank agreed to pay unpopular move at the time.
strike back, winning praise African countries. The compa- $7.2bn to settle with America’s
from Mr Trump. nies agreed to pay a penalty of Department of Justice for Japan’s prime minister, Shinzo
at least $3.5bn, the largest mis-selling subprime mortgage Abe, paid his first visit to the
A gunman attacked a night- settlement ever in a global securities, about half the American naval base at Pearl
club in Istanbul during New bribery case. amount the regulator had Harbour. He expressed “sin-
Year’s Day festivities, killing at initially sought. Credit Suisse cere and everlasting condo-
least 39 people. Islamic State Stockmarkets had a good agreed to pay $5.2bn to resolve lences” to those who died in
claimed responsibility. Turk- 2016. The S&P 500 rose by 10% claims. But Barclays rejected a Japan’s attack on it 75 years
ish religious authorities who over the 12 months and the settlement, prompting the ago. Soon after, however, his
had criticised new year’s Dow Jones by 13%. The FTSE department to file a lawsuit. defence minister, Tomomi
celebrations as un-Islamic 100 recovered from its Brexit Inada, paid a visit to Yasukuni
condemned the attack. It came wobbles to end 14% up; Rus- Ford made a U-turn when it Shrine in Tokyo where Japa-
two weeks after a policeman sia’s RTS index soared after the scrapped plans for a new nese war criminals are hon-
shouting “Don’t forget Alep- election of Mr Trump to finish factory in Mexico to build oured among the war dead.
po!” fatally shot the Russian 52% higher; and Brazil’s Bo- compact cars, and diverted
ambassador to Turkey. vespa rose by 39%, despite, or some of the investment to a The British government ap-
because of, the defenestration plant near Detroit to produce pointed Sir Tim Barrow, a
Relations between Israel and of the president. But Italy’s electric vehicles. Ford stressed former ambassador to Russia,
America became strained main index fell by 10%, and that this was a commercial as its new ambassador to the
when John Kerry, the soon-to- China’s Shanghai Composite decision. Donald Trump had EU, three months before it is
retire secretary of state, said never fully recovered from its criticised the proposed Mex- due to trigger negotiations
that the Israeli government turbulent start to 2016, ending ican factory when he cam- over Brexit. This followed the
was undermining the pros- the year12% lower. paigned on the theme of sav- early exit of Sir Ivan Rogers
pects for a “two-state solution” ing American jobs. from the job. His resignation
with the Palestinians. His Donald Trump picked Jay note decried “muddled think-
comments came soon after Clayton, a legal expert on Meanwhile, Paul Ryan, the ing” by ministers.
America abstained in the UN mergers and acquisitions, to be most senior Republican in the
Security Council vote that the next head of the Securities House of Representatives, said Other economic data and news
criticised Israel’s construction and Exchange Commission. that Congress was not going to can be found on pages 68-69
of settlements.

Politicians in the Democratic

Republic of Congo struck a
deal in which elections will be
organised in 2017 and Presi-
dent Joseph Kabila will step
down by the end of the year.
Mr Kabila himself has not
signed the deal, however.

Argentina’s president, Maur-

icio Macri, dismissed the
finance and treasury minister,
Alfonso Prat-Gay. He left ap-
parently because of disagree-
ments over the structure of the
economic team. Mr Macri split
the finance ministry into two.
Luis Caputo, the new finance
minister, will be responsible
for borrowing. A new treasury
minister, Nicolás Dujovne, will
oversee tax and spending.

A battle between gangs at a

prison in the Brazilian state of
“ If you need to get from
A to B, think of me! ”
Kojo, CEO of Kojo’s Bikes

Kojo turned his life around with one idea:

renting out his bike and saving the money for
his education. Kojo’s business has quadrupled
since then. He now has four bikes and plans on
having bike shops all across Africa one day.

Aflatoun provides social and

financial education for Kojo and
millions of children worldwide.

Find more stories like Kojo’s on

Turning dependence into independence af latoun.org

 The Economist January 7th 2017 9
Leaders
Now we’re talking
Voice technology is making computers less daunting and more accessible

A NY sufficiently advanced
technology, noted Arthur C.
Clarke, a British science-fiction
Although deep learning means that machines can recog-
nise speech more reliably and talk in a less stilted manner, they
still don’t understand the meaning of language. That is the
writer, is indistinguishable from most difficult aspect of the problem and, if voice-driven com-
magic. The fast-emerging tech- puting is truly to flourish, one that must be overcome. Comput-
nology of voice computing ers must be able to understand context in order to maintain a
proves his point. Using it is just coherent conversation about something, rather than just re-
like casting a spell: say a few sponding to simple, one-off voice commands, as they mostly
words into the air, and a nearby device can grant your wish. do today (“Hey, Siri, set a timer for ten minutes”). Researchers
The Amazon Echo, a voice-driven cylindrical computer that in universities and at companies large and small are working
sits on a table top and answers to the name Alexa, can call up on this very problem, building “bots” that can hold more elab-
music tracks and radio stations, tell jokes, answer trivia ques- orate conversations about more complex tasks, from retrieving
tions and control smart appliances; even before Christmas it information to advising on mortgages to making travel ar-
was already resident in about 4% of American households. rangements. (Amazon is offering a $1m prize for a bot that can
Voice assistants are proliferating in smartphones, too: Apple’s converse “coherently and engagingly” for 20 minutes.)
Siri handles over 2bn commands a week, and 20% of Google
searches on Android-powered handsets in America are input When spells replace spelling
by voice. Dictating e-mails and text messages now works reli- Consumers and regulators also have a role to play in determin-
ably enough to be useful. Why type when you can talk? ing how voice computing develops. Even in its current, rela-
This is a huge shift. Simple though it may seem, voice has tively primitive form, the technology poses a dilemma: voice-
the power to transform computing, by providing a natural driven systems are most useful when they are personalised,
means of interaction. Windows, icons and menus, and then and are granted wide access to sources of data such as calen-
touchscreens, were welcomed as more intuitive ways to deal dars, e-mails and other sensitive information. That raises pri-
with computers than entering complex keyboard commands. vacy and security concerns.
But being able to talk to computers abolishes the need for the To further complicate matters, many voice-driven devices
abstraction of a “user interface” at all. Just as mobile phones are always listening, waiting to be activated. Some people are
were more than existing phones without wires, and cars were already concerned about the implications of internet-connect-
more than carriages without horses, so computers without ed microphones listening in every room and from every
screens and keyboards have the potential to be more useful, smartphone. Not all audio is sent to the cloud—devices wait for
powerful and ubiquitous than people can imagine today. a trigger phrase (“Alexa”, “OK, Google”, “Hey, Cortana”, or
Voice will not wholly replace other forms of input and out- “Hey, Siri”) before they start relaying the user’s voice to the
put. Sometimes it will remain more convenient to converse servers that actually handle the requests—but when it comes
with a machine by typing rather than talking (Amazon is said to storing audio, it is unclear who keeps what and when.
to be working on an Echo device with a built-in screen). But Police investigating a murder in Arkansas, which may have
voice is destined to account for a growing share of people’s in- been overheard by an Amazon Echo, have asked the company
teractions with the technology around them, from washing for access to any audio that might have been captured. Ama-
machines that tell you how much of the cycle they have left to zon has refused to co-operate, arguing (with the backing of pri-
virtual assistants in corporate call-centres. However, to reach vacy advocates) that the legal status of such requests is unclear.
its full potential, the technology requires further break- The situation is analogous to Apple’s refusal in 2016 to help FBI
throughs—and a resolution of the tricky questions it raises investigators unlock a terrorist’s iPhone; both cases highlight
around the trade-off between convenience and privacy. the need for rules that specify when and what intrusions into
personal privacy are justified in the interests of security.
Alexa, what is deep learning? Consumers will adopt voice computing even if such issues
Computer-dictation systems have been around for years. But remain unresolved. In many situations voice is far more conve-
they were unreliable and required lengthy training to learn a nient and natural than any other means of communication.
specific user’s voice. Computers’ new ability to recognise al- Uniquely, it can also be used while doing something else (driv-
most anyone’s speech dependably without training is the lat- ing, working out or walking down the street). It can extend the
est manifestation of the power of “deep learning”, an artificial- power of computing to people unable, for one reason or an-
intelligence technique in which a software system is trained other, to use screens and keyboards. And it could have a dra-
using millions of examples, usually culled from the internet. matic impact not just on computing, but on the use of language
Thanks to deep learning, machines now nearly equal humans itself. Computerised simultaneous translation could render
in transcription accuracy, computerised translation systems the need to speak a foreign language irrelevant for many peo-
are improving rapidly and text-to-speech systems are becom- ple; and in a world where machines can talk, minor languages
ing less robotic and more natural-sounding. Computers are, in may be more likely to survive. The arrival of the touchscreen
short, getting much better at handling natural language in all was the last big shift in the way humans interact with comput-
its forms (see Technology Quarterly). ers. The leap to speech matters more. 7
10 Leaders The Economist January 7th 2017

Japan’s economy

The second divine wind

The strong dollar has given Abenomics another chance. Now corporate Japan must do its bit

Yen per dollar

Inverted scale
J
100
APAN’S
Shinzo Abe,
prime
was the
minister,
first for-
eign leader to meet Donald
Business leaders argue that Japan is an uninviting place to
invest, not least because it already has a large stock of capital,
paired with a dwindling population (see page 28). But if the
110
Trump after his improbable Japanese are an increasingly scarce and precious commodity,
TRUMP WINS ELECTION election victory. The photo- corporate Japan has a funny way of showing it. Despite low
120
graphs show him smiling al- unemployment, real wages have declined under Abenomics.
130
J A S O N D J most as broadly as the new pres- Last month the boss of Dentsu, Japan’s biggest advertising
2016 2017
ident-elect. But not even Mr Abe agency, said he would resign after an investigation concluded
could have guessed how much he would have to smile about. that overwork drove an employee to suicide. Japan’s core
The prospect of stronger spending in America, which has workers cannot easily be fired, but nor can they easily quit, be-
raised bond yields and strengthened the dollar against the cause their skills and status in a firm are not seamlessly trans-
yen, has rekindled some optimism about Abenomics, Mr ferable elsewhere. That limits their bargaining power.
Abe’s campaign to lift the economy out of its decades-long There are signs ofchange. The investigation and resignation
stagnation. At the Bank of Japan’s most recent meeting, one at Dentsu—like the huge losses unveiled by Toshiba, a troubled
policymaker said that the prospects for growth and reflation conglomerate (see page 50)—may be a paradoxical sign of pro-
stand at a “critical juncture”. They likened conditions to those gress, of problems long hidden now coming to light. The com-
of2013 and early 2014, when the currency was cheap, the stock- position of Japan’s workforce is slowly changing, with greater
market was buoyant and inflation was rising. That momentum numbers of workers, especially women, on more flexible con-
was not sustained. On its fourth anniversary, Abenomics has tracts that are more exposed to market forces, for better or
found a second wind. But this time Mr Abe must tackle the worse. The government’s next budget will help by raising the
weak link in his programme: corporate Japan. amount that second earners, usually women, can make before
their spouses lose a generous tax exemption.
The golden hoard But a bigger shove is needed. The government ought to re-
The ability of Abenomics to lower borrowing costs, weaken tain a tax exemption for all couples, regardless of how much
the yen and lift share prices was never much in doubt. The pro- the second earner makes. It should redesign corporate taxes to
blem is that these gifts to Japanese industry have generated discourage the hoarding ofprofits. Ifannual wage negotiations
disappointingly meagre increases in domestic investment, in the spring yield disappointing results, blunter options, like
wages and consumption. Many firms would rather hold cash big rises in the minimum wage, exist.
or securities than make big capital outlays (although counting Abenomics has succeeded in stemming deflation during a
R&D as investment, as Japan’s new statistics do, improves the difficult few years when many other big economies looked in
picture). They have also been happier paying one-off bonuses danger of succumbing to it. If the reflationary trend of recent
or hiring temporary workers than increasing the base pay of months persists, the global economy may become more sup-
core workers, which would be harder to reverse. Abenomics portive of Abenomics. But for Japan to prosper, Japan’s firms
has run into a bottleneck of corporate timidity. must swap caution for courage. 7

Trumponomics

Men of steel, houses of cards

The president elect’s team needs to realise that America’s economy is not like a steel mill

I T MUST seem to Donald

Trump that reversing globali-
sation is easy-peasy. With a cou-
tax handout and a few casual threats.
Mr Trump has consistently argued that globalisation gives
America a poor deal. He reportedly wants to impose a tariff of
ple of weeks still to go before he 5% or more on all imports. To help him, he has assembled ad-
is even inaugurated, contrite visers with experience in the steel industry, which has a rich
firms are queuing up to invest in history of trade battles. Robert Lighthizer, his proposed trade
America. This week Ford can- negotiator, has spent much of his career as a lawyer protecting
celled a $1.6 billion new plant for American steelmakers from foreign competition. Wilbur Ross,
small cars in Mexico and pledged to create 700 new jobs build- would-be commerce secretary, bought loss-making American
ing electric and hybrid cars at Flat Rock in Michigan—while steel mills just before George W. Bush increased tariffs on im-
praising Mr Trump for improving the business climate in ported steel. Daniel DiMicco, an adviser, used to run Nucor,
America. Other manufacturers, such as Carrier, have changed America’s biggest steel firm. Peter Navarro, an economist, au-
their plans, too. All it has taken is some harsh words, the odd thor of books such as “Death by China” and now an adviser on 1
 The Economist January 7th 2017 Leaders 11

2 trade, sees the decline of America’s steel industry as emblem- ducers (in 2016 the Obama administration placed a tariff of
atic of how unfair competition from China has hurt America. 522% on cold-rolled Chinese steel), as has the European Union.
But the steel business is not a model for trade policy in gen- Yet this way of thinking fails to deal with the question of
eral and companies are capable of being tricksy, too. Mr Trump whether an ample supply of cheap steel courtesy of a foreign
may simply be looking for good headlines, but if he wants government is really so terrible: it benefits American firms that
more, his plans threaten to be an expensive failure. consume steel—and they earn bigger profits and employ more
people as a result. Moreover, trade in most goods and services
The miller’s tale is not like steel. America’s biggest import from China is electri-
One reason is that Paul Ryan, the Speaker of the House of Rep- cal machinery. China’s government does not subsidise the
resentatives, said this week that Congress would not be raising overproduction of iPhones which are then dumped on the
tariffs. Executive orders are bad politics and can get Mr Trump market, causing iPhone-makers in America to be laid-off. In-
only so far. Another is that Ford’s plans are not as simple as stead, a smartphone might be designed and engineered in Cal-
they look. It will still build its new small car in Mexico—at an ifornia and assembled in China, using components made or
existing plant (see page 51). But above all, Mr Trump gravely un- designed in half a dozen Asian and European countries, using
derestimates the complexity of messing with tariffs. metals from Africa. Likewise, every dollar of Mexican exports
The men of steel are right to complain about China. Its gov- contains around 40 cents of American output embedded
ernment has indeed subsidised its steelmakers, leading to a within it. For producers of such goods, tariffs would be a costly
glut that was dumped on the world market. Successive Ameri- disaster. American steelmakers might seek out government
can governments have put up tariffs to protect domestic pro- protection. Apple and its kind will not. 7

Fixing failed states

First peace, then law

How to save nations from collapse

E IGHT years ago Ashraf Gha-

ni and Clare Lockhart wrote
a book called “Fixing Failed
and Liberia, two war-scorched African nations where UN
peacekeepers gave new governments breathing-space to start
afresh. It worked in Colombia, too, where American support
States”. Now Mr Ghani is in a helped the government drive back the drug-dealing leftist in-
position to follow his own ad- surgents of the FARC and force them to the negotiating table,
vice. He is the president of Af- producing a historic peace deal in 2016. However—and this is
ghanistan, a state that failed in the lesson of Iraq—good government cannot be imposed from
the 1990s and could fail again. outside. National leaders have to want it and work for it, over-
State failure causes untold misery (see page 46). Broadly de- coming stiff resistance from the militia bosses and budget-bur-
fined, it is the main reason poor countries are poor. Its chief gling ministers who benefit from its absence.
cause is not geography, climate or culture, but politics. Some Mr Ghani has the right priorities. First, establish a degree of
countries build benign, efficient institutions that foster eco- physical security. Next, try to entrench the rule of law. Both are
nomic growth; others build predatory ones that retard it. South hard in a nation where suicide-bombers kill judges and war-
Sudan is an extreme example of predation. Its politics consist lords grow rich from the poppy trade. Yet he has made pro-
of warlords fighting over oil money. The warlords also stir up gress. The Afghan army is becoming more capable. Tax collec-
tribal animosity as a tool to recruit more militiamen. The state tion has improved, despite the economic shock of the
makes Big Men rich while ordinary folk subsist on food aid. American troop drawdown. Corruption, though still vast, is
being curbed in some areas.
Ashes to assets This is not a side issue. If ordinary Afghans see the state as
Afghanistan must overcome several hurdles to avoid the same predatory, they will not defend it against the Taliban. Right
fate. Since Barack Obama pulled out most of the NATO troops now the jury is out: most Afghans are terrified of the Taliban,
supporting the government, the Taliban, an Islamist militia, but trust in the government is low, too. Mr Ghani needs time to
has recaptured parts of the country. In the past year it has been implement his reforms; donors must be patient.
fought to a stalemate. But were Donald Trump to withdraw After a civil war ends somewhere, Western donors often
the remaining American forces, the jihadists would probably pour in more money than the damaged state can absorb, and
take over again. The last time they were in power they banned pull back when results disappoint. NGOs parachute in, poach
female education, crushed gay people with bulldozers and the best staff with higher wages and form a costly parallel state
hosted Osama bin Laden, so the stakes are high. that will one day pack up and go. This undermines national in-
As a first step, Mr Trump should maintain at least the cur- stitutions. It would be better if donors scaled up their largesse
rent level of air support, training and funding for the Afghan gradually, channelled it through national coffers where possi-
army. He should also ramp up pressure on Pakistan to stop let- ble and stuck around for the long run.
ting the Taliban use its territory as a rear base. (Pakistan insists None of this will succeed if a country’s leaders do not want
it is doing all it can; no one believes it.) it to. In South Sudan neither of the two main warlords is inter-
Foreign military support can buy time for a fragile state to ested in nation-building, so donors have no one to work with.
build the right kind of institutions. This worked in Sierra Leone But in Kabul they do. They should not cut and run. 7
12 Leaders The Economist January 7th 2017

British politics

Theresa Maybe

After six months, what Britain’s new prime minister stands for is still unclear—perhaps even to her

W ITHIN hours of the Brexit

referendum last summer
David Cameron had resigned,
schools will be resurrected—but only on a small scale, and per-
haps not at all, given how many Tory MPs oppose the idea.
Other reversals smack of dithering. The construction of a new
and within three weeks Theresa nuclear plant at Hinkley Point was put in doubt, then given the
May had succeeded him as go-ahead; a new runway at Heathrow airport was all but
prime minister. The speed of her agreed on, then deferred until a parliamentary vote next year.
ascent to power, on July 13th “Just-about-managing” households were the prime minister’s
2016, without a general election lodestar for a week or so, then dropped. So were suggestions
or a full-blown Tory leadership contest, meant that Mayism that Britain would seek a transitional deal with the EU after
was never spelt out in any manifesto or endorsed by the elec- Brexit—until they were recirculated a few weeks later when
torate. Yet the new prime minister soon made clear the scale of Mrs May apparently changed her mind once again.
her ambitions for Britain. Not only would she make a success The cause of this disarray could be that Mayism itself is
of Brexit, she would also set in motion a sea-change in social muddled. While vowing to make Britain “the strongest global
mobility to correct the “burning injustices” faced by the down- advocate for free markets”, the prime minister has also talked
trodden, and reshape “the forces of liberalism and globalisa- of reviving a “proper industrial strategy”. This is not about
tion which have held sway...across the Western world.” Her al- “propping up failing industries or picking winners”, she in-
lies talked of an epochal moment, comparable to Margaret sists. Yet unspecified “support and assurances” to Nissan to
Thatcher’s break with the past in 1979. The feeble condition of persuade the carmaker to stay in Sunderland after Brexit
the Labour opposition gave Mrs May control of a one-party amount to more or less that. Her enthusiasm for trade often sits
state. As for her mandate, she cited the referendum: a “quiet uncomfortably with her scepticism of migration. Consider the
revolution” by people “not prepared to be ignored any more”. recent trip to India, where her unwillingness to give way on
Yet after half a year in office there is strikingly little to show immigration blocked progress on a free-trade agreement.
for this May revolution (see pages 18-20). The strategy for
Brexit, which is due to be triggered in less than three months, A citizen of nowhere
remains undefined in any but the vaguest terms, and seems in- There is one lesson in the overdone comparison of Mrs May to
creasingly chaotic. At home, the grand talk about transforming Thatcher. The woman who really did transform Britain had a
society and taming capitalism has yielded only timid propos- shambolic first term; privatisation and union reform, with
als, many of which have already been scaled down or with- which she is now associated, did not really get going until after
drawn. The growing suspicion is that the Sphinx-like prime 1983. Angela Merkel also made a shaky start as Germany’s
minister is guarded about her plans chiefly because she is still chancellor. Mrs May could yet find her feet—and given the state
struggling to draw them up. of Labour, she will have time to do so, if Brexit does not pro-
vide her own party with a reason to oust her.
The emperor’s new trousers Yet Mrs May could turn out to resemble another, less obvi-
Mrs May built a reputation for dogged competence during six ous predecessor: Gordon Brown. He, too, was thin-skinned.
years at the Home Office, a tricky beat that has wrecked many Like her, he moved into Downing Street without an election, in
political careers. She skilfully survived the Brexit referendum 2007. He also started with a fearsome reputation and big
despite backing the losing side. In the abbreviated Conserva- promises. And when it became clear he had little idea what to
tive leadership race she stood out as the only grown-up; few do with the job he had so coveted, he flopped. The financial
Tories regret plumping for her over the unprepared and unseri- crisis paralysed his government because of his desire to micro-
ous other contenders. In negotiating Brexit, the hardest task for manage every decision.
any prime minister since the second world war, she faces a There is more than a little of this in Mrs May. One person
powerful drain on political capital and governmental capacity. can just about run the Home Office single-handed. But being
Half the country is against the idea and the rest may sour once prime minister requires delegation—especially when Brexit
its drawbacks materialise. Most of the civil servants imple- looms so large. Care for the elderly is fraying. The National
menting Brexit think it a mistake. If Britain’s next few years will Health Service is running out of money. A housing shortage is
be about avoiding traps, then the wary tenacity of Mrs May worsening. Scotland and Northern Ireland are raising awk-
could be just what the country needs. ward constitutional questions. As long as every proposal has
Yet caution has started to look like indecision. Her most se- to be pored over by the prime minister, radical decisions of the
nior official in Brussels has just resigned, saying that the gov- sort needed to solve these problems will not be taken. To get a
ernment does not have a clear Brexit plan (see page 35). After grip on Britain, Mrs May must learn to loosen hers.
six months it is hard to name a single signature policy, and easy For this, she must decide what the grand promises of her
to cite U-turns. Some are welcome: a silly promise to put work- government actually amount to. The need for every policy to
ers on company boards, for instance, was abandoned; a dread- be agonised over in Downing Street, the secrecy over Brexit
ful plan to make firms list their foreign employees lasted less and the silence on the government’s broader plans for Britain
than a week; and hints at curbing the Bank of England’s inde- all point to the same problem: Theresa Maybe does not really
pendence were quietly forgotten. Selective “grammar” know what she wants. 7 1
 The Economist January 7th 2017 13
Letters
Snooping on shoppers December17th). bon-free electricity generation ing the entire class of ships the
Ranging more widely, the as a percentage of overall Izumo class, Japan is sending a
You shone a light on the bone-breaking changes in such generation has fallen. This is clear message to China.
harrowing implications of the industries as retail and media explained by both the decline DOUG CLARK
Chinese Communist Party’s are now reaching finance, with of nuclear power and the Hong Kong
“social-credit system” (“Creat- fintech. Ford will become an failure of renewables to make
ing a digital totalitarian state”, information-technology up the difference. With winter here…
December17th). But private company competing at that In the United States alone,
industries, too, have imple- industry’s speed, using its five nuclear plants have closed The British government’s
mented a social-credit system. autonomous cars and the over the past several years. response to the crisis in care for
Through Alibaba’s finance services enabled by the Together they generated as the elderly is, as you say, “Too
arm, for example, Sesame internet of things. The cheap much electricity as all of Amer- little, too late” (December17th).
Credit scores people based on global connectivity of the ica’s solar plants and resi- You are also right that funding
their consumption habits and internet, combined with the dential installations put to- services for old people through
digital behaviour. The score large and increasing share of gether. Many more nuclear local-government taxes often
can affect one’s ability to take information and knowledge in plants are at risk of closing in leaves the councils that need it
out a loan, buy movie tickets or products, will obviate any the Western hemisphere with- the most with the least cash.
even find a significant other political moves towards out any replacement in sight. But there is an even greater
(dating firms often require autarky. Clean electricity is likely to defect in the system.
courters to display their credit VLADIMIR ZWASS continue declining for years to Responsibility for care of
scores). Editor-in-chief come. Policymakers have been the elderly is divided between
The technology powering Journal of Management slow to realise that the man- the National Health Service
such systems has significant Information Systems dated purchases of heavily and local councils, and their
benefits for Chinese consum- Saddle River, New Jersey subsidised renewables have interests are usually diamet-
ers and the businesses serving depressed electricity prices. rically opposed. Every elderly
them. Alibaba and other Chi- Election advice for Italy Even with very low fossil-fuel person who has to remain in
nese firms make this tech- prices, ageing nuclear plants, hospital because there is no
nology available to market Why do you recommend which often have remaining space in a care home is a
researchers, who use it to first-past-the-post elections in lifetimes longer than new solar financial gain for the council
assess where a likely customer Italy (“Salvaging the wreck- and wind facilities, are at a but a considerable cost for the
lives, where they typically age”, December10th)? It is an disadvantage. Yet they also do hospital (as well as denying a
shop and how much it costs to inherently undemocratic not pollute. bed to someone who needs it).
get them to a store. This has voting system. Take the most CESAR PENAFIEL The only way to resolve this
spurred significant investment recent British general election. New York conflict of interest is to put
in China from multinationals In 2015 the Conservative Party social care in the community
that want a slice of its retail pie, won 330 seats with only 37% of Japan’s broadside under the control of the NHS.
and has also helped China the total vote, giving it a major- This is perfectly logical as it is a
become the largest retail ity government without an national “health” service not a
e-commerce market in the actual electoral majority. The national “hospital” service.
world. UK Independence Party got DAVID TERRY
JOE NORA just one seat with 13% of the Droitwich, Worcestershire
Marketing director vote, whereas the Scottish
Export Now Digital Solutions Nationalists secured 56 seats Grouping economists
Shanghai with 5% of the vote.
The single-transferable Professor Ben-Gad answered
Ideas management vote, used in Ireland and your call for a collective noun
Malta, is a better system, for economists with the admi-
One may easily take issue with because it reflects the will of rable suggestion of “aggregate”
Schumpeter, who believes that the electorate and keeps (Letters, December17th). But
management theorists have politicians more in tune with given the befuddling diversity
gone astray by subscribing to their constituents. Lexington mentioned that of economic mantras and
the dead ideas of increasing MICHAEL RYAN Japan’s new destroyer is economists, that suggestion
competition, widespread Dublin named the Izumo (December risks mixing apples and
enterprise, the growing speed 10th). The original Izumo was oranges.
of business operations and Nuclear v solar an armoured cruiser that There must be at least two
globalisation (December17th). served as the Japanese navy’s other collective nouns for
For anecdotal evidence I doubt that the El Romero flagship in China in the 1930s economists: an inefficiency
disproving Schumpeter, just Solar Plant in the Chilean and 1940s. She saw battle in and a disutility.
glance at the article that desert would power a city of a both the 1932 and 1937 DONALD NORBERG
preceded his column. It was million people (Bello, Decem- Sino-Japanese wars, shelling Sturminster Newton, Dorset 7
about the competitive success ber10th). In fact, it would Chinese positions from the
of Zara, a highly entrepreneur- power120,000 Chilean house- middle of the Huangpu river in
ial company with a global holds today, and far fewer in Shanghai. She also sank the Letters are welcome and should be
addressed to the Editor at
footprint, and the edge it has the future, if the forecasts of last British gunboat and The Economist, 25 St James’s Street,
attained by adjusting its cloth- rapid growth in demand mate- captured the last American London sw1A 1hg
ing lines in lightning speed to rialise. Globally, electricity gunboat in Shanghai in 1941. E-mail: letters@economist.com
the most current fashion consumption far outpaces new By giving the new Izumo More letters are available at:
Economist.com/letters
(“Behind the mask of Zara”, solar and wind power. Car- her name, and, indeed, nam-
14
Executive Focus

The Banque centrale du Luxembourg / Eurosystem is seeking a

Head of Economics and Research Department (m/f)

Job description:
The incumbent will lead and coordinate a team of economists analysing economic
developments in Luxembourg and the euro area, conducting research on topics
pertaining to central banking, including monetary policy, and analysing public
inances, with a particular focus on Luxembourg. His/her responsibilities will also
include representing the Bank in high level national and international meetings.
The incumbent will report directly to the Governor.
Main tasks and responsibilities:
• Provide advice to the Governor on monetary policy and to Management in
general in terms of economic analysis and research;
• Develop the department’s work programme, with a particular emphasis on the
strategic direction of its research activities;
• Organize, supervise and assess the department’s work, in particular its
contribution to the BCL’s economic publications and to the department’s
research output;
• Develop research partnerships with universities, research institutes, think
tanks and other central banks.
Your profile:
• PhD in economics or M.A. in economics with extensive experience in research
and economic analysis;
• Experience in conducting and supervising research related to central banking
with a strong publication record;
• Solid knowledge of the Eurosystem’s monetary policy framework;
• Excellent command of English. French or German will be considered as an
advantage;
• Ability to communicate with peers, managers and policymakers; strong sense
of efficiency, organization and time management.
To apply, please email your cv and motivation letter to app8@egonzehnder.com
before February 15, 2017.

The Economist January 7th 2017

 15
Executive Focus

The Opportunity
We are currently looking for a Director, Research and Evidence to join us in our London office.
This is a new senior Leadership role in which you will provide global leadership to ensure a step
change in the rigour, relevance, and strategic direction of our global evidence base, so that we
can fully leverage our $2bn international programming portfolio across 120 countries; ensure
our ambitions for children, and become a knowledge leader on what works for children.
In order to be successful you will have:
• Extensive experience in applied implementation of data and evaluation systems to
improve frontline practice in the development/humanitarian context.
• Extensive skills and experience in designing, managing and communicating quantitative
and mixed method research and evaluation, using rigorous designs
• Demonstrable experience in the areas of research and evidence strategy development
and implementation
• Proven leadership abilities, with the ability to mobilise and motivate individuals outside
of your reporting line in a highly matrixed and federated environment
On a personal level you will be an inclusive and confident leader, with the gravitas to inspire
and influence a wide range of stakeholders, and a belief in the mission and values of Save the
Children.
This role offers a competitive salary, in the context of the sector, and a company pension
scheme.
The organisation
It’s an exciting time at Save the Children as we start the implementation of our new 15-year
global strategy – Ambition for Children 2030 – which focuses on achieving three Breakthroughs:
no child dies from preventable causes before their fifth birthday, all children learn from a quality
basic education, and violence against children is no longer tolerated.
Save the Children is a federated Membership organisation with 29 Members who are based
across the globe and provide Save the Children International with the funds to carry out our
international programming activities.
Application information
Please apply using a cover letter and CV explaining why you would be suited to this role, and do
also include your current and expected salary. Please send this all as a single document. A copy
of the full role profile can be found at www.savethechildren.net/jobs
We need to keep children safe, so our selection process reflects our commitment to the
protection of children from abuse.

The Economist January 7th 2017

18 The Economist January 7th 2017
Briefing Theresa May

tion, convention and precedent. The legal,

Steering the course political, economic and diplomatic com-
plexities of Brexit have put paid to that. A
costly and possibly bitter divorce must be
negotiated. Trade deals with the remain-
der of the EU, and possibly the rest of the
world, must be struck. A new immigration
CHURCH ENSTONE AND MAIDENHEAD
regime must be established, economic
The making and meaning of a prime minister
shocks contained, partners reassured, Scot-

A S A student at Oxford, Theresa May

looked like a typical ambitious young
Tory. The daughter of a vicar, she had been
move. By contrast Mrs May cares about
places, their preservation and people’s at-
tachment to them, an attitude which
land held in the union, peace in Northern
Ireland preserved and painful fractures in
British society closed. There are no prece-
stuffing envelopes for her local Conserva- makes her particularly concerned with dents. It is for Mrs May to create her own; to
tive association for years. She was a mem- down-and-out areas that need help pick- make choices that dwarf most of those that
ber of the Oxford University Conservative ing themselves up. confronted her predecessors.
Association; it was at one of its discos that In this she is well-suited to her times. A prime minister who had won a gen-
Benazir Bhutto, later the prime minister of Britain’s vote for Brexit (the responsibility eral election, or even a contested party
Pakistan, introduced her to the man she for whose realisation she inherited from leadership campaign, would have had to
would marry. She also joined the Oxford Mr Cameron) was partly a cry of protest by give some sense of how she would make
Union, a debating society where politi- parts of the country that felt left behind, ex- such choices. But Mrs May has done nei-
cians in embryo learn to speechify, ingrati- cluded from its successes, or overwhelmed ther of those things. Thus for an idea of
ate themselves and stab each other in the by rapid change. It showed how much peo- how she reads the lay of the unknown
back. She told a tutorial partner that she ple’s sense of belonging in the place where land ahead, and how adept she will prove
wanted to be prime minister. they live mattered to them, and the value at navigating it, it pays to look closely at
Yet various things distinguished her they placed on stability and order. The who she is and where she came from.
from the classic Tory hack. For one, she did prime minister’s talk of reviving manufac-
not read philosophy, politics and econom- turing, reducing immigration and tackling Onward Christian soldiers
ics (PPE), the course designed to train future corporate excess plays well to such feel- Mrs May was born in 1956 to the Reverend
elites. She read geography. For David Wil- ings. The public likes her considerably bet- Hubert Brasier and his wife Zaidee. When
letts, who was minister for universities in ter than it did Mr Cameron two years into she was a girl her father became vicar of St
the 2010-15 coalition government in which the previous parliament, and much better Kenelm’s in Church Enstone, a cinemati-
Mrs May was home secretary, this distinc- than the lamentably led Labour Party (see cally idyllic huddle of golden stone houses
tion is more than incidental. chart on next page). In a YouGov poll pub- amid the drystone walls and rolling fields
He notes that PPEists (like David Camer- lished on January 3rd, every region, every of the Cotswolds. Her ecclesiastical up-
on, Mrs May’s predecessor, and indeed social class and every age group said she bringing has prompted comparisons to
Lord Willetts) tend to concentrate on Brit- would be a better prime minister than Je- Angela Merkel (whose father was a Luther-
ain’s sectoral strengths—its booming ser- remy Corbyn, the Labour leader. an pastor in East Germany) and Gordon
vice industries, its great universities, the The outlook, education and character Brown, Tony Blair’s successor as Labour
City—whose success might trickle down to of a leader always matter; but with Mrs prime minister (whose father was a Presby-
poorer areas, or into whose orbit residents May they matter more than usual. Most terian minister in Fife, near Edinburgh). All
of poorer areas might be persuaded to prime ministers travel on tracks of tradi- three grew up in households dominated 1
 The Economist January 7th 2017 Briefing Theresa May 19

2 by the moral and practical duties imposed ers cite her experience of diabetes—the ing gay marriage she shared. But she ex-
by the life of the church; all were thereby prime minister must inject herself with in- cluded and ignored those—like Jeremy
furnished with an unflashy, serious and sulin several times a day. But the best ex- Browne and Norman Baker, Ms Feather-
cautious character. planation is her career as a woman educat- stone’s two successors in the department—
Her vicarage childhood lives on in Mrs ed at a provincial grammar-school (the with whom she did not.
May’s very English traits. She drinks Earl granddaughter of domestic servants, no She clashed with Michael Gove, then
Grey tea, reads Jane Austen, watches James less) in a party dominated by public- the education secretary, over measures to
Bond films, regularly attends church in her school boys given to cavalier confidence deal with extremism in schools and with
constituency (Maidenhead, a posh town in and clever-clever plans. When her allies Mr Osborne over immigration—she want-
the Thames valley) and adores cricket. Ech- praise Mrs May’s methodical style and her ed to tighten up Britain’s student visa re-
oes of this can be seen in her leadership. disdain for chummy, informal “sofa gov- gime. She was typically one of the last min-
Anglicanism often combines stormy, king- ernment”, they are channelling her long- isters to agree on her department’s budget
dom-of-God language with a restrained held exasperation with the know-it-all in the annual financial round. She also had
conservative culture: hymns about crusad- posh boys—particularly Mr Cameron and a run-in with Boris Johnson, then mayor of
ers and the devil belted out before tea and George Osborne, his chancellor. London, over three water cannon he
biscuits. In her first months as prime minis- The prime minister has little time for bought without seeking the Home Office’s
ter Mrs May, too, has been bolder in her the parliamentary village, avoiding its bars necessary—and, in the event, withheld—
rhetoric than in her actions—big ideas have and tea rooms, declining dinner-party invi- approval. The incident serves her inner cir-
received little follow-through, or been tations in London—let alone in Brussels, or cle as a house parable showing the perfidy
dropped altogether. There is a touch of her Washington, DC. She is the opposite of cos- of civil servants (who talked Mr Johnson
cricketing hero, Geoffrey Boycott, about mopolitan. “If you believe you’re a citizen into the idea), the folly of ill-scrutinised de-
her too. It is hard not to detect her admira- of the world, you’re a citizen of nowhere,” cisions, the danger of informal structures
tion for the stolid style of the Yorkshire she told her party conference in October. and the comeuppance of those who do not
batsman in her matter-of-fact demeanour. She struggles with the small talk that oils do things Mrs May’s way.
When her aides say “She just gets on with diplomatic (and cabinet) wheels. The Euro- In Downing Street Mrs May has im-
the job” it is the sort of praise their boss pean Council summit on December 16th posed the centralised, formal working
would like. saw the prime minister fiddling awkward- practices that she honed at the Home Of-
A social reformism rooted in her Angli- ly with her cuffs as fellow leaders air- fice. The day is governed by the 8.30am
can upbringing and practice (“part of who I kissed behind her. She is far more at home meeting, a shoeless free-for-all under Mr
am and therefore how I approach things”, in her constituency on the banks of the Cameron that now has a strict invitation
she has said) has been a constant of her ca- Thames. Her house in the village of Son- list. Blue-sky thinking and speculation
reer. When the voters of Maidenhead first ning sits by what Jerome K. Jerome, a Vic- about the headlines that evening are out;
sent her to Westminster in 1997 she was, in torian humorist, described as “the most firm instructions to staffers are in. In the
this respect, to the left of her party. In 2002 fairy-like little nook on the whole river”. prime minister’s office a table and chairs
she warned her colleagues and their sup- Here, in her natural habitat, she is by all ac- (and vases of hydrangeas) have replaced
porters that they had become known as counts witty, relaxed and gregarious. the sofa. Ministers and staffers must sub-
“the nasty party”. The following year, as mit papers earlier than under Mr Cameron,
shadow transport minister, she argued for Ordering their estate to allow her to work through them late in
more state intervention in the economy, a Mrs May’s time running the Home Office, a the evening (he would do them the next
more nuanced relationship with trade un- department institutionally obsessed with day). The whole machine is run by a small,
ions and limits on fat-cat excesses. order and control, earned her a reputation powerful team centred on her two chiefs-
All of this lives on in her premiership. for inscrutability, formality and obsession of-staff, Fiona Hill and Nick Timothy.
When, having lost the Brexit referendum, with detail (“she was always asking for Cabinet and sub-cabinet meetings are
Mr Cameron resigned, Mrs May enumerat- more papers in her red box,” says one lieu- venues for serious discussion, not Potem-
ed the inequities of modern Britain as she tenant). She worked well with people with kin forums with pre-decided outcomes.
launched her campaign to succeed him: whom she had things in common, like Having for the most part distributed minis-
boys born poor die nine years earlier than Lynne Featherstone, the Liberal Democrat terial portfolios evenly between Leavers
others; children educated in state schools minister whose commitment to introduc- and Remainers, Mrs May appointed three 1
are less likely to reach the top professions
than those educated privately; many
women earn less than men. The one-party state
Conservative party conference. Article 50 European
When she became prime minister she Britain, 2016 Pledge to trigger Article 50 Supreme Council
by April 2017 Court case Summit
repeated some of these “burning injus- Brexit vote Theresa May becomes prime minister
tices” on the steps of Downing Street. She 60
Who would do better as prime minister? Mrs May backs new
has talked up a new generation ofstate-run % replying: Theresa May runway at Heathrow
grammar schools (schools, like the one she 50
VOTING INTENTION
attended, that are allowed to select their % replying: CONSERVATIVE
pupils through competitive exams) to give 40
clever children from poor backgrounds a
LABOUR
leg up. She has hinted at worker represen- 30
tation on company boards; she has lament-
ed the effect of the Bank of England’s low
20
interest rates on savers. Jeremy Corbyn
21 Labour
Mrs May patently stands apart from front High Court rules
benchers Parliament Mrs May retreats 10
many of her colleagues in ways that go be- resign Labour leadership contest should vote from workeers--on-
Tory leadership on Article 50 boards pledgee
yond this reformism; there is a social dis- contest
tance, too. Some say it has to do with the 0
June July August September October November December
isolating shock of losing both of her par-
ents when she was relatively young. Oth- Sources: ICM; Ipsos MORI; Opinium; YouGov
20 Briefing Theresa May The Economist January 7th 2017

2 people who, unlike her, campaigned for plunged into a legal bunfight to prevent it. gave.” Mr Boycott, one feels, might approve
Brexit to the departments most concerned As the Deloitte memo put it, she seems to such dogged defensiveness; but few would
with bringing it about—Mr Johnson to the have no coherent plan for Brexit, her gov- look to him for lessons on team building.
Foreign Office, Liam Fox to a new Depart- ernment is “struggling” and still she is On coming to power it was not enough
ment for International Trade and David prone to “drawing in decisions and details for Mrs May to fire Mr Osborne and Mr
Davis to a new Department for Exiting the to settle matters herself”. Gove: she capriciously gave each a dress-
EU. Giving the Brexit-related jobs to Some confirmation of this came on Jan- ing down in the process. Close observers
paid-up Brexiteers insulates her from criti- uary 3rd when Sir Ivan Rogers, Britain’s say she is allergic to cutting deals and that
cisms of not supporting the policy. It also ambassador to the EU, left his job ten in cabinet she sees eye-to-eye only with
cannily reduces the chance ofa single Brex- months early. In a leaked e-mail he took ministers who, like Philip Hammond, her
iteer emerging as a rival if the process’s out- aim at “muddled thinking” on Brexit (see chancellor, and Damian Green, her wel-
come disappoints the diehard Leavers. page 35). He is not the first senior civil ser- fare secretary (and the husband of her Ox-
One minister says that, whereas the vant to leave early; Helen Bower, the re- ford tutorial partner), she has known for
cabinets of Mr Blair and Mr Brown were fu- spected chief spokeswoman at 10 Down- decades. Her sporadic attempts to lighten
rious power struggles, and Mr Cameron’s ing Street, went first. A senior minister in up are hit-and-miss: her frequent public
cabinets mostly shams, Mrs May’s cabinet the upper house, Jim O’Neill, has also mockery of Mr Johnson is making an ene-
features open discussions in which the walked out. my of him—and feels weird coming from
prime minister really listens. Another All of which is a reminder that, al- the woman who gave him his powerful
claims that she is more interested in evi- though the Labour Party’s disarray makes job in the first place.
dence than her predecessor was and Mrs May look unassailable, her position is
praises the fluency with which she shifts not entirely safe. She has a very small par- Many a conflict, many a doubt
between subjects. Acolytes insist that the liamentary majority and the Conservative There may be lessons as to Mrs May’s pos-
mighty chiefs-of-staff produce decisions Party has a knack for regicide. It looks quite sible longevity and success from her fellow
that have been properly tested (not so un- likely that the Brexit talks will founder; Mrs children of the cloth, Mr Brown and Mrs
der Mr Cameron) without prime ministeri- May insists that she wants to maintain cer- Merkel. Mr Brown, whose brief premier-
al overload (not so under Mr Brown). tain economic benefits of EU membership ship was dominated by the global finan-
Most of all, though, these arrangements but end free movement of labour, a deal cial crisis, never unified his party and was
give the prime minister what she most cov- deemed unthinkable in Brussels. That up against a strong opposition led by Mr
ets: control. Even close allies call Mrs May a could lead to economic chaos and expose Cameron. Mrs Merkel has faced crises,
control freak—and as is often the case, the her to a challenge from Mr Osborne, who is too—but for more than a decade has grown
freakery comes at the expense of trust and remaking himself as the backbench stan- through them, outwitting or co-opting her
efficiency. The “Nick and Fi” filter on poli- dard-bearer for liberal Toryism. Alterna- opposition, maintaining unquestioned su-
cies creates a bottleneck delaying urgent tively, a final deal could involve trade-offs premacy in her party.
measures (new funding to soothe the so- unpalatable to her most keenly Brexiteer Like Mrs Merkel, Mrs May has seen off
cial-care crisis was unveiled almost a MPs, who would then cut up rough. rivals through canny manoeuvring; she
month later than planned). Apparent pri- When things start to go south the defen- bides her time, knowing when to speak up
orities—like those grammar schools—have sive and needlessly belligerent tone and when (as in the referendum cam-
failed to turn into flagship policies. The shown in her tenure to date will serve her paign) to stay quiet. Like Mr Brown, she is
suggestions of workers on boards, govern- ill. For most of her end-of-term grilling by prone to overblown rhetoric, irritability
ment meddling in monetary policy and the liaison committee—a panel of MPs and indecisiveness. The biggest worry,
obligations on firms to list their foreign which scrutinises the government—she though, is that she may also share his in-
workers have all come to nothing. More re- wore an aquiline scowl, quibbling with ability to adapt—the key difference be-
grettably, so have hints of big new infra- the questions and, when pushed, cleaving tween Mr Brown and Mrs Merkel.
structure investments and house-building to evasive platitudes: “I gave the answer I Mrs May shows few signs of the ability
schemes. Westminster feels dead. to assimilate the new that has made Mrs
Comments by ministers have been dis- Merkel so successful. Her vision of leader-
owned, the Treasury feels sidelined, dip- ship, it seems, is focused on giving state-
lomats believe they are ignored. When a ments, installing processes, gathering up
consultant’s memo to the Cabinet Office information and control—and little else.
criticising Mrs May’s leadership style This makes it worryingly easy to imagine
leaked, the prime minister reportedly de- the Britain of 2018 or 2019 in disarray: her
manded that Deloitte, the firm in question, party in revolt, her ministers and partners
be “punished”. It has since withdraw from alienated, her government sclerotic, Brexit
a series of bids for government contracts, talks breaking down, the economy tanking
and ministers’ e-mails and phone records and Number10 in bunker mode.
are to be seized to prevent further leaks. For there is more to leadership than Mrs
Even the queen has reportedly grumbled May’s procedures. There is also what Peter
about Mrs May’s slogan-heavy furtiveness Hennessy, a contemporary historian, calls
about how Britain will leave the EU. “the emotional geography” of power. This
Indeed, six months after coming to means adapting to events and institutions,
power all the prime minister can say on building networks and—yes—being judi-
that subject is that “Brexit means Brexit” ciously informal sometimes: a dose of in-
and that it will be “red, white and blue” (ie stinct, a snap decision, a deal cut, a risk tak-
patriotic, rather than Caucasian, bloodied en on a wing and a prayer. It means sharing
and bruised). Her fear of losing control ex- information, accepting dissent, seeking al-
plains why, instead of holding a simple ternative opinions, staking out a position
parliamentary vote on triggering Article 50 and persuading people of it. It is this emo-
of the EU Treaty (the process by which Brit- tional landscape that Britain’s geographer
ain will leave the union), she stubbornly Very well, alone prime minister must master, if she can. 7
 The Economist January 7th 2017 21
United States
Also in this section
22 Congressional ethics
23 Recruiting police officers
23 Stand-your-ground laws, measured
24 Charleston’s new museum
24 Markets for tickets
25 Lexington: Learning to love
Trumpism

For daily analysis and debate on America, visit

Economist.com/unitedstates
Economist.com/blogs/democracyinamerica

Inequality the middle may seem to explain a lot politi-

cally, but it is not true. Much federal policy
Fat tails benefits middle earners more than the
poor. One example is the tax-deduction for
mortgage-interest payments. This handout
currently costs slightly more than the
earned income tax-credit (EITC), the flag-
ship anti-poverty programme that tops up
WASHINGTON, DC
poor workers’ earnings. Yet it benefits only
America’s government spends a lot on middle earners and little on the poor
those who can afford to own their home

A PUZZLE exists where America’s eco-

nomics meet its politics. Income in-
equality is higher than in other rich coun-
earners do not seem to bother voters near-
ly as much as many on the left would like
them to.
(the bigger the mortgage, the more gener-
ous the deduction). Another example is
the tax exemption for employer-provided
tries, and the recent election was In fact, some argue that a focus on in- health insurance. Unlike the mortgage-in-
interpreted by many as the revenge of the equality actually harmed Democrats’ terest deduction, this does help many poor
left-behind, who found their champion in chances. Most of the rise in inequality hap- workers. But it benefits the middle more,
Donald Trump. Yet the candidate who pened over a decade ago (see chart 1). Polls and this disparity has become sharper in
made income inequality a campaign usually suggest that Americans care less recent decades as insurance has become
theme, wanted higher taxes on the rich about inequality than they do about eco- more expensive (see chart 2).
and promised more financial regulation nomic opportunity. And voters have rea- Handouts to the relatively well-off do
lost. Since the election, Mr Trump has son to worry about stagnation in the mid- not end with tax exemptions. Ignoring
nominated a cabinet with a combined net dle-classes. Median weekly earnings, public pensions, America’s biggest federal
worth of over $6bn, by one estimate. He adjusted for inflation, were the same in redistribution programme is Medicare,
has invited the bosses of big corporations 2014 as they were in 2000. Health-insur- which offers free health insurance to
to advise him on economic policy. And he ance premiums have soared. A recent pa- over-65s of any income. Much Medicare
has filled key White House posts with per by Raj Chetty of Stanford University spending, which totalled $589bn (around
Goldman Sachs alumni. The riches of top and colleagues documents the “fading 3% of GDP) in 2016, benefits the middle 1
American dream”. In 1970 more than nine
in ten 30-year-olds earned more, in infla-
1 2
For richer tion-adjusted terms, than their parents did A healthy chunk
United States Richest 1%, share of
at the same age. In 2014 only half did. United States, employers’ health-insurance
Gini index* after-tax income, % Democrats, the logic goes, focus too contributions, as % of market income
0.6 18 much on helping the poor and taxing the 1990 2013
rich, ignoring justified feelings ofabandon- 7
0.5 16
ment in the middle. But there is another 6
0.4 14 half to the political argument: the potent 5
0.3 12 charge that government redistribution also 4
0.2
picks the pockets of the hard-working mid- 3
10
dle, offering welfare to the feckless poor. 2
0.1 8 This suspicion of redistribution explains 1
0 how Mr Trump could run simultaneously 0
1980 85 90 95 2000 05 10 14 1st 2nd 3rd 4th 5th
as populist insurgent and as champion of
Poorest INCOME QUINTILE Richest
Sources: CBO; Piketty, *0=perfect equality, huge tax-cuts for the highest earners.
Saez and Zucman (2016) 1=perfect inequality Source: CBO
The idea that government has exploited
22 United States The Economist January 7th 2017

swing might be thought of as a revolt of the driven inequality since 2000. A recent
3
Easing the pain lower middle. However, it was largest compendium published by the Russell
United States, median real household income* among those with incomes beneath Sage Foundation warns of growing differ-
1979=100 $30,000. Most of these voters are probably ences in wealth even among those who are
Market income: in the poorest fifth of households, though not rich. Mr Trump’s plan to reduce taxes
plus transfers plus transfers less taxes some may previously have held more lu- on capital returns and abolish them on in-
150 crative jobs. The Pew Research Centre esti- heritance could exacerbate these trends,
140 mates that the middle class, defined as much as the Reagan income-tax cuts coin-
those with incomes between two-thirds cided with growing disparity in wages.
130
and twice the median, shrank from 55% of The effect of Mr Trump’s economic poli-
120 the population in 2000 to 51% by 2014. cies on median incomes will depend on
110 whether they encourage firms to invest,
100
Reaganite or kryptonite? boosting workers’ productivity. Historical
Inequality will rise if Mr Trump succeeds evidence is not encouraging: median earn-
90 in slashing taxes for the highest earners, as ings barely grew in the 1980s. But if wages
1979 85 90 95 2000 05 10 13
it did after Ronald Reagan’s tax cuts in the continue their recent recovery, Mr Trump is
Source: CBO *Adjusted for household size
1980s. Then, the labour market was about sure to claim the credit. And, unlike his
to bifurcate into winners and losers from party, Mr Trump has shown little appetite
2 class, notes Gabriel Zucman of the Univer- globalisation and technological change. to curb spending on the middle class. A
sity of California, Berkeley. With Thomas Today, rising inequality in wealth, rather very rich elite, high poverty and plentiful
Piketty and Emmanuel Saez, two other than in wages, might be a bigger concern. government spending on the middle could
economists, Mr Zucman recently produced Mr Zucman and his co-authors find that a make Mr Trump look like a continuity can-
new estimates which harness GDP data to boom in investment income at the top has didate after all. 7
improve the familiar figures from surveys
and tax returns. They find that the incomes
Congressional ethics
of those in the 50th to 90th income percen-
tiles have grown by 40% since 1980, more
than previously thought, thanks to grow- Old bog, new tricks
ing tax exemptions. The poorer half of
WASHINGTON, DC
Americans pay roughly as much in taxes as
How to lose votes and irritate people
they receive in cash redistribution, in spite
of the EITC.
Before the financial crisis, government
redistribution kept median incomes rising
A S THEIR first major initiative of the
new year, Republican congressmen
announced a scheme so crassly self-
congressional control and limit the scope
of its investigations and its ability to
publicise its work. Paul Ryan, the Repub-
even as wages stagnated (see chart 3). Since interested as to suggest they had learned lican Speaker of the House of Repre-
then it has kept incomes flat as wages have nothing from the old one. Denizens of a sentatives, warned against this; the plan
fallen. By 2013 median household income reviled institution, and a party railroaded was nonetheless approved, by a vote of
before taxes was 1.6% lower than it was in by Donald Trump’s populist insurgency, 119 Republican congressmen to 74.
1999. But after taking off taxes and adding they planned to gut the Office of Congres- Mr Trump, no doubt aware of how
in government transfers, it was fully 13.7% sional Ethics (OCE), an independent badly this was playing, offered a mea-
higher. More recent data suggest that even investigative body designed to root out sured criticism of the congressmen’s
pre-tax incomes are now growing again: corruption. Less than 24 hours later, after initiative. In a tweet, he called the OCE
they were up by 5.2% in 2015. a hail of condemnation, they turned tail; “unfair” but suggested his Republican
The economic safety net for the poor- even so their bungling was damning. colleagues had bigger things to be getting
est, however, remains perilously thin by in- The OCE was founded by the Demo- on with. A deluge of negative comments
ternational standards. A typical jobless crats in 2008 after a run of scandals— received at their district offices made that
married couple with two children can ex- including a big one concerning the Re- point more forcefully. So did Senator
pect a welfare income, including the value publican lobbyist Jack Abramoff—high- Lindsey Graham of South Carolina, who
of food stamps, worth 23% of median pay. lighted the impunity with which some called the attempted takedown of the
The average in the OECD, a club of mostly lawmakers were abusing their office in OCE “the dumbest frickin thing I’ve ever
rich countries, is 40%. Partly as a result, rel- exchange for campaign contributions. heard”. On January 3rd, the opening day
ative poverty is higher than every other The office is empowered and equipped to of the new Congress, the plotters hastily
member of the club bar Israel. This looks investigate allegations of impropriety. It agreed to leave the OCE alone after all.
even worse as the lower-paid have borne may then report its findings to the House This delivered an easy triumph to Mr
the brunt of rising inequality. Messrs Pi- Ethics Committee and, even if that body Trump, whose tweet was credited by
ketty, Saez and Zucman find that the trend decides to take no further action, pub- many headline writers with having
since 1980 can be summarised as a shift of licise them. Anti-corruption campaigners persuaded the congressmen to change
8% of national income from the bottom consider it a bulwark against official course, albeit without much evidence. It
half of earners to the top 1%, with no effect corruption. Many congressmen consider also showed those lawmakers to lack
on those in between. it unjust and wasteful. self-awareness to an amazing degree. If
That all still leaves those whose earn- Several who have been subject to the the OCE is not working well, they should
ings place them between the middle and office’s inquiries were involved in the start a debate—in and with the public—
the poor. Median household income in effort, at a closed-door meeting of Repub- about how better to investigate and
2015 was nearly $57,000. Exit polls suggest lican congressmen, to nobble it. They prevent their abuses. To avoid an unnec-
that Mr Trump lost among voters with in- included Blake Farenthold of Texas, who essary partisan fight, they also plainly
comes beneath $50,000, as a Republican was investigated and exonerated by the need Democratic support. This is basic
presidential candidate would be expected office over an allegation of sexual harass- politics. Republican congressmen should
to. But he did much better with such voters ment. The plan was to put the OCE under really learn how to do it.
than Mitt Romney did in 2012. The positive
 The Economist January 7th 2017 United States 23

Recruiting police officers Dallas, though sympathy can also boost re-
cruitment. Dallas has seen an uptick in ap-
The force is weak plications since its officers were attacked.
The last is the image of policing. The
deaths of several unarmed black men at
the hands of police officers and the ensu-
ing backlash seem to have made police
work less appealing. “We have a situation
LOS ANGELES
where law enforcement is being scruti-
Police departments struggle to stay fully staffed
nised more heavily,” says Mr Hamilton of

S TAR WARS can be used to sell almost

anything, from Lego to a career in polic-
ing. Fort Worth’s police department re-
the LAPD. According to Gallup, a polling or-
ganisation, trust in law enforcement gener-
ally has remained fairly stable since it be-
leased a recruitment video on its Facebook gan surveying the topic in 1993. But
page in December featuring an officer at according to data collected by Harris, an-
target practice with a stormtrooper. The other polling group, the share of both
white-clad soldiers are notoriously poor whites and blacks who believe that Afri-
shots, and the video shows the galactic GI can Americans are discriminated against
missing every attempt he makes until he by the police has risen markedly between
creeps so far forward that his goggles are 1969 and 2014.
very nearly touching his target. When the Baltimore Police Department’s officer
exasperated officer asks “who referred you shortage led it to Puerto Rico in search of
to us?” Darth Vader peeks out from the fresh faces. The department also mulled re-
back of the room, shaking his helmeted laxing its stance on past marijuana use.
head in disgust. The scrolling text at the Chicago has cut its minimum age require-
end of the video, which has garnered 17m ment for its police academy from 25 to 21.
views thus far, urges: “Join our Force! If you Several departments have lowered educa-
have what it takes to be a Fort Worth Police No college required tional requirements for recruits. If Presi-
Officer and are a better aim than a Storm- dent-elect Trump follows through on his
trooper.” The advert underscores a serious such as the assassination of five Dallas po- promises to beef up military and infra-
problem affecting police forces nation- lice officers in July 2016. “When you look structure spending, the plight of police de-
wide. Economic and social changes have around the nation and you see the acts of partments might worsen, worries Mr Lim.
made it harder for police departments to violence directed at police officers—it The armed and police forces tend to com-
keep their forces fully staffed, and lead to makes people reluctant to join. Many peo- pete for applicants. If more jobs become
increasingly desperate recruitment. ple join the profession when they’re 22 or available in industry and construction,
The Los Angeles Police Department 23 when parents still have a heavy influ- putting on a badge might become even less
was short of nearly 100 officers as of mid- ence,” says Scott Walton, deputy chief in appealing to young workers. 7
December—only 1% of its total workforce,
but still enough to be felt on the ground,
says Captain Alan Hamilton, who runs re-
Gun laws
cruitment for the department. Philadel-
phia had 350 vacancies, largely due to a With the stroke of his pen in 2005, Jeb Bush, then governor of Florida, ignited enthusi-
spate of retirements. Last spring, Dallas asm for “stand-your-ground” laws. Citizens who “reasonably believed” their lives to be
cancelled two academy classes for lack of threatened were given the right to “meet force with force, including deadly force”—
applicants; its preliminary applications even in public places and, critically, without the duty to try and retreat first. More than
dropped by over 30% between 2010 and 20 states have passed similar laws since then. Critics warned that, rather than protect-
2015. In 2012, the ratio of police officers to ing self-defence rights as intended, the bill would result in unnecessary deaths. Re-
population hit its lowest level since 1997, search published in the Journal of the American Medical Association appears to
according to Uniform Crime Reporting vindicate those fears. Soon after the law took effect in Florida, there was a sudden and
Programme data published by the FBI. sustained 24% jump in the monthly homicide rate. The rate of homicides involving
The dynamics underpinning the short- firearms increased by 32%. The authors found that in states without a stand-your-
ages vary by department, but there are na- ground law over the same time period those rates remained flat, suggesting that a
tional trends making it harder for police nationwide crime wave was not to blame for the abrupt increase.
forces to attract applicants. The first is a
strong economy. Nelson Lim, a researcher Florida, United States, homicides per 100,000 population, victims aged 20-34 years
at the RAND Corporation, a think-tank, 2.0
says this is nothing new. When plenty of “STAND-YOUR-GROUND”
LAW COMES INTO EFFECT
jobs are available, people are usually less
motivated to enter dangerous professions. 1.5
ALL HOMICIDES
Police forces as well as the armed forces
tend to field less interest in boom times. 1.0
The second is the perception of in-
creased danger associated with policing:
135 officers were killed in the line of duty 0.5
between January 1st 2016 and December Of which: HOMICIDES BY FIREARM
28th 2016—a 10% increase from 2015 but 0
fewer than the 192 killed in 2007. Shooting 1999 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 14
deaths increased from 41 to 64. Several of Source: “Evaluating the impact of Florida’s ‘stand-your-ground’ self-defence law on homicide and suicide by firearm”
by D.K. Humphreys, A. Gasparrini and D.J. Wiebe, January 2017
them were high profile and gruesome,
24 United States The Economist January 7th 2017

Charleston’s new museum

Markets for tickets
Cobblestones and Battling bots
bones NEW YORK
Why you still can’t get a ticket for “Hamilton”

CHARLESTON
Filling in the gaps in America’s history
“H AMILTON”, the hip-hop Broad-
way musical about one of Ameri-
ca’s founding fathers, has broken all sorts
Last month President Obama signed
legislation which aims to eliminate bots
and intends to slap hackers with hefty

J UST inside the gates of the Unitarian

Church in Charleston sits a slab of sal-
vaged bricks. Affixed to the front is a met-
of box-office records. Demand is high
because it is exceptionally good. But this
is not the only reason tickets are so scare.
fines. Under the new law, the Better
Online Ticket Sales Act, the federal gov-
ernment can also intervene and file suit
al bird looking backwards—a West African Every time the show’s producers release on behalf of people shut out of buying
symbol, a plaque explains, which means a new block to sell, they immediately get tickets because of bots. The law has
“learning from the past in order to move snapped up by “ticket bots”, high-speed support from across the industry, in-
forward”. An inscription dedicates the ticket-buying software. The bots cut the cluding Stubhub, a secondary market-
monument to “the enslaved workers who virtual queue, manipulating and paralys- place. Stubhub does not sell anything
made these bricks and helped build our ing sites like Ticketmaster before real directly, but takes a transaction fee. Je-
church.” The church is off most tourists’ people can get a look-see. Jeffrey Seller, remy Liegl, a lawyer at Ticketfly, which
trails, so many miss the memorial. But an “Hamilton’s” producer, has called bots sells and promotes music events, said
overdue museum aims to spread its frank “computerised cheaters”. during a congressional hearing that bots
message more widely. Despite Mr Seller working with Tick- harm everyone in the music industry
Like much of the South, for a long time etmaster—which runs software in an except for the bots’ operators. The ticket
the city glossed or downplayed the abom- effort to stop bots—to get tickets into the markups end up in the pockets of the bot
ination that made it rich and left it beauti- hands of real fans, too many tickets end operator, not the promoter, not the venue
ful. Visitors to its grand townhouses, or to up on secondary market websites for and not the performers.
the sumptuous plantation mansions near- substantially inflated prices. According to But the secondary market, worth as
by, might be shown suspiciously well-ap- Ticketmaster, about 60% of the hottest much as $8bn worldwide, may be too
pointed “servants’ quarters”. The conflict tickets are bought by bots. A single bro- valuable for virtual scalpers to give up.
known as the “war between the states” ker, using a bot, purchased 1,012 to a 2014 Federal law enforcement may be unable
was not, repeat not, fought over slavery. U2 concert in under a minute, despite the to hunt down bot-operators based out-
There is more honesty these days; the trade venue limiting sales to four tickets per side America. And the scale of the racket
in human beings is documented in a small customer. By the end of the day, that is daunting. Last year bots made 5bn
exhibition in an old slave mart. But such same broker had purchased 15,000 tick- attempts to buy tickets on Ticketmaster,
acknowledgments are not commensurate ets. Even tickets for free events, like Pope at a rate of roughly 10,000 a minute. A
with the role the institution once played in Francis’s visit to New York in 2015, were cold-hearted economist would propose a
Charleston, and Charleston in it. Rose-tint- gobbled up by bots and sold for thou- simple solution: make the tickets much
ing continues. As Michael Boulware sands of dollars on secondary sites. more expensive in the first place.
Moore, boss of the planned International
African American Museum (IAAM), says,
for many the plantations are less “places of building will duly be raised on pedestals, can-American museum in Washington
horrific inhumanity” than picturesque the waterfront windows affording views (the two share an exhibit designer). So, he
backdrops for weddings. of the Cooper River and out towards Fort hopes, will its emphasis on genealogical
The IAAM’s progenitor was Joseph Ril- Sumter, where the civil war began in 1861. research, a bid to fill some of the gaps
ey, Charleston’s mayor for four decades un- That setting is one ofthe features Mr Moore scoured by enslavement, plus its interest in
til last year. He announced the idea in says will differentiate it from the new Afri- Africa itself. Some locals, he says, fear that,
2000, aiming to remedy an amnesia he de- in a rapidly gentrifying environment, the
scribes as “a societal defect in America”. (In IAAM might “pimp black history”. On the
the 1970s his outreach to the black commu- contrary, says Mr Riley, it will tell the “un-
nity earned him the sobriquet L’il Black varnished, harsh story” of the country’s
Joe: “an honour”, he now says.) Ser- “original sin”, including the roughly 700
endipitously, he recalls, the city was able to people who froze to death in a warehouse
acquire “one of the most sacred sites of Af- near the wharf in the winter of1807-08.
rican-American history in the Western Yet along with the horror, promises Mr
hemisphere”, the location of Gadsden’s Moore, the museum will commemorate
Wharf, where perhaps 40% of the slaves the skills and accomplishments of slaves
imported to America first set foot on the and their descendants, reassuring black
mainland. Overall Charleston’s wharfs ac- youngsters that “there are heroes who look
counted for around half of those arrivals. just like them”. One such is his own great-
As Mr Riley says, nowhere else in the coun- great-grandfather, Robert Smalls (pic-
try was as important to slavery, and “no tured), who in 1862 won his freedom by
place has more of a duty” to remember it. commandeering a Confederate steamship
He is helping to raise the $20m needed for and delivering it to the federal fleet. Later
the project to meet its target of $75m. he was elected to Congress and bought his
When the museum opens in 2019—the former master’s house. A century and a
400th anniversary of the first slave ship to half after his escapade, two markers were
land in the colonies—its “greatest artefact”, erected in Charleston in his honour. One
says Mr Moore, “will be the ground.” The Smalls by name, big in daring was promptly vandalised. 7
 The Economist January 7th 2017 United States 25

Lexington Learning to love Trumpism

Conservatives are working hard to reconcile their beliefs with the next president’s agenda
Other conservative grandees wonder if a dose of economic
nationalism is the price of solidifying the coalition that carried
Mr Trump to power, including blue-collar voters in the Midwest
who abandoned the Democrats in droves. They praise Mr Trump
as a patriot-pragmatist in the spirit of Lincoln or Theodore Roose-
velt. They are slower to note more recent models for Trumpism,
starting with populist-nationalist movements sweeping Europe.
Parallels with Nicolas Sarkozy, France’s centre-right president
from 2007-12 and a hyperactive corporatist, are startling. Mr Sar-
kozy denounced French carmakers for producing cars in eastern
Europe (“not justifiable”, he growled), and rushed to a steelworks
to promise workers he would save their jobs (a pledge he could
not keep).
Hugh Hewitt, a conservative talk-radio host, this month will
publish “The Fourth Way”, a book-length guide to how Trum-
pism might advance bits ofthe Reagan agenda, by promoting con-
servative judges, stronger armed forces (Mr Hewitt likes Mr
Trump’s talk of a 350-ship navy) and free enterprise (above all
rolling back “the vast and growing regulatory state”). To that he
would add a “repatriation window” for corporate profits held
abroad, and a new, voter-pleasing wave of infrastructure projects,

A TRUE politician is someone who, upon spying a torch-wield-

ing mob marching on his legislature, declares: “Oh good, a
parade—I must lead it.” A striking number of conservatives are
including reopened shipyards, modernised airports, local sports
facilities and other visible signs of Trumpian largesse. Billions
would be disbursed by temporary, county-level commissions ap-
taking that approach ahead of Donald Trump’s inauguration on pointed by Congress and the White House (“the patronage!”
January 20th. The president-elect’s followers include many who sighs Mr Hewitt) and as classic pork-barrel spending by members
distrust both main parties and, if handed a pitchfork, might skew- ofCongress. To breakthe partisan stalemate over immigration Mr
er half the Republicans in Congress. Undaunted, party bigwigs Hewitt would have Mr Trump lay out detailed plans for a double-
and intellectuals have begun making the case that, for all its row border fence along the southern border, which when half- or
rough edges, “Trumpism” is a recognisably conservative way of three-quarters built would trigger a legalisation programme for
viewing the world, with the potential to rescue swathes of Amer- most of the 11m immigrants in America without the right papers.
ica from feelings of abandonment and despair, securing major- Get all this right, Mr Hewitt says, and Mr Trump can realign na-
ities for Republicans for years to come. tional politics. Get it wrong and Mr Trump could face “catastroph-
Republican leaders who clashed with Mr Trump during the ic” midterm elections in 2018, a primary challenger in 2020 or, if
election campaign now urge colleagues to see his victory as a les- embroiled in scandals, impeachment.
son in humility. After the new Congress was sworn in on January
3rd Paul Ryan, the Speaker of the House of Representatives, told Seeking Mr Trump’s inner Reagan
members that for too long leaders in Washington had treated In the spring Newt Gingrich, a former Speaker and adviser to Mr
complaints about closed factories with “condescension”. Now Trump, will publish “Understanding Trump.” He calls the presi-
Americans had let out a “great roar”, Mr Ryan continued: they dent-elect the third attempt, after Reagan’s election in 1980 and
have given Republicans control ofCongress and the White House his own Contract with America in 1994, to break free from the big-
not as an act of generosity but as a demand for “results”. government mindset of Franklin Roosevelt’s New Deal. To
Embracing the results sought by Trumpism will not be easy for square that claim with Mr Trump’s free-spending, distinctly stat-
convinced free-marketeers such as Mr Ryan. On the day that Con- ist campaign promises, Mr Gingrich portrays the businessman as
gress returned to work, Ford announced that it is cancelling plans a disruptive innovator, using social media and a genius for pub-
for a $1.6bn plant in Mexico and will create 700 jobs in Michigan licity to win a presidential election on the cheap. That thriftiness,
building electric vehicles. This follows months of public brow- also displayed in Mr Trump’s business life, tells Mr Gingrich that
beating by Mr Trump, including threats of punitive tariffs on firms President Trump will run a lean federal bureaucracy, root out
making things abroad—though Ford’s chief executive cast the de- waste and generally “kick over the table”. Pondering Mr Trump’s
cision to invest in America as a vote of confidence in “pro- desire for better relations with Russia, Mr Gingrich has called its
growth” policies outlined by the president-elect. Ford joins Carri- president, Vladimir Putin, “a thug” but at the same time scolded
er, Lockheed Martin and Boeing as companies that have changed Republicans who treat Russia as if it were still the Soviet Union,
investment or pricing decisions after Trumpian arm-twisting rather than a competitor that needs dealing with “as it is”.
(hailing Carrier’s climb-down, eased by tax breaks from the state Some conservative enthusiasm for Trumpism reflects a sin-
of Indiana, Mr Trump declared that the free market had failed cere desire to grapple with voter angst. Some is born of opportun-
American workers “every time”). As Mitt Romney’s vice-presi- ism and fear that the next president will set his voters on Repub-
dential running-mate in 2012, Mr Ryan scorned the idea of gov- licans who defy him. Yet Mr Trump will need allies in Congress,
ernments picking “winners and losers”. Today the Speaker talks too, if he is to rack up achievements to impress supporters.
up the prospects of tax reforms and deregulation giving all com- Trumpism, born as a populist revolt, must become a programme
panies good cause to stay in America. for government. That’s harder than leading a parade. 7
26 The Economist January 7th 2017
The Americas
Also in this section
27 Evo Morales for ever?
Bello is away

Brazil’s prisons alliance with the Comando Vermelho (Red

Command, or CV). But the paulistas used
Horror in the jungle their growing might to force their partner
into a subordinate position, which pro-
voked a rupture. The PCC has since teamed
up with the CV’s main rival, the Amigos
dos Amigos (Friends of Friends). Prosecu-
tors say the arrangement has allowed the
SÃO PAULO
São Paulo group to take control of Rocinha,
A massacre in Manaus shows that competition among gangs is increasing
a favela in Rio de Janeiro, thought to be the

T HE rampage lasted 17 hours. By the end

of it, 56 inmates of the Anísio Jobim pri-
son complex in Manaus, a city set amid the
bers of Família do Norte (Family of the
North, or FDN), which controls drug traf-
ficking in the Amazon region, organised
city’s most profitable drug market.
The CV has responded by forming alli-
ances with other crime groups threatened
Amazon rainforest, were dead. Many had the Compaj massacre. Having gained con- by the PCC’s expansion. Among them are
been decapitated; severed arms and legs trol over much of the prison, the gang the FDN, Brazil’s third-biggest gang, which
were stacked by the entrance to the jail, sought to wipe out opposition from Pri- controls drug-smuggling routes in the Am-
known to most as Compaj, a contraction of meiro Comando da Capital (First Com- azon. The clashes in Roraima and Rondô-
its full name. Luís Carlos Valois, a judge mand of the Capital, or PCC), a larger rival nia were a harbinger of the Compaj massa-
who negotiated an end to the violence on based in São Paulo, a south-eastern state. cre. Most of the dead were members of the
January 2nd, called the hellish scene “Dan- The assault on the PCC seems to be a re- FDN and the CV, targeted by the PCC in re-
tesque”. It was Brazil’s bloodiest prison riot action to its growing strength. Formed in venge for attacks mounted by the FDN the
in a quarter-century. 1993 by inmates in São Paulo after police year before.
Only the death toll makes the carnage massacred more than 100 prisoners at the
at Compaj stand out. Brazil’s prisons erupt notorious Carandiru jail, it has branched Payback time
often. Last year 18 inmates died in clashes out into drug running, extortion and prosti- Officials now wonder where and when
between gangs at prisons in the northern tution, often with the tacit consent of pri- the PCC will retaliate. The retribution will
states of Roraima and Rondônia. In Per- son authorities. The PCC killed the last big come from calculation, not rage, says Gua-
nambuco, a north-eastern state whose pri- rival drug trafficker in Paraguay in 2016. racy Mingardi, a criminologist. But come it
sons are overstuffed even by Brazilian stan- That gave it dominance over smuggling will. The PCC “cannot remain quiet, as
dards, violent deaths are a frequent along the borders with Paraguay and Bo- they will lose prestige, and prestige in the
occurrence. In January 2016, 93 prisoners livia, and thus over the supply of cocaine long term represents money”.
broke out of two of the state’s jails. and marijuana to the south-east, Brazil’s There is little prospect that govern-
Prisons are both hellholes and head- richest region. It used that advantage to be- ments will do much to end the cycle of vio-
quarters for Brazil’s most powerful crimi- come the country’s biggest and most profit- lence. Alexandre de Moraes, Brazil’s justice
nal gangs. The country’s prison population able organised-crime group. Exploiting its minister, said the ringleaders of the Com-
of 622,000, the world’s fourth-largest, is growing control of the main entry points paj massacre will be transferred to federal
crammed into jails built to hold 372,000 in- for drugs, the PCC moved beyond its home prisons. The federal government promised
mates. Compaj houses 2,200, nearly four region and now has a nationwide pres- at the end of 2016 to spend an extra 1.2bn
times its capacity. Guards often do little ence. The battle at Compaj is “principally a reais ($370m) quickly to build and
more than patrol the perimeters, leaving reaction to the growing power of the PCC modernise state prisons. But that will not
gangs free to manage far-flung criminal op- across Brazil in the distribution of drugs”, be enough to improve conditions that a
erations via mobile phones. says Bruno Paes Manso, a criminologist at previous justice minister described as “me-
The riot at Compaj suggests that prison the University of São Paulo. dieval”. The cash-strapped federal govern-
violence—and the behaviour of the gangs At first, the PCC co-operated with the ment will have a hard time finding more.
behind it—is entering a new phase. Offi- dominant forces in other states. In Rio de Historically, it has preferred to let state gov-
cials in the state of Amazonas say mem- Janeiro it formed a narcotics-distribution ernments, which house nearly all of Bra- 1
 The Economist January 7th 2017 The Americas 27

2 zil’s prisoners, bear the burden of manag- nationalised utilities, put party hacks in
ing and paying for the system. Evo’s economy charge and failed to invest in them. La Paz’s
They, in turn, have neither the money Bolivia water reserves reached dangerously low
nor the ideas needed to improve condi- 9
levels even before the drought took hold.
tions. Politicians and judges are more eager GDP, % increase on a year earlier Such setbacks have damaged the gov-
to lock up criminals, especially if they are 6 ernment’s prestige. In October it had to
poor and black, than they are to reduce 3
cancel a popular bonus of an extra
overcrowding. About two-fifths of Brazil’s + month’s wages paid to all workers in the
prisoners are awaiting trial rather than 0 formal sector, but only in years when GDP
–
serving sentences; university graduates, growth is more than 4.5%. Mr Morales’s re-
3
priests and others are entitled to wait in General-government lations with trade unions and social move-
budget balance, % of GDP
comfier conditions. 6 ments, which once gave him unstinting
Governments also fear that a crack- support, have been hurt by disputes over
9
down on violence in prisons will cause 2006 08 10 12 14 16*17† infrastructure projects and benefits for dis-
trouble outside them. An attempt by São †Forecast
abled people. A conflict over regulation of
Source: IMF *Estimate
Paulo’s government in 2006 to curb the pri- mining by co-operatives led to the deaths
son-based operations of the PCC set off a of four miners and the murder of a vice-
campaign ofviolence by the gang’s confed- Bolivia’s woes may cut Mr Morales minister. The Central Obrera Boliviana,
erates across the state. Hundreds died over down to size. Despite the onset of the rainy the main trade-union federation, has fallen
ten days in attacks on policemen and the season in December, many districts are still out with the government. The MAS lost
reprisals they provoked. Politicians prefer rationing water. The state-owned water control of El Alto, Mr Morales’s political
to keep the violence within prison walls. 7 company that supplies La Paz, the seat of stronghold, in regional elections in 2015.
government, and El Alto, a populous city None of that deters his allies from plot-
perched on a cliff above it, ran out of water ting to keep him in power. Many lookto the
Bolivia in November. The water level in the Inca- example of the late Hugo Chávez, Vene-
chaca reservoir, which serves parts of La zuela’s left-wing leader, who lost a referen-
For Evo, for ever Paz, was far below normal in early January.
Residents of the city queue for hours to get
dum to end term limits in 2007 only to hold
another one 14 months later, which he
deliveries by lorry. Farmers and ranchers won. Under Bolivia’s constitution, a peti-
are reporting large and growing losses. tion signed by a fifth of the electorate could
This is contributing to the slowdown of trigger a re-run of the referendum to lift the
LA PAZ
the economy, which depends largely on term limit facing Mr Morales.
Evo Morales’s supporters are looking
gas exports. Their price is linked to the Another option, suggested by the vice-
for ways around term limits
price of oil, which has halved since 2014. In president, Álvaro García, is that Mr Mo-

A S 2016 drew to a close, a resignation let-

ter from Bolivia’s president, Evo Mo-
rales, lit up social media. It was a hoax, per-
2017 Bolivia is expected to earn $2.1bn from
gas sales, just a third of what it made when
prices were high.
rales resign for real, turning the hoax into
reality. If this were coupled with a reform
of the constitution, Mr Morales could ar-
petrated on día de los inocentes (“day of the As a result, GDP will grow 3.9% in 2017, a gue that his current mandate, served under
innocents”), the Latin American version of bit more than this year but far below the an outdated constitution, should not count
April Fools’ Day, which falls on December peak of 6.8% in 2013, forecasts the IMF (see towards one of the two terms he is al-
28th. The unamused communications chart). Bolivia’s overvalued currency is lowed. He used this manoeuvre once be-
minister, Marianela Paco, denounced it as hurting producers of goods besides raw fore, in 2014, to run for re-election.
an “attack on the people’s right to reliable materials, warned the IMF last month. The president says that what he really
and truthful news”. Alarmingly, the current-account and bud- wants is to return to his career as a grower
In fact, Mr Morales’s allies are scheming get deficits were around 8% of GDP in 2016. of coca, a traditional stimulant that is also
to keep him in office indefinitely, even By the profligate standards of Latin the raw material for cocaine. In fact, he was
though, in a referendum last February, Bo- America’s left-wing leaders, Mr Morales more an organiser of farmers than a culti-
livians voted to deny him the right to run has been a fairly responsible economic vator himself. Only inocentes believe it is
for a fourth term in 2019. On December17th manager. He invested Bolivia’s gas wind- his ambition to become one. 7
his party, the Movement to Socialism fall in roads, bridges, hospitals and schools.
(MAS), named him as its presidential can- Until 2014 he kept a lid on budget deficits.
didate for the next election. “If the people But the oil-price slump and wacky weather
decide it, Evo will continue,” Mr Morales are exposing the government’s failures.
promised his supporters. High taxes on the production of oil and gas
The clamour to keep him is not a sign of and the absence of an independent regula-
recent success. Bolivia is suffering from a tor have discouraged investors from pros-
severe drought, whose effects are made pecting for new reserves, says Hugo del
worse by the government’s failure to plan Granado, a former energy official. Just two
and invest. Economic growth, which sus- foreign energy companies, Russia’s Gaz-
tained Mr Morales’s popularity for most of prom and Venezuela’s PDVSA, have come
his 11 years in office, has lost momentum. to Bolivia in the past decade. Debt-ridden
Scandals, strikes and clashes between PDVSA has only a token presence; Gaz-
protesters and police have turned some prom spent years battling bureaucracy and
Bolivians against the government. Yet Mr ended up scaling back its ambitions. Rath-
Morales, Bolivia’s first president of indige- er than invest on its own, it formed a part-
nous origin, dwarfs his rivals. Nearly half nership with France’s Total, which already
of voters still approve of his performance. had operations in Bolivia.
No one in the MAS has the stature to suc- The government’s infrastructure-
ceed him. The opposition is fragmented. spending binge did not extend to water. It Why stop in 2025?
28 The Economist January 7th 2017
Asia
Also in this section
29 Japan’s elderly workers
29 Indonesia debates a booze ban
30 New Zealand’s national parks
31 Banyan: Malaysia’s political puzzle

For daily analysis and debate on Asia, visit

Economist.com/asia

Demography in Japan square-metre apartments in the old blocks

were sufficient for the post-war generation,
A negative-sum game modern Japanese families demand more
space. Tama’s authorities intend to trans-
form other districts in a similar way.
This is smart policy, but there is a pro-
blem with it. The number of 20- to 29-year-
TAMA
olds in Japan has crashed from 18.3m to
The ageing of Japan’s population is changing its cities. The first of two stories looks
12.8m since 2000, according to the World
at the impact on suburbia
Bank. By 2040 there might be only 10.5m of

M IEKO TERADA moved to Tama in

1976, at about the same time as every-
one else there. Back then, the fast-growing
confused old people wandering around.
By 2025, officials in Tama predict, almost
one in four elderly residents will be bed-
them. Cities like Tama are therefore play-
ing not a zero-sum game but a negative-
sum game, frantically chasing an ever-di-
city in Tokyo’s suburban fringe was busy ridden and one in seven will suffer from minishing number of young adults and
with young married couples and children. dementia. And the city is hardly ideal for children. And some of their rivals have ex-
These days, however, the strip of shops old people. It is built on steep hills, and the tremely sharp elbows.
where Ms Terada runs a café is deathly qui- five-storey apartment blocks where many Follow the Tama river upstream, into
et, her clientele elderly. The people of Tama of the residents live do not have lifts. the mountains, and you eventually reach a
and their apartments are all growing old For Tama, though, the most worrying tiny town called Okutama. What Tama is
and decrepit at the same time, she says. effects ofageing are fiscal. Two-thirds ofthe trying to avoid has already happened
In the mid-1990s Japan had a smaller city’s budget goes on social welfare, which there. Okutama’s population peaked in the
proportion of over-65s than Britain or Ger- old people require lots of. They do not con- 1950s, as construction workers flocked to
many. Thanks to an ultra-low birth rate, ad- tribute much to the city’s coffers in return. the town to build a large reservoir that sup-
mirable longevity and a stingy immigra- Although Japan’s central government re- plies water to Tokyo in emergencies. It has
tion policy, it is now by far the oldest distributes money between municipal- grown smaller and older ever since.
country in the OECD. And senescence is ities, much of what local governments Today 47% of people in the Okutama
spreading to new areas. Many rural Japa- spend comes from local residency taxes, administrative area—the town and sur-
nese villages have been old for years, be- which fall only lightly on pensioners. In rounding villages—are 65 or older, and 26%
cause young people have left them for cit- short, says Shigeo Ito, the head of commu- are at least 75. Children have become so
ies. Now the suburbs are greying, too. nity health in Tama, it pays for a place to scarce that the large primary school is only
Between 2010 and 2040 the number of avoid growing too old. about one-quarter full. Residents in their
people aged 65 or over in metropolitan To- 70s outnumber children under ten by
kyo, of which Tama is part, is expected to Tama’s enticements more than five to one (see chart, next page).
rise from 2.7m to 4.1m, at which point one- So, as well as providing more in-home care And Okutama’s residents are as stub-
third of Tokyo residents will be old. In and laying on aerobics classes to keep peo- born as they are long-lived. Some of its out-
Tama, ageing will be even swifter. The ple fit enough to climb all those stairs, lying villages have become so minuscule
number of children has already dropped Tama is once again trying to lure young that providing them with services is diffi-
sharply: its city hall occupies a former families. With a developer, Brillia, it has al- cult, says Hiroki Morita, head of the plan-
school. Statisticians think the share of peo- ready razed 23 five-storey apartment ning and finance department. It would be
ple over 65 in Tama will rise from 21% to blocks and put up seven towers in their better for their residents, and certainly bet-
38% in the three decades to 2040. The num- place. The number of flats in the redevel- ter for the local government, if they con-
ber of over-75s will more than double. oped area has almost doubled, and many solidated into larger villages. But old peo-
The city’s inhabitants have already are larger than before. That has attracted ple refuse to leave their shrunken hamlets
been spooked by an increasing number of new residents: although the poky 40- even during heavy snowstorms, and are 1
 The Economist January 7th 2017 Asia 29

Japan’s elderly workers find work through Koreisha were once em-
Where are the kids? ployees of Tokyo Gas, Japan’s largest sup-
Population of Okutama and Japan
Five-year age groups, 2015, % of total
Silver lining plier of natural gas to homes. They do the
same kind of work now—reading meters
OKUTAMA, TOKYO PREFECTURE JAPAN and explaining the use of appliances to
12 9 6 3 0 3 6 9 homeowners. “They have so much experi-
95+ ence and knowledge that can be put to
90-94 good use,” says Mr Ogata.
85-89 TOKYO
80-84 They can also be cheaper. Companies
As Japan ages, so too does its workforce
75-79 often hire back retirees on non-permanent
70-74
65-69
60-64
L IKE many firms in Aichi prefecture, Ja-
pan’s manufacturing heartland, Nishiji-
max, a maker of machine tools for the car
contracts offering poorer terms than their
previous ones. Takashimaya, a depart-
ment-store chain, has introduced a perfor-
55-59
50-54 industry, is struggling to find workers. Its mance-based system for such employees
45-49 solution in a country with a drum-tight la- aged 60-65 (at no extra cost to the company,
40-44 bour market is one that is increasingly it says).
35-39 common in Japan: raising the age of retire- Japan’s labour crunch has created a
30-34
25-29
ment. More than 30 of the company’s 140 chronic shortage of nursing care for elderly
20-24 employees are over 60; the oldest is 82. Put- people who are no longer fit enough to
15-19 ting qualified people out to pasture early is work. McKinsey, a consultancy, says Japan
10-14 a waste, says Hiroshi Nishijima, a manag- should encourage able-bodied elderly
5-9
er; “If they want to work, they should.” people to help. If 10% of them were to take
0-4
Since peaking at over 67m in the late up such work, the country would have an
Sources: Okutama town records; Statistics Japan
1990s, Japan’s workforce has shrunk by additional 700,000 carers by 2025, it reck-
about 2m. The government says it could ons. One way of encouraging this would
2 unlikely to move permanently just to collapse to 42m by mid-century as the pop- be to give priority to those who have
make a bureaucrat’s life easier. The inter- ulation ages and shrinks. The number of worked as carers when allocating places in
net and home delivery help them cling on, foreigners inched up in 2015 to a record nursing homes, says McKinsey. It does not
points out Mr Morita. high of 2.2m, but that is far from enough to help, however, that the state pension sys-
Okutama has tried to promote agricul- fill the labour gap. Instead of opening its tem discourages some elderly people from
ture: wasabi, a spicy vegetable that is doors wider to immigrants, Japan is trying working by cutting their benefits if they
ground up and eaten with sushi, grows to make more use of its own people who earn more than a certain amount.
well there. It hopes to appeal to families by are capable of working. At Nishijimax, managers clearly want
offering free vaccinations, free school Large companies in Japan mostly set a elderly workers to stay. The company’s
lunches and free transport. None of that mandatory retirement age of 60—mainly work routine is tailored to their needs. So,
has staved off ageing and decline. So now it as a way of reducing payroll costs in a sys- too, are the canteen’s offerings—right
is touting free housing. Mr Morita esti- tem that rewards seniority. But other busi- down to the reduced-salt miso soup. 7
mates that the town has about 450 empty nesses are less stringent. About 12.6m Japa-
homes. He wants the owners to give their nese aged 60 or older now opt to keep
homes to the town government, which working, up from 8.7m in 2000. Two-thirds Alcohol in Indonesia
they might do in order to avoid property of Japan’s over-65s say they want to stay
taxes. The government will then rent the
homes to young couples, the more fecund
gainfully employed, according to a govern-
ment survey. The age of actual retirement
Dry talk
the better. If they stay for 15 years their rent for men in Japan is now close to 70, says the
will be refunded. OECD, a rich-country think-tank. In most
Although its setting, amid steep hills, is countries people typically stop working
spectacular, Okutama is not a pretty town. before the age at which they qualify for a
SEMARANG
Its houses are neither old enough to be con- state pension. Japan, where the state pen-
Debating a ban on booze
sidered beautiful nor modern enough to sion kicks in at 61 (it is due to rise to 65 by
be comfortable. Some feature post-war
wheezes like plastic siding. Still, the pros-
pect of free accommodation some two
2025), is a rare exception.
The greying of Japan’s workforce is
clearly visible. Elderly people are increas-
O NE of Indonesia’s newest brands of
beer, Prost, traces its ancestry back to
1948 when Chandra Djojonegoro, a busi-
hours’ journey from central Tokyo might ingly seen driving taxis, serving in super- nessman, started selling a “health tonic”,
tempt some young families. And in the markets and even guarding banks. Bosses known as Anggur Orang Tua, from the
meantime, Okutama has another plan. are getting older, too. Mikio Sasaki, the back of a bright-blue lorry at night markets
A building once occupied by a junior chairman of Mitsubishi Corporation, a in the coastal city of Semarang. A troupe of
high school, which closed for lack of pu- trading company, is 79. Masamoto Yashiro, dancing dwarves would pull in the punt-
pils, is becoming a language college. Jelly- the chairman and CEO of Shinsei Bank, is ers, while Djojonegoro peddled shots of
fish, an education firm with tentacles in 87. Tsuneo Watanabe, editor-in-chief of the what was, in essence, a fortified herbal
several countries, will use it to teach Japa- world’s biggest-circulation newspaper, the wine to fishermen. It kept them warm dur-
nese to young graduates from East and Yomiuri Shimbun, is a sprightly 90. ing the chilly nights in the Java Sea.
South-East Asia. It hopes to enroll 120 stu- It is inevitable that people will stay in The tonic is still sold in bottles with dis-
dents, plus staff, which ought to make a no- the workforce longer, says Ken Ogata, the tinctive labels depicting an old Chinese
table difference in a district where there are president of Koreisha, an agency that pro- man with a thick white beard. The com-
now fewer than 350 people in their 20s. vides temporary jobs exclusively to people pany that makes it now produces a vast
Some of those students might even decide over 60. He notes that the country has little range of consumer goods, and Prost beer is
they like the place, and settle down. Whis- appetite for importing workers, so it will the latest addition to its range. It is made in
per it, but this sounds a little like a more lib- have to make more use of pensioners, a $50m brewery that opened in August
eral immigration policy. 7 women and robots. Many of those who 2015, filled with shiny stainless-steel ma- 1
30 Asia The Economist January 7th 2017

2 chinery from Germany. Thomas Dosy, est Muslim population, Indonesia is re- which were shot in New Zealand’s breath-
chief executive of the subsidiary that pro- markably permissive. Night spots in Jakar- taking wilderness).
duces Prost, says that given Orang Tua’s ta, the capital, and tourist magnets such as But for every happy Chinese couple
history in the booze business it was natural the island of Bali have their raunchy sides. snuggling up for a selfie next to a tuatara
for the company to move into Indonesia’s In Semarang, Mr Dosy predicts steady there is a grumpy New Zealander who re-
$1bn-a-year beer market. growth in domestic sales of 8-9% per year, members the way things used to be—when
It will not be straightforward. Conser- buoyed by a growing number of middle- you could walk the tracks without running
vative Muslim groups have become more class tipplers. Most Indonesians, proud of into crowds at every clearing. Many locals
assertive. Only months before the brewery their tradition of tolerance, will be hoping now wonder why their taxes, as they see it,
opened, the government slapped a ban on that he is right. 7 are paying for someone else’s holiday. Mr
the sale of beer at the small shops where Sanson would seem to agree. Entry fees
most people buy their groceries. It led to a could be used to upgrade facilities such as
13% slump in sales, according to Euromon- New Zealand’s national parks cabins, car parks and trails. A varying levy
itor, a research firm. The government min- could also help reduce numbers at some of
ister who issued the decree has since been
sacked, but his ban remains in place. And
Lord of the the popular locations by making it cheaper
to use lesser-known, but no less beautiful,
Muslim parties in parliament are still not
satisfied. They are pushing legislation that
ker-chings trails farther afield.
Some are not so sure it would work.
would ban the production, distribution Hugh Logan, a former chief of conserva-
QUEENSTOWN
and consumption of all alcoholic bever- tion for the government who now runs a
A proposal to tax users of national parks
ages. Drinkers could face two years in jail. mountaineering club, worries it would
has aroused fierce argument
The law is unlikely to pass. Muslim par- cost too much to employ staff to take mon-
ties control less than one-third of the legis-
lature’s seats. The government is propos-
ing a far more limited law aimed at curbing
N EW ZEALAND’S chiefconservation of-
ficer, Lou Sanson, caused a stir in Octo-
ber by suggesting that it might be time to
ey from hikers at entrances. It would also
be difficult to prevent tourists from sneak-
ing around the toll booths.
the production of toxic home-brews, start charging tourists for using the coun- Some argue that it would be easier to
known as oplosan, which are responsible try’s wilderness trails. New Zealanders are charge visitors a “conservation tax” when
for nearly all alcohol-related deaths in In- keen fans of their national parks. Many they enter the country. The Green Party, the
donesia. Turning Indonesia dry would be would be outraged at having to pay. But third-largest in parliament, says that add-
seen by many people as an affront to the many also worry about a huge influx of ing around NZ$18 ($12.50) to existing bor-
cultural diversity of the sprawling archi- foreigners who have been seeking the der taxes would still make the total
pelago, which has large Buddhist, Chris- same delights. amount levied less than visitors to arch-ri-
tian and Hindu minorities, as well as many In 2016 New Zealand hosted 3.5m tour- val Australia have to pay. But some travel
Muslims who are partial to a cool one. ists from overseas; by 2022 more than 4.5m companies oppose the idea. They note that
Brewers argue that alcohol is not an im- are expected every year—about the same tourists already contribute around
port from the decadent West, as the puri- as the country’s resident population. Tou- NZ$1.1bn through the country’s 15% sales
tans often claim, but has been produced rism has overtaken dairy produce as the tax. Better, such firms say, to use foreign
and consumed in Indonesia for at least 700 biggest export, helped by a surge in the tourists’ contribution to this tax for the
years. “It is part of the culture of Indone- number ofvisitors from China. The nation- maintenance of the parks.
sia,” says Michael Chin, chief executive of al parks, which make up about one-third Among the fiercest critics ofa charge are
Multi Bintang, the country’s biggest brew- of the territory, are a huge draw. About half those who point out that unfettered access
er. Indonesians consume less than one litre of the foreign tourists visit one. They are to wilderness areas is an important princi-
of alcohol per head a year, belying Muslim keen to experience the natural beauty ple for New Zealanders. It is enshrined in a
groups’ claims that booze is creating a promised by the country’s “100% Pure National Parks Act which inspires almost
health crisis. Still, even without a national New Zealand” advertising campaign (and constitution-like devotion among the
prohibition, Islamists will push for local shown off in the film adaptations of “The country’s nature-lovers. Mr Sanson has a
bans—such as the one in force in Aceh since Lord of the Rings” and “The Hobbit”, rocky path ahead. 7
2005 and adopted elsewhere.
Beyond booze, the state-backed council
of clerics, the Indonesian Ulema Council
(MUI), has in recent years passed edicts
condemning everything from homosexual
partnerships to the wearing of Santa hats.
Although these have no legal force under
Indonesia’s secular constitution, vigilantes
have sometimes used the edicts to target
revellers as well as religious and sexual mi-
norities. Partly at the MUI’s urging, parlia-
ment has passed sweeping anti-pornogra-
phy laws, which some Indonesians see as
a threat to artistic and cultural liberties.
Muslim groups are petitioning the courts
to interpret the law in a way that would
criminalise extramarital sex. They are also
making more use of laws against blasphe-
my—notably in the trial against the gover-
nor of Jakarta, Basuki Tjahaja Purnama, a
Christian of Chinese descent.
Still, for a country with the world’s larg- Welcome to Orcland
 The Economist January 7th 2017 Asia 31

Banyan Selling Malaysians down the river

An authoritarian prime minister looks more secure than ever. Looks can deceive
with sedition has shot up. As for1MDB, the only conviction in Ma-
laysia related to it has been of a whistle-blowing legislator who
highlighted alleged wrongdoing by the fund’s managers.
Now perhaps Mr Najib feels that the chief risks from 1MDB are
behind him. Bear in mind that among the most assiduous investi-
gations to date have been those by America’s Department of Jus-
tice, which claims $3.5bn is missing from the fund. Yet the next
American president, Donald Trump, speaks admiringly ofMr Na-
jib, a golfing buddy. It might be hard for the department to pursue
a full-throttle investigation if Mr Trump expressed displeasure.
At any rate, the prime minister is at work covering his domes-
tic bases, including wooing the Islamist party, the Pan-Malaysian
Islamic Party (PAS). Some analysts mock the PAS leader, Abdul
Hadi Awang, as having ayatollah-like aspirations: the party has
long urged for sharia punishments to apply much more widely to
the Malay Muslims who make up nearly two-thirds of the popu-
lation. Such a proposal is not only morally but also constitution-
ally iffy. Undaunted, Mr Najib took the extraordinary step last
year of backing Mr Hadi’s private member’s bill, which aims to
increase the power of Islamic courts. With little discussion in cab-
inet or with the other 12 coalition members, the government sub-

A ROUND of applause, ladies and gentlemen. Any typical

leader of a typical democracy, when found with nearly
$700m of ill-explained money from an unnamed foreign donor
mitted it to Parliament.
Mr Najib’s strategy is clear. Although his image has not hither-
to been one of ostentatious piety, he is rebranding himself as a
in his accounts, would experience a swift and fatal fall. Yet, nearly Muslim devout. And the message to Malays is also clear: either
two years after news first broke that Najib Razak’s bank balance you are with him, or, as Jayum Anak Jawan of Ohio University
had been thus plumped up, his high-wire act continues. puts it in New Mandala, a website on South-East Asia, “your Ma-
You could even argue that the Malaysian prime minister, who lay-ness or Muslim-ness are brought into question.”
denies any wrongdoing, is at the top of his game. Mr Najib ap- If that seems a masterstroke, looks may deceive. Mr Najib’s
pears to command the unstinting loyalty of the party, the United people insist that the issue is no business ofthe (non-Muslim) eth-
Malays National Organisation (UMNO), which leads the co- nic Chinese, who make up a quarter of the population, or with
alition that has ruled the country since independence in 1957. He ethnic Indians, who make up a tenth. Yet these largely urban and
has undermined a fractious opposition, not least by peeling an Is- prosperous groups worry that Mr Najib is playing a potentially
lamist party away from it. And as investigations proceed in sever- explosive game of racial politics, targeted at them. That could gal-
al other countries into the alleged bilking of colossal sums from vanise the opposition.
1MDB, an indebted state investment-fund whose advisory board
Mr Najib once chaired, the prime minister himself remains un- Friendless in high places
touched. Staying in power helps stave offany riskhe might face of As it is, Mr Najib is counting on the squabbling opposition not to
international prosecution. A general election is due by late Au- get its act together—in particular, on its failing to acknowledge the
gust 2018, but perhaps Mr Najib will call a snap poll in the next futility of Mr Anwar leading the opposition from jail. Yet there is
few months to give himself several more years’ rule. ample scope for surprises. A growing number of opposition sym-
The question is how, despite the mysteries surrounding 1MDB pathisers say that a heavyweight with political experience is
and his personal accounts, the prime minister appears to be con- needed to take on UMNO. The obvious candidate is Muhyiddin
solidating his power. Patronage is a big part of it. Though his wife Yassin, a former UMNO deputy prime minister who fell out with
has a lusty appetite for Hermès Birkin bags, and the wedding of Mr Najib over 1MDB. Last year he and Mahathir Mohamad, who
his daughter to a nephew of the Kazakhstani president was an oc- ran the country for 22 years, founded an ethnic-Malay party op-
casion of such bling that the Malaysian media were discouraged posed to Mr Najib. The opposition would need to swallow a lot
from publishing photographs, Mr Najib may be essentially right ofpride and some principles to askMr Muhyiddin to be its leader.
when he says the cash in his accounts was not for personal gain. But he shares some of its reformist agenda, and it would trans-
An UMNO leader needs money to buy loyalty from powerful pol- form the opposition’s chances of victory.
iticians. It is also handy for spreading largesse among ordinary Lastly, Mr Najib is running not only against the opposition, but
Malays—including helping devout Muslims make the haj. against the economy. Since April the currency has fallen by nearly
Threats are as important as money. Anwar Ibrahim, the charis- a quarter, reflecting the weak price of oil, a crucial export, and
matic leader of the informal opposition coalition which won the concern about cronyism under Mr Najib (Malaysia ranks second,
popular vote in an election in 2013 (though not, thanks to gerry- after Russia, in The Economist’s crony-capitalism index). China’s
mandering, a majority of seats), has been in prison since 2015 on help in bailing out 1MDB may have bought Mr Najib time, but
trumped-up charges of sodomy. In November the leader of an budgets are strapped as economic growth starts to slow. If he
anti-corruption rally in Kuala Lumpur was arrested and held un- can’t keep the money flowing, his seemingly loyal allies would
der tough new security laws. Newspapers and bloggers have abandon him in a jiffy. So if anything keeps the prime minister
been hounded. The number of activists and politicians charged awake at night, it may well be a future without friends. 7
32 The Economist January 7th 2017
China
Also in this section
33 China promotes its own Shakespeare

For daily analysis and debate on China, visit

Economist.com/china

The party congress der way. They involve a massive operation

for the selection of congress delegates. On
Selection year paper, this is a bottom-up exercise. Party
committees down to village level are
choosing people who will then choose
other representatives who, by mid-sum-
mer, will make the final pick. Thousands of
party members are also scrutinising the
BEIJING
party’s charter, looking for bits that might
For 20 years China’s political transitions have been predictable. Not in 2017
need changing.

E VERY four years the United States holds

an election that can change national
policy and unseat many decision-makers.
picked in 2012, when he took over, not by
him but by the people then running the
country, including his two predecessors.
It may sound like a vast exercise in
democratic consultation, but Mr Xi is leav-
ing little to chance. Provincial party bosses
Every five years China holds a selection After previous congresses held five years are required to make sure that all goes to
process that can do the same thing. Com- into a leader’s normally ten-year term— (his) plan. Over the past year, Mr Xi has ap-
munist Party officials tout it as evidence of that is, those convened in 2007 and 1997—it pointed several new provincial leaders, all
a well-ordered rhythm in their country’s became clear who that leader’s successor allies, who will doubtless comply.
politics. This year it may turn out as unpre- was likely to be. If the coming meetings are
dictable as America’s election in 2016. like those earlier ones—a big if—they will Hands up who likes Xi
The people up for re-selection are the give a strong clue to Mr Xi’s choice of suc- Those chosen to attend the congress will
350-odd members of the party’s Central cessor and start the transition from one follow orders, too, especially when it
Committee, the political elite, along with generation of leaders to another. comes to casting their votes for members
its decision-taking subsets: the Politburo, Second, congresses can amend the of the new Central Committee. And the
the Politburo’s Standing Committee (a sort party’s constitution. China’s leaders like newly selected committee will stick even
of inner cabinet) and the army’s ruling the document to give credit to their favour- closer to script. The processes that lead to
council. The choice of new leaders will be ite ideological themes (and Mr Xi is partic- its selection of the party’s and army’s most
made at a party congress—the 19th since ularly keen on ideology). When Jiang Ze- senior leaders are obscure—a bit like the
the founding one in 1921—which is expect- min stepped down as party chief in 2002 picking of cardinals in the Vatican. But an
ed to be held in Beijing in October or No- his buzzwords were duly incorporated; so account in the official media of what hap-
vember, and at a meeting of the newly se- too were those of his successor, Hu Jintao, pened in 2007 suggests that at some point
lected Central Committee which will be five years later. Mr Xi’s contribution to in the summer, Mr Xi will convene a secret
held directly afterwards. party-thought—such as on the need to meeting of the current Central Committee
Party congresses, which are attended purge it of corruption while strengthening and other grandees for a straw poll to rank
by more than 2,000 hand-picked dele- its grip—is likely to gain similar recognition. about 200 potential members of the new
gates, and the Central Committee meet- Third, congresses are the setting for a Politburo (which now has 25 members).
ings that follow them, are little more than kind of state-of-the-union speech by the This is called “democratic recommenda-
rubber-stamp affairs. But they are of huge party leader, reflecting an elite consensus tion”, although those taking part will be
symbolic importance to Chinese leaders. hammered out during the circulation of mindful of who Mr Xi’s favourites are.
They matter for three reasons. First, they numerous drafts. In the coming months, Candidates for the Politburo must fulfil
endorse a sweeping reshuffle of the leader- Mr Xi will be devoting most of his political certain criteria, such as holding ministerial
ship that is decided in advance during se- energy to ensuring that his will prevails in rank. For the coming reshuffle, Mr Xi has
cretive horsetrading among the elite. The all three of these aspects. His authority in added a new stipulation: faithful imple-
coming congress will be Mr Xi’s first oppor- the coming years will hugely depend on mentation of his policies. For all his power,
tunity to pack the Central Committee with the degree to which he succeeds. Mr Xi has struggled with widespread pas-
his own allies; the outgoing one was Preparations for the gatherings are un- sive resistance to his economic reforms. To 1
 The Economist January 7th 2017 China 33

2 ram home the importance of obedience, rule, his successor will be someone who speare’s 37), and is not as quotable. But no
Mr Xi recently held what he called a joins the Standing Committee right after matter. The timing was perfect. Tang died
“democratic life session” at which Polit- the coming congress. in 1616, the same year as Shashibiya, as
buro members read out Mao-era-style self- But there is widespread speculation Shakespeare is called in Chinese. President
criticisms as well as professions of loyalty that Mr Xi might seek to stay on in some ca- Xi Jinping described Tang as the “Shake-
to Mr Xi as the “core” leader (as the party pacity when his term ends in 2022. He speare of the East” during a state visit to
decided last October to call him). might, for instance, retire as state president Britain in 2015. The Ministry of Culture lat-
By August, when Mr Xi and his col- (for which post there is a clear two-term er organised a Tang-themed exhibition,
leagues hold an annual retreat at a beach limit) but continue as party general-secre- comparing his life and works to those of
resort near Beijing, the initial lists of lead- tary. He faces a trade-off. The more he Shakespeare. It has shown this in more
ers will be ready. Probably in October, the breaks with precedent, the longer he will than 20 countries, from Mexico to France.
Central Committee will hold its last meet- retain power—but the more personalised The two playwrights would not have
ing before the congress to approve its docu- and therefore more unstable the political heard of each other: contacts between Chi-
ments. The “19th Big” will start soon after, system itself may become. Trying to square na and Europe were rare at the time. But
and will last for about a week. The first that circle will be Mr Xi’s biggest challenge that has not deterred China’s cultural com-
meeting of the new Central Committee in the politicking of the year ahead. 7 missars from trying to weave a common
will take place the next day, followed im- narrative. A Chinese opera company
mediately by the unveiling before the press created “Coriolanus and Du Liniang”, in
of Mr Xi’s new lineup (no questions al- Literature which Shakespeare’s Roman general en-
lowed, if officials stick to precedent). counters an aristocratic lady from Tang’s
The process is cumbersome and elabo-
rate, but over the past 20 years it has pro-
There is flattery in best-known play, “The Peony Pavilion”.
The musical debuted in London, then trav-
duced remarkably stable transfers of pow-
er for a party previously prone to turbulent
friendship elled to Paris and Frankfurt. Last month
Xinhua, an official news agency, released
ones. This has been helped by the intro- an animated music-video, “When Shake-
SHANGHAI
duction of unwritten rules: a limit of two speare meets Tang Xianzu”. Its lines, set bi-
Officials are using Shakespeare to
terms for the post of general secretary, and zarrely to a rap tune, include: “You tell love
promote a bard of China’s own
compulsory retirement for Politburo mem- with English letters, I use Chinese ink to de-
bers if they are 68 or over at the time of a
congress. Mr Xi, however, is widely be-
lieved to be impatient with these restric-
L IKE many countries, China had a busy
schedule of Shakespeare-themed cele-
brations in 2016, 400 years after his death.
pict Eastern romance.”
The anniversary of Shakespeare’s
death is now over, but officially inspired
tions. He has ignored the party’s hallowed There were plays, lectures and even plans adulation of Tang carries on (a musical
notion of “collective leadership”, by accru- announced for the rebuilding of his home- about him premiered in September in Fu-
ing more power to himself than his post- town, Stratford-upon-Avon, at Sanweng- zhou, his birthplace—see picture). Chinese
Mao predecessors did. upon-Min in Jiangxi province. But as many media say that a recent hit song, “The New
If precedent is adhered to, five of the organisers saw it, Shakespeare was just an Peony Pavilion”, is likely to be performed
seven members of the Politburo’s Standing excuse. Their main aim was to use the Eng- at the end of this month on state televi-
Committee, six of its other members and lish bard to promote one of their own: Tang sion’s annual gala which is broadcast on
four of the 11 members of the party’s Cen- Xianzu. Whatever the West can do, their the eve of the lunar new year. It is often de-
tral Military Commission (as the army message was, China can do at least as well. scribed as the world’s most-watched tele-
council is known) will all start drawing Tang is well known in China, though vision programme. Officials want to culti-
their pensions. In addition, roughly half even in his home country he does not en- vate pride in Chinese literature, and boost
the 200-odd full members of the Central joy anything like the literary status of his foreign awareness of it. It is part of what
Committee (its other members, known as English counterpart—he wrote far fewer they like to call China’s “soft power”.
alternates, do not have voting rights) will works (four plays, compared with Shake- Shakespeare’s works only began to take
retire, or will have been arrested during Mr root in China after Britain defeated the
Xi’s anti-corruption campaign. This would Qing empire in the first Opium War of
make the political turnover at this year’s 1839-42. They were slow to spread. After
gatherings the biggest for decades, akin to the dynasty’s collapse in the early 20th
changing half the members of the House century, Chinese reformers viewed the
of Representatives and three-quarters of lack of a complete translation of his works
the cabinet. as humiliating. Mao was less keen on him.
Until late in 2016 there was little to sug- During his rule, Shakespeare’s works were
gest any deviation from the informal rules. banned as “capitalist poisonous weeds”.
But in October Deng Maosheng, a director Since then, however, his popularity has
of the party’s Central Policy Research Of- surged in tandem with the country’s grow-
fice, dropped a bombshell by calling the ing engagement with the West.
party’s system of retirement ages “folk- Cong Cong, co-director of a recently
lore”—a custom, not a regulation. opened Shakespeare Centre at Nanjing
The deliberate raising of doubts about University, worries that without a push by
retirement ages has triggered a round of ru- the government, Tang might slip back into
mour and concern in Beijing that Mr Xi relative obscurity. But Ms Cong says the
may be considering going further. The “Shakespeare of the East” label does Tang a
main focus is his own role. Mr Xi is in the disservice by implying that Shakespeare is
middle ofhis assumed-to-be ten-year term. the gold standard for literature. Tang
By institutional tradition, any party leader worked in a very different cultural envi-
must have served at least five years in the ronment. That makes it difficult to compare
Standing Committee before getting the top the two directly, she says. Officials, how-
job. So if Mr Xi is to abide by the ten-year The balcony scene of the East ever, will surely keep trying. 7
34 The Economist January 7th 2017
Britain
Also in this section
35 Brexit preparations
35 International development
36 Bagehot: Pierogi and integration

For daily analysis and debate on Britain, visit

Economist.com/britain

Crime the switch it dropped to 4%.

Yet the fall in crime seems to have
How low can it go? slowed. The overall number of offences
dropped by just 1% in the year to June 2016,
according to the Crime Survey. Compare
that with the decline of 13% over the previ-
ous two years. And a few crimes are rising
again. Car theft edged up by 1%. The kinds
A decades-long fall in offending seems to be tapering off. Yet crime rates could drop
of violent crimes that do not cause physi-
even further in future
cal injury (such as stalking, harassment

M ARY ANN COTTON was one of the

great Victorian poisoners. She proba-
bly killed three of her four husbands, a lov-
der to loot them, is largely a thing of the
past, says Nick Tilley, a criminologist at
University College London, because of in-
and death threats) climbed by 18%. Pick-
pocketing, which had been going up even
while instances of other offences fell, con-
er, her mother and 11 of her 13 children. Ar- novations such as the introduction of bol- tinued to rise. Have Britain’s crime rates
senic was her weapon of choice. As the lards in front of such premises and security reached their nadir?
deaths mounted, the authorities became shutters to protect shopfronts. The recent levelling off may be the long-
suspicious. Only when they tested the Other criminal enterprises have be- expected impact of the financial crisis, sug-
empty medicine bottles that littered her come less rewarding. Phone theft in- gests Tim Newburn, a criminologist at the
house and found evidence of arsenic was creased as smartphones took off, says Gra- London School of Economics. In times of
Cotton caught. She was tried and hanged ham Farrell, a criminologist at the hardship people steal more. Attempts to
in 1873. Today murder by poison is rare— University of Leeds, but it has since ebbed break into homes have risen by 5% over the
dangerous substances are more tightly as owners have gained the power to track past year. Domestic violence goes up with
controlled and the accuracy of autopsies and disable their stolen devices. The pro- the anxiety of poverty and appears to be
makes the crime harder to pull off. In the portion of owners reporting their phone increasing. The Crime Survey stops count-
year to March 2015 only 11 people were nicked fell by half between 2009 and 2016. ing offences after five incidents involving
killed in this way. Nor is it any longer worth robbing bus driv- the same victim. But remove that cap and
Poisoning is not the only offence almost ers, because card payments and cash-drop violence against women has been rising
to have disappeared. Since the mid-1990s boxes mean they no longer carry much since 2008. That suggests that even if the
Britain has seen a steady and dramatic de- money. Data from Transport for London number of women being abused at home
cline in lawbreaking: the number of crimes show a fall of 56% in bus robberies be- has not risen, victims are being attacked
has more than halved, according to the offi- tween 2013 and 2015, which coincides with more often.
cial Crime Survey for England and Wales. a reduction in the number of cash pay- Still, further declines in crime are possi-
Vehicle theft has fallen by 86% and bur- ments for fares. ble. Pinching cars is one example of a “gate-
glary by 71% since 1995. Violent crime has In some cases, the harm has been re- way crime”—the first rung on the ladder to
dropped by two-thirds and robberies by duced even as the crime has persisted. En- more serious lawbreaking. The drastic re-
more than half. Even with the onset of the suring that pubs and clubs give drinkers duction in car theft in the past couple of de-
financial crisis in 2007 and the ensuing venturing outside receptacles made of cades has thus meant fewer entrants into
cuts to welfare and public services, includ- plastic or toughened glass, which breaks the pool of criminals. Young people make
ing the police, Britain has grown ever safer. into blunt little cubes rather than jagged up a shrinking share of the prison popula-
The explanations range from the falling shards, has cut the number of severe inju- tion. In June 2011, men aged 18-24 account-
value of items once stolen, such as televi- ries, particularly to the face, incurred by ed for 26% of those locked up. They now
sions, to clever policing and improved se- drunken brawlers. Before the drinks indus- represent just 17%. And whereas youths are
curity. Ram-raiding, a once-common crime try switched to toughened glass in 1997, 13% growing less likely to reoffend, among old-
in which criminals crash cars or vans of violence between strangers involved er cons recidivism is on the increase.
through the front of shops or banks in or- the use of glasses or bottles. The year after Older, experienced crooks lie behind 1
 The Economist January 7th 2017 Britain 35

2 the recent rises in certain crimes. Although Cameron settled instead for a four-year
International development
car theft in general has been falling, sophis- freeze on in-work benefits for EU migrants.
ticated thefts of expensive cars by skilled
criminals have increased. Swiping posh
Brexiteers claim that, without Sir Ivan’s ex-
cessive caution, Britain could have got a lot A stingy new year
vehicles for resale and export is more diffi- more. Yet the EU’s attachment to free
cult than nicking them off the street for joy- movement is genuine and deep—even the
The juicy aid budget sparks jealousy
riding. Thieves are pinching car keys rather benefits change that Mr Cameron won
than simply breaking into vehicles, or un-
locking them remotely by hacking into
their security systems.
took 48 hours of hard pounding to secure.
Uncertainty clouds Brexit, even after
the speedy replacement of Sir Ivan by Sir
I N 2015 Britain gave away £12.1bn
($18.5bn) in foreign aid, more than any
country bar America. It was one of just
That such professionals are responsible Tim Barrow, previously ambassador to six countries to meet the UN’s target of
hints at why crime rates may have further Russia. Sir Ivan’s letter makes clear that the spending 0.7% of GDP on international
to fall. Studies in America, where crime has government has no detailed exit strategy assistance. Yet although the leaders of all
also been declining for a long time, suggest and that its negotiating team is not even Britain’s main political parties support
that men over 40 today offend at a much fully in place. Mrs May insists she will trig- this generosity, grumbles that the money
higher rate than men of that age did a cou- ger Article 50, the legal way to leave the EU, should stay at home are growing louder.
ple of decades ago. Today’s middle-aged by the end of March, earlier than Sir Ivan For the past few months newspapers
crooks learned their trade in the 1980s advised. That will set a two-year deadline have been digging up examples of exor-
when crime was relatively easy, and have for Brexit. A chunk of 2017 will be taken up bitant aid-industry salaries and alleged
carried on offending, says Mr Farrell. In by Dutch, French, German and probably mis-spending. According to the Daily
time this light-fingered generation will “re- Italian elections. Sir Ivan pointedly notes Mail, £5.2m of British cash went to an
tire”, or die. With fewer novices taking that serious multilateral negotiating expe- Ethiopian pop group (defenders point
their place, crime may dip lower still. 7 rience is in short supply in Whitehall. In out that the band was part of a project to
the EU institutions in Brussels, it is not. change attitudes about women’s roles).
His resignation supports the idea that Some backbench Conservatives have
Brexit preparations Mrs May and her ministers mistrust advis- called for aid to be redirected to pay for
ers tainted by time in Europe. Lord Mac- social care for elderly Britons. The UK
Rogers and out pherson, a former permanent secretary to
the Treasury, tweeted that, with other de-
Independence Party wants to spend it on
homeless veterans instead.
partures, it was a “wilful & total destruc- The appointment of Priti Patel as
tion of EU expertise”. Anyone with experi- head of the Department for Internation-
ence of Brussels knows it is a place in al Development in July raised hawks’
which knowledge of EU customs, laws and hopes, since she had previously called
The departure of Britain’s man in
procedures is valuable, especially after for the department to be abolished. So
Brussels lays bare a lack of Brexit plans
midnight. Mrs May could be repeatedly far, though, Ms Patel has done little to

C IVIL servants mostly operate behind

the scenes and off camera. Sir Ivan
Rogers, Britain’s permanent representative
ambushed if she is bereft of advisers ready,
as Sir Ivan puts it, to “challenge ill-founded
arguments and muddled thinking.”
live up to her ferocious reputation be-
sides talking tough to international
agencies. Few aid-watchers expect big
to the European Union since November Other EU countries have long been frus- changes to government policy. The 0.7%
2013, fits the bill nicely. Yet his announce- trated by the British, who favour a transac- target was enshrined in law by the Con-
ment on January 3rd that he was leaving tional approach to the project over dreams servative-Liberal Democrat coalition in
early became big news because of what it of ever closer union. But they have also 2015; maintaining it is a Tory manifesto
showed about the government’s unreadi- come to admire the talent and dedication commitment.
ness for Brexit negotiations. of British diplomats and officials. It would Some charity bosses whisper that the
Sir Ivan, a former Treasury and EU offi- be gravely damaging to Mrs May if she fuss is not all bad. A few executives are
cial, knows everything there is to know were to lose those advantages at a time indeed paid too much, and consul-
about how Brussels works. He was David when they are needed more than ever. 7 tancies sometimes overcharge, they say.
Cameron’s chief adviser on Europe. He got Pointing this out is worthwhile, especial-
to know Theresa May when, as home sec- ly since the industry can be too defen-
retary, she engaged in tortuous talks over sive about instances of genuine incom-
Britain’s opt-out from EU policies on justice petence. Yet much of the criticism is
and home affairs. But he has long been hollow. Some newspapers complained
faulted by Eurosceptics as too gloomy over about bureaucracy, then whinged about
Brexit. In December he was pilloried for re- programmes in which cash handouts
porting that it could take ten years to nego- were given directly to the poor.
tiate and ratify a trade deal with the EU. Yet The government could tweak aid
as Sir Ivan put it this week, free trade “does policy to use more of the funds to pro-
not just happen when it is not thwarted by mote British commercial interests, or
authorities.” Experience shows that such hand out more money bilaterally rather
deals can indeed take years to agree. than through intermediaries. Neither
His other purported sin came during would make aid spending more effec-
Mr Cameron’s attempted renegotiation of tive, says Owen Barder of the Centre for
Britain’s membership terms before the ref- Global Development, a think-tank. Nor
erendum. At one point the prime minister would they insulate the government
wanted to demand a unilateral emergency from criticism. With public services
brake on free movement of EU citizens to facing cuts, the generous aid budget will
Britain. Sir Ivan advised him that other EU come under continued fire however well
leaders, including Germany’s Angela Mer- it is spent.
kel, would reject this out of hand. So Mr Ivan to break free
36 Britain The Economist January 7th 2017

Bagehot Pierogi and the British genius

Britain is a more cohesive society than the doom-mongers claim

the floor (to evoke the nativity), wafers broken before the meal
and 12 dishes including carp, herring, pierogi, mushrooms, beet-
root soup and poppy-seed cake. No meat or alcohol is taken, so
the vodka comes out at midnight. The steady traffic of local Poles
in the shop spoke to the strength of this foreign culture. “Every
year my uncle sends me this from Silesia, for good financial luck,”
said Mrs Bates, producing a shiny carp scale from her purse.
Below the surface, however, something else is happening.
Britons also shop at “White & Red”, lured by the garlicky sausage
and crusty bread. And Poles are picking up British habits like eat-
ing turkey and watching the queen’s Christmas speech. Those
who, like Mrs Bates, have British partners are leading the fusion:
her Anglo-Polish son receives British chocolate from the Polish St
Nicholas on December 6th; her Christmas tree is decorated to-
wards the start ofthe month (the British way) but will stay up well
into January (the Polish way); her son receives half of his presents
on December 24th (Polish) and half on the 25th (British). She
serves turkey on Christmas Day, as is typical in Britain, but also
leaves a chair empty—a Polish tradition respecting strangers.
When relatives visit she cooks an English breakfast, which they
love (apart from the baked beans). She enjoys crackers but feels “a

T HE new year finds Britain tense. Brexit looms: Theresa May

will soon start the two-year countdown. There is still the tan-
gle of divisions that contributed to last June’s referendum vote.
bit silly with a paper hat on my head”. Ms Bialas plans to create a
similar mix of cultures for her baby, due in 2017.
Without oaths, integration classes or other forms of state do-
The gaps between liberal, Remain-voting places and conserva- goodery, central European cultures in Britain are melding with lo-
tive, Leave-voting ones will widen as the trade-offs of Brexit be- cal ones. Children are leading the way. Right after the Brexit vote
come clear. Cultural grievances concerning rapid inflows of for- teachers in Ely had to sooth not just upset Polish pupils but also
eigners, and of existing immigrants perceived to have integrated British ones who fretted about losing their pals. Ms Bialas de-
poorly, remain unresolved. Racist slogans have appeared on scribes school pick-up time, when Polish and British parents tend
walls and hate crimes are up. Still Mrs May refuses to guarantee to stick to their own, but children pour out in a multinational
European Union citizens the right to stay put. “A disunited King- muddle. Ask the Polish ones which football teams they support,
dom”, bellow headlines. she says, and they often name two: one Polish and one British.
How to reunite it? Debates rage over Louise Casey’s review Some have become so British that they now struggle in their na-
into integration, published last month. Commissioned by David tive tongue, getting A* grades in maths but Ds in Polish written ex-
Cameron, the civil servant’s report paints a grim picture of a land ams. This even extends to the liturgy. Mariusz Urbanowski, a lo-
cleft by segregation, where citizens live parallel lives. It recom- cal Polish priest, says he mixes the two languages in his festive
mends that schools teach British values and that immigrants take services, to cater for different generations of Anglo-Poles.
an oath of loyalty (an idea endorsed by Sajid Javid, the communi-
ties secretary). Much of the opposition agrees, Stephen Kinnock Szczesliwego New Year!
urging his fellow Labour MPs to “move away from multicultural- Such is the Britain forgotten by the gloomsters. Fully 82% of its citi-
ism and towards assimilation”. On January 5th a new Parliamen- zens socialise at least monthly with people from different ethnic
tary group on integration advocated a middle way between the or religious backgrounds; from 2003 to 2016 the proportion call-
two approaches. Expect more in this vein as the year unfolds. ing their vicinity “cohesive” rose from 80% to 89%; over half of
Much of it will be warranted. Segregation scars parts of Brit- first-generation migrants have friends of a different ethnicity
ain, some immigrant groups remain poorly integrated and mi- (among their kids the proportion is nearer three-quarters); num-
norities within them are hostile to liberal values. But the gloom bers of inter-ethnic marriages and households are rising; educa-
lacks a sense of the bigger picture. Accompany Bagehot to Ely, a tional and employment gaps are shrinking. The proportion of
cathedral city sprouting from the prairies of eastern England, British-Pakistani households using English as their main lan-
where thousands of central and eastern Europeans have moved guage rose from 15% to 45% in the 13 years to 2010.
to pick vegetables for low wages—and where many have settled. The story of British life in 2017 is that new immigrants are en-
Your columnist visited on December 23rd to witness the segrega- riching and combining with this mongrel culture as loyally as
tion. What better litmus test than Christmas, with its many na- their predecessors once did. In pubs and churches, gyms and
tional variations? schools, Britishness is being made and remade not by political
Sure enough, the local Poles’ traditions were widely evident. diktat but by an organic process of mixing and mingling. Britain
In a shop named “White & Red”, green-grey carp glistened in ice contains few French-style banlieues or American-style ghettos.
boxes; shelves groaned with pierogi (dumplings) and bottles of London’s mayor is a liberal Muslim. Sikhs in turbans protect
bison-grass vodka; piles of sachets variously containing hay and Buckingham Palace. Tikka masala (Indian-ish) and fish and chips
communion wafers teetered by the till. Gosia Bates and Joanna (Jewish-ish) are the country’s national dishes. Polish-ish pierogi
Bialas, two locals, explained that each ingredient features in the will surely join them soon. In a troubled age, let this diverse coun-
Wigilia, or Christmas Eve, meal. This involves hay scattered on try take more pride in all that. 7
 TECHNOLOGY QUARTERLY January 7th 2017
LANGUAGE

Finding a voice
 2017, as written by:

George Clooney

Sadiq Khan

Martin Sorrell

Maria Alyokhina of Pussy Riot

Justin Trudeau

& The Economist’s j u nalis s

The World in 2017 brings together opinion-formers and

trendsetters, along with journalists from The Economist
and analysts from The Economist Intelligence Unit.
Explore the issues that will shape your year ahead.

Buy The World in 2017 on the newsstand or at

shop.economist.com. Download the digital
edition from the app store.
 TECHNOLOGY QUARTERLY Language

Finding a voice

Computers have got much better at translation, voice recognition and speech synthesis, says Lane
Greene. But they still don’t understand the meaning of language

“
I
’M SORRY, Dave. I’m afraid I can’t do that.” to handle the unexpected are still far off. Artificial-in-
With chilling calm, HAL 9000, the on- telligence (AI) researchers can only laugh when asked
board computer in “2001: A Space Odys- about the prospect of an intelligent HAL, Terminator or ALSO IN THIS TQ
sey”, refuses to open the doors to Dave Rosie (the sassy robot housekeeper in “The Jetsons”). SPEECH RECOGNITION
Bowman, an astronaut who had ventured Yet although language technologies are nowhere near I hear you
outside the ship. HAL’s decision to turn on ready to replace human beings, except in a few highly
his human companion reflected a wave of fear about routine tasks, they are at last about to become good SYNTHETIC SPEECH
intelligent computers. enough to be taken seriously. They can help people Hasta la vista,robot
When the film came out in 1968, computers that spend more time doing interesting things that only hu- voice
could have proper conversations with humans mans can do. After six decades of work, much of it
seemed nearly as far away as manned flight to Jupiter. with disappointing outcomes, the past few years have MACHINE TRANSLATION
Since then, humankind has progressed quite a lot far- produced results much closer to what early pioneers Beyond Babel
ther with building machines that it can talk to, and that had hoped for.
can respond with something resembling natural Speech recognition has made remarkable ad- MEANING AND MACHINE
INTELLIGENCE
speech. Even so, communication remains difficult. If vances. Machine translation, too, has gone from terri- What are you talking
“2001” had been made to reflect the state of today’s ble to usable for getting the gist of a text, and may soon about?
language technology, the conversation might have be good enough to require only modest editing by hu-
gone something like this: “Open the pod bay doors, mans. Computerised personal assistants, such as Ap- BRAIN SCAN
Hal.” “I’m sorry, Dave. I didn’t understand the ques- ple’s Siri, Amazon’s Alexa, Google Now and Micro- Terry Winograd
tion.” “Open the pod bay doors, Hal.” “I have a list of soft’s Cortana, can now take a wide variety of
eBay results about pod doors, Dave.” questions, structured in many different ways, and re- LOOKING AHEAD
Creative and truly conversational computers able turn accurate and useful answers in a natural-sound-1 For my next trick

The Economist January 7th 2017 3

 TECHNOLOGY QUARTERLY Language

2 ing voice. Alexa can even respond to a request to “tell me a joke”, Many early approaches to language
but only by calling upon a database of corny quips. Computers technology—and particularly translation—
lack a sense of humour. Many early got stuck in a conceptual cul-de-sac: the
When Apple introduced Siri in 2011 it was frustrating to use, so rules-based approach. In translation, this
many people gave up. Only around a third of smartphone owners approaches meant trying to write rules to analyse the
use their personal assistants regularly, even though 95% have tried
them at some point, according to Creative Strategies, a consultan-
to language text of a sentence in the language of origin,
breaking it down into a sort of abstract
cy. Many of those discouraged users may not realise how much
they have improved.
technology “interlanguage” and rebuilding it accord-
ing to the rules of the target language.
In 1966 John Pierce was working at Bell Labs, the research arm got stuck in These approaches showed early promise.
of America’s telephone monopoly. Having overseen the team that But language is riddled with ambiguities
had built the first transistor and the first communications satellite, a conceptual and exceptions, so such systems were
he enjoyed a sterling reputation, so he was asked to take charge of hugely complicated and easily broke
a report on the state of automatic language processing for the Na- cul-de-sac down when tested on sentences beyond
tional Academy of Sciences. In the period leading up to this, schol- the simple set they had been designed for.
ars had been promising automatic translation between languages Nearly all language technologies began to get a lot better with
within a few years. the application of statistical methods, often called a “brute force”
But the report was scathing. Reviewing almost a decade of approach. This relies on software scouring vast amounts of data,
work on machine translation and automatic speech recognition, it looking for patterns and learning from precedent. For example, in
concluded that the time had come to spend money “hard-head- parsing language (breaking it down into its grammatical compo-
edly toward important, realistic and relatively short-range goals”— nents), the software learns from large bodies of text that have al-
another way of saying that language-technology research had ready been parsed by humans. It uses what it has learned to make
overpromised and underdelivered. In 1969 Pierce wrote that both its best guess about a previously unseen text. In machine transla-
the funders and eager researchers had often fooled themselves, tion, the software scans millions of words already translated by
and that “no simple, clear, sure knowledge is gained.” After that, humans, again looking for patterns. In speech recognition, the
America’s government largely closed the money tap, and research software learns from a body of recordings and the transcriptions
on language technology went into hibernation for two decades. made by humans.
The story of how it emerged from that hibernation is both sal- Thanks to the growing power of processors, falling prices for
utary and surprisingly workaday, says Mark Liberman. As profes- data storage and, most crucially, the explosion in available data,
sor of linguistics at the University of Pennsylvania and head of the this approach eventually bore fruit. Mathematical techniques that
Linguistic Data Consortium, a huge trove of texts and recordings had been known for decades came into their own, and big compa-
of human language, he knows a thing or two about the history of nies with access to enormous amounts of data were poised to
language technology. In the bad old days researchers kept their benefit. People who had been put off by the hilariously inappro-
methods in the dark and described their results in ways that were priate translations offered by online tools like BabelFish began to
hard to evaluate. But beginning in the 1980s, Charles Wayne, then have more faith in Google Translate. Apple persuaded millions of
at America’s Defence Advanced Research Projects Agency, encour- iPhone users to talk not only on their phones but to them.
aged them to try another approach: the “common task”. The final advance, which began only about five years ago,
came with the advent of deep learning through digital neural net-
Step by step works (DNNs). These are often touted as having qualities similar
Researchers would agree on a common set of practices, whether to those of the human brain: “neurons” are connected in software,
they were trying to teach computers speech recognition, speaker and connections can become stronger or weaker in the process of
identification, sentiment analysis of texts, grammatical break- learning. But Nils Lenke, head of research for Nuance, a language-
down, language identification, handwriting recognition or any- technology company, explains matter-of-factly that “DNNs are
thing else. They would set out the metrics they were aiming to im- just another kind of mathematical model,” the basis of which had
prove on, share the data sets used to train their software and allow been well understood for decades. What changed was the hard-
their results to be tested by neutral outsiders. That made the pro- ware being used.
cess far more transparent. Funding started up again and language Almost by chance, DNN researchers discovered that the graphi-
technologies began to improve, though very slowly. cal processing units (GPUs) used to render graphics fluidly in ap-
plications like video games were also bril-
liant at handling neural networks. In
Now I understand computer graphics, basic small shapes
A history of language technologies
Microsoft speech-recognition
move according to fairly simple rules, but
Scientists from John Pierce’s highly Dawn of “common system reaches human parity there are lots of shapes and many rules, re-
IBM and critical report on task” method. quiring vast numbers of simple calcula-
Georgetown language technologies Researchers share tions. The same GPUs are used to fine-tune
demonstrate published. Funding data, agree on the weights assigned to “neurons” in DNNs
a limited languishes for decades common methods
machine- of evaluation Google releases neural-net machine as they scour data to learn. The technique
translation translation for eight language pairs has already produced big leaps in quality
system “2001: A Space Odyssey”
released for all kinds of deep learning, including de-
Siri debuts on iPhone
ciphering handwriting, recognising faces
“Hey Siri” and classifying images. Now they are help-
No US government ing to improve all manner of language
research funding Statistics-based version of
for machine Google Translate launched technologies, often bringing enhance-
translation ments of up to 30%. That has shifted lan-
or speech guage technology from usable at a pinch to
recognition really rather good. But so far no one has
Source: The Economist

1954 60 1965 70 75 80 85 90 95 2000 05 10 16

quite worked out what will move it on
from merely good to reliably great. 7
4 The Economist January 7th 2017
 TECHNOLOGY QUARTERLY Language

Speech recognition

I hear you
Computers have made huge strides in recognising human
speech

W
HEN a person speaks, air is forced out through the
lungs, making the vocal chords vibrate, which
sends out characteristic wave patterns through the
air. The features of the sounds depend on the ar-
rangement of the vocal organs, especially the ton-
gue and the lips, and the characteristic nature of the
sounds comes from peaks of energy in certain frequencies. The
vowels have frequencies called “formants”, two of which are usu-
ally enough to differentiate one vowel from another. For example,
the vowel in the English word “fleece” has its first two formants at
around 300Hz and 3,000Hz. Consonants have their own charac-
teristic features.
In principle, it should be easy to turn this stream of sound into
transcribed speech. As in other language technologies, machines
that recognise speech are trained on data gathered earlier. In this
instance, the training data are sound recordings transcribed to text
by humans, so that the software has both a sound and a text input.
All it has to do is match the two. It gets better and better at working
out how to transcribe a given chunk of sound in the same way as
humans did in the training data. The traditional matching ap-
proach was a statistical technique called a hidden Markov model
(HMM), making guesses based on what was done before. More re-
cently speech recognition has also gained from deep learning.
English has about 44 “phonemes”, the units that make up the
sound system of a language. P and b are different phonemes, be-
cause they distinguish words like pat and bat. But in English p with
a puff of air, as in “party”, and p without a puff of air, as in “spin”,
are not different phonemes, though they are in other languages. If At the level of phonemes, each language has strings that are
a computer hears the phonemes s, p, i and n back to back, it should permitted (in English, a word may begin with str-, for example) or
be able to recognise the word “spin”. banned (an English word cannot start with tsr-). The same goes for
But the nature of live speech makes this difficult for machines. words. Some strings of words are more common than others. For
Sounds are not pronounced individually, one phoneme after the example, “the” is far more likely to be followed by a noun or an ad-
other; they mostly come in a constant stream, and finding the jective than by a verb or an adverb. In making guesses about ho-
boundaries is not easy. Phonemes also differ according to the con- mophones, the computer will have remembered that in its train-
text. (Compare the l sound at the beginning of “light” with that at ing data the phrase “the right to bear arms” came up much more
the end of “full”.) Speakers differ in timbre and pitch of voice, and often than “the right to bare arms”, and will thus have made the
in accent. Conversation is far less clear than careful dictation. Peo- right guess.
ple stop and restart much more often than they realise. Training on a specific speaker greatly cuts down on the soft-
All the same, technology has gradually mitigated many of ware’s guesswork. Just a few minutes of reading training text into
these problems, so error rates in speech-recognition software have software like Dragon Dictate, made by Nuance, produces a big
fallen steadily over the years—and then sharply with the introduc- jump in accuracy. For those willing to train the software for longer,
tion of deep learning. Microphones have got better and cheaper. the improvement continues to something close to 99% accuracy
With ubiquitous wireless internet, speech recordings can easily be (meaning that of each hundred words of text, not more than one is
beamed to computers in the cloud for analysis, and even smart- wrongly added, omitted or changed). A good microphone and a
phones now often have computers powerful enough to carry out quiet room help.
this task. Advance knowledge of what kinds of things the speaker might
be talking about also increases accuracy. Words like “phlebitis”
Bear arms or bare arms? and “gastrointestinal” are not common in general discourse, and
Perhaps the most important feature of a speech-recognition sys- uncommon words are ranked lower in the probability tables the
tem is its set ofexpectations about what someone is likely to say, or software uses to guess what it has heard. But these words are com-
its “language model”. Like other training data, the language mod- mon in medicine, so creating software trained to look out for such
els are based on large amounts of real human speech, transcribed words considerably improves the result. This can be done by feed-
into text. When a speech-recognition system “hears” a stream of ing the system a large number of documents written by the speak-
sound, it makes a number of guesses about what has been said, er whose voice is to be recognised; common words and phrases
then calculates the odds that it has found the right one, based on can be extracted to improve the system’s guesses.
the kinds of words, phrases and clauses it has seen earlier in the As with all other areas of language technology, deep learning
training text. has sharply brought down error rates. In October Microsoft an-1
The Economist January 7th 2017 5
 TECHNOLOGY QUARTERLY Language

2 nounced that its latest speech-recognition system had achieved

parity with human transcribers in recognising the speech in the Loud and clear
Switchboard Corpus, a collection of thousands of recorded con- Speech-recognition word-error rate, selected benchmarks, % Log scale
versations in which participants are talking with a stranger about 100
a randomly chosen subject. Switchboard Switchboard cellular
Error rates on the Switchboard Corpus are a widely used
benchmark, so claims of quality improvements can be easily com- Meeting speech
pared. Fifteen years ago quality had stalled, with word-error rates
of 20-30%. Microsoft’s latest system, which has six neural net-
10
works running in parallel, has reached 5.9% (see chart), the same as Broadcast speech
a human transcriber’s. Xuedong Huang, Microsoft’s chief speech IBM, Switchboard
scientist, says that he expected it to take two or three years to reach
The Switchboard corpus is a collection of recorded
parity with humans. It got there in less than one. telephone conversations widely used to train and
5.9%
Microsoft, Switchboard
The improvements in the lab are now being applied to pro- test speech-recognition systems
ducts in the real world. More and more cars are being fitted with 1
voice-activated controls of various kinds; the vocabulary in- 1993 96 98 2000 02 04 06 08 10 12 14 16
volved is limited (there are only so many things you might want to Sources: Microsoft; research papers
say to your car), which ensures high accuracy. Microphones—or of-
ten arrays of microphones with narrow fields of pick-up—are get- systems for the background noise, special vocabulary and other
ting better at identifying the relevant speaker among a group. idiosyncrasies they will encounter in that particular environment.
Some problems remain. Children and elderly speakers, as well That could be useful anywhere from a noisy factory floor to a care
as people moving around in a room, are harder to understand. home for the elderly.
Background noise remains a big concern; if it is different from that But for a computer to know what a human has said is only a be-
in the training data, the software finds it harder to generalise from ginning. Proper interaction between the two, of the kind that
what it has learned. So Microsoft, for example, offers businesses a comes up in almost every science-fiction story, calls for machines
product called CRIS that lets users customise speech-recognition that can speak back (see box below). 7

Hasta la vista, robot voice

Machines are starting to sound more like humans

“I’LL be back.” “Hasta la vista, baby.” have been “concatenative”, consisting of the stresses in the correct places is about
Arnold Schwarzenegger’s Teutonic drone very short segments recorded by a hu- 50% solved, says Mark Liberman of the
in the “Terminator” films is world-fam- man and then strung together as in the University of Pennsylvania.
ous. But in this instance film-makers acoustic model described above. More Many applications do not require
looking into the future were overly pessi- recently, “parametric” models have been perfect prosody. A satellite-navigation
mistic. Some applications do still feature generating raw audio without the need to system giving instructions on where to
a monotonous “robot voice”, but that is record a human voice, which makes turn uses just a small number of sentence
changing fast. these systems more flexible but less patterns, and prosody is not important.
Creating speech is roughly the inverse natural-sounding. The same goes for most single-sentence
of understanding it. Again, it requires a DeepMind, an artificial-intelligence responses given by a virtual assistant on a
basic model of the structure of speech. company bought by Google in 2014, has smartphone.
What are the sounds in a language, and announced a new way of synthesising But prosody matters when someone is
how do they combine? What words does speech, again using deep neural net- telling a story. Pitch, speed and volume
it have, and how do they combine in works. The network is trained on record- can be used to pass quickly over things
sentences? These are well-understood ings of people talking, and on the texts that are already known, or to build interest
questions, and most systems can now that match what they say. Given a text to and tension for new information. Myriad
generate sound waves that are a fair reproduce as speech, it churns out a far tiny clues communicate the speaker’s
approximation of human speech, at least more fluent and natural-sounding voice attitude to his subject. The phrase “a Ger-
in short bursts. than the best concatenative and paramet- man teacher”, with stress on the word
Heteronyms require special care. How ric approaches. “German”, may, in the context of a story,
should a computer pronounce a word The last step in generating speech is not be a teacher of German, but a teacher
like “lead”, which can be a present-tense giving it prosody—generally, the mod- being explicitly contrasted with a teacher
verb or a noun for a heavy metal, pro- ulation of speed, pitch and volume to who happens to be French or British.
nounced quite differently? Once again a convey an extra (and critical) channel of Text-to-speech engines are not much
language model can make accurate meaning. In English, “a German teacher”, good at using context to provide such
guesses: “Lead us not into temptation” with the stress on “teacher”, can teach accentuation, and where they do, it rarely
can be parsed for its syntax, and once the anything but must be German. But “a extends beyond a single sentence. When
software has worked out that the first German teacher” with the emphasis on Alexa, the assistant in Amazon’s Echo
word is almost certainly a verb, it can “German” is usually a teacher of German device, reads a news story, her prosody is
cause it to be pronounced to rhyme with (and need not be German). Words like jarringly un-humanlike. Talking comput-
“reed”, not “red”. prepositions and conjunctions are not ers have yet to learn how to make humans
Traditionally, text-to-speech models usually stressed. Getting machines to put want to listen.

6 The Economist January 7th 2017

 TECHNOLOGY QUARTERLY Language

Machine translation
Speak easy

Beyond Babel Human scorers’ rating* of Google Translate and human translation
Translation method Phrase-based†
(2007)
Neural-network†
(2016)
Human

3 4 5 Perfect translation= 6
Spanish
English French
Computer translations have got strikingly better, but still Chinese

need human input Spanish English

I
French English
N “STAR TREK” it was a hand-held Universal Translator; in
Chinese English
“The Hitchhiker’s Guide to the Galaxy” it was the Babel
Fish popped conveniently into the ear. In science fiction, Input sentence
the meeting ofdistant civilisations generally requires some
kind of device to allow them to talk. High-quality automat- Pour l’ancienne secrétaire d’Etat, il s’agit de faire oublier un mois de
cafouillages et de convaincre l’auditoire que M. Trump n’a pas l’étoffe
ed translation seems even more magical than other kinds d’un président
of language technology because many humans struggle to speak
more than one language, let alone translate from one to another. Phrase-based† Neural-network† Human
The idea has been around since the 1950s, and computerised For the former For the former secretary The former secretary of
translation is still known by the quaint moniker “machine transla- secretary of state, this of state, it is a question state has to put behind
is to forget a month of of forgetting a month of her a month of setbacks
tion” (MT). It goes back to the early days of the cold war, when bungling and convince muddles and convincing and convince the
American scientists were trying to get computers to translate from the audience that Mr the audience that Mr audience that Mr Trump
Russian. They were inspired by the code-breaking successes of the Trump has not the Trump does not have the does not have what it
makings of a president stuff of a president takes to be a president
second world war, which had led to the development of comput-
ers in the first place. To them, a scramble of Cyrillic letters on a Source: Google *0=completely nonsense translation, 6=perfect translation †Machine translation

page of Russian text was just a coded version of English, and turn-
ing it into English was just a question of breaking the code.
Scientists at IBM and Georgetown University were among proach that would revive optimism about MT. Its Candide system
those who thought that the problem would be cracked quickly. was the first serious attempt to use statistical probabilities rather
Having programmed just six rules and a vocabulary of 250 words than rules devised by humans for translation. Statistical, “phrase-
into a computer, they gave a demonstration in New York on Janu- based” machine translation, like speech recognition, needed
ary 7th 1954 and proudly produced 60 automated translations, in- training data to learn from. Candide used Canada’s Hansard,
cluding that of “Mi pyeryedayem mislyi posryedstvom ryechyi,” which publishes that country’s parliamentary debates in French
which came out correctly as “We transmit thoughts by means of and English, providing a huge amount of data for that time. The
speech.” Leon Dostert of Georgetown, the lead scientist, breezily phrase-based approach would ensure that the translation of a
predicted that fully realised MT would be “an accomplished fact” word would take the surrounding words properly into account.
in three to five years. But quality did not take a leap until Google, which had set itself
Instead, after more than a decade of work, the report in 1966 by the goal of indexing the entire internet, decided to use those data
a committee chaired by John Pierce, mentioned in the introduc- to train its translation engines; in 2007 it switched from a rules-
tion to this report, recorded bitter disappointment with the results based engine (provided by Systran) to its own statistics-based sys-
and urged researchers to focus on narrow, achievable goals such tem. To build it, Google trawled about a trillion web pages, looking
as automated dictionaries. Government-sponsored work on MT for any text that seemed to be a translation of another—for exam-
went into near-hibernation for two decades. What little was done ple, pages designed identically but with different words, and per-
was carried out by private companies. The most notable of them haps a hint such as the address of one page ending in /en and the
was Systran, which provided rough translations, mostly to Ameri- other ending in /fr. According to Macduff Hughes, chief engineer
ca’s armed forces. on Google Translate, a simple approach using vast amounts of
data seemed more promising than a clever one with fewer data.
La plume de mon ordinateur Training on parallel texts (which linguists call corpora, the plu-
The scientists got bogged down by their rules-based approach. ral of corpus) creates a “translation model” that generates not one
Having done relatively well with their six-rule system, they came but a series ofpossible translations in the target language. The next
to believe that if they programmed in more rules, the system step is running these possibilities through a monolingual lan-
would become more sophisticated and subtle. Instead, it became guage model in the target language. This is, in effect, a set of expec-
more likely to produce nonsense. Adding extra rules, in the mod- tations about what a well-formed and typical sentence in the tar-
ern parlance of software developers, did not “scale”. get language is likely to be. Single-language models are not too
Besides the difficulty of programming grammar’s many rules hard to build. (Parallel human-translated corpora are hard to come
and exceptions, some early observers noted a conceptual pro- by; large amounts of monolingual training data are not.) As with
blem. The meaning of a word often depends not just on its dictio- the translation model, the language model uses a brute-force sta-
nary definition and the grammatical context but the meaning of tistical approach to learn from the training data, then ranks the
the rest ofthe sentence. Yehoshua Bar-Hillel, an Israeli MT pioneer, outputs from the translation model in order of plausibility.
realised that “the pen is in the box” and “the box is in the pen” Statistical machine translation rekindled optimism in the field.
would require different translations for “pen”: any pen big enough Internet users quickly discovered that Google Translate was far
to hold a box would have to be an animal enclosure, not a writing better than the rules-based online engines they had used before,
instrument. such as BabelFish. Such systems still make mistakes—sometimes
How could machines be taught enough rules to make this kind minor, sometimes hilarious, sometimes so serious or so many as
of distinction? They would have to be provided with some knowl- to make nonsense of the result. And language pairs like Chinese-
edge of the real world, a task far beyond the machines or their pro- English, which are unrelated and structurally quite different,
grammers at the time. Two decades later, IBM stumbled on an ap- make accurate translation harder than pairs of related languages1
The Economist January 7th 2017 7
 TECHNOLOGY QUARTERLY Language

2 like English and German. But more often than not, Google Trans- Neural-network translation requires heavy-duty computing
late and its free online competitors, such as Microsoft’s Bing Trans- power, both for the original training of the system and in use. The
lator, offer a usable approximation. heart of such a system can be the GPUs that made the deep-learn-
Such systems are set to get better, again with the help of deep ing revolution possible, or specialised hardware like Google’s Ten-
learning from digital neural networks. The Association for Com- sor Processing Units (TPUs). Smaller translation companies and re-
putational Linguistics has been holding workshops on MT every searchers usually rent this kind of processing power in the cloud.
summer since 2006. One of the events is a competition between But the data sets used in neural-network training do not need to be
MT engines turned loose on a collection of news text. In August as extensive as those for phrase-based systems, which should give
2016, in Berlin, neural-net-based MT systems were the top per- smaller outfits a chance to compete with giants like Google.
formers (out of102), a first. Fully automated, high-quality machine translation is still a
Now Google has released its own neural-net-based engine for long way off. For now, several problems remain. All current mach-
eight language pairs, closing much of the quality gap between its ine translations proceed sentence by sentence. If the translation of
old system and a human translator. This is especially true for such a sentence depends on the meaning of earlier ones, automat-
closely related languages (like the big European ones) with lots of ed systems will make mistakes. Long sentences, despite tricks like
available training data. The results are still distinctly imperfect, but the attention model, can be hard to translate. And neural-net-
far smoother and more accurate than before. Translations be- based systems in particular struggle with rare words.
tween English and (say) Chinese and Korean are not as good yet, Training data, too, are scarce for many language pairs. They are
but the neural system has brought a clear improvement here too. plentiful between European languages, since the European Un-
ion’s institutions churn out vast amounts of material translated by
The Coca-Cola factor humans between the EU’s 24 official languages. But for smaller
Neural-network-based translation actually uses two networks. languages such resources are thin on the ground. For example,
One is an encoder. Each word of an input sentence is converted there are few Greek-Urdu parallel texts available on which to train
into a multidimensional vector (a series of numerical values), and a translation engine. So a system that claims to offer such transla-
the encoding of each new word takes into account what has hap- tion is in fact usually running it through a bridging language, near-
pened earlier in the sentence. Marcello Federico of Italy’s Fonda- ly always English. That involves two translations rather than one,
zione Bruno Kessler, a private research organisation, uses an in- multiplying the chance of errors.
triguing analogy to compare neural-net translation with the Even if machine translation is not yet perfect, technology can
phrase-based kind. The latter, he says, is like describing Coca-Cola already help humans translate much more quickly and accurately.
in terms of sugar, water, caffeine and other ingredients. By con- “Translation memories”, software that stores already translated
trast, the former encodes features such as liquidness, darkness, words and segments, first came into use as early as the 1980s. For
sweetness and fizziness. someone who frequently translates the same kind of material
Once the source sentence is encoded, a decoder network gen- (such as instruction manuals), they serve up the bits that have al-
erates a word-for-word translation, once again taking account of ready been translated, saving lots of duplication and time.
the immediately preceding word. This can cause problems when A similar trick is to train MT engines on text dealing with a nar-
the meaning of words such as pronouns depends on words men- row real-world domain, such as medicine or the law. As software
tioned much earlier in a long sentence. This problem is mitigated techniques are refined and computers get faster, training becomes
by an “attention model”, which helps maintain focus on other easier and quicker. Free software such as Moses, developed with
words in the sentence outside the immediate context. the support of the EU and used by some of its in-house translators,
can be trained by anyone with parallel cor-
pora to hand. A specialist in medical trans-
lation, for instance, can train the system on
medical translations only, which makes
them far more accurate.
At the other end of linguistic sophistica-
tion, an MT engine can be optimised for
the shorter and simpler language people
use in speech to spew out rough but near-
instantaneous speech-to-speech transla-
tions. This is what Microsoft’s Skype Trans-
lator does. Its quality is improved by being
trained on speech (things like film subtitles
and common spoken phrases) rather than
the kind of parallel text produced by the
European Parliament.
Translation management has also ben-
efited from innovation, with clever soft-
ware allowing companies quickly to com-
bine the best of MT, translation memory,
customisation by the individual translator
and so on. Translation-management soft-
ware aims to cut out the agencies that have
been acting as middlemen between clients
and an army of freelance translators. Jack
Welde, the founder of Smartling, an indus-
try favourite, says that in future translation
customers will choose how much human
intervention is needed for a translation. A
quick automated one will do for low-1
8 The Economist January 7th 2017
 TECHNOLOGY QUARTERLY Language

2 stakes content with a short life, but the cold today?” The assistants know a few things about users, such as
most important content will still require a where they live and who their family are, so they can be personal,
fully hand-crafted and edited version. Not- Computer too: “How’s my commute looking?” “Text my wife I’ll be home in
ing that MT has both determined boosters 15 minutes.”
and committed detractors, Mr Welde says translation And they get better with time. Apple’s Siri receives 2bn re-
he is neither: “If you take a dogmatic quests per week, which (after being anonymised) are used for fur-
stance, you’re not optimised for the needs is still ther teaching. For example, Apple says Siri knows every possible
of the customer.”
Translation software will go on getting
known as way that users ask about a sports score. She also has a delightful
answer for children who ask about Father Christmas. Microsoft
better. Not only will engineers keep tweak-
ing their statistical models and neural net-
“machine learned from some of its previous natural-language platforms that
about 10% of human interactions were “chitchat”, from “tell me a
works, but users themselves will make im- translation” joke” to “who’s your daddy?”, and used such chat to teach its digi-
provements to their own systems. For tal assistant, Cortana.
example, a small but much-admired startup, Lilt, uses phrase- The writing team for Cortana includes two playwrights, a poet,
based MT as the basis for a translation, but an easy-to-use interface a screenwriter and a novelist. Google hired writers from Pixar, an
allows the translator to correct and improve the MT system’s out- animated-film studio, and The Onion, a satirical newspaper, to
put. Every time this is done, the corrections are fed back into the make its new Google Assistant funnier. No wonder people often
translation engine, which learns and improves in real time. Users thank their digital helpers for a job well done. The assistants’ re-
can build several different memories—a medical one, a financial plies range from “My pleasure, as always” to “You don’t need to
one and so on—which will help with future translations in that thank me.”
specialist field.
TAUS, an industry group, recently issued a report on the state of Good at grammar
the translation industry saying that “in the past few years the How do natural-language platforms know what people want?
translation industry has burst with new tools, platforms and sol- They not only recognise the words a person uses, but break down
utions.” Earlier this year Jaap van der Meer, TAUS’s founder and di- speech for both grammar and meaning. Grammar parsing is rela-
rector, wrote a provocative blogpost entitled “The Future Does Not tively advanced; it is the domain of the well-established field of
Need Translators”, arguing that the quality of MT will keep im- “natural-language processing”. But meaning comes under the
proving, and that for many applications less-than-perfect transla- heading of “natural-language understanding”, which is far harder.
tion will be good enough. First, parsing. Most people are not very good at analysing the
The “translator” of the future is likely to be more like a quality- syntax of sentences, but computers have become quite adept at it,
control expert, deciding which texts need the most attention to de- even though most sentences are ambiguous in ways humans are
tail and editing the output of MT software. That may be necessary rarely aware of. Take a sign on a public fountain that says, “This is
because computers, no matter how sophisticated they have be- not drinking water.” Humans understand it to mean that the water
come, cannot yet truly grasp what a text means. 7 (“this”) is not a certain kind of water (“drinking water”). But a com-
puter might just as easily parse it to say that “this” (the fountain) is
not at present doing something (“drinking water”).
As sentences get longer, the number of grammatically possible
Meaning and machine intelligence but nonsensical options multiplies exponentially. How can a
machine parser know which is the right one? It helps for it to know

What are you talking that some combinations of words are more common than others:
the phrase “drinking water” is widely used, so parsers trained on
large volumes of English will rate those two words as likely to be
about? joined in a noun phrase. And some structures are more common
than others: “noun verb noun noun” may be much more common
than “noun noun verb noun”. A machine parser can compute the
Machines still cannot conduct proper conversations with overall probability of all combinations and pick the likeliest.
humans because they do not understand the world A “lexicalised” parser might do even better. Take the Groucho
Marx joke, “One morning I shot an elephant in my pyjamas. How

I
N “BLACK MIRROR”, a British science-fiction satire series he got in my pyjamas, I’ll never know.” The first sentence is ambig-
set in a dystopian near future, a young woman loses her uous (which makes the joke)—grammatically both “I” and “an ele-
boyfriend in a car accident. A friend offers to help her deal phant” can attach to the prepositional phrase “in my pyjamas”.
with her grief. The dead man was a keen social-media user, But a lexicalised parser would recognise that “I [verb phrase] in
and his archived accounts can be used to recreate his per- my pyjamas” is far more common than “elephant in my pyjamas”,
sonality. Before long she is messaging with a facsimile, and so assign that parse a higher probability.
then speaking to one. As the system learns to mimic him ever bet- But meaning is harder to pin down than syntax. “The boy
ter, he becomes increasingly real. kicked the ball” and “The ball was kicked by the boy” have the
This is not quite as bizarre as it sounds. Computers today can same meaning but a different structure. “Time flies like an arrow”
already produce an eerie echo of human language if fed with the can mean either that time flies in the way that an arrow flies, or
appropriate material. What they cannot yet do is have true conver- that insects called “time flies” are fond of an arrow.
sations. Truly robust interaction between man and machine “Who plays Thor in ‘Thor’?” Your correspondent could not re-
would require a broad understanding of the world. In the absence member the beefy Australian who played the eponymous Norse
of that, computers are not able to talk about a wide range of topics, god in the Marvel superhero film. But when he asked his iPhone,
follow long conversations or handle surprises. Siri came up with an unexpected reply: “I don’t see any movies
Machines trained to do a narrow range of tasks, though, can matching ‘Thor’ playing in Thor, IA, US, today.” Thor, Iowa, with a
perform surprisingly well. The most obvious examples are the population of 184, was thousands of miles away, and “Thor”, the
digital assistants created by the technology giants. Users can ask film, has been out of cinemas for years. Siri parsed the question
them questions in a variety of natural ways: “What’s the tempera- perfectly properly, but the reply was absurd, violating the rules of
ture in London?” “How’s the weather outside?” “Is it going to be what linguists call pragmatics: the shared knowledge and under-1
The Economist January 7th 2017 9
 TECHNOLOGY QUARTERLY Language

2 standing that people use to make sense of the often messy human Fernando Pereira of Google points out why. Automated speech
language they hear. “Can you reach the salt?” is not a request for recognition and machine translation have something in common:
information but for salt. Natural-language systems have to be there are huge stores of data (recordings and transcripts for speech
manually programmed to handle such requests as humans expect recognition, parallel corpora for translation) that can be used to
them, and not literally. train machines. But there are no training data for common sense.
Knowledge of the real world is another matter. AI has helped
Multiple choice data-rich companies such as America’s West-Coast tech giants or-
Shared information is also built up over the course of a conversa- ganise much of the world’s information into interactive databases
tion, which is why digital assistants can struggle with twists and such as Google’s Knowledge Graph. Some of the content of that
turns in conversations. Tell an assistant, “I’d like to go to an Italian appears in a box to the right of a Google page of search results for a
restaurant with my wife,” and it might suggest a restaurant. But famous figure or thing. It knows that Jacob Bernoulli studied at the
then ask, “is it close to her office?”, and the assistant must grasp the University of Basel (as did other people, linked to Bernoulli
meanings of “it” (the restaurant) and “her” (the wife), which it will through this node in the Graph) and wrote “On the Law of Large
find surprisingly tricky. Nuance, the language-technology firm, Numbers” (which it knows is a book).
which provides natural-language platforms to many other com- Organising information this way is not difficult for a company
panies, is working on a “concierge” that can handle this type of with lots of data and good AI capabilities, but linking information
challenge, but it is still a prototype. to language is hard. Google touts its assistant’s ability to answer
Such a concierge must also offer only restaurants that are open. questions like “Who was president when the Rangers won the
Linking requests to common sense (knowing that no one wants to World Series?” But Mr Pereira concedes that this was the result of
be sent to a closed restaurant), as well as a knowledge of the real explicit training. Another such complex query—“What was the
world (knowing which restaurants are closed), is one of the most population of London when Samuel Johnson wrote his dictio-
difficult challenges for language technologies. nary?”—would flummox the assistant, even though the Graph
Common sense, an old observation goes, is uncommon knows about things like the historical population of London and
enough in humans. Programming it into computers is harder still. the date of Johnson’s dictionary. IBM’s Watson system, which in1

Brain scan Terry Winograd

The Winograd Schema tests computers’ “understanding” of the real world

THE Turing Test was conceived as a way questions were obvious to humans but
to judge whether true artificial intelli- would require computers to have some
gence has been achieved. If a computer reasoning ability and some knowledge of
can fool humans into thinking it is hu- the real world. The first official Winograd
man, there is no reason, say its fans, to Schema Challenge was held this year,
say the machine is not truly intelligent. with a $25,000 prize offered by Nuance,
Few giants in computing stand with the language-software company, for a
Turing in fame, but one has given his program that could answer more than
name to a similar challenge: Terry Wi- 90% of the questions correctly. The best of
nograd, a computer scientist at Stanford. them got just 58% right.
In his doctoral dissertation Mr Winograd Though officially retired, Mr Winograd
posed a riddle for computers: “The city continues writing and researching. One
councilmen refused the demonstrators a of his students is working on an applica-
permit because they feared violence. tion for Google Glass, a computer with a
Who feared violence?” display mounted on eyeglasses. The app
It is a perfect illustration of a well- would help people with autism by read-
recognised point: many things that are ing the facial expressions of conversation
easy for humans are crushingly difficult partners and giving the wearer infor-
for computers. Mr Winograd went into mation about their emotional state. It
AI research in the 1960s and 1970s and would allow him to integrate linguistic
developed an early natural-language and non-linguistic information in a way
program called SHRDLU that could take that people with autism find difficult, as
commands and answer questions about Mr Page went on to co-found Google, Mr do computers.
a group of shapes it could manipulate: Winograd became a guest researcher at Asked to trick some of the latest digital
“Find a block which is taller than the one the company, helping to build Gmail. assistants, like Siri and Alexa, he asks them
you are holding and put it into the box.” In 2011 Hector Levesque of the Univer- things like “Where can I find a nightclub
This work brought a jolt of optimism to sity of Toronto became annoyed by my Methodist uncle would like?”, which
the AI crowd, but Mr Winograd later fell systems that “passed” the Turing Test by requires knowledge about both nightclubs
out with them, devoting himself not to joking and avoiding direct answers. He (which such systems have) and Methodist
making machines intelligent but to mak- later asked to borrow Mr Winograd’s uncles (which they don’t). When he tried
ing them better at helping human beings. name and the format of his dissertation’s “Where did I leave my glasses?”, one of
(These camps are sharply divided by puzzle to pose a more genuine test of them came up with a link to a book of that
philosophy and academic pride.) He machine “understanding”: the Winograd name. None offered the obvious answer:
taught Larry Page at Stanford, and after Schema. The answers to its battery of “How would I know?”

10 The Economist January 7th 2017

 TECHNOLOGY QUARTERLY Language

2 2011 beat two human champions at the lack of anything challenging to do would be harmful to people.
quiz show “Jeopardy!”, succeeded mainly Fortunately, the tasks that talking machines can take off hu-
by calculating huge numbers of potential mans’ to-do lists are the sort that many would happily give up.
answers based on key words by probabili- Machines are increasingly able to handle difficult but well-de-
ty, not by a human-like understanding of fined jobs. Soon all that their users will have to do is pipe up and
the question. ask them, using a naturally phrased voice command. Once upon a
Making real-world information com- time, just one tinkerer in a given family knew how to work the
putable is challenging, but it has inspired computer or the video recorder. Then graphical interfaces (icons
some creative approaches. Cortical.io, a and a mouse) and touchscreens made such technology accessible
Vienna-based startup, took hundreds of to everyone. Frank Chen of Andreessen Horowitz, a venture-capi-
Wikipedia articles, cut them into thou- tal firm, sees natural-language interfaces between humans and
sands ofsmall snippets ofinformation and machines as just another step in making information and services
ran an “unsupervised” machine-learning What available to all. Silicon Valley, he says, is enjoying a golden age of
AI technologies. Just as in the early 1990s companies were piling
algorithm over it that required the comput-
er not to look for anything in particular but machines online and building websites without quite knowing why, now
to find patterns. These patterns were then everyone is going for natural language. Yet, he adds, “we’re in 1994
represented as a visual “semantic finger- cannot yet for voice.”
print” on a grid of 128x128 pixels. Clumps 1995 will soon come. This does not mean that people will com-
of pixels in similar places represented se- do is have municate with their computers exclusively by talking to them.
mantic similarity. This method can be used
to disambiguate words with multiple
true con- Websites did not make the telephone obsolete, and mobile de-
vices did not make desktop computers obsolete. In the same way,
meanings: the fingerprint of“organ” shares
features with both “liver” and “piano” (be-
versations people will continue to have a choice between voice and text
when interacting with their machines.
cause the word occurs with both in different parts of the training Not all will choose voice. For example, in Japan yammering
data). This might allow a natural-language system to distinguish into a phone is not done in public, whether the interlocutor is a hu-
between pianos and church organs on one hand, and livers and man or a digital assistant, so usage of Siri is low during business
other internal organs on the other. hours but high in the evening and at the weekend. For others,
Proper conversation between humans and machines can be voice-enabled technology is an obvious boon. It allows dyslexic
seen as a series of linked challenges: speech recognition, speech people to write without typing, and the very elderly may find it
synthesis, syntactic analysis, semantic analysis, pragmatic under- easier to talk than to type on a tiny keyboard. The very young,
standing, dialogue, common sense and real-world knowledge. Be- some of whom today learn to type before they can write, may
cause all the technologies have to work together, the chain as a soon learn to talk to machines before they can type.
whole is only as strong as its weakest link, and the first few ofthese Those with injuries or disabilities that make it hard for them to
are far better developed than the last few. write will also benefit. Microsoft is justifiably proud of a new de-
The hardest part is linking them together. Scientists do not vice that will allow people with amyotrophic lateral sclerosis
know how the human brain draws on so many different kinds of (ALS), which immobilises nearly all of the body but leaves the
knowledge at the same time. Programming a machine to replicate mind working, to speak by using their eyes to pick letters on a
that feat is very much a work in progress. 7 screen. The critical part is predictive text, which improves as it gets
used to a particular individual. An experienced user will be able
to “speak” at around 15 words per minute.
People may even turn to machines for company. Microsoft’s
Looking ahead Xiaoice, a chatbot launched in China, learns to come up with the
responses that will keep a conversation going longest. Nobody

For my next trick would think it was human, but it does make users open up in sur-
prising ways. Jibo, a new “social robot”, is intended to tell children
stories, help far-flung relatives stay in touch and the like.
Another group that may benefit from technology is smaller
language communities. Networked computers can encourage a
winner-take-all effect: if there is a lot of good software and content
in English and Chinese, smaller languages become less valuable
Talking machines are the new must-haves online. If they are really tiny, their very survival may be at stake.
But Ross Perlin of the Endangered Languages Alliance notes that

I
N “WALL-E”, an animated children’s film set in the future, new software allows researchers to document small languages
all humankind lives on a spaceship after the Earth’s envi- more quickly than ever. With enough data comes the possibility
ronment has been trashed. The humans are whisked of developing resources—from speech recognition to interfaces
around in intelligent hovering chairs; machines take care with software—for smaller and smaller languages. The Silicon Val-
of their every need, so they are all morbidly obese. Even ley giants already localise their services in dozens of languages;
the ship’s captain is not really in charge; the actual pilot is neural networks and other software allow new versions to be gen-
an intelligent and malevolent talking robot, Auto, and like so erated faster and more efficiently than ever.
many talking machines in science fiction, he eventually makes a There are two big downsides to the rise in natural-language
grab for power. technologies: the implications for privacy, and the disruption it
Speech is quintessentially human, so it is hard to imagine ma- will bring to many jobs.
chines that can truly speak conversationally as humans do with- Increasingly, devices are always listening. Digital assistants like
out also imagining them to be superintelligent. And if they are Alexa, Cortana, Siri and Google Assistant are programmed to wait
superintelligent, with none of humans’ flaws, it is hard to imagine for a prompt, such as “Hey, Siri” or “OK, Google”, to activate them.
them not wanting to take over, not only for their good but for that But allowing always-on microphones into people’s pockets and
of humanity. Even in a fairly benevolent future like “WALL-E’s”, homes amounts to a further erosion of traditional expectations of
where the machines are doing all the work, it is easy to see that the privacy. The same might be said for all the ways in which language1
The Economist January 7th 2017 11
 TECHNOLOGY QUARTERLY Language

2 software improves by training on a single user’s voice, vocabulary, officer, likes to think that this will free chief financial officers from
written documents and habits. having to write up the same old routine analyses for the board,
All the big companies’ location-based services—even the accel- giving them time to develop more creative approaches.
erometers in phones that detect small movements—are making Carl Benedikt Frey, an economist at Oxford University, has re-
ever-improving guesses about users’ wants and needs. The mo- searched the likely effect of artificial intelligence on the labour
ment when a digital assistant surprises a user with “The chemist is market and concluded that the jobs most likely to remain immune
nearby—do you want to buy more haemorrhoid cream, Steve?” include those requiring creativity and skill at complex social inter-
could be when many may choose to reassess the trade-off be- actions. But not every human has those traits. Call centres may
tween amazing new services and old-fashioned privacy. The tech need fewer people as more routine work is handled by automated
companies can help by giving users more choice; the latest iPhone systems, but the trickier inquiries will still go to humans.
will not be activated when it is laid face down on a table. But hack- Much of this seems familiar. When Google search first became
ers will inevitably find ways to get at some of these data. available, it turned up documents in seconds that would have tak-
en a human operator hours, days or years to find. This removed
Hey, Siri, find me a job much of the drudgery from being a researcher, librarian or jour-
The other big concern is for jobs. To the extent that they are rou- nalist. More recently, young lawyers and paralegals have taken to
tine, they face being automated away. A good example is customer using e-discovery. These innovations have not destroyed the pro-
support. When people contact a company for help, the initial en- fessions concerned but merely reshaped them.
counter is usually highly scripted. A company employee will veri- Machines that relieve drudgery and allow people to do more
fy a customer’s identity and follow a decision-tree. Language tech- interesting jobs are a fine thing. In net terms they may even create
nology is now mature enough to take on many of these tasks. extra jobs. But any big adjustment is most painful for those least
For a long transition period humans will still be needed, but able to adapt. Upheavals brought about by social changes—like
the work they do will become less routine. Nuance, which sells the emancipation of women or the globalisation of labour mar-
lots of automated online and phone-based help systems, is bull- kets—are already hard for some
ish on voice biometrics (customers identifying themselves by say- people to bear. When those
ing “my voice is my password”). Using around 200 parameters for changes are wrought by ma- OFFER TO READERS
identifying a speaker, it is probably more secure than a fingerprint, chines, they become even harder, Reprints of Technology Quarterly
are available at US$7.00 each,
says Brett Beranek, a senior manager at the company. It will also and all the more so when those
with a minimum of 5 copies, plus
eliminate the tedium, for both customers and support workers, of machines seem to behave more 10% postage in the United
going through multi-step identification procedures with PINs, and more like humans. People al- States, 15% postage in Mexico
passwords and security questions. When Barclays, a British bank, ready treat inanimate objects as and Canada. Add tax CA, DC, IL,
offered it to frequent users of customer-support services, 84% if they were alive: who has never NY, VA; GST in Canada.
signed up within five months. shouted at a computer in frustra-
For orders to NY, please add tax
Digital assistants on personal smartphones can get away with tion? The more that machines based on cost of reprints plus
mistakes, but for some business applications the tolerance for er- talk, and the more that they seem postage.For classroom use or
ror is close to zero, notes Nikita Ivanov. His company, Datalingvo, a to understand people, the more quantities over 50, please
Silicon Valley startup, answers questions phrased in natural lan- their users will be tempted to at- telephone for discount
guage about a company’s business data. If a user wants to know tribute human traits to them. information.
which online ads resulted in the most sales in California last That raises questions about Please send your order with
month, the software automatically translates his typed question what it means to be human. Lan- payment by cheque or money
into a database query. But behind the scenes a human working for guage is widely seen as human- order to:
Datalingvo vets the query to make sure it is correct. This is because kind’s most distinguishing trait.
Jill Kaletha of Foster Printing
the stakes are high: the technology is bound to make mistakes in AI researchers insist that their
Service
its early days, and users could make decisions based on bad data. machines do not think like peo-
This process can work the other way round, too: rather than ple, but if they can listen and talk Telephone: 866 879 9144,
natural-language input producing data, data can produce lan- like humans, what does that extension 168, or e-mail:
guage. Arria, a company based in London, makes software into make them? As humans teach jillk@fostereprinting.com
which a spreadsheet full of data can be dragged and dropped, to ever more capable machines to (American Express, Visa and
be turned automatically into a written description ofthe contents, use language, the once-obvious MasterCard accepted)
complete with trends. Matt Gould, the company’s chief strategy line between them will blur. 7
12 The Economist January 7th 2017
 The Economist January 7th 2017 37
Middle East and Africa
Also in this section
38 Science amid the sheep farmers
38 Zimbabwe’s sex trade
39 The battle for Mosul continues
40 Trump and the West Bank
41 Israel’s divisions

For daily analysis and debate on the Middle East

and Africa, visit
Economist.com/world/middle-east-africa

South Africa’s schools After Nelson Mandela became presi-

dent in 1994 his government expanded ac-
Bottom of the class cess to schooling. It also replaced a school
system segregated by race with one divid-
ed by wealth. Schools in poorer areas re-
ceive more state funding. But schools in
richer areas can charge fees on top.
In theory these schools must admit pu-
CAPE TOWN
pils even if their parents cannot afford the
Why South Africa has one of the world’s worst education systems
fees. In practice they are fortresses of privi-

A FTER half an hour of pencil-chewing Li-

zeka Rantsan’s class lines up at her
desk to hand in its maths tests. The teacher
who start school just one can expect to do
well enough to study engineering. Ten
white kids can expect the same result.
lege. There are still about 500 schools built
from mud, mainly in the Eastern Cape. The
Western Cape has some of the largest cam-
at Oranjekloof primary school in Cape Many of the problems have their roots puses in the southern hemisphere, with
Town thanks the 11- and 12-year-olds and in apartheid. The Bantu Education Act of cricket pitches as smooth as croquet lawns.
flicks through the papers. Ms Rantsan 1953 set out to ensure that whites received a And yet money is not the reason for the
sighs, unimpressed. Pulling one sheet of er- better education than blacks, who were, malaise. Few countries spend as much to
rant scribbles from the pile she asks: “How according to Hendrik Verwoerd, the future so little effect. In South Africa public
are we supposed to help these children?” prime minister then in charge of educa- spending on education is 6.4% of GDP; the
It is a question that South Africa is fail- tion, to be educated only enough to be average share in EU countries is 4.8%. More
ing to answer. In a league table of educa- “hewers of wood and drawers of water”. important than money are a lack of ac-
tion systems drawn up in 2015 by the OECD Black pupils received about a fifth of the countability and the abysmal quality of
club of mainly rich countries, South Africa funding of white peers. They were taught most teachers. Central to both failures is
ranks 75th out of 76. In November the latest almost no maths or science. Most indepen- the South African Democratic Teachers
Trends in International Mathematics and dent church-run schools that provided a Union (SADTU), which is allied to the rul-
Science Study (TIMSS), a quadrennial test good education in black areas were shut. ing African National Congress (ANC).
sat by 580,000 pupils in 57 countries, had The role of SADTU was laid bare in a re-
South Africa at or near the bottom of its va- port published in May 2016 by a team led
rious rankings (see chart), though its scores Far behind by John Volmink, an academic. It found
had improved since 2011. Its children are Selected TIMSS maths scores*, 2015, % of pupils “widespread” corruption and abuse. This
behind those in poorer parts of the conti- Below 400 400-475 475-550 included teachers paying union officials
nent. A shocking 27% of pupils who have 550-625 At or above 625 for plum jobs, and female teachers being
attended school for six years cannot read, 0 20 40 60 80 100 told they would be given jobs only in ex-
compared with 4% in Tanzania and 19% in Singapore change for sex. The government has done
Zimbabwe. After five years of school about South Korea little in response. Perhaps this is unsurpris-
half cannot work out that 24 divided by Japan ing; all six of the senior civil servants run-
three is eight. Only 37% of children starting Australia ning education are SADTU members.
school go on to pass the matriculation Sweden
The union’s influence within govern-
exam; just 4% earn a degree. ment belies its claim that officials are to
Italy
South Africa has the most unequal blame for woeful schools. Last year it suc-
Botswana
school system in the world, says Nic Spaull cessfully lobbied for the cancellation of
of the University of Stellenbosch. The gap Morocco standardised tests. It has ensured that in-
in test scores between the top 20% of South Africa spectors must give schools a year’s notice
schools and the rest is wider than in almost Source: Trends in International before showing up (less than 24 hours is
Mathematics and Science Study *500=Average
every other country. Of 200 black pupils the norm in England). And although par- 1
38 Middle East and Africa The Economist January 7th 2017

2 ent-led school governing bodies are meant And it is everything state schools are not. Early results show that its pupils are on
to hold teachers to account, they are more Its 360 pupils begin learning at 7.30am and average a year ahead of their peers. Spark
often controlled by the union, or in some end around 3pm-4pm; most state schools runs eight schools and plans to have 20 by
cases by gangs. close at 1.30pm. At the start of the day pu- 2019. Other operators, such as Future Na-
But even if there were better oversight pils gather for mindfulness exercises, tion, co-founded by Sizwe Nxasana, a for-
most teachers would struggle to shape up. maths questions, pledges to work hard— mer banker, are also expanding. “We are
In one study in 2007 maths teachers of 11- and a blood-pumping rendition of Katy never going to have a larger footprint than
and 12-year-olds sat tests similar to those Perry’s “Firework”. “We have an emotional [the] government but we can influence it,”
taken by their class; questions included curriculum as well as an academic one,” hopes Stacey Brewer, Spark’s founder.
simple calculations of fractions and ratios. says Bailey Thomson, a Spark director. Another promising scheme is the “col-
A scandalous 79% of teachers scored be- Pupils attend maths lessons based on laboration schools” pilot in the Western
low the level expected of the pupils. The Singapore’s curriculum; literacy classes Cape, based on academies in England and
average14-year-old in Singapore and South draw on how England teaches phonics. charter schools in America. The five col-
Korea performs much better. Crucially, teachers are not members of laboration schools are funded by the state
It does not have to be this way. Spark SADTU. But they receive 250 hours of pro- but run by independent operators. In what
School Bramley in Johannesburg is a low- fessional development per year, about as Helen Zille, the premier of the Western
cost private school, spending roughly as much as the average state-school teacher Cape, calls “a seminal moment”, the par-
much per pupil as the average state school. gets in a decade. ents of Oranjekloof pupils petitioned to
keep the school in the collaboration pro-
gramme when unions tried to oppose it.
Astronomers v sheep farmers in South Africa
Ms Zille wants to open a “critical mass” of
Stars and baas collaboration schools to inject competition
into the public system.
Spark and the collaboration schools
THE KAROO
suggest that South African education need
A telescope in the desert meets NIMBYism
not be doomed. But together they account

T HERE is a haunting beauty to the

Karoo, a vast swathe of semi-desert
that seems empty save for the stars over-
allow scientists to peer into the origins of
the universe.
Still, some sheep farmers are grum-
for a tiny fraction of the country’s more
than 25,000 schools. Widespread im-
provement will require loosening the grip
head and sheep grazing below. Economic bling. Because of the sensitivity of the of SADTU. In local polls in August the rul-
opportunities here are few. Scrubby, telescope, the surrounding area must be ing party saw its worst results since the end
sprawling farms support sheep, ostrich, kept free from radio interference caused of apartheid. This may force it to review
springbok and little else. (To be fair, Karoo by everything from mobile phones to vested interests. More likely it will contin-
lamb is delicious.) microwave ovens and some car engines. ue to fail children. “The desire to learn has
But the Karoo’s clear skies also draw The SKA is buying up more farms than been eroded,” says Angus Duffett, the head
some of the world’s best scientists. A originally expected to ensure radio si- of Silikamva High, a collaboration school.
radio telescope project called the Square lence over an area of some 130,000 hect- “That is the deeper sickness.” 7
Kilometre Array (SKA) is under construc- ares. There will be no mobile phone
tion, with the latest cluster of 64 giant signals allowed, except in the few towns
antennae due to be completed late next in the area. Residents will instead be Decriminalising Zimbabwe’s sex trade
year. South Africa won the right to host given an alternative radio communica-
half of the $2bn international project in
2012. When finished it will be the biggest
tion system. Save the Karoo, an advocacy
group, isn’t swayed by the prospect of
Less stigma, more
radio telescope in the world and should groundbreaking astronomical discover-
ies. Its members fear the restrictions will
competition
make the Karoo “a cut-off and backward
HARARE
region”, and warn that abattoirs and
Why some prostitutes wish their job
windmill repairmen serving farms near
was still banned
the SKA site could face financial ruin. “I
couldn’t give a damn about a black hole
sitting somewhere out in space,” says Eric
Torr, an organiser with the group. “It does
I T IS midnight at a shopping centre in Ho-
pley, a poor suburb east of Harare. Mas-
celine, an orphaned 15-year-old, stands in
not put food on the table.” the darkness. Her aim is to find a client. But
Sky-high expectations in this down-at- she also wants to avoid getting beaten up
heel area are also a problem. An SKA by older prostitutes who resent the compe-
official grumbles that the locals expect tition she represents.
the telescope to solve all their woes. Zimbabwe’s Constitutional Court
Some jobs have been created, but few ruled in 2015 that the police could not arrest
locals have the skills to decipher the women for prostitution. At first, sex work-
secrets of distant galaxies. Until recently ers cheered. No more would they be
the high school in Carnarvon, a nearby dragged to police stations and shaken
town, didn’t even have a maths and down for bribes to avoid six-month jail
science teacher. The SKA organisation terms. It was a relief, too, for the many oth-
hired one, and is also offering bursaries er women whom the cops used to arrest
to college students. Perhaps if the next just for walking alone at night or drinking
generation’s horizons are raised, they in a pub.
will be able to take advantage of the radio Yet there was a catch. Tambudzai Miko-
Where lambs once frolicked telescopes in their own backyard. rasi, a 40-year-old sex worker, says she may
have celebrated too early. Now that the old- 1
 The Economist January 7th 2017 Middle East and Africa 39

Iraq’s long war

A goody and Abadi

BAGHDAD
Behind the battle for Mosul lies a struggle for power in Baghdad

T HEY said it would be over by Christ-

mas. Now Haider al-Abadi, Iraq’s prime
minister, is suggesting that the battle for
er into a victorious commander by don-
ning military fatigues. Should there be fur-
ther mishaps, Mr Abadi’s rivals in Baghdad
Mosul could last until Easter. For almost a will be waiting to pounce. Among them is
month his forces had stalled on what was his predecessor, Nouri al-Maliki, and his
supposed to be the easier eastern bank of cohorts in Iraq’s assortment of predomi-
Iraq’s second city. And the costs have been nantly Shia militias, which are collectively
gruelling. A fifth of Iraq’s elite force has re- known as the Hashd al-Shaabi, or popular
portedly fallen in the assault. With the sup- mobilisation forces (PMF). As the govern-
port of more American special forces, Mr ment-led advance on Mosul slows, they
Abadi has launched a second phase, taking are calling for the deployment of Iranian-
the city’s industrial zone. Progress is being backed brigades. So short of men are Iraq’s
made. But what Iraqi soldiers clear by day, army and police that even some American
Supply and demeaned Islamic State (IS) fighters often regain by commanders now welcome the use of
night, thanks to a warren of tunnels under these auxiliaries.
2 est profession has been decriminalised, a the front lines. To date the Iraqi government’s assault
flood of young women and girls are join- Not only are IS fighters holding the line (with air support from the American-led
ing it and driving down prices. (Jobs of any against Iraqi soldiers and their American coalition) has managed to minimise civil-
kind are scarce thanks to Robert Mugabe’s backers after ten weeks of fighting in Mo- ian casualties in Mosul. But if Shia militias
disastrous management of the economy.) sul, but they are also fending off Turkish are unleashed another bout of sectarian
Some veterans have responded by hir- troops 515km (320 miles) to the west, killings might ensue. It could push the
ing thugs to protect their turf. In return, the around the town of al-Bab in northern Syr- city’s remaining 900,000 Sunnis towards
men can have sex whenever they want. ia. They have also recaptured Palmyra IS. Moreover an enhanced role for the mili-
“We have no option,” says Ms Mikorasi, from the Syrian regime. tias would weaken the state by boosting
her muscles flexing as she pulls down her Across Iraq the insurgency has a new the PMF. Its brigades already display fac-
miniskirt. “It has never been this bad. lease of life. The sickening rhythm of sui- tional flags, run several secret prisons and
These little girls are pushing us out of busi- cide bombs in Shia suburbs of Baghdad raise money by extorting bribes at gun-
ness.” Malaika Chatyoka, a 37-year-old, and southern Iraq is quickening again. In point at checkpoints.
complains that the fee she can charge has Anbar and Salahuddin, provinces long Mr Maliki, for his part, seems to be in-
slumped from $10 for 30 minutes to as little since reclaimed by the government, IS is tent on building a sectarian pasdaran, or
as $2 on some nights. The price for a full also flexing its muscles. On January 2nd it revolutionary guard, much like the one
night is down to $10, one fifth of what she won control of a police station in Samarra that wields real power in neighbouring
used to charge. for several hours and it cut briefly the Bagh- Iran. As prime minister from 2006 to 2014
Police raids used to scare away compet- dad to Mosul road. It is putting out lights in Mr Maliki built up networks that still give
itors. “Only the brave remained on the Diyala. “It is not an organisation that is him influence. From the judiciary to the
streets. Now it’s free-for-all,” says 25-year- close to collapse,” says an analyst in touch civil service to parliament, many in Iraq’s
old Sazini Ngwenya from Bulawayo. She with people in Mosul. upper echelons owe him their positions.
adds that without the police paying atten- The prolonged campaign carries politi- One of his last acts as prime minister was
tion there has been an increase in robber- cal costs for Mr Abadi, who had sought to to form the PMF. Having tried for months
ies and rape. turn himself from a bumbling office-hold- to chip away at Mr Abadi’s authority by im-
Faced with a slumping economy Zim- peaching his senior ministers, Mr Maliki
babweans are so desperate that, for many, has recently switched tack in favour of bol-
even cut-price sex work seems like the TURKEY stering the PMF. On November 26th MPs
least-bad option. “With no education, al-Bab Mosul
voted to create an autonomous force com-
faced with the responsibility to fend for Aleppo prising110,000 PMF militiamen paid by the
Raqqa I R A Q
their siblings and/or their own children, S Y R I A government and overseen by parliament.
many girls and young women are being SALAHUDDIN In response Mr Abadi is using the new
Palmyra
forced to sell sex for survival,” laments Tal- Samarra
IRAN PMF law to woo the Sunni militias that Mr
ent Jumo, a director of the Katswe Sista- Damascus DIYALA Maliki had ostracised when he was prime
hood, a charity. With no sign of an eco- ANBAR
Baghdad minister. He has brought thousands of
nomic recovery, many more girls could be JORDAN Tigr
is
Sunni officers and soldiers from Saddam
forced onto the streets, she says. E up
hrat Hussein’s former army onto the govern-
SAUDI es
For Masceline, the need to put food on ARABIA ment payroll under the command of a for-
the table for her family means she will con- Iraqi distribution mer governor of Mosul, Atheel al-Nujaifi.
200 km of population
tinue renting out her body. “Everything I Charges of terrorism against Khamis al-
Kurdish
face here is better than going hungry or Areas of Islamic Sunni Arab
Khanjar, a Sunni politician financed by the
watching my baby sister drop out of State control Gulf, have been quietly dropped. And with
Shia Arab
December 2016
school,” she says hurriedly, as a potential Source: Institute for Sparsely populated Mr Abadi’s blessing, Ammar al-Hakim,
client approaches. 7 the Study of War Source: CIA World Factbook who heads the largest Shia parliamentary 1
40 Middle East and Africa The Economist January 7th 2017

2 bloc, has gone to Amman and Beirut to ne-

gotiate terms for a national reconciliation,
including an amnesty, with Sunni exiles
who had long since despaired of a deal
with Baghdad’s Shia masters.
The hope is that if they are promised a
future inside Iraq, former Baathists and
other Sunni Islamists might join forces to
rid Iraq of IS. “Some Shia are starting to re-
alise that if they can’t absorb Sunnis and
Kurds, what remains of Iraq risks becom-
ing another wilaya [province] of Iran,” says
a diplomat in Baghdad.
Mr Abadi’s main failure has been politi-
cal: he has not broken the hold that sectari-
an parties, including his own, have on
Iraq’s coffers. Political parties in his cabinet
continue to take handsome cuts from gov-
ernment contracts and collect the pay of
ghost workers in defunct factories. Rather
than tackling political corruption, he has
squandered the backing of protesters and
Iraq’s leading ayatollahs by slashing the America and Israel
pay of civil servants and raising taxes.
Yet for all his setbacks, Mr Abadi has re-
gained most of the territory that Mr Maliki
Unsettled
had lost. He has secured renewed Ameri-
can military support and overseen a four-
fold increase in America’s troop deploy-
ment over the past year. With American
MAALE ADUMIM
help, the panic-stricken army that fled Mo-
President Trump may not be all good news for Binyamin Netanyahu
sul in June 2014 has been rearmed and
now sports an air force and a division of
special-forces soldiers who are proving ca-
pable fighters. His men are also operating
W ITH its shopping malls, sports cen-
tres and new residential blocks,
Maale Adumim (pictured above) looks
right Jewish Home party, says he will pro-
pose a bill to extend Israeli sovereignty to
Maale Adumim, arguing that the new
alongside Kurdish fighters for the first time and feels like any other Israeli dormitory American administration offers “a unique
in a decade. suburb. Less than ten minutes’ drive east- window of opportunity” to redraw the
Socially, too, Baghdad is regaining a ward from Jerusalem, the town on the map. “For the first time in 50 years we Israe-
semblance of normality. The concrete bar- edge of the Judaean Desert, which is also lis have to decide what we want—a Pales-
ricades encasing public buildings like lugu- the third-largest Jewish settlement in the tinian state in Judea and Samaria, or Israeli
brious tombstones have slowly come West Bank, may be about to become the law replacing military law where Israeli
down, and checkpoints have thinned. first test case of America’s Middle East poli- citizens live.” Mr Bennett believes that he
Iraq’s economy is now weathering a crisis cy under Donald Trump. and his colleagues must press the prime
caused by a slump in the oil price and a Elements of Binyamin Netanyahu’s minister to persuade Mr Trump to recog-
surge in war-related spending. Oil produc- right-wing coalition are agitating to annex nise the settlements as permanent at his
tion reached record levels in 2016 and the parts of the West Bank, starting with Maale first meeting.
IMF has extended a $5.3bn loan, which Adumim, in the belief that the Trump ad- After eight years of friction with Barack
promises to attract an additional $11bn in ministration will reverse a long-standing Obama’s administration, Mr Netanyahu
international credit and export guarantees. American policy opposing Israeli settle- has good reason to feel optimistic. He is ex-
The bits of the economy not related to oil, ments in territory it occupied in 1967. pected to be the first foreign leader to meet
which slumped 5% in 2016 and 14% the year The mayor, Benny Kashriel, says that he the new president after his inauguration
before, will probably expand by 5% this is not concerned about international poli- on January 20th. Although Mr Netanyahu
year, the IMF reckons. American compa- tics so much as local laws: “I want my town may not get a promise to scrap the Iran nuc-
nies that had previously fled as Iraq to have the same rights as any other town lear deal, in every other way he will be
slipped into mayhem, such as General in Israel.” He complains that, because the pushing on an open door when it comes to
Electric, are now tiptoeing back. West Bank (called Judea and Samaria by enlisting Mr Trump’s help to counter Irani-
Even in parliament unusual alliances the Israeli government) is under military an influence in the region.
are forming across sectarian lines. Kurds, rule, Maale Adumim’s residents need to Then there is the pre-election promise
Sunni Arabs and Shias no longer vote as apply to the army if they wish, for instance, by Mr Trump to relocate the American em-
united blocs. Selim Jabbouri, the Sunni to close a veranda: “There is no reason that bassy from Tel Aviv to Jerusalem, with all
parliamentary speaker who hails from the the Israeli law shouldn’t apply here. Netan- the symbolism that would involve. Mr
Muslim Brotherhood, speaks of establish- yahu tells us he is in favour but that we Trump’s pick of David Friedman to be
ing a cross-confessional party in the 2018 have to wait for better timing.” Emphasis- America’s ambassador to Israel has also
elections and canvasses in Shia as well as ing that the time may indeed be approach- sent a strong message. A bankruptcy law-
Sunni parts of Iraq. For all its faults, Iraq is ing, this week Maale Adumim welcomed yer without diplomatic experience, Mr
still the Arab world’s most boisterous the former presidential candidate and go- Friedman believes that Israel is legally enti-
multiparty democracy. Perhaps it may vernor of Arkansas, Mike Huckabee, to in- tled to annex the West Bank and supports
after all convince a majority of its people augurate a new building. the building of new settlements there—
that they have a future together. 7 Naftali Bennett, the leader of the hard- steps that would rule out any possibility of1
 The Economist January 7th 2017 Middle East and Africa 41

2 a peace deal based on the establishment of

Israel’s divisions
a Palestinian state next to Israel.
The gulf between the outgoing and in-
coming administrations was laid bare on Uniform justice
December 23rd. Mr Obama’s decision not
TEL AVIV
to veto UN Security Council Resolution
The conviction of a soldier divides Israel
2334 (reiterating that the settlements are il-
legal and expressing concern that pros-
pects for the two-state solution were being
sabotaged by both sides) was a well-aimed
O NE of the most contentious cases in
Israel’s military history reached its
verdict on January 4th when three mil-
public seems to believe that Mr Azaria
was right to have shot a wounded prison-
er who no longer posed a danger. A poll
parting shot. Mr Trump’s administration itary judges found a serving soldier, last August by the Israeli Democracy
will not be able to overturn a resolution Sergeant Elor Azaria, guilty of man- Institute and Tel Aviv University indicat-
that may embolden the International slaughter for killing a Palestinian. ed that 65% of Israel’s Jewish majority
Criminal Court to take action over settle- The public controversy was not over supported his actions. A seemingly con-
ments; Israeli officials will have to consider the facts. Both the prosecution and de- tradictory finding in the same poll put
the risks of building more. fence agreed that on March 24th 2016, in public support of the Israel Defence
Mr Netanyahu’s fury must at least have the West Bank city of Hebron, Mr Azaria Forces (IDF), the same organisation that
been soothed by Mr Trump’s response on had fired point-blank at Abdel-Fattah put Sergeant Azaria on trial, at 87%.
Twitter: “Stay strong Israel, January 20th is al-Sharif, a Palestinian man lying griev- One explanation for this discrepancy
fast approaching!” The Israeli prime minis- ously wounded after he had been shot is that anger is high over the sporadic
ter tweeted back: “President-elect Trump, while stabbing an Israeli soldier. campaign of stabbings by Palestinians
thank you for your warm friendship and Nor was it over the court’s dismissal since 2015. Another is that admiration for
your clear-cut support for Israel!” of Mr Azaria’s claim to have been acting the army does not necessarily extend to
A few hours later America’s secretary in self-defence; the judges reached a the generals, who rushed to condemn
of state, John Kerry, in a speech highly criti- unanimous decision that he had acted him when video of the shooting
cal of Israel’s government, explained the “calmly, without urgency and in a calcu- emerged. This mixed message is coming
context of the UN abstention. He warned lated manner” and that, as he said on the from the politicians, too. The prime
that right-wing ideologues within Mr Net- scene to a comrade, he thought Mr al- minister, Binyamin Netanyahu, called Mr
anyahu’s coalition were leading Israel in- Sharif “deserve[d] to die”. Azaria’s parents to express solidarity
exorably towards abandoning even the Instead the controversy relates to the shortly after his arrest. Since the convic-
pretence of interest in a two-state solution, fact that a large section of the Israeli tion he joined several ministers in calling
with profound consequences for both the for Mr Azaria to be pardoned by the
country’s future security and its status as a president, Reuven Rivlin. The only senior
democratic Jewish state. There was little in member of the ruling Likud party to
Mr Kerry’s speech, which also forthrightly condemn the shooting unequivocally
condemned Palestinian glorification of was Moshe Yaalon, then the defence
terrorism, that deviated from American minister. Shortly afterwards he was
policy towards Israel that goes back more pushed out of office and replaced by
than 40 years. But his disappointment and Avigdor Lieberman, a hardliner.
frustration were clear. Manslaughter convictions of IDF
In practice, Mr Netanyahu may not find soldiers on duty are very rare. The last
Mr Trump’s uncritical friendship an unal- was 11 years ago when one was found
loyed blessing. It has often suited him to guilty of killing Tom Hurndall, a British
play off hardliners, such as Mr Bennett, pro-Palestinian activist. Human-rights
against Washington. It has served his pur- organisations say other similar shootings
pose to keep the idea of the two-state sol- have gone unpunished.
ution alive while doing nothing to help Still, the generals can take comfort
make it a reality. Typically, he has yet to re- from the judges’ firm line: the IDF’s claim
spond to the latest demands for annexing to be a highly moral army requires it to
Maale Adumim. One of Mr Netanyahu’s act against cases of blatant indiscipline.
allies, the regional co-operation minister, And Mr Netanyahu, though bending to
Tzachi Hanegbi, warned this week that “it populist sentiment at home, will doubt-
would be bad for Israel to unilaterally an- less hold out the verdict as proof to the
nex Judea and Samaria.” However, many world that his country is a democracy
members of the ruling Likud party also fa- where the rule of law prevails, in a region
vour the Maale Adumim law. Rallying for the right to shoot prisoners where such virtues are rare.
The right wing has scented an opportu-
nity in legal problems facing Mr Netanya-
hu. The prime minister was questioned jailed. Mr Netanyahu may have to concede Bank in two, making it almost impossible
this week by police over fraud and graft al- something to the hardliners to keep his to establish in the future a viable Palestin-
legations. This is one of a number of cor- own job. ian state.” He doubts that Mr Netanyahu
ruption probes into his financial affairs “The Maale Adumim law is the first sign wants to go that far, which means he may
and the prime minister is suddenly vulner- that the Netanyahu government is using its have to throw his right-wingers other
able. Although he insists that there is noth- newfound power in the Trump era to make meat, such as more settlement-building in
ing of substance in the allegations, he will unilateral moves,” says Danny Seide- east Jerusalem and the West Bank. Delay-
not have forgotten how his predecessor, mann, a director of Terrestrial Jerusalem, ing tactics and ambiguity have been the
Ehud Olmert, was forced by his cabinet an NGO that monitors building works in twin hallmarks of Mr Netanyahu’s pre-
colleagues eight years ago to resign over al- and around Jerusalem. “Annexing Maale miership. Both may become harder with
legations of bribe-taking, and was later Adumim would virtually cut the West the advent of Mr Trump. 7
42 The Economist January 7th 2017
Europe
Also in this section
43 Putin outmanoeuvres Obama
43 Bavaria’s angry drivers
44 Spain and Catalonia
45 Charlemagne: How Martin Luther
nailed it

For daily analysis and debate on Europe, visit

Economist.com/europe

Terror in Turkey an alliance of Western powers. An MP

from the governing party blamed—who
From celebration to carnage else?—the CIA.
The shooting also raised questions of
accountability. More than 400 lives have
been lost in big terrorist attacks since the
summer of 2015, yet not one minister has
resigned. Just over a week before the night-
ISTANBUL
club attack, Russia’s ambassador was fatal-
An Islamic State attack on a nightclub widens the secular-religious divide
ly shot by an off-duty Turkish policeman.

A FTER a year of terrorist attacks and a

violent coup attempt, Istanbul resi-
dents are getting used to the sound of ex-
the 2.8m Syrian refugees living in Turkey.
The latest, which hit a venue where celeb-
rities dance and drink alongside foreigners
The government says it foiled 339 attacks
last year. But it has also used the war on ter-
rorism as an excuse to silence critics. In De-
plosions. When blasts rang out near the and the monied elite, threatens to inflame cember authorities detained a Wall Street
city’s best-known nightclub just after 1am tensions between Islamists and secular Journal reporter for three nights, allegedly
on January 1st, some thought they were Turks, many of whom blame the pro-Is- for retweeting an image from an IS murder
new-year pyrotechnics. Yet the skies above lamist government for the spread of ex- video. Days later they arrested an investi-
them were empty. A massacre was unfold- tremism. “Islamic State reads Turkish soci- gative reporter, Ahmet Sik, on farcical ter-
ing below. By the time it was over at least 39 ety very well and it knows to strike at the rorism charges. Since the coup, more than
people, mostly foreigners, were dead, and key pressure points,” says Hilmi Demir, an 100 journalists have been locked up.
dozens more wounded. Autopsies suggest- expert on Muslim sects and radicalisation. Largely because of the state’s control
ed that many had been shot at close range. Those pressure points are multiplying. over religious debate, support for IS among
Some saved themselves by leaping into the Instead of healing his divided country Turks is minimal. Yet the group is deter-
Bosporus. As The Economist went to press after the coup in July, Turkey’s president, mined to pit Turkey’s traditionally tolerant
the attacker, a suspected follower of Islam- Recep Tayyip Erdogan, cracked down on brand of Islam against an emboldened
ic State (IS), had not been caught. his opponents, including Kurdish activists, fundamentalist fringe. IS wants to galva-
IS has carried out at least eight big at- leftists and secularists. Official discourse is nise those Islamists who condemn secular
tacks in Turkey, including the deadliest in increasingly conservative. In December ways of life, says Rusen Cakir, a journalist.
the country’s history, a suicide-bombing the country’s religious-affairs directorate, “They want to transform Turkey into a bat-
that killed more than 100 people in Octo- the Diyanet, joined Islamist groups in pro- tlefield,” he says.
ber 2015. The nightclub attack is the first it claiming that new-year festivities were The New Year’s Day attack could serve
has undisputedly claimed. In an online “alien” to Turkish values. Meanwhile, a as a wake-up call. The ruling Justice and
statement the group praised the shooting group of young ultranationalists staged a Development party is realising that polar-
as an attack on an “apostate” celebration protest at which they pretended to hold isation can win elections “but that it makes
and revenge for a Turkish offensive against Santa Claus—that unwelcome Western in- the country ungovernable,” says Ozgur Hi-
it in Syria. Turkey’s army cleared IS from truder—at gunpoint. sarcikli, head of the Ankara office of the
strongholds overlooking the border in ear- German Marshall Fund, a think-tank. The
ly September, and fighting continues near Losing the plot Diyanet has declared that an attack on a
al-Bab, a town north-east of Aleppo. Many Turkish conservatives refuse to ad- nightclub is as reprehensible as an attack
Under pressure in Syria, IS has struck mit that innocents, including Muslims, are on a mosque. Mr Erdogan himself has
back by destabilising Turkey. The group’s being murdered by a group acting in the warned against allowing the fault lines in
earliest attacks in 2015 helped to reignite a name of Islam. They prefer conspiracy the- Turkish society to widen, which is exactly
war between Kurdish militants and Tur- ories. A pro-government newspaper what IS wants. Alas, Mr Erdogan’s populist
key’s armed forces. A second wave scared claimed the attack on New Year’s Day was authoritarianism, jingoism and repression
away tourists and fanned resentment of the work of a “mastermind”, shorthand for are only wedging them further apart. 7
 The Economist January 7th 2017 Europe 43

America’s new Russia sanctions

Motorway charges
Feint praise Another European crisis
KIEFERSFELDEN
One continent, divided by lots of toll booths
MOSCOW
As Putin outmanoeuvres Obama,
Trump applauds
E VERY winter, northern Europeans
bound for ski holidays zip insouciant-
ly through the Netherlands, Belgium and
will be cheaper, and the tax relief for
Germans better disguised.
That still has other Europeans fuming

I T WAS Vladimir Putin as we have come

to know him: unpredictable, cynical and
skilful at trumping real events with propa-
Germany on motorways that are free of
charge. But near the borders of Austria or
Switzerland they must pull over to buy
about Bavarian harassment aimed at
them. Austria and the Netherlands, pos-
sibly joined by Denmark and Belgium,
ganda. On December 29th Barack Obama stickers so that they can drive on the may sue Germany before the European
expelled 35 Russian diplomats involved in Alpine motorways—even as Austrian and Court of Justice. A Bavarian pet peeve has
intelligence work (along with their fam- Swiss cars zoom in the opposite direction thus escalated to crisis diplomacy. “We in
ilies), ordered two Russian diplomatic onto Germany’s free Autobahn. To the Austria are very unhappy about this,”
compounds in America closed, and im- perceived injustices in the European Christian Kern, the Austrian chancellor,
posed fresh sanctions against Russian se- Union (EU), add another: the nuisances said in December. “This is a stress test for
curity agencies and a list of individuals. Mr of a quilt of road-tolls. good German-Austrian relations.” Mr
Obama was retaliating for Russian interfer- Bavarians are particularly cranky. If Dobrindt retorted: “I have little sympathy
ence in America’s elections, which includ- you live in Munich, say, work and play for this toll-whingeing, especially when it
ed hacking the computers of high-level extend naturally across the border. Hence comes from Austria.” It seems that the EU
Democratic Party officials and leaking the the grousing about paying on Austrian will always find new ways to puncture its
embarrassing contents to the press. The roads while Austrians “free-ride” on own tyres.
White House expected Russia to eject an Bavarian ones. In 2013 the CSU, a regional
equal number of American diplomats. In- party that governs Bavaria, made fixing
stead, Mr Putin responded asymmetrically, “this unfair situation” a condition for
parrying the American action and mock- joining the coalition of the chancellor,
ing Mr Obama as a bitter loser. Angela Merkel. The CSU’s Alexander
Mr Putin’s performance was carefully Dobrindt, who became transport min-
choreographed. In the first move Sergei ister, got to work.
Lavrov, the foreign minister, appeared on He knew that his biggest hurdle
state television to declare that Russia would be the EU, which forbids dis-
would respond to America’s actions in criminating against the citizens of other
kind. The foreign ministry and other agen- member states. So he came up with two
cies, he said, had proposed to Mr Putin that nominally separate laws. In one, every-
31 diplomats from the American embassy one, German or foreign, would be
and four diplomats from the consulate in charged a new road toll, like Austria’s. In
St Petersburg be declared personae non the other, Germans would get a cut in
gratae. Mr Lavrov also recommended shut- their vehicle tax that miraculously equals
ting down the American embassy’s dacha the price of the new toll. In effect, only
in a wooded Moscow park. foreigners would have paid more to use
In the second move, Mr Putin publicly the Autobahn. That was a bit too cheeky
overruled his foreign minister. While for the European Commission, which in
America’s actions were “unfriendly” and 2015 flashed a stop sign in front of Mr
“provocative”, and merited the toughest Dobrindt. But now he has struck a com-
response, Mr Putin said, he would not “re- promise with Brussels. The proposed toll
sort to irresponsible ‘kitchen’ diplomacy”
but would instead plan steps for improved
relations with the incoming president, Do- of affection for children. The media stunt daily. “As a Russian, it is amusing to watch
nald Trump. Moreover, he would not pun- earned an unctuous tweet from Mr Trump: this. The West now identifies all its pro-
ish the children of American diplomats for “Great move on delay (by V. Putin)—I al- blems with ‘Russia’, just as Russia identi-
the tensions between the two countries. ways knew he was very smart!” fies all its problems with ‘the West’.”
Instead, he invited them to a Christmas Mr Trump’s tweet added to the mystery Americans’ treatment of Russia as a bo-
and New Year’s Day show at the Kremlin. of his apparent infatuation with Mr Putin geyman fills Mr Putin’s supporters with
He then wished Mr Obama and Mr Trump and fuelled anxiety about Russia’s ability pride. They see it at a sign of Russia’s re-
a happy new year. to undermine American democracy. Yet newed great-power status. But while the
Russian state television, which has for pro-Western Russian liberals, the pan- Kremlin may be benefiting from fears of its
been pumping out anti-American propa- icked attitude of some of America’s main- influence in the short term, it is unclear
ganda for years, quickly seized on a new stream media was equally discomfiting. It how it plans to turn those fears to its lon-
narrative. “The provocation has failed,” an- seemed a mirror image of Russia’s own ger-term advantage. Mr Putin has long de-
nounced a news anchor on Channel One. hysteria about the role of America in sow- pended on fear of America as a mighty en-
Mr Obama had found himself “in a pud- ing chaos and staging colour revolutions in emy to reinforce his hold on power.
dle”, while Mr Putin had displayed dip- Russia’s back yard. Kicking the outgoing Mr Obama may be a
lomatic “mastery at the world level”. The “In the eyes of the West, Russia appears poor substitute. Paradoxically, Mr Trump’s
invocation of Christmas and family to be the source of most uncomfortable so- dismissal of Russian influence could be
seemed a backhanded jab at Mr Obama’s cial changes,” wrote Maxim Trudolyubov more harmful to the Kremlin’s narrative
pacific reputation and his public displays in a column in Vedomosti, an independent than fears of its interference. 7
44 Europe The Economist January 7th 2017

Spain and Catalonia starts with the “binding referendum”.

It is not hard to divine the contours of a
Catalexit? deal. Mr Rajoy could offer concessions on
financing and infrastructure. More contro-
versially, he could propose recognising the
Catalan language or that Catalonia is a na-
tion within Spain.
The toughest issue is the referendum.
BARCELONA
This is no moment to contemplate any sort
A search for a face-saving deal to avoid another unsettling referendum
of plebiscite with equanimity. Catalan na-

I F YOU look up from the bustle of the win-

ter tourists thronging the streets of Barce-
lona, you will see some balconies draped
25% to more than 45%. “Society moved to-
wards more radical positions,” thinks Joan
Culla, a historian. Others see this as at least
tionalists claim to be exemplary pro-Euro-
peans. But there are many echoes of Brexit
in Catalonia. Instead of Brussels, it is Ma-
with the estelada, a blend of the Catalan in part induced by the Generalitat, with its drid the nationalists accuse of stealing Cat-
and Cuban flags that has become the ban- money and powerful communications alans’ money. They argue that indepen-
ner of those who want their land to be- machine. It allowed the nationalists to dence would be quick and easy. “The great
come independent. There are fewer than keep power, despite budget cuts and reve- growth in support for independence from
there once were, but still enough to inspire lations that for decades they had taken 2012 was the first manifestation of popu-
the Catalan regional government’s pledge rake-offs on public contracts. lism in Spain,” says Javier Cercas, a writer
to hold a binding referendum on indepen- Catalan society remains split. “There who lives in Barcelona.
dence in 2017. Since the Spanish govern- aren’t the numbers to advance [to indepen- Mr Puigdemont insists that blocking the
ment refuses to contemplate such a vote, a dence] but there’s enough to make a lot of referendum “would be bad news for de-
confrontation seems inevitable. noise,” says Jordi Alberich of the Cercle mocracy”. He is prepared to negotiate its
Indeed, it has already begun. Some 300 d’Economia, a business group. timing. But he adds: “We won’t easily re-
Catalan officials face court cases for flout- nounce it. I think we’ve earned the right to
ing the law, in acts ranging from a previous Best of enemies be heard.” Some in Barcelona believe the
unilateral effort in 2014 to organise an inde- This stand-off has been politically profit- Generalitat’s leaders are searching for a
pendence vote to petty protests, such as able not just for the Catalan nationalists dignified way to back down. Mr Puigde-
flying the estelada from town halls. Carles but also for Mariano Rajoy, Spain’s prime mont talks also of “constituent” elections
Puigdemont, the president of the General- minister, and his conservative People’s to found a new state. But his party, clouded
itat (the Catalan government), promises to Party. His staunch defence of his country’s by corruption, may suffer. The Catalan var-
push through “laws of disconnection” this territorial unity is popular in most places iant of Spain’s left-wing Podemos, which
summer, such as one setting up its own tax outside Catalonia. For years Mr Rajoy did already runs Barcelona’s city government
agency, prior to holding a referendum, nothing to respond to Catalan grievances, and which is forming a new, broader, party,
probably in September. His pro-indepen- some of which are justified. Catalonia is likely to gain ground. It wants Catalonia
dence coalition has a majority in the Cata- pays more into the central kitty than it gets to form part of a “plurinational” Spain, a
lan parliament. On December 14th Spain’s back, but its transport systems have been cleverly vague formula.
Constitutional Tribunal warned the Gen- neglected while Madrid has spiffy metro “Is being part of Spain a problem in the
eralitat that the referendum would be ille- lines and a surfeit of motorways. daily life of Catalans?” asks Inés Arrima-
gal. Spain could face unprecedented de- Yet weariness with the deadlock has das of Ciudadanos, an anti-nationalist
fiance of its democratic constitution. taken hold, in both Barcelona and Madrid. party that leads the opposition in the Cata-
How has it come to this? Spain’s consti- Last month Mr Rajoy put his deputy, So- lan parliament. “For us the problems of
tution of 1978 gave Catalonia, one of the raya Sáenz de Santamaría, in charge of the Catalonia are unemployment, poverty
country’s most prosperous regions, more Catalan question. She is putting feelers out and corruption.” The longer the deadlock
self-government than almost any other to the Generalitat. Mr Puigdemont has lasts, the harder Mr Puigdemont may find it
part of Europe. The Generalitat controls published a list of 46 points to negotiate. It to persuade Catalans otherwise. 7
not just schools and hospitals but police
and prisons. It has made Catalan the main
language of teaching. Under Jordi Pujol,
the skilful moderate nationalist cacique
(political boss) who headed the Generali-
tat from 1980 to 2003, Catalonia was con-
tent with this settlement, using its votes in
the Madrid parliament to extract incre-
ments to it powers and revenues.
Two things upset matters. The first was
when the Constitutional Tribunal in 2010
watered down a new autonomy statute,
which recognised Catalonia’s sense of na-
tionhood and granted additional legal
powers to the Generalitat. It had been ap-
proved by referendum in Catalonia and by
the Spanish parliament. The second factor
was the economic crisis after the bursting
of Spain’s property bubble in 2008.
In 2012 demonstrators against austerity
began to put the blame on Madrid, rather
than Artur Mas, Mr Pujol’s heir. Support
for independence surged from less than Let my pueblo go
 The Economist January 7th 2017 Europe 45

Charlemagne Nailed it

How Luther’s ideas have shaped Germany for half a millennium

concerts are still attended like sermons, sombrely and seriously.
Luther’s inheritance can also be seen in the fact that Germany,
the world’s 17th-most populous country, has the second-largest
book market after America’s. After he translated the Bible into
German, Luther wanted everyone, male or female, rich or poor,
to read it. At first Protestants became more literate than Catholics;
ultimately all Germans became bookish.
Finally, a familiar thesis links Luther to German attitudes to-
wards money. In this view Catholics, used to confessing and be-
ing absolved after each round of sins, tend to run up debts (Schul-
den, from the same root as Schuld, or “guilt”), whereas Protestants
see saving as a moral imperative. This argument, valid or not, has
a familiar ring in southern Europe’s mainly Catholic and Ortho-
dox countries, which have spent the euro crisis enduring lectures
on austerity from Wolfgang Schäuble, Germany’s devoutly Lu-
theran finance minister.
Yet on money, too, Luther differed from other reformers.
When Max Weber wrote of the Protestant work ethic in 1904, he
had in mind Calvinism and its relatives, such as American Puri-
tanism. Calvin viewed an individual’s ability to get rich as a sign
that God had predestined him to be saved. To Luther, Christians

S ET foot in Germany this year and you are likely to encounter

the jowly, dour portrait ofMartin Luther. With more than 1,000
events in 100 locations, the whole nation is celebrating the 500th
were already saved, so wealth was suspect. Instead of amassing
it, Christians should work for their community, not themselves.
Work (Beruf) thus became a calling (Berufung). Not profit but re-
anniversary of the monk issuing his 95 theses and (perhaps apoc- distribution was the goal. According to Gerhard Wegner, a profes-
ryphally) pinning them to the church door at Wittenberg. He set sor of theology, this “Lutheran socialism” finds secular expres-
in motion a split in Christianity that would forever change not sion in the welfare states of Scandinavia and Germany.
just Germany, but the world. Luther’s “subcutaneous” legacy keeps popping up in surpris-
At home, Luther’s significance is no longer primarily theologi- ing places, says Mrs Eichel. Germans, and especially Lutherans,
cal. After generations of secularisation, not to mention decades buy more life insurance but fewer shares than others (Luther
of official atheism in the formerly communist east (which in- didn’t believe in making money without working for it). And
cludes Wittenberg), Germans are not particularly religious. But everywhere they insist on conscientious observance of principle
the Reformation was not just about God. It shaped the German and order. They religiously separate their rubbish by the colour of
language, mentality and way of life. For centuries the country glass and are world champions at recycling (65% of all waste), eas-
was riven by bloody confessional strife; today Protestants and ily beating the second-place South Koreans.
Catholics are each about 30% of the population. But after Ger-
man unification in the 19th century, Lutheranism won the culture Holier than thou
wars. “Much of what used to be typically Protestant we today Luther also shares blame for some negative qualities ascribed to
perceive as typically German,” says Christine Eichel, author of Germans. He was deeply anti-Semitic, a prejudice his country-
“Deutschland, Lutherland”, a book about Luther’s influence. men have shed at great cost (he blamed evil stares from Jews for
Start with aesthetics. For Luther this was, like everything else, the illness that eventually killed him). Germans’ legendary obe-
a serious matter. He believed that Christians were guaranteed dience to authority is attributed to Luther’s insistence on separat-
salvation through Jesus but had a duty to live in such a way as to ing spiritual and worldly authorities (which princes in his day
deserve it. Ostentation was thus a disgraceful distraction from the found useful in suppressing a peasants’ revolt). And although
asceticism required to examine one’s own conscience. The traces personally fond of boisterous jokes, he was among the founding
of this severity live on in Germany’s early 20th-century Bauhaus figures of Germany’s rather humourless and preachy tradition of
architecture, and even in the furniture styles at IKEA (from Luther- public discourse. Germans today are the first to bemoan their na-
an Sweden). They can be seen in the modest dress, office decor tional habit of delivering finger-wagging lectures.
and eating habits of Angela Merkel, the daughter of a Lutheran Such rigid moralism can make Germans hard to deal with, es-
pastor, and of Joachim Gauck, Germany’s president and a former pecially in Brussels, where the EU’s problems demand a willing-
pastor himself. Both may partake of the glitz of the French presi- ness to let misdemeanours slide. But there are worse traits than
dency while visiting Paris, but it would never pass in Berlin. excessive morality. Besides, 500 years on, Lutheran Germany is
Luther shared his distaste for visual ornament with other Prot- being transformed by globalisation. Germany today has not only
estant reformers. But he differed in the role he saw for music. The devout ascetics but everything from consumerist hipsters to Om-
Swiss Protestants John Calvin and Huldrych Zwingli viewed mu- chanting yogis. A growing Muslim population is pushing the
sic as sensual temptation and frowned on it. But to Luther music country towards a new kind of religious pluralism. Mrs Eichel
was a divinely inspired weapon against the devil. He wanted be- herself finds German churches “too serious”; she attends one
lievers to sing together—in German, in church and at home, and headed by an African-American gospel preacher. If the downside
with instruments accompanying them. Today Germany has 130 of Germans’ Lutheran heritage is a difficulty in lightening up or
publicly financed orchestras, more than any other country. And accepting alternative lifestyles, they seem to be getting over it. 7
46 The Economist January 7th 2017
International

Fixing fragile nations American troops should leave Afghani-

stan, and that they should “probably” stay.
Conquering chaos Afghans are nervous. “We hope this new
American administration will be suppor-
tive too,” says Ashraf Ghani, the president.
Few things matter more than fixing
failed states. Broadly defined, state failure
JUBA AND KABUL
provides “a general explanation for why
Why states fail and how they can be rebuilt: lessons from Afghanistan and
poor countries are poor”, argue Daron Ace-
South Sudan
moglu of the Massachusetts Institute of

I N THE middle of 2016 a suicide-bomber

blew up a minibus full of judicial staff in
Kabul. The injured were rushed to the
areas controlled by the government. Oth-
ers live under Taliban control (about 10%)
or in areas that are violently disputed.
Technology and James Robinson of the
University of Chicago in “Why Nations
Fail”. Life in a failed or failing state is short
Emergency Hospital in the Afghan capital. Wherever they can, the Taliban replace and harsh. Life expectancy in the bottom 16
One was married to a nurse there, who the government’s justice with their own countries on the Fragile States Index com-
was on duty when he arrived. He is now swifter, harsher (and, some say, less cor- piled by the Fund for Peace, a think-tank
paraplegic. She is “coping”, says a col- rupt) variety. If two peasants quarrel over a (see map on next page), is 85% of the global
league: “She’s one tough woman.” piece of land, a Taliban official will hear average. Measured at purchasing-power
It is striking how many of the hospital’s both sides and make a ruling. Such rulings parity, income per head is a miserable 21%.
patients were targeted for upholding the often stick, for no one doubts that the Tali-
law. Amir Muhammad, a policeman with ban will enforce them. There goes the neighbourhood
shrapnel wounds, says the Taliban at- The pull-out of foreign troops has made Lawless regions, such as the badlands of
tacked his post and killed seven of his 14 Afghanistan not only more dangerous, but Pakistan and Yemen, act as havens for ter-
fellow officers. “They had heavier weap- poorer, too. By one estimate, the NATO mis- rorists. And civil wars tend to spill across
ons than us,” he explains. sion cost almost $1trn between 2001 and borders. The Rwandan genocide of 1994,
The Taliban are as shrewd as they are 2014—more than six times as much as Af- for example, sparked an even deadlier con-
brutal. Afghanistan is close to becoming a ghanistan’s GDP over that period. Many Af- flagration in Congo.
failed state again. To avert that catastrophe, ghans sold stuff to and built things for the In the most extreme form of state fail-
the government must provide adequate foreigners. Now that boom is over. Eco- ure, in places like Somalia, the central gov-
security and establish something resem- nomic growth plunged from 14% in 2012 to ernment does not even control the capital
bling the rule of law. But it is tricky to set up 0.8% in 2015. city. In milder forms, as in Nigeria, the state
a functioning legal system when judges “Day by day we are losing our busi- is far from collapse but highly dysfunction-
and police officers keep getting murdered. ness,” says Ashad Wali Safi, who runs an al and unable to control all of its territory.
Moreover, the government can hardly electronics store in Kabul. The aid agencies Or, as in North Korea today or China under
claim to be keeping people safe when they that used to buy printers from him are Mao Zedong, it controls all of its territory
fear being blown up on their way to work. gone. Security is “very bad”. (The previous but governs in a way that makes everyone
Since Barack Obama drastically re- day, a suicide-bomb had killed at least 30 but a tiny elite much worse off.
duced the number of American troops in people in a nearby mosque.) “Even in day- This article will look at two main exam-
Afghanistan, the Taliban have made time, we don’t feel safe. At night? Forget it.” ples: an unambiguously failed state, South
alarming gains. NATO forces there fell from Adding to the uncertainty, no one Sudan, and a state tottering on the brink,
a peak of 132,000 in 2011 to around 13,000 knows what Donald Trump’s Afghan poli- Afghanistan. It will argue that, as Mr Ace-
today. Only about 60% of Afghans live in cy will be. In the past he has said both that moglu and Mr Robinson put it, the key to 1
 The Economist January 7th 2017 International 47

2 understanding state failure is “institutions, South Sudanese—a quarter of the popula- The splintering of South Sudan can be
institutions, institutions”. The world’s tion—have fled their homes. Were it not for glimpsed in the “protection of civilians”
newest country, South Sudan has received food aid, often dropped out of planes onto camps maintained by the UN. One in Juba
billions of dollars of aid and the advice of remote villages, hundreds of thousands holds almost 40,000 people. At night, gun-
swarms of consultants since seceding from would starve. shots are common and aid workers refuse
Sudan in 2011, but has failed to build any in- South Sudan failed to build institutions to venture inside. Most of the residents are
stitutions worthy of the name. Afghani- that transcended tribal loyalties or curbed Nuers, like Mr Machar, who have been
stan faces a terrifying insurgency but has a the power of warlords. Torit, where Ms stranded here since the civil war began.
president doing his best to restore order. Mandi boarded that minibus to Kenya, is a They are sure who is to blame. “Our tribe
States are not wretched and unstable good place to observe the hollowness of was killed by the government and so we
because of geography—if so, how to ex- the country’s government. Though it is came here,” says Kikany Kuol Wuol, a com-
plain the success of landlocked Botswana? capital of one of South Sudan’s 28 states, it munity chairman in the camp. “We cannot
Nor is culture the main culprit: if so, South feels like a military outpost. Troops in leave, we have nowhere to go. If our wom-
Koreans would not be more than 20 times “technicals”—pick-up trucks with mount- en just go outside to look for firewood they
richer than North Koreans. Some societies ed machine-guns—patrol the streets. are raped.” When fighting broke out in
have “inclusive institutions that foster eco- There are plenty of government build- Juba in July between Mr Machar’s forces
nomic growth”; others have “extractive in- ings, including state ministries of educa- and the government, it spread into the
stitutions that hamper [it]”. South Sudan is tion, culture and health. But none of them camp as UN peacekeepers withdrew. The
an extreme example of the latter. does much. Teachers were last paid in Sep- problem, says Mr Kuol, is that: “This is a
tember, says Jacob Atari, the local educa- government only for Dinkas. The rest of us
Never look back tion minister. Inflation of over 800% they want to starve to death.” Everyone in
“Everybody I know is getting out,” says means their monthly salary of around 300 the camp supports Mr Machar, he says.
Joyce Mandi, as she mixes maize porridge South Sudanese pounds is now worth less Mr Acemoglu and Mr Robinson are pes-
for her six children at a bus stop in South than $4. Over 70% of children are out of simistic about failed nations’ chances of
Sudan. Around her, young men heave bags school, says Mr Atari. turning around. Extractive institutions
and mattresses onto the roof of a minibus. Nowhere in South Sudan does the state typically have historical roots. For exam-
Ms Mandi is fleeing her village and head- do what it is supposed to. Only 27% of ple, the authors trace the failure of today’s
ing for Kakuma, a refugee camp in neigh- adults can read, according to the UN. Pre- Democratic Republic of Congo partly to
bouring Kenya. Her husband has gone into ventable diseases such as cholera, measles the pre-colonial Kingdom of Kongo, where
the bush, she says, to fight the government. and malaria are rampant. The rule of law is taxes were arbitrary (one was levied
The South Sudanese, who are mostly a distant dream. whenever the king’s beret fell off) and the
black African and non-Muslim, fought for The country’s political system is in the- elite sold their subjects to European slav-
half a century to secede from Sudan. Arab ory decentralised, but in reality the money ers. Peasants therefore lived deep in the for-
Muslims from the north used to oppress flows through Juba, the national capital. est, to hide from slavers and tax-collectors.
and enslave them. Perhaps 2m southern- And instead ofbeing distributed to states, it They did not adopt new technology, such
ers died in the war of secession. But few is typically stolen or spent on weapons. as the plough, even when they heard of it.
think life has got better since then. Politics is a euphemism for armed battles Why bother, when any surplus was sub-
Those now in charge are former guerril- over plunder. The warlord who wins can ject to seizure? Modern Congolese farmers
las from the Sudan People’s Liberation steal the oil and pay his troops. (Or, he can make similar complaints.
Army (SPLA), a group of tribal militias un- simply let them rob civilians.) “Why Nations Fail” argues that “the
ited only by hatred of the north. The first The fighting becomes tribal because politics of the vast majority of societies
president, Salva Kiir, tried to hold the warlords recruit by stirring up ethnic ten- throughout history has led, and still leads
SPLA’s factions together by paying them off sion so that their kinsmen will rally to today, to extractive institutions.” These
with petrodollars (oil is almost the only them. This creates a vicious circle. Lacking tend to last because they give rulers the re-
thing South Sudan exports). Alex de Waal protection from other institutions, people sources to pay armies, bribe judges and rig
of Tufts University estimates that in 2013 seekit from their own tribe. Rather than de- elections to stay in power. These rulers
the government paid salaries for 320,000 mand evenhanded government, they back adopt bad policies not because they are ig-
soldiers, police and militiamen—more tribal leaders, knowing that they will steal norant of good ones but on purpose. Let-
than a tenth of all men aged 15-54. Many of and hoping they will share the spoils with ting your relatives embezzle is bad for the
these soldiers did not exist: their pay was their kin. nation but great for your family finances. 1
pocketed by the warlords supposedly com-
manding them.
But the state’s largesse did not buy loy- BEST: Finland 18.8

alty. Instead, it encouraged the men with

guns to demand more. Then the money Canada 23.8
ran out, thanks to collapsing oil prices and Britain 32.4 Syria 110.8 N. Korea 93.9
United
a suicidal game of chicken, in which the States 34.0 Libya 96.4 Afghanistan 107.9
government stopped production to try to S. Korea 36.1
squeeze better terms from Sudan (which China 74.9
Mexico 70.4
controls the pipeline through which South Sierra Leone 91.0 Yemen 111.5
Sudanese oil is exported). Liberia 95.5
WORST: Somalia 114.0
As his coffers emptied, Mr Kiir started Indonesia 74.9
Fragile States Brazil 65.3 Nigeria 103.5
flagrantly to favour his own Dinka tribe, Index score Rwanda 91.3
South Sudan’s biggest, to stay in power. His 2016 S. Sudan 113.8

vice-president, Riek Machar, who is from <60.0

Botswana 63.5 Congo 110.0
the Nuer tribe, the second-biggest, was 60.0-89.9
forced out of government in July 2013 and 90.0-99.9
went back to war later that year. A peace 100.0+
Source: The Fund For Peace
deal in 2015 quickly broke down. Some 3m
48 International The Economist January 7th 2017

2 But failed states are not doomed to stay October he convinced them to pledge
that way. Between 2007 and 2016, accord- $15bn over the next four years. Yet he is
ing to the Fragile States Index, 91 countries leery of how aid is dispensed. The flood of
grew more stable and 70 grew shakier. foreign cash that followed the American-
Among those improving were giants such led toppling of the Taliban government in
as China, Indonesia, Mexico and Brazil. 2001 often undermined the state or was
The worst performers were mostly small- wasted. Aid agencies paid salaries 20 times
er, such as Libya and Syria. higher than the Afghan civil service,
Even states that have collapsed com- prompting the best officials to quit to work
pletely can be rebuilt. Liberia and Sierra Le- as drivers and interpreters. Mr Ghani has
one were stalked by drug-addled child sol- long argued that aid should flow through
diers a decade and a half ago; now both are the national government, rather than sup-
reasonably calm. The key is nearly always port a parallel state that can pack up and go
better leadership: think of how China when donor fashions change. He may be
changed after Mao died. Many bad rulers getting his way: roughly half of aid now
continue deliberately to adopt bad poli- passes through the national budget, a
cies, but they can be—and often are—re- share that is expected to rise.
placed with better ones. Even with a leader determined to make
good choices, building an honest state is
Instructions included hard. Mr Ghani complains of inaccurate in-
Afghanistan’s president since 2014, Mr formation. “There were three databases in
Ghani is a former academic and author of the Ministry ofEducation: one for teachers,
a book called “Fixing Failed States”. His one for salaries, one for schools…they
TED talk on fixing broken states has been weren’t talking to each other.” Faulty re-
viewed 750,000 times. Now he is trying to Politics by other means in South Sudan cords make it easier for money to vanish.
put his own theories into practice. Digital payments should help, he says—the
Yet he admits that rebuilding Afghani- NATO air power combined with Ameri- police thought they had received a pay rise
stan is more complex than he expected. can-trained Afghan special forces pack “an when the first experiments with mobile
The insurgents draw support from several offensive punch”, says General Nicholson. payments began, because commanders
sources: local grievances, tribal animos- The Taliban cannot mass troops for fear of could no longer skim their wages. But there
ities, global Islamist networks, organised NATO bombs. However, they have “safety is a long way to go.
crime (Afghanistan is the world’s largest outside the country”. “A decade ago, if you went into a minis-
producer of opium) and the Pakistani secu- Mr Ghani is less tolerant of corruption ter’s office, you’d see dust on the desk, no
rity services. In 2015 Mr Ghani accused than was his predecessor, Hamid Karzai, computer and the minister picking his toe-
Pakistan of being in an “undeclared state and appears to have cleaned up customs nails,” says a Western official in Kabul.
of hostility” towards his country. Now he and government procurement a fair bit. He “Now you have competent ministers and
goes further. “In October it was almost a has improved tax collection and promoted lots of young professional staff who keep
declared state of hostility,” he says. The Ta- infrastructure projects, such as rail links in touch via WhatsApp and speak English.
liban enjoy havens in Pakistan’s lawless ar- and power plants, in the hope that Afghan- The bad news is that Ghani is still learning
eas and, analysts suspect, direct help from istan will become a central Asian hub. (He how to be a politician. Karzai would get on
Pakistani spooks, some of whom would notes with satisfaction that the Taliban the phone with tribal leaders and chat
rather have Afghanistan in chaos than see have said they will not attack such about their fathers’ health [before talking
India gain a foothold there. Recent suicide- schemes.) He promotes education for business]. Ghani tries to book them for a
bombs in Kabul appear to have contained women, which was banned when the Tali- ten-minute meeting, and hustles them out
military-grade explosives, which Afghans ban ruled Afghanistan in 1996-2001. To of the door before the tea is cold.”
assume came from over the border. conservative Afghans who think this This is a common criticism. Mr Ghani is
Mr Ghani has a clear idea of the state’s would lead to illicit mixing with men, he good at retail politics (he won the disputed
basic functions. First, it must uphold the has a convincing response. “In the remote election in 2014 partly because he had
rule of law. Second, it must secure a mo- provinces, they are asking for women doc- spent so much time sitting in villages ask-
nopoly on the use of violence. The two are tors,” he points out. How can they have fe- ing ordinary Afghans what they wanted).
linked. As Sarah Chayes points out in male doctors if they do not allow their But he is a technocrat among warlords,
“Thieves of State”, when people see the daughters to go to school? some of whom have been made billion-
state as predatory, they are more likely to Nonetheless, a survey by the Asia Foun- aires by the drugs trade. He rules in uneasy
support insurgents. She cites the example dation finds that only 29% of Afghans be- coalition with a “chief executive” with ill-
of an Afghan who was shaken down nine lieve the country is moving in the right di- defined powers: Abdullah Abdullah, the
times by police on a single journey, and rection. This is largely because 70% fear for man he beat in 2014. His vice-president is a
vowed not to warn them if he saw the Tali- their safety—the highest level in over a de- blood-spattered warlord. The president
ban planting a bomb to kill them. cade. However, a slim majority (54%) say will struggle to build a clean state when so
Mr Ghani justly takes credit for the fact the army is getting better at providing secu- many bigwigs prefer it dirty, critics say.
that the Taliban did not overthrow the rity, while only 20% say it is getting worse. Mr Ghani dismisses the charge. “If poli-
state after Mr Obama’s pull-out. “In 2015 Public perceptions of corruption have tics becomes all tactics, where would you
we were in danger, because the global and barely budged since Mr Ghani came to produce change?” he asks. He insists that
regional consensus was that we would not power, with 89% of Afghans saying it is a he bends over backwards to be respectful
be able to hold,” he says. Now, says Gen- problem in their daily life. More encourag- of tribal leaders, “but it cannot be at the ex-
eral John Nicholson, the commander of ingly, the share of those who had dealt pense of building institutions.” This is a
the NATO forces in Afghanistan, the Tali- with police and reported sometimes hav- crucial point. Countries whose stability
ban have been fought to a stalemate. They ing to pay bribes is falling somewhat: from depends on an individual strongman are
seized a big city, Kunduz, in 2015, but were 53% in 2015 to 48% in 2016. brittle. Those that create inclusive institu-
driven out and have taken no more since. Foreign donors warm to Mr Ghani. In tions need never fail again. 7
 The Economist January 7th 2017 49
Business
Also in this section
50 Toshiba’s latest write-down
51 Ford and Donald Trump
52 Schumpeter: The fat-cow years

For daily coverage of business, visit

Economist.com/business-finance

Nestlé cuts wreck firms’ growth prospects even

further, or whether, in fact, they are best off
A life less sweet accepting that robust expansion is a thing
of the past and wringing out profits.
Nestlé is not immune to such pressures.
In recent years it has often missed its goal
of 5-6% sales growth. Excluding acquisi-
tions, its numbers have not met investors’
VEVEY
expectations in 11 of the past 17 quarters. In
As rivals nibble at its business, Nestlé’s new boss must find a formula for growth
the most recent quarter, the firm registered

L ARGE food companies have long been

among the world’s most solid, with re-
assuringly consistent returns even in hard
aged goods, mainly food and drink compa-
nies, lost three percentage points of market
share in America—a lot in the industry’s
organic sales growth of 3.2%.
Changing consumer tastes explain
some of these shortfalls. So does a shifting
times. None would seem steadier than context—according to a study by the Bos- retail landscape. Managing a giant portfo-
Nestlé, based in the Swiss town of Vevey, ton Consulting Group, a consultancy, and lio of brands, from KitKat and Nespresso to
on a lake near snowy peaks. For its 150th IRI, a data provider. DiGiorno pizza and Purina dog food, has
anniversary in 2016 it opened a new muse- As super-sized companies swat at such become harder. Mr Schneider will have to
um filled with corporate heirlooms: the tiny attackers, another foe is gaining master online ways to market and deliver
first written notes about a new product ground. 3G, a Brazilian private-equity firm, its well-known brands. The firm needs to
called milk chocolate, laid out in black cur- likes to buy big, slow-growing food and coax customers to pay more for premium
sive; an old tin of Nescafé, used by soldiers drinks companies and slash their costs. products as ordinary ones get commodi-
as a stimulant in the second world war; Targets have included Kraft and Heinz, two tised, and discounted by firms such as Ger-
and an early can of Henri Nestlé’s infant giants which 3G helped merge into one many’s Lidl and Aldi.
formula, which in 1867 saved the life of a group in 2015, as well as several of the The firm can still boast impressive stay-
premature baby. world’s biggest brewers. Other food com- ing power—its global market share across
It has come a long way since then. It panies are scrambling to make cuts of their its entire range of products has remained
sold goods worth nearly $90bn in 189 own, lest they become 3G’s next meal. That near 20% for the past decade. François-Xa-
countries in 2015. Ofthe 30,000 cups ofcof- has prompted a debate over whether such vier Roger, Nestlé’s chief financial officer,
fee sipped around the world each second, points out that the group’s sales growth in
Nestlé estimates, one-fifth are cups of Nes- the first nine months of 2016 was among
café. But the industry it presides over is in The latest recipe the fastest of the top ten biggest food and
upheaval. On January 1st a new chief exec- 2015 fiscal year drink companies. Yet a detailed examina-
utive, Ulf Mark Schneider (pictured), took AB InBev Kraft-Heinz* Nestlé tion of its position by Sanford C. Bernstein,
over. He is the first outsider to get the top 0 10 20 30 40 50
a research firm, shows that when growth
job since 1922, and his background—run- from acquisitions is excluded, it lost share
ning a health-care firm, not selling choco- Operating profit in all but three of its top 20 product catego-
As % of sales
late bars or frozen pizza—suggests the main ries between 2007 and 2015. Some of its
source of worry for the business. Operating cost core offerings, such as bottled water and
As % of sales
More and more consumers are snub- single-serve coffee, fared the worst. (Keu-
bing packaged food’s sugar, salt and unpro- Return on equity rig, Nestlé’s arch-rival in coffee pods,
nounceable preservatives. Meanwhile, % slurped share in America.)
swarms of smaller firms, emboldened by Gross profit Such results are likely to attract particu-
the ease of peddling goods online, are tout- $bn lar censure from investors because of Nes-
ing supposedly healthier options. From Sources: Bloomberg; tlé’s past heavy emphasis on growth and
company reports *Year to October 2016
2011 to 2015 big sellers of consumer-pack- market share, which sometimes came at 1
50 Business The Economist January 7th 2017

2 the expense of the firm’s profits. In 2015 its valuable. It worked—its frozen-food sales consolidating procurement, which will
operating-profit margin was 15%, better in America grew faster. In November 2015 save about SFr2bn each year from 2020.
than the 13% at Danone, a French competi- they were 6% above what they had been a Whatever else Mr Schneider has on the
tor, but far below the 21% at Kraft-Heinz. year earlier. But Bernstein’s Andrew Wood menu for Nestlé, radical changes may be
Shareholders in the firm are waiting to see points out that the revival of frozen food somewhat limited by the fact that so many
whether Mr Schneider will shake things now looks wobbly again. of those who built the company into what
up. Some want him to sell off businesses Nor is Nestlé ignoring 3G’s strategy en- it is now are sticking around. Mr Bulcke is
that seem most at risk of long-term decline, tirely: it is trying to trim expenses. “We are expected to become its chairman. The out-
such as frozen food, as shoppers look for very much in an investment position, not going chairman, Peter Brabeck-Letmathe, a
fresher fare. in a cost-cutting exercise,” says Mr Roger, former Nestlé chief executive, may be-
“but that doesn’t mean that we don’t want come honorary chairman. Mr Bulcke, for
Food for life? to be cost-efficient in what we do.” One ef- one, seems sure that the company should
For now, Nestlé is defiant. “We started 150 fort, which includes trimming waste at fac- maintain its strong emphasis on the long
years ago having a product that actually— tories, is credited with saving about term. He taps his hand on the table, rattling
there’s symbolism there—saved the life ofa SFr1.5bn ($1.5bn) a year. Last year Nestlé an- some Nespresso cups, as he insists that
child,” says Paul Bulcke, the outgoing chief nounced organisational changes, such as growth is still the key. 7
executive. He and his colleagues say that
investment in health and related innova-
tion will produce strong growth at the Toshiba
company for years to come. Mr Schneider,
who used to run Fresenius, a big German
firm that offers kidney-dialysis products
Losing count
and other medical services, will certainly
emphasise that message. Nestlé differen-
tiates itself from 3G, with its keen focus on
cuts. Mr Roger says he respects what 3G
TOKYO
does, but that “they have a strategy which
Japan’s enfeebled giant faces a multi-billion-dollar write-down
is very different from ours.”
Still, few observers would call Nestlé a
health company. Many of its products are
perfectly healthy, including bottled water
T HE probe in 2015 into one of Japan’s
largest-ever accounting scandals, at
Toshiba, an electronics and nuclear-power
Westinghouse Electric, bought a nuclear-
construction firm, CB&I Stone & Webster.
One year on, on December 27th, Toshiba
and coffee. Many are not—milk chocolate conglomerate that has been the epitome of announced that cost overruns at that new
and ice cream, to name but two. And for the country’s engineering prowess, con- unit could lead to several billions of dollars
now, the purest forms of Nestlé’s focus on cluded that number-fiddling at the firm in charges against profits.
health contribute relatively little to its was “systemic”. It was found to have pad- Its shares fell by 42% in a three-day
sales. A business unit called Nestlé Health ded profits by ¥152bn ($1.3bn) between stretch as investors dumped them, fearing
Science, for example, sells nutritional pro- 2008 and 2014. Its boss, and half of the a write-down that could wipe out its share-
ducts for medical needs, such as vitamin- board’s 16 members, resigned; regulators holders’ equity, which in late September
packed drinks for the elderly and for can- imposed upon it a record fine of $60m. stood at $3.1bn. Moody’s and S&P, two rat-
cer patients. It contributes less than 5% of Now its deal-making nous is in doubt ings agencies, announced credit down-
revenue. too. In December 2015—the very same grades and threatened more. Toshiba’s ex-
The firm has a research institute de- month that it forecast hundreds of billions planation for how it got the numbers so
voted to studying food’s role in the man- of yen in losses for the financial year then wrong on a smallish purchase is woolly.
agement and prevention of disease—for ex- under way, as it struggled to recover from But it is clear that missing construction
ample, better understanding nutrition’s the scandal—Toshiba’s American arm, deadlines on nuclear-power plants can
ability to promote brain health. It may send costs skyrocketing. Its projects in
bring growth but probably only in the long America, and in China, are years behind
term. Nestlé has also partnered with schedule. Mycle Schneider, a nuclear ex-
young drugs firms, including one that is pert, says that in America, as elsewhere,
testing a treatment for ulcerative colitis. engineering problems are compounded by
More immediately rewarding may be a shortage of skilled manpower. Few
its efforts to make best-selling but un- plants have been built there recently.
healthy foods a bit more wholesome. In Part of the $229m that Westinghouse
November the company said it had created paid for CB&I Stone & Webster included
hollow sugar crystals that taste sweet but $87m of goodwill (a premium over the
contain fewer calories than the usual stuff. firm’s book value based on its physical as-
It will begin to put the new ingredient in its sets). It is that initial estimate that is now
chocolate in 2018. being recalculated.
It is also proud of changes to the mil- Toshiba had looked to be bouncing
lions of frozen dinners it sells every week back from its accounting nightmare. Before
in America. Shoppers had been avoiding the latest plunge it had made the second-
the frozen-food aisle. Nestlé first tried dis- biggest gains on the Nikkei 225 index in
counts, and then in 2015 introduced new 2016, where its shares were up by 77%. In
versions of its Lean Cuisine products, strip- April it wrote off $2.3bn on the goodwill
ping out unpalatable ingredients and re- value of Westinghouse, purchased for
placing them with organic ones. At $5.4bn in 2006—a write-down that it had
Stouffer’s, another frozen brand, Nestlé de- long avoided. In August it announced its
cided to target men with easy, protein- first profit in six quarters. It forecast a net
packed meals that are more nutritionally Ritual contrition profit of ¥145bn for the financial year of 1
 The Economist January 7th 2017 Business 51

Westinghouse woes Donald Trump and business

Toshiba, share price, yen

ACCOUNTING SCANDAL
CB&I STONE &
WEBSTER
WRITE-DOWN
Wheel spin
600
CEO RESIGNS
500 Ford Motors cancels a new plant in Mexico
RECORD LOSS $4.6BN
400

300
I T WAS in the spring of 2016 that Donald
Trump singled out Ford Motors, calling
its plans to build a plant in Mexico an
Rock facility, where Ford this week trum-
peted 700 new jobs to come, the firm had
already announced back in December
WESTINGHOUSE
200 “absolute disgrace” and promising it 2015 that it would invest in electrification
WRITE-DOWN
100 would not happen on his watch. Back and in 13 new electric vehicles. Linking
then, it seemed remarkable that the one location for that (Flat Rock) with the
0 candidate thought he could boss around Mexican plant cancellation looked like
2015 16 17
a firm of Ford’s stature. On January 3rd yet more accomplished spin.
Source: Thomson Reuters
Ford cancelled its $1.6bn project in the Things would undoubtedly be diffi-
Mexican state of San Luis Potosí and said cult for global carmakers if Mr Trump
2 2016-17, a clear reversal from its ¥460bn loss it would instead invest $700m into an tried to follow through on a campaign
of the previous year. Part of that was existing plant in Flat Rock, Michigan, to promise to slap a 35% tariff on cars ex-
thanks to a bold turnaround plan: firing build electric and autonomous cars. ported from Mexico to America. In 2015
14,000 staff, as well as selling lossmaking Ford’s manoeuvre seems more wheel- the country exported 2.7m vehicles, over
parts of its manufacturing empire, like TVs, spin than U-turn. Mr Trump’s strong- four-fifths of which went to North Ameri-
and one of its star units, a medical-equip- arming of corporate America is real ca. By appearing to kowtow to the new
ment maker, for $6bn. enough, and the carmaker will have boss-in-chief, Ford’s chief executive,
That left it free to focus on its semicon- gained much favour with the president- Mark Fields, may hope to keep this threat
ductor arm, which has been buoyed by de- elect. But its decision can be explained at bay—and to extract other favourable
mand from Chinese smartphone makers, largely in operational terms. The original concessions, such as softer rules on emis-
and its nuclear unit, which accounts for a plan was for the new Mexican plant to sions standards. “We have a president-
third of its revenue. The latest write-down build chiefly Focus cars—small passenger elect who has said very clearly that one
could dampen future investment in both. vehicles for which demand has fallen, of his first priorities is to grow the econ-
Toshiba has limited ways left to raise cash. thanks to America’s love affair with omy,” enthused Mr Fields. “That should
It has been barred from doing so on the SUVs, crossovers and pick-up trucks and be music to our ears.”
stockmarket ever since it was put on alert to low petrol prices. The decision to scrap Next in the line of fire is General Mo-
after the accounting fiasco—one step short the new plant looks far more like Ford tors, America’s biggest carmaker, which
of a delisting. reducing its exposure to the small-car said in 2013 that it would invest $5bn in
Observers reckon that Toshiba has game in North America than reducing its Mexico over six years. This week Mr
some room to manoeuvre, and that it will footprint in Mexico, says George Galliers Trump admonished it for making its
not ditch its nuclear business. It could raise at Evercore, an investment bank. Chevy Cruze, another compact car, most-
as much as $4bn from the sale of some The firm will still move production of ly over the border. “Make in U.S.A. or pay
part-owned subsidiaries, including Nu- the Focus away from its plant in Wayne, big border tax!” he tweeted. The com-
Flare, a spinoff of its semiconductor unit, Michigan to an existing plant in Hermosi- pany may find it hard to match Ford’s
says Seth Fischer of Oasis Management in llo, Mexico. As for the upgrade of the Flat skilful road-handling.
Hong Kong, a hedge fund, and a share-
holder in Toshiba’s power-station affiliate.
It could even choose to sell its lucrative
chip business altogether (Toshiba is the
world’s second-biggest maker of NAND
chips after Samsung Electronics of South
Korea), as well as some of its remaining
consumer-electronics ones.
Toshiba’s central part in a plan by the
government of Shinzo Abe, the prime min-
ister, to pep up growth by exporting nuc-
lear-power technology to emerging coun-
tries may help. In June Westinghouse
clinched a deal in India to build six new-
generation AP1000 reactors, Toshiba’s first
order since the triple meltdown at the Fu-
kushima Dai-ichi nuclear plant in 2011.
Toshiba is also involved in that site’s costly The consensus on Toshiba’s latest the scandal laid bare in 2015. Satoshi Tsuna-
and complex clean-up. Some think that screw-up is that a long-standing culture of kawa, who was installed as the company’s
Japanese banks, known for keeping zom- poor management is to blame. Toshiba’s new boss in June 2016, said last week that
bie firms on life support, will stand behind audit committee, for example, was until he had only become aware of the problem
it, come what may. Shares in Toshiba’s two 2015 headed by its former chieffinancial of- with CB&I Stone & Webster in December. It
main lenders, Sumitomo and Mizuho, slid ficer; such bodies should be fully indepen- was in 2015 that Mr Abe introduced Japan’s
last week after the profit warning. Inves- dent, says Nicholas Benes of the Board Di- first detailed rules on how companies
tors expect more big bank loans or a debt- rector Training Institute of Japan. It is not should run themselves. The spectacle of
for-equity swap, which allows a bank to clear whether or not the firm has fully over- Toshiba’s apparently endless crisis sug-
turn bad loans into shares. hauled its culture as part of its response to gests more needs to be done. 7
52 Business The Economist January 7th 2017

Schumpeter The fat-cow years

Banks in the rich world are getting their appetites back. Don’t be too scared
tigue seems to have set in among the public. True, when firms
misbehave, there is still a firestorm of outrage. John Stumpf, the
boss of Wells Fargo, quit in October after his bank admitted creat-
ing fake accounts. But many people can see that power has mi-
grated from banking to the technology elite in California. The
brew of high pay, monopolistic tendencies and huge profits that
attracts populist resentment is now more to be found in Silicon
Valley than in Wall Street or the City of London.
Global supervisors are still cooking up new rules, known as
“Basel 4” (see page 54), but are unlikely to demand a big rise in the
safety buffer the industry holds in the form of capital. The stron-
gest banks are signalling that they will lay out more in dividends
and buy-backs, rather than hoard even more capital (today, the
top 100 rich-world banks pay out about 40% of their profits).
A third reason for optimism in bank boardrooms is returns.
Global banking’s return on equity (ROE) has crept back towards a
respectable 10%. The worst of the fines imposed by American reg-
ulators are over. So far, “fintech” startups that use technology to
compete with rich-world banks have not won much market
share; banks have used technology to boost efficiency. They have
also got better at working out which of their activities create val-

I N THE Bible, seven years of feast were followed by seven years

of famine. For banks there have been ten lean years. Subprime-
loan defaults started to rise in February 2007, causing a near-col-
ue after adjusting for risk and the capital they tie up. Barclays,
once known for cutting corners, says it can calculate the ROE gen-
erated by each of its trading clients. It is ditching 7,000 of them.
lapse of the industry in America and Europe. Next came bail-outs Given the giddy mood, the big danger starts with a C, for com-
from governments, then years of grovelling before regulators, placency. Regulators believe that banks now pose less of a threat
mass firings of staff and quarter after quarter of poor results that to taxpayers. American lenders have $1.2trn of core capital, more
left banks’ shareholders disappointed. Now, a decade later, the than twice what they held in 2007. Citigroup, the most systemi-
moneylenders are quietly wondering if 2017 is the year in which cally important bank to be bailed out, now has three times more
their industry turns a corner. capital than its cumulative losses in 2008-10. European banks’
Over the past six months the FTSE index of global bank shares capital buffers have risen by 50% since 2007, to $1.5trn.
has leapt by 24%. American banks have led the way, with the val- Yet there are still plenty of weak firms that could cause may-
ue of Bank of America rising by 67%, and that of JPMorgan Chase hem. Deutsche Bank, several Italian lenders and America’s two
by 39%. In Europe BNP Paribas’ market value has risen by 52%. In state-run mortgage monsters, Fannie Mae and Freddie Mac, are
Japan shares in the lumbering Mitsubishi UFJ Financial Group— examples. Mega-banks may simply be too big for any mortal to
the rich world’s biggest bank by assets—have behaved like those control. For every dollar of assets that General Electric’s Jeff Im-
of a frisky internet startup; they are up by 57%. Predictions about melt manages, Jamie Dimon at JPMorgan Chase looks after $5.
global banks’ future returns on equity have stopped falling, note
analysts at UBS, a Swiss bank. Some of the biggest casualties of Once bitten
the financial crisis are even expanding. On December 20th And banks still lack a post-crisis plan beyond cost-cutting. De-
Lloyds, bailed out by British taxpayers in 2009 at a cost of $33bn, spite their surging shares, most are valued at around the level
said it would buy MBNA, a credit-card firm, for $2bn. they would fetch if their assets were liquidated, which hardly in-
The excitement can be explained by three Rs: rates, regulation dicates optimism about their prospects. Before the crisis, they in-
and returns. Consider interest rates first. The slump in rates has flated their profits by expanding in unhealthy ways. They cap-
been terrible for banks. Between 2010 and 2015, the net interest in- tured rents from state guarantees, created ever more layers ofdebt
come of the rich world’s 100 biggest banks fell by $100bn, or relative to GDP, and grew their balance-sheets by means of heavy
about half of 2010 profits. When rates across the economy rise, by over-borrowing. They have reversed much of this expansion
contrast, banks can expand margins by charging borrowers more, over the past decade but that strategy cannot go on for ever.
while passing on only some of the benefit of higher rates to de- In 2017 banks will need to articulate a new growth mission
positors. So bankers have been watching the bond market with and show that they can expand profits without prompting public
barely concealed joy. Ten-year government yields have risen by outrage or a regulatory backlash. One area of promise is the drive
one percentage point in America, and by 0.30-0.64 points in the to raise rich-world productivity. That would boost economies
big euro-zone economies and Japan over the last six months. In- broadly, and their own profits. There is plenty that banks could
vestors are talking about a Trump-inspired “reflation”: the presi- do: get more credit to young firms, improve payments systems so
dent-elect promises to embark on a public-spending boom. In that a higher proportion of midsized firms can engage in cross-
Germany inflation is at a three-year high of1.7%. border e-commerce, and harness technology to make banking as
Banks’ CEOs are also chipper because they think that regula- cheap and easy to use as a smartphone app. Forward-thinking
tion has peaked. In America the new administration is likely ei- bank bosses are already emphasising such goals. If they could
ther to repeal the Dodd-Frank act, an 848-page law from 2010, or achieve them over the next decade, they might even realise a
to prod regulators to enforce it less zealously. Bank-bashing fa- fourth R—redemption. 7
 The Economist January 7th 2017 53
Finance and economics
Also in this section
54 Impact investing
54 Bank capital requirements
55 Buttonwood: The new global regime
56 Sub-national currencies
56 Futures and options trading
57 Sir Anthony Atkinson, RIP
57 Deaths of the rich and famous
58 Free exchange: Brexit and the fallacy
of the “WTO option”

For daily analysis and debate on economics, visit

Economist.com/economics

Indian economics tors, such as the rise in the oil price and the
surge in the value of the dollar after the
Many rupee returns election of Donald Trump, are also at play.
Whether the costs of the exercise justify
the benefits depends, of course, on what
those benefits are. In his speech announc-
ing the measure, Narendra Modi, the prime
minister, highlighted combating corrup-
MUMBAI
tion and untaxed wealth. Gangsters and
The impact of India’s radical monetary reform is becoming clearer
profiteers with suitcases full of money

M OST economists might hazard a guess

that voiding the bulk of a country’s
currency overnight would dent its imme-
manufacturing plunged from relative opti-
mism throughout 2016 to the expectation
of mild contraction. Firms’ investment pro-
would be left stranded. But reports suggest
that nearly 15trn rupees of the 15.4trn ru-
pees taken out of circulation are now ac-
diate growth prospects. On November 8th posals fell from an average of 2.4trn rupees counted for. So either the rich weren’t
India took this abstruse thought experi- ($35bn) a quarter to just 1.25trn rupees in hoarding as much “black money” as was
ment into the real world, scrapping two the one just ended, according to Centre for supposed, or they have proved adept at
banknotes which made up 86% of all ru- Monitoring Indian Economy, a data pro- laundering it. The Indian press is full of
pees in circulation. Predictably, the econ- vider. As a result, corporate-credit growth, tales of household staff paid months in ad-
omy appears indeed to have been hobbled already anaemic, has reached its lowest vance in old notes, or of bankers agreeing
by the sudden “demonetisation”. Evidence rate in at least 30 years (see chart). to exchange vast sums illegally.
of the measure’s costs is mounting, while All this amounts to “a significant but Fans of demonetisation point to three
the benefits look ever more uncertain. not catastrophic” impact, says Shilan Shah beneficial outcomes. First, banks, laden
At least the new year has brought a sem- of Capital Economics, a consultancy. An- with fresh deposits, will lend this money
blance of monetary normality. For seven nual GDP growth forecasts for the fiscal out and so boost the economy. Big banks
weeks queues had snaked around banks, year ending in March have slipped by cut lending rates this week (quite possibly
the main way for Indians to exchange their around half a percentage point, to under nudged by government, the largest share-
old notes for new ones or deposit them in 7%, from an actual rate of 7.3% in the last full holder of most of them). But their lending
their accounts. That is over, largely because quarter before demonetisation. Other fac- recently has not been constrained by a lack
the window to exchange money closed on of deposits, so much as by insufficient
December 30th. The number of fresh notes shareholder capital to absorb potential
that can be withdrawn from ATMs or bank Less cash, less credit losses, and by the over-borrowed balance-
counters is still curtailed, but the acute cash India, bank credit to the commercial sector sheets of many industrial customers.
shortage is abating, at least in big cities. % increase on a year earlier Second, Indians will move from living
As data trickle through, so is evidence 30
cash in hand into the taxed formal econ-
of the economic price paid for demonetisa- omy. Mr Modi has recently promoted the
tion. Consumers, companies and investors 25 idea of a cashless, or “less-cash”, India (not
all wobbled in late 2016. Fast-moving con- 20 something mentioned at the outset), as
sumer goods, usually a reliable growth sec- one reason for demonetisation. Progress
15
tor, retrenched by 1-1.5% in November, ac- towards getting Indians to pay for things
cording to Nielsen, a research group. 10 electronically is indeed being made, but
Bigger-ticket items seem to have been hit 5 from an abysmally low base.
harder. Year-on-year sales at Hero Moto- The third upshot is the most controver-
corp, the biggest purveyor of two-wheel- 0 sial. Now that the demonetised bank notes
2000 02 04 06 08 10 12 14 16
ers, slid by more than a third in December. are worthless, the government is intent on
Source: Thomson Reuters
A survey of purchasing managers in in effect appropriating the proceeds. The 1
54 Finance and economics The Economist January 7th 2017

2 procedure requires trampling on the credi- vestment. Bodies such as the council of in- der management.
bility ofthe Reserve BankofIndia (RBI), the vestors and borrowers that sets the Green But that is to ignore the scale and pro-
central bank, which must first agree to dis- Bond Principles, guidelines for bonds ear- gress that large institutional investors have
honour the promise, on all banknotes, to marked for environmental projects, have brought to impact investing. Although
“pay the bearer” the value. If it does so, “ex- helped set common standards. $7bn is a tiny slice of Goldman’s portfolio,
tinguishing” the notes and its liability for Definitional squabbles still plague the it is huge compared with the investments
them, it can transfer an equivalent amount impact community. For sticklers, invest- of even well-established impact special-
to the government budget. ment only deserves “impact” status if it de- ists, such as LeapFrog, whose commit-
With so much cash handed in at banks, livers both near-market level returns and ments total around $1bn. And the entry of
the amount remitted to government by the strict measurement of the non-financial hard-nosed financial giants sends an im-
RBI might amount to perhaps 0.2-0.3% of impact: eg, of the carbon emissions saved portant message about impact investing:
GDP. Proceeds from a tax-amnesty scheme by a renewable-energy project; or of the that they see it as profitable for themselves
for cash-hoarders may swell the figure. number of poor people who borrow from and their clients. It is not enough to make
Even so, it will not be enough to justify the a microcredit institution. Others, however, investors feel good about themselves; they
costs of demonetisation—or even, perhaps, include philanthropic investment, where also want to make money. 7
the damage to the reputation of the RBI, financial returns are sacrificed for greater
which is already facing questions about its social benefits; or less rigorous types of do-
independence. But having imposed the good investments. Bank capital
costs, Mr Modi will be keen to trumpet Such disagreements make it hard to
whatever benefits he can find. 7 gauge the true extent of impact invest-
ment. For instance, BlackRock Impact and
Polishing the floor
Goldman both also offer two looser invest-
Impact investing ment categories: “negative screening” (ie,
not investing in “bad” sectors—say, tobacco
Coming of age or oil); and “integrated” investments that
take environmental, social or governance
Supervisors put off finalising reforms to
the Basel rules
(ESG) considerations into account (eg, by
selecting for firms with, say, good working
conditions). Neither firm, however, pro-
vides a complete breakdown of these cate-
S OME banks find existing capital require-
ments too taxing. To no one’s surprise,
on December 23rd Monte dei Paschi di Si-
Investing to do good as well as to make
gories by assets under management. ena, at present Italy’s fourth-biggest bank,
money is catching on
The industry is also held back by a re- asked the Italian state for help, having

W HEN investors gathered in Amster-

dam in late 2016 for perhaps the larg-
est annual conference on “impact invest-
stricted choice of asset classes, and by the
limited scale of investment opportunities.
According to a survey by the Global Impact
failed to raise from the private sector €5bn
($5.2bn) in capital demanded by the Euro-
pean Central Bank before the year’s end.
ing”, the mood was upbeat. The concept of Investing Network, which organised the Three days later Monte dei Paschi said that
investing in assets that offer measurable conference in Amsterdam, investors were the ECB had redone its sums—and conclud-
social or environmental benefits as well as managing $36bn in impact investments in ed that the stricken lender faced an even
financial returns has come a long way from 2015. But the median size of investment re- bigger shortfall, of €8.8bn.
its modest roots in the early 2000s. Panel- mained just $12m. Urban Angehrn, chief Plenty of other European banks—in far
lists at the conference included, among investment officer of Zurich Insurance, better nick than poor old Monte dei Paschi,
others, representatives of two of the says the Swiss firm has had trouble fulfill- which is overloaded with bad loans—are
world’s largest pension funds, TIAA of ing its pledge to commit 10% of its private- grumbling that they too may eventually
America and PGGM of the Netherlands, equity allocation to impact investments. have to find more capital. They have spent
and of the asset-management arm of AXA, Cynics may still dismiss impact invest- years plumping up cushions that the finan-
a French insurance behemoth. A niche pro- ing as faddish window-dressing. Of Zu- cial crisis showed to be worryingly thin,
duct is inching into the mainstream. rich’s $250bn-plus in assets under manage- but fear that proposed adjustments to Ba-
In the past two years BlackRock, the ment, only $7bn-worth are classified as sel 3, the latest global standards, will re-
world’s biggest asset manager, launched a impact investments. At Goldman’s asset- quire more. The Basel Committee on Bank-
new division called “Impact”; Goldman management arm, impact and ESG-inte- ing Supervision, which draws up the
Sachs, an investment bank, acquired an grated investments combined only make standards, had hoped to agree on the revi-
impact-investment firm, Imprint Capital; up $6.7bn out of a total $1.35trn in assets un- sions by the end of 2016. It’s not there yet:
and two American private-equity firms, on January 3rd an imminent meeting of
Bain Capital and TPG, launched impact central-bankgovernors and supervisors, to
funds. The main driver of all this activity is Doing good doing better approve the changes, was postponed.
investor demand. Deborah Winshel, boss Impact investing The amendments are intended to re-
of BlackRock Impact, points to the transfer Assets under management, by sector*, $bn duce the variation in banks’ own calcula-
ofwealth to women and the young, whose 40
tions of risk-weighted assets (RWAs), large-
investment goals, she says, transcend mere ly by restricting their use of in-house
financial returns. Among institutions, 30 models. Under Basel rules, the ratio of a
sources of demand have moved beyond bank’s equity to its RWAs are a key gauge of
charitable foundations to hard-bitten pen- Other its strength: if lenders are too sanguine
20
sion funds and insurers. Energy about risk, their estimated RWAs will be
The sector has also been boosted by in- Other financial 10 too low and their reported capital ratios
services
creased attention from policymakers and Microfinance
misleadingly high.
the development of industry standards. In- 0 The main obstacle to an agreement is
ternational organisations—such as the UN, 2013 14 15 the committee’s proposal of an “output
and a global task force founded under the Source: Global Impact
*61 respondents worldwide
floor”—a lower bound for banks’ RWAs—
Investing Network
aegis of the G8—have promoted impact in- calculated as a percentage of the figure 1
 The Economist January 7th 2017 Finance and economics 55

2 churned out by a “standardised” method. ed; several European lenders could be means fixing a floor, but how high? Omar
The higher the percentage, the tighter the stung. That is partly because America has Keenan and Kinner Lakhani, of Deutsche
standard: a first version of the proposals already installed floors in its domestic Bank, estimate that a 75% floor would in-
suggested 60-90%; a failed compromise rules—and, Americans would add, its crease the RWAs (and hence reduce the
last month proposed gradually raising it to banks shaped up faster after the crisis. capital ratios) of 26 of the 34 listed Euro-
75% over four years, starting in 2021. Europeans retort that it also reflects trans- pean banks they cover; at 60%, the number
American officials like the floor, believ- atlantic differences in business models. drops to ten, mainly in the Netherlands
ing that it limits banks’ ability to play European lenders tend to keep more resi- and Nordic countries.
games with the rules. European banks and dential mortgages on their books than Phasing in the rules would give banks
officials don’t. Both the Association of Ger- American banks, which often sell them on; time to adapt. Under the timetable envis-
man Banks and the Bundesbank, for exam- they also lend more to companies and for aged by the committee, they would have
ple, want no floor at all. They argue that in- project finance. All this may carry heavier until 2025—almost two decades after the
ternal models make capital calculations risk-weights under the revised rules. world’s financial system started to crack. If
more, not less, sensitive to risk. Officials are still aiming for agreement the stand-off continues, the repairs will
America’s banks would be little affect- in the first quarter of 2017. That probably take even longer to complete. 7

Buttonwood The third regime

The world is changing and investors may be too optimistic about the results

T HANKS to Brexit and the election of

Donald Trump, 2016 is widely viewed
as a political turning-point. But it may
Seismic shifts
United States, long-term interest rates, %
bubble. That was a portent of the bigger
crisis of 2007-08. Both showed how in-
vestors could be prey to “irrational exu-
also come to be seen as an economic turn- 20 berance” and push asset prices to absurd
ing-point, marking the third big change of BRETTON WOODS GLOBALISED
15 levels. Just as rising bond yields in the
SYSTEM SYSTEM
direction since the second world war. 10 1960s presaged the inflationary battles of
The post-war period from 1945 to 1973 5 the 1970s, so falling bond yields in the
was the era of the Bretton Woods system 0 1990s and 2000s foreshadowed today’s
of fixed exchange rates and capital con- 1945 60 70 80 90 2000 10 16 struggles with deflation and slow growth.
trols. It was a time of rapid economic Real S&P composite-price index Financial markets seem to expect that
growth in the rich world as countries re- Log scale political turmoil will indeed lead to an-
built themselves after the war and as the 5,000 other change of economic regime. Since
technological innovations of the first half 1,000
500
the American election the MSCI World
of the 20th century—cars, televisions, and 100
equity index has rallied and the Dow
so on—came into widespread use. High 50 Jones Industrial Average has hit record
taxes reduced inequality; fiscal policy 10 highs. Valuations reflect this optimism. In
was used to control the economic cycle. It 1945 60 70 80 90 2000 10 16 the early 1980s price-earnings ratios were
Sources: Robert Shiller; The Economist
all came crashing down in the early 1970s in single digits. In contrast, the S&P 500
as the fixed-currency system collapsed, now trades on an historic price-earnings
and an oil embargo imposed by Arab pro- that controlling inflation should be the ratio of 25. Another contrast with the
ducers ushered in stagflation (ie, high un- main aim of their policies). But moneta- 1980s is that, back then, short-term inter-
employment combined with inflation). rism proved harder to implement than its est rates were at double-digit levels and
By the early 1980s, a new system had proponents thought; the monetary targets equity valuations were able to climb as
emerged. Currencies floated, capital con- behaved unpredictably. By the mid-1980s, rates fell. That cannot happen now.
trols were abolished, the financial sector monetarism had been quietly dropped. So what kind of economic regime are
was liberalised, industry was privatised Since the 2008 crisis, monetary policy investors expecting? They seem to be
and tax rates on higher incomes were cut. has had to be rethought again, with central cherry-picking the best bits from the pre-
In this system inequality widened again banks grappling with the “zero bound” for vious two regimes—the tax cuts and de-
(although economists still debate how to interest rates. Their first move was to adopt regulation of the 1980s with an expecta-
parcel out the blame between technologi- quantitative easing, the purchase of assets tion that (as under Bretton Woods) fiscal,
cal change and globalisation, as China to drive down longer-term borrowing rather than monetary, policy will be used
and other countries took a full part in costs. Some have since followed this up to smooth the ups and downs of the cycle.
trade). Growth was slower than in the with negative rates on bank reserves. But the populist revolt is, in large part,
Bretton Woods era but inflation was Financial-market trends have played a reaction against the free movement of
reined in. Monetary measures replaced out against the backdrop of these two poli- capital and labour that has made so many
fiscal ones as the main policy tool. This cy eras. Equities did very well for 20 years financiers rich. A much bleaker outcome
era suffered its defining crisis in 2007-08 under the Bretton Woods regime, but start- is possible, whereby rising nationalism
and has come to an end. ed to falter in the mid-1960s, well before leads to trade wars and an ageing work-
The final years of both periods were the system’s collapse. Perhaps investors al- force makes it impossible for the rich
marked by a degree of monetary experi- ready took fright at signs of inflation; bond world to regain the growth rates of past
mentation. In the late 1970s many policy- yields had been trending upwards since decades. Change is coming. But rather
makers were converted to the doctrine of the end of the second world war. than resembling the 1980s, the new re-
monetarism—the idea that by setting a tar- In the era of globalisation a great equity gime could look more like the 1930s.
get for the growth of the money supply bull market began in 1982 but declined in
governments could control inflation (and 2000-02 with the bursting of the dotcom Economist.com/blogs/buttonwood
56 Finance and economics The Economist January 7th 2017

Sub-national currencies the Ithaca Hour, the most hyped “success”,

has seen its circulation fall precipitously
Local difficulties from two decades ago, says its founder,
Paul Glover.
Local currencies face three hurdles.
First, they are relatively illiquid, being ac-
cepted only at willing local businesses.
They are, in effect, a form of self-imposed
From Brixton to New York, local
economic sanction, narrowing the range
currencies struggle to survive
of choice for consumers and businesses.

T UCKED away in a corner of Brixton, in

south London, a rainbow-coloured
ATM dispenses cash, looking for all the
Second, local-currency schemes suffer
from a trust deficit: they are not backed by
the central bank, so holders do not want to
world like any other. But the notes it spews risk having too much. Finally, having to
out are not pounds sterling. They are Brix- deal with two parallel currencies imposes
ton pounds (B£). Not to be mistaken for sil- transaction costs—and those wanting to
ly Monopoly money, the Brixton pound back local businesses can easily use the na-
can actually be spent, legally: the currency, tional currency.
which has a fixed one-for-one exchange All of which helps explain why local-
rate with sterling, is accepted at over 150 lo- currency circulation in most of these Nothing to outcry about
cal shops and businesses. It can even be places is very low. Just B£100,000
used to pay local taxes. ($123,000) circulates, for example, in an bank’s presidency. His new post is as Mr
Launched in 2009, this is one of many area of 300,000 people. That is too little to Trump’s chief economic adviser. Vincent
such initiatives. Local currencies have have much of an economic impact one Viola swapped a job at an exchange for Vir-
been adopted in other towns and cities in way or another. The odd-looking notes, tu Financial, the electronic-trading firm he
Britain, such as Bristol, Exeter and Totnes. however, do make good souvenirs. 7 founded that made him a fortune. He will
Elsewhere, examples include the eusko, be nominated as army secretary.
used in the French Basques; BerkShares, Tales of failure as well as of success
used in western Massachusetts; and the Futures and options trading abound. A scandalous default in the pota-
Ithaca Hour, in Ithaca, New York. Barcelo- to market in the 1970s wiped out several
na plans an experiment in 2017.
Such schemes aim to boost spending at
Out of the pits firms. A failure to corner the silver market
in the 1980s led to the spectacular bank-
local retailers and suppliers, by encourag- ruptcy of one of America’s richest families.
ing the recirculation of money within a The destruction of the World Trade Centre
community. Because the currency is in 2001 obliterated the floor used by four of
CHICAGO
worthless outside its defined geographic New York’s commodity exchanges but
A long era of trading closes as the
area, holders spend it in the neighbour- even before the flames were extinguished
underlying business gathers steam
hood, thus creating a “local multiplier ef- they were back to business, some in small
fect”. Backers of the schemes also claim en-
vironmental benefits: stronger local
businesses cut transport distances and car-
A S A new trading year began this week in
the art-deco tower that houses the Chi-
cago Board of Trade, big men were clus-
temporary facilities like technological junk
shops, knit together by familiar cries.
In the end it was not scandal or terro-
bon emissions. tered around pits dealing in futures and op- rism that undermined open outcry; it was
But local currencies have a poor record. tions tied to various commodities. Their efficiency. Computers turned out to be
Of over 80 launched in America since 1991, approach dates back to the building’s quicker, cheaper and more precise than hu-
only a handful survive. Elsewhere, the opening in 1930, and was once familiar in mans. Almost all the important contracts
Guardiagrele simec in Italy, the Toronto cities throughout America. But after de- ended up in the hands of the CME Group,
dollar, the Stroud pound and others are cades of attrition, on December 30th the which was first to realise that the most dy-
languishing or are already defunct. Even CME Group (named after the Chicago Mer- namic business was not in traditional com-
cantile Exchange) closed the “open outcry” modities but in interest rates, stock indices
trading pits that it operated in New York. In and currencies. The strong volume these
America, Chicago’s hue and cry has be- products provided enabled the CME to
come unique. create economies of scale in clearing and
Even this exchange is a shadow of its trading systems, and to scoop up other ex-
former self. There are now nine pits, down changes as they faltered.
from 32 in 2007. A once teeming trading Bit by bit, the exchange has shed its real-
floor was closed in 2015. Most activity in estate assets. The Board of Trade building
the contracts still traded in the pits is elec- was sold in 2012 and the equivalent New
tronic. No one in the surviving CME pits in York facility in 2013. This contraction, how-
Chicago seems worried by the New York ever, is far from reflecting the health of
closures. But they have a symbolic impact. overall business—which is booming. In
The markets have long been a colourful, 2016 Brexit, the American election and In-
fractious component of America’s finan- dia’s monetary experimentation, to cite
cial architecture. just three examples, each created demand
They have always lured the ambitious. for futures and options tied to interest
Two alumni of New York’s commodity rates, precious metals and currency. Tran-
markets have joined the Trump adminis- saction volume on the CME grew by 12% to
tration. Gary Cohn parlayed a cab ride into reach a new record. The markets are more
a job as a silver trader, into a position at important than ever, even if, increasingly,
Five Bowies make a Winston Goldman Sachs, and, eventually, that they can be neither seen nor heard. 7
 The Economist January 7th 2017 Finance and economics 57

Anthony Atkinson
Insuring talent
For poorer, for Death Star
richer
When the famous die, it is increasingly costly for insurers

Anthony Atkinson, a great British

economist, died on January1st, aged 72
T HE death of Carrie Fisher, a much-
loved actor in the “Star Wars” movies,
left a hole in the force for fans. It may also
his on-screen persona live on. This in-
cluded hiring body-doubles and digitally
inserting Mr Walker into the movie with

“T IME is of the essence,” wrote Sir An-

thony Atkinson, a British economist,
in a report on measuring global poverty,
burn a hole in the pockets of underwrit-
ers, syndicated under Lloyds of London.
They may have to fork out as much as
hundreds of computer-generated images.
Most workers are easier to replace.
Employers can take out simple life insur-
published in July 2016. His sense of urgen- $50m to meet Disney’s claim for its loss. ance that pays a fixed lump sum. But the
cy may have been influenced by another The studio, which owns the sci-fi saga, value of a film star to a studio, or a striker
constraint. In 2014 Sir Anthony had been had wisely taken out so-called contractu- to a football club, is harder to calculate in
diagnosed with incurable cancer. Some al-protection insurance (CPI) in case advance. It depends on all sorts of things,
might have paused; he sped up. He chaired death thwarted a contractual obligation: especially timing. This is where contin-
the World Bank commission that produced in Ms Fisher’s case to film and promote gency insurance, such as CPI, comes in.
the poverty report, and wrote a book, “In- future “Star Wars” episodes. Unlike a life policy, how much of the
equality: What Can Be Done?”, in just three Contrary to the headlines, 2016 was $50m Disney receives depends on how it
months. On January 1st, his time ran out. not an especially lethal year to be a celeb- now calculates and justifies the losses
In his lifetime, he was tipped for a No- rity. Like the rest of us, they do die. But caused by Ms Fisher’s death. This could
bel prize. On his death, fellow economists unlike most of us, their employers can be include, for example, her role in boosting
rushed to describe him as “one of the all- left with astronomic bills. When Paul sales of storm-trooper figurines.
time greats” and emphasised his extraordi- Walker, an actor in “The Fast and the Insuring talent is becoming popular
nary “decency, humanity and integrity”. Furious”, a series of action movies, died outside Hollywood. The aptly named
The two were linked. For him, economics in 2013 while filming the seventh in- Exceptional Risk Advisors, a company
was about improving people’s lives. stalment, Universal Pictures had to spend based in New Jersey that reportedly
A six-month stint volunteering as a considerable effort (and dollars) to make brokered the Fisher policy, also helps
nurse in a hospital in deprived inner-city insure against the deaths of hedge-fund
Hamburg was an early influence. He saw managers, company executives and
poverty, and went on to spend his life com- sports teams’ star players. Publishers
bating it. He fought his battles gently—shy- have taken out CPI in case bestselling
ing away from the adversarial style he ex- authors die with books half-written.
perienced as a student at Cambridge—but Jonathan Thomas, from Munich Re,
with rigorous precision and an unfailing who has written contingency policies for
sense of social justice. over 30 years, says they are “exactly what
As economists fell in love with markets Lloyd’s is good at”. The greatest change
in the 1980s and 1990s, he wrote the best he has seen is in the sums involved. But
textbook on their failures, with Joseph Sti- some worry that underwriters are drop-
glitz, another economist. (Mr Stiglitz’s ping their standards and taking on too
scrawl was some comfort to Sir Anthony, much risk. This could well become a
as evidence of handwriting even worse problem if contingency insurance grows
than his own.) Faced with an imperfect much larger. But today it is still tiny com-
world, he showed how to achieve a sec- pared with life insurance.
ond-best compromise. With rock stars remaining on stage
The theoretical pontificating of 18th- into their dotage and long-running se-
and 19th-century political economists on quels one of the surest ways to make
welfare and inequality had rather fallen money in Tinseltown, the risks of losing a
out of fashion. Sir Anthony quickly identi- “key human” (or on occasion animal) are
fied a big obstacle to getting the message growing. That creates business opportu-
across: a lack of good data. He pored nities for insurers, so long as they remain
through historical sources to unearth past Carrie trade prudent and don’t become star-struck.
trends in income inequality. He created
data sets on the highest incomes, findings
from which would support the slogans on sures, he showed, might seem like neutral His faith in the power of government to
protesters’ placards. Sir Anthony was a indicators of the spread of incomes in a right the world’s ills led to radical propos-
mentor and collaborator of Thomas Pi- country. In fact they contained implicit val- als. His final book on inequality argued for
ketty, famous for his book, “Capital in the ue judgments. Some were more sensitive a participation income (a payment for all
Twenty-First Century”. Mr Piketty says that to sagging incomes for the poorest; others who contribute to society) and a tax on
all work on trends in income and wealth would respond more to soaring incomes at wealth to finance an inheritance for every-
inequality stems from Sir Anthony’s. the top. Always constructive, he then one on reaching the age of 18. He pushed
In the course of his career, Sir Anthony created a new class of inequality mea- back against pressure to cut taxes and prio-
contributed to an average of nearly a book sures, making explicit what had been im- ritise containing inflation over reducing
a year and sat on numerous government plicit. Today they are used by the US Cen- unemployment. To the end, he was bat-
commissions. The legacy of his most cited sus Bureau. tling lifelong challenges: inadequate data;
paper, published in 1970, is an inequality He went beyond analysing the world to how to harness government for good; and
index that bears his name. Existing mea- trying to fix it—in ways that many rejected. closed minds. 7
58 Finance and economics The Economist January 7th 2017

Free exchange The fallacy of the fallback

The “WTO option” for Brexit is far from straightforward

EU-approved commitments hardly looks like “taking back con-
trol”. It would also lead to other problems.
WTO trade agreements assume that the EU as it currently
stands is a coherent economic bloc. Trade in goods between the
28 member states is pretty free. Multinationals, which need to
move components back and forth frequently between different
member states, have set up supply chains accordingly. Brexit
complicates this arrangement. If Britain kept the common exter-
nal tariff in place, then it might also apply to a company moving
components between the EU and Britain. Such a firm could incur
tariff charges each time a border is crossed. A WTO member
might kick up a fuss if, say, one of its car companies with produc-
tion facilities in both Britain and the EU suddenly found it more
expensive to assemble a model.
A related problem concerns the WTO’s “tariff-rate quotas”
(TRQs). These allow a certain amount of a good to enter at a
cheaper tariff rate. The EU has almost 100 of them. Peter Ungpha-
korn, formerly of the WTO secretariat, uses the example of the
“Hilton” beef quota (named after a hotel where the agreement
was reached) to illustrate how gnarly Brexit could be.
The EU’s current official quota on beef imports is about

T HE two sides of the Brexit debate do not agree on much, but

they agree on this: if Britain fails to reach a trade deal with the
EU it will have to revert to the “WTO option”. This involves trad-
40,000 tonnes, charged 20% import duty, he reckons. Above the
quota, the duty is much higher. Britain and the EU will need to di-
vide those 40,000 tonnes. The EU might push Britain to take a big
ing only under rules set by the World Trade Organisation. The share, appeasing European beef producers. British farmers
Leave camp is happy with this idea; Remainers less so. But the would howl as low-tariff beef flooded in. The quotas might need
awkward truth is that the WTO option is not much of a fallback. to be increased because Britain-EU trade would now come under
Becoming an independent WTO member will be tortuous. them. Expect to hear more about TRQs in 2017. According to Luis
It is puzzling that Brexiteers, whose campaign was summed González García of Matrix Chambers, a legal-services firm, they
up as “Vote Leave, take back control”, seem happy with the WTO are likely to become “the most contentious issue” in Britain’s re-
option. The WTO is truly global, with only a handful of countries establishment of its status as an independent WTO member.
outside it (zealous as they are about sovereignty, Brexiteers do not
want to join the ranks of Turkmenistan and Nauru). But forsaking Least-favoured nation
one unelected, unaccountable bureaucracy in Brussels for anoth- The WTO will even shape the Brexit negotiations themselves. In
er housed in a leafy district of Geneva seems perverse. WTO recent weeks, the government has appeared keen to ensure that,
members are at the mercy of its “dispute-settlement” regime, even after Brexit, Britain’s big exporters will be able to sell freely
which allows other countries to enforce penalties. to the single market. It has mooted paying into the EU budget to
Inconsistency has its upside. Membership of the WTO ap- guarantee access for the City of London’s financiers. It has as-
pears to be good for trade. Most economists believe Britain’s over- sured Nissan, a carmaker, that it will not lose from Brexit. It has
all trade will suffer if Britain leaves the single market. But Brexi- studiously refused to spell out the terms of this guarantee, ru-
teers argue that, out of the EU’s clutches, Britain will be the WTO’s moured to entail as-yet-unspent regional-development funds.
star pupil, striking trade deals across the world. China’s explosive WTO rules, however, make such industry-specific deals hard.
export growth after joining in 2001 testifies to its potency. If Britain were to agree bilaterally with the EU not to apply tariffs
However, there is a snag. Britain is already a member of the on cars, the WTO’s “most-favoured nation” principle would force
WTO, but operates through the EU. To become a fully indepen- it to offer tariff-free access to other countries’ too, says Mr Ungpha-
dent member, Britain needs to have its own “schedules”, WTO- korn. And free-trade deals are not supposed to cover just one or
speak for the lists of tariffs and quotas that it would apply to other two goods, but “substantially all the trade” between the coun-
countries’ products. Alan Winters, of the UK Trade Policy Obser- tries involved. Meanwhile, channelling government money to
vatory at the University of Sussex, says that, in theory, it would boost exports is frowned on in Geneva.
not be too hard for Britain to acquire its own schedules. Any Some of these problems are surmountable. The WTO is not as
change would require the acquiescence of other members. But, legalistic as you might think, says Mr Winters; countries that stay
using a “rectification” procedure, the government would simply in others’ good books find things easier. But so far, British politi-
cut “EU” at the top of the page and paste in “UK” instead. Bigger cians are also struggling on that front. Boris Johnson, the foreign
changes—say, raising tariffs on certain goods—might require a secretary, has irritated his counterparts with clownish com-
more ambitious “modification” and more thorough negotiations. ments. “We are pro-secco but by no means anti-pasto,” he recent-
The most simple course, then, would seem to be for Britain to ly told the Sun, a newspaper, alluding to food imports from the
keep its schedules as they are under the EU, including the “com- EU. When the reality of Brexit dawns, Mr Johnson and his fellow
mon external tariff”, applied uniformly by EU members to im- Brexiteers will find no trade deal to be especially appetising. 7
ports from third countries. The government has recently hinted
as much. This avoids diplomatic wrangling. But simply to readopt Economist.com/blogs/freeexchange
60 The Economist January 7th 2017
Science and technology
Also in this section
61 Diagnosing illness by smell
62 A hurricane paradox
62 A tale of dinosaur eggs

For daily analysis and debate on science and

technology, visit
Economist.com/science

Medicine and computing turned quickly into understanding.

Scientific output doubles every nine
The shoulders of gAInts years. And data are, increasingly, salami-
sliced for publication, to lengthen re-
searchers’ personal bibliographies. That
makes information hard to synthesise. A
century ago someone could still, with ef-
fort, be an expert in most fields of medi-
cine. Today, as Niven Narain of BERG
Artificial intelligence may help unpick the complexity of biology
Health, an AI and biotechnology firm in

I N A former leatherworks just off Euston

Road in London, a hopeful firm is starting
up. BenevolentAI’s main room is large and
tiative (CZI), from the founder of Facebook
and his wife, or the biological subsidiaries
being set up by firms such as Alphabet
Framingham, Massachusetts, points out, it
is not humanly possible to comprehend all
the various types of data.
open-plan. In it, scientists and coders sit (Google’s parent company), IBM and Mi- This is where AI comes in. Not only can
busily on benches, plying their various crosoft, the new Big Idea in Silicon Valley is it “ingest” everything from papers to mo-
trades. The firm’s star, though, has a priv- that in the squidgy worlds of biology and lecular structures to genomic sequences to
ate, temperature-controlled office. That disease there are problems its software en- images, it can also learn, make connections
star is a powerful computer that runs the gineers can solve. and form hypotheses. It can, in weeks, elu-
software which sits at the heart of Bene- cidate salient links and offer new ideas that
volentAI’s business. This software is an ar- Drug money would take lifetimes of human endeavour
tificial-intelligence system. The discovery of new drugs is an early test to come up with. It can also weigh up the
AI, as it is known for short, comes in ofthe beliefthat AI has much to offer biolo- evidence for its hypotheses in an even-
several guises. But BenevolentAI’s version gy and medicine. Pharmaceutical compa- handed manner. In this it is unlike human
of it is a form of machine learning that can nies are finding it increasingly difficult to beings, who become unreasonably at-
draw inferences about what it has learned. make headway in their search for novel tached to their own theories and pursue
In particular, it can process natural lan- products. The conventional approach is to them doggedly. Such wasted effort besets
guage and formulate new ideas from what screen large numbers of molecules for the best of pharmaceutical firms.
it reads. Its job is to sift through vast chemi- signs of pertinent biological effect, and For example, Richard Mead, a neurosci-
cal libraries, medical databases and con- then winnow away the dross in a series of entist at the University of Sheffield, in Eng-
ventionally presented scientific papers, more and more expensive tests and trials, land, says BenevolentAI has given him
looking for potential drug molecules. in the hope of coming up with a golden two ideas for drugs for ALS, a neurodegen- 1
Nor is BenevolentAI a one-off. More nugget at the end. This way of doing things
and more people and firms believe that AI is, however, declining in productivity and
The Richard Casement internship
is well placed to help unpick biology and rising in cost.
advance human health. Indeed, as Chris One explanation suggested for why We invite applications for the 2017 Richard Casement
internship. We are looking for a would-be journalist to
Bishop of Microsoft Research, in Cam- drug discovery has become so hard is that spend three months of the summer working on the
bridge, England, observes, one way of most of the obvious useful molecules have newspaper in London, writing about science and
thinking about living organisms is to recog- been found. That leaves the obscure ones, technology. Applicants should write a letter introducing
themselves and an article of about 600 words that they
nise that they are, in essence, complex sys- which leads to long development periods think would be suitable for publication in the Science
tems which process information using a and high failure rates. In theory, growing and Technology section. They should be prepared to
combination of hardware and software. knowledge of the basic science involved come for an interview in London or New York. A stipend
of £2,000 a month will be paid to the successful
That thought has consequences. ought to help. The trouble is that too much candidate. Applications must reach us by January 27th.
Whether it is the new Chan Zuckerberg Ini- new information is being produced to be These should be sent to: casement2017@economist.com
 The Economist January 7th 2017 Science and technology 61

2 erative disease that he works on. Both mol- from this information the network of pro- drug or not. Most known protein struc-
ecules remain confidential while their util- tein interactions that underlie that disease. tures have been worked out from crystal-
ity is being assessed. One is bang in the At that point human researchers intervene lised versions of the molecule, held tight
middle of what he and his team are doing to test the model’s predictions in a real bio- by networks of chemical bonds. In reality,
already. To him, this confirms that the artifi- logical system. One of the potential drugs proteins are flexible, but that is much hard-
cial intelligence in question is generating BERG Health has discovered this way—for er to deal with.
good ideas. The other, though, is compli- topical squamous-cell carcinoma, a form More work at the molecular level is
cated and not obvious, but mechanistical- of skin cancer—passed early trials for safe- therefore needed before AI will be able to
ly interesting. Without the AI to prompt ty and efficacy, and now awaits full-scale crack open the inner workings of a cell.
them, it is something his team might have testing. The company says it has others in One of CZI’s first projects is generating just
ignored—and that, he admits, might in turn development. such basic data. That, in itself, is a massive
be a result of their bias. For all the grand aspirations of the AI undertaking—but it is one which collabora-
For now, BenevolentAI is a small actor folk, though, there are reasons for caution. tion with artificial intelligence will also
in the theatre of biology and artificial intel- Dr Mead warns: “I don’t think we are in a speed up. AI will nudge people to generate
ligence. But much larger firms are also in- state to model even a single cell. The model new data and run particular experiments.
volved. Watson, a computer system built we have is incomplete.” Actually, that in- Those people will then ask the AI to sift the
by IBM, is being applied in similar ways. In completeness applies even to models of results and make connections. As Isaac
particular, IBM has gone into partnership single proteins, meaning that science is not Newton put it, “If I have seen further, it is
with Pfizer, an American pharma com- yet good at predicting whether a particular by standing on the shoulders of giants.” If
pany, with the intention of accelerating modification will make a molecule intend- the brains of those giants happen to be
drug discovery in immuno-oncology—a ed to interact with a given protein a better made of silicon chips, so be it. 7
promising area of cancer therapy that en-
courages the body’s own immune system
Olfactory medicine
to fight tumours.
Artificial intelligence will also move
into clinical care. Antonio Criminsi, who, Whiff of danger
like Dr Bishop, works at Microsoft Research
in Cambridge, observes that today the pro-
A prototype device to detect the smell of disease
cess of delineating the edges of tumours in
images generated by MRI machines and CT
scans is done by hand. This is tedious and
long-winded (it can take up to four hours).
O NE of a doctor’s most valuable tools
is his nose. Since ancient times,
medics have relied on their sense of
able manner. The combined changes
generated an electrical fingerprint that,
the researchers hoped, would be diag-
AI can reduce the time taken to minutes, or smell to help them work out what is nostic of the disease a patient was suf-
even seconds—and the results are com- wrong with their patients. Fruity odours fering from.
pletely consistent, unlike those arrived at on the breath, for example, let them To test their invention, Dr Haick and
by human doctors. monitor the condition of diabetics. Foul his colleagues collected 2,808 breath
Another example of AI’s move into the ones assist the diagnosis of respiratory- samples from 1,404 patients who were
clinic is described in a recent paper in JAMA, tract infections. suffering from at least one of the diseases
an American medical journal. This paper But doctors can, as it were, smell only they were looking at. Its success varied. It
showed that it is possible to use AI to detect what they can smell—and many com- could distinguish between samples from
diabetic retinopathy and macular oedema, pounds characteristic of disease are patients suffering from gastric cancer and
two causes of blindness, in pictures of the odourless. To deal with this limitation bladder cancer only 64% of the time. At
retina. Enlitic, a new firm based in San Hossam Haick, a chemical engineer at distinguishing lung cancer from head and
Francisco, is using AI to make commercial the Technion Israel Institute of Tech- neck cancer it was, though, 100% success-
software that can assist clinical decisions, nology, in Haifa, has developed a device ful. Overall, it got things right 86% of the
including a system that will screen chest X- which, he claims, can do work that the time. Not perfect, then, but a useful aid to
rays for signs of disease. Your.MD, a firm human nose cannot. a doctor planning to conduct further
based in London, is using AI, via an app, to The idea behind Dr Haick’s invention investigations. And this is only a proto-
offer diagnoses based on patients’ queries is not new. Many diagnostic “breathalys- type. Tweaked, its success rate would be
about symptoms. IBM is also, via Watson, ers” already exist, and sniffer dogs, too, expected to improve.
involved in clinical work. It is able to sug- can be trained to detect illnesses such as
gest treatment plans for a number of differ- cancer. Most of these approaches,
ent cancers. All this has the potential to though, are disease-specific. Dr Haick
transform doctors’ abilities to screen for wanted to generalise the process.
and diagnose disease. As he describes in ACS Nano, he and
his colleagues created an array of elec-
The power of networking trodes made of carbon nanotubes (hol-
Another important biological hurdle that low, cylindrical sheets of carbon atoms)
AI can help people surmount is complex- and tiny particles of gold. Each of these
ity. Experimental science progresses by had one of 20 organic films laid over it.
holding steady one variable at a time, an Each film was sensitive to one of a score
approach that is not always easy when of compounds known to be found on the
dealing with networks of genes, proteins breath of patients suffering from a range
or other molecules. AI can handle this of17 illnesses, including Parkinson’s
more easily than human beings. disease, multiple sclerosis, bladder can-
At BERG Health, the firm’s AI system cer, pulmonary hypertension and
starts by analysing tissue samples, geno- Crohn’s disease. When a film reacted, its
mics and other clinical data relevant to a electrical resistance changed in a predict- The nose knows
particular disease. It then tries to model
62 Science and technology The Economist January 7th 2017

Atmospheric physics
Palaeontology
The storm before Cracking a puzzle
the calm
How reptilian were dinosaur eggs?

Something is damping down cyclones

before they reach the American coast
D ID dinosaur eggs hatch quickly, like
those of birds (which are dinosaurs’
direct descendants), or slowly, like those
was laid by Protoceratops andrewsi, a
sheep-sized creature that lived 70m years
ago. The second, from Canada, was laid

I N 2015, a bit over two years after Hurri-

cane Sandy hit his city, Bill de Blasio,
New York’s mayor, announced the cre-
of modern reptiles (which are dinosaurs’
collateral cousins)? That is the question
addressed by Gregory Erickson of Florida
by Hypacrosaurus stebingeri—a species
contemporary with P. andrewsi that grew
to something between the weights of a
ation of a $3 billion restoration fund. Part State University and his colleagues in a rhinoceros and an elephant.
of the money is intended to pay for sea paper just published in the Proceedings of In each case the researchers used an
walls that will help protect the place from the National Academy of Sciences. It is X-ray scanner to examine the teeth of
future storms. pertinent because it touches on the wider embryos found inside the eggs. In cross-
Building such walls may be an even matter of just how “reptilian” the dino- section, dinosaur teeth display growth
more timely move than Mr de Blasio saurs actually were. Researchers already rings, called von Ebner lines, that are
thought when he made his announce- know that many were warm-blooded, reminiscent of the annual growth rings
ment. As a paper just published in Nature and that some had insulation in the form of a tree trunk. In all living species which
explains, for the past two decades a natural of feathers, even though they could not have von Ebner lines those lines repre-
form of protection may have been shield- fly. Fast-developing embryos would drive sent a day’s growth. It therefore seems
ing America’s Atlantic coast, stopping big a further wedge between them and their reasonable to believe that this was true
storms arriving. Such protection, though, is truly reptilian kin. for dinosaurs as well.
unlikely to last forever. Mr de Blasio is thus To investigate, Dr Erickson looked at Assuming also, as Dr Erickson and his
taking the prudent course of mending the two sets of fossilised dinosaur eggs. The colleagues did, that dinosaurs’ teeth
roof while the sun is shining. first, from a Mongolian nest (pictured), began to grow about halfway through
The study in question was conducted embryonic development (which is when
by James Kossin of America’s National a crocodile’s embryonic teeth first ap-
Oceanic and Atmospheric Administration, pear), they conclude that the P. andrewsi
using wind and ocean-temperature data eggs they looked at were about 83 days
collected since 1947. In it, Dr Kossin shows old, making that the lower bound of their
that the intensity of hurricanes which incubation period. This compares with
make landfall in the United States tends to the 42 days an ostrich egg takes to in-
be lowest when the Atlantic’s storm-gener- cubate and the 200-plus days required by
ation system is at its most active. a Komodo dragon egg—both of these
In Dr Kossin’s view, the cause of this ap- animals being, when adult, of compara-
parent paradox is that, when conditions in ble size to P. andrewsi.
the deep Atlantic conspire to produce the The bigger eggs of H. stebingeri need-
most hurricanes, precisely the opposite ed, according to Dr Erickson’s calcula-
conditions obtain along the American tions, a minimum of171 days incubation.
coast. That creates a buffer zone which low- Sadly, no egg-laying animal of its size is
ers the intensity of incoming storms before around today for comparison. But projec-
they make landfall. The agent responsible tions based on size and incubation-
for this lowering of intensity is vertical period data from modern birds and
wind shear—in other words, wind speeds reptiles suggest 171 days is substantially
and directions that vary greatly with alti- more than would be expected if the eggs
tude. Vertical wind shear removes energy of H. stebingeri were developing in a
from hurricanes by pulling heat and mois- birdlike way.
ture out of a storm’s centre. When the At- The truth, then, is that in this as in
lantic is in its hurricane-producing phase, other matters, dinosaurs are less reptilian
with low wind shear and high surface tem- than was once thought, but not as avian
peratures in its central region, the part as some revisionists would like to be-
along the American coast behaves in the lieve. A messy answer, perhaps. But, in
opposite manner, with high wind shear A dinosaur’s nest nature, things are not always clear-cut.
and low surface temperatures that sap
storms’ energy.
The obverse is also true. When wind ographer at Florida State University, sug- between Earth’s rotation and their own, a
shear and sea-surface temperatures keep gests that the correlations between storm phenomenon called the Coriolis effect—
the Atlantic’s hurricane-generating region generation and storm strength at landfall and therefore avoid landfall altogether.
quiet, as they did between 1970 and 1992, which Dr Kossin observes could be ex- Whatever its physical explanation,
those storms which do appear are two to plained another way. The biggest storms though, the correlation looks secure. And,
three times more likely to intensify rapidly tend to start out far from land rather than with the current period of active hurricane
(defined as gaining 15 knots of wind speed near it, and during periods of high activity formation now 24 years old, a lull, with ac-
in six hours) when they are near the coast hurricanes are generated farther out in the companying superstorms, may not be long
than is the case during active periods. Atlantic than happens during lulls. These in coming. Time, perhaps, for other mayors
Not everyone agrees with Dr Kossin’s distant storms thus have more time to veer along America’s Atlantic coast to follow Mr
proposed mechanism. James Elsner, a ge- north—pushed that way by the interaction de Blasio’s example. 7
 The Economist January 7th 2017 63
Books and arts
Also in this section
64 Johnson: Word of the year
65 Chinese economics
65 Nigerian fiction
66 High-end car parks

For daily analysis and debate on books, arts and

culture, visit
Economist.com/culture

Britain and the European Union draft ofhistory. It will not give Mr Cameron
much satisfaction.
Why Brexit won Partly because they expected to win
easily, as Harold Wilson did in 1975, Mr
Cameron and the Remainers made tactical
mistakes. These included accepting a pre-
vote period of official government “pur-
dah”, constraining what it could publish;
allowing cabinet ministers to back Leave
The first crop of Brexit books includes entries rich with detail and analysis
without resigning; and avoiding direct

O NE explanation of Britain’s vote to

quit the European Union last June is
that Eurosceptics worked towards it for de-
What Next: How to Get the Best from
Brexit. By Daniel Hannan. Head of Zeus;
“blue-on-blue” attacks on fellow Tories. Mr
Cameron’s renegotiation of Britain’s mem-
bership in February was also successfully
cades. A young Daniel Hannan joined 298 pages; £9.99. To be published in portrayed by Leavers as trivial.
their number in the early 1990s, first as a America in February In the campaign itself, Mr Cameron’s
student, later as a journalist and Tory MEP. team relied heavily on what became tarred
In his new bookMr Hannan duly slams the The Brexit Club. By Owen Bennett. as “Project Fear”. Modelled on the defeat of
EU’s erosion of national sovereignty and Biteback; 340 pages; £12.99 the Scottish independence referendum in
supposed antipathy to free markets. His vi- September 2014, it stressed Brexit’s risks to
sion is ofa more liberal, open and less regu-
The Bad Boys of Brexit. By Arron Banks. the economy. George Osborne, the chan-
lated Britain, trading freely around the Biteback; 338 pages; £18.99 cellor, issued gloomy forecasts of lost in-
globe and no longer held back by a bureau- come, output and jobs. Many domestic
All Out War. By Tim Shipman. William
cratic and stagnant EU. and international bodies were wheeled
Collins; 630 pages; £25
Yet this differs sharply from the ideas of out to support such warnings, culminating
other Brexiteers, such as Nigel Farage, the with Barack Obama saying that Britain
former leader of the UK Independence tellingly called “The Bad Boys of Brexit”), would be at “the back of the queue” for
Party. Because Mr Hannan has economic bent on talking about immigration and lit- trade deals. There was little effort to put out
nous, he likes a Norwegian-style “soft tle else. On the other, with Mr Hannan, a positive message about the EU or to de-
Brexit”, at least as a transition. Norway is were leading Tory MPs like Michael Gove fend immigration, Leavers’ key weapon.
outside the EU but in its single market, so it and Boris Johnson, backed by UKIP’s only The main Vote Leave campaign led by
accepts most of its rules, freely admits EU MP, Douglas Carswell, who played down Matthew Elliott and Dominic Cummings
migrants and pays into its budget. Mr Far- immigration and talked up global trade lib- was more vigorous and more aggressive
age will have none of this: anything less eralisation instead. than the Stronger In team led by Will Straw
than a “hard Brexit” that takes Britain out Mr Bennett is good on the internecine and Craig Oliver from 10 Downing Street.
of the single market would betray voters. warfare among Brexiteers, but his book Downing Street also misjudged the mood
This tension between hard and soft lacks the detailed reporting that is in Tim of Tory MPs. It hoped gratitude for the 2015
Brexit is one reason why Theresa May’s Shipman’s “All Out War”. Mr Shipman, po- Tory election victory and respect for Mr
Tory government has remained so opaque litical editor of the Sunday Times, has inter- Cameron’s leadership would reduce rebel
about its goals. It was also evident during viewed almost everyone involved in the numbers to 50-60. But careful canvassing
the campaign, as Owen Bennett’s book referendum (though apparently not Mrs by Steve Baker, a Eurosceptic backbencher,
shows. Indeed, the rival Brexiteers hated May’s predecessor, David Cameron, who pushed them up to over 140, including the
each other even more than they did their is writing his own memoir). He has in a re- critical duo of Mr Gove and Mr Johnson.
opponents—or the EU. On one side stood markably short time produced a story that Letting the Remain campaign seem largely
Mr Farage and his millionaire backer, Ar- is thorough, comprehensive and utterly Tory-run was another error.
ron Banks (whose diary of the campaign is gripping. It is hard to imagine a better first The Leavers made mistakes, too. They 1
64 Books and arts The Economist January 7th 2017

2 failed to answer the economic argument, endum harder. Although he nominally many pollsters got the result wrong.
being reduced to Mr Gove’s notorious at- backed Remain, he and his team often sab- The third goes back to Mr Hannan and
tack on “experts”. They did not set out clear otaged the Labour In campaign, for exam- his friends. For three decades British gov-
alternatives to membership. Their internal ple refusing to use the word “united” to de- ernments of both parties, egged on by a
splits and focus on immigration often scribe Labour’s position or to share a shrilly Eurosceptic press, did little but carp
made them seem nasty, a big worry when platform with former party leaders. at Brussels. Mr Cameron’s delusion was
a Labour MP, Jo Cox, was brutally mur- A second was the rising anti-elite, anti- that, having himself hinted that he might
dered in mid-June, just before the vote, by a London and anti-globalisation mood of campaign to Leave, he could turn senti-
man linked to the far right. By then many many voters, especially in the Midlands ment round completely in just three
Leavers thought they would lose. and north. Those who feel they were left months. Instead, his past stance made him
That they won is down to three causes behind after the financial crisis have seem unconvincing when he portrayed EU
deeper than Remainers’ tactical errors. turned to populists in many countries (in- membership as vital for Britain’s economy
One was the Labour Party leadership. The cluding to Donald Trump in America). In and security. This same legacy could now
arrival of Jeremy Corbyn, a far-left anti-EU the Brexit referendum they voted in unex- make it trickier for Mrs May to persuade
figure, in late 2015 made winning the refer- pectedly large numbers, a big reason why voters to accept a soft Brexit. 7

Johnson Word of the year

The past12 months saw many words enjoy a breakthrough. Unfortunately most of them are grim

C HOOSING the “word of the year” can

be an unenlightening exercise. The
last several years have seen language ma-
paign managers, the candidate hired
Steve Bannon to run his election bid. Mr
Bannon had been the chairman of Breit-
vens and dictionary publishers pick an bart, a website devoted to the worldview
emoji (the one meaning “crying with of maverick conservatives who some-
joy”), “because” as a preposition (because times call themselves “race realists”,
teenagers), and “hashtag” (as in “I’m so while others call them “white national-
happy, hashtag irony,” to signal a hashtag ists”. Most reject labels like “white su-
in speech). Most are probably passing premacist” or the dreaded “racist”: white
fads; a “word of the year” should ideally nationalists merely say that whites, like
both summarise the feel of the 12 months other peoples, should have their own
and have a chance of surviving. countries, for everyone’s good.
If recent years have offered slim pick- Many people voted for Mr Trump not
ings, that is certainly not the case of 2016. because they thought he was a racist, but
Last year gave the English language an because they could believe anything they
unusually big crop. Take “adulting”, an liked about him and his opponent, Hilla-
unlikely verb used by younger millenni- ry Clinton. It was the year of “fake news”,
als to describe the joys of paying rent and “viral” stories in that word’s original in-
making it to work on time and sober. fectious-plague sense, convincing many
Memes circulate online with the likes of a voters that Mrs Clinton had sold weapons
picture of a puppy lying passed out on the to Islamic State, or that Pope Francis had
floor under the text “I Can’t Adult Today. endorsed Donald Trump.
Please Don’t Make Me Adult”. With slang mark on the lexicon. Truly fake stories were relatively rare,
rising and falling faster than ever before, First came “Brexit”, a strong runner for though. The more worrying phenome-
though, it is anyone’s guess whether word of the year. It isn’t the first portman- non was a general disappearance of the
adulting will survive as long as it takes for teau word with a country name and expectation that politicians should even
its users to become seasoned grown-ups. “-exit”—that was Greece’s possible exit be expected to stick to the facts. So John-
The same short shelf-life might be re- from the euro, or “Grexit”—but it’s the one son’s word of the year is “post-truth”. Poli-
served for “hygge”, a venerable Danish that has actually happened, and its conse- ticians have always strayed from the
word for a kind of relaxed happiness, and quences will be around for a long time. truth, but shame kept them in the general
a phenomenon that hit Britain’s publish- Britain’s vote to leave the European Union postcode. But in 2016 Pro-Brexit cam-
ing industry like the hammer of Thor in has others talking of a potential “Frexit”, paigners said falsely that Britain sent the
2016. No fewer than nine books on hygge should Marine Le Pen become president of EU £350m a week, successfully goading
were released or planned. Danes are France, or “Italeave”, if Italy should be the Remain camp into debating the figure
amused that Britons think its joys can be forced out of the euro. The portmanteau endlessly—and so keeping the topic in the
found in a book, as it has a lot more to do that spawned a thousand others, Brexit public’s mind. Mr Trump, after a series of
with good company than things like the has also resulted in “Remoaners”, those misogynist comments, said that nobody
socks and mulled wine touted on these who voted for Britain to remain in the EU, in the world respected women more than
books’ covers. It is hard to imagine non- and who are still grousing about the result. he does. In 2016 the only rule was “any-
Danes still going on about hygge in 2026. It was America’s turn to embrace leap- thing goes, so long as it gets attention,”
Many words do look more likely to into-the-unknown populism with the elec- and the most audacious at following it
survive. The Chinese do not actually tion of Donald Trump in November. The were the winners. Other campaigners
curse you with “may you live in interest- “alt-right”, another newly prominent have been watching and taking note, a
ing times,” but 2016 certainly has been a group, played a role in Mr Trump’s victory. frightening sign that “post-truth” may be
bit too interesting, its politics making a After firing two more conventional cam- around for some time to come.
 The Economist January 7th 2017 Books and arts 65

Chinese economics
Fiction
Western takeaway Crazy city

Welcome to Lagos. By Chibundu Onuzo.

Unlikely Partners: Chinese Reformers,
Faber and Faber; 358 pages; £12.99
Western Economists, and the Making of
Global China. By Julian Gewirtz. Harvard
University Press; 389 pages; $39.95. To be
published in Britain on January 31st
A T LEAST in their conception of the
world, there are two broad categories
of Nigerians—or for that matter Kenyans,

I N 1985 James Tobin, a Nobel laureate in

economics, delivered a talk at a confer-
ence in China. Mao had died less than a de-
Pakistanis, Chinese or anyone from the
poor world. The vast majority are those
for whom national boundaries represent
cade earlier and modern economic con- insurmountable barriers, for whom even
cepts, shorn of socialism, were still a bus ride to the city seems an other-
unfamiliar to many in the country, includ- worldly journey. And then there are
ing the interpreter on this occasion. Strug- those who flit between African and
gling to find the right words, she burst into European cities as easily as if they were
tears. Two conference participants stepped riding the Victoria line from Brixton to
aside after Tobin spoke and, on the spot, Green Park. They are the lucky ones with
devised the Chinese term for “macroeco- connections at embassies or stores of
nomic management”. Future interpreters capital certified and triple-stamped by
would have it easier. bank officials, or, best of all, the burgundy
Chinese officials and academics, espe- passports of the European Union.
cially those with a reformist bent, were Lagos, a sprawling shambles of some Where paths cross
acutely aware of their tenuous grasp on 21m souls, has its fair share of both cate-
economics at the time. Five years earlier, gories, and they come crashing together From another world come Ahmed,
Deng Xiaoping, the country’s paramount in Chibundu Onuzo’s second novel, the pampered, British-passport-holding
leader, had put it bluntly when meeting “Welcome to Lagos”. crusader who returns to Lagos to start a
Robert McNamara, president of the World Some welcome. It is hard to imagine a muckraking newspaper after a decade as
Bank: “We have lost touch with the world.” megacity less hospitable to newcomers. a banker in London, and Chief Sandayo,
With China’s economic rise now into At every turn lurk scammers, thieves, the minister of education, on the run
its fourth decade, it is easy to forget how crooked cops and rent-extracting gang- from Abuja with $10m in his suitcase.
shaky its footing was at the start of its as- lords. Into this metropolis come Chike These worlds—rich and poor, urban and
cent. It began not just in poverty, but beset and Yemi, two soldiers deserting their rural, privileged and powerless, Muslim
by basic uncertainty about how to devel- posts in the Niger Delta after one too and Christian, Igbo and Yoruba—collide
op. There was even disagreement over many orders to shoot civilians and burn to spectacular effect as their paths cross
whether development, in so far as it en- down villages. Along the way they meet, and power shifts hands in surprising and
tailed market forces, was the right goal. and become fellow travellers with, a unexpected ways, and then does so
The oft-told story is that the Commu- motley crew of runaways: Fineboy, a again, and again. It is an unlikely plot, but
nist Party forged ahead with policy experi- militant fleeing from the very same army; Ms Onuzo pulls it off, revealing the fault
ments—“crossing the river by feeling for the Isoken, a young girl near-raped by those lines in her country’s society—or indeed
stones”, as the Chinese reformers’ saying militants; and Oma, a housewife escap- those of any half-formed democracy.
goes—and, little by little, found the ingredi- ing her abusive husband. Clueless, practi- Though drenched in Lagosian atmo-
ents for growth. There is much truth to this. cally penniless and unaccustomed to the sphere, the book wears its Nigerian set-
But the role of Western economists in help- nasty ways of the big city, they find refuge ting lightly: it is clearly the work of a
ing shape that journey is missing. “Unlike- under a bridge until, one day, Fineboy pan-African and an internationalist—and
ly Partners” by Julian Gewirtz, a doctoral finds an abandoned flat to squat in. is all the better for it.
candidate in Chinese history at Oxford
(and an occasional reviewer for these
pages), fills that gap. It vividly brings to life na found its way, it is also necessary to re- were actually relevant to China.
China’s economic debates from Mao’s cognise the influence of foreign ideas. In The Chinese were most receptive to
death in 1976 until 1993, by which time the some cases the impact was immediate. economists who themselves hailed from
country’s direction was clearer. The concept of special economic zones, planned economies and understood their
The claim is not that Westerners were which enabled coastal regions to flourish, flaws but also knew that sudden changes
responsible for China’s development. A began with a Chinese vice-premier’s trip to were impractical. Ota Sik, from Czechoslo-
large constellation of Chinese reformers western Europe in 1978, where he saw ex- vakia, inspired a phased-in pricing strategy
deserves the credit for that. Indeed, one of port-processing zones. in the early 1980s, whereby China gave en-
the book’s virtues is that it puts the spot- More often, the impact was diffuse. Ac- terprises ever more control over setting
light on Zhao Ziyang, the Communist Party ademics trained in Marxist economics prices. The biggest star was Janos Kornai, a
chief who wound up under house arrest lapped up translated versions of Western Hungarian economist who moved to Har-
after the 1989 Tiananmen protests. Mr Zhao textbooks. American professors came for vard after writing a seminal book in which
has been written out of official histories, weeks at a time to teach econometrics. Chi- he identified shortage as the chronic pro-
but his consistent support for bold think- nese institutions invited a succession of blem of socialism. What came to be called
ing was critical to China’s success. Western economists to give talks and then “Kornai fever” gripped the study of eco-
Nevertheless, to understand how Chi- sifted through their ideas for those that nomics in China in the late 1980s, and his 1
66 Books and arts The Economist January 7th 2017

2 book sold more than 100,000 copies. pening on factory floors or in farm fields. a Basel firm that also specialises in muse-
The World Bank also had a big hand in But it is still a gripping read, highlighting ums, completed 1111Lincoln Road in 2010. A
China’s take-off. The bank has a tainted what was little short of a revolution in Chi- ziggurat of bare concrete linked by precipi-
reputation from that era, when it was seen na’s economic thought. tous ramps, it provides accommodation
as pushing a “Washington consensus” Reading the book today, it is tempting to for a series of art-crowd-friendly shops on
agenda of liberalisation that harmed Latin conclude that China is ignoring a basic les- the ground floor and a home for the devel-
America. Much less attention is paid to its son from its success: that being open to for- oper, Robert Wennett, on the roof. This gid-
subtler positions in China in the 1980s. It eign ideas served it so well. Under Xi Jin- dy stack of concrete cards set a benchmark
carried out two major studies of the econ- ping, officials rail against “Western values”. for audacity, its upper deck providing stun-
omy (the first of their kind), became Chi- Yet there is also a less gloomy conclusion. ning views and one of the most sought-
na’s largest source of foreign capital and, China’s path has never been linear: re- after party spaces during Art Basel Miami
responding to Chinese requests, provided formists and conservatives have constant- Beach. From this example, the high-end car
reams of useful policy advice. ly jostled for the upper hand. But voices for park became firmly established.
Mr Gewirtz’s book does not attempt to openness have ultimately prevailed. And In November, as part of a new six-block
provide a definitive account of China’s the gains that China has made in its under- development in the mid-Beach area, Alan
economic rise. It dwells in the world of standing of economics and, more funda- Faena, an Argentine developer, revealed
ideas, tracing the arc of debates. Little at- mentally, in the lives of its people will not his parking garage (pictured). It boasts a
tention is paid to what was actually hap- be easily undone. 7 glazed side elevation that exposes the ro-
botic car elevator, which installs and re-
trieves cars from closely stacked shelves: a
Architecture preparation for the dance performances in
the Faena Forum arts centre to which it is
Pile ‘em in style appended. The car park actually only pro-
vides room for around 100 cars (though
there are 300 subterranean parking places
beneath the development). Yet still Mr Fae-
na felt that the development needed an
above-ground car park, to be “a state-
ment”. He had his designed, like the adja-
The most exciting architecture in Miami Beach is car parks
cent arts centre, by OMA, the fashionable

C AR parks are rarely well-designed.

Even more rarely do they amount to
“design”: something to enjoy on a purely
fairs in Europe was seeking to expand into
America it made an inspired choice. Art
was popular there, both among the Ameri-
firm founded by Rem Koolhaas.
Soon the designer car park will breach
the borders of the Beach into the wider
aesthetic level. However, in Miami Beach, can celebrity set, who had taken to Miami metropolitan area. Later this year in down-
Florida, the car park has become not just a Beach as a place to party, and among the town Miami, Terence Riley, a former cura-
building type that is visually pleasing, but wealthy Latin Americans who saw the city tor at New York’s Museum of Modern Art,
something else entirely: a set piece that of- as both their home and their financial base will open an 800-car garage that will be
fers architects the chance to show off. in America. There were only a handful of clad in a crazy collage of different façades
Perhaps because the city has expanded galleries, however. Entering into the art-led designed by five of the world’s trendiest
rapidly as a travel destination, its new ho- regeneration of Miami Beach, the car parks practices. Although Miami has no more
tels are invariably disappointing dumb cit- are in many ways monuments to the suc- cars per person than the rest of America, it
adels of glass and steel that dominate the cess of that relationship, creating spaces is still hugely car-dependent. The competi-
city’s charming old art-deco look apparent- that enable commerce and art to exist side tion among developers to build the most
ly on purpose. Most galleries and muse- by side. extravagant or most striking take on an oth-
ums are soulless, too, the glamorous ve- Car parks put developers at the centre erwise dull building is typical of Miami’s
randa of the Pérez Art Museum not- ofupcoming areas. Herzog and de Meuron, peculiarly intimate glamour. 7
withstanding. Miami is largely built on
sand or swamp and has a high water-table,
making subterranean parking expensive;
building above ground is a better option.
The first building to turn this inconve-
nience into a design opportunity was the
evocatively titled Ballet Valet. Arquitecton-
ica, a local firm, had established itself in
the 1980s with a series of brash, colourful
apartment blocks that were immediately
snapped up as sets for “Miami Vice”, a tele-
vision series, and “Scarface”, a Cuban
gangster epic. Asked in the following de-
cade to create a car park that would add
something to a block of boutique shops,
Arquitectonica adapted its garish palate to
the more sensitive 1990s by wrapping the
building in a fibreglass mesh with an irriga-
tion system, and filling it with indigenous
clusias and sea lettuce, which ran riot.
Ballet Valet might have remained a one-
off were it not for the arrival of Art Basel in
Miami Beach. When one of the largest art Starchitects and their car parkitecture
Courses 67

Tenders

ADDENDUM No. 1 FOR EXTENSION OF TENDER SUBMISSION DATE

Kaduna State Ministry of Health and Human Services
Project Management Unit,
Independence Way, Kaduna State – Nigeria.
This notiication is in continuation of the Notice Inviting Bids published by the
Project Management Unit of Kaduna State Ministry of Health and Human Services
on 8th October, 2016 for the Procurement/Installation of Medical and Non-Medical
Equipment ICB 01 and ICB 02 for the 300-Bed Specialist Hospital Project in Kaduna
State from eligible bidders.
Kaduna State Ministry of Health and Human Services has decided to extend the last
date of submission of tender further. Revised date and time for submission of bids is
by 12.00 noon Local Time on 11th January, 2017. All other tender conditions remain
unchanged. Further details and tender document are available on sales.
Signed
Project Manager,
Construction/Equipping of 300-Bed Specialist Hospital Project,
Ministry of Health and Human Services,
Independence Way,
Kaduna State – Nigeria
Tel: +234 8037001891, +234 8028919812
Email: musahayatuddini@yahoo.com, byuseef@yahoo.com

Readers are recommended

to make appropriate enquiries and take appropriate advice before sending
money, incurring any expense or entering into a binding commitment in relation
to an advertisement.
The Economist Newspaper Limited shall not be liable to any person for loss
or damage incurred or suffered as a result of his/her accepting or offering to
accept an invitation contained in any advertisement published in The Economist.
The Economist January 7th 2017
68 The Economist January 7th 2017
Economic and financial indicators
Economic data
% change on year ago Budget Interest
Industrial Current-account balance balance rates, %
Gross domestic product production Consumer prices Unemployment latest 12 % of GDP % of GDP 10-year gov't Currency units, per $
latest qtr* 2016† latest latest 2016† rate, % months, $bn 2016† 2016† bonds, latest Jan 4th year ago
United States +1.7 Q3 +3.5 +1.6 -0.6 Nov +1.7 Nov +1.3 4.6 Nov -476.5 Q3 -2.6 -3.2 2.47 - -
China +6.7 Q3 +7.4 +6.7 +6.2 Nov +2.3 Nov +2.0 4.0 Q3§ +264.6 Q3 +2.5 -3.8 2.93§§ 6.95 6.52
Japan +1.1 Q3 +1.3 +0.7 +4.6 Nov +0.5 Nov -0.2 3.1 Nov +184.2 Oct +3.7 -5.6 0.04 117 119
Britain +2.2 Q3 +2.3 +2.0 -1.2 Oct +1.2 Nov +0.6 4.8 Sep†† -138.1 Q3 -5.7 -3.7 1.27 0.81 0.68
Canada +1.3 Q3 +3.5 +1.2 +1.6 Oct +1.2 Nov +1.5 6.8 Nov -53.6 Q3 -3.5 -2.5 1.71 1.33 1.39
Euro area +1.7 Q3 +1.4 +1.6 +0.6 Oct +1.1 Dec +0.2 9.8 Oct +380.4 Oct +3.2 -1.8 0.27 0.95 0.93
Austria +1.2 Q3 +2.4 +1.5 +0.2 Oct +1.3 Nov +1.1 5.9 Oct +8.0 Q3 +2.1 -1.4 0.50 0.95 0.93
Belgium +1.3 Q3 +0.7 +1.2 +2.8 Oct +2.0 Dec +1.9 7.9 Oct +3.4 Sep +0.7 -2.8 0.47 0.95 0.93
France +1.0 Q3 +1.0 +1.2 -1.8 Oct +0.6 Dec +0.3 9.7 Oct -40.0 Oct‡ -1.1 -3.3 0.78 0.95 0.93
Germany +1.7 Q3 +0.8 +1.8 +1.2 Oct +1.7 Dec +0.4 6.0 Dec +296.2 Oct +8.8 +1.0 0.27 0.95 0.93
Greece +1.6 Q3 +3.1 +0.4 +6.8 Oct -0.9 Nov nil 23.1 Sep -1.0 Oct -0.2 -5.6 6.72 0.95 0.93
Italy +1.0 Q3 +1.0 +0.8 +1.3 Oct +0.5 Dec -0.1 11.6 Oct +49.5 Oct +2.4 -2.6 1.88 0.95 0.93
Netherlands +2.4 Q3 +3.1 +2.0 +0.6 Oct +0.6 Nov +0.2 6.6 Nov +57.1 Q3 +8.5 -1.1 0.43 0.95 0.93
Spain +3.2 Q3 +2.9 +3.2 -2.1 Oct +1.6 Dec -0.4 19.2 Oct +23.0 Oct +1.6 -4.6 1.43 0.95 0.93
Czech Republic +1.6 Q3 +0.9 +2.4 -1.7 Oct +1.5 Nov +0.6 4.9 Nov§ +3.7 Q3 +1.5 nil 0.50 25.8 25.0
Denmark +1.1 Q3 +1.5 +0.9 -0.3 Oct +0.4 Nov +0.3 4.2 Oct +23.2 Oct +5.9 -1.0 0.40 7.10 6.91
Norway -0.9 Q3 -1.9 +0.6 nil Oct +3.5 Nov +3.5 4.8 Oct‡‡ +18.0 Q3 +4.4 +3.5 1.67 8.60 8.91
Poland +2.0 Q3 +0.8 +2.6 +3.3 Nov +0.8 Dec -0.7 8.2 Nov§ -2.4 Oct -0.5 -2.7 3.71 4.17 3.98
Russia -0.4 Q3 na -0.5 +2.6 Nov +5.4 Dec +7.0 5.4 Nov§ +29.0 Q3 +2.4 -3.7 8.45 60.6 73.0
Sweden +2.8 Q3 +2.0 +3.1 -0.5 Oct +1.4 Nov +0.9 6.2 Nov§ +22.2 Q3 +5.0 -0.3 0.60 9.11 8.50
Switzerland +1.3 Q3 +0.2 +1.4 +0.4 Q3 -0.3 Nov -0.4 3.3 Nov +68.2 Q3 +9.4 +0.2 -0.15 1.02 1.01
Turkey -1.8 Q3 na +2.9 +0.2 Oct +8.5 Dec +7.8 11.3 Sep§ -33.8 Oct -4.8 -1.8 11.32 3.57 2.97
Australia +1.8 Q3 -1.9 +2.9 -0.2 Q3 +1.3 Q3 +1.3 5.7 Nov -47.9 Q3 -3.5 -2.1 2.79 1.37 1.40
Hong Kong +1.9 Q3 +2.5 +1.6 -0.1 Q3 +1.3 Nov +2.8 3.3 Nov‡‡ +13.3 Q3 +2.6 +0.6 1.89 7.76 7.75
India +7.3 Q3 +8.3 +7.2 -1.9 Oct +3.6 Nov +4.9 5.0 2015 -11.1 Q3 -0.9 -3.8 6.37 68.1 66.6
Indonesia +5.0 Q3 na +5.0 -2.7 Oct +3.0 Dec +3.5 5.6 Q3§ -19.2 Q3 -2.1 -2.6 7.85 13,440 13,918
Malaysia +4.3 Q3 na +4.3 +4.2 Oct +1.8 Nov +1.9 3.5 Oct§ +5.6 Q3 +1.8 -3.4 4.26 4.50 4.35
Pakistan +5.7 2016** na +5.7 +2.3 Oct +3.7 Dec +3.8 5.9 2015 -4.1 Q3 -0.9 -4.6 8.03††† 105 105
Philippines +7.1 Q3 +4.9 +6.9 +8.3 Oct +2.6 Dec +1.8 4.7 Q4§ +3.1 Sep +0.9 -1.0 5.08 49.7 47.1
Singapore +1.1 Q3 +9.1 +1.3 +11.9 Nov nil Nov -0.6 2.1 Q3 +63.0 Q3 +21.5 +0.7 2.56 1.44 1.43
South Korea +2.6 Q3 +2.5 +2.7 +4.8 Nov +1.3 Dec +0.9 3.1 Nov§ +99.0 Nov +7.2 -1.3 2.10 1,206 1,188
Taiwan +2.0 Q3 +3.9 +1.0 +8.8 Nov +1.7 Dec +1.3 3.8 Nov +74.7 Q3 +14.4 -0.5 1.13 32.2 33.0
Thailand +3.2 Q3 +2.2 +3.2 +3.8 Nov +1.1 Dec +0.2 1.0 Nov§ +47.9 Q3 +11.8 -2.3 2.68 35.8 36.2
Argentina -3.8 Q3 -0.9 -2.0 -2.5 Oct — *** — 8.5 Q3§ -15.7 Q3 -2.5 -5.3 na 16.1 13.1
Brazil -2.9 Q3 -3.3 -3.4 -7.3 Oct +7.0 Nov +8.3 11.9 Nov§ -20.3 Nov -1.1 -6.3 11.31 3.22 4.04
Chile +1.6 Q3 +2.5 +1.8 -1.4 Nov +2.9 Nov +3.7 6.2 Nov§‡‡ -4.8 Q3 -1.9 -2.7 4.26 672 717
Colombia +1.2 Q3 +1.3 +1.8 +0.4 Oct +6.0 Nov +7.5 7.5 Nov§ -13.7 Q3 -5.1 -3.7 7.05 2,963 3,212
Mexico +2.0 Q3 +4.0 +2.1 -1.4 Oct +3.3 Nov +2.8 3.6 Nov -30.6 Q3 -2.8 -3.0 7.65 21.4 17.4
Venezuela -8.8 Q4~ -6.2 -13.7 na na +424 7.3 Apr§ -17.8 Q3~ -2.8 -24.3 10.43 10.0 6.31
Egypt +4.5 Q2 na +4.3 -4.9 Oct +19.4 Nov +13.1 12.6 Q3§ -20.8 Q3 -7.0 -12.4 na 18.2 7.83
Israel +5.1 Q3 +3.4 +3.3 -0.8 Oct -0.3 Nov -0.5 4.5 Nov +13.3 Q3 +2.8 -2.4 2.06 3.85 3.93
Saudi Arabia +1.4 2016 na +1.1 na +2.3 Nov +3.8 5.6 2015 -46.8 Q3 -5.6 -11.7 na 3.75 3.75
South Africa +0.7 Q3 +0.2 +0.4 -1.3 Oct +6.6 Nov +6.3 27.1 Q3§ -12.3 Q3 -4.0 -3.4 8.93 13.6 15.6
Source: Haver Analytics. *% change on previous quarter, annual rate. †The Economist poll or Economist Intelligence Unit estimate/forecast. §Not seasonally adjusted. ‡New series. ~2014 **Year ending June. ††Latest
3 months. ‡‡3-month moving average. §§5-year yield. ***Official number not yet proved to be reliable; The State Street PriceStats Inflation Index, Nov 35.38%; year ago 25.30% †††Dollar-denominated bonds.
 The Economist January 7th 2017 Economic and financial indicators 69

Markets
% change on GDP forecasts
Dec 31st 2015 2017, % change on a year earlier
Index one in local in $ Best Worst
Jan 4th week currency terms
0 2 4 6 8 10 6 4 2 – 0 + 2
United States (DJIA) 19,942.2 +0.5 +14.4 +14.4
China (SSEA) 3,307.5 +1.8 -10.7 -16.6 Myanmar Trinidad & Tobago
Japan (Nikkei 225) 19,594.2 +1.0 +2.9 +5.6
Ivory Coast Ecuador
Britain (FTSE 100) 7,189.7 +1.2 +15.2 -3.9
Canada (S&P TSX) 15,516.8 +1.0 +19.3 +24.6 Bhutan Azerbaijan
Euro area (FTSE Euro 100) 1,121.9 +1.1 +2.5 -1.1
Euro area (EURO STOXX 50) 3,317.5 +1.2 +1.5 -2.1 Laos Chad
Austria (ATX) 2,682.6 +1.7 +11.9 +7.9 Cambodia Syria
Belgium (Bel 20) 3,665.7 +1.6 -0.9 -4.5
France (CAC 40) 4,899.4 +1.1 +5.7 +1.9 Tanzania Timor-Leste
Germany (DAX)* 11,584.3 +1.0 +7.8 +4.0
Ghana Puerto Rico
Greece (Athex Comp) 657.5 +3.4 +4.1 +0.4
Italy (FTSE/MIB) 19,626.6 +2.0 -8.4 -11.6 India Equatorial Guinea
Netherlands (AEX) 487.6 +0.7 +10.4 +6.4
Djibouti Libya
Spain (Madrid SE) 956.1 +1.5 -0.9 -4.5
Czech Republic (PX) 934.2 +1.2 -2.3 -5.8 Vietnam Venezuela
Denmark (OMXCB) 805.4 +1.0 -11.2 -14.0
Source: Economist Intelligence Unit
Hungary (BUX) 32,649.0 +1.9 +36.5 +35.0
Norway (OSEAX) 772.6 +0.8 +19.1 +22.5
Poland (WIG) 52,753.8 +2.8 +13.5 +7.5 Other markets The Economist commodity-price index
Russia (RTS, $ terms) 1,176.7 +3.4 +28.9 +55.4 % change on 2005=100
% change on
Sweden (OMXS30) 1,530.9 +0.2 +5.8 -2.0 Dec 31st 2015 Dec 20th Dec 27th Jan 3rd one one
Switzerland (SMI) 8,354.8 +1.2 -5.3 -7.4 Index 2016 2016 2017* month year
one in local in $
Turkey (BIST) 76,143.6 -1.8 +6.2 -13.3 Jan 4th week currency terms Dollar index
Australia (All Ord.) 5,788.2 +1.0 +8.3 +8.4 United States (S&P 500) 2,270.8 +0.9 +11.1 +11.1 All items 142.0 140.8 141.9 -1.7 +13.8
Hong Kong (Hang Seng) 22,134.5 +1.7 +1.0 +0.9 United States (NAScomp) 5,477.0 +0.7 +9.4 +9.4
India (BSE) 26,633.1 +1.6 +2.0 -0.9 Food 154.9 152.6 154.8 -1.2 +6.4
China (SSEB, $ terms) 344.8 +1.1 -13.5 -19.1
Indonesia (JSX) 5,301.2 +1.8 +15.4 +18.4 Japan (Topix) 1,554.5 +1.2 +0.5 +3.1 Industrials
Malaysia (KLSE) 1,647.5 +1.1 -2.7 -7.1 Europe (FTSEurofirst 300) 1,443.8 +1.0 +0.4 -3.1 All 128.6 128.5 128.5 -2.3 +24.8
Pakistan (KSE) 48,705.0 +2.7 +48.4 +48.3 World, dev'd (MSCI) 1,774.0 +1.3 +6.7 +6.7 Nfa† 136.5 136.8 138.1 +2.4 +27.9
Singapore (STI) 2,921.3 +0.8 +1.3 -0.2 Emerging markets (MSCI) 871.5 +2.4 +9.7 +9.7 Metals 125.2 124.9 124.4 -4.3 +23.4
South Korea (KOSPI) 2,045.6 +1.0 +4.3 +1.4 World, all (MSCI) 427.2 +1.4 +7.0 +7.0 Sterling index
Taiwan (TWI) 9,287.0 +0.9 +11.4 +13.5 World bonds (Citigroup) 877.6 +0.2 +0.9 +0.9
Thailand (SET) 1,563.6 +2.6 +21.4 +22.0 All items 209.0 208.9 210.8 +2.1 +36.2
EMBI+ (JPMorgan) 776.0 +0.7 +10.2 +10.2
Argentina (MERV) 18,143.1 +9.9 +55.4 +24.9 Hedge funds (HFRX) 1,203.2§ -0.1 +2.5 +2.5 Euro index
Brazil (BVSP) 61,589.1 +3.0 +42.1 +74.4 Volatility, US (VIX) 11.9 +13.0 +18.2 (levels) All items 170.1 167.4 169.9 +1.6 +17.5
Chile (IGPA) 20,809.5 +1.4 +14.6 +20.9 CDSs, Eur (iTRAXX)† 67.9 -5.5 -12.0 -15.1 Gold
Colombia (IGBC) 10,288.4 +1.6 +20.4 +28.9 CDSs, N Am (CDX)† 63.4 -6.6 -28.2 -28.2 $ per oz 1,131.6 1,133.5 1,156.1 -1.3 +7.3
Mexico (IPC) 46,587.7 +2.2 +8.4 -12.5 Carbon trading (EU ETS) € 5.7 -10.0 -31.6 -34.1 West Texas Intermediate
Venezuela (IBC) 31,839.2 +4.7 +118 na Sources: Markit; Thomson Reuters. *Total return index.
Egypt (EGX 30) 12,608.4 +2.8 +80.0 -23.3 †Credit-default-swap spreads, basis points. §Dec 29th. $ per barrel 51.9 52.0 52.3 +2.7 +45.9
Sources: Bloomberg; CME Group; Cotlook; Darmenn & Curl; FT; ICCO;
Israel (TA-100) 1,287.8 -0.1 -2.1 -1.1
Indicators for more countries and additional ICO; ISO; Live Rice Index; LME; NZ Wool Services; Thompson Lloyd &
Saudi Arabia (Tadawul) 7,198.1 -0.6 +4.1 +4.2 Ewart; Thomson Reuters; Urner Barry; WSJ. *Provisional
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70 The Economist January 7th 2017
Obituary Vera Rubin
their geometry in order to look them up lat-
er. He even helped her make her first tele-
scope, from a cardboard tube; she had al-
ready made her own kaleidoscope. She
hadn’t ever met an astronomer, but it never
occurred to her that she couldn’t be one.
But her early research was largely ig-
nored. In other work, male astronomers el-
bowed her aside. Fed up, she looked for a
problem “that people would be interested
in, but not so interested in that anyone
would bother me before I was done.”
She found it. In the 1930s Fritz Zwicky,
an idiosyncratic Swiss astrophysicist, had
suggested that the brightly shining stars
represented only a part of the cosmic
whole. There must also be “dark matter”,
unseen but revealed indirectly by the ef-
fects of its gravity. That conjecture lan-
guished on the margins until Ms Rubin,
working with her colleague Kent Ford, ex-
amined the puzzle of galactic rotation. Spi-
ral galaxies such as Andromeda, she
proved, were spinning so fast that their
outer stars should be flying away into the
never-never. They weren’t. So either Ein-
stein was wrong about gravity, or gravita-
tional pull from vast amounts of some-
Dark star thing invisible—dark matter—was holding
the stars together.
The discovery reshaped cosmology,
though initially her colleagues embraced it
unenthusiastically. Astronomers had
thought they were studying the whole uni-
Vera Rubin, an American astronomer who established the existence of dark matter,
verse, not just a small luminous fraction of
died on December 25th, aged 88
it. New theories developed on what the

W HEN in 1965 Vera Rubin arrived for a

four-day stint at “the monastery”, as
the Palomar Observatory, home of the
When she halted her academic career—the
worst six months of her life—she wept ev-
ery time the Astrophysical Journal arrived
matter might be—but its fugitive particles
escaped all direct detection.
Some are worried by the absence. Ms
world’s largest telescope, was dubbed, in the house. But, working part-time, she Rubin was unbothered. Astronomy, she
there were no women’s lavatories. No fe- made sure to be home when the kids re- reckoned, was “out of kindergarten, but
male astronomer had ever worked there turned from school. She never inspected only in about the third grade”. Many of the
before. How could they, when it would their rooms, she said, and they grew up universe’s deep mysteries remained to be
mean walking home late at night? fine, all with PhDs in science or maths. discovered by eye and brain, with all the
It had been the same thinking at high Her master’s thesis was, her Cornell su- joy that involved.
school. When she told her revered science pervisor said, worthy of being presented
teacher of her scholarship to Vassar he to the American Astronomical Society. But Shining a light
said: “You should do OK as long as you stay she was about to give birth, so, he suggest- There were other scientific feats, too: in
away from science.” She was the only as- ed, he would present it—but in his name. 1992 she discovered NGC 4550, a galaxy in
tronomy major to graduate there in her She refused. Her parents drove up from which half the stars orbit in one direction,
year. When in 1947 she requested a gradu- Washington and took their 22-year-old mingled with half that head the other way.
ate-school catalogue from Princeton, the daughter, nursing her newborn, on a gruel- She won medals aplenty: the Gold Medal
dean told her not to bother: women were ling snowy trip from upstate New York to of Britain’s Royal Astronomical Society
not accepted for physics and astronomy. Philadelphia . She addressed the roomful (last awarded to a woman in 1828) and
George Gamow, later her doctoral adviser, of strangers for ten minutes about galaxy America’s National Medal of Science.
said she could not attend his lecture at the rotation, soaked up some patronising criti- Princeton, which had once shunned her,
Johns Hopkins Applied Physics Lab “be- cism and a smidgen of praise—and left. was among the many universities to award
cause wives were not allowed”. Though rows were unpleasant, defeat her an honorary doctorate. She gave nota-
She was indeed a wife. She married— was worse. “Protest every all-male meet- ble commencement speeches.
aged 19—Robert Rubin, a physicist whom ing, every all-male department, every all- The plaudits were pleasant, but num-
she followed to Cornell, sacrificing her male platform,” she advised. At Palomar, bers mattered more: the greatest compli-
place at Harvard. He was, she said, her she made a ladies’ room by sticking a ment would be if astronomers years hence
greatest ally. Later, when she attended handmade skirt sign on a men’s room door still used her data, she insisted. She was a
night classes at Georgetown University, he (she returned a year later: it was gone). perennial favourite for a Nobel prize in
drove her there, eating his dinner in the car She’d never anticipated such problems. physics—only ever awarded to two wom-
until he could drive her home, while her Her father encouraged her childhood habit en. That call never came: like dark matter,
parents baby-sat. Still, she found raising of watching meteor showers, leaning out her fans lamented, she was vitally impor-
four children “almost overwhelming”. of her bedroom window and memorising tant, but easy to overlook. 7
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