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 [Fri, 22 Sep 2023]

The world this week

Leaders
Letters
Briefing
Asia
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International
Business
Finance & economics
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Obituary

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The world this week
Politics
Business
KAL’s cartoon
This week’s covers

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The world this week

Politics
Sep 21st 2023

Canada’s prime minister, Justin Trudeau, said that Indian agents were
behind the killing of a Sikh leader near Vancouver in June. India denied it.
Hardeep Singh Nijjar had pushed for a Sikh homeland in India. India says he
was a terrorist, Mr Nijjar’s supporters say he was a peaceful activist. Mr
Trudeau’s allegation of a fellow democracy assassinating a Canadian citizen
on Canadian soil has ramifications beyond a souring of relations with India.
America’s National Security Council has said it is “deeply concerned”, and
has urged India to co-operate.

India’s MPs held their first session in a new Parliament building, which
replaces the old one designed by the British in the 1920s. In May opposition
parties protested against its inauguration, accusing Narendra Modi, the prime
minister, of turning what was supposed to be a show of national unity into a
party rally.

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Speculation swirled around China’s defence minister, General Li Shangfu,
who has not been seen in public for weeks. Some reports suggested that he
was under investigation for corruption and would be removed. The episode
comes just months after purges of China’s foreign minister, Qin Gang, and
the leadership of China’s Rocket Force, which controls the country’s
conventional and nuclear missiles.

China’s top diplomat, Wang Yi, met America’s national-security adviser,

Jake Sullivan, in Malta. Among the topics discussed was the war in Ukraine.
A day later Mr Wang arrived in Moscow, where he met Russia’s president,
Vladimir Putin. China claims to be neutral in the war, but its officials repeat
Kremlin talking points. Local media said Mr Wang’s trip would help pave
the way for a visit by Mr Putin to China.

Azerbaijan sent its army into Nagorno-Karabakh, a disputed enclave with a

majority Armenian population, in what it described as an “anti-terrorism”
operation against “illegal Armenian military formations”. Ethnic Armenians
agreed to a ceasefire. Tensions have been running high because of
Azerbaijan’s blockade of Karabakh, which has led to medicine and fuel
shortages.

Volodymyr Zelensky gave a speech in person to the UN General Assembly

in New York, in which he warned that Russia is trying to smash the
established international order and push the world to a “final war”. The
Ukrainian president also compared Russia’s abduction of Ukrainian children
to “genocide”. Mr Zelensky then went to Washington to discuss further help
for Ukraine’s war effort.

Hungary, Poland and Slovakia imposed their own curbs on imports of

Ukrainian grain, after the European Union lifted a partial ban. As a row
over the curbs escalated, Poland said it would no longer supply weapons to
Ukraine.

Evika Silina became Latvia’s new prime minister, after forming another
coalition headed by the centre-right New Unity party. One of the first tasks
of the new government was to close one of Latvia’s border points with
Belarus following an increase in illegal crossings by migrants.

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Greens see red
Rishi Sunak, Britain’s prime minister, announced some changes to the
government’s plan to reach net-zero emissions by 2050, such as delaying a
ban on new petrol cars by five years to 2035. He said this was being done so
that the 2050 target could be met in a “better, more proportionate” way. In
Sweden the government’s budget contained tax-cutting measures, including
on fuel duties. Sweden was the first country to lay out an aim of net-zero,
but some think the budget means it now won’t be able to hit that goal in
2045.

The Italian cabinet approved a measure that extends the time that some
migrants can be detained to 18 months. The government is scrambling to
respond to a wave of 8,000 migrants who have landed on the tiny Italian
island of Lampedusa, a favourite destination for the people-smugglers who
traffic migrants in boats from Tunisia, just 113 kilometres (61 miles) away.

Protests broke out against the authorities in Derna, a city in eastern Libya
recently devastated by floods. Calls are growing for an international
investigation into why the dams in the city burst.

Israeli forces killed six Palestinians in the occupied West Bank and Gaza
Strip. Four were killed in a raid on Jenin refugee camp, the scene two
months ago of Israel’s biggest raid in 20 years. In New York Israel’s prime
minister, Binyamin Netanyahu, held a long-awaited meeting with Joe Biden.
Mr Biden said the pair had discussed “hard issues”.

One of the leaders of the Free Current coalition in Egypt, the main liberal
opposition party, was sentenced to six months in prison for slander and
verbally assaulting a police officer. His supporters say the charges were
politically motivated and the party has said it will not put up a candidate in
Egypt’s presidential election due next year.

Iran and America each swapped five prisoners in a deal in which $6bn-
worth of frozen Iranian assets, mostly oil revenues, were also released.
Shortly after the deal was announced Ebrahim Raisi, Iran’s president,
addressed the UN assembly, accusing America of inflaming violence in
Ukraine. Meanwhile Iranian MPs passed a draft law imposing sentences of

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up to ten years on women who flout the country’s dress code, a year after
widespread protests against the killing of Mahsa Amini, a woman who was
detained for showing her hair.

The Dominican Republic sealed its border with Haiti after a breakdown in
negotiations over using water from the Massacre River. A farmers’ group in
Haiti is building a canal to irrigate land dried out by drought, but this will
divert water from the Dominican Republic, says the country’s president, Luis
Abinader.

Thousands of Guatemalans demonstrated to demand an end to efforts by

officials to hinder the transfer of power to Bernardo Arévalo, who was
elected as the country’s president in August. Mr Arévalo, a reformist who is
due to take office in January, presented a petition asking the Supreme Court
to block attempts to overturn his victory.

America’s merry-go-round
Kevin McCarthy, the speaker of America’s House of Representatives, had
another battle on his hands with rebels in his Republican Party, who are once
again threatening to shut down the government by refusing to back stopgap

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funding legislation. Meanwhile, America’s gross national debt exceeded
$33trn for the first time.

The Texas Senate acquitted Ken Paxton, the state’s attorney-general, at his
impeachment trial. In May Mr Paxton, a hardline conservative, was
impeached by the Texas House of Representatives, which is Republican
controlled, for alleged bribery and abuse of public trust.

Paul Kagame, who has been president of Rwanda since 2000 and its de
facto leader since toppling a genocidal government in 1994, said he plans to
run for a fourth presidential term next year. Mr Kagame pushed through a
constitutional change in 2015 that could allow him to stay in power until
2034.

The EU has stopped funding Zimbabwe’s electoral commission, citing

concerns about its independence during elections in August. Although the
electoral funding is worth just $5m, cutting it may signal a deeper breach
with the EU, which had been hoping to mend relations and unlock financial
support for Zimbabwe from the World Bank and IMF.

There are “grave and ongoing” violations of human rights taking place in
Tigray and other regions of Ethiopia, almost a year since a formal end to its
civil war, the UN’s Human Rights Council said in a report. Many of the
ongoing atrocities in Tigray are being committed by soldiers from Eritrea,
whose forces were supposed to have withdrawn under the terms of the peace
deal.

Burkina Faso, Mali and Niger have signed a mutual-defence pact known as
the Alliance of Sahel States (ASS). All three members of the ASS are run
by military juntas following a series of coups over the past two years.
This article was downloaded by zlibrary from https://www.economist.com/the-world-
this-week/2023/09/21/politics

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The world this week

Business
Sep 21st 2023

The Federal Reserve left its benchmark interest rate on hold at a range of
between 5.25% and 5.5%, but said it remained “highly attentive to inflation
risks”. New forecasts from the central bank suggest that the American
economy is proving to be more robust than expected, pointing to another rate
rise before the end of the year. Markets don’t expect the Fed to start cutting
rates until towards the end of next year at the earliest.

The Bank of England also maintained its key interest rate, at 5.25%, ending
a run of 14 consecutive rate rises. The bank’s decision came a day after
figures showed that Britain’s annual rate of inflation had unexpectedly
slipped to 6.7%. Economists had predicted that the inflation rate would rise
because of higher fuel costs, but this was offset by an easing of prices in
certain items, including food and hotels.

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In its latest projections, the OECD said that the impact of higher interest
rates is “becoming increasingly visible”. The organisation upgraded its
estimate of world GDP growth this year to 3%, but pared back its forecast
for next year to 2.7%. The OECD said that monetary policy needed “to
remain restrictive” until inflation is firmly under control, but it warned that
the effects of rate rises “will continue to work their way through economies
for some time”.

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Instacart’s share price rose by 12% on its first day of trading on the Nasdaq
exchange. The online-groceries company raised the offer price of its shares
to $30, after Arm’s successful IPO on September 14th whetted investors’
appetite for more tech offerings. The British chip designer’s stock soared by
25% in its debut on the Nasdaq, raising $5bn to make it the biggest IPO in
America in two years. But the share prices of both Arm and Instacart fell
back in subsequent trading.

Bob van Dijk abruptly resigned as chief executive of Naspers, an internet

company based in South Africa, and as the head of Prosus, which is
controlled by Naspers and is one of the world’s biggest technology-
investment firms. Mr Van Dijk had led Naspers for nine years, trying to
handle the problematic mismatch between the value of its assets and its share
price.

Toshiba’s shareholders approved an offer for the Japanese conglomerate that

will take it private. Its management hopes the fresh start will draw a line
under years of upheaval. The consortium taking over Toshiba is led by a
Japanese private-equity firm, Japan Industrial Partners.

Elemental
Disney announced that it is doubling its investment in its theme parks, cruise
line and resorts to $60bn. The company’s parks-and-experiences division
generates more operating income ($7.6bn for the nine months ending July
1st) than its media and entertainment business ($2.2bn).

California’s governor, Gavin Newsom, said he would sign a state bill

requiring companies to disclose how much greenhouse gas they directly
emit, as well as indirect emissions. They are the toughest measures on
climate disclosure in America and will affect around 5,000 companies that
do business in the state. Meanwhile California’s attorney-general lodged a
lawsuit against big oil companies such as BP and ExxonMobil, seeking
damages for what it claims is an industry cover-up about the harm that fossil
fuels can do.

Oil prices climbed to their highest levels in ten months, as markets fretted
that cuts to output by Saudi Arabia and Russia could cause a supply

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shortfall. Brent crude rose to $95 a barrel for the first time since November.
Saudi Arabia’s energy minister defended the decision to lower production.
It’s not about “jacking up prices”, he said, and more to do with economic
uncertainties, such as demand in China.

The United Auto Workers union said it would expand its strike to other
factories unless there was “serious progress” in talks with Ford, General
Motors and Stellantis. The UAW has co-ordinated its action against all three
of Detroit’s carmakers for the first time, but limited the strike to one plant
for each company. Meanwhile Ford reached a tentative deal with its union in
Canada to avert a strike there.

China’s imports of Japanese seafood fell by 68% in August from the same
month last year. China, the world’s biggest market for Japanese fish and
shellfish, banned the products when Japan released wastewater from the
damaged Fukushima nuclear plant into the sea.

It’s a family affair

FTX, a bankrupt cryptocurrency exchange, sued the parents of its founder,
Sam Bankman-Fried, to recover “fraudulently transferred and
misappropriated funds” that it claims were paid out to the couple before the
company collapsed last November. Mr Bankman-Fried goes on trial on
October 3rd charged with fraud related to FTX’s implosion. A judge sent
him to jail in August, accusing him of tampering with witnesses.

Elon Musk described reports that Tesla is in talks to build a factory in Saudi
Arabia as “utterly false”. Mr Musk has a complex relationship with the
Saudis, caused in large part by what he perceives to be a Saudi failure to
back a plan to take Tesla private. “You are throwing me under the bus,” Mr
Musk tweeted to the head of the country’s sovereign-wealth fund in 2018.
This article was downloaded by zlibrary from https://www.economist.com/the-world-
this-week/2023/09/21/business

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The world this week

KAL’s cartoon
Sep 21st 2023

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

Rishi Sunak’s anti-green turn on Britain’s climate targets

Climate change is coming for America’s property market
Why people struggle to understand climate risk

KAL’s cartoon appears weekly in The Economist. You can see last week’s
here.
This article was downloaded by zlibrary from https://www.economist.com/the-world-
this-week/2023/09/21/kals-cartoon

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The Economist

This week’s covers

How we saw the world
Sep 21st 2023

SOME WEEKS, including this one, we publish more than one cover. In
most of the world, we consider how a change of course could help Ukraine.

The counter-offensive that began in June was based on the hope that
Ukrainian soldiers would recapture enough territory to put their leaders in a
strong position at any subsequent negotiations. But despite heroic efforts the
front line has barely shifted. Both Ukraine and its Western supporters are
coming to realise that this will be a grinding war of attrition. “I have to be
ready for the long war,” President Volodymyr Zelensky told The Economist.
But unfortunately, Ukraine is not yet ready; nor are its Western partners.
They need to rethink Ukraine’s military strategy and how its economy is run.
Instead of aiming to “win” and then rebuild, the goal should be to ensure that
Ukraine has the staying power to wage a long war—and can thrive despite it.

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Leader: Ukraine faces a long war. A change of course is needed
Briefing: To endure a long war, Ukraine is remaking its army, economy and
society
Briefing: Western help for Ukraine is likely to diminish next year

In Asia we explain how Asian economies are coming closer together, with
profound consequences for the world.

The phrase “factory Asia” describes one of history’s most impressive

economic achievements. Over the past half-century Japan, South Korea,
Taiwan and, more recently, China became bustling hubs for manufacturing
goods, which they then exported to the rest of the world, especially the well-
off West. Millions of Asians escaped poverty by making stuff; many grew
prosperous. Now the region’s economic model is shifting again.

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Leader: Asian economies are investing more in the neighbourhood
Finance and economics: How Asia is reinventing its economic model
Asia: China isn’t the only country giving out goodies in Asia

For subscribers only: to see how we design each week’s cover, sign up to our
weekly Cover Story newsletter.
This article was downloaded by zlibrary from https://www.economist.com/the-world-
this-week/2023/09/21/this-weeks-covers

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Leaders
Ukraine faces a long war. A change of course is needed
Asian economies are investing more in the neighbourhood
If India ordered a murder in Canada, there must be consequences
ChatGPT mania may be cooling, but a serious new industry is
taking shape
To end AIDS, high-risk countries will need to jab schoolgirls
Climate change is coming for America’s property market

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Ukraine

Ukraine faces a long war. A change of course is

needed
Its backers should pray for a speedy victory—but plan for a long struggle
Sep 21st 2023

THE WAR in Ukraine has repeatedly confounded expectations. It is now

doing so again. The counter-offensive that began in June was based on the
hope that Ukrainian soldiers, equipped with modern Western weapons and
after training in Germany, would recapture enough territory to put their
leaders in a strong position at any subsequent negotiations.

This plan is not working. Despite heroic efforts and breaches of Russian
defences near Robotyne, Ukraine has liberated less than 0.25% of the
territory that Russia occupied in June. The 1,000km front line has barely
shifted. Ukraine’s army could still make a breakthrough in the coming
weeks, triggering the collapse of brittle Russian forces. But on the evidence
of the past three months, it would be a mistake to bank on that.

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Asking for a ceasefire or peace talks is pointless. Vladimir Putin shows no
sign of wanting to negotiate and, even if he did, could not be trusted to stick
to a deal. He is waiting for the West to tire and hoping that Donald Trump is
re-elected. Mr Putin needs war to underpin his domestic dictatorship; any
ceasefire would simply be a pause to re-arm and get ready to attack again. If
Ukrainians stop fighting, they could lose their country.

Both Ukraine and its Western supporters are coming to realise that this will
be a grinding war of attrition. President Volodymyr Zelensky visited
Washington this week for talks. “I have to be ready for the long war,” he told
The Economist. But unfortunately, Ukraine is not yet ready; nor are its
Western partners. Both are still fixated on the counter-offensive. They need
to rethink Ukraine’s military strategy and how its economy is run. Instead of
aiming to “win” and then rebuild, the goal should be to ensure that Ukraine
has the staying power to wage a long war—and can thrive despite it.

The first recalibration is military. Ukraine’s soldiers are exhausted; many of

its finest have been killed. Despite conscription, it lacks the manpower to
sustain a permanent large-scale counter-offensive. It needs to husband
resources, and to change the game. New tactics and technologies can take
the fight to Russia. Ukraine’s tech-savvy entrepreneurs are ramping up drone
production: Ukrainian drones recently destroyed Russian warships; its
missiles seem to have damaged a big air-defence system in Crimea. Many
more strikes are likely, to degrade Russia’s military infrastructure and deny
its navy sanctuary in the Black Sea. Don’t expect a knockout blow. Russia
has also scaled up its drone production. Still, Ukraine can hit back when
Russia bombs it, and perhaps even deter some attacks.

Alongside this offensive capability, Ukraine needs to boost its resilience. As

well as heavy weaponry, it needs help with maintenance to sustain a multi-
year fight: humdrum repairs, reliable supplies of artillery and training. More
than anything, a long war requires better air defence. Ukraine cannot thrive
if Russia blasts infrastructure and civilians with impunity, as it has for the
past 18 months. Kyiv is a surprisingly vibrant city because it has effective
defences against non-stop aerial attacks. The same set-up is needed for other
cities, which is why squadrons of F-16s and more missile-defence systems
are essential.

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An economic recalibration is needed, too. That means fewer highfalutin
plans for post-war reconstruction and more attention to boosting output and
capital spending now. The economy has shrunk by a third and almost half of
Ukraine’s budget is paid for with Western cash. In an odd kind of wartime
Dutch disease the currency, the hryvnia, has strengthened even as private
investment has plunged. With around 1m people bearing arms and millions
having fled from the country, workers are scarce.

Ukraine’s economy needs to shift from relying on aid to attracting

investment, even as the conflict keeps raging. From making more arms to
processing more of what it grows on its farms, Ukraine has plenty of
potential. The challenge is to get local and foreign firms to invest more, and
to lure more Ukrainians back to the calmer parts of the country in the west.

Better security can help. The stronger Ukraine’s air defences, the lower the
risk that a new factory will be blown up. The farther Russia’s navy is pushed
back, the more safely exports can flow through Ukraine’s ports on the Black
Sea. But economic reforms matter, too. More must be done to curb Ukraine’s
long-standing corruption, with a priority on making the judiciary clean and
impartial. And more action is needed to make doing business easier, from
recognising qualifications that refugees have earned abroad to offering firms
war insurance.

All this requires political will from Ukraine, but also from its friends in the
West. In the long term, the best guarantee of Ukraine’s security is NATO
membership. Short of that, partners have promised a web of bilateral
security guarantees. Equally important is what the European Union can
offer: not just cash, but the prospect of membership. It is not easy to nurture
a flourishing economy while being barraged with explosives—even Israel
never had to face such a powerful aggressor. But Ukraine, unlike Israel,
could one day be integrated into the world’s richest economic bloc. A
roadmap for EU accession over, say, a decade, with clear milestones, would
offer hope to Ukrainians and accelerate economic reforms, just as the same
promise galvanised much of eastern Europe in the 1990s.

A new member of the club

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For that to happen a shift in mindset is needed in Europe. It has committed
as much weaponry as America and far more financial aid. Yet it needs to
step up further. If Mr Trump wins in 2024, he may cut back American
military assistance. Even if he loses, Europe will eventually need to carry
more of the burden. That means beefing up its defence industry and
reforming the EU’s decision-making so it can handle more members.

The stakes could hardly be higher. Defeat would mean a failed state on the
EU’s flank and Mr Putin’s killing machine closer to more of its borders.
Success would mean a new EU member with 30m well-educated people,
Europe’s biggest army and a large agricultural and industrial base. Too many
conversations about Ukraine are predicated on an “end to the war”. That
needs to change. Pray for a speedy victory, but plan for a long struggle—and
a Ukraine that can survive and thrive nonetheless.■

For subscribers only: to see how we design each week’s cover, sign up to our
weekly Cover Story newsletter.
This article was downloaded by zlibrary from
https://www.economist.com/leaders/2023/09/21/ukraine-faces-a-long-war-a-change-of-
course-is-needed

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From Asia to Asia

Asian economies are investing more in the

neighbourhood
The continent’s economies are coming closer together, with profound
consequences for the world
Sep 21st 2023

THE PHRASE “factory Asia” describes one of history’s most impressive

economic achievements. Over the past half-century Japan, South Korea,
Taiwan and, more recently, China became bustling hubs for manufacturing
goods, which they then exported to the rest of the world, especially the well-
off West. Millions of Asians escaped poverty by making stuff; many grew
prosperous. Now the region’s economic model is shifting again, with
consequences for Asia and for the world.

Asia’s long manufacturing boom fostered a wave of trade integration. In

1990, 46% of Asian trade took place within the region. By 2021 that figure
had risen to 58%, making it the most integrated continent after Europe. As
Asia has become richer and its firms more muscular, investment flows are
becoming more regional, too.

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Over the past decade Asian firms have been enthusiastic investors in their
own neighbourhood. Foreign direct investment into Asia by other Asians has
grown almost twice as quickly as that by Western investors. Much of it has
come from rich and ageing Japan and South Korea, as well as from China,
and has gone to poorer, younger places. As a result, in 2021 Asians owned
59% of the stock of foreign direct investment in Asia (excluding the
financial hubs of Hong Kong and Singapore), up from 48% in 2010. The
West’s share, meanwhile, has fallen.

A similar picture emerges from other financial flows. Asia’s share of cross-
border bank lending has risen from less than 40% before the global financial
crisis to 54% today. Firms like the Industrial and Commercial Bank of
China, Japan’s Mitsubishi UFJ Financial Group and Singapore’s United
Overseas Bank have expanded in the region even as Western lenders have
retreated.

What development finance is done in the region by America is done in large

part through multilateral banks. Asian countries are bigger lenders, and
direct ones too. Between 2015 and 2021 China committed an average of
$5.5bn to the region annually, compared with $4bn from Japan and $2.9bn
from South Korea. Much of this is accompanied by the transfer of technical
expertise. Visit Ho Chi Minh City’s nearly completed metro stations, and
you cannot miss that they were built with Japanese support. Few
infrastructure projects across the region are bedecked in the Stars and
Stripes.

Asian integration is likely to deepen. Newish trade agreements such as the

Regional Comprehensive Economic Partnership have removed some of the
barriers to commerce. As supply chains become still more complex, more
cross-border investment in logistics will be needed. Even where regional
firms are scrambling to reduce their reliance on China, many are looking to
set up factories in India or Vietnam instead.

More important, Asia’s rising consumers should turbocharge integration. For

now a large share of intra-Asian trade is in intermediate inputs, used to
produce finished goods, rather than consumer items. But over the next five
years, the IMF predicts, emerging and developing Asian economies are

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likely to grow by 4.5% a year, three times as quickly as advanced countries.
As consumers get richer they will buy more from their neighbours.

The economic implications are exciting. Today the disparities in income

across Asia are vast, with GDP per person ranging from $8,000 in India to
$49,000 in Japan, adjusting for purchasing power. Just as integration with
the EU helped incomes in eastern Europe catch up with those in the west, so
too integration in Asia should lift incomes in the south and south-east. The
savings of richer, ageing Asian countries are being put to good use in poorer
and younger ones, where they are helping to spread prosperity while
generating healthy returns for investors. Increased trade should reduce prices
for consumers, and more investment should bring down the cost of capital.

What of the political consequences? Unlike in Europe, deeper economic ties

in Asia do not herald political integration. The European project was
propelled by a desire to avoid another continental war; in Asia today there is
no similar impetus. Asian countries are fiercely independent, and their
political systems are too varied—from liberal democracy to war-scorched
tyranny—to make an Asian Union feasible. An Asian mosaic is more likely,
with several powers vying for influence.

Although America remains an important investor in the region, its economic

and political sway will be diminished. In relative terms, it has lost financial
clout, so it stands to gain relatively less from Asia’s coming boom.
Moreover, support for free-trade deals has evaporated on both sides of the
aisle in Washington. When seeking to build alliances in Asia, America has
fewer economic carrots to offer than in the past.

Yet this does not mean that the region will be dominated by China, the
regional heavyweight. True, China has gained influence through its huge
trading heft and the Belt and Road Initiative. But many Asian countries are
wary of China, not least because its foreign policy has grown more abrasive
under President Xi Jinping. Indians tell pollsters they are no fans of China.
Socialist Vietnam is playing both sides, as President Joe Biden’s recent trip
to the country shows.

Rich, mature Asian democracies such as Japan and South Korea will be an
important counterweight to China. Japan’s long-standing development aid to

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South-East Asia helps explain why regional elites say it is the most trusted
power in the region, according to a survey by the ISEAS-Yusof Ishak
Institute in Singapore. South Korea takes pride in its rapid transition from
aid recipient to big donor. Both Japan and South Korea are much friendlier
to America than they are to China.

Pan-Pacific prosperity
Even though America’s relative economic weight is diminishing in Asia, it
can still wield influence through its partners. At a summit last month Mr
Biden welcomed South Korea’s president, Yoon Suk-yeol, and Japan’s prime
minister, Kishida Fumio; the three leaders all reaffirmed their support for a
rules-based order. As Asian countries grow richer together, America should
remember that it, too, is a Pacific nation, and should resist the temptation to
turn inward. ■

For subscribers only: to see how we design each week’s cover, sign up to our
weekly Cover Story newsletter.
This article was downloaded by zlibrary from
https://www.economist.com/leaders/2023/09/21/asian-economies-are-investing-more-in-
the-neighbourhood

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Death in Vancouver

If India ordered a murder in Canada, there must

be consequences
Western countries have for too long acquiesced to the Indian government’s
abuses
Sep 20th 2023

FOR YEARS, India objected to Western strategists lumping it together with

its violent and chaotic neighbour in the phrase “Indo-Pakistan”. Now
recognised as a fast-growing giant and a potential bulwark against China,
India claims to have been “de-hyphenated”. Yet the explosive charge aired
this week by Justin Trudeau suggests that diplomatic recalibration may have
gone too far. Canada’s prime minister alleges that Indian agents were
involved in the murder in Vancouver of a Canadian citizen sympathetic to
India’s Sikh separatist movement. India has long been accused of
assassinating militants and dissidents in its own region; never previously in
the friendly and orderly West. And though India calls the victim, Hardeep
Singh Nijjar, a terrorist, and had offered a reward for information leading to

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his arrest, he had rebuffed Indian allegations linking him to separatist
violence.

India denies everything. But Canada is reported to have shared intelligence

about the murder with its allies in the “Five Eyes” pact. None appears to
have questioned it. Shortly after Mr Trudeau levelled the charge in Canada’s
parliament, America and Britain released cautiously supportive statements,
urging India to co-operate with a Canadian probe. The killing, by two
unknown gunmen outside a Sikh temple in June, followed a spike in both
Sikh separatist activity and at times heavy-handed Indian suppression of it.

The row, which has involved tit-for-tat expulsions of Indian and Canadian
diplomats, could escalate. Mr Trudeau faces domestic pressure to reveal
evidence of Indian involvement in the killing. A criminal investigation is
under way. The Canada-India relationship, already blighted by Indian
suspicions of separatist support in the 770,000-strong Sikh diaspora in
Canada, has deteriorated. America and its allies will hope the rot stops there.
Yet even if it does, they should consider this a wake-up call about the
government of Narendra Modi—and their own eagerness to overlook its too-
frequent abuses.

On its own turf it has muzzled the press, cowed the courts and persecuted
minorities, even though none is a threat to it. The alleged assassination in
Canada, too, appears gratuitous as well as wrong. The movement to create
an independent Sikh nation (known as Khalistan) led to the killing of tens of
thousands of people in India in the 1980s and 1990s, but has since been little
more than an idle talking-point in the Sikh diaspora, even as India’s ability to
police it by conventional means at home has improved.

Making martyrs of separatist leaders is a gift to their beleaguered cause. This

might be considered typical of an Indian government that, for all its recent
swagger on the world stage, remains dogged by feelings of insecurity. It is a
feature of India’s rapid rise. The country is almost invariably weaker than its
leaders publicly proclaim, yet stronger than they privately fear—and that
mismatch is a recipe for miscalculations of this kind. Mr Modi, a probable
shoo-in for re-election next year, should know that confident countries
entrust their security to the rule of law.

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India’s Western friends cannot count on that, however. Hitherto reluctant to
condemn Mr Modi’s excesses, they have maintained a fiction that their
partnership with India is based on shared democratic values, not interests.
This has laid them open to charges of hypocrisy. It also seems likely, in the
light of Mr Nijjar’s demise, to have emboldened Mr Modi. If the
investigation confirms Indian involvement in this crime, it is time for a
tougher line. Strategic partners do not air all their dirty linen in public, and
neither do they murder each other’s citizens. Canada’s allies must join it in
making that clear to Mr Modi. ■
This article was downloaded by zlibrary from
https://www.economist.com/leaders/2023/09/20/if-india-ordered-a-murder-in-canada-
there-must-be-consequences

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Beyond the hype

ChatGPT mania may be cooling, but a serious new

industry is taking shape
Three forces will shape the business of generative AI
Sep 21st 2023

THE FIRST wave of excitement about generative artificial intelligence (AI)

was like nothing else the world had seen. Within two months of its launch in
November 2022, ChatGPT had racked up 100m users. Internet searches for
“artificial intelligence” surged; more than $40bn in venture capital flowed
into AI firms in the first half of this year alone.

The craze for consumer experimentation has since cooled a little: ChatGPT
use has fallen and fewer people are Googling “AI”. Son Masayoshi, a
Japanese investor notorious for diving into already frothy markets, is thought
to be interested in investing in OpenAI, ChatGPT’s creator. But a second,
more serious phase is beginning. An entirely new industry centred on
supercharged AI models is taking shape. Three forces will determine what it
eventually looks like—and whether OpenAI stays dominant, or other players
prevail.

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The first factor is computing power, the cost of which is forcing model-
builders to become more efficient. Faced with the eye-watering costs of
training and running more powerful models, for instance, OpenAI is not yet
training its next big model, GPT-5, but GPT-4.5 instead, a more efficient
version of its current leading product. That could give deep-pocketed rivals
such as Google a chance to catch up. Gemini, the tech giant’s soon-to-be-
released cutting-edge model, is thought to be more powerful than OpenAI’s
current version.

High computing costs have also encouraged the proliferation of much

smaller models, which are trained on specific data to do specific things.
Replit, a startup, has trained a model on computer code to help developers
write programs, for instance. Open-source models are also making it easier
for people and companies to plunge into the world of generative AI.
According to a count maintained by Hugging Face, an AI firm, roughly
1,500 versions of such fine-tuned models exist.

All these models are now scrambling for data—the second force shaping the
generative-AI industry. The biggest, such as OpenAI’s and Google’s, are
gluttonous: they are trained on more than 1trn words, the equivalent of over
250 English-language Wikipedias. As they grow bigger they will get
hungrier. But the internet is close to being exhausted. Many model-makers
are therefore signing deals with news and photography agencies. Others are
racing to create “synthetic” training data using algorithms; still others are
trying to work with new forms of data, such as video. The prize is a model
that beats the rivals.

Generative AI’s hunger for data and power makes a third ingredient more
important still: money. Many model-makers are already turning away from
ChatGPT-style bots for the general public, and looking instead to fee-paying
businesses. OpenAI, which started life in 2015 as a non-profit venture, has
been especially energetic in this regard. It has not just licensed its models to
Microsoft, but is setting up bespoke tools for companies including Morgan
Stanley and Salesforce. Abu Dhabi plans to establish a company to help
commercialise applications of Falcon, its open-source AI model.

Another approach is to appeal to software developers, in the hope of getting

them addicted to your model and creating the network effects that are so

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prized in tech. OpenAI is offering tools to help developers build products
using its models; Meta hopes that LLaMA, its open-source model, will help
create a loyal community of programmers.

Who will emerge victorious? Firms like OpenAI, with its vast number of
users, and Google, with its deep pockets, have a clear early advantage. But
for as long as computing power and data remain constraints, the rewards for
clever ways around them will be large. A model-builder with the most
efficient approach, the most ingenious method to synthesise data or the most
appealing pitch to customers could yet steal the lead. The hype may have
cooled. But the drama is just beginning. ■
This article was downloaded by zlibrary from
https://www.economist.com/leaders/2023/09/21/chatgpt-mania-may-be-cooling-but-a-
serious-new-industry-is-taking-shape

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How to beat HIV

To end AIDS, high-risk countries will need to jab

schoolgirls
Injections that could keep a generation virus-free are on the horizon
Sep 21st 2023

TWO DECADES ago HIV was ripping across Africa like flames across a
lake of petrol. In some countries more than a quarter of adults were infected.
Nearly all were expected to die, slowly, leaving families without
breadwinners and forcing girls to drop out of school to care for sick parents.
Sober observers predicted social collapse. But then the price of antiretroviral
drugs plunged: pills that not only kept people alive but made them less
infectious. By a conservative estimate, they saved 21m lives.

Why, then, is AIDS still the top cause of death for African women and
number three for women aged 15-49 worldwide? The answer is that,
although 30m people with HIV are taking the pills, 9m are not. Those who
do not know they have the virus can easily pass it on: 1.3m people were
freshly infected last year and 630,000 died of the disease, which ravages the
immune system.

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The UN has set a goal of ending AIDS as a public health threat by 2030.
Ideally, someone would invent a cure or a vaccine, but neither is likely soon.
So two approaches must be pursued simultaneously. First, find people who
are HIV positive but don’t know it, and offer them drugs to keep them
healthy and uninfectious. And second, stop uninfected people from catching
the virus.

All this could, in theory, be accomplished with existing technology. But

persuading people to get tested is hard. People with HIV may experience no
symptoms for years, and men are often reluctant to visit a clinic when they
feel well. As for prevention, condoms work, but only when people use them,
which many don’t. So another tool is generating excitement: pre-exposure
prophylaxis, or PrEP. Today this means a daily pill that dramatically cuts the
odds of contracting HIV during sex. It works for gay men in rich countries,
but is suboptimal for the largest high-risk group: heterosexual women in
poor places where HIV is common. Taking a daily pill is a hassle, and hard
to conceal from a jealous boyfriend in a cramped home.

A long-lasting injection would be more discreet, less bother and, unlike a

condom, require no negotiation with a recalcitrant partner. ViiV, a British
drug firm, offers a new jab that lasts two months and has licensed it to
generic manufacturers. Gilead, an American firm, is testing a drug that could
last for six months.

Some states and NGOs already give prophylaxis to drug injectors and sex
workers. If the six-month injection works, it should be routinely offered to
teenage girls in high-risk countries (a fifth of South African adults are HIV
positive). Mass jabbing in schools would be controversial, but probably
effective.

Young people who are not yet having sex are unlikely to have the virus. In
sub-Saharan Africa it is the girls who typically get it first, by sleeping with
older men (who, unlike schoolboys, can pay for dates). When the girls are
older, they pass it on to partners closer to their own age. If transmission from
“sugar daddies” to teenagers is broken, a younger age cohort could grow up
virtually virus-free.

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Drug prices will need to be negotiated. But every new infection means a
lifetime of treatment, which costs on average $380,000 in rich countries and
$5,000 in poor ones. So it should be possible to devise a programme that
saves money in the long run. Donors can drive a hard bargain by buying
PrEP in bulk.

The size of the prize makes it galling that some Republicans are blocking the
reauthorisation of PEPFAR, America’s global AIDS programme, which
expires on September 30th. (Some object that it doesn’t stop recipients from
mentioning abortion.) They should pick a different battle. As George W.
Bush, PEPFAR’s founder, puts it: no programme could be more pro-life than
one that saves millions. ■
This article was downloaded by zlibrary from
https://www.economist.com/leaders/2023/09/21/to-end-aids-high-risk-countries-will-
need-to-jab-schoolgirls

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Uninsurable America

Climate change is coming for America’s property

market
Insurance is supposed to signal risk. Policymakers should let it
Sep 21st 2023

FOR DECADES Americans have been moving to beautiful places that are
vulnerable to extreme weather. Florida, once a swampy frontier, is now
America’s third-most populous state. It is also the state most often hit by
hurricanes. By 2015, the Atlantic and Gulf coasts boasted more than $13trn
of real estate. Look West and the story is similar. Homes are proliferating in
the wildland-urban interface, where nature and development anxiously
coexist and wildfire season seems never to end.

It is climate change that makes extreme weather more common. But the
financial cost of storms and fires depends, more than anything else, on how
many homes people choose to build in risky places. After adjusting for
inflation, there have been more billion-dollar disasters so far in 2023 than
any year since America’s National Oceanic and Atmospheric Administration
began keeping records. Losses as a proportion of GDP have kept stable over

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the past four decades. But there are big local exceptions: last year hurricane
damage cost Florida between 7.5% and 10% of the state’s GDP.

Those who enjoy the benefits of living in high-risk areas (such as a majestic
ocean view) should shoulder the costs. However, both federal and state
governments ensure that they do not, by subsidising or suppressing property
insurance rates in such places. This has encouraged reckless building. A new
report from the First Street Foundation, a non-profit research group, finds
that if proper account is taken of climate risk, nearly a quarter of all
properties in the continental United States are overvalued. These 39m
properties represent a climate-insurance bubble inflated by government.

Private insurers burned by huge payouts after disasters are abandoning risky
markets such as Florida and California. Homeowners are turning to state-
backed insurers of last resort, which offer less coverage for a higher price.
When these plans cannot cover claims, taxpayers are often left with the bill.
As climate change continues, the uninsurable parts of America will only
grow.

At the federal level the National Flood Insurance Programme, which offers
subsidised flood insurance to homeowners in hazardous places, is drowning
in debt. America’s Federal Emergency Management Agency (FEMA), which
runs the programme, is in the process of raising rates to keep it solvent. But
property-owners are rebelling by cancelling their policies, and the politicians
who represent them are threatening to intervene.

Such intransigence is bipartisan. State and national politicians, Democrats

and Republicans, prefer to keep rates artificially low, constituents happy and
their tax bases intact. This is short-sighted. So long as disaster risk is
underpriced, people will take too much of it. And it is unclear how long
taxpayers who live in comparatively safe places will be happy to subsidise
insurance for those who don’t, especially when the subsidy-guzzlers are rich.
A Congressional Budget Office study from 2007 found that 23% of coastal
properties with subsidised flood insurance were second homes. Taxpayers
should not be helping the Real Housewives of Miami build seaside castles.

Instead, policymakers should allow private insurers to set actuarially sound

rates, so they can keep writing coverage. Realistic premiums would deter

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reckless new construction. They would also hurt existing homeowners, so
politicians would probably have to keep offering government flood
insurance, at least temporarily, to those who cannot afford anything else.

Eventually, though, some Americans will need to move to keep safe from
rising seas, roaring floods and fast-encroaching flames. The government
should ease the transition: for example, FEMA could offer buyouts to
homeowners who cannot afford their insurance. But make no mistake: the
longer politicians subsidise building in dangerous places, the worse the pain
will be, and the bigger the final bill. ■

For more coverage of climate change, sign up for the Climate Issue, our
fortnightly subscriber-only newsletter, or visit our climate-change hub.
This article was downloaded by zlibrary from
https://www.economist.com/leaders/2023/09/21/climate-change-is-coming-for-americas-
property-market

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Letters
Letters to the editor

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On nuclear weapons, business agglomerations, Germany, heat pumps,
the EU’s Council of Ministers, inoculations, headline wordplay

Letters to the editor

A selection of correspondence
Sep 21st 2023

Destroy nuclear weapons

The recommendations in your leader on persuading America, China and
Russia to rein in their nuclear-arms race were sound but didn’t go far enough
(“A three-way nuclear-arms race”, September 2nd). The United States and
Russia need to resume notifications and verification measures under the New
START treaty and China should join confidence-building measures. But to
reduce and remove the rising nuclear danger effectively, all three of these
powers, together with the six other nuclear-armed states, should engage with
the 140 countries that support the United Nations Treaty on the Prohibition
of Nuclear Weapons.

The current strategy of the nuclear-armed countries to grant these weapons

legitimacy and claim they are necessary for self-defence perpetuates their

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existence and the threat they pose to us all. These states need to start
upholding their responsibilities. As long as nuclear weapons are seen as
valuable, they will be coveted. As long as nuclear weapons exist, they pose a
threat to more than the countries that have them.

Ever since the invention of the atom bomb, various ideas have been floated
on how to break this cycle, but none has proved successful. The only sure
way to rid the world of the nuclear threat is to eliminate the weapons for
good. That is what the treaty prohibiting nuclear weapons is there to do. It
includes timelines for weapons (and weapons-production facilities) to be
dismantled and destroyed, mandates support for the victims of nuclear use
and testing, and has widespread global support. As we said in our Nobel
peace-prize lecture, the TPNW provides the pathway forward at a moment of
growing global crisis. All nuclear-armed states should engage with it.

MELISSA PARKE
Executive director
International Campaign to Abolish Nuclear Weapons
Geneva

Dispersed companies
The merits of agglomeration for businesses can be overstated (“Air raids and
agglomeration”, August 26th). Fleet Street was once the location of Britain’s
national newspapers, with printing presses in the basements, compositors
and other craftsmen above, and editorial staff on the upper floors. The
cluster benefited from shared suppliers, workers and gossip. But there were
offsetting downsides, notably the cost of getting newsprint into the centre of
London each day, sending out newspapers each night and restrictive labour
practices. When computerised typesetting became possible, the print works
moved to peripheral locations, the editorial offices dispersed around London,
and the power of the print unions was broken. Nowadays, “Fleet Street” is a
metaphor more than a location. With hindsight, the benefits of
agglomeration were less than they had appeared.

The coronavirus pandemic has prompted changes in working habits, aided

by technology that permits remote working and meetings. Although it is too
early to tell, it may turn out that the benefits of agglomerations in city

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centres are less than we had supposed, not least on account of the reluctance
of commuters to pack sardine-like on trains and buses.

DAVID METZ
Honorary professor
Centre for Transport Studies
University College London

Germany benefited from a cheap currency

After he stepped down as chairman of the Bundesbank, I remarked to Hans
Tietmeyer that Germany’s exporting industry was benefiting from the euro
being a 20% cheaper currency than the Deutsche Mark would have been.
“Oh, no,” Mr Tietmeyer replied, “I think the euro’s exchange-rate subsidy to
our exporters could well be 40%.” “Maybe”, he added, “a bit more.”

By then to Mr Tietmeyer, himself a creator of the euro, the common

currency now risked being a cheap semi-Greek/Italian/Spanish currency in a
way that mighty Germany’s very own high-value D-mark had never been.

This cheap-currency prop to one of the world’s most legendary exporting

nations simply feathered its bed over a decade or more in a way that the

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expensive D-mark never had. From this stemmed those too-easy
manufacturing years, the multiple inefficiencies, and Germany’s loss of
rigorous mission, which you so vividly describe (“How the wheels came
off”, August 19th).

As your newspaper has long said, exchange rates fixed between unequal
economies remain fixed at a price. As Germany prospered on a too-cheap
currency, Spain suffered years of 40%-plus youth unemployment from the
same common currency being so German and so dear. And do not mention
Greece.

ANDREW KNIGHT
Shipston-on-Stour, Warwickshire

Better heat pumps

Air-source heat pumps work at cross purposes to nature, attempting to
transfer heat outside when it is hot and to move heat indoors when it is cold
(“All that gas”, September 9th). Heat pumps work by transferring heat from
one place to another, but air-source heat pumps use the worst available
source from an energy perspective.

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Ground-source heat pumps would be far more efficient, taking advantage of
temperature averages over the year. When the weather is cold (that is, below
average for the year), the ground is warmer than the air and a better source
of heat energy. Conversely, when the weather is hotter than the annual
average, the ground is cooler than the air and a more effective place to dump
heat from inside buildings. And ground-source systems do not require noisy
and energy-gobbling fans. They typically use water to bring about the
transfer of energy.

The only advantage of air-source heat pumps is that you can thoughtlessly
bolt them onto the outside of a building with a minimum of plumbing.
Perhaps this reflects humankind’s reluctance to invest in infrastructure, like
plumbing and insulation, or its own future.

MAX ARAI
Andover, Massachusetts

It’s not just owners of older houses that face difficult choices on insulation
and heat pumps. Modern British homes, those built since 2000, are already
pared back in space to the minimum, with, inside, no hall, no cupboards,
rooms barely big enough to contain all the furniture needed for their function
(bed, clothes storage, table, TV). Outside, there is minimum space for a bin
at the side and nugatory garden space. If a large heat pump and extra wall
insulation is necessary, where will all this go? Maybe we genetically
engineer the inhabitants to be half-size?

DR HILLARY SHAW
Newport, Shropshire

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Who’d want to be president?
Charlemagne’s call to scale back the rotating presidency of the European
Union’s Council of Ministers (September 9th) underestimates the extent to
which this has already been done and overestimates the extent to which
further reform would help. The council presidency was always overhyped. It
was never the “president of the EU”, as some countries like to portray it
(especially when it’s their turn) but simply the chairmanship of one of the
EU’s several institutions, for a short six-month period, with a largely
inherited agenda, and with no extra powers nor any formal power to put
forward new legislation.

Since 2010, the country holding the rotating presidency no longer hosts or
chairs the European Council summit of heads of government, who are now
free to choose their own president. It no longer represents the EU externally,
as that job is now given to a jointly chosen high representative/vice-
president of the European Commission who heads the European External
Action Service with its own diplomatic representations across the world (that
task, too, no longer rotating among national embassies). It doesn’t even
always chair the council. When foreign affairs or security are discussed, the
high representative chairs it.

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Further reforms along the lines suggested by Charlemagne, whereby each
configuration of council elects a specific minister from across a variety of
countries, has some attractions, but risks a confusing fragmentation. Much
time and effort would be needed to secure balance among the member states.
The term of office would presumably be longer than six months, but cease
when there was a change of minister in the country concerned. Longer term
and more visible presidents might also cause confusion in public perceptions
with the role of the corresponding commission member.

In short, much effort for little further gain.

RICHARD CORBETT
Former member of the European Parliament
Brussels

A pioneer in inoculation
Your review of Simon Schama’s book, “Foreign Bodies”, (“The long shot”,
September 9th) neglected the role of Lady Mary Wortley Montagu, who
brought smallpox inoculation from the Ottoman empire to England in 1721.
Though ridiculed by many for inoculating her children, she deserves credit
for popularising the practice.

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Incidentally, by the time of Edward Jenner’s vaccine in 1796, it had long
been known among dairy farmers that exposure to the milder cowpox
protected against the more dangerous smallpox.

PADRAIC ROHAN
Quincy, Illinois

A day of RICOening
As a fan of your publication’s witty wordplay titles, I was surprised at the
headline “Puerto RICO” (August 19th) for an article describing Donald
Trump’s indictment in Georgia for allegedly violating the Racketeer
Influenced and Corrupt Organisations Act. I didn’t get the connection,
puerto meaning “harbour” in Spanish notwithstanding. If the point was to
use the acronym RICO, a more applicable title might have been “RICO and
famous” or “On the RICOrd”, that would be my RICOmmendation.

PEDRO SPIVAKOVSKY-GONZALEZ
Lecturer on law
Harvard Law School
Cambridge, Massachusetts
This article was downloaded by zlibrary from
https://www.economist.com/letters/2023/09/21/letters-to-the-editor

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Briefing
To endure a long war, Ukraine is remaking its army, economy and
society
Western help for Ukraine is likely to diminish next year

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The battle within

To endure a long war, Ukraine is remaking its

army, economy and society
The improvisation and decentralisation of the early part of the war will no
longer suffice
Sep 21st 2023 | KYIV

IN THE AUTUMN sunshine Kyiv looks glorious. The leafy streets are full
of life: café terraces bustle and hipsters throng the bars of Podil, a trendy
neighbourhood. The odd air-raid siren aside, the main signs of the 18-month-
old war with Russia are rusty tanks turned into makeshift war memorials and
the various men in uniform enjoying some leave with their loved ones.

To Valery Zaluzhny, Ukraine’s top soldier, the scenes of children eating ice
cream and men presenting flowers to their sweethearts are satisfying. “This
is what we are fighting for. I just want people to have a normal life in the
whole of Ukrainian territory,” he says. The critical word is “whole”:
Ukraine’s counter-offensive has not yet produced the results he and others
had hoped for. Russian lines have not crumbled. Almost a fifth of Ukrainian
territory remains in Russia’s hands. In the war of attrition that looms, it is not

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clear which side has more staying power. In part, of course, that depends on
a second uncertainty: in what quantities the military and financial support
supplied by Ukraine’s allies will keep flowing as the war grinds on.

A break in the clouds

For all its superficial normality, Kyiv is awash with apprehension.
Ukrainians know that Russia has been stockpiling missiles and drones to
attack their energy infrastructure when temperatures drop. They know that
the supply of volunteers has dried up, and that men are being conscripted to
replace casualties at the front. And they know no end is in sight: a year ago
50% of them thought it would be over within a year. Now only 34% believe
that. Whereas Vladimir Putin, Russia’s dictator, does not care about the lives
of his own troops, Volodymyr Zelensky, Ukraine’s president, presides over a
democratic society which does. “It is not just about de-occupation [at any
cost]. It’s about de-occupation, but not losing a lot of lives,” he recently told
The Economist.

The prospect of an attenuated struggle has started to seep into Mr Zelensky’s

speeches. “We need to learn to live with [the conflict],” he told Ukrainians
recently. “It depends on what kind of war. We are prepared to keep fighting
for a very long period of time…[while] minimising the number of casualties.
Like in Israel, for example. We can live like that.”

A war of endurance, however, will require big changes in military planning,

the economy and society more broadly. The heroic improvisation and
decentralisation of the early part of the war will no longer suffice. On the
military side, Mr Zelensky has initiated a clear shift by installing a new
minister of defence, Rustem Umerov. Like almost all Ukrainians, he has a
personal stake in the war, as a Crimean Tatar, an ethnic group persecuted for
Ukrainian sympathies since Russia’s annexation of Crimea in 2014. But, he
says, “Ukraine is not about emotions, it is about a system, logistics and
industries.”

Mr Umerov, a 41-year-old former entrepreneur and investor, says his

mission is to build the capacity of both Ukraine’s defence industry and its
soldiers, so that Western allies see Ukraine not as a dependent always
begging for aid, but as a partner, capable of shaping its own fortune. His

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previous job was managing the government’s property portfolio, and he
wants to bring an efficient managerial mindset to his new role. Red tape
must be eliminated. “Anything that can be digitised, needs to be digitised,”
he says. He is not afraid to make waves: after two weeks in the job, he
replaced six of his seven deputies.

An explosive legacy
When it was part of the Soviet Union, Ukraine had a vast defence industry.
Some 1.5m Ukrainians laboured in 700 military enterprises, including 205
factories and 130 research and development sites. Leonid Kuchma,
Ukraine’s second president, ran the world’s biggest rocket plant in the city of
Dnipro in Soviet times. A flagship factory in Kharkiv produced 900 tanks a
year. But corruption and neglect after the break-up of the Soviet Union in
1991 gradually killed these businesses.

Now Ukraine is rebuilding its arms industry almost from scratch. “Anything
that can be produced locally, must be produced locally,” Mr Umerov insists.
In part that involves reforming state enterprises, the job of Oleksandr
Kamyshin, a former investment banker who used to run the state railway
company and follows Western management fads. “The first hundred days of
the war were about bravery. The next 1,000 days are about steeliness,” he
declares. In June, three months after his appointment, Ukraine produced as
many shells as it had in the entire previous year. In July it reached double
that, Mr Kamyshin says.

Mr Umerov wants to encourage private arms manufacturers, which account

for only 20-30% of the local industry. He says he is prepared to pay local
firms in advance if they can demonstrate their ability to make useful kit.
Many are struggling with a dearth of capable managers: the defence ministry
is offering to help bring such people back from the front lines. Within five
years, Mr Kamyshin predicts, private firms will produce 80% of local
output.

One focus is on drones. Ukraine’s output of them has grown exponentially,

albeit from a tiny base. “We will [produce] 120 to 150 times more drones
than we did last year,” says Mykhailo Fedorov, the 32-year-old minister for
digital transformation, who is co-ordinating the effort. The number of local

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firms in the business has risen from seven in December to 70 now, the vast
majority of them private. To encourage this growth the government has
eliminated tariffs on imported components and is buying drones at prices
that allow margins of as much as 25%. “We can win in a technological war,”
says Mr Fedorov. “We are getting help from countries with large economies
and a greater level of freedom. Technologies like freedom and they like
mobility. We have both.”

Mr Kamyshin wants Western military contractors to start localising their

production, too. BAE Systems, a British defence firm which makes lots of
weapons supplied to Ukraine, has set up a local subsidiary, hoping to
produce L119 and M777 howitzers, which are both in wide use at the front.
Rheinmetall, Germany’s biggest arms manufacturer, is already repairing
Leopard tanks in Ukraine and plans to open an armoured-vehicle factory
soon. As Armin Papperger, its CEO, told CNN, “[Ukrainians] have to help
themselves. If they always have to wait [for] Europeans or Americans [to]
help them over the next ten or 20 years…that is not possible.”

Protecting such factories from Russian attacks will require ingenuity. “We
will not have one Soviet-style hypergiant plant but many smaller plants
spread across the country,” says Mr Kamyshin. Drones are proof of what is
possible: Ukraine’s surging output of reconnaissance devices, Mr Fedorov
says, has helped give it parity with Russia’s forces. Production of longer-
range ones, which can hit targets in Crimea and deep inside Russia, is also
growing. “It is an important historical moment,” he says, “when we are not
simply receiving aid and hoping [that it will not run out] but when we are
taking responsibility for our own lives in our own hands and starting to form
our own capability.”

Ukraine’s growing drone industry also allows its armed forces to adopt new
tactics, by taking the war inside Russia. One aim is to hit military factories in
an effort to disrupt whole supply chains. Recent examples include an attack
on a facility that produces decalin, a fuel additive essential for rockets, and a
plant that makes circuitry for Kinzhal and Iskander missiles.

A second aim is psychological: to shatter the facade of normality the

Kremlin tries to preserve, particularly in big cities such as Moscow. Airports
there have had to suspend flights for brief spells almost daily in recent weeks

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owing to drone attacks on the city. (Mr Kamyshin says he would like to set
up a shop selling T-shirts with the slogan “Moscow never sleeps”.)

Ukraine also has a third goal in its strikes on Russian infrastructure: to deter
Russian attacks on its own infrastructure. Since Russia withdrew in July
from a deal allowing exports of grain from Ukraine’s ports on the Black Sea,
it has been bombarding those and other export routes and threatening ships
calling at Ukrainian ports. Ukraine’s exports have halved as a result, doing
yet more damage to an already stricken economy.

Ukraine is trying to break the Russian blockade. Last month it established a

new sea route, hugging the western coast of the Black Sea close to Romania
and Bulgaria. If Ukraine can protect it, it could raise its exports to some 70%
of pre-war levels. On September 17th, two ships docked at the port of
Chornomorsk near Odessa to load almost 20,000 tonnes of wheat. Hours
later Russia unleashed a barrage of drones and missiles at other nearby ports.

A sea change
Ukrainian strategists hope that, if they can threaten Russian ports on the
Black Sea and strike at the military bases from which attacks on Ukrainian
ports are launched, they may be able to keep Ukraine’s exports afloat. Earlier
this month Ukrainian missiles damaged a submarine, a ship and port
facilities at a Russian naval base in Crimea. It had decent air defences, but
more distant Russian facilities may not be as protected.

The focus on protecting exports reflects a sense among Ukrainian officials

that the economy will also need a drastic overhaul to cope with a long war.
Ukraine received $31bn in financial aid last year and is on course to receive
even more this year. But Serhiy Marchenko, the finance minister, assumes
that such largesse will not be forthcoming indefinitely.

Meanwhile, military spending has leapt from 5% of GDP before the war to
26% this year. Even if the fighting stopped, spending might not drop much.
General Zaluzhny says, “I want the Ukrainian army to be so strong that
Russia does not even dare to look in our direction.” The shrunken economy
is too small to generate sufficient tax revenue to pay for Ukraine’s security,

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Mr Marchenko notes, so the government will have to help it grow by
improving the business climate and fostering industry.

The main concern for investors, says Mr Marchenko, is not physical security
but the unreliable legal system, a problem that predates the war. Similarly, it
is corruption rather than the damage done by the war to Ukraine’s
infrastructure that most Ukrainians see as the main obstacle to recovery. The
independent corruption-fighting investigators, prosecutors and courts that
Ukraine has put in place are making progress, but the broader judicial
system remains inefficient and unpredictable.

Perhaps the worst injury that the war has inflicted on the economy has been
to prompt an exodus of 7m Ukrainians—nearly 20% of the pre-war
population of 37m people. More than two-thirds are women, since men of
fighting age are barred from leaving the country. The working-age
population has shrunk from 16.7m in 2021 to 12.4m this year.

The call of the placid

To lure people back, the government is offering startup grants for businesses
and subsidised mortgages for those rebuilding homes. But many of the
departed have settled in richer, more stable places in the EU, found jobs and
put their children in school. They are unlikely to want more upheaval and
they may see more opportunity for themselves and their children in their new
homes, whatever the security situation in Ukraine. A recent survey found
that about half of those who have moved to Germany, at least, intend to stay
there for the foreseeable future.

There is not just an economic cost to the exodus, but a social one as well.
According to Olena Zelenska, Mr Zelensky’s wife, who heads a government
mental-health initiative, there has already been a rise in the number of
divorces “because women and children are abroad and men are here”. Mr
Zelensky says there is a real risk that a war of attrition could accelerate an
outflow of people from Ukraine, creating further economic problems and
widening the gap between those who left and those who have stayed.

This is not the only source of social tension. Roman Hasko, a lieutenant
from the 80th Airborne Assault Brigade, who volunteered in the first week

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of the war, says he feels disappointed to see the bustle of night-time Kyiv,
having just arrived on leave from the front line near Bakhmut. “I see a lot of
potential recruits. I have many free positions in my unit. Not all have been
killed—some are wounded or sick…If we are talking about winning this
war, these empty lines need to be filled.”

In the first weeks of the war men like Mr Hasko queued up to enlist. Now
Ukraine is filling the ranks through conscription. Some young men who have

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not yet been called up are nervous about leaving home or passing
checkpoints for fear of being dragooned. Many try to bribe their way out of
military service and to leave the country illegally. Last month Mr Zelensky
sacked the heads of all the regional military recruitment centres. He replaced
them with soldiers with battlefield experience who had been vetted by
intelligence services. Earlier this month the Ministry of Defence drastically
cut the number of medical exemptions.

Ukrainians clearly have some concerns about how the country is being run.
Approval of the army and the president remain sky high, but confidence in
the country’s politicians in general is down from 60% in December to 44%
in June. The share of Ukrainians who say the country is on the right track
has also slipped (see chart). There is disquiet about corruption in particular.

But 76% tell pollsters they do not want new elections until the war is over.
Support for Ukraine’s independence is the highest it has ever been, at 82%.
Most do not complain about restrictions on movement or other wartime
curtailment of civil liberties. “War has become part of a new horrific
normal,” says Darina Solodova, a sociologist with the United Nations
Development Programme in Kyiv.

Resistance to Russia’s aggression remains a unifying principle for the vast

majority. “It is not the question of whether to resist or not, but who has done
more or less for that resistance,” says Ms Solodova. Across Ukraine 42% say
that even if Russia intensifies its bombing of cities Ukraine should keep
fighting. Some 21% think that the conflict should be frozen without making
any concessions to Russia. Only 23% think it is worth initiating negotiations.
Even in the east and south, which have borne the brunt of the war, support
for negotiations is relatively low, at 32% and 39% respectively. Only 5% of
Ukrainians are willing to cede any territory to Russia and only 18% to
forswear joining NATO.

Research by the Centre for Sustainable Peace and Democratic Development,

a think-tank in Cyprus, suggests that Ukrainians have become more
optimistic about the future despite the war. Most believe that future
generations will be better off. Ms Zelenska is not surprised: “People know
what they are fighting for, not just what against.” ■

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This article was downloaded by zlibrary from
https://www.economist.com/briefing/2023/09/21/to-endure-a-long-war-ukraine-is-
remaking-its-army-economy-and-society

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A lean patch

Western help for Ukraine is likely to diminish next

year
There is a shortage of weapons and munitions—and, in some quarters,
goodwill
Sep 21st 2023

THE END keeps receding. There was a time when some Ukrainian officials,
having halted Russia’s army outside Kyiv, thought it would take only a few
more months to bring the war to a conclusion. “Most of the active combat
actions will have finished by the end of this year,” predicted Lieutenant-
General Kyrylo Budanov, the head of military intelligence, in May 2022. By
last November, shortly after a spectacular Ukrainian offensive in Kharkiv,
Volodymyr Havrylov, a deputy defence minister at the time, was still
expecting a swift victory. “My feeling is that by the end of the spring, this
war will be over.”

In fact, Ukraine’s counter-offensive did not even begin until June. Far from
hastening the war’s end, it has demonstrated just how long the fighting could
drag on. Ukrainian forces, stymied by Russian minefields and other

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defences, have inched forward on foot. The deployment of reserves and
spiffy Western weapons has not yet yielded any big breakthroughs. Wet
weather and a shortage of ammunition will probably bring the Ukrainian
advance, such as it is, to a halt by late October, if not earlier.

Another fighting season beckons. “We must prepare ourselves for a long war
in Ukraine,” warned Jens Stoltenberg, NATO’s secretary-general, on
September 17th. “It’ll take a considerable length of time to militarily eject
all 200,000 or plus Russian troops out of Russian-occupied Ukraine,” agreed
Mark Milley, America’s top general, the same day.

America insists it will stay the course for “as long as it takes”, as Joe Biden,
the president, has put it several times this year. Britain, France, Germany and
other allies have all used the same phrase. As ironclad as these pledges
sound, they depend on two uncertain variables. One is the West’s ability to
furnish Ukraine’s army with enough weapons and ammunition. The other is
the political will to keep handing them over.

Start with the first. Russia’s defence industry moved onto a war footing in
the last quarter of 2022, says Richard Connolly, an expert on Russia’s
economy, who points to a big jump in steel production. British officials say
that Russia can now produce around 200 tanks a year, twice as many as they
had previously assumed. Mr Connolly says that, with refurbished tanks
included, the true figure is probably 500 to 800. Western sanctions are not
crimping output much, he adds, with crucial components such as
semiconductors smuggled in via Hong Kong or Central Asia.

In principle, Ukraine’s friends should have no trouble helping it outgun

Russia. The combined GDP of NATO’s members is 12 times that of Russia,
even after accounting for Russia’s lower prices. The difference is that Russia
is willing to spend much more heavily on the war: military spending now
takes up almost 40% of the national budget, far in excess of Western levels.
NATO countries are trying to redress this imbalance by investing in arms
production, which has been neglected since the cold war ended. But there are
two snags.

One is cost. Estonia spends around $5,000 to $6,000 on every new artillery
shell, says Kusti Salm, the senior civil servant in the country’s defence

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ministry. That is relatively cheap by NATO standards, he notes. Russia, he
says, spends 60,000 roubles, or around $620. The vast difference is largely
down to cheaper labour and materials, lower quality products and lower
profit margins for arms manufacturers, most of which are state-owned.
Inflation is exacerbating the problem. “Prices for equipment and ammunition
are shooting up,” complained Admiral Rob Bauer, a NATO bigwig, on
September 16th.

The second issue is timing. “After a slow start,” says Mr Connolly, “Russia
has reached race pace and they’re in gear now. They’re now going to start
churning stuff out at the rate approximating what they need.” American and
European investments in new capacity, having started later, will not yield
much extra supply until the second half of 2024 or 2025, giving Russia more
time to mobilise, build new defences and pin down Ukrainian forces.

Take the case of artillery shells. The good news is that American and
European production is soaring. American officials say that their own output
has risen from an annualised rate of 168,000 shells in the spring to 336,000
today. It will continue to rise, thanks both to new facilities and to more
intensive use of existing ones. European production is set to double by the
end of this year or the start of next, according to Estonia’s defence minister.
Between them, America and Europe should comfortably produce nearly 2m
shells next year.

Shell shock
The trouble is, that is barely enough to keep up. Russia will produce 1m-2m
shells next year, according to British estimates. That is on top of a stock of
around 5m shells, new and refurbished. That should allow it to fire at least
15,000 rounds a day for a year, says Mr Salm. That is roughly on a par with
Ukraine’s heightened consumption during its counter-offensive, according to
people familiar with the data. But Ukraine can probably sustain that tempo
for only a couple more months.

The gap could be bridged by borrowing from elsewhere. Ukraine’s counter-

offensive was enabled by a massive transfusion of South Korean shells.
America and its allies have discreetly purchased arms and ammunition from
non-aligned countries such as Egypt and Pakistan on Ukraine’s behalf. But

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such ready sources of weaponry are running out. Western armies’ stockpiles
have been depleted, too.

As the Western arms industry ramps up, this problem should ease. By 2025
there might even be a “glut” of shells, says a Western official. If most of the
new output goes to Ukraine, and assuming that neither China nor North
Korea bails out Russia, the Ukrainian army might then be able to out-
pulverise the Russian army for the first time in the conflict. But 2025 is the
military equivalent of a lifetime away. Next year, meanwhile, Ukraine will
probably struggle to mount a big offensive.

The year after next is also a lifetime away in terms of politics. In Europe, the
political winds seem favourable to Ukraine. Polls conducted in June and July
showed that 64% of Europeans favour military aid to Ukraine, with strong
support not just in countries with a long-standing suspicion of Russia, such
as Sweden (93%), but also in more distant member states such as Portugal
(90%).

Some hard-right parties, such as France’s National Rally, led by Marine Le

Pen, and Germany’s Alternative for Germany (AfD), cast the conflict as a
waste of European resources. “The German public is paying three times over
for this war,” complains Gunnar Lindemann, an AfD member of Berlin’s
regional assembly, “supporting 1m refugees, carrying huge energy bills and
sending weapons to Ukraine.” Both parties are rising in the polls, but both
remain far from power.

Olaf Scholz, Germany’s chancellor, has been mindful of anti-war sentiment,

notably within his own Social Democratic Party. He dithered for months
before agreeing to send Leopard tanks to Ukraine. He still refuses to send
long-range Taurus missiles, even though Britain and France have given
Ukraine comparable weapons. Yet Mr Scholz has by now realised that public
scepticism is mushy: as soon as he sends a new weapon, approval broadly
follows. On September 18th his government announced another €400m
($429m) of arms, including ammunition, armoured vehicles and mine-
clearing equipment.

Emmanuel Macron, France’s president, who provoked grumbling in Kyiv

last year over his frequent phone calls with Vladimir Putin, his Russian

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counterpart, and over his hesitation in sending weapons, is now among the
most gung-ho of European leaders. France has long resisted expanding the
EU, yet Mr Macron has become a fervent supporter of Ukraine’s accession
to the bloc. A poll in July showed that 58% of the French backed this
approach.

Ukraine’s bid for EU membership is proceeding at a pace that would have

astonished Europe-watchers just a few years ago. It formally became a
candidate to join in June, 2022. This December, barring a shock, that status
will be upgraded by the opening of detailed negotiations on accession.
Ukraine is dazzling EU officials with its swift progress on the necessary
reforms. It may still take years for Ukraine to become a fully fledged
member, but the war seems to be speeding up the process rather than
delaying it.

Now for Congress to get on board

In America, however, the outlook is much more divided and uncertain. On

August 10th the White House asked Congress to authorise another $24bn
“supplemental” budget for Ukraine, which would bring total American aid
thus far to $135bn. Supporters of such assistance, among both Democrats
and Republicans, constitute a clear majority of both chambers of Congress.

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Were the request put to a simple up-or-down vote, it would be approved
relatively easily.

But it is unlikely to be, because of America’s dysfunctional politics. A

majority of the members of the House of Representatives may support
Ukraine, but a small number of Republicans hold extreme anti-Ukrainian
views, including Matt Gaetz, who has proposed inviting Russia to join
NATO, and Marjorie Taylor Greene, a conspiracy theorist who has promoted
the absurd notion that aid to Ukraine is actually being siphoned off by
donors to the Democrats. Since the Republicans have only a slender majority
in the House and since the Speaker, Kevin McCarthy, does not want to rely
on Democratic votes to push legislation through, the pro-Russia fringe has
much more influence than its numbers would imply.

The likeliest course is for Mr McCarthy to attach the supplemental budget to

other important legislation, making it harder to derail. Past efforts in the
House to deny Ukraine funding have been overcome, although each one
attracts more Republican votes. Mr Biden already has congressional
approval to send a further $6bn-worth of weapons to Ukraine from existing
stockpiles. But after that there is likely to be a delay of several months while
Congress contorts itself over the latest request. What emerges may be dribs
and drabs of aid, rather than the big packages of last year.

In the longer run, aid for Ukraine is fast becoming a partisan issue, which
makes its prospects ever less certain. Republican voters, egged on by the
scepticism of Donald Trump, their party’s likeliest nominee for president
next year, have begun to question further aid to Ukraine. Democrats remain
broadly supportive. The big budget deficit and high interest rates make
politicians of all parties reluctant to rack up more debt. And even Democrats
support the notion that America’s European allies should be the ones taking
the initiative in conflicts on their own borders.

And then there is the possibility that Mr Trump wins next year’s election.
His policy on Ukraine is characteristically incoherent. In March he promised
that he would settle the war in “no longer than one day”, before even
entering office. “We don’t have ammunition for ourselves,” he complained
in May, “We’re giving away so much.” But he denies he would push for a
deal allowing Mr Putin to keep Ukrainian territory. “Nobody was tougher on

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Russia than me,” he said this week, insisting he would strike “a fair deal for
everybody”.

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Nevertheless, Western officials worry that Mr Putin will wait to see whether
Mr Trump becomes president again before agreeing to negotiations. That
scenario is already provoking frenetic debate in Europe. “If the United States
tried to force a negotiated settlement on Ukraine,” argued Liana Fix and
Michael Kimmage, a pair of Russia experts, in Foreign Affairs recently,
“Europeans would have little capacity to resist.” Others say this is unduly
fatalistic. French officials argue that, should America end its support for
Ukraine, although Europe cannot replace American military aid gun for gun
and missile for missile, the prudent and rational thing is for Europe to try to
preserve its options by boosting arms manufacturing.

The question is whether Europe alone can drum up enough cash and
weapons to keep Ukraine going. Although America provided the lion’s share
of aid for much of the war, the latest analysis from the Kiel Institute for the
World Economy, a German think-tank, finds this pattern has reversed.
Europeans have long dispensed more financial aid. They are now providing
more aid of all sorts, thanks in part to the EU’s recent €50bn pledge, a multi-
year commitment which stretches to 2027 (see chart).

Money isn’t everything

Yet the figures do not tell the whole story. America has been the fulcrum of
the allied effort to support Ukraine, chairing the regular meetings at which
donations of weapons are pledged and co-ordinated at Ramstein, an
American military base in Germany. It has provided diplomatic cover for
other countries’ aid: Mr Scholz, for instance, insisted that he would not
allow German-made Leopard tanks to be sent to Ukraine unless Mr Biden
first sent some American M1A1 Abrams tanks.

In some cases Europeans have sent arms to Ukraine on the understanding

that they will receive new American weapons to replace the donated ones.
America’s security guarantees, underwritten by nuclear weapons, have given
Europeans the confidence to stand up to Russian threats. Finally, America
has provided vital intelligence that has helped Ukraine find and destroy
high-value targets, from generals to warships. Substituting for this
organisation and assistance would be a Herculean task.

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It may be unavoidable. “The assumption of the West was—and I think
everyone has been unspoken on this—was that we give them everything we
can, then they will go on this one large offensive and whatever happens at
the end of this we will settle for that,” says Mr Salm, the Estonian official.
“That was the plan.” A new one is required, he suggests, involving not just
more arms, but also more technology to offset Russia’s advantages in mass,
bolder sanctions, such as expulsion from the Paris Olympics, and new
training that learns from the mistakes of the summer.

Above all, a change in mentality is needed. “This is exactly what a war of

attrition is about: convince the West that we can out-suffer you, we can out-
fight you, we can out-last you. They know the weak points of democracies,”
Mr Salm says. The task, he believes, is to persuade Mr Putin that the
opposite is true. “We, as the Ramstein coalition, are 25 times richer, stronger
and [more] technologically advanced than Russia…It’s not that we are
empty-pocketed here.” ■
This article was downloaded by zlibrary from
https://www.economist.com/briefing/2023/09/21/western-help-for-ukraine-is-likely-to-
diminish-next-year

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Asia
China isn’t the only country giving out goodies in Asia
Demolishing one of Babe Ruth’s last stadiums
A devastating accusation by Justin Trudeau against India
China’s claim to the South China Sea gets even odder

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Asia’s new aid diplomacy

China isn’t the only country giving out goodies in

Asia
Japan and South Korea are offering development cash too
Sep 21st 2023 | SEOUL, SINGAPORE AND TOKYO

THE ASIA-PACIFIC region is the world’s most dynamic, and yet its
development needs remain vast. The Asian Development Bank (ADB)
estimated them to be $1.7trn a year until 2030. Fast growth breeds its own
demands, in terms of roads, railways, power stations, ports and
digitalisation. But swathes of the region still suffer from poverty, poor access
to education and health care, misgovernment, and vulnerability to climate
and other natural disasters. And that is before considering the damage caused
by the covid-19 pandemic.

The good news is that all these challenges are coming into sharper focus
among Asia’s richer countries, as well as regional organisations including
the ADB. Japan, South Korea, Australia and Taiwan have all recently shaped
new aid and development policies intended to make scarce dollars more
effective, with much talk of collaboration. This underlines two realities. The

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first is that Asia’s appetite for aid and development finance will mostly be
met by donors within the region. (For all America’s security presence in
Asia, its bilateral aid contribution is tiny, though somewhat redeemed by its
large shareholdings in the World Bank and ADB.) A tally by the Lowy
Institute, a think-tank in Sydney, noted that four of the top five donors to
South-East Asia from 2015 to 2021, accounting for 73% of $200bn of
official development spending, were from Asia: China, the ADB, Japan and
South Korea. The fifth was the World Bank.

The second reality is that this will have geopolitical consequences. China’s
position as Asia’s biggest source of development finance in recent years was
being challenged even before recent financial strains at home and souring
loans abroad led it to pull back on lending. Development finance and co-
operation are emerging as what the Lowy Institute calls “key tools” in Asia’s
geopolitics. How Asian donors interact with poorer neighbours may shape
the region as much as the defence and security contest between China and
America.

China has exerted development influence mainly through President Xi

Jinping’s Belt and Road Initiative to improve infrastructure and lower
obstacles to trade (while presenting China as a benevolent and rightful
global leader). In South-East Asia, for instance, China leads as the single
biggest provider of official aid, shelling out about $5.5bn a year, a fifth of
the total. Yet it faces significant competition, from Japan and South Korea
especially. While China is strong in infrastructure (with nearly 40% of all
development finance in that sector), Japan funds transport slightly more than
China does. South Korea is level with China in communications. China
dominates energy—but in water and sanitation it is nearly absent.

The Chinese approach can breed resentment. It delivers fewer projects than
promised. Often using Chinese companies and workers, it puts less emphasis
on local hiring and training. And borrowers from China’s two main policy
banks typically pay a full, “non-concessional” whack of interest. There is
sometimes corruption and shoddy work. In Sri Lanka, the Maldives and
Laos, Chinese loans have turned sour as borrowers struggle to repay. The
scale of the problems is unclear—a lack of transparency also attends the
Chinese approach.

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Poor countries therefore relish options—and tend in particular to favour
Japan. Its aid engagement is understated but long-standing. Japan began
advancing aid in the 1950s, partly in atonement for its wartime aggression.
Today it aims to build not only things, but also capacity. Unlike China, Japan
often works with local contractors. Complex new subway systems, such as
in Jakarta or Manila, come coupled with technical assistance on how to
operate them. Hayakawa Yuho, South-East Asia head at the Japan
International Co-operation Agency (JICA), says projects that often take a
decade to complete require sustained commitment, insulated from
interruptions and policy changes. Surveys show Japan as easily the most
trusted power in the region. Young Japanese heading overseas as volunteers
on Japanese poverty-alleviation projects help reinforce that trust.

Unlike China, Japan makes development-assistance loans mostly at

concessional rates, principally through JICA, which also marshals world-
class Japanese expertise for advice and training. The Japan Bank for
International Co-operation (JBIC) provides project financing for
infrastructure development. It is a winning combination. In India and
Bangladesh, Japan is easily the biggest bilateral donor. In the Philippines,
says one South-East Asian diplomat, Japan “does all the heavy lifting”
among donors, competing “very, very aggressively” against China.

South Korea’s aid approach resembles Japan’s. As an exporting powerhouse,

it has huge dollar holdings to recycle and a bunch of high-class companies in
areas such as infrastructure, mining and communications to back up its aid
strategy. (It helps that such companies are active in the region anyway.)
President Yoon Suk-yeol wants to pitch his country into the ranks of the
world’s ten biggest donors. He has sharply increased aid spending. A recent
emphasis has been on health care. The fact that South Korea is a middling
rather than a great power (except in its music, films and food, which Asia
loves) makes it an uncontroversial benefactor.

Historically poor relations between Japan and South Korea have improved,
increasing talk of collaboration over aid. Australia, the key donor to Pacific
island states and keen to expand in South-East Asia, also talks of working
with “like-minded” partners. In theory, countries can bring complementary
strengths—such as financial nous, or expertise in training or renewable
energy. But Kei Koga of the Nanyang Technological University in Singapore

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says the challenges of collaboration will be great—starting with budgeting,
since the countries’ fiscal calendars are not aligned. As for drawing in the
private sector, which donors aspire to do, the challenge is making the
proposition safe and attractive enough for private capital.

These regional partners are like-minded because they believe in the same
things: transparency, low corruption, the rule of law, safe sea lanes and so
on. Such qualities also define a prominent American-led ambition for a “free
and open Indo-Pacific”, formulated with China’s disdain for international
rules and grandiose territorial and maritime claims in mind. So it is no
wonder that overseas development assistance is increasingly shading into
security policy. Japan, for instance, provides the Philippines with patrol
boats to police its waters against piracy and smuggling; a greater presence on
the water also helps against frequent incursions by Chinese vessels,
including warships. Projects to help improve ports, which could be used for
both civil and military purposes, are similarly double-edged.

Aid experts often insist that security issues are beyond their remit. Yet the
reality is that development assistance and security, butter and guns, are
already linked in the Asia-Pacific region. And as China continues striving to
assert regional dominance, and its rivals to resist it, they will become ever
more tightly enmeshed. ■
This article was downloaded by zlibrary from
https://www.economist.com/asia/2023/09/21/china-isnt-the-only-country-giving-out-
goodies-in-asia

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Rebuilding Tokyo

Demolishing one of Babe Ruth’s last stadiums

Baseball fans and environmentalists are opposing a lavish redevelopment
project
Sep 21st 2023 | TOKYO

JINGU BASEBALL STADIUM in Tokyo has seen many iconic moments in

its century-old history. Babe Ruth played there in 1934, on a tour of Japan
that confirmed baseball’s popularity in the country and led to its first
professional team. Over half a million Tokyoites lined the streets to welcome
the Bambino and his teammates. In 1959 Nagashima Shigeo, one of Japan’s
best-loved sportsmen, hit a walk-off home run at Jingu stadium in the only
professional baseball game attended by a Japanese emperor.

A plan to demolish the stadium, as part of a broader redevelopment of the

central Jingu Gaien area, is therefore proving controversial. Since the city’s
government approved it in February, outraged baseball aficionados have
joined in opposition with heritage fans and environmentalists, concerned
about hundreds of mature trees that are also slated for the chop. Over

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220,000 people have signed an online petition against the redevelopment;
thousands have showed up to protest against it.

It is the next phase of a project launched before the Olympic Games that
Tokyo hosted in 2020, which included construction of a new national
stadium next to the baseball one. In the process the city eased regulations
against high-rise buildings in the area. By levelling and replacing the
baseball stadium and a nearby rugby one, it aims to turn Jingu Gaien into a
“world-class sports cluster”, which would also include two soaring towers, a
shopping area and hotels.

To erect skyscrapers at the site, first developed as a recreational area in 1926

to honour the Meiji emperor, would be “sacrilegious”, says Ishikawa Mikiko
of ICOMOS, a UNESCO advisory body. Hashimoto Satoko, an architect,
says the existing baseball stadium, which was renovated in 2014 to be made
earthquake-proof, should be maintained. She accuses the city’s officials of
being trapped in the “scrap and build” mentality that defined Tokyo’s urban
planning in the 1960s, a time of rapid economic growth and change in the
metropolis.

Some baseball fans raise practical concerns, suggesting the planned

skyscrapers could cause disruptive winds at the new stadium. Rampant
redevelopment of baseball stadiums in America suggests such worries can be
exaggerated. Of the dozens that hosted Babe Ruth, two remain, Fenway Park
in Boston and Wrigley Field in Chicago. After Jingu Stadium goes, Koshien
Stadium in Kobe will be the only other survivor.■
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Murder in the suburbs

A devastating accusation by Justin Trudeau

against India
The row between Canada and India could draw in America and Britain
Sep 19th 2023 | Delhi and Ottawa

ON THE EVENING of June 18th Hardeep Singh Nijjar, a Canadian Sikh

leader whom India considered a terrorist, was sitting in his truck in a car
park outside a gurdwara (a Sikh temple) in Surrey, a suburb of Vancouver in
British Columbia, when two masked men shot him dead. They fled through a
park and disappeared.

On September 18th Justin Trudeau, Canada’s prime minister, told lawmakers

in Ottawa that “credible intelligence” from the country’s security services
linked India to the killing. It is a highly unusual accusation for the leader of
one democracy to make against the government of another. Mr Trudeau said
that he had discussed the allegation with Narendra Modi, India’s prime
minister, on the sidelines of a G20 meeting in Delhi on September 10th, and
that he would push India to co-operate with an investigation. “Any
involvement of a foreign government in the killing of a Canadian citizen on

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Canadian soil is an unacceptable violation of our sovereignty,” he told
Parliament.

The accusation marks a new low in the already frosty relationship between
the two countries. Shortly after Mr Trudeau’s remarks, Canada’s foreign
minister announced the expulsion of the head of India’s intelligence agency
in Canada.

India’s foreign ministry categorically denied the “absurd” allegation, and

said Canada had shared no evidence for the damaging claim with India. It
also announced the reciprocal expulsion of a Canadian diplomat and a
suspension of visa issuance in Canada. It accused Canada of sheltering
“Khalistani terrorists and separatists”, a reference to those who seek an
independent homeland for Sikhs in the state of Punjab and other parts of
northern India.

In India, the public reaction to Mr Trudeau’s speech broadly echoed the

government’s line. A spokesman for the main opposition Congress party
declared that India must be “uncompromising” in fighting terrorism. Several
editorials highlighted Canada’s alleged failures in tackling Sikh extremism
and accused Mr Trudeau of pandering to terrorists. Some supporters of Mr
Modi also predicted that the row would help the prime minister. “Justin
Trudeau starts campaigning for Modi ahead of the 2024 General Elections
by blaming his govt of neutralising a terrorist on Canadian soil,” Nupur J.
Sharma, the editor of OpIndia, a right-wing website, wrote on X (formerly
Twitter).

A deterioration in India-Canada ties had been apparent for some time. On

September 1st Canada said it had paused trade talks with India. In the days
leading up to the G20 Canada, while doggedly raising its allegation,
apparently tried to reduce tensions by quietly sending the head of its
intelligence service and Mr Trudeau’s national security adviser to India. It
did not help. At the G20 summit in Delhi, where other Western leaders held
long meetings with Mr Modi, Mr Trudeau was fobbed off with a ten-minute
huddle on the sidelines. A smiling Mr Modi draped a silk scarf round Mr
Trudeau’s neck in what now looks like an ironic welcome. Mr Modi later
accused Canada of allowing India’s enemies to promote secession and incite
violence against Indians in Canada. (A previous trip by Mr Trudeau to India

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in 2018 turned into a fiasco after a convicted Sikh extremist was invited to a
reception for him at the Canadian High Commissioner’s residence; the
invitation was later withdrawn.)

Sikh separatism, the cause behind a bloody insurgency in India in the 1980s
and early 1990s, has long been a sore point between India and Canada,
which has a large Sikh diaspora. India accuses Canada of being soft on
militant separatists. Former Canadian security officials say India’s
government has conducted surveillance on Khalistani groups in Canada for
years. Canada itself became the victim of Khalistani terrorism in 1985, when
a bomb blew up an Air India aeroplane flying from Montreal to London,
killing 329 people, mostly Canadians. It remains the deadliest terrorist attack
against Canada in history. Just one suspect was convicted in connection with
the bombing; another was shot dead in his car last summer, in the same city
where Mr Nijjar was killed.

The plane bombing has in no way soured relations between the 770,000
Sikhs living in Canada and their fellow Canadians. An important political
constituency, Sikhs are courted by all Canadian parties. Canada insists it has
cracked down on the small minority who have brought their fight for
Khalistan to the country. Mr Nijjar had been a vocal advocate for an
independent Khalistan, but he denied involvement in violence.

A deepening estrangement between the two countries would have economic

implications, if modest ones. Canadian investors have become more
important in India as they seek to profit from its high-growth economy: CPP
Investments, a giant Canadian national savings fund, has some $20bn
invested in the subcontinent. India is Canada’s tenth-largest trading partner.

All eyes on Modi

But the ramifications of Mr Trudeau’s accusations go far beyond the
relationship between Canada and India. The prime minister said that Canada,
a member of the Anglophone “Five Eyes” intelligence alliance, was “closely
co-ordinating” with allies on the matter. On September 18th America’s
National Security Council duly released a supportive statement, saying it
was “deeply concerned about the allegations referenced by Prime Minister
Trudeau” and urged India to co-operate with the Canadian investigation.

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Britain and Australia, which have both had recent run-ins with India over the
activities of Sikh separatists on their soil, issued similar statements. All three
countries are courting India as a potential hedge against Chinese domination
in Asia, and are painfully reluctant to antagonise it. Yet Mr Trudeau’s public
airing of the allegation, based on evidence that they will have seen, gave
them little choice.

If Mr Trudeau’s allegation is correct, the assassination points towards an

activist turn in the operations of India’s intelligence services in the West, not
least the Research and Analysis Wing (RAW), India’s foreign-intelligence
arm, the likeliest candidate for such an operation. Carved out of the domestic
Intelligence Bureau in 1968, reputedly with help from the CIA, RAW has
focused mainly on gathering intelligence on, and conducting operations in,
Pakistan, China and other neighbours of India. It has been suspected of
conducting black operations to influence India’s neighbours, and to arrest
and sometimes to kill its foes. But it is hard to find a precedent for such a
seemingly overt attack in the West. It would have been “madness to
perpetrate an act like this in a Five Eyes country”, says a European former
intelligence official.

India may hope to emulate Israel’s Mossad, whose famously long arm strikes
foes far away. But it risks being classed with Russia, whose murders abroad
have provoked widespread condemnation and Western sanctions. If the
allegations are correct, RAW may have spotted a chance to get rid of a
troublesome separatist in Canada and send a message to others like him. But
the killing seems more likely to inflame than quell the Khalistanis—while
forcing India’s Western allies to ponder how benign a global power it really
is. ■

Clarification (September 21st 2023): This piece has been edited to provide
further details of India’s response to the allegation.
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https://www.economist.com/asia/2023/09/19/a-devastating-accusation-by-justin-trudeau-
against-india

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Banyan

China’s claim to the South China Sea gets even

odder
Despite its more co-operative tone, China will not stop its bullying in the
South China Sea
Sep 21st 2023

LATE LAST month the government in Beijing published a “standard map”

of China and all its territorial claims. It did a strikingly efficient job of
upsetting the neighbours, from India to Japan, but above all those around the
South China Sea. Vietnam objected to the map’s inclusion of the Paracel
Islands, which China seized from it in 1974. The Philippines protested over
the Scarborough Shoal, from which China has barred it by force since 2012,
even though it lies well within the Philippines’s 200-nautical-mile exclusive
economic zone (EEZ). And the map’s inclusion of the Spratly Islands—a
welter of islets, atolls and reefs spread out across a vast swathe of the South
China Sea a very long way from China itself—angered those countries and
Malaysia, too.

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Yet that much was predictable. South-East Asians have long suffered from
Chinese expansionism in the South China Sea. China’s notorious “nine-dash
line” is both symbol and tool of its extravagant claims: a U-shaped tongue of
passive cartographic aggression, it encompasses almost the entire sea. In
2016 an arbitral tribunal at The Hague, in a case brought by the Philippines,
ruled among other things that the line had no basis in law. Yet the new
standard map even includes an extra dash to the line, placed east of Taiwan.
This new, tenth dash has bred the most consternation. Some sense that it
opens a new front in China’s grandiose claims. Is that likely?

The concerns are overdone, writes Bill Hayton in Fulcrum, house journal of
the ISEAS-Yusof Ishak Institute, a regional research outfit in Singapore.
This is not the first time Chinese cartography has included a tenth dash.
Besides, Mr Hayton explains, the nature of the U-shaped line, which dates
back to the 1940s, has always been vague and subject much of the time to
“happenstance and incompetence”. Back then, Chinese mappers were not
really clear what lay inside the line, which was intended as merely a
schematic outer marker of what might in future be claimed within it. In
recent decades, vagueness has suited the Chinese Communist Party as it has
asserted (though never officially) absurd “historic rights” over everything
inside the line. Maximalist claims, in turn, help China bully neighbours over
things like fisheries and hydrocarbons exploration. The basis of the new line,
says Mr Hayton, is as nonsensical as was the original.

In the Diplomat, an Asia-focused online magazine, Mark Raymond of the

University of Oklahoma and David Welch of the University of Waterloo in
Ontario go further. The tenth dash seems intended to incorporate Taiwan,
which China has long claimed as its own. Yet the dash falls arbitrarily,
neither demarcating Taiwan’s territorial waters nor fully including its official
EEZ. It therefore does not match any maritime area China formally claims.
The authors suggest this and other inconsistencies are tacit acknowledgment
that China knows that claiming everything inside its U-shaped line is
fanciful. Were it to be up front about this it would cause a backlash at home.
That would be to confess to an “intensely nationalistic domestic audience
that China does not have the full slate of sovereign rights in the South China
Sea that it previously behaved as though it had”.

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Since the map’s publication, senior Chinese officials have sought to dampen
the controversy over it. They speak of China’s “brotherly ties” with its
neighbours and need for co-operation on the troubled sea. Yet, says Jay
Batongbacal of the University of the Philippines, to expect good behaviour
from China is fanciful. Its powerful coastguard has used military-grade
lasers against Philippine counterparts and last month forcibly blocked the
resupply of a Philippine military outpost on the Second Thomas Shoal. The
shoal is perhaps the sea’s likeliest flashpoint right now. Mr Batongbacal says
China might want to provoke an escalation there and then blame it on the
Philippines.

The expectation of continued Chinese coercion in the South China Sea is

thickening military ties among others wary of it. Defence co-operation
between America and the Philippines, a treaty ally, is growing fast. In
August the Philippines held joint naval exercises with America, Australia
and Japan—a first. This week the ten-nation ASEAN conducted its first-ever
combined exercises (admittedly well to the south of the contested parts of
the sea). Small steps add up to a big change from even a few years ago,
when neighbours were reluctant to do anything to offend. China has only its
behaviour, and ludicrous map, to blame.■

Read more from Banyan, our columnist on Asia:

How to unite India, Bollywood-style (Sep 14th)
Joe Biden’s visit to Hanoi is a signal to China (Sep 7th)
South-East Asian democracy is declining (Aug 31st)
This article was downloaded by zlibrary from
https://www.economist.com/asia/2023/09/21/chinas-claim-to-the-south-china-sea-gets-
even-odder

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China
The disappearance of China’s defence minister raises big questions
How China uses UNESCO to rewrite history
China tells its citizens to be on the lookout for spies
China wants to be the leader of the global south

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Xi’s troubled coterie

The disappearance of China’s defence minister

raises big questions
Officials selected by Xi Jinping are going down. What does that say about
his judgment?
Sep 20th 2023

AN ABILITY TO groom talented officials, China’s leader, Xi Jinping, once

said, “largely determines the rise and fall, as well as the survival or demise”
of political parties and countries. After a sweeping reshuffle of ministerial
posts in March, the government’s main news agency, Xinhua, recalled Mr
Xi’s words in an article aimed at showing how meticulous the selection
process had been. Since late June, however, two of the most senior officials
who were promoted in that shake-up have disappeared: first Qin Gang, the
former foreign minister, and more recently General Li Shangfu, the defence
minister. The swiftness of their apparent downfalls has been striking. The
questions they raise about China’s politics are big.

There is no sign that this is an existential moment for the Communist Party,
or Mr Xi’s rule. Adulation of Mr Xi continues unabated in state media. He

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stayed away from the G20 summit in Delhi on September 9th and 10th—an
unprecedented absence. But on September 16th and 17th Wang Yi, who
succeeded Mr Qin as foreign minister in late July, met America’s national
security adviser, Jake Sullivan, in Malta. According to Bloomberg, they
discussed a possible meeting between Mr Xi and President Joe Biden at a
gathering of Asia-Pacific leaders scheduled for November in San Francisco.
China’s military activities appear unaffected, too. On September 17th and
18th about 100 Chinese fighter jets flew around Taiwan, an unusually high
number in such a space of time.

But the churn at the highest levels of the state and military apparatus has
been unusually fast, even by the standards of Mr Xi’s purge-filled tenure.
General Li has not been seen in public since August 29th, when he appeared
at a China-Africa security forum. He was supposed to attend an annual
meeting with Vietnamese defence officials on September 7th and 8th. But
that plan was scrapped, with Chinese officials citing the general’s health.
Unspecified illnesses seem to be a common problem for those in political
trouble. Mr Qin was said to have a health condition, too. But according to
the Wall Street Journal, senior Chinese officials were told in secret last
month that he had “lifestyle issues”. They allegedly involved an extramarital
affair, resulting in the birth of a child, while Mr Qin was ambassador in
Washington before becoming foreign minister.

On official websites, no change has been indicated in General Li’s duties.

But American and other officials have told Western media that they believe
he has been relieved of his post. Reuters reported that he was suspected of
corruption related to the procurement of military equipment, which he
oversaw from 2017 to 2022. The news agency said that eight senior officials
from the procurement department were being investigated, too.

There is also speculation that graft is a reason for the replacement in late
July (announced in state media) of General Li Yuchao and General Xu
Zhongbo. They were the two most senior commanders of the Rocket Force,
which controls China’s nuclear and conventional missiles. General Li
Yuchao had been put in charge only last year. A less high-profile but equally
unusual personnel change came to light on September 1st with the dismissal
of Major General Cheng Dongfang as president of the People’s Liberation
Army military court after just eight months in the job. No reason was given.

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General Cheng had previously served as spokesman of China’s military
garrison in Hong Kong.

On Chinese social media, censors have stifled most discussion. Only one
comment is visible on the post of a user with more than 670,000 followers
who hinted at the defence minister’s absence. “Aren’t you afraid of having
your account closed down?” it says. “Don’t talk about him.” But given Mr
Xi’s efforts to portray China’s political system as a more stable and effective
alternative to liberal democracy, the purges have provided rich pickings for
his foreign critics. On X (formerly Twitter) America’s ambassador to Japan,
Rahm Emanuel, compared the turnover to Agatha Christie’s novel, “And
Then There Were None”. He later offered another literary analogy: “As
Shakespeare wrote in Hamlet, ‘Something is rotten in the state of
Denmark’.”

To be sure, the posts of defence minister and foreign minister are not as
critical in China as they often are in other countries. Neither General Li nor
Mr Qin are among the 24 members of the Politburo, the apex of political
power. But the ministerial jobs involve defending the country’s interests
abroad. (In China’s eyes, Mr Qin’s alleged behaviour may have made him a
security risk.) And the purges raise questions about Mr Xi’s ability to select
the right talent and his capacity to scare officials into avoiding corruption.

The moves have targeted people who were clearly Mr Xi’s men. Mr Qin’s
elevation to the rank of foreign minister was unusually rapid, suggesting he
may have impressed Mr Xi during a stint as the chief organiser of his foreign
trips. He was promoted last year to the party’s Central Committee and in
March got the additional title of state councillor (a senior role in China’s
cabinet). Only four others hold that rank, including General Li. The defence
minister is also a Central Committee member and one of the six officers who
work under Mr Xi in the armed forces’ governing body, the Central Military
Commission.

Team of no rivals
General Li and Mr Qin were among many people close to Mr Xi who
benefited from the reshuffle in March as well as another one last October
involving party jobs. The overhaul produced a ruling team more seemingly

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in lockstep with the paramount leader than any since the era of Mao Zedong.
In China, questions will certainly be asked (in whispers) about how stable it
is.

But Mr Xi must be used to muttering. His previous purges have affected

hundreds of thousands of officials, high and low, including many in the
services most vital to maintaining the party’s grip on power: the armed
forces, the police and the spy apparatus. Most of the fallen have been
accused of corruption, but some, too, of political wrongdoing. Last
September courts imposed lengthy prison sentences on several security
chiefs accused of being corrupt, as well as members of a disloyal cabal.
They included a former deputy minister of public security and a former
justice minister. In 2015 Zhou Yongkang—a retired head of China’s internal
security services and former member of the Politburo’s Standing Committee
—was sentenced to life in prison for bribery and leaking state secrets. Mr Xi
accused him and other jailed associates of attempting to “seize power”.

If General Li is replaced as defence minister, there could be an upside for

America. Last August, in response to a visit to Taiwan by the then speaker of
America’s House of Representatives, Nancy Pelosi, China halted regular
talks between the two countries’ defence establishments. America is keen to
restart them, seeing them as useful for discussing ways of preventing
unintended clashes. But while working in procurement, General Li was
placed under American sanctions in 2018 for buying fighter jets and missiles
from Russia. China wants the sanctions to be lifted before talks resume.
Removing the man himself may resolve an impasse. ■

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understand what the world makes of China—and what China makes of the
world.
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minister-raises-big-questions

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Claims on the past

How China uses UNESCO to rewrite history

The country’s heritage sites often reinforce the Communist Party’s view of
the past
Sep 21st 2023

PU’ER TEA is an earthy brew beloved of dieters for its digestive qualities.
Its leaves come from the forests of Jingmai mountain in south-west China,
which was listed as a World Heritage site by UNESCO, the cultural arm of
the United Nations, on September 17th. The designation, China hopes, will
boost tea sales and lure tourists to the region, which is near the border with
Myanmar, Laos and Vietnam. Chinese officials work hard to obtain the
UNESCO stamp of approval. Only Italy has more such sites. No country
comes close to China in terms of the number of cultural practices recognised
by the organisation.

But there is more to China’s efforts than increasing tea sales and tourism.
The Communist Party claims that present-day China, which has dozens
(perhaps hundreds) of ethnic minorities, is a single nation with a continuous
history stretching back thousands of years. National identity is conflated

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with that of the Han, the ethnic group accounting for more than 90% of the
population. China’s heritage laws aim to maintain “the unification of the
country” and foster “social harmony”. In practice, this often means distorting
history so that it aligns with the party’s view of the past and reinforces its
vision of nationhood.

When UNESCO conceived its record of World Heritage sites in the 1970s,
China was intent on crushing its cultural relics. Today, though, China
donates more money and sends more delegates to the international body than
any other country. Many of the sites ratified by UNESCO, such as the Great
Wall, are well known. But others, along with certain cultural practices, are
put forward in order to legitimise the party’s rule over regions with large
ethnic minorities, says Christina Maags of Sheffield University. Areas such
as Xinjiang and Tibet have not always been part of China, nor dominated by
the Han. Yet the party’s version of history tells a different story.

In the far-western region of Xinjiang, over 40% of the population are

Uyghur, an ethnic minority. Their culture, language and Muslim faith set
them apart from much of China. The Uyghur heartland began to fall under
formal Chinese control in the mid-18th century—revealingly, the Manchu
rulers of the Qing dynasty named it Xinjiang, meaning “new territory”. Over
the past decade the party has forced Uyghurs and other ethnic minorities in
the region to assimilate. After 2017 perhaps a million of them passed
through “re-education camps”. Security remains intense, with the
government citing concerns about terrorism and separatism. Activists say it
is erasing the Uyghur culture.

None of this is reflected in the government’s nomination of the Tianshan

mountains in Xinjiang as a World Heritage site. “Since ancient times, people
of all Chinese nationalities have lived on this fertile land and have created a
rich material culture and spiritual civilisation,” reads the application. It
describes a Xinjiang of Han military towns and transportation centres and
cites Han poets who lauded the Tianshan mountains. In nearly 1,000 pages
of documentation the Uyghurs are mentioned only a handful of times, often
as part of a list of ethnic groups who live in the area. A similar history of
Xinjiang was put forward by the Chinese government when a portion of the
Silk Road was up for UNESCO recognition. The region was described as a

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cultural belt that saw the “integration” and “continuous fusion” of Han
people with “local residents”.

When Mao Zedong’s guerrillas seized power in 1949, China’s borders were
not clearly defined, nor its population entirely submissive. In 1950, when
Communist troops invaded Tibet, they were not welcomed by its residents as
liberators, as the party claims. Promises of autonomy were broken, leading
to an abortive Tibetan uprising against Chinese rule in 1959. The history
approved by UNESCO, though, suggests a more harmonious past. In 2013
the organisation accepted the records of Tibet from China’s Yuan dynasty
(1279–1368) into its “memory of the world”. These were proof, said the
government in Beijing, of an ancient period when imperial rulers were
“highly tolerant of the religious, political system and culture of Tibet”—and
also evidence that the integration of Tibet into China under the Yuan was
lasting.

All for one

To bolster the idea of a Han-centric identity, the party seeks to dilute the
contributions of minority groups in UNESCO claims. For example,
documents filed with the organisation state that Tibet’s Potala Palace, the
winter home of Dalai Lamas from 1649 to 1959 (pictured), exhibits the skills
of many ethnic groups, not just Tibetans. The government uses “radical
selectivity” in choosing which places, people and practices to emphasise,
says Rachel Harris of the School of Oriental and African Studies, part of the
University of London.

The state is also selective about what cultural practices it ascribes to

different groups. The Han are typically credited with “civilisation building”,
says Juheon Lee of Midwestern State University in Texas. So the group is
associated with applications involving high culture, such as the Peking
opera, or technical expertise, such as bridges. In contrast, ethnic groups in
border regions are nominated for folk practices like medicinal bathing
(Tibetans) and throat singing (Mongols).

UNESCO tends not to dispute China’s claims. Nor would it be safe for
historians in China to do so. Ms Harris notes that Uyghur scholars are locked
up for asserting a different version of history. But the party’s effort to put

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forward its own interpretation has been slowed, at least. In 2018 UNESCO
changed its rules so that a country could nominate just one new site a year. ■

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understand what the world makes of China—and what China makes of the
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Spooked

China tells its citizens to be on the lookout for spies

They’re everywhere, says the local intelligence agency
Sep 21st 2023 | BEIJING

A SEA-CUCUMBER farm is not an obvious target for spies. So when a

group of foreigners turned up at one in north-east China last year, the owner,
Mr Zhang, did not think much of it. According to state media, the guests
received permission to install seawater-quality monitors. After they left, Mr
Zhang noticed that the equipment was not working properly. It also had a
mysterious, beeping antenna attached to it. So he called the authorities. They
said it was transmitting strategic data on China’s oceans to “hostile powers”.
The foreigners were found and arrested.

Stories like this, true or not, serve the purpose of China’s intelligence
agency, the Ministry of State Security (MSS). It claims that the kind of
espionage discovered by Mr Zhang is rampant—and ordinary Chinese must
help to stop it. On August 1st the MSS joined WeChat, a popular messaging
app, to implore “all of society” to look out for spies. This followed a
comment by William Burns, the CIA director, that America had made

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progress in rebuilding its spy networks in China a decade after dozens of its
sources were killed or disappeared.

The government is doing its part to increase public awareness. It has offered
rewards of up to 500,000 yuan ($68,500) for reporting spies. In the city of
Zhengzhou, warnings about foreign snoopers have been placed on the back
of bus seats. Elsewhere officials are using leaflets, lectures and comic strips
to get the message out. In the region of Xinjiang officials produced a short
film depicting a spy disguised as an amateur photographer. The spy asks a
taxi driver to take him to a military base. The alert driver takes him to the
police.

A specific appeal has been directed at young people. The MSS says it wants
“the seeds of national security to take root and sprout” in their minds. Local
branches of the ministry have joined up with schools to put on classes and
exercises. One of these, at Xiamen University earlier this year, saw students
play spies and spy-hunters. Middle-schoolers in Shanghai are taught about
national security on board a mock aircraft-carrier, while dressed in fatigues.

But things get tricky when students go abroad. Officials worry they will be
lured into spying for foreign powers. The MSS has shared cautionary tales
on WeChat. In one, a Chinese student in Italy is said to have been recruited
by American spooks over fancy dinners and trips to the opera. Another is
said to have got too friendly with an American embassy official in Japan.
Both of the students returned to China and sold secrets to the CIA; they have
since been caught and punished, says the MSS.

The ministry’s campaign has gone down well with some members of the
public. Netizens have warned government workers not to share too much
about their jobs online, in case spies are reading. A video that claims the
CIA was behind the recent deaths of several engineers and scientists has
over half a million views.

Others, though, think the government is going too far. Hu Xijin, a well-
known nationalist commentator, complained that people are growing
increasingly scared to meet foreigners, lest they be reported. On Weibo, a
social-media site, some users worried about a return to the days of the
Cultural Revolution, a decade of Maoist madness when neighbours, friends

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and even family members informed on each other. “History is a circle,” said
one person. “Tragedies like sons reporting on fathers seem to be getting
close again.”

The increased paranoia will make life even harder for foreigners in China. A
photo circulating on social media shows an American teacher in Shanghai
explaining to his class that he is not a spy. Your correspondent was recently
intercepted by officials while on a reporting trip. A member of the public,
the officials explained, had seen a foreigner asking questions. Being a good
citizen, they had called it in. ■

Subscribers can sign up to Drum Tower, our new weekly newsletter, to

understand what the world makes of China—and what China makes of the
world.
This article was downloaded by zlibrary from
https://www.economist.com/china/2023/09/21/china-tells-its-citizens-to-be-on-the-
lookout-for-spies

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Chaguan

China wants to be the leader of the global south

An unusual speech in Cuba gives hints about its grand plan
Sep 21st 2023

IT IS NOT every day that someone from Xi Jinping’s inner circle drops a
reference to Zhou Enlai, Mao Zedong’s chief diplomat. Yet Zhou’s dapper
ghost hung over a recent speech given in Havana to developing-world
leaders by Li Xi, boss of the feared Central Commission for Discipline
Inspection. Indeed, the whole speech was filled with nods to the past. Mr Li
recalled mid-20th-century struggles for “national independence and
liberation”. He mentioned the “Bandung Spirit” and “Five Principles of
Peaceful Coexistence”. That refers to the Bandung Conference of 1955, at
which Zhou committed China to a path of non-aggression and non-
interference in the affairs of other Asian and African countries.

The discipline-enforcement boss was sent to Cuba as Mr Xi’s personal

envoy to a summit involving China and emerging economies from the G77
group. He promised that China will “always be part of the developing world
and a member of the global south”, no matter how advanced it becomes. By

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way of explanation, Mr Li reached back into history. China is forever bound
to other nations that fought colonial-era “exploitation and oppression”, he
said.

Mr Li, a member of the Politburo Standing Committee, the top leadership

body, was not speaking off the cuff. Nor was his cold-war history lesson a
one-off, inspired by the sight of shark-finned old Cadillacs chugging through
Havana. China has launched a new, concerted campaign to present itself as a
natural leader for the developing world, starting with countries that have
painful memories of bullying by colonial powers or by America.

On September 13th the foreign ministry published a “Proposal of the

People’s Republic of China on the Reform and Development of Global
Governance”. This urges sweeping changes to the rules and institutions that
oversee international development, security and human rights. It finds many
lessons in history. America (referred to as a “certain country”) is told to learn
from past wrongdoing, including ignoring Russia’s “legitimate security
concerns”, making “wanton use” of sanctions and hampering scientific
progress with “hegemonic” controls on technology sales.

In the name of redressing “historical injustices”, China calls for developing

countries to be given a much greater say at the United Nations, including
seats for Africa on an expanded Security Council (the proposal makes no
mention of China’s rival, India, a developing giant that has long sought a
seat on the council). Restating long-standing Chinese arguments, the
proposal calls the rights to subsistence and development “the basic human
rights of paramount importance.” All other rights must bow to “national
realities”. To advance that worldview, China proposes that UN human-rights
bodies should employ more citizens from developing countries as soon as
possible. More clearly than ever before, the document weaves together Mr
Xi’s big foreign-policy proposals, from the Belt and Road Initiative to the
Global Development Initiative, Global Security Initiative and Global
Civilisation Initiative. It presents them as China’s unified plan for tackling
everything from climate change to the regulation of cyberspace. The stated
goal: to create a “better future for humanity”.

The proposal was followed days later by a joint statement issued by Mr Xi

and Zambia’s president, Hakainde Hichilema, who was on a state visit to

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China. The statement names and endorses Mr Xi’s various global initiatives
in turn. China’s preferred foreign policies are presented as in the common
interest of developing countries. Rich states are reminded of their
“inescapable historical responsibilities over climate change”, and told to take
the lead in reducing emissions. Zambia declares China a new model for
countries seeking independent paths towards modernisation. Independence is
relative, of course. Zambia owes China billions of dollars. After long
resistance, Chinese lenders agreed to restructure much of this debt in June,
but largely by extending maturities and offering to suspend interest
payments for some years, rather than by writing off loans.

Towards a China-crafted, China-led order

Chinese officials and scholars detect a turning-point in history. Many low-
and middle-income countries resent Western arguments about right and
wrong. They blame sanctions on Russia, imposed by Western countries over
its invasion of Ukraine, for high food and energy prices. In response, China
is presenting itself as leader of something resembling a new, non-aligned
movement. China calls for “true multilateralism”, delivered by international
bodies, from the UN to the World Bank and International Monetary Fund,
that are no longer dominated by America and other rich liberal democracies.
It talks of respecting the diversity of the world’s civilisations: code for
rejecting liberal values as a form of Western-centric racism.

China’s non-aligned posture does not stand much scrutiny, though. In the
original non-aligned movement, Egypt, India, Yugoslavia and others gained
clout by forming an ideologically unpredictable and diverse group, says
Richard Gowan of the International Crisis Group, a think-tank. This time, for
all the “mood music about anti-colonialism”, what China is offering is “a
coalition of states that China would lead”.

By declaring that a rich China would still be a developing country, Chinese

leaders are manipulating language so that “developing” ceases to be an
economic term and means “non-Western”, says a diplomat. The goal is to
rally non-Western countries around Mr Xi’s favoured vision for global
governance. Some will be wary, adds the diplomat, for they wish “to
diversify their strategic, economic and political interests”, not sign up to a
China-led bloc.

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Still, foreign leaders can expect pressure to endorse China’s new proposal
for global governance. It contains so many Xi-branded initiatives that
Chinese diplomats must promote it, or risk seeming disloyal to their supreme
leader. Chairman Mao’s long-suffering envoy, Zhou Enlai, would
understand. ■

Read more from Chaguan, our columnist on China:

Xi Jinping builds a 21st-century police state (Sep 14th)
The Belt and Road, as seen from China (Sep 7th)
When China thought America might invade (Aug 31st)

Also: How the Chaguan column got its name

This article was downloaded by zlibrary from
https://www.economist.com/china/2023/09/21/china-wants-to-be-the-leader-of-the-
global-south

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United States
Parts of America are becoming uninsurable
What Ken Paxton’s acquittal means for Texas Republicans
Illinois is the first state in America to abandon cash bail
Biden, alone at the top table as the UN withers
America’s states are trying to set rules for the internet
In America, lots of usable organs go unrecovered or get binned
America’s dumbest, wildest budget fight yet

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Uninsurable America

Parts of America are becoming uninsurable

Blame growth in hazardous areas, climate change and bad policy
Sep 21st 2023 | Santa Clarita

ELLIE LAKS remembers watching the wildfire crest the desiccated hills in
front of her property. “We’re talking about a wall of fire coming towards you
and eating everything in its sight,” she recalls. Ms Laks runs the Gentle
Barn, an animal sanctuary nestled in the mountainous scrublands of Santa
Clarita, in Los Angeles County. On most days the farm is a soothing place.
But on October 24th 2019, fear was the dominant emotion. “You can’t see,
you can’t hear…your throat hurts, you’re coughing, you can hardly breathe,”
she says. The Gentle Barn survived the blaze. But this year, Ms Laks lost her
property insurance when her insurer decided to limit its business in
California. She is not alone. According to state data, 85% of properties in
one Santa Clarita zip code were dropped by their insurers between 2015 and
2021.

In theory, insurance sends a risk signal. Homeowners could expect their

policy to be expensive if they live in a floodplain or in a forest. It would be

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cheaper in places less prone to storms, wind or fire. Yet for decades
distortions in federal and state insurance markets have suppressed rates,
enabling a mass migration to hazardous areas. The population of Florida,
which suffers more hurricanes than any other state, grew more than twice as
fast as the country did between 2000 and 2020. Texas, which is vulnerable to
storms that form in the Gulf of Mexico, grew even faster. By 2015, the value
of insured property along the Gulf and Atlantic coasts had passed $13trn. A
recent study from researchers at Stanford, the University of California in Los
Angeles and the Australian National University suggests the population
living in the “wildland-urban interface”, where nature meets development,
doubled between 1990 and 2010, to nearly 21m people. Even more striking,
the population in areas most prone to wildfires grew by 160%.

While Americans were moving to risky places, climate change was making
them riskier. Now private insurers are sounding alarm bells. Firms are
writing fewer policies in vulnerable areas, and are pulling out of some states
altogether. A new report from the First Street Foundation, a non-profit
research group, suggests 6.8m people have seen increased rates—or, like Ms
Laks, cancelled policies—due to rising flood, wind or wildfire risk. Another
39m, or about a quarter of all properties in the continental United States,
have climate risks yet to be reflected in their premiums. “We are marching
steadily towards an uninsurable future in a number of places across the
United States,” warns Dave Jones, a former insurance commissioner in
California and director of the Climate Risk Initiative at the University of
California in Berkeley.

To understand the challenges facing homeowners, insurers and regulators, it

is worth examining three different markets: Florida, California and the
National Flood Insurance Programme (NFIP).

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In Florida the average home-insurance premium in 2023 is around $6,000,
more than three times the national average and up 42% year-on-year. Yet
rather than drooling over juicy profits, insurers are fleeing. At least 15 firms

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have recently limited their business in the state, according to the Insurance
Information Institute; seven others were declared insolvent. With 1.3m
policies, the state-backed insurer of last resort now has the highest market
share in Florida and is insuring assets worth $608bn. When it can’t afford to
pay claims, policyholders foot the bill.

Extreme weather is not all to blame. In 2021 Florida accounted for nearly
7% of American property claims but 76% of lawsuits. Last year state
lawmakers eliminated a fee system that incentivised lawyers to sue insurers,
in the hope that it would decrease litigation and prevent more costs from
being passed on to homeowners.

The Golden State is following the Sunshine State into market failure, but for
different reasons. Though California is a pricey place to live, property
insurance is relatively cheap thanks to strict consumer-protection laws.
Regulations prevent insurers from raising premiums high enough to cover
inflation, increasing wildfire risk and rising reinsurance rates. State Farm,
the biggest insurer in California, Allstate and Farmers Insurance have
recently limited new policies. As in Florida, the state’s insurer of last resort
is stepping in. California’s FAIR plan nearly doubled its policy count
between 2018 and 2021.

Broker breakers
At the tail-end of the legislative session state lawmakers tried to craft a deal
which, it is said, would have allowed insurers to raise rates and use forward-
looking climate models to set premiums, in exchange for staying in the
market. But time ran out. Rule changes that do not require legislation, such
as allowing the use of catastrophe modelling, may still emerge.

The federal government is the champion of enabling development in risky

areas, though. The flood-insurance programme was created in 1968 to
provide cover which was hard to come by on the private market, and to help
manage risk in flood plains. Yet because the NFIP was heavily subsidised, it
had the perverse effect of enabling, rather than discouraging, development in
such places. The subsidies, combined with increasing risk as development
soared, have left the NFIP in a financial mess. Congress forgave $16bn of its
debt in 2017 so that the programme could pay claims for hurricanes Harvey,

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Irma and Maria. The NFIP’s insolvency is not a recent problem, nor one
created by climate change. The Government Accountability Office, a
watchdog, has pointed out for 40 years that the NFIP’s rates have not been
actuarially sound.

Both in the states and in Congress, there is a bipartisan desire to keep rates
low and constituents happy. In 2021 the Federal Emergency Management
Agency (FEMA), which runs the NFIP, began implementing a new pricing
scheme, called Risk Rating 2.0, to raise rates to a level that accurately
reflects risk. Two-thirds of policyholders will see their premiums rise, some
by astronomical amounts. Price rises are capped at 18% per year, but
Plaquemines Parish, the toe of Louisiana’s boot, will eventually see rates
quintuple above 2022 levels. The backlash has been swift. More than
200,000 people have cancelled their federal flood-insurance policies. Ten
states and dozens of parishes in Louisiana are suing FEMA to scrap the
initiative.

If the NFIP is not reauthorised by Congress before September 30th, it will

have to stop writing new policies. Over the past six years Congress has
granted the NFIP 25 short-term reauthorisations, punting any attempt at
reform down the road. That seems likely to happen again. Yet Sean Becketti,
a former chief economist at Freddie Mac, argues that taxpayers in safer
places may soon wake up to the fact that they are subsidising insurance for
homeowners in risky ones. ”People in Montana are going to say: ‘Why am I
paying for someone to live in south-east Florida?’”

Some reforms reduce risk for insurers and lower costs for some
homeowners. This year insurers in California must begin offering discounts
for homeowners who protect their properties from wildfires. During a recent
demonstration in Orange County, firemen set the grounds of two sheds on
fire. One had all the hallmarks of a fire-safe home—such as a lack of plants
and fencing up against the house. The other boasted shrubs, mulch and a
wooden fence. After a few minutes, this house was engulfed in flames. The
fire-safe one escaped the experiment unscathed.

Such tweaks cannot erase risk. As premiums rise and homeowners have
trouble finding coverage, local economies may suffer. Some people will be
priced out. Mr Becketti recently warned the Senate that overvalued homes

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will depreciate as their true risk is realised and, unlike after America’s
subprime housing bubble burst in 2007, they will not recover their value.
Insurance is “the canary in the coal mine”, for how climate change will
affect property markets, he tells The Economist.

In time, the people who can afford to stay in coastal Florida or in the
foothills of the Sierras will be those who can pay the exorbitant cost of
insurance that comes with an ocean view or woodland retreat. Or, if there is
no coverage to be found, those who can afford not to be insured at all. What
about the people who can’t afford to stay, and can’t afford to abandon their
homes? Jesse Keenan, a professor of sustainable property at Tulane
University in New Orleans, argues local governments need to start thinking
seriously about managed retreat. “At the end of the day, people who live in
super-high-risk zones are going to have to move,” he says. “And there’s
going to be a lot of political bloodshed along the way.”■

Stay on top of American politics with Checks and Balance, our weekly
subscriber-only newsletter, which examines the state of American democracy
and the issues that matter to voters.
This article was downloaded by zlibrary from https://www.economist.com/united-
states/2023/09/21/parts-of-america-are-becoming-uninsurable

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Pax Texana

What Ken Paxton’s acquittal means for Texas

Republicans
Threats from the MAGA phalanx cowed lawmakers
Sep 21st 2023 | Austin

THOUGH THE Texas House of Representatives overwhelmingly impeached

Ken Paxton in May, in a trial that concluded on September 16th a star-
studded prosecution team failed to persuade the Senate that the attorney-
general had illegally used his office to benefit his buddy Nate Paul, an
Austin-based property developer. Only two of the 18 Republicans voted to
convict on the articles handed to them by their sister chamber, falling seven
votes short of ejecting him. The acquittal comes after two weeks of
testimony from the office’s former top brass, who were sacked or resigned
after reporting to the FBI that their boss was taking bribes. It also promptly
sends the conservative demagogue back to work.

After the senators set Texas’s top cop free, Dan Patrick, the lieutenant
governor who presided as a non-partisan trial judge, blasted the House for
wasting taxpayer dollars on a sham probe. His change in disposition, though

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stark, is unsurprising. In July, one day after he issued a gag order that
forbade lawmakers from talking about the case, it came out that he had
received $3m from Defend Texas Liberty PAC, a pro-Paxton outfit. Mr
Patrick may not have been the only one who accepted donations while the
House was deciding whether to impeach Mr Paxton. Because of Texas’s lax
campaign-finance rules, the senators were free to accept cash from interest
groups. That is unusual, considering they were meant to be acting as jurors.

Pundits correctly predicted that whether Mr Paxton was ousted or reinstated,

it would be by a wide margin. Defend Texas Liberty vowed to lead the
campaign to crush Republicans who betrayed the attorney-general. Before
the trial San Jacinto 2023, a corporation newly registered in Virginia, spent
at least $30,000 on ads targeting swing senators; on his talk-show the War
Room, Steve Bannon had them called out by name. The calculus became
clear: if acquittal seemed likely, it could be political suicide for lone
Republican senators to stick their neck out to convict. Neither Kelly
Hancock nor Robert Nichols, the two who dared to, is up for re-election in
2024.

Mr Paxton applauded the senators for restoring the will of the people who
voted him in. Yet according to the Texas Politics Project at the University of
Texas at Austin, ahead of the trial 47% of registered voters thought the
attorney-general ought to be removed and 18% did not (the others weren’t
sure). Dedicated partisans, however, closed ranks around him.

Because Texas is a one-party state—the Democrats have not held statewide

office since 1994—fringe right-wingers have outsize influence. Republican
primaries are the only contest in town and even though members of either
party are eligible to vote in them, just 2m of the state’s 30m residents
typically do. Polls show that those who cast ballots prize far-right policies
and have little interest in moderates.

Texas’s now-reinstated attorney-general could yet be toppled by the feds. In

February the Justice Department took over the FBI’s investigation of the
whistleblowers’ claims. Though fellow Republicans led the impeachment
inquiry, Mr Paxton contends that Joe Biden was ultimately behind it. Being
dethroned by Washington officials after Texas lawmakers voted him back in
would electrify animosity.

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That case, which has been under way for three years, is unlikely to be settled
soon. In the meantime, the nearly martyred Mr Paxton may jockey for higher
office. His election-denying heroics make him a prime candidate for a gig in
a second Trump administration. On Tuesday he was interviewed by Tucker
Carlson. Following the playbook of the former commander-in-chief, who
congratulated Mr Paxton on a “Texas sized VICTORY”, he aims to turn his
legal liabilities into badges of honour. ■

Stay on top of American politics with Checks and Balance, our weekly
subscriber-only newsletter, which examines the state of American democracy
and the issues that matter to voters. You can read other articles about the
elections of 2024 and follow along as we track shifts in Joe Biden’s approval
rating.
This article was downloaded by zlibrary from https://www.economist.com/united-
states/2023/09/21/what-ken-paxtons-acquittal-means-for-texas-republicans

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Busting out

Illinois is the first state in America to abandon

cash bail
Will it actually keep people out of jail?
Sep 21st 2023 | CHICAGO

AT THE BACK of room 100 in the Cook County criminal court, in south-
west Chicago, a conversation is taking place before proceedings start. The
room is packed, and two young men awaiting a decision on the fate of a
friend, arrested the night before, chat with a woman who explains why the
place is so busy. As of this morning, she explains, nobody arrested or
charged in the state will be asked to put up money to be set free before trial.
“You mean you don’t even need to put up property?” asked one of the men
in reply, surprised. No, she explains. “Nah,” says the other man, sceptically.
“This is a business.” If the judges cannot charge people money, they will
lock everybody up, he opines. “It is gonna be back to three men in a cell.”

On September 18th, Illinois became the first state to completely scrap cash
bail, when it implemented a law passed more than two-and-a-half years ago.
In the 1950s Nelson Algren, a poet, wrote that Chicago was “still the easiest

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joint in the country in which to get a jump bond”, with “the price commonly
being whatever you have in your wallet.” Now, the price will be less even
than that. The idea, in the words of Kim Foxx, the chief prosecutor in Cook
County, which covers Chicago and its inner suburbs, is that people should
not be held in jail “by some arbitrary monetary amount”. Advocates hope it
will set a precedent that other states might follow. But the men in the
courtroom are not the only sceptics about how it will play out.

The case for the reform is simple. “The money-bond system is

fundamentally irrational,” says Sarah Staudt of the Prison Policy Initiative, a
criminal-justice-reform charity. Domestic abusers were often freed on bond,
whereas homeless shoplifters ended up in jail, she says. And pre-trial
imprisonment imposes huge costs on people who are still legally innocent.
They can lose jobs, see relationships collapse or become victims of violence
themselves inside. Some studies suggest that innocent people are more likely
to plead guilty, so as to be released, sentenced to time already served.
Against that, however, is the fear that dangerous criminals will be let free.

Under the new system, judges are meant to balance those risks more
deliberately. Whereas bonds used to be decided in as little as a minute, now
hearings to set bail conditions take at least five, and hearings to detain
somebody longer still. Prosecutors deliver a summary of the arrest and
charge, as well as the suspect’s criminal history. The defence offers
mitigating factors, such as the suspect’s employment or caring
responsibilities. An official from a new “pre-trial” agency delivers two
scores: on threat to public safety and likelihood to skip bail. And then the
judge decides.

Advocates such as Ms Staudt stress that reducing the number of people in

jail is the point. Ms Foxx, a progressive district attorney, says that in fact she
hopes more of at least some types of suspects will be locked up. “We have
seen far too many people who have been able to access cash bail who have
gone on to commit harm, to threaten to terrorise,” she says. Exactly how the
balance shifts is yet to be seen. Those your correspondent witnessed freed on
September 18th included people charged with offences such as shoplifting.
But there was also a woman accused of pepper spraying several police
officers; at least a dozen cases of people caught with illegal guns; and one

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man, released not that long ago from prison for murder, who was accused of
threatening to “shoot everybody” in a shop he was stealing from.

In New York, a law that eliminated cash bail in all but a few serious violent
offences led to a 40% reduction in pre-trial detention between 2019 and
early 2020, according to the Centre for Justice Innovation, a charity. But as
crime rose, from the summer of 2020 onwards, the result was a backlash
(even though it rose everywhere). The law has been amended three times
since. In Chicago, few shootings at least are committed by people on bail,
says Jens Ludwig, of the University of Chicago’s crime lab. But judges and
prosecutors will probably be cautious. Do not expect three men to a cell; but
the Cook County jail may not empty that quickly either. ■

Stay on top of American politics with Checks and Balance, our weekly
subscriber-only newsletter, which examines the state of American democracy
and the issues that matter to voters.
This article was downloaded by zlibrary from https://www.economist.com/united-
states/2023/09/21/illinois-is-the-first-state-in-america-to-abandon-cash-bail

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Diplomacy in the new cold war

Biden, alone at the top table as the UN withers

Global power shifts to smaller groups
Sep 20th 2023 | NEW YORK

COME SEPTEMBER, come the gridlock to Manhattan as leaders gather for

the UN General Assembly. This year, though, there was less grandeur to it.
President Joe Biden was the only leader of the big five permanent members
of the Security Council to show up. This gave him more freedom to show a
way through what he calls “an inflection point in world history”. And
Ukraine’s president, Volodymyr Zelensky, took the spotlight, warning that
Russia’s invasion threatened all: “Many seats in the General Assembly Hall
may become empty if Russia succeeds.”

Granted, Xi Jinping and Vladimir Putin rarely attend the talkfest. The
Russian leader is anyhow indicted for war crimes. The surprise was that
Rishi Sunak and Emmanuel Macron, the British and French leaders, passed
up the UN stage. Blame summit fatigue—both European leaders were in
Delhi earlier this month for the G20 summit hosted by Narendra Modi (who
also skipped New York). Or blame concerns at home, as Mr Sunak

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weakened green pledges and Mr Macron hosted the pope and the British
king.

Yet the no-shows point to deep malaise at the UN, paralysed by the war in
Ukraine, the rivalry between America and China and the outdated but
unreformable Security Council. “Our world is becoming unhinged,”
lamented the UN secretary-general, António Guterres. “Geopolitical tensions
are rising. Global challenges are mounting. And we seem incapable of
coming together to respond.” His cry barely caused a stir.

Some think the looser G20, whose economies account for four-fifths of
global output, is the better venue to seek global solutions. America regards
the smaller G7 group of industrialised countries as “the steering committee
of the major democracies”, where its allies can best respond to Russia and
China. And though China seeks to bend the UN to its liking , Mr Xi is keen
to bulk up the BRICS group of developing countries.

“The real political value is moving to other places,” says Richard Gowan of
the International Crisis Group, a think-tank. “Reform of the UN is blocked,
so other political clubs inevitably become more important.” America has
been creating ad hoc groups, notably in Asia. This week Mr Biden hosted a
new summit with five Central Asian leaders. Antony Blinken, his secretary
of state, launched a new “partnership for Atlantic co-operation” including
African and Latin American states. Coalitions of the willing are part of
diplomacy but lack “universal endorsement”, notes Mark Malloch-Brown, a
former UN deputy secretary-general; the UN will endure, but will “busy
itself with second-tier issues as it did during the cold war”. ■

Stay on top of American politics with Checks and Balance, our weekly
subscriber-only newsletter, which examines the state of American democracy
and the issues that matter to voters. For more coverage of Joe Biden’s
presidency, visit our dedicated hub.
This article was downloaded by zlibrary from https://www.economist.com/united-
states/2023/09/20/biden-alone-at-the-top-table-as-the-un-withers

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Blocking manoeuvres

America’s states are trying to set rules for the

internet
This sets up a clash between protecting children and free speech
Sep 21st 2023 | WASHINGTON, DC

THE INTERNET has changed a bit since America Online’s discordant tones
marked the slow progress towards an even slower online connection. But
federal and state legislators have struggled to keep up with policies to
regulate it. California’s new online-safety law for children, signed by
Governor Gavin Newsom in September 2022, was supposed to correct for
this. Child-safety advocates hoped it would be a major step towards
regulating the internet. However, a federal judge has intervened, setting up a
clash of values between child safety and free speech.

NetChoice, a trade organisation that includes Google and Meta as members,

sued California on First Amendment grounds. On September 18th Beth
Labson Freeman, a district-court judge, temporarily blocked the law.
California’s was supposed to lead the way; instead, it looks like a warning to
other states that would like to do the same.

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The law, known as the California Age-Appropriate Design Code Act, was
supposed to go into effect in July 2024, and would require online platforms
to treat children with more sensitivity. Car seats, cots and pyjamas have
special regulations for children, says Buffy Wicks, a California legislator and
co-author of the law. “Products that kids access online should have similar
consumer-protection regulations.”

California modelled its law on Britain’s Age Appropriate Design Code,

which came into force in 2020. If California’s law survives the legal
challenges, companies would need to be careful about how they collect
personal information, such as where a child is. Some firms might choose to
disable direct messages between children and adults who are not in their
network. Others may choose to turn off autoplay features or turn on bedtime
reminders for children.

After California’s bill was signed, other states followed. Florida and
Connecticut have drawn up similar bills. Other states are focused less on
design and more on giving parents a say in what their children can do online.
Utah’s governor signed two laws in March that require children to have
parental consent to use social media. The state also prohibits minors from
using the sites between 10:30pm and 6:30am, and holds companies liable for
harming children. Utah’s laws will go into effect in March 2024. A similar
law in Louisiana will start next summer. A different law in Arkansas that
would have taken effect in September of this year has also been temporarily
blocked by a federal judge.

Much of the legal pushback is on free-speech grounds. “Any law that limits
the ability of younger people to access certain material…that sounds alarm
bells,” says Megan Crowley of Covington & Burling, a law firm. She has
represented tech firms on first amendment cases. “The Supreme Court has
made it clear that kids have First Amendment rights,” she says. Ms Wicks is
hopeful that the law will survive legal challenges, but Eric Goldman, a
professor of law at Santa Clara University, is sceptical. The First
Amendment is “pretty foundational stuff for us,” he says. “We were willing
to go to war [with Britain] over that.”

Other states attempting to regulate tech have also stirred-up controversy. In

July Pornhub, a hub for porn, blocked its website in Virginia after the state

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passed a law requiring users to verify their age to access pornographic
websites. In August a federal judge blocked a similar law in Texas.
NetChoice is suing Texas and Florida over laws that prevent social-media
companies from regulating content, such as removing extremist political
opinions. That case could reach the Supreme Court in its next term.
California’s setback may give state legislators pause, but the legal battles
over who rules the web have only just begun.■

Stay on top of American politics with Checks and Balance, our weekly
subscriber-only newsletter, which examines the state of American democracy
and the issues that matter to voters.
This article was downloaded by zlibrary from https://www.economist.com/united-
states/2023/09/21/americas-states-are-trying-to-set-rules-for-the-internet

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Wasted organs

In America, lots of usable organs go unrecovered

or get binned
That is a missed opportunity to save thousands of lives
Sep 16th 2023 | New York

WHEN THE phone rings at LiveOnNY, death turns to opportunity. The

organisation fields calls from 100 or so hospitals in and around New York
City about every dead or dying person on a ventilator: stroke patients,
gunshot victims, car-crash fatalities. Their organs might save sick people’s
lives. But most are not registered donors, so staff at LiveOnNY must
persuade their families to donate, then rush the organs to transplant centres.
Time is precious. A heart can go no more than six hours outside the body.
Kidneys last longer, and can fly commercial.

LiveOnNY is one node in a network that gets organs from dead bodies into
sick patients. America has more deceased donors, relative to its population,
than any other country, but that does not adjust for type of death. Take into
account America’s surfeit of drug overdoses, car crashes, suicides and

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shootings—which tend to be more conducive to donation—and the country
probably looks less exceptional.

Last year more than 36,000 organs from deceased donors were transplanted,
though the pool of unrecovered, potentially usable organs is estimated to be
at least double that. Tapping that supply would help meet a vast demand:
103,000 people are waiting for an organ. Last year about a tenth died while
waiting or were delisted because they were too ill. Ignoring the “gap

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between the donors that we know are out there and the donors that we’re
actually finding”, says Seth Karp, director of Vanderbilt University’s
transplant centre, is “kind of unconscionable”. Modest increases could
eliminate heart, lung and liver waiting-list deaths, and reduce the wait for a
kidney, which averages four years.

More than four-fifths of all donated organs and two-thirds of kidneys come
from dead people (who must die in hospital); living donors can give only a
kidney or parts of a lung or liver. Whereas some countries, such as England,
France and Spain, have an opt-out model, in America donors must register or
their families must agree. Persuading them will always be hard: Dr Karp’s
hospital gets consent from about half of potential donors. Elsewhere rates are
much lower because those responsible are not trying hard enough, or at all.
The Veterans Health Administration—the country’s largest health-care
provider—yielded just 33 deceased donors out of roughly 5,200 donation-
consistent deaths between 2010 and 2019.

Responsibility lies partly with some of the 56 nonprofit Organ Procurement

Organisations (OPOs), like LiveOnNY, that do the legwork. Brianna Doby, a
researcher and consultant, advised Arkansas’s OPO in 2021 and was
astounded to learn that most calls about potential donors went unanswered
outside the nine-to-five workday and at weekends. Other OPOs, by contrast,
sent staff to hospitals within an hour of an alert about a prospective donor.

Each OPO has a monopoly in the region in which it operates: the idea was
that they should not jockey with each other at a deathbed. But none has ever
lost its contract, even though performance varies hugely. If the bottom three-
quarters of OPOs matched the top performers’ recovery rates in 2021, about
6,000 more organs would have been transplanted, or 17% of the total from
deceased donors that year.

Kidney been
This will soon change. Laggards will be decertified in 2026 and taken over
by high-performers that bid for them. The group responsible for monitoring
the OPOs is also due for a shake-up. In July Congress passed a law to open
bidding for parts of that job, which has been done for decades by the United
Network for Organ Sharing (UNOS).

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Yet unrecovered organs are not the only reason America could do more
transplants. A surprising number of organs from deceased donors end up in
the rubbish: more than a quarter of kidneys and a tenth of livers last year. In
the past few years UNOS have expanded the geographical area in which
organs can be allocated, increasing travel times and discard rates. The
system is “groaning under this new complexity”, says Peter Reese of the
University of Pennsylvania’s medical school.

Hospitals are often risk-averse, too. Discard rates are higher for organs of
lower quality. Olivier Aubert at the Necker Hospital in Paris and his
colleagues found that between 2004 and 2014 America’s kidney-discard rate
was twice that of France, which makes use of older kidneys. During that
time three in five kidneys binned in America would have been transplanted
in France. Extrapolation from French data yielded more than 132,000
unrealised life-years had they been transplanted.

For elderly recipients, getting older or otherwise risky kidneys generally

means better odds of survival than staying on dialysis. But hospitals dislike
using them for two reasons. First, they can lead to more complications and
thus require more resources, eating into margins. Second, if the recipient
dies soon after the transplant, hospitals suffer—a key measure used to
evaluate them is the survival rate of recipients a year after transplant.
According to Robert Cannon, a liver-transplant surgeon at the University of
Alabama at Birmingham, hospitals succeed by being excessively cautious
and keeping patients with worse prospects off waiting lists.

Meanwhile, usable organs are going to waste. Sumit Mohan of Columbia

University found that kidneys of the same quality were 25% more likely to
end up in the rubbish if procured on Friday or Saturday. That would mean
operating at weekends. ■

Stay on top of American politics with Checks and Balance, our weekly
subscriber-only newsletter, which examines the state of American democracy
and the issues that matter to voters.
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states/2023/09/16/in-america-lots-of-usable-organs-go-unrecovered-or-get-binned

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Lexington

America’s dumbest, wildest budget fight yet

Sensible lawmakers should exploit it to make some demands of their own
Sep 21st 2023

HOW STRANGE that some American politicians have persuaded

themselves it is patriotic and wise to menace their own country’s credit or
shut down its government. Amid such nonsense, one can forget that
Washington teems with bureaucrats, non-profiteers and even members of
Congress who are devoted students of public policy, brimming with zeal for
sensible reform. Upon encountering such would-be do-gooders in this era of
legislative hissy fits, should one be filled with relief, or pity?

Lexington found himself mulling this question as, buffeted by successive

waves of each sentiment, he roamed recently among the hundreds of boffins
mingling at the annual “Budget Bash” of the Committee for a Responsible
Federal Budget, a non-profit group whose name rings more plangently with
each passing year.

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It was a muggy September evening at the top of a Washington office
building; through the gloaming glimmered the dome of the Capitol, where
the speaker of the House, Kevin McCarthy, had just given up persuading
fellow Republicans to vote for a defence-spending bill the Republicans
themselves had written. With the end of the fiscal year approaching, and
Republicans in the House at each other’s throats—let alone in serious talks
about the budget with Democrats in the House, let alone the Senate, let alone
the White House—the government was careening again towards a shutdown.
Small wonder there was talk among the “budget community”, as these
beleaguered believers refer to themselves, of rolling boulders up hills.
“Obviously, there’s not much to celebrate,” announced one of the evening’s
toastmasters.

As the budget community knew well, the current stand-off was dire, and
dumb, even by the dismal standards of impasses past. Though Congress
decades ago abandoned the orderly budget process it created in the early
1970s, budget fights in recent years have tended to be over how to allocate a
certain amount of money stipulated by law or agreement. That was supposed
to be how things would go this year: under pressure last spring from House
Republicans, who threatened to force America to default by not raising the
statutory limit for its debt, President Joe Biden in June signed the Fiscal
Responsibility Act, which set caps for the next two years on “discretionary
spending”—that is, money for programmes that are not entitlements, such as
Social Security.

But some House Republicans think those caps are too high. They want to
break the deal made just over three months ago. Meanwhile, Senate
Republicans have joined Democrats to seek more spending than the caps
allow. As a result, even the top-line numbers, this time, are up in the air.

The budget community also knew well, as it laid siege to the bar at the
Budget Bash, that Mr McCarthy had made matters even more fraught in a
blundering attempt to appease his most radical colleagues: he had
unilaterally started an impeachment inquiry into Mr Biden over his son
Hunter’s business dealings, despite lacking any evidence the president has
broken a law. Mr McCarthy’s gambit made House Democrats even less
inclined to lend him any votes, but it had not mollified his berserkers,

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members of the so-called Freedom Caucus. They were still threatening to
shut down the government and to topple Mr McCarthy.

And yet, in the face of this mounting chaos, the budget community was
collectively shrugging. It knows that, though a real rupture is always
possible, these dramas tend to follow a certain script. Stopgap funding bills
keep the government open (or, should a shutdown occur, eventually reopen
it) and negotiators work their way to a deal—one that none of the wonks will
recognise as “responsible”.

That is what preoccupies the budget community: not the pantomime in the
foreground, with its gestures at rectitude, but the real crisis building in the
medium to long term. As revenue has slipped and the cost of the federal debt
has risen with interest rates, the deficit has, in effect, doubled in a year to
$2trn, reaching its highest level as a percentage of GDP, 7.4%, in any fiscal
year when the country was not facing some national emergency, such as a
war or recession. The gross federal debt is above 120% of GDP and
climbing. With pensioners multiplying relative to workers, the fund that tops
up Social Security benefits is due to be depleted in ten years, which will
mean mandated benefit cuts of 23-25%.

But because Democrats have successfully campaigned on the sanctity of

entitlements, even the Freedom Caucus has fled from trimming them. And
because Republicans have successfully campaigned on tax cuts, even Mr
Biden favours keeping most of Donald Trump’s profligate tax law of 2017,
set to expire after 2025, a gimmick meant, at passage, to camouflage its
long-term cost.

Just another word for nothing left to choose

That leaves the Freedom Caucus, in its false piety, focused on discretionary
programmes, such as education and transport, which account for about a
quarter of spending. This is magical budgeting. Since neither party wants to
reduce money for defence or veterans either, the Committee for a
Responsible Budget estimates that, to reach balance, spending on all other
programmes would have to be cut by 85% from current levels over ten years.

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If the budget community got its wish, responsible representatives would use
their votes in this collision to insist on concessions, too. They would demand
a commission of respectables to map all paths back to fiscal stability, with a
plan due after the election. Much as the heart might sink at this hoary
strategy, it is probably the only way for Washington to confront such hard
choices. Lawmakers should also demand passage of a bipartisan Senate bill
that, in a shutdown, would force members to stay in session seven days a
week until they pass a budget. They owe the country at least that, and it
might help them get back in practice. In the lulling era of low rates, austerity
fell out of fashion. That is changing gradually, and, one of these days, may
change very suddenly indeed.■

Read more from Lexington, our columnist on American politics:

Why some GOP candidates don’t act as aggrieved as Donald Trump (Sept
14th)
What Democrats can learn from Bobby Kennedy (Sep 7th)
Joe Biden’s re-election bid is in trouble (Aug 31st)

Stay on top of American politics with Checks and Balance, our weekly
subscriber-only newsletter, which examines the state of American democracy
and the issues that matter to voters.
This article was downloaded by zlibrary from https://www.economist.com/united-
states/2023/09/21/americas-dumbest-wildest-budget-fight-yet

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Middle East & Africa
Is the end of AIDS in sight?
Iran’s $6bn hostage deal is part of a broader diplomatic strategy
Lebanon’s prison inmates are running short of food
Khalifa Haftar will use Libya’s floods to deepen his control

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Making sex safer again

Is the end of AIDS in sight?

The virus can be brought under control, but it’s complicated
Sep 18th 2023 | JOHANNESBURG

HOW CAN cotton wool help in the fight against AIDS? The answer is
surprising, and illuminates how complicated it will be to beat the deadliest
sexually transmitted sickness of all time. The struggle involves not only
dazzling science but also old-fashioned insights into human behaviour,
rational and irrational.

Many people who do not have HIV, the virus that causes AIDS, know they
are at risk. They can take pre-exposure prophylaxis (PrEP), a kind of drug
that reduces their chance of contracting it by 99% or so. This comes as a
daily pill, and is popular among gay men in rich countries.

However, there is a much larger group of people at high risk, for whom a
daily pill is far from ideal: heterosexual women in poor places where HIV is
still very common. If their boyfriends discover they are taking the pill, they
may conclude that their girlfriend does not trust them, or that she is planning

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to cheat on them. And a depressing number of boyfriends who suspect such
things react violently.

A high-tech solution is on the horizon: cabotegravir, from ViiV Healthcare, a

single injection that lasts for two months and is much more discreet than a
daily pill. Alas, it is new, costly and not widely available, especially in
Africa, where the virus is most widespread. So Patrick Mdletshe of the
KwaZulu Natal Provincial Council on AIDS in South Africa offers a low-
tech fix: stuff cotton wool in the bottle so the daily pills don’t rattle and your
boyfriend won’t notice that you are taking them.

UNAIDS, a UN body, hopes to end AIDS as a major public-health threat by

2030, building on the staggering success of the past two decades. AIDS,
which weakens the immune system, has killed about 40m people—more
than covid-19. However, the pace at which people are dying of it has fallen
dramatically. In the early 2000s it was 2m a year, largely in poor countries,
where hardly anyone could afford $10,000 a year for life-prolonging pills. In
some African countries between a fifth and quarter of the adult population
was infected with HIV; nearly all were expected to die of it. Life expectancy
in Zimbabwe and Eswatini fell by two decades.

AIDS slaughtered adults in their productive prime—slowly. Breadwinners

sickened, stopped earning and needed care. Their spouses looked after them
until they, too, fell ill. Daughters dropped out of school to care for ailing
parents. Households headed by orphaned children became frighteningly
common.

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Then the price of antiretroviral pills plummeted, as drug firms offered steep
discounts for poor countries and donors chipped in billions to pay for them.
Today a year’s supply can cost a mere $45. Between 2001 and 2019 life
expectancy in sub-Saharan Africa rose by 17%—and much more in the
worst-affected countries (see chart). Globally, some 21m deaths have been
averted, by one estimate. Today, three-quarters of those infected—roughly
30m people—are receiving treatment.

Unfortunately, triumph has bred complacency, argues Peter Sands, the head
of the Global Fund to Fight AIDS, Tuberculosis and Malaria, a donor-
financed body. “There’s a diminishing sense of urgency,” he says. Or worse.
The biggest donor by far is America. Its global AIDS programme, PEPFAR,
which was set up by President George W. Bush, expires on September 30th
and some Republicans are trying to block its reauthorisation. A recent report
from a conservative think-tank described AIDS as “primarily a lifestyle
disease” and griped that PEPFAR was being used to promote a “radical
social agenda overseas”. (It does not bar aid recipients from talking about
abortion.) Mr Bush is horrified. “To abandon our commitment now would
forfeit two decades of unimaginable progress and raise further questions
about the worth of America’s word,” he fumed in the Washington Post on
September 13th.

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An estimated 39m people are HIV positive—more than half of them in
Africa. All will need lifelong treatment unless a cure is found. Meanwhile,
the virus is still spreading. Some 1.3m people were freshly infected last year.
In eastern Europe and the Middle East, the numbers of new infections in
2022 were 49% and 61% higher than in 2010, albeit from low bases.

There are two main approaches to tackling the virus. One is to invent new
medicines: ideally a cure or an effective vaccine. The other is to reach more

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people with existing technology. Both approaches—in the lab and on the
ground—are being pursued in tandem by governments, private companies,
donors and NGOs.

A cure seems a long way off. A vaccine may be closer, but HIV is an elusive
target. It is highly mutable, and hides its DNA inside some of the immune
cells that are supposed to destroy it. Nina Russell of the Gates Foundation,
who has worked on HIV vaccines for “many, many, many, many” years, is
nonetheless hopeful.

From past failures scientists have discovered that they need to design
vaccines that can teach the body to make antibodies to tackle a wide range of
viral strains. They might have to create three, four or five different vaccines
and jab people with all of them, in the correct order. Firms such as Moderna
and BioNTech are using mRNA technology to speed up the process.
However, even optimists do not expect success this decade. So hitting the
2030 target will depend largely on two things. First, finding and treating
more infected people. Second, identifying those who are at risk of infection
and helping them avoid it.

UNAIDS urges countries to aim for “95-95-95”: where 95% of those who
have the virus know they have it, 95% of those who know they have it are
receiving treatment, and crucially that 95% of those in treatment are “virally
suppressed”. If the drugs suppress the virus to a level where it is
undetectable—and keep it there—it cannot be passed on sexually.

If the world were to reach 95-95-95, the disease would be brought under
control, UNAIDS reckons, though tens of millions would still be living with
it. In 2022 the figures were 86-76-71, a hefty improvement on 71-48-40 in
2015. But the “last mile” will be hard. “You have to be much more creative,”
says Dr Quarraisha Abdool Karim of CAPRISA, a research centre in
Durban.

One enormous, tricky group is men. They are less likely to get tested than
women, not least because they do not get pregnant. Prenatal clinics are a
wonderfully convenient place to test women who have recently had
unprotected sex. If they test positive, many countries now offer them free
drugs, which protect mother, child and future romantic partners.

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There is no male equivalent of a prenatal clinic. Also, some men have a
macho reluctance to seek medical help. They “get very sick before they get
tested”, says Sibongile Tshabalala, the chair of the Treatment Action
Campaign, an NGO in South Africa.

“As men, we’re embarrassed to go to a clinic. We’re taught we need to be

strong, so we cannot be seen to be sick,” says Ronnie Sibisi, a 60-year-old
from Vosloorus, a township near Johannesburg. He was “a player” with
many girlfriends, he says. He knew how the virus was transmitted, but
seldom used condoms. “I didn’t think about it,” he shrugs. He did not get
tested until he collapsed and woke up in hospital.

It is, perhaps, most crucial to reach young women and girls. In sub-Saharan
Africa HIV is three times more common among females aged 15-24 than
among their male peers. This is because older men often seek younger
partners. There is peer pressure on young women to have trendy clothes and
hairstyles, says Ms Tshabalala. These cost money, which impels some girls
to sleep with older men. And only 36% of young women in eastern and
southern Africa report having used a condom the last time they had sex with
a casual partner. In West Africa it is only 25%.

If their “sugar daddies” infect them, the girls may pass the virus to a partner
of their own age. This is the most common way that HIV passes from one
age cohort to the next. Breaking that link would allow the younger cohort,
who are largely virus-free before they become sexually active, to stay that
way. If you can reduce new infections among young girls, “you break the
back of the pandemic in Africa,” says Dr Salim Abdool Karim, an
epidemiologist (who is married to Quarraisha Abdool Karim).

A tangle of social problems makes everything harder. Poverty is one. If you

are poor, getting tested can be a challenge even if the test is free. A day off
work and a bus fare to the clinic can scupper your budget.

Male violence is another obstacle. A study in six African countries found

that women who had been physically abused in the previous year were 3.2
times more likely to have been infected with HIV recently. Women who live
in fear may find it harder to say no to unprotected sex. And the first wave of
AIDS, by killing so many parents, made families in some countries even

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poorer and more unstable than they already were. In South Africa, for
example, thanks to a long tradition of migrant labour under apartheid and the
recent ravages of AIDS, only a third of children live with both biological
parents.

Social dysfunction helps the virus spread. Thulina Moukangwe was raped by
four different relatives, starting when she was 11. She does not know which
one infected her. She did not get tested until she was 17, “because I was
young and ignorant”, she says. She received little support from her chaotic
family, and did not seek treatment for another five years.

Fear of death can make bad boyfriends behave even worse. After
Makhosazana Molotsane tested positive her partner was furious. For years
he refused to get tested himself, drunkenly sang in the street that she was
bringing disease into his home, and burned the condoms Ms Molotsane
wanted to use. He seized her antiretroviral drugs and tossed them away. She
hid her pills in a nappy bag. He beat her up; eventually she left him.

Both women’s fortunes eventually improved. Ms Molotsane, who is 40,

found a more supportive partner, who reminds her to take her drugs. Her
viral load is low enough that her doctor tells her it is safe for them to have a
baby. Ms Moukangwe, who is now 29, has become a “peer educator”: a
volunteer who helps people make informed decisions about their health.

This is one area where NGOs are especially useful. Health services are
overstretched, and people often resist instructions from officials. A more
effective way to persuade scared, reluctant people to take the right medicine
is for them to talk to people from similar backgrounds. Ms Moukangwe, who
had heard that antiretroviral drugs “made you crazy”, started taking them
after she saw that a friendly volunteer, who had been taking them for years,
was sane and healthy. “You can’t just tell people to go to a clinic,” says Ms
Moukangwe. “I talk about myself, as a way of encouraging others.”

Testing, testing
Private companies pitch in, too. Mining firms in southern Africa saw AIDS
as a huge threat two decades ago. Their workers were often migrants, who
lived far from their families in hostels surrounded by prostitutes. Companies

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such as Anglo American started offering staff free testing and antiretroviral
drugs even as South Africa’s president at the time, Thabo Mbeki, publicly
questioned their efficacy. It was a delicate task, recalls Brian Brink, who
used to run Anglo’s AIDS programme. Unions had to be convinced that tests
would not be used to identify sick staff and fire them.

Stigma lingers even in countries where nearly everyone knows someone

with HIV. People worry that if they get tested near home, or pick up
antiretrovirals from a pharmacy, a neighbour will spot them, says Mr
Mdletshe. This makes it less likely that they will get tested in the first place,
or stick to a lifelong drug regimen.

Sometimes stigma is compounded by law. Aspects of sex work are

criminalised by 168 governments. This deters sex workers from seeking
help. Nokwanda Gambushe, an activist in Durban, complains that cops
search sex workers’ handbags and, if they find condoms, arrest them. This
hardly encourages safe sex.

In addition, 145 countries criminalise drug use and 67 criminalise gay sex.
The sharp increase in infections in eastern Europe and the Middle East is
largely due to a lack of prevention services for marginalised populations,
reckons UNAIDS. Uganda introduced the death penalty this year for

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“aggravated homosexuality”, which might make gay Ugandans think twice
before walking into a clinic to get tested.

Policy can make a huge difference. President Mbeki’s AIDS denialism cost
an estimated 300,000 South African lives. However, when he was sacked by
his party in 2008, experts persuaded a caretaker government to adopt a first-
rate AIDS policy. Drugs were swiftly rolled out, and between 2009 and 2012
the proportion of children under five in South Africa who were orphans
plunged from 12% to 7.3%.

The best foundation for fighting AIDS is a well-functioning public-health

system with short queues and sensitive staff, says Mr Mdletshe. Many
countries fall short. Waiting times are often long, pharmacies run out of pills,
staff are sometimes judgmental. When Ms Moukangwe tested positive, a
nurse shouted at her for her lax morals. Even in rich countries, governments
that fail to prioritise the disease tend to deal with it badly. The proportion of
infected people taking antiretroviral drugs is actually lower in eastern
Europe and central Asia than in sub-Saharan Africa.

Governments do not work in a vacuum. The places that have come closest to
hitting the 95-95-95 targets are typically African countries where donors are
pouring in resources and expertise, such as Botswana, Rwanda, Tanzania
and Zimbabwe. The second tier are often rich countries with generous public
services (Denmark, Saudi Arabia) or places that developed a serious anti-
AIDS strategy early on in the pandemic, such as Cambodia and Thailand.

One of the biggest obstacles to curbing the spread of HIV is that the
symptoms take a long time to appear. “Recently infected people have high
viral loads, and are more likely to infect others. The problem is that those
who have been infected don’t yet know it,” laments Dr Salim Abdool Karim.
“The gap between being infected and being tested is usually years.”

So he suggests something radical: offering PrEP to girls in schools. Instead

of waiting for those who think they are at risk to come to a clinic, health
workers should go to schools and offer PrEP to all the girls above a certain
age, along with testing, contraception and health-care services. This could
meet stiff resistance from traditionalists who think it would encourage
promiscuity. Also, it is “only feasible if you have a PrEP that lasts six

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months,” says Dr Salim Abdool Karim. “You can’t keep going to the schools
more than…once every six months. It’s not practical.”

Longer-lasting drugs are in the pipeline, and could “change the trajectory” of
the disease, says Deborah Waterhouse, the boss of ViiV. The first not-for-
profit delivery of ViiV’s two-month injection, to PEPFAR, will be in
October. It has regulatory approval in four southern African countries, and
has been licensed to cheap generic manufacturers. Gilead, an American firm,
has a drug called lenacapavir, which is already used as a treatment, and
which breaks down so slowly that it might work as a prophylaxis for six
months. It is in clinical trials among girls in South Africa and Uganda.

Rolling out new drugs would cost a lot. Roughly $21bn was spent on
fighting HIV in poor and middle-income countries in 2022, with slightly less
than half coming from donors; UNAIDS thinks $29bn will be needed in
2025. To those who would penny-pinch, Mr Sands retorts that it is “rational
to hit this thing hard and fast”. Fighting AIDS slowly would be “much more
expensive…If you don’t reduce the number of new infections, every new
infection is translating into a lifetime of antiretroviral treatments...and
complications.”

A lifetime of treating someone with HIV in a poor country costs around

$5,000, by one estimate; in rich countries, it is $380,000. By comparison, the
cost of averting an infection in Zambia or South Africa is $2,000-$3,000,
according to a different study published in the Lancet in 2021. And so long
as the virus is circulating somewhere, nowhere is safe. ■
This article was downloaded by zlibrary from https://www.economist.com/middle-east-
and-africa/2023/09/17/is-the-end-of-aids-in-sight

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Hostages and a fortune

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Iran’s $6bn hostage deal is part of a broader
diplomatic strategy
But inside the country, tensions are running high
Sep 18th 2023

FEW IRANIAN acts outrage its enemies more than its taking of hostages.
Foreigners are offered visas to visit Iran and are then seized on departure by
the Islamic Revolutionary Guard Corps, Iran’s strongest force. Iran then uses
them as bargaining chips for prisoner swaps and cash, among other things.
“The Islamic republic isn’t a banana republic, but…it still behaves like a
mafia state,” says a Western diplomat, previously based in Iran.

On September 18th Iran and America each exchanged five prisoners in a

deal sweetened by America’s unfreezing of $6bn of Iranian funds—mainly
payments for its oil—held in South Korea. The released hostages include
Siamak Namazi, an Iranian-American businessman held since 2015, and
Morad Tahbaz, an Iranian-American environmentalist who also holds British
citizenship. But perhaps a dozen Westerners and several dozen more dual
nationals remain behind bars as leverage for future deals. And on September

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16th Iran arrested another dual national in Karaj, a city west of the capital,
Tehran.

Iranian officials claim they have no choice but to take prisoners, since their
adversaries also flout international law. Their ire has been stoked by
America’s imposition of sanctions and by the unloading last month of
Iranian oil from a tanker America had seized and taken to Texas.

Over the longer run such hostage-taking cripples Iran’s hopes of developing
a tourism industry and hampers foreign investment and trade. But the cash it
generates is tempting for a regime that faces discontent amid soaring
inflation and a currency that earlier this year fell to a record low (before
rebounding on hopes of a prisoner-for-cash deal). America’s Treasury will
monitor how Iran spends the $6bn to ensure that funds are used by Iran only
for humanitarian purposes. But, says Norman Roule, a former American spy
in the region, the deal could free up cash for Iran’s military programmes, too.
Iran might also gain a sanctions-waiver mechanism that could be reused in
other financial transactions. “This could be a learning moment for future
diplomacy over sanctions relief,” says Esfandyar Batmanghelidj, an Iranian-
American economist in London.

A flurry of diplomatic activity has followed. Iran’s president, Ebrahim Raisi,

went to New York to address the UN General Assembly. Further talks are
planned between the Iranians and their erstwhile regional foe, Saudi Arabia,
together with the other five Arab states of the Gulf Co-operation Council on
the sidelines of the UN meetings. And to coincide with the prisoner release,
Iranian and European officials met for talks, too.

But in the wake of the deal, the two belligerents toughened their stance.
America unveiled new sanctions targeting Iran’s drone production. Mr Raisi
used the UN podium to denounce “the project to Americanise the world”.
And buoyed by the prisoner deal, Iran’s parliament passed a law imposing
jail sentences of up to ten years on women who flout the dress code (it still
needs to be approved by the country’s Guardian Council) .

Few observers see this as the first step towards reviving the JCPOA, an
agreement signed in 2015 that was intended to prevent Iran from enriching
uranium to a level that would have put it on the “threshold” of acquiring

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nuclear weapons. The Trump administration withdrew from the deal in 2018,
prompting Iran to ignore its key restrictions. “Iran is already a threshold state
so that horse has bolted,” says a mediator. In protest at Iran’s enrichment of
uranium beyond civilian levels of 60%, Britain, France and Germany
announced earlier this month that they were enshrining UN sanctions in
national law before they expired under the terms of the JCPOA.

Still, the hostage deal continues a remarkable diplomatic offensive under Mr

Raisi, a supposed clerical hardliner in a historically xenophobic regime. In
recent months his administration has restored diplomatic relations with its
regional competitor, Saudi Arabia, begun talks on joining the BRICS, a club
of big emerging markets, and finally joined the Shanghai Co-operation
Organisation of Eurasian countries. Even the Israeli prime minister,
Binyamin Netanyahu, has muted his criticism, apparently for fear of
exacerbating tensions with the Biden administration and spoiling his own
hopes of establishing diplomatic ties with Saudi Arabia.

But hubris in the wake of the prisoner deal may get the better of the regime.
The clerics need to shore up international support as the Islamic Republic
grapples with plans for the succession of its 84-year-old supreme leader,
Ayatollah Ali Khamenei, and tackles its greatest threat—its disgruntled
population.

The ayatollahs’ opponents have criticised the deal as a slap in the face by
America, particularly since it coincides with the first anniversary of the
death of Mahsa Amini, an Iranian woman detained for showing her hair.
More than 500 Iranians were killed in the months of protests that followed.
In Iran, riot police and bully boys on motorbikes are roaming the streets to
prevent demonstrations.

For now the regime has the upper hand. The few small protests that have
occurred in Tehran have been rapidly dispersed. In the province of
Kurdistan, where Ms Amini lived, the security forces reportedly used live
ammunition. But Iranians speak of mounting tension. Many have resorted to
civil disobedience. Women continue to discard their headscarves and refuse
to pay fines for doing so. Implementation of the new law carries risks.
Renewed unrest could reopen the rift that the last bout exposed between
hardline clerics and less ideological commanders in the IRGC. Iran might

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have hoped to mollify international opinion, at least temporarily, but
Iranians’ anger remains unassuaged. ■
This article was downloaded by zlibrary from https://www.economist.com/middle-east-
and-africa/2023/09/18/irans-6bn-hostage-deal-is-part-of-a-broader-diplomatic-strategy

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Prison blues

Lebanon’s prison inmates are running short of

food
And most have not even been convicted
Sep 21st 2023 | BEIRUT

WHEN RABEA, a small-time drug dealer from Tripoli in northern Lebanon,

was caught with two kilos of hash in 2017, he knew what to expect. His
local lock-up, Qubbah Prison, where he would spend the next five years, was
already filled with men from his neighbourhood. He knew about the years-
long wait to see a judge. And he had heard about the crowded cells where 60
detainees take it in turns to sleep on the floor, the gangs and the fights.

But Rabea did not know that things were about to get even worse. In 2019,
halfway through his sentence, Lebanon’s economy went into meltdown. The
country’s economic crisis—in the course of which its GDP has contracted by
almost 40%—caused havoc in its prisons. Food and medical supplies
became ever scarcer and violence surged in jails that are now at 323% of
capacity.

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Amid a multitude of crises, the welfare of Lebanon’s prisoners is not a
priority. The budget for the interior ministry, which runs the prisons, has
officially increased in recent years. But a collapsing currency—the lira has
lost 98% of its value since 2019—and soaring annual inflation (official
figures put it at over 250% in July) mean that its purchasing power has been
steadily eroded.

Inflation also means that families struggle to afford to buy food to

supplement prisoners’ increasingly meagre rations. By the end of his
sentence, Rabea says he was expected to survive on as little as a spoonful of
bulgar wheat a day. Amid budget cuts, prisoners are being denied crucial
medical treatment. More than 800 were taken to hospital in 2018; only 107
were taken in 2022, even as the total prison population has remained stable,
according to Amnesty International, a human-rights charity. Deaths in
prisons almost doubled between 2018 and 2022.

Meanwhile, the vast majority of Lebanese detainees are technically not

guilty—not yet at least. Some 82% of prisoners have yet to see a judge,
compared with 54% in 2017. When Rabea at last had his day in court, he had
already been in jail for almost three years. Budget cuts within the justice
ministry are slowing the government’s ability to clear the backlog, so the
proportion of detainees in pre-trial detention is expected to grow. In 2022
just 2,672 criminals were convicted compared with 4,772 in 2020. Strikes by
judicial officials and shrinking resources are making the problem worse. At
least one recent trial was suspended when prison wardens had insufficient
petrol to transport the accused to court.

Time keeps draggin’ on

When Rabea was released in 2022 almost everyone in his cell was awaiting
trial. Some had been incarcerated for ten years, he says, only to be handed a
one-year sentence. He watched with envy as a lucky few took advantage of
the country’s chaos to secure a quicker release. “If you’ve got money, you
can pay a good lawyer and he can get your case torn up,” Rabea says. “But if
you haven’t, you’re not going anywhere.”■
This article was downloaded by zlibrary from https://www.economist.com/middle-east-
and-africa/2023/09/21/lebanons-prison-inmates-are-running-short-of-food

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Never let a crisis go to waste

Khalifa Haftar will use Libya’s floods to deepen

his control
His son is in charge of disaster aid, while talk of elections will be put on
hold
Sep 21st 2023 | DUBAI

IN THE DAYS after a disaster, even the most maladroit politician knows to
follow a script: soothe survivors, praise aid workers, vow to rebuild. For
thugs who dominate eastern Libya, however, even such basic displays of
human decency are a struggle. One, clad in army fatigues, tooled around a
flood-battered city behind the wheel of a Humvee, more conquering general
than contrite governor. Another blamed the victims for their own deaths.

The response was tone-deaf but hardly surprising. Khalifa Haftar, the
warlord who controls Libya’s east, cares only about empowering his family.
A catastrophe that could have been prevented is, for him, a chance to
consolidate power.

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Rescuers describe scenes of utter despair in Derna, the city walloped earlier
this month by a Mediterranean storm called Daniel. Record rainfall caused
two dams south of Derna to fail. Floodwaters surged through the narrow
wadi, or riverbed, that bisects the city, sweeping away entire neighbourhoods
in minutes.

The Libyan Red Crescent says that 11,300 people died, while the World
Health Organisation (WHO) says it has identified 3,958 bodies, with another
9,000 people missing. The final toll may not be known for months, if ever.
Many bodies were washed out to sea or buried under rubble. Libya has not
conducted a census since 2006.

Aid has trickled in, but slowly. The west of the chaotic country is run by a
rival regime. The divisions make Libya a hard place to work. Hospitals are
overwhelmed. Survivors are terrified that rotting bodies will spread cholera
and other diseases (although the WHO says such fears are overblown). Many
residents are homeless.

On September 18th hundreds of angry protesters gathered outside a well-

known Derna mosque. They chanted slogans against Aguila Saleh, the head
of Libya’s eastern parliament. Some then burnt the home of the mayor, who
was suspended after the flood (and is Mr Saleh’s nephew).

While the crowds were not large, they were evidently too big for the military
men who run the region. The next morning, telephone and internet links to
Derna went down. Authorities blamed a severed fibre-optic cable. But then
journalists began receiving orders to leave within hours. A United Nations
team scheduled to travel from Benghazi to Derna was barred from entering
the city. Libyans fear the Haftars are preparing for a violent crackdown. Mr
Haftar once laid siege to Derna for months to root out Islamist groups.

The floods could have been lessened if Libya had invested in repairing the
dams, which were half a century old. But Mr Haftar cares little for upgrading
Libya’s infrastructure. His son Saddam, whose name is a homage to the late
Iraqi dictator, has taken charge of relief efforts. That helps cement the
family’s control, but it offers little succour to survivors. Asked by a
journalist from Sky News if the flood could have been prevented, Saddam
all but shrugged: kulu tamam, he replied, everything is fine.

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Another son, Elseddik, claimed that residents ignored Mr Haftar’s warnings
to leave. “My father, thanks to his wise leadership, sensed things before the
disaster hit,” he said. Never mind that Mr Haftar issued no such evacuation
order: he is the saviour, the victims are the villains.

Elseddik recently launched a long-shot bid to become president. After the

flood, though, talk of elections—which the UN had hoped would happen this
year—is probably on hold. That will not bother Khalifa Haftar, who runs
eastern Libya as a military regime and has no interest in a fair vote.
Municipal elections in Derna were cancelled earlier this month after his men
arrested the front-runner.

The Haftars were not the only ones to find fault elsewhere. Kais Saied, the
authoritarian president of neighbouring Tunisia, knows who to blame for the
flood: Jews. At a cabinet meeting on September 18th he noted that the
storm’s name was also that of a Hebrew prophet. To Mr Saied this was no
coincidence; it was proof of how deeply Zionists had “penetrated mind and
thought”. Libyans need help from their rulers and their neighbours. What
they get instead is repression, condescension and occasional anti-Semitic
rambling. ■
This article was downloaded by zlibrary from https://www.economist.com/middle-east-
and-africa/2023/09/21/khalifa-haftar-will-use-libyas-floods-to-deepen-his-control

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The Americas
Brazil’s hinterland now resembles Texas

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Sertanejo swagger

Brazil’s hinterland now resembles Texas

It is a land of “roughs”, not playboys
Sep 21st 2023 | SINOP, MATO GROSSO

THINK OF BRAZIL and, if you’re like most people, you’ll think of palm-
lined beaches, samba and caipirinhas. The cliché needs updating. In the past
two decades the centre of political and economic gravity has started shifting
from the humid coasts, to which Brazilians were said to cling “like crabs”, to
the vast, arid plains of the interior. Its soundtrack is sertanejo (country
music). The preferred beverage is cold beer.

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Brazil’s census, its first in 12 years, showed a notable trend when it was
published in June. Seven of the ten municipalities that have grown most are
in the farmbelt in the southern half of the country and the centre-west. The
population of the centre-west, which includes the states of Goiás, Mato
Grosso and Mato Grosso do Sul plus the capital, Brasília (see map), grew by
1.2% a year, more than double the national rate. The south-east still has the
most people and money—São Paulo state alone produces a third of Brazil’s

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GDP and is home to a fifth of its population. But even within that state, it is
in the farmbelt where the population and economy are growing most.

Migrations within Brazil are nothing new. A movement from the poor north-
east to the industrial hub around the city of São Paulo did much to shape the
country’s economy and culture in the second half of the 20th century.
Brazil’s current president, Luiz Inácio Lula da Silva, is the most famous of
the millions who made that journey. After a famine struck his birthplace in
Pernambuco, his mother packed her eight children onto a pau de arara
(macaw’s perch), a flatbed truck, and headed south. Lula rose to prominence
as a trade-union leader in the car industry near São Paulo. Now when people
leave the poor north-east they tend to head to the interior. What has changed
is the perception of which activity can offer better lives, says Carlos Vian of
the University of São Paulo. “Before, it was industry; not any more.”

The magnet that drew Lula to São Paulo has lost strength. In the mid-1980s
manufacturing accounted for a third of Brazil’s GDP; now it represents just
10%. The country’s surplus in manufacturing trade, $6bn in 2005, became a
deficit of $108bn by 2019. Productivity in manufacturing and services has
stagnated or shrunk.

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Cultivation, the basis of Brazil’s economy in the 19th century, has made a
comeback. The country still exports coffee and sugar, which were once
grown on plantations worked by slaves. Since the early 2000s voracious
demand from China has encouraged a rise in production of soyabeans, grains
and meat (see chart). Agricultural exports as a share of the total have more
than quadrupled since 2000, to 40%. Today the sector accounts for a quarter
of GDP and employs a similar share of workers. From 2002 to 2020 the
economy of Mato Grosso, the soyabean heartland, grew by 4.7% a year in

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real terms, more than that of any other state and more than double the
national rate.

The agri-business boom is slowly changing demography and culture. In the

1970s, more than four-fifths of population growth occurred in the biggest
cities. In the past 12 years, during which the population grew more slowly,
two-thirds of the growth has taken place in mid-size towns.

Sinop, a soyabean centre in Mato Grosso, typifies the trend. The state, whose
name means “dense forest”, had few inhabitants until the middle of the 20th
century. A succession of Brazilian governments set out to populate the
country’s hinterland. Agencies were established to offer land and cheap
credit to people who moved west. They flourished during a military
dictatorship, which ruled from 1964 to 1985. Sinop, founded in 1974, is
named after one such company.

Life at first was hard for the settlers (though harder for the indigenous
people they pushed out). The rust-coloured earth yielded little and disease
was rampant. Technology came to the rescue. In the 1980s Embrapa, the
national agricultural-research agency, developed a variety of soyabean that
thrived in the region’s acidic soils. Among the beneficiaries was the father of
Juliano Antoniolli, who arrived in Sinop in 1981, before farms had access to
electricity. Back then, downtown was “just a big mud bath”, says Mr
Antoniolli, a 38-year-old farmer.

Now 4,000 head of cattle roam alongside the soyabean fields and rows of
maize on his 2,400 hectares near Sinop. Drones spray fertiliser and John
Deere tractors pull ploughs. Three base stations from Starlink, owned by
Elon Musk, connect the farm to the internet. Mr Antoniolli employs 12
people full-time, plus temporary workers during the harvest. He pays an
average wage of 8,000 reais ($1,600) a month, three times Brazil’s median
salary. He sells most of his produce to COFCO, a Chinese food giant.

Sertanejo’s soft power

Thanks to the money and jobs brought by the farming boom, not just for
farmhands but for construction workers and others, Sinop’s population has
swelled by 73% in the past 12 years, to 200,000. Now a city of roundabouts

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and car dealerships, it resembles a settlement in the United States’ deep
South more than Brazil’s coastal metropolises. A petrol station calls itself
Texas; a butcher, Super Beef.

With economic clout comes other sorts of influence. Sertanejo is Brazil’s

most popular music. In 2003 16% of the top songs on Brazilian radio were
of that genre. By 2022 three-quarters were. A sub-genre, agronejo, praises
big agriculture. Luan Pereira, a lanky singer, wrote a hit song about fooling
around in a Dodge Ram, a muscular American pickup truck favoured by
soya barons. The video has been viewed almost 100m times in the past six
months on YouTube. Some country singers style themselves “roughs”, as
opposed to “playboys” from the city. “Five playboys can’t do what one
rough can,” boasts a cowboy-hatted DJ Kévin, joined by Mr Pereira.

Sertanejo self-confidence poses a challenge for Lula and his government. On

the one hand, they welcome the economic growth that comes with
agricultural expansion. On the other, they worry about its environmental cost
and its political implications. Farmland is growing partly at the expense of
the cerrado (tropical savannah), Brazil’s second-largest biome after the
Amazon. Its owners tend to be fans of Jair Bolsonaro, the right-wing
president whom Lula defeated in the election last year. (Indeed, according to
a news website, Mr Antoniolli was present in January this year when
supporters of the former president attacked federal buildings in Brasília to
protest against Lula’s inauguration. He told the website that he left as soon
as the vandalism began.) In response to the census, Brazil’s Supreme Court
in August ordered the first reapportionment of seats in the lower house of
Congress since 1993. The Lula-friendly north-east will lose; the farmbelt
will gain.

Lula began his third term in January (he had been president from 2003 to
2010) as a foe of farming and ranching. During the election campaign he
proposed limiting beef exports to hold down domestic prices. Yet he has
since tried to get along with agri-business, offering more support while
cajoling it to be greener. On June 27th he announced 364bn reais of
subsidised loans to farmers, Brazil’s biggest-ever agricultural-credit plan.
Farmers who use renewable energy and non-chemical pesticides will qualify
for the cheapest loans. The national development bank, set up in the 1950s to
promote industry, is shifting towards financing agriculture. In 2009 agri-

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business received just 5% of the bank’s loans. Last year nearly a quarter of
its financing went to agriculture, and less than a fifth to industry. The
balance is unlikely to shift back under Lula’s government.

Many farmers profess to support the government’s push to make farming

greener. Daniel Freire, the head of a chain of slaughterhouses in Pará, an
Amazonian state, says that his company needs environmental permits to
export to Europe and the United States. “To ship to the best markets in the
world, it’s important to improve our sanitary and environmental standards,”
he says. In April the European Parliament passed a law that from the end of
next year will oblige producers of commodities to verify that their goods
have not contributed to deforestation since 2020.

But privately many farmers grumble about environmental rules. They

oppose, and sometimes flout, the national forest code, which obliges farmers
in the cerrado to maintain native vegetation on 20-35% of their land. Some
growers and ranchers move into the rainforest in states such as Pará, where
the requirement is stricter (80% of their forest has to be preserved) but
enforcement is even weaker.

Brazil is one of the few countries where farmland is still expanding. The US
Department of Agriculture estimates that by 2031 another 20m hectares,
close to a quarter of the area now planted with crops, will be brought into
production. Growth need not mean destroying trees. Some 170m hectares of
pasture are thought to be under-used. If farmers grew soyabeans on just 10m
of those hectares, they could raise output by 40m tonnes a year over the next
decade, roughly a tenth of today’s global output, says Daniel Amaral of the
Association of Brazilian Vegetable Oil Industries. The productivity of each
hectare could also increase. Brazilian maize farmers grow an average of six
metric tonnes per hectare, half the yields American farmers achieve. Better
infrastructure could boost profits and investment. The lorries that carry Mato
Grosso’s grains to port must travel along a single 1,000km pothole-filled
road. Brazil’s logistics costs are the equivalent of 12.1% of gross national
product, compared with 7.6% in the United States. Farmers have much to
gain from a government that would invest in reducing them.

In places like Sinop the future looks bright. But fears are growing that the
success of Brazil’s farmers could contain the seeds of its undoing.

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Deforestation of the cerrado could eventually reduce rainfall. Already signs
of stress from global climate change are beginning to appear. Sertanejo
could some day lose its swagger. ■
This article was downloaded by zlibrary from https://www.economist.com/the-
americas/2023/09/21/brazils-hinterland-now-resembles-texas

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Europe
Azerbaijan is close to taking control of Nagorno-Karabakh
Angst mounts over Germany’s green transition
Why the EU will not remain the world’s digital über-regulator
Europe’s conservative populists pit migrants against babies

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A one-day war

Azerbaijan is close to taking control of Nagorno-

Karabakh
The ethnic-Armenian enclave has agreed to disarm
Sep 21st 2023 | ISTANBUL

THINGS COULD have got much nastier, and they still might in the days
and weeks ahead. On September 20th, a day after Azerbaijan launched an
armed offensive against Nagorno-Karabakh, an ethnic-Armenian enclave
inside its borders, a ceasefire took hold. Under its terms, the region’s
Armenian separatists agreed to surrender and disband, something Azerbaijan
has insisted on for some time.

The deal may have prevented a massacre on Europe’s doorstep; in a single

day, Azerbaijan’s drones and bombs had reportedly killed at least 200 people
across the region. Images showed Armenians hunkering down in basements
as sirens sounded over Stepanakert, the regional capital. But the agreement,
brokered by Russian peacekeepers deployed to the region three years ago,
also appears to spell the end of the enclave’s semi-independent status.

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Thousands of Armenians have already abandoned their homes. Many more
may decide to flee to Armenia.

Azerbaijan called the assault an “anti-terrorist operation” intended to restore

constitutional order. Officials in Armenia, including the country’s prime
minister, Nikol Pashinyan, called it an ethnic-cleansing campaign against
Karabakh, home to some 100,000 ethnic Armenians. Azerbaijan says the
offensive was in large part a response to elections held in the enclave on
September 9th and to recent mine explosions that killed six Azerbaijanis,
including four police officers. But the attack seems to have been in the
making for some time. Armenia accused Azerbaijan of massing troops near
the border separating the two countries and around Nagorno-Karabakh in
early September.

Nagorno-Karabakh, populated by Armenians but formally part of

Azerbaijan, has been bloodied by two large wars in three decades. The most
recent of these, in 2020, saw Azerbaijan recapture territories occupied by
Armenian forces since the 1990s. Since last December, Azerbaijan has
blocked the Lachin corridor, the only road connecting Karabakh with
Armenia, so as to force its leaders to relinquish any dreams of autonomy.
The government in Baku agreed to reopen the corridor on September 9th, in
exchange for the opening of another road linking Nagorno-Karabakh with
the rest of Azerbaijan. But the new offensive and the ceasefire agreement
seem to have sealed Karabakh’s fate.

Azerbaijan now plans to “reintegrate” Nagorno-Karabakh, says Hikmet

Hajiyev, a presidential adviser. But how this is supposed to happen without
an exodus of the region’s Armenians is unclear. The government in Baku
refuses to offer them any special rights or security guarantees. “It will be just
like any other region of Azerbaijan,” says Mr Hajiyev. For the Armenians,
that is hardly a comforting thought. Following three decades of bloodletting
on both sides, they are more likely to leave than to live under Azerbaijan’s
rule and risk discrimination and retribution.

No one plans to stand in Azerbaijan’s way. Western powers have largely

contented themselves with routine condemnations. Afraid of being drawn
into a wider war with Azerbaijan, which it would almost surely lose,
Armenia’s army claims to be staying out of the dispute.

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Striking in its absence has been any reaction from Russia, the region’s
power-broker. As Azerbaijan massed its troops on the Armenian border and
prepared to shell Nagorno-Karabakh, Mr Pashinyan accused Russia of
failing in its peacekeeping duties. Margarita Simonyan, the boss of “Russia
Today”, a Kremlin mouthpiece, openly mocked the Armenian leader. “He is
asking for help from Russian peacekeepers,” she said. “Why doesn’t he ask
NATO?”

The conflict began in 1988 when the Armenians of Karabakh, then part of
Soviet Azerbaijan, called for the region’s merger with Soviet Armenia. It
snowballed into a brutal war in the early 1990s, after the Soviet empire
collapsed. Armenia, backed by Russia, prevailed, and ended up in control of
Karabakh, though the region formally remained part of Azerbaijan. Russia
has since retained an army base in Armenia.

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Since the 2020 war, Armenia has regularly accused Russia, with which it has
a defence pact, of leaving it out in the cold, and drawn closer to America.
The country recently hosted military exercises featuring a small number of
American troops and has turned to India and other countries for weapons.
Most insultingly for the Kremlin, Armenia has moved to join the
International Criminal Court, which has issued an arrest warrant for Russia’s
dictator, Vladimir Putin. Armenian officials were well aware of the risk they
were taking in pivoting to the West. “But if we did nothing, we would almost

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certainly lose our statehood,” one says. By washing his hands of Nagorno-
Karabakh, Mr Putin wants to show there is a price to be paid for leaders who
turn their back on Russia.

The ceasefire may have saved Karabakh from a bloodbath. Barring a

breakdown in the newly announced talks between Azerbaijan and the
Karabakh Armenians, the agreement will probably hold, because Baku has
achieved its objectives.

But there is little to celebrate. Officials in Baku claim the Karabakh

Armenians are welcome to stay and enjoy the rights extended to
Azerbaijan’s other minorities. But even assuming pure intentions, the bad
blood between the two sides, the trauma of past wars and years of vile
propaganda may be impossible to overcome. “It’s hard to see a scenario”,
says Laurence Broers of Chatham House, a think-tank, “in which
coexistence is possible.” ■
This article was downloaded by zlibrary from
https://www.economist.com/europe/2023/09/21/azerbaijan-is-close-to-taking-control-of-
nagorno-karabakh

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Energie-wander

Angst mounts over Germany’s green transition

Meeting its targets looks hard
Sep 21st 2023 | BERLIN

WHEN ROBERT HABECK, co-leader of the Green party and the economy
tsar in Germany’s ruling coalition, floated a bill last spring that mandated
replacing gas and oil boilers with cleaner heat pumps, he got more heat than
he bargained for. Tabloids screamed his “heat hammer” would push millions
into debt. Whipped-up fury against “Green fascism” boosted ratings for the
hard-right Alternative for Germany (AfD) party. The minister spent much of
the summer tweaking his bill. His patience paid off. In early September the
Bundestag passed it by a cosy 397-275 votes.

Yet the new law may prove a sign of things to come. For one thing, the
spring storm exposed just how fast and how low enthusiasm for
environmental initiatives can sink the moment they threaten wallets. Mr
Habeck’s compromise also showed that despite much progress in Germany’s
Energiewende, the now two-decade-old national effort to shift entirely to
clean energy remains a steep uphill climb. Indeed, at current rates it looks

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increasingly doubtful that Germany will reach its target of net carbon
neutrality by 2045.

Home heating is a small part of the puzzle, but well illustrates the challenge.
Some 80% of Germany’s buildings heat using fossil fuels, contributing about
15% of total CO2 output. The draft law, which would have forced adoption
of electric heat pumps starting next year, aimed to cut this in half by 2030. A
longer time-frame and wider exemptions under the new law mean it will

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reach perhaps 75% of this goal, says Mr Habeck’s ministry. And that sounds
optimistic. Trade groups say there are few skilled pump-fitters. Older
buildings will need costly insulation upgrades. And the complexity of state
subsidies for the pumps, which can cost upwards of €20,000 ($21,000), may
slow take-up.

There is another problem. For all their efficiency, heat pumps draw on
electricity that in Germany is largely still supplied by hydrocarbons. True, on
good days solar and wind power now generate well over half the power
supply. But with demand expected to grow by 20% by 2030—pushed up by
millions of new electric cars and now heat pumps—the addition of
renewables capacity will need to speed up markedly. So will investment in
the already stressed distribution network, which must increasingly cope with
capricious wind and solar rather than steady thermal inputs.

And so, say many experts, will investment in dirty old thermal plants. A
recent report on bottlenecks to German growth from Deutsche Bank is
categorical: “The basic problem is that no cost-effective electricity-storage
technologies on a large industrial scale are in sight…Germany will therefore
continue to rely on traditional back-up power-generation capacity.” This
means not just gas and coal but even stinkier domestic lignite: scrambling in
2022 to make up for cut-off Russian gas supplies, it relaunched no fewer
than five mothballed “brown coal” plants.

Hans-Werner Sinn, an economist in Munich, is also blunt. The 40% decline

since 1990 in the amount of CO2 that Germany emits, he said in a recent
lecture, was reached by plucking “low-hanging fruit”, such as letting grimy
smokestack industries in former East Germany die. In Germany’s current
primary-energy mix, including such things as fuel used for transport and
heating as well as electricity generation, the share of renewables still remains
below 20%. Given that Germany abandoned nuclear energy earlier this year,
Mr Sinn reckons that making the remainder clean would mean covering
some 2% of Germany’s surface, as much as its entire transport network, in
wind and solar farms. Maybe Germany should have invested in more nuclear
power instead. ■
This article was downloaded by zlibrary from
https://www.economist.com/europe/2023/09/21/angst-mounts-over-germanys-green-
transition

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Geopolitical monster v Brussels effect

Why the EU will not remain the world’s digital

über-regulator
It is not a big enough player in AI
Sep 21st 2023 | BERLIN

EUROPE HOPES to become the promised land—in the digital realm, at

least. Harmful posts on social-media platforms will be rapidly removed.
Texts will fly between rival messaging apps. You will be able to get apps
from all over the internet, not just from your phone’s app store. And artificial
intelligence (AI) models will be trained exclusively on data free of bias.

This is the noble aim of a set of new digital laws in the EU. Implementation
of the Digital Services Act (DSA), which regulates social media, and the
Digital Markets Act (DMA), which aims to keep big tech firms from
competing unfairly, is entering a critical phase. Earlier this month, the
European Commission designated what it calls “gatekeeper” firms, ranging
from Alphabet to Microsoft, which will have to follow the DMA’s rules or
risk vast fines.

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And as if these new rules were not enough, the powers in Brussels are
already negotiating their next big tech-policy package: an AI Act. By the end
of the year this may impose significant changes on the AI models that power
such services as Alphabet’s Bard and ChatGPT of OpenAI, a startup, which
exhibit human-like skills in writing text. Not one of the ten leading models
evaluated came close to being compliant with a draft passed by the European
Parliament in June, according to a study by Stanford University. The
proposed act includes requirements to reveal which data are used to train
models and how much energy such training consumes. OpenAI’s model,
called GPT-4, for instance, scored only 25 out of 48 possible points, the
researchers said.

This latest wave of digital rule-making rolling out of Brussels raises one
question that is particularly important: will it cement the EU’s role as über-
regulator of the virtual world, established in the late 2010s with its General
Data Protection Regulation (GDPR), which became the model for most of
the world’s 150 privacy laws? Two new books provide a framework for
predicting what may come to pass.

The first is “Digital Empires”, by Anu Bradford of Columbia Law School. In

a previous tome, she noted that EU laws, particularly digital ones, tend to
become global standards. She termed this the “Brussels effect”, a phrase that
has caught on. Tech companies have found it cost-effective to comply with
the GDPR globally. Governments around the world have adopted the law to
make trade with the EU easier.

In her new book, Ms Bradford compares the EU with the other two main
digital empires: America and China. Many believe that the EU will be a
bystander in the clash of these two, but Ms Bradford disagrees. America’s
market-driven model, which tends to place the interests of firms above those
of citizens, is facing growing criticism around the world. Consequently, she
thinks, America will end up being forced to adopt elements of the EU’s
model. The bloc is thus likely to “remain the primary source of regulatory
constraint for the tech industry”, she writes.

The authors of the second book, “Underground Empire”, paint a far

gloomier picture for the old continent. Henry Farrell of Johns Hopkins
University and Abraham Newman of Georgetown University also draw on

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their influential earlier work, a widely read paper entitled “Weaponised
Interdependence”, the central thesis of which was that America uses its
control over financial networks to force other countries to do its bidding.
“Just as all roads once led to Rome, the world’s fibre-optic networks,
financial systems and semiconductor supply chains converge on the United
States, allowing it to project its might,” they argue, expanding this thesis.

One could argue that the Brussels effect describes a network that America
has tended to ignore: the web of rules, mostly controlled by Europe. In the
case of the DSA and the DMA that set-up may still work. Copycat laws so
far are rare, but other countries are interested in drawing up their own. Firms
say that implementing the newer regulations will be hard to automate. But
some of the DSA’s rules, such as those for content-moderation and
transparency requirements, are already being followed by American
companies.

In AI, however, the chances are that the outcome will be very different. For a
start, being the keeper of the rules was useful in a world based on rules and
markets, but may prove irrelevant in one defined by a growing rivalry
between great powers.

Secondly, in privacy and social media, the EU can rightly claim it represents
one of the world’s biggest markets, so that tech giants need to follow its
rules. While this is still true, Europe’s global position in AI is much weaker.
According to another study by Stanford University, EU researchers have yet
to contribute in a significant way to such models as GPT-4. Whereas 54% of
makers of AI models were American in 2022, only 3% came from Germany,
which leads the EU pack. The picture is similarly one-sided when it comes
to private investment in AI: in America it amounted to $249bn between 2013
and 2022, while Germany spent only $7bn.

Finally, America seems to be adding the web of new tech rules to its own
underground empire—or at least trying to neutralise Europe’s role as the
rule-setter. Despite recent congressional hearings on AI, an American AI act
is still unlikely. But the White House is trying to develop its own alternative
to the EU’s regulatory network. In July it secured “voluntary commitments”
from the principal model-makers, including OpenAI and Alphabet, to limit
the technology’s risks.

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Thus the geopolitical and technological “monster” that is America will
eventually overpower the Brussels effect, predicts Mr Farrell. For the EU,
this means that it cannot rest on its regulatory network. Instead it should
redouble its efforts to strengthen its own AI industry, especially by
completing the EU’s single digital market, which would make life easier for
European startups. Since Europe is unlikely to become an AI superpower
soon, the Centre for European Reform, a think-tank, argued in a recent
report, it should also focus on getting businesses to adopt the technology.

Observers often ask how long America can use its invisible networks to
throw its weight around the world. It is a good question: excessive use of
network power can push other countries to seek alternatives. But perhaps the
more pressing question to consider is how long the EU can lay claim to the
role of global standards-setter, when it may well play such a minor role in
the next wave of technology. ■
This article was downloaded by zlibrary from
https://www.economist.com/europe/2023/09/21/why-the-eu-will-not-remain-the-worlds-
digital-uber-regulator

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Charlemagne

Europe’s conservative populists pit migrants

against babies
Viktor Orban and Giorgia Meloni want their citizens to have more
children
Sep 20th 2023

WITHIN MOMENTS of a wedding cake being cut, one of the happy

couple’s parents inevitably drops a hint about extending the family tree,
nudge nudge. By the time the honeymoon is over, lobbying for sprogs is in
full swing. Only when the request is fulfilled do the young parents realise the
production of a single offspring merely fuels demands for many more. If
such endless nagging by in-laws seems exhausting, imagine such pestering
done by national leaders, with Hungary’s Viktor Orban and Giorgia Meloni
of Italy in the role of berating wannabe grandparents.

Like much of the rich world, Europe is in the midst of a demographic winter.
No EU country is producing anywhere near enough babies to sustain its
population. This vaguely worries liberals, who wonder about the
sustainability of the welfare state as retirees start outnumbering workers. But

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conservative leaders like Mr Orban and Ms Meloni paint the struggle for
babies as existential. To them, families mark the bedrock of an orderly state
—as long as they are straight and of local ethnic stock, that is. Holding back
on procreating undermines the nation, no less. Even worse are those who
think migration might offer a quick fix to the demographic morass Europe
finds itself in. Who wants migrants when you can have homegrown babies
instead? So make babies, people.

Mr Orban and Ms Meloni were at their naggiest at a “Demographic Summit”

organised by the Hungarian authorities between September 14th and 16th.
Held every two years since 2015 in Budapest, the forum provides a safe
space for conservatives tired of liberal takes on everything from those
migrants to LGBT rights. Mr Orban held court in front of delegates from
dozens of countries, many of them from central Europe and the Balkans.
After boasting of his five children, he explained how there is “no freedom
without authority”, an Orwellian pastiche. It is making babies that allows us
to “become who God intends us to be”, especially women. Ms Meloni,
mother of one and this year’s special guest, blamed hostility towards
families for derailing the birth rate; she now has a minister whose job title
includes boosting that single statistic. “We want Italy to go back to having a
future,” she said. Cultural interludes livened up the summit: dancers in
traditional garb frolicked around a wholesome couple only one or two plum
brandies away from discovering the secrets of procreation for themselves.

Demography is the perfect issue for Mr Orban in particular to burnish his

reputation beyond Hungary. In Europe he is a bête noire, thanks to his pro-
Russia stance and perennial fights with the EU over his hobbling of the
judiciary. But to those who think Europe is facing a demographic abyss,
none of this matters. Pesky questions around judicial arrangements, or even
issues Brussels types bang on about like climate change, are small fry
compared with the baby drought. Better yet, the “progressive elite” can be
cast as baddies, the instigators of an unwitting demographic death-cult. By
giving individuals too much licence to focus on their own wants, liberals
have lost the plot. Women have become prone to thinking of children as a
pointless sacrifice. Now they must go back to acknowledging their duty to
society. One speaker spoke of feminism needing to be replaced with
“familism”.

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Hungary thinks it is showing the way. When Mr Orban regained power in
2010, its fertility rate was just 1.26 children per woman, the lowest in the
EU. Now it is in the middle of the European pack, at 1.52—still well below
the 2.1 replacement number, but a marked improvement. Conservatives
credit family-friendly policies. Women with four kids or more are exempt
from income tax for life, a measure that might be extended to those with just
three. Would-be parents can apply for loans that get written off as they have
children. Fertility clinics have been nationalised. Whether those costly
measures are at the root of the baby mini-boom is a matter of debate:
incentives probably bring forward child-bearing, but have little impact over
the long term. Other countries in Europe, from Sweden to Slovenia, have
seen similar surges in the past, especially after baby slumps. Nobody quite
knows why. When it comes to understanding long-term trends,
demographers make economists look like oracles.

Hit me baby, one more time

Natalists lay another charge on liberals: that what they really want is to
replace missing Hungarians or Italians with immigrants. For conservatives,
to bring in adult foreigners instead of pushing up the domestic birth rate is as
baffling as a newly married couple eschewing having a child in favour of
adopting a 25-year-old Senegalese bloke. In the same week as her jaunt to
Budapest Ms Meloni visited Lampedusa, a Mediterranean island belonging
to Italy where around 7,000 people had landed from north Africa in just two
days. Populists paint the fight for babies and the one against migration as
two sides of the same coin: make babies or else we will have little choice but
to welcome these African hordes. This is, to put it politely, utterly crackers.
Those risking their lives in small boats have not recently consulted
Hungarian fertility tables.

As a mainstream media type, Charlemagne stands as immediately suspect in

the eyes of the Budapest crowd (though perhaps his track record as a father
of three will lend him a degree of credibility). But as far as he can tell, the
progressive elite’s plot is even more dastardly than the Hungarian-Italian
axis suspects. Liberals do not, in fact, see immigration as a straight-up
replacement for baby-making. Their approach is, if anything, worse: it is to
do nothing. People should make babies according to their own preferences,
not those of the state; occasionally the tax or child-care systems can help

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with measures that make it easier for parents to work. Separately, some
people will move across countries and cultures, not to “replace” anything or
anyone but in a bid to improve their family’s lot. Quite plausibly all this will
kick up some problems down the line; but they are vastly better than the
solutions being proffered by Mr Orban and his friends. ■

Read more from Charlemagne, our columnist on European politics:

Meet Matus Vallo, Bratislava’s hipster mayor-architect (Sep 14th)
The EU’s rotating presidency should be scrapped (Sep 6th)
A sexism scandal in Spanish football hides the country’s progress (Aug 29th)

Also: How the Charlemagne column got its name

This article was downloaded by zlibrary from
https://www.economist.com/europe/2023/09/20/europes-conservative-populists-pit-
migrants-against-babies

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Britain
Rishi Sunak’s anti-green turn on Britain’s climate targets
Britain’s war on drugs enters a new phase
What supermarkets reveal about Britain’s economy
France rolls out the red carpet for Britain
A fight over dangerous dogs in Britain
The legacy of Liz Truss
The largest freshwater lake in the British Isles has been poisoned
Russell Brand was the norm in the nasty noughties

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Panicky policymaking

Rishi Sunak’s anti-green turn on Britain’s climate

targets
It creates uncertainty, will deter investors and probably won’t win voters
Sep 20th 2023

IN A HASTILY arranged speech on September 20th, Rishi Sunak promised

a “new approach” to Britain’s climate policy. The prime minister snipped at
his predecessors for imposing unnecessary costs on people rather than letting
them choose when to make changes. He said a target to end the sale of new
vehicles with internal-combustion engines by 2030 would be delayed.
Another, to phase out new gas boilers by 2035, would be weakened.
Regulations on energy efficiency and on oil boilers would be loosened.
Bizarrely, he also “scrapped” a non-existent meat tax and reassured voters
there would be no “diktat to sort your rubbish into seven different bins”.

He has been weighing such moves since a by-election in Uxbridge in July,

where a backlash over a charge for drivers of polluting cars in outer London
helped the Conservatives cling to the seat. Labour, which has a stubborn lead
of around 20 points in national polls, has promised more ambitious climate

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action. If Mr Sunak hopes attacking its green plans is a way to turn around
the polling figures, then he is almost certainly wrong.

It is true that reaching net zero will be both costlier and more disruptive than
many politicians admit. And Labour’s plans—notably a focus on large
public subsidies—do need more scrutiny. But his own hotch-potch of delays
is likely to deter investors, making it harder to cut the price of technologies
such as heat pumps. That will raise the costs paid by consumers in the long
term, not reduce them.

The speech marked a U-turn from the Conservatives’ previous stance. Green
action was a big part of the boosterish agenda on which Boris Johnson, Mr
Sunak’s predecessor but one, got elected in 2019. Two years ago Mr Johnson
published a net-zero strategy, built on long-term targets that would drive
market transitions in energy, transport and homes. Mr Sunak has unpicked
the latter two. There were already doubts over the first, having a clean power
system by 2035, after the government’s latest auction failed to attract any
new offshore-wind projects.

The immediate consequence will be questions over Britain’s commitment to

emissions targets and uncertainty for businesses. Mr Sunak emphasised that
Britain had cut emissions faster than others. But the country is off course for
its legal climate targets beyond 2028. In 2022 a court ordered the
government to publish more details to show how it would get back on track.
Mr Sunak’s new approach will probably provoke another legal challenge and
opposition in Parliament.

It is stable, long-term policies that drive down the costs of new technologies.
In March, renewables provided 47% of Britain’s electricity production. But
too often, action has been hindered by stop-start schemes. Britain’s market
for insulating homes and installing heat pumps remains tiny, partly because
firms have been burned by repeated policy changes. More delays will not
help. Mr Sunak did promise more subsidies for heat pumps, but without
clear regulations the market will take longer to grow, meaning costs will be
slower to fall.

The backtracking on electric vehicles was most surprising. Just two months
ago, the government promised a £500m ($643m) subsidy to Tata, an Indian

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conglomerate, for a new battery plant in Somerset. (And in July Michael
Gove, a cabinet minister, had agreed the 2030 deadline was immovable.)
Other carmakers immediately reacted angrily. Ford said the industry needed
“ambition, commitment and consistency” from government, all of which had
been undermined. Sir Simon Clarke, a former Conservative cabinet minister,
asked how businesses should plan “if we respond to one by-election…by
tearing up key planks of government policy.”

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Some Conservatives dream that there are electoral gains in all of this. But
they risk overinterpreting the Uxbridge result. None of the policies that Mr
Sunak dumped imposes immediate and direct costs in the way the London
car scheme has. It will be hard to terrify voters with the prospect of not being
able to buy a gas boiler in 12 years’ time. Pollsters are also sceptical that
greenery is a strong wedge issue for Mr Sunak—rowing back on
commitments looks more likely to divide his own voters, not opposition-
leaning ones. Across all parties, voters are much likelier to say the
government should do more, not less, on climate (see chart). They do want a
fair transition, but Mr Sunak “risks putting the Conservatives on the wrong
side of Britain’s climate consensus”, says Luke Tryl, of More in Common
UK, a think-tank that carried out polling on the issue.

Mr Sunak may hope to focus attention on Labour’s economic credibility and

its plan to spend, eventually, £28bn yearly on climate change measures. But
Labour can adjust that stance without much loss of face. Given a crisis over
crumbling schools, some in that party had anyway started to ask if limiting
extra capital investment to green measures made sense. For all of Mr
Sunak’s protestations that his own new position was “not actually about
politics”, it evidently was. Whether it will anyway help looks doubtful. ■

For more coverage of climate change, sign up for the Climate Issue, our
fortnightly subscriber-only newsletter, or visit our climate-change hub.
This article was downloaded by zlibrary from
https://www.economist.com/britain/2023/09/20/rishi-sunaks-anti-green-turn-on-
britains-climate-targets

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A shot in the arm

Britain’s war on drugs enters a new phase

A new overdose prevention centre in Glasgow will save lives. It could also
change drug policy
Sep 21st 2023 | GLASGOW

THE SHOOTING gallery will be behind the car park of a pram shop in the
east of Scotland’s biggest city. Inside, drug users who have brought heroin or
other illicit drugs may shoot up under medical supervision. On September
27th Glasgow City Integration Joint Board, which makes public-health
decisions in the city, is set to approve its opening. Remarkably, no
opposition is expected.

Safe drug-consumption rooms, or overdose-prevention centres (OPCs), are

already legal in 16 countries, but this will be Britain’s first. Studies suggest
they do nothing to increase drug use but do help to get users to enrol in other
treatment. The pilot should save many users who would otherwise succumb
to overdoses. Potentially, it will spur a much-needed shift in the country’s
out-of-date drug policy.

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The need is urgent. “We are in a public-health emergency,” says Allan
Casey, a Glasgow city councillor. Last year 1,051 Scots died of drug misuse.
That was a 21% fall from the year before, but still quadruple the annual tally
seen two decades ago. Worryingly, drug deaths have risen again in the first
half of 2023. In deaths per million people, among rich countries, only
America has a worse record (see chart). Death rates are highest in the post-
industrial cities of Glasgow and Dundee.

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Scotland’s exceptional problems have multiple causes. Scots in the poorest
areas are 16 times more likely to die a drug-related death than those in the
richest places. The nation has a high rate of problematic drug users, which
puts a larger cohort at risk. Deaths rocketed as physicians cut the
prescription of benzodiazepines in the late 2000s, notes Andrew McAuley, at
Glasgow Caledonian University. More dangerous street varieties, pressed
into pills in home factories, and then taken with heroin and other drugs, took
their place.

The Scottish National Party (SNP), in power for 16 years, blames

Westminster for austerity and not devolving drug policy to Holyrood. In fact
the party is also to blame for previous cuts to frontline services including on
beds for recovering addicts. More recently the SNP has spent more, and
named a minister for drugs, but both governments have been woefully slow
to act.

Frustrated at the impasse, in 2020 Peter Krykant, an activist, started an

illegal OPC in a minibus in Glasgow, saving lives after nine overdoses. It
appears his experiment has focused minds. On September 11th Lord
Advocate Dorothy Bain, Scotland’s chief legal officer, said her office would
not support prosecutions of those who took drugs in the pilot facility. The
Scotland secretary in Westminster Alister Jack confirmed that the British
government would also not intervene (although the Home Office continues
to oppose OPCs).

That matters nationally as more cities could feel emboldened to set up OPCs.
“We will see them in Wales and also England within the next 12-18
months”, predicts Steve Rolles of Transform Drug Policy Foundation, a
charity. Drug deaths are some three times higher in Scotland than in the rest
of Britain, but a record 4,859 people died from overdoses in England and
Wales in 2021.

Yet the pilot in Scotland does not in itself change the law. The Scottish
government now wants to decriminalise the possession of drugs for personal
use. It hopes to emulate the progress made in countries such as Portugal and
Switzerland, where drug deaths are far lower. Yet Scotland is still beholden
to Britain’s punitive Misuse of Drugs Act, passed in 1971. Helen Clark, who
chairs the Global Commission on Drug Policy, a lobbying group of former

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world leaders, says Britain is “behind” many rich countries on harm
reduction.

Politicians are reluctant to move ahead of public opinion; seven out of ten
Britons think that possessing small quantities of heroin or cocaine should be
a criminal offence. On September 12th MPs voted by a majority of 368 to
amend the Misuse of Drugs Act. Unfortunately, they did so to toughen it—
banning sales or possession of laughing gas. Lawmakers thus look
increasingly out of step with their own experts who advised against a ban.

Still, the pilot programme in Glasgow counts as one of various small steps
towards decriminalisation, eked out with needle exchanges, heroin
prescriptions and drug-safety checks at festivals. “Each time, the War on
Drugs rhetoric becomes a little less effective,” says Mr Rolles.■

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Inflation and wages

What supermarkets reveal about Britain’s

economy
It’s an exceptionally good time to work for a big grocer
Sep 21st 2023

ON A RAINY afternoon outside a north London branch of Aldi, a German-

owned discount supermarket, Ibrahim and two co-workers are enjoying their
cigarette break. They most like the fact they are earning as they smoke. For
Aldi, unusually among supermarkets, offers paid breaks. Times have been
tough for British workers over the past two years with price rises outpacing
average wage growth in each month from December 2021 until May this
year. But for Ibrahim what politicians dub the cost-of-living crisis has never
bitten quite so hard. In July Aldi implemented its fourth pay increase in just
over a year. The starting rate for London-based shop workers is now £12.85
($15.90) an hour, 23% above the minimum wage.

Workers are doing well from a new front in the battle between supermarket
chains. The firms have long competed fiercely on prices to woo customers.
(Until recently Britons enjoyed access to the cheapest food in western

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Europe.) Now they find themselves in a similarly intense contest over
wages, terms and conditions in order to recruit and retain staff. Despite a
cooling economy, the jobs market remains tight with labour demand still
outstripping supply. According to the official numbers, average regular
weekly pay rose at an annual pace of 7.8% in the year to July, the joint
fastest rate since data were first gathered in 2001.

Running a supermarket takes a lot of labour. In the industry, which employs

around 870,000 people, bosses sound almost wistful about wage-growth
rates that other sectors have seen. Pay rises of 10-15% have been
commonplace for grocers. Recruiters are keen to emphasise that headline
hourly pay rates understate the extent of rising labour costs. Sainsbury’s, for
example, has offered staff free food during shifts since 2022. Waitrose, an
upmarket chain, gave each member of staff £500 last December, as a one-off
cost-of-living payment. Tesco allows employees as much as 15% off their
weekly shop. Lidl, another German discounter, has increased the hourly
premium it pays workers who toil in its freezer rooms to £1.50.

Rapid wage growth is helping to keep inflation uncomfortably high. New

data released by the Office for National Statistics on September 20th showed
the annual pace of consumer-price inflation falling slightly from 6.8% in
July to 6.7% in August. Analysts, who had pencilled in a rise, greeted that
with relief. Though prices in Britain are rising faster than in America, France
or Germany, the Bank of England decided to leave interest rates at 5.25% on
September 21st, after a long run of increases. Still, policymakers believe the
jobs market needs to loosen considerably more to return inflation to the 2%
target. Few sectors show this more clearly than food retailing.

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Food and non-alcoholic drinks prices have risen by 13.6% over the past year
and inflation in the sector has outpaced that of Britain’s peers (see chart).
The primary driver of Britain’s higher rate of food inflation is the battle for
staff. Earlier this year, as food-price inflation neared 20%, Sir Edward
Davey, leader of the Liberal Democrats, called for a public inquiry into
supermarket prices and accused firms of profiteering. Retail analysts were
not impressed. “You have to be criminally insane to believe that,” says Clive
Black, director of research at Shore Capital, a stockbroking firm. The “sweet

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spot” for the firms, according to Mr Black, is food-price inflation of 2-4%.
Any more and consumers begin to switch to cheaper brands and a worsening
product mix hits firms’ bottom line.

Operating margins in British supermarkets have historically been low at

around 3-4% and wage bills typically make up 10-15% of their total
operating costs. The Competition and Markets Authority, a regulator,
reported this summer that average operating margins fell from 3.2% in 2021-
22 to 1.8% in 2022-23. The level of operating profits across the sector,
meanwhile, dropped by more than 40%.

All labour-intensive industries employing low-wage workers have faced a

margin squeeze and pressure to increase prices in the past year. The legal
minimum wage rose by 9.7% last April. But problems have been most acute
in food retailing. Bosses point to the German discounters, Aldi and Lidl, as
the underlying driver. The two firms somehow offer the lowest prices to
consumers and yet also top the league table for pay.

They do so at a cost. Lidl’s British arm reported an annual loss on September

14th despite 19% sales growth and Aldi operates on ultra-thin margins. The
two firms, which are both privately owned, have strong balance sheets and
can, rivals say, play a long-term game of building market share. Rival
supermarket chiefs are not the only ones complaining. Last year a boss in the
social-care sector told a parliamentary committee that he dreads hearing that
an Aldi is opening nearby, as “I know I will lose staff.”■

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economy

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Brits in Paris

France rolls out the red carpet for Britain

Emmanuel Macron plays host to the royals, and Sir Keir Starmer
Sep 18th 2023 | PARIS

A YEAR AGO, trust between France and Britain was in free fall. Liz Truss,
briefly British prime minister, had won office after claiming not to know
whether Emmanuel Macron, the French president, was a “friend or foe”. The
two countries were at odds over fish, migrants, borders and more. So it is a
mark of the cross-Channel turnaround since then that France this week rolled
out the red carpet for Britain.

Sir Keir Starmer, leader of the Labour Party, was the first beneficiary. On
September 19th Mr Macron hosted him at the Elysée Palace, the day before
King Charles and Queen Camilla arrived for a three-day state visit. Some in
Labour circles presented Sir Keir’s meeting as a coup. In reality Mr Macron
periodically receives aspirant leaders, among them Olaf Scholz in 2021
before he became Germany’s chancellor and, in 2019, Volodymyr Zelensky
when he was running to be Ukraine’s president.

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Nonetheless it was a moment for Mr Macron and Sir Keir, who had never
met, to get the measure of each other. Both come from the centre-left: Sir
Keir as a Labour moderate, Mr Macron as a former minister in a Socialist
government. Both count Sir Tony Blair, a former Labour prime minister, as a
regular interlocutor. Both have a professional background outside politics:
Sir Keir as a lawyer, Mr Macron as an investment banker.

After the meeting Sir Keir, who gave Mr Macron an Arsenal shirt, seemed
pleased, although it was never going to be a moment for any negotiation. He
turned up having restated his ambition that, if he became prime minister, he
would try to secure improvements to a Brexit deal agreed in 2020. It is due
for a review in 2025-26. Sir Keir would not seek to re-enter the European
Union’s single market or customs union, but hopes for better arrangements
on a broad swathe of subjects from border checks on animals and food to
migration and security. France has always been clear, however, that
discussions about Brexit must happen between the British government and
the European Commission.

Up to a point, the French have already turned the page on the dismal cross-
Channel years under Boris Johnson, and then Ms Truss. Broadly, they work
well with Britain’s current prime minister, Rishi Sunak. Last year they
agreed to reinforce policing of “small boat” crossings from the French coast,
although the results have been limited. The bilateral optics have improved,
too. In March the two governments got together at the Elysée for a Franco-
British summit, the first for five years.

The French are well aware, though, that they also need to look ahead. There
is obvious appeal for them in working with a future British government
under a leader who voted against Brexit and is serious about engaging in a
more structured way with the EU, especially on defence and security. “The
French really miss the strategic dimension that the British bring to the table,”
says Mujtaba Rahman, of Eurasia Group, a consulting firm.

After Sir Keir’s audience, the trumpets came out in force. The royal state
visit was postponed from March because of rioting over Mr Macron’s
pension reform. This time France was gripped by royal mania. Mr Macron
treated King Charles to a banquet at Versailles, which the French insist is a
nod to a state dinner held there in 1972 for Queen Elizabeth II, not a

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reminder of the reason their monarchs got into trouble in the past. The king
was due to give a speech, at least partly in French, to members of both
houses of parliament in the Senate, and to visit Notre Dame, still being
repaired after the fire in 2019. Events touching on climate change and
biodiversity were also scheduled, as well as, naturellement, a trip to a classy
organic vineyard near Bordeaux.

The king and Mr Macron are said to have already forged a bond. As for the
French at large, fully 71% say that they have a good opinion of the British
royal family. Indeed in 2015 a little-known French minister argued that on
some level the French “did not want the death” of their own king. The
minister in question? Mr Macron. ■

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britain

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Scary mutts

A fight over dangerous dogs in Britain

The promised ban of the Bully XL shows how policy is made
Sep 15th 2023

THE GREAT British public loves two things: dogs and banning things.
What happens when the two passions collide? To answer that, consider the
plight of the Bully XL, a type of dog. To its fans the Bully XL is a (mostly)
gentle giant. The creatures, which can grow to be 60kg, make for “an
excellent family dog” according to the United Kennel Club in America. To
campaigners, they are a menace responsible for a sharp increase in fatal
attacks.

After a man was killed by a pair of dogs, suspected to have been Bully XLs,
in Staffordshire on September 14th, the government sided with the
campaigners. Speaking with the solemn manner of a prime minister
declaring war, Rishi Sunak announced that the type of dog would be banned
by the end of the year. “It is not about a handful of badly trained dogs, it is a
pattern of behaviour and it cannot go on,” said Mr Sunak.

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The Bully XL, a mix of pit-bull and Staffordshire terriers, as well as other
breeds, was introduced to Britain in 2014. Although pit-bull terriers are
illegal in Britain, the Bully XL was deemed to be a distant enough relative
that it was not forbidden. Their popularity exploded during the pandemic
lockdown, when people rushed to buy or adopt dogs of all kinds.

Although Bully XLs account for barely 1% of all dogs, they are responsible
for almost half of all reported attacks in Britain, according to Bully Watch, a
campaign group that has called for the type to be banned. The data are
sketchy. Not all dog bites are recorded. But not all dog bites are equal. Being
nibbled by a chihuahua is one thing; being mauled by a 60kg mutt is quite
another. According to Bully Watch, Bully XLs have killed as many as 14
people in Britain since 2021.

Before the dog can be banned, the government will first have to come up
with a definition of the Bully XL. Then the breed will be added to an
existing list of four illegal ones—Dogo Argentino, Fila Brasileiro, pit-bull
terrier and Japanese Tosa—with consequences for anyone who owns, sells,
breeds or abandons them.

Lawyers argue that the law being used, the Dangerous Dogs Act of 1991, is
a mess, with the forbidden breeds poorly defined. Instead, a dangerous dog
is classified like the old joke about pornography: the Home Secretary should
know it when they see it. Animal charities have long campaigned against the
law, arguing that ownership rather than breed was the deciding factor. Ban
one breed and irresponsible people may still opt for other breeds of large,
equally menacing dogs.

The law is, however, relatively effective in practice. Until the emergence of
the Bully XL, dog-related deaths were less common in Britain than in
America, where there are no limits on pit-bull-types of dog. Likewise, the
law is less brutal than it was. Before 1997, forbidden doggies faced an
automatic death sentence. Since then, well-behaved dogs of prohibited
breeds can live under certain conditions, such as if they are neutered and
kept muzzled when out in public. Other methods of control, such as
licensing or banning dogs whose jaws are dangerously strong, would be far
more intrusive to the vast majority of dog-owners whose pets pose little
threat to passers-by.

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The coming ban on Bully XLs demonstrates how easy it can sometimes be
to influence policy in Britain. The topic came to prominence only after
Lawrence Newport, an academic and YouTuber, drew attention to the
number of attacks. With the help of a handful of allies, Dr Newport and co
whipped up attention on the problem, mostly on social media, and in turn the
mainstream media and politicians took notice. Few regular readers hang
around on X (as Twitter is now known). But lots of bored politicos and
journalists are still there. The result is that a few well-targeted posts can have
a big impact, especially when the problem is cheap to fix. The posting-to-
policy pipeline is an increasingly short one. A niche campaign can become a
national issue. It pays to be dogged. ■

Correction (September 17th 2023): Lawrence Newport is not part of Bully

Watch as we originally stated, but of another organisation that has worked
with them.

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A year after the disastrous mini-budget

The legacy of Liz Truss

Is Britain still paying a moron risk premium?
Sep 21st 2023

JAMES CARVILLE, an adviser to Bill Clinton when he was president, once

quipped that when he died, “I would like to come back as the bond market.
You can intimidate everybody.” A year ago financial markets gave Britain a
fright, after Liz Truss’s new government unveiled a “growth plan” on
September 23rd that involved £45bn ($56bn) of annual, unfunded tax cuts,
equal to 1.8% of GDP . The cavalier approach to public finances sent yields
on gilts spiralling and the pound plummeting to its lowest-ever value against
the dollar.

The chaos was short-lived—as was Ms Truss’s hapless government. The

Bank of England intervened to steady markets, and Ms Truss sacked her
chancellor and closest ally, Kwasi Kwarteng, on October 14th, before
resigning herself six days later. Ms Truss’s 49 days in office were the briefest
of any prime minister. Although economic orthodoxy has now been restored
by Rishi Sunak’s government, is Britain still paying a “moron risk

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premium”—a term coined by Dario Perkins of TS Lombard, a research firm
—for Ms Truss’s misadventure?

The bond market has provided mixed signals. After the yield on ten-year
gilts peaked at 4.5% last September, it fell to 3.0% by the beginning of 2023.
But it now stands at 4.3%. The main reason is that inflation has proved
stickier than expected, so the bank’s policy rate has increased faster and will
stay higher for longer—exactly as investors feared it would after Ms Truss’s

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tax cuts. The bank has also been selling bonds, which in combination with
continued debt issuance by the government may have further pushed up
yields.

So why all the fuss a year ago? The telltale sign of investor panic was the
combination of rising rate expectations and a crashing currency. Under
normal conditions high rates should entice investors to buy sterling, not shun
it. Today that relationship has been restored. The pound is 20% higher
against the dollar than at its nadir on September 26th 2022.

For a better sense of whether a risk premium persists, look instead at credit-
default swaps. These instruments insure investors in the event that the bond-
issuer goes bust, so give a clearer indication of financial competence. Last
September the price of insuring British government debt against default for
five years rose from 29 basis points to 49 basis points after Ms Truss’s
growth plan was unveiled. Today, that instrument trades once more at 29
basis points.

While financial order appears to have been restored, the Conservative Party
is still reeling. The Tories’ deficit to Labour is close to 20 points in the polls.
The party’s reputation for economic competence has been shattered, too. Ms
Truss shows little contrition. On September 18th she told the Institute for
Government, a think-tank, that her regret was moving too quickly, not
executing the plan itself. ■

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Pollution in Northern Ireland

The largest freshwater lake in the British Isles has

been poisoned
Cleaning up Lough Neagh in Northern Ireland will be a challenge
Sep 21st 2023 | Cranfield Point

SEEN FROM afar, Lough Neagh should appear as a glittering inland sea.
The biggest freshwater lake in the British Isles supplies drinking water to
some 750,000 people, 40% of the population in Northern Ireland, and is a
much-loved spot for fishing, swimming, and other recreation. Or at least it
used to be. These days much of its water is clogged with sludge, its surface a
luminescent green.

Stand at Cranfield Point, on the lough’s northern shore, and the stink from
congealed slime can be overwhelming. Discarded rubbish fails to sink into
the gloop. Signs warn would-be bathers to stay onshore and keep pets close.
The danger is from a form of blue-green algae, cyanobacteria, which
produces toxins powerful enough to kill cows. Swans, dogs and foxes have
died. Populations of migratory birds that stop off at the lough are said to be
much reduced.

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Various factors explain the massive growth of the bacteria. For decades
nutrients have built up, the result of fertiliser run-off from farms and of
dumped wastewater, including sewage. As the numbers of pigs and poultry
farmed nearby soared in the past decade, the outpouring of slurry on land—
and into water—also surged. Heavier rainfall, in more intense bursts, is
probably washing more nutrients from fields. The water has also warmed by
1°C since 1995. The arrival of an invasive species, the zebra mussel, is
another problem. As a filter feeder it first makes the water clearer, letting
sunlight penetrate deeper, which encourages algae.

Solutions exist, at a cost. Boats can scoop up the thickest sludge. Better
water-treatment plants would reduce the volume of raw sewage being
dumped. Some farmers are being paid to plant “riparian strips”—fencing off
fields near to water and letting plants absorb excess nutrients. Most of all,
farmers should be encouraged not to over-use fertiliser. Machines could
inject slurry into the soil rather than spreading it on the surface. A project to
map the soil composition of every field in Northern Ireland is under way.
When complete, farmers should understand better the chemistry of their soil,
and so judge the right quantity of fertiliser to use.

Lough Neagh’s freshwater has gone stale because for years it has been taken
for granted. At least the problem is being discussed in newspapers, on radio
talk shows and by politicians. Getting concerted action will take time and
leadership. Unfortunately Northern Ireland’s politics is, for now, about as
gummed up as the lough. Don’t expect inspiration from the political
leaders.■

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british-isles-has-been-poisoned

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Bagehot

Russell Brand was the norm in the nasty noughties

The disgraced comedian is the symbol of a cruel, misogynistic and
politically vacant era
Sep 19th 2023

AT SIX FEET two and closer to seven when a hairspray-induced beehive

hairdo was added, Russell Brand was hard to miss. From about 2005, the
comedian-cum-presenter-cum-wannabe politician bestrode British society
like a skinny-jeaned colossus. He evolved from bit-part presenter on
Channel 4 to household name, hosting radio shows, writing columns and
interviewing politicians. He married a pop star, broke into Hollywood and
became a self-styled revolutionary. All the while he boasted of a rampant
sexuality, which was applauded by press and punters.

Now several women have accused Mr Brand of crimes including sexual

assault and rape. An investigation by the Sunday Times and Channel 4
revealed two decades of misogynistic behaviour, ranging from criminality to
the harassment of junior staff. (Mr Brand has not been charged and rejects
all allegations.) Although the most serious allegations are new, the bulk of

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coverage regurgitates the behaviour Mr Brand once bragged about and
which was blithely accepted by media executives, politicians and viewers.
Mr Brand is the personification of a cruel, misogynistic and politically
vacant age, which Britain would rather forget but should not.

Enthusiastic cruelty shaped British media in the noughties and into the
2010s. Mr Brand revelled in it. He came to national notoriety in 2008 after
he rang Andrew Sachs, who played Manuel in “Fawlty Towers”, a 1970s
comedy, and boasted of having sex with the actor’s granddaughter. The
recording was then broadcast on BBC Radio 2. Mr Brand was forced to
resign by the BBC. He had crossed a line. “There is no line,” he wrote
afterwards. “People draw that line in afterwards to fuck you up.”

It is easy to see why he thought that. British television at this point delighted
in torture. “Little Britain”, a sketch show with grotesque caricatures, was the
dominant comedy of the era. Two decades after it first emerged, audiences
now wince at the blackface and incessant cruelty. At the time people loved
it. Its characters were household names. Vicky Pollard, a yob, became the
face of Britain’s working class: fat, lazy and fecund. Cherie Blair, wife of Sir
Tony Blair, said it was the family’s favourite show. Sir Tony discussed
appearing on it for charity.

Newspapers are filled with appalled references to jokes that Mr Brand made
on stage to sell-out arenas and on TV to millions. In one, he boasted about
his predilection for “them blowjobs where the mascara runs a little bit”. At
the time, the jokes were lauded. Britain was, after all, a comfortably
misogynistic country. The Sun awarded Mr Brand the title “Shagger of the
Year” for three years running. It long ran topless women on page three.
Anyone who offered criticism was hounded. When Clare Short, a former
Labour cabinet minister, complained, the newspaper photoshopped her face
onto a topless woman. The headline called Ms Short “fat and jealous”. The
feature stopped only in 2015.

Among the most chilling allegations are the claims that Mr Brand sexually
assaulted a teenager, with a BBC car picking up the 16-year-old from school.
During their relationship, Mr Brand referred to her as “the child”. When it
came to women, an attitude of the younger the better permeated the media.
When in 2007 another 30-something comedian was linked with a 16-year-

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old studying for her GCSEs, it was gaily framed by the press as a problem
only because it might upset her father. “Soccer AM”, a football show that
peaked in the noughties, featured young women in skimpy football kits
being interviewed and bombarded with innuendo. When they were asked
their age, the audience would shout “Great age!” unless they were 18, at
which point the crowd would simply cheer.

By 2014 Mr Brand had evolved from celebrity into wannabe politico. He

published “Revolution”, a deranged manifesto that suggested forbidding any
company from having revenue more than the GNP of the smallest country
(Tuvalu, with $60m). Political debate was so vacant that Mr Brand was
lauded, rather than spurned. Readers of high-minded Prospect magazine
voted him the fourth-greatest of the world’s leading thinkers of 2015. Mr
Brand guest-edited the New Statesman (joking that he would rename it the
Nude Statesman); Ed Miliband, then the Labour Party’s leader, appeared on
Mr Brand’s YouTube channel. It was not that Mr Brand’s misogyny was
unknown. It was that it did not matter.

The nasty noughties

Nostalgia and amnesia combine to isolate Mr Brand from an era he
dominated. The folk memory of the noughties is of a kinder, more pleasant
time. The economy was growing. Social media mattered less. “Grown up”
politicians settled the issues of the day. The result is that the media bosses
who coddled Mr Brand, and the politicians who sucked up to him, now
dismiss him as a vile exception rather than the norm.

He was not an aberration. The audio of Mr Brand trying to arrange a meeting

with Jimmy Savile, who was later revealed as a serial rapist, by offering the
chance to see his assistant nude sounds like a surreal parody. It was a
genuine broadcast on Radio 2 in 2007. The decision to share it “beggars
belief”, says Lorraine Heggessey, a former BBC executive. Yet it was the
spirit of the times. A few years before, Savile had appeared on “Have I Got
News For You”, a satirical television show, and declared: “I’m feared in
every girls’ school in this country.” The audience laughed.

Putting Mr Brand in this context is to explain rather than excuse him. Britain
has, thankfully, changed a lot in the past decade. The needless cruelty and

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casual misogyny has dwindled. An obsession with teenage girls is now seen
as weird, not natural. Censorious and sometimes puritanical attitudes that are
prominent today exist as a reaction to the excesses of a previous era. Mr
Brand, relegated to a modest audience on YouTube, which has stripped him
of the right to earn money from his videos, now sits on the fringes of society.
It is comforting to think that he was always there. But it is wrong. ■

Read more from Bagehot, our columnist on British politics:

Centrists need to stop worrying and learn to love politics (Sep 14th)
Britons should watch GB News, carefully (Aug 31st)
Britons are not all in it together (whatever they might think) (Aug 23rd)

Also: How the Bagehot column got its name

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noughties

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International
Meet the world’s new arms dealers

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Young guns

Meet the world’s new arms dealers

Where to buy drones, fighters and tanks on the cheap
Sep 19th 2023

THE SIGHT of North Korea’s chubby leader, Kim Jong Un, shaking hands
with Vladimir Putin on September 13th—having travelled by train to a
spaceport in Russia’s far east to discuss selling its dictator a stash of North
Korean weapons—was remarkable both on its own terms and for what it said
about the business of selling arms. The world’s five biggest arms-sellers
(America, Russia, France, China and Germany) account for more than three-
quarters of exports. But up-and-coming weapons producers are giving the
old guard a run for their money. They are making the most of opportunities
created by shifting geopolitics. And they are benefiting from the Russian
invasion of Ukraine.

Mr Kim’s trip to Russia followed a visit to Pyongyang in July by Sergei

Shoigu, Russia’s defence minister, who wanted to see if North Korea could
provide gear that would help his country’s faltering war effort. North Korea
would love to find buyers for its kit. And few regimes are willing to sell

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Russia arms. China has so far been deterred from providing much more than
dual-purpose chips (although it could yet channel more lethal stuff through
North Korea). Only Iran has obliged, selling some 2,400 of its Shahed
“kamikaze” drones.

North Korea could provide a wider range of stuff. As well as drones and
missiles such as the KN-23, which is almost a replica of the Russian
Iskander ballistic missile, it could offer self-propelled howitzers and multi-
launch rocket systems. According to sources in American intelligence, North
Korea has been delivering 152mm shells and Katyusha-type rockets to
Russia for the best part of a year. Russia is shopping in Pyongyang and
Tehran because both regimes are already so heavily targeted by international
sanctions that they have nothing to lose and much to gain by doing business
with Mr Putin’s government. They are not so much an “axis of evil” as a
marketplace of pariahs.

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Social Media Pakistan 0342-4938217
If the North Korean arms industry is being boosted by the war in Ukraine, its
southern foe is doing even better. South Korea’s arms exporters were
cleaning up even before the conflict. In the five years to 2022 the country
rose to ninth place in a ranking of weapons-sellers compiled by the
Stockholm International Peace Research Institute (SIPRI), a think-tank (see
chart). The government aspires to make South Korea the world’s fourth-
largest arms exporter by 2027. Last year it sold arms worth $17bn, more
than twice as much as in 2021. Some $14.5bn came from sales to Poland.

The size and scope of the agreements South Korea has reached with Poland,
which sees itself as a front-line country in Europe’s defence against a
revanchist Russia, are jaw-dropping. The deal includes 1,000 K2 Black
Panther tanks, 180 of them delivered rapidly from the army’s own inventory
and 820 to be made under licence in Poland. That is more tanks than are
operating in the armies of Britain, France, Germany and Italy combined. It
also includes 672 K9 Thunder self-propelled howitzers; 288 K239 Chunmoo
multiple-rocket launchers; and 48 Golden Eagle FA-50s, a cut-price fourth-
generation fighter jet.

South Korea’s success in the arms business is down to competitive costs,

high-quality weaponry and swift delivery, says Tom Waldwyn at the
International Institute for Strategic Studies, a think-tank based in London. Its
prices reflect South Korea’s efficient manufacturing. The quality derives
from South Korea’s experience working with the best American weaponry,
and from its own high-tech civil sector. Speedy delivery is possible because
the South Koreans, facing a major threat across their northern border, run hot
production lines that can also ramp up quickly.

Siemon Wezeman, a researcher with SIPRI’s arms-transfer programme, says

wholehearted support from government and attractive credit arrangements
are also critical to South Korea’s success. Asian customers like the fact that
it has close ties to America without being America, which is often seen as an
unreliable ally. This could also help South Korea clinch a $45bn deal to
renew Canada’s submarine fleet. Questions for the future include how far
South Korea will go in transferring technology to its customers—a crucial
issue for Poland, which sees itself as an exporting partner of South Korea’s,
competing with Germany and France in the European market.

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If South Korea is the undisputed leader among emerging arms exporters,
second place goes to Turkey. Since the ruling AK party came to power in
2002 it has poured money into its defence industry. A goal of achieving
near-autarky in weapons production has become more pressing in the face of
American and European sanctions—the former imposed in 2019 after
Turkey, a NATO member, bought Russian S-400 surface-to-air missiles.

Rocket-fuelled
SIPRI thinks that between 2018 and 2022 Turkey’s weapons exports
increased by 69% compared with the previous five-year period, and that its
share of the global arms market doubled. According to a report in July by a
local industry body, the value of its defence and aerospace exports rose by
38% in 2022, compared with the previous year, reaching $4.4bn. The target
for this year is $6bn. Pakistan is receiving modernised submarines from
Turkey. And the last of four corvettes which Turkey has sold to the Pakistan
navy was launched last month. More sales to other countries are likely, both
because Turkey’s ships are competitively priced and because Turkey has few
qualms about who it will sell to.

Yet Turkey’s export charge is led by armed drones. On July 18th Turkey
signed a $3bn agreement with Saudi Arabia to supply the Akinci unmanned
combat aerial vehicle (UCAV). It was made by Baykar, which also produces
the Bayraktar TB2—a drone that has been used in combat by Azerbaijan,
Ethiopia, Libya and Ukraine. The TB2 was developed to hunt Kurdish
militants after America refused to sell Turkey its Predator drone. More than
20 countries lined up to buy it because it was cheaper and more readily
available than the American alternative, and more reliable than the Chinese
UCAVs that had previously dominated the non-Western market.

The Akinci (pictured right, next to the TB2) is more powerful. It can carry
lots of big weapons, including air-to-air missiles and the SOM-A, a stealthy
cruise missile with a range of 250km. It will find buyers among several other
Gulf countries, such as Oman, Qatar and the UAE, which are keen to hedge
against souring relations with America by reducing their reliance on its
weaponry. These countries also have ambitions to build their own defence
industries; they see Turkey as a willing partner and as an example to follow.

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Turkey’s ambitions are shown by what else is in the pipeline. Its new navy
flagship, the Anadolu, is a 25,000-tonne amphibious assault ship and light
aircraft-carrier that will carry Bayraktar UCAVs. At least one Gulf country is
said to be in talks to buy a similar ship. Turkey’s fifth-generation fighter jet,
the KAAN, in which Pakistan and Azerbaijan are partners, should fly before
the end of the year. Developed with help from Britain’s BAE Systems and
Rolls-Royce, the KAAN could be seen as a response to Turkey’s ejection
from the F-35 partner programme (as punishment for buying the S-400).
Turkey will market the plane to anyone America will not sell F-35s to—or
who balks at the conditions. Once again, Gulf countries may be first in line.

South Korea and Turkey have benefited from the woes of their main
competitors. Russia’s arms exports between 2018 and 2022 were 31% lower
than in the preceding five-year period, according to SIPRI. It is facing
further large declines because of the strain its war of aggression is putting on
its defence industries, its geopolitical isolation and the efforts of two major
customers, India and China, to reduce their reliance on Russian weaponry.

India, previously Russia’s biggest customer, cut its purchases of Russian

arms by 37% in the 2018-22 period. It is probably wishing it had gone
further: Russia’s largely state-controlled arms industry is having to put its
own army’s needs ahead of commitments to customers. Many of India’s 272
Su-30MKIs, the backbone of its air force, are kaput because Russia cannot
supply parts. Some of Russia’s weapons have performed poorly in Ukraine
compared with NATO kit. And sanctions on Russia are limiting trade in
things such as microchips, ball-bearings, machine tools and optical systems,
which will hinder Russia’s ability to sell combat aircraft, attack helicopters
and other lethal contraptions. The longer the war in Ukraine lasts, the more
Russia will struggle to claw back its position in the global arms market.

Damp squibs
As for China, over half its arms exports in the 2018-22 period went to just
one country, Pakistan, which it sees as an ally against India. Nearly 80% of
Pakistan’s major weapons needs are met by China, according to SIPRI.
These include combat aircraft, missiles, frigates and submarines. Beijing has
no interest in its customers’ human-rights records, how they plan to use what
China sends or whether they are under Western sanctions.

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But China’s arms industry also has its problems. One challenge, says Mr
Waldwyn, is that although China set out to dominate the military drone
market a decade ago, its customers got fed up with poor quality and even
worse support, opening a door for Turkey. A second is that, with the
exception of a putative submarine deal with Thailand and a package of
weapons for Myanmar, countries in South-East Asia are tired of Chinese
bullying and “won’t touch them”, says Mr Wezeman.

At least China does not have to worry about competition from India. Despite
much effort, India’s growth as an arms exporter has been glacial. The
government of Narendra Modi has listed a huge range of weapons parts that
must be made in India; it hopes home-made light tanks and artillery will
enter service by the end of the decade. But India has relied for too long on
the transfer of technology from Russia under production-licensing
agreements for aircraft, tanks and warships that have failed to deliver.
Investment is wastefully channelled through state-owned bodies. Red tape
suffocates initiative.

Projects such as the Tejas light combat aircraft have taken decades to reach
production and remain fraught with problems. The Dhruv light helicopter,
launched in 2002, has crashed dozens of times. After decades in
development, the Arjun Mk-2 tank turned out to be too heavy for
deployment across the border with Pakistan. Locally made kit is often
rejected by India’s own armed forces. “If they don’t want it, exporting it
becomes impossible,” says Mr Wezeman. South Korea and Turkey show
how countries can build lucrative arms businesses that underpin domestic
security. India, for all its bombast, is a lesson in how not to do it. ■
This article was downloaded by zlibrary from
https://www.economist.com/international/2023/09/19/meet-the-worlds-new-arms-dealers

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Business
Could OpenAI be the next tech giant?
Abu Dhabi throws a surprise challenger into the AI race
California cracks down on carbon
America’s big car firms face lengthy strikes
Big pharma can’t get enough of one class of cancer drugs
Friendships in the office
What Arm and Instacart say about the coming IPO wave

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Smart money

Could OpenAI be the next tech giant?

What the business of AI’s leading startup says about the technology’s
future
Sep 18th 2023 | San Francisco

THE CREATION of a new market is like the start of a long race.

Competitors jockey for position as spectators excitedly clamour. Then, like
races, markets enter a calmer second phase. The field orders itself into
leaders and laggards. The crowds thin.

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In the contest to dominate the future of artificial intelligence, OpenAI, a
company backed by Microsoft, established an early lead by launching
ChatGPT last November. The app reached 100m users faster than any before
it. Rivals scrambled. Google and its corporate parent, Alphabet, rushed the
release of their chatbot, Bard. So did startups like Anthropic. Venture
capitalists poured over $40bn into AI firms in the first half of 2023, nearly a
quarter of all venture dollars this year. Then the frenzy died down. Public
interest in AI peaked a couple of months ago, according to data from Google

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searches. The number of visitors to ChatGPT’s website fell from 210m in
May to 180m now (see chart 1).

The emerging order still sees OpenAI ahead technologically. Its latest AI
model, GPT-4, is beating others on a variety of benchmarks (such as an
ability to answer reading and maths questions). In head-to-head
comparisons, it ranks roughly as far ahead of the current runner-up,
Anthropic’s Claude 2, as the world’s top chess player does against his closest
rival—a decent lead, even if not insurmountable. More important, OpenAI is
beginning to make real money. According to the Information, an online
technology publication, it is earning revenues at an annualised rate of $1bn,
compared with a trifling $28m in the year before ChatGPT’s launch.

Can OpenAI translate its early edge into an enduring advantage, and join the
ranks of big tech? To do so it must avoid the fate of erstwhile tech pioneers,
from Netscape to Myspace, which were overtaken by rivals that learnt from
their early successes and stumbles. And as it is a first mover, the decisions it
takes will also say much about the broader direction of a nascent industry.

OpenAI is a curious firm. It was founded in 2015 by a clutch of

entrepreneurs including Sam Altman, its current boss, and Elon Musk,
Tesla’s technophilic chief executive, as a non-profit venture. Its aim was to
build artificial general intelligence (AGI), which would equal or surpass
human capacity in all types of intellectual tasks. An intermediate goal was
an AI that could master a video game called “Dota”. In working on that
problem, OpenAI’s boffins alighted on a simple approach that involved
harnessing oodles of computing power, says an early employee who has
since left. When in 2017 researchers at Google published a paper describing
a revolutionary machine-learning technique they christened the
“transformer”, OpenAI’s engineers realised they could scale it up by
combining untold quantities of data scraped from the internet with
processing oomph. The result was the generative pre-trained transformer, or
GPT for short.

Obtaining the necessary resources required OpenAI to employ some

engineering of the financial variety. In 2019 it created a “capped-profit
company” within its non-profit structure. To begin with, investors in this
business could make 100 times their initial investment—but no more. Rather

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than distribute equity, the firm distributes claims on a share of future profits
that come without ownership rights (“profit-participation units”). What is
more, OpenAI says it may reinvest all profits until the board decides that
OpenAI’s goal of achieving AGI has been reached. OpenAI stresses that it is
a “high-risk investment” and should be viewed as more akin to a “donation”.
“We’re not for everybody,” says Brad Lightcap, OpenAI’s chief operating
officer and its financial guru.

Maybe not. Mr Musk pulled out in 2018. Some potential investors were
scared away from OpenAI’s most recent funding round by its complex
structure. But Mr Altman and Mr Lightcap were able to win over others. To
become more attractive the company has loosened its profit cap to one based
on an annual rate of return (though it will not confirm what the maximum
rate is). And academic debates about the meaning of AGI aside, the profit
units themselves can be sold on the market just like standard equities. The
firm has already offered several opportunities for early employees to sell
their units. Investors who chose to buy in appear confident that they can
achieve venture-scale returns if the firm keeps growing.

SoftBank, a risk-addled tech-investment house from Japan, is thought to be

the latest investor keen to place a big bet on OpenAI. The startup has so far
raised a total of around $14bn. Most of it, perhaps $13bn, has come from
Microsoft, whose Azure cloud division is also furnishing OpenAI with the
computing power it needs. In exchange, the software titan will receive the
lion’s share of OpenAI’s profits—if these are ever handed over. In the short
term, it gets to license OpenAI’s technology and offer this to its own clients,
which include most of the world’s largest companies.

It is just as well that OpenAI is attracting deep-pocketed backers. For the

firm needs an awful lot of capital to procure the data and computing power
necessary to keep creating ever more intelligent models. Mr Altman has said
that OpenAI could well end up being “the most capital-intensive startup in
Silicon Valley history”. OpenAI’s most recent model, GPT-4, is estimated to
have cost around $100m to train, several times more than GPT-3.

For the time being, investors appear happy to pour more money into the
business. But they eventually expect a return. And for its part OpenAI has

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realised that, if it is to achieve its mission, it must become like any other
fledgling business and think hard about its costs and its revenues.

GPT-4 already exhibits a degree of cost-consciousness. For example, notes

Dylan Patel of SemiAnalysis, a research firm, it was divided into 16 parts
that specialise in different types of tasks. That makes it trickier to design
than a monolithic model. But it is then cheaper to actually use the model
once it has been trained, because not all the specialists are required to answer
questions. Cost is also a big reason why OpenAI is not training its next big
model, GPT-5. Instead, say sources familiar with the firm, it is building
GPT-4.5, which would have “similar quality” to GPT-4 but cost “a lot less to
run”.

A model salesman
But it is on the revenue-generating side of business that OpenAI is most
transformed, and where it has been most energetic of late. AI can create a lot
of value long before AGI brains are as versatile as human ones, says Mr
Lightcap. OpenAI’s models are generalist, trained on a vast amount of data
and capable of doing a variety of tasks. The ChatGPT craze has made
OpenAI the default option for consumers, developers and businesses keen to
embrace the technology. Despite the recent dip, ChatGPT still receives 60%
of traffic to the top 50 generative-AI websites, according to a study by
Andreessen Horowitz, a venture-capital (VC) firm which has invested in
OpenAI (see chart 2).

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Yet OpenAI is no longer only—or even primarily—about ChatGPT. It is
increasingly becoming a business-to-business platform. It is creating
bespoke products of its own for big corporate customers, which include
Morgan Stanley, an investment bank. It also offers tools for developers to

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build products using its models; on November 6th it is expected to unveil
new ones at its first developer conference.

In addition, the firm has a $175m pot to invest in smaller AI startups

building applications on top of its platform, which at once promotes its
models and allows it to capture value if the application-builders strike gold.
To spread its technology further, it is handing out perks to AI firms at Y
Combinator, a Silicon Valley startup nursery that Mr Altman used to lead.
John Luttig of Founders Fund, a VC firm which also has a stake in OpenAI,
thinks that this vast and diverse distribution may be even more important
than any technical advantage.

Being the first mover certainly plays in OpenAI’s favour. GPT-like models’
high fixed costs erect big barriers to entry for competitors. That in turn may
make it easier for OpenAI to lock in corporate customers. If they are to share
internal company data in order to fine-tune the model to their needs, many
clients may prefer not to do so more than once—for cyber-security reasons,
or simply because it is costly to move data from one AI provider to another,
as it already is between computing clouds. Teaching big models to think also
requires lots of tacit engineering know-how, from recognising high-quality
data to knowing the tricks to quickly debug the source code. Mr Altman has
speculated that fewer than 50 people in the world are at the true model-
training frontier. A lot work for OpenAI.

These are all real advantages. But they do not guarantee OpenAI’s
dominance. For one thing, the sort of network effects where scale begets
more scale, which have helped turn Alphabet, Amazon and Meta into quasi-
monopolists in search, e-commerce and social networking respectively, have
yet to show up. Despite its vast number of users, GPT-4 is hardly better
today than six months ago. Although further tuning with user data has made
it less likely to go off the rails, its overall performance has changed in
unpredictable ways, in some cases for the worse.

Being a first mover in model-building may also bring some disadvantages.

The biggest cost for modellers is not training but experimentation. Plenty of
ideas went nowhere before the one that worked got to the training stage.
That is why OpenAI is estimated to have lost some $500m last year, even
though GPT-4 cost one-fifth as much to train. News of ideas that do not pay

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off tends to spread quickly throughout AI world. This helps OpenAI’s
competitors avoid going down costly blind alleys.

As for customers, many want to reduce their dependence on OpenAI, fearful

of being locked into its products and thus at its mercy. Anthropic, which was
founded by defectors from OpenAI, has already become a popular second
choice for many AI startups. Soon they may have more cutting-edge
alternatives. Google is building Gemini, a model believed to be more
powerful than GPT-4. Despite its partnership with OpenAI, even Microsoft
is something of a rival. It has access to GPT-4’s black box, as well as a vast
sales force with deep ties to the world’s biggest corporate IT departments.
This array of choices diminishes OpenAI’s pricing power. It is also forcing
Mr Altman’s firm to keep training better models if it wants to stay ahead.

The fact that OpenAI’s models are a black box also reduces its appeal to
some potential users, including large businesses concerned about data
privacy. They may prefer more transparent “open-source” models like
Meta’s LLaMA 2. Sophisticated software firms, meanwhile, may want to
build their own model, in order to exercise full control over its behaviour.

Others are moving away from generality—the ability to do many things

rather than just one thing—by building cheaper models that are trained on
narrower sets of data, or to do a specific task. A startup called Replit has
trained one just to write computer programs. It sits atop Databricks, an AI
cloud platform which counts Nvidia, a $1trn maker of specialist AI
semiconductors, among its investors. Character AI has designed a model that
lets people create virtual personalities based on real or imagined characters
that can then converse with other users. It is the second-most popular AI app
behind ChatGPT.

The core question, notes Kevin Kwok, a venture capitalist (who is not a
backer of OpenAI), in a forthcoming essay, is how much value is derived
from a model’s generality. If not much, then the industry may be dominated
by many specialist firms, like Replit or Character AI. If a lot, then big
models such as those of OpenAI or Google may come out on top. Mr
Altman still believes in size. “We will keep scaling for sure,” he says, even if
many of the gains “will hopefully come from other things”.

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Mike Speiser of Sutter Hill Ventures (another non-OpenAI backer) suspects
that the market will end up containing a handful of large generalist models,
with a long tail of task-specific models. Such an oligopoly might limit the
chance of an astronomical Google-like outcome, but could still earn OpenAI
a pretty penny. And if the company really does achieve its mission of
creating a thinking machine that surpasses humans? Then all bets are off. ■

Correction (19th September 2023): In an earlier version of this article we

made an error in expanding the abbreviation GPT. Apologies for the
hallucination.

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This article was downloaded by zlibrary from
https://www.economist.com/business/2023/09/18/could-openai-be-the-next-tech-giant

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Can Falcon soar?

Abu Dhabi throws a surprise challenger into the

AI race
It has released the world’s most powerful open-source model, and will
soon launch an AI company
Sep 21st 2023

OVER RECENT decades the oil-rich economies of the Gulf have shown a
taste for flashy government projects with dubious payoffs. In the early 2000s
Dubai spent an estimated $12bn building an artificial archipelago shaped
like a palm. Last year Qatar splurged around $220bn hosting the football
World Cup. Saudi Arabia, the region’s gorilla, is building a pair of 120km-
long skyscrapers in the desert—for roughly $1trn.

Amid the vanity projects, some serious efforts at economic diversification

are also being pursued. One such endeavour is under way in Abu Dhabi,
where earlier this month a government research institute released Falcon
180B, its latest massive artificial-intelligence (AI) model, which is
impressing technologists around the world with its performance.

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Abu Dhabi has even bigger AI ambitions. “We are entering the game to
disrupt the core players,” says Faisal al-Bannai, secretary-general of the
Advanced Technology Research Council (ATRC), the government agency
which houses the institute that created Falcon. He says that later this year the
ATRC will announce the launch of a state-backed AI company to go head to
head with the field’s leading lights, such as OpenAI, creator of ChatGPT.
Though it will face an uphill battle, the Emirati outfit could yet emerge as a
credible competitor. Its success will be closely watched both by rivals and by
other governments seeking to carve out a role in an AI economy currently
dominated by America and China.

The Technology Innovation Institute (TII), the applied-research arm of the

ATRC, employs around 800 staff of 74 nationalities, working on subjects
from biotechnology and robotics to quantum computing. Launched in 2020,
it has been experimenting with ChatGPT-like “generative” AI for some time.
It released Noor, an Arabic-based AI model, in April last year, and then
Falcon 40B, the first iteration of its flagship open-source model, in May this
year.

Falcon 180B, as its name hints, is a beefed-up version of its predecessor.

Comparing the performance of AI models is notoriously tricky, but going by
a selection of commonly used benchmarks compiled by Hugging Face, a
library of models, TII’s latest release bests the previous open-source
champion, Meta’s LLaMA 2. A blog post by Hugging Face staff suggests the
model is “on par” with Google’s PaLM 2.

Why make such a powerful model freely available? Mr Bannai talks of

“democratising” access to a transformational new technology, and warns
against power falling into the hands of a small clique of companies, as has
happened in the internet economy. But opening up access to Falcon 180B
also allows software engineers to play around with a model that is not quite
at the technological frontier, and suggest improvements. According to TII,
some 12m developers experimented with the first generation of Falcon.

Giving away the model also opens up other opportunities for monetisation.
Consider Stability AI, a startup whose open-source Stable Diffusion model
was behind 13bn of the 15bn images generated by AI in the year to August,
according to Everypixel, a software firm. Emad Mostaque, Stability AI’s

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founder, says that its open-source strategy makes “commercial sense” for the
firm “because the models are adopted far more quickly and widely than
proprietary models”. Although the company generates revenue directly
through its DreamStudio text-to-image generator, that tool accounts for a
small fraction of the pictures produced using Stable Diffusion. It also makes
money from developers opting to build applications based around the model
(or others created by the company) on top of its computing platform, and by
building tailored solutions for customers.

Mr Bannai has a similar vision. He pictures an “end-to-end platform for AI

developers”, pointing to Shopify, an e-commerce platform used by
merchants to build online shops, as his inspiration. He says the company will
also build new proprietary models and applications tailored for specific
fields, such as medicine and law, while keeping access to its core model
open. It will experiment, too, with “multimodal” AI systems that incorporate
many types of data (from text and images to audio) and “edge” models that
can run on smaller devices such as phones.

Abu Dhabi may not seem like an obvious hub for AI talent, but big (and tax-
free) salaries have already started luring tech whizzes from abroad. The
emirate has also been training local brainboxes, including at the Mohamed
bin Zayed University of Artificial Intelligence, founded in 2019. And
although it will be a late entrant to an already crowded race, the Emirati firm
will have some advantages, too.

One is a tight-knit business milieu. Many bosses are still grappling with how
best to harness generative AI. By teaming up with local businesses and using
them as test cases, Mr Bannai reckons his agency’s AI company will quickly
be able to learn what works and what doesn’t.

Another advantage is the emirate’s deep pockets. Abu Dhabi’s various

sovereign-wealth funds hold around $1.5trn in assets, which makes even
OpenAI’s $40bn valuation look like chump change. With frontier AI models
becoming more computationally intensive and data-guzzling, access to cash
could become decisive, especially in a world of higher interest rates.

If the endeavour succeeds, it will be a favourable omen for the long-term

prospects of the Gulf as the demand for oil declines. Countries that harbour

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similar hopes of becoming an AI superpower, including Britain, will be
watching along with interest—and, perhaps, envy. ■

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https://www.economist.com/business/2023/09/21/abu-dhabi-throws-a-surprise-challenger-
into-the-ai-race

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Emissionary zeal

California cracks down on carbon

It is not just attacking big oil. Big everything is in the line of fire
Sep 21st 2023 | LOS ANGELES

CLIMATE WEEK NYC got off to an early start in California. In the days
running up to the launch of the annual jamboree in New York City,
America’s most populous and economically powerful state seized the
initiative by hurling two thunderbolts at carbon-intensive businesses.

The most eye-catching was a lawsuit filed on September 15th by the

Democrat-led state government accusing five big oil companies—BP,
Chevron, ConocoPhillips, ExxonMobil and Shell—of lying about the
dangers of climate change. Two bills passed days earlier by the state
legislature may have a bigger impact. They could, for the first time in
America, force big business to make climate-related disclosures. Governor
Gavin Newsom vowed to sign both, after a few tweaks.

The two approaches—legal and legislative—were hailed by climate

campaigners as tipping points in American law. The lawsuit against “big oil”

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aims to make the defendants pay for the alleged environmental damage
suffered in California as a result of the use of their products. The firms
reasserted their commitment to decarbonisation and said that the courts were
not the right place to tackle such a momentous problem. It is the latest and
most significant of dozens of court cases filed by states and cities against
fossil-fuel producers in recent years. Those lawsuits proceed slowly and, as
yet, no firm has lost. But in April the Supreme Court dealt a blow to oil
producers by rejecting their efforts to move such cases from state to federal
courts.

The two laws are likely to have bigger, and more immediate, consequences.
They require large firms that do business in California to disclose their
greenhouse-gas emissions and climate-related vulnerabilities. They are the
first of a kind in America—and will, like the state’s vehicle-emissions
standards, probably have implications far beyond California’s borders.

One applies to more than 5,000 companies with global annual revenues of
over $1bn, and obliges them to disclose direct and indirect emissions, known
as scope 1 and scope 2, beginning in 2026. A year later, they must also
reveal their scope 3 emissions, which include those generated by their
suppliers and end users. For example, carmakers will have to account for the
emissions of those who provide them with parts and those who drive their
cars. Scope 3 emissions are hard to calculate and can be many times the
direct emissions, making some firms loth to calculate them.

The second measure applies to 10,000 or so companies with revenues above

$500m. Starting in 2026 they must file reports every other year on the
financial impact of climate change on their business. Some companies, such
as Microsoft, a tech giant, and Patagonia, a clothing brand, threw their
support behind the measures. The California Chamber of Commerce, a lobby
group, opposed them, arguing that they would push up compliance costs for
firms without curbing emissions. Even so, companies will find it hard to
resist the lure of California’s giant market.

The climate-disclosure requirements come shortly before America’s

Securities and Exchange Commission (SEC), a regulator, is expected to
launch something similar at a federal level. Michael Gerrard of the Sabin
Centre for Climate Change Law at Columbia University points out that the

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SEC’s rule is narrower in scope than California’s, only affects publicly
traded companies above a certain size, and may be more legally vulnerable.

Internationally, California is not alone. Many American multinationals will

soon have to comply with even further-reaching climate-disclosure
requirements by the European Union. America’s Republican states may
growl about extraterritoriality. But when it comes to standard-setting,
businesses know they must take California and the EU seriously. ■

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Strike while the engine is hot

America’s big car firms face lengthy strikes

Detroit’s “big three” v the United Auto Workers
Sep 20th 2023

THE CAR industry faces unprecedented upheaval as the importance of the

internal-combustion engine, which has defined it for more than a century,
declines and that of battery power, which will define its future, rises. The
latest reverberation of this historic shock is now rippling through the four-
yearly contract negotiations between Detroit’s “big three” carmakers and its
biggest trade union. On September 15th, for the first time ever, members of
the United Auto Workers (UAW) began simultaneous industrial action
against Chrysler, General Motors (GM) and Ford. (Chrysler is part of
Stellantis, whose biggest shareholder part-owns The Economist’s parent
company.) The union’s tactical change foreshadows a protracted stand-off,
the stakes of which are high for union and carmakers alike.

In the past the UAW renegotiated its contract with one of the big three, with
the other two usually falling into line with any agreements. In 2019 the
renegotiation happened at GM, which reached a deal with the union only

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after a six-week strike by 48,000 workers had cut production by 300,000
vehicles, costing the company $3.6bn in net profit. Even though this time the
industrial action is affecting all three companies, it is more targeted. The
three factories affected so far together employ only 13,000 of the UAW’s
146,000 members who work at the Detroit trio. As a result, reckons Evercore
ISI, a bank, only up to 20,000 vehicles might be lost in the first week of the
strike.

That could change if the talks do not move fast enough. The UAW has
threatened to tighten the screw considerably if no progress is made by
September 22nd. In particular, extending the strikes to factories making
engines could result in 150,000 unmade vehicles a week, because other
plants that depend on powertrains are also forced to stop production. Hitting
the manufacture of lucrative pickups would inflict even more duress on the
companies. The union thinks it can afford to dig in, thanks to an $825m
strike fund that could pay $500 a week to all the UAW‘s big-three members
for 11 weeks. It also has the public on its side; two in three Americans tell
pollsters they support unions, almost an all-time high.

The UAW argues that American carmakers’ recent good fortune should be
shared out more evenly, pointing to record profits and ballooning bosses’
pay. The self-styled “audacious and ambitious” set of demands from Shawn
Fain, the UAW’s newish leader, includes a cumulative pay rise of 36% over
the next four years. Also on the wish list are a return of more generous
pension provisions and a rapid end to a scheme introduced in 2007 after bail-
outs induced by the financial crisis, whereby new workers are paid less than
existing employees.

The car giants have countered by offering a pay increase of around 20% and
some other concessions. They contend that meeting all the union’s demands
would frustrate their costly efforts to turn themselves from manufacturers of
gas-guzzlers into software-powered makers of electric vehicles (EVs). Ford
says that doing so would more than double its labour costs. These, the firm
adds, are already much higher than at Tesla, a non-unionised EV pioneer, or
at foreign-owned factories with similarly unorganised workforces. And far
from paying the “poverty wages” as Mr Fain claims, Ford says that its offer
would boost average annual pay and benefits from $112,000 to $133,000.

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The carmakers are right to worry about rising costs. The UAW, for its part,
may well see the current moment as its last chance to stay relevant before
more of the industry switches to EVs, which are less mechanically
complicated and so less labour-intensive to make. This is signalled by
another of its demands—the right to strike over factory closures. Its
insistence on that suggests that in four years’ time the negotiations will not
be so much about money. Instead, they could be more like a rerun of 2019,
when one of the main points of contention was GM’s decision to close four
plants—but on a much larger scale. ■

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strikes

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Missile stockpiles

Big pharma can’t get enough of one class of cancer

drugs
A spate of dealmaking suggests high expectations for antibody-drug
conjugates
Sep 21st 2023 | New York

AROUND THE world, dealmaking is in a rut. A combination of higher

interest rates, geopolitical tensions and economic uncertainty has put a hold
on joint ventures, mergers and acquisitions. One exception is targets with AI
in their name. Another, less obvious one, involves a less catchy initialism:
ADCs.

Makers of these antibody-drug conjugates, to give them their full name, are
all the rage among the world’s biggest drugmakers. Pfizer is paying $43bn
for Seagen, which in turn has just teamed up with Nurix Therapeutics, a
smaller biotechnology firm, to work on this class of drugs. Amgen,
AstraZeneca and Merck have also placed billion-dollar bets on ADCs. In the
past five years licensing deals worth $60bn have been signed for such
therapies. The number of such deals tripled in that period, to 26. So far this

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year 18 have been signed, outpacing similar deals involving other emerging
cancer drugs.

ADCs aren’t new. The first was approved in 2000 for types of leukaemia.
They act like guided biological missiles: a payload of toxic chemotherapy is
carried by antibodies able to seek out cancer cells directly. Because they
bypass normal tissue and go straight for their targets, they let patients
receive higher doses that would otherwise cause too much collateral damage.

Two developments explain the frenzied stockpiling of these anti-cancer

weapons of late. One is increased clinical confidence. Enhertu, an ADC
developed by AstraZeneca and Daiichi Sankyo, a Japanese biotechnology
company, was first approved in America in 2019. But after another set of
trials in 2022 showed that it allowed breast-cancer patients to live almost
twice as long without relapse as those treated with standard chemotherapy,
its approval was extended to different types of breast and lung cancer.
Regulators have cleared a dozen other ADCs, which are now routinely used
to treat some of the deadliest cancers, including leukaemia, lymphoma and
breast cancer.

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More than 140 new ADCs are currently in clinical trials. Bristol Myers
Squibb and Sanofi all have therapies in late-stage tests. AstraZeneca and
Merck have each formed a joint-venture with biotech firms in China, to take
advantage of Chinese regulators’ more relaxed rules for early-stage trials,
which helps accelerate the drugs’ development. Susan Galbraith, who
oversees oncology research and development at AstraZeneca, says that the
timeline for drug testing in China has been significantly reduced in the past
decade.

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Clinical success has, in turn, boosted commercial confidence. Sales of
Enhertu exceeded $1.2bn in 2022. Revenue from Trodelvy, a similar drug
approved for advanced breast cancer and sold by Gilead Sciences, rose by
79% last year, to $680m. Kadcyla brought in $1.1bn for its Swiss developer,
Roche, in the first half of this year. Evaluate, a provider of health-care data,
forecasts that ADC sales could reach nearly $30bn by 2028, up from around
$7.5bn last year (see chart).

Some of these wagers could misfire. It is unclear just how well the drugs
will work in combination with others, such as immunotherapies. They are
also complex to make. Any deals involving Chinese partners could unravel if
Sino-Western tensions increase. For now, though, ADCs are a global arms
race worth cheering. ■

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the Bottom Line, our weekly subscriber-only newsletter.
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https://www.economist.com/business/2023/09/21/big-pharma-cant-get-enough-of-one-
class-of-cancer-drugs

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Bartleby

Friendships in the office

Friends make employees more engaged. That’s no reason for companies to
get involved
Sep 21st 2023

SCHOLARS OF HAPPINESS have found that close relationships are one of

the critical ingredients of a contented life. What is true in general is also true
of the workplace, according to research by Gallup. The pollster finds that
having a “best friend at work” is closely associated with all manner of good
things, from greater employee engagement to higher retention and better
safety records.

At some level, that is unremarkable. Spending time with people you like
makes most things more appealing, including work. If a job is sufficiently
humdrum, camaraderie among colleagues can be the main draw. The support
of friends can also encourage people to try new things. A study from 2015
by Erica Field of Duke University, and her co-authors, looked at the impact
of business training given to Indian women. Women who attended the course

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with a friend were more likely to end up taking out loans than those who
came alone.

The reverse also applies. Antagonistic relationships with co-workers are

always likely to make working life miserable. A study conducted by Valerie
Good of Grand Valley State University found that loneliness has an adverse
effect on the performance of salespeople. Among other things, they start
spending more on wining and dining their customers. The only thing worse
than a salesperson who sees you as a way to make money is one who wants
your company.

So friends matter. The problems come when managers see the words “higher
employee engagement” and leap to the conclusion that they should try to
engineer work friendships. In a report published last year Gallup gave the
example of an unnamed organisation which has a weekly companywide
meeting that spotlights one employee’s best friend at work. It’s not known if,
in the Q&A, others pop up to sob: “But I thought we were best friends at
work.”

Startups also offer services to encourage work friendships. One monitors the
depth of connections between people in different teams. It identifies shared
interests (gluten-free baking, say, or workplace surveillance) between
employees who don’t know each other and arranges meetings between them.
You thought life was bad? At least you are not making crumpets with a
stranger in finance.

It is a mistake for managers to wade into the business of friend-making, and

not just because it royally misses the point. The defining characteristic of
friendship is that it is voluntary. Employees are adults; they don’t need their
managers to arrange play-dates. And the workplace throws people together,
often under testing conditions: friendships will naturally follow.

The bigger problem is that workplace friendships are more double-edged

than their advocates allow. They can quickly become messy when power
dynamics change. The transition from friend to boss, or from friend to
underling, is an inherently awkward one (“This is your final warning. Fancy
a pint?”).

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And friendships have the potential to look a lot like cronyism. A clever study
by Zoe Cullen of Harvard Business School and Ricardo Perez-Truglia of
University of California, Berkeley, found that employees’ social interactions
with their managers could give their career prospects a boost relative to
others.

The researchers looked at promotions of smokers and non-smokers who

worked for a large bank in South-East Asia, hypothesising that sharing
smoking breaks with managers who also indulged might give workers a leg
up. And so it did. Smokers who moved from a non-smoking boss to a puffer
were promoted more quickly than those who moved to another non-smoker.
The authors found that social interactions did not just help smokers;
socialising between male managers and male employees played a large role
in perpetuating gender pay gaps. If firms are going to make friendship their
business, they should worry about its downsides, too.

Companies should facilitate interactions between employees, particularly in

a world of hybrid and remote working. Social gatherings and buddy systems
are reasonable ways to encourage colleagues to meet each other and to foster
a culture. But a high-quality work relationship does not require friendship. It
requires respect for each other’s competence, a level of trust and a desire to
reach the same goal; it doesn’t need birthday cards and a shared interest in
quiltmaking. Firms should do what they can to encourage these kinds of
relationships. If individuals want to take it further, it’s entirely up to them. ■

Read more from Bartleby, our columnist on management and work:

Who is the most important person in your company? (Sep 14th)
Networking for introverts: a how-to guide (Sep 7th)
The best bosses know how to subtract work (Aug 31st)

Also: How the Bartleby column got its name

This article was downloaded by zlibrary from
https://www.economist.com/business/2023/09/21/friendships-in-the-office

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Schumpeter

What Arm and Instacart say about the coming

IPO wave
The old-school stockmarket debut is back. About time
Sep 21st 2023

TECH BOSSES have long sought to disrupt the initial public offering (IPO).
They bristle at the thought of the high fees collected by spreadsheet-savvy
investment bankers for flogging their vision, at the alchemical process of
divvying up shares to new investors and at the money left on the table when
the price of a company’s shares soars as soon as they begin trading on an
exchange. Many plans have been hatched to improve the process, with
varying degrees of success. When going public in 2004 Google botched a
“Dutch” auction for its shares, which started with the highest bid and worked
downwards, rather than upwards, to a price that matches the supply of shares
to investors’ demand. As a final insult to the formalities of the normal IPO
process, an interview with the search giant’s founders was published, of all
places, in Playboy magazine, and of all times, during the supposedly “quiet
period” in the run-up to their company’s stockmarket debut.

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Little of this bravado was on display on September 19th, when Instacart was
welcomed on New York’s Nasdaq exchange. The grocery-delivery firm is
one of the latest to ring the bell after an almost two-year drought in IPO
activity. Instacart sold its shares for $30 a pop, the top of a price range that
had been revised higher in the days before its listing. Their price closed a
further 12% above that after the first day of trading, giving the firm a market
value of $11bn. That was the second strong debut in as many weeks. On
September 14th Arm’s share price climbed by 25% after its Japanese owner,
SoftBank, floated around 10% of the chip designer’s stock on the Nasdaq.

On the surface, Arm and Instacart look rather different. Instacart’s market
capitalisation is less than a quarter that of Arm. Its business of connecting
shoppers with people who buy and ferry their groceries looks less exciting
than chipmaking, an industry at the heart of the artificial-intelligence (AI)
revolution. Yet both firms are, in various ways, indicative of what to expect
from the gathering wave of public listings. This is likely to be less audacious
than the last bonanza in 2021. And that may be for the better.

Although Instacart’s first-day pop was mostly undone the next day, the fact
that the share price did not sink below the offer price may inspire confidence
in other startups. Plenty are looking for inspiration. According to data from
PitchBook, around half of the 83 unlisted American firms that were first
valued at more than $1bn in 2019 have either gone public, gone bankrupt or
gone on sale. For the significantly larger class of 2021, composed of nearly
360 such “unicorns”, the share drops to 6%. Having missed out on the listing
boom of 2020-21, many may now be ready to trade in the relative quietude
of private-company life for the drudgery of quarterly earnings calls, not least
to provide liquidity for their shareholders, including stock-option-holding
employees.

Many investors are ready to back them but, in contrast to the go-go years,
not unconditionally. For a start, hand-on-heart promises of future growth
count for less in an era of high interest rates than profits in the here and now.
According to Goldman Sachs, a bank, nearly half of the class of 2020-21
failed to post even one profitable quarter within two years of listing.
Emphasis on profitability in turn favours more mature companies. Data
collected by Jay Ritter of the University of Florida show that the share of
firms that were lossmaking before listing fell from 81% in 2000 to less than

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half in the subsequent three years, after the dotcom bubble burst. In that
period the median age of a listing firm rose from six years to more than ten.
Few fresh listers are quite as mature as Birkenstock, a nearly 250-year-old
German sandal-maker about to list in New York. But many are at least
adolescent. Klaviyo, which helps clients automate marketing and listed on
September 20th, was founded in 2012. So was Instacart. Arm turns 33 in
November.

Startups that barely manage to edge into the black, as Instacart did for the
first time in 2022, should prepare to go public at a steep discount to their
peak private-market valuations. Jefferies, an investment bank, estimates that
in the first half of this year stakes in venture-capital funds changed hands at
an average of 69% of their reported asset values. This is already translating
into compressed valuations on public stock exchanges. Instacart’s market
capitalisation is around a quarter of the $39bn implied by its last private
funding round in February 2021, when Silicon Valley venture investors
including Andreessen Horowitz and Sequoia pumped $265m into the firm.

The way companies are listing their shares is also looking less exuberant.
Bosses considering a listing in 2021 had two novel paths to the market, in
addition to the old-school IPO. One was to merge with one of the more than
800 special-purpose acquisition companies (SPACs), which raised $220bn in
2020 and 2021, and allowed startups to escape some of the scrutiny of
conventional IPOs. The other, a direct listing, involved floating shares
without the usual IPO roadshow to drum up investors’ interest and line up
buyers, for which investment bankers charge companies through the roof.
But SPACs often attracted firms which had less sensible business models, or
less scrupulous ones. After a series of scandals and disappointments, SPACs
look dead in the water.

Whatever floats your basket

Today’s nervy investors may balk even at the less controversial direct
listings, which can be more volatile since they do away with some of the
pre-flotation price discovery. Indeed, what little IPO innovation there is aims
to smooth the listing process in a jittery environment. Notably, both Arm and
Instacart lined up big-name investors to buy slugs of shares in their
offerings. These included, among others, Alphabet, Apple and Nvidia for

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Arm, and, for Instacart, Norway’s sovereign-wealth fund and PepsiCo. The
practice has historically been more prevalent in cautiously capitalist Asia.
America’s turbocharged capitalism may need to get used to it, too, at least
temporarily. ■

Read more from Schumpeter, our columnist on global business:

The Mittelstand will redeem German innovation (Sep 14th)
America’s bosses just won’t quit. That could spell trouble (Sep 4th)
Cherish your Uber drivers. Soon they will be robots (Aug 31st)

Also: If you want to write directly to Schumpeter, email him at

schumpeter@economist.com. And here is an explanation of how the
Schumpeter column got its name.
This article was downloaded by zlibrary from
https://www.economist.com/business/2023/09/21/what-arm-and-instacart-say-about-the-
coming-ipo-wave

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Finance & economics
How Asia is reinventing its economic model
Why aren’t more people being sacked?
Does China’s fear of floating exceed its fear of deflation?
Macau offers a new way to get rich
How to avoid a common investment mistake
Why uranium prices are soaring
Renewable energy has hidden costs

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A new era

How Asia is reinventing its economic model

The continent’s future will involve less Western influence
Sep 19th 2023 | Singapore

SEVEN HUNDRED years ago, maritime trade routes that stretched from the
coast of Japan to the Red Sea were peppered with Arab dhows, Chinese
junks and Javanese djongs, ferrying ceramics, precious metals and textiles
across the region. At its centre, a trading post known as Singapura
flourished. The enormous intra-Asian commercial network was disrupted
only by the arrival of sailors from rising European empires and the
emergence of farther-flung markets for Asian goods.

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Today another reconfiguration is under way. The “Factory Asia” model of
the late 20th century, in which the continent produced products for American
and European consumers, provided an astonishing boost to the prosperity of
China, Japan, South Korea and Taiwan. In 1990 just 46% of Asian trade took
place within the continent, as vast quantities of goods flowed to the West.
Yet by 2021 that figure had reached 58%, closer to European levels of 69%
(see chart 1). More regional trade has led to an increase in capital flows, too,

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binding countries tighter still. A new era of Asian commerce has begun—
one that will reshape the continent’s economic and political future.

Its emergence began with the growth of sophisticated supply chains centred
first on Japan in the 1990s, and later on China as well. Intermediate goods—
components that will eventually become part of finished products—soon
started to move across borders in greater numbers. They were followed by
foreign direct investment (FDI). Asian investors now own 59% of the stock
of FDI in their own region, excluding the financial hubs of Hong Kong and
Singapore, up from 48% in 2010. In India, Indonesia, Japan, Malaysia and
South Korea the share of direct investment from Asia rose by more than ten
percentage points, to between 26% and 61%.

After the global financial crisis of 2007-09, cross-border banking also

became more Asian. Before the crisis hit, local banks accounted for around a
third of the region’s overseas lending. They now account for more than half,
having taken advantage of the retreat of Western financiers. China’s huge
state banks led the way. Overseas loans by the Industrial and Commercial
Bank of China more than doubled from 2012 to last year, rising to $203bn.
Japan’s megabanks have also spread, in order to escape narrow margins at
home, as have Singapore’s United Overseas Bank and Oversea-Chinese
Banking Corporation.

The presence of Western governments has also diminished. In a recent

survey of South-East Asian researchers, businessfolk and policymakers by
the ISEAS-Yusof Ishak Institute in Singapore, some 32% of respondents said
they thought America was the most influential political power in the region.
Yet just 11% of respondents called it the most influential economic power.
State-led investment from China to the rest of the continent under the Belt
and Road Initiative has captured attention, but official assistance and
government-facilitated investment from Japan and South Korea are also
growing.

These trends are likely to accelerate. In the face of deteriorating relations

between America and China, companies in the region that rely on Chinese
factories are considering alternatives in India and South-East Asia. At the
same time, few bosses expect to desert China entirely, meaning two Asian
supply chains will be required, along with some doubling-up of investment.

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Trade deals will speed this along. A study published last year suggested that
the Regional Comprehensive Economic Partnership, a broad but shallow
pact signed in 2020, will increase investment in the region. By contrast, as a
result of America’s abandonment of the Trans-Pacific Partnership trade deal
in 2017, there is little chance of Asian exporters gaining greater access to the
American market.

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The need to establish new supply chains means that transport and logistics
are another area where intra-Asian investment will probably increase, notes
Sabita Prakash of ADM Capital, a private-credit firm. Matching investors
searching for reliable income with projects looking for finance—the mission
of such private-credit companies—has been a lucrative pastime in Asia, and
is likely to become a more popular one. The size of the private-credit market
in South-East Asia and India rose by around 50% between 2020 and mid-
2022, to almost $80bn. Other big investors are turning to infrastructure, too.
GIC, Singapore’s sovereign wealth fund, which manages a portion of the
country’s foreign reserves, is spending big on the building required for new
supply chains.

Changes to Asian savings and demography will also speed up economic

integration. China, Hong Kong, Japan, Singapore, South Korea and Taiwan
have climbed the ranks of overseas investors, becoming some of the world’s
largest. These richer and older parts of the continent have exported striking
volumes of capital into the rest of the region, with cash following recently
established trade links. In 2011 richer and older countries in Asia had about
$329bn, in today’s money, invested in the younger and poorer economies of
Bangladesh, Cambodia, India, Indonesia, Malaysia, the Philippines and
Thailand. A decade later that figure had climbed to $698bn.

Silk flows
In India and South-East Asia, “you’ve still got urbanisation happening, and
capital follows those trends,” says Raghu Narain of Natixis, an investment
bank. Bigger cities require not only more infrastructure investment, but also
new companies better suited to urban life. Asian cross-border merger-and-
acquisitions (M&A) activity is changing, according to Mr Narain, becoming
more like that found in Europe and North America. Even as deals into and
out of China have slowed considerably, M&A activity has become more
common elsewhere. Japanese banks, facing low interest rates and a slow-
growing economy at home, are ravenous for deals. Over the past year
Sumitomo Mitsui Financial Group and Mitsubishi UFJ Financial Group have
snapped up Indonesian, Philippine and Vietnamese financial firms.

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Meanwhile, rising Asian consumption makes local economies more
attractive as markets. Whereas in Europe 70% or so of consumption goods
are imported from the local region, just 44% are in Asia. This is likely to
change. Of the 113m people expected next year to enter the global consumer
class (spending over $12 a day in 2017 dollars, adjusted for purchasing
power), some 91m will be in Asia, according to World Data Lab, a research
firm. Even as Chinese income growth slows after decades of expansion,
other countries will pick up the pace. The five largest economies in ASEAN,

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a regional bloc—namely, Indonesia, Malaysia, the Philippines, Singapore
and Thailand—are expected to see imports grow by 5.7% a year between
2023 and 2028, the most rapid pace of any region (see chart 3).

These regional trading patterns would represent a return to a more normal

state of affairs. The globe-spanning export model that delivered first-world
living standards to large parts of Asia, and encouraged investment from far
afield, was a product of unique historical circumstances. The amount of
goods that travel from the continent’s industrial cities to America is far
higher than would be predicted by the relative size of their respective export
and import markets, and the distance between them. Indeed, a paper by the
Economic Research Institute for ASEAN and East Asia suggests that
machinery exports from North-East and South-East Asia to North America
in 2019 were more than twice as high as such factors would suggest.

Closer commercial links will bind the business cycles of Asian economies
even more tightly together. Despite the enduring use of the dollar in cross-
border transactions and Asian investors’ continuing penchant for Western-
listed markets, a study by the Asian Development Bank in 2021 concluded
that Asian economies are now more exposed to spillovers from economic
shocks in China than in America. This has been on display in recent months,
as China’s faltering trade has hit exporters in South Korea and Taiwan. More
trade, not just in intermediate parts but in finished goods for consumption,
means the continent’s currencies and monetary-policy decisions will
increasingly move together.

This will have political ramifications. America will retain influence over
Asian security, but its economic importance will decline. Local businessfolk
and policymakers will be more interested in and receptive to their
neighbours, rather than customers and countries farther afield. With local
factories still being built, consumption growing and a deep pool of savings
from Asia’s increasingly elderly savers desperate for projects to finance, the
high point for regional integration has yet to be reached. The new era of
Asian commerce will be more locally focused and less Western-facing. So
will the continent itself. ■

For more expert analysis of the biggest stories in economics, finance and
markets, sign up to Money Talks, our weekly subscriber-only newsletter.

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This article was downloaded by zlibrary from https://www.economist.com/finance-and-
economics/2023/09/19/how-asia-is-reinventing-its-economic-model

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The price battle

Why aren’t more people being sacked?

How inflation has fallen without mass casualties
Sep 17th 2023 | San Francisco

IF CENTRAL BANKERS are to defeat inflation, they must cool the labour
market. For the past couple of years growth in rich-world wages has added
to corporate costs, sending prices relentlessly upwards. But as they began
raising interest rates to slow the economy, monetary policymakers hoped for
an even rosier outcome. They wanted to achieve a “soft landing”, which
involves both bringing down inflation and doing so without mass job losses.
It is a lot to ask of a tool as blunt as monetary policy.

So far, and unexpectedly, labour markets from San Francisco to Sydney are
co-operating. Central bankers started to raise rates at a time when demand
for labour had almost never been so strong (see chart 1). Last year the
unemployment rate across the OECD club of rich countries, measuring the
share of people in the labour force who would like a job, was a shade under
5%, which was close to an all-time low. Excess demand for labour showed
up in an unprecedented surge in unfilled vacancies, which reached an all-

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time high. Workers bargained for higher wages, knowing that they had
plenty of options elsewhere.

The scale of the task central bankers set themselves was illustrated by the
historical record. Research by Alex Domash and Larry Summers, both of
Harvard University, found that there had never been an instance in which the
American vacancy rate had fallen substantially without unemployment rising
significantly. Last year Michael Feroli of JPMorgan Chase, a bank, studied
past episodes and noted that “whenever the vacancy rate goes down a little it
goes down a lot, and the economy lands in recession”.

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Social Media Pakistan 0342-4938217
To assess progress in rich-world labour markets, we have assembled data
from the OECD and Indeed, a listings website, covering 16 countries. In this
group, employers have reduced open vacancies by more than 20% on
average from their peak—a historically rapid decline. Some countries, such
as France, have seen relatively modest falls of 10% or so. In others, such as
Canada, Japan and Switzerland, unfilled job postings are down by a quarter
or more.

Declining vacancies are helping to trim wage growth. In America the annual
rate of pay rises has slipped from 6% in late 2022 to below 5% today (see
chart 2). Canadian wage growth is also falling fast. The story is less clear
elsewhere, not least because the quality of the earnings data is worse. In
Germany and Italy wage growth has probably stopped rising, though there
remain pockets of concern, including in Britain, where year-on-year pay
growth is edging up towards 8%. Yet even here forward-looking surveys,
which quiz firms and consumers on expectations for wage growth, point to
sharp future reductions.

For policymakers, this would feel a bit soiled if it came with a sharp rise in
joblessness. According to the rules of thumb for America discussed by
Messrs Domash and Summers, in normal times you would expect a 20%-
plus fall in vacancies to come alongside a rise in unemployment of three or
so percentage points within a year.

In reality, a year or so after vacancies started heading down, something else

appears to be happening. Recently the unemployment rate in the OECD has
held steady. Job growth, at 500,000 a month across the rich world, is about
as fast as it was in the second half of last year. The working-age employment
rate—the share of people aged 16-64 who are actually in a job—has risen to
an all-time high in around half of OECD countries. Even places known for
high unemployment, such as Italy and Portugal, have found jobs for an
unprecedented share of their working-age population.

Why are labour markets breaking the historical rule? One possibility relates
to “the great resignation” during the covid-19 pandemic. In 2021, spooked
by stories of employees quitting to start crypto firms and write novels, some
employers may have put up job vacancies as an insurance policy. Now, as
fewer folk leave their jobs, they are taking them down again.

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A second possibility relates to “labour hoarding”. During lockdowns in 2020
many companies laid off workers, only to struggle to rehire them when the
economy opened up. Bosses do not want to make the same mistake twice. So
today, even as the economy slows and firms cut job ads, they are trying to
hang on to existing workers. According to recent research published by the
Federal Reserve’s San Francisco branch, unemployment in America is
“notably lower” than expected given the current rate of economic growth.
We find similar trends across the rich world.

Central bankers still have a difficult task on their hands, as inflation in many
places remains uncomfortably elevated. Even in America and Canada,
demand for labour is high relative to supply. Across the rich world, wage
growth exceeds productivity growth, adding to the inflationary pressure.
And Messrs Domash and Summers could still be proved right if
unemployment jumps in the coming months. But after two years of bad
inflation data, and warning after warning that their strategy was sure to fail,
policymakers nevertheless have reason to be hopeful. ■

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markets, sign up to Money Talks, our weekly subscriber-only newsletter.
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economics/2023/09/17/why-arent-more-people-being-sacked

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All at once

Does China’s fear of floating exceed its fear of

deflation?
The central bank is constrained by its own limits on the yuan
Sep 21st 2023

WHEN ECONOMISTS pass judgment on exchange-rate regimes, they like

to invoke the monetary-policy “trilemma”. A country might want a stable
currency, free capital flows and an independent monetary policy, which can
respond to the needs of the domestic economy, regardless of what central
banks elsewhere are doing. There are, however, intrinsic tensions between
these objectives. And so, sad to say, a country can choose only two of the
three.

The trilemma is a canonical bit of theory. In practice, however, the choice is

not so stark. No country can have all three blessings in full. But some
countries, such as China, like a little of each.

This year, for example, China has tried to go its own way in monetary
policy. A property slump, low consumer morale and falling exports have

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marred the economy’s reopening from covid-19, contributing to dangerously
low inflation. In response, China’s central bank has eased its monetary
stance, even as interest rates have risen dramatically in America and
elsewhere. It lowered reserve requirements for banks on September 15th for
the second time this year. It has also twice cut interest rates.

China’s slowdown and its monetary response have, predictably, weighed on

the yuan. From mid-January, when euphoria about China’s reopening
peaked, to September 8th, the yuan fell by 9% against the dollar. On the face
of it, this is a good thing. A weaker currency should boost exports and ward
off deflation. According to Goldman Sachs, a bank, a sustained 10% drop in
the yuan against China’s trade partners could add 0.75 percentage points to
China’s growth, which is struggling to reach 5% this year. It could also
increase consumer-price inflation, which is near zero, by one percentage
points in the long term.

China, however, would also like a little currency stability to go with its
monetary independence. It fears that sharp declines in the yuan can lead
investors to expect further falls. It still bears the scars of 2015, when a
devaluation triggered heavy capital outflows. The central bank thus feels
inhibited in its exercise of monetary autonomy. Its rate cuts have been small
—only 0.1 percentage points each time for the short-term rate. They have
also been discreet. In June it cut this seven-day rate two days earlier than
such moves are normally made, notes Becky Liu of Standard Chartered,
another bank, perhaps to avoid too conspicuous a clash with the monetary-
policy meeting of America’s Federal Reserve.

China’s central bank has also tried to prop up the yuan. Officials have told
speculators not to take one-sided bets. They have cut foreign-exchange
reserve requirements for banks, releasing dollars into the system. The central
bank has tightened yuan liquidity offshore, making it harder for speculators
to borrow yuan in order to sell it. The central bank’s own foreign-exchange
reserves fell by $44bn in August, not all of which can be easily accounted
for by changes in the valuation of assets it holds. This raises the possibility
that the bank intervened modestly itself.

China’s distinctive exchange-rate system also gives the central bank a

chance to intervene in another way. The yuan is not allowed to float by more

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than 2% above or below a “fix”, which the bank calculates each morning.
The fix is supposed to reflect the previous day’s market forces. But the bank
sometimes introduces what it calls a “countercyclical factor” (ie, a fudge
factor) into its calculations. This has allowed it to set the fix at a rate that is
stronger than the previous day’s close. Indeed, in recent days there has been
more fudge in the fix than ever before.

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These interventions have enjoyed some success. The yuan has stopped
falling against the trade-weighted basket of currencies that the authorities
use as a benchmark for managing its value (see chart). The currency is also a
little stronger against the dollar than it was early in the month.

All this intervention comes at a cost. It tightens financial conditions, undoing

some of the monetary easing the central bank is pursuing. Although a
slightly more stable yuan can be engineered, it produces a somewhat less
powerful monetary stimulus. China can have a little of everything. But not
too much of anything. ■

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economics/2023/09/21/does-chinas-fear-of-floating-exceed-its-fear-of-deflation

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Financial innovation

Macau offers a new way to get rich

Forget gambling. Invest in small Chinese firms instead
Sep 21st 2023

MACAU IS BEST known as the casino capital of Asia. But the former
Portuguese colony, on China’s south coast, is hoping to gain a reputation for
more reputable ways to make money. In August trading began on the
MCEX, an over-the-counter market that is the first of its kind. Investors are
not exchanging currencies, debt or equity. Instead, they are buying the future
revenues of businesses in mainland China.

If successful, the exchange may help solve a problem that plagues smaller
firms both in China and elsewhere: the difficulty of finding finance. Charles
Li, a former boss of Hong Kong’s stock exchange and the creator of the new
market, has said that investors tend to eschew lending to such businesses
simply because the risks and rewards are poorly matched, with borrowers
burdened if a venture flops and financiers short-changed if it goes well. For
bigger companies, the solution is listing on a public market—something
beyond the means of their smaller peers.

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Mr Li believes he may have solved this mismatch. MCEX allows investors
to buy and sell a new type of financial instrument called a Daily Revenue
Obligation (DRO). Contract owners gain a fraction of a business’s revenue
for a fixed period of time, in effect buying the right to future income.
Issuance has been strong. DROs worth almost 2.2bn yuan ($300m) were
offered on the exchange in the first month of trading.

Selling future revenues is a good deal for small firms. Owners get access to
capital without diluting their stake and without repayment obligations. For
investors, the advantage is less clear (indeed, no information is available
about their appetite so far). Micro Connect, which owns the exchange,
claims they can enjoy “equity-like returns”. Their exposure is, however,
rather large. Small firms often fail. Whereas a loan secured against assets has
limited downside for its financier, the risk for a DRO holder is limited only
by the size of the investment. They have no claims on the assets of the
business if it goes bankrupt.

But Micro Connect does have a couple of selling points. If financial

instruments designed to fund firms that banks won’t lend to and investors
won’t buy sounds unpalatable, allocators can diversify their risk by buying
up pools of DROs, known as a “Daily Revenue Portfolio”. The underlying
DROs are unrated, but the pools are given a risk indicator under a
framework developed by a Chinese rating agency, which relies on
predictions of cash flows.

Mr Li’s financial innovation also offers foreign investors something

valuable: access to China. After decades of trying, overseas investors still
have few good options. Cross-border private-equity deals have collapsed;
“keepwell agreements”, between parent firms and subsidiaries, have been
the subject of years-long court disputes. MCEX promises to be different.
DROs are Macau-issued copies of contracts agreed on the mainland. Micro
Connect takes on the enforcement risk in mainland China and offers
investors the assurance of a contract enforceable under Macanese law.

The company that issues a DRO will have its revenues verified and
disbursed by local banks each day, and recorded on a blockchain, providing
investors with real-time insight into the performance of the business in
which they have an interest. Although technology cannot eliminate

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accounting trickery, such as changing when invoices are issued, it can
prevent fraud. It is almost impossible for a business to earn and not disclose
cash revenues in China’s entirely digitised economy.

China’s entrepreneurs may be especially eager to make use of the scheme

now. Banks are scrutinising lending more closely owing to the economy’s
struggles, so firms are looking elsewhere for capital. Many are turning to
outfits beyond the banking system, known as “shadow lenders”, from which
China Beige Book, a data firm, says borrowing is at near-record highs as a
share of total lending. This helps explain why China’s smaller firms are
keen. Whether these are the sorts of businesses in which foreign investors
want to invest is another question entirely. ■

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markets, sign up to Money Talks, our weekly subscriber-only newsletter.
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economics/2023/09/21/macau-offers-a-new-way-to-get-rich

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Buttonwood

How to avoid a common investment mistake

Think less about what to buy, and more about how much
Sep 21st 2023

IF YOU EVER hear a professional investor talk about a trade that taught
them a lot, prick up your ears. Usually, this is code for “a time I lost an
absolutely colossal amount of money”, and you are in for one of the better
stories about how finance works at the coalface.

On this front, Victor Haghani is a man to whom it is worth listening. He

spent the mid-1990s as a partner and superstar bond trader at the hottest
hedge fund on Wall Street. In its first four years, Long-Term Capital
Management (LTCM) made its initial backers average returns of more than
30% a year and never lost money two months in a row. Moreover, its
partners had been trading the capital of Salomon Brothers, an investment
bank, for the preceding 20 years, with similar results. But in 1998 the wheels
came off in spectacular fashion. LTCM lost 90% of its capital at a stroke.
Despite a $3.6bn bail-out from a group of its trading counterparties, the fund

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was liquidated and its partners’ personal investments wiped out. Mr Haghani
writes that he took “a nine-figure hit”.

Now, along with his present-day colleague James White, he has written a
book that aims to spare other investors his mistakes. Fortunately, “The
Missing Billionaires” is not a discussion of the minutiae of LTCM’s bond-
arbitrage trades. Instead, it examines what its authors argue is a much more
important—and neglected—question than picking the right investments to
buy or sell: not “what” but “how much”.

People tend to answer this question badly. To show this, the book describes
an experiment in which 61 youngsters (college students of finance and
economics, plus some young professional financiers) were given $25 and
asked to bet on a rigged coin at even odds. Each flip, they were told, had a
60% chance of coming up heads. They had time for about 300 tosses, could
choose each bet’s size and would keep their winnings up to a cap of $250.
This was an exceptionally good deal: simply betting 10% of the remaining
pot on each toss had a 94% chance of yielding the maximum payout and
none of going bust. Yet the players’ average payout was just $91, only a fifth
of them hit the cap and 28% managed to lose everything.

A list of the coin-flippers’ mistakes reads like a parable of how not to invest
in the stockmarket. Rather than picking a strategy and sticking to it, subjects
bet erratically. Nearly a third wagered their entire pot on a single flip and,
amazingly, some did so on the 40% chance of getting tails. Many doubled
down on losses, even though doing so is a reliable way of making mild ones
catastrophic. Others made small bets fixed in dollar amounts, avoiding ruin
but also giving up the lion’s share of their potential returns. Few considered
the optimal, lucrative strategy of betting a constant fraction of their wealth
on an attractive opportunity.

The rest of the book offers a corrective to these wealth-sapping instincts.

Most important is to devise rules for spending, saving and allocating
investments, expressed as fractions of your total wealth. Then you must stick
to them, avoiding the temptation to chase hot assets or spend too much in the
face of losses.

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The authors’ great success is in offering a consistent and explicit framework
within which to do all this. At its core is the concept of “expected utility”, or
the pleasure derived from a given level of wealth. This accounts for the fact
that most people are averse to risking large chunks of their capital. A happy
consequence is that sizing investments to maximise expected utility, rather
than wealth, can sharply reduce your chances of intolerable losses while
keeping enough risk for a shot at decent returns.

In practical terms, the book’s crowning achievement is its explanation of the

“Merton share”. This is a simple rule of thumb for determining asset
allocation, which says that allocations should rise in proportion to expected
returns, fall in proportion to the investor’s risk aversion and fall a lot in
proportion to volatility (specifically, to its square).

This is not to suggest the book makes for light reading. The authors
prescribe calculations that will appeal to only the most dogged investors,
ideally with access to a Bloomberg terminal. Most will conclude that they
need a wealth-management firm to help them; conveniently enough, Messrs
Haghani and White run one. Yet for those investing in their own business—
or, indeed, a hotshot hedge fund—it is worth reading simply for Mr
Haghani’s reflection on how much he ought to have ploughed into LTCM all
those years ago. Spoiler alert: it was rather less than he did. ■

Read more from Buttonwood, our columnist on financial markets:

Why diamonds are losing their allure (Sep 13th)
Should you fix your mortgage for ever? (Sep 7th)
High bond yields imperil America’s financial stability (Aug 29th)

Also: How the Buttonwood column got its name

This article was downloaded by zlibrary from https://www.economist.com/finance-and-
economics/2023/09/21/how-to-avoid-a-common-investment-mistake

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Rod stewards

Why uranium prices are soaring

Conflicts and resurgent demand combine to radioactive effect
Sep 21st 2023

WHEN RUSSIA invaded Ukraine, panic gripped Europe’s nuclear experts—

the civilian variety, that is. Ukraine, where 15 reactors relied on Russia for
their uranium, rushed to sign an unusually long 12-year deal with Canada.
European utilities, also reliant on Russia, drew the maximum they could
under other contracts. Most exposed were operators in Finland and eastern
Europe that owned Russian-made reactors, which only Russian firms knew
how to feed. Finding an American rival that could bundle uranium rods into
the hexagonal blocks such plants demand took a year. Now they are
searching for the metal needed to restart the atomic Tetris.

Such last-minute procurement of uranium is very rare, notes Per Jander of

WMC, a trader. Utilities usually take deliveries two to three years after
signing a contract. The scramble is just one illustration of the fallout of the
war on a once-sedate market already squeezed by rising demand, supply
shocks and speculation. In the week to September 18th uranium’s spot price

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hit $65 a pound, its highest since 2011, reports UxC, a data firm. At the
industry’s yearly shindig in London, which drew a record 700 delegates this
month, some warned it could reach $100. The two largest producers are sold
out until 2027; some utilities are thought to be short for 2024.

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Social Media Pakistan 0342-4938217
Just 85,000 tonnes of uranium are used each year. This compares with
170,000 for niche metals like cobalt and many millions for industrial ones
like copper. Unlike coal or gas plants, nuclear reactors cost a lot to build but
little to run, so utilities mostly opt to keep them going regardless of, say, the
economic cycle, making demand for fuel predictable. It also means that
utilities cannot afford to run out, which is why they buy the stuff via long-
term contracts.

Most supply comes directly from mines. Canada and Kazakhstan, two
reliable exporters, account for 60% of such “primary” supply. A quarter of
total global supply arrives from “secondary” sources. Exhausted fuel blocks,
replaced every three-to-four years, are re-enriched and re-used. Fuel is also
made by diluting weapons-grade uranium, which contains more than 90%
fissile elements, to concentrations of just 3-4%. In the two decades following
the cold war the dilution of just 30 tonnes a year displaced 10,000 tonnes of
annual mine output. More supply is regularly released from stockpiles.
America, China, France and Japan hold a combined stash worth years of
global use, which can be drawn from when prices are high.

This tranquil trade is now being rocked by two forces. One is resurgent
demand. For years after the Fukushima disaster in 2011 the closure of plants
in Japan, Germany and elsewhere pushed the market into surplus. But the
search for steady sources of low-carbon power, and Russia’s war in Ukraine,
have led governments back to nuclear energy, which emits about the same as
wind power and can operate even if pipelines are shut. Some 60 new reactors
are under construction, which should add an additional 15% to the world’s
nuclear-power-generation capacity over the next decade, reckons Liberum, a
bank. Small “modular” reactors—cheap and easy to build—could
turbocharge demand for fuel. The World Nuclear Association, an industry
body, forecasts that they could make up half of France’s nuclear capacity by
2040.

Uranium’s glowing prospects are not lost on financiers. In recent years

several listed funds have launched. Sprott Physical Uranium Trust and
Yellow Cake, the two biggest, have bought 22,000 tonnes in the past two
years, equivalent to over a quarter of annual demand. Both are set up for the
long run, with no fixed date or target price at which they will liquidate their
holdings.

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Meanwhile, supply is looking precarious—the second reason why prices are
soaring. Early panic aside, Russian ores can still be obtained. But a coup in
Niger in July has put 4% of mined supply in jeopardy. Last week Orano,
France’s state-owned giant, said it had halted its ore processing there owing
to a lack of critical chemicals. Logistical headaches are causing
Kazatomprom, the leading Kazakh supplier, to ship less uranium than
expected (it typically passes through Russia). Cameco, Canada’s champion,
recently cut its production forecast by 9% after hiccups at two mines.

All this will probably keep the market in deficit next year, as it has been
since 2018. Outright shortages remain unlikely, however. Major utilities
retain stocks. And the fuel blocks inserted into operating reactors have
another one-to-three years of life left, with a year’s extension possible at
limited costs. Most also have the next block ready to go. Thus the risk of
running out lies more than four years ahead.

That leaves time for supply to respond. Cameco and Kazatomprom, which
have lots of unused capacity after trimming output during the dreary 2010s,
will not like to see higher-cost producers nab market share. Tom Price of
Liberum estimates that they could add another 15-20% to global supply in as
little as 12-18 months. If that fails to tame the market, then a sustained rise
in price will incentivise the opening of new mines. Jonathan Hinze of UxC
reckons a spot price of $70-80 would be enough to get many projects started.
Supply snags are also unlikely to last too long. Niger’s junta has a beef with
France, but not with China, which runs other mines in the country. If all else
fails, Kazatomprom can always decide to export uranium by plane.

So the most likely outcome is high prices for a few years, with a surplus
returning by the middle of the decade. No one anticipates a repeat of 2007,
when buying by the first uranium fund and floods at big mines combined to
push the spot price beyond $135 a pound. Utilities have ample room for
absorbing price shocks anyway. Because uranium is heavily processed, raw
materials are worth less than half as much as finished fuel, which itself
accounts for just 10% of a plant’s operating costs (against 70% for natural
gas). The rally matters more to speculators than to the cost of what comes
out of your socket. ■

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markets, sign up to Money Talks, our weekly subscriber-only newsletter.
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economics/2023/09/21/why-uranium-prices-are-soaring

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Free exchange

Renewable energy has hidden costs

Why it is often more expensive than policymakers expect to go green
Sep 21st 2023

IT MATTERS WHEN electricity is produced. A barrel of oil may be a barrel

of oil whether it is pumped at midday or midnight, but a megawatt hour
(MWh) of electricity is worth a great deal less when you are sleeping than
during the middle of the day or, indeed, during moments when everyone
decides to boil the kettle. The difficulty of bottling electricity makes its
economics unusual: it is a question not just of “how much” but also “when”.

At the same time, if there is one thing that everyone knows about renewable
energy, it is that it is getting cheaper. Each year, or so the story goes, the
costs of wind and solar power fall as the world improves its ability to
harness natural resources. In 2014 the levelised cost of offshore wind, a
measure for comparing different methods of generating electricity, was
around $200 per MWh, according to America’s Energy Information
Administration (EIA), an official agency; by 2023 it had fallen to $127,
excluding subsidies. Yet the industry is struggling. Six state governors

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recently begged Joe Biden to intervene to keep producers alive, according to
Bloomberg, a news service. In Britain the latest annual offshore wind
auction attracted no bids whatsoever.

To understand what is going on, consider the levelised cost of energy in

more detail. Do away with sun and wind, too, and return to a world where
the choice is gas, coal or nuclear energy. These differ in terms of both their
fixed and variable costs. The costs of a nuclear plant are mostly fixed: once
built it is inexpensive to produce another unit of electricity. Natural-gas
plants are the opposite: most of the costs are the fuel, and are thus variable.

A levelised cost means taking these fixed and variable costs over the lifetime
of the plant and weighting them by the expected number of watt-hours the
plant will produce. This gives a comparable measure. According to the EIA,
the levelised cost of nuclear power is $91 per MWh. Natural gas comes to
$43. Compare that with expectations for the price of electricity and you
should have a good idea of whether or not a new plant is worthwhile.

Yet these costs vary depending on how often a source is producing energy. A
nuclear plant will be cheapest if it is running constantly, as the high upfront
costs will have produced greater output. Gas, with low fixed costs and high
variable costs, has lower economies of scale. Coal sits somewhere between
the two. Considered purely on the financial merits, the optimal power mix is
to have nuclear cover the “baseload”, or minimal level of demand, coal for
the “mid-load” and, finally, natural gas for the “peak load”, when demand is
highest. Add a carbon price and the coal will be displaced by natural gas,
which is less dirty, as has happened in Europe over the past few decades.

Unfortunately, this dynamic is upset by renewables, which provide power

according to the weather and often require the rest of the energy system to
accommodate them. Gas, with its low fixed but high variable costs, can do
so easily. Nuclear, with high fixed and low variable costs, becomes much
more expensive. It is costly to build a nuclear power plant to cover only the
windless hours.

As such, solar panels and wind turbines are themselves less beneficial than
they might seem. If they cannot reliably produce electricity when it is
needed, then their generating capacity is not as valuable as that of a regular

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power plant. To truly compare the two requires a measure of not just how
much each megawatt hour costs to produce, but the value of that particular
hour.

In an idealised market, with prices updating moment-to-moment and

geographically from node-to-node on the grid, the relative benefit of any
energy source would be easy to calculate: it would depend on the “capture
rate”. This is the difference between the market price that a source receives
and the average price for electricity over a period. Prices should be higher
when people most want electricity, boosting the capture rate of sources that
produce at that time. Fortunately for renewables, this is usually during
daylight hours, making solar useful, or during the cold windy months. But as
more renewables join the grid the capture rate will fall, since an abundance
of solar panels means that when it is sunny electricity prices are very low, or
even negative.

Consider these costs, as measured by the EIA in America, and most

renewables look less competitive: solar’s cost of $23 per MWh falls below
an average capture rate of $20 for the electricity generated. That is still
sufficiently good to beat everything other than onshore wind, geothermal
energy and adding more battery storage to the grid. Offshore wind, by
contrast, looks downright uncompetitive: the capture rate of its electricity is
around $30 compared with a cost of $100 per MWh—only nuclear and coal
have lower ratios. Add in rising costs, due to higher interest rates and
disrupted supply chains, and it is no wonder many offshore-wind providers
are struggling.

Scottish power
Most electricity markets are not ideal. Prices do not reflect the true value of
time and place, meaning they are not a perfect guide to how much society
wants each MWh of electricity. Look at Britain. Wholesale electricity prices
are settled for half-hour blocks, which should mean pricing will give a
decent idea if renewables are producing at the wrong times of day. But there
is only one price for the whole country. Most onshore wind is in Scotland,
since England until recently had a de facto ban on building such wind farms,
though more of the demand for electricity is in the south of England. A lack
of capacity on the grid to move the electricity south means that the grid

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manager pays to turn off Scotland’s wind turbines while gas power plants in
England are turned on.

Eventually, increasing the grid’s capacity to shift and store electricity will
solve such problems. But for the moment, comparing costs with the capture
rate would not give an accurate idea of the relative benefits of building more
Scottish wind power. The true costs of renewable energy are greater than
they appear. ■

Read more from Free exchange, our column on economics:

Does China face a lost decade? (Sep 10th)
Argentina needs to default, not dollarise (Sep 7th)
How will politicians escape enormous public debts? (Aug 31st)

For more expert analysis of the biggest stories in economics, finance and
markets, sign up to Money Talks, our weekly subscriber-only newsletter.
This article was downloaded by zlibrary from https://www.economist.com/finance-and-
economics/2023/09/21/renewable-energy-has-hidden-costs

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Science & technology
How common infections can spark psychiatric illnesses in children
A chunk of asteroid is coming to Earth
Finding alien life may require finding new sorts of planets

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PANDA-monium

How common infections can spark psychiatric

illnesses in children
And why many doctors do not realise it
Sep 20th 2023

IT WAS A sunny day in September 2007 when Garrett Pohlman, then seven
years old, came home from school. Crying, he warned his mother that
radiation was coming out of the house’s electrical sockets. If they went
outside, he said, birds would peck them to death. These pronouncements
were accompanied by odd facial movements. The boy would stick his tongue
out and jerk his arms and legs. The day before, Garrett had been a normal
boy. Both the paranoia and the tics had come out of the blue, but they proved
to be the start of a horrifying mental decline.

In the end, Garrett was lucky. A hospital scan three months later revealed a
bacterial sinus infection. A course of antibiotics cured the infection and
brought about a striking improvement in his psychiatric symptoms. Garrett
had been suffering from PANDAS, which stands for Paediatric
Autoimmune-Neuropsychiatric Disorders Associated with Streptococcus.

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Many other children are not so fortunate; some have suffered long-term
damage. In plain English, Garrett’s unsettling behaviour was the result of an
immune system gone haywire following an infection with group A
Streptococcus, a common bacterium. (A similar illness, triggered by other
infections, goes by the acronym PANS, for Paediatric Acute-onset
Neuropsychiatric Syndrome.)

Yet many doctors have heard of neither PANDAS nor PANS. Some have
dismissed them as fictitious diseases. Very few countries issue guidance on
their diagnosis or treatment. Diana Pohlman, Garrett’s mother, says she is
“exhausted” by years spent campaigning to get doctors to take the illnesses
seriously.

That is starting to change. Scientists are beginning to characterise the

conditions in detail and determine exactly what is going wrong with the
immune systems of sufferers. On September 12th Maria Caulfield, a British
health minister, weighed in, telling legislators that PANDAS and PANS exist
and are triggered by infections.

Such efforts are starting from a low base. In a 2020 survey for PANS
PANDAS UK, a charity, 95% of parents whose children have PANDAS said
their family doctors had not offered the diagnosis, suggesting awareness is
low. Things were only a little better among specialists. Around half of
paediatricians said they had never heard of the disease. Nearly one in five of
the parents surveyed said their paediatrician felt that the diagnosis was
controversial.

That ignorance carries costs. In many countries children with PANDAS are
presented with an alphabet soup of psychiatric misdiagnoses. These can
include attention-deficit hyperactivity disorder, autism and sensory-
processing disorders. Children can be given inappropriate drugs like
antipsychotics, many of which have unpleasant side-effects and which do
nothing to treat the cause of their disease.

In some cases parents have been accused of inventing or inducing their

children’s illness. The Economist has spoken to parents who say their
children have been committed to mental-health services against their will, or
removed from their care altogether. According to testimony provided in

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Parliament, one doctor told a child that he would not treat “an American
illness”. In 2019 several dozen children with PANDAS and PANS were
discharged from a British hospital. Their parents were told they had a
“functional neurological disorder”—a diagnosis that has evolved from the
old (and discredited) idea of hysteria, and which some doctors joke grimly
means “finding no diagnosis”.

Exactly why the diagnosis is controversial remains unclear. After all, the
idea that the aftermath of an infection can cause psychiatric symptoms is not
new. Sydenham’s chorea, in which patients suffer from jerky movements of
the face and body, is likewise the result of a streptococcal infection. The
Economist contacted a number of psychiatrists and professional bodies for
comment. Some did not reply. Others said they were unable to offer any
comment. The Royal College of Psychiatrists said it was struggling to find
an available spokesperson.

The body and the mind

But as evidence accumulates that PANS and PANDAS are real, attitudes are
beginning to shift. Scientists who study the disorder now believe it is caused
by an auto-immune reaction, in which the body’s immune system mistakenly
attacks brain tissue. After infection with Streptococcus, the theory goes,
children begin producing antibodies that cause inflammation in their own
brains, which in turn causes the psychiatric symptoms.

In 2018 Christopher Pittenger, a psychiatrist at Yale University, and his

colleagues extracted antibodies from the blood of children with PANDAS
and introduced them into laboratory mice. They found that the antibodies
attacked cholinergic interneurons in particular, a group of cells in parts of the
brain associated with tic disorders, which are one of the features of
PANDAS. Chandra Menendez, a researcher at the University of Oklahoma
Health Sciences Centre, says she has found a “correlation between
antibodies that target dopamine receptors D1 and D2 and the PANDAS
phenotype”. This sort of work could help develop diagnostic tests.

A paper by Dritan Agalliu, a neurologist at Columbia University, currently

under review by a scientific journal, suggests that blocking a particular part
of the immune system—a type of lymphocyte called T helper 17 cells—with

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anti-inflammatory drugs reduces damage to the brain, at least in mice. Other
work suggests that damage to the blood-brain barrier, a filter designed to
protect the brain from potentially harmful substances in the blood, could also
be part of the story.

Such findings may have significance beyond a single obscure, debilitating

illness. For they fit an intriguing, and growing, body of evidence that other
kinds of psychiatric conditions might also result from infections. Dr
Pittenger says it is now clear that covid-19 infections can trigger psychosis,
fatigue and other neuro-psychiatric symptoms. A misbehaving immune
system is thought to be the culprit. The idea that schizophrenia may, at least
sometimes, likewise be an auto-immune disorder is also under investigation.
(Intriguingly, people with any kind of auto-immune disorder appear to be
about 40% more likely to develop psychotic disorders such as
schizophrenia.)

How long it takes doctors to pick up on this change of thinking is another

matter. Some of the prodding now comes not from patients, but from
governments. Robin Millar, a British MP who chairs a parliamentary group
on PANDAS and PANS, says Britain’s government is committed to working
out how to diagnose and assess the illnesses. It has begun discussions with
doctors, and is pondering a research project to work out how prevalent the
diseases are. A pan-European patient group called EXPAND, founded in
2018, is also pushing to improve understanding.

Such efforts are sorely needed. As Garrett Pohlman’s case shows, if

infections are caught early, treatment can be very effective, avoiding long-
term damage. Now 23, Mr Pohlman graduated in 2022 with high honours
from the University of California, Berkeley, in chemical engineering, and
these days runs his own company. Not every patient has been so lucky. ■

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technology/2023/09/20/how-common-infections-can-spark-psychiatric-illnesses-in-
children

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Creation and destruction

A chunk of asteroid is coming to Earth

It could shed light on the origins of life—and how to protect it
Sep 20th 2023

ON SEPTEMBER 24TH, if all goes according to plan, scientists will hit

Earth with part of an asteroid. That is less alarming than it sounds, for the
chunk of rock in question weighs at most a few hundred grams. It will arrive
in a small capsule, complete with parachute, that will drift gently to the
ground in the Utah desert.

The rock is from an asteroid named Bennu, which was visited in 2018 by an
American spacecraft called OSIRIS-REx. The probe will drop its cargo off en
route to another asteroid, Apophis, at which it is due to arrive in 2029.

Astronomers take a great interest in asteroids. The solar system was formed
around 4.5bn years ago, when a cloud of dust and gas collapsed under its
own gravity into a disc, which in turn agglomerated into the sun and its
planets. Asteroids are leftover chunks that never accrued enough mass to

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become planets. Studying them thus offers a window into the ancient
astronomical past.

This will not be the first time that bits of asteroids have been brought to
Earth. In 2010 Hayabusa, a Japanese spacecraft, visited an asteroid called
Itokawa but returned with less than a milligram of it. Its successor,
Hayabusa2, was able to procure five grams of rock from an asteroid named
Ryugu in 2020. OSIRIS-REx’s dig did not go quite according to plan. Some
of the excavated material is thought to have jammed its digger, allowing
some of the sample to fall back out. But NASA is confident that the mission
has exceeded its minimum target of 60 grams. Compared with previous
missions, that will be a bounty.

Researchers are interested in Bennu in particular for two reasons. One is that
it appears to be rich in carbon, the element whose complicated chemistry
underlies all life on Earth. When scientists analysed Ryugu, the carbon-rich
asteroid explored by Hayabusa2, they found a smorgasbord of organic
compounds (that is, those containing carbon), including several different
amino acids, the chemical building blocks of proteins. Examining OSIRIS-
REx’s cargo should allow scientists to cross-check those results.

Bennu also contains traces of another vital ingredient of life: water. When
researchers looked at spectral data collected by OSIRIS-REx while it was in
orbit around the asteroid, they found molecules with oxygen and hydrogen
atoms bonded together in clay. The asteroid also appears to have large stores
of carbonate minerals. On Earth these are found, among other places, near
deep-sea hydrothermal vents. Such vents, which provide a steady stream of
chemical energy, are one candidate for the origins of Earthly life.

Scientists are interested in asteroids for a more immediately relevant reason,

too: self-preservation. It was an asteroid colliding with Earth that wiped out
the dinosaurs (and plenty of other organisms), around 65m years ago. Bennu
is one of around 2,400 asteroids that NASA has deemed a modern-day
collision risk (there is thought to be about a 1-in-1,750 chance of it colliding
with Earth by 2300). Bennu is roughly spherical, with a diameter of about
500 metres. That makes it much smaller than the asteroid that ended the
dinosaurs, which is thought to have been between 11km and 81km across.
But a collision would still inflict a great deal of damage.

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Scientists are therefore keen to characterise such asteroids in order to work
out how a looming impact might be averted. “If we don’t know what they’re
made of or how their materials behave, then it’s hard to find an effective
method to deflect these asteroids,” argues Philipp Heck, senior director of
research at the Field Museum of Natural History, in Chicago.

Several more missions are therefore planned. In October another NASA

spacecraft will begin a mission to a metal-rich asteroid named Psyche. In
2024 the European Space Agency will launch a probe named Hera. It will
visit Didymos, a pair of asteroids visited in 2022 by yet another NASA
mission named DART. That mission involved crashing a spacecraft into one
of the asteroids in an attempt to alter its orbit. Hera will help analyse the
aftermath.

That is also why, after dropping off its cargo, OSIRIS-REx is due to visit
Apophis. This asteroid’s orbit also comes uncomfortably close to Earth’s. In
April 2029 it is due to whizz by within 20,000 miles of Earth’s surface, an
altitude below the orbits of some satellites. The vagaries of orbital
mechanics mean that OSIRIS-REx will not reach its quarry until a few days
after that hair-raising astronomical near miss. ■

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technology/2023/09/20/a-chunk-of-asteroid-is-coming-to-earth

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Godforsaken rocks

Finding alien life may require finding new sorts of

planets
For now, telescopes can examine only small, inhospitable kinds of star
Sep 20th 2023 | CAMBRIDGE, MASSACHUSETTS

ON SEPTEMBER 12TH, at a conference on life in the universe hosted by

Harvard University, David Charbonneau, an astronomer at that same
university, gave a talk titled “The terrestrial planets of the smallest and
closest stars”. The unofficial title, as revealed on his second slide, was
“Small angry stars and the many godforsaken rocks which orbit them”.

Astronomers have now found more than 5,500 planets around other stars, or
exoplanets, most of them detected by means of the small dip in the star’s
light that happens when the planet passes across its face, and the planet’s
shadow thus passes across the Earth. Hundreds of these sit in their parent
star’s “habitable zone”, which means they orbit neither so close that any
water on their surfaces would boil away, nor so far that it would be frozen.
Since water is vital to every form of life known on Earth, such potential

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sogginess is much prized by scientists interested in whether some exoplanets
might harbour life of their own.

What astrobiologists most want to do when they come across a planet in the
“Goldilocks zone” is look at its atmosphere. The Earth’s atmospheric
chemistry betrays the presence of life on its surface in a number of ways.
The same should hold true for exoplanets that carry life. The launch in 2021
of the James Webb Space Telescope (JWST) brings with it the chance that
such signs might be seen in planets around other stars. The prosaically
named Extremely Large Telescope (ELT), presently being built in Chile and
due to start work in 2028, will also be able to look at the atmospheres of
nearby exoplanets.

Unfortunately, there is a catch. Powerful as they are, these instruments

cannot look at planets in habitable zones around stars like the Sun, or many
other types of potentially interesting star. The only habitable-zone
atmospheres into which they can peer belong to exoplanets which orbit “M-
class” stars, one of two types of star commonly known as red dwarfs.

Being limited to one type of star is unfortunate. Being limited to M-class

stars in particular may be doubly so, for they are the small, angry stars of
which Dr Chabonneau spoke. The physical characteristics of M-class stars
make their habitable zones look a lot less hospitable than the term implies,
especially if the life in question favours smallish rocky planets like the
Earth.

But rocky planets are not the only sort on offer. There are a fair few red
dwarfs with bigger, less dense companions in their habitable zones, planets
ten times the mass of the Earth and two or three times its radius. That makes
them a bit smaller than Neptune, the smallest of the outer solar system’s gas
giants. Their density makes it certain that these “sub-Neptunes” have
atmospheres; were they solid rock they would be more heavy. Their other
attributes are mysterious. Some astronomers think that they, rather than their
rocky neighbours, may offer the best chance of discovering signs of life
elsewhere. The first JWST study of such a planet, one called K2-18 b, which
was published on September 11th, did not do that. But the presentation of the
data was still one of the highlights of the conference.

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Red dwarfs are good targets for study because they are small, dim and very
common. Quite how common is only appreciated by astronomers. Being
small (between half to a tenth the radius of the Sun) makes them so dim
(0.3%-7% as bright as the Sun) that none of them, not even Proxima
Centauri, the nearest star to the Sun, is visible to the naked eye. But there are
more M-dwarfs in the nearby sky than stars of all other types put together.

The ubiquity of M-class stars means there are plenty for telescopes to look
at. Their small size and dimness, meanwhile, makes it easier to study the
planets that orbit them. Studying their atmospheres is done by looking at
what happens to light from the star when it passes through the orbiting
planet’s atmosphere. The smaller the star, the larger the proportion of its
light that passes through the atmosphere. The dimmer the star, meanwhile,
the less likely the signal from the atmosphere is to be swamped by the light
from the rest of the star’s disk.

But if the stars’ smallness helps with the study of their planets’ atmospheres,
it also makes the very existence of such atmospheres—at least around rocky
planets in the habitable zone—less likely. Young M-class stars have complex
internal dynamics which give rise to very powerful magnetic fields. These
lead to stellar flares, sometimes very dramatic ones, and to powerful
emissions of X-ray and ultraviolet radiation. In the billion years or so it takes
a young M-class dwarf to settle down into mature quietude, that radiation
could be more than enough to strip the atmospheres from any rocky planets
in the Goldilocks zone. This may have been the fate of TRAPPIST-1 c, a
planet in the habitable zone of a red dwarf 40 light years away; in June
astronomers announced that, having looked at it with the JWST, they could
see no clear evidence of any atmosphere at all.

Another problem with M-class stars is that few seem to possess big planets
that orbit beyond their habitable zones, as Jupiter does in the solar system.
Jupiter’s powerful gravity throws icy comets from the outer reaches of the
solar system towards the rocky planets closer to the sun. That is thought to
have delivered water and other simple molecules, such as nitrogen, to the
early Earth. Without such Jupiter analogues, rocky planets around M-class
dwarfs could be starved of such bounty.

The depths of somewhat less despair

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All this makes rocky Earth-like planets in such habitable zones poor
prospects for life. Neither factor is so much of a problem for sub-Neptune
planets. They are known to have atmospheres, and those atmospheres may
well contain the sort of molecules Earth had to have delivered from the outer
solar system. In 2019 a group of astronomers at University College London
used the Hubble Space Telescope to look at the atmosphere of such a planet:
K2-18 b, which orbits an M-class star 124 light years away in the
constellation of Leo. One of the things they thought they saw was evidence
of water vapour.

This inspired Nikku Madhusudhan, an astronomer at the University of

Cambridge, to imagine a sort of sub-Neptune that would be truly habitable.
He calls the result of his imaginings “Hycean” worlds after their two vital
features: hydrogen atmospheres (whence the hy-) and oceans (hence the -
cean).

Dr Madhusudhan began with the mass of K2-18 b, its radius and thus its
average density. He also knew how the pressure, volume and temperature of
various gases and liquids are related to one another, relations called
“equations of state”. That allowed him to make a self-consistent model of
K2-18 b with a dense rocky core, a watery high-pressure shell around that
core and a thinnish atmosphere of hydrogen on top.

That model is not the only one that fits what little data there are. What
singles out the Hycean idea is that it allows the upper reaches of the planet’s
water layer to be liquid and temperate. It would be an odd ocean, admittedly;
one with no continents and no islands, and which instead of having a rocky
or muddy sea floor is underlain by ice (high-pressure ices are denser than
liquid water). But any ocean looks better, to an astrobiologist, than bare
rock.

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The ELT, transiting the sun

Dr Madhusudhan asked for and got time on the JWST to see if K2-18 b
might match up to his speculations. As he told the conference, in some ways
it did. Chemical modelling predicts that, if it were indeed a Hycean planet,
its mostly hydrogen atmosphere should contain detectable amounts of
carbon dioxide and methane. Both had indeed been found. There were also
signs in the starlight compatible with the presence of dimethyl sulphide. On
Earth, that molecule is produced only by life. That would make its presence
on K2-18 b a possible “biosignature”, the sort of thing which triggers great
excitement. As things stand, though, the evidence for its presence is
sufficiently weak that no such excitement is warranted. A more conservative
scientist might not even have mentioned the possible sighting.

There were also some things which were not seen. One was ammonia. The
processes which produce methane in such an atmosphere should also
produce ammonia. Dr Madhusudhan interprets its absence as circumstantial
evidence for an underlying ocean. Ammonia dissolves in water in a way that
methane does not; the ocean may be swallowing it up leaving only the
methane for the atmosphere.

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The other thing not seen, oddly, was water vapour. Given that it was the
supposed detection of water vapour that provided the spur for Dr
Madhusudhan’s theorising, its absence might be seen as a problem. But it
does not have to be. The error bars on the initial detection were very wide.
Some of the water signal might in fact have been methane; it is also possible
that the water vapour is there, just at a level low enough that the JWST
cannot see it.

Even if the Hubble measurements were simply wrong, and there is no water
in the signal after all, that does not necessarily rule out an ocean. After all,
Earth is a wet planet. But its upper atmosphere is dry, because above a
certain altitude water vapour freezes out of the air. And the observations of
K2-18 b looked only at the highest reaches of its atmosphere.

Now Hycean, now you don’t

Dr Madhusudhan was careful to stress that his results were merely
compatible with the idea of K2-18 b being a Hycean world, not proof that
that it is one. Just as well: many of his peers remain sceptical of the whole
idea. Hydrogen is a potent greenhouse gas. So is water vapour. Water vapour
from the surface of an ocean warmed by a hydrogen greenhouse will add to
the warming, producing more water vapour. Some see this as likely to lead
to a “runaway greenhouse effect” which will get rid of all the liquid water,
leaving behind only steam and high-pressure, high-temperature,
“supercritical” H2O. To escape such a fate, a Hycean world would need to
start off with just the right amount of hydrogen. That may be a very rare
occurrence.

The JWST should help sort all this out. There are already more observations
of K2-18 b on its schedule. Other rocky and Neptune-like planets in orbits
that bring them across the face of their parent stars will come under scrutiny,
too. The ELT, for its part, will take a keen interest in Proxima Centauri b, the
closest habitable-zone exoplanet to Earth. As seen from Earth it does not
pass across the face of its star. But the huge telescope may be able to study
its atmosphere, should it have one, directly.

What is for sure is that, for the time being, the habitable zones around M-
dwarfs are the only such game in town. Telescopes that can see planets in

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such zones around other sorts of star are decades away. But if that sounds
like a long time to wait, consider that a generation ago the ability to study
exoplanets of any kind, around any sort of star, seemed almost too much to
hope for. Now the field is alight with fresh observations and new ideas, if not
yet with signs of life. ■

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technology/2023/09/20/finding-alien-life-may-require-finding-new-sorts-of-planets

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Culture
TikTok is changing the way books are recommended and sold
Publishing used to be packed with parties and punch
From myth to art, bears have long captivated people
An opera about Steve Jobs is opening in San Francisco
Donald Trump and the dramatic power of not turning up
The British Empire peaked 100 years ago this month

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Tok of the town

TikTok is changing the way books are

recommended and sold
This represents a profound shift for readers, authors and publishers
Sep 21st 2023

FIRST THE camera pans across eight books arrayed with hundreds of sticky
tabs, flaunting that they have been closely read and meticulously annotated.
Next a description runs across the screen: “Books I would sell my soul to
read again for the first time”. The music crescendoes, and a manicured hand
reveals the books’ covers in time with the beat, featuring authors including
Simone de Beauvoir, Elena Ferrante and Sally Rooney.

The user, who is called “buryme.withmybooks”, does not say why she likes
them, but that does not matter. On TikTok hyperbole is the name of the
social-media game. Around 9.3m people have watched the video and almost
400,000 people have saved it for future reference.

TikTok, which has more than 1bn regular users, is making a mark on the
world of publishing. Much of this is done through BookTok, the app’s

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community of users who comment on books. It is among the largest
communities on the app; videos with this tag have been viewed 179bn times,
more than twice as many as BeautyTok (beauty enthusiasts splinter into
various groups). Adding #reading, #books and #literature pushes views to
more than 240bn. Whoever said books are dead has not spent much time on
TikTok, nor in bookstores, which now have whole displays touting titles “as
seen on TikTok”.

Last year in Britain one in four book buyers used TikTok. The slice of sales
directly attributable to the app is still small. Video platforms like TikTok and
YouTube drove only around 3% of sales in 2022 in Britain, according to
Nielsen, a research firm. But TikTok’s influence is significant and growing.
The largest group of book buyers—women aged 54 and younger—are more
likely to use the app than their male peers. TikTok recommendations
influence their purchases, creating new literary stars and unearthing unlikely
past ones, too.

TikTok is not the first online platform to alter the publishing landscape.
Wattpad, a self-publishing firm founded in 2006, helped writers publish
stories and reach readers online. For years Facebook, Instagram and Twitter
(now X) have allowed authors to connect with readers—and sometimes
score a book deal in the first place.

However, TikTok functions slightly differently. One way to think about

BookTok is as a book club for the internet age. Just as stars like Oprah
Winfrey and Barack Obama can cause copies to fly off bookstore shelves by
updating their lists of recommended reads, BookTok does something similar.
However, the tastemakers are not usually celebrities but attractive
#bookgirlies doing #readingchallenges, often in artfully lit bedrooms.
(Although Ms Winfrey’s book club is now on TikTok, too.)

In many ways BookTok has become a new artistic genre, where emoting
about characters and plots is glorified, even required. (Unlike those
buttoned-up professional literary critics, who do not tend to write about how
books make them cry.)

Some old-fashioned bibliophiles may suspect that BookTok is less about

books than about people seeking attention by promoting them. But

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BookTokers are already swaying bestseller lists. Novels categorised as
“romance” have enjoyed the biggest boost, as happened with previous
technological shifts, including the rise of e-books. Colleen Hoover’s “It Ends
With Us” went viral on TikTok in early 2022 and has sold over 1m
paperback copies in Britain. Six of the ten bestselling titles in America last
year were written by her, too. They pick up similar themes, such as women
lusting after hard-to-get men and “trauma bonding”, subjects that fare well
on the video-sharing app.

But BookTok favourites are often older releases, with some, including Ms
Hoover’s most popular, written before the app was invented. For example,
an aesthetic known as “dark academia”, which glamorises gothic-style
universities, tweed and classic literature, has brought attention to a 544-page
novel published in 1992 called “The Secret History” by Donna Tartt.

The popular Netflix show “Bridgerton”—big on colourful costumes, light on

substance—created new fans of period romance and, in turn, inspired young
readers to rediscover classic books such as “Pride and Prejudice”. In August
Jane Austen’s novel won “Best BookTok Revival” at TikTok’s inaugural
book awards. (How Austen would have felt about this honour is another
question.)

Because TikTok is so visual, the app has an outsize impact on sales of

physical books in particular. E-books do not make such attractive visual
props. According to a survey by Nielsen, 80% of Brits aged 14-25 prefer
print. BookTokers show off annotations and flick through pages. Filming
themselves finishing a book in a single day against a backdrop of hundreds
of them on shelves is all part of the performance, and viewers will be extra
impressed if the book looks thick.

Many authors remain puzzled by the app. Ms Hoover does not have a
TikTok account, and neither do many of her other bestselling peers.
Publishers, happy for new sales, are also a bit perplexed; their official
TikTok accounts are unpopular by comparison. The challenge is how to keep
up. It is not as simple as commissioning more books that make people cry,
squirm or shudder and then hoping that people film themselves doing so.
Although some editors are doing that anyway.

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Some enterprising publishers keep an eye out for gushing videos about
forthcoming books and then snap up the rights in other territories. Others are
making the most of momentum on BookTok. When Sarah Benton, a former
executive at Orion, heard that “The Silent Patient”, a two-year-old thriller
that the firm had published, was unexpectedly gaining traction, Orion
tweaked its marketing and told booksellers to emphasise success on
BookTok. Such tricks are rapidly becoming the norm.

Publishers may find that TikTok means not only new readers but also more
competition. ByteDance, the Chinese company that owns the app, has plans
to launch its own book publisher and is said to be in discussions to sign
romance writers. The fact that a Chinese company owns one of the most
important platforms for young people’s free expression in the West—and a
critical route for recommendations of books, paginated symbols of free
thinking—is a plot twist fit for fiction. Publishing its own books will bring
ByteDance’s relationship with literature (if its books can be called that) to a
new level. ■

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https://www.economist.com/culture/2023/09/21/tiktok-is-changing-the-way-books-are-
recommended-and-sold

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Books and bobs

Publishing used to be packed with parties and

punch
A new biography of George Weidenfeld looks at the heyday of book
publishing
Sep 21st 2023

The Maverick: George Weidenfeld and the Golden Age of Publishing.

By Thomas Harding. Pegasus Books; 336 pages; $25.95. W&N; £25

GEORGE ORWELL’S wife was a nasty snitch. The launch party for
“Lolita” was nearly a flop when censors threatened to spoil the fun. Saul
Bellow was a needy fusspot. Mick Jagger could not tell a story. The biologist
James Watson could, but he expressed such misogyny that readers, even in
the 1960s, were alarmed. The anecdotes pile up in a new biography of
George Weidenfeld (pictured), the founder of Weidenfeld & Nicolson, a
publisher. Isaiah Berlin was tricky; Henry Kissinger was a loyal friend; the
historian Antonia Fraser was succulently beautiful. The Mitford sisters,
naturally, were ghastly.

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Most editors fall broadly into two types: those who love the printing press
and those who love pressing the flesh. The former are inky-fingered
introverts for whom high drama is a fight over fonts. Weidenfeld was firmly
in the latter camp. He was an impresario rather than an artisan; writing bored
him. He lunched with Orwell, befriended Berlin and advised Vita Sackville-
West’s son, Nigel Nicolson, on how to seduce a woman: foreplay helped, he
advised, as did the right amount of booze. Yet, throughout this book, which
is less a biography than an anthology of encounters with the famous,
Weidenfeld remains something of an enigma.

Today, like Ben & Jerry’s or Marks & Spencer, Weidenfeld is better
remembered as the name on one side of an ampersand than as a man. This is
a pity, as he was fascinating in many ways. He lived in a time when the
giants of publishing—Allen Lane, Max Schuster, André Deutsch—were not
merely names on spines but people with them. Weidenfeld had more
backbone than most, publishing everything from Vladimir Nabokov’s
“Lolita”, to the eccentric “Hitler’s Table Talk” (a collection of the Führer’s
monologues), to Harold Wilson’s analysis of the coal industry, “New Deal
for Coal” (a brave literary decision if ever there was one).

His life was courageous, too. Weidenfeld, who was Jewish, fled Germany in
1938, arriving in Britain vaguely determined to “be a success”. He swiftly
became one. After a short spell working for the BBC, he wrote a book about
Nazi propaganda. Then, having decided (rightly) that writing books was not
much fun, he chose to publish them instead. He teamed up with Nicolson,
founded a publishing house and was soon meeting—and, in some cases,
making—many of the most famous names of 20th-century literature. Not
that they were always grateful. Berlin likened talking to Weidenfeld to going
to a brothel (fun but grubby) and wondered if he had a “total absence of a
moral centre”.

Did he? The reader struggles to know. For all the detail in this book, and
there is a lot, Weidenfeld himself remains elusive. Readers learn what he
drank (milk); what he wore to bed (pyjamas); the texture of his hands
(“podgy”); how many times he was married (four). They also learn about
parties where the air was heavy with cigar smoke, tainted with a pungent
whiff of sexism and anti-Semitism. What readers do not learn, despite the
detail, is the texture of Weidenfeld’s mind. Or perhaps it is because of the

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detail, for there is too much: the reader does not need to know, for example,
that someone called Cyril “was beset by fibroids”.

However, this book has two subjects: Weidenfeld and his world. If, as the
biography of a man, it does not quite work, as the biography of an era—the
smoky, scurrilous world of post-war publishing—it does. ■

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parties-and-punch

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Where the wild things are

From myth to art, bears have long captivated

people
A new book tells the story of eight bear species and their travails
Sep 21st 2023

Eight Bears: Mythic Past and Imperilled Future. By Gloria Dickie. W.W.
Norton; 272 pages; $30 and £25

WHEN MICHAEL BOND wrote his first draft of “A Bear Called

Paddington” in the 1950s, he described his hat-clad protagonist as hailing
from “darkest Africa”. Bond’s literary agent, Harvey Unna, liked the story
but spotted an error: no bears lived in Africa. “Children either know this or
should know this,” Unna wrote, adding that, “There are plenty of bears in
Asia, Europe and America, and quite a few on the stock exchange.” Bond
changed Paddington’s origins to “darkest Peru”, modelling him on the
spectacled bear from there.

Bears occupy a special place in myth and mind. Youngsters are read stories
about Paddington, Winnie-the-Pooh and the three bears and are presented

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with stuffed teddies. Perhaps also because bears can stand erect on two legs,
resembling humans, people have long felt drawn to them. Bears have
featured in ancient paintings, constellation names (ursa major, otherwise
known as the Big Dipper) and diplomatic negotiations. China’s parcelling
out of pandas to allies has precedent: in 1252 King Haakon IV of Norway
gave Henry III a polar bear, which spent its days swimming and fishing in
the River Thames.

“Eight Bears” explores the wonder and friction that characterise the
relationship between bruins and people. The author, Gloria Dickie, a
journalist for Reuters, travels around the world, bringing readers on a
riveting and unique sort of bear hunt. She dresses up like an “imprisoned
smurf” to volunteer at a panda-research centre in China, ventures into arctic
temperatures to find polar bears in Canada, hikes in Peru in the hope of
seeing Paddington’s ilk and wanders through villages of India to meet people
mauled by sloth bears, whose name belies their aggression.

There are just eight bear species, compared with 41 types of felines and
more than 500 primates. This offers pleasant concision, but Ms Dickie’s tone
is sombre. Polar bears are not the only ones on thin ice; most bear species
are threatened by habitat destruction and climate change. Pandas, for
example, need to eat about 18kg of bamboo a day, but agricultural expansion
imperils their food supply. Deforestation has destroyed the habitat of sloth
bears (India’s most deadly wild animal). During droughts they roam in
search of water, sparking conflict with people, who pursue “revenge kills”
after bear attacks.

Ms Dickie concludes that only three bear species are likely to thrive past the
end of this century: black bears, American brown bears and pandas. (There
are fewer than 2,000 pandas, but China has started to take panda
preservation seriously.)

This book is about bears but also about people, revealing two opposing sides
of human nature. One is people’s cruelty. “Bear-baiting”, in which bruins
were tied up and forced to fight with dogs, was a popular sport in Britain,
made illegal only in 1835. (Elizabeth I so enjoyed bear-baiting that she
overruled Parliament’s attempt to ban it in 1585.) Although outlawed in
India in 1972, “bear dancing” has persisted. People kill mother sloth bears

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and kidnap cubs; they then bash out their teeth and sometimes use muzzles
with nails, forcing them into a “dance of fear and desperation” that offers
“the illusion of merriment”.

Elsewhere bears are enslaved for their bile. In Vietnam (where bear farming
is illegal) and China (where it is not), sun and moon bears are kept in cages.
Bile is extracted from their gall bladders in a process akin to torture. The
resulting “liquid gold” is sold for its anti-inflammatory properties. Bears’
imprisonment is made all the more disturbing by their intelligence.
Researchers have observed that black bears can distinguish between animals
and even gauge numbers.

But people also have a more positive side. They are building systems that
allow for co-existence, from bear “jails” (where creatures are sent if they
come too close to population centres) to bear-proof garbage bins and lockers.
Many people around the world are trying to save and improve bears’ lives,
proving there is some beauty in this story of beasts and humans. ■

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captivated-people

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Powering up

An opera about Steve Jobs is opening in San

Francisco
Can people be lured back to the opera by one of the most famous
businessmen?
Sep 20th 2023

STEVE JOBS was heralded as one of history’s greatest tech visionaries but
was also a music man. The iPod (which Apple released in 2001 while Jobs
was boss) and the iTunes store (launched in 2003) helped boost the fortunes
of the beleaguered music industry by persuading people to pay for songs
instead of stealing them. Twenty years later, some are looking to Jobs to help
music again—this time, opera.

On September 22nd “The (R)evolution of Steve Jobs” opens at the San

Francisco Opera, in the city where Jobs was born—a 45-minute drive from
the garage in Los Altos where the first Apple computer was designed. The
opera will later travel to the Kennedy Centre in Washington, DC, one of
America’s most prestigious performance spaces, probably in 2025.

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In 20 short scenes that jump back and forth in time, spanning Jobs’s youth in
the 1960s to his death in 2011, music helps audiences experience the
conflicting facets of the tech titan. “There is an element of Jobs being both a
protagonist and an antagonist that only an opera can uniquely explore,” says
Mason Bates, the American composer who wrote “The (R)evolution”.

This is not your average opera, however. It begins, for one thing, with a
product launch: a reimagining of Jobs taking the stage in 2007 to introduce
the iPhone. Yet this is not a story about devices either—it is the story of a
man grappling with mortality. Mr Bates insists that “The (R)evolution” has
classic operatic themes: “passion, betrayal and, of course, tragedy”.

His music is user-friendly; it mixes Californian minimalism with syncopated

dance rhythms more often heard at raves and clubs. The opera features
Jobs’s quote from the Macintosh launch in 1984: “Never trust a computer
you can’t lift.” Mr Bates sets this vocal line to feel both breezy and comic,
while his orchestral score chugs along behind it.

First commissioned to debut in Santa Fe in 2017, “The (R)evolution” was a

bet that Jobs could attract younger audiences, including tech folk, to a more
than 400-year-old art form. That is San Francisco Opera’s hope, too.

Culture in California is still reeling from the effects of long-running covid

lockdowns. In May a study by CVL Economics, a think-tank, revealed that
the state’s performing-arts sector lost a decade’s worth of jobs in 2020-21.
San Francisco has been hit particularly hard. The city’s grants for arts—
funded by hotel taxes—have been hollowed out, and the performing-arts
district and downtown feel beggared. Two of the state’s well-regarded
theatres, the California Shakespeare Theatre and Mark Taper Forum,
cancelled their 2023-24 seasons due to unexpected budget shortfalls.

San Francisco Opera is betting on Mr Jobs’s cool factor, but it has

successfully incubated new productions before. It hired an unknown
composer to adapt a popular book and film, “Dead Man Walking”, about an
inmate on death row. The opera had its premiere in 2000 and has since been
performed around the world; it will open at the Metropolitan Opera in New
York later this month. The Met has also commissioned Mr Bates to write a

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new opera, based on “The Amazing Adventures of Kavalier and Clay”, a
Pulitzer-prizewinning novel by Michael Chabon.

But betting a new opera will be a success is a bit like rooting for a happy
ending in “Madam Butterfly”. It represents hope over experience. Of the
hundreds of new operas that premiered in the past two decades, only about
10% get a second performance, and fewer still survive beyond that. Techies
are not known for their arts philanthropy. Whether they can be lured to the
opera—even by a character as well-known as Jobs—is uncertain.

This is no doubt why San Francisco Opera is offering an online viewing

option. In addition to attending in person, viewers can purchase a pass to
watch the live-stream for $27.50, roughly the cost of a rear-balcony seat in
the opera house. If techies refuse to show up, perhaps (just perhaps) they
will log on and watch at home on their iPhones. ■

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san-francisco

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Back Story

Donald Trump and the dramatic power of not

turning up
Like Beckett and Chekhov, he knows a character need not be on stage to
dominate
Sep 21st 2023

HER HANDWRITING, her furs, her ostrich-feather fan and azalea perfume
—along with her beauty, cruelty, secrets and lies: traces of Rebecca are
everywhere in “Rebecca”. At Manderley, her husband’s country pile, her
evening dresses seem to rustle eternally in the breeze. “Her footsteps
sounded in the corridors,” writes Daphne du Maurier, “her scent lingered on
the stairs.” Above all she intrudes in the twisted devotion of the
housekeeper, Mrs Danvers. Yet Rebecca herself, dead before the novel
opens, never directly appears.

His orange skin and blond quiff, the erratically capitalised social-media
posts, demeaning nicknames and gimme-a-breaks: in a similar sort of way,
although Donald Trump skipped the Republican presidential debate in
August, his image haunted it. He may well pull off the same trick in the

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second debate on September 27th. Mr Trump seems to intuit something
which du Maurier and other storytellers have grasped—that a character you
don’t see can make a bigger impression than those you do.

In fiction, as in life, absence can be a power play. The leader, don or

spymaster asserts his authority over other characters, and impresses it on
you, by relying on minions to do his bidding. The titular boss in “Charlie’s
Angels” issues orders to his agents while his face stays out of sight. In the
British sitcom “Yes, Minister” the prime minister is capricious but invisible.
When, in the first debate, Mike Pence referred to Mr Trump as “one that’s
probably looking on”, he made the no-show sound almost celestial.

Absence can cultivate fear, since what you cannot see is often scarier than
what is revealed. Stirred by creepy music, each imagination fills the void
with its own horrors. Viewers do not see the baddie who stalks the film
students in “The Blair Witch Project” (pictured), nor the hunter who shoots
Bambi’s mother. The driver whose lorry hounds the protagonist of Steven
Spielberg’s “Duel” is not identified. (Conversely, the shark in “Jaws” is
much less terrifying after it surfaces on screen.)

The unseen are a mystery. Sometimes it is ultimately dispelled, as with the

Wizard of Oz, Boo Radley in “To Kill a Mockingbird” and Harry Lime in
“The Third Man”. Sometimes the mystique endures. So remote is Big
Brother that readers of “1984” cannot know if he is, or ever was, a real
person. In two James Bond films, 007’s arch-enemy Ernst Blofeld appears as
a pair of hands stroking a cat. During the first debate, live shots of Fulton
County jail, where Mr Trump was due to turn himself in, had the air of a
villain’s lair, the tenebrous place standing in for the elusive man.

Most subtly, a hidden figure can be a mirror and measure of other people’s
vices and virtues. Initially Romeo is moping not for Juliet but for Rosaline,
in his view the fairest maiden “since first the world begun”. Audiences never
meet her, but she supplies an early sense of his overheated emotions. Anton
Chekhov was an expert in devising this kind of absentee. In “Three Sisters”
the gallantry and philosophising of Vershinin, an army officer, are undercut
by his blithe neglect of his suicidal wife—who is always offstage.

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Likewise in the first debate Mr Trump provided a spectral yardstick of the
other candidates’ independence. Chris Christie incurred boos for saying that
some of his actions were “beneath the office of president”. Vivek
Ramaswamy praised Mr Trump to the heavens. Ron DeSantis tried to
wriggle between condemnation and defence, a spectacle as agonising as
watching him try to smile.

The most famous unseen character in literature combines these effects. In

Samuel Beckett’s “Waiting for Godot”, Vladimir and Estragon are not sure
what Godot looks like, whether he will ever materialise and, if he does,
whether salvation or punishment will ensue. Godot gives them a purpose yet
is a pretext for inertia. “In this immense confusion”, says Vladimir, “one
thing alone is clear. We are waiting for Godot to come.”

Mr Trump is no Godot. Nor is he really offstage, even on debate nights. He

holds court online and in friendly interviews, dominating conversations and
front pages whether he shows up or not. His absence projects power, and he
evokes fear in many Americans, but he is scarcely a riddle. They have seen
the Trump movie before.

Still, like Vladimir and Estragon, the rest of the Republican field will again
be plagued and paralysed by Mr Trump’s shadow should he miss more
debates. The play’s ending captures their limbo-like predicament. “Let’s go,”
says Estragon, before the deadening final stage direction: “They do not
move.”■

Read more from Back Story, our column on culture:

Lots of people mourn when famous writers and musicians die. Why? (Sep
3rd)
Calls for actors’ identities to match their roles have gone too far (Aug 18th)
An infamous murderer and the truth about true crime (Aug 8th)

Also: How the Back Story column got its name.

This article was downloaded by zlibrary from
https://www.economist.com/culture/2023/09/21/donald-trump-and-the-dramatic-power-of-
not-turning-up

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Here, there and almost everywhere

The British Empire peaked 100 years ago this

month
Two new books examine the history and consequences of colonialism
Sep 16th 2023

One Fine Day: Britain’s Empire on the Brink. By Matthew Parker.

PublicAffairs; 624 pages; $35. Abacus; £25

Imperial Island: A History of Empire in Modern Britain. By Charlotte

Lydia Riley. Bodley Head; 384 pages; £25

THE BRITISH Empire was and is many things to many people: a civilising
endeavour, a bringer of peace, an exploitative force or a project based on
white supremacy. Arguments exist for each characterisation. But there is one
thing that the British Empire is not: completely over.

It lives on in court cases, including one brought in 2019 by indigenous

people of the Chagos Islands, whom the British colonial government
forcibly relocated in 1965-73 (with American support). It exists in the

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loyalties of the 15 commonwealth “realms”, including Australia and Canada,
for which their monarch and head of state is King Charles III (pictured in
1984). And it lives on in the demographic make-up of Britain, where one in
five people is Asian, black or mixed race. A similar share of cabinet
ministers, including the prime minister, are children of immigrants from the
former empire. As the old saying goes, “We are here because you were
there.”

Two new books consider the “here” and “there”. “One Fine Day” is a
sprawling account of the British Empire by Matthew Parker, a historian. It
travels like the never-setting imperial sun across Asia, Africa and outposts of
the “new world” in the Caribbean. The book’s organising principle is a day
—September 29th 1923—when the British Empire reached its maximum
territorial extent. The portrait is achieved with a wide-angle lens, but the
choice of a single day also brings focus.

Mr Parker’s approach is to find the most interesting currents in the empire’s

various corners in September 1923 and to tell them through little-
remembered colonial administrators and prominent locals. For example, in
what was then Malaya (modern-day Malaysia and its surrounds) readers
meet Hugh Clifford, who learned Malay and fell in love with the country and
its people. He was self-aware enough to wonder whether “the boot of the
white man” had stamped out the best parts of local culture. Yet Clifford was
also responsible, at the age of just 22, for adding 15,000 square miles of
territory to the empire and described Malays as “the cattle of mankind”.

In colonies across continents, elites were disillusioned with the obvious

hypocrisy of foreign rulers, while foot-soldiers such as George Orwell found
themselves uneasy with the violence of colonial rule. What emerges is a
picture of an empire straining under the weight of its own contradictions.
The British thought of their role as an enlightened one: stopping tribal
warfare and introducing modern health care and education. Yet they brought
forced labour and colonial massacres, racist rules, and substandard health
care and education. Rather than simply stating so baldly, Mr Parker points
this out through copious examples and meticulous research. He appears to
have read the front page of every newspaper published in the empire on that
day.

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Such thoroughness can go too far. At a chunky 600 pages, crammed full of
unfamiliar names and places even for those acquainted with imperial history,
“One Fine Day” offers little by way of obvious structure. A closer edit and
more hand-holding could have helped make a rewarding and fascinating read
an easier one, too.

“Imperial Island” by Charlotte Lydia Riley, a historian at the University of

Southampton, is half the length and better organised. Starting with the
contributions of the empire’s troops in the second world war and the meagre
thanks (or even acknowledgment) given to them afterwards, she runs
through headline events of post-war British history.

Yet to call this an imperial history is misleading. The book reads more like a
history of race relations in modern Britain, and the links to empire often feel
forced. Fundraising for a famine in Ethiopia reveals, in Ms Riley’s telling, a
guilt-ridden imperial hangover, as do children’s books about India and
cookbooks with dishes from around the world. A map of countries where an
overseas volunteer organisation operates is—what else?—a throwback to the
British Empire’s pink map.

This is a shame, because a book that lived up to the promise made by Ms

Riley’s would have been revealing and important. The legacy of colonialism,
like the empire itself, is riddled with contradictions. It is impossible to
attempt to understand Britain today without wrestling with ambiguities. Yes,
children of immigrants in Britain carried out the Tube bombings in 2005,
sparking a national reckoning over homegrown extremism, as Ms Riley
describes over several pages; but another child of immigrants, Rishi Sunak,
ascended to the highest echelons of government and is not mentioned by her.
The Brexit campaign to leave the European Union was based on the
paradoxical promises of keeping foreigners out while opening up to the
former foreign empire. It deserves more careful examination than the meagre
four pages Ms Riley devotes to it.

A century after it controlled a vaster empire than the world has ever seen,
today Britain is less influential than it has been in memory. It has a
diminished military force and has separated from its biggest market, Europe
(which Mr Parker reminds readers “had almost always been far more
important than the empire”). Marking the centenary of Britain’s largest

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territorial footprint, many are still asking what the future holds for “little
England”. These books, alas, do not hold the answer. ■

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this-month

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Economic & financial indicators
Economic data, commodities and markets

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Indicators

Economic data, commodities and markets

Sep 21st 2023

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Social Media Pakistan 0342-4938217
Social Media Pakistan 0342-4938217
Social Media Pakistan 0342-4938217
This article was downloaded by zlibrary from https://www.economist.com/economic-and-
financial-indicators/2023/09/21/economic-data-commodities-and-markets

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Graphic detail
China’s “demographic dividend” appears to be a myth

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China’s demography

China’s “demographic dividend” appears to be a

myth
If youth didn’t drive past growth, is ageing bound to be disastrous?
Sep 19th 2023

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Social Media Pakistan 0342-4938217
SINCE STARTING to open up to market forces in the 1980s China’s
economy has grown at a formidable rate. Adjusting for the cost of living,
GDP per person has risen ten-fold. But now China faces headwinds.
Consumer confidence is low, youth unemployment is high and the economy
is on the verge of deflation. On top of this, demography, a factor once
credited for the country’s growth, is becoming a handicap.

During the past four decades China’s working-age population grew far
faster than the number of young and elderly dependants did. This, in theory,
increased the average citizen’s contribution to GDP, a feature often
described as the country’s “demographic dividend”. However, a new
working paper by Xin Meng of the Australian National University, appears
to refute this widely accepted explanation for China’s economic success.
Although the share of the country’s population that were of working age
surged during this period, the share of people available to work did not.

Dr Meng gathered data from China’s decennial censuses and its between-
census surveys between 1982 and 2015. The country does not make up-to-
date detailed demographic figures openly available, but it has granted some
researchers, of whom Dr Meng is one, access to a subset of the data. These
audits contain information on the age, work status, education and hukou
(household registration) of a representative sample of the population.

Her analysis showed that between 1982 and 2015 China’s working-age
population, defined as those aged between 16 and 65, grew from 600m to
1bn. As a share of the population, it rose from 60% to 73%.

During this same period, however, labour-force participation dropped from

85% to just over 70%. Much of the decline came from those with an urban
hukou. Unlike holders of rural hukou, urbanites were subjected to
mandatory retirement at the age of 55 for women and 65 for men.
Compulsory education and greater university enrolment kept under-25s out
of the workforce. Labour-force participation for women of childbearing age
also fell, probably owing to the increasing cost of child care.

As a result, China’s labour force as a share of the total population was

roughly stable, hovering at around 50%, from 1982 to 2015. The

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demographic dividend, Dr Meng argues, may never have existed.

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Social Media Pakistan 0342-4938217
The quality, rather than quantity, of the workforce seems a better
explanation for the country’s extraordinary growth in GDP per person.
From 1982 to 2010, the share of people going to university increased
tenfold to 38% for those with an urban hukou. In rural areas, the proportion
who attained a basic level of education more than doubled to nearly 60%.
By moving rural workers into more productive jobs in the cities,
urbanisation probably also helped.

Last year China’s population started shrinking for the first time since the
1960s. Its working-age population has been declining for almost a decade.
There is growing concern that the country may have “grown old before it
has grown rich”.

But if demographic changes were not a critical driver of gains in GDP per
person the past, they may not be disastrous for the future. These results
suggest that the country has other levers to pull to offset a dwindling
workforce. It could increase the retirement age. Its urbanisation rate, at
64%, is still below that of advanced economies and has room to rise.
Immigration, if China were to ever consider it, could bolster the labour
force too. Whether all that would be enough to save the country from
economic slowdown remains an open question. ■

Sources: “China’s 40 years of demographic dividend and labour supply:

the quantity myth”, by Xin Meng, 2023; World Bank
This article was downloaded by zlibrary from https://www.economist.com/graphic-
detail/2023/09/19/chinas-demographic-dividend-appears-to-be-a-myth

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The Economist explains
Why Poland is halting its supply of weapons to Ukraine
What is Khalistan, the independent homeland some Sikhs yearn
for?

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The Economist explains

Why Poland is halting its supply of weapons to

Ukraine
A row over duty-free grain has escalated rapidly—but Poland’s
government is also posturing
Sep 21st 2023

POLAND HAS been among the staunchest supporters of Ukraine since

Russia’s invasion in February 2022. But on September 20th its prime
minister, Mateusz Morawiecki, said that his country was no longer supplying
weapons to its neighbour, and would focus on rearming itself with modern
kit. It is unclear whether Mr Morawiecki’s comments amounted to a change
in policy: Poland has already sent Ukraine much of its stock of Soviet-era
weaponry, including tanks and jets, and the transit of Western aid and arms
to Ukraine, of which around 90% goes through Poland, will continue
unobstructed. But Poland’s government has certainly left observers with that
impression. On September 21st the government spokesman, Piotr Müller,
said that his country would only complete previously agreed deliveries of
arms and ammunition to Ukraine, and mentioned its neighbour’s

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“unacceptable” statements and actions. He was referring to an escalating
quarrel with Ukraine over grain exports.

European Union member states that border Ukraine have long argued that
the duty-free import of Ukrainian produce to the bloc has caused havoc in
their markets. On May 2nd, to allay their fears, the European Commission
agreed to ban the sale or storage of certain Ukrainian produce in Bulgaria,
Hungary, Poland, Romania and Slovakia (though transit through these
countries was still allowed). These measures expired on September 15th. But
Hungary, Poland and Slovakia defied Brussels by unilaterally extending
them. On September 18th Ukraine filed a complaint against these countries
at the World Trade Organisation. On September 19th Volodymyr Zelensky,
Ukraine’s president, accused the trio of making “political theatre”—
specifically a “thriller from grain”. Why has this row escalated?

The problem has been over a year in the making. In June 2022, to help
Ukraine’s economy and avert a global food crisis caused by a Russian
blockade of its Black Sea ports, the EU lifted tariffs on a range of Ukrainian
exports, including many agricultural products, and negotiated transit
corridors through Bulgaria, Poland and Romania. The idea was to ship the
goods to the Middle East and Africa. An agreement between Russia and
Ukraine to let some produce travel via the Black Sea collapsed in July 2023,
leaving river, road and rail routes as crucial corridors for Ukrainian produce.

But a shortage of trains and lorries slowed shipments to markets beyond

eastern Europe, and much of the produce ended up in local ones.
Plummeting prices hurt the incomes of farmers, sparking weeks of protests.
On April 15th Poland’s government banned the import and transit from
Ukraine of dozens of goods, including grains, milk, honey, fruits, vegetables
and some meats. Robert Telus, the agriculture minister, said that Poland’s
embargo was necessary to “open the eyes of the EU”. Hungary and Slovakia
quickly followed suit. The European Commission, which runs the EU’s trade
policy, agreed to a compromise: impose temporary import bans, but allow
transit to the west. That compromise has now expired, and the EU refuses to
extend it, claiming that the “market distortions in the five frontline countries
have disappeared”.

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Not everyone agrees. Hours after the embargo ended, Hungary, Poland and
Slovakia said they would introduce their own restrictions on grain imports
(transit through their territories is still exempt). But Ukraine’s economy
minister, Yulia Svyrydenko, said their actions chipped away at the EU’s
solidarity with Ukraine, and deepened the distress of Ukrainian farmers.
“Ukraine sees this as a violation of international obligations,” she said. Her
deputy, Taras Kachka, said that Ukraine was considering retaliatory
measures on Polish products, such as onions and apples, as well as on
Hungarian cars if the bans had not been lifted by September 22nd.

The unilateral moves also put Hungary, Poland and Slovakia on a collision
course with the European Commission, which can launch infringement
procedures against countries that do not implement the EU’s trade policy.
The EU is normally responsible for representing its members in disputes
with the WTO, meaning it could be drawn into Ukraine’s complaint.
Germany’s agriculture minister, Cem Özdemir, accused the three countries
of “part-time solidarity”. His French counterpart, Marc Fesneau, said that the
unilateral actions threatened “collective efforts to preserve global food
security”.

On September 21st the Slovakian government struck a deal with Ukraine

that will see the resumption of grain imports. But Poland seems less likely to
relent. Mr Morawiecki even said that further Ukrainian products could be
added to the import ban if Ukraine “escalates”. The motivation is political.
Poland’s ruling Law and Justice (PIS) party, which depends on the rural
vote, faces a difficult general election on October 15th. But even if the
posturing is chiefly aimed at a domestic audience, it will undermine the EU’s
attempts to maintain a united front against Russia. And it could set a
dangerous precedent for other countries that want to reduce their support for
Ukraine. ■
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explains/2023/09/21/why-poland-is-halting-its-supply-of-weapons-to-ukraine

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The Economist explains

What is Khalistan, the independent homeland

some Sikhs yearn for?
The separatist movement is now largely propagated from abroad
Sep 19th 2023

WHEN INDIA gained independence from Britain in 1947, few outside the
country believed that a union of such diverse states could hold together.
India has survived—but not without threats to its unity. One of the most
enduring has been the Khalistan movement, which seeks to establish an
independent homeland for Sikhs. On September 18th Canada’s prime
minister, Justin Trudeau, alleged that Indian government agents were behind
the killing, in June, of Hardeep Singh Nijjar, a Canadian Sikh leader who
supported independence for Khalistan. India’s government, which denies any
involvement, has accused Canada of harbouring “terrorists and separatists”.
How serious is the Khalistan movement?

The origins of Khalistan lie in Sikhism, a religion practised by 23m people

in India and 3m more around the world. The faith emerged in the 15th
century in Punjab, a region in northern India, then ruled by the Mughals. In

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1699, frustrated by life under Muslim rule and corruption among Sikh
priests, Guru Gobind Singh, the faith’s leader, reformed the religion. The
khalsa (or pure) tradition he initiated radically changed the way Sikhism was
practised and organised. It also came with a political vision: to ensure Sikh
rule in Punjab.

At independence, some Sikhs tried to realise that vision by carving out a

separate country. But the group was small (in the 1941 census, Sikhs
accounted for 15% of the Punjab province in British India). The British
partitioned Punjab between India and Pakistan. Most Sikhs living on the
Pakistani side chose to move to India.

The dream of Khalistan survived. In the late 1970s and early 1980s the
movement re-emerged, fuelled by growing Sikh diasporas in places like
Britain and Canada. In 1980 Jagjit Singh Chauhan, a doctor in London,
declared himself president of the “Republic of Khalistan”.

That did not much bother India’s government, for which Punjab’s politics
were of greater concern. Throughout the 1970s, there was a clamour within
the state for greater autonomy and policies favouring Sikhs. Congress, then
India’s ruling party, believed such requests amounted to secession. In the
1980s the movement for autonomy turned violent.

Part of that was down to the growing popularity of Jarnail Singh

Bhindranwale, a radical preacher who claimed Sikhs were “slaves in
independent India” and wanted them to return to the fundamentals of the
faith. Bhindranwale said he did not want independence for Khalistan, but
were it to be offered he would not refuse. His rhetoric helped fuel
widespread communal violence.

The biggest flashpoint came in 1984. By then, Bhindranwale and a group of

supporters had set up a base in the Golden Temple, Sikhism’s holiest site, in
the Punjabi city of Amritsar, from where they sought to lead the insurgency.
As violence spread across the state, the Indian government decided to enter
the temple to evict the terrorists.

Operation Blue Star, as it was called, proved momentous for the Khalistan
movement. By some estimates more than 3,500 people were killed,

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including hundreds of government troops, pilgrims and Bhindranwale
himself. The bloodshed left a “collective wound in the psyche of the Sikhs”,
writes Ramachandra Guha in “India After Gandhi”, a history. Weeks later
Indira Gandhi, the prime minister, who had ordered the attack, was killed by
her Sikh bodyguards. That provoked more violence. Across India, Sikhs
were attacked; thousands were killed.

That in turn boosted the Khalistan movement. Sikhs in India and abroad
signed up for the cause. Violence by Khalistani militants surged. In 1985
Khalistani terrorists planted a bomb on an Air India flight between Montreal
and London, killing 329 people, most of them Canadians.

Eventually, though, the movement lost steam in India—partly owing to a

government crackdown and economic growth. Many Sikhs still consider
Bhindranwale a martyr, but few try to emulate him and those who do are
quickly stopped. The only remaining party that advocates Khalistani
independence secured less than 3% of the vote in the latest state election.

Outside India the movement persists. Groups in America, Australia, Britain

and Canada continue to support separatism. India’s relations with Canada
were strained even before Mr Nijjar’s killing and Mr Trudeau’s accusation.
Similar tensions could emerge with other countries. Khalistan may no longer
be a threat to India’s unity, but it will affect its foreign policy. ■
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explains/2023/09/19/what-is-khalistan-the-independent-homeland-some-sikhs-yearn-for

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Obituary
Mangosuthu Buthelezi had his own vision for a democratic South
Africa

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On a spear’s edge

Mangosuthu Buthelezi had his own vision for a

democratic South Africa
The Zulu chief, a rival to Nelson Mandela, died on September 9th, aged 95
Sep 21st 2023

AT THE AGE of 14 Mangosuthu Buthelezi was presented with an assegai

and plunged it into the ground. His father had just died; with the spear, and a
loud shout, he was claiming his inheritance. That inheritance, he insisted
later, was royal, because he was the son of a princess. Other members of the
family, of similar standing, did not take the title “prince”. He made the most
of it. When he became chief minister of KwaZulu—a poor rump of the old
Zulu nation granted nominal self-rule under apartheid—he said that job was
hereditary, like the traditional prime-minister role his grandfather had played
for the royal family. Again, people murmured. What was not in doubt was
that, in the chaotic and often bloody years of South Africa’s transition to
democracy, he was the most powerful man in the Zulu nation. Any belittlers
or critics could expect a long, furious riposte punched out on his ancient
typewriter, if not a lawsuit.

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Assegais stayed, and became a symbol of the Inkatha Freedom Party (IFP)
that he founded in 1975. He flourished that short, stabbing weapon in honour
of King Shaka, who had built up the Zulu nation as a military power. The
greatest moment in Zulu history was the rout of British forces, with assegais,
in 1879 at the battle of Isandlwana. Within hours, the British made a stand at
Rorke’s Drift; and in “Zulu”, a blockbuster film about that, Mr Buthelezi
played his ancestor King Cetshwayo, with assegai, cowhide shield and royal
leopard-skin cape. He loved the part. When in 1992, at the height of violent
clashes between the IFP and its rivals in the townships, the authorities
banned the carrying of assegais at rallies, he ignored it. They were part of
what Zulus were; they were what the power in their arms was for. He also
told his followers to crack the skulls of any “riff-raff” in the party, and to
squeeze them as they would wring the necks of scrawny cockerels crowing
on dunghills; but then denied that those were dangerous words.

His creed, he insisted, was non-violence. He did not believe, like many of
his rivals in the left-wing African National Congress (ANC), that Marxist
revolution was needed in South Africa. On the contrary, it meant disaster,
dragging the country into the Soviet orbit. Instead he preferred long-drawn-
out negotiations between the various factions, leading to a federal state.
Philosophically he followed Edmund Burke, who had opposed the French
revolution: a conservative who found friends at the Heritage Foundation and
backers in Ronald Reagan and Margaret Thatcher. He liked to think of
KwaZulu as a constitutional monarchy on the British model, rather than one
in which King Goodwill Zwelithini was firmly under his thumb; he wanted
free markets and lower taxes. Thatcher was impressed with him, when they
met.

Personally, too, he seemed mild enough. He was a practising Anglican, even

attending synod, and therefore had only one wife. In childhood he would
sleep and wake to the sound of his mother, a poet and composer, singing
Zulu songs. His shelves groaned with books, especially biographies; the life
of Gandhi was a favourite, and he read the Bible daily. He felt this side of
him was as important as his political life. But that eclipsed everything,
dividing opinion for the whole of his career.

In brief, KwaZulu was too small a stage for him; so he worked with
whichever national power bloc could best advance his ambitions. At times,

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much as he loathed apartheid, this meant the white regime. At university he
had studied “Bantu administration”, the running of the ten nominally
independent homelands set up under apartheid, and his first job was as a
clerk in the KwaZulu office of Bantu affairs. He played along with the
system. He refused, however, to see his Zulu homeland as a separate place,
cut off from the rest of South Africa. Zulus were the largest ethnic group in
the country, and a strong South Africa would be one in which all the groups
united—preferably under him.

For that to happen, he had to reckon with the ANC. Until 1979 they had a
fragile alliance, before the Marxist element made him back away. He argued
that Nelson Mandela, as a relative moderate, should be freed from jail, and
later tried to take the whole credit for that. Yet he also asked the white
regime to train black special forces to deal with communist “terrorists”,
otherwise the ANC and their allies, in the townships. Those troops, the
Caprivi 200, did the job with gruesome thoroughness. In all, between 1986
and 1996, around 20,000 people were killed by one side or the other.
Assegais featured, as well as knives and bullets. The Truth and
Reconciliation Commission blamed militants aligned to the IFP for the worst
of it; but Mr Buthelezi absolutely rejected that, even getting the commission
to tone down its report. The ANC, he always said, stirred up most of the
trouble.

After the transition to democracy, rapprochement was rocky. For a long, long
time he resisted taking part in the 1994 elections, eventually agreeing so
close to polling day that his photo had to be stuck to the voting slips. The
ANC won two-thirds of the vote; Mandela became South Africa’s first black
president; he himself got the ministry of home affairs, a job he did not care
much about in an office that grew famous for corruption.

At times, when Mandela went abroad, he became the acting ruler of South
Africa. In truth, though, his power was fading. After the 2004 election he left
the coalition and went into opposition, his more natural place; in the 2014
election the IFP won only around 10% of the vote in KwaZulu-Natal and a
mere 2.4% nationwide. Back home he remained traditional prime minister to
the royal family, since that role was for life; but the king had now largely
wriggled free of his influence. Mr Buthelezi spent much of his time curating

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his reputation, relying heavily on the IFP-owned Ilanga lase Natal, the
oldest Zulu newspaper, to pay him due respect.

At his Anglican funeral in Ulundi, the former Zulu capital, the roads were
lined with mourners in warrior headbands, carrying cowhide shields. They
also carried ceremonial canes and knobkerries; but there were few assegais
in sight. ■
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https://www.economist.com/obituary/2023/09/21/mangosuthu-buthelezi-had-his-own-
vision-for-a-democratic-south-africa

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