Table of Contents

The world this week

Politics
Business
KAL’s cartoon
This week’s covers
Leaders
How Britain can become an AI superpower
Joe Biden and Narendra Modi are drawing their countries closer
The real injustice would have been not to indict Donald Trump
The crackdown on foreign firms will deter global business—and undermine China’s own
interests
Fiscal policy in the rich world is mind-bogglingly reckless
Letters
Letters to the editor
By Invitation
Sir Richard Barrons on the broader security considerations around Ukraine’s counter-
offensive
Finding the money to fix the world requires a rethink on tax, says Jayati Ghosh
Asia
America is courting India in part for its growing economic clout
India’s foreign minister on ties with America, China and Russia
On defence, America and India edge closer together
Narendra Modi is the world’s most popular leader
China
America and China try to move past a new bump in relations
China hopes Mazu, a sea goddess, can help it win over Taiwan
China’s tolerance for public oversight is limited
Xi Jinping reaches into China’s ancient history for a new claim to rule
United States
The South is fast becoming America’s industrial heartland
How ChatGPT could help teachers and lower the cost of college
How LA’s drag nuns took centre stage in the culture wars
American states are bailing out public transport
Attack of the feral parakeets
How the Pentagon thinks about America’s strategy in the Pacific
North Carolina may be the hottest political battleground of 2024
Middle East & Africa
Egyptians are disgruntled with President Abdel-Fattah al-Sisi
Why wretched Lebanese are fleeing across the sea
Saudi Arabia may accept normal relations with Israel
Why Kenya could take the lead in carbon removal
Rural Africans are finding work beyond their farms
The Americas
Lula’s ambitious plans to save the Amazon clash with reality
What does China want from Latin America and the Caribbean?
Canada’s wildfires have burnt an area 16 times larger than normal
Europe
Ukraine’s counter-offensive is making mixed progress
The death of Silvio Berlusconi creates uncertainty for his party
Germany’s new national security strategy is strong on goals, less so on means
The problems ailing Western Europe’s left are not just cyclical
Why Europe’s asylum policy desperately needs rebooting
Britain
How to make Britain’s AI dreams reality
How much is a human head?
Wage growth, inflation and more place Britain’s central bank in a spot
Reading the death certificate on Boris Johnson’s political career
International
India’s diaspora is bigger and more influential than any in history
Business
Is doing business in China becoming impossible for foreigners?
Oracle is making Larry Ellison the world’s third-richest man
It is make or break for Intel’s giant bet on Germany
The upside of workplace jargon
Which sport is the best business?
Why self-storage is turning into hot property
How long will the travel boom last?
What Tesla and other carmakers can learn from Ford
Finance & economics
Is the global housing slump over?
A new super-regulator takes aim at rampant corruption in Chinese finance
Sooner or later, America’s financial system could seize up
AI is not yet killing jobs
America is losing ground in Asian trade
South Korea has had enough of being called an emerging market
Wage-price spirals are far scarier in theory than in practice
Science & technology
The idea of “holobionts” represents a paradigm shift in biology
There’s more than one way to spay a cat
Culture
For the boldest commentary on African politics, look to cartoonists
The eastern half of Europe is united by its diversity
Cormac McCarthy was the great novelist of the American West
A potato can have no finer fate than ending up as an Irish crisp
Meant to be liberating, the Sullivanian community became a nightmare
“The Full Monty” gang are back
The Economist reads
What to read to understand modern Poland
Economic & financial indicators
Economic data, commodities and markets
Graphic detail
England may soon become the world’s best cricket team
Obituary
Silvio Berlusconi duped Italians for years
 [Fri, 16 Jun 2023]
 The world this week
 Leaders
 Letters
 By Invitation
 Asia
 China
 United States
 Middle East & Africa
 The Americas
 Europe
 Britain
 International
 Business
 Finance & economics
 Science & technology
 Culture
 The Economist reads
 Economic & financial indicators
 Graphic detail
 Obituary
The world this week
 Politics
 Business
 KAL’s cartoon
 This week’s covers
The world this week
Politics
Jun 15th 2023

Donald Trump appeared in a court in Miami to plead not guilty to 37 criminal charges
related to his mishandling of classified documents. It is the first time an American
president, former or sitting, has been charged in a federal court. The indictment claims Mr
Trump stored secret papers haphazardly throughout his home in Florida, such as in a
shower stall. Some of the material related to the defence and weapons capabilities of
America and foreign countries, including America’s nuclear programmes. Before his court
appearance Mr Trump vowed to remain in the presidential race, even if he is convicted. “I’ll
never leave,” he said.
Italy held a state funeral forSilvio Berlusconi, who died aged 86. Italy’s longest-serving
prime minister was a media tycoon and unapologetic populist. He was known for a string of
corruption and sex scandals, the most infamous being the “Bunga Bunga” parties at his
villa, where he cavorted with (very) young scantily clad women. He was still a force in
politics. His Forza Italia party forms part of Italy’s coalition government.
Ukraine’s counter-offensive trundled on. It claims to have retaken several villages from
Russia. Russia said that one of its senior generals had been killed in the fighting. Russian
missile attacks killed 12 people in Kryvyi Rih, a town in central Ukraine known for being
the birthplace of Volodymyr Zelensky. Russia also attacked the Black Sea port town of
Odessa. Meanwhile the governor of Russia’s Kursk region accused Ukraine of firing missiles
over the border.
Alexander Lukashenko, the dictator of Belarus, said his country had started to take delivery
of some Russian nuclear weapons, the first time they have been deployed outside Russia
since the fall of the Soviet Union in 1991.
Germany published its first-ever national security strategy. It said that Russia poses the
“most significant threat to peace” and pointed to China as a menace for using its dominance
in supply chains to wield its political clout. The document reiterated Germany’s
commitment to increase defence spending.
Kosovo’s prime minister, Albin Kurti, offered to hold fresh local elections in areas where
ethnic Serbs form the majority, in an effort to defuse tensions that has led to attacks on
NATO peacekeepers. The trouble was sparked by the imposition of ethnic Albanian mayors
in the Serb areas following municipal elections that Serbs largely boycotted. Mr Kurti has
come under pressure from America and the European Union to calm the situation, and to
stick to a deal that gives a degree of autonomy to Serb municipalities.
Bye-bye Boris
Boris Johnson resigned as an MP ahead of a damning report from the parliamentary
Privileges Committee that found he had deliberately misled Parliament about lockdown
parties held in Downing Street when he was prime minister. Mr Johnson accused the
committee of being a “kangaroo court”. He also took umbrage with another committee that
rejected eight people from his honours list, which former prime ministers are allowed to
recommend. Just two of Mr Johnson’s allies said they would also quit Parliament in
solidarity with him.
Scotland’s former first minister, Nicola Sturgeon, was for once glad that Mr Johnson
hogged the headlines to divert attention from her troubles. Ms Sturgeon was arrested in
connection with a police investigation into the Scottish National Party’s finances while she
was its leader. She was later released without charge.
A 44-year-old mother of three was imprisoned in Britain for having an abortion after the
legal limit of 24 weeks post-conception. The woman took abortion pills, which are allowed
for home use up to ten weeks after conceiving (she was over 30 weeks pregnant). Calls
were made to release the woman from prison in the highly unusual case.
At least 78 migrants died and hundreds were missing, after their boat sank off the coast of
Greece. The vessel was en route to Italy from Libya. Many of those on board were from
north African countries.
The UN’s refugee agency said that there were 19m more refugees at the end of last year
than at the same point in 2021, an increase of 21%. The total number of refugees was
around 108m. That number is the highest ever and includes people displaced within their
own country as well as refugees. Before the civil war began in Syria in 2011, the figure in
the agency’s annual report had been steady at around 40m. At the end of 2022, 11.6m
Ukrainians remained displaced.
Nigeria’s new president, Bola Tinubu, suspended the governor of the central bank, leading
to hopes among investors that the country will abolish its cumbersome system of multiple
fixed exchange rates. The naira, which was kept artificially inflated by the central bank,
plunged against the dollar.
White rhinos have been re- introduced to the Garamba national park in Congo 17 years
after the last one was killed by poachers. The park is one of Africa’s oldest, but conflict and
poaching have denuded it of many of its animals.
America warned that North Korea may be preparing to send weapons to Russia, after Kim
Jong Un, the North Korean dictator, called for closer strategic ties with Russia, which he
summed up as “holding hands firmly” with Vladimir Putin. America believes that North
Korea sent rockets and missiles to the Wagner Group, Russia’s mercenary force, last
November. Meanwhile, the UN said Russia had restarted oil exports to North Korea.
The government of Australia introduced a bill to criminalise the public display of Nazi and
Islamic State symbols, and ban trading in items bearing the designs. Laws on accessing and
sharing violent extremist material online will also be toughened.
At least nine people were killed in the latest clashes between rival ethnic groups in the
Indian state of Manipur, which borders Myanmar. The groups are fighting over
government quotas for jobs, among other things. At least 80 people have died since the
violence erupted in May and 40,000 have been displaced.
Trying to block Twitter
Jack Dorsey, one of the founders of Twitter, accused India of threatening to shut down the
social-media platform across the country during the farmers’ protests of 2020-21. The
deputy minister for IT described Mr Dorsey’s accusation as an “outright lie”.
Reports that China planned to establish a spy station in Cuba provoked outrage from some
politicians in Washington, who drew comparisons to the Cuban missile crisis of 1962. But
the White House said China had been gathering signals intelligence from Cuba for years.
The furore did not stop America’s secretary of state, Antony Blinken, from moving ahead
with a long-delayed visit to Beijing.
Four children, including a baby, were found after spending 40 days in the Colombian
jungle. Their plane had crashed, killing their mother and two other adults. All four children
were from the Huitoto indigenous group, and were fleeing their homes after a threat of
being forcibly recruited by armed groups.

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The world this week
Business
Jun 15th 2023

The Federal Reserve decided to leave its key interest rate unchanged at a range of 5% to
5.25%. It was the first time that America’s central bank left the rate on hold following ten
consecutive increases, which started in March 2022. However, it indicated that it would
probably lift the rate twice again this year.
The easing of inflationary pressures was a big factor behind the Fed’s decision. America’s
overall annual inflation rate fell to 4% in May, the lowest it’s been since March 2021. Core
inflation, which strips out energy and food prices, was 5.3%: it has hardly budged since the
start of the year, in part because housing-related costs are rising. Despite higher mortgage
rates, house prices are steadily increasing again.
With inflation remaining elevated in the euro zone, the European Central Bank lifted
interest rates again by a quarter of a percentage point. That takes it deposit facility to 3.5%,
the highest it’s been since 2001.
The French finance minister, Bruno Le Maire, secured a promise from 75 food producers to
cut their prices. Food prices in France rose by 14.1% in the 12 months to May.
China’s central bank took a big shift towards easing monetary policy by trimming interest
rates. The economy has been losing steam since a strong rebound immediately after the
lifting of covid restrictions. Retail sales and industrial production grew more slowly than
economists had expected in the year to May. Unlike the rest of the world, inflation is
negligible and the property market is in the doldrums.
New figures showing that wages are soaring in Britain probably mean that more interest-
rate rises from the Bank of England are on the cards. The data caused the yields on short-
term government bonds to jump to their highest levels since August 2008, higher even than
the spike after the ill-fated mini-budget of Liz Truss’s government last September.
A new beginning
UBS completed its takeover of Credit Suisse, bringing an end to the latter’s 167 years of
independence; for now it will operate as a subsidiary. The emergency takeover was
proposed by the Swiss government in March following the collapse of market confidence in
Credit Suisse after years of scandals and losses. The combined company will oversee $5trn
in assets.
America’s Nasdaq stock exchange agreed to buy Adenza, a provider of risk-management
and regulatory software, for $10.5bn. Nasdaq is best known for the tech firms that list their
shares on the exchange. It reckons the deal will boost its financial-compliance services.
In Japan the Nikkei stockmarket index closed above the 33,000 mark for the first time
since 1990. It was boosted this week in part by a surge in the share price of SoftBank, amid
rumours that it might team up with the firm behind ChatGPT. The Nikkei has gained 30%
this year and the Topix 20%, helped by a weaker yen that has attracted foreign investors.
Toyota faced down two proxy votes at its annual general meeting. In an unusual challenge
to the management of a Japanese company, activist investors in America and Europe
recommended voting against Toyoda Akio, the grandson of the carmaker’s founder, as
chairman. They say he has been slow in rolling out electric vehicles. Another proposal
urged full disclosure on Toyota’s climate policy. Both proposals were defeated.
The Federal Trade Commission asked a court to stop Microsoft completing its $69bn
takeover of Activision Blizzard, a video-gaming company, amid reports that the closure of
the deal is imminent. The FTC has sued to stop the acquisition and legal proceedings begin
in August. In April Britain’s competition regulator said it would also try to block the
takeover.
A jury in New Jersey awarded $25.6m to a regional manager at Starbucks, finding that she
was sacked for being white. Shannon Phillips was fired after an incident in 2018 at a
Starbucks outlet in Philadelphia in which two black men were asked to leave, causing a
media furore at the time. Ms Phillips said she was sacked after questioning the firing of
another white supervisor, who did not oversee the store in question. The black manager of
the store kept his job.
Pride comes before a fall
Bud Light is no longer America’s bestselling beer, following a months-long boycott by
conservatives angered by the brand’s association with a transgender activist. Modelo
Especial, a lager brewed near Mexico City for Constellation Brands, took the top spot in
May. Bud Light’s share of the beer market is now 7.3%, down from 10.3% in January.
New York introduced a minimum wage for food-delivery workers of $17.96 an hour, plus
tips, which rises to $19.96 in 2025. The minimum wage for other workers in the city is $15.
Labour activists complained that the new rate was still too low and would not cover
workers’ costs. Food-delivery companies such as Uber and Grub said New York had bitten
off more than it could chew and that litigation is on the table.

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The world this week
KAL’s cartoon
Jun 15th 2023

Dig deeper into the subject of this week’s cartoon

Is Donald Trump the victim of a witch-hunt?
Ron DeSantis has little chance of beating Donald Trump
Donald Trump is in his most serious legal trouble yet
KAL’s cartoon appears weekly in The Economist. You can see last week’s here.

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The Economist
This week’s covers
How we saw the world
Jun 15th 2023

WE HAVE SPLIT covers this week. In the Americas and Asia we concentrate on the
relationship between America and India. Can both sides gain the business and security
benefits of co-operation even as they share fewer principles than they may care to admit?
America and its allies should be realistic about where India’s sympathy lies—with its
interests, not theirs—and creative in their efforts to find overlaps between the two.
Asia: America is courting India in part for its growing economic clout
Asia: India’s foreign minister on ties with America, China and Russia
Asia: On defence, America and India edge closer together
Asia: Narendra Modi is the world’s most popular leader
International: India’s diaspora is bigger and more influential than any in history

To readers in Europe, on the other hand, we show a cover focused on the British
government and its dreams of making the country a science superpower. Generative AI has
stoked a frenzy of excitement (and some fear) among techies and investors. But for Britain
to prosper, much will have to change.
Leader: How Britain can become an AI superpower
Britain: Rishi Sunak’s bet that Britain can prosper from AI requires a new approach

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Leaders
 How Britain can become an AI superpower
 Joe Biden and Narendra Modi are drawing their countries closer
 The real injustice would have been not to indict Donald Trump
 The crackdown on foreign firms will deter global business—and
undermine China’s own interests
 Fiscal policy in the rich world is mind-bogglingly reckless
BritGPT
How Britain can become an AI superpower
Rishi Sunak’s enthusiasm is welcome. But his plans for Britain fall short
Jun 15th 2023

GET READY for some big British celebrations in 2030. By then, if Rishi Sunak is to be
believed, the country will be “a science and technology superpower”. The prime minister’s
aim is for Britain to prosper from the booming opportunities offered by supercomputing
and artificial intelligence. Generative AI has stoked a frenzy of excitement (and some fear)
among techies and investors; now politicians have started to acclaim its potential, and
British ones are in the vanguard. Britain, says Mr Sunak, will harness AI and thus spur
productivity, economic growth and more. As he told an audience in London this week, he
sees the “extraordinary potential of AI to improve people’s lives”.
Mr Sunak’s vim and his readiness to champion AI are welcome, even if his claims sound
breathless. After all, Britain’s government has spurred innovation that had sweeping
economic effects—think of the Big Bang reforms in the 1980s that turned London into
Europe’s financial hub. There is every reason to believe a new AI era will create huge
opportunities . He is right to plan for how to make the most of these chances. But could
Britain, realistically, lead on this?
The country does have some advantages. It is home to several important AI companies,
mostly in London—in particular, Google DeepMind. It has excellent universities, and
welcomes the highly skilled foreign workers that AI companies need. The state generates
troves of data; no other country has such an array of health records under a single entity,
the National Health Service (NHS). And Brexit creates a chance to adopt an appealing
regulatory position that could be a model for medium-sized countries around the world as
they also rush to join the AI party.
But there are problems aplenty, too. The most obvious is that Britain is a smallish place.
America’s dominance in tech exerts a steady pull on capital, people and ideas, and
American firms duly dominate in AI. The way Brexit was done means that Britain has lost
access to the European Union’s single market. Although Oracle has a cluster of the
advanced graphics processing units (GPUs) needed to train large models, none of the cloud-
computing giants has yet chosen Britain as the base for what techies call the “compute”.
For Britain to prosper in AI, therefore, much will have to change. It needs to cram more
people who know one end of a GPU from the other into positions of influence in
government. Mr Sunak may loudly extol the promise of BritGPT, but his government should
include more engineers who understand the mix of data and compute from which AI is
built.
Time to chatGPU
Once it has the expertise, the government must deal with three broad concerns. The first is
about those public datasets. They are in no fit state for AI developers to exploit—the data
are unrefined ore, not sparkling treasure. Only the state has the authority to get these
datasets cleaned up, and to start thinking of what new ones could be built. A stock of clean,
regularly updated datasets that are technically and legally easy for algorithm-makers to use
would draw in engineers who want to build new AI systems. An AI-ready NHS would be the
jewel in Britain’s crown.
Second, Britain should move fast to gain an edge in regulation. The goal should be a
pragmatic set of rules keeping AI safe that sits somewhere between America’s Wild West
permissiveness and what is likely to be a regulatory warren in the EU. Mr Sunak announced
at a White House meeting with President Joe Biden this month that he will host a global
summit on AI regulation this autumn. Good. That will be the place and time to set out
Britain’s stall as having rules for AI that are sufficiently flexible to work for different
industries. Hairdressers who want AI to help pick new styles, for example, need not be
regulated in the same way as mortgage lenders.
The last and thorniest concern is how to get AI developers the compute they need to train
and run large models. Advanced GPUs made by Nvidia—for now, the only chips worth
using—are suffering a global supply crunch. The government could help by telling British
companies and its own departments to be much readier than now to send their data abroad
to AI developers in other, friendly countries. For most datasets, worries about privacy and
security are overdone.
However, an unfortunate correlation exists between the sensitivity of datasets and their
value in creating large models; data that are sensitive, that capture aspects of either human
health or behaviour, or pertain to national security, are what would be most useful to
inform new models. There is an understandable reluctance to send such data abroad.
That is why Britain urgently needs more GPU clusters within its borders. More compute on
British soil will have all sorts of local spin-offs and benefits. Jeremy Hunt, the chancellor,
has talked of giving academic computer scientists £900m ($1.1bn) to build a British
supercomputer in Edinburgh.
Yet commercial AI is so dynamic that the Edinburgh scheme risks becoming an AI white
elephant. Amazon alone spends around $25bn a year on compute. British taxpayers cannot
keep up with the private sector—and should not try. Instead the government should do all
it can to persuade commercial providers to invest in GPU clusters on British soil.
One focus should be to ensure a reliable supply of clean, affordable power. To train models
needs mind-boggling quantities of electricity. If Britain is without cheap supplies of power,
it will struggle to persuade anyone to set up big GPU centres there. The queue to obtain a
connection to Britain’s grid is holding back potential investors across the economy.
Other steps could include using public money to fund a “moonshot” project, such as
developing open-source software, to help chipmakers break the near-monopoly that Nvidia
holds on the AI market. Nvidia’s edge comes from clever software which makes training
models on its GPUs a breeze. Rival chipmakers in America and Britain have no equivalent
and are all but locked out of the AI market. With better software their chips could compete
with Nvidia’s and ease the supply crunch that dogs AI developers the world over. That’s a
worthy ambition for a country seeking global AI greatness. ■
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America’s new best friend
Joe Biden and Narendra Modi are drawing their countries
closer
India does not love the West, but it is indispensable to America
Jun 15th 2023

NO COUNTRY EXCEPT China has propped up Russia’s war economy as much as oil-thirsty
India. And few big democracies have slid further in the rankings of democratic freedom.
But you would not guess it from the rapturous welcome Narendra Modi will receive in
Washington next week. India’s prime minister has been afforded the honour of a state visit
by President Joe Biden. The Americans hope to strike defence deals. Mr Modi will be one of
the few foreign leaders, along with Winston Churchill, Nelson Mandela and Volodymyr
Zelensky, to address a joint session of Congress more than once. The praise gushed on
Capitol Hill about the partnership makes no mention of Ukraine, democracy or grit in the
gears of America’s new best friendship.
As our Asia section explains, the global clout of the South Asian giant is rising fast. Its
economy is the world’s fifth biggest. Its 18m-strong diaspora is thriving, from America to
the Gulf. And India has become indispensable to America’s effort to assert itself in Asia and
deter Chinese aggression. Yet though huge, capitalist, democratic and wary of China, India
is also poor, populist and, as our interview with Subrahmanyam Jaishankar, its foreign
minister, outlines, dismissive of the vestiges of the post-1945 Western order. The
relationship is therefore a test case for the messy alliance of democracies emerging in a
multipolar world. Can both sides gain the business and security benefits of co-operation
even as they share fewer principles than they may care to admit?
India’s ascent is an uplifting story. One of the fastest-growing economies, its GDP is
expected to overtake Japan’s and Germany’s by 2028, even as it treads a novel path
towards getting rich. In contrast to East Asia’s Tigers, India’s exports are powered by
services, of which it is the world’s seventh-largest vendor. Think not just of call centres but
data scientists for Goldman Sachs. Infrastructure has also improved under Mr Modi and his
immediate predecessors, and manufacturing may pick up as supply chains diversify from
China: Apple assembles 7% of iPhones in India. India’s chief failing is its vast numbers of
unskilled, jobless young people. It is trying to help them by pioneering a digital welfare
state.
Thanks in part to its diaspora, India’s soft power is world-beating. The bosses of Alphabet,
IBM and Microsoft are of Indian descent, as are the heads of three of America’s five top
business schools. Reflecting the accomplishment of Indian-Americans, 70% of the wider
American public views India favourably, compared with 15% for China.
You might think all this makes America and India natural partners. Certainly, a 25-year
effort to develop ties has been unaffected by political changes in either country. India is
part of the Quad, a security grouping that includes America, Australia and Japan. In order to
augment India’s hard power, America is promoting a series of defence deals, some of which
may be signed in Washington next week, to enhance military-technology co-operation. The
Biden administration reckons this would be the biggest milestone in the bilateral
relationship since the striking, in 2005, of a civil-nuclear co-operation agreement.
Yet the relationship faces two potential sources of friction. First, India’s pro-Western tilt—
which became more pronounced after border skirmishes with Chinese troops in 2020—is
essentially pragmatic. Ideologically, it is suspicious of Western countries and flatly rejects
their claim to global leadership. From Jawaharlal Nehru to Mr Modi, India considers the
post-war order to have offered it little more than another bout of domination by other
countries. The result of these contradictory impulses is disorientating. India is an American
strategic partner that mistrusts the West, is unlikely ever to enter a formal alliance with
America and is attached to Russia, which supplies it with arms. It is not clear how much
support, if push came to shove, America could expect from India. It wants to bolster its land
defences against China, not fight over Taiwan.
The second sticking-point is Mr Modi’s attacks on liberal norms. Under his Hindu
nationalist, Islamophobic party, India is increasingly hostile to over 200m of its own
people. Lynchings and the dispossession of Christians and Muslims are becoming more
common. The press is cowed and the courts are largely pliant. Though India seems sure to
remain a democracy—not least because Mr Modi is almost guaranteed re-election next
year—it is an illiberal one. The fact that only 60m of its 1.4bn people have formal jobs is a
potentially explosive situation in a country prone to rabble-rousing.
Some suggest that America risks repeating its history with China, by showering economic
advantages on a rival that ends up turning against it. That seems unlikely. Mutual suspicion
of China alone should keep India close. Primly rejecting co-operation with India because its
ideology and democracy do not conform to Western ideals would only empower China. It
would also show that America has failed to adapt to the multipolar world that lies ahead.
Instead, America and its allies should be realistic about where India’s sympathy lies—with
its interests, not theirs—and creative in their efforts to find overlaps between the two. That
means layering the relationship with common endeavours. The Biden administration’s
efforts to accelerate technology transfer to India seem a promising example. By boosting
India’s defence industry, America hopes to wean it off dud Russian weapons and provide an
affordable new source of arms for other Asian democracies. Other areas of co-operation
could include clean energy and tech, where both seek to avoid relying on China.
An alignment of interests, not principles
America’s foreign policy has always combined realism with idealism. So America must
speak out against attacks on democratic norms and human rights, even as it works more
closely with India. For its part, India must get used to the idea that, as it grows more
powerful, it will face more scrutiny. Discount the expressions of unconditional friendship
and brotherhood in Washington next week. To work, the relationship will have to function
like a long-term business partnership: India and America may not like everything about it,
but think of the huge upside. It may be the most important transaction of the 21st century.
■
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Leaders
The real injustice would have been not to indict Donald
Trump
The former president must be subject to due process
Jun 13th 2023

THE ARRAIGNMENT of Donald Trump at a court in Miami on June 13th marks a first in
American history. The current president’s administration believes that the previous
president endangered national security, by wilfully mishandling classified documents. Even
more extraordinary, the defendant is the front-runner in the Republican primary. Thus the
2024 election could turn into a campaign for Mr Trump to stay out of prison.
Such a fight would suit Mr Trump. Before the indictment was even unsealed, his campaign
seized on it as a fundraising opportunity. His people lashed out against Joe Biden, Mike
Pence and Hillary Clinton. All hung on to classified documents or were reprimanded for
carelessness with official secrets. But only Mr Trump has been indicted—proof, they say,
that he is the victim of a witch-hunt.
Nonsense. America’s security bureaucracy classifies so many documents that lots of
officials and politicians inadvertently end up holding secret files. In practice, they are
prosecuted only when the most secret papers are involved; when those who possess them
refuse to hand them back or obstruct justice; and when they leave them vulnerable to
snoops or share them with others. Mr Trump is alleged to be guilty of all three.
Some of the documents in his indictment are highly secret. Others are marked “HUMINT”,
which means they have been gathered by sources who could be in grave peril if caught.
Mr Trump’s handling of the documents is worrying, too. Lawyers for Mr Biden and Mr
Pence found classified papers and handed them to the Justice Department. Mr Trump left
the White House with at least 15 boxes of documents, containing at least 30 top-secret files.
These are not in the indictment because Mr Trump’s office returned them. The problem
was that even then, Mr Trump hung on to more secret files and told his lawyers to hide or
destroy them. “Why don’t you take them with you to your hotel room and if there’s
anything really bad in there, like, you know, pluck it out,” he reportedly told one. Earlier
this month a retired air force lieutenant-colonel was sentenced to three years in prison for
“wilfully retaining” top-secret information.
Mr Trump’s documents were also vulnerable to being seen or stolen. Mr Biden left
classified documents in his garage next to his Corvette—which was both sloppy and on
brand. Mrs Clinton’s were kept on a personal email server that she used for work. Mr
Trump’s were at Mar-a-Lago—whose several hundred members can take guests for a swim
or a club sandwich and fries. According to the indictment, many boxes were in a storage
room, which could be reached from the pool through a door that was often open.
Mr Trump is also alleged to have shared documents. His need to brag is so strong that he let
a writer, his publisher and two staff members look at what was probably a plan for
bombing Iran’s nuclear-enrichment facility at Fordow. “This is secret information,” he is
recorded saying. “See, as president I could have declassified it. Now I can’t, you know, but
this is still a secret.”
So serious are these allegations that not to have charged Mr Trump would have been to
single him out for special treatment. Bill Barr, Mr Trump’s former attorney-general, told
Fox News that the indictment is “very, very damning” and concluded that “If even half of it
is true, then he’s toast.”
That Mr Trump could be brought down by vanity, paranoia, chaos and conceitedness seems
tragicomically apt. The trial and appeals may well drag on past next year’s presidential
vote. If he were elected, that might well spare him a trial until 2029. But if he were
convicted, a second-term President Trump could seek to pardon himself. That really would
be unfair. ■
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.

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hunt
Undoing business in China
The crackdown on foreign firms will deter global business
—and undermine China’s own interests
Bosses are scrambling to ensure that they do not fall foul of data-security laws
Jun 15th 2023

BOSSES OF MULTINATIONALS may have breathed a sigh of relief after the leaders of the G7
group of rich countries met in Japan last month. The talk was not of decoupling their
economies from China, but of “de-risking” commercial ties with it. Yet any respite will have
been momentary. The reality of operating in China is becoming increasingly bleak. As China
takes a harsher approach to data privacy and counter-espionage, lawyers and executives
say that the mood is tenser than ever.
Officials have raided a number of foreign firms, invoking vaguely worded laws concerning
data, intellectual property and national security. Since the spring they have searched the
offices of Capvision and Bain, two consultancies; and they have detained employees from
Mintz, an American due-diligence firm, and Astellas, a Japanese drugmaker.
Routine lawyering is now harder. Contracts containing non-public information about state-
owned firms could turn out to be breaking the law. Due-diligence firms asking questions
about local tycoons could also find themselves in trouble. According to the Wall Street
Journal, local branches of asset managers can no longer tell their overseas headquarters the
size of their positions in local firms, or the names of their clients. Even forwarding an email
signature to a recipient abroad could be judged an infringement of rules governing
sensitive personal information.
China used to take a lax approach to intellectual-property (IP) rules, partly because its
economy needed foreign know-how. Now that it has more IP of its own to protect, it is
more stringent. It has also become more guarded about data as it seeks to fend off Western
sanctions. To be sure, worries about data security are not limited to China: American
lawmakers are clamouring to ban TikTok, an app ultimately owned by a Chinese firm,
which they fret might share data with the Communist Party. But two factors make China’s
actions especially chilling for business.
One is the opacity that surrounds them. The rules are hazily worded—perhaps by design,
to leave officials free to act as they choose. The authorities rarely feel compelled to explain
themselves. As a result, most multinational firms worry they could be punished for
breaking laws that seem arbitrary. The second is the types of companies being pursued.
Professional-services advisers, including lawyers and due-diligence investigators, provide
the information companies need to do deals and expand in China. If they cannot operate,
their customers suffer, too.
This adds up to a tax on global business. Many companies are turning to costly
workarounds in order to continue to operate in China. Some are drawing up contingency
plans; others are considering hiring staff to ensure compliance with the rules, and
developing software to ring-fence data on Chinese operations.
At most multinationals these costs will not extinguish the allure of China’s vast market. In
2021 the 200 biggest global firms made sales of $700bn in the country. But at smaller or
less successful firms, they could tip the balance between risk and reward. Others may
follow Sequoia, a venture-capital firm, which on June 6th announced plans to break off its
China branch.
Large yard, high fence
Such bluntness could be bad for China. Its approach may keep some secrets out of
foreigners’ hands. But by driving firms away, it is also likely to do itself substantial harm.
Officials say they want to attract investment and that China is open for business after years
of zero-covid. Their actions belie those words.
They also undermine support in the West from the last of the China doves—the
businesspeople and financiers who for years made bumper profits in China, while in turn
helping fuel the country’s exporting success. They used to be advocates for a friendlier
approach to China. Even today, they are less forceful advocates than they once were. As
decoupling becomes a reality, they may fall silent altogether. ■

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Recklessly red
Fiscal policy in the rich world is mind-bogglingly reckless
High inflation and low unemployment require tighter budgets not looser ones
Jun 14th 2023

THE DIRE state of rich-world governments’ budgets would make even the luxury-loving
Madame Bovary wince. America has avoided a debt-ceiling disaster, but in the year to May
the federal government’s revenue fell short of its spending by $2.1trn, or 8.1% of GDP. In
the European Union politicians are finding that rising interest rates mean the debts
financing much of the bloc’s €800bn ($865bn) in post-pandemic recovery spending
threaten to drain the common budget. Japan’s government recently omitted from its
economic-policy framework a timetable for balancing its primary budget, which excludes
interest payments but is still in the red by more than 6% of GDP. And on June 13th Britain’s
cost of borrowing for two years rose above the levels reached after its calamitous “mini-
budget” in September.
Global fiscal policy does not only look reckless—it is also unsuited to today’s economic
circumstances. High inflation and low unemployment mean the world needs tight policy,
not loose. On June 14th the Federal Reserve held interest rates steady while it waited for
more signals about the health of the economy. But with underlying inflation above 5%, few
believe it will stand pat for long. As we published this leader, the European Central Bank
was poised to raise interest rates again. The Bank of England will almost certainly follow on
June 22nd; with nominal pay rising at an annual rate of 6.5%, Britain is uniquely exposed to
the threat of a wage-price spiral.
Politicians’ failure to get the memo is astonishing. America’s deficit has previously
exceeded 6% only in periods of turmoil: during the second world war, after the global
financial crisis and, most recently, following covid-19 lockdowns. Today no such disaster
makes vast emergency spending necessary. Even the energy crisis in Europe that resulted
from Russia’s invasion of Ukraine is in abeyance. The main effect of all this lavish
borrowing has been to stimulate economies, forcing interest rates higher than they would
otherwise need to go.
Higher interest rates make financial instability more likely. They also affect government
budgets. For every one-percentage-point rise in rates, the British government’s debt-
service costs rise by 0.5% of GDP within a year. One reason America faces a revenue
shortfall is that the Fed’s profits, which flow into the Treasury’s coffers, have turned to
losses as the central bank has had to pay more interest on the money it created to buy
bonds during the stimulus years. These feedback effects matter. Monetary policy controls
inflation only if budgets are prudent, which becomes less likely as interest bills mount.
Yet politicians’ efforts to change course have been paltry. Even after the “Fiscal
Responsibility Act”, which lifted America’s debt ceiling and trimmed spending, net public
debt is forecast to rise from 98% of GDP today to 115% by 2033. The British government,
having planned to tighten its belt last year, now reportedly hopes to cut taxes. The euro
zone looks solid enough as a whole but many of its member states are fragile. At the
interest rates now priced in—and they could yet rise further—bringing down Italy’s
already huge debt-to-GDP ratio at the glacial pace of one point per year over several
decades probably requires surpluses before interest payments of 2.4% of GDP.
All the while, pension and health-care systems face the strain of an ageing population;
reaching net-zero carbon emissions requires public investments; and defence spending
needs to rise to counter the threat posed by autocracies. These demands on the state are
not unworthy. But if governments want to satisfy them, they will need to raise taxes to do
so—or accept the eventual inflationary consequences. ■

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bogglingly-reckless
Letters
 Letters to the editor
On the English language, oil prices, Pakistan, digital payments, productivity, Henry
Kissinger, Monty Python, pronouncing Erdogan
Letters to the editor
A selection of correspondence
Jun 15th 2023

The dominance of English

Johnson (May 27th) claimed that Anglophone peoples must accept that the English
language no longer belongs to them but to non-native speakers of English. The empirical
evidence does not support this claim. Most speakers of English as a second language have
an elementary or intermediate knowledge of it that is by no means comparable with that of
native speakers. A study for the European Parliament that I co-wrote shows that only 11%
of adults of working age in the EU claim to know English very well, far less than the 40%
claimed by Johnson.
Native Anglophones hold the “monopoly of legitimate competence”, to paraphrase Max
Weber. This is evident in academic journals, where authors are always asked to write in
American or British English, and to have their articles proofread by a native speaker in
order to avoid rejection. ELF (English as a lingua franca) is not accepted.
The economic and symbolic advantages for native Anglophones are immense, and this
raises a problem of global linguistic justice that should be tackled, for example, through a
language tax, or by reducing the extent of the legal protection of copyrights and patents
published in English. Since native English speakers do not have to learn other people’s
languages and thereby make huge savings, it is fair that the rest of the world should freely
appropriate some intellectual products published in English.
MICHELE GAZZOLA
Lecturer
Ulster University
Belfast
The entire history of English is that of mergers and acquisitions. As Jorge Luis Borges
observed, in English there are two words for every idea: one Saxon and one Latin (credit
the Norman conquest in 1066 for the latter). “Dark” versus “obscure”, “regal” v “kingly”,
“spirit” v “ghost” were among his favourite examples. Fast forward to William Dalrymple’s
chronicle of the East India Company, which notes upfront that “loot” comes from a
Hindustani word for plunder. The evolution of English takes the path of least resistance.
Expect a few Ukrainian words to be appropriated next.
YACOV ARNOPOLIN
New York

Oil-price benchmarks
You summarised the significant work that has been done over the past several years to
ensure sufficient physical crude oil will remain deliverable against the Brent benchmark for
many years to come (“New anchor”, June 3rd). Platts, a part of S&P Global Commodity
Insights, has led many such initiatives in Brent since we launched the Dated Brent
benchmark in 1987. This includes the introduction of the Forties and Oseberg crude
streams in 2002, Ekofisk crude in 2007, Troll crude in 2018 and now Midland crude in
2023.
We are proud of our role in the evolution of commodity benchmarks so that they remain
reflective of the markets we serve. Far from “needlessly raising questions” about
benchmark robustness, our forward-looking work on commodity benchmarks has ensured
that they have been robust through every cycle in the global economy.
SAUGATA SAHA
President
S&P Global Commodity Insights
New York

Pakistan and Imran Khan

Your leader and article on Pakistan (“Soldiers, go home”; “Military victory”, June 3rd) failed
to take the viewpoint of the government. We object to you labelling Pakistan as a “global
menace” without providing any substantial evidence to support such a damning claim.
Furthermore, the assertion that Imran Khan is under “de facto” house arrest is false. He
enjoys unrestricted access to the media and is free to express his views openly.
The claim that the army orchestrated the vote of no confidence in April 2022 is unfounded.
The removal of Mr Khan’s government was carried out through a universally acknowledged
constitutional process. Contrary to your speculation, there is no evidence of the army’s
involvement in framing the charges Mr Khan faces in the courts.
And comparing Pakistan’s economy to India’s is unfair. You conveniently overlooked
Pakistan’s sacrifices as a front-line state in the war on terror, which have had a significant
impact on the economy. Political polarisation and instability caused by Mr Khan’s party
only worsened the economy.
Attacking state institutions, as was done recently in Pakistan, is widely condemned. The
Economist knows this. The perpetrators of violence will be brought to justice by various
courts. These include military courts, established in 1952, and their decisions go through
multiple layers of appeals to ensure justice is served.
MUNEER AHMAD
First secretary (press)
Pakistan High Commission
London

Cash and illegal drugs

Discussions about digital currencies typically remark that cash is in serious decline (Special
Report on digital finance, May 20th). That may be true for its legitimate usage, but crooks
haven’t stopped using it. America’s horrific drug plague feeds almost exclusively on cash.
Cartels extract some $300bn of it each year. Cash to buy pernicious drugs motivates high
percentages of robbery, burglary and thefts.
The assumption that society could rely on cash should payment systems fail is as
unrealistic as relying on horses should petrol supplies fail. Digital-payment reliability has a
stellar history. Smartphones that span disaster areas are the future and an incomparably
superior solution.
Dismayingly, a retrograde movement has gained foothold in America and parts of Europe
that characterizes cash as a “public good” and proselytises that it is “in the public interest”
to force banks to maintain currency availability and retailers to accept it. Protagonists have
an ambitious plan to keep bills and coins as a permanent alternative to digital monies.
DAVID WARWICK
Santa Rosa, California
The Productivity Genie
Congratulations to Bagehot for calling out British politicians who fall under the spell of the
“Reform Fairy” (June 3rd). Perhaps Bagehot could turn his attention to the Productivity
Genie. Both Conservative and Labour politicians firmly believe that productivity will lift
economic growth and tax revenues, thereby reducing the need to choose between higher
taxes or reduced public services. Alas some of your writers seem to believe in this genie
too. I have lost count of the number of “this time it is different” stories on the latest
innovation that will lift economic growth. But it always ends the same way.
Productivity may rise, but output doesn’t. Instead the gains go to more low-productivity
activities, like health care, or a reduced workforce, or early retirement, or more messing
about (surfing social media).
MATTHEW GREEN
Isfield, East Sussex
Kissinger on Ukraine
I find Henry Kissinger’s view that the West provoked Russia’s aggression in Ukraine to be
preposterous (“How to prevent a third world war”, May 20th). The reality is that the West
became less confrontational after the fall of the Soviet Union, which was an unalloyed good.
Most European countries reduced the size of their armed forces and defence budgets.
America was preoccupied by other regions and reduced its military presence in Europe.
Ukraine gave up its nuclear weapons. The withdrawal of America from Afghanistan
reduced the presence of Western arms in areas close to Russia. Europe tied itself closer to
Russia through its natural gas. Russian external savings washed through the European
financial system.
Given these facts, Vladimir Putin took the decision to invade Ukraine because he thought he
could get away with it, rather than any provocation by the West.
LARS SCHONANDER
Larchmont, New York
Mr Kissinger is “reviled by many as a warmonger for his part in the Vietnam war” you say.
That includes his illegal and secret bombing campaign in Cambodia that killed tens of
thousands of civilians. An action that helped sow the seeds of the Cambodian genocide, as it
drove Cambodians into the arms of Khmer Rouge.
Rather than sitting down with Mr Kissinger to hear him pontificate on matters of
diplomacy, perhaps The Economist could have asked him whether he felt guilty celebrating
his 100th birthday, when many of the Cambodian victims of his statesmanship died very
young.
THOMAS PRATT
Chicago
Always look on the bright side of life
After mentioning a hyperactive American industrial policy, robust export controls,
onshoring of critical supply chains, de-risking from China, a diplomatic commitment to
rebuild America’s leadership, unwavering military support for Ukraine and a mission to
strengthen democracy around the world, you then ask, what is so bold about America’s
leadership (“America’s plan for the 21st century”, May 20th)? It reminded me of the scene
in Monty Python’s “Life of Brian”: what have the Romans ever done for us?
INGO STEINHAEUSER
Washington, DC

Phonetic victory
The word plays in your headlines are often witty. However, the title of your leader on the
Turkish president’s re-election, “Erdogain” (June 3rd), fell flat. The pronunciation of
Erdogan is not Er-do-ghan but rather Er-do-wan. Er-do-won may have been more
appropriate, or perhaps Er-do-wane, given his rather meagre majority vote and the state of
the Turkish economy.
JEM ESKENAZI
London

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By Invitation
 Sir Richard Barrons on the broader security considerations around
Ukraine’s counter-offensive
 Finding the money to fix the world requires a rethink on tax, says Jayati
Ghosh
War in Ukraine
Sir Richard Barrons on the broader security considerations
around Ukraine’s counter-offensive
It is one act in a global drama pitting democracies against autocracies, says the former
British general
Jun 12th 2023

UKRAINE’S COUNTER-OFFENSIVE is under way, and its armed forces intend to take back
as much Russian-occupied territory as possible in the coming months. The outcome is
hostage to the chance and emotion that characterises all wars. Whatever the result,
understanding whose counter-offensive this really is will determine what happens after it
draws to a close as the weather turns later this year.
There are three very broad potential outcomes. First, the offensive routs the Russian
invaders and by Christmas the last occupier is back across the border. This would rely
more on Russia folding than on the relatively limited force Ukraine has assembled.
The second possible outcome is that an improved Russian defence holds and Ukrainian
forces batter against it at enormous cost in blood and materiel for little or Pyrrhic gain.
This would signal that the occupation is not going to end without levels of firepower
unattainable by Ukraine so far.
The third outcome, somewhere between the first two, is that Ukraine takes and holds
worthwhile territory somewhere along the 1,000km-long frontline. This would not
conclusively end the war, so at Christmas neither side would think they have won, lost or
exhausted the will to fight. The strategic calculus would not have moved much.
If total success and total failure look unlikely, sufficient battlefield success to “prove” that
the war can eventually be won by Ukraine would indicate the size of the bill for continuing,
priced in military and civilian blood and equipment from supportive foreign powers.
Whether and how that bill is met depends on whose interests are really at stake.
Many in the global south and some important American political figures, particularly on the
right, consider the counter-offensive to be a matter for Ukraine and Russia, not the wider
world. Given the choice, American politicians who hold this view would turn off the funding
tap for Ukraine.
Were that view to gain ground—the chances of which would increase if total military
success looked impossible—would the West support an armistice or ceasefire? Would the
political, military and financial costs of supporting Ukraine be seen as not worth the candle,
despite the efforts since February 2022? If so, the day the West stopped sending the money,
weapons and ammunition would be the day there was no point more Ukrainians sweating
and bleeding against a much more powerful neighbour.
If this happens, then 10-20% of Ukraine will have been annexed by force by Russia. Russia
will have won, no matter the extraordinary costs to it in so many ways, and taken a big step
towards restoring its empire. The rest of the world may conclude that the 21st century will
now be shaped by the decline of the West as a political and military force—still
economically powerful but with no stomach for resisting pressure. It is hard to see many
Western political leaders arguing that this is acceptable, either for Ukraine or for their own
nations’ long-term security, prosperity and influence.
As the counter-offensive unfolds, a key consideration for European leaders will be the
extent to which they should view its success or failure as a regional security question. That
calculus would become more urgent if America, after contributing or pledging the lion’s
share of Western aid (around $80bn to date) but seeing no decisive result, were to cede
leadership to Europe so as to focus on its internal affairs and its relationship with China.
Picking up the bill would mean Europe having to rapidly mobilise its collective defence-
industrial capacity to match the demands of bringing a long, big war in Ukraine to a
successful (to be defined) conclusion. It would mean finding more than $100bn a year for at
least three years, followed by the expectation of as much as $1trn more for rebuilding
Ukraine when the shooting stops. Serious money—but with the GDP of the European Union
alone around $17trn, the price could be afforded if governments were willing to make hard
choices.
The money would underpin a new, stable security order in Europe, managing an angry,
well-armed but well-contained Russia. Russia might still be the petulant junior to China in
an alliance of autocracies, but after defeat on the battlefield it would no longer be able to
pursue its territorial, imperial ambitions. If this is the way ahead, $100bn a year could be a
bargain, a deal much enhanced by the fact that it is Ukrainians doing all the fighting and the
dying for wider Western interests.
However, a broader perspective may be needed. The offensive in Ukraine is just one
episode in the unfolding drama of how the liberal democracies of the West establish a
relationship with assertive autocracies, led by China, to decide how the 21st century is
going to work. This “discussion” is already playing out against the chronically unstable,
complex backdrop of population growth, climate change, the risks and opportunities of the
digital age and the proliferation of nuclear weapons.
From this perspective, the counter-offensive must be followed by the efforts of America
and Europe (with their combined GDPs of more than $40trn) bearing down on Russia
($2trn), to win both on the Ukrainian battlefield and to get the better of Russia strategically
over the long term. The economic disparity highlights how absurd it is that the West ever
let Russia feel it could expand its territory by making war in Europe. It reflects the failure of
NATO’s “deterrence by punishment” policy, which has allowed Europe’s conventional
defences to be steadily weakened over 30 years in favour of reliance on nuclear weapons.
There is a price, too, for failing to equip Ukraine after Russia’s annexation of Crimea in
2014 in order to deter further aggression. The West’s limited, off-the-shelf emergency
response since February 2022 has enabled Ukraine to survive but not yet to triumph. Seen
through this prism, the West is coming from behind. It needs to understand that
safeguarding its own security, prosperity and values will require an unshakable
commitment to restoring Ukrainian territorial integrity, even at the high price Russia has
set. ■
General Sir Richard Barrons is a former commander of the British Joint Forces Command. He
is the co-chairman of Universal Defence and Security Solutions, a global defence consultancy.

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Global taxation
Finding the money to fix the world requires a rethink on
tax, says Jayati Ghosh
The co-chair of an independent tax commission on why the focus should be on
squeezing more from big business and billionaires
Jun 13th 2023

THE WORLD is facing numerous extreme, interlinked challenges, including a climate

emergency and growing economic inequalities between and within countries. Tackling
these problems requires funds to flow in the right direction, towards reducing carbon
emissions, supporting education, health and other essential services and overhauling global
infrastructure. All of this will, in turn, require massive increases in public spending.
But the current international economic and financial architecture—from the structure and
goals of multilateral lenders to the regulation of financial flows—is inadequate and even
obstructive. World leaders will meet in Paris next week to discuss ways to fix this
architecture. But already the level of ambition seems to be low; all that may result is yet
another ineffective talking-shop. Yet two obvious strategies to increase public resources
across the world are available: ending tax avoidance by multinational companies and
taxing extreme wealth.
Currently multinationals avoid tax payments of at least $240bn per year, and probably
more, because the current international taxation rules were developed a century ago, when
there were fewer border-straddling companies and no digital ones. The rules allow
multinationals to treat each national subsidiary as a separate “arm’s-length” entity for tax
purposes, and to move profits to low- or no-tax jurisdictions (a process dubbed BEPS, for
Base Erosion and Profit Shifting). This can be prevented by recognising that multinationals
are global unitary businesses, and by abandoning the arm’s-length principle.
Multinationals’ profits could then be divided among countries according to a formula based
on the location of revenues, employees and so on. A global minimum tax would further
reduce the incentive to move profits to tax havens.
Since 2013 the OECD, a club of mostly rich countries, has been mandated by the G20 to
work towards changing the rules to permit that. Years of fraught negotiations yielded an
agreement between 136 countries in 2021. Billed as a sweeping overhaul, it did accept the
principles of unitary taxation of multinationals and a global minimum tax rate. But it
watered down the proposals so much that it will probably deliver very little additional
revenue to developing countries, while requiring them to forgo independent sources of
revenue, such as “digital-services” taxes on tech giants’ local sales.
Done right, a global minimum tax would yield large revenues for governments. A rate of
25%, the median of corporate-tax rates around the world, has been proposed by the
Independent Commission for the Reform of International Corporate Taxation, a group of
experts which I co-chair. The Biden administration suggested 21%. But the final
compromise of only 15% forged under the OECD-led process mainly pleases the tax havens.
The potential revenue difference is significant: instead of more than $500bn of extra tax
receipts with a 25% minimum tax rate, 15% provides only $220bn. And very little of that
would accrue to the less-developed countries most in need of a boost to public coffers, even
though some of them host large amounts of multinational business activity.
The commitment to divide taxing rights between countries has been eroded even more. It
will apply only to large multinationals (with annual turnover of around $20bn) whose
profits exceed 10% of revenues. And only a quarter of the “residual” profits above the 10%
floor would be available for reallocation across countries for tax purposes. This would
deliver as little as $12bn-25bn in additional revenues, with a small fraction of that going to
lower-income countries. In any case, this measure may never see the light of day, since it
requires a multilateral convention. Politics in many countries make this difficult.
Republicans in America’s Congress, for example, are clearly unwilling to share with the rest
of the world rights to tax the profits of American multinationals.
One reason the OECD outcome has been underwhelming is that the process was not really
inclusive: it ignored concrete proposals put forward during the negotiations by developing
and emerging countries. Many countries are now tired of allowing America and Europe to
decide for the rest of the world. In late 2022 lower-income countries won a diplomatic
tussle with America and other OECD members, to give the United Nations a mandate to
kickstart a new round of intergovernmental talks on taxation. These are scheduled to begin
later this year.
Several countries—including Brazil, India, Indonesia and Nigeria—have already imposed
or plan to impose digital-services taxes, despite fierce opposition from America. These are
not a panacea for tax avoidance, but they are simpler to administer than the proposed new
rules to divide taxing rights and can provide much-needed revenue until a better solution is
negotiated.
Similarly, wealth taxes can be levied nationally. Even modest taxes on extreme wealth,
which has grown dramatically in recent years, can reduce financial inequality and provide
more revenue. Most countries have taxes on property but do not levy them on other
wealth. Financial assets account for a growing share of the wealth of the richest individuals
and the revenue potential is significant.
Raising more revenue through wealth taxes requires identifying the true beneficial owners
of all assets, financial and physical. This information can be collected in national registries
and shared across jurisdictions to prevent people from dodging taxes by shifting their
wealth offshore. Moving towards a global asset registry should be the ultimate aim, but
like-minded countries can co-operate even without a global agreement. This is already
happening. In July Colombia, Brazil and Chile will convene a meeting of Latin American and
Caribbean countries to look for a common approach to taxing multinationals and fighting
tax havens—the first regional ministerial summit of its kind. Other regions could follow
their example.
An international tax architecture that works for the benefit of all countries is in the best
interests of people everywhere. Let’s see whether leaders at the Paris summit take note. ■
Jayati Ghosh is co-chair of the Independent Commission for the Reform of International
Corporate Taxation.

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Asia
 America is courting India in part for its growing economic clout
 India’s foreign minister on ties with America, China and Russia
 On defence, America and India edge closer together
 Narendra Modi is the world’s most popular leader
The elephant in a boom
America is courting India in part for its growing economic
clout
But a young population may not be enough to sustain rapid growth
Jun 13th 2023

FEW VISITORS can expect the sort of welcome Narendra Modi, India’s prime minister, will
receive in Washington later this month. Joe Biden, America’s president, is throwing a
formal banquet for him at the White House. The leaders of the two chambers of Congress,
not to be outdone, have invited him to address a joint session for the second time—an
honour previously accorded only to the likes of Winston Churchill. The visit will, in the
words of a gushing White House press release, “affirm the deep and close partnership
between the United States and India”.
In fact, the partnership between India and America has never been that deep or close. But
America’s leaders, both Republican and Democratic, would like it to be. They see India as
an indispensable accomplice in their rivalry with China. After all, India recently became the
world’s most populous country. Its foreign policy has become more assertive and more
hostile to China of late, even if it remains opposed to the idea of an American-led order. Its
diaspora is the world’s biggest, and remarkably influential. But India’s allure also rests on
the sense that its economy may at last be starting to fulfil its potential. It is already the
world’s fifth-biggest. Mr Modi has promised growth of a sort that would turn it into a pillar
of the world economy, on a par with America, China or the European Union. Despite the
many failings of his government’s economic management, it is not an implausible target.
India’s economy will boom, Mr Modi’s lieutenants argue, because of its young workforce,
muscular industrial policy and the opportunities presented by Western firms’ sudden
wariness of China. Many high-flying businessmen are persuaded. Tim Cook, Apple’s boss,
who has just opened its first store in India, declared to investors last month, “The
dynamism in the market, the vibrancy, are unbelievable…India is at a tipping point.” Days
later Foxconn, a Taiwanese electronics firm, broke ground on a $500m factory. India’s GDP
grew by 6.1% in the first quarter, year-on-year. Investment as a share of GDP is at its
highest for over a decade.
There is no shortage of sceptics. Some point to cronyism and protectionism, which hold the
economy back; others complain that dodgy statistics exaggerate its growth. India was hit
badly during the pandemic, causing enduring suffering among the poor. Westerners see Mr
Modi’s erosion of democratic norms and growing sectarianism as potential threats to
growth. Chinese officials, meanwhile, think India is not authoritarian enough. In March
your correspondent heard one tell an audience of global bosses that India’s linguistic
diversity, its layers of legislation and its poorly educated workers made it an unattractive
place to do business.
But for India to become a pillar of the world economy, no miraculous improvement on all
these scores is required. It just needs to keep growing at roughly its present pace. Goldman
Sachs projects India’s GDP will overtake the euro area’s in 2051 and America’s by 2075
(see chart 1). That assumes a growth rate of 5.8% for the next five years, 4.6% in the 2030s
and lower beyond.
Goldman’s confidence rests partly on demography. The workforces of China and the EU are
shrinking as their populations age. But according to projections from the OECD, a club
mostly of rich countries, India’s will grow until the late 2040s. The swelling supply of
labour accounts for a full percentage point in Goldman’s forecast of India’s annual
economic growth over the next five years. India will, however, remain relatively poor. Even
by 2075 its output per person will be 45% lower than China’s and about 75% below
America’s.
In 1700 India’s economy was the world’s biggest, eclipsing even China. But its share of
global output declined throughout the colonial era and in 1993, after a financial crisis, hit a
humiliating low of 1% when measured using market exchange rates. Since then it has
grown fast, a trend that has continued after Mr Modi’s election in 2014. India now accounts
for 3.6% of global GDP, the same as China in 2000. By 2028, the IMF forecasts, it will hit
4.2%, overtaking both Germany and Japan. India’s heft is growing in other ways, as well: its
stockmarket is the fourth-biggest after those of America, China and Japan. Its annual
exports of goods and services relative to GDP are near record levels. They have grown by
73% over the past decade, and as a result India’s share of global exports has gone from
1.9% in 2012 to 2.4% in 2022.
Transport infrastructure has improved dramatically under Mr Modi and his recent
predecessors. Investment in it has more than tripled as a share of GDP compared with the
mid-2010s. The length of the road network has increased by about 25%, to 6m kilometres,
since 2014. The number of airports has doubled—and many of the new ones rival the
sleekest in the rich world. Digital infrastructure has also blossomed, with 832m broadband
connections as of last year and a range of state-sponsored digital services, from e-banking
to welfare payments, that reach hundreds of millions of people. There is a build-out of
energy infrastructure, too: India will add more solar generating capacity in 2023 than
anywhere else bar America and China, according to Bloomberg New Energy Finance.
India is unusually reliant on services for a developing economy: they account for about
40% of all exports (see chart 2). That makes India the world’s seventh-largest exporter of
services, accounting for 4.5% of the global total, up from 3.2% a decade ago. Its big tech-
services firms have been on a growth spurt since the pandemic began, hiring eagerly and
honing their software, which is sold around the world. Links to Silicon Valley via India’s
vast diaspora help maintain the pace of innovation and support a nascent startup culture.
The catch is that the IT-services industry, while earning a huge $200bn-odd in export
revenues, directly employs a mere 5m or so people. Indeed, out of a total of over 900m
people of working age, only about half are in the labour force and perhaps 60m have formal
jobs. One way to remedy this would be to create more blue-collar employment by fostering
manufacturing. This has been a preoccupation of Indian policymaking for three decades.
Mr Modi’s manufacturing push, under the slogan “Make in India”, aims to seize on Western
firms’ desire to diversify their supply chains away from China. India’s infrastructure has
improved, it offers a sizeable domestic market and it is awash with potential workers. An
IMF study in April concluded that it would be one of the few places to benefit if supply
chains were split by a geopolitical divide. To that end, Mr Modi launched a $33bn subsidy
scheme in 2020, using “production-linked incentives” (PLIs), which reward firms in 14
industries, from pharmaceuticals to solar panels, if their sales hit certain targets.
Some manufacturing is booming: exports of machinery, electronics and vehicles or parts
have risen by 63% in the past five years and are now a fifth of all goods exports. Apple
assembles 7% of its handsets in India, according to Bloomberg. Indian conglomerates,
including Tata Group, are investing in electronics. Nonetheless, although PLIs have
prompted plenty of announcements, actual capital deployed so far is probably below
$10bn. One big project, a $19bn semiconductor plant in Gujarat, has stalled, according to
some reports.
Manufacturing grew by only 4.5% year-on-year in the last quarter of 2022, and as a share
of GDP, at 17%, is only a little above the average for the past decade. About a third of the
increase in exports of goods by value since 2019 reflects India’s growing purchases of
Russian oil, some of which is refined and re-exported. Vietnam has captured more activity
displaced from China than India, whose share of global goods exports has risen only
marginally, to 1.8% in 2022 from 1.6% in 2012. In short, there is no big bang in
manufacturing in India, although steady growth may continue.
Is this unusual pattern of growth sustainable? Elements of the formula seem sure to
endure, including an abundant workforce, strong elite education, an entrepreneurial
culture and valuable links to an influential diaspora. Mr Modi is expected to win a third
term in office next year. That will provide continuity in economic policymaking at the
central level, especially for the infrastructure splurge. Closer relations with America are
also helpful for the economy. America, after all, is the buyer of many of India’s exports of
services. And with a relatively closed banking system, India will continue to rely on
Western networks for cross-border payments.
East lenders
Meanwhile financial instability, a plague in the past, seems less of a risk. The banking
system has been cleaned up and corporate debt is low. Like China, India has large currency
reserves. It also inhibits foreign investment in its banks and government-debt markets to
diminish the risk of destabilising capital flight. An attack by short-sellers in January on
Adani Group, a well-connected conglomerate, revealed flaws in India’s capital markets,
such as opaque governance, but also a degree of resilience: they shrugged off the episode.
But three threats do loom. First, the boom in IT services could run out of steam. India’s
firms have access to a huge pool of skilled labour, and so have adopted a labour-intensive
model. But new technology, including artificial intelligence, could undermine this strategy.
In preparation, the industry is diversifying into new fields, such as data-science, often
provided through “global capability centres” for foreign firms. And it is expanding in
accounting and consulting: non-tech services made up about a fifth of all services exports in
the last quarter.
The second risk is that Mr Modi’s promotion of domestic champions and erosion of
institutions, including the courts, may begin to deter foreign investment. Many Chinese tech
firms have been banned. Multinationals have long had to deal with India’s fluid tariffs, rules
and taxes. Now they increasingly feel the need to strike deals with big domestic firms:
Holcim, a European cement firm, sold its Indian arm to Adani; Meta invests in Reliance
Industries, which has a large digital arm.
Fear of an uneven playing field may explain why gross inflows of foreign direct investment
have slowed from a rough average of $7bn a month for the past few years to below $5bn in
February and March. There are other signs of tentativeness from big foreign investors. We
examined the exposure to India of the four global banks most active there, which often
cater to multinationals. On average their exposure to India fell by 11% in 2022 in dollar
terms.
But India’s government probably reckons that in the longer term it is big enough to draw
Western firms, however warped the rules of the game. Their subsidiaries there have sales
of almost a quarter of a trillion dollars. Over the past five years the profits of all
multinationals in India rose by 80% to $56bn, according to our analysis of central-bank
data. That’s enough to compensate for a lot of headaches.
The final risk is that India’s implicit strategy of “trickle-down” economics may cause a
popular backlash. Instead of manufacturing jobs, it relies on wealth from the relatively
small amount of formal industry to flow through the economy to benefit a bigger share of
the population, who are often poorly educated. This is not necessarily pie in the sky: as
more housing is built for the well-off, for example, the construction industry is growing
fast, drawing in unskilled workers. And part of Mr Modi’s agenda has been to augment
trickle-down economics. The government has forced hordes of tiny firms to start paying
tax, giving them an incentive to merge, formalise and invest. India’s digital welfare schemes
have made the provision of aid to the poor more efficient, and could be used to supplement
incomes on a bigger scale.
Young and restless
Still, better administration and tech may not make ill-educated people more productive
workers. And if the aspirations of India’s vast army of the underemployed are not at least
partially satisfied, India’s growth is likely to suffer. Even if widespread social unrest is
averted, it may be because politicians try to satisfy or deflect frustration in unhelpful ways.
Mr Modi has combined economic modernisation with illiberalism and religious chauvinism.
To placate the jobless, he and his successors may become even more repressive and
sectarian. Public opinion could also turn against economic openness. And the Western
countries which India is befriending could be put off by such developments. India’s
economic rise is real, and probably durable, but not without its pitfalls. ■

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Non-alignment non-negotiable
India’s foreign minister on ties with America, China and
Russia
In a rare interview Subrahmanyam Jaishankar makes no apologies for self-interested
diplomacy
Jun 15th 2023 | DELHI

IN A RECENT interview with this paper, Henry Kissinger, a former American secretary of
state, gave a troubling assessment of a world in which old powers are fading, new ones are
rising and superpower conflict threatens. Yet he offered, alongside few other hopeful notes,
this accolade: “I have very high regard for the way the Indians conduct their foreign policy
now, because it shows balance.”
Among the ways this was striking was the fact that Mr Kissinger is known in India as the
former enabler of a viscerally anti-Indian president. “The Indians are bastards,” he told
Richard Nixon, after the president had hosted India’s prime minister at the time, Indira
Gandhi, at the White House in 1971. “They are the most aggressive goddamn people
around.”
What has changed in Indian diplomacy in the intervening decades? In some ways,
everything. Over the past quarter of a century, as India has added economic heft to its vast
populace, America and its allies have come to see it as an indispensable counterweight to
an assertive China. And India, which under Mrs Gandhi was closer to the Soviet Union than
America, has seized with growing enthusiasm the opportunities for closer ties that the
West has offered. Narendra Modi, in Washington next week to accept praise and goodies—
including the possible offer of a step-up in co-operation on high-tech weapons—has gone
so far as to describe India and America as “natural allies”.
In other ways, however, Indian foreign policy remains distinctly challenging to America.
India does not really believe in alliances. An immutable feature of its foreign policy, from
Nehruvian non-alignment to today, is a deep, post-colonial fear of being beholden to a
richer power. That in itself might raise doubts about the extent of its pro-Western tilt. And
indeed, it has embraced America’s outreach mainly as an economic opportunity, less
fulsomely as a strategic one—albeit that its desire for defence and security ties is growing,
especially following border clashes with China in 2020. India has also retained its close ties
to Russia, whose invasion of Ukraine it refuses to condemn. Russia supplies most of its
arms and, thanks to a generous wartime discount, nearly half of its oil.
Mr Kissinger reserved particular praise for India’s foreign minister, Subrahmanyam
Jaishankar—calling him “the practising political leader that is quite close to my views”. To
discuss the geopolitical oddity that India’s rising power represents, Mr Jaishankar sat down
with The Economist for a rare, hour-long interview in his airy, sandstone office in Delhi.
Formerly India’s top diplomat (and ambassador to both Washington and Beijing), Mr
Jaishankar is one of the brains behind India’s balancing act. Besides the familiar diffidence
about alliances, he espouses above all a commitment to multipolarity. Unlike many in
Washington, India does not see the world in terms of a cold-war-style duality, pitting
American-led countries against those hewing to China. It sees an emerging dance of big
powers—chiefly America, China, Russia and itself—in which it will engage multiple
partners, albeit to different degrees. “We would like to have multiple choices. And
obviously try to make the best of it,” says Mr Jaishankar, a dapper 68-year-old. “Every
country would like to do that. Some may be constrained by other obligations, some may
not.”
As the world churns
That transactional view (in a recent book, Mr Jaishankar describes a “multipolar world with
frenemies”) does not preclude long-term partnerships. On the contrary, the
“transformation of the India-US relationship”, he says, is “the big change in my professional
life”. He attributes much of this to Mr Modi, crediting the prime minister with having
jettisoned the “ideological hesitations”—by which he means anti-Americanism—of India’s
former left-leaning elite. Now, he says, the relationship is “getting more consequential by
the day… moving forward very, very rapidly”. He believes it will be further boosted by two
big economic changes: diversification of supply chains away from China and increased
digitisation. Both processes, which he describes as a “new globalisation”, in theory depend
on the sort of mutual trust India and America are building.
If America wants proof of India’s reliability, he implies, it should not look to it to unwind its
ties with Russia, but, counter-intuitively, the opposite. India’s relationship with Russia,
which he terms “a cardinal principle of our foreign policy”, has been an enduring feature of
it for “60 years of history”—including, he notes pointedly, an American arms embargo on
India in 1965 that pushed it to the Soviets. This is clearly self-serving, but so is India’s
foreign policy. That is rather the point. Mr Jaishankar, far from apologising for India’s
eagerness to get economic advantage from Vladimir Putin’s illegal war, openly relishes the
prospect of getting more. He believes Russia is being economically reoriented towards Asia.
“What I suspect this whole Ukraine issue is going to mean is that Russia, a country which
was actually truly Eurasian, is probably today discovering or is anticipating that a large
part of its relationship with the West will no longer work.” Meanwhile, India’s growth is
fuelling its hunger for Russian resources. “It’s common sense that the two trends intersect.”
Under its urbane first prime minister, Jawaharlal Nehru, India was known for demanding a
more moral world order. It can now sound like the world’s most untrammelled realist. In
truth, the change is not that marked. India was not so much virtuously “non-aligned” as
simply marginal to world affairs, because it was weak and introspective. Despite its
tendency to grandstand against the West, it was still willing to align itself with America
when threatened, as when it accepted its military aid during a war with China in 1962. In
recent years, no doubt, it has engaged with America more openly and decisively. Yet the
transformative change in India’s global position has to do with its fortunes.
Its economic rise has brought it to the centre of global affairs—and Mr Jaishankar predicts
demography alone will ensure that growth continues: India “churns out” trained people on
a scale no other democratic society can. India’s new importance, in turn, is giving it many
more opportunities to pursue the same preoccupations—including its economy and
territorial integrity—it has always prioritised. And if it seems unusually upfront or
unapologetic about those goals, that points to an even more momentous geopolitical
change.
The emergence of new great powers—for now China and arguably India; in future perhaps
Brazil, Indonesia and Nigeria—is making geopolitics more complicated and prone to the
sorts of contradictions and trade-offs that Indian foreign policy embraces. India is not only
maintaining its lucrative relationship with Russia as a hedge against the West. It also
considers its partnership with Russia a means to limit Russian support for its two major
adversaries, Pakistan and China.
Igniting Indo-American co-operation
Mr Jaishankar insists that those around Joe Biden, America’s president, well understand the
looser, more uncertain and sometimes contradictory international relations that a
multipolar world will foster. “I think they’re acutely conscious that the post-1945 order has
been severely challenged and that they need a new template, new partners, that they need
to look beyond alliance constructs.” There is evidence for this, despite Mr Biden’s talk of a
new “alliance of democracies”. In a recent speech, Jake Sullivan, his national security
adviser, envisaged a world in which America will pursue its economic self-interest more
overtly than it has in recent years, while working with a cast of friends and allies who will
do likewise. In describing this apparently more-contingent American-led order, Mr Sullivan
used the word “partners” 24 times but “allies” only twice.
Perhaps that is the best the West can hope for. Emerging powers such as India, with huge
economic needs and complicated domestic politics, will not line up behind America, or for
that matter China, in the old cold-war fashion. Whether the new geopolitical reality they
represent will be stable is another question. India’s relationship with China may be an early
test. Always fraught, it is the pole around which revolve America’s approach to India,
India’s receptiveness to America, and ultimately, it might be argued, Asian security.
Home and affray
Mr Jaishankar denies that India’s military embrace of America—with whom the Indian
armed forces now conduct more exercises than with any other power—has tightened in
response to the border clashes of 2020. Yet the Asian powers’ territorial dispute is clearly a
big factor in their rivalry and, it follows, a spur to defence co-operation between America
and India. It is therefore worth pondering the implications for India’s ties with America if
India and China were to succeed in their current effort to resolve the dispute, at least for
now, by negotiating a demilitarised “buffer zone” along their frontier.
Some American strategists are already questioning India’s utility on security. As the chief
proponent of the civil-nuclear co-operation deal that America negotiated with India in
2005, Ashley Tellis, now of the Carnegie Endowment, a think-tank in Washington, was
instrumental in the bilateral rapprochement. Yet, in a recent essay in Foreign Affairs
entitled “America’s bad bet on India”, he sought to temper American hopes that India will
be a pivotal security partner. India wants American help only to defend itself against
possible Chinese aggression, he argued; it cannot be counted on to help America fight
China.
Mr Jaishankar will not be drawn on the buffer-zone talks, or, hypothetically, on how a deal
might affect Indian relations with China or America. “We know that solving the boundary
question will take time,” he says, adding that ensuring “peace and tranquillity” and “no acts
of violence” should be the minimum condition for “moving the relationship forward”.
“Unless we find a resolution to that, no government can, at least in my opinion, pretend that
everything is OK, and let’s do business in every other part of our relationship.”
It may be that Mr Tellis and others are worrying too much about India’s commitment to
America. Over the past two decades, the relationship has developed significant ballast and
momentum, based on shared interests, a vigorous Indian-American diaspora and
enthusiastic cross-party support in both countries. Most of that will endure. Comparing
India with its dysfunctional neighbour, Stephen Cohen, a late scholar of South Asia, used to
say that Pakistan was an American ally but never a friend, and India the opposite. That is
truer now than ever.
Even so, the doubt about what sort of partnership America and its allies should expect of
India, a rising power that rejects alliances and juggles competing priorities, is a significant
one. “You have an India which is looking at multiple opportunities across multiple
geographies, often polities which have contradictory interests. And it is trying to advance
on all fronts,” says Mr Jaishankar. It is a good appraisal of India’s challenging new role in
the world. It also underlines the uncertainties, and threat to stability, that Mr Kissinger
warned of in an increasingly multipolar world. ■

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Too good to refuse
On defence, America and India edge closer together
India is being weaned off its dependence on Russian weaponry
Jun 15th 2023 | DELHI

BOTH AMERICA and India were unmistakably satisfied with the outcome of a visit to Delhi
on June 5th by America’s defence secretary, Lloyd Austin. When Mr Austin met his Indian
counterpart, Rajnath Singh, he offered a deal. The Americans see it as their most generous
proposal since a controversial pact in 2005 to co-operate on nuclear power despite India’s
nuclear-weapons programme. The hope is that India’s prime minister, Narendra Modi, will
sign a range of agreements on defence during his state visit to America next week.
A pressing concern for both America and India is China’s growing assertiveness in what
American strategists call “the Indo-Pacific”. China’s growing navy is more active in the
Indian Ocean and its armed forces have been reinforcing on India’s northern border (and
clashing with Indian troops). Mr Austin’s most important offer is a so-called roadmap for
defence-industrial co-operation covering technology in such areas as air combat, armoured
vehicles, munitions and ISR (intelligence, surveillance and reconnaissance).
India, the world’s biggest importer of weapons, has long been desperate to expand its
indigenous defence industry. It has not been easy. A “Make in India” defence policy was
launched eight years ago, followed in 2020 by “Atmanirbhar Bharat” (Self-reliant India),
when the government raised the maximum stake that could be held by foreigners in joint
ventures in defence from 49% to 74%.
However, by the start of last year, foreign direct investment in the defence industry had
reached only $380m, against a target of $10bn by 2025. Rahul Roy-Chaudhury of the
International Institute for Strategic Studies (IISS), a British think-tank, doubts it will be
reached, as most big foreign defence firms will balk at the technology-transfer
requirements, especially because of fears that their intellectual property might end up in
Russian hands.
The other big lever the Indian government is pulling is to allocate around 75% of the armed
forces’ capital budget to home-grown purchases. The country’s official defence-acquisition
arm recently earmarked $8.5bn for spending with local manufacturers by the end of the
decade, in the hope that new indigenous light tanks, artillery, missiles and helicopters
might reach service by then. There are also four “positive indigenisation lists” that together
ban imports of 411 types of weapons and equipment, as well as thousands of components.
But it is not yet clear whether the Indian defence industry can provide suitable substitutes,
nor whether the country’s sometimes picky armed forces will accept them.
That is why America thinks its offer is attractive. The most eye-catching element could be a
deal for India to manufacture under licence General Electric’s GE-F414 jet engine, which is
found in Boeing’s F-18 Super Hornet and Saab’s Gripen. The powerful turbofan engine
would be produced at a new factory by the state-owned Hindustan Aeronautics Ltd (HAL)
and would be used to power HAL’s Tejas Mk2 light combat aircraft, which is still under
prototype development (and possibly the highly ambitious Advanced Medium Combat
Aircraft, a proposed fifth-generation fighter with radar-beating stealth characteristics). But
to get the amount of technology transfer India wants from GE requires both America’s
Congress to issue an exemption and GE to go along—both possible roadblocks.
Mr Austin’s proposals may also be welcome in Delhi because India’s faith in Russia, by far
its biggest arms supplier, has ebbed, especially since the invasion of Ukraine. According to
SIPRI, a think-tank, Russia’s share of India’s weapons imports fell in the four years to 2022
from 64% to 45% (France is second with 29%; America has only 11%). But data from IISS’s
Military Balance show how much India still depends on Russia. More than 90% of its
armoured vehicles, 69% of its combat aircraft and 44% of its surface warships and
submarines are Russian or made under a Russian licence.
Russian weapons cost less than Western ones, and Russia imposes fewer conditions on
their use and fusses less about technology transfer. However, Russia’s largely state-
controlled arms industry has prioritised Russian forces in Ukraine over even its biggest
customers. India is still awaiting delivery of two of the five S-400 surface-to-air missile
systems for which it agreed to pay Russia $5.4bn in 2018. Much worse, an increasing
number of India’s combat aircraft are grounded for lack of spare parts. Back in March of
last year, an air force officer told parliament’s defence committee that “a very large
number” of India’s 272 Su-30s, the country’s most potent jet fighters, were inoperable. The
“sick list” will have grown since then. Sanctions on Russia have also sapped the capacity of
its arms industry.
But reducing India’s dependence on Russia will take time. India will still need Russia for
some technology, such as the nuclear reactors for submarines, that it will not get
elsewhere. Fully reshaping India’s armed forces with Western and home-made equipment
could take decades rather than years, even if India buys no big new weapons systems from
Russia.
India has also shown itself in the past to be a difficult customer. After France reached an
agreement to sell Rafale fighter jets to India in 2012, it took nearly nine years for the first
planes to arrive. During that time the order was cut from 126 to 36, partly because the
original manufacturer, Dassault, feared that HAL would struggle to make the complex plane
under licence. Over the years, every aspect of the deal became mired in mutual accusations
of cronyism and corruption. On a trip to France next month, Mr Modi is expected to sign a
new deal for up to 50 Rafales. However, it seems they will all be made in France.
Mr Austin’s proposed roadmap sets America and India on what may still be a long and
winding path. But the map’s very existence suggests both sides see the relationship as vital.
And, adds Mr Roy-Chaudhury, the direction of travel is clear. ■
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Banyan
Narendra Modi is the world’s most popular leader
The prime minister’s odious Muslim-bashing is not the main reason
Jun 15th 2023

GANESHA KANOJIA does not consider himself a Bharatiya Janata Party supporter. The 58-
year-old auto-rickshaw driver has mostly voted for the Congress party, as members of his
low-caste Dalit group tend to. In local elections in Delhi, where he lives, he still disdains the
BJP, because he dislikes its Hindu supremacist ideology. But in general elections, including
one due next year, Mr Kanojia is a safe BJP vote. “Because of Modi-ji,” he explains.
This illustrates one of the most remarkable developments in global politics. Over the past
nine years the BJP has emerged, in two general elections and dozens of state ones, as
India’s biggest party. Yet it is far short of having a popular majority. It controls only half of
India’s 28 states. In general elections, it seems nonetheless to have a lock on power, for the
next five years and probably more, thanks to the popularity of Narendra Modi. With an
approval rating of 77%, the prime minister is more than twice as popular as his party. He is
by far the world’s most popular elected leader.
Conversations with political scientists and a cross-section of Modi fans suggest three main
reasons for this phenomenon. Mr Modi is benefiting from a combination of good luck,
political brilliance and ruthlessness.
He is lucky in his opposition, which is not merely a shambles, but a sort of shambles that
plays to his strength. Contrary to the story he tells, India’s economy has not done better
under his government than under its Congress-led predecessors. Yet under its weak,
uncharismatic fourth-generation dynastic leader, Rahul Gandhi, Congress has failed to lay
claim to this success, let alone promise a repeat performance.
It has also been tarred by Mr Modi’s most effective populist claim, that he represents the
triumph of vernacular, battling India over its complacent Anglophone former rulers. Mr
Gandhi is half Italian and, like his father, grandmother and great-grandfather, all Indian
prime ministers, Oxbridge-educated. Mr Modi was born poor, is largely self-taught and,
partly because that describes millions of Indians, hugely admired for it. Another
Cambridge-educated Congress luminary once dismissed him as a chaiwala (tea-seller)—
which he was. No political barb has backfired more disastrously.
Mr Modi’s genius is his ability to capture the political narrative in such ways. He is adept at
reading mass sentiment and, as a relentless campaigner, courts it as no other Indian leader
has since Indira Gandhi, or ever. Also like Mrs Gandhi, he claims credit for everything his
government has achieved—and much that it has not. His smiling image, ubiquitous on
billboards, is the face of welfare schemes, infrastructure projects and diplomatic shindigs.
In a time of tumultuous change, many Indians crave a kingly figure whom they can thank
for the progress they hope for, and trust to manage the uncertainties they fear. “Only Modi
knows how to implement things,” says Rajdip Ghosh, a 34-year-old IT professional in
Kolkata (who was named after Mr Gandhi’s father, Rajiv). “Modi-ji is providing so many
houses for the poor,” says Narendra Yadav, a 55-year-old driver in Delhi. “During the
pandemic Modi-ji saved so many lives.”
Asked to give a relative weighting to these factors, Sanjay Kumar, a psephologist, attributed
20% of Mr Modi’s popularity to the ineffectiveness of his opponents and 65% to his
political skills. He attributed only 15% to the prime minister’s ruthlessness—which could
seem surprising, given how conspicuous it is.
Mr Modi is closely associated with his party’s Hindu chauvinism, owing to a vicious pogrom
against Muslims in Gujarat in 2002, while he was the state’s chief minister. He denies
having any link to the atrocity, but has never really condemned it. Nor does he chastise the
Hindu zealots who man his campaigns while openly inciting violence against Muslims. It is
good to know most Modi fans are not mainly drawn by his party’s Muslim-bashing. It is
sobering to ask why, then, does he not stop it?
Mr Modi has also ranged into other sorts of illiberalism. His critics in the media have been
cowed into silence. India’s parliament, civil service and judiciary have been bent to his will
—as demonstrated in March, when Mr Gandhi was convicted of bogus charges levelled by a
BJP lawmaker and disqualified from parliament. Again, the fact that Mr Modi’s popularity is
not dependent on such activities is comforting only to a degree. It suggests his illiberalism
is less strategic than compulsive.■
Read more from Banyan, our columnist on Asia:
Japan offers Ukraine a lesson in reconstruction (Jun 8th)
The strange tale of a prominent North Korean defector (Jun 1st)
America is lavishing attention on Pacific island states (May 25th)
Also: How the Banyan column got its name

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leader
China
 America and China try to move past a new bump in relations
 China hopes Mazu, a sea goddess, can help it win over Taiwan
 China’s tolerance for public oversight is limited
 Xi Jinping reaches into China’s ancient history for a new claim to rule
Not another crisis
America and China try to move past a new bump in
relations
Antony Blinken is headed to Beijing despite reports of Chinese eavesdropping in Cuba
Jun 9th 2023

FEW AMERICANS would ever forget those chilling 18 minutes in the evening of October
22nd 1962. As they gathered around their radios and televisions, their president, John F.
Kennedy, revealed that the Soviet Union had moved nuclear-capable missiles to Cuba, 90
miles (140km) from the coast of Florida. America would blockade the island until they
were removed, he said. It was the first the public learned of the crisis that over the next five
days would bring the world to the brink of nuclear war.
Analogies with that episode were perhaps inevitable when the Wall Street Journal, followed
by several other American media outlets, reported on June 8th that China had made a
secret agreement to establish a listening station in Cuba. Senators from both sides of the
aisle urged the White House to take preventative action. Mike Gallagher, a Republican
congressman who chairs the House of Representatives’ new bipartisan Select Committee
on the Chinese Communist Party, warned that a new cold war “once again, has come to our
doorstep”. He even quoted from Kennedy’s address that night in 1962.
Yet such comparisons are undue. The White House, having initially dismissed the reports
as inaccurate, now says that China has gathered signals intelligence from Cuba for some
time and upgraded its facilities there in 2019. Officials say they have shared their concerns
with Cuba and successfully lobbied other governments not to host Chinese military or
spying outposts. Despite the furore, America’s secretary of state, Antony Blinken
(pictured), will go ahead with a long-delayed visit to Beijing—his first in that role—on June
18th.
Chinese eavesdropping in Cuba is, indeed, nothing new. A report from the US Army War
College’s Strategic Studies Institute in 2011 suggested that China had access to three
listening stations there, at Bejucal, Santiago de Cuba and Lourdes. It was using them to
intercept radio and mobile-phone transmissions, and to conduct cyber-espionage, the
report said. The Lourdes facility, just outside Havana, was the Soviet Union’s biggest
overseas listening station and used by Russia until the early 2000s.
Dennis Wilder, a former China analyst at the CIA and now a professor at Georgetown
University, says he had been aware of China’s use of Cuba for electronic eavesdropping
since the end of the cold war. The facilities there, he says, are most likely operated by the
Third Department of the People’s Liberation Army Joint Staff Department (often referred to
as 3PLA and roughly equivalent to America’s National Security Agency). Other 3PLA sites
may include North Korea, Pakistan and Djibouti, where China opened its first (and only)
overseas military base in 2017.
China is probably using facilities in Cuba to try to hoover up information related to
American satellite systems, Mr Wilder suggests, and the recent upgrades may have
involved installing bigger, more powerful data-gathering equipment, which is often
contained in large round structures known as radomes. “That’s the kind of thing that I think
that the Chinese are trying to put in Cuba—very large arrays with tremendous capability,”
he says. “That kind of capability would be very, very useful to the Chinese military.”
Troubling as that may be for America, it has few good options to respond. China and Cuba
have both denied the media reports and the Biden administration’s subsequent allegations.
Anyway, such facilities do not violate international law. And America is thought to have
many similar sites in countries around the world, including Japan, South Korea, Taiwan and
Australia, and uses them to gather signals intelligence on China. So America is unlikely
seriously to escalate its protests over any such Chinese activity in Cuba.
China, meanwhile, is using the controversy to highlight what it sees as American hypocrisy.
“Slanders and smears” would not obscure America’s “deplorable track record of
indiscriminate mass spying around the world”, a foreign-ministry spokesman said on June
12th. In a call with Mr Blinken two days later, Qin Gang, China’s foreign minister (pictured),
rebuked America for harming China’s security. But both sides have confirmed Mr Blinken’s
trip. And though American officials do not expect breakthroughs on a lengthy agenda,
including Taiwan and Ukraine, they hope the visit will help to establish better lines of
communication. “Intense competition requires intense diplomacy,” said one.
That will come as a relief to many other countries, especially in Asia. They worried that
tensions were spiralling out of control in February when America shot down a Chinese
high-altitude balloon that the Pentagon said had been monitoring American military bases.
China said the balloon was gathering meteorological data, but the White House rejected
that explanation and postponed a visit by Mr Blinken that had been scheduled for later that
month.
The effect was to stall efforts to stabilise relations that President Joe Biden and his Chinese
counterpart, Xi Jinping, began when they met in Bali in November. In the past few weeks,
however, there has been a swirl of high-level contacts, including a visit to Beijing in May by
William Burns, the CIA chief. Jake Sullivan, America’s national-security adviser, also met
Wang Yi, China’s top diplomat, in Vienna that month. Economic officials have met, too.
Resuming high-level talks is important because it means the two sides can at least
communicate their positions in private. That is preferable to doing so in heated public
exchanges as they have for much of the time since a visit to Taiwan in August by Nancy
Pelosi, then the speaker of America’s House of Representatives. Direct contacts could also
facilitate progress on some technical and commercial issues, which would smooth the way
for Mr Xi’s expected attendance of the Asia-Pacific Economic Co-operation forum in San
Francisco in November. Mr Blinken’s trip could open the door, too, for others whom China
is more interested in receiving, such as America’s treasury secretary, Janet Yellen, and
climate envoy, John Kerry.
Even so, the Cuba controversy is a reminder that high-level strategic tensions endure—and
will not be easily resolved. That was also clear when China’s defence minister, Li Shangfu,
refused to hold talks with America’s defence secretary, Lloyd Austin, at a security
conference in Singapore in early June (China wants American sanctions on General Li lifted
first). In their public statements, General Li warned America and its allies to stop
surveillance operations near China’s coast, while Mr Austin cited an “alarming increase” in
unsafe Chinese intercepts of American and allied ships and aircraft.
The Cuban contretemps also feeds into a domestic political climate in both China and
America that is making it harder for their leaders to compromise on any substantial issues.
And their room for manoeuvre could shrink further in the coming months, with a
presidential election due in Taiwan in January and campaigning for America’s presidential
poll expected to start in earnest this August with the first Republican primary debate.
The level of hostility towards China on both sides of the aisle in Congress was writ large in
responses to the Cuba reports. “We urge the Biden administration to take steps to prevent
this serious threat to our national security and sovereignty,” said Mark Warner, the
Democrat who chairs the Senate Intelligence Committee, and Marco Rubio, the Republican
vice-chairman. Mr Gallagher accused the Biden administration of whitewashing Chinese
aggression. “We must make it clear that, as President Kennedy said over 60 years ago on
the eve of a previous crisis in Cuba, ‘One path we shall never choose, and that is the path of
surrender or submission.’” ■
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bump-in-relations
Mazu and the motherland
China hopes Mazu, a sea goddess, can help it win over
Taiwan
She is said to have cured people of disease, so unification should be easy
Jun 15th 2023 | YUANLIN

THE SLEEPY town of Yuanlin in central Taiwan is transformed when Mazu passes through.
The maiden-turned-goddess lived in southern China during the tenth century—and,
according to legend, used her mystical powers to save relatives from a shipwreck. Despite
her roots in the mainland, she is widely worshipped in Taiwan. Each year her statue is
carried across the island on a multi-day tour. In Yuanlin she was greeted by firecrackers
and prostrate devotees. One woman burst into tears. Mazu healed her from cancer and
protected her from covid-19, she says.
Officials in Beijing hope Mazu will help them in a different way. The United Front Work
Department, the Communist Party branch with the job of boosting China’s influence
abroad, views the goddess as a tool to win Taiwanese hearts and minds.
Mazu—or Lin Moniang, as she was known before becoming a goddess—hailed from a small
fishing village on the island of Meizhou in the province of Fujian. Today worshippers make
pilgrimages to her ancestral temple there. That is useful to China, which has been
supporting Mazu-related cultural exchanges with Taiwan since the late 1990s. Local offices
of the United Front talk openly of using Mazu to “strengthen Taiwan’s patriotic unification
force”. If they can turn Taiwan’s love of Mazu into love of the motherland, that would make
it easier to peacefully bring Taiwan back under the mainland’s rule.
In recent years China has taken a hardline approach to Taiwan, buzzing its airspace with
military jets and performing drills around the island. But with covid restrictions lifted and a
Taiwanese presidential election scheduled for next year, China’s influence operations are
increasing. In February the head of the Taiwan Mazu Fellowship, a large network of
temples, met Song Tao, the head of China’s Taiwan Affairs Office in Beijing. They discussed
how Mazu could play a role in promoting “one family” on both sides of the Taiwan Strait,
according to Chinese state media.
At Tai’an Gong, a small temple in Taipei that belongs to the Taiwan Mazu Fellowship, two
elders proudly point to a gilded plaque that they received from the Meizhou temple. Every
time representatives of Tai’an Gong visit, they are feted with banquets, says one of the
elders. The leaders of each temple are “like brothers”, he says. In some cases they are also
business partners.
The head of the temple in Meizhou is a member of China’s People’s Political Consultative
Conference, a government advisory body. But the cultural exchanges are “not political”,
insists Ah Sen, a director at Tai’an Gong. He points to calendars on the wall from different
temple associations in Taiwan, some of which favour unification, whereas others back
independence. Those who take part in the trips to Meizhou already lean a certain way, so
they will not change their minds, he says. And at Tai’an Gong it does not matter which party
worshippers support; everyone comes for Mazu. The two elders agree, sharing stories of
how the goddess saved them from car accidents and stockmarket crashes.
It is difficult to assess the impact of China’s Mazu-related efforts. Many factors influence
how a Taiwanese person votes and what they think about China. The views of temple
leaders are not that important, says Ku Ming-chun, a sociologist at Taiwan’s National Tsing
Hua University. Worshippers do not feel a need to be politically aligned with them. But
China uses the cultural exchanges to sow disinformation. Delegations of Taiwanese
pilgrims often form chat groups that become platforms for Chinese propaganda, says Ms
Ku.
Chang Kuei-min of National Taiwan University says China has created a narrative in which
the Communist Party is a champion of folk religion, while Taiwan’s government opposes it.
Before Ms Chang went on a religious exchange to China in 2019, a temple elder warned her
that she might be questioned by Taiwan’s security services on her return. She saw this as a
regurgitation of Chinese propaganda. In Beijing, she says, officials spoke of how Taiwan’s
government was politicising religion. “Surely Mazu is not an agent of the Communist
Party?” they would say, according to Ms Chang. Of course, that is exactly what the party
wants Mazu to be. ■
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win-over-taiwan
The affair of the pink dress
China’s tolerance for public oversight is limited
The Communist Party wants to decide which officials are held to account
Jun 15th 2023 | BEIJING

PUBLIC DISPLAYS of affection can have dire consequences in China. Just ask Hu Jiyong. The
boss (and Communist Party secretary) of the subsidiary of a state-owned firm held hands
with a female subordinate as they strolled through Chengdu this month. Her pink dress
caught the attention of a fashion photographer, who posted a video of the couple online. A
commenter recognised Mr Hu and said that he was married to another woman.
Having a mistress is often seen as a sign of official corruption in China. So netizens
launched what is known as a “human-flesh search”—a kind of crowdsourced investigation.
They dug up photos that suggested the woman was spending lavishly. A formal
investigation of Mr Hu was launched by anti-corruption authorities (no proof has yet
emerged of wrongdoing). Both he and his companion have been suspended from their jobs.
Adultery, while not illegal in China, is against party rules.
Some joke that the authorities should rely more on street photographers. Such humour
highlights the party’s complicated relationship with individuals and groups that expose
wrongdoing. Officials are supposed to submit to the “democratic supervision” of the people.
Citizens have long helped to reveal misdeeds. In one rather infamous case, in 2008, footage
emerged of a man in a hotel arguing with a couple who had accused him of assaulting their
daughter. “I rank as high as your mayor. How dare you quarrel with me,” he said. After
online sleuths worked out his name and party rank, he was fired.
When it comes to adultery, sometimes little investigation is needed. In the 2010s a string of
officials were brought down by scorned mistresses who took to social media. One, called Ji
Yingnan, posted details of her luxurious lifestyle after discovering that her lover, an official
at the National Archives Administration, was married.
But the party’s tolerance for public supervision is limited. In 2014 the authorities accused
members of the “New Citizens’ Movement” of organising protests featuring banners that
urged officials to declare their assets. Three of the activists were given prison sentences. In
2017 a commentary in the People’s Daily, a party mouthpiece, warned that online
corruption investigations could threaten social stability by stirring up resentment of
officials and the rich. “The government must guide people’s emotions…to create a rational,
peaceful and positive public opinion,” it argued.
The party’s reaction seems to depend in part on the rank of the alleged offender and, thus,
the risk to its reputation. In 2021 Peng Shuai, a professional tennis player, revealed on
social media that she had been in a years-long extramarital affair with Zhang Gaoli, a
former member of the Politburo Standing Committee, the party’s top leaders. She accused
him of sexual assault. Censors quickly scrubbed her post from the internet and Ms Peng
disappeared for two weeks. After re-emerging, she denied she had made the accusation.
Things have gone differently in Mr Hu’s case. Under the law, human-flesh searches are
banned. Officials criticise them for violating privacy and leading to cyber-bullying. (Mr Hu’s
companion has been the target of online attacks.) But the party seems to think that the
furore surrounding the executive is manageable—and perhaps even useful if it helps deter
such behaviour. ■
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Chaguan
Xi Jinping reaches into China’s ancient history for a new
claim to rule
The Communist Party is stuck in a legitimacy trap
Jun 15th 2023

FOR DECADES outsiders have told a simple story about the ties that bind China’s
Communist Party and its people. This story describes a bargain between rulers and
subjects, in rather condescending terms. In this telling, most Chinese people, from the
toiling masses to the urban middle classes, know to avoid talking or thinking about politics.
And in exchange for shunning the world of power, citizens are allowed to compete for their
share of the wealth and opportunities generated by a rising China. Recently—as China’s
economy slows, house prices slide and job opportunities for new graduates dwindle—the
same outsiders have taken to wondering whether the public might turn on the party.
In fact, that economically focused description of China’s social compact understates the
party’s ambitions, certainly since Xi Jinping took over as supreme leader 11 years ago. Mr
Xi has for some time played down the pursuit of material wealth as a national cause and
put politics—albeit in a strictly policed, top-down form—back at the centre of daily life. He
has enjoyed considerable success, at least to date. A striking number of citizens—and
especially those born after 1990, who have known only ever-growing national wealth and
strength—have been ready to believe that, on balance, China succeeds because of its stern,
one-party political system, not despite it.
When unelected governments or autocracies claim that they deserve to rule because they
govern well and efficiently, political scientists talk of appeals to “performance legitimacy”.
In this vein, the first two years of the covid-19 pandemic were a particular gift to party
ideologues. Day after day, the propaganda machine pumped out news of the latest covid
death toll in America, backed by images of patients on ventilators in Western hospitals,
recycled clips of President Donald Trump scorning science at White House press
conferences, and protests in Western cities against lockdowns, mask-wearing and vaccine
mandates. For sure, censorship was heavy and omnipresent, and locked-down Chinese
chafed against thuggish enforcement of zero-covid rules, especially as the pandemic
dragged on. On balance, though, boasts of Chinese exceptionalism rang true for many
citizens. Party ideologues hailed Mr Xi as commander-in-chief of a people’s war against
covid, offering China order and safety, in contrast with squabbling, selfish, Western
democracies.
Alongside boasts about the party’s governing competence, Mr Xi has offered darker calls for
China to become self-reliant and learn to struggle against foreign foes. In speeches he talks
of China’s re-emergence as a great power, and how that will involve defying a hostile
American-led West bent on containment. Such talk of dangers serves more than one
purpose. It unifies the masses, while turning anyone with conflicting views into an enemy
within. For in times of peril, dissent by underlings is a form of sabotage, like a sailor
arguing with the captain of a storm-tossed ship.
Yet a mandate to rule based on the claim that the party is exceptionally competent, and
indeed is successful because it brooks no dissent, becomes a trap when top leaders mess
up. A decisive, though tyrannical, captain quickly becomes a liability if he repeatedly steers
the ship of state onto rocks. An unusually candid essay by two Chinese scholars, Fu Yu and
Gui Yong, describes a crisis of confidence among the young. The work, based in part on
surveys of social media, is flagged and translated by David Ownby of the University of
Montreal on his “Reading the China Dream” blog.
Focusing on Chinese born after the 1990s, it describes a gap between their patriotism and
high expectations of their rulers, and the realities of a society that seems to them cruelly
unequal, to the point that hard-working provincial Chinese can never catch up with those
born into privilege. First published in 2022 and reissued last month by an academic
journal, the Beijing Cultural Review, the essay, “The Five Intriguing Paradoxes of
Contemporary Chinese Young People”, describes youngsters who have turned against “evil”
private capital and want a strong state to tame it. Some are suffering “crises of belief” that
are leading many to shun marriage and decline to have children. Worse, since the piece was
first published, the country has endured the sudden, bungled collapse of its zero-covid
policy and the concealment of large numbers of deaths, further undermining public
confidence.
A new pitch, for a slower-growing China
Not unrelatedly perhaps, on June 2nd Mr Xi outlined his broadest-yet claim to rule, based
on China’s exceptional culture. He called China the only civilisation to be uninterrupted
over many millennia. As if suggesting that convergence with liberal values would betray
every dynasty that preceded him, Mr Xi declared: “The fact that Chinese civilisation is
highly consistent is the fundamental reason why the Chinese nation must follow its own
path.” Because Chinese civilisation is unusually uniform, Mr Xi went on, different ethnic
groups must be integrated and the nation unified: code for imposing Chinese culture on
Tibet and other regions, and for taking back Taiwan. For anyone puzzled that a once-
revolutionary party now calls itself the “faithful inheritor” of “excellent traditional culture”
(plus a dose of Marxism), the People’s Daily weighed in with commentaries explaining why
Mr Xi’s emphasis on cultural confidence is vital in a perilous moment when “strategic
opportunities, risks and challenges co-exist”. Economic heft is not enough, the newspaper
added. If China’s economy develops but its spirit is lost, “Can the country be called strong?”
Take a step back, and Mr Xi is crafting an appeal to what might be termed civilisational
legitimacy. When the public is disappointed by a slowing economy and by the pandemic’s
incompetent ending, this gambit must be tempting. After all, who will dare challenge a
mandate to rule that is supposedly unchanged in 5,000 years? How foreign governments
are supposed to engage with such chauvinism is a different and worrying question. ■
Read more from Chaguan, our columnist on China:
The end of Western naivety about China (Jun 8th)
Why the Communist Party fears gay rights (May 25th)
China learns to manage decline (May 11th)
Also: How the Chaguan column got its name

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history-for-a-new-claim-to-rule
United States
 The South is fast becoming America’s industrial heartland
 How ChatGPT could help teachers and lower the cost of college
 How LA’s drag nuns took centre stage in the culture wars
 American states are bailing out public transport
 Attack of the feral parakeets
 How the Pentagon thinks about America’s strategy in the Pacific
 North Carolina may be the hottest political battleground of 2024
Southern shift
The South is fast becoming America’s industrial heartland
Joe Biden’s manufacturing boom is accelerating the region’s rise
Jun 12th 2023 | Elizabethtown, Kentucky

IN POPULAR PERCEPTION America’s industrial heartland is its Midwest. Just look at where
President Joe Biden has travelled for many of his big made-in-America speeches: Ohio
thrice, Michigan twice and Wisconsin. (These, helpfully, are also political battleground
states.) But look at where the money is flowing, and a different picture emerges. It is the
South—a region running from Texas to Virginia—that is fast becoming America’s new
industrial heartland (see map).
The shifting of American factories has been years in the making. When Japanese and
German carmakers started production in America in the 1980s and 1990s, most chose the
South. They were attracted by a dearth of unions and generous subsidies. Nissan went to
Tennessee, Toyota to Kentucky, Mercedes-Benz to Alabama and BMW to South Carolina. In
1985 the Midwest had 1.25 workers making durable goods such as cars and electronics for
each one in the South, according to the Department of Labour. By 2021 the South had just
about drawn even (see chart).
What stands out now is the pace of change. The industrial policies crafted by Mr Biden’s
administration—notably, incentives and rules to boost the production of semiconductors,
renewable energy and electric-vehicles (EVs)—have catalysed a surge in investment, much
of it in the South. S&P Global Market Intelligence, an analytics company, calculates that
about two-thirds of planned EV jobs will be there. The White House keeps a tally of
investments in “21st-century industries” since Mr Biden took office: the South has received
more than twice as many as the Midwest. The Midwest is getting plenty of new factories,
too. It is just that the balance has tilted southward.
For a glimpse, visit the once-sleepy fields of south Hardin County in Kentucky. New high-
voltage lines run to a giant lot where thousands of construction workers have already
completed the grey carapace of one warehouse-like building and are busily putting up a
second. It is a 1,500-acre supersite—roughly equivalent to about 1,140 American-football
fields—given in 2021 to Ford and SK, a South Korean industrial group, for an EV battery
joint venture.
For Rick Games, president of a local development office, it is a sweet reward for two
decades of patience. Hardin County has sat on the plot since 2002, making sure it was
connected to highways, railways, power and water supplies, but waiting for the right buyer.
“There were maybe three or four semi-serious inquiries for nearly two decades,” but then
from around 2020 “things just started going crazy,” he says. “The phone was ringing off the
hook and I started showing the site once or twice a month.” The venture, known as
BlueOval SK, expects to invest nearly $6bn and to employ some 5,000 people—making it, at
a stroke, the biggest business in the county.
The availability of big land plots is a crucial part of the South’s recipe for success. Nathan
Niese of BCG, a consultancy, says the region’s officials were ahead of the curve. “They have
been focused from the beginning on the ease of doing business. They have well-prepared
megasites, and within 24 hours of a request can get full details about them into your
hands,” he says. Georgia started a programme to pre-certify industrial sites, setting them
up for fast-track construction, in 2008. Tennessee launched a similar initiative in 2012. In
the Midwest, Ohio was similarly proactive, but others have been slower: Michigan passed
site-readiness legislation in 2021; Illinois founded a megasite-investment programme just
a few months ago.
The absence of a century-old carmaking legacy in the South also means that its officials
have had a freer hand in luring firms across a range of industries, from chemicals to
batteries and plastics. “We have a good diverse portfolio thanks to the fact that we were
once such an agrarian state,” says Jeff Noel, secretary of Kentucky’s cabinet for economic
development.
The South has other selling points, too. It has cheap power, critical to battery factories that
use vast amounts of energy. Of the ten regions monitored by the Energy Information
Administration, a government agency, the “east south central”, including Kentucky and
Tennessee, has the least expensive power in America, at about six cents per kilowatt hour,
nearly 20% cheaper than power in the Midwest.
Awkwardly for companies aiming for greener growth, that cost advantage is predicated on
the south-east’s continued reliance on coal: Kentucky, for example, generates about 70% of
its electricity from coal, the fourth-highest share of any state. It is adding more renewables
to its mix, though progress is slow. “The fundamental reality is that today, coal-fired
facilities are delivering reliable, efficient electricity,” says Mr Noel.
The relative lack of unions in the South is less compelling than it once was. Just 6% of
America’s private-sector workers were union members in 2022. But workers come into the
equation in another way: firms have a bigger pool of potential labour in the South. Texas
has attracted more new residents than any other state in recent years; Georgia, Tennessee
and the Carolinas have also been magnets. State investments in worker training make this
migration even more potent. A ranking of workforce programmes by Area Development, a
site-selection magazine, is telling: in 2022 its top five were Georgia, Virginia, South
Carolina, Alabama and Louisiana. Alabama, for example, offers free specialised technical
training to both firms and jobseekers.
Geographical advantages play out differently depending on the sector. For EVs many
companies aim to be near the I-75 interstate highway, which runs from Ontario through the
Midwest and the South, and down Florida’s Gulf coast. It puts most suppliers and many
customers within a day’s drive. The south-west, and specifically Arizona, has become the
preferred destination for semiconductor manufacturers, thanks to its cheap land and stable
geology.
Might the South’s manufacturing boom have political consequences? The investment surge
resulting in part from Mr Biden’s policies so far looks like the opposite of pork-barrel
politics: most of the money has gone to places that do not favour him. According to a
database of EV investments announced in the 300 days since the passage of the Inflation
Reduction Act, Mr Biden’s clean-tech law, more than 80% has gone to Republican-
controlled districts. Could the presence of more manufacturing—an industry once aligned
with Democrats—move their politics leftward? Perhaps. But as factories become less
labour-intensive, their political weight may well diminish. Robots do not vote.
Still, an increase in manufacturing may reshape political priorities in other ways. Susan
Elkington, president of Toyota’s Kentucky plant in Georgetown, notes how companies there
are struggling to find enough workers—a national concern that is especially acute in
factory towns. One solution is to lure more women into work: in Kentucky only 53% are in
the labour force, among the lowest rates in the country. That, in turn, points to a need for
more child care. Toyota provides onsite day care for its employees, but many workers
elsewhere struggle to get similar support. “It’s difficult to find quality child care, and then it
is difficult to afford it,” says Ms Elkington. State funding for child care is an objective which
Mr Biden failed to enshrine in law, but manufacturers may yet push it to the fore at the
state and local level.
For now such challenges are not getting in Toyota’s way. On May 31st it announced that it
will produce its first American-made electric vehicle—a three-row SUV—at its factory in
Georgetown. These cars are likely to hit the road in a couple of years, with batteries from a
new plant in North Carolina. It is a $600m investment in Kentucky, but it barely made a
ripple in national media. That is testament to how far the South has come. In 1986 Toyota’s
decision to pick Kentucky as a factory hub was groundbreaking; in 2023 it seemed an
obvious choice. The South is no longer a manufacturing upstart. Instead it looks more like
the incumbent power. ■
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americas-industrial-heartland
Teacher’s pet
How ChatGPT could help teachers and lower the cost of
college
The college essay may be dying, but AI has plenty of upsides in education
Jun 15th 2023 | WASHINGTON, DC

MANY HAVE mused on how ChatGPT could change the world, not least schools. Plenty fear
the worst. The college essay has been pronounced dead. ChatGPT is causing an educational
“crisis”, claims Inside Higher Ed. Maybe so; but ChatGPT could also be a teacher’s friend.
It is easier to see the threat. Users can ask ChatGPT to compare Milton Friedman with Paul
Samuelson, and it will create a five-point summary that contrasts their views. Ask it to
create a rap about Friedman, and it delivers lines like: “He was an economist with a unique
vision / Spittin’ truth about free markets with precision”. This sophistication and creativity
worries lots of teachers and schools. New York City public schools, America’s largest school
district, banned ChatGPT in January, only to reverse the decision in May. Some universities
abroad have banned its use.
“Initially…everybody was thinking that the sky was falling,” says Jonathan Torres, an
assistant professor of English at Quinnipiac University in Connecticut. He also trains
teachers at Quinnipiac, and argues that AI can push them to become better. For example,
before ChatGPT came along, an economics teacher might ask pupils to write an essay
describing Keynesianism. With ChatGPT as an option, the teacher might ask the students to
assess and revise the chatbot’s response to the same question—a more difficult task. AIs
have other practical uses for teachers. They can help write lesson plans and worksheets at
different reading levels and even in different languages. They can also cut down the time
spent on duties, such as writing recommendation letters, that devour time that could be
spent teaching.
Some organisations are going even further. Khan Academy, an education non-profit,
recently launched a pilot of Khanmigo, its virtual guide that uses GPT-4, the latest upgrade
of ChatGPT, to support pupils and teachers. If pupils gets a wrong answer to a maths
problem, the chatbot helps them solve it on their own. In science, the program evaluates
open-ended questions. In English class, it asks pupils questions about their essays. And in
history, a pupil can debate with the bot to prepare for an in-class discussion.
The program provides teachers with a report on their pupils’ activities. Khanmigo can help
teachers create lessons and test pupils’ knowledge afterwards. It can support pupils in
different languages. It even allows pupils to “talk” to historical figures or literary characters
via simulations. “This gives us the opportunity to give every student a one-on-one tutor,
every teacher a teaching assistant, and more,” says Sal Khan, the founder of Khan Academy.
For those in charge of school and college administrations the benefits are, if anything,
clearer. David Harris, president of Union College, a liberal-arts college in New York state,
decided to play around with ChatGPT. He asked it to write a letter announcing that the
college would no longer require the covid-19 booster jab after the spring term. The results
were good enough for him to show examples to each of his senior staff—a letter to students
about changing the campus mascot for his communications director, an Instagram post for
campus photos on spring break, a final warning for an employee with chronic lateness for
human resources.
Dr Harris is excited about what all this could mean for college costs. Many universities,
including Union College, Stanford University and others, will charge about $80,000 a year
next year for tuition, room and board. In 2021 the median household income in America
was $71,000. College administration in America has become bloated. AI could eliminate the
need for some of these jobs, and maybe enable colleges to pass savings on to students.
ChatGPT may have killed the college essay, but with all its potential in and out of the
classroom, perhaps that is OK. ■
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Pride/prejudice
How LA’s drag nuns took centre stage in the culture wars
A backlash against gay-pride festivities is rooted in gender-identity politics
Jun 15th 2023 | Los Angeles

IT IS NOT your average group of nuns. In fact, the Sisters of Perpetual Indulgence are not
nuns at all. They are transgender and queer drag queens dressed in technicolour—or
sometimes leather—habits, who raise money for local charities. The sisters’ fame grew last
month when the Los Angeles Dodgers invited, uninvited and then re-invited them to the
club’s annual gay-pride night game. The baseball team suddenly found itself caught
between conservatives who consider the drag nuns an anti-Catholic group and liberals
outraged that the team capitulated to appease the conservatives. The Catholic League for
Religious and Civil Rights is filling Los Angeles’s airwaves with radio ads urging the faithful
to boycott the game. Attendance on June 16th will reveal whether LA’s religious baseball
fans feel the need to stop worshipping at Dodger Stadium.
As absurd as the fight over the sisters has become, it is just one of many political skirmishes
over gay-pride events this year. In Glendale, a city next to Los Angeles, a brawl erupted
outside a school-board meeting in which officials were deciding whether to recognise June
as LGBTQ pride month for the fifth year running. Parents protested against a pride
assembly at an elementary school in North Hollywood. Nor is the backlash limited to
California. Conservatives called for the boycott of Bud Light, Cracker Barrel, Target, The
North Face and other brands that recognise pride month, work with transgender
influencers or hawk rainbow-flecked merchandise.
Bill Clinton first declared June to be national “gay and lesbian pride month” back in 1999.
So why, more than 20 years later, has pride become controversial? Two connected trends
explain it. First, the scope of pride has changed over the years, perhaps faster than public
opinion. During their presidencies Barack Obama and Joe Biden expanded their pride
declarations to include more people of different sexualities and gender identities. This year
Mr Biden proclaimed June to be “lesbian, gay, bisexual, transgender, queer and intersex
pride month”. LG has become LGBTQI+.
More Americans than ever, about 71%, support gay marriage. But there is less enthusiasm
for the latter bits of the initialism. A recent survey for The Economist by YouGov suggests
that about a third of Americans think society has gone too far, and the same think it has not
gone far enough, in accepting trans people. One opponent of pride month in Glendale
identified herself as an LGB activist. “LGBTQIA [”A” stands for asexual] is so broad that it
really is quite difficult…to hold together as a front,” says Karla Jay, who helped organise the
first pride marches in New York and Los Angeles in 1970.
Second, issues around gender identity have become core to the culture wars. The
Republican Party’s presidential hopefuls are betting that framing their fight against drag
shows and books with queer characters as a battle for parental rights will win them votes.
Nikki Haley has suggested, without evidence, that trans children playing in girls’ sports has
led to more teenage girls contemplating suicide. Mike Pence called the Dodgers’ drag-nuns
invitation “deeply offensive”. And Ron DeSantis, by prioritising anti-LGBTQ bills as
governor of Florida, has turned himself into America’s biggest anti-woke warrior.
Florida has pushed anti-LGBTQ bills, such as the so-called “Don’t Say Gay” law, which bans
teachers from discussing sexual orientation or gender identity with young pupils
(something it is not clear they were doing in the first place). But it is not the only state
doing so. The American Civil Liberties Union reckons state lawmakers have introduced
nearly 500 gender-identity bills in 2023 alone. Nearly half concern education, and would do
such things as ban students from using bathrooms that do not correspond to their
biological sex, or oblige schools to inform parents if children change their pronouns.
Meanwhile in Los Angeles, the Sisters of Perpetual Indulgence are declaring victory. “May
the fans be blessed!” they wrote after being invited back to the baseball game. “May the
beer and hot dogs flow forth in tasty abundance!”■
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stage-in-the-culture-wars
Going bus
American states are bailing out public transport
The alternative is fare rises and steep service cuts
Jun 15th 2023 | CHICAGO AND SAN FRANCISCO

SOMETIMES, IT TURNS out, protests work. On June 3rd, over a hundred San Franciscans
mounted a mock funeral for public transport. Walking to city hall in the sun, they carried on
their shoulders models of buses and trains like coffins, as musicians played a funeral dirge
on trumpets and a saxophone. Their anger was over a proposal by Gavin Newson,
California’s governor, that would have cut $2bn of spending from public transport in an
attempt to balance the state’s hefty deficit. MUNI, San Francisco’s local transport agency,
had suggested it might have to remove the equivalent of 20 bus routes to stay solvent.
Within a week, a deal had been worked out by the state legislature. Assuming it passes (and
Mr Newson signs it), instead of cuts roughly $1.1bn a year will be made available to public
transport, raised from the state’s emissions cap-and-trade scheme. California will thus
stave off a problem afflicting public-transport systems across America: that of a fiscal cliff,
as federal covid-relief money dries up. The Golden State is not alone in creating a financial
parachute. In May New York legislators agreed a budget with over $1bn of new funding for
the Metropolitan Transit Authority, New York City’s system. Minnesota has also introduced
a new sales tax to raise $450m a year for the system in Minneapolis and St Paul.
Compared with other countries, public-transport use in America has been slow to recover
from the pandemic. The number of bus and train passengers in May was still at only 69% of
the pre-pandemic level, according to data from the American Public Transportation
Association, an industry group. In May New York’s subway was carrying a mere 71% of the
passenger total in 2019. Ridership on BART, in the San Francisco Bay Area, was at just 37%
of the 2019 figure. In London in May, travel on the Underground system was already back
to around 87% of pre-pandemic levels.
If it persists, lower ridership means less revenue from fares. For example, the ticket take on
the Chicago Transit Authority was almost $300m lower last year than in 2019. Awkwardly,
those agencies which were considered to be doing the best job pre-pandemic—because
they raised lots of fare revenue, and so were subsidised less—are now the ones most in
trouble, notes Yonah Freemark of the Urban Institute, a think-tank in Washington, DC.
In 2008, when the Great Recession created similar deficits, the result was often steep
service cuts and fare rises. That could happen again. “We have some very serious fiscal
challenges,” admits Leanne Redden, the director of Chicago’s Regional Transportation
Authority, an umbrella agency for the region’s three transport agencies. She projects a
$730m deficit by 2026. The transport systems of Boston and Philadelphia also face funding
shortfalls that have yet to be tackled. Seattle’s has already announced cuts.
Yet even if states put up money, other changes will be needed to encourage ridership.
Rising crime and disorder have kept some passengers off the subway in New York, says
Nicole Gelinas of the Manhattan Institute, a think-tank. In Los Angeles, where homelessness
has become an extreme problem, 22 people died in the year to March on buses and trains,
most from drug overdoses. Crime also makes holding onto employees trickier, says Kam
Buckner, a state representative in Illinois. Drivers he knows “have walked away because
they don’t feel safe”. Staff shortages mean service is already shoddier even as the money
still flows.
Yet good public transport is needed in America’s cities more than ever. Ted Egan, the chief
economist of San Francisco, says the city’s economy will struggle to recover without it. “You
can’t have everyone drive in,” he says. Without decent buses and trains, building more
housing while lessening punishing congestion will be tricky. Yet the benefits, while
immense, are also diffuse. By contrast, cliffs, fiscal or otherwise, are difficult to miss.■
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public-transport
Invasive species in America
Attack of the feral parakeets
Pretty pests present power problems
Jun 15th 2023 | BROOKLYN, NEW YORK

“THESE GUYS are tenacious,” says John Stalzer, of PSEG Long Island, a utility company. No
matter what his team does to stop them from building nests, the monk parakeets prevail.
The birds will find the smallest gap, as teeny as a quarter of an inch (6mm), and insert a
twig. “They will literally build off a twig and build their nests,” says Mr Stalzer, an
environment specialist. “We should hire them as engineers.” The nests can be ten feet
(three metres) in diameter , apartment buildings for the feathered set. When the birds
expand their nests around electrical equipment, which keeps them warm, they can cause
power cuts and sometimes fires. Since May 2021 they have knocked out power for 41,000
customers on Long Island.
Monk parakeets, also known as Quaker parakeets, come from Argentina, where they are
pests to farmers. But they look cute and are sociable, so lots were exported. Birds now
breed in more than 20 states, including cold spots like Chicago. Stephen Pruett-Jones, a
professor of ecology and evolution at the University of Chicago, says most of the colonies in
America are probably descendants of escaped or released pets (another theory, almost
certainly not true, is that the wife of a pet-shop owner released all the pet parakeets after a
bitter divorce).
America has about 50,000 non-native plant and animal species. About one in nine of those
species has become invasive. Their cost is huge—estimates of the damage run to $120bn a
year.
California has made it illegal to own a monk parakeet. In general, though, cuteness is an
excellent survival strategy in the Anthropocene. PSEG does not destroy nests during
nesting season. A lawmaker in New York introduced a bill to give monk parakeets
protected status. Before the pandemic Stephen Baldwin gave parakeet safari tours in
Brooklyn. Bird-watchers trek to Green-Wood Cemetery to see the nests built atop its Gothic
Revival entryway. Other invasive species, like the Burmese pythons in Florida or the
hemlock woolly adelgid (an aphid-like critter with no natural predators in North America),
have less support. ■
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The chain
How the Pentagon thinks about America’s strategy in the
Pacific
Our correspondent travels through Asia with Lloyd Austin, the defence secretary
Jun 15th 2023 | ON BOARD A US MILITARY AIRCRAFT

HOW TO PREVENT war with China? And how to win if one breaks out? As American
strategists turn to the map, one school argues for holding the “first island chain” that
girdles China, from Japan to Malaysia; others prefer to draw the line at the second chain,
which runs from Japan to New Guinea. The first is populous and important economically
but also vulnerable, lying well within the “weapons engagement zone” of many Chinese
missiles; the second is safer and offers more certain access—including American outposts
such as Guam. To judge from a flurry of moves by America and its allies, the answer is:
redouble the defences of the first chain, but also strengthen the second.
In defence terms, America’s “pivot to Asia” is not a single move, but a weaving of initiatives
—with overlapping bi-, tri-, quadri- and multilateral deals—to create an ever-thickening
lattice on China’s periphery. Some deals are modest; many are uncertain if tested in war.
But they amount to the “fortification of America’s forward defence perimeter in the
western Pacific”, says a senior American defence official.
American planners once traced east-west lines of coaling stations in the Pacific to reach
China and Japan. But the second world war changed their perspective, says Michael Green
of the United States Study Centre in Sydney. The attack on Pearl Harbour showed that vast
distances do not guarantee safety; America’s island-hopping campaign highlighted the
importance of north-south axes. Later on, the first island chain helped America contain the
Soviet Union. Now it holds back China.
To see how, begin with the northernmost link, Japan. Despite its pacifism, it is greatly
boosting defence spending. American marines in Okinawa are practising how to scatter and
defend the islands and sea passages. The next link, Taiwan, is under intense strain, given
China’s aim to retake the self-governing island by force if necessary. America may soon
announce the first “drawdown” of weapons from its own arsenal, pre-emptively
strengthening Taiwan much as it has armed Ukraine. The Philippines, the next link, is
weaker but has agreed to give America access to nine bases in the country; in return
America is helping to beef up its forces.
In the second chain, meanwhile, America is devising ways to disperse its jets in wartime
and hardening the defences of Guam. It wants to project more power from Australia, where
it rotates air force and marine units. It is working with Britain to supply nuclear-powered
submarines to Australia under the AUKUS deal; the three are also working on new
weapons, including hypersonic missiles. Farther afield, the Quad—America, Australia and
Japan working with India—is not a formal security grouping, but their navies exercise
together. Across the region, American-led war-games are becoming bigger and more
sophisticated. Sometimes America’s security arrangements are limited, for instance its new
defence deal with Papua New Guinea; or its efforts to help littoral states improve “maritime
domain awareness” to, say, curb illegal fishing by Chinese fleets. This, too, helps enmesh
America in the region.
Travelling across Asia on an E4-B, the flying command post of Lloyd Austin, America’s
defence secretary, brings alive this web-weaving strategy. One expected highlight turned to
disappointment when the Chinese defence minister, Li Shangfu, declined to meet him at a
talkfest in Singapore—even as a near-collision of American and Chinese warships in the
Taiwan Strait on June 3rd made plain the need for such contacts. (Antony Blinken,
America’s secretary of state, is visiting on June 18th).
Still, Mr Austin was busy strengthening links. In one meeting he sought to hasten the
rapprochement between Japan and South Korea and integrate their missile defences. In
another he brought forth a new quad with Australia, Japan and the Philippines. In Tokyo he
promised to help Japan develop “counter-strike” missiles that could reach mainland China.
In Delhi he prepared an ambitious defence-industrial deal with India.
China accuses America of building an “Asian NATO”. But the reality is a looser system.
America’s friends and allies in the “Indo-Pacific” have no mutual-defence commitments
akin to NATO’s Article 5, under which an attack on one is an attack on all, nor integrated
multinational commands. Japan is just starting to develop a joint headquarters for its own
military branches. How that might connect to American command structures is unclear.
In any war, the US official admits, America cannot be sure who would fight or offer help.
Much would depend on the politics of the day. But he notes: “China also faces growing
uncertainty. It is one thing for China to threaten one country, another for it to risk war with
the whole region.” ■
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americas-strategy-in-the-pacific
Lexington
North Carolina may be the hottest political battleground of
2024
Political manoeuvring and changing demography are making it the most interesting
state to watch
Jun 15th 2023

THE MOST fascinating political chess match in America outside Washington, DC—where
the usual game is more like 52-card pickup anyway—is taking place in North Carolina,
involving races from the local to the national level. Joe Biden, who is already running
campaign advertising in the state, made his sixth trip there as president on June 9th, the
same day as Governor Ron DeSantis of Florida and a day ahead of two other Republican
candidates, Mike Pence and Donald Trump.
At the state Republican convention in Greensboro on June 10th, Mr Trump called North
Carolina “a very, very special place” and boasted of his “tremendous success here”. He
chose not to mention that from 2016 to 2020 his margin of victory plunged by 2.3
percentage points, to fewer than 75,000 votes out of more than 5.4m cast. Among the 26
states he won in 2020, that was his narrowest edge. Whereas a Democrat has a plausible
path to victory without North Carolina’s 16 electoral votes, a Republican does not.
Having dominated legislative races in rural areas, Republicans have the chance to entrench
control: this spring a Democratic lawmaker stunned her party by defecting, thereby
providing Republicans with majorities big enough to make law over vetoes by the
governor, Roy Cooper, a Democrat in his second term. Republicans won a majority on the
elected state Supreme Court last year, removing another check.
Yet the governor gives every sign of feeling he has the Republicans right where he wants
them. A genial, canny centrist first elected to the legislature back in 1986—he wrote the
veto law, in 1995—Mr Cooper thinks they are overplaying their hand. “They’re beginning
to hear from their constituents,” he says with a chuckle, sitting in the governor’s mansion in
Raleigh and gesturing toward the statehouse. “I’m talking to their constituents and
informing them of what’s going on behind closed doors over there.”
The legislature has begun stripping the governor of some powers, granting itself authority
to make certain appointments. Mr Cooper is worried about what that means for the balance
of power, but does not think voters will pay much attention to such mechanics. “They care
about the issues that affect their day-to-day life, so they care about some of the things that
are beginning to result from this grab for power,” he says. He points to a 12-week ban on
abortion that the assembly just imposed over his veto, and a school-voucher plan to let
parents, regardless of income, use public money to pay for private school.
Mr Cooper, whom polls show to be the most popular state politician, has declared a state of
emergency in public education and is using his bully pulpit to warn that the abortion ban is
a step toward even tighter restrictions. A poll by Meredith College in February found that
57% of the state’s residents supported keeping or expanding the previous law, which
allowed abortion up to 20 weeks. Republican lawmakers argue that their law is a sensible
middle ground. “The things in this bill are not obstacles to abortion,” the state’s speaker pro
tempore, Sarah Stevens, insisted during floor debate. “They’re safeguards.” That is a
posture unlikely to satisfy either Democrats or fervently anti-abortion Republicans.
Mr Cooper is term-limited, which means North Carolina will have one of the fiercest races
for governor in 2024. The likely Democratic nominee is Josh Stein, the state attorney-
general, who is cut from Mr Cooper’s cloth. The Republican front-runner is Mark Robinson,
the lieutenant governor, elected separately from the governor. He models the Trumpist
flair that enraptures Republican hardliners but tends to dismay everyone else. He has
compared abortion to slavery, called homosexuality and transgenderism “filth” and
ridiculed survivors of a school shooting as “media prostit-tots”. He has praised Joe
McCarthy and attacked the civil-rights movement as destroying freedoms. Mr Robinson,
who is black, complained on Facebook that the movie “Black Panther” was “created by an
agnostic Jew” and “put to film” by a “satanic Marxist.” At the state convention, Mr Trump
called Mr Robinson “one of the great stars of the party” and said he would endorse him.
Carolina blues
Some Republican activists believe their party’s dominance is assured by the erosion of the
historic Democratic loyalty of voters in the rural east of North Carolina, Mr Cooper’s home
turf. But Paul Shumaker, a longtime Republican strategist, does not share their optimism.
He notes that 75% of the increase in voters in the past decade has occurred in just 12 of the
100 counties, in and near cities that favour Democrats. “My message to my party is if you
don’t fix your urban-suburban problem, you won’t fix your statewide problem,” he says.
“And not just your supermajority, your majority will be gone by the next decade.”
Mr Cooper is not counting on that trend alone. “Demography may be destiny, but you have
to make it work, and you have to get people out to vote,” he says. With all legislative seats
on the ballot in 2024, he plans to run a Democratic candidate in every district to motivate
Democrats even in overwhelmingly Republican areas. “That will help us overall statewide,”
he says. “And I think there’s going to be a historic amount of investment in the governor’s
race, because of what’s at stake.”
Republican legislators plan to rewrite voting laws in ways that will advantage them, and
they will also be able to draw favourable state and congressional districts. Under the
“independent state legislature theory”, North Carolina’s Republicans are arguing at the
Supreme Court that legislatures should be free of any court oversight of election laws. The
court seems unlikely to endorse that view, but Mr Cooper worries about what it implies for
election integrity. “The foundation of democracy is at stake when you have a legislature,
just like President Trump, who would do anything to the fabric of the system to stay in
power,” he says. “And my goal is that we would never find out whether they would go that
far.” ■
Read more from Lexington, our columnist on American politics:
Nikki Haley, like other long shots, sees a path to victory (Jun 1st)
DeSantis is a truer believer, if a lesser politician, than Trump (May 24th)
It turns out that Democrats bus migrants, too (May 18th)
You can read other articles about the elections of 2024 and follow along as we track shifts in
Joe Biden’s approval rating.

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political-battleground-of-2024
Middle East & Africa
 Egyptians are disgruntled with President Abdel-Fattah al-Sisi
 Why wretched Lebanese are fleeing across the sea
 Saudi Arabia may accept normal relations with Israel
 Why Kenya could take the lead in carbon removal
 Rural Africans are finding work beyond their farms
Ten hard years
Egyptians are disgruntled with President Abdel-Fattah al-
Sisi
But they are scared of the chaos another uprising would bring
Jun 15th 2023 | Alexandria

HE PROMISED SO much. He built a new capital. He cut the Suez Canal through the Sinai
desert. He spanned his kingdom with railways and bridges. But Khedive Ismail’s pursuit of
modernisation bankrupted Egypt. First he had to sell his prized palaces. Then his stake in
the canal went too. Finally Egypt lost its sovereignty altogether. All that remains of the
grand palace in the old city of Cairo where he was born in 1830 are mounds of rubble
hiding stray dogs and youngsters injecting drugs.
Today’s Egyptians fear they may be reliving the sad tale of a dictator with a similar folie de
grandeur. Abdel-Fattah al-Sisi, a field-marshal who took over in a coup ten years ago next
month, once declared he would create “a new republic”. He has built a second Suez Canal
parallel to the first, as well as two dozen new cities, railways costing $23bn, hundreds of
bridges and a shiny new capital on Cairo’s outskirts with a price tag of $58bn. Though
Africa’s tallest building is nearly finished, Mr Sisi has been driving the economy into the
ground. Debt servicing consumes over half the budget. Food inflation is running at 60%.
“We can’t eat bridges,” curses a retired bank manager whose family, like many in the
middle class, is sliding towards poverty.
To give him his due, Mr Sisi has fulfilled much of what he promised. He rescued Egypt from
the turbulence of the Arab spring, when his people narrowly elected an Islamist whose
reign of barely a year was marked by chaos and incompetence. Mr Sisi has also hauled
Egypt out of the 30 years of sclerosis under a previous military leader, Hosni Mubarak, and
has frenetically tackled the country’s decayed infrastructure. He has opened the first stage
of a high-speed railway that is set to run from the Mediterranean to the Red Sea. A
billboard on the airport road proclaims: “4,800km of highway”.
He has made the country function better in other respects, too, despite the rise in
population by nearly 3m a year: it now tops 106m. Traffic jams are less frequent. Digital
government services are speeding up applications that used to be tangled in red tape and
long queues. Waiting lists at state-run hospitals have fallen, officials say.
Mr Sisi has bucked some bad old traditions. For instance he has junked regulations that
restrict church repairs: Coptic cupolas are rising above small towns in the Nile delta. The
genital mutilation of infant girls is falling because of tougher penalties. And though he is
deeply religious, Mr Sisi has backed reforms of Koranic prescriptions that would give
women half a man’s share of inheritance. More women are dropping the once common
niqab, the full-face veil; many are removing the veil entirely. Thanks to phone apps in big
cities, “Ana nazil date (I’m off on a date)“ is a trendy new expression.
The costs, though, are hard to bear. Under Mr Sisi external debt as a proportion of GDP has
more than doubled (see chart ). Dwindling business confidence has triggered capital flight.
Foreign investors withdrew $20bn in the first nine months of last year. Under Mr Sisi the
Egyptian pound has lost five-sixths of its value against the dollar; it has halved in the past
year. In a country that imports many essentials, inflation is soaring. The cost of
antidepressants has doubled since April.
Hard currency is so scanty that last month Egypt had to defer payment for wheat. Large
debt repayments are pending, shrinking the dismal share of the budget that is devoted to
education and health. By some calculations more than half of Egyptians can be deemed to
be poor. Police in starched uniforms ask for baksheesh (bribes). Judges tend to obey the
ruler.
While billboards display happy homes in Mr Sisi’s sparkling new cities, Egyptians are
becoming more disgruntled—and outspoken. Mr Sisi cannot jail all the people all the time:
at least 60,000 are thought to be behind bars for political reasons. His campaign for a third
term has already begun in the provinces. But his unpopularity is everywhere palpable. “He
controls everything,” says a Cairene father of five. “So why can’t he control prices?”
Some say that if Gamal Mubarak, a son of the late president ousted in 2011, were allowed to
stand against him, Mr Sisi would lose. Others quietly promote the virtues of Hazem Abu
Ismail, an Islamist who is in prison. Football fans half-seriously suggest Mo Salah, a clean-
living star who plays for Liverpool. Even the 71-year-old Ahmed Fouad, the son of the late
King Farouk who resides in Switzerland and speaks broken Arabic, is occasionally
mentioned.
The anger is also aimed at the army, the state’s backbone since the monarchy’s fall in 1952.
Army engineers claim to be more public-spirited, less corrupt, more efficient and cheaper
than their counterparts in the private sector. Their access to conscript labour, after all,
gives them a competitive edge. But the generals who have replaced technocrats to run key
state enterprises have been an avaricious bunch. A study by Yezid Sayigh of the Carnegie
Centre in Beirut found that the armed forces have been expanding their economic and
commercial activities. “They’re seen as serving themselves, not the country,” says a
journalist, echoing a standard view.
Last month, after trailing the idea for nearly a year, Mr Sisi launched a “national dialogue”,
an old trick. In theory he ponders suggestions from the people. Handpicked participants,
excluding bodies like the Muslim Brotherhood, which in 2012 won the last free election,
have a few minutes to speak. It is plainly a charade.
Meanwhile would-be investors, donors and the IMF are losing patience. Last year the fund
was assured that 32 companies owned by the army would soon be privatised. It has yet to
happen. “We have to protect jobs for Egyptians,” explains a loyalist. “The army is a
Frankenstein,” says a seasoned foreign observer. “It won’t give up its economic control.”
Islamist desires for revenge may still lurk. “This president killed our president,” says the
suffering bank manager, referring to Muhammad al-Morsi, the overthrown Islamist
president who died in prison in 2019. A liberal group has drafted a manifesto, “The last of
the generals”, proposing a transition back to civilian rule. But most Egyptians are wary of
the chaos that followed the uprisings of 2011 and 2013.
Mistrusting his own generals, Mr Sisi regularly rotates their jobs. He may want to curb the
ambition of Mahmoud Hegazy, a former head of intelligence who is his son’s father-in-law.
The president is thought to sleep in a different place every night. After all, he has enough
fine houses to choose from.
Egypt has often looked for economic salvation to the Gulf, which is estimated to have
extended almost $100bn in soft loans, grants and cheap fuel since he took power. But of
late the sheikhs have despaired. In the past few years they have sent little, says a Western
diplomat. Instead of bail-outs, they talk of acquisitions. Khedive Ismail’s charming Gezira
Palace in Cairo may be back on the market. It is whispered that for a trillion dollars or so
Egypt may even have to offer a 99-year lease of the Suez Canal. ■
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and-africa/2023/06/15/egyptians-are-disgruntled-with-president-abdel-fattah-al-sisi
Betting on boats
Why wretched Lebanese are fleeing across the sea
Most people in Lebanon say they want to live abroad
Jun 15th 2023 | Beirut

LAST AUGUST 31-year-old Nader Yusuf embarked with 410 other people on an eight-day
sea crossing from Lebanon to Italy. His salary as a delivery driver, priced in Lebanese
pounds, had plummeted in two years to barely 5% of its original value against the dollar,
leaving him unable to afford his $100-a-month rent. He was promptly evicted, along with
his pregnant wife and five children, two of whom were seriously ill.
Depressed and desperate, Mr Yusuf sold his truck for $4,000, borrowed another $2,000 to
pay a smuggler to take him to Europe and called his wife from the boat to say what he had
done. “Please forgive me, I had no other choice.”
Most of the boat people leaving the shores of Lebanon illegally are Syrians seeking asylum
in Europe. The overall number illicitly plying the seas has leapt tenfold in four years,
according to the Lebanese army, which is supposed to stop them.
But the proportion of those coming from Lebanon doubled from 12% in 2021 to 24% a
year later. Triple-digit inflation, an economic meltdown and a breakdown in public services
are driving more Lebanese people away. According to a recent poll, 61% of them say they
would like to live or work abroad.
“People come here every day looking for somebody to take them across,” says Zakaria Abd
el-Rahman, a 60-year-old boat captain in Tripoli, Lebanon’s second port. Seven years ago
he used to charge $1,000-2,000 a head to take Syrian asylum-seekers on the 14-hour
crossing to Cyprus. Not any more. In 2020 Cyprus and Lebanon agreed that irregular
arrivals would be swiftly sent back.
So most boats leaving Lebanon illegally now head for Italy, ten times farther. In 2019 the
number who died trying to reach nearby Cyprus was six; last year at least 157 perished
heading farther west. A migration expert fears that this year fatalities could reach 400.
The risk of boats being caught has also increased, prompting some captains to stay in
Europe themselves. And desperate people still want to brave the passage. Mr Yusuf is now
in Germany.■

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and-africa/2023/06/15/why-wretched-lebanese-are-fleeing-across-the-sea
Breaking a taboo
Saudi Arabia may accept normal relations with Israel
Binyamin Netanyahu may be getting close to a historic deal
Jun 15th 2023 | Jerusalem

FOR YEARS Israel and Saudi Arabia have been partners in all but name. The leaders of the
two countries confer in secret, share a rival in Iran, plan joint telecoms infrastructure, do
quiet business deals and are members of American-led defence alliances. But while five
other members of the Arab League already have agreed to full diplomatic relations with
Israel, it has not been that simple for the Saudi kings to break 75 years of taboo against
“normalisation” with the oft-reviled Jewish state.
The Saudis’ conservative 87-year-old king, Salman bin Abdelaziz, has been loth to make any
public overture to Israel while the Palestinian people remain stateless. The Saudis have
long backed the Arab Peace Initiative of 2002, which stipulates that normalisation can
come only after Israel vacates the territories it conquered in the war of 1967 and allows a
Palestinian state there to be born.
No progress has been made on the Palestinian front since the initiative was first published,
so some Arab countries have stopped waiting. In 2020 Bahrain and the United Arab
Emirates (UAE) agreed to establish formal ties with Israel, a step they are unlikely to have
taken without tacit Saudi support. A flurry of diplomatic activity between the Saudis,
Israelis and Americans suggests that the kingdom may be ready to come out into the open,
too.
“We believe that normalisation is in the interest of the region, that it would bring
significant benefits to all,” said the Saudi foreign minister, Faisal bin Farhan, in June. It is
the closest that the Saudis have come to acknowledging in public their desire to have
formal relations with Israel.
The main reason is a change in President Joe Biden’s attitude to the Saudis. In 2019, before
coming to office, he said he intended to treat them as “the pariah that they are”. This was in
the wake of the murder and dismemberment of a Saudi columnist for the Washington Post,
Jamal Khashoggi, by agents presumed to be working for the kingdom’s crown prince and de
facto ruler, Muhammad bin Salman.
Mr Biden has reassessed his stance for fear that America’s standing in the Middle East is
eroding. Since Russia invaded Ukraine, he has failed to get the region’s oil-producers to
agree to an energy policy that would help Western countries ride out the shortages caused
by their cutting links with Russia. This year China also stole a march on America by
mediating an agreement between the Saudis and Iran to resume diplomatic relations with
each other.
Achieving an Israeli-Saudi deal is part of America’s wider strategy to renew and enhance its
alliance with the Saudis, while once again seeking an agreement with Iran to limit its
nuclear programme in return for economic-sanctions relief. Midwifing improved relations
between Israel and the Saudis would serve a dual purpose.
Binyamin Netanyahu makes no secret of his desire to be the Israeli prime minister who
signs a treaty with one of the Arab world’s chief powers. Such a feat might soften his
opposition to an American deal with Iran, which could soon be able to build nuclear bombs.
Mr Netanyahu is revered by many Republicans in America, so having him on board would
help Mr Biden sell an agreement with Iran to his foes at home. With America’s presidential
election only a year and a half away, he would present it as a major foreign-policy coup.
Obstacles remain, however. The crown prince, known as MBS, has a long list of demands,
including the supply of advanced weapons systems, American support for a civilian nuclear
programme and a strategic defence treaty beefed up by assurances the Americans are
reluctant to grant. Were these demands to be at least partially met, the Palestinian issue
would nonetheless fester. Israel would have to make some kind of concession over it, even
one amounting to little more than lip-service, to appease the Saudis. ■

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and-africa/2023/06/15/saudi-arabia-may-accept-normal-relations-with-israel
The Great Carbon Valley
Why Kenya could take the lead in carbon removal
Geothermal energy and cheap talent offer comparative advantage
Jun 15th 2023 | NAIROBI

EAST AFRICA’S Rift Valley, which runs for thousands of kilometres from the Red Sea to
Mozambique, provides a unique window into the evolutionary history of humanity. The
shifting of tectonic plates that formed its deep lakes and sheltered canyons created
conditions that first nurtured the ancestors of modern humans and then preserved their
bones. Those geological forces may also push open a door to the future by making it
possible to capture and store global-warming carbon dioxide cheaply from the air.
That, at least, is the hope of James Irungu Mwangi, a Kenyan environmentalist and
development expert, who talks of the opportunity that could be afforded by what he calls
“the Great Carbon Valley”. The rift, he argues, has the key attributes that make it attractive
for “direct air capture” (DAC) stations to suck carbon dioxide from the air: renewable-
energy potential and the right geology for storing carbon.
DAC plants need huge amounts of energy. Some of this is in the form of electricity, which is
used to run fans blowing air through or over chemicals that absorb carbon dioxide. Much
more energy is then needed in the form of heat to make these chemicals belch the gas,
which is then compressed for use or storage.
Because the earth’s crust is thinner than usual along the rift, it has vast geothermal
potential. The American government reckons Kenya alone could generate 10,000MW of
geothermal power, more than ten times the amount it currently produces. A by-product of
such power stations is plenty of waste steam, which can then be used to heat DAC
machines. Moreover, since close to 90% of Kenya’s power is renewable, the electricity
these machines consume does not contribute to more global warming.
Capturing carbon dioxide is just part of the process. Next it has to be safely locked away.
The rift’s geology is particularly good for this, too. It has bands of porous basalt (a volcanic
rock) that stretch across thousands of square kilometres. This makes the region “ideal” for
carbon capture and storage, according to a paper published in 2021 by George Otieno
Okoko and Lydia Olaka, both of the University of Nairobi. After carbon dioxide has been
sucked from the air it is dissolved in water (in the same way one would make sparkling
water). This slightly acidic and bubbly liquid is then injected into the rock. There it reacts
with the basalt to form carbon-rich minerals—in essence, rocks—which means the gas will
not leak back into the atmosphere.
A similar combination of geothermal energy and volcanic rock has already attracted
companies elsewhere. Climeworks, a Swiss firm, opened the world’s biggest DAC plant in
Iceland in 2021. It can remove some 4,000 tonnes of carbon dioxide a year from the
atmosphere at a cost of $600-800 a tonne.
Martin Freimü ller, the founder of Octavia Carbon, a Kenyan startup, is working to build the
world’s second-biggest DAC plant in the Rift Valley. He hopes it will be able to sequester
carbon dioxide far more cheaply than Climeworks can, in part thanks to cheap renewable
electricity and geothermal steam, and in part because hiring skilled engineers and chemists
costs less in Kenya than in the rich world.
Octavia’s pilot plant, scheduled for completion next year, is forecast to have costs of well
below $500 a tonne. Mr Freimü ller aims to cut this to below $100 within five years. That is
far cheaper than industry-wide forecasts of $300-400 by BCG, a consulting firm. As this
new market matures, nascent firms and technologies will have to evolve quickly, or die out.
■

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and-africa/2023/06/15/why-kenya-could-take-the-lead-in-carbon-removal
Pastures new
Rural Africans are finding work beyond their farms
Land pressure and markets are transforming the countryside
Jun 15th 2023 | BUSHENYI

TO UNDERSTAND THE changing economics of the African countryside, talk to Jovelence

Kemizano. Her banana garden slopes into a bucolic valley in Bushenyi, western Uganda. It
is too small to feed her family. So when planting time comes, she works for wages in
another’s field, until she has earned enough to rent an extra plot of her own for the season
ahead.
The forces of supply and demand are against her. Rents in her village are rising, because
each year there are more people on the same amount of land. She cannot bargain for better
pay, as there is always someone else willing to dig in her place. This season she has earned
too little to rent a plot. She will work as a casual labourer throughout, buying a kilo of
maize flour with her daily wage.
Outsiders often view the African countryside as a sea of self-sufficient peasant farmers,
who grow what they eat and eat what they grow. But that romantic picture is long
outdated. Rural workers have to hustle and take paid work. Much of their time is spent
trading goods or running small shops. This unfolding transformation is driven by both
poverty and relative prosperity, existing side by side. Scholars call it the deepening of rural
capitalism.
Africa is at an earlier stage of this transition than Asia or Latin America. Nearly all rural
Africans still till some land of their own, which often remains their chief source of income.
Half of them can be considered farming specialists, in that they earn more than three-
quarters of their income from their fields. But household surveys show that people spend
just two-fifths of their working time farming their plots. A quarter is spent processing,
transporting and selling farm produce.
Most of their remaining time goes on small and informal activities such as artisanal mining,
making charcoal, brewing beer and driving motorbike taxis. This is to earn cash to pay
hospital bills and school fees, as well as to buy foods that they cannot grow themselves. In a
swampy hollow near Ms Kemizano’s home in Bushenyi a dozen young men press clay into
bricks, which they bake in kilns. “We don’t have enough land for farming,” says Richard
Baguma, his palms grey with earth.
The quickening of commerce is also creating opportunities. Traders in Bushenyi buy jerry
cans of mudfish and transport them along a chain that stretches across Lake Victoria to
Tanzania, where fishermen prize them as bait. A local women’s group is making cooking
pots. Gordon Ahimbisibwe rides door-to-door on his motorbike, buying coffee beans which
he sells to an exporter. He has reinvested the profits in a shop, a lawn-mowing business and
a machine for milling maize, as well as snapping up several plots of land.
In places the bustle of trade is boosting demand for local goods and services. Thriving
wholesalers and truckers are connecting farms to urban markets. Indeed, workers are
leaving their fields at a faster rate in those areas where land is bountiful, because there is
more money swilling around to create jobs. “Productive agriculture sheds labour,” says
Felix Kwame Yeboah of Michigan State University.
Class distinctions are thus becoming sharper, as those with land and capital hire the labour
of others. The World Bank’s household surveys typically find that wage work in rural Africa
is rare. But that may reflect biases in the way that questions are asked, argues Bernd
Mueller of the International Labour Organisation. Respondents often conflate the concept
of employment with formal salaried work only. And local terms for casual labour, such as
the Swahili word kibarua, which has its origins in the hiring of slaves, come with stigma
attached. When Mr Mueller conducted his own survey in north-east Tanzania he found that
60% of households had members engaged in wage labour, far higher than conventionally
estimated.
Where people come from or their gender often determines what work they can get. The
expansion of cash crops, such as groundnuts in Senegal and flowers in Ethiopia, pulls in
migrant workers from afar, notes Carlos Oya of the School of Oriental and African Studies.
Women face particular barriers in patriarchal cultures where they are expected to work
within the household. Those who take on paid work are often widowed or divorced.
Workers are improvising new livelihoods almost everywhere. In Zimbabwe the acquisition
of land by white settlers created a class of black workers, many from abroad, employed on
commercial farms. That system was upended by Robert Mugabe’s land-grabs and the
economic collapse they caused. Former farmworkers now eke out a precarious living, by
mixing small-scale farming, temporary wage work and informal enterprise, says Toendepi
Shonhe of the University of South Africa. In that regard, Zimbabwe increasingly resembles
other parts of Africa.
The idea of the subsistence farmer isolated from markets is a myth. Surveys of rural
households in southern and east Africa find that they purchase more than 40% of their
food, rather than growing it themselves. Uganda’s President Yoweri Museveni tours the
countryside exhorting villagers to “join the money economy”. He is wasting his breath. The
money economy is coming, whether they wish it or not. ■
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and-africa/2023/06/15/rural-africans-are-finding-work-beyond-their-farms
The Americas
 Lula’s ambitious plans to save the Amazon clash with reality
 What does China want from Latin America and the Caribbean?
 Canada’s wildfires have burnt an area 16 times larger than normal
Unsustainable
Lula’s ambitious plans to save the Amazon clash with reality
The Brazilian president faces resistance from Congress, the state oil company and
agribusiness
Jun 13th 2023 | São Paulo

WHEN LUIZ INÁ CIO LULA DA SILVA won Brazil’s election last year, climate activists the
world over breathed a sigh of relief. His right-wing predecessor, Jair Bolsonaro, had gutted
the environmental agency, turned a blind eye to illegal gold-mining and undermined
indigenous rights. Lula, by contrast, promised to end illegal deforestation in the Amazon
and lead international efforts to halt climate change. On June 5th the left-winger outlined
an ambitious plan to stop illegal deforestation in the Amazon by the end of the decade.
“There should be no contradiction between economic growth and environmental
protection,” he said. Yet Lula’s green agenda is suffering setbacks.
In theory, Brazil is well placed to lead efforts against climate change. In 2019 fully 82% of
its electricity was generated from renewable sources, compared with a global average of
29%. Its carbon emissions mainly come from deforestation and agriculture, rather than
energy.
Curbing deforestation promises rich rewards. The World Bank estimates that the value of
the Amazon rainforest, mainly as a carbon store, is $317bn a year, nearly all the benefits of
which accrue to the rest of the world. This is three to seven times more than the estimated
value which could be made from farming, mining or logging in the area. A Senate
committee is working on creating a carbon market, which would allow Brazil to make
money by selling carbon credits. And in April the EU, with which Brazil may soon sign a
trade agreement, passed a law that will ban imports of products that contribute to
deforestation. All this provides incentives to prevent more tree-felling.
Several problems are getting in Lula’s way. For a start, he is far less popular than under his
first two terms, between 2003 and 2010. Back then, he could sway Congress more easily.
But he only won last year’s election by a slim margin.
What’s more, Congress has veered to the right. Lula leads a rowdy coalition that has
frequently failed to vote with him. He has had to resort to pork-barrel tactics, but that has
not entirely worked. On June 1st Congress passed a law that removed the rural-land
registry and management of waste and water from the environment ministry. It also took
away the power of the newly created indigenous ministry to demarcate territories. The day
before, the lower house passed a bill which, if approved by the Senate, would not recognise
claims to land by indigenous groups arising after 1988.
Both bills were coups for the agri-business lobby, which is the second problem for the
president. Agriculture is increasingly important in the country. First-quarter GDP figures
released this month show the agricultural sector is 18% larger than the same period last
year, a performance strong enough to prompt analysts to raise their full-year forecasts for
the whole economy. This was partly because of a spell of good weather compared with last
year, and because the price of agricultural commodities has risen. By contrast industrial
output declined and the service sector grew slightly. According to the World Bank, the
value added of agriculture, forestry and fishing as a share of GDP has risen from 4% in
2010 to 7% in 2021.
The agri-business lobby now commands 347 out of 594 seats across both houses of
Congress, up from 280 in 2018. “There is no Brazil without agri-business,” says Pedro
Lupion, the leader of the lobby.
Part of the agriculture sector’s expansion happened under Lula’s first two administrations,
when trade with China accelerated. Yet Lula has struggled to win back the support of the
lobby, which has rallied behind Mr Bolsonaro. In April Lula’s agriculture minister had his
invitation to the country’s biggest agricultural fair rescinded, after Mr Bolsonaro
announced that he would attend. Later, Lula called the organisers of the event “fascists”. Mr
Lupion complains that the left has made the green agenda an “ideological” issue.
A third problem for Lula is the importance of the state oil firm, Petrobras. In his first two
administrations, Lula celebrated Petrobras as a national champion after the company made
one of the largest offshore oil discoveries ever in 2006, in what are known as the pre-salt
fields off the south-eastern coast. The discovery allowed Brazil to become the world’s
eighth-biggest oil-producer. Much more of that potential oil will be developed this decade,
which the government hopes could make Brazil the fourth-biggest oil-producer. Adtiya
Ravi, an analyst at Rystad Energy, a consultancy, estimates that oil from the pre-salt fields
alone could account for nearly 4% of global supply by the end of the decade. Petrobras
expects to increase output from 3m barrels per day today to over 5m by 2030.
Along with developing existing projects, Petrobras is trying to win a licence to drill for
offshore oil near the Amazon basin, in an area known as the equatorial margin (see map).
This area could hold as much as 30bn barrels of oil and its equivalents, of which a quarter
are thought to be extractable. Recent discoveries of oil in Guyana and Suriname are
encouraging Petrobras, which is ready to invest roughly half of its $6bn exploration budget
over the next five years in the area. On May 18th Brazil’s regulator denied the company an
exploration licence, though Petrobras has appealed the decision. Alexandre Silveira, the
energy and mining minister, described oil exploration in the region as a “passport to the
future”, and called the regulator’s demands “incoherent and absurd”. Lula said he finds it
“difficult” to believe that oil exploration would cause environmental damage in the region.
Meanwhile, Petrobras’s five-year business strategy barely mentions investments in
renewable energies. It says $4.4bn, or 6% of its capital expenditure over the period, will go
towards “strengthening [the company’s] low-carbon position” and most of that will be
directed towards decarbonising oil production, rather than fostering renewable energy. By
comparison, BP invested $5bn in renewable energy, hydrogen, biofuels and electric-vehicle
charging stations in 2022, or 30% of its capital expenditure that year. Maurício
Tolmasquim, recently appointed the chief energy-transition officer at Petrobas, admits that
the company “is lagging behind” other major energy companies in its plans to go green. In
March its new CEO, Jean Paul Prates, boasted that Brazil could be “the last oil producer in
the world”.
According to Rystad Energy, Brazil has approved or is set to approve the highest number of
oil and gas projects in 2022 and 2023 after Saudi Arabia and Qatar (see chart). Whereas oil
production in Europe, Africa and Asia is set to decline over the next decade, South
America’s share of global output is expected to rise from 7.2% today to nearly 10% by
2030, mostly thanks to Brazil, Guyana and Suriname.
To fulfil his green pledges, Lula needs to drop “his loyalty to oil nationalism”, says Natalie
Unterstell, the head of Talanoa Institute, a think-tank in Rio de Janeiro. But the government
can smell the money. Even without the development of the equatorial margin, Petrobras
expects to provide over $200bn of revenue to state coffers over the next five years, or
about 5% of total government revenues.
The final obstacle is a desire to develop the Amazon and the states near the equatorial
margin. Brazil’s northern and northeastern states contain three-quarters of the country’s
poor (as defined by estimates from the statistical agency), though they contain just over a
third of its population. Northern governors want more investment. Last June, before being
elected, Lula said he was in favour of a highway being built through the Amazon that would
connect the soya-growing interior to ports on the coast. Lula’s transport minister has also
listed a huge railway that would link the interior to the coast among his priorities. Yet one
study from 2021 reckoned that if the railway were constructed, 230,000 hectares of trees
on indigenous lands would be chopped down by 2035.
Already, Lula’s desire to boost the economy has clashed with his environmental agenda.
Days before announcing the plan to end deforestation, his administration lowered taxes on
cars and lorries to stimulate consumption. To go green, Lula will need to adapt many of his
plans for enriching Brazil. ■

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amazon-clash-with-reality
Comrades across continents
What does China want from Latin America and the
Caribbean?
Along with trading with the region, it is increasingly important in geopolitical terms
Jun 15th 2023 | Mexico City

CHINA’S ENGAGEMENT with Latin America has tended to be purely transactional. It went
from hardly trading with the region at the turn of the century to overtaking the United
States to become the top trading partner for South America, and the second almost
everywhere else in Latin America. Annual goods trade between China and Latin America
rose to $445bn in 2021, up from $12bn in 2000. But its relationship with the region
appears to be evolving. Latin America is increasingly useful to China in geopolitical terms,
too.
On June 8th the Wall Street Journal reported that the Communist government of Cuba had
secretly agreed to allow China to set up an electronic-spying facility in the country. At first
American and Cuban officials denied the story. Two days later the White House admitted
that a base has existed for some time. This is not the first time that China has been reported
to have military or security footholds in the region. China has long been thought to have a
small military presence in Cuba and access to listening stations. It has several satellite
ground-stations in Latin America, which are believed to also have spying purposes. A space
observatory in Argentina is run by the Chinese army and its activities are opaque. The
latest move is “a small step”, says Evan Ellis of the United States Army War College, “but
over a big threshold”.
Deepening geopolitical ties follow closer economic ones. China is a big source of cash for
the region. Between 2005 and 2021 Chinese state-owned banks loaned $139bn to Latin
American governments. It has invested billions of dollars in the region, mainly in energy
and mining. Some 21 countries in Latin America and the Caribbean have signed up to
China’s Belt and Road Initiative, a massive global infrastructure-building spree.
Latin American countries are also turning to the yuan for trade and to include in their
central-bank reserves. On June 2nd Argentina doubled its currency-swap line with China,
meaning that around a third of its central-bank reserves, which stand at $32bn, will
effectively be in yuan. Last year, the yuan surpassed the euro to become the second-most
important foreign currency in Brazil’s central-bank vaults.
Many commercial projects have caused concern. In some cases, they are in sensitive
industries such as telecoms or energy. In April a Chinese state-owned power company
reached an agreement to purchase two power suppliers in Peru that would give China a
near-monopoly over the country’s energy grid. Some fret over Chinese construction of
ports in the region, such as the Chancay megaport near Lima in Peru, fearing that they
could be repurposed to military ends.
China’s most recent strategy paper on Latin America, published in 2016, says it will
“actively carry out military exchanges and co-operation”. Although the United States
remains the primary military partner in the region, China has boosted engagement with
law-enforcement agencies. It has trained police forces from countries including Argentina
and Brazil, donated cars and investigative equipment to Nicaragua and Costa Rica, and sold
surveillance equipment to Ecuador.
So far, China seems to be winning the geopolitical popularity contest—and not just with the
usual suspects, such as Venezuela’s autocratic regime or Cuba’s socialists. Since 2017 five
countries in the region have ditched ties with Taiwan in favour of China. In March,
Honduras was the latest to do so. Xiomara Castro, the president of Honduras, wrapped up a
six-day visit to China on June 14th. Argentina, Honduras and Uruguay are all in the process
of joining the Shanghai-based New Development Bank, founded by the BRICS countries.
Not all are impressed. Argentina’s centre-right opposition is challenging an agreement
between the governor of Tierra del Fuego, at the southernmost tip of the continent, and a
Chinese petrochemicals group to build a port, power station and chemical plant there
costing $1.2bn.
But mostly Latin America’s leaders shrug off concerns about Chinese meddling. The chance
to avoid what they perceive as hypocritical lectures from the United States appeals not only
to left-wingers, but also to populists who have little time for human rights, such as El
Salvador’s president, Nayib Bukele, and to moderates in Ecuador, Panama and Costa Rica.
Even under Jair Bolsonaro, Brazil’s right-wing president from 2018 to 2022, who made
critical comments about the country, China continued to trade and invest in Brazil.
Whether China’s deeper engagement is a risk depends on “the eye of the beholder”, says a
Mexican official. China has tended to avoid provoking the United States, keeping its
engagement primarily in South America rather than Central America and the Caribbean
(with the exception of Cuba). But China’s growing ambitions and Latin America‘s supplies
of many of the minerals needed for the green transition, such as lithium and copper, mean
ties are likely to deepen. ■
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america-and-the-caribbean
Burning bright
Canada’s wildfires have burnt an area 16 times larger than
normal
American air quality may have improved, but the fires are still going
Jun 15th 2023

“BLAME CANADA”, read the front page of the New York Post, when smoke from wildfires in
Quebec blanketed the east coast of the United States last week. The average air quality of
the country was its worst in a decade. New York was for a time the most polluted major city
in the world. What had previously been a problem in Canada—of enormous wildfires—
quickly became one in the United States, when abnormal winds pushed plumes south of the
border. Since then, the winds have changed, sparing the populous east coast from smoke.
But the blazes in Canada are still raging.
Canadian wildfires started earlier than usual this year and have burned ferociously ever
since. On one day alone the area burnt in Canada was around 200,000 hectares (or 0.5m
acres). That is greater than the total area burnt by wildfires in California last year,
according to David Wallace-Wells, a writer on climate change. As of June 14th, the Canadian
Interagency Forest Fire Centre, a not-for-profit, estimated that a total area of 5.4m hectares
had been set alight—roughly the size of Costa Rica. This makes 2023 so far the worst year
for wildfire damage since 1995, when it was 7.5m hectares.
The weather is partly to blame. May was the hottest since 1940. It was also seventh-driest.
Such conditions desiccate vegetation and help fires start and spread. Although the absolute
number of fires has been only slightly higher than normal, each fire has grown far larger
than it usually would. The area ablaze in Quebec is 217 times greater, for example.
With the exception of the health hazard posed by the haze, the direct impact on humans has
been minimal. Around 26,000 people were ordered to evacuate parts of Canada. But as we
went to press, no deaths had been reported. President Joe Biden has said that 600
firefighters would be sent from the United States to help. It would only take a change in the
wind to make it America’s problem once again. ■

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area-16-times-larger-than-normal
Europe
 Ukraine’s counter-offensive is making mixed progress
 The death of Silvio Berlusconi creates uncertainty for his party
 Germany’s new national security strategy is strong on goals, less so on
means
 The problems ailing Western Europe’s left are not just cyclical
 Why Europe’s asylum policy desperately needs rebooting
Going into hell
Ukraine’s counter-offensive is making mixed progress
Its real test will come when it hits Russia’s prepared defences
Jun 14th 2023 | KHERSON AND ODESSA

UKRAINE’S COUNTER-OFFENSIVE is now into its second week. Its shape is gradually
becoming clearer. One long-standing axis points east, at the area around the bloodily
contested town of Bakhmut and in Luhansk province. A new one aims south and south-east
from Velyka Novosilka and Vuhledar in Donetsk province. And a third has opened in the
south, where Ukrainian troops are battling their way south around the town of Orikhiv in
Zaporizhia province, which forms the central part of the war’s long front line. They are
making progress. But neither side has committed its reserves and the most important
fighting may not occur for another week or so.
The thrust in Donetsk appears so far to have been the most successful. Ukraine used seven
brigades near Velyka Novosilka to liberate around 60 sq km of territory within four days,
says Konrad Muzyka of Rochan Consulting, a firm that tracks the war. That included a
cluster of villages hugging the Mokri Yaly river, including Blahodatne, liberated on June
11th; Storozheve, where video footage showed marines walking through the village and
brandishing a Ukrainian flag in the centre; and Makarivka to the south. The tiny villages of
Urozhaine and Staromaiorske may be next.
That progress contrasts with less encouraging news from another counter-offensive
operation taking place farther south and west, in the Zaporizhia region. Full-frontal fighting
along the Orikhiv-Tokmak axis there has been hard going, a military source conceded, with
Ukraine taking significant losses of armour and personnel. Images published by Russia
showed German Leopard tanks and American Bradley armoured vehicles caught in
minefields and struck by artillery. One video showed a Russian soldier next to a Leopard
with its engine still running. Russia is taking a bruising, too. In a meeting with Russian
military bloggers on June 13th, Vladimir Putin, Russia’s president, said that Russia had lost
54 tanks during the Ukrainian offensive. That figure far exceeds open-source estimates that
are based on public numbers.
The scale of the deployment along the Tokmak axis—and the town’s strategic role as both a
rail hub and a gateway to strike at Russia’s main road to Crimea—suggest that it might
grow into the main push. But most of the attacks so far have been conducted with
Ukrainian units that were already in place and are aimed at identifying weaknesses in the
Russian line, rather than breaking through with overwhelming force. “The offensive has
clearly started, but not I think the main attack,” notes Ben Hodges, a retired general who
commanded America’s army in Europe. “When we see large, armoured formations join the
assault, then I think we’ll know the main attack has really begun.”
Ukraine is thought to have thrown in only a few brigades in Zaporizhia so far. “We haven’t
committed our main forces,” agrees a source in Ukraine’s general staff, “and the Russians
haven’t committed their main forces.” Russia is mounting what military officers call a
defence in depth: falling back to more favourable ground to the rear. Both sides are
involved in a “chess game” to draw out each others’ reserves, says the source. He adds that
Ukraine’s “immediate priority” is reducing Russian superiority in artillery by targeting its
batteries with long-range fire. The Economist’s analysis of data from NASA’s infrared
satellites shows unusually intense fire activity across southern Ukraine. Russian military
bloggers reported that one strike had killed Major General Sergei Goryachev, the chief of
staff of Russia’s 35th Combined Arms Army—the first Russian general to die for a year.
Aviation is playing an important role. More of it is now being used in the Zaporizhia sector
than has been deployed at any time since the opening stages of the war. Russian attack
helicopters are proving a particular hazard. Samuel Bendett of CNA, a think-tank, notes that
Russian military bloggers are boasting of a new tactic: Russian air strikes are forcing
Ukraine to push its scarce air-defence systems farther forward. Those systems can then be
struck by Russia’s Lancet attack drones and their operators targeted by Russian snipers.
Denys Yaroslavsky, a special-forces officer fighting north of Bakhmut, reports a big increase
in the use of drones there. Apart from Lancet strike drones, capable of destroying tanks and
artillery systems, Russian forces have acquired significant numbers of commercial Chinese
drones, he says. Mr Yaroslavsky is confident that Ukraine will continue to close the circle
around Bakhmut. “It’s hard going, but we are moving constantly. Within a week we will
have the high ground…and Bakhmut in the palm of our hands.” Ukrainian attacks in the
east are probably intended to “fix” Russian positions there in place, preventing them from
reinforcing the south.
One unexpected variable could be the situation in the flooded plains of Kherson. The
collapse of the Nova Kakhovka dam on June 6th created a humanitarian disaster. It also
upended Ukrainian plans. The destruction of the bridge alongside the dam has allowed
Russia to shift some units from Kherson to Zaporizhia—one possible motivation for the
dam’s destruction. Its collapse almost certainly puts an end to any crossing by heavy
weaponry. That said, Ukrainian military sources hint at a different type of operation.
Flooding has washed away Russian defences on the eastern side of the Dnieper, one says,
and that has created opportunities. “The conditions are arguably better for a limited assault
using speedboats and special forces,” says another. The satellite data suggests that Ukraine
is heavily pounding Russian positions across the river from Kherson city.
Western officials say that on paper Ukraine has what it needs to make significant advances;
enough to put Russian overland routes to Crimea within its rocket range, and Russian
shipping in the Sea of Azov within range of its anti-ship cruise missiles. But they say that
this will require luck on the part of the Ukrainians and blunders on the part of the Russians.
Nature could also play a part. Rain is predicted for much of the next week, which may delay
some of Ukraine’s advances, while also making Russian air operations and reconnaissance
more difficult. The biggest risk, say officials, is Ukrainian units becoming caught in Russian
“fire pockets”—patches of territory covered by Russian drones and artillery—as they
breach defences, which include several lines of trenches, fortifications and minefields.
Those defences are unlikely to be tested until around the last week of June, say officials
tracking the fighting. Despite Ukraine’s advance south from Velyka Novosilka in Donetsk, it
is still around 20km away, by road, to the first serious line of prepared Russian defences. In
Zaporizhia, the town of Robotyne, which probably marks the farthest extent of Ukraine’s
advance, is still 10km away from the east-west defences that cut through the villages of
Ilchenkove and Solodka Balka to the south. Tokmak, ringed by its own dedicated defences,
is then another 20km away.
“All I know is it’s going to plan,” said Ben Wallace, Britain’s defence secretary, on June 13th.
“They’re being successful, they’ve maintained momentum.” Jack Watling of RUSI, a think-
tank, agrees: “They are beating expectations.” But the real test is to come, says a Western
official. “They are about to go into hell.” ■
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mixed-progress
After Berlusconi
The death of Silvio Berlusconi creates uncertainty for his
party
But it might strengthen the hand of Giorgia Meloni within the ruling coalition
Jun 13th 2023 | ROME

SILVIO BERLUSCONI had a political career of rare longevity. He first became prime minister
in 1994, when Helmut Kohl, François Mitterrand and others who have long since passed
into history led Europe’s powerhouses. Almost 30 years later, he still headed a party with
significant parliamentary representation, having come and gone as prime minister in four
administrations. His death on June 12th will thus inevitably alter Italy’s political landscape.
The likelihood is that the changes will benefit Italy’s current prime minister, Giorgia
Meloni. But not without exposing her to new risks.
Most obviously, Mr Berlusconi’s departure from politics removes a source of intermittent,
though acute, discomfort. Italy’s longest-serving post-war prime minister had an ego of
pharaonic dimensions. He never truly reconciled himself to the fact that, following last
year’s general election, his party, Forza Italia, had become part of a coalition government in
which, for the first time, he was not the leader. Even before Ms Meloni took up her new post
in October, he had embarrassed her by slyly making public a list of characteristics
—”patronising, bossy, arrogant and offensive”— that he later, and unconvincingly, denied
were hers.
As the new leader strove to convince Italy’s allies that her government stood with Ukraine,
Mr Berlusconi not only alluded to his friendship with Vladimir Putin but backed his version
of events there (on hearing of his death, Mr Putin again embarrassed Ms Meloni by lauding
him as a “dear person”).
Though much diminished, Forza Italia is still decisive for the government’s control of
legislation. It occupies 44 seats in the 400-member lower house, where the governing
coalition has a 38-seat outright majority, and 17 of the 206 seats in the Senate, where Ms
Meloni’s majority is 15. But the latest polls give it an average of just 7.3% of the vote. And it
has reportedly amassed debts, guaranteed by Mr Berlusconi, of €90m ($97m). His heirs
may be less keen to underwrite them.
Hence another striking reaction to the former prime minister’s death, from Gianfranco
Miccichè, who served as a minister in one of his governments. “As of today,” he opined,
“Forza Italia no longer exists.” He may be right. Without its charismatic leader, the party
will almost certainly fragment and could even disappear.
Mr Berlusconi’s later years were lived in a context reminiscent of the court of a medieval
sultan—harem included. Like many an absolute ruler, his towering self-esteem prevented
him from ever naming a successor. And the cast of players he leaves behind would be only
too familiar to the denizens of an Ottoman palace.
It includes a favoured, and ambitious, “wife”, the mysterious, taciturn Marta Fascina, a
young Forza Italia lawmaker who “symbolically married” Mr Berlusconi last year in a
ceremony that had all of the trappings of a wedding but no civil or religious validity. There
is also an ousted rival, Licia Ronzulli, another Forza Italia parliamentarian who formerly
ruled Mr Berlusconi’s inner circle of hangers-on; and the vizier-like Antonio Tajani, a
former European commissioner and president of the European Parliament, who now
serves as Italy’s foreign minister and deputy prime minister in Ms Meloni’s government.
What impact all this will have on a party abuzz with rumours of conspiracy remains
unclear. But the biggest threat to Ms Meloni is that some of Mr Berlusconi’s followers could
join the opposition, eroding her majority. There is a precedent. Rather than join a coalition
dominated by her hard-right Brothers of Italy (FdI) party, two prominent Forza Italia
liberals defected to a centrist party.
Another potential exit route leads to the Northern League, the second-largest party in Ms
Meloni’s coalition. But, like Forza Italia, the League has been severely weakened by the rise
of the Brothers. It is the FdI which represents by far the most promising alternative for
Forza lawmakers in need of a new home—and especially those seeking a post in
government.
The most likely outcome is thus a reinforcement of the Brothers’ ascendancy. That would
doubtless be welcome to Ms Meloni. But what is less obvious is whether she would stand to
benefit from Forza Italia’s wholesale disintegration. The style and methods of Forza’s
founder anticipated those of many of today’s right-wing populists. But it has never been as
radical or consistently Eurosceptical as its allies.
Without it, Ms Meloni’s coalition would be incontrovertibly aligned with the radical,
identitarian right, undermining her efforts to portray her government to Italy’s allies as
representative of a harmless “Latin conservatism”. In the weeks ahead, Ms Meloni may
have cause to reflect that you can get too much of a good thing. ■
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uncertainty-for-his-party
Big words
Germany’s new national security strategy is strong on goals,
less so on means
Olaf Scholz unveils a long-delayed review
Jun 15th 2023 | BERLIN

THE DANES do it. The Dutch do it. Even Jamaica, Honduras and Papua New Guinea
regularly state the formal goals of their defence and foreign policies. And so now does
Germany. Long squeamish about flexing its muscles despite being the world’s fourth-
biggest economy and a pillar of European stability, the country bit the bullet on June 14th
and launched its first-ever national security strategy.
The 76-page document, meant to bring coherence and a sense of purpose across the
breadth of government, does not make for exciting reading. Predictably, it stresses
Germany’s deep commitment to the European Union and to NATO, as well as relationships
with key partners such as America and France. Understandably, it fingers Russia as “the
most serious threat to peace and security in the Euro-Atlantic area”. And somewhat
daringly for a country whose biggest businesses depend heavily on trade with China, it
does not shy away from blaming the Asian dragon for “acting time and again counter to our
interests and values”, though it insists that China “remains a partner without whom many
challenges and crises cannot be resolved.”
Yet while the strategy usefully clarifies Germany’s perceptions and goals, it is less clear
about whens and hows. Almost a decade ago, for instance, Germany joined other NATO
members in pledging to boost defence spending to 2% of GDP. In the face of Russia’s
invasion of Ukraine, the gravest threat to European security since the end of the cold war,
and in the unwonted light this has cast on the woeful state of Germany’s own army, the
strategy paper does no more than restate the same promise. It hedges a bit, too, adding that
2% should be a multi-year average and that the government would strive to implement this
“at no additional cost to the federal budget”.
At the press conference that accompanied the policy document’s launch Christian Lindner,
the finance minister, carefully explained that for at least the next few years the 2% goal
would be made up not from the regular budget but via top-ups from a temporary €100bn
($109bn) special fund. In other words, it will be up to some future government to commit
to permanently bolster Germany’s shrunken armed forces. “No party would agree to cuts in
welfare to spare more for defence,” comments Thorsten Benner of the Global Public Policy
Institute, a Berlin think-tank. “This question is just being kicked down the road.”
The strategy also lacks what some had hoped would be a key component, the creation of a
body with implementing power akin to America’s National Security Council. This idea, say
insiders, fell victim to wrangling inside the ruling three-party coalition as the foreign
ministry, currently held by the Green party, resisted ceding influence to the Social
Democrat-headed chancellor’s office, where such a council would logically be housed.
The national security strategy’s slogan—”Robust, Resilient, Sustainable”—is also a
reflection of coalition politics. Short on specifics about defence, the document touches
necessary notes of budget probity for Mr Lindner’s liberal Free Democrats, as well as of
commitment to climate-change goals for the Greens. More important than the wording of
the document, however, is the fact that it was written at all.
Since its resurrection as a Federal Republic on the ashes of the second world war, Germany
has flinched from bold stands. After reunification in 1990, caution was replaced by
complacency. Prosperity seemed assured under a trinity of blessings: American security,
cheap Russian energy and a growing Chinese market. Even before Russia smashed into
Ukraine last year, however, it was clear that the good times could not last. When the
current coalition was elected in 2021, its pledge to issue a national security strategy was
meant as a signal that it understood the growing precariousness of Germany’s situation.
The biggest perceived danger then, however, was of America drifting into Trumpian
isolation. Yet even though Trumpian isolation is hardly a spent force, it merits nary a
mention in the review. ■

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is-strong-on-goals-less-so-on-means
Left hanging
The problems ailing Western Europe’s left are not just
cyclical
Battered by the populist right, progressives lack a vision for the future
Jun 15th 2023 | AMSTERDAM AND PARIS

DE BALIE, A cosily chic cultural venue on Amsterdam’s Leidseplein, is the epicentre of

Dutch liberal intellectual life. On May 3rd it played host to two thinkers representing ideas
that are pulling the European left apart. Gloria Wekker is a black Dutch academic who
argues that the Netherlands suffers from structural racism. Susan Neiman, an American-
born German-Jewish philosopher, recently published a book (“Left Is Not Woke”) that calls
for dropping identity politics and re-embracing universal values. The left, Ms Neiman says,
must “come up with things that we’re moving towards”, rather than simply denouncing
taxonomies of oppression.
Like many debates on the left, this one took place inside a bubble. Amsterdam is a
multicultural city of cycling lanes and tolerant drug policies, run by a coalition of liberal
(D66) and left-wing parties (Labour and GreenLeft). But in the rest of the Netherlands,
politics has been transformed by anti-immigrant populism. In provincial elections on
March 15th, populist parties on the right combined for more than a third of the national
vote. The BoerBurgerBeweging (Farmer-Citizen Movement), a four-year-old outfit mainly
devoted to fighting environmental regulations, drew 19%. On the left, Labour got just 8%
and GreenLeft 9%.
The Dutch left’s problems are echoed across western Europe. (Eastern Europe’s leftist
parties, descended from the Soviet-era communists, face different problems.) Social-
democratic parties are in decline; voters see them as mushy and elitist. They face
competition from green parties, and from radical outfits that offer socialist economics or
woke politics. All are fighting over a shrinking pie, hemmed in by conservative populism.
Most of the left faces the problem Ms Neiman identified: the lack of a credible vision.
This should be a propitious time for Europe’s left. Inflation is fuelling calls for more
government benefits. Surveys show citizens are more concerned with climate change and
the cost of living than with crime. Antipathy to the EU has faded since the 2010s. Belief in
small government, declining since the financial crisis, was all but killed off by the covid
pandemic. A recent study of six European countries by pollsters André Krouwel and
Yordan Kutiyski found that big majorities everywhere agreed that “the state should play a
larger role in the regulation of the economy.”
Indeed, the left looked healthy as recently as 2021, when it governed all four Nordic
countries as well as Portugal and Spain. At the end of that year Olaf Scholz’s Social
Democrats (SPD) took power in Germany in coalition with the Greens and the liberal Free
Democrats. But the moment proved fleeting. In France’s elections in 2022 the centre-left
Socialists were all but wiped out. Hard-right parties now hold or share power in Italy and
Sweden, and in Finland are in coalition negotiations. The centre-right seems poised to keep
power in Greece, where leftist parties performed woefully in a general election on May
21st. Spain’s Socialists are heading into an early election they look likely to lose. In
Germany Mr Scholz’s coalition is divided and increasingly unpopular.
The left’s problems start with the once-great social democratic parties. In the early 2000s
in western Europe they averaged nearly 30% of the vote. They have declined steadily since
the global financial crisis in 2008, to just above 20% (see chart). Having embraced free-
market economics during the “Third Way” period of the 1990s, most centre-left parties
endorsed fiscal austerity after the financial crisis. That was a huge mistake, argues Bjö rn
Bremer of the Max Planck Institute in Cologne: voters could no longer see the difference
between the centre-left and the centre-right.
In some countries that has led to collapse. France’s Socialists governed indecisively from
2012-17, and when Emmanuel Macron founded his own movement to run for president he
took many centrists with him. The party’s image has since become “gaseous and
unfocused”, says one former Socialist politician. Its candidate won just 2% in last year’s
presidential election. The Dutch Labour Party, meanwhile, joined the centre-right in
government between 2012 and 2017, sharing responsibility for budget cuts. In the 2017
election it fell from 25% of the vote to 6%, and did little better in 2021. Such parties are
now too centrist to offer an alternative, and too small for voters to believe they can win.
Centre-left outfits like Germany’s SPD are still big enough for voters to see them as
contenders. In Spain and Portugal, Socialist governments have managed to hold power,
buoyed by solid economies. Italy’s colourless Democratic Party is still the second-biggest in
parliament. Finland’s Social Democrats, led by Sanna Marin, the outgoing prime minister
(pictured), came close to winning their latest election, as did Sweden’s. But their voter
bases are ageing. Sweden’s centre-left is “incredibly unpopular among young people”, says
Max Jerneck of the Stockholm School of Economics. “The zeitgeist is against them.”
The party’s over for Sanna Marin
Voters dissatisfied with milquetoast social democrats often turn to more radical parties.
Take France, where leadership on the left has passed to La France Insoumise
(“Unsubmissive France”, or LFI), a hard-line outfit that aims to resurrect the working-class
left of yore. In a café near the National Assembly filled with MPs in business suits, François
Ruffin, one of LFI’s up-and-coming deputies, is the only one wearing a leather jacket. He
lays out his plan to end the “neo-liberal parenthesis” which François Mitterrand, a Socialist
president, launched 40 years ago by privatising state enterprises and deregulating financial
markets. Mr Ruffin calls for protectionism and indexing state workers’ wages to inflation.
LFI’s vintage socialism and its 71-year-old leader, Jean-Luc Mélenchon, are surprisingly
popular among young people. The wounded Socialists have joined LFI and France’s often
feckless Greens in an alliance called NUPES, which forms the biggest opposition bloc in
parliament. But although NUPES’s rejectionism gives it a clear profile, it makes it
impossible to win a majority or join a broad coalition.
Italy’s Democratic Party (PD) seems to be imitating the French turn to the left. In February
it elected a young left-wing leader, Elly Schlein, who takes progressive stances on gay rights
and immigration. She is seen as a breath of fresh air, and the PD is doing better in polls. But
Italy’s left, too, is split: many left-leaning voters back the unpredictable, populist Five Star
Movement.
Tensions with the radicals could spell the end of centre-left rule in Spain as well. Pedro
Sá nchez, the Socialist prime minister, has just called a snap election, in which he faces a
challenge from a new leftist outfit called Sumar. The radical left elsewhere is doing poorly;
Syriza, a far-left party that botched Greece’s response to the euro crisis while in power
between 2015-19, was crushed in that country’s election on May 21st. Portugal’s long-
sitting Socialist government has successfully teamed up with radicals, but it too is losing
popularity.
Green parties, at least, have a clear vision of the future. Many leftists hope they will take
over from social democrats and lead a national revival. But only in Germany has a green
party come close to doing so. The German Greens did well in 2021, but have been badly
damaged since by high energy prices and new rules mandating heat pumps in private
homes. As the costs of the zero-carbon transition come due, voters are starting to rebel.
If not environmentalism, then what? Ideas about intersectional social justice that enthuse
progressive Americans are less popular in Europe. They evoke thorny problems of
integration, which since the migrant crisis of 2015-16 have been seen as vote losers. Some
look to Denmark’s governing Social Democrats as a model. They have turned to punitive
anti-immigrant policies. But studies show that imitating the right’s harshness towards
immigrants does not win back voters for the left. At most, says Tarik Abou-Chadi of Oxford
University, it discourages low-engagement voters from turning out.
A decade ago, when interest rates were negative and unemployment was high, Europe
seemed ripe for a revival of Keynesian economics. Thinkers like Thomas Piketty, a French
economist, argued for government stimulus to reduce inequality and pay for the green-
energy transition. But few governments seized the moment. Nowadays leftist parties
offering more government spending face two problems.
The first is that with much higher inflation, interest rates and debt, they no longer have
fiscal room. The second is that on state intervention they have won the argument. Nearly
everyone in European politics, from right to left, now accepts that governments must play a
big role in the economy. That makes it hard for leftist parties to stand out.
Optimistic progressives note that Europe’s centre-right is having difficulties, too. Yet the
best argument that the western European left is not in crisis may be that it was never as
strong as many imagined. Since 1960, outside the Nordic countries and Iberia, the right has
held power far more often than the left. To remain a contender, the left will have to
reinvent itself. The question is how. ■

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are-not-just-cyclical
Charlemagne
Why Europe’s asylum policy desperately needs rebooting
A deadly shipwreck in Greek waters highlights its dangers
Jun 15th 2023

IF THERE IS one thing Europeans like more than August off and coalition governments, it is
a half-baked EU project. The euro brought much of the continent into a currency union,
which ended up causing endless division when it turned out the requisite plumbing had not
been installed. The single market is a triumph for goods like cars and widgets, but works
poorly for the services that now dominate the economy. Migration has long been another
will-complete-mañana policy. Internal borders were scrapped within most of the bloc
almost 30 years ago. But the messy business of how to deal with the external border—and
the hundreds of thousands who cross it illegally year after year—was given too little
thought. The upshot has been a chaotic asylum system, leaving thousands dead in the
Mediterranean each year and fuelling the rise of populist politicians. On June 14th at least
78 migrants died when an overcrowded fishing vessel capsized in Greek waters; hundreds
more remain unaccounted for.
Not before time, then, a stab has at last been made at completing the job. And, of course,
nobody is happy. Europe is a magnet for migrants, being rich and easy to reach by lots of
people from war-torn (or poor) places in Africa and the Middle East. Some migrants who
enter on small boats or overland are entitled to asylum because they are fleeing
persecution; but well over half of the arrivals are not. Many land in societies that have done
a bad job of integrating previous waves of foreigners, often from past colonies. The system
can be kind: a surge of some 4m or so Ukrainians fled to EU countries with few problems.
More often it is dysfunctional, turning an emotive policy area into one where everyone
casts blame widely but accepts none.
As often happens, the tangle of EU and national rules has left a mess (this will be familiar to
those who recall how avidly national governments ignored EU budget strictures ahead of
the euro crisis a decade ago). The corollary of internal borders being scrapped in 1995 as
part of the Schengen agreement was that migration failures in one country—for example a
leaky external border—would affect others in the passport-free zone. To ensure that
governments properly guarded their frontiers with non-EU places, migrants crossing into
the bloc illegally were to be processed by the country in which they had first set foot.
Known as the Dublin convention, this placed huge burdens on front-line places such as
Greece and Italy. Countries such as Sweden or Germany—where most migrants had hoped
to settle—were able to send migrants who reached them back to where they first arrived.
This was manageable when flows were light. But in the 2010s the numbers spiked as a
result of the Arab spring, war in Syria and chaos in Afghanistan. Mediterranean countries
demanded help from their EU neighbours. None was forthcoming, notably because what
was really needed was for countries to agree to take in migrants themselves, besides those
—numbering more than 1m—who settled in Germany in an intense wave of arrivals in
2015-16. An attempt then at a new migration deal descended into acrimony that still
endures. Several countries in central Europe simply refused to take in any asylum-seekers,
denouncing EU plans to foist mass immigration on an unwilling populace. And thus the
system all but broke down. Southern countries sometimes did little to intercept migrants,
or treated them so nastily that northern authorities balked at sending them back. Schengen,
one of the EU’s signature achievements, has teetered: six countries, including France and
Germany, have restricted passport-free travel.
Things might now change as a result of an unexpected deal between EU governments on
June 8th. For the first time an element of “mandatory solidarity” will apply. Countries
beyond the front lines of migration will have to take in at least 30,000 asylum-seekers a
year; those who refuse will have to pay €20,000 ($21,600) per migrant into an EU fund.
This will ease the burden on Italy and others. In return, the front-line countries will have to
host camps in which some migrants’ asylum claims will be processed—so confirming their
status as border guards for the whole EU, a role they resent. Europe will throw money at
the root causes of migration. A delegation of EU leaders including Giorgia Meloni of Italy
has just been in Tunisia with a promise of financial aid, in the hope of curbing migration if
the fragile country collapses.
Why, after so many years of acrimony, has an agreement suddenly become possible? Vit
Novotny of the Wilfried Martens Centre, a think-tank in Brussels, says it is because the EU
has gained experience in managing big, emotive crises, such as the pandemic, the war in
Ukraine and climate change. In part, lessons have been learned from past failures, such as
to give a way out for countries that refuse to take migrants. But the mood around migration
has changed too. A buoyant labour market means migrants, legal or otherwise, are needed
to staff factories and deliver pizzas.
Barriers to entry
Having shown generosity towards Ukrainians, Europeans are comfortable giving shorter
shrift to others from the rest of the world. The mooted migration deal was possible in part
because Europe is happier than before to be tough on those who reach its shores. Some
migrants, for example those whose countries are not notably dangerous, will be sent back
after a cursory check of their asylum claims, and could end up deported to countries far
from their own. Human-rights groups are unhappy. The EU now talks openly of
withholding aid or nixing trade deals with poor countries if they do not help with
migration, for example by taking back failed asylum-seekers (currently, fewer than one in
five of those denied asylum are successfully deported).
Migration is Europe’s Achilles heel. A place that sees itself as a force for good in the world
resents having to play bad cop when it comes to keeping people out, as it must. But refusal
to face up to the dysfunction of the old system has served nobody well. The agreement
between governments still has some way to go before it becomes EU law—by the end of the
year, it is hoped. An imperfect system that works will be better than a bad one that doesn’t.
■
Read more from Charlemagne, our columnist on European politics:
Albania is no longer a bad Balkan joke (Jun 8th)
Bakhmut and the spirit of Verdun (Jun 1st)
Europe has shaken off Putin’s gas embargo (May 25th)
Also: How the Charlemagne column got its name

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needs-rebooting
Britain
 How to make Britain’s AI dreams reality
 How much is a human head?
 Wage growth, inflation and more place Britain’s central bank in a spot
 Reading the death certificate on Boris Johnson’s political career
Britain’s AI future
How to make Britain’s AI dreams reality
Rishi Sunak’s bet that Britain can prosper from AI requires a new approach
Jun 14th 2023

RISHI SUNAK dreams of Britain becoming an AI superpower. The prime minister says the
technology, the subject of intense global interest thanks to successes of large language
models such as GPT-4, could unlock economic growth and improve sclerotic public
services. AI-related announcements these days gush from Downing Street faster than
commentators can keep up. In March Jeremy Hunt, the chancellor, vowed to spend £1bn
($1.3bn) over five years on AI and supercomputing. In May Mr Sunak met the bosses of
leading AI companies in London. On June 7th, while visiting Joe Biden in Washington, he
said that Britain would host the “first global summit on Artificial Intelligence” this autumn.
His broadest ambitions are well placed. AI has great potential, and Britain has an edge that
could help it to prosper. The country is arguably the foremost location, outside China and
America, to start a new tech company (see chart 1). It is home to important AI outfits, most
notably DeepMind, an AI research lab owned by Alphabet, an American tech giant, and
Stability AI, a generative-AI startup, both in London. Its excellent universities churn out
capable graduates who are keen to toil in AI. In London, too, it has a globally appealing city
that draws investors and high-skilled migrants.
Data collected by its public bodies—crucially that from the enormous National Health
Service (NHS), for example on drug-use outcomes, hospital logistics, or scans of the body
under different conditions—could provide a goldmine for training health-focused AI. The
government also has a decent record of finding ways to use tech well. Just over a decade
ago it launched the Government Digital Service, which digitised public services such as the
issuing of passports or driving licences. That has been copied by governments around
Europe and in America.
But for all the well-intentioned zest for the big new thing, Mr Sunak’s government has yet
to confront reality: enormous hurdles still block Britain’s path towards AI success. AI
systems are built from three ingredients: computation, clean datasets and the work of
people who know how to wrangle vast quantities of both. A successful industry, in turn,
needs the right regulation. Britain has serious difficulties to overcome in all those areas,
and especially in the first two.
The most pressing problem is over “compute”, the term AI researchers use for the vital
infrastructure, lots of computing power, required to train the new sort of AI models. None
of the big three cloud-computing companies—Amazon, Google, Microsoft—has built a
large, advanced cluster of graphical processing units (GPUs) for compute to happen at scale
in Britain (see chart 2). Only Oracle, a relative newcomer to the field, offers a cluster. This is
in part because of Britain’s smallish domestic market and its lack of access to the large one
on its doorstep.
The fate of DeepMind, the country’s most hopeful AI company, illustrates the compute
problem. It had about 80 staff, all in London, when bought by Google (now Alphabet) in
2014. Today it is vastly bigger, with over 15% of its employees in America, mostly at
Alphabet’s headquarters, according to information on LinkedIn, a social-media platform.
For Demis Hassabis, one of DeepMind’s founders, this growth couldn’t have happened with
domestic resources alone: the pressing reason for selling to Google was the need to access
the compute for training models. Today, DeepMind trains them in Oklahoma. What it faced
roughly a decade ago persists today. Pitifully little has been done to tackle the shortfall. The
lack of access to compute remains the biggest problem for AI growth, and for winning the
wider economic benefits of Mr Sunak’s dreams.
Politicians say that they are acting on this. Mr Hunt says he will spend £900m on a
supercomputer, probably at the Edinburgh Parallel Computing Centre, “because AI needs
computing horsepower”. The EPCC is indeed world class in supercomputing for scientific
research. But, sadly, not all such horsepower is created equal. The new computer won’t be
ready before 2026 and the centre has no experience in building the kinds of GPU clusters
used to train large AI models. And whereas the cloud clusters provided by Amazon, Google
and Microsoft (who are also known as hyperscalers) are routinely updated with the latest
chips, the EPCC, in contrast, will be stuck with whatever GPUs it can obtain now. It will then
live with them until 2031, when its funding runs out. That is an eternity in AI time.
Beasts with horsepower
Mark Parsons, an eminent computer scientist who runs the EPCC, is right to say
supercomputers and GPU clusters are increasingly similar beasts, but even he accepts that
the government plan has disadvantages. “The hyperscalers pride themselves in
continuously updating their GPUs,” he concedes, adding that the cost of doing that is too
high for others to match. Others are less polite. For the government to claim a single,
powerful computer in Edinburgh would solve Britain’s compute woes is “borderline
dishonest,” says a well-connected techie who understands the mix of data, compute and
skills required.
An alternative option exists: renting compute. No companies or government agencies are
entirely locked out from using AI. Anyone (at least when a global shortage of chips
eventually eases) may rent time on cloud supercomputers used to train models. Anyone
can download Common Crawl, an internet-scale database on which GPT-4 was trained, and
start training a model. And anyone can use GPT-4 or a host of excellent open-source models
to generate text or code.
“Compute is not like oil,” notes the techie. “You can call Amazon and rent it. It’s a problem
that money solves in perfectly continuous increments. It’s not this magical thing that if you
don’t buy it you can’t have,” he says. Some companies do exactly this. The boss of Stability,
Emad Mostaque, says his firm in London trains its models on Amazon’s compute clusters
based in Ohio and Virginia, for example.
The trouble is that Stability’s behaviour is more exception than rule. Too often, British
officials or companies require—for reasons of politics, national security, privacy or
something else—that their data remain in the country. Neither the Ministry of Defence nor
the NHS, for example, is about to upload sensitive data to foreign clouds. The boss of one
large tech company with several public-sector contracts describes going “on bended knee”
to the hyperscalers, begging for access to compute in Britain. He was offered GPU time in
the Netherlands or Ireland. But without local GPUs, he is not permitted to help his
government customers train or run AI models based on their unique datasets.
Nor is sensitivity about data the only downside to renting compute abroad. Being
physically close to compute at home brings real benefits. AI engineers and companies gain
expertise by experimenting regularly on it. Techies seeking innovations need hands-on
time. “A country generates large benefits beyond access from having technology assets
physically located there. ‘Learning by doing’ and the compounding of process knowledge is
key to having a vibrant deep tech ecosystem and the high value jobs and companies that
come with it,” says Matt Clifford, chair of the Advanced Research and Invention Agency, a
government skunkworks that helps to fund research in tech.
The most ambitious progress, therefore, depends on getting hyperscalers to set up GPU
clusters in Britain. So how to do that? In the first instance, says one tech boss, Mr Sunak
should know better what to ask for. He could start by launching a “global lobbying unit” to
press for Amazon, Google or Microsoft to set up shop. The government should consider
what hyperscalers would need to build in Britain.
Building entire new datacentres is not necessary. Instead Amazon, Google or Microsoft
could replace servers in their existing (older style) British-based centres with ones that
include the new chips produced by Nvidia, ideally the latest A100 or H100 models.
Obtaining those chips may be the biggest problem in the short term, given a global supply
crunch.
Another challenge would be ensuring sufficient supplies of electricity, at low enough cost
(and ideally green), because training AI models devours a lot of power. Such tasks don’t
look insurmountable, even if there would not be a quick fix. (Though it is hard to imagine it
would take longer than building Mr Hunt’s supercomputer). In the meantime Britain will
have to limit itself to using foreign compute.
The longer the delay, however, the lower the chances of success. Without hyperscale GPU
clusters, another set of British companies misses out: those attempting to supply picks and
shovels in the AI boom. Nigel Toon, the boss of Graphcore, a young British company based
in Bristol which makes AI chips, notes that his American competitors have great
advantages that he lacks in selling their products to local, big stacks of compute.
Unsurprisingly, he also wants the new supercomputer in Edinburgh to favour British
suppliers like his firm. The hour grows late, though. Sequoia, one of Graphcore’s biggest
investors, wrote down the value of its stake to zero in April. Meta, another American tech
giant, has already scooped up some of the Graphcore team. The Bristol firm has plenty of
cash in the bank, but desperately needs to get its chips into data centres.
After the difficulty of the compute desert, the other challenges look more manageable. One
priority is improving the datasets available for AI developers. Data generated by public
agencies should be the most appealing raw material for those working on AI.
Unfortunately, they are too often a mess, including those within the NHS. Data to do with
welfare are no better. Officials say that the computer systems running the Department for
Work and Pensions are so feeble, for example, that six months are needed to adjust
recipients’ benefits for inflation. Trying to build BenefitsGPT atop a creaking 20th-century
infrastructure looks like a fool’s errand.
At least cleaning up the valuable datasets is within the control of the government. Officials
could also look for benefits from generating new ones. “States don’t leverage their only
advantage: the sovereign right to produce data about things companies don’t have,” says
Benjamin Bratton, who has written a book on the state’s relationship with technology. He
observes that states have the means to “produce models of their societies”, but Britain’s
government (like most) lags behind tech companies in being able to model its own people’s
behaviour, the country’s environment and its resources.
The NHS is particularly ripe for a data retrofit, though the road to doing this is littered with
the bodies of politicians and companies who tried and failed. NHS IT, an effort to centralise
medical records that was launched in 2002, ate up at least £10bn before it was quietly
dumped in 2011. New companies are popping up, attempting to solve the problem in a
bitesized manner. At least one new startup wants to be paid to clean up government
datasets, to make them useful for training AI models and to improve the more mundane
services those data flows allow.

The last £100m of Mr Hunt’s £1bn on AI may help with this. It is to be spent through a new
Foundation Model Task-force. The outfit will focus on finding ways to train big models for
the public sector and on making “strategic investments in the full AI stack,” says an official.
That is encouraging, even if the amount of money available is small; training a single large
model once could eat up much of the funds Mr Hunt has set aside. “Sovereigns have the
most interesting leverage on data, for sure,” says the official. The task-force may direct
some of money to kick-starting a data-hygiene industry, something for which there has not,
to date, been a business model.
Making all of this happen in turn requires having enough skilled people around: British
universities produce lots but, given the huge draw of Silicon Valley, there is also a steady
flow of techies across the Atlantic. And as talent flows West, it takes its intellectual
property along. “The reality is that the number of people who have seen GPUs melt because
of 24/7 training jobs is very small,” says Nathan Benaich of Air Street Capital, a London VC
firm. “Certainly they don’t work for the government, and they can’t be hired by the
government to do a deal with the cloud vendors. These are the guys who know how it
works.”
Neither Wild West nor rabbit hole
One step to better retaining talent (as well as attracting investors) is to get the regulation of
AI right. This means avoiding the path that the European Union is expected to follow, with
ever-expanding swathes of horizontal rules, ones that cut across sectors, on how AI can be
used safely. Britain’s existing sector-by-sector, common-law approach, which would
regulate different industries differently, looks like a better bet. Given global anxieties about
the power and impact of AI, “there’s an opportunity for Britain to move quickly and
establish itself as a pragmatic place,” says the tech boss who is struggling to access
compute. Mr Sunak’s summit in the autumn should be a good place to start.
“I do buy the Sunak picture,” says the tech boss. “In keeping with common law. You have
these context-specific regulators. You don’t have broad cross-sectoral statutory
regulations. The EU is not going to do it; it has disappeared down the EU rabbit hole and is
going to be down there for a couple of years. The US is going to be the Wild West. Britain is
the one place that’s going to combine that concern around ethics of models and their
application with a deep pragmatism and openness to innovation. We have courts and
regulators that are globally respected.”
Achieving more of this, and faster, also requires having more people in positions of power
who understand computation. “We lack competence and confidence at the heart of
government,” says one adviser. “The people who run compute policy in the Department for
Science, Innovation and Technology really just don’t understand it. They don’t understand
the difference between general and specific computing.” Hence the trumpeting of a
supercomputer built by computer-science researchers as an answer to the country’s AI
woes.
For an example of what savvy techies with official support can do, look to the United Arab
Emirates. Its government-backed Technology Innovation Institute used Amazon’s cloud to
train an open-source large language model called Falcon which is competitive with the best
models trained by American companies, such as OpenAI. TII grants access to its compute to
people with new ideas for training models and starting companies. Every nerd in the world
has taken notice, and many now contribute their brain power to a project whose benefits—
such as attracting computer graduates to work on AI projects—broadly accrue to the UAE.
The closest thing Britain has to this is Stability, the startup whose models generate
photorealistic images. Its open source Stable Diffusion model produces pictures which have
driven many on the internet into a frenzy (think fake pictures of Donald Trump’s arrest, or
the pope in a Balenciaga jacket). But the gravity of America’s tech scene is exerting itself on
Stability. The firm started in London but the majority of its employees are now in America,
according to LinkedIn data. American backers provided all of its most recent funding.
Mr Sunak’s route to British AI superpowerdom will not run along paths where the most
promising companies add most of their jobs overseas. Much remains to be done to make
Britain more attractive, but the race has already begun and, for now, the country lags. ■
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Costing an arm and a leg
How much is a human head?
The business of chopping up cadavers is important, but too little talked about
Jun 14th 2023 | Nottingham

A HUMAN HEAD will set you back about $640. An arm is less: that costs roughly $430. A
leg, by contrast, is $1,600; while a torso costs around $2,000. A hand, however, is a mere
$300. Postage and packaging, as so often online, add considerably to the cost of these
American imports—at times to the tune of thousands of dollars. And not wholly without
reason, for transporting fresh-frozen corpses can be tricky: they need a lot of ice. They can
defrost at awkward moments. They can puzzle customs officials. But overall, human body
parts come surprisingly cheap: getting an arm and a leg rarely costs an arm and a leg.
There exists a surprisingly lively international trade in dead human bodies for medical
dissection. This trade is rarely discussed and relatively lightly regulated: there is no one
head, or body, that directly oversees the imports of heads and bodies. This trade is also
important, for it allows doctors to practise on real, dead humans before they practise on
real, live ones. As one doctor puts it, “would you rather a surgeon learned on you, or on a
cadaver?”
Most would rather ignore that question altogether. A combination of sanctity and
squeamishness meant dissection was forbidden in Britain until the 16th century, while an
early attempt by two Edinburgh-based entrepreneurs, William Burke and William Hare, to
invigorate the market in corpses (by killing people) merely sullied the reputation of
anatomists. If death remains a taboo then the remains of the dead are even more of one.
This is not, says Peter Dangerfield, the president of the British Association of Clinical
Anatomists, “the sort of thing you’d talk about over…dinner in the evening over a glass of
wine”.
Which is a pity, as cutting up corpses matters. It is not essential to use dead bodies to teach
medical students: computer generated anatomical simulations exist. But for all the digital
brilliance there are still things that flesh and blood can do that computers cannot—such as
making medics faint. Looking at a model “isn’t quite the same as seeing the real thing in
front of you”, says Professor Dangerfield. Corpses offer more muted emotions, too. To hold
a human skull in your hands is, Hamlet-like, to be underwhelmed rather than awed. A head,
emptied of human, is surprisingly small; you will have eaten from more substantial cereal
bowls.
Bodies help with practical considerations as well as emotional ones. Textbooks tend to
offer anatomy that is just that: textbook. Similarly, computer models, like the human kind,
tend to have square jaws, broad shoulders and impressively toothy grins. Reality is much
messier, and the visible variation on humans is as nothing compared with what lies
beneath. Textbooks will tell you that there are three branches coming off the aorta but, says
Claire Smith, head of anatomy at Brighton and Sussex Medical School, it is “really common
to see four [or] to see two branches”. To do their job as well as possible, surgeons need to
be aware of such variations in viscera.
The demand for bodies, then, is there—but in many countries it is not matched by supply.
Around 1,300 donors (anatomists are careful to call the bodies “donors” rather than
“cadavers”) are accepted each year in Britain. But not all that are donated can be used.
Bodies might be rejected for many reasons, including being HIV positive; being too thin; too
tall; too fat; or having an open wound (embalming fluid pours out). At other times, demand
can simply be too sudden to meet: finding 20 human heads in a hurry is hard.
The invisible hand
Which is where the international trade comes in. What determines whether a country is a
net importer of body parts (like Britain) or exporter (like America) is chiefly what form of
consent it allows. Britain allows only first-person consent, by which someone may donate
their own body to science while of sound mind. America allows second-person consent,
through which someone—or the state—can donate a deceased person on their behalf; in
some places, dead prisoners can legally be used.
Second-person consent has its advantages. Give up a relative and you save on funeral fees
(the cost of dying, like the cost of living, has risen) and also on bother, for such companies
are slick operators. “If you are calling for a patient or a loved one that has passed away…”
says a softly-spoken American voice message of one bodybroker, “please press ‘one’ now.”
Technically, such companies do not sell bodies; they merely charge fees for procuring,
handling and shipping them. But to use their services is, for British doctors “a last-resort
sort of situation” according to Professor Dangerfield. Until recently, however, they had little
alternative.
That is changing. At the end of an underwhelming looking corridor in Nottingham City
Hospital, behind a clinical white door, is a large white room. Its temperature is a
refreshingly cool 18°C; its smell is cleanly chemical; its air hums quietly with the sound of
refrigeration. It might be a commercial kitchen—but on a steel tray, beneath a shroud-like
covering, lies a body. And in the freezers around its walls are human legs, arms, heads and
torsos.
This is the National Repository Centre, created in 2011 by a Scottish shoulder surgeon,
Angus Wallace, because he was “unhappy about…the principle of buying body parts from
other countries”. After a slow start (people were “very cautious”) he eventually obtained
the support of his hospital—and a relationship with a local frozen food delivery company
(“Obviously they weren’t allowed to transport body parts at the same time.”) The
pioneering Repository is the result.
Practically, what the Repository does is similar to American firms: it stores bodies, en
masse, for surgeons who need them. The cost of British parts is (depending on currency
movements) slightly lower than American ones: a head is £500; a leg £650. Just as in
America, the cost of each part generally depends on its size: parts tend to be costed by the
kilo rather than by any more emotional evaluation. A leg is pricier because it is bigger, says
Steve Gill, an intensive-care consultant and the current head of the Repository.
But legally, and arguably ethically, Nottingham is different. The Repository (unlike many
American firms) is not for profit and all its donors are just that—willing, first-person
benefactors. Like America, it does not technically sell body parts. Instead, it merely loans
them: when surgeons have finished with the parts they are sent back to Nottingham; each
body is gathered together, cremated and given a committal service. And its transport costs
are small by comparison: hundreds of pounds rather than thousands.
Speak to British medical professionals and they explain that they prefer to use the
Repository because it feels more ethical. Yet there remains a hint of hard-headed
commercialism. Another reason that British surgeons instantly preferred his Repository
was, as Professor Wallace points out, because “we were cheaper”. ■
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Britain’s economy
Wage growth, inflation and more place Britain’s central
bank in a spot
Britons brace for pricier mortgages
Jun 14th 2023

PARTS OF BRITAIN are growing uncomfortably hot. On June 13th the Met Office, a weather
monitoring outfit, gave warning that large swathes of the country were officially in a
heatwave. Data published the same day by the Office for National Statistics (ONS), keeper of
other sorts of official figures, suggest that the labour market swelters, too: private-sector
wages, excluding bonuses, were 7.6% higher than a year before. That was one of the fastest
rates of growth of the past two decades—just shy of a headline inflation rate, including
housing costs, of 7.8% in April.
Economists had expected wage growth to increase after the main minimum wage climbed
by 9.7% at the start of April, from £9.50 ($12) an hour to £10.42. Pay rises were, however,
concentrated in higher-paid sectors. Compared with last year, earnings in finance and
business services were 9.2% higher while those working in hospitality or retail saw median
pay rise by only 5.1%. The ONS has revised up its estimates of wage growth for all three
months.
That is despite the Bank of England’s efforts to chill the labour market. Companies’ demand
for workers, as measured by open vacancies, has lessened. But the economy still added
250,000 jobs in the past quarter and total working hours have at last exceeded their pre-
pandemic level. Labour supply is recovering only gradually. Inactivity due to long-term
sickness, meanwhile, has reached a record high. Following the publication of the figures
Andrew Bailey, the central bank’s governor, told the House of Lords that the recovery in
activity was going “very slowly, frankly.”
Traders expected that the bank will do more to dampen demand. The cost for the
government to borrow for two years reached 4.9%, above its peak in the aftermath of the
disastrous September 2022 mini-budget. That has a knock-on effect on homeowners,
raising costs for anyone renewing or starting a mortgage. Moneyfacts, a data provider, says
the cost of fixing a mortgage for five years has risen to 5.5% a year, up from 5% at the start
of May. Circumstances this time are different. Unlike after the mini-budget, when the pound
collapsed as traders took flight, the currency strengthened against the dollar, which should
help bring inflation down. Rather than fretting about the soundness of the country’s
economic policy, traders reckon inflation is more stubborn and rates will rise further.
That will cause problems. The Office for Budget Responsibility, the fiscal watchdog,
suggests that every percentage-point rise in interest rates reduces the amount the Treasury
has to spend annually by £20bn. Since the chancellor, Jeremy Hunt, delivered his budget in
March the cost of borrowing for ten years has risen by that much. He has little chance to cut
taxes ahead of an election that is due next year.
Faster growth than expected may explain some of the stubborn inflation. It may also be that
the bank’s previous rate rises are having less effect than predicted. New mortgages may be
far more expensive but fewer have them: according to the English Housing Survey, roughly
30% of homes were owned with a mortgage in 2022, compared with 56% in 1993. More of
these mortgages are fixed for a few years, too. The central bank estimates that the effective
rate on mortgages has increased by only 0.7 points, despite the central bank putting up
rates by 4.4 points, since December 2021. It says higher mortgage costs have squeezed
household consumption, in aggregate, by only 0.3%.
That makes the central bank’s job harder. The effect of its previous rate rises will be felt
more strongly over the coming months as more fixed-rate mortgages end. If the bank puts
up rates again it could slow the economy more than it intends. Then again, if it delays then
higher inflation could become more embedded. The Met Office warned that thunderstorms
and flooding could follow the heatwave. Britons should hope a similar fate can still be
avoided for the jobs market.■
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Bagehot
Reading the death certificate on Boris Johnson’s political
career
The political legacy of Britain’s former prime minister has already disappeared
Jun 15th 2023

THE DEATH certificate for Boris Johnson’s career in politics read June 12th. A government
statement appeared that evening appointing Alexander Boris de Pfeffel Johnson as
“Steward and Bailiff of the Three Hundreds of Chiltern”, the title MPs accept, according to
Britain’s absurd constitution, in order to resign. He went because an inquiry into whether
Mr Johnson deliberately misled Parliament found that he had. Not only that, he’d also
impugned the investigating committee and joined a campaign of abuse and intimidation
against it. Mr Johnson faced suspension as an MP for a remarkable 90 days. Given
forewarning of the report, the former prime minister quit.
A funeral for Mr Johnson’s career had taken place some days before in a stuffy conference
centre in Doncaster. The annual meeting of the Northern Research Group (NRG), a cartel of
northern Conservative MPs who owe their careers to Mr Johnson, was supposed to be a
celebration. Instead it was a premature wake.
The miserable gathering was the best place to survey his political legacy. The NRG, rather
than Britain’s departure from the European Union, represented the apogee of Mr Johnson’s
political career. It emerged after the 2019 general election, when the party won an 87-seat
majority under Mr Johnson as voters across northern England backed the Conservatives for
the first time in living memory. In 2005, the Conservatives had 19 northern MPs. Then in
2019, they managed 68, with voters enticed by Mr Johnson’s promise of nothing less than a
realignment of British politics.
Now, however, the realignment has reversed. Conservatives are losing everywhere. But
support is falling fastest in the northern constituencies the party was so proud of winning.
Across the country Labour enjoys a 14-point poll lead. In “Red Wall” constituencies, this
rises to 23 points, according to one pollster. In Doncaster, people knew it. When Bagehot
made politely optimistic noises about the Conservatives’ chances of recovery, a Tory MP
looked at him as if he was insane.
Four years on, northern voters who backed the Tories have little to show for it.
Conservative MPs were happy to give excuses. Sir Jake Berry, an acolyte of Mr Johnson
(with the knighthood to show for it), took aim at the “blob”—the nickname for Whitehall
civil servants. Sir Jake despaired that government spent more digging a single tunnel for
HS2, a railway line from London to Birmingham, than it was prepared to spend on public
transport to Bradford, England’s tenth-biggest city. Curiously, the fact that it was his own
party’s doing went unmentioned.
Problems were more fundamental than mere faulty execution. Not for the first time in his
life, Mr Johnson had made impossible promises. Voters in northern seats were offered four
big pledges: higher spending, lower immigration, no new taxes and Brexit. They received
one: Brexit. And by delivering it, the other three became much harder to achieve. Brexit has
weighed on growth. This meant a government committed to cutting immigration instead
had to boost it, to give the economy a hand. Meanwhile the grand schemes that Mr Johnson
had promised, such as a new rail line between the north’s main cities, were scrapped
because of fiscal pressures worsened by Brexit. Taxes have crept up anyway.
Instead, MPs offered bromides that would be best left in an airport self-help book. “It’s
about being a victor, not a victim,” said Nick Fletcher, the MP for Don Valley, a post-
industrial constituency on the outskirts of Doncaster. It is an admirable sentiment, albeit
one he will struggle to live by. According to polls, Labour has a 90% chance of retaking the
seat. When in doubt, people fall back on the vague boosterism beloved of Mr Johnson.
“Hands in the air if you think the north is awesome,” pleaded one chairwoman at a fringe
event, channelling a children’s television presenter.
Any cause for optimism came, in the self-help vernacular, from a negative place. Voting
Conservative for the first time was a big deal. “They want to be proven right,” said Ben
Houchen, the mayor for Tees Valley, a Johnson ally freshly ennobled in Mr Johnson’s
resignation honours list. Shy Tories have won elections for the Conservatives before. Now
the party is banking on obstinate ones. Mostly, however, Conservatives are hoping that
Labour screws up. “I guarantee Labour is going to shoot themselves in the foot,” says the
soon-to-be Lord Houchen.
Labour will have to lose because the Conservatives are not trying to win. The party is on
defensive manoeuvres. That means placating voters in the south-east. In the latest budget,
the government promised more money for child care, which is most unaffordable in the
south-east. Likewise, pension reforms that let people snuffle away £60,000 per year tax-
free were sold as a boost for surgeons, but will mainly go to bankers in Surrey. The
Conservatives need to win voters in the north of England to hold power. The party needs to
maintain voters in the south to exist.
I know it’s over and it never really began
Rishi Sunak, Mr Johnson’s successor, talks a good game when it comes to the north. He
wears the fact he represents a northern seat rather heavily, labelling himself a “prime
minister for the north”. The seat is less Red Wall than dry-stone wall: his patch largely
consists of two national parks. But the sweeping promises of Mr Johnson’s era are gone.
Prosaic achievements are heralded. There will be no new railway between the north’s
badly connected cities, but the Treasury has opened an office in Darlington, a town near Mr
Sunak’s constituency.
Instead, Mr Sunak’s speech to the delegates in Doncaster became an accidental eulogy for
the form of Conservativism that Mr Johnson personified in 2019 but which is dead today.
“There is no route to electoral success without you,” said Mr Sunak. He is right. It was
meant to be a call to arms, but came across as an admission of defeat. Mr Johnson is gone.
His main political achievement will not live on. ■
We’re hiring (June 12th 2023). The Economist is looking for a Britain economics writer,
based in London. For details and how to apply, click here.
Read more from Bagehot, our columnist on British politics:
British politics is littered with fake taboos (June 8th)
Britain’s new political sorcerer: the Reform Fairy (May 31st)
British voters want more immigrants but less immigration (May 25th)
Also: How the Bagehot column got its name

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johnsons-political-career
International
 India’s diaspora is bigger and more influential than any in history
Making it as migrants
India’s diaspora is bigger and more influential than any in
history
Adobe, Britain and Chanel are all run by people with Indian roots
Jun 12th 2023 | NEW YORK

HAVING JUST surpassed China as the world’s most populous country, India contains more
than 1.4bn people. What’s more, its migrants are both more numerous and more successful
than their Chinese peers. The Indian diaspora has been the largest in the world since 2010,
and is a powerful resource for India’s government.
Of the 281m migrants spread around the globe today—generally defined as people who
live outside the country where they were born—almost 18m are Indians, according to the
latest UN estimates from 2020 (see chart 1). Mexican migrants, who comprise the second-
biggest group, number some 11.2m. Chinese abroad come to 10.5m.
Understanding how and why Indians have triumphed abroad, whereas Chinese have
tended to sow suspicion, illuminates geopolitical faultlines. Comparing the two groups also
reveals the extent of Indian achievement. The diaspora’s wins both promote India’s image
and benefit its prime minister, Narendra Modi.
Migrants have stronger ties to their motherlands than their descendants born abroad, and
so build vital links between their adopted homes and their birthplaces. In 2022 India’s
inward remittances hit a record of almost $108bn, around 3% of GDP, more than in any
other country. And overseas Indians with contacts, language skills and know-how boost
cross-border trade and investment.
Huge numbers of second-, third- and fourth-generation Chinese live abroad, notably in
South-East Asia, America and Canada. But in many rich countries, including America and
Britain, the Indian-born population exceeds the Chinese-born.

Indian-born migrants are found across the world (see chart 2), with 2.7m living in America,
more than 835,000 in Britain, 720,000 in Canada, and 579,000 in Australia. Young Indians
flock to the Middle East, where low-skilled construction and hospitality jobs are better
paid. There are 3.5m Indian migrants in the United Arab Emirates and 2.5m in Saudi Arabia
(where the UN counts Indian citizens as a proxy for the Indian-born population). Many
more dwell in Africa and other parts of Asia and the Caribbean.
India has the essential ingredients to be a leading exporter of talent: a mass of young
people and first-class higher education. Indians’ mastery of English, a legacy of British
colonial rule, probably helps, too. Only 22% of Indian immigrants in America above the age
of five say they have no more than a limited command of English, compared with 57% of
Chinese immigrants, according to the Migration Policy Institute (MPI), an American think-
tank.
The way things were
Since Indian independence in 1947 there have been several waves of migration to the rich
world, enabling the diaspora to grow in number and might. The first, in the years following
the second world war, involved low-skilled workers largely from the states of Gujarat and
Punjab. A multitude went to Britain, which was facing acute labour shortages. They worked
in tough places, such as textile mills and other industrial outfits. Many Indians whose
families had moved to eastern Africa in the colonial period as indentured labourers later
went west, too. America managed to attract a host of talented individuals by overhauling its
immigration laws in 1965. Quotas that barred Indian nationals were out, new rules that
favoured highly skilled migrants were in. Australia and Canada then followed suit with
batches of similar regulations.
As the Indian diaspora has grown, it has also become more diverse. An increasing number
of Indians from poor and marginalised backgrounds are moving abroad. Of Indian-
Americans that identify with a caste group, in a 2020 survey published by the Carnegie
Endowment for International Peace, a think-tank in Washington, DC, 17% described
themselves as lower-caste. Migrants no longer come mainly from Gujarat and Punjab. South
Indians are emigrating in droves. The American consulate in the southern city of
Hyderabad is the largest outpost that America has in southern Asia. Meanwhile, the fastest-
growing language in America is Telugu, which is spoken almost exclusively in the south of
India.
Brains on the move
As India’s population expands over the coming decades, its people will continue to move
overseas to find lucrative jobs and to escape its ferocious heat. Immigration rules in the
rich world filter for graduates who can work in professions with demand for more
employees, such as medicine and information technology. In 2022 73% of America’s H-1B
visas, which are given to skilled workers in “speciality occupations” such as computer
scientists, were won by people born in India.

Many of India’s best and brightest seem to prepare themselves to migrate. Arvind
Subramanian, a former economic adviser to the Indian government, says that they are, in
the economic jargon, “highly positively selected migrants”. Consider the findings of a paper
soon to be published in the Journal of Development Economics by Prithwiraj Choudhury of
Harvard Business School, Ina Ganguli of the University of Massachusetts Amherst and
Patrick Gaule of the University of Bristol. It analysed the results of students who took the
highly competitive entrance exams for the Indian Institutes of Technology, the country’s
elite engineering schools, in 2010. Eight years later, the researchers found that 36% of the
1,000 best performers had migrated abroad, rising to 62% among the 100 best. Most went
to America.
Another study looked at the top 20% of researchers in artificial intelligence (defined as
those who had papers accepted for a competitive conference in 2019). It found that 8% did
their first degree in India. But only a tiny number of researchers now work there.
In America almost 80% of the Indian-born population over school age have at least an
undergraduate degree, according to number-crunching by Jeanne Batalova at the MPI. Just
50% of the Chinese-born population and 30% of the total population can say the same. It is
a similar story in Australia, where almost two-thirds of the Indian-born population over
school age, half the Chinese-born and just one-third of the total population have a
bachelor’s or higher degree. Other rich countries do not collect comparable data. But
looking at the figures that are available, the same pattern seems to hold almost
everywhere.
Joseph Nye, a Harvard professor who coined the term “soft power“ more than three
decades ago, notes that such power is not automatically created by the mere presence of a
diaspora. “But if you have people in the diaspora who are successful and create a positive
image of the country from which they came, that helps their native country.” And, as he
adds, “India has a lot of very poor people, but they are not the people coming to the United
States.” According to Henley and Partners, a consultancy, more dollar millionaires (about
7,500) emigrated from India last year than from anywhere but China and Russia.
Indeed Indian migrants are relatively wealthy even in the countries they have moved to.
Indians are the highest-earning migrant group in America, with a median household
income of almost $150,000 per year. That is double the national average and well ahead of
Chinese migrants, with a median household income of over $95,000. In Australia the
median household income among Indian migrants is close to $87,000 per year, compared
with an average of roughly $62,000 across all households and about $58,000 among the
Chinese-born.
The might of the Indian diaspora is increasingly on display at the pinnacle of business and
the apex of government. Devesh Kapur and Aditi Mahesh at Johns Hopkins University
totted up the number of people with Indian roots in top jobs, including those born in India
and those whose forebears were. They identified 25 chief executives at S&P 500 companies
of Indian descent, up from 11 a decade ago. Given the large number of Indian-origin
executives in other senior positions at these companies, that figure is almost sure to rise
further.
Up at the top
It is only recently that Indians abroad have begun to win such prestigious posts. Meghnad
Desai was one of a handful of Indians at American universities when he won a scholarship
to the University of Pennsylvania in 1960. He points out that the diaspora wasn’t rich or
powerful back then. “I remember people saying: ‘Americans will never have Indians in top
positions’,” he recalls.
In the tech industry, Vinod Khosla, co-founder of Sun Microsystems, a computer-maker,
explains that it was difficult for Indian entrepreneurs to raise money in 1980s America.
“You were people with a funny accent and a hard-to-pronounce name and you had to pass a
higher bar,” he says. Now Adobe, Alphabet, Google’s corporate parent, IBM and Microsoft
are all led by people of Indian descent. The deans at three of the five leading business
schools, including Harvard Business School, are as well.
The Indian diaspora is also thriving in the world of politics and policy. The Johns Hopkins
researchers counted 19 people of Indian heritage in Britain’s House of Commons, including
the prime minister, Rishi Sunak. They identified six in the Australian parliament and five in
America’s Congress. America’s vice-president, Kamala Harris, was raised by her Tamil
Indian mother. And Ajay Banga, born in Pune in western India, was chosen to lead the
World Bank last month after running MasterCard for more than a decade.
The Chinese diaspora is the only other group with comparable influence around the world.
An analysis by The Economist conducted as the covid-19 pandemic began estimated that
more than three-quarters of the total $369bn of billionaire wealth in South-East Asia is
controlled by huaqiao, a Mandarin term for the ethnic Chinese who are citizens of other
countries.
In Europe and across North America the picture is somewhat different. There are fewer
bosses of Chinese descent running S&P 500 companies than there are bosses of Indian
descent. That may be because many of the most successful business types choose to stay in
China, working for Chinese funds and investing in fast-growing Chinese businesses, like
Xiaomi, a smartphone-maker, Baidu, an internet-search giant, and ByteDance, the Beijing-
based parent company of TikTok, a social-media app crammed with videos.
Indian rules
Moreover, as America drifts towards a new cold war with China, Westerners increasingly
see the country as an enemy. The covid-19 pandemic, which began in the Chinese city of
Wuhan, probably made matters worse. Recent scares—the appearance of a Chinese spy-
balloon over America in late January, and reports this month that China had reached an
agreement with the Cuban government to set up an electronic-eavesdropping station on
the island—have further sharpened the image of China as a hostile adversary. In a recent
survey of Americans’ attitudes by Gallup, a pollster, 84% of respondents said they viewed
China mostly or very unfavourably. On India, only 27% of people asked said they held the
same negative views.
This mistrust of China percolates through policy. Huawei, a Chinese telecoms-equipment
manufacturer suspected in the past of embargo-busting and of being a conduit for Chinese
government spying, has been banned in America. Some European countries are following
suit. Stringent reviews of foreign investments in American companies on national-security
grounds openly target Chinese money in Silicon Valley. Individuals found to be doing
China’s bidding, including one ex-Harvard professor, have been punished. Indian firms do
not face such scrutiny.
From London with love
The Indian government, by contrast, has been—at least until Mr Modi and his Hindu
nationalist Bharatiya Janata Party (BJP) took over—filled with people whose view of the
world had been at least partly shaped by an education in the West. India’s first prime
minister, Jawaharlal Nehru, studied at Cambridge. Mr Modi’s predecessor, Manmohan
Singh, went to both Oxford and Cambridge. When Mr Modi took the reins, the central bank
was run by Raghuram Rajan, a former IMF official and professor at the University of
Chicago.
India’s claims to be a democracy steeped in liberal values help its diaspora integrate more
readily in the West. The diaspora in turn then binds India to the West. A stunning example
of this came in 2005, when America struck an agreement that, in effect, recognised India as
a nuclear power, despite its refusal to sign the Nuclear Non-Proliferation Treaty (along
with Pakistan and Israel). Lobbying and fundraising by Indian-Americans helped push the
deal through Congress.
The Indian diaspora gets involved in politics back in India, too. Ahead of the 2014 general
election, when Mr Modi first swept to power, one estimate suggests more than 8,000
overseas Indians from Britain and America flew to India to join his campaign. Hordes of
others used text messages and social media to turn out BJP votes from afar. They
contributed unknown sums of money to the campaign.
It is Mr Modi himself that interests many. When he visited Australia in May the highlight of
his trip was a rally for the Indian diaspora held at a 21,000-seat stadium fit for a rock star.
In his speech, Mr Modi celebrated Indian-Australians as a “living bridge” between the two
countries. Courting the diaspora is likely once again to be at the top of Mr Modi’s agenda
during his forthcoming state visit to America. His previous audiences with Indian-
Americans include a rally for 18,000 at Madison Square Garden in New York in 2014 and a
“Howdy Modi” rally for 50,000 in Houston back in 2019.
Away from any crowds, Joe Biden will play host to talks with Mr Modi on June 22nd. The
pair will discuss their countries’ “commitment to a free, open, prosperous and secure Indo-
Pacific”, among several other topics. The discussions may be difficult. Under Mr Modi,
India’s ties to the West have been tested. Reasserting its status as a non-aligned power,
India has refused to condemn Russia’s invasion of Ukraine, and stocked up on cheap
Russian oil and fertiliser. India has talked loudly of promoting the interests of developing
countries as chair of the G20 forum this year. It is also an important voice in the BRICS
grouping, a forum which includes Brazil, Russia, China and South Africa alongside India.
The club is considering whether to let Saudi Arabia and Iran join.
Mutually assured attraction
At home, officials spew reams of nationalist rhetoric that pleases right-wing Hindu
hotheads. And liberal freedoms have come under attack. In March Rahul Gandhi, who is the
leader of the opposition Congress party, was disqualified from parliament on a spurious
defamation charge after an Indian court convicted him of criminal defamation. Meanwhile
journalists are harassed and their offices raided by the authorities.
Mr Nye of Harvard warns that the chauvinist brand of Hindu nationalism Mr Modi is
pushing in India puts the country’s reputation at risk. Next year’s elections are likely to see
rising religious tensions and a further erosion of democratic norms. “India likes to boast
that it is the largest democracy in the world,” Mr Nye says. “To the extent that it doesn’t live
up to that, it hurts Indian soft power.”
But overseas Indians help limit the damage and ensure neither India nor the West gives up
on the other. Mr Modi knows he cannot afford to lose their support and that forcing
hyphenated Indians to pick sides is out of the question. At a time when China and its friends
want to face down a world order set by its rivals, it is vital for the West to keep India on-
side. Despite its backsliding, it remains invaluable—much like its migrants. ■

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Business
 Is doing business in China becoming impossible for foreigners?
 Oracle is making Larry Ellison the world’s third-richest man
 It is make or break for Intel’s giant bet on Germany
 The upside of workplace jargon
 Which sport is the best business?
 Why self-storage is turning into hot property
 How long will the travel boom last?
 What Tesla and other carmakers can learn from Ford
Spooked
Is doing business in China becoming impossible for
foreigners?
Selective enforcement of draconian data and spying laws is scaring Western
companies
Jun 11th 2023 | Shanghai

JUDGING PURELY by the steady stream of Western executives crossing the Pacific, China is
picking up where it left off before the onset of covid-19. In the past couple of weeks Elon
Musk of Tesla, an electric-car maker, met officials in Beijing on his first trip to the country
in more than three years. At the same time Jamie Dimon of JPMorgan Chase, America’s
biggest bank, was hosting a conference in Shanghai that brought together more than 2,500
clients from around the world. Hundreds of business bigwigs have made similar trips in the
past three months. President Xi Jinping’s top officials have been greeting them with the
mantra that, after a pandemic hiatus, “China is back in business.”
Once the executives settle in, though, many are finding the place a lot less welcoming. In
April the government strengthened an already strict anti-espionage law and, according to
the Wall Street Journal, put China’s spymaster in charge of cracking down on security
threats posed by American firms. Officials invoke hazily worded data-related laws
introduced during the pandemic, which perplex many foreign businesses, American or
otherwise. Something as innocent as sharing an email signature, considered under some
interpretations of Chinese data laws as personal information, with a recipient abroad can
get you into hot water.
The space for foreign businesses in China was already being constrained by restrictions
that their own governments, led by America’s, have placed on Chinese firms amid
geopolitical tensions; more than 9,000 Chinese firms have been hit by Western sanctions,
according to Wirescreen, a data provider. Now Mr Xi is shrinking businesses’ room for
manoeuvre further. Worse, even cautious movements within the space that remains can
invite disaster.
A spate of spectacular cases has sent chills down the spines of foreign executives. In March
five local employees of Mintz Group, an American due-diligence firm, were arrested over
what many suspect was a potential breach of laws relating to data security. A month later
the authorities launched an investigation into Bain, a consultancy with headquarters in
Boston, over apparently similar transgressions.
In May state television aired footage of police rummaging through the offices of Capvision,
a multinational research firm. At JPMorgan’s conference, cocktail-party chatter turned,
sotto voce, to the case of a Chinese banker well known in foreign business circles, whose
detention would, as it emerged during the evening, be extended for three more months for
unspecified reasons. Mintz said it “always operated transparently, ethically and in
compliance with applicable laws and regulations”. Bain said it was “co-operating as
appropriate with the Chinese authorities”. Capvision vowed to resolutely abide by China’s
national-security rules.
It is unclear why the authorities took aim at the advisers; rumours are rife that it had to do
with their sleuthing in Xinjiang, where America accuses China of using forced labour, and in
China’s semiconductor industry, which it hopes to hobble by withholding advanced chips.
In the absence of clarity, and facing pressure from governments at home, some foreigners
are calling it quits. On June 6th Sequoia Capital, a stalwart of Silicon Valley’s venture-capital
industry, decided to part ways with its Chinese arm, which will become a separate firm. On
June 10th the Financial Times reported that Microsoft would move a few dozen top
artificial-intelligence researchers from China to Vancouver, in part to avoid them being
poached by Chinese big-tech rivals, but also for fear of harassment by Chinese authorities.
The boss of a Swiss asset manager whispers, “I don’t think [China] is investible, honestly.”
Many foreigners concur. Still, for most of them China remains too big a prize to forsake.
Those that stay put must therefore learn to live with not one pushy superpower, but two.
The travails of Mintz, Bain and Capvision struck a nerve in foreign boardrooms because
they targeted the investigators, consultants, lawyers and other advisers on whose expertise
outsiders depend to find their feet in faraway places. Clients most commonly enlist such
intermediaries in order to understand whom they are doing business with, to identify any
hidden risks and to lubricate transactions.
The Communist authorities have always looked askance at such work and put in place rules
on data-sharing and state secrets that, if enforced, could be used to curb it. Practitioners
report that this year enforcement has become much more common. In areas like Xinjiang
and chipmaking, corporate investigations now appear entirely verboten. Details on critical
inputs for the broader technology sector—which could become targets of fresh American
sanctions—increasingly seem to be treated as state secrets. So is personal information
about state-linked businesspeople, who often find themselves in the sights of due-diligence
firms. This list of forbidden subjects is unlikely to be exhaustive. And it is almost certainly
lengthening.
WIND Information, a Chinese firm employed by banks and brokers around the world to
provide financial information on Chinese companies, has been told by the authorities to
stop offering some of its services to foreigners, ostensibly lest they breach data-security
rules. So has Qichacha, another data provider. A number of Chinese analysts working for
foreign companies have been visited by the authorities and pressed to present a rosier
picture of China. Officials’ fears that regulatory disclosures in America could divulge secrets
about Didi Global’s technology suppliers or the whereabouts of sensitive passengers were
potent enough to force the ride-hailing firm to delist from New York last year.
When corporate muckrakers try to dig up information beyond what is publicly available, or
volunteered by firms, things get thornier still. Asking too many questions about a company
that turns out to have ties to powerful officials can prove especially hazardous for a nosy
adviser. As one consultant recounts, such questions just “shouldn’t be asked”. Many now
turn down requests for “enhanced” due diligence, which can leave clients in the lurch.
Even humdrum administrative and legal footwork required in most business dealings, from
writing emails to exchanging bank-account information, is becoming fraught. Whereas,
historically, foreign firms worried most about leakage of their intellectual property to
Chinese rivals, now they fret about the flow of information from their Chinese partners to
them, notes Diana Choyleva of Enodo, a research firm in London. The boss of a global law
firm says he can technically no longer correspond with his partners in China. When the
Chinese company in question has links to the state, as many do, any of its information could
be classified as a state secret.
Foreign companies are scrambling to navigate this perilous new environment. To avoid
accidental data leaks, some are considering developing software to parse all exchanges of
information, including contracts and emails. They will probably also need to hire and train
people to review any data that is flagged by the computer as sensitive. Experts compare it
to the anti-money-laundering systems which banks and other multinationals began putting
in place more than a decade ago.
Many Western firms have also started drawing up “action plans” for dealing with the new
risks. These are being devised by in-house counsel or outside law firms, often at the behest
of multinational companies’ regional offices, which are keen to demonstrate preparedness
to headquarters back home. The scope and depth of these plans make them unlike the ones
that firms draw up routinely, says Benjamin Kostrzewa of Hogan Lovells, a law firm. They
are based on a broad survey of fast-changing Chinese laws, such as those concerning data,
intellectual property and national security, as well as of the equally protean American
restrictions. Their provisions are informed by an evaluation, so far as one is possible, of any
Chinese companies and individuals involved.
Contingencies that the plans consider include reviewing office leases, employment
contracts and other legal responsibilities if a firm were suddenly forced to pull out of China.
Companies are also more careful about sending executives to China. A mining executive
describes how any visit to the mainland is now preceded by lengthy meetings with the
company’s lawyers to discuss how to behave in the event of an arrest or other run-in with
Chinese officialdom. Without such training, the executive says, the compliance department
would not sign off on a Chinese trip.
To ensure compliance with China’s data laws, meanwhile, joint ventures between foreign
and Chinese firms have been restructuring how they process and store information,
explains an adviser. Many joint ventures which are ostensibly run as a single unit are
divvying up data-hosting to make sure that the foreign partner does not end up holding
anything that could be considered a state secret. Any Chinese intellectual property is kept
on Chinese servers.
Cash trapped
Concerns are mounting, too, over the threat of multinationals’ money being seized or
frozen in the event of a conflict between China and the West, says Mark Williams of Capital
Economics, a research firm. In response, advisers say that some foreign firms are putting in
place corporate structures that would reduce their overall financial exposure to the
country and its capital controls. One ruse is to set up new companies in China that use
money borrowed from Chinese banks to buy assets held by the foreign firm’s original
Chinese subsidiary. That original company then remits the proceeds of the sale overseas.
Should those assets be seized, the liabilities sit with Chinese banks, not with the foreign
multinational or its bank abroad.
Such arrangements are possible thanks to a series of rule changes in the past four years
that relaxed criteria for lending to newly formed foreign entities. Though the structures
remain rare for now, some advisers see them as a sign of deteriorating confidence. This
confidence is almost certain to deteriorate further, as foreign companies determined not to
give up on their Chinese dream find themselves in an impossible situation. They must
comply with Western sanctions and, at the same time, with China’s ever more draconian
laws and Mr Xi’s desire to control cross-border flows of information. To make the system
work, either China or the West must turn a blind eye. China used to be willing to do this for
the sake of economic growth. No longer. ■
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Ahead in the clouds
Oracle is making Larry Ellison the world’s third-richest man
Can the software giant’s winning streak last?
Jun 13th 2023

AT 78 LARRY ELLISON, co-founder and chairman of Oracle, is still brimming with energy.
During the business-software firm’s latest quarterly earnings call on June 12th the
septuagenarian rhapsodised about artificial intelligence (AI) and the latest cloud-
computing technology. He has good reason to be in high spirits. Over the past year Mr
Ellison’s wealth has rocketed to more than $150bn, according to Forbes, a magazine that
tracks such things, on the back of Oracle’s soaring share price. Mr Ellison has now edged
past Jeff Bezos, the founder of Amazon, as the world’s third-richest man.
Like Mr Ellison, Oracle might be regarded as a dinosaur of American tech. It began life in
1977 as a database-software business, later expanding into applications for business
functions such as finance, sales and supply-chain management. As a latecomer to the cloud,
however, Oracle has in recent years ceded market share in its core enterprise products to
Amazon, Google and Microsoft, three cloud giants that have aggressively expanded their
business-software offerings. Oracle’s slice of the database-software market, which remains
its bread and butter, fell from 43% in 2012 to 19% in 2022, according to Gartner, a
research firm.
Now the business seems to be turning a corner. To catch up with rivals, Oracle has been
investing heavily in cloud computing. Capital expenditures in the past 12 months added up
to $8.7bn, or 17% of sales, up from just 5% two years ago. Last year it acquired Cerner, a
cloud-based health-records business, for $28bn. The upshot has been significant growth in
sales of its cloud-based products, which were up by 33% year on year in the most recent
quarter, or 55% after including the Cerner acquisition. These sales have grown much faster
than the cloud divisions of Amazon, Google and Microsoft. Oracle also outwitted them to
snatch the cloud contract to host the American operations of TikTok, a Chinese-owned
short-video app to which millions of youngsters are glued.

Investors like what they see. Oracle’s share price has risen by 73% in the past 12 months,
well ahead of the tech-heavy NASDAQ index (see chart). The company’s market value is
$330bn, making it the world’s fourth-most-valuable business-software provider, behind
only Microsoft, Alphabet (Google’s corporate parent) and Amazon.
Mr Ellison’s company is now hoping to cash in on the latest craze in tech: generative AI of
the sort that powers ChatGPT and other content-creating bots. In March it became the first
cloud provider to offer access to the DGX Cloud, a supercomputer designed by Nvidia, an
American chipmaker, specially for training AI models. During the latest earnings call Mr
Ellison announced that Oracle will also be launching a new service with Cohere, an AI
startup in which it recently took a stake, to help clients use their own data to build
specialised generative-AI models. Meanwhile, the firm is embedding generative-AI features
into its various business applications.
There is one potential snag. Over the past five years Oracle has returned $100bn in cash to
shareholders through share buy-backs, reducing its share count by around a third. Mr
Ellison, who has held onto his shares, has been among the biggest beneficiaries—his slice of
the company jumped from 28% to 42% in the period. To fund those repurchases, and its
cloud investments, the company has taken on hefty debts. Its net debt is now more than
four times its earnings before interest, tax, depreciation and amortisation (a figure above
three is considered risky). Indeed, the firm’s debts now exceed the book value of its assets,
leaving it with negative shareholder equity on its balance-sheet, a telltale sign of
dangerously high leverage.
For now, the company has time on its hands. Fixed interest on its debts means it has
suffered little from rising benchmark rates. Its corporate bonds are priced by the market at
a yield of 5.7%, but require coupon payments of only 3.8%. And just one-fifth of its debt
will mature in the next three years. In recent quarters it has slowed share repurchases and
started to chip away at its debt mountain.
The hope will be that the heavy investments made in the past two years will allow the
company to grow out of its debt. If it pays off, Mr Ellison may continue his climb up the
world’s rich list. Either way, Oracle is not about to go extinct. ■
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worlds-third-richest-man
The Magdeburg gambit
It is make or break for Intel’s giant bet on Germany
The American chipmaker’s capital spending would constitute the biggest foreign direct
investment in German history
Jun 15th 2023 | BERLIN

RARELY DO GERMANY’S top economists see eye to eye on a big economic-policy

controversy. But when it comes to the government’s decision to spend billions on subsidies
for Intel’s mega semiconductor factory in Magdeburg, Reint Gropp of the Halle Institute for
Economic Research, Marcel Fratzscher of the German Institute for Economic Research and
Clemens Fuest of the Ifo Institute all agree. They consider lavishing billions on the
American firm a spectacular waste of taxpayers’ money.
The wonks’ consensus is falling on deaf ears. Olaf Scholz’s centre-left coalition government
has agreed to prop up Intel’s mega-site in Magdeburg to the tune of €6.8bn ($7.4bn), a big
chunk of Intel’s €17bn investment in the east German town. Christian Lindner, Germany’s
pro-market finance minister, recently said there was no money in the budget to meet Intel’s
demands for an extra €3bn or so in state aid to close a “cost gap” caused by the higher
prices of energy and construction. Yet the Social Democratic chancellor appears open to
loosening the purse-strings, provided that Intel expands its project.
Pat Gelsinger, Intel’s boss, is touring Europe in mid-June. According to sources close to the
government, he is expected to meet Mr Scholz in Berlin on June 19th to make his case. The
talks could seal the fate of the giant endeavour, which would be the biggest foreign direct
investment in German history. He will also visit Magdeburg, where 30 Intel employees,
including Bernd Holthaus, head of personnel in Germany, are already beavering away.
Mr Gelsinger’s supporters in the chancellery and the economy ministry argue that Intel’s
site will create an innovation hub and spawn up to five jobs for each of the 3,000
permanent high-tech positions that Intel plans to create in Magdeburg (in addition to the
7,000 temporary construction workers it will need to build the thing). Moreover, its
advocates argue, the chip plant will help to reach the EU’s goal of increasing the bloc’s
share of global chip production from around 10% today to 20% by 2030. This would
reduce Europe’s dependence on suppliers in Taiwan, South Korea and other countries in
the backyard of an increasingly pushy China.

Critics of the project say that subsidising each Intel job to the tune of €1m (if you include
construction workers) is lunacy, especially in a region where unemployment is low and
where local industrial firms are having trouble recruiting staff. They doubt the lofty
estimates of job creation. Many economists reckon that in the best-case scenario one job at
Intel might create 1.5 other jobs. Mr Gropp thinks it makes more sense for Germany to buy
chips from America (which is already lavishing subsidies on chipmakers).
Does the subsidy make sense for Intel? The firm needs a fillip. In recent years it has fallen
behind rivals such as TSMC of Taiwan and Samsung of South Korea in cutting-edge
technology. In April it reported a quarterly net loss of $2.8bn, its steepest ever, as global
demand for many types of chip cooled. Its market value of $148bn is just over half what it
was in early 2021. Mr Gelsinger believes that the way to reverse the decline is by investing
heavily in new capacity (see chart). At a time when chips are no longer selling like hot
cakes, that is a risky gamble—with or without German generosity. ■
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bet-on-germany
Bartleby
The upside of workplace jargon
Acronyms and slang can help build cultures and improve efficiency
Jun 15th 2023

AN IDEA TO run up the flagpole: jargon gets an overly bad press. Not the kind of jargon that
involves using the words “flagpole” and “run up”, but the kind that binds teams together.
The kind that is exemplified by the term “nub”. In the very unlikely event that you find
yourself on board a submarine but are not a member of the crew, you will be a nub.
A nub is a “non-useful body”—someone who uses up oxygen, food and space and offers
nothing in return. A nub is someone who is not on the team, and the opacity of jargon gives
the word extra bite. Only insiders know what it means.
Useful crew members have their own names. This cast of characters includes nukes, coners,
shower techs and other bubbleheads whose jobs may include looking after Sherwood
Forest. (If you need to ask, you are a nub.) Although submarines are unusual environments,
the use of jargon to signify specific practices, objects and people is prevalent in workplaces
everywhere.
Some of this jargon is not much more than slang. The “blue goose” is what White House
staffers call the travelling presidential lectern. The “grid” is the nickname for the diary of
planned policy announcements by the British government. Doctors have a private
vocabulary for patients when they are out of earshot. “Status dramaticus” is how some
medics diagnose people who have not much wrong with them but behave as though death
is nigh; “ash cash” is the fee that British doctors pocket for signing cremation forms.
Such shared language is not exactly high-minded but it does serve a useful purpose—
creating a sense of tribe and of belonging. Each company generates its own particular
lexicon. The GE logo is also known as “the meatball” by people inside the industrial firm. At
Stripe, a digital-payments company, hiring-committee meetings are called “tropes”. A
“fourth leader” is what journalists at The Economist call lighthearted opinion articles. No
one knows why; it is usually the fifth of five editorials. But the knowing is enough. The code
confers membership.
Jargon can spread for practical reasons as well as cultural ones. The airline industry has the
usual slang, from “deadheads” (off-duty crew on a commercial flight) to “George” (a
common nickname for the autopilot). But codifying knowledge in agreed ways can be a
serious business. Well over 1,000 passengers and crew lost their lives between 1976 and
2000 in accidents where misunderstandings over language were found to have played a
role. Pilots use highly standardised and scripted terminology in order to reduce the scope
for potentially fatal errors.
Terms can arise as a way of increasing efficiency. A paper published last year, by Ronald
Burt of Bocconi University and Ray Reagans of the Massachusetts Institute of Technology,
looked at how jargon emerges naturally among groups. It describes an experiment in which
volunteers are assigned to teams. Each team member is separately assigned a set of
symbols, and one symbol is common to all of them. Team members must quickly identify
this shared symbol by sending messages to each other that describe what they have been
given.
To start with, the teams use quasi-sentences and generic words to get across what they are
seeing (one symbol “looks like its leg is out in a kicking motion”). Soon enough everyone in
the team is calling it “kicking man” or “kicker”. As rounds progress a tacitly agreed
vocabulary allows teams to identify the common symbol more and more quickly. Different
teams alight on different forms of jargon for each symbol, but the effect is the same:
everyone knows what is meant and things get done faster.
Jargon can be desperately unhelpful. The criminal-justice system is made more
intimidating, to victims and suspects alike, by confusing terminology. Conversations
between doctors and patients go much better when everyone understands each other. One
reason why management jargon arouses so much irritation is because it usually substitutes
for something that was doing the job perfectly well. No one hears the words “Let’s talk
about it later” and feels baffled. Plenty of people do hear the phrase “Let’s put a pin in it”
and wish they had a sharp object to hand.
There is an awful lot of non-useful blather out there, in other words. But the fact that jargon
emerges spontaneously and repeatedly suggests it has its merits. In the right circumstances
it can help build a culture and act as a useful shorthand. If you think all jargon is worthless,
it may be time to circle back. ■
Read more from Bartleby, our columnist on management and work:
Why employee loyalty can be overrated (Jun 8th)
How to beat desk rage (Jun 1st)
Why are corporate retreats so extravagant? (May 25th)
Also: How the Bartleby column got its name

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Ball is life
Which sport is the best business?
American sports leagues are more competitive, lucrative and monopolistic than
European ones
Jun 15th 2023

THE 2023 finals of America’s National Basketball Association (NBA) and Europe’s football
Champions League were both history-making events, in rather different ways. On June 12th
the basketball contest crowned a small-city team that had never before won a
championship, the Denver Nuggets. They defeated an unlikely challenger in the Miami Heat,
the last-seeded team in its conference of eight. Had Miami won, that would have been a first
for such a lowly side. Meanwhile, the UEFA Champions League final, held on June 10th,
featured a powerhouse from Britain, Manchester City, defeating a mainstay of European
football, Italy’s Inter Milan.
European and British football leagues generally let teams spend as much as they want on
players, as long as they do not lose too much money. More successful sides tend to earn
more money, and so have more cash to splurge on star players—which in turn translates
into more success on the pitch, and so on. The week before its Champions League triumph,
Man City snatched the English FA Cup, beating Manchester United, another deep-pocketed
team. Man United and Man City have won 20 out of the past 31 English Premier League
titles; the Champions League (or its predecessor, the European Cup) has been won by Real
Madrid and AC Milan, Inter’s arch-rival, 21 out of 68 times.
Across the Atlantic, meanwhile, the sports world’s most lucrative competition, the National
Football League (NFL, which involves the non-soccer variety) has a hard salary cap, leading
to more parity among teams. The top two squads have won only 12 of 56 Super Bowls, the
annual tournament’s final round. The penalty for breaking the NBA’s current $124m salary
cap was bumped up in 2011 and again this year in a revenue-sharing deal negotiated
between the players’ union and owners. “The new deal is basically trying to prevent
superteams,” says Brian Windhorst of ESPN, a television network. And it seems to be
working. The Economist’s analysis of NBA data shows that a broader set of teams have
indeed made it to the playoffs in recent history. In the five years to 2023, 29 of the NBA’s 30
squads made the league’s knockout stage at least once (the Charlotte Hornets are the
exception). That has not happened since the five years to 2008, itself an unusually
competitive period.
American sporting socialism, then, appears to lead to more competitive contests than
Europe’s winner-takes-all approach. But do more competitive leagues make for better
business? Here the evidence is mixed. On the one hand, unpredictability may drive interest
—why watch when you know who will win? The possibility of an underdog’s success might
help small teams develop devoted fan bases. On the other hand, people love a winner. Mr
Windhorst notes that seasons in which big-name teams like the Boston Celtics have
dominated were some of the NBA’s most money-making years. In 2022, when the finals
pitted the Celtics against San Francisco’s Golden State Warriors, another star team, the
league raked in record revenues of $10bn.
Another structural difference between American and European sport is easier to correlate
with their moneymaking potential. Unlike European football, where teams can be
promoted or relegated across various tiers of leagues, American sports tend to be
“closed”—there is no way for new teams to accede to the top tournament. “The Europeans
see this as fundamental to the organisation of team sports,” explains Stefan Szymanski of
the University of Michigan, Ann Arbor. Count all the tiers, and more than 1,000 clubs across
Europe hope to compete in the Champions League. The NBA’s 30 or the NFL’s 32 make for
more concentrated markets. And concentration leads to riches. (That explains why the
threat of a breakaway league of elite teams hangs over European football.)
Last year the NFL’s revenues reached $19bn, nearly three times as much as the English
Premier League, which probably boasts more fans worldwide than all the American sports
put together (see chart). As a result, American teams, which partake in the bonanza, fetch
higher valuations. Over the past decade the value of the average NFL and NBA teams has
grown by more than 300% and 600%, respectively, compared with a rise of 170% for
America’s booming stockmarket. A willingness to sacrifice profits for participation makes
Europe’s sport look European, after all. ■
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Unit economics
Why self-storage is turning into hot property
Working from home and supply constraints have produced outsize returns
Jun 15th 2023 | New York

ANYONE ASKED to come up with their favourite literary home is spoiled for choice:
Pemberley, Brideshead, Blandings, Jay Gatsby’s mansion, to name a few. The same holds
true for workplaces on television: Los Pollos Hermanos, Dunder Mifflin and the swish
Waystar Royco offices, for instance. Ask someone to come up with their favourite fictional
storage unit, and expect a blank stare (the most ardent Neal Stephenson fans may recall the
one where Hiro Protagonist lives in “Snow Crash”).
Ubiquitous and unremarkable, self-storage solves a deeply American problem: what to do
with too much stuff. A bunch of empty rooms near a highway is not the sexiest part of a
property portfolio. Yet few property assets have matched their performance lately (see
chart).
One reason is more people moving house. (Ron Havner, former boss of Public Storage, the
biggest self-storage firm, said that people seek his services for “the four Ds”: death, divorce,
disaster and dislocation.) Amid covid-19, anyone living in a house or flat with no spare
rooms had to convert an existing one to a home office or gym. That meant clearing out
whatever was there. Many were reluctant to bin things, especially early on when nobody
knew how long self-isolation would last. The alternative was to stash it in storage. Over the
past three years self-storage occupancy rates have risen from around 90% to as much as
96%. Demand has been especially high in Florida, Texas and the sunbelt, where people
flocked in search of larger homes and laxer lockdowns.
High demand, in turn, has given landlords pricing power. Rent bumps went from around 8-
9% every six months before the pandemic to as much as 35%, according to Spenser
Allaway of Green Street, an advisory firm. Facilities managers can get away with this
because customers tend to be “sticky”: they may shop around and choose a facility based on
price and proximity, but once their stuff is in they seldom bother moving it. As Stephanie
Wright of New York University explains, “Individuals tend to think, ‘I’ll park my stuff here
for a month or two,’ but the average rental duration is in excess of a year.”
Storage firms have also embraced dynamic-pricing software. Knowing up-to-the-minute
market rates allows them to avoid undercharging customers. This is of a piece with the
sector’s operational efficiency (a small staff keeps labour costs low; preparing a unit for a
new customer requires little more than a quick sweep) and with its drive to modernise.
Indoor, climate-controlled facilities are becoming the norm. “The days of the old drive-up
with a rickety fence and a Doberman for a security system, that’s not going to cut it
anymore,” says Tim Garey of Cushman Wakefield, a property consultancy.
The last factor behind self-storage’s outperformance is constrained supply. Whereas the
amount of available square footage rose by more than 15% from 2016 to 2019, labour
shortages, high construction costs and supply-chain snags have limited new construction in
the past few years. That may change as these bottlenecks ease. Even then, the self-storage
business may slow but not collapse. As long as Americans keep buying things, they will
continue to need places to put it. ■
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property
Summer holidays
How long will the travel boom last?
Will demand for sunny getaways wane with economic turbulence?
Jun 15th 2023

REVENGE HOLIDAYS are in full swing and the travel industry is cashing in. After a rocky
few years, the urge to splurge on airline tickets and hotels is set to bring in bumper
earnings. Tour operators are inundated with bookings; hotel chains are raking in record
profits. EasyJet has raised its earnings forecasts twice this year; IAG and Ryanair have both
returned to profit for the first time since the start of the pandemic, and Singapore Airlines
is handing out some of its record profits as bonuses worth eight months’ salary. With air
fares rising faster than inflation, global airline bosses now expect $9.8bn in net income this
year, more than double the amount initially forecast, according to the International Air
Transport Association, an industry body.
The holiday boom has lifted the outlook for international travel. Worldwide tourist arrivals
this year are expected to reach up to 95% of pre-pandemic levels, up from 63% in 2022,
estimates the UN’s World Tourism Organisation. Share prices of travel companies, which
tumbled in early 2022 amid fears of rising inflation and a looming recession, are soaring
again (see chart). High prices have not deterred sunseekers so far. “People are prioritising
travel over other discretionary spending,” says David Goodger of Oxford Economics, a
consultancy. Still flush with cash saved during lockdowns, many are splashing out on
holidays, even as they trim spending on clothes or dining out.
A few factors will determine how long the good times roll on for. Some have to do with the
industry’s supply side: shortages of airport staff, soaring jet-fuel costs and crumbling IT
systems, which buckled under the weight of demand last year, leading to hours-long flight
delays or cancellations at short notice. A quarter of all flights in America were scrapped or
delayed last summer. Such meltdowns erode trust. They are also costly. Southwest Airlines
estimates that the cancellation of nearly 17,000 flights in December led it to incur around
$800m in losses.
A bigger question concerns demand. After a glorious summer, appetite for holidays could
come crashing down as fast as it has risen. Although America’s Federal Reserve has paused
interest-rate rises, it is expected to lift rates again in coming months. As the Fed and other
central banks in rich countries keep fighting stubborn inflation, holidaymakers may
eventually throw in the beach towel.
Chinese tourists, the third-biggest group after Americans and Germans in 2019, according
to Oxford Economics, may not pick up the slack. Since covid restrictions in China were
eased last year, nearby destinations such as Macau and Thailand have proved popular. Yet
Chinese enthusiasm for far-flung spots remains tepid. Accor, a hotel giant, estimates that
around three-quarters of Chinese travellers this year will opt for “staycations” instead.
A lull in holidaymaking would be bad news for a heavily indebted industry already facing
escalating expenses and recovering from past losses. Airlines alone lost $138bn in 2020.
Moody’s, a credit-rating agency, expects their labour costs to increase by nearly a fifth this
year. Short-staffed hotels are struggling to fill positions despite raising wages. In Britain,
wage bills are 15% higher than before the pandemic. After a years-long holiday, day-to-day
economic reality may be setting in for the travel industry. ■
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Schumpeter
What Tesla and other carmakers can learn from Ford
The 120-year-old company shows the importance of knowing your limits
Jun 13th 2023

JIM FARLEY relishes a challenge. In January Ford’s boss, an enthusiastic amateur racer of
historic cars, made his professional debut on the track in a powerful modern Mustang GT-4.
Yet the risks of tearing round a circuit are nothing compared with manoeuvring Ford,
which on June 16th will celebrate 120 years in business, through a new age of carmaking.
Ford, like other legacy firms, is trying to reinvent itself to compete in an era of
electrification and software-defined vehicles. It faces established rivals as well as
newcomers, foremost among them Elon Musk’s Tesla. Amid this packed grid, Mr Farley is
charting a singular racing line.
Established carmakers have long been written off by investors as clunkers, characterised
by low growth, low margins and an unmatched ability to destroy shareholder value.
Between 2014 and Mr Farley’s taking the wheel in October 2020, Ford’s market
capitalisation shrivelled by three-fifths, to $27bn. After a euphoric spike in early 2022,
when it hit $100bn on enthusiasm about the company’s electric plans, it is back down to
$57bn. But as befits a racing driver, Mr Farley is undaunted. He has reorganised the
company into three units, focusing on electric vehicles (EVs, in which Ford plans to invest
$50bn between 2022 and 2026), on high-margin petrol-driven cars and on Ford’s world-
beating commercial-vehicle business. He thinks that Ford can boost operating margins
from 6.6% in 2022 to 10% by 2026 and turn EV-related losses, which are forecast to reach
$3bn in 2023, into profits.
Mr Farley’s plan hinges on learning a thing or two from the disrupters, whose contribution
to the industry he is quicker to acknowledge than most other car bosses are. “Tesla has
influenced a lot of our thinking,” he admits. Most important, he has a clear idea of where
emulating rivals plays to his company’s competitive advantage and, critically, where it does
not.
Mr Musk’s biggest contribution to carmaking may be proving that EVs, which have been
losing the incumbents money for years, can turn a healthy profit. Tesla’s operating margin,
of 17% in 2022, was comfortably higher than those that most established carmakers enjoy
on their petrol-powered ranges. To achieve his electric goals, Mr Farley is following Mr
Musk and reversing years of industry practice that left the big marques’ largest suppliers to
manage those lower down the value chain.
Ford is not the only legacy carmaker to be bringing more of the supply chain in-house.
Rivals such as General Motors (GM) and Volkswagen are also building battery
“gigafactories” close to their big markets. But Mr Farley is, like Mr Musk, busier than most
bosses in negotiating directly with mining firms to secure battery minerals. Ford has
already signed deals to guarantee supplies of 90% of the lithium and nickel it needs for the
2m EVs it wants to be producing annually by 2026. Ford even intends to process some of
the lithium in America. This should help it reduce the industrywide reliance on Chinese
refiners. It also ensures that electric Fords qualify for subsidies under the “made in
America” terms of the Inflation Reduction Act, a giant green-funding law passed last year.
As a result, Mr Farley hopes soon to be making the cheapest batteries in America at Ford’s
plant in Michigan.
Mr Farley is also emulating Mr Musk in trying to pare back the industry’s notorious
complexity. Just as a lighter, nimbler machine has a better chance of staying ahead of a big
and powerful one on the track, the thinking goes, a simpler company should be able to
negotiate the twists and turns of industrial change. Famously, Tesla makes just four models
with few options for customisation. Similarly, Ford’s next generation of electric pickups will
come with one cabin, one frame and one standard battery in just seven basic formats, says
Lisa Drake, Ford’s overseer for EV industrialisation. That compares with an options list for
the bestselling petrol-powered F-150 pickup that allows for millions of combinations.
Rather than integrating hundreds of parts from suppliers, each with chips that need to
work in harmony, Ford’s new EV architectures, set for launch in 2025, will share more
common mechanical and software underpinnings.
Where Mr Farley’s thinking and Mr Musk’s diverge is over what besides manufacturing
vehicles carmakers ought to be doing. Mr Musk has an expansive view of his company’s
role, which stretches from designing Teslas’ infotainment system to building a charging
network where owners can top up their batteries. Mr Farley, by contrast, is focusing
squarely on manufacturing vehicles and is happy to outsource some of the other things. In
May Ford stunned many observers when it signed a deal with Mr Musk’s firm to grant Ford
EVs access to Tesla’s North American Supercharger network, with its 12,000 charging
stations.
Soft power
More surprising even than the charging deal is Ford’s decision to continue relying on
outside partners for a lot of in-car software. This flies in the face of received wisdom in the
industry, according to which things like infotainment systems, from satellite navigation to
music streaming, will increasingly determine the car-owning experience, differentiate car
brands and generate revenues from new services. Tesla does not accommodate Apple’s
CarPlay and Google’s Android Auto platforms, which connect motorists’ smartphones to
their cars’ dashboards. GM recently declared that it would ditch CarPlay and Android Auto
and come up with its own better system. Mr Farley sees the need to keep control of
computer programs in critical areas such as safety and security. But he accepts that Ford
has lost the battle for the cockpit to big tech.
There are signs that some incumbents may be becoming more clear-eyed about their
limitations. On June 8th GM announced it had made a similar charging arrangement with
Tesla. More would probably benefit from greater realism about their software prowess.
Stick to what you do well and leave the rest to others is a lesson that many of Ford’s rivals
could usefully learn. ■
Read more from Schumpeter, our columnist on global business:
What TIM’s mega-spin-off reveals about Europe’s telecoms industry (Jun 8th)
Australia and Canada are one economy—with one set of flaws (Jun 1st)
Why tech giants want to strangle AI with red tape (May 25th)
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.

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learn-from-ford
Finance & economics
 Is the global housing slump over?
 A new super-regulator takes aim at rampant corruption in Chinese finance

 Sooner or later, America’s financial system could seize up

 AI is not yet killing jobs
 America is losing ground in Asian trade
 South Korea has had enough of being called an emerging market
 Wage-price spirals are far scarier in theory than in practice
The great escape
Is the global housing slump over?
Why rising interest rates have not yet triggered property pandemonium
Jun 12th 2023 | SAN FRANCISCO AND SYDNEY

IN AUSTRALIA HOUSE prices have risen for the past three months. In America a widely
watched index of housing values has risen by 1.6% from its low in January, and
housebuilders’ share prices have done twice as well as the overall stockmarket. In the euro
area the property market looks steady. “[M]ost of the drag from housing on GDP growth
from now on should be marginal,” wrote analysts at JPMorgan Chase, a bank, in a recent
report about America. “[W]e believe the peak negative drag from the recent housing-
market slump to private consumption is likely behind us,” wrote wonks at Goldman Sachs,
another bank, about South Korea.
Economists had expected a house-price bloodbath. In March 2022, when the Federal
Reserve first started raising interest rates to combat resurgent inflation, the average value
of a house in a rich country was 41% higher than five years earlier. Prices had bounced
back from the financial crisis of 2007-09, then rocketed during the covid-19 pandemic (see
chart). Since then central-bank policy rates have risen by more than three percentage
points on average globally, making mortgages costlier and slowing the economy.
Global house prices have certainly come off the boil. They are 3% below their recent peak,
or 8-10% lower once adjusted for inflation. This is in line with the average correction since
the late 19th century. Yet this slump should have been different because it followed a boom
when prices rose at their fastest rate of all time. The upshot is that real house prices remain
miles above the level of 2019. Many millennials and Gen-Zers, who had dreamt that a crash
would allow them to buy their first house, are no doubt disappointed.
During a typical global housing slump some countries have a torrid time. After the financial
crisis Irish house prices fell by half. American house prices dropped by 20%. This time the
underperformers are doing better. In San Francisco house prices are a tenth off their peak,
as tech types have decamped to Florida and Texas. Yet they have stopped falling—and the
average house will still set you back more than $1.1m, around ten times the median income
in the city.
Having gone bananas in 2020-21, house prices in Australia have since fallen by 7%. But, as
a recent auction hinted, the market is recovering. A two-bedroom bungalow in Double Bay,
a greying suburb on Sydney’s harbour, recently opened at A$4m ($2.7m). It represents, the
auctioneer declares, an “outstanding opportunity to come along and add a lot of value”.
Translation: it needs some work. That does not deter the well-heeled crowd which jostles
outside its gate—the bidding is frantic. The gavel finally drops at more than A$6m.
By contrast with previous housing slumps, there is no hint that lower house prices have
created financial contagion. Banks do not seem worried about a surge in bad mortgages.
They have fewer risky loans and have not binged on dodgy subprime securities. In New
Zealand mortgage arrears have risen, but remain below their pre-pandemic norm. In
America delinquencies on single-family mortgages recently hit a post-financial-crisis low.
In Canada the share of mortgages in arrears is close to an all-time low.
Nor do property woes appear to be throttling the wider economy. Weaker housing
investment is dragging on economic growth, but the effect is small. In previous housing
busts the number of builders declined sharply long before the rest of the labour market
weakened. Yet today there is still red-hot demand for them. In South Korea construction
employment has dropped slightly from its pandemic highs but now seems to be growing
again. In America it is rising by 2.5% a year, in line with the long-run average. In New
Zealand construction vacancies remain well above historical levels.
Three factors explain the rich world’s surprising housing resilience: migration, household
finances, and people’s preferences. Take migration first, which is breaking records across
the rich world. In Australia net migration is running at twice pre-pandemic levels, while in
Canada it is double the previous high. Demand from the new arrivals is supporting the
market. Research suggests that every 100,000 net migrants to Australia raise house prices
by 1%. In London, the first port of call for many new arrivals to Britain, rents for new lets
rose by 16% last year.
Strong household finances, the second factor, also play a role. Richer folk drove the housing
boom, with post-crisis mortgage regulations shutting out less creditworthy buyers. In
America in 2007 the median mortgagor had a credit score of around 700 (halfway decent),
but in 2021 it was close to 800 (pretty good). Wealthier households can more easily absorb
higher mortgage payments. But many borrowers will also have locked in past low interest
rates. From 2011 to 2021 the share of mortgages across the EU on variable rates fell from
close to 40% to less than 15%. Even as rates have risen, the average ratio of debt-service
payments to income across the rich world remains lower than its pre-pandemic norm. As a
result fewer households have had to downsize, or sell up, than during previous slumps.
The pandemic itself has played a role. In 2020-21 many households drastically cut back on
consumption, leading to the accumulation of large “excess savings” worth many trillions of
dollars. This stash of savings has also cushioned families from higher interest rates.
Analysis by Goldman Sachs suggests a positive correlation across countries between the
stock of excess savings and resilience in house prices. Canadians accumulated vast savings
during the pandemic; home prices there have recently stabilised. Swedes amassed smaller
war chests, and their housing market is a lot weaker.
The third factor relates to people’s preferences. Research published by the Bank of England
suggests that shifts in people’s wants—such as the desire for a home office, or a house
rather than a flat—explained half of the growth in British house prices during the
pandemic. In many countries, including Australia, the average household size has shrunk,
suggesting that people are less willing to house-share. And at a time of higher inflation,
many people may want to invest in physical assets, such as property, infrastructure and
farmland, that better hold their value in real terms. All this could mean that housing
demand will remain higher than it was before the pandemic, limiting the potential fall in
prices.
Could the housing bust be merely delayed? Perhaps. Some past house-price declines,
including in the late 19th century, were grinding rather than spectacular. Central bankers
may also be minded to raise rates or keep them high until the higher cost of money truly
starts to bite. Making homeowners feel poorer is one way of getting them to cut spending,
which would help trim inflation.
Yet there is reason to believe the worst is over. After reaching an all-time low last year,
consumer confidence across the rich world is rising again. Households on average still have
plenty of excess savings. A structural shortage of housing means that there is almost always
someone willing to buy if someone else cannot. And there is little sign that people are
losing their taste for home offices and weight-lifting in the attic. The housing boom has
ended with a whimper, not a bang. ■
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Graftbusters
A new super-regulator takes aim at rampant corruption in
Chinese finance
Grim times for the country’s star moneymen
Jun 15th 2023 | Shanghai

HARDLY A DAY passes without someone in Chinese finance “falling off his horse”, or
coming under a corruption investigation. State media warned on June 5th that the banking
industry is infested with “moths”—mid-level managers who slowly ingest lenders’
resources from the inside out. “Internal ghosts”, executives who use insider connections to
pilfer billions from banks, often pose a greater danger. There are “nest cases”, where
clusters of fraud spanning several banks are discovered at once, and “skewer cases”, in
which the arrest of one banker leads to another, then another. After a recent spate of
scandals an official newspaper dubbed smaller banks an “anti-corruption disaster zone”.
Such parlance hints at pervasive graft throughout China’s vast financial system, which has
assets of 400trn yuan ($56trn). Between January and May at least 60 financial institutions
were hit with major investigations into personnel, according to official statements and
press reports. Research by The Economist shows that, over the past five years, 78
executives at China’s eight largest banks have been investigated or charged with
corruption. Since 2018 authorities have also probed 385,000 shareholders of rural banks
suspected of using the lenders as personal piggy banks.
The crackdown has shown no sign of ebbing as the Communist Party gains a much firmer
grip over enforcement. In the biggest regulatory change in two decades, the central
government announced earlier this year that it would create a super watchdog that
oversees all areas of finance except the securities industry. How it applies its mega-powers
is bound to remould a sector the health and stability of which matters hugely not just to
China, but also to the global economy.
The new system is modelled on America’s, which seeks to avoid overlapping mandates. The
National Administration for Financial Regulation (NAFR), as the new watchdog is dubbed,
has been granted status that moves it closer to the central government. That gives it
stronger enforcement powers, similar to America’s Securities and Exchange Commission. It
has gained investor-protection responsibilities, akin to America’s Financial Stability
Oversight Council, and taken over financial oversight from the central bank (which, like the
Federal Reserve, now focuses on macroprudential policy).
NAFR is preparing to take forward what has perhaps been the most extensive financial
clean-up campaign in history. Starting in 2017, its predecessor scrambled to slow down a
dangerous rise in risky financial activities. It tightened rules on shadow banking, shrinking
the stock of shadow loans from the equivalent of 25.3% of total banking assets in 2017 to
just 13.5% last year. It subdued sprawling financial firms and powerful people that had
sought to manipulate the system. Among them were Anbang, an insurance group, and
Baoshang Bank, a mid-tier lender. It crushed a 1trn yuan peer-to-peer lending industry,
where people lent to one another via online platforms. The central government also
upended the fintech empire of Jack Ma, China’s most famous entrepreneur, after his
company, Ant Group, built a mammoth lending business that received little regulatory
scrutiny.
The new team will have to reckon with the costs of the clean-up, which are mounting. Many
wealth-management products have gone bust, causing investors to protest. The bill for
cleaning up urban banks and bailing out several large lenders has come to 10trn yuan.
Rescuing Anbang alone cost $10bn. Tens of thousands of investors in peer-to-peer lending
products have lost their savings. Nearly 630 small banks have been restructured.
The cutting down of Mr Ma has hurt China’s reputation as a place safe for entrepreneurial
experimentation. So has the recent detention of Bao Fan, one of China’s most famous
investment bankers. Senior regulators bristle at such criticisms and feel that, at least in Mr
Ma’s case, official actions were too timid for a risky business model. The new system will
rectify that by giving NAFR regulatory control over financial holding companies such as
Ant.
The vision for regulating the financial sector is becoming clear. Senior officials believe they
have chosen the best features of the American system while rejecting the values of Wall
Street, which, in their view, have seeped into China over two decades. The message to
bankers is grim. Entrepreneurs will be allowed to continue to reap enormous fortunes. But
the government does not want bankers to become exorbitantly wealthy. No celebrity
financier, no matter how high-profile, appears immune from corruption probes.
NAFR has several pressing tasks ahead of it. First it must replace local financial regulators
with its own teams and dismantle the connections between banks and local governments.
The establishment of thousands of new banks since the 1990s and commands from
politicians to build endlessly have helped feed a cesspool of bad assets. The small lenders
that sprung up across the country often had close connections with local governments and
the largest local companies, namely developers. In many cases tycoons who held shares in
the banks, or controlled them outright, used them to fund their businesses. One result was
a decade of high-speed economic growth. Another was rampant graft and poor allocation of
funds.
So far the onslaught on corruption, the biggest threat to China’s financial stability according
to many, is proving highly effective, says Sam Radwan of Enhance, a consultancy. The
number of arrests will probably fall. But to purge the financial system of the bad assets
revealed by the campaign will be a big job—and it is an urgent one. Tight links between
banks, property developers and city governments have left the industry with masses of
risky loans. Developers and local-government companies owe China’s banks 130trn yuan,
or about 42% of total banking assets, according to Xing Zhaopeng of ANZ, a bank.
Most of those debts are deemed healthy. Li Yunze, who was recently appointed to lead
NAFR, said on June 8th that the risks are controllable. In its most recent review of the
banking system, the central bank said just 1.6% of total system assets are considered high-
risk.
That could change if things get worse for developers and local governments. Both are
finding it increasingly hard to pay back loans. A group of companies called local-
government financing vehicles (LGFVs), which often borrow from banks on behalf of cities
and provinces, have spooked markets in recent weeks as many show signs of impending
failure. Such risks often emerge suddenly and have the potential to contaminate banks.
Dalian Wanda, one of China’s top developers, has reportedly entered into talks with banks
on a loan-relief plan. It has more than 90bn in outstanding loans. An LGFV in south-west
China is rumoured to be paying back loans using local social-security funds.
Failure to handle this pile of debt threatens to mire the system in bad credit. Many such
loans may not turn into toxic assets overnight. Instead, some will become long-term drags
on bank profits. Another LGFV in southern China recently agreed with banks to restructure
15.6bn yuan in loans by lowering interest rates and pushing the maturity of the loans out
by 20 years. In such situations banks have few other options than to extend.
Regulators have been experimenting with merging bad banks for years. So far 23 urban
banks have been combined. But insiders say the process is cumbersome, can drag on for
years and ultimately leads to the creation of larger bad banks. Another option is letting
banks fail. This has been tested only a few times and risks causing runs on deposits—the
opposite of the stability China’s leaders are trying to achieve.
Large banks are absorbing some bad debts from smaller ones. But their ability to do this is
limited, and they are unlikely to take on equity in troubled banks. Some local state-owned
firms have started injecting liquidity into rural lenders and taking shares in them,
according to Chinese media. This type of recapitalisation is bolstering banks’ balance-
sheets and giving them more room to dispose of bad debts.
The only way to heal the sector is to recognise and treat soured loans. Efforts to do so have
been haphazard. In 2019 regulators said they would require banks to declare the true scale
of bad loans instead of using fancy accounting to hide them. But the pandemic then forced
watchdogs to enforce the rules less stringently; they also told banks to roll over loans. This
avoided mass corporate defaults, but also added to the hidden accumulation of bad assets.
Now, with the pandemic at an end, the long-delayed recognition of more bad debts is
starting, says Ben Fanger of ShoreVest Partners, an investor in distressed debt. This means
a vast flow of toxic assets is coming on to the market.
State-owned asset managers will buy up some of that debt at discounted rates. Unlike 20
years ago, when the previous mountain of bad assets failed to lure bargain-hunters, there
are now more local private investors willing to snap up non-performing loans from banks.
Some corporate investors will also pick through the rubble of the property sector to search
for distressed debts that allow them to take over projects on the cheap. As the economy
slows and the extent of the financial rot is revealed, China’s new regulators can only hope
there are enough of them. ■
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Buttonwood
Sooner or later, America’s financial system could seize up
The Federal Reserve must soon decide when to stop shrinking its balance-sheet
Jun 15th 2023

MASTERLY INACTIVITY is back in vogue at the Federal Reserve’s rate-setting committee.

After its meeting on June 14th it kept its benchmark rate on hold, rather than raising it, for
the first time since January 2022. One or two more rate rises may lie ahead: Jerome Powell,
the Fed’s chairman, suggested so in his post-meeting press conference, and that is what
investors expect. Gradually, though, the main debate among Fed watchers has shifted from
how high the rate will go to how long it will stay there before being cut.
That is a knotty problem, made knottier by the fact that core prices in America (excluding
volatile food and energy) rose by 5.3% in the year to May. It is also not the only one facing
Mr Powell and his colleagues. They have spent the past year steadily shrinking the Fed’s
huge stock of Treasuries and mortgage-backed securities (MBS), the face value of which
has fallen from $8.5trn to $7.7trn. Each month the Fed allows up to $60bn-worth of
Treasuries, and $35bn of MBS, to mature without reinvesting the proceeds. Now it must
decide when to stop.
This vast portfolio was amassed via the Fed’s quantitative-easing (QE) programme,
through which it bought bonds with newly created money. Conceived amid the global
financial crisis of 2007-09, it was put into overdrive during the covid-19 pandemic. QE
flooded markets with liquidity and nudged nervous investors into buying riskier assets—
because the Fed was already buying the safest ones, which pushed their yields down. That
kept the supply of credit and other risk capital flowing into the real economy. Critics
decried all this as reckless money printing. But with inflation low and deflation more of a
threat, they were easy to dismiss.
The return of high inflation makes QE’s reversal (quantitative tightening, or QT) desirable
on several counts. Just as buying Treasuries brings long-term rates down, the
disappearance of a buyer should raise them, complementing the tightening effect of the
Fed’s short-term rate rises. And if the Fed is not buying Treasuries, someone else must be
holding on to them. That means they are not buying a riskier asset such as a stock or
corporate bond, reducing the supply of capital to an overheated economy. Both effects
should dampen price rises.
QT also bolsters the Fed’s credibility. If it only ever conducted QE, and never reversed the
process, accusations of money printing and currency debasement would be much harder to
brush off. Inflation expectations could rise, self-fulfillingly and perhaps disastrously. So the
Fed must prove it is willing to hoover up dollars as well as pump them out.
In that case, why stop at all? The simplest reason is that the Fed’s tightening cycle is
approaching its end. Eventually it will consider cutting short-term rates again, especially if
economic cracks appear. To still be pushing long-term ones up at that point would be akin
to a driver pressing the accelerator and the brake at the same time.
The more troubling reason is that, just like raising short-term rates, QT can inflict its own
damage. Having been tried only once before, from 2017 to 2019 and at a much slower pace,
its side-effects are poorly understood. That does not make them less dangerous. By sucking
cash out of the system, the previous bout of QT prompted a near-failure of the money
markets—the place where firms borrow to meet immediate funding needs and one of the
world’s most important pieces of financial plumbing. The Fed cleared the blockage with an
emergency lending facility that it has since made permanent. It also had to halt QT.
This time it would be something else that breaks. The stockmarket is an obvious, if
unthreatening, candidate: only a devastating crash would threaten financial stability. A
broader liquidity crunch would be worse. Credit markets, already tight following several
bank failures and rising defaults, are more likely to seize. America’s Treasury, meanwhile,
is set to soak up yet more liquidity. It must sell more than $1trn of debt over the coming
three months to rebuild its cash buffers after the latest debt-ceiling drama. By increasing
the risk of sudden market moves, that raises the odds of participants suddenly needing to
raise cash for margin calls—and the risk that they cannot.
However small the ideal size of the Fed’s balance-sheet, ever more shrinking could be
dangerous. So QT must stop before it risks sparking a crisis that requires a return to QE.
But when? That is the central bank’s next big dilemma.■
Read more from Buttonwood, our columnist on financial markets:
Surging stockmarkets are powered by artificial intelligence (Jun 7th)
Investors go back into battle with rising interest rates (Jun 1st)
The American credit cycle is at a dangerous point (May 24th)
Also: How the Buttonwood column got its name

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Boy cries wolf
AI is not yet killing jobs
White-collar workers are ever more numerous
Jun 15th 2023 | San Francisco

AFTER ASTONISHING breakthroughs in artificial intelligence, many people worry that they
will end up on the economic scrapheap. Global Google searches for “is my job safe?” have
doubled in recent months, as people fear that they will be replaced with large language
models (LLMs). Some evidence suggests that widespread disruption is coming. In a recent
paper Tyna Eloundou of OpenAI and colleagues say that “around 80% of the US workforce
could have at least 10% of their work tasks affected by the introduction of LLMs”. Another
paper suggests that legal services, accountancy and travel agencies will face unprecedented
upheaval.
Economists, however, tend to enjoy making predictions about automation more than they
enjoy testing them. In the early 2010s many of them loudly predicted that robots would kill
jobs by the millions, only to fall silent when employment rates across the rich world rose to
all-time highs. Few of the doom-mongers have a good explanation for why countries with
the highest rates of tech usage around the globe, such as Japan, Singapore and South Korea,
consistently have among the lowest rates of unemployment.
Here we introduce our first attempt at tracking AI’s impact on jobs. Using American data on
employment by occupation, we single out white-collar workers. These include people
working in everything from back-office support and financial operations to copy-writers.
White-collar roles are thought to be especially vulnerable to generative AI, which is
becoming ever better at logical reasoning and creativity.
However, there is as yet little evidence of an AI hit to employment. In the spring of 2020
white-collar jobs rose as a share of the total, as many people in service occupations lost
their job at the start of the covid-19 pandemic (see chart). The white-collar share is lower
today, as leisure and hospitality have recovered. Yet in the past year the share of
employment in professions supposedly at risk from generative AI has risen by half a
percentage point.
It is, of course, early days. Few firms yet use generative-AI tools at scale, so the impact on
jobs could merely be delayed. Another possibility, however, is that these new technologies
will end up destroying only a small number of roles. While AI may be efficient at some
tasks, it may be less good at others, such as management and working out what others
need.
AI could even have a positive effect on jobs. If workers using it become more efficient,
profits at their company could rise which would then allow bosses to ramp up hiring. A
recent survey by Experis, an IT-recruitment firm, points to this possibility. More than half
of Britain’s employers expect AI technologies to have a positive impact on their headcount
over the next two years, it finds.
To see how it all shakes out, we will publish updates to this analysis every few months. But
for now, a jobs apocalypse seems a way off. ■
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The great steeplechase
America is losing ground in Asian trade
China’s campaign to regionalise supply chains is doing better than appreciated
Jun 15th 2023 | Singapore

THE INTENSIFYING rivalry between America and China has not been kind to open markets.
Letting defence or foreign ministers dictate trade policy, it turns out, is not conducive to
making goods move more smoothly across borders. Yet even as globalisation crumbles, a
race to gain commercial clout in the world’s most populous and fastest-growing region has
kicked off. It is a race China is quietly winning.
Both America and China are keen to trumpet to Asian countries the benefits of the regional
pacts they sponsor (each of which excludes their rival power). On May 27th a group of 14
countries agreed to set up an early-warning system over supply-chain problems—the first
building block of the Indo-Pacific Economic Framework (IPEF), President Joe Biden’s
flagship offering. On June 2nd the Regional Comprehensive Economic Partnership (RCEP), a
China-backed trade deal which includes Australia, Japan, New Zealand, all of South-East
Asia (bar East Timor) and South Korea, came into force in the Philippines, the last of the
pact’s 15 members to ratify it.
At first blush the two pacts look mostly insubstantial. American negotiators are not
interested in offering greater market access for Asian exporters, robbing IPEF of the raison
d’être of a trade deal. Critics dismiss RCEP as broad but shallow because it does not cover
labour rights, the environment and state-owned enterprises.
Despite those limitations, however, RCEP is already expanding China’s commercial heft.
Whereas the value of Chinese exports to America and the EU dropped by 15% and 5%
respectively in the five months to June, compared with the same period in 2022, exports to
the Association of South-East Asian Nations grew by 8% over the period. The ten-member
bloc is now China’s largest trading partner.
It helps that the area where RCEP has made most progress—harmonising rules of origin for
goods exports—matters a lot to the complex supply chain that runs across the world’s
biggest manufacturing hub. The deal, in effect, creates a single market in the intermediate
goods that go into final products, helping RCEP to prevent the so-called “noodle-bowl” of
dozens of overlapping trade deals that exporters struggle to digest.
That makes the region “a kind of tariff-free supply web”, says Aditya Gahlaut of HSBC, a
bank. The reduced complexity is more attractive to Asia’s countless small businesses and
encourages investment in production that takes place in RCEP countries, instead of
elsewhere.
Another selling point is that RCEP may well make its members richer. That will not be
thanks to tariff reductions, which are too puny to matter. A recent World Bank study
projects that they will raise local real incomes by only 0.07% by 2035. Instead gains will
come in the form of improvements in productivity brought about by fewer trade frictions
and more liberal rules of origin. The bank reckons trade between RCEP countries could rise
by a whopping 12% over the same period, compared with a no-deal scenario.
There is still time for IPEF to catch up. Some of America’s Asian allies hope a Biden win at
next year’s presidential election will change the mood music in Washington, enabling faster
progress. For now that looks optimistic. One former trade negotiator jokes that the fact that
India is a member of IPEF is a signal that any future agreements will be toothless. Its
government, which opted out of both the Trans-Pacific Partnership (IPEF’s bolder
predecessor) and RCEP, is studiously avoiding multilateral trade agreements that
genuinely mean business. By casting a wide net, America has ensured that IPEF can
advance only at the pace of its slowest member. ■
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Lost and won
South Korea has had enough of being called an emerging
market
And yet it may fail to join the top league of global bourses once again
Jun 15th 2023 | SEOUL

IN THE 1960s South Korea was a poor, backward country recovering from a devastating
war. Now it is the 12th-largest economy in the world. Its 52m people earn an average of
$35,000 a year, nearly as much as Italians and way more than Iberians. Its stockmarket is
the 16th-biggest globally, with a capitalisation of $1.8trn, and the seventh-busiest by daily
traded volumes. The IMF has deemed South Korea an advanced economy since 1997.
Anyone still describing it as an emerging market might therefore appear to have been
asleep for the past half-century.
And yet this is what MSCI, a company that creates market benchmarks, has been doing for
three decades. South Korea was the 13th country to join its Emerging Market Index, which
now counts 24 members. Some have since been relegated to a “frontier” basket (Croatia,
Morocco), shunted to “standalone” markets (Argentina) or even dropped altogether
(Venezuela). Less glitzy economies than South Korea’s, such as Greece and Portugal, were
elevated to MSCI’s Developed Market index years ago. South Korea therefore thinks it is
overdue a promotion. It may hope to achieve one on June 22st, when MSCI announces
which countries stand a chance to receive the accolade next year.
The index provider has long pointed out that investing in South Korean assets is often an
unnerving experience. Shareholders’ rights are weak. Ownership structures are byzantine.
Repeated scandals expose lapses in governance. And state interventions routinely warp
markets.

To address such misgivings the government in January announced a raft of ambitious

reforms. Rules governing the distribution of dividends, for years clear as mud, will be
brought closer to Western standards. Procedures for takeovers and spin-offs will be
revamped to better protect minority shareholders. An arduous registration process for
foreign investors will be abolished by the end of the year, with large South Korean
companies required to release filings in English from then on (smaller firms are slated to
follow in 2026). Most important for MSCI, South Korea has pledged to open up its foreign-
exchange market and to extend its working hours, which should help make the won more
tradable internationally.
Such reforms aim to make South Korea’s financial markets more dynamic—a worthy goal
in itself. But the government reckons inclusion in MSCI’s elite benchmark is also worth
angling for, because it would bring with it a vast influx of cash from foreign investors.
About $3.5trn of assets under management, spread across the globe, currently track MSCI’s
Developed Market index—nearly twice as much as the money following its emerging-
market cousin, according to Goldman Sachs, an investment bank. Analysts estimate that a
promotion could lure some $46bn-56bn of fresh capital into South Korean assets.
Moving on up could also help put an end to the “Korean discount”—the persistently lower
valuation of South Korean firms relative to foreign ones with similar earnings and assets.
Investors had to contend with poor governance and shareholders’ rights, along with the
nagging risk of a conflict with North Korea; they often received meagre dividends for their
trouble. By signalling that the regime is becoming friendlier, the logic goes, an MSCI
upgrade would help dispel investors’ doubts.
The trouble is that South Korea has been there before. It made it on to MSCI’s coveted
watchlist in 2009, only to be crossed off in 2014 after the index provider alleged it was not
sufficiently upping its game. Various administrations have since aimed for the promotion
but failed to set adequate reforms in motion.
Some critics paint even the latest batch of measures as half-hearted. South Korea has ruled
out some changes the MSCI would like, such as removing limits on foreign ownership in key
industries and loosening restrictions on short-selling. And political whims continue to
make investors queasy. Last year bond markets experienced a wild few days after a
provincial governor refused to honour the region’s debts. In February the country’s
president, Yoon Suk-yeol, ordered the markets watchdog to keep a lid on banks’ profits,
because they are “part of the public system”. Investors were unimpressed.
MSCI has already indicated that this might still not be South Korea’s year. On June 8th it
hinted that it would wait until the capital-market reforms were fully implemented and see
how investors react to them before considering adding the country to its premier league.
That might be a blessing in disguise. South Korea should not rush into an upgrade, says
Hwang Sun-woo of Korea University. Its economy, which depends heavily on exports, could
be rocked in the event of a hasty opening of its foreign-currency markets. And the potential
rewards should be put into perspective. The expected capital inflows, small relative to the
size of South Korea’s markets, would mostly benefit big companies. They could also be
reversed. After luring money upon its promotion in 2010, Israel, the country to most
recently graduate to developed-market status, suffered $2.5bn in net outflows the next
year, which erased all earlier gains.
Membership of elite clubs will not in itself cure South Korea’s reputational ills; after all,
these have persisted despite its inclusion in top indices created by other blue-chip
providers, such as Dow Jones and FTSE Russell. To do so, the reforms will have to convince
a wider public. ■
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Free exchange
Wage-price spirals are far scarier in theory than in practice
Rising salaries are a poor predictor of future inflation
Jun 15th 2023

A WAGE-PRICE SPIRAL is the stuff of inflationary nightmares. It refers to a situation when

prices gallop higher—perhaps because of a sudden shock or policy missteps, or both—and
wages race upward to keep pace with them, in turn feeding through to yet more price rises
and yet more wage increases, and so on in a vicious circle. It can seem as if the world’s
economies have been living this horror: in America hourly earnings rose by about 6% last
year, the biggest annual increase in four decades. In Britain wages excluding bonuses are
rising at an annual clip of about 7%. On June 14th, when the Federal Reserve elected to
leave interest rates unchanged after ten consecutive increases, Jerome Powell, its chairman,
warned that he was watching wage trends as one test of whether the central bank might
resume raising rates in July.
But the dangers that appear in nightmares usually bear little resemblance to the threats
worth worrying about in reality. The world’s uncomfortable ride with inflation over the
past two years seems to point to a similar conclusion about wage-price spirals: they are a
caricature of what happens to an economy with an inflation problem.
The historical parallel often trotted out in discussing wage-price spirals is the 1970s. Price
and wage inflation seemed to interact throughout that decade, much as the spiral
framework suggests. Each surge in general price inflation was followed by a surge in wage
inflation, which was followed by more price inflation—and on it went. But the 1970s are
flawed as evidence for the existence of spirals. The repeated waves of inflation stemmed
more from successive oil-price shocks (in 1973 and 1978) than from prior wage gains. To
the extent that wages and prices moved in lockstep, this reflected trade unions’ practice
back then of pegging salaries to the cost of living, guaranteeing a ratchet effect. Spirals were
a feature of contracts rather than proof of an economic concept.
Late last year a group of economists at the IMF interrogated the historical record, creating a
database of wage-price spirals in advanced economies dating back to the 1960s. Applying a
fairly low bar—they looked for accelerating consumer prices and rising nominal wages in
at least three out of four consecutive quarters—they identified 79 such episodes. But a few
quarters of high inflation is not all that scary. A few years is far more frightening. Judged by
this longer standard, the IMF economists offered a more upbeat conclusion: the “great
majority” (they omitted the exact percentage) of short-term spirals were not followed by a
sustained acceleration in wages and prices.
In a note in March, Gadi Barlevy and Luojia Hu, economists with the Fed’s Chicago branch,
took a closer look at the role of wages in the current episode of inflation. They focused on
“non-housing services”, a category that covers everything from car washes to medical
check-ups and which Mr Powell regularly cites as a useful indicator because of its tight
association with wages. Mr Barlevy and Ms Hu concluded that wages do help to explain this
segment of inflation: nominal wage gains have outstripped productivity growth by a
sizeable margin over the past year. Facing that cost squeeze, service providers would
naturally want to raise prices.
However, the spiral thesis claims not merely that wages matter, but that they predict future
inflationary trends. On this count, the Chicago Fed economists found the relationship
unidirectional: inflation helps to forecast changes in labour costs, but changes in labour
costs fail to predict inflation. Service providers, in other words, raised prices before rising
wage costs hit their bottom line. Mr Barlevy and Ms Hu posit that employers may have been
ahead of the curve in anticipating the effects of a tight labour market. That makes wages a
lagging, not a leading, indicator for inflation.
Adam Shapiro, an economist with the San Francisco Fed, has been even more critical of the
wage worries. In a note in May, he isolated unexpected changes in wages to argue that
rising labour costs were only a small driver of non-housing service inflation and a
negligible one in broader inflation. Like his Chicago colleagues, he concluded that wage
growth was following inflation.
None of this means that wage-price spirals are a total myth, which some overeager
commentators have written. As the IMF‘s study noted, serious spirals can occur; it is just
that they are extremely unusual. Were inflation to stay very high for a long time, people
might start to view fast-rising prices as a basic fact of life and incorporate that assumption
into their wage demands. It is possible that this process has begun in Britain.
But in America what is striking about the past two years is how relatively moderate
inflation expectations have remained, despite price pressures. In a paper last month for the
Brookings Institution, a think-tank, Ben Bernanke, a former chairman of the Fed, and
Olivier Blanchard, a former chief economist of the IMF, decomposed the drivers of
pandemic-era inflation. They concluded that a triumvirate of shocks (commodity-price
spikes, strong demand for goods and supply shortages) accounted for most of the inflation
overshoot since 2020. There was scant evidence that inflation itself had triggered higher
wage demands. Wages shot up simply because demand for workers outstripped supply.
Dreaming spirals
Wages and prices can be driven up by the same force: excessive spending in the economy
compounded by shortages of both products and the workers to produce them. Overheated
economies are worth worrying about regardless of whether prices and wages are feeding
on each other.
For their part, Messrs Bernanke and Blanchard argue that as pandemic shocks fade away,
overheated labour markets are likely to contribute more to inflation. To stop that, central
bankers need to make sure that the demand for workers cools off. Only if inflation persists
once the labour market is back in balance will fear of a self-sustaining spiral be worth
losing sleep over. ■
We’re hiring (June 12th 2023). The Economist is looking for a Britain economics writer,
based in London. For details and how to apply, click here.
Read more from Free exchange, our column on economics:
A flawed argument for central-bank digital currencies (Jun 8th)
What does the perfect carbon price look like? (Jun 1st)
What performance-enhancing stimulants mean for economic growth (May 25th)
Also: How the Free Exchange column got its name
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Science & technology
 The idea of “holobionts” represents a paradigm shift in biology
 There’s more than one way to spay a cat
You are legion
The idea of “holobionts” represents a paradigm shift in
biology
These meta-organisms are made up of animals, plants, and the microbiota that live on
and inside them
Jun 14th 2023 | Boston and London

“HOW MANY cells are there in a human being?” It sounds like a question from a nerdy pub
quiz. It is also a profound philosophical inquiry. One answer is around 37trn. This is the
number, in a typical adult weighing 70kg, that trace their descent from the fertilised egg
which brought that human into existence.
Look at it another way, though, and you arrive at a figure roughly twice as large. That adds
in the archaean, bacterial, fungal and protist cells which occupy the mouth, gut, skin, lungs
and almost every other surface, nook and cranny of the human body. These cells contribute
only about 0.3% to a person’s body weight. But being, on the whole, much smaller than
“proper” human cells, they are almost equally numerous.
That human beings have this accompanying microbiome is not news. Nor is it news that,
while some of those extra cells are mere passengers, others are actively beneficial. The idea
of symbiosis, in which different species live together intimately and collaboratively, goes
back to the 19th century. Yet what started as a finite list of unusual cases has gradually
grown to the point where it is clear that almost every multicellular organism—and even
some single-celled ones—have symbionts.
This suggests to some biologists that the time is ripe for a “paradigm shift”—a new way for
scientists to look at the world. Out, they say, with the old idea of plants and animals “having
a microbiome”, and in with the idea that both are merely parts of a united meta-organism
whose components evolve in concert with each other. And in, too, with a name for these
communal critters: holobionts.
Holistic thinking
One believer in this way of thinking is Thomas Bell, head of the Leverhulme Centre for the
Holobiont at Imperial College, London, which opened in January. Paradigm shifts have
many causes. But one that has helped tip the balance in this case is a technology called
metagenomics. Dr Bell and his colleagues plan to apply it to a wide range of known and
potential holobionts.
Metagenomics analyses simultaneously the genomes of everything in a sample—be it of
soil, water, leaf litter or a mashed-up part of a plant or animal. Before its invention, trying
to work out which microbes were present in such samples was tricky. Few bugs are
amenable to being cultured in a laboratory, so many were, in effect, invisible to science.
These days you can run a relevant extract of any organism you care to mention through the
metagenomics mill—and if you do so, it is likely to show up as a holobiont.
Dr Bell and his colleagues are looking, in particular, at insects, amphibians and plants.
Besides being eukaryotes—meaning their cells have proper nuclei and contain complex
structures called organelles—these have little enough in common, evolutionarily speaking.
Each group was picked for study because viewing its members as holobionts rather than
individual creatures is illuminating.
Among insects, the centre is starting with bark beetles and honeybees. Bark beetles’
holobiont nature is emphasised by the fact that some have evolved special structures called
mycangia, which carry fungal spores. The spores grow thin tendrils called hyphae that
allow them to digest wood. That releases nutrients which the beetles can metabolise. But if
these fungi (one of the best known of which causes Dutch elm disease) get out of hand, they
can devastate entire forests.
Honeybees, meanwhile, are important pollinators, a behaviour that may result in hives
exchanging microbiomes via flowers their members visit. Some bee populations also show
signs of being under stress, possibly from insecticide use. Several of Dr Bell’s colleagues
suspect the explanation for this lies not in the animal part of the holobiont, but rather in its
microbial part.
Amphibians are on the list because many are threatened with extinction by skin fungi
called chytrids, which have been spread from their Asian homeland by humans. Along with
researchers at London Zoo, the centre’s scientists are studying the diversity of amphibian
skin microbiomes, and whether this can give the meta-organism immunity to chytrid
infection.
Plants find themselves in the centre’s crosshairs because most are accompanied by a
“rhizosphere” of bacteria and fungi attached to, or even penetrating their roots. The
rhizosphere’s biochemical pathways increase the range of nutrients available to the
holobiont as a whole. The rhizosphere is sustained in turn by carbohydrates and other
nutrients synthesised by the holobiont’s plant component.
A beneficial alliance
Work like Dr Bell’s means the idea of holobionts as a meaningful category is catching on
(see chart). But for it to be accepted fully, it needs to be disentangled and defined. As Scott
Gilbert, a developmental biologist at Swarthmore College, puts it, “This notion [of
holobionts] challenges and seeks to replace the concept of a monogenomic individual
whose essential identity arises during development, is maintained by the immune system,
and which is selected through evolution.” That is a big claim.

One possible stumbling block is individual continuity. For organisms as conventionally

classified, the link between parent and offspring is clear. For putative holobionts, it can be
less so. Rather than growing from a single fertilised egg, holobionts have to be assembled.
Sometimes the components are passed between parents and offspring. Humans, for
example, are born with some microbes already in their guts. They pick up others during the
messy process of birth, and more from their mother’s milk. In these circumstances it is easy
to see how the various components of a holobiont could co-evolve into a single, functioning
unit.
Plants tend to make their associations horizontally—forming alliances with microbes
already living in the soil in which they germinated. That might be thought to weaken the
case for the resulting alliances behaving as single evolutionary units. In fact, calculations by
Joan Roughgarden, an evolutionary biologist at Stanford University, show that horizontal
transmission also supports co-evolution, and thus the emergence of true holobionts.
One piece of evidence to suggest she is right comes from a study of switchgrass by Thomas
Juenger, a biologist at the University Texas, Austin. If plants and their rhizospheres are
evolutionary units, they might be expected to collect a “core” microbiome that is
encouraged into existence by specific genes in the plant. Switchgrass has three genetically
distinct populations in North America. By comparing these and their associated
rhizospheres, Dr Juenger showed a relationship between a plant’s genes, particularly those
associated with its immune system, and which bacteria thrived in the resulting
rhizosphere.
Sometimes, as with bark beetles and their mycangia, the evolutionary integration of
primary host and microbiome is obvious even without a genetic analysis. Mastotermes
darwiniensis, an Australian termite, relies on gut microbes to break the tough wood it eats
into molecules which the holobiont’s animal part can metabolise. Mixotricha paradoxa, one
of those fibre-digesting components, is itself a composite of a protist (a single-celled
eukaryote) and four types of bacteria. Lynn Margulis, the American biologist who coined
the term holobiont in 1991, called this critter “the beast with five genomes”.
Aphids are equally intriguing. All members of this group carry bacteria of the genus
Buchnera, a variety unknown anywhere else. In a relationship reckoned to date back
around 200m years, Buchnera live inside specialised aphid cells called bacteriocytes. The
bacteria are so cossetted that they have shed most of the genes they started with, relying
on their animal partners to fill the biochemical gaps. In exchange, they synthesise amino
acids the insects are unable to make for themselves.
Nor does the story end there. Many aphids host a second bug, Hamiltonella defensa, in their
bacteriocytes. These critters, which also rely on Buchnera for their supply of amino acids,
kill the larvae of parasitic wasps that would otherwise consume an aphid alive. But that, in
turn, happens only in the presence of a virus called APSE—an even smaller metaphorical
flea in the holobiont hierarchy.
All that is reminiscent of the most extreme case of holobiontry: that of organelles called
mitochondria and chloroplasts. Mitochondria generate energy by metabolising glucose, and
are found in all eukaryotes. Chloroplasts engage in photosynthesis, and are restricted to
algae and plants. Both are the distant descendants of formerly free-living bacteria that
began their relationship with the cells they now call home over a billion years ago. (It was
these two cases which led Margulis to coin the term holobiont.)
The holobionic man
The varying degrees of intimacy on display—from surface passenger to vital cellular
component—do raise the question of where, exactly, the borders of the term “holobiont”
lie. But biology is full of concepts that are at once fuzzy and useful (“species” is one).
Perhaps the most important job of the concept is to act as a reminder to biologists never to
neglect a possible role for the microbiome in any phenomenon they are trying to
understand. For example, the study of the evolution of pesticide resistance in insects
usually involves the genome of the insect itself. But resistance by pests called bean bugs to
fenitrothion, an insecticide, is conferred by bacteria of the genus Burkholderia which live in
their guts—important knowledge, if you want to counter that resistance.
And there are even stranger powers brought to holobionts by their microbial parts. For
example, certain bacteria are sensitive to magnetic fields. Researchers suspect some may
have formed alliances with creatures such as turtles and birds, enabling these animal-based
collectives to use Earth’s field to navigate. More familiarly, it is the holobiont nature of dogs
(and also hyenas and other carnivores with anal glands) that enables them to communicate
via scent marks. The odours they deposit this way are created by bacterial degradation of
secretions into these glands.
The best studied animal holobiont of all is Homo sapiens. Topologically, a human being is a
torus—a three-dimensional object with a hole through the middle. The hole in question is
the alimentary canal. Nearly the whole surface of this torus is home to microbes, though
different parts have different inhabitants. By far the largest numbers of them live in the
lower gut.
These gut microbes extend the digestive capabilities of the human holobiont in the same
way (though not to the same degree) as happens in termites, by breaking up fibrous plant
polymers into smaller molecules that the other 37trn cells can metabolise. But they
produce lots of other molecules, too, some of which send signals to the holobiont’s animal
cells. Those cells, moreover, often signal back.
This signalling seems particularly influential over parts of the nervous system. Among the
molecules secreted by gut bacteria are serotonin, GABA and catecholamines. All are
neurotransmitters, chemicals which carry impulses between nerve cells. The microbiome is
thus an integral part of the gut-brain axis, the constant neural chatter between the largest
group of nerve cells in the body (the central nervous system) and the second-largest (the
enteric nervous system).
The third big interaction between host and microbiome involves the immune system. This
brokers the deal that keeps the whole show on the road by preventing any particular part
of the microbiome running riot—a task at least as important as fending off infectious
diseases. In return, a well-balanced microbiome assists the immune system by preventing
pathogenic bugs from multiplying in the intestines.
The gut microbiome is thus deeply integrated with the mammalian part of the human
holobiont—as can be seen when that integration goes wrong. Dysbiosis, as this is known, is
at least associated with, and in many cases probably helps cause, obesity, diabetes, high
blood pressure, atherosclerosis, asthma, inflammatory bowel disease, some liver diseases,
various cancers, autism, Parkinson’s disease and depression. And this is not an exhaustive
list.
Looking beyond the 37trn mammalian cells in this way can be medically fruitful. A largely
plant-based diet, for example, encourages fibrolytic bugs, while a meat-rich one favours
those that thrive on fat and proteins. As a consequence, plant-based diets yield molecules
such as butyric and propionic acids which are known to regulate inflammation and other
immune-system functions. Meat-based ones result in branched-chain fatty acids, and
phenols and indoles, which have a range of bad effects, including being risk factors for bad
cardiovascular health.
Fixing things with holobionics
Crop breeders, too, are starting to take the holobiont concept seriously. Field agents for
Indigo Ag, in Boston, Massachusetts, identify rare survivors in farmers’ fields of events like
droughts and infestations, and send these plants in for study. The assumption is that there
is something special about such survivors. Indigo’s foundational guess was that this special
something is often in the rhizosphere.
Pursuing that thought, the firm has found—and now markets—rhizospheric bugs which
confer drought-tolerance on cotton, maize, soyabeans and wheat; improve resistance to
fungi in maize, soyabeans and wheat; guard against nematode attack; liberate phosphorus
and potassium from the soil; and “fix” atmospheric nitrogen by turning it into molecules
such as nitrates, which plants can use to make amino acids, the building blocks of proteins.
Another firm, Pivot Bio of Berkeley, California, is concentrating on nitrogen fixation. Pivot’s
researchers have edited the genes of two types of nitrogen-fixing bacteria so that they
continue to work even when there is already plenty in the soil, and also turn out more fixed
nitrogen than they usually would. When planted alongside a crop such as maize, a cocktail
of these bugs provides an instant, nitrogen-fixing rhizosphere for each seedling. That can
reduce fertiliser use by a fifth.
Jean-Michel Ané of the University of Wisconsin-Madison, who is, inter alia, a scientific
adviser to Pivot, has two other nitrogen-fixing ideas up his sleeve. One, observing that
legumes grow special root nodules to house nitrogen-fixing bacteria, is to reshape the roots
of cereals (rice is the main target) so that they grow similar nodules. He and his colleagues
have identified two leguminous genes that, when transplanted to poplars (a common
experimental plant) cause them to grow nodules too.
Dr Ané’s other idea is based on unusual strains of maize and sorghum that grow aerial
roots which secrete a gel in which nitrogen-fixing bacteria like to live. This gel then drips to
the ground, where the fixed nitrogen is absorbed by the plant’s roots. In the case of maize,
he and his colleagues have managed to cross-breed plants carrying this trait with
commercial cultivars, and are now into the fifth generation of plants bearing it.
Cattle and other livestock are also coming under scrutiny. Their termite-like digestive
systems generate more than 100m tonnes of methane a year, about 6% of the greenhouse-
gas emissions for which humans are responsible. The bugs in question can be curbed by
adding either of two substances to cattle feed—a chemical called 3-nitrooxypropanol or a
seaweed called Asparagopsis taxiformis. Indeed, adding A. taxiformis not only curbs
methane output, but also increases the conversion rate of feed into milk or meat.
Conservationists see promise in thinking of organisms as holobionts, too. That is the motive
for Dr Bell’s work on amphibians. Others, though, are looking to help entire ecosystems.
Both forests and coral reefs are temperature-sensitive and thus threatened by global
warming. Viewing their members as holobionts may allow ecologists to help them adjust.
Like Indigo’s researchers, Cassandra Allsup, Isabelle George and Richard Lankau, of the
University of Wisconsin–Madison, have been looking at soil microbes. They have sampled
forests in their home state and in Illinois to the south. Testing seedlings of various species
grown near the north and south of this span, which are 5.8 degrees of latitude apart, they
found that those grown in soil inoculated with bacteria from sites with similar climates
grew faster than those in soil given bugs from different ones. Though inoculating entire
forests is not practical, they hope that treating nursery-grown saplings intended for local
reforestation projects might help those trees’ survival.
Like humans, corals are a particularly well-studied meta-organisms. Their tourist-
attracting colours come from photosynthetic protists called zooxanthellae that live inside
special cells in the sessile animals responsible for secreting the limestone of which coral
heads are made—and it is these which provide the holobiont with most of its nutrition.
A weakness of this arrangement is that if zooxanthellae get too hot, their photosynthetic
mechanisms go haywire, generating toxic oxygen-rich molecules called free radicals. The
coral animals then expel them, a phenomenon called bleaching. If conditions return to
normal in time, recolonisation may occur. But corals that remain bleached for too long will
die.
Some people are trying to inculcate resistance to rising temperatures by tinkering with the
genes of the animal part of the system. But Madeleine van Oppen of Melbourne University,
in Australia, and Raquel Peixoto of King Abdullah University, in Saudi Arabia, are looking, in
separate projects, to tweak either the zooxanthellae, or some of the many bacteria which
are also part of the holobiont.
Such ecosystem engineering represents holobionic thinking on a grand scale. Whether it
will lead somewhere fruitful remains to be seen. But the very fact that it is happening at all
is, surely, testament to an idea whose hour has come. ■
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Don’t have kittens
There’s more than one way to spay a cat
A new vaccine could be a cheap, simple solution to a big problem
Jun 14th 2023

RUNNING A CITY can be an expensive business. There are potholes to fix, policemen and
firefighters to fund, and mountains of refuse to collect. In many cases, the kitty is empty.
Other sorts of kitties cause problems, too. Some 480m of the world’s 600m domesticated
cats are thought to be free-roaming. Strays can be unsightly and can spread diseases, either
to each other or to people. Many endure short and uncomfortable lives. Even those that
land on their feet can cause suffering elsewhere—more than 60 species of animals, ranging
from mice to birds, have been hunted to extinction by predatory cats.
Fixing the problem, as well as the cats, is not cheap. Tel Aviv, which has tens of thousands
of the animals, has spent over $100,000 a year on neutering programmes alone. Now,
though, a paper in Nature Communications suggests a single jab could offer a cheap, safe
and long-lasting way to sterilise a cat.
The technology involved is gene therapy, in which a gene is carried into an organism’s
body, usually by a modified virus, in order to fulfil some additional function. This has been
gaining momentum in humans, with seven different gene therapies approved by America’s
Food and Drug Administration as of this February. Most are designed to target rare genetic
diseases, including haemophilia B, where mutation causes problems with blood clotting.
David Pépin, a molecular biologist at Harvard University, came to realise the same
techniques could also be used to induce contraception. His laboratory was investigating a
lesser-known reproductive hormone called AMH (anti-mü llerian hormone), which is
produced by the follicles that house immature egg cells in mammals. These follicles grow
inside the ovaries until they burst, releasing their cargo into the fallopian tubes and
towards potential fertilisation. More mature follicles produce AMH in order to slow down
the growth of those eggs remaining in the ovaries. The hormone acts as a red traffic light, as
it were, to ensure the flow of maturing eggs is not too rapid.
Dr Pépin concluded that persuading a mammal to produce higher-than-usual amounts of
AMH—by inserting the right type of gene—might strengthen this braking signal and halt
follicle production altogether. After initial successes in rodents, he joined forces with Bill
Swanson at the Cincinnati Zoo and Botanical Gardens to test the idea on cats.
In 2019 the researchers injected six cats with a harmless virus that contained a synthetic
copy of a feline AMH gene, and three control cats with the virus alone. The virus they chose
was able to deliver its payload direct to the cats’ muscle cells. These cells are ideal for two
reasons. First, muscle cells are perfectly placed to pump hormones such as AMH into the
bloodstream and thence into organs across the body, including the ovaries.
Second, muscle cells neither die off nor split in two during an animal’s lifetime. That
ensures the new genes they had been armed with would not disappear over time—
essential for permanent sterilisation. This is particularly important for the delivery
mechanism employed by Dr Pépin. While most of an animal’s genes are contained in
strands of DNA inside the nuclei of cells, the AMH gene floats around in the cellular
cytoplasm. Despite its unorthodox location, it is still capable of instructing the cell to
produce hormones.
All nine cats—which were named after the wives of American presidents—then had their
faeces monitored over the course of two years so that the levels of their reproductive
hormones could be checked. In order to ensure the right cats were being matched to the
right scat, each was fed food with a different coloured dye or, for a few fabulous individuals,
glitter. After eight months, and then again after 20 months, male cats were introduced into
the living quarters so that the females’ breeding patterns could be assessed.
Though the three control cats (Michelle, Nancy and Rosalyn) ovulated and got pregnant, the
six injected with the gene-carrying virus (Betty, Dolly, Jacqueline, Abigail, Barbara and
Mary) did not. Each had levels of AMH up to a thousand times higher than before they were
treated. Four refused to even try to breed, and the two that were still receptive to the idea
had no pregnancies. “These cats are not able to reproduce,” concludes Dr Swanson.
While the precise mechanisms in cats and rodents are not identical, high levels of AMH
seem to have a contraceptive effect in both species. Dr Pépin hopes AMH could become a
useful target in human contraception too—though as a pill with temporary effects rather
than a permanent injection. Presently, the most common kind of hormonal contraception is
the combined pill, which contains oestrogen and progesterone. These limit the release of
hormones which cause follicles to ripen, and thicken the mucus at the entrance of the
womb, preventing the passage of sperm.
But there are oestrogen and progesterone receptors all over the body, not just in the
reproductive system. Synthetic hormones affect those as well. That is one reason for the
pill’s many side-effects, including mood swings, nausea and headaches. AMH receptors in
humans are much more specific, being found mostly in the reproductive system. The hope
is that a contraceptive that targets AMH may therefore be one with many fewer side-
effects. ■
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Culture
 For the boldest commentary on African politics, look to cartoonists
 The eastern half of Europe is united by its diversity
 Cormac McCarthy was the great novelist of the American West
 A potato can have no finer fate than ending up as an Irish crisp
 Meant to be liberating, the Sullivanian community became a nightmare
 “The Full Monty” gang are back
African political cartoons
For the boldest commentary on African politics, look to
cartoonists
They go further than many of the continent’s journalists ever dare
Jun 15th 2023 | KAMPALA

THE PRESIDENT is a gun-toting dairy farmer who is milking his “cowntry” dry. His brother
takes the form of a pair of sinister sunglasses eyeing the national pension fund. His son is a
toddler in an oversize army hat who has not learned to tie his shoelaces.
Or so they appear in the imagination of Chrisogon Atukwasize, the man with the sharpest
pencil in Uganda. Signing himself “Ogon”, he uses his cartoons in the Daily Monitor
newspaper to shame the corrupt and upbraid the powerful. Last year soldiers kidnapped
and tortured the writer of a satirical novel which featured one of his illustrations on the
front cover. They were said to have also made inquiries about Ogon. He responded with a
sketch of a torturer drawn as one of the Minions—characters in “Despicable Me”, an
animated-film franchise—struggling to read the offending book.
Criticism of the authorities is not entirely silenced in Uganda. But under Yoweri Museveni,
a rebel who fought his way to power and has kept it for 37 years, the real news is often
hidden between the lines. Cartoons revel in such ambiguity; after all, in a picture,
everything can be a kind of subtext. Illustrators use their relative freedom to probe deeper
than most journalists in the region dare to. At first, Ogon just wanted to draw. Later, he
says, “You find you have a cause to push.”
That situation holds true all over Africa, where satirists are often the boldest commentators
on politics and vice. “Cartoonists use visual imagery as a kind of mask, to conceal in order
to reveal,” says Ganiyu Jimoh, a Nigerian cartoonist and scholar. He compares the wit and
allusions in cartoons to the traditional masquerades in Yoruba culture, in which masked
performers would ridicule the powerful. As an adage has it, “Oba kii mu onkorin”: the king
does not arrest a satirist.
The first press cartoons in Africa were drawn by white colonialists—and were often racist.
In the 1930s black artists began to publish political cartoons in Nigeria and South Africa.
But African cartoons truly blossomed in the 1990s, as a democratic wave washed over the
continent. In Francophone countries satirical periodicals flourished, modelled on Le Canard
enchaîné, a French weekly. The Senegalese everyman Goorgoorlou, created by the
cartoonist Alphonse Mendy, crossed from the page to the television screen, a popular hero
for an age of economic hardship at the close of the millennium.
Satirists wore their politics on their sleeves. South Africa’s most famous cartoonist,
Jonathan Shapiro—better known by his pen name Zapiro—was a white anti-apartheid
activist who had taught himself cartooning in the 1980s after being forcibly conscripted
into the army. In Kenya, the ramparts of authoritarianism were breached when cartoonists
began to draw the president for the first time. “A cartoon is like that little boy that can say
the emperor is naked,” says Godfrey Mwampembwa, or Gado, east Africa’s greatest satirist.

Today most countries in Africa have multiparty elections and an independent press. But in
many places democracy is a paper-thin veneer, at which cartoonists caustically scratch
away. Even in the freest societies, satire has come under pressure. Jacob Zuma, the former
president of South Africa, tried to sue Zapiro over a cartoon which showed him preparing
to rape Lady Justice. Gado got into trouble in 2015 after drawing the president of Tanzania
as a half-naked sybarite fed by women labelled Cronyism, Incompetence and Corruption.
The EastAfrican, the paper in which the sketch appeared, was banned in the country; the
next year, Gado lost his job.
But he is still drawing. His recent targets have included Uganda’s hateful new anti-gay law,
which prescribes the death penalty for “aggravated homosexuality” and was signed by
President Museveni in May (see top image). Like other cartoonists, Gado sometimes uses
his art as camouflage for pithy verbal commentary. Many of his cartoons feature a tiny,
squiggly figure in the corner—“my alter ego”, he quips—offering quirky reflections of its
own. “When I started I would use that as a way of getting away with stuff because editors
wouldn’t pay attention to it,” he says. With time it became a technique to add extra layers to
his work. The inherent power of cartoons, he adds, is that they are “open to interpretation”.
Artistic licence
That ambiguity has proved useful to the Zimbabwean cartoonist Tony Namate, who says
the role of satire is “to punch holes in the hot-air balloons of politicians”. On one occasion a
crowd of war veterans besieged the newspaper offices where he worked. On another his
editor was dragged to court after he sketched a figure that seemed to be Robert Mugabe
fleeing a mob. The prosecution could not prove that the caricature was indeed of the
former president, and the case eventually collapsed.
Most African cartoonists now use the internet to share their work—especially when it is
deemed too controversial to make it into print. “If it can’t run in the publication, then that’s
well and good, you publish it on your socials instead,” says Celeste Wamiru, a Kenyan
cartoonist. On Twitter and Facebook cartoons take on a life of their own, unmoored from
newspapers and floating in a sea of memes. New kinds of satire evolve. In April Jimmy Spire
Ssentongo, a Ugandan cartoonist, invited the citizens of Kampala to an online exhibition of
the city’s potholes. Photographs of cratered roads flooded social media and the president
swiftly promised action.
The community of African cartoonists is growing, supported by networks such as
Cartooning for Peace, an association based in France. But some voices are still lacking. Most
cartoonists are men, who can be too quick to deploy gendered images or sexual metaphors.
Ms Wamiru became the first woman to be employed as an editorial cartoonist in east Africa
when she was hired by the People Daily in 2011. Women are taught to “take a back seat and
be led”, she says. One of her cartoons shows a stooped mother carrying her husband in a
basket, while he dreams peacefully of money.
A cartoonist’s work is never done. Ogon laments the fact that Ugandan politicians are just
as corrupt as when he first picked up his pen. Some rage at his scabrous caricatures. But
sometimes, he says, he gets phone calls from people on the inside, who know the truth and
are scared to speak out themselves. “Don’t relent on your cartoons,” they tell him. ■
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European history
The eastern half of Europe is united by its diversity
So says Jacob Mikanowski in his insightful chronicle, “Goodbye, Eastern Europe”
Jun 15th 2023

Goodbye, Eastern Europe. By Jacob Mikanowski. Pantheon; 400 pages; $30. Oneworld
Publications; £22
FOR MOST of the past three decades, the received view of eastern Europe, defined roughly
as the territory between Germany and Russia, has been breezily optimistic. A region that
exemplified the cultural and intellectual vim of the old continent had escaped a cruel
communist yoke. It was now free to make an uneven but inexorable recovery, joining the
West’s institutions and following its political and economic models.
Among Eurocrats, multinational lenders and NATO strategists, any difference between the
countries in “central and eastern Europe”, to use the new nomenclature, mattered less than
their common recent past and collective destination. Even the wars in the former
Yugoslavia were seen as a nasty blip rather than a reversal of these trends. Ditto the
emergence of chauvinist politics in Poland and Hungary: that was a disappointment, not a
sea-change.
One of the merits of “Goodbye, Eastern Europe” by Jacob Mikanowski, an American writer
and scholar brought up partly in Poland, is that it challenges this glib view from several
angles, some of them unexpected. Distilling more than a decade of research, he carefully
argues that if something marks out Europe’s eastern half, it is not homogeneity but wild,
glorious diversity, including the long presence of Judaism, Islam and religious practices that
blended Christianity and paganism. More edgily, he contends that communism, including
the Soviet sort, was not an alien phenomenon but had been deeply rooted in the region
since the early 20th century.
Both his Polish grandfathers, Mr Mikanowski notes, became communists after considering
a narrow range of other options, including Zionism, emigration and staying in a traditional
Jewish community, or shtetl. With disarming openness, he shares the story of one of them, a
partisan fighter with an impressive war record—he helped free several hundred fellow
Jews from a camp in Belarus—who in the 1950s assisted in a communist sting that
embarrassed Poland’s underground opposition and its Western friends.
Readers might wonder how the author’s emphasis on cultural and ideological variety
squares with his title, which seems to suggest that the east of Europe was in the past a
distinct, coherent region. His answer is implied rather than spelled out. In describing pre-
industrial history, he stresses how diversity and bouts of sectarian hostility co-existed with
fusions and overlaps. Thus for all the social barriers between them, Jews and Christians
relied on each other’s folk remedies, faith healers and exorcists. They formed a single
religious ecosystem. In communist times, another odd symbiosis developed between
dissidents and the secret police who devoted huge resources to monitoring and
circumscribing their lives.
In this way—and for all the power of dynasties, emperors and 20th-century tyrants—the
region spawned distinctive grassroots cultures and hosted an ingenious interplay between
groups and ideologies. That talent was not entirely eliminated by the Holocaust, nor by
Soviet-led communism, but may now be threatened by globalisation. Such, broadly, is the
author’s view (though he makes the last point more explicitly elsewhere).
He yearns for the survival of an east European world in which people react unpredictably
to their geopolitical or economic masters. In practice, though, the line between downward
pressure and local ingenuity is harder to draw than he allows.
Take the book’s final section on Russia’s invasion of Ukraine. Mr Mikanowski makes the
familiar point that after Ukraine became independent in 1991, its leaders struggled to form
a nation out of the Russophone east of the country and the post-Habsburg west. Then the
Kremlin simplified that task by claiming Ukraine had never existed and should never exist.
The courage, and creativity, of the Ukrainians’ response is visible to all.
Not for the first time in the region’s history, a common struggle to defy annihilation is
forging new social, cultural and psychological realities, which neither external nor domestic
leaders can control. The fallout from that life-and-death conflict is being felt in every
adjacent land, creating new fissures and new transnational bonds. It may still be too soon
to say goodbye to eastern Europe. ■
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its-diversity
American bards
Cormac McCarthy was the great novelist of the American
West
His fiction faces a bloody past and never looks away
Jun 14th 2023 | NEW YORK

WILLIAM FAULKNER is the bard of the American South. Saul Bellow is the supreme
chronicler of Chicago. New York is contested territory. For a long time, Wallace Stegner
could have laid claim to the West. But that was before Cormac McCarthy hit his stride.
To understand the American West, you need to know the land and its beautiful, terrifying
expanse, as Stegner did. But in his fiction Mr McCarthy, who died on June 13th at the age of
89, grasped and dramatised another essential truth: that the West was won with violence.
The saga of the region’s piecemeal incorporation into America involved bravery, gumption
and careful planning—but also decades of brutal, intimate bloodshed. It haunts every strip
mall and stylish restaurant and housing development from Kansas City to Los Angeles and
beyond. This was Mr McCarthy’s subject: the reality and implacability of cruelty and
conflict.
The great theme of his career is all the more striking because this was not his native
territory. He was born in Providence, Rhode Island, in 1933 with the first name Charles. At
some point he changed it to Cormac, supposedly in honour of an Irish ruler, and he grew up
mostly in Knoxville, Tennessee. His early novels—“The Orchard Keeper” (published in
1965), “Child of God” and “Suttree”—were deeply Faulknerian: arch, self-referential and
largely plotless.
He gained fame with his “Border trilogy”: “All the Pretty Horses” (1992), “The Crossing”
and “Cities of the Plain”. Like all his fiction these were demanding stories, but they won him
a wider readership, especially “All the Pretty Horses”. Elegant and well plotted, it was made
into a film starring Matt Damon and Penélope Cruz at the start of their careers. The best
book in the trilogy was the last. It was austere, bloody and hopeless, as the West had been
for those on the losing end of its conquest.
The best film adaptation of Mr McCarthy’s work was the Coen brothers’ version of “No
Country for Old Men”, a slim, propulsive, noirish novel published in 2005. A wonderful film
that was true to the author’s vision, it featured commanding performances from Josh Brolin
as the foolish hero; Javier Bardem as his psychopathic nemesis; and Tommy Lee Jones, who
imbues the sheriff of the story with a world-redeeming, plain-spoken goodness. Published
in 2006, and recounting the plight of a father and son in a post-apocalyptic world, “The
Road” won a Pulitzer prize and also became a film.
But Mr McCarthy’s best novel—and arguably the best work of fiction written in English in
the past 50 years—was “Blood Meridian”. Its narrator, “the kid”, joins a gang of Apache
hunters who are hired to collect scalps at $100 apiece. Despite his deeds the kid, like Mr
Jones’s sheriff, has a stubborn decency, though it proves no match for his milieu.
Mr McCarthy based the book in part on the real-life Glanton Gang, scalp-hunters who
haunted what is now Sonora, New Mexico, and bits of Arizona. It features one of literature’s
most pitiless and vibrant depictions of vice, in the form of a quasi-mythical character, fat
and hairless, who becomes the novel’s amoral centre. Its plot is relentlessly violent, the
language almost biblical. Finishing it takes determination; at times it seems perversely
intent on persuading readers to give up. The baroque descriptions of gore include a tree
with dead babies hanging from the branches and a head split open “to the thrapple”.
Persist: “Blood Meridian” makes art out of man’s inhumanity to man. To read it is to know
what not to do and how not to live, but also to confront an aspect of the past that all
Americans inherit. It is not exactly redemptive; rather it bears witness. Mr McCarthy does
not look away. He never did.
He lived a deeply unliterary life in the south-west, preferring the company of scientists to
authors. He gave few interviews and appeared uninterested in fame (though the daring of
his books suggests a fierce ambition). If his last two novels, published in 2022, were too
abstract and psychological for some, they were also works of striking vibrancy and
originality from an author who was nearly 90. In his mature prose Mr McCarthy was wholly
himself, original and distinctive. For a novelist there is no higher praise. ■
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World in a dish
A potato can have no finer fate than ending up as an Irish
crisp
There is a joy in saving foods, however quotidian, for particular times and places
Jun 15th 2023

WHAT IS NIRVANA for a potato? To be sliced and slivered and bathed in boiling oil before
emerging as a French fry? To have its weight matched in butter and cream and be
transformed into glorious mounds of mash? No. The answer is found in a plastic bag. For a
potato, there is no nobler fate than to end up in a packet of Tayto cheese-and-onion crisps.
Taytos are the consummate crisps (potato chips to Americans). The company was
established in Ireland in 1954 by Joe “Spud” Murphy. He was not the inventor of crisps, but
he has been credited with transforming them. Until then there was no way to flavour the
individual crisps themselves; instead each bag came with a small blue packet of salt to be
sprinkled and shaken over the contents.
The invention after the second world war of the gas chromatograph dispensed with that
DIY process. It allowed food scientists to understand the chemical compounds behind
flavours such as cheese. That in turn led to the development of artificial flavours, an
advance on which Murphy seized to great effect.
He started with cheese and onion. The pairing is a classic: think of the strings of Gruyère
emerging from a bowl of French onion soup, or a dish of Kä sespä tzle, German dumplings
that are mixed with cheese and topped with caramelised onions. And the flavour combines
well with spuds. Potatoes, wrote Seamus Heaney, one of Ireland’s greatest poets, promise
the “taste of ground and root”. The less poetic might describe them as a bit bland. Sprinkled
with the salty, savoury umami of Murphy’s seasoning, however, they became a cut-price
sensation.
Taytos remain the quintessential Irish crisp, but now they are available elsewhere (as, of
course, are many other brands of flavoured crisps). That is a mixed blessing. Once upon a
time even industrially produced foods had a limited range. To travel was to discover not
only the cooking in other places, but the snacks. Going to France was a chance to chug a
bulbous bottle of Orangina, a fizzy drink. For Europeans, a trip to America—or a visit from
Americans—was an opportunity to stock up on Reese’s Peanut Butter Cups. Thanks to a
globalised food system and the appetites of homesick migrants, such items are now
available far beyond their lands of origin.
That shift entails the loss of a modest joy. At first glance a bag of Taytos is the antithesis of a
seasonal or local food, characteristics that today are prized. Encased in their silvery plastic,
they survive in all seasons and locales. And yet, for your columnist at least, these potato
snacks are entangled with their Irish roots.
For her, Taytos are a once-a-year treat, to be eaten on a beach in south-west Ireland
shivering after an icy swim or sweating at the top of a mountain. That is not out of
necessity. They can be bought in London, her home city, or ordered on the internet, albeit
at a mark-up. The ingenious seasoning should taste no different in a London park than in
Murphy’s homeland. But somehow it does. ■
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American cults
Meant to be liberating, the Sullivanian community became a
nightmare
In his new book, Alexander Stille tells a story of experimental living and exploitation
Jun 15th 2023

The Sullivanians. By Alexander Stille. Farrar, Straus & Giroux; 432 pages; $30
“HOW MANY cults have reunions?” So muses a former member of the Sullivanians, a
therapeutic community that thrived in New York in the 1960s. As Alexander Stille shows in
this absorbing account of the group’s rise and fall, many of its alumni do indeed remain in
close contact with each other. But others regard it as a failed utopia or even “the most
traumatic experience of their lives”. One interviewee tells Mr Stille, whose previous books
have covered his own parents’ marital woes and the Sicilian Mafia, that he “joined a
movement that turned into a business, that became a racket”. Another describes the
Sullivanians’ driving force, Saul Newton, as “a sexual monster”.
The Sullivan Institute for Research in Psychoanalysis was named after Harry Stack Sullivan,
a psychiatrist who was heavily influenced by the work of Sigmund Freud. Isolated as a
child, Sullivan took a keen professional interest in the problem of loneliness—and in its
antidote, which he called “chumship”.
In 1957 Newton and his wife, Jane Pearce, both followers of Sullivan, founded a centre that
would expand on the radical implications of his ideas. Then a highly regarded therapist,
Pearce shaped the group’s theoretical framework and gave it credibility. Meanwhile
Newton, who liked to brag about his exploits fighting fascists in the Spanish civil war, lent it
his charisma. Together they acquired a handsome town house on the Upper West Side and
built a summer retreat on Long Island.
Newton and Pearce believed that the nuclear family was an instrument of “deadening
conformity”, which trapped children and stifled parents. Instead they favoured “group
marriage”, a mode of polyamory that allowed adults to luxuriate among “alternate
validators”, while their offspring were brought up by baby-sitters or sent away to boarding
schools.
At first the Sullivanian community prized creativity. Notable patients included the artist
Jackson Pollock, Lucinda Childs, a choreographer, and Clement Greenberg, an art critic who
championed Abstract Expressionism. In the mid-1970s the focus narrowed: its main
artistic channel became the Fourth Wall Repertory Company, which staged shows such as
“The King of the Entire World”, a musical which appeared to shed light on Newton’s
autocratic mindset.
Many of those who took part in Sullivanian therapy, and especially the men, were drawn by
the prospect of easy sex. But this was not a zone of unfettered hedonism. Rules abounded.
These extended to food, prompting one member, who had been required to travel to a
conference in Indiana with provisions from New York, to contemplate his wilting salami
and reflect: “I don’t think Armageddon is going to happen if we have a cheeseburger.”
Rigid codes were supposed to foster closeness. Yet what to some members seemed the
atmosphere of a tight-knit village struck others as a grotesque culture of surveillance. The
leaders purported to be communists but revelled in hierarchical privilege. As disciples
fretted about status and earning “prestige points”, Newton—who was divorced from
Pearce in the early 1970s and married six times in all—ran amok. (A serial predator, he
demanded sexual favours from a woman who had very recently given birth.) He died in
1991, aged 85; in his declining years his appetites became violent and abusive.
Mr Stille carefully documents the institute’s unravelling and eventual collapse in the 1990s,
as Newton’s last two wives feuded over his legacy. The author is sensitive to the human
cost of this experiment, even if occasionally his language is rather breezy (one character
goes on a “wild paternity rollercoaster”; the state of mind of others is “somewhat
schizophrenic”). He elicits zinging critiques from his sources—not least one of Newton’s
daughters, Esther, who remarks that her father’s project “combined the worst of Marxism,
psychoanalysis and the musical theatre”. ■
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Back Story
“The Full Monty” gang are back
In a new TV series, they can leave their hats on
Jun 14th 2023

UNEMPLOYMENT, ATTEMPTED suicide, sexual dysfunction, the impending repossession of

a sunbed: in “The Full Monty” all manner of woes inspired six former steelworkers to strip
to their birthday suits for a raucous paying audience. Gaz, their ringleader, played by
Robert Carlyle, was an ex-con at risk of losing contact with his son. Overweight and
depressed, his best pal Dave (Mark Addy) feared for his marriage. All six were adrift and
emasculated in the post-industrial world. It was a hoot.
And not only because of the penis jokes and the fact that they got their kit off. Released in
1997, the film exemplified two winning genres. First, a tale in which a posse of misfits seek
salvation in a shared endeavour—a brass band, a choir—as the clock ticks towards a
showdown. Second, as “Rocky” was to Philadelphia, “The Full Monty” was a paean to an
unlovely place that is loved nevertheless, in this case Sheffield, Yorkshire, in all its rusty
glory: the sun rising behind the smokestacks, the polluted canals, derelict mills, grimy
terraces, grey tower blocks and garden gnomes.
It was also a toe-tapping ode to the dance music of the Seventies and Eighties, from “Hot
Stuff” to “You Sexy Thing”. (“Look at that,” Dave complained of Irene Cara’s welding
technique in the video for “Flashdance”, “her mix is all to cock!”) Coming out at a moment
when British culture had clout, the film was an international hit. A quarter of a century on,
the gang are back in an eight-part series of the same name, out on June 14th on Hulu in
America and Disney+ elsewhere.
Seeing them after all these years is like meeting long-lost friends, albeit the kind who make
you think: if that’s what you look like, how the hell do I look? Life has continued to come at
them, in the form of bereavement, adultery and loan sharks. Still skint, Gaz lives in a
caravan and has a teenage daughter, Destiny, or Des (Talitha Wing, the best thing here).
Like her old man, Des makes mistakes but tries to make up for them, struggles to go
straight but has a heart of gold. The story is again anchored in Gaz’s friendship with Dave
and Dave’s marriage to Jean (Lesley Sharp). She is now the head teacher of a school where
Dave is the caretaker.
Closeted in the movie, Lomper (Steve Huison) has a husband and runs a café that is the
chums’ HQ. It is a homely version of the mobsters’ meat-shop hangout in “The Sopranos”,
with less ultraviolence and more cake. The six wrestle with 21st-century mores such as
automated supermarket checkouts and political correctness. Once again they get into
harmless scrapes; again Gaz’s children are father to the man. Along with the children come
assorted animals (a stolen celebrity dog, a prize racing pigeon).
This sounds twee, and it is. At the same time the mood is much grimmer than the original’s,
and not only because everyone keeps their clothes on. The film had decay and despair but
also the gentleness of a fable. Here, beneath the antics and confectionary, the wider world
is desolate. The school’s ceilings leak. Hospitals are creaking. The welfare system is a cruel
obstacle course. People go hungry.
As a result, the tone whiplashes between doleful and cute, the comedy veering from
whimsical to screwball to macabre. Dramatic tension suffers. For all the post-Thatcher
political consciousness, the real battle in 1997 was between the six men and themselves.
Several almost pulled out of the striptease because of their neuroses, psychological or
anatomical. Baring all became, for them, a sort of gaudy apotheosis.
In the new series, the antagonist is the pitiless, skinflint state, a foe you can dodge and bait
but not defeat. The clock the men race is the tick-tock of mortality. “Tomorrow’s another
day. Might be shit too,” Gaz tells Des, expressing the limit of the drama’s optimism, “but at
least shit in a different way.”
As for the thongs and Velcro-seamed trousers: this show knows it can’t dance in the same
dole queue twice, and doesn’t try to. Nods to the gyrations of yore are sparing; only one
scene comes close to reprising the old routine, and then in circumstances bleak enough for
Beckett. Instead it updates and amplifies the politics and deepens the characters.
Does it work? It grows on you. And there is a brave kind of integrity in this approach to
making a sequel. Most sequels run on nostalgia, peddling the dual pleasures of a gauzily
revisited past and a sense of progress and resolution. Boldly, “The Full Monty” offers little
of either. The past is past and, even with the crutches of friendship and gallows humour,
the present is scarcely a remedy.■
Read more from Back Story, our column on culture:
The comic opera of England (May 28th)
What happens when a story loses a main character? (May 2nd)
Picasso was a genius—and a beast. Can the two be separated? (April 5th)
Also: How the Back Story column got its name.
For more on the latest books, films, TV shows, albums and controversies, sign up to Plot Twist,
our weekly subscriber-only newsletter
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The Economist reads
 What to read to understand modern Poland
From partition to pierogi
What to read to understand modern Poland
Six books about the country that sees itself as the heart of Europe
Jun 15th 2023

WHERE THERE are two Poles, there are three opinions, goes a Polish saying. Poland’s
tumultuous history and polarised politics give its writers a lot to reflect on and disagree
about. For more than a century from the late 1700s the country was partitioned by its
neighbours, including Russia, Prussia and Austria. After the second world war it was
subjugated by the Soviet Union. Many writers sought literary escape from the grimness of
communism, through science fiction and reportage from far-off lands. Their tales were
often coded satires of the Soviet-imposed system, which managed to escape censorship.
Contemporary Poland sees itself as a Western country, anchored in NATO and the
European Union, but its government does not always abide by the democratic norms of its
allies. Here are six books about a country that is at once at the heart of Europe and on its
edge.
God’s Playground: A History of Poland (Two Volumes). By Norman Davies. OUP Oxford;
488 pages and 616 pages; £48.49 and £57.00
To understand modern Poland, start with a tour of its past. In the 17th century, as the
Polish-Lithuanian Commonwealth, it covered more territory than any other European state
west of Russia (and was more than triple its current size). By the end of the 18th it had
ceased to be an independent entity. Poland became a battle zone in the two world wars and
was then forced by the Soviet Union to become a socialist dictatorship. Norman Davies, the
leading chronicler of Poland in English, squeezes 1,000 years of history into two volumes
(and further compressed all that into a separate single-volume work, “Heart of Europe”).
His book weds a British historian’s detachment to the passion of a naturalised Pole, and
weaves through its account of Poland’s identity the heritage and influence of Jews,
Germans, Ukrainians and Lithuanians. Mr Davies enriches his chronicle of events with
anecdotes, poetry and retellings of the myths that have shaped Poland’s character.
Twilight of Democracy. By Anne Applebaum. Knopf; 224 pages; $16. Penguin; £16.99
Anne Applebaum starts her tale at the point where Mr Davies ends: with the new
millennium. On New Year’s Eve the American-born journalist and her husband, Radoslaw
Sikorski, who later became Poland’s defence minister and foreign minister, gathered
friends at their manor house. The air was crisp with optimism. After decades behind the
Iron Curtain Poland had joined NATO and was in the EU’s waiting room. But during the
following 20 years the camaraderie crumbled. United by their rejoicing in the collapse of
communism, the guests split into liberal and populist-conservative camps. The latter,
represented by the Law and Justice party (PiS), is now in power. Over the past eight years it
has weakened Poland’s hard-won democracy by packing courts and public media with
party loyalists. Other post-communist countries, notably Hungary, experienced similar
developments.
In “Twilight of Democracy”, which was published soon after the re-election of the PiS
government in 2019, Ms Applebaum, a former correspondent for The Economist, traces
how intellectuals—frustrated, self-pitying and opportunistic, in her description—became
agents of populism. She names and shames old friends who became leading supporters of
the PiS government. Some may play prominent roles in the parliamentary election due in
late 2023.
Other liberals have criticised Ms Applebaum’s pro-Western assumptions. In “The Light That
Failed”, Ivan Kratsev, a Bulgarian academic, and Stephen Holmes, an American one, argue
that eastern Europeans resent being cast as imitators of the progressive West. Populists
have seized on their disillusionment. Pro-Western liberals like Ms Applebaum, Mr Krastev
says, have tragically failed to respond with a compelling narrative of their own.
Drive Your Plow Over the Bones of the Dead. By Olga Tokarczuk. Translated by Antonia
Lloyd-Jones. Penguin; 288 pages; $17. Fitzcarraldo Editions; £8.99
A series of mysterious murders shakes a village in Klodzko valley in south-western Poland
(where the author has a house). The victims are members of a hunting club; one harvests
fox furs. An eccentric pensioner tries to persuade the villagers that animals, including deer,
beetles and birds, committed the murders as revenge. Her accusations anger the hunters
and the powerful Catholic church. Whodunnit?
Olga Tokarczuk, born in 1962, is one of the most exciting novelists of her generation. She
has won the Nobel prize for literature and the international Booker prize. “Drive Your
Plow” is more readable than the gargantuan “The Books of Jacob”, perhaps her most
famous work. Yet this relatively short eco-thriller has Ms Tokarczuk’s characteristic depth.
It is layered with allegory, weaving in astrology and the poetry of William Blake, both
passions of the book’s protagonist. Agnieszka Holland, a Polish director, made it into a
movie, “Pokot”(roughly, “hunting trophy”), which was released in 2017.
Solaris. By Stanislaw Lem. Translated by Bill Johnston. Pro Auctore Wojciech Zemek; 179
pages; £6.99 on Amazon Kindle
If much of Polish literature provides escape from grim realities, Stanislaw Lem casts his
readers farthest. “Solaris”, published in 1961, travels to the fictional planet of the same
name, which has a mind of its own. A crew of scientists in a cramped space station in orbit
above a sentient undulating organism slowly lose their grip on reality. What takes its place
are painful memories. Lem thought that much of British and American science fiction was
intellectually shallow. Their protagonists tend to explore alien worlds that become
comprehensible; Lem imagined worlds that remain fundamentally mysterious. His novels
send readers on psychological and philosophical journeys. And, as was common practice
for independent-minded writers during the years of Soviet domination, Lem found ways to
dodge censorship. Popular behind the iron curtain, many of his books were competently
translated into English only decades after their publication.
Andrzej Sapkowski is the contemporary Lem. His best-selling “The Witcher” series of
novels follows a gruff monster-slayer for hire. A video game based on the books helped put
Poland’s gaming industry on the international map. Its makers, CD Projekt, became the
largest company in Poland by market capitalisation in 2020. A Netflix series of “The
Witcher” appeared in 2019.
Ryszard Kapuscinski: A Life. By Artur Domoslawski. Translated by Antonia Lloyd-Jones.
Verso; 464 pages; $34.95 and £25
If you have marvelled at the shimmering prose of Ryszard Kapuscinski, Poland’s best-
known journalist, consider diving below the surface. A controversial biography of the
celebrated war reporter, published in 2012, attests to his courage and talent but also
exposes darker truths. He was a sloppy chronicler, an embellisher of facts, a poor father
and husband and a collaborator with Poland’s communist regime. Even so, a younger
generation of more scrupulous journalists learned from what was best about Kapuscinski’s
work.
Pierogi. By Zuza Zak. Hardie Grant; 176 pages; $24 and £18.00
Zuza Zak’s writing seeks to prove that Polish food is more than “just dumplings”. Her recent
book shows that even dumplings are not just dumplings. “Pierogi” has more than 50
recipes, divided into historical and modern categories. Some are regional. Large potato
cepeliny (zeppelins) are stuffed with smoked fish from the Baltic sea. Baked paszteciki
parcels, prepared all across Poland, enwrap wild mushrooms (for which Poles forage
avidly). Other recipes are specialities of Poland’s ethnic minorities. Manty, leathery
dumplings which can be stuffed with a sweet curd cheese and covered with raspberry
sauce, are made by Tatars, who have lived in eastern Poland from the 14th century.
“Pierogi” captures some truths about how Poles eat these days. Most families eat home-
cooked food (ready-meals are rare and restaurants are for celebrations). Seasonality is
important. Winter brings an appetite for starchy potato-cheese pierogitopped with lardons;
summer is incomplete without bilberry dumplings and a dollop of sour cream. Ms Zak’s
“modern” chapters also show how the country’s eating habits are changing. Warsaw,
Poland’s capital, is one of the most vegan-friendly cities in the world.
Also try:
We published a companion piece on literary non-fiction from Poland, which includes
reportage about Albania, Bulgaria, the Czech Republic and Russia. Read our obituary of
Kapuscinski. This review looks at eastern Europe more widely. As the election draws
closer, follow our coverage of Polish politics. Here we write about how Poland is (again)
missing its opportunity to matter in Europe. We also look at how millions of Ukrainians are
making the country multicultural again, why its politicians like to hate Germany, and why
the EU dislikes Poland back. ■

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reads/2023/06/15/what-to-read-to-understand-modern-poland
Economic & financial indicators
 Economic data, commodities and markets
Indicators
Economic data, commodities and markets
Jun 15th 2023
This article was downloaded by zlibrary from https://www.economist.com/economic-and-
financial-indicators/2023/06/15/economic-data-commodities-and-markets
Graphic detail
 England may soon become the world’s best cricket team
And then there were three
England may soon become the world’s best cricket team
Winning the Ashes would propel them past India and Australia
Jun 13th 2023
ON JUNE 11TH Australia prevailed over India to win cricket’s World Test Championship.
Although national teams have played each other in the Test format since 1877, this event is
new. Australia are only its second victors, after New Zealand in 2021.
The International Cricket Council (ICC) has held world championships for one-day cricket
since 1975, and for T20 matches, which last just a few hours, since 2007. As these short
formats have gained popularity, purists have fretted that Test cricket’s stature was at risk.
In response, the ICC launched the World Test Championship.
Because Test matches can last up to five days, too long for prolonged tournaments to be
practical, the ICC devised an awkward system. Over two years of games, teams earn points
to qualify for a final. However, they play varying numbers of matches, and face different
levels of opposition. For example, Bangladesh played 12 games, and none versus Australia
and England, two of cricket’s giants. In contrast, half of India’s 18 matches were against
those teams.
So were Australia deserving winners? One tool to assess their strength is Elo, a rating
system built for chess that has been used for various sports, but rarely for cricket. All teams
start with a score of 1,500 and then swap points after each match, with the winner’s rating
rising and the loser’s falling. The more surprising the result, the more points get traded. Elo
also accounts for home advantage, a big edge for teams that modify pitches to suit their
styles.
Calculating Elo scores back to 1947, we find that the World Test Championship got this one
right: the world’s best team is indeed Australia. By historical standards, its rating of 1,685
is similar to South Africa’s peak in 2013. However, the team pales in comparison with
Australia’s own past. In January 2008 an Australian team packed with stars achieved a
record Elo score of 1,797. If that team were to time-travel to the present, Elo suggests it
would beat today’s Australians 66% of the time.
The most striking recent trend in the data is the sharp rise in England’s rating since the
team made Brendon McCullum its coach in May 2022. Under his stewardship, England have
taken a Test-wide trend of trying to score faster and put it into overdrive. This hyper-
aggressive style, nicknamed “Bazball”, has borne fruit: England have won 11 of their past
13 Tests, while scoring an unprecedented five runs per over. During that period, their Elo
score has risen by nearly 100 points, to 1,637. This week, England begin the Ashes, their
biennial five-match series against Australia. If they win at least three Tests, they will
become Elo’s top-rated team.
England’s surge has aligned performance on the pitch with cricket’s finances. The sport’s
economic titan is India, expected to account for 39% of international media revenue across
all formats in 2024-27. England and Australia jointly make up a further 13%. Because
broadcasters pay only paltry amounts for Test matches lacking a “big-three” team, other
countries have little economic incentive to play them. This leads weaker teams to
participate in fewer Test matches, and has left the once-mighty West Indies struggling to
pay their players. On current trends, New Zealand, the world’s first official Test champions,
will probably be the last winners outside the big three for years to come.■
Chart sources: Cricinfo.com; Devashish Fuloria; ICC; The Economist

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detail/2023/06/13/england-may-soon-become-the-worlds-best-cricket-team
Obituary
 Silvio Berlusconi duped Italians for years
The great seducer
Silvio Berlusconi duped Italians for years
The republic’s longest-serving prime minister, perpetually dogged by scandal, died on
June 12th, aged 86
Jun 12th 2023

BUT FOR the genitalia of the women of the Caucasus, the whole improbable adventure
might never have happened. Becoming one of the world’s richest men; creating a political
party from nothing in less than a year; and going on to become the Italian Republic’s
longest-serving prime minister.
It all went back to his conversation on the train with the hostile vice-president of a pension
fund. He desperately needed this man to invest in his first big construction project. His
original ploy—getting relatives to pretend they were clamouring for the apartments he had
built near an industrial complex outside Milan—had gone embarrassingly wrong. The
pension-fund boss had realised he was being duped. But then the 27-year-old Silvio
Berlusconi deployed his irresistible charm, seduced the vice-president’s secretary,
persuaded her to tell him when her boss was next travelling to Milan and booked the seat
opposite.
By the time they reached Milan they were both at the bar, half-drunk, with the pension-
fund manager telling him how extraordinary were the private parts of the women of
Caucasia. The venture was rescued, enabling the young entrepreneur to embark on an even
more grandiose development, Milano Due. The cable-TV station at Milano Due in turn
provided the foundations for a vast media group that smoothed his entry into Italian
politics and helped sustain him as a force in parliament for nearly 30 years.
But all that, he assumed, was more or less bound to happen. He was not only a self-made
man but also a man of destiny; even if his first enterprise had bombed, he would eventually
have earned the success that was his due. He had enormous energy, a master salesman’s
talent for persuasion, a wave of the hand for laws that stood in his way and limitless self-
belief. As he told his American biographer, he knew how to create and how to lead. And, he
added, “I know how to make people love me.”
So he did. A poll of young Italians conducted in 1993, the year before he first became prime
minister, found they loved him more than Jesus. Though he never succeeded in getting a
majority of the electorate to vote for him, those who backed him did so with a fervour rare
in democratic societies. At the height of his personality cult, before the general election of
2008, his campaign song was entitled “Thank goodness for Silvio”:
Say it like this,
with a strength that belongs only
to those who are pure of mind:
“Prime minister, we are with you. Thank goodness for Silvio.”
He took care to ensure the devotion of his collaborators, remembering birthdays and
buying flowers for female assistants. As one (straight) male deputy from his Forza Italia
party put it, they didn’t just come to like Silvio. They came to love him.
All this seemed perfectly understandable to the object of their adulation. It was
incomprehensible, therefore, that so many others failed to see things the same way. There
were the journalists (though fewer perhaps than might be expected) who asked how the
son of a Milanese bank manager could become so fabulously wealthy in just a few years.
Some even hinted, insultingly, that he might have received his seed capital from organised
crime. They noted that his father’s bank was said to be a laundry for Cosa Nostra money;
that he hired a Mafia boss to work in his home, and that the man who set up Forza Italia for
him, Marcello Dell’Utri, was convicted of aiding and abetting Cosa Nostra and given a
seven-year prison sentence.
Then there were the prosecutors who wanted to know, among many other impertinent
things, whether his success as a media tycoon was entirely due to his business acumen, or
whether it had more to do with the bribing of judges and the illegal funding of the party
that let him own a three-channel national TV network. Case after case was brought against
him. Yet he always managed to wriggle free, often thanks to laws that guillotined Italy’s
lengthy judicial processes. During his longest spell in office, from 2001 to 2006, he changed
the law to ensure the blade fell earlier on the kind of trials he was most likely to face. It was
among nearly 20 measures he introduced that favoured either him or his businesses, which
grew like topsy while he was in power.
None of this, however, shook his belief in his own altruism. On the stump he would
reproach voters for their lack of appreciation of his selflessness, reminding them that he
owned more than 20 houses around the world but, instead of enjoying them, slaved night
and day for the good of his ungrateful compatriots.
Perhaps most hurtful of all, some people insinuated that he was a misogynist. But he loved
women. At least, those who were young and beautiful. Not like Angela Merkel, whom he
allegedly described as an unbeddable lard-arse and publicly humiliated at a NATO summit.
He nevertheless adored his mother, Rosa, and, whether coincidentally or not, it was after
she died in 2008, just before his third spell as prime minister, that he became involved in
the first of many scandals involving young—sometimes very young—women. His second
wife, Veronica Lario, a former actress, separated from him, after declaring she could not
share her life with a man who consorted with under-age girls.
His supporters, or at least the men, might have overlooked the scandals, had it not been for
the financial crisis that erupted at the same time. The resulting emergency was particularly
unsuited to his personality. He had always taught his salespeople that they should “carry
the sun in their pocket”, and he himself always radiated positivity and optimism. But what
the Great Recession revealed was that he was almost physically incapable of
communicating bad news. On the contrary, he told Italians the crisis would not affect them.
And as their economy crumbled the next year, even many of his most devoted followers
realised—like that pension-fund chief at the start of it all—that they too had been duped by
the great seducer.■

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