[Fri, 28 Jul 2023]

The world this week

Leaders
Letters
By Invitation
Asia
China
United States
Middle East & Africa
The Americas
Europe
Britain
International
1843 magazine
Business
Finance & economics
Science & technology
Culture
Economic & financial indicators
Graphic detail
The Economist explains
Obituary
The world this week
Politics
Business
KAL’S cartoon
The world this week

Politics
Jul 27th 2023

TheIsraeli Knesset passed the first in a series of laws aimed at drastically

limiting the powers of Israel’s Supreme Court. Members of the opposition
walked out in protest at the final reading of the bill, which passed 64-0 in the
120-strong chamber. The legislation significantly curtails the court’s ability to
review government decisions on the ground of “reasonableness”. The White
House criticised the law, saying it was “unfortunate”. Israel’s credit rating
was downgraded. The Supreme Court has said it will hear petitions against
the bill after the summer recess.

Soldiers staged a coup in Niger, the Sahelian country most closely aligned to
the West, and said that Mohamed Bazoum had been removed as president.
Two of Niger’s neighbouring countries, Burkina Faso and Mali, have each
had two coups since 2020.

Russia complained that Western pressure had dissuaded most African leaders
from attending a Russia-Africa summit this week in St Petersburg, to the
chagrin of President Vladimir Putin. Only 17 African heads of state and
government (out of 54) were reported to have made the trip.

A suicide-bomber loyal to al-Shabab, a jihadist group aligned to al-Qaeda,

killed at least 25 soldiers at a military training barracks in Mogadishu, the
capital of Somalia. The government has pledged to defeat the movement,
which has been waging a civil war for nearly two decades.

Guillermo Lasso, the president of Ecuador, declared a state of emergency in

the country’s prisons amid rising violence. A nightly curfew was also
imposed on three coastal provinces. The measures came into force after eight
people were killed over one weekend, including a mayor. Battles between
rival gangs in prisons have also caused over 30 deaths in recent days.

An independent panel investigating the disappearance of 43 college students

in Mexico nearly a decade ago issued its final report. The panel, appointed by
the Inter-American Commission on Human Rights, said that members of the
armed forces, navy, police and intelligence services knew of the location of
the students, but had been unco-operative.

Justin Trudeau, the prime minister of Canada, announced a cabinet reshuffle.

The ministerial changes come amid a rise in the cost of living, which has
heaped pressure on the minority government led by Mr Trudeau. An election
is not expected until 2025.

On the campaign trial

A judge in Florida set the date of May 20th 2024 to begin the criminal trial of
Donald Trump over his alleged concealment of classified material at his
home. The date falls after the bulk of primary contests, so the Republican
candidate for president should be known by then. Mr Trump holds a strong
polling lead in that race.

Hunter Biden, Joe Biden’s son, pleaded not guilty to federal tax charges,
after a deal with prosecutors in which he would have pleaded guilty and
avoided prosecution on a gun charge started to unravel. The judge in the case
told both sides to come back with a new deal.
China’s foreign minister, Qin Gang, was removed from his post. Mr Qin had
not been seen in public for weeks, fuelling rumours that he was being purged
for personal indiscretions. Wang Yi, the previous foreign minister, has been
returned to the job.

Hun Sen, Cambodia’s autocratic leader, said he would step down as prime
minister on August 10th and hand the job to his son, Hun Manet. Mr Hun Sen
has ruled Cambodia for 40 years, recently winning an election in which there
was no opposition. He will remain head of the governing party.

Chinese and Russian delegations attended military parades in Pyongyang,

North Korea’s capital, to mark the 70th anniversary of the end of the Korean
war. It was the first public visit by officials from North Korea’s allies since
the start of the covid-19 pandemic. Russia’s delegation included the defence
minister, Sergei Shoigu.

Spain’s general election resulted in deadlock. The opposition conservative

People’s Party took the most seats, but not enough to form a majority. It would
still fall short even if it joined forces with the hard-right Vox party. The
governing Socialists did better than expected, but to govern they would need
the support of left-wing parties and Basque and Catalan nationalists. The PP’s
leader, Alberto Núñez Feijóo, is trying to form a minority government.
Ukrainian ports on the Danube, which lie just across the river from Romania,
were attacked by Russia in a series of drone strikes. Ukraine has been trying
to establish an alternative route for its grain exports following Russia’s
bombardment of Odessa and other Black Sea ports.

The IMF warned that India’s ban on exports of non-basmati white rice could
push up global food prices. India accounts for 40% of the world’s total rice
exports. The ban comes amid a surge in wheat futures caused by uncertainties
about Ukrainian supplies.

Russia blamed Ukraine for another drone attack on Moscow. One of the
drones caused minor damage near the defence ministry, close to a room where
the army discusses its strategy for the war in Ukraine.

Vladimir Putin signed a law that bans transgender surgery in Russia and
outlaws any attempt by a person to change their sex legally. It also annuls
marriages in which one spouse is transgender.

Moldova ordered Russia to reduce the number of diplomats at its embassy in

the capital, Chisinau, from 80 to 25, claiming the mission’s staff were trying
to undermine the government.

A group of far-right protesters set fire to copies of the Koran outside the
Egyptian and Turkish embassies in Copenhagen. It was the latest incidence of
Koran-burning in Denmark and Sweden. In Iraq outraged Muslims have set the
Swedish embassy alight.

Six men were found guilty of murder in Brussels over a terrorist attack on the
city’s airport and metro system in 2016, which killed 32 people. One of the
men convicted was Salah Abdeslam, who was sentenced to life imprisonment
last year as the sole survivor of the terrorist squad that attacked Paris in
November 2015.

Cruel summer
Wildfires swept through many Mediterranean and south European countries.
Dozens of people were killed in Algeria, ten of them soldiers who were
trapped by fire during an evacuation.
Jim Skea was elected as the new chairman of the Intergovernmental Panel
on Climate Change. Mr Skea is a professor at Imperial College London and
co-led the IPCC’s landmark reports on global warming in 2018 and climate
change and land in 2019.

Three parliamentary by-elections in Tory-held seats in Britain provided

mixed results for the Conservative government. Two of the by-elections went
as scripted, with Labour taking a seat in the north and the Liberal Democrats
winning one in the south-west, both with swings from the Tories of well over
20 percentage points. But the Conservatives held on, just, to Boris Johnson’s
former seat in west London. That emboldened Rishi Sunak, the prime minister,
to claim that a Tory defeat at next year’s election is “not a done deal”.
This article was downloaded by zlibrary from https://www.economist.com/the-world-this-
week/2023/07/27/politics
The world this week

Business
Jul 27th 2023
The Federal Reserve resumed its policy of monetary tightening following a
pause at its last meeting in June, raising its key interest rate by a quarter of a
percentage point to a range of between 5.25% and 5.5%. Inflation has slowed
in America. However, other indicators point to a labour market and overall
economy that, while no longer “hot”, have not cooled sufficiently for the
ratesetters. The Fed offered few clues about its next move.

The European Central Bank also raised interest rates by a quarter point,
which took the deposit facility to 3.75%. It, too, provided little guidance
about whether it will raise rates at its next meeting in September, but said it
would follow a “data-dependent approach”.

Turkey’s central bank took more measures to try to control inflation,

increasing the maximum interest rates charged on overdrafts and credit-card
cash advances. On July 20th the bank lifted its main interest rate from 15% to
17.5%. Although that extended the bank’s reversal of its previous low-rate
policy, the rise was smaller than markets had expected.

The Chinese government appointed Pan Gongsheng as governor of the

People’s Bank of China. Mr Pan was confirmed as the central bank’s
Communist Party secretary earlier this month. It is the first time the two jobs
have been combined since 2018, which may reflect the party’s growing
control over the financial sector. Meanwhile, the government promised to do
more to aid China’s “tortuous” recovery from the pandemic, but provided
scant details on how it would do so.

The world economy is now expected to grow by 3% this year, according to

the IMF, a slightly faster pace than its previous estimate in April. Britain is no
longer expected to fall into recession, in part because of strong consumption
and less post-Brexit uncertainty. However, Germany’s economy is forecast to
shrink by 0.3% because of weak manufacturing output.

America’s economy grew by 2.4% at an annualised rate in the second

quarter, according to a first official estimate. The figure came in well above
the expectations of most economists’ surveys. GDP expanded by 2% in the
first quarter.

The Federal Reserve and the Bank of England fined UBS a total of $387m for
misconduct at Credit Suisse, which UBS recently acquired. The fines relate
to Credit Suisse’s “unsafe and unsound” practices in managing the risk from
its dealings with Archegos Capital Management. Archegos collapsed in 2021,
saddling Credit Suisse with a $5.5bn loss.

A crushed Rose
Dame Alison Rose resigned as chief executive of NatWest, a British bank,
after admitting that she was the source of an incorrect BBC story about the
closure of a bank account held by Nigel Farage. Mr Farage helped to lead the
campaign in 2016 to pull Britain out of the EU. Dame Alison told the BBC
that his account had been shut at Coutts, a subsidiary of NatWest, solely for
commercial reasons. But Mr Farage obtained a dossier that showed the
account was closed in part because his political views on a range of issues
were “at odds” with the bank’s “position as an inclusive organisation”. The
affair has raised concerns about how far banks can go to withhold their
services from someone with whose views they disagree.

Two of America’s tech giants, Alphabet and Microsoft, reported solid

increases in revenue and profit as their core businesses outperformed
expectations: digital-ad sales for Alphabet and cloud-computing for
Microsoft. Both companies said their spending on AI would increase over the
coming quarters, which could hit profit margins.

Meta’s quarterly revenue and profit also rose at a fast clip, but the loss at its
Reality Labs division, which is developing the metaverse, stood at $3.7bn.
That pushes the division’s cumulative losses since the beginning of last year
to $21bn.

Despite surging revenues on the back of big orders for its planes, Boeing
reported another quarterly loss. The aerospace company was dragged down
this time in part by charges related to delays in some defence projects. Still,
Boeing is ramping up production of commercial aircraft, and expects to
deliver up to 450 737 jets this year.

Rio Tinto, a big mining company, said it would not reach its target of
reducing emissions by 15% by 2025 because of engineering constraints, and
the needs of integrating its ambitions with the “needs of our local
communities.”

“Barbie” won the battle of the box office against “Oppenheimer”, taking
more money in ticket receipts after both films were released on the same day.
Barbenheimer made for the best opening weekend in America this year,
renewing hopes for a revival in cinema attendance. Other recent blockbusters,
such as “Indiana Jones and the Dial of Destiny”, have not attracted the
audiences that had been hoped for.
Er, Elon, what are you doing?
Twitter killed off its blue bird logo. The platform has been rebranded, now
displaying a white “X” on a black background. The bird is not entirely dead,
however, and still floats around on many mobile apps. Twitter is now
officially called X, though everyone still calls it Twitter. Workmen trying to
remove the old name from its headquarters in San Francisco were stopped
midway by police, leaving “er” as the company’s front signage.
This article was downloaded by zlibrary from https://www.economist.com/the-world-this-
week/2023/07/27/business
The world this week

KAL’S cartoon
Jul 27th 2023

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

How cities can respond to extreme heat
What happens when extreme weather hits several places at once?
Are the current heatwaves evidence that climate change is speeding up?

KAL’s cartoon appears weekly in The Economist. You can see last week’s
here.
This article was downloaded by zlibrary from https://www.economist.com/the-world-this-
week/2023/07/27/kals-cartoon
Leaders
The overstretched CEO
The world should not let Vladimir Putin abandon the grain deal
Israel has lurched closer to constitutional chaos
Weather forecasting has come far. Its future is brighter still
Keir Starmer’s plans for aid and diplomacy could help define him
Global business

The overstretched CEO

Companies are increasingly caught up in governments’ competing aims.
What to do?
Jul 27th 2023

CHIEF EXECUTIVES have long had to be contortionists, balancing the needs

of employees, suppliers and above all shareholders while staying within the
limits set by governments. But the twisting and stretching is now more
fiendish than ever. The world is becoming dangerous and disorderly as
governments try to manipulate corporate behaviour. Global companies and
their bosses find themselves being pulled in all directions.

Few multinationals are unscathed. As tensions between China and America

ratchet up, chipmakers from Micron to Nvidia have been the target of
sanctions. TikTok, a Chinese-owned short-video app, is in the sights of
American lawmakers. The Biden administration’s plans to curb outbound
investment will encompass private-equity giants and venture capitalists.
Once-staid carmakers now find their investments in the spotlight, as countries
vie to host the next electric-vehicle factory. China’s tech behemoths have been
tamed by Xi Jinping. Everyone from bankers to brewers has been ensnared in
America’s toxic culture wars.

All this rips up the unspoken agreement between government and business that
held sway in America and much of the West after the 1970s. Businesses aimed
for shareholder value, by maximising wealth for their owners, promising
efficiency, prosperity and jobs. Governments set taxes and wrote rules but
broadly left business alone. Although the gains of the system were not evenly
spread across society, trade flourished and consumers benefited from greater
choice and cheaper goods.

The rules have changed. Governments are becoming more dirigiste, spurred
by fragile supply chains in the pandemic, a more menacing China and the
dangers of climate change. Company CEOs need a new approach for a new
age.

Businesses’ re-entry into politics began in the run-up to the Trump era. By
taking a stand on social issues bosses saw a way to signal their distaste for
populism—and surely also a way to signal their virtue to their employees and
customers. It was around this time that Larry Fink, the boss of BlackRock,
America’s largest asset manager, became a proponent of investing using
environmental, social and governance principles, or ESG.

Yet instead of solving social problems, that seemed only to deepen divisions.
As we set out in an extended profile, Mr Fink has been demonised by the right
for going too far and the left for not going far enough. He is not alone.
Disney’s former boss, Bob Chapek, waged a battle over gay rights with
Florida’s Republican governor, Ron DeSantis, one reason he lost his job. In
Britain Dame Alison Rose, head of NatWest, has resigned over the bank’s
cancellation of the Brexiteer Nigel Farage, partly over his political views.
Such encounters bruise egos but do little for the long-term bottom line.

The real front is broader and the stakes are higher. Governments seem to be
everywhere all at once. They want to correct the problems of globalisation by
winning back manufacturing jobs. They want to enhance national security by
protecting vital technologies. And they want to fight climate change by
speeding up decarbonisation.
Each aim is worthy in its own terms. But the means to bring it about are
flawed, or involve trade-offs. Manufacturing jobs are not the high-earning
prize they are cracked up to be. Roughly $1trn of green subsidies in America
will reduce efficiency and raise costs for firms and consumers. America says
national security requires “a small yard and high fence”, but unless
policymakers are clear about the risks from subsidies, export controls and
investment curbs, the yard is likely to get bigger and the fence grow taller.
These convulsions affect big firms far more than arguments over who should
use which bathroom. Yet, out of joint after the wokelash, few bosses are
prepared to say so.

Some companies are wrapping themselves in the flag, so as to become

national champions. That has long been the norm in places like China and
India, but it is heading West. After Intel broke ground on two chipmaking fabs
in America last year, Pat Gelsinger, its head, said that he “could feel the
national pride welling up”. Similar jingoism is on display over generative AI.
Grandees of venture capital such as Marc Andreessen express horror at the
risks of Chinese AI conquering the world.

Others hope that by keeping under the radar, they will avoid political flak.
Taking their cue from Jack Ma, the once-outspoken boss of Alibaba who was
mercilessly brought to heel by the Chinese government, CEOs have ducked
out of public view. Pony Ma, the founder of Tencent, surfaced recently only to
pay lip service to new guidelines set by the Chinese Communist Party. In
America Shein, a fast-fashion giant that is a favourite with Gen Z shoppers,
does its best to hide its Chinese roots. So does TikTok, which says it is a
“myth” that Bytedance, its owner, is Chinese. Among Western CEOs even a
loudmouth like Elon Musk is learning the value of silence in China. His recent
visit to Tesla’s factory in Shanghai provided no media access. He did not
even tweet.

Yet both of these strategies could easily go wrong. Patriotic cheerleading is a

problem when you do business elsewhere in the world. Intel is building fabs
not just in America but in Germany, too. The average American multinational
has eight foreign subsidiaries; a giant like General Motors has a hundred. And
what the boss may see as a stealthy below-the-radar strategy can look to
others like sticking your head in the sand. Just ask an American lawmaker
where they think TikTok is from.
Corner-office diplomacy
What to do? In a fractious world, businesses cannot hide from politics and
geopolitics. But the lesson of the wokelash is that outspokenness can backfire.
When deciding whether to speak up, bosses of global firms should use long-
term shareholder value as their lodestar. The more directly what they say
affects their business, the more credibility they have and the less risk of
appearing a fraud or a hypocrite.

This approach may include reminding politicians of the benefits that

efficiency and openness once brought to economies around the world. When
governments seem to contain a dearth of champions for either, that would be
no bad thing. ■

For subscribers only: to see how we design each week’s cover, sign up to
our weekly Cover Story newsletter.
This article was downloaded by zlibrary from
https://www.economist.com/leaders/2023/07/27/the-overstretched-ceo
Make Ukraine’s grain Russia’s loss

The world should not let Vladimir Putin abandon

the grain deal
Here is how to get him to sign up again
Jul 26th 2023

RUSSIA’S BELEAGUERED president took up his pen this week. In the days
before a Russia-Africa summit in St Petersburg on July 27th, Vladimir Putin
published an article on the Kremlin’s website to justify why he has abandoned
the grain deal that ensured safe passage for Ukraine’s crops and fertiliser.
Promising to make up the shortfall, he wrote that the “so-called” deal solely
enriched Western businesses, and that promises to exempt Russian exports
from sanctions had been broken. Pretty much every word was false.
For a start, Russian exports of food and fertiliser, though shunned by Western
businesses, are not under sanctions. What’s more, the arrangement has
benefited all food-importing countries. Under the deal, signed in July 2022
and overseen by Turkey and the UN, Ukraine has exported over 32m tonnes of
crops. That helped lower prices, which have risen since Russia quit on July
18th and then set about destroying Ukraine’s grain stocks and ports (see
chart).

Mr Putin’s real reason for sinking the deal was to further ruin the prospects
for Ukraine’s economy. Ever since the invasion stalled, Russia’s strategy has
been to convince the West that Ukraine cannot win a long war—and that
Russia’s foes had better cut their losses. Yet, after the mutiny by Wagner
mercenaries in June and ructions in Russia’s regular army, it became clear that
time is working against Mr Putin, too. Abandoning the grain agreement is his
attempt to strike back. He must fail.

If Ukraine cannot export grain, its economy will suffer. Food made up roughly
two-fifths of its total exports of $68bn in 2021. Farmers can still send limited
amounts of grain by rail and by ship, via the Danube, though both are
expensive. But Mr Putin has taken to attacking these alternative export routes,
and European Union farmers resent falling prices in local markets. If
Ukrainian farmers cannot earn enough, they will not be able to replant their
fields, ruining the next harvest.

The blow to Ukraine’s economy comes on top of its sluggish counter-

offensive. Mr Putin’s message is that he will inflict whatever pain it takes to
keep fighting—whether on Ukraine, the world or his own people. This appeal
finds an audience in the global south. Some countries sympathise with Russia;
more suffer from the war and resent the West for putting off its supposedly
inevitable resolution.

Ukraine’s backers need to expose Mr Putin’s mendacity. Forcing an unequal

ceasefire on Ukraine, even if that were possible, would not bring lasting
peace. The lack of Western resolve it signalled would invite Mr Putin to
attack again after he had re-armed. In the meantime, he would surely continue
to seek to harm Ukraine’s economy by disrupting its exports.

Instead, the world should press Russia to revive the grain deal—starting at the
Russia-Africa summit. African leaders have no interest in higher prices and
fragile global food markets. They could berate Mr Putin, and send a grain ship
to Ukraine under an African flag. In addition, Turkey has influence over Mr
Putin and the motivation to wield it. As a large importer of Ukrainian wheat, it
can help solve its inflation problems and earn money by selling some supplies
on. Turkey is a conduit for Russian imports. Its grandstanding president,
Recep Tayyip Erdogan, could win prestige as a mediator.

Ukraine’s Western backers have a part to play, too, by signalling that if

diplomacy fails they will use force to break an illegal blockade of
international waters. Giving Ukraine long-range missiles would be a first
step; offering insurance for convoys another. A last resort would be to
provide them with a military escort. If Turkey exercises its right to refuse
warships access to the Black Sea through the Bosporus, some NATO members
could supply air cover instead. By quitting the grain deal, Mr Putin may think
he has demonstrated that he has the advantage. All he has revealed is that he is
running out of options. ■
This article was downloaded by zlibrary from
https://www.economist.com/leaders/2023/07/26/the-world-should-not-let-vladimir-putin-
abandon-the-grain-deal
A sad day

Israel has lurched closer to constitutional chaos

But there are still ways to step back from the brink
Jul 26th 2023

TISHA B’AV is the saddest day in the Jewish calendar. A time of mourning
and fasting, it marks the destruction of the first and second temples in
Jerusalem—the result, in part, of infighting among the Jewish people. This
year the commemoration began on July 26th, two days after Israel’s
government passed a law aimed at dramatically weakening the country’s
Supreme Court. The reform’s many opponents see it as an act of self-
destruction. The echo of Tisha B’Av only deepened their sorrow.

The vote on July 24th means that the Supreme Court will no longer be able to
overturn government decisions on the ground of “reasonableness”, which
critics had seen as a blank cheque for judicial meddling. It has prompted a
furious reaction among many Israelis. The opposition boycotted the final vote.
Israelis once again flooded into the streets to protest. Trade unions are talking
about a general strike. Thousands of army reservists have vowed not to turn
up for duty. The day after the vote Morgan Stanley downgraded Israeli
sovereign debt. In a striking criticism, America, Israel’s closest ally,
described the government’s move as “unfortunate”.

The outrage reflects—and has deepened—the divisions within Israel over the
most fundamental questions surrounding the country’s democratic and Jewish
character. If infighting is not to threaten the Jewish state once again,
politicians from all sides need to step back from the brink and search for a
constitutional reform that commands broad support.

Whether or not Binyamin Netanyahu wished it, the judicial reforms have
become his defining policy. The prime minister had delayed a vote in March
to give time for compromise, but talks went nowhere. Even as he waited to
vote in the Knesset this week, he tried in vain to persuade his allies to delay
once again. Instead his coalition of far-right and ultra-religious parties forced
through the reform. Just a day out of hospital for heart surgery, Mr Netanyahu
looked exhausted. He faces charges of corruption that Supreme Court reform
may help dismiss. By caving in to his far-right partners’ threats to resign, he
has made clear that he puts his own political survival above all else. He has
thus given the extremists the upper hand.

Even the government’s fiercest critics agree that Israel’s judicial system needs
reform. Many would place limits on use of the reasonableness standard,
without abolishing it altogether. The committee that appoints judges has a
majority of sitting justices and Bar Association representatives, leaving
politicians in a minority. Because the right feels the court no longer reflects
the country’s views, the idea that it is self-perpetuating is harmful.

However, the way the government has rammed through its changes has fed
fears that the far-right means to clear any legal obstacles to its efforts to
transform Israel, whether by changing the status of religion or by annexing
parts of the Palestinians’ West Bank. After the vote, Yariv Levin, the hardline
justice minister, declared that this was merely the first step in the coalition’s
plans. Some worry that the government wants legislation that would skew the
electoral system to make conservative victories more likely. Because the
Knesset has only one chamber, Israel risks falling into majoritarian rule—a
particular threat to secular Jews and minorities, including Israeli Arabs.
The Knesset is about to go into its summer recess. That gives two months to
find a way to heal a divided country. Although Mr Netanyahu is concerned
with his own political survival, he must realise that if the cost is ramming
through the judicial reform, he will pay with his legacy. If he does not want to
be remembered as the prime minister who weakened Israeli democracy, he
needs to build consensus. If he cannot find that among politicians, he should
establish a broad and inclusive constitutional convention that would codify
the powers of parliament and the courts.

And if Mr Netanyahu fails? The task will fall to the Supreme Court. It has said
it will hold off from hearing appeals against the law until September. If the
coalition is determined to pursue the reforms to their full extent the court
should strike down the law. It faces a terrible choice. As the first court to
reject part of one of Israel’s basic laws, which is in effect the country’s stand-
in constitution, the court would seem to be vindicating those who say it is out
of control. But failing to do so would leave all of Israel’s institutions in peril.

Striking down the law would bring Israel’s constitutional crisis to a head. But
that would force the country’s leaders to deal explicitly with how to preserve
democracy. Israel’s founders failed to write a constitution because they could
not agree on principles such as its relationship with the Palestinians and the
role of religion. It has muddled through for 75 years. If the temple is not
strengthened, it may start to crumble. ■
This article was downloaded by zlibrary from
https://www.economist.com/leaders/2023/07/26/israel-has-lurched-closer-to-
constitutional-chaos
A spell of sunshine

Weather forecasting has come far. Its future is

brighter still
Three things need to be done to make the most of its potential
Jul 27th 2023

MANIAC, A COMPUTER designed at Princeton after the second world war,

could perform a blistering 10,000 calculations a second. This extraordinary
power was applied to two main problems: modelling thermonuclear
explosions and the Earth’s weather. They were the two most consequential
applications the machine’s creators could imagine.

It would have taken MANIAC the entire 13.8bn-year history of the universe to
perform as many calculations as today’s fastest computer can carry out in an
hour. But though their abilities and ambit have increased, today’s
supercomputers still see a great deal of their capacity devoted to weaponry
and weather. Their contributions to H-bomb design add little to most everyday
lives beyond an undercurrent of dread. But their work on the weather at
forecasting outfits around the world finds practical application almost
everywhere.
Research from the World Bank and others puts the benefits of numerical
weather prediction (NWP) at $162bn a year. Its success can be attested to by
any modern farmer or military commander. It can also be felt in the fabric of
everyday life. No smartphone lacks icons redolent of sun, rain, wind or cloud.
Deciding to leave an umbrella at home on a forecaster’s advice is no longer
necessarily a triumph of hope over experience.

The application of machine learning and other forms of artificial intelligence

(AI) will improve things further. The supercomputers used for NWP calculate
the next days’ weather on the basis of current conditions, the laws of physics
and various rules of thumb; doing so at a high resolution eats up calculations
by the trillion with ridiculous ease. Now machine-learning systems trained
simply on past weather data can more or less match their forecasts, at least in
some respects. If advances in AI elsewhere are any guide, that is only the
beginning.

What is more, in some cases the AI approach seems able to reveal aspects of
the weather’s behaviour that NWP cannot reach by calculation alone. And
AI’s lower costs will attract new entrants into the weather business. They can
be expected to bring products exquisitely tailored to customers’ needs and
fresh ideas that open new markets.

Three things need to be done to make the most of the possibilities. One is to
ensure that healthy competition does not erode basic infrastructure. The
mostly governmental outfits that dominate NWP put a great deal of effort into
assimilating observations from around the world into the consistent
representations of the weather their models need. The costs of this can be
defrayed by selling high-value forecasts into specialist markets.

To do their best work, AIs will need to be trained on the data in those
representations. But that best work will almost certainly undercut some of the
current forecasters’ wares. So a modus vivendi has to be found whereby
being generous with the data new entrants need to train their AIs does not
leave existing forecasters too much out of pocket. To do otherwise could
threaten the meticulously set up systems they use to turn observation and
computation into the data sets on which the AIs and the world rely, at least for
the time being.
The second thing to be done is to bring together AI and number-crunching to
deal with climate change. At the moment it is not possible to run climate
models at the resolution used for weather forecasting. New hardware being
built for AI systems could help (Nvidia, a chipmaker, is interested). And AI
could also be used to look for patterns in the projections such models
produce, making them more informative, and as an interface that makes their
insights more accessible to non-experts.

Before that becomes an issue, better access is needed in the here and now. In
2019 the Global Commission on Adaptation reported that 24 hours’ notice of
a destructive weather event could cut damage by 30%, and that a $800m
investment in early-warning systems for developing countries could prevent
annual losses of $3bn-16bn. Accordingly, the World Meteorological
Organisation has made “Early Warnings for All” by 2027 its priority. Its chief,
Petteri Taalas, argues that, given three out of four of the world’s people have
mobile phones, it is outrageous that only half their countries have systems to
warn them of disaster.

How to save some lives

No breakthroughs are required to put this right, just some modest investment,
detailed planning, focused discussion and enough political determination to
overcome the inevitable institutional barriers. It is not an effort in the
Promethean tradition of MANIAC’s begetters; it will neither set the world on
fire nor model the ways in which it is already smouldering. But it should save
thousands of lives and millions of livelihoods.■
This article was downloaded by zlibrary from
https://www.economist.com/leaders/2023/07/27/weather-forecasting-has-come-far-its-
future-is-brighter-still
Britain’s aid policy

Keir Starmer’s plans for aid and diplomacy could

help define him
The Labour leader’s stance is a test of his priorities
Jul 27th 2023

DEBATES OVER the duty one person owes another tend to stir strong
feelings. Take foreign aid. Those on the right of Britain’s Conservative Party
see spending on the distant poor as a symptom of wastefulness and wokeism.
Boris Johnson once called the aid department a “giant cashpoint in the sky”,
dishing out funds without regard for domestic interests. Those on the left of
the Labour Party feel just as keenly that aid is a moral imperative and that
post-Brexit Britain needs to signal more clearly than ever that it is committed
to the broader world. Polls suggest that Labour will form the next government.
What Sir Keir Starmer, its leader, decides on foreign policy matters. His
stance on foreign aid is a test of his priorities.

The big question is how to fix the Foreign, Commonwealth and Development
Office (FCDO), the mega-department formed from the merger of the aid corps
and diplomatic service in 2020. Like many rushed marriages, this one has not
gone well . Top talent is hard to lure. Funding has been cut abruptly, throwing
aid projects into disarray. Other departments have pilfered its funds: about
30% of the foreign-aid budget is now spent in Britain, mostly by the Home
Office to put up asylum-seekers in hotels. With little good news to share, the
department has clammed up. After it stopped publishing detailed spending
data, Britain has tumbled down international rankings of aid transparency. The
country’s cherished reputation as a leader on aid is being lost.

What might Sir Keir do? He has talked of unpicking the merger. It is easy to
see why. Such a gesture would look bold, pleasing party activists who rate
him as a timid centrist, lacking in flair. Those who yearn for the return of a
powerful, independent aid department would cheer. Unlike many other
election promises, this one would be easy to honour. Sir Keir may also
believe it would burnish Britain’s image. Paired with a commitment to restore
a target to spend 0.7% of gross national income on aid (up from 0.5% today),
it may even yield a stirring campaign pledge.

Yet to demerge would be a mistake. One reason is the distraction and cost of
re-splitting a traumatised department only just beginning to settle down.
Although the execution of the merger was botched, now that the diplomats and
aid experts have built one roof they are better staying under it. Another reason
is that keeping aid spending and diplomacy bundled together makes sense. The
main purpose of the FCDO’s aid is to help the poor. But to command support
at home, aid policy ought to chime with Britain’s interests. Combining
development with diplomacy would not alarm foreign recipients, who already
suspect that aid is tied to the donor’s advantage.

Instead Sir Keir needs to find other ways to make aid work better, as some
senior folk in his party are now making plain. Restoring the 0.7% goal would
be admirable, showing Britain is serious about being a model donor. But until
the public finances improve, the more important ambition is for stability—to
provide a predictable aid budget that cannot be raided by other departments.
The aid minister, Andrew Mitchell, sits in cabinet and is already bringing
improvements; his successor should be in cabinet, too. Giving aid specialists
more autonomy would make sense, as would restoring transparency and
having the FCDO co-operate better with Parliament.
Will Sir Keir resist the headline-grabbing promise of splitting the FCDO?
Many voters still know little about him. His policy on aid is a chance to signal
the sort of prime minister he would be. He told party activists this week, after
Labour’s narrow failure to win a by-election in Mr Johnson’s old seat in
Uxbridge and South Ruislip, not to be complacent about the general election.
He is right. He needs to show that he can run a tight ship, in contrast to the
administrative chaos of recent Tory governments. At times, the wisest course
is to opt for a policy that brings fewer headlines. In aid, at least, Sir Keir
should do just that. ■
This article was downloaded by zlibrary from
https://www.economist.com/leaders/2023/07/27/keir-starmers-plans-for-aid-and-diplomacy-
could-help-define-him
Letters
Letters to the editor
On manufacturing, Donald Trump, the Anthropocene, the Palestinian
Lions’ Den, Greek gods, London’s Elizabeth line, superforecasts

Letters to the editor

A selection of correspondence
Jul 27th 2023

Letters are welcome via e-mail to letters@economist.com

America’s industrial policy

“The manufacturing delusion” (July 15th) has gripped politicians around the
world, you say. You present pro and con arguments for the money that national
governments spend to build or retain a manufacturing base, but the con wins
every bout. This projects more certainty in your theory and less on the reality
of trade-offs.

Economics teaches us that it is rare to find a high-stakes policy decision that

has no trade-offs. Or more precisely, decisions where there are no trade-offs
are not even debated because the answer is self-evident. America has recently
come around to implementing an industrial policy after trying the alternatives
over many decades and finding them somewhat disastrous. It could be that
America has learned the wrong lesson from decades of lost industrial
capacity and leadership in core sectors. But I’m not so convinced. Pursuing
industrial policy has substantial risks. Forswearing industrial policy has
equally many risks, especially when our chief economic and strategic
competitors are currently using it to great effect.

DAVID AUTOR
Professor of economics
Massachusetts Institute of Technology
Cambridge, Massachusetts

We feel there are three crucial points to add to the discussion. First, you
overlook a central aspect of initiatives promoting manufacturing. It is not
about establishing the superiority of one sector over another, but rather
recognising their inter-dependencies and the relevance of all sectors for a
healthy economy. As Professor Ha-Joon Chang, a South Korean economist,
points out, countries with strong manufacturing industries also have strong
service industries (although the reverse is not necessarily true).

Second, productivity and value-add are significant factors. Manufacturing has

been the primary driver of productivity growth in economies where it
accounts for more than 20% of GDP. Between 1998 and 2017, it accounted
for almost half of the aggregate labour productivity growth in Taiwan; roughly
a third in Korea and China; and a quarter in Germany. Moreover, Singapore’s
remarkable GDP per person, comparable to America and Britain, can be
attributed to its impressive share of high-value-added services
(approximately 25% of GDP) and sustained manufacturing contribution
(around 20%, equivalent to Japan and Germany).

Finally, there is clear evidence showing that a growth in manufacturing also

contributes to narrowing regional inequalities within countries. By
comparison, knowledge-intensive services, such as professional, scientific
and technical activities and finance and insurance, are among the largest
regional disparities.

Indeed, as your headline says, there is a manufacturing delusion, but it does

not stem from succumbing to a manufacturing fetishism. Rather, it comes from
a failure to grasp the vital but evolving role that manufacturing plays as part of
any well-balanced economy.

DR JENNIFER CASTANEDA-NAVARRETE
DR CARLOS LOPEZ-GOMEZ
PROFESSOR TIM MINSHALL
Institute for Manufacturing
University of Cambridge

Planning for government

Though not a supporter of Donald Trump, I find nothing wrong in early efforts
by his partisans to organise a second term if he should win the 2024
presidential election (“Chaos meets preparation”, July 15th). The American
system of political appointment reflects the basic democratic notion that the
people should get what they vote for. Since the days of Andrew Jackson (Mr
Trump’s spiritual predecessor) we have charged loyalists of the president
with carrying out his mandate. Because both political parties doubt that the
bureaucracy (or “deep state”) can do this, we have political appointments
down to the executive branch’s mid-levels.
My advice to the Trump planners is to get their people into appointed jobs
before they deal with civil servants at lower levels. This was the great
mistake of 2017-21. Mr Trump was much better at firing than hiring. The
result was a hollow government run by—guess who?—civil servants. Able
appointees in previous Republican administrations learned that the
bureaucracy can be led and even trusted if properly motivated. The typical
civil servant (or military officer or career diplomat) knows who won the
prior election and wants new direction. Yes, some careerists may seek to
thwart a president’s policies, but they can be dealt with creatively under
existing rules.

The key is having appointees who are not only loyal to the president but know
how to succeed in their appointments. Most of all it means finding people to
fill every job and getting them swiftly confirmed by the Senate.

CHASE UNTERMEYER
Director of presidential personnel, 1988-91
Houston

The future of the Anthropocene

One possibility you did not mention in your scenarios on how the
Anthropocene ends is that it ends by choice because we decide to transform
our relationships to energy and social organisation (“Tomorrow and
tomorrow and…”, July 15th). Such imaginations of the future that call for
profound, if gradual and planned, societal change are not entertained by your
projections, which do not imagine life beyond the present economic model.

Most problematically, your argument that the Anthropocene ends and

“civilisation would fall back” and perhaps not grow again thinks of
civilisation as if it were a linear process with peaks and troughs, like an
economic graph measurable by quantities of technologies in society. This is a
colonial and positivist framing of transformation and change that has been
rejected by many historians. It works to consolidate your second vision of the
future because “decoupling” appears to be the only option in which the
Anthropocene ends and we move towards a “different future”, thus “progress”
is maintained.

DR SOFIA GREAVES
PROSPERA, European Research Council
Pontevedra, Spain

Defining terrorism
You published an article under your 1843 masthead on the Lions’ Den, which
you labelled as “a Palestinian armed-resistance group” (“Inside the Lions’
Den: the West Bank’s Gen Z fighters”, July 7th). The article barely discussed
Israel, instead describing the Lions’ Den “resistance” against Israel’s
periodic incursions into the West Bank to root out those who are killing Israeli
citizens in terrorist attacks.

Unfortunately, the article contained no context into which one can view these
young men, who were virtually treated as heroes. Wouldn’t it have been
important to point out, for example, that Israeli sorties have occurred over the
years in response to terrorism that has cost many Israeli
lives, and not simply to
punish Palestinians?
It could have also been pointed out that the second intifada, which in 2000
sparked a multi-year terrorist spree, was set in motion by Yasser Arafat after
turning down an extremely good offer to create a Palestinian state during the
peace negotiations at Camp David. It resulted in the killing of 1,000 Israelis
during an extremely difficult period of time.

You should pick your heroes much more carefully and, at a minimum, tell the
full story and not a one-sided highly biased one.

ROBERT MEDNICK
Chicago

The Olympian office

I appreciated Bartleby’s parallels between the Iliad and the modern
workplace (July 8th). However, the column forgot the words of Zeus, who
thought that mortals blame the gods for their woes when their troubles are
actually of their own making. Agamemnon is not a mere co-worker, but the
boss who inherited his position from daddy instead of earning it on his own
merits. His resulting pathetic insecurity, especially in relation to the talented
Achilles, who loathes catering to him and is a strong advocate of the merit
system, leads to boneheaded actions that set this particular Greek tragedy in
motion.

Despite a century of management advice, the premise of this story will hold
up a while longer.

DAN BLICKMAN
Bryn Mawr, Pennsylvania

Regarding Bartleby’s praise of jargon (June 17th) we use the term “mumbly-
peg” to refer to someone who is talking about a subject they know nothing
about (usually from human resources). The word refers to a game using
pocket-knives, but the onomatopoeia is perfect because people mumble when
they are uncertain of the facts. Incidentally if you are in the same room with
someone speaking mumbly-peg you may detect the faint odour of bovine fecal
matter.

R. SIMMONDS
Mattawa, Canada

At least the trains run on time

Another good example of the delusions of greatness in Britain because of low
expectations (Bagehot, July 8th) is the new Elizabeth line in London’s
transport system that everyone is so proud of. Yes, it is modern, clean,
functional and aesthetically inoffensive, but is it so exceptional for one of the
greatest cities in the world to build an occasional new underground line?
Paris is currently constructing four of them and extending two existing lines,
with 68 additional stations.

When I look at the Elizabeth line, instead of feeling overly good about an
infrastructure project that succeeded (they are supposed to, after all), I see
missed opportunities. It does not use driverless trains, even though the
technology allows it; the door-closing signals are so shrill they sound like a
bomb is about to go off; the video displays do not provide useful information
about the journey; driver announcements are at times barely intelligible, and
so on.

Perhaps I am being overly negative, but shouldn’t one strive for the best
instead of smugly replicating existing inferior standards and patting oneself on
the back?

JEM ESKENAZI
London

Must do better
I was amazed that global warming didn’t make the superforecasters’ list of the
most probable causes of catastrophes and extinction by 2100 (“Bringing down
the curtain”, July 15th). Greta Thunberg needs to pull her socks up. Imagine
losing out to artificial intelligence.

ALLAN SUTHERLAND
Stonehaven, Aberdeenshire
This article was downloaded by zlibrary from
https://www.economist.com/letters/2023/07/27/letters-to-the-editor
By Invitation
Lawrence Summers, Philip Zelikow and Robert Zoellick on why
Russian reserves should be used to help Ukraine
Ukraine, Russia and reparations

Lawrence Summers, Philip Zelikow and Robert

Zoellick on why Russian reserves should be used to
help Ukraine
Doing so would strengthen, not undermine, international law, they argue
Jul 27th 2023

LAST WEEK The Economist cautioned about how to use Russian assets to
help Ukraine. We appreciate the invitation to make the case for what we
believe can and should be done. Two of us are lawyers. Each of us has
worked on problems of international law and knows the arguments in this
case. We know that, as the Ukraine war wears on, the outcome may be
determined by the balance of hope or despair as well as on the battlefield.
The Ukrainian economy is in the intensive-care unit. But we face a unique
circumstance. As Russia launched the largest act of international aggression
since the second world war, it left enormous sums, at least $300bn-worth of
dollars, euros, sterling and yen, in the law-abiding states that oppose this
aggression.
Public international law has always combined “black letter” law with
customs established as state practice adapts to new challenges. As
international law confronts its most severe test since the founding of the
United Nations, states can wring their hands, baffled, while Ukraine burns. Or
they can strengthen international law.

The international law of state countermeasures differs from law or EU

directives which govern “sanctions”. Countermeasures have long been
recognised as extra-judicial state measures of self-help. As the UN’s
International Law Commission explained back in 2001, “traditionally the term
‘reprisals’ was used to cover otherwise unlawful action, including forcible
action, taken by way of self-help in response to a breach.” Now international
lawyers use the term “countermeasures” for non-violent reprisals, with the
law limiting collective countermeasures to the most serious cases.

We have proposed that, as one such countermeasure, relevant states should

transfer frozen Russian assets into escrow to give Ukraine hope that it can
rebuild, perhaps also help others injured by Russia’s aggression, and assist in
a future settlement. The countermeasure would induce Russia to perform its
legal duty to compensate, voluntarily or involuntarily, the victims of its
aggression. Though some worry that the move might make some countries
more reluctant to hold dollars or euros, it poses no added risk to the stability
of reserve currencies.

The Economist worried that state assets are ordinarily protected from transfer
or seizure under a doctrine of sovereign immunity. But this doctrine applies to
judgments by foreign courts. State assets, in contrast to private assets, are
protected from other sovereigns only by customary obligations of reciprocal
regard (or in bilateral investment treaties). Court action is unnecessary or
quite limited in the case of an international act of state. State assets have been
seized or transferred before. In 1992, in the lesser case of Iraq’s invasion of
Kuwait, America and European countries placed Iraqi state assets into
escrow to compensate Iraq’s victims (including mainly claims from Kuwait
but also from 42 other states) without Iraq’s voluntary consent.

Ordinarily Russia could claim repayment for lost assets. In this case Russia’s
own serious breach of the inviolable norms of international law permits a
legal suspension of that obligation. The Economist called for “patient,
relentless work to expand the legal case against Russia”. But a ruling by the
International Court of Justice (ICJ), handed down in March 2022, has already
demanded that Russia end its aggression, and Russia has ignored this
obligation for 16 months. In November 2022 the UN General Assembly
established Russia’s duty to provide reparations under the very procedure
—“a stand-in for the Security Council”—that The Economist recommended.
Russia has ignored that notice and duty for nine months.

Calls for years of litigation in the ICJ—which even then could end fruitlessly,
just as Georgia’s case against Russia fizzled for jurisdictional reasons more
than ten years ago—seem, as former American secretary of state George
Marshall put it, like allowing the patient to die while the doctors deliberate.
The Russian assets sit idle while damages grow, rewarding the aggressor.
There is indeed much more work to do in preparing the way for the transfer of
funds, and more work to design international mechanisms for timely
reconstruction assistance and sifting claims. But the legal prerequisites for the
enabling countermeasure have been met.

Why does The Economist seem to offer such conflicted advice? Its article
candidly revealed the core of the opposing position: Russia’s assets, it said,
can only be used if Russia consents.

Why? Because, we are told, the opponents fear that such countermeasures
might be abused by powerful states. Any law enforcement can be abused. But
reflect on the paradox. In this argument to restrain the powerful, it is Russia,
the powerful aggressor, whose rights take precedence over the rights of those
it has injured. And this will reinforce the rule of law?

The solicitude for Russia’s rights is particularly ironic. We advocate targeting

only Russian state assets. Anything else, such as moves against oligarchs,
would indeed require due process to establish an association between that
person and the target state.

Russia is not so considerate. In April it announced a presidential decree using

the doctrine of state countermeasures to declare that it can seize private
companies if they are domiciled in countries deemed “unfriendly”. It then
seized German and Finnish companies and has since grabbed the Russian
operations of Danone, a French food company, and Carlsberg, a Danish
brewer, turning them over to Vladimir Putin’s cronies. To this patently
unlawful use of state countermeasures, Western governments have offered no
coherent reply.

Some of those who disagree with us fall back to a position that a

countermeasure must be reversible. They presume Russia might have to be
paid back. But the well-established codification of this principle, adopted
more than 20 years ago by the UN’s International Law Commission, says that
the suspended obligations need only be restored “as far as possible”.

In 1949 Robert Jackson, a justice on the United States Supreme Court,

warned: “There is a danger that, if the court does not temper its doctrinaire
logic with a little practical wisdom, it will convert the constitutional Bill of
Rights into a suicide pact.”

At this moment in history, those who want to defend the rule of law should not
take positions that would cut out its heart. ■

Lawrence Summers is President Emeritus and Charles W. Eliot University

Professor of Economics at Harvard University. He was America’s Treasury
Secretary from 1999 to 2001.

Philip Zelikow is Professor of History at the University of Virginia and

Distinguished Visiting Fellow at Stanford University’s Hoover Institution.
He has served in five administrations, both Democratic and Republican.

Robert Zoellick was US Trade Representative from 2001 to 2005, Deputy

Secretary of State in 2005-06 and President of the World Bank from 2007 to
2012.
This article was downloaded by zlibrary from https://www.economist.com/by-
invitation/2023/07/27/lawrence-summers-philip-zelikow-and-robert-zoellick-on-why-
russian-reserves-should-be-used-to-help-ukraine
Asia
Kim Jong Un has no desire to let his country rejoin the world
South Korea has given up on talking to the North
A slew of scandals puts Singapore’s government on the back foot
Unsplendid isolation

Kim Jong Un has no desire to let his country rejoin

the world
Ongoing pandemic-era seclusion hurts North Koreans—but suits their
dictator
Jul 24th 2023 | SEOUL

SECLUSION FROM the world has long been a guiding principle for the
rulers of North Korea, a secretive hereditary dictatorship. Kim Jong Un, the
current despot, took isolation to a new level during the covid-19 pandemic.
The border with China was slammed shut, with the construction of a new
border fence and shoot-to-kill orders against anyone attempting to cross.
Travel to North Korea, already a niche pursuit at best, ceased completely.
Foreign diplomats, aid workers and businesspeople left the country in droves.
In contrast to other parts of the world, the shutdown continued after the
pandemic. Until this week, the only people thought to have officially entered
North Korea in nearly three and a half years were the Chinese ambassador
and a handful of his staff.
In recent weeks speculation has grown that seclusion may at last be easing.
The rumours have been fuelled by Chinese customs statistics, satellite
imagery and reports from the border that suggest a modest rise in trade
between China and North Korea. On July 25th and 26th Chinese and Russian
delegations travelled to North Korea for a military parade to mark the
armistice that ended the Korean War.

Yet expectations that the regime has any serious plans for a wider opening are
probably misguided. Being locked down and shut off from the world for years
has been painful for ordinary North Koreans, many of whom depend on
informal trade for their livelihoods. Mr Kim, by contrast, has thrived.
Pandemic-era controls have allowed him to extend his power over party and
people. They have also helped him advance the country’s nuclear programme
far from the prying eyes of the world, distracted by the war in Ukraine and
America’s tetchy relationship with China. He will probably attempt to hang on
to some form of that control for as long as he can.

Germophobic and xenophobic, Mr Kim handled the pandemic with a paranoid

vigilance. The new threat of the virus and the old one of perceived enemies,
notably “imperialist” America and its “puppets” in South Korea, commingled.
Kim Yo Jong, the dictator’s trusted sister, accused the South of spreading the
virus via balloons released by local activists to carry anti-regime leaflets
across the border. She threatened to respond “not only by exterminating the
virus but also by wiping out the South Korean authorities”.

Three and a half years after the pandemic began, there are few credible signs
that this attitude has changed. True, the rest of the world seems impatient for
the hermit kingdom to reopen. International aid agencies are preparing to send
staff back to the country. In Japan a pro-North Korean newspaper is
advertising tours. Much is made of reports that traders in Hyesan, one of three
hubs for China-North Korea trade, are gearing up to handle higher goods
volumes. Yet Mr Kim has given no official hint that these amount to much.

Given past hyper-vigilance, the reticence is hardly surprising. Why should Mr

Kim rush things? Jeongmin Kim of NK News, a leading website tracking
North Korea, emphasises the disadvantages to the regime of having
bothersome foreigners back. They snoop around where they can—ready,
among other things, to point to the threadbare state of the economy.
Indeed, ordinary North Koreans have been the main victims of pandemic
controls. The border closure and domestic covid-era edicts put an end to
much of the informal trading that was a lifeline to millions. There are reports
of street vendors and pullers of delivery carts being summarily apprehended
and sent to the gulag. The number of malnourished people has risen by some
10% compared with the early days of the pandemic, reckons the UN’s World
Food Programme.

Yet the welfare of his people is a secondary concern for the leader. Control
ranks higher, points out Aidan Foster-Carter, another Korea-watcher. The
pandemic-era emergency has given Mr Kim cover to expand control over all
aspects of life in the country. He has continued to streamline party
organisation, and has forced the powerful army to defer more to the party.
Backtracking on market liberalisation, he has recentralised prices and steered
more food distribution into state-run shops.

Mr Kim’s expansion of control is making North Korea more alarming for the
world. For whatever meagre surpluses can be squeezed from the economy
flow into boosting the dictator’s nuclear programme, a family obsession for
three generations. Profits from the armed forces’ many money-making
activities can be appropriated for the same purpose. Mr Kim also controls the
revenues from the state’s criminal activities, including cyber-theft, which
American officials say may fund as much as half the weapons programme.

The North’s arsenal has increased in size and grown more diverse. New kit
has been tried out, and missile launches now also test for operational
readiness. Reputable estimates of the nuclear stockpile range from enough for
20 up to 116 weapons and growing. Last year the regime tested a record
number of missiles. On July 12th it launched a second test of the Hwasong-18,
its first solid-fuel missile capable of reaching America. Yet the launch barely
registered in many Western capitals. Between Ukraine and China, America
and its allies have bigger problems.

North Korea has not detonated a nuclear device since 2017. If it conducts its
seventh nuclear test soon, that may indicate that Mr Kim’s boffins have
achieved their long-desired miniaturisation of a nuclear warhead to fit on a
missile. He would then boast both strategic and tactical (that is, useful on the
battlefield) nuclear weapons, as well as the means for a first- and second-
strike capability against America and South Korea. Ankit Panda of the
Carnegie Endowment for International Peace in Washington, DC, says that this
undermines the credibility of the allies’ claim that any use of nukes by the
North would lead to the annihilation of the regime. In time, that might tempt
Mr Kim to use his weapons.

There are worryingly few checks left on him. China and Russia used to join
UN sanctions against North Korea. But since it loudly supported Russia’s
invasion of Ukraine last year, they have had Mr Kim’s back. Both countries
now block fresh resolutions against North Korea at the UN. They undoubtedly
help Mr Kim evade the existing sanctions.

America and its allies are hardly more of a roadblock. Yoon Suk-yeol, the
hawkish president of South Korea, has no interest in engaging with the North.
Meanwhile President Joe Biden’s insistence that any American engagement
must involve the North putting its nukes on the table is, for Mr Kim, a non-
starter. Better to wait to see if Donald Trump, whom Mr Kim charmed at their
meeting in Singapore in 2018, returns to the White House.

At some point, North Korea may feel the need to engage again with the world.
For now, Mr Kim can sit back. Among the few known knowns about his
activities, gleaned from satellite imagery, is that he has extended his seaside
resort on the east coast, and has been spending time drifting about on his
luxury yachts. ■
This article was downloaded by zlibrary from
https://www.economist.com/asia/2023/07/24/kim-jong-un-has-no-desire-to-let-his-country-
rejoin-the-world
A little less conversation

South Korea has given up on talking to the North

The conservative government prefers emphasising its military superiority
Jul 27th 2023 | SEOUL

THE AUTUMN of 2018 was a heady time on the Korean peninsula. Meetings
earlier that year between Moon Jae-in, then South Korea’s president, and Kim
Jong Un, North Korea’s dictator, had buoyed hopes for peace between the two
Koreas and prosperity in the North. So had a bromance-laden encounter
between Mr Kim and Donald Trump, America’s president, in Singapore.

Coffee shops in Seoul drew pictures of Mr Kim into their milk foam as South
Koreans queued around the block for Pyongyang-style cold noodles. In
September 2018 Mr Moon, standing next to Mr Kim, addressed a crowd of
150,000 North Koreans in a stadium in the North’s capital, something no other
South Korean president had done before. He promised “to mend the broken
blood ties of our people”.

How times change. The talks which Mr Moon’s enthusiasm helped facilitate
broke down a few months later with nothing to show for them in terms of
either peace or prosperity. When covid-19 struck, Mr Kim sealed North
Korea’s border and concentrated on developing weapons. Yoon Suk-yeol,
who succeeded Mr Moon as president in 2022, has little truck with mending
blood ties. Apparently keen to match the North’s bellicose rhetoric, he claims
that “only overwhelming force on our part will bring true peace.”

Mr Yoon has matched his tough talk with shows of military readiness. South
Korea and America conducted their largest-ever live-fire exercises in May
and have held several rounds of trilateral missile-defence exercises with
Japan (Mr Moon had scaled down drills). After publicly musing about South
Korea getting its own nuclear weapons, Mr Yoon persuaded President Joe
Biden to set up a forum to discuss how the Americans would use theirs in the
event of war on the peninsula. A visit from an American nuclear-capable
submarine, the first in over 40 years, accompanied the group’s inaugural
meeting. The North Korean regime protested that the sub’s presence might
justify using its own nuclear weapons and expressed its rage with a volley of
(conventional) missiles into the sea.

At home, Mr Yoon’s hard-nosed stance is making itself felt most strongly in

the shake-up of an institution whose job it is to look after all things to do with
North Korea: the optimistically named Ministry of Unification (MOU). Set up
in 1969 by Park Chung-hee, the South’s strongman ruler, the ministry
facilitates inter-Korean co-operation during times of detente but also gathers
information about North Korea, monitors human-rights abuses and helps
refugees from the North.

Given the contradictory nature of its tasks—being reminded of their crimes

tends to make North Korea’s leaders less co-operative—the ministry’s focus
depends on the vagaries of politics. Mr Moon had its officials establish a de
facto embassy in the North (which Mr Kim blew up a few months later) and
devise schemes to connect the two countries by road and rail. Human-rights
monitoring fell by the wayside. An annual report on North Korea’s atrocious
treatment of its citizens that the ministry was legally required to produce was
classified for fear of upsetting Mr Kim.

Mr Yoon has said the ministry will no longer act as “a support department for
North Korea” and appointed Kim Yung-ho, a conservative scholar, to lead it.
At his confirmation hearing on July 19th the (South Korean) Mr Kim, who
served as a human-rights envoy under two previous conservative
governments, cut a mainstream, if hawkish, figure. Yet he has said in the past
that “the path to unification opens up when the Kim Jong Un regime is
overthrown” and that the dialogue-based approach taken for the past 25 years
had been a “scam”. Should the North ever seek to return to the table, he seems
unlikely to recommend taking up any offer of talks.

Tough talk on North Korea’s regime tends to come with a sharper focus by the
MOU on the human rights of ordinary North Koreans. There are some signs
that it has begun paying more attention. In March it published the report Mr
Moon’s administration would not. But even as the ministry has appeared
keener to support human-rights groups, little has changed in practice, says
Sokeel Park of Liberty in North Korea, an NGO.

For now, the South’s reticence is matched by the North’s insouciance. Yet Mr
Yoon’s attempts to keep up with the North’s bellicosity make for an uneasy
equilibrium. Talking will not persuade the North to abandon its nuclear
weapons. But it may eventually become necessary to dissuade it from using
them. ■
This article was downloaded by zlibrary from
https://www.economist.com/asia/2023/07/27/south-korea-has-given-up-on-talking-to-the-
north
Banyan

A slew of scandals puts Singapore’s government on

the back foot
Its response is to insist that the system is working as intended
Jul 27th 2023

IN POWER IN Singapore since 1959, the People’s Action Party (PAP) has
always demanded that its legitimacy be judged by its steady hand at the helm
as well as by its spotless conduct. Yet uncomfortable disclosures in recent
weeks have put it on the defensive. Singaporeans are dismayed at the party
that has been in charge for even longer than the city state has been
independent.

In mid-July the transport minister, S. Iswaran, was arrested along with a

tycoon, Ong Beng Seng, who brought Formula One racing to Singapore. The
Corrupt Practices Investigation Bureau (CPIB) is looking into the relationship
between the two men.

Lee Hsien Loong, the prime minister, claims the arrests show that the system
is working. After all, the government acted promptly—Mr Lee himself gave
approval for the CPIB’s investigation. Questions remain, however, not least
why Mr Iswaran’s arrest was only announced three days after it had taken
place. Many Singaporeans think the explanation of “operational
considerations” given by Lawrence Wong, the deputy prime minister and Mr
Lee’s successor-in-waiting, is limp.

Much harder to defend are the circumstances surrounding the departure of

Parliament’s speaker, Tan Chuan-Jin, once a PAP high-flyer. An innocent
outsider might assume that his calling a member of the opposition Workers’
Party, Jamus Lim, a “fucking populist”, caught in Parliament on a hot mic,
would be the clear reason for his going (Mr Lim was merely arguing that more
should be done to help lower-income groups). Mr Tan later apologised for
“unparliamentary” language. Yet, points out Ian Chong of the National
University of Singapore, it apparently occurred to few PAP leaders to reflect
on the flagrant partisanship in a supposedly impartial post.

In Mr Lee’s book the slur was the lesser sin. Worse, he said, Mr Tan was
having an affair with a fellow married MP. Put aside the prime minister’s
staggering claim that he had found time to give marriage counselling to the
peccant couple. More troubling was his admission that he had accepted Mr
Tan’s resignation as far back as February but asked the speaker to stay in
place until he had sorted out succession arrangements for his constituency.
Prolonging the tenure of a compromised speaker is surely putting party above
country. Was the president informed? No one has said. Meanwhile, for the
PAP, the mysterious leaking of a video which revealed that two prominent
members of the opposition were also having an affair could not have come at
a better time.

The government cites the Tan saga as further evidence that it keeps an eye out
for wrongdoing and then acts on its findings. There is a Singaporean phrase
for it: “Ownself check ownself”, a form of self-monitoring that has been
raised almost to dogma by the PAP leadership.

The process was also kicked into gear following the revelation that the home
and law minister, K. Shanmugam, and the foreign minister, Vivian
Balakrishnan, have been renting colonial-era homes on Ridout Road from the
land authority that Mr Shanmugam himself oversees. Again, the CPIB was
called in. It found no wrongdoing, or favours for either minister. A review by
Singapore’s senior minister, Teo Chee Hean, also cleared them of any taint.

So why do Singaporeans resent the Ridout episode? Surely because, to turn

the PAP’s words against it, public perception matters. Reporting to the prime
minister, who appoints its head, the CPIB cannot be fully independent. The
senior minister is both a friend of Mr Shanmugam’s and in the same branch of
government. The case for an independent judge to be appointed to head such
reviews is a strong one. Even if everything at Ridout Road is squeaky clean,
the optics are appalling. Finding affordable housing is a big worry for
cramped Singaporeans. Mr Shanmugam has a house and grounds the size of a
shopping mall.

Another feature of the Singapore model follows from the party’s spotlessness
and steady hand: with the grown-ups in charge, liberal democratic features
such as a combative press and a vigorous civil society can be dispensed with.
Nothing wrong with “ownself check ownself”. But if internal checks cannot
ensure spotlessness and a steady hand, there is good reason to add external
ones. That is a conclusion that the PAP, which is now playing whack-a-mole
in going after what it says are false online comments on its various scandals in
the press and online blogs, is a very long way from drawing.■

Read more from Banyan, our columnist on Asia:

Why are politics in West Bengal so violent? (Jul 20th)
Asia is rowing about Fukushima nuclear wastewater (Jul 13th)
Sri Lanka is uncovering mass graves but not the grisly truth of its civil war
(Jul 6th)

Also: How the Banyan column got its name

This article was downloaded by zlibrary from
https://www.economist.com/asia/2023/07/27/a-slew-of-scandals-puts-singapores-government-
on-the-back-foot
China
Could economic indicators signal China’s intent to go to war?
China’s missing foreign minister loses his job
In Xi Jinping’s China, central planners rule
Clues to a conflict

Could economic indicators signal China’s intent to

go to war?
Before any missiles are launched, food and fuel must be bought
Jul 27th 2023

IN THE EARLY 1980s, during a tense period in the cold war, the Soviet
Union feared that America and its allies were considering a nuclear strike and
went looking for warning signs. The KGB’s list of indicators ranged well
beyond the military sphere. Big campaigns to donate blood, the slaughter of
livestock and the movement of art might signal that an attack was coming.

Today a new kind of cold war pits America against China. And again analysts
are looking for signs of a potential conflict. The most likely flashpoint is
Taiwan, the self-governing island that China claims and America supports.
Were China planning to invade Taiwan, its military preparations would be
hard to hide. But before troops begin to muster, other actions, of an economic
and financial nature, might signal China’s intent.
The Soviet Union mistook ordinary activities, such as blood drives, for
possible indicators of war. When it comes to China, finding signals in the
noise is even harder. The country has spent decades improving its armed
forces. It routinely stockpiles food. And it has hardened its economy against
potential sanctions. All of these actions have fed fears of war—yet they do not
necessarily mean that one is imminent. The challenge for Western intelligence
agencies, then, is to imagine how China might deviate from this wary baseline
in the run-up to an actual attack.

One area to focus on is commodities, namely energy, food and metals. China
would want to secure adequate supplies of each before launching an invasion.
Many of these goods come from abroad and are bought by the state, so trade
data are a useful gauge of the government’s intentions. Patterns that would
warrant attention include large and continuous increases in supplies, sudden
changes in imports or exports, purchases that go against the market and moves
that are out of line with historical trends. No single data point will indicate
that a war is coming. But a plausible early-warning system might be formed
by pooling observations.

Energy is a good place to start. China imports nearly three-quarters of the oil
it uses. The substance accounts for only 20% of the country’s energy use, but it
would be crucial to any war effort. Military vehicles run on it, as do the
lorries that transport supplies. If China were to start increasing its reserves—
it currently has enough to last three months at today’s consumption rate—that
would be one of the best indicators that it is preparing for war, says Gabriel
Collins of Rice University in Texas.

Detecting increases that deviate from recent trends will be tricky. Chinese
imports of oil have been rising for a decade. The country is expanding its
storage capacity, building underground caverns that are both more secure and
harder to spy on than tanks out in the open. But in wartime China might restrict
use largely to the armed forces. Signs of such rationing would be a more
obvious, if late, indicator.

Gas makes up a far smaller share of China’s energy mix, but it may still hold
clues to a coming conflict. If China feared being cut off from foreign supplies
it would probably burn more coal, of which it has plenty. It might also go on a
buying spree. Such was the case in the run-up to Russia’s invasion of Ukraine
last year, when Russia’s main gas company curbed supply. In the six months
before the attack, Chinese entities bought more than 91% of all the liquefied
natural gas purchased worldwide under term deals (typically spanning four
years or longer), according to Mr Collins and his colleague, Steven Miles.

The firms signed contracts that locked in near-term supplies, breaking from
China’s past practice of focusing on future deliveries. Nine of the 20 state-
owned outfits involved in the purchasing had never bought gas before. China
may simply have decided to stock up before prices rose even higher (as they
did). But Messrs Collins and Miles say the deals raise questions about
China’s complicity with Russia.
Whereas fuel would be needed to power China’s war machine, food must be
procured to sustain its people. China imports more agricultural produce than
any other country. Obsessed with food security, it already has enormous
stockpiles. In 2021 an official said its wheat reserves could meet demand for
18 months. Over the past decade China has greatly increased its purchases of
wheat, corn, rice and soyabeans (see chart).
How might China change its behaviour if war were on the horizon? The
answer is that it would probably buy even more food. One product to watch is
soyabeans. China imports 84% of its stock. Much of it is used to feed pigs.
(Pork accounts for 60% of all meat consumption in China.) The country
currently has enough beans to feed its pigs for under two months. A rapid
increase in buying could indicate that it was preparing for conflict, says
Gustavo Ferreira, an agricultural officer in the US Army, particularly if these
purchases were not matched by a rise in livestock production or if they went
against market trends.

Some of this activity may be hard to see. The size of China’s grain hoard, for
example, is hotly debated. When it comes to metals, the challenge may be
even greater. Items such as beryllium and niobium are used to make military
gear. Platinum and palladium go into engines. How much China has of these
metals, most of which are imported, is difficult to say because its consumption
patterns are unclear.

As with fuel and food, unusual metal-buying patterns could be a signal.

Changes in China’s exports would be a more visible indicator. It might
become more reluctant to part with the rare-earth metals crucial to many
technologies. China has a near-monopoly on many of these. In July it
announced export controls on gallium and germanium, two metals used in
chips. This was part of its tech battle with America, though, not a sign of a
looming hot war.

China buys many of its commodities from countries that might not mind if it
invades Taiwan, nor adhere to a Western-led embargo. But China’s leader, Xi
Jinping, has told his security chiefs to prepare for the “worst-case scenario”.
They would probably want to make China as self-sufficient as possible in the
case of war.

Similar thinking infuses China’s approach to the financial system. It has

introduced a cross-border payment mechanism that could, if necessary, bypass
Western financial institutions—though at present most transactions still go
through foreign platforms. China and its state-owned firms increasingly push
trade partners to sign contracts in yuan, to reduce the country’s dependence on
the dollar. If it were planning for war, China might also move its foreign-
exchange reserves out of dollars and euros and into assets that are harder to
sequester, such as gold.

Financial markets tend to react late to geopolitical dangers. But if investors

got wind of China’s plans, there would be capital flight. The government
would probably tighten its capital controls. State entities would also cash in
assets held by overseas custodians and repatriate the proceeds. They might
renege on some overseas investments or delay payments. In the days leading
up to an attack the government might freeze all foreign funds in China.

Some of these actions may come too late to be useful signals of war. Others
may prove illusory as indicators. When talking about national security, Mr Xi
says “stormy seas” are ahead. The state’s efforts to batten down the hatches
could be mistaken for something worse. To a certain extent, that is the point.
Part of China’s strategy is to convince the world that it is ready and willing, if
not about to invade Taiwan. But its behaviour risks confirming the most
pessimistic assumptions of Western analysts.

So it went during the last cold war. In 1983 NATO held a military drill that
was to culminate in a simulated nuclear attack. Relying on the kind of
indicators the KGB had identified, some Soviet officials feared the exercise
might be cover for the real thing. Today, as China practises invading Taiwan,
Western analysts must be careful not to suffer from their own confirmation
bias. But if economic and financial indicators—along with satellite imagery,
signals intelligence and human sources—can help America and its allies see a
war coming, perhaps they can prevent it. ■

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

understand what the world makes of China—and what China makes of the
world.
This article was downloaded by zlibrary from
https://www.economist.com/china/2023/07/27/could-economic-indicators-signal-chinas-
intent-to-go-to-war
Qin Gang is gone

China’s missing foreign minister loses his job

The pride and fall of Xi Jinping’s model diplomat
Jul 25th 2023 | BEIJING

PROXIMITY TO Xi Jinping—backed by a well-judged blend of worldly

charm and anti-Western scorn—propelled Qin Gang (pictured) to the top of
China’s foreign ministry at stunning speed. On July 25th Mr Qin fell, losing
his job as foreign minister after vanishing from the public eye for 30 days.

The formal announcement, when it finally came, left everything else about Mr
Qin’s fate shrouded in mystery. No mention was made of the unspecified
health problems which had been offered, albeit half-heartedly, as an
explanation for his absence by underlings. The Communist Party’s stubborn
preference for opacity, even at the cost of worldwide diplomatic
embarrassment, is—for now—the one fixed point in this murky saga.

Mr Qin, 57, rose through the ranks at exceptional speed after a stint as a close
aide to Mr Xi, China’s supreme leader. His disappearance was a crisis for the
machinery of state because Mr Qin is so widely seen as a protégé of the party
boss.

As foreign minister for the past seven months, and before that as China’s
ambassador to Washington, Mr Qin fulfilled perfectly Mr Xi’s instructions to
Chinese diplomats to show more swagger, self-confidence and fighting spirit
—especially when either wooing Western audiences or explaining to foreign
grandees why America and its allies are in decline. That same rapid rise also
made Mr Qin a target of envy, which may explain why so many members of
Beijing’s power-elite spent recent weeks gleefully sharing ever-wilder
rumours about his disappearance, many involving his private life.

China’s rubber-stamp legislature issued a terse bulletin that Mr Qin has been
replaced by his own predecessor, Wang Yi, who served as foreign minister
from 2013 until 2022. Mr Wang appears to have retained his other, more
senior post, as the Communist Party’s top diplomat. At the age of 69, Mr
Wang, a member of the ruling Politburo, may not be expected to hold that
gruelling double-mandate for very long. However, after the messy confusion
of the past month, Mr Wang’s long experience and his suave-yet-imperious
manner, makes him a safe pair of hands.

The past month has been a confounding one for Beijing-based foreign
diplomats. Ambassadors were initially sympathetic to reports that Mr Qin
might be seriously ill, after the foreign ministry abruptly cleared his packed
diary following public meetings on June 25th, including with a visiting
Russian envoy.

There was understanding about the party’s penchant for secrecy regarding the
health of senior officials, notably in a system where leaders are expected to
show physical vigour. Ambassadors will miss Mr Qin. Though he was
capable of real menace, issuing veiled threats to governments that had angered
China in some way, he could also be unusually candid and pragmatic. A fluent
English speaker, he was educated at an elite university with close links to
China’s intelligence services and began his career as a government-provided
researcher for United Press International, an American news agency. A
dapper sort, with a taste for traditional Chinese jackets as well as well-cut
Western suits, Mr Qin drew on his previous overseas postings to discuss
sports with foreign guests, as well as offering views on the hypocrisy of
major Western political and even religious institutions. He offered opinions
about different foreign media outlets, too, letting it be known that he
subscribed to them even in Beijing.

As the days of silence became weeks, foreign ambassadors—and not only

from liberal democracies wary of China—grew increasingly startled that their
hosts would rather allow rumours to flourish than offer any hints about what
had happened to the country’s foreign minister. Indeed many questions remain
unanswered, including about Mr Qin’s other high-ranking positions as a state
councillor and member of the party central committee. Soon after China’s
legislature voted to replace Mr Qin, all traces of his ministerial career began
vanishing from the website of the foreign ministry.

The mysteries of the past month offer, in a way, an unusually clear window on
the nature of power in Mr Xi’s China. However the episode ends, it is a
reminder that Beijing, for all its gleaming skyscrapers and purring fleets of
electric cars, is the capital of a Marxist-Leninist regime that plays by its own,
brutal rules. ■

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

understand what the world makes of China—and what China makes of the
world.
This article was downloaded by zlibrary from
https://www.economist.com/china/2023/07/25/chinas-missing-foreign-minister-loses-his-job
Chaguan

In Xi Jinping’s China, central planners rule

When one plan misfires, expect another laid on top
Jul 27th 2023

THE PROBLEM with central planners is not that they make mistakes. After
all, everyone is fallible: even (oh, the shame of it) newspaper columnists. The
trouble with technocrats is how they respond when plans go awry. All too
often, when goals are missed or policies backfire, their solution is another
plan laid on top.

This dynamic is increasingly visible in the China ruled by Xi Jinping. And it

is especially true in the countryside. Policies for rural areas have become a
tangled thicket of clashing priorities, core principles and “red lines” that must
be defended. The transformative reforms of the 1980s, when collective farms
were broken up and peasants were allowed to plant whatever the market was
eager to buy, seem ever further away.

This renewed insistence on planning comes from the top. Time and again, and
most recently at a meeting on July 20th of the powerful Central Finance and
Economics Commission, Mr Xi has called food security a guozhidazhe. That
is the high-flown phrase which he uses to denote “the main affairs of state” or
“national priorities”. To that end, the supreme leader and his underlings
emphasise the need to grow grain, rather than frivolities like fruit or flowers,
on China’s limited stocks of prime arable land.

Chinese leaders have long worried about feeding nearly a fifth of the people
on Earth with 9% of the world’s arable land and 6% of its fresh water. Mr Xi
wants China to become less reliant on imports, notably in an age of rising
international tensions. As he puts it, “Chinese people should hold their rice
bowls firmly in their own hands, with grains mainly produced by themselves.”
In part thanks to top-down price controls it is hard for farmers to make money
growing staples. Thus food security challenges another of Mr Xi’s signature
policies: identifying high-value crops and agricultural industries to raise
farmers’ incomes in the name of poverty alleviation and “rural revitalisation”.

In a growing list of places, officials are responding with more zeal than
common sense. Village cadres have sent bulldozers to tear out fruit trees. In
the south-western city of Chengdu, Chaguan saw corn and sunflower fields
freshly planted in a new suburban park, the Chengdu Eco Belt Park, and along
highway verges. In the southern province of Yunnan, terraced rice fields have
been cut into slopes. When videos of such incidents surface on social media,
some angry netizens recall disastrous Mao-era campaigns to grow food on
steep hillsides. Others ask what happened to another national priority since
the 1990s, namely the creation of forests to combat soil erosion and bind
deserts, including by planting trees on underused farmland beneath the slogan
“Grain to Green”.

This resentment is heard in Beijing. In June the Ministry of National

Resources issued a directive banning local governments from trying to grow
crops on steep slopes and ecologically fragile land, or from using “one-size-
fits-all” measures like bulldozing orchards, nurseries and fish ponds to
generate new farmland. When recovering arable land that was illegally taken
for construction or for other money-earning schemes, officials must proceed
“step by step” and protect farmers’ interests at all times.

Yet on the ground a bossier approach may be seen, involving new plans on top
of failed schemes. In and around Chengdu, the capital of Sichuan province,
officials are focusing on Mr Xi’s current priority. That means growing grain.
They are making their obedience visible. Mr Xi visited the fertile Chengdu
plain last year, recalling how it was known in history as “heaven’s granary”.
Those words, along with Xi-isms about food security and cropland, now
appear on village walls and roadside propaganda posters.

The road to the fourth section of Pingshan village, south of Chengdu, dips and
climbs like a fairground ride. Every inch of the reddish soil is used. Tiny
plots are planted with pungent Sichuan peppercorns, plum trees, grapevines
and tea bushes. Still, incomes are low. In 2011 officials boasted of following
a priority of the day by “returning farmland to forests”. In Pingshan, this
involved planting mulberry trees and promoting the rearing of silkworms.
State media predicted that this would open up “new ways to get rich”. Yet
today the mulberry trees are gone. Some excited netizens claim that China is
in the grip of a national deforestation campaign. The reality is untidier.
Mulberry trees did not make money so villagers stopped growing them,
reports a young, bare-chested man in sunglasses, watched by a toddler on a
tricycle. But Pingshan is not caught up in mass grain-growing campaigns
either, being too dry and far from a main road, the young man adds. Luckily, he
has another job driving an excavator. Last year that sideline took him to a
different village to uproot citrus trees to make arable fields. Asked how
farmers reacted, he smiled. “It’s the government’s will, how could they not be
satisfied?” he replied.

Because the party knows best

In nearby Yueying village, locals talk of a neighbour who was reluctant to
give up his trees. Because the man was a party member, however, he was told
“to lead the way” and submit. In Gaohe village, a farmer surnamed Luo
describes years of policy about-turns. “When I was young, we grew rice
here,” Mr Luo explains. Then locals were encouraged to rent their small plots
to a company growing grapes and other cash crops. “That didn’t work out, so
they returned the land to us and we started growing citrus fruit,” he says. His
family’s six mu (0.4 hectares) of land supported a few hundred trees in all.
They made up to 30,000 yuan ($4,200) per mu in good years. The trees were
uprooted last year and the land handed to a company that grows rice in a
combined plot of about 20 hectares. Mr Luo’s family receives 1,200 yuan per
mu in annual compensation. He is fatalistic about clever schemes that come
and go. Farming supplements his main income from working in a nearby town.
A few trees still surround his family home. “The country asks us to grow rice,
so we grow rice,” he says. In Mr Xi’s China, changeable policies are like the
weather: a constant to be endured. ■

Read more from Chaguan, our columnist on China:

China’s foreign minister goes missing (Jul 20th)
Rule by law, with Chinese characteristics (Jul 7th)
China’s message to the global south (Jul 6th)

Also: How the Chaguan column got its name

This article was downloaded by zlibrary from
https://www.economist.com/china/2023/07/27/in-xi-jinpings-china-central-planners-rule
United States
American universities have an incentive to seem extortionate
The making of America’s elite
Oppenheimer’s secret city is a shrine to the Manhattan Project
Regulation could disrupt the booming “kidfluencer” business
The Biden administration embraces place-based industrial policy
Fentanyl is spreading the opioid crisis into America’s big cities
Sticker shocker

American universities have an incentive to seem

extortionate
They are much cheaper than the “crisis of college affordability” suggests
Jul 23rd 2023 | WASHINGTON, DC

THE COST of many private colleges in America has reached $80,000 a year.
The median household income in America in 2021 was $71,000 a year. This
shows that college is unaffordable. Or does it?

The consensus view is that America has a college-affordability crisis and

things are getting worse. According to the Heritage Foundation, a
conservative think-tank, “college costs are out of control”. Bernie Sanders, a
senator from Vermont, and other progressives have pushed for free college
and loan-forgiveness for years. The White House attempted a costly bail-out
of student borrowers which the Supreme Court recently declared
unconstitutional. Both sides are telling a similar tale. But it does not reflect
reality. Most undergraduate degrees in America are actually affordable, and in
many cases going to college is actually getting cheaper.
There are three main types of colleges in America: public, non-profit private
and for-profit private. Public colleges are much less expensive than private
ones. According to US News & World Report, which ranks universities, the
average annual tuition fee for students at a public college studying in their
home states is about $10,000, compared with $40,000 for private colleges.
And most American students benefit from these lower prices. In 2021, 77% of
college students (about 12m) were enrolled in public colleges. Some states
are cheaper than others. Tuition in Wyoming costs $6,000 per year for
residents, whereas Vermont charges $19,000.

Public colleges in America look more expensive than most of their rich-
country counterparts. America ranks second-highest for fees in the OECD, a
club of mostly rich countries, behind England. However, this does not give a
full picture.
American universities advertise a sticker price that few students actually pay.
According to the National Association of College and University Business
Officers, a non-profit organisation, private colleges discount tuition by over
50% on average. And contrary to the common narrative, the net cost (what
students really pay) of public and private colleges has fallen (see chart).

Schools with large endowments are particularly generous. According to US

News & World Report the average student at Princeton pays $16,600 per year
for tuition and fees (compared with a $56,010 price tag), and tuition is free
for families making $160,000 a year or less. With these tuition discounts,
private colleges can sometimes cost less than public ones, though public
colleges are usually cheaper.

Americans also have alternative paths to a four-year degree that can help them
save money. Students can attend two-year public community colleges for less
than one year’s tuition cost at a four-year university degree, then apply those
two years towards a four-year degree. The system is flexible: two-thirds of
community-college students work and 70% attend part-time. This flexibility is
unusual compared with higher education in other countries, says Simon Roy of
the OECD.

Though there are plenty of stories of students being landed with lots of debt
for worthless degrees, college generally pays off too. College-educated men
earn $587,400 more over their lifetime than men who only graduated from
high school (women earn $425,100 more). This is much greater than the
equivalent premium in Britain ($210,800 for men and $193,200 for women).
“The expected gains from having a college degree are actually quite high in
the US because the US is also one of the countries where income inequality is
the highest,” says Abel Schumann of the OECD. This inequality makes
college-going worth the initial cost for most people.

Why, then, is there a perception that there is some sort of general crisis in
college affordability in America? One reason is that country-level
comparisons, such as the analysis by the OECD, compare the sticker price of
American universities with that of their peers. Sticker prices are rising while
net costs remain steady and, in some cases, drop. A report from the College
Board, an NGO, shows that whereas published tuition and fees for private
non-profit colleges increased from $30,000 in 2006-07 to $38,000 in 2021-22
(in 2021 dollars), the net price actually decreased from $17,000 to $15,000.
The story is similar for public colleges. Published tuition and fees were
nearly $8,000 in 2006-07 and rose to nearly $11,000 in 2021-22. Meanwhile
the net cost fell by $730.

This discrepancy between the sticker price and the net price creates
confusion, but it continues because it is valuable to colleges, says Beth Akers
of the American Enterprise Institute, a conservative-leaning think-tank.
Wealthy students pay the full price, subsidising their poorer peers. The higher
prices are also good for marketing. Consumers tend to associate higher prices
with higher quality. And students (and their proud parents) are flattered by
tuition markdowns pitched as merit scholarships rather than discounts.

Yet even with decreasing costs and discounts, college can still seem
unaffordable to many. Plenty of citizens in countries with free or low tuition
do in fact pay for college. Instead of paying a tuition bill, they pay over time
with higher taxes. Americans pay less in taxes, but that lump-sum tuition bill
can be off-putting. For those students and their families unable to pay in cash,
loans can be an answer. But accrued interest can quickly turn a reasonable
cost into an unreasonable one. Here too there is some progress: a new
initiative by the Biden administration will prevent interest from accruing on
federal loans for people making timely payments.

College does not benefit everyone and the quality is variable. Some for-profit
colleges have become notorious for providing little value and targeting poor
and non-white students. Students who chose to major in photography (or
journalism) at a private college may find it takes a while to pay off their loans
once they encounter the job market—but that choice may be worth it too. For
the vast majority, though, college is affordable and worth attending.

Regardless of the reality, American confidence in college is declining. A poll

by Gallup released this month shows that only 36% of Americans have “a
great deal” or “quite a lot” of confidence in higher education. This is down
from 48% in 2018 and 57% in 2015. The perceived high cost of college could
be driving down these results, says Jeremy Wright-Kim, an education
professor at the University of Michigan. College may be relatively affordable
and worth the overall cost, but Americans are struggling to believe it.■

Stay on top of American politics with Checks and Balance, our weekly
subscriber-only newsletter, which examines the state of American
democracy and the issues that matter to voters.
This article was downloaded by zlibrary from https://www.economist.com/united-
states/2023/07/23/american-universities-have-an-incentive-to-seem-extortionate
Legacy problems

The making of America’s elite

A new paper quantifies the boost that students with rich parents get when
applying to the best universities
Jul 24th 2023

THE RULING by America’s Supreme Court in June that in effect banned

universities from using racial preferences in admissions sparked two lively
debates. Although the better publicised argument was over whether the
decision represented an advance or a setback for equality of opportunity,
perhaps the more interesting one focused on whether the admissions decisions
of a handful of selective institutions deserved so much attention to begin with.

Just 6% of American undergraduates attend colleges that accept less than a

quarter of their applicants, leaving the vast majority unaffected. Moreover,
most academic analyses of the socioeconomic impact of a bachelor’s degree
from highly selective colleges have failed to quantify just what it is that they
add. Although these universities’ alumni do have unusually high incomes after
leaving college, they also had unusually strong high-school qualifications
before they went.
One study, by Stacy Dale and Alan Krueger of Princeton, found that those who
attend higher-ranked universities do not, on average, wind up earning more
money than do those who go to lower-ranked ones. This suggests that the likes
of Harvard and Yale do not actually improve their students’ earning
prospects, but instead admit bright, ambitious applicants who are destined for
success regardless of which college they attend.

However, a working paper by Raj Chetty and David Deming of Harvard and
John Friedman of Brown University, released on July 24th, refutes this
interpretation. Linking together data on tax returns and tuition subsidies,
standardised-test scores and universities’ internal admissions records, they
tracked the lives of 2.4m students who applied to top colleges between 2001
and 2015, from high school to their early 30s. The researchers’ findings
suggest that pupils have good reason to burnish their résumés in the hope of
securing admission to highly selective colleges, because they are the most
surefire route into America’s economic and professional elite.
The paper also shows that the preferences these universities give to
“legacies” (children of alumni), athletes and students at private high schools
cause them to admit the children of America’s richest families at remarkably
high rates—at the expense of less privileged, better qualified applicants who
would be more likely to achieve success after graduation. Eliminating these
policies would improve socioeconomic diversity at such colleges. It would
also improve the brainpower of America’s future elites. The White House has
noticed: it is now looking at whether Mr Chetty’s and Mr Deming’s employer,
Harvard, is breaking civil-rights law.

The study focuses on three groups of universities: “Ivy-plus”, consisting of the

eight members of the Ivy League (including Harvard, Yale and Princeton) plus
Duke, the University of Chicago, Stanford and MIT; “other highly selective
private colleges”, such as Caltech and New York University; and “highly
selective flagship public colleges”, like the University of California, Berkeley
and the University of Michigan. Simple data on the number of alumni from the
Ivy-plus group who reach positions of unusual wealth or power make clear
that graduates of these universities exercise an influence that is vastly
disproportionate to their small numbers. Since 1967, two-thirds of justices on
the Supreme Court have been Ivy-plus alumni. So are 12% of current Fortune
500 CEOs and a quarter of sitting senators.

Separating the effect of going to one of these colleges from the selection
effects (that they attract the cleverest applicants) is hard. The new study
comes up with various different ways of doing so, but the most ingenious
involves looking at the 10% of Ivy-plus applicants who were wait-listed—
those that admissions offices thought were neither strong enough to admit
outright nor weak enough to reject. Of these, 3.3% eventually get in.

The authors note that, although selective colleges tend to reach the same
decision (acceptance or rejection) about students who apply to more than one
of them, there is no such correlation for wait-listed students. Those who get in
via a wait-list are no more likely to be accepted by other colleges than are
those who are rejected. As a result, the paper assumes that all wait-listed
applicants at a given college are equally strong—and thus that comparing the
fortunes of those who get in and those who do not provides a natural
experiment.
When examining average earnings, this approach confirmed that Ivy-plus
attendance did not seem to make much of a difference. However, this broad
average disguised a striking difference at the upper “tail” of the distribution:
the most successful subset of Ivy-plus alumni fared far better than did the most
successful graduates of other colleges. Among wait-listed students with
similar test scores and whose parents had similar incomes, those who went to
Ivy-plus universities were 60% more likely to be in the top 1% of earners by
age 33 than those who attended leading public universities. Moreover, they
were three times as likely to work for “prestigious” but not necessarily high-
paying employers, such as highly ranked hospitals.
If Ivy-plus universities really do improve their students’ chances of reaching
the pinnacle of professional success, then the way they choose which
applicants receive this benefit merits close scrutiny. And the study’s second
central finding is that three factors given heavy weight by admissions offices
bias their decisions in favour of applicants whose prospects for post-college
success are relatively weak, but who have extremely wealthy parents.

Students whose parents earn more than 95% of Americans are no more likely
than the average student with the same test scores to attend an Ivy-plus
college. In contrast, those at the 99th percentile of family income are nearly
twice as likely to go to one, and those in the top 0.1% three times as likely. If
admissions were based solely on test scores, 7% of students at Ivy-plus
colleges would come from families in the top 1% of the income distribution.
In fact, this share is 16%. This is roughly comparable to the effect of racial
preferences for African-Americans and Hispanics.

It takes two to make an accident

Not all of the responsibility for this belongs with admissions offices. Students
from the richest families are unusually likely to apply to Ivy-plus schools, and
to enroll if they are accepted. But of the total nine-percentage-point
difference, around six points occur because such applicants are unusually
likely to get in.

The biggest of their advantages is the preference given to legacies. On

average, children of alumni are four times likelier to get into an Ivy-plus
college than are non-legacies with equivalent academic records. They are no
likelier to get into Ivy-plus colleges that their parents did not attend. Nearly
15% of Ivy-plus applicants from the richest 0.1% of families are legacies.

Wealthy families also benefit from selective colleges’ insistence on fielding

teams in dozens of sports, many of which are upper-class pastimes like
rowing or lacrosse. Just 5% of Ivy-plus students whose parents land in the
bottom 60% of the income distribution are recruited athletes. Among those
from the richest 1% of households, this share is 13%.

The paper also identifies a third, less well-known variable that benefits the
wealthy: non-academic ratings. These scores measure extra-curricular
activities like theatre, debating or writing for student newspapers, which are
most common at the non-religious private schools that privileged children
often attend. Among applicants with equivalent test scores, admissions offices
assign vastly higher non-academic ratings to students from families whose
incomes are in the top 1%. Students at non-religious private schools are twice
as likely to be accepted to Ivy-plus universities as students from good state
schools with similar academic qualifications.

Private colleges have the right to select applicants on any basis allowed by
law. They may well view a class with strong family ties to the university, a
wide range of intercollegiate sports and lots of students with strong extra-
curricular accomplishments as preferable to one solely composed of the
brainiest applicants possible. In theory, the fact that all three of these factors
boost attendance by the students whose parents are most capable of making
large donations could simply be an unintended benefit. But these preferences
also affect American society as a whole—and not just by perpetuating
inequality.

The study’s analysis of wait-listed applicants found that, after accounting for
academic qualifications, parental incomes and demographic factors, Ivy-plus
graduates who were legacies had a worse chance of reaching the top 1% of
the income distribution than did those who were not legacies. The same was
true for their odds of attending elite graduate schools or working for
prestigious employers, as it was for athletes and students who were assigned
high non-academic ratings.

However, students who benefited from these preferences still had better odds
of achieving these measures of professional success than did similarly
qualified and privileged students who did not attend an Ivy-plus school. In
other words, these universities are channelling comparatively underqualified
legacies, athletes and private-school graduates into positions of unusual
influence. A greater emphasis on academic merit would yield not only a fairer
society, but also a brighter elite.■

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.
Source: “Diversifying Society’s Leaders? The Causal Effects of Admission
to Highly Selective Private Colleges”, by Raj Chetty, David Deming and
John Friedman, working paper, 2023
This article was downloaded by zlibrary from https://www.economist.com/united-
states/2023/07/24/the-making-of-americas-elite
Destroyer of worlds

Oppenheimer’s secret city is a shrine to the

Manhattan Project
A tiny town in New Mexico is proud to be the place the bomb was
invented
Jul 24th 2023 | Los Alamos

WALK AROUND the old historic centre of Los Alamos, New Mexico, and J.
Robert Oppenheimer greets you at every turn. The local event centre—which
hosted an Oppenheimer festival to celebrate the release of Christopher
Nolan’s new film about the father of the atomic bomb—is just off
Oppenheimer Drive. A bronze statue of Oppenheimer, dapper hat and pipe
included, stands on a street corner. The local pub offers Oppenheimer trivia.
To pay homage to the “Trinity test” detonation of Oppenheimer’s bomb in the
New Mexican desert, there is Trinity Drive, Trinity Urgent Care and Trinity
on the Hill Episcopal Church.

When Oppenheimer was recruited to run the Manhattan Project in 1942, he

chose to build his laboratories in Los Alamos. The site, in the government’s
view, was an ideal place for bomb-building. The desert mesas and ponderosa
pine forests offered solitude and secrecy. But Oppenheimer also had a
personal reason for picking the Land of Enchantment. Early in Mr Nolan’s
film, Oppenheimer (Cillian Murphy) admits to being homesick for New
Mexico, where he and his brother owned a ranch. “When I was a kid”, he
says, “I thought if I could find a way to mix physics and New Mexico, my life
would be perfect.”

The most notable thing about the town, apart from its history and vistas, is that
it is home to the Los Alamos National Laboratory, the successor to
Oppenheimer’s science campus, where research on nuclear weapons
continues. But the release of Mr Nolan’s film has residents rolling out the red
carpet. Tourism is surging. Wendy Berhman, who runs the Manhattan Project
National Historical Park, says visitor numbers have more than doubled since
last year.

Locals are still starstruck, even a year after Hollywood’s glitterati descended
on their stretch of desert. “I believe I was there when Nolan decided to film in
the Oppenheimer house,” says Leslie Linke of the Los Alamos Historical
Society. “I could see it in his eyes.”

Mr Nolan’s film dwells on Oppenheimer’s internal battle between his

relentless pursuit of scientific inquiry and his moral qualms about the lethal
purpose of his lab’s invention. Yet Los Alamos’s shrines to the Manhattan
Project feel more celebratory than sombre. Plaques around town salute the
scientists whose work “ended world war two” and “deterred global conflict”.
A re-examination of Oppenheimer’s legacy is slowly taking place, however.
Posters in the visitor centre mention the Hispanic homesteaders and tribes that
were forced off their land so the government could build Oppenheimer’s
secret city. New Mexicans exposed to radiation from the Trinity test, known
as “Downwinders”, say their health was sacrificed for America’s atomic
advantage.

Perhaps Los Alamos’s newfound fame will hasten that retelling. But for now,
the town is all Oppenheimer, all the time. “Robert built that place,” says
Lewis Strauss (Robert Downey Jr), the film’s eventual villain. “He was
founder, mayor and sheriff, all rolled into one.”■
Stay on top of American politics with Checks and Balance, our weekly
subscriber-only newsletter, which examines the state of American
democracy and the issues that matter to voters.
This article was downloaded by zlibrary from https://www.economist.com/united-
states/2023/07/24/oppenheimers-secret-city-is-a-shrine-to-the-manhattan-project
Child influencers

Regulation could disrupt the booming

“kidfluencer” business
America’s Federal Trade Commission is reviewing rules for advertising
aimed at children
Jul 27th 2023 | NEW YORK

IT STARTED WITH a Lego “choo-choo train”. The video shows three-year-

old Ryan Kaji picking it out from the store “because I like it”, he tells his
mother, Loann. Back at the family home in Houston, Texas, the toddler opens
the box and plays with his new toy. It’s nothing out of the ordinary. But it
helped make the Kajis millionaires. Loann had recorded and uploaded the
video to a new YouTube channel, “Ryan ToysReview”. Eight years, many toy
unboxings and 35m subscribers later, “Ryan’s World”, as the channel is now
known, is considered YouTube royalty. He is part of a new generation of child
social-media influencers (those under the age of 18) changing the shape of
kids’ entertainment in America—and making a lot of money in the process.

Ryan, now aged 11, and “Like Nastya”, a nine-year-old with 106m
subscribers, lead the charge on YouTube; they earned $27m and $28m in
2021, respectively, according to Forbes. Most social-media sites require
users to be over 13, but parents or guardians can create and run accounts on
behalf of their children. Kid creators speak to other kids in their videos: they
play make-believe with friends and family, show off new toys and give
tutorials on dancing and hand-washing. A survey in 2020 by Pew Research
Centre, a think-tank, found that 81% of American parents with a child aged
three to four allowed their children to watch YouTube. (YouTube Kids, which
lets children of all ages navigate the site under parental controls, was created
in 2015.)

Money can be made through ads on videos and by partnering with brands,
which see an opportunity to reach very young audiences, sometimes paying
thousands of dollars for the privilege. “If it can be a revenue source for the
family, and a way for them to have new experiences or put a kid through
college, why not?” asks Greg Alkalay, CEO of BatteryPOP, a kids-
entertainment network that also manages child influencers. (Mr Alkalay also
claims to have coined the term “kidfluencers”.)

Operating these accounts once “felt more like a family business”, says Allison
Fitzpatrick, who represents brands and agencies in influencer negotiations at
Davis+Gilbert, a law firm. Now they have been “taken over by production
companies”. Ryan’s World partners with pocket.watch, an entertainment
studio that works with 45 top kid creators and helps them to franchise. The
firm has facilitated Ryan’s partnerships with brands such as Nintendo and
Mattel (one of his recent uploads is an advertisement for a new Mario Kart
game). It has also brought his videos to children’s television channels and
streaming services, and his own branded merchandise—toys included—to
sellers such as Target. These products have generated “hundreds of millions
of dollars at retailers globally”, says Chris Williams, the firm’s CEO.

Some child influencers are born to “momfluencers”, inheriting large

followings before they have learned to walk. The LaBrants, a family based in
Tennessee, have accumulated millions of followers documenting their lives
online. They run Instagram accounts for each of their children; their youngest,
aged one and four, already have 1.4m followers on a joint profile. Other mini
influencers are sprouting. Like the grown-ups, some are ambassadors for
clothing lines, or are represented by talent agencies that have traditionally
worked with actors. It is a sign of how advertising has changed: spending on
influencer marketing is projected to swell to $21.1bn this year, up from
$1.7bn in 2016, according to Influencer Marketing Hub.

But concerns from regulators threaten to rein in kids’ earning potential.

Watchdogs have accused creators of not clearly signposting sponsored content
in toy videos. And in 2019 America’s Federal Trade Commission (FTC)
clamped down on targeted advertisements shown on YouTube videos directed
at kids, accusing the social-media platform of illegally collecting data from
underage users. Channels must now label content for children. The FTC is
also reviewing research that suggests current advertising disclosures do not
work for kids. If the commission chooses to act on this, “everything we’re
talking about is going to rapidly disappear and change,” warns Ms Fitzpatrick.

Mommy managers
The ever-changing nature of social media has made it trickier for new stars to
rise to the top. “There used to be this sense that anybody could suddenly
become the next Ryan ToysReview. Now it’s much harder,” says Mr Alkalay.
Critics argue the business is exploitative. The earnings of child actors are
protected in some states under the Coogan Law, a Hollywood-inspired piece
of legislation from the 1930s. Child influencers have no such protection.

Children cannot sign brand deals, so parents do so on their behalf. Production

studios will suggest guidelines and choose only to work with families that
follow them, but those who are just starting out might not have the same
oversight. Change could be coming. In May Illinois became the first state to
pass a bill to protect the privacy and earnings of child influencers.

What happens when a child influencer grows up? “Ryan always comes first to
us,” say his parents in a statement to The Economist. “If he doesn’t feel like
filming, we do not force him to.” The Kaji family have pivoted into
educational content and cartoons, employing 30 people to help run Ryan’s
channel and several others under their own production company.

Other child influencers are trying to move away from playing with toys on
YouTube and into making lifestyle content on TikTok and Instagram, but may
struggle to bring their audiences, who followed them for something else, with
them. Then there are those who will simply tire of making videos and go back
to reality. But there will always be another starlet (and another pushy parent)
waiting in the wings. ■

Stay on top of American politics with Checks and Balance, our weekly
subscriber-only newsletter, which examines the state of American
democracy and the issues that matter to voters.
This article was downloaded by zlibrary from https://www.economist.com/united-
states/2023/07/27/regulation-could-disrupt-the-booming-kidfluencer-business
$ marks the spot

The Biden administration embraces place-based

industrial policy
But building whole industries from scratch is easier promised than done
Jul 27th 2023 | JOHNSTOWN, PENNSYLVANIA, and WARREN, OHIO

FOR SEVERAL days in late June, Ro Khanna, who represents part of Silicon
Valley in Congress, travelled through some of the most un-Silicon-Valley-like
places in America—eastern Ohio and western Pennsylvania. These were once
thriving manufacturing hubs and are now shells of their former selves. He was
there to hear people talk about how job losses at factories had affected their
communities. There were stories of broken pension and health-care promises,
suicide, shattered families and itinerant job-seeking.

Tim Tuinstra, a union representative, reported that one school district in

southern Pennsylvania has less than half as many children entering
kindergarten as graduating high school, and ruefully noted that cities across
America have bars catering to fans of the Pittsburgh Steelers, an American-
football team. “It’s not because people there just decided they liked the
Steelers,” he explained. Like the cratering school population, it’s because so
many people have left.

America was founded by people who left, and ever since those first ships
reached the New World, Americans have been happy to up sticks and chase a
brighter future. But what about those who would prefer to stay home, but feel
they can’t because of a lack of opportunity? Joe Biden wants to put an end to
that dilemma. “I believe that every American willing to work hard should be
able to get a good job no matter where they live,” he explained in a speech
earlier this month, “and keep their roots where they grew up.”

To that end, the Biden administration has embraced “place-based” industrial

policy, and has directed tens of billions of dollars to boost manufacturing
capacity in struggling regions. Its bet is that this money will incentivise
private-sector investment, leaving thriving factories, supply chains and
grateful blue-collar Democrats in its wake. That is a tall order.

In recent decades richer areas have far outpaced the rest. Ranking counties by
income levels in 1980 and 2021 shows growth of 172% at the 99th percentile
by 2021 and 101% at the 90th, but just 55% at the 10th percentile. Big cities
have done well while rural areas have lagged. The average income, adjusted
for local cost of living, is around $68,000 in cities with more than 1m people,
but just $55,000 in rural areas. Mr Khanna calls this divergence “the biggest
challenge for the country”.

The Biden administration thinks it can shrink this disparity through dirigiste
industrial policy. So far Congress has authorised at least $80bn in place-
based spending (according to the Brookings Institution, a think-tank),
disbursed through a range of competitive grants. The biggest-ticket items
include funding authorised in the CHIPS Act, passed last year to spur
American semiconductor manufacturing.

That law contains $10bn to help create 20 regional “Tech Hubs” outside
currently dominant areas such as Silicon Valley and Boston, as well as $9.6bn
for “regional innovation engines” and “collaborative innovation resource
centres”, designed respectively to boost research and development, and to
help early-stage tech firms. Other pieces of legislation authorise billions of
dollars for “regional clean-hydrogen hubs” and “direct air-capture hubs”.
Although large majorities of Republicans voted against the CHIPS Act and the
Infrastructure Investment and Jobs Act—the second-largest source of place-
based funding—the bills passed with some votes from both parties. Framing
this funding not just as largesse, or a spur to private investment, but also as a
response to the national-security challenges posed by China, helped broaden
its support. Mark Muro of Brookings, who is a longtime champion of place-
based policy, argues that this is the beginning of a lasting shift, that “place-
based growth strategy is here to stay”.

That may well be true. But evidence that place-based policy actually works is
mixed. Boosters point to successes such as the Tennessee Valley Authority
(TVA), created in the midst of the Great Depression to help develop an area
spanning seven states that was then among America’s poorest regions. More
recently, federal research investments and local government support helped
develop North Carolina’s Research Triangle.

But not every recipient of the Biden administration’s funding will have three
top universities, as the Research Triangle area does. And there is a difference
between providing electricity to a region that had none and building entire
industries from scratch. New York tried that with solar panels, spending
nearly $1bn on a Tesla factory that has fallen short of expectations.

As for the people who actually work in the places these policies are intended
to help, they are hopeful but wary. “People in this area are tired of people
making promises, and then just forgetting about those promises, and then guess
what: four years later they’re back here asking for our vote,” says Jim Grant, a
retired auto worker from Warren, Ohio. “Show me something.”

Unfortunately, Mr Grant may have good cause for concern. Setting aside
place-based policy’s mixed results, Congress-watchers know there is a
difference between authorising and appropriating funds. The most recent
budget request from the White House appropriated 20% less than the CHIPS
Act authorised. And even if all the funding comes through as promised,
manufacturing jobs are not what they were when Mr Grant and his colleagues
were in their prime. Industry is more mechanised, has fewer low- and mid-
skill jobs and across the rich world pays less of a wage premium than it once
did. The administration’s desire to help places like Warren and Johnstown
seems real enough. So is the risk of failure. ■
Stay on top of American politics with Checks and Balance, our weekly
subscriber-only newsletter, which examines the state of American
democracy and the issues that matter to voters.
This article was downloaded by zlibrary from https://www.economist.com/united-
states/2023/07/27/the-biden-administration-embraces-place-based-industrial-policy
Darker still

Fentanyl is spreading the opioid crisis into

America’s big cities
And death rates may rise further
Jul 27th 2023 | CHICAGO

IN A WORLD where open data makes spreadsheets with tens of thousands of

anonymised entries available to the public, sometimes individual detail can
still stand out. On Christmas Day last year, according to data downloaded
from the Cook County medical examiner, the coroner in Chicago and its closer
suburbs, four people died from opioid overdoses. One, a 34-year-old man,
had apparently been taking cocaine. Another, a 43-year-old, was suffering
“complications of chronic ethanolism”. All four, however, were almost
certainly killed by the first drug listed as cause of death: fentanyl. They were
among exactly 2,000 people killed by opioid overdoses in Cook County last
year, accounting for close to one in 20 of all deaths. Over the past eight years,
the annual total has tripled. Nine in ten deaths involved fentanyl.

When opioids first started killing Americans in very large numbers, it was
disproportionately white people, often in rural areas, who were the victims.
Cities and ethnic minorities generally suffered lightly. Yet a far worse wave
of death is under way now, caused almost entirely by fentanyl, an incredibly
powerful synthetic opioid that can be used legally as a painkiller, but is
mostly produced by Mexican cartels and smuggled into America.

In 2021 opioid overdoses killed 80,000 Americans, according to data from

the Centres for Disease Control, a government agency. The figures from Cook
County suggest that cities are now being hit hard too, as are ethnic minorities.
Of deaths in Cook County last year, a majority were African-American.
Nationally in 2021 black Americans made up 18% of victims, up from 13% in
2018, even though deaths of people of all races continue to rise.

Because it is so potent, and so easy to smuggle, fentanyl has all but competed
heroin, made from poppies, out of the market. One Chicago-based drug dealer
(who sells only cannabis) says that fentanyl pills can be had wholesale for as
little as $1 each. But that potency is also deadly: dealers using crude
equipment can easily accidentally press a lethal quantity into a single pill.
Sadly, that suggests death rates may not yet have peaked.■

Stay on top of American politics with Checks and Balance, our weekly
subscriber-only newsletter, which examines the state of American
democracy and the issues that matter to voters.
This article was downloaded by zlibrary from https://www.economist.com/united-
states/2023/07/27/fentanyl-is-spreading-the-opioid-crisis-into-americas-big-cities
Middle East & Africa
A blow against Israel’s Supreme Court plunges the country into
crisis
Why African leaders shunned Vladimir Putin’s summit
Soldiers declare they have overthrown Niger’s president
The first crack

A blow against Israel’s Supreme Court plunges the

country into crisis
A tempestuous period of protest is in prospect
Jul 24th 2023 | Jerusalem

ON JULY 24TH Israel’s parliament, the Knesset, passed the first in a series of
laws aimed at drastically limiting the powers of the country’s Supreme Court.
Members of the opposition walked out in protest at the final reading of the
law, which passed 64-0 in the 120-strong chamber, with the votes of all the
members of the far-right coalition led by the prime minister, Binyamin
Netanyahu. The law all but eliminates the court’s ability to overturn
government decisions on the grounds of “reasonableness”.

Since the coalition presented its plans nearly eight months ago, hundreds of
thousands of Israelis have taken to the streets in protest. Mr Netanyahu’s allies
claim that in recent decades the Supreme Court has been too interventionist
and that its powers should be curbed. Opponents of the reforms argue that they
will undermine Israeli democracy and risk introducing majoritarian rule.
The government has been unmoved. Thousands of reserve officers in Israel’s
armed forces have announced that they will no longer turn up for their
voluntary service, but before the vote Mr Netanyahu refused to meet the
army’s chief of staff, who wanted to warn him of the security implications of
the dispute. The prime minister has also brushed off a rare public warning
from Israel’s closest ally: President Joe Biden called on the government to
postpone the vote and try to reach a compromise with the opposition. The
White House described the result as “unfortunate”.

After attempts to pass the full raft of his government’s legal reforms stalled in
the face of widespread opposition, Mr Netanyahu repeatedly promised that he
would try to pursue the constitutional changes through consensus. That came to
nothing. Under pressure from the extreme elements in his coalition, he
abandoned efforts to find any kind of compromise. Instead the government
took one of the original four laws they had hoped to pass earlier this year and
rushed a vote on that through the Knesset in a matter of weeks.

Even as the final votes were being held on Monday, Mr Netanyahu and his
relatively moderate defence minister, Yoav Gallant, sought to delay the
parliamentary procedure, in a last-gasp attempt to find a compromise. In the
Knesset session the hardline justice minister, Yariv Levin, could be seen
berating his colleagues, as Mr Netanyahu sat glumly silent. Mr Levin and
other far-right members of the coalition threatened to resign if the amendment
was not passed immediately.

The fact that Mr Netanyahu, just back from a hospital stay to have a
pacemaker fitted, was unable to persuade his allies to delay the vote suggests
that his power is now limited. It is unclear what will prevent the most extreme
members of the coalition of nationalist and ultra-religious parties from
pursuing their political agenda, both on the legal reforms and more widely. In
the aftermath of the vote Mr Levin said this was the “first step” in fixing
Israel’s judicial system. Ministers have threatened to use the freedom the new
law gives them to fire the independent-minded attorney-general. They could
replace her with someone friendlier to the government who would be more
willing to revisit the corruption charges currently facing Mr Netanyahu (which
he strenuously denies).
And then there are the next stages in the judicial overhaul. When the Knesset
returns in October after a long summer recess, the coalition plans to put
forward legislation which would give it control of the appointment of
Supreme Court judges. In a speech shortly after the vote Mr Netanyahu
promised that he would once again pursue consensus on these matters. His
allies have no interest in any compromise, however, and the prime minister
has little leverage over them.

Israel may find itself in a constitutional crisis within days, well before the
next pieces of legislation come up. Various civil-rights groups have already
sent petitions to the Supreme Court calling for the new law to be overturned.
The judges will still have legal tools to review government decisions, but
these will be much more limited. If they rule that this new law restricting their
powers is unconstitutional, they will be on a collision course with the
government.

The demonstrators who believe their country is on a slippery slope to

dictatorship are not going home. Entire reserve units and squadrons could be
paralysed. Major business groups have already closed their establishments in
protest and the trade unions are considering a general strike. Angry protests
broke out following the vote, causing havoc in central Jerusalem, Tel Aviv
and elsewhere around the country. Israel is facing a tempestuous summer. ■
This article was downloaded by zlibrary from https://www.economist.com/middle-east-and-
africa/2023/07/24/a-blow-against-israels-supreme-court-plunges-the-country-into-crisis
Grain games

Why African leaders shunned Vladimir Putin’s

summit
Russia’s weaponisation of food reflects its cynical approach to the
continent
Jul 26th 2023 | CAPE TOWN

VLADIMIR PUTIN has never been so diplomatically isolated. Few heads of

state have visited him since his invasion of Ukraine last year. So when
African leaders arrived in St Petersburg on July 27th for the second Russia-
Africa summit, it was something of a coup—so to speak—for Russia’s
president. Yet the turnout shows the limits to Russia’s sway on the continent.
Reports suggest that just 17 African leaders travelled, less than half the 43
who went to the first bash in 2019.

The showing underlines Africa’s ambivalence towards Russia. Of Africa’s 54

countries, 19 backed Ukraine in most of the five votes on the war at the UN
General Assembly in the first year of the conflict, versus just two that did the
same with Russia. But overall, African states abstained or did not show up on
52% of occasions.
There is no single reason for the postures of African countries. Several are
autocracies run by elites with close links to Russia; a few host Russian
mercenaries from the Wagner Group. Some states selectively recall their
historical links to the Soviet Union, or are instinctively sceptical of the West’s
foreign policy. Most feel that, pulled hither and yon by geopolitical shifts, it is
better to avoid picking sides—and instead strike a balance.

The African response to Russia’s withdrawal from the Black Sea grain
initiative should be viewed in this primarily pragmatic context. On July 17th
Russia said it would no longer honour the deal it signed a year earlier that
unblocked an export channel for Ukrainian grain and helped push cereal
prices down by 14%, according to the Food and Agriculture Organisation, a
UN agency. NGOs working in the Horn of Africa, in particular, say Russia’s
move will worsen inflation and hunger. Though no leader publicly criticised
Mr Putin, they will raise the deal at the summit.

Russia will hope that it can keep African leaders quiet with the kind of
cynical, elite-driven approach to the continent that it favours. Ukrainian
officials say that Russia has blocked their efforts to donate grain to Africa,
under a programme launched in November. Meanwhile Russia is exporting its
wheat to friendly states; Mali, the junta of which is propped up by Wagner,
received 50,000 tonnes at knockdown prices last month. The Kremlin has
used a scheme to donate Russian fertiliser stranded in Europe, through the
World Food Programme, to lobby African states to call for an end to sanctions
on Russia.

Russia has to exert its influence where it can because it is an economic

minnow in Africa, relative to America, China or European powers. In 2018,
the most recent year analysed by researchers, Russia gave $28m in bilateral
aid to African countries, less than one-hundredth of Britain’s total—and one-
thirteenth of what Russia gave Cuba. Russia accounts for a tiny fraction of
foreign direct investment in Africa. In 2020 Russia-Africa trade hit $14bn,
2% of the continent’s total and about one-twentieth of EU-Africa trade. At the
first Russia-Africa summit officials bragged of signing deals worth $12.5bn.
Few materialised. No wonder leaders from Kenya, Nigeria and other big
economies skipped this year’s event.
Still, Russia is a compelling partner for authoritarian regimes clinging to
power. It has been Africa’s largest weapons supplier for more than a decade.
Though more than half of these exports were to Algeria and Egypt, it also
sells weapons to sub-Saharan African regimes such as Uganda more cheaply
and with fewer strings than the West would attach.

The Wagner Group—another part of the Kremlin’s security offer to autocrats

—is seemingly staying put in Africa after its short-lived mutiny against Mr
Putin. “There was—and will be—no reduction in our programmes in Africa,”
Yevgeny Prigozhin, its leader, said last week. In the Central African Republic
Wagner is helping run a referendum on July 30th that will see Faustin-
Archange Touadéra, the president, abolish term limits.

Guns and mercenaries are just part of Russia’s low-cost, high-impact strategy
of targeting African elites. Many of the countries where the ruling class has
the closest ties to Russia—such as Algeria, Madagascar, Mozambique,
Uganda and Zimbabwe—often abstained at the UN. And the targeting of elites
extends to more democratic places. Jacob Zuma, who came close to signing a
gargantuan nuclear-power deal with Russia, is one of several figures in South
Africa’s ruling African National Congress that Russia has tried to woo and
protect. The former president is currently in Russia for “health reasons”; as it
happens, he faces prison time at home.

All Russia’s efforts are backed up by propaganda. Its disinformation

campaigns target influential African voices on social media. They are
effective in part because the messages fall on fertile anti-Western ground,
especially in French-speaking west Africa. In a poll of 23 African countries
in 2022 Gallup found that the states with the highest approval ratings of
Russia were Mali (84%) and Ivory Coast (71%). The top seven were
Francophone.
But there is a limit to Russia’s appeal. In 2021 Afrobarometer, a research
group, released results of polls across 34 African countries. On average just
35% of respondents said Russia was a good influence. That share was behind
those for former colonial powers, regional hegemons, America and China
(see chart).

Volodymyr Zelensky, Ukraine’s president, has belatedly joined the battle for
these hearts and minds. Last week in Kyiv he hosted a group of African
journalists. He compared the war in Ukraine to the anti-colonial wars in
Africa: “Many of your ancestors went through this.” Mr Zelensky added that
Russia’s approach to grain and Africa was like its earlier use of oil and gas in
Europe. In both cases, he said, Russia tried to eliminate competitors and use
resources to create political dependence.

To judge by the low turnout for this week’s summit, African leaders are
recalibrating their views of Russia. Mr Putin’s officials blame Western
pressure. In truth, it reflects exactly the sort of African autonomy they
cynically claim to champion. ■
This article was downloaded by zlibrary from https://www.economist.com/middle-east-and-
africa/2023/07/26/why-african-leaders-shunned-vladimir-putins-summit
Coup and chaos

Soldiers declare they have overthrown Niger’s

president
The fall of Niger’s democracy would be a heavy blow to regional stability
Jul 27th 2023 | Dakar

THE LAST seemingly solid government aligned with the West in the jihadist-
plagued Sahel, a belt of poverty-stricken Francophone countries that spreads
across the Sahara desert, seems to have fallen to a military coup. Late in the
evening of July 26th a group of soldiers appeared on Niger’s national
television to declare that they had “decided to put an end to the regime that
you know”.
President Mohamed Bazoum, who took office about two years ago in the
country’s first peaceful democratic transfer of power, had reportedly planned
to dismiss the presidential guard’s head, General Omar Tchiani, who may
now be the new man in charge. Yet uncertainty remained. After the
announcement Mr Bazoum, who was reportedly held but had not yet publicly
resigned, tweeted: “The hard-won achievements will be safeguarded. All
Nigeriens who love democracy and freedom will see to it.”

Political chaos and violence in Niger, a country of 26m, could sorely harm the
wider region, too. Niger is the only true Western ally and the sole democracy
in the fight against jihadists linked to al-Qaeda and Islamic State that have
slaughtered their way across much of Mali and Burkina Faso to the west—and
into parts of Niger. It is also trying to fend off jihadists from Boko Haram,
another terrorist outfit, that spills over from Nigeria.

If it sticks, this coup would be the sixth to succeed in west Africa in under
three years. None has helped. In Mali soldiers overthrew civilian rule in
2020. In Burkina Faso soldiers seized power in January 2022, only to be
overthrown by rival gun-toting men in September. In both countries they soon
pushed out and scapegoated French forces fighting the jihadists. Mali
replaced them with mercenaries from Russia’s Wagner Group. Yet the result
was even more violence. Last year in Burkina Faso, Mali and Niger more than
10,000 people were killed, the bloodiest rate so far. This year could be
bloodier still.

Yet much less of the carnage is in Niger, where fewer people were killed in
the first six months of this year than in any similar period since 2018. The
West has poured in billions of dollars in aid to the country. Some 1,500
French soldiers have been fighting alongside the army; 1,000-plus Americans
are also deployed there. And they have drone bases, too.

Mr Bazoum has not just relied on Western muscle. Fighting between ethnic
groups plays into the jihadists’ hands, so he has backed peace deals between
local communities. His government has even reached out directly to jihadists
to try to persuade them to lay down their arms.

Now this progress is at risk. Even if Mr Bazoum regains control, his army
will be divided. Speaking of the coups in Mali and Burkina Faso, he told The
Economist in May: “The army, which is the institution we need the most to
deal with insecurity, is weakened by these coups, because they turn things
upside down.” Alas, his words apply to Niger, too.
This article was downloaded by zlibrary from https://www.economist.com/middle-east-and-
africa/2023/07/27/soldiers-declare-they-have-overthrown-nigers-president
The Americas
Canada’s miserly defence spending is increasingly embarrassing
Meet the Peruvian indigenous singer inspired by K-pop
A NATO laggard

Canada’s miserly defence spending is increasingly

embarrassing
Even after the invasion of Ukraine, the country doles out just 1.22% of
GDP
Jul 24th 2023

DESPITE ITS renowned special forces and stalwart service in Afghanistan,

Canada has long been seen by its allies as something of a laggard when it
comes to its defence spending. Many Canadians still recall an excruciating
exchange between Donald Trump, then president of the United States, and
Canada’s Liberal prime minister, Justin Trudeau, at a NATO summit in 2019
when Mr Trump asked jeeringly: “Where are you at? What is your number?”
Mr Trudeau had more friends at that summit than Mr Trump. But since the
Russian invasion of Ukraine, Canada’s position as a penny-pinching outlier
has become more embarrassing for the country.
The statement of Jens Stoltenberg, NATO’s secretary-general, before the
NATO summit in Vilnius this month that spending 2% of national GDP on
defence was no longer to be regarded as the “the ceiling” but “the floor”
could have been designed to cause blushes in Ottawa. According to the
alliance’s latest data on defence spending, Canada’s defence budget amounted
to just 1.22% of its GDP in 2022. That puts it in the same company as
Belgium, Luxembourg, Slovenia, Spain and Turkey—a country whose
commitment to NATO is at best shaky. All spend less than 1.4% of GDP on
defence (see chart).

Following Russia’s invasion of Ukraine, even former military slowcoach

Germany announced its determination to meet its 2% obligation. But Mr
Trudeau has not shown much enthusiasm for bridging the gap. Leaked
Pentagon intelligence documents, first reported in the Washington Post in
April, confirmed that Mr Trudeau had told NATO allies not only that Canada
would not reach the 2% commitment but that it “never” would. When Mr
Trudeau was asked to confirm or deny the remark, he blandly replied: “I
continue to say and will always say that Canada is a reliable partner to
NATO, a reliable partner around the world. And with our military
investments, with the support we give to Canadians, we will continue to be
doing that.”

The gulf between what Mr Trudeau intends and what NATO expects is indeed
a large one. Last year the parliamentary budget officer, Yves Giroux,
estimated that Canada would need to spend an additional C$75.3bn ($57bn)
before the end of 2027 to get to the 2% target.

Yet, while Mr Trudeau remains seemingly unrepentant that his government

ranks defence and security behind social spending, some effort is being put
into presenting a more reassuring picture to Canada’s allies. Last year, in the
immediate aftermath of Russia’s invasion, the government said it was
undertaking a defence-policy review in the light of the changing security
environment. When Canada’s foreign minister, Mélanie Joly, was confronted
in an interview ahead of the Vilnius summit about Mr Stoltenberg’s demand
for more spending, she suggested that the defence review would reflect the
need “to make sure that we step up our game”.

However, the review is now not expected to report until next year, and any
new procurements that may stem from it will be subject to delays, which in
Canada’s case tend to be long. Earlier this year the government finally signed
a deal to spend C$19bn on 88 F-35 fighter jets, some 13 years after the
decision of the former Conservative government to buy the stealth aircraft.
When campaigning to be prime minister in 2015 Mr Trudeau said he would
cancel the deal. Once in power, however, he opened it up to a bidding process
(which was in essence for show, as Lockheed pretty much has a monopoly on
the market for the most advanced fighters).

The politicisation of procurement decisions is not the only issue Canada’s

defence budget faces. Another problem is that the Department of National
Defence (DND) has a poor record in spending the money it has been given.
According to a recently leaked DND internal report, staffing at the
department’s acquisitions arm is about 30% under strength, with 4,200 jobs
vacant at the end of May last year. None of this bodes well for Canada’s navy,
which is chugging along with 30-year-old frigates and just four former British
Royal Navy submarines that are even older.

A reason often given for Canada’s reluctance to invest in its armed forces is
that it is a long way from Europe and that the United States will always have
its back. But even if Ukraine is distant from Canada, neither Russia nor China
is. As Canadians are grimly aware, global warming is opening up Arctic sea
lanes and making the High North an increasingly contestable strategic region.
Both Russia and China are showing a close interest in Canada’s backyard. If
the navy is to respond to this, the money will have to be found for new frigates
and submarines to give it a persistent presence in harsh conditions.

After Mr Trudeau visited South Korea in May there was speculation that the
Canadian navy, which wants 12 new submarines, would push for that
country’s highly capable KSS-III. The submarine programme could cost
around C$60bn. The navy is also hoping to get 15 new Type-26 frigates,
which would cost between C$60bn and C$84bn. But such decisions must
await the conclusions of the review.

The paradox of Mr Trudeau’s determination to brush aside his NATO

spending obligations is that the country actually has a growing appetite for an
enhanced security role. Polls suggest that there is support for higher defence
spending, particularly among older voters. And although delayed, the F-35
purchase and the infrastructure that goes with it are a major commitment, with
a total cost of about C$70bn. So too is Canada’s agreement to a NATO plan
for it to to lead a brigade-strength force in Latvia by 2026. Canada has also
pledged to invest nearly C$40bn in NORAD, the North American air-defence
system, over the next 20 years. But the first and last of these undertakings will
occur over the long term. The funding for them will be spread out over
several decades.

Whatever Mr Trudeau thinks about the NATO 2% threshold, he and Anita

Anand, Canada’s outgoing defence minister, have publicly committed
themselves to spending more in the future. The much-touted defence review
should identify what capabilities Canada needs. But the damage done by
decades of complacency and neglect by governments of both parties will take
many years to rectify. The consequence will be a growing tension between
budgetary constraints and strategic ambition. One or the other will have to
give. ■
This article was downloaded by zlibrary from https://www.economist.com/the-
americas/2023/07/24/canadas-miserly-defence-spending-is-increasingly-embarrassing
Call it Q-pop

Meet the Peruvian indigenous singer inspired by

K-pop
Lenin Tamayo is fusing South Korean culture with his Quechua heritage
Jul 27th 2023 | Lima

AS A TEENAGER Lenin Tamayo Pinares, now 23, used to fantasise about

leading a glamorous life in South Korea. His reality in Peru seemed a world
apart. He grew up as an indigenous person in a country with deep-seated
racism. His mother, a talented Andean folk musician, often struggled to make
ends meet. Although she raised him to take pride in their Quechua culture, he
was bullied at school.

K-pop offered an escape. He discovered the genre through a group of girls he

befriended in secondary school. “My mind was blown,” he says. Part of K-
pop’s appeal among indigenous youth in Peru is simply that its performers
look more like them than other pop stars do, Mr Tamayo explains. The same
features he was ridiculed for at school—his prominent cheekbones, straight
black hair and slight build—were what distinguished K-pop artists.
Now Mr Tamayo is making his own version of K-pop under his first name,
Lenin (his mother named him after the Russian revolutionary). His
compositions blend Korean-style beats and ballads mixed with Andean
instruments and sounds. He writes choruses and rap interludes in Quechua, the
most widely spoken indigenous language in the Americas. His videos feature
choreographies infused with folk-dance moves and costumes with traditional
flair, such as devil masks worn at highland parades.

His fans call it Q-pop. Mr Tamayo sees it as a platform for indigenous

culture. Although indigenous peoples make up nearly a quarter of Peru’s
population, they tend to be underrepresented in the media. Quechua society is
often depicted as a relic of Peru’s Incan past, and comedians still perform
brown-face skits of Andean women on TV and in film. Peruvians “have to
broaden their idea of what pop culture is, because I don’t fit into it,” says Mr
Tamayo.

Mr Tamayo is not the first non-Korean to dabble in K-pop, which itself drew
inspiration from American hip-hop. But two things make his efforts distinct.
For a start, because he lacks the backing of a big record label to imitate K-
pop, he has more creative liberty to reinvent it. His recording studio is run by
friends, and his mother helps him create his music. Mr Tamayo is also part of
a generation of influencers in Peru who are building their careers on social
media. Since he went viral last year, his videos have had more than 5m plays
per month on TikTok, where he has more than 200,000 followers. That is
small by Korean standards—but it is a start. ■
This article was downloaded by zlibrary from https://www.economist.com/the-
americas/2023/07/27/meet-the-peruvian-indigenous-singer-inspired-by-k-pop
Europe
Beneath France’s revolts, hidden success
Wildfires threaten Greece’s tourist economy
Ukraine’s missile cemetery
Germany tries to stop brawls in public swimming pools
Spain shows that some voters still want centrism
The France that works

Beneath France’s revolts, hidden success

On many counts it is quietly doing better than other Europeans
Jul 27th 2023 | PARIS

SO FAR THIS year the French have done a fine job portraying their country
as broken. Twice they have spread mayhem, and derailed a state visit, with
street rebellions. The first, over a rise in the retirement age, underlined
people’s refusal to face up to the financing needs of the state pension system.
The second, over the fatal police shooting of a 17-year-old, spoke of a failure
to get law enforcement right in rough neighbourhoods. Emmanuel Macron, the
president, runs a minority government that seems to lurch from crisis to crisis.

Yet behind the headlines, one of the abiding mysteries of France today is this:
a country with an aversion to change, a talent for revolt and an excessive taste
for taxes still manages to get so much right. Recently France has even
outperformed its big European peers. Since 2018 cumulative growth in GDP
in France, albeit modest, has been twice that in Germany, and ahead of
Britain, Italy and Spain.
Indeed by some measures France shows surprising vitality compared with its
four biggest European neighbours (see chart ). This is partly due to historical
decisions. France’s high-speed (and green) rail network, which debuted in the
1980s, dwarfs not only America’s but the average of its big European peers.
France also generates some of Europe’s lowest-carbon electricity, thanks not
to renewables but to its nuclear industry, launched in the 1970s. This still
provides 66% of France’s electricity, despite maintenance issues last year at
the country’s 56 reactors. Six new-generation reactors are now planned.

France’s performance reflects more recent choices too. It has more companies
in the global top 100, measured by market capitalisation, than any other
European country. It owes this largely to its luxury-goods giants, which have
jumped in profitability and scale in the past decade. French luxury brands
were more profitable in 2022 than American tech firms. All three of the
world’s top luxury firms—LVMH, Hermès and Dior—are French.

There is more to French business, though, than the hand-stitched leather

clutch. France is also home to the euro zone’s most valuable bank, BNP
Paribas. Between 2017 and 2022 the country increased its share of global
arms exports by four points, to 11%. Last year France registered more patents
than the average of its big European neighbours, and nearly twice as many as
Britain. On a wooded plateau south of Paris, the government is pouring
billions into an innovation cluster around Saclay, designed to become a
“French MIT”.

Britain and Germany are still home to more of Europe’s top 100 unicorns, or
unlisted firms valued at over $1bn. Yet the startup scene in Paris has been
transformed. One-time pioneers such as Xavier Niel have become
establishment figures. In 2019 Mr Macron promised that France would
produce 25 tech unicorns by 2025; the figure was reached last year.
“Business-school graduates used to prefer the security of big corporate life,”
says Frédéric Mazzella, head of BlaBlaCar, a French ride-sharing firm and an
early unicorn. “Now it’s become cool to be a tech entrepreneur.”

How to explain this under-hyped French performance? One recent factor is

the global revival of state interventionism, newly fashionable even in
America and Britain. In France this tradition goes back to Louis XIV’s finance
minister, Jean-Baptiste Colbert, and was revived by government central
planners after the second world war as le Plan. The EU is now less strict
about public subsidies, leaving France freer to indulge its core instincts.

Take the four gigafactories being built in “battery valley” in northern France.
This reaches from the port of Dunkirk to Douvrin and Douai in the old mining
basin. When, or if, fully operational it will make France one of the biggest
electric-battery producers in Europe. State handouts helped to persuade
ProLogium, a Taiwanese firm, to build the factory in Dunkirk. Roland
Lescure, France’s industry minister, argues that it was “not just about
subsidies” but “reliable, low-carbon energy supply” as well as “accelerated
planning procedures and the growing battery ecosystem”. Batteries will roll
off the production line in Douvrin this year, only two years after the first
planning application was lodged.

A second explanation is the fine-tuning of a set of social preferences. The

revolutionary-minded French like to think that theirs has become a deeply
unequal society. The feeling is reinforced by the soaring wealth of their
billionaires, while inflation squeezes ordinary people’s budgets. This year
Bernard Arnault, head of the LVMH luxury empire, became the world’s
richest man for a time, worth $211bn (before ceding to Elon Musk). In 2022
six of the top ten European billionaires were French. Mr Macron, who
reduced the wealth tax to a mere mansion tax, is seen by his detractors as the
président des riches bent on loosening labour protection and curbing benefits.

Yet France on Mr Macron’s watch has managed to combine a more favourable

attitude towards wealth creation with a welfare state that still does a better
job than its big peers at correcting inequality. The French poverty rate is well
below the average of its European neighbours, and little over half America’s.
Nursery education, a proven means of improving life chances for lower-
income groups, is now compulsory from the age of three. The French live six
years longer on average than Americans, and far fewer are obese. Their
jobless rate, at 6.9%, is at its lowest in 15 years. Despite Mr Macron’s
reforms, the French state still takes more in taxes as a share of GDP than any
OECD country bar Denmark—and devotes more to social spending.

A final factor is policy stability. Mr Macron is the first president in 20 years

to be re-elected. Bruno Le Maire has been finance minister for the longest
consecutive period under the Fifth Republic. The pair vowed not to put up
taxes, and have stuck to it. An annual confab of foreign corporate titans,
invited by Mr Macron to “Choose France”, has turned into a sought-after elite
event. This year over 200 of them jetted in to be dined at Versailles, jointly
announcing another €13bn ($14.4bn) of investments. Morgan Stanley is nearly
doubling its headcount in Paris. Pfizer is doubling to €1.2bn its investment in
the country over the next four years. “The reality is that there is a long-term
trend towards greater attractiveness,” says Ludovic Subran, chief economist
at Allianz, a German insurer.

France has not got everything right, far from it. There are genuine concerns
about standards in state schools and regional access to health services.
Politics remains polarised and society anxious. Average real wages have
been flat, not rising as in America. All those French subsidies and
infrastructure projects come with an eye-watering price tag. The public
finances are stretched, partly by capping energy bills to protect consumers
from the cost-of-living crisis, which is only slowly being phased out. France
has not balanced a government budget since before Mr Macron was born.

Yet, as the French board super-fast trains on the way to their enviably long
summer holidays, France’s model continues to defy those who predict its
collapse. A recent analysis by Sam Bowman, a British commentator, puzzled
over France’s relative wealth, despite high taxes and tight labour laws. Better
infrastructure, simpler planning and housing supply, cheaper child care and
abundant energy seemed to explain it. “France gets so much wrong,” he
concluded, “and yet it still does pretty well on the metrics that actually
matter.”■
This article was downloaded by zlibrary from
https://www.economist.com/europe/2023/07/27/beneath-frances-revolts-hidden-success
Greek fire

Wildfires threaten Greece’s tourist economy

Thousands have been evacuated, and more fires may be coming
Jul 27th 2023 | ATHENS

WILDFIRES HAVE DESTROYED thousands of hectares of forest on Greek

islands, forcing the evacuation of over 30,000 tourists and locals from Corfu,
Evia and Rhodes. With temperatures above 40°C (104°F), a week-long blaze
caused chaos on Rhodes, where some tour operators cancelled flights until
August. On Corfu and Evia holiday-makers fled luxury villas on the coast.
Efthymios Lekkas, a natural-disaster expert, blamed “an unprecedented
heatwave…combined with very strong winds”. Several EU countries and
Turkey sent firefighters and water-dropping aircraft to join local forces. On
July 25th an old Greek air-force firefighting plane crashed in Evia. With the
meltemi (annual northerly winds) expected to strengthen, there may be little
respite ahead.■
This article was downloaded by zlibrary from
https://www.economist.com/europe/2023/07/27/wildfires-threaten-greeces-tourist-economy
Cold cases

Ukraine’s missile cemetery

Dissecting Russian rockets for clues
Jul 27th 2023 | KYIV

THE MISSILES line up like headstones: tipped on their sides, ordered by

family and final resting date. Grass grows around them, where leaked fuel has
not killed it. Walking among them is like browsing a catalogue of Russia’s
war effort. There are cruise missiles, ballistic missiles, glide bombs, free-fall
bombs and twisted components: wires, circuit boards, gyroscopes, lenses,
casing and cladding. All of this metal fallen from the sky has been collected in
a secret study centre near Kyiv. “If you are going to battle something,” says
Colonel Mykola Danilyuk, “you need to first understand what you are dealing
with.”

Ukraine’s missile graveyard was launched in the spring of 2022. When the
centre’s officers arrive at an impact site, they must first figure out what
projectile hit it. Then they look for serial numbers or other markings. The
more effective the missile, the less tends to be left of it. The best case is when
air defence scores a hit on the engine and the rest of the missile falls intact.
Then the officers can easily work out when and where it was produced and
serviced, and whether it has been upgraded. Understanding the dynamics of
production is key to staying ahead of the game, says “Sasha”, an officer at the
site.

Some news is encouraging: Russia is running down its missile stockpiles. The
most recent arrivals were built in the second quarter of 2023. But the high rate
of use shows the Russians have stepped up production. They appear to be
prioritising their most effective cruise missile, the air-launched Kh-101. This
is increasingly their weapon of choice, says Colonel Danilyuk: able to fly low
to avoid detection and to change direction dozens of times. A typical attack
comprises several strike groups, including Kh-101s and drones. “One group
might attack Kyiv from the north, and a second group will make figure-of-
eight turns before striking an airbase in Odessa.”

Russia is modernising its missiles in the midst of war. Kh-101s recovered in

2022 had a homing system using one optical sensor; the latest have three. Such
findings change Ukraine’s calculations about how to fight them, says Sasha.
Earlier in the war, he says, studying the optical contrast seekers of Kalibr sea-
launched cruise missiles allowed Ukrainians to engineer cone-shaped decoys
to trick them. These are now deployed at targets such as bridges. Other
findings helped air-defence forces deal with Russian “thermal traps”: clouds
of projectiles released from missiles that aim to overwhelm automated
systems. The Ukrainians can now tell the decoys from the real thing, says
Colonel Danilyuk.

A missile’s post-mortem can also reveal who built it. Remarkably, because of
bureaucracy at the plant which produces the Kalibr, many components carry
the names of workers who produced them. Ukraine has used this fact to
publicly identify and shame them for killing civilians. “We put it to the
workers that they had options: to leave or sabotage production,” says Sasha.
Sure enough, production stalled for a while in the winter.

Colonel Danilyuk is unimpressed by the missiles’ electrical circuity, which

has not moved on from Soviet designs: “The relay box might say it was
produced in 2022, but it’s the same size as you saw in the 1970s.” The
Russians are, however, using imported microcomponents. The vast majority
of those in the optical homing systems of Kh-101s came not from China, but
America. These include Altera Flex logic boards, which are dual-use and so
not subject to sanctions. It would be difficult to stop the flow: “You can
simply order them on Aliexpress and export them in a couple of suitcases
from Kazakhstan.”

The experts say their 16 months of study leaves little doubt about the
capacities of the military industry they are taking on. The build quality of the
missiles was always impressive, they said. But Russia had not yet found a
strategy to use them to turn the war, they added. The growing success of
Ukrainian air-defence systems (including hand-held surface-to-air missiles
that are many times cheaper than their targets) raises questions as to the
viability of Russian cruise missiles in modern warfare. “In non-nuclear mode,
they haven’t been precise or destructive enough to make a strategic
difference,” says Sasha. ■
This article was downloaded by zlibrary from
https://www.economist.com/europe/2023/07/27/ukraines-missile-cemetery
Law and order poolside

Germany tries to stop brawls in public swimming

pools
Summer tensions are high at the Schwimmbad
Jul 27th 2023 | BERLIN

SUMMER IN BERLIN is not dull this year. More than 100 police spent July
20th chasing reports of a stray lion. None turned up; it was probably a wild
boar. So Berliners returned to the other big local debate: whether police
should patrol municipal pools to prevent brawls.

Both Friedrich Merz, the head of Germany’s opposition Christian Democrats

(cDU), and Nancy Faeser, the Social Democratic interior minister, are in
favour. The police union is not. Cops, it says, are not trained to be
Bademeister (lifeguards); in Germany, world champion of occupational
licensing, the job requires a three-year apprenticeship. One idea is to restrict
pools to families with children during peak hours.

Fights at pools are nothing new, but the frequency and violence have risen
lately. In the past four weeks Eric Voss of the German society for bathing
culture has tallied around 20 brawls or assaults in Germany’s 2,800 public
outdoor pools. Some stem from cultural clashes between immigrant groups or
residual frustration from pandemic lockdowns. A new factor is high inflation
that has made vacation trips unaffordable. “We have all become more thin-
skinned and more selfish,” says Peter Harzheim, Germany’s head lifeguard.

What to do? Mr Harzheim favours video surveillance, guards and requiring

bathers to sign in with an ID (which recently became mandatory in Berlin). He
also thinks crimes at pools need to be punished faster. (The cDU wants
miscreants hauled before a judge on the same day; Mr Harzheim finds this
unrealistic.) Some pool operators deploy volunteer mediators. In Stuttgart
their blue shirts read Respektlotsen (respect guides), in Berlin Cool am Pool.

Unsurprisingly, the far-right Alternative for Germany party is diving in,

blaming the fights on migrants. Sensationalist media are fanning the flames
too. By autumn the heat will probably dissipate, but for now the scene at
German pools is not very chill.■
This article was downloaded by zlibrary from
https://www.economist.com/europe/2023/07/27/germany-tries-to-stop-brawls-in-public-
swimming-pools
Charlemagne

Spain shows that some voters still want centrism

The reasons for an Iberian wave of moderation
Jul 26th 2023

PEOPLE DO NOT always think through the metaphors they use. Though the
phrase “meteoric rise” is common, meteors are better known for falling.
Prices are said to “spike” even when their rise is not accompanied by a
descent. And when people talk about “waves” sweeping Europe, they often
forget a crucial feature: waves break. That seems to have been what happened
to the wave of nationalist populism that failed to sweep into Spain in the
general election on July 23rd.

The election was expected to hand power to a coalition of the centre-right

People’s Party (PP) and, for the first time in Spain’s modern democratic
history, the hard right, in the shape of a ten-year-old party called Vox.
Nationalist-populist parties already run Hungary, Poland and Italy; others
share power in Sweden and Finland. Getting into government in Spain would
have confirmed that Europe’s populist swell was rising. Right-wingers from
across the continent did their best to stir the waters. At Vox’s final campaign
rally at the Plaza de Colón in Madrid (a favourite spot for nationalists,
featuring the biggest national flag in Spain), Poland’s Mateusz Morawiecki,
Hungary’s Viktor Orban and Italy’s Giorgia Meloni appeared in videos
cheering the party on.

Instead, Vox lost 19 of its 52 deputies. The PP came first, but even with Vox it
lacks a majority, and no other party will join any coalition that includes the
populists. The governing left-wing bloc headed by Pedro Sánchez, the
Socialist prime minister, won fewer seats, and can reach a majority only by
including a gaggle of regional separatists. Spain may have to hold new
elections. The wave turned out to be one of those monsters that build far
offshore, only to crash early. Why?

The reasons lie below the surface. Superficially, Vox shares many of the
common bugaboos of Europe’s right: feminism and gender identity,
demographic decline, immigration and the “religion” of climate change. Yet
until recently it was unusual in rarely bashing the EU. Spain has profited so
handsomely from its membership since 1986—rising living standards, good
roads, high-speed rail—that running against Europe seemed suicidal. In this
campaign, though, Santiago Abascal, Vox’s leader, switched the formula. The
party platform denounces Brussels bureaucrats whom “no one elected” and
calls for subordinating EU law to Spain’s (impossible under the bloc’s
treaties). The profile of Jorge Buxadé, a Vox MEP and former member of the
fascist Falange party, rose during the campaign. This scared some voters
away.

The weakness of the ultranationalists in Spain, and in next-door Portugal, is

often attributed to the living memory of far-right dictatorships that ended only
in the mid-1970s. With those dictators gone, attitudes in Spain and Portugal
changed faster than in almost any other European countries. In a survey in
2021, Spanish support for gay marriage was the third-highest in the EU, after
only Sweden and the Netherlands. Portugal has the most liberal drug laws in
Europe. Both countries’ nationalist parties have grown in recent years. But
they are nowhere near the 30% that went to Marine Le Pen and Eric Zemmour
in the first round of France’s presidential election last year, the 35% taken by
hard-right parties in Italy’s latest election or the roughly 20% each in Sweden
and Finland.
What seems to best explain the surge and then recession of Vox is a factor
entirely specific to Spain: the question of Catalan independence. Vox’s first
big moment came after Catalonia’s separatist leaders staged an
unconstitutional independence referendum in 2017. That infuriated huge
numbers of Spaniards in other regions, not all of them conservative. Vox,
which advocates abolishing Spain’s devolution of extensive powers to its
regions, was perfectly placed to take advantage. Since then the independence
question has receded from the headlines, in part because Mr Sánchez has
deftly cut deals with separatist parties. That may have done more to undercut
Vox than anything else.

Meanwhile, other wavelets that could have joined a big populist splash are
instead petering out. The decade-long fragmentation of Spain’s politics, in
which the two big traditional parties lost ever more voters to shiny new ones,
has gone into reverse. Podemos, a far-left outfit born during the global
financial crisis, is a shadow of its former self; it had to join another leftist
grouping, Sumar, to survive the election. The combined vote share won by the
PP and the Socialists, which had fallen to 45% in April 2019, recovered to
65%. Portugal, too, has social-democratic and conservative parties in decent
nick: they won 70% of the vote last year.

The other Iberian exception

This is now a rarity in Europe. In France, the two parties that have dominated
the Fifth Republic since 1958 came in fifth and tenth in the presidential
elections. In Germany, the far-right Alternative for Germany is polling ahead
of each of the three parties in the current government. Conservative politicians
in Germany and in the Netherlands are now talking cautiously about breaking
the taboo against working with the hard right. And although Spain shows that
fragmentation is not irreversible, its return to the centre has left the PP and
Socialists almost evenly matched. Neither can assemble a majority without
parties that infuriate many Spaniards: Catalan and Basque separatists on the
left, Vox on the right.

They could, of course, do what the Germans, Dutch and Danes have done in
recent years and form a grand coalition. Spaniards say they want the big
parties to work together. But the country has no such tradition, and there is
much bad blood between the big two. Having dodged a metaphorical populist
wave, Spain’s politicians would love to spend the next few weeks at the
beach catching some literal ones. Instead they will have to sort out whether to
cobble together a flimsy coalition, to vote yet again—probably around
Christmas, so ruining another holiday season—or to listen to the majority who
want the centre to hold.■

Read more from Charlemagne, our columnist on European politics:

A spat in Brussels pits an open vision of Europe against an insular one (Jul
19th)
Farewell, Mark Rutte, the Tiggerish Dutch prime minister (Jul 13th)
The burning of the banlieues (Jul 5th)

Also: How the Charlemagne column got its name

This article was downloaded by zlibrary from
https://www.economist.com/europe/2023/07/26/spain-shows-that-some-voters-still-want-
centrism
Britain
Britain has blown its reputation as a world-leader in aid
Nigel Farage, NatWest and a political storm
London’s latest effort to clear bad air is contested but necessary
How high should Britain’s interest rates go?
No, really. Rishi Sunak is a right-winger
Foreign policy

Britain has blown its reputation as a world-leader

in aid
Blame a botched merger of its aid and diplomatic corps, lower spending,
and more secrecy
Jul 27th 2023

MERGERS ALMOST always go wrong. Investors, rightly, worry when a

corporate one is announced. Combining two organisations, their differing
goals, incompatible IT systems and management structures, at best causes
headaches. It always proves expensive. Cultures clash. People get distracted.
According to the Harvard Business Review, 70-90% of mergers and
acquisitions (M&A) deals fail. The only surprise is that the figure isn’t higher.

The prospects were thus never great for a tie-up between the Foreign &
Commonwealth Office (FCO) and the Department for International
Development (DfID), which got under way in 2020. On one side was the
diplomatic service, with lots of staff and an annual budget of some £2.4bn
($3.1bn). On the other was DfID, with fewer staff but a budget roughly four
times bigger. Cultures differed starkly. As one former official noted, the
choice of footwear said it all: hard-nosed diplomats showed up to meetings in
smart office shoes; the bleeding hearts in sandals or trainers.

The success, or not, of the expanded Foreign, Commonwealth and

Development Office (FCDO) has taken on totemic significance as Britain
seeks a global role post-Brexit. To some, like Simon McDonald, who led the
diplomatic service until 2020, it will let a fading power speak with one voice
abroad. In his vision, other agencies, such as the Department for International
Trade, could one day be wrapped in. To others, the deal was a hostile
takeover by right-wingers bent on gutting the development corps. Awkwardly,
Andrew Mitchell, who was brought in last year as the minister for
development and Africa, had been in the second camp: he had previously
called the merger a “self-inflicted act of vandalism”.

Three years on, which side has been proved right? The success of an M&A
deal is judged mostly on whether the two groups are doing their work better
after the tie-up than before. On this score the FCDO has been struggling.
Britain remains a big spender on the needy: it set aside $15.7bn, or 0.5% of
gross national income (GNI) for doing so in 2022 and thus ranks as a donor
behind America, France, Germany and Japan, but still ahead of other
countries (see chart). Public opinion about that spending is split. Labour
voters generally back it; the right wing of the Conservative Party, egged on by
tabloids, loathes such do-goodery, associating it with waste, wokeism and
handouts for corrupt African leaders.
Some Conservatives favour aid. It was a Tory government, in 2015, that
signed up to spend 0.7% of GNI on it. Then Boris Johnson, as prime minister,
squeezed it. As foreign secretary between 2016 and 2018, he had lamented
how often DfID overshadowed its aristocratic older brother. He was most
peeved on one trip to an African country, when its leader denied him an
audience, only to learn that a DfID director had been granted one a week
before.

Nonetheless, Mr Johnson’s decision to merge diplomacy and aid was fair.

Others, including Australia, Canada and Norway, have all tried doing so
(albeit with mixed success). But his handling of the merger was badly
botched. He announced it during the covid-19 pandemic without consulting
cabinet. He did not wait for publication of the “integrated review” of foreign
policy, security, defence and international development, which he had
previously billed as the biggest rethink of Britain’s global stance since the
cold war. He also seemed to confirm fears that this was a populist attack on
aid, describing DfID as a “giant cashpoint in the sky” that dished out
taxpayers’ money without care for domestic interests.

Months later the government then reneged on the 0.7% promise, abruptly
cutting the budget to 0.5% of GNI, at least until public finances improved.
Other departments, which have a long history of trying to grab aid spending,
have meanwhile grown more adept at doing so. The share of the aid budget
controlled by DfID had already dropped from 86% in 2014 to 73% in 2019.
Today, less than 60% of aid is spent by the FCDO. Most striking, a large
portion is siphoned off by the Home Office to pay bills at hotels in Britain that
house asylum-seekers from Afghanistan, Ukraine and beyond. These huge
domestic costs for refugees jumped to £3.7bn last year, almost 30% of the
total aid budget.

Many people in Whitehall think the merger was bungled. The FCDO is not
working better today than before. It is tough to measure its foreign-policy
achievements, not least because Ukraine absorbs so much attention. But the
muddled merger adds to the perception that Britain’s foreign policy in the
wake of Brexit has seen barriers thrown up against the world.

For those who consider that aid buys influence abroad, the sharp cut in
spending means Britain carries noticeably less weight. For Sir John Vereker,
who led aid efforts when international development split from the FCO in
1997, DfID became “by common consent one of the strongest pieces of British
soft power”, with a recognised brand and highly qualified staff. That argument
has weakened.
It is easier to gauge the merger’s shortcomings in terms of British aid’s
effectiveness. Less aid is getting to the poorest places than before (partly
because of Ukraine). The share of British aid that goes to specific regions in
Africa slipped to 44% in 2022 from around 50% in 2019.

Nor is Britain, as it once was, a model on aid transparency. Unlike DfID, the
FCDO seems loth to let outsiders evaluate its work. Publish What You Fund, a
non-profit group that ranks donors’ openness, for years put DfID in its top
spot. Under the FCDO Britain is tumbling down the rankings. Sarah
Champion, chair of the international development committee in Parliament,
says the FCDO has repeatedly presented “dodgy information”. Requests for
data, like a breakdown of what money goes to helping women and girls, have
been unanswered. Ironically, too, the abrupt aid cuts led to the sort of
frittering of funds the Tory right was so keen to stem, after the FCDO had to
stop funding projects midway, often wasting what was already spent.

The merger has been costly. A project devoted to integrating the departments
is expected to cost more than £40m, a new IT and human-resources system
over £100m. Staff morale has dipped. Just over one in ten employees leave
the FCDO every year, a relatively low churn rate for the civil service. But it
has been hard to recruit top talent. By last December the government had still
not filled 200 development jobs, once considered to be plum posts. In a
survey of staff engagement, last year, the FCDO scored below average across
Whitehall—and lower than the FCO or DfID did before the merger. “Change
can be uncomfortable,” a spokesperson from the department says. “As with
any merger, there will have been people from both departments who were
worried.”

The department says a turnaround may, however, be under way. Development

aid is inching back up the agenda at the FCDO. Mr Mitchell, a dynamic
former head of DfID, has a seat in cabinet and on the National Security
Council. He is working on a white paper for British aid. The Independent
Commission for Aid Impact, which monitors Britain’s foreign aid, says the
FCDO is being more co-operative. In an annual report published in July the
FCDO said spending on bilateral aid will rise in the next financial year.
Africa will get more.
Meanwhile the Labour Party is mulling a more dramatic overhaul if it wins
office. Sir Keir Starmer, its leader, pledged last year to undo the merger but
has more recently hinted at other options, such as keeping aid under the
Foreign Office but in a free-standing agency. That would in effect be back to
its status before 1997, when DfID was set up. Undoing the merger would
cause another round of headaches, costs and confusion. Better, then, to work
on saving a troubled marriage. ■

For more expert analysis of the biggest stories in Britain, sign up to

Blighty, our weekly subscriber-only newsletter.
This article was downloaded by zlibrary from
https://www.economist.com/britain/2023/07/27/britain-has-blown-its-reputation-as-a-
world-leader-in-aid
Britain’s banks and political risk

Nigel Farage, NatWest and a political storm

Britain’s government puts down a marker on free speech and business
Jul 26th 2023

NIGEL FARAGE, the front man of the Brexit campaign, has sown havoc in
another British institution. Mr Farage had claimed he was the victim of
“blatant corporate prejudice” after Coutts, a bank whose clients include the
royal family, dropped him. The government agreed. Early on July 26th Dame
Alison Rose, the chief executive of NatWest, Coutts’s parent group and one of
Britain’s biggest lenders, resigned over her mishandling of the affair. The
state remains NatWest’s largest shareholder. At a time when businesses
appear ready to dump clients at the first whiff of controversy, ministers have
laid down a marker.

Banks have been under increasing regulatory pressure to vet “politically

exposed persons” for money-laundering risks. In 2012 Coutts was whacked
with a £8.8m ($11.3m) fine for lax due diligence. Since the beginning of the
war in Ukraine, businesses with links to Russia are under more scrutiny. But
an internal Coutts risk report obtained by Mr Farage concluded that there was
no sign of dodgy cash flows.

Rather, it said, he had been “below commercial criteria for some time”
(clients need £1m in investments or borrowing from the bank, or £3m in
savings with it). Moreover, it assessed Mr Farage as a reputational risk: his
perceived sympathy for Vladimir Putin and Donald Trump, and his views on
climate change, immigration, human rights and women amounted to
“commentary and behaviours that do not align to the bank’s purpose and
values”. Coutts has embraced Pride and Black History Month in pursuit of
“trailblazers and pioneers, disrupters and challengers”, meaning the new rich.
Beery Mr Farage—whose “default, ambient reputation”, the report said, was
of a “disingenuous grifter”—did not fit the luxury brand.

As for Dame Alison, she admitted to a “serious error of judgment” in being

the source of a BBC story that stated, incorrectly, that Mr Farage was dropped
purely on commercial grounds. It was an apparent breach of the first rule of
banking: do not gossip about clients. She quit after Downing Street and the
Treasury made plain their disquiet. (She had been a friend of the government,
taking on reviews into energy efficiency and women entrepreneurs.) On the
same day Andrew Griffith, the City minister, called in bosses of retail banks
for a lecture on their clients’ right to free expression. Proposed reforms will
give dumped clients longer notice periods and more transparency. There is a
trade-off between the prerogative of businesses to guard their reputations by
choosing their clients with care, and that of people to enter politics without
repercussions. Ministers have decisively sided with the latter. ■

For more expert analysis of the biggest stories in Britain, sign up to

Blighty, our weekly subscriber-only newsletter.
This article was downloaded by zlibrary from
https://www.economist.com/britain/2023/07/26/nigel-farage-natwest-and-a-political-storm
The politics of ULEZ

London’s latest effort to clear bad air is contested

but necessary
Despite the backlash, expect other cities to copy the ULEZ scheme
Jul 25th 2023 | Uxbridge

AS UXBRIDGE GREW in the 1930s, one of its attractions to those moving

from central London was abundant space. The suburban town lured
commuters with the promise of semi-detached houses and room to park a
motor car. George Orwell, who lived in Uxbridge in 1933, thought he had
glimpsed a future England “along the arterial roads”, where life centred
around “the Picture Post, the radio and the internal combustion engine.”

Orwell was right: the car’s dominance in Uxbridge, and suburbs like it, is
entrenched. But doubts exist over another attraction—the chance for residents
to escape the city’s smog. For the air is not clean. On August 29th a scheme
championed by Sadiq Khan, London’s mayor, will tackle this by expanding a
scheme known as the ultra-low emission zone (ULEZ) to the city’s outer
boroughs. The initiative obliges drivers of the most polluting vehicles inside
the zone to pay £12.50 ($16) a day. On July 21st the voters of Uxbridge and
South Ruislip narrowly stuck with the ruling Conservatives in a by-election.
That outcome was seen by many as a rebuke to Mr Khan, a Labour man, and
ULEZ.

In two other by-elections held on the same day, the Conservatives were
mauled. In Selby and Ainsty (in North Yorkshire) they lost to Labour on a
swing of nearly 24 points; in Somerton and Frome (in Somerset) to the Liberal
Democrats on a 29-point swing. Such swings, if repeated nationally, would
see the Conservatives turfed from national office. Labour has not won in
Uxbridge for 50 years. Yet the election postmortems have focused on whether
it should ditch some of its green policies.

Mr Khan’s plan creates the world’s biggest (and an especially strict) clean-air
zone. ULEZ, which snares petrol cars and vans over 19 years old and diesel
ones over eight, will triple in size, and cover almost 9m residents. Milan’s
“Area B” is the other notable clean-air zone in Europe, says Lucy Sadler of
Urban Access Regulations, which analyses policies. ULEZ will be around
seven times bigger.

London, though hardly as suffocated as Delhi or Beijing, is badly polluted.

Cancer, asthma and lung disease associated with high concentrations of
nitrogen oxide and small particulates kill an estimated 4,000 Londoners every
year, according to a study from Imperial College in 2021. Air remains dirtiest
near the city centre, which has most congestion, but the suburbs are also
affected. Most deaths occur in outer London, where more people live and
toxicity is falling only slowly. Those most at risk—children, the elderly, those
with lung problems—tend not to be drivers.

Yet it is not just London that will have to act. By law cities across Europe,
including Britain, must show they are trying to meet European Union air-
quality standards adopted in 2008 (and since transposed into British law). In
2018 the High Court ruled against the government because 33 towns and cities
had unsafe air and no plans for cleaning it. The government ordered them to
act. Many will roll out, or expand, clean-air zones.
London has been in the vanguard. Learning from Singapore and Oslo, it
introduced a congestion charge 20 years ago (see map). In 2008 it added a
low-emission zone, targeting lorries. As mayor, Boris Johnson announced the
original ULEZ, which arrived in 2019 and grew in 2021. That programme has
helped cut the concentration of nitrogen oxide in central London by over a
quarter. Along with crackdowns on idling vehicles at school gates, these
policies are popular—at least in inner London, which has extensive public
transport and fewer car-owners.

Elsewhere, clean-air schemes face a bumpier ride. Manchester slammed the

brakes on plans for a clean-air zone this year, following furious opposition.
Similar plans in Bristol and Birmingham were greeted by concerted non-
payment campaigns. (In June the French government delayed plans to expand
clean-air zones in 43 towns and cities, including Paris.)

Uxbridge is particularly unforgiving territory for Mr Khan and Labour. Cut in

two by the A40 and skirted by the M25, it is more car-dependent than
anywhere in Greater London bar Havering. Access to public transport is poor.
Many residents commute by car to nearby towns or Heathrow airport (which
locals grumble is the real polluter of concern). Driving is “the only way I can
work,” says Sharon Jones, a cleaner. Almost 80% of households own a
vehicle, in line with the national average but far above the share in central
London.

Mr Khan insists ULEZ will affect only one-tenth of vehicles on outer

London’s roads (opponents are disputing that figure in court). The local
council has argued that the figure for Uxbridge is much higher. It is likely that
some voters wrongly believed they would have to pay. Meanwhile, those
forced to switch vehicles have suffered because of a rush to sell before the
August deadline: resale prices for non-compliant vehicles have plunged.

The mayor can’t do much about that. He lacks funds to compensate losers
from ULEZ, though some argue it could have been more cleverly designed. It
is not expected to raise revenues, given the implementation costs. Nor will the
national government expand a £110m scheme that pays owners of old cars to
scrap them. Meanwhile the mayor’s new innovation, a “Superloop” bus route
connecting points of outer London, looks pitifully inadequate.
Recriminations over the Uxbridge result within Labour have been rapid. Sir
Keir Starmer, the party leader, has used it to warn against complacency in the
next general election. He told a policy forum this week that the party is doing
something wrong when its policies appear on “every Tory leaflet”. Labour
must abandon policies that annoy suburban voters, he said.

Yet the greater risk is probably for the Conservatives. Some in that party saw
the Uxbridge result as a repudiation of green policies in general. They may
now target a national policy on replacing gas boilers, as voters start worrying
about the costs of that. But Britons are overwhelmingly concerned about the
climate. They can see the world is burning; some literally from their
sunloungers.

Mr Khan is unlikely to delay the ULEZ roll-out, though he could do a better

job of explaining exactly who will be affected. But London’s mayor is an
unusual politician in Britain—one who does not rely on the votes of many
motorists to keep his job. He is likelier, therefore, to drive ahead as planned.
■

For more expert analysis of the biggest stories in Britain, sign up to

Blighty, our weekly subscriber-only newsletter.
This article was downloaded by zlibrary from
https://www.economist.com/britain/2023/07/25/londons-latest-effort-to-clear-bad-air-is-
contested-but-necessary
Bank of England

How high should Britain’s interest rates go?

Rules of thumb suggest rates are still too low. Forecasters disagree
Jul 27th 2023

RATE-SETTERS at the Bank of England had an easy job in the 18th century.
For more than 100 years, from 1719 to 1821, the central bank’s policy rate
was left undisturbed, at 5%. In June their rather more active successors set
interest rates at the same point after 13 successive increases, designed to fight
annual inflation which peaked at over 11% in October. The job is not yet
done. Investors expect that on August 3rd the bank will again raise rates, to
5.25%, and will lift them by another half a percentage point by Christmas.

Not long after, the tightening will end, according to many forecasters.
Optimism has grown since annual inflation was calculated to be 7.9% in June,
lower than expectations. Yet economists’ predictions have a poor recent
record. In November the bank itself criticised as too hawkish market
expectations that rates would peak merely around 5%. And, alarmingly,
simple rules of thumb suggests the bank could still be well behind the curve.
The textbook formula for setting interest rates is a “Taylor rule”, named for
John Taylor of Stanford University. It has three inputs: the gap between
current inflation and the target; how much slack is in the economy; and, last,
the so-called neutral rate of interest, at which the central bank is neither
stimulating the economy nor dampening it. Plug plausible assumptions for the
British economy into the Taylor rule and it spits out the eye-watering
recommendation of interest rates of 11.4%, up at levels last seen in 1992
when the bank was desperately trying to defend the pound against a run. Such
high rates might guarantee the end of inflation but they would also doom the
government and, indeed, much of the economy.

Most central bankers would take such a result as proof that the algorithm is
broken. What, then, is the Taylor rule missing? Start with inflation. Britain’s
high headline rate partly reflects the effect of international food and energy
prices, over which the bank has little control. But use core inflation, which
excludes food and energy, and the Taylor rule still suggests raising interest
rates to a punishing 9.9%.

Ben Bernanke, a former chair of America’s Federal Reserve, once drew an

analogy between monetary policy and a golfer trying to play with an
unfamiliar club: taking huge swings risks dramatically overshooting or
undershooting the hole. Instead, the wise golfer would gradually tap her way
forwards and learn how her tool works. The central banker should do the
same. Yet even an “inertial” Taylor rule, designed to avoid big swings in
interest rates—and still using core inflation—would suggest the bank has been
a laggard and should immediately raise rates to 6%.

Part of the problem, as the bank’s chief economist, Huw Pill, has noted, is that
no one truly knows how the economy works. Rules that rely on conceptually
shaky concepts of the neutral interest rate or the true potential output of the
economy can lead policymakers astray. The 0.5% neutral real rate of interest
and 4% equilibrium unemployment rate that your correspondent has assumed
reflect received wisdom but have not been scientifically calculated.

Janet Yellen, current American treasury secretary and another former Fed
chair, once suggested a monetary-policy rule that would not rely on estimates
of a neutral rate of interest at all. Instead it would make small changes based
only on observable data. It works like gradually adding spice to a dish, tasting
it and adding more only as needed. Applied in Britain today, however, Ms
Yellen’s rule comes to a similar conclusion as the Taylor one does: rates
should rise to 10.9%.
The only way to get the bank off the hook is to alter the exercise more
fundamentally. Most Taylor rules are backward-looking. Yet it can take over a
year for the effects of monetary policy to feed into the economy. The
sophisticated central banker is supposed to “target the forecast” for inflation,
rather than reacting too zealously to what has already happened. Otherwise,
he might neglect inflationary or disinflationary pressures that are starting to
build but do not yet appear in the data.
A forward-looking policy rule would therefore rely on inflation forecasts.
Financial markets expect the inflation rate in two years’ time to have fallen to
around 3%. Inflation expectations themselves depend on predicted monetary
policy. But set aside the circularity and plug the figure into a Taylor rule and it
suggests the bank is in danger of raising rates too high: the recommended
interest rate is only 4.3%. That helps to explain the dissents of doveish
policymakers at the bank who have opposed recent rate increases.

The trouble is that inflation forecasting has gone haywire of late. In July 2022
the average forecaster surveyed by the Treasury expected inflation to fall to
3.6% by the end of 2023; today the expected figure is 4.9%. In May the bank
said it had begun to pay less attention to its own model of the economy owing
to its unreliability. The less confidence you have in economists’ assurances
that the inflation problem will soon dissipate, the trickier it is to set aside the
fact that the hard data say monetary policy is still too loose. ■

For more expert analysis of the biggest stories in Britain, sign up to

Blighty, our weekly subscriber-only newsletter.
This article was downloaded by zlibrary from
https://www.economist.com/britain/2023/07/27/how-high-should-britains-interest-rates-go
Bagehot

No, really. Rishi Sunak is a right-winger

The prime minister is the most right-wing Conservative leader of his
generation
Jul 27th 2023

FOLLOWERS OF Rishi Sunak on social media are treated to high politics

and low culture. In one post, the prime minister accused Labour of being on
the same side as “criminal gangs” who profit from smuggling people across
the Channel into Britain. In another, a beaming Mr Sunak posed with his young
family mulling whether to see “Barbie”, the pinktastic film about the doll, or
“Oppenheimer”, a biopic about the godfather of the atom bomb. “Barbie first
it is,” posted the unapologetically lowbrow politician.

Mr Sunak’s perky and nerdy demeanour covers an overlooked fact: he is

comfortably the most right-wing Conservative prime minister since Margaret
Thatcher. Taking a hard position on asylum-seekers is just the beginning. On
everything from social issues, devolution and the environment to Brexit and
the economy, Mr Sunak is to the right of the recent Tory occupants of 10
Downing Street. Yet neither voters nor his colleagues seem to have noticed.
Critics dismiss Mr Sunak’s hardline position on small boats crossing the
Channel as focus group-led posturing. Mr Sunak has made stemming the flow
of people across those waters one of the main goals of his government. The
prime minister has curtailed the right of asylum for people who arrive in
small boats. A barge for 500 asylum-seekers is docked in Dorset waiting for
its human cargo. Mr Sunak wants to solve the crisis in the most aggressive and
prominent way. If it is all for show, it is a needlessly expensive blockbuster.
There is a simpler explanation for Mr Sunak’s approach: he believes in it.

Where recent Conservative prime ministers dragged the party towards

liberalism, Mr Sunak is resolutely traditionalist. David Cameron, prime
minister from 2010 until 2016, backed gay marriage against the wishes of a
majority of his MPs. Theresa May’s government tried to let trans people
“self-ID”, so people could change gender without a medical or lengthy
bureaucratic process. Those days are gone. When the Scottish National Party
introduced similar rules, Mr Sunak’s government blocked them, upsetting 25
years of constitutional norms. On trans rights, Mr Sunak has picked a fight. “I
know what a woman is,” says Mr Sunak. It would be an easy topic to skirt, yet
the prime minister runs at it.

Each recent Conservative prime minister has boasted of their

environmentalism. David Cameron extolled his green credentials to the point
of mockery, even riding a sledge within the Arctic Circle. Mrs May made “net
zero” law in one of the most consequential, but least commented upon,
achievements of her government. Mr Sunak’s government is a reluctant
follower, keeping the same goal but grudgingly. The prime minister is “simply
uninterested” in the environment, wrote Zac Goldsmith, a former minister, in a
resignation letter. He is right. Any environmental obligation that stands
between Mr Sunak and re-election will be ditched.

Critics within the party moan that Mr Sunak is a closet leftie: a man who was
too quick to spend money when he was chancellor during the pandemic and is
too slow to cut taxes now that he is prime minister. Such largesse was out of
necessity, rather than choice. By instinct, Mr Sunak is the most fiscally
conservative leader since Mr Cameron. Mrs May was comfortable with a
larger state as was Boris Johnson, Mr Sunak’s predecessor from 2019 to
2022. By contrast, Mr Sunak winces at the idea. Mr Sunak’s idol is Nigel
Lawson, Thatcher’s chancellor, who cut taxes only once it could be afforded.
Mr Sunak is attempting the same path. Yet economic thinking in the Tory party
has become so confused that fiscal hawkishness is painted as proto-socialist.

When it comes to Brexit, now a religious question for the Conservatives

rather than a policy one, Mr Sunak was always a believer. The prime minister
churned out articles for his school newspaper about the perils of a European
superstate. This marks him out among former prime ministers. Mr Cameron
opposed Brexit. Mrs May grinned and bore it. Mr Johnson supported it out of
cynicism rather than conviction. Ms Truss learned to love it for similar
reasons. Mr Sunak is alone among his peers in thinking that it was always and
remains a fundamentally good idea.

Mr Sunak’s credentials as a right-winger are close to immaculate. Yet few see

him this way. Partly this is a matter of age. Other prime ministers who came to
power in their early 40s, such as Sir Tony Blair and Mr Cameron, tried to
drag the country in a liberal direction. Mr Sunak has no such plans. Race
plays a role, too. Bizarrely, given that the Conservative cabinet is filled with
ethnic minorities, there is still an assumption that non-white Britons are left-
leaning liberals. It is an increasingly wrong one.

Right on
Ultimately, Mr Sunak’s strange reputation is due to the scrambling of British
politics after 2016, which mangled the old left-right axis. Mr Sunak’s most
decisive act was to bring down Mr Johnson. If Mr Johnson was Brexit
incarnate, then his assassin must be a Remainer stooge. Right-wing Brexiters
flocked to the Remain-supporting Ms Truss, who was loyal to Mr Johnson, in
the leadership contest last summer; Mr Sunak relied on a rump of more liberal
Tory MPs. Nor was this delusion isolated to Conservatives. After the
unprofessionalism of Mr Johnson and the chaos of Ms Truss, centrists
welcomed the rise of the diligent Mr Sunak, mistaking competence for
liberalism. They assumed he was one of their own based on his age, manner
and background rather than his views. Many of them still do.

It is this ideological dissonance that creates the danger for Mr Sunak. He is

left channelling another former prime minister who had to persuade his party
his views were genuine. In 2001, after New Labour had secured re-election,
one party wallah asked Sir Tony if he would ditch his rightward drift. Sir
Tony replied: “It’s worse than you think. I really do believe in it.” Mr Sunak
is right-wing out of conviction, rather than convenience—even if few others
believe it.■

Read more from Bagehot, our columnist on British politics:

The rise of the self-pitying MP (Jul 20th)
The strange success of the Tories’ schools policy (Jul 7th)
Britons turn into Borat when it comes to health, housing and avocados (Jul
6th)

Also: How the Bagehot column got its name

This article was downloaded by zlibrary from
https://www.economist.com/britain/2023/07/27/no-really-rishi-sunak-is-a-right-winger
International
The Ukrainian army commits new forces in a big southward push
Russia is attacking Ukraine’s agricultural exports
Hunting for a breakthrough

The Ukrainian army commits new forces in a big

southward push
After eight of weeks of slow progress, it is trying to revive its counter-
offensive
Jul 27th 2023

AFTER EIGHT weeks of slow progress, Ukraine’s counter-offensive entered

a new phase on July 26th when Ukraine’s army committed a big part of its
reserve forces in the south. There was heavy fighting reported around the
village of Robotyne. Ukrainian officials say their units are attacking in the
direction of Melitopol, a city that dominates the “land bridge” linking Russia
to Crimea, and Berdyansk, a port on the Sea of Azov (see map).
Ukraine’s hope is that Russia’s army, roiled by dysfunctional command and a
drumbeat of Ukrainian missile attacks against its logistics, will break under
the new pressure. But for that to happen, Ukraine must overcome the problems
that hobbled the first phase of its offensive earlier this summer.
The counter-offensive began on June 4th when Ukraine launched attacks near
Velyka Novosilka and around Bakhmut in Donetsk province, as well as a
prior thrust in Zaporizhia province in the south where it is now intensifying its
assault. Its new Western-equipped brigades got bogged down, sometimes in
minefields, and were targeted by Russian artillery, anti-tank missiles, attack
helicopters and loitering munitions. Ukraine responded by changing tactics. It
held back armour and sent in smaller units of dismounted infantry, often no
more than 20 soldiers, to proceed slowly and haltingly.

“The various wargames that were done ahead of time have predicted certain
levels of advance,” conceded General Mark Milley, America’s top officer, on
July 18th. “And that has slowed down.” In part, the slow progress reflects the
scale of the task. Russian defences are 30km deep in places, bristling with
tank traps and spattered with mines. Most NATO armies would struggle to
punch through comparable lines without complete dominance in the air, which
Ukraine does not enjoy.

Another problem is that Russia has mounted a stronger defence than expected,
conducting rapid, mobile counter-attacks in response to Ukrainian advances,
rather than remaining confined to trenches. Rob Lee, an expert on Russia’s
armed forces who recently visited the front lines, notes that they have not just
executed their doctrine competently, but also innovated, for instance by
stacking multiple anti-tank mines on top of one another to destroy mine-
clearing vehicles.

Ukraine’s inability to breach Russian lines is partly to do with equipment—it

needs demining kit, air-defence systems and anti-tank missiles capable of
blunting Russian counter-attacks from a greater distance. It is also to do with
tactics. Mr Lee describes an occasion when a brigade’s advance was delayed
by a couple of hours, until dawn. That not only negated Ukraine’s advantage in
night-vision systems, but also meant that the accompanying artillery barrage
lifted hours earlier than it should have done. Russian infantry and anti-tank
squads, who should have been suppressed by well-timed shellfire, were free
to attack.

This lack of proficiency in co-ordinating complex attacks involving multiple

units and different sorts of weapons is hardly surprising. Ukraine’s new
brigades were put together in a hurry with unfamiliar equipment. Newly
mobilised men were given a month of training in Germany. They have
struggled with tasks like reconnaissance, says Mr Lee, with new units
becoming disoriented at night time. Co-ordination has also been a problem,
with confusion around where friendly units have placed mines.

Ukraine’s allies do not seem troubled by the slow progress to date. “It is far
from a failure, in my view,” said General Milley, when asked whether the
offensive had stalled. “I think that it’s way too early to make that kind of call.”
Optimists point to three factors in Ukraine’s favour. One is that it need not fear
a serious Russian counter-attack, despite minor Russian gains in northern
Luhansk province in recent days. “There appears now to be little prospect of
the Russian forces regaining momentum,” said Richard Moore, the head of
MI6, a British spy agency, on July 19th. That may be one reason why Russia
has torn up a grain deal and resumed strikes on Ukraine’s ports and grain
stores.

Second, Russia’s decision to defend forward, rather than falling back to

prepared defences, has slowed down Ukraine’s progress but also left Russia
with little mobile reserve in the rear, a point underscored by Yevgeny
Prigozhin’s unhindered march to Moscow in June.

The third factor is that Ukraine has been chipping away at Russia’s combat
power. On July 11th a Ukrainian strike reportedly killed Oleg Tsokov, a
Russian general, in Berdyansk, suggesting that Ukraine was successfully
targeting command posts. In recent days Ukraine has also used British-
supplied Storm Shadow missiles to strike air bases and ammunition depots,
including in Crimea. Meanwhile, America’s decision to provide cluster
munitions, allows Ukraine to keep up the offensive for longer than originally
planned—certainly beyond the summer if necessary.

These factors explain why General Valery Zaluzhny, Ukraine’s top general,
decided to throw in fresh legs on July 26th. He has been forced to adapt his
original plan. Brigades from Ukraine’s 9th Corps had been expected to fight
their way to Russia’s main line of defence. Then the 10th Corps, in essence a
second echelon, including three Western-equipped brigades, were to be
deployed to fight their way through the strongest defences. Finally, light, fast-
moving air-assault units were supposed to exploit any breakthrough, pouring
through the hard-won breach.
In the event, 9th Corps struggled. Advances that were supposed to be
completed in days ended up taking weeks. Ukraine was unable to deploy
whole brigades, instead breaking them down into smaller units. Some experts
worry that 10th Corps has now been thrown in prematurely. The main Russian
line is still kilometres away and 10th Corps’s units might be worn down
before they get there, leaving them too exhausted to punch through.

Western officials play down these concerns. “I think they timed it well,” says
one. Ukraine is in a “very strong operational position”, says another, pointing
to the turmoil in Russia’s senior ranks, including the decision in early July to
sack General Ivan Popov, who commanded a big portion of Russian forces in
southern Ukraine. Russian military bloggers have described heavy losses of
Russian artillery pieces in recent weeks.

However, a fluid war of manoeuvre is likely to remain a stretch for a force

cobbled together in a few months. The Russian verb peremalyvat (to grind
through) is invoked on both sides. But Ukraine’s junior commanders, having
seen their units gutted over the past 18 months, refuse to send their new citizen
army into a meat-grinder in the way that Russia did in Bakhmut. As Ukraine
has become more European, Ben Wallace, Britain’s defence minister, recently
suggested, it has acquired “a Western European caution”.

Some American and European military officials argue that Ukrainian

commanders have in fact been too slow to strike with their new brigades, a
mistake that they think Ukraine committed last year in Kherson, when tens of
thousands of Russian troops withdrew east over the Dnieper river with their
equipment. Ukrainian commanders chafe at the idea that they should gamble
their army in circumstances that NATO generals have never faced.

The 10th Corps’s assault is a break with that hesitation. And the upside of the
aversion to casualties thus far is that many Ukrainian units are in better shape
than planners had assumed. Brigades that assaulted Russian positions were
expected to be left with only a third of their original strength. Thanks in part to
well-armoured Western vehicles, they have taken a lighter knock. Even so, the
commitment of 10th Corps is a fateful moment for General Zaluzhny, a
cautious commander with the weight of Ukrainian and allied expectations on
his shoulders. “This is the last big decision for Zaluzhny to make this
summer,” says the Western official. “The die is cast.” ■
This article was downloaded by zlibrary from
https://www.economist.com/international/2023/07/27/the-ukrainian-army-commits-new-
forces-in-a-big-southward-push
Grain wreck

Russia is attacking Ukraine’s agricultural exports

It is blowing up both the facilities used to ship food out and the deal that
grants it safe passage
Jul 27th 2023 | KHARKIV

“TODAY’S DECISION”, António Guterres, the UN’s secretary-general,

lamented last week, “will strike a blow to people in need everywhere.” The
injury he was decrying was Russia’s repudiation of a year-old deal whereby
it had allowed exports of food crops from Ukrainian ports on the Black Sea
despite a naval blockade. The resulting leap in grain prices, Mr Guterres
warned, would leave many hungry. This week Russia landed blows of a more
literal sort on Ukraine’s grain exports, bombing the ports around Odessa from
which they are shipped.

A volley of missiles against wharves near the city centre on the night of July
22nd was so indiscriminate it hit one of the city’s cathedrals. On July 19th
60,000 tonnes of grain were destroyed in another bombardment. And on July
24th Russia targeted Reni, a port on the Danube river (not covered by the
agreement) through which Ukraine had been exporting grain via Romania.
Before Russia’s invasion Ukraine exported some 45m tonnes of grain a year,
around 90% of it via Odessa and other ports on the Black Sea. In the year the
grain deal was in operation almost 33m tonnes were exported through
Odessa’s ports. That has now stopped.

Exports by road, rail and river barge have been increasing but Hanna Shelest,
an analyst from Odessa, says there is not enough capacity to replace maritime
shipments. Anyway, she adds, these alternatives are “several times more
expensive in terms of logistics, and slower”. Exports by land have also
caused grain prices to slump in neighbouring countries, infuriating farmers in
otherwise friendly places such as Poland.

Before the war agriculture accounted for more than 10% of Ukraine’s GDP
and nearly 15% of employment. Many farms are still operating. The wheat
harvest is under way. Sunflowers will follow in early autumn and maize a few
weeks later. Russian bombardment has destroyed much of Ukraine’s storage
capacity, so the need to find a new outlet for Ukraine’s exports is pressing.■
This article was downloaded by zlibrary from
https://www.economist.com/international/2023/07/27/russia-is-attacking-ukraines-
agricultural-exports
1843 magazine
The demonisation of BlackRock’s Larry Fink
Rum and coke and automatic rifles: Myanmar’s Gen Z guerrillas
Who will succeed the Dalai Lama?
Finance

The demonisation of BlackRock’s Larry Fink

All he wanted to do was save the planet while making his firm a fortune.
Henry Tricks meets the face of woke capitalism
Jul 27th 2023
In early 2022 New Yorkers encountered the sight of black trucks driving
around Times Square displaying a peculiar billboard. It showed a balding
man dressed in a dark business suit, bearing a Dr Evil stare. A columnist for
the New York Post wrote, tongue-in-cheek, that “it made me wonder whether
this dude was about to assign a hit squad to come to my house.” Beneath the
advertisement was a question and a website URL. Both asked “Who is Larry
Fink?”

Whoislarryfink.com accuses Fink of being enamoured of China and exploiting

those in financial misfortune, but it doesn’t mention the most salient facts. He
is the 70-year-old chairman and chief executive of BlackRock, the world’s
biggest asset manager. It invests trillions of dollars on behalf of its clients,
which include pension funds, mutual funds and insurance companies. The
firm, with a market value of about $100bn, is the world leader in innovative
low-cost investment funds. Its assets under management, valued at $9.4trn,
include stakes in about 18,000 listed companies across the Western world.
When Fink talks, people listen – and Fink certainly likes to talk.

The advertising trucks were paid for by Consumers’ Research, a group that
describes itself as America’s oldest consumer-protection agency. These days
though, it looks more like a hit squad for a clique within the Republican Party.
Historically, Republicans have allied themselves with business to oppose
government regulation and promote free enterprise. But in recent years a
faction has remonstrated against firms that speak out on issues like climate
change, LGBT rights and other subjects that they consider “woke”. Ron
DeSantis, the governor of Florida and the leading challenger to Donald Trump
in next year’s Republican presidential primary contest, is its most prominent
advocate.

One of the main targets of this vituperative cabal is ESG: environmental,

social and governance investing. A lot of ESG is flim-flam. The theory behind
it suggests that you can measure companies’ performance on metrics other
than financial returns, though the scoring systems are subjective, inconsistent
and often set goals that conflict with each other. Less than 3% of BlackRock’s
investments in America are ESG-related, but Fink has made himself the face
of the movement since 2016, when he began urging the chief executives of the
companies in BlackRock’s portfolio, in increasingly strident terms, to make
their businesses more sustainable.
With a market value of about $100bn, BlackRock is the world leader in
innovative low-cost investment funds

Consumers’ Research and other well-funded right-wing organisations have

formed a powerful lobby transmitting the message deep into Republican-
governed states that ESG is wrecking social norms and dooming fossil-fuel
production, on which many rely for jobs and tax revenue. This year alone,
Republican lawmakers in 37 states have proposed at least 167 laws targeting
ESG (most have not passed). Some states have blacklisted firms like
BlackRock from handling their investments. Call it defunding the climate
police.

Fink has become the right wing’s bête noire. This was made clear last year
when Peter Thiel, a venture capitalist and conservative rabble-rouser,
attacked ESG at a Bitcoin conference in Miami, as Fink’s face stared out of
the screen behind him. “ESG is just a hate factory,” he said. BlackRock’s
attempts to dampen the ire of the right have earned it the wrath of the left – as
it counters criticism that it is doing too much to save the planet, the other side
attacks it for doing too little.

When I met Fink at his bucolic farm an hour from New York City, he was
determined to show that he had put all this furore behind him. He is an
ebullient conversationalist, rhapsodising about the catch of a lifetime in
March while fly-fishing in Mexico. Yet when I asked him if he would have
done anything differently to avoid the backlash, he ducked the issue by
questioning the value of counterfactuals. Some in his orbit told me he
struggles to admit he is wrong. “Everyone asks me what are the things in life
that I would do differently. And I would say nothing,” Fink said.

Still, the demonisation has taken a toll. One former colleague, usually in awe
of Fink’s energy, was shocked to find him looking “sad, tired and older” last
year as the campaign against him heated up. Another close observer likens the
treatment of Fink to that of Emmanuel Goldstein, the enemy of the state in
George Orwell’s “1984”, whose image is shown on a screen and abused by
viewers during a daily ritual called the “Two Minutes Hate”.

Fink receives sinister emails every day. Some include death threats, many
spew anti-Semitism. “It’s insane,” he said. Last year, BlackRock’s board
authorised the firm to provide him with bodyguards. For safety’s sake, it
obliges him to use a private jet (which he frequently did anyway, even as he
promoted sustainable investments). Security cameras were installed on the
farm where we met.

BlackRock’s success has been built on a rigorous approach to risk

management – a lesson Fink learned after a career-defining mishap on Wall
Street. The company has built sophisticated computer systems to analyse the
exposures of its clients’ assets. You might expect the person who has led such
a firm since its founding to be cool, methodical and unemotive. Yet Fink
couldn’t be more different. One former employee called him “exceptionally
intuitive”. He loves shooting the breeze on the phone – he calls his wife
multiple times a day – and improvises in meetings with global poobahs.
Another former employee once sent Fink a text message saying he’d rather be
loved than respected. Fink replied, “We all would.”
Happy as Larry Larry Fink, chairman and CEO of BlackRock, the world’s
biggest asset management firm, at his farm in upstate New York (top). Fink
and Emmanuel Macron, the French president, pictured right, discuss climate
change at a dinner in 2019 (bottom)

His yearning for admiration can make him thin-skinned and conscious of his
status. In recent years, as he has jetted around the world to chew the fat with
corporate clients, prime ministers and central bankers, he seems to have
enjoyed his job as much for the platform it gave him as for the money it
generates. Raising the banner for ESG seemed to offer the opportunity to
cement his importance as a financial statesman – and for BlackRock to make a
killing at the same time. Instead, the experience has been chastening. To
understand Larry Fink, you need to understand what went wrong.

I first spoke to Fink via a video call in February, as he sat in his office in a
converted barn on the farm, where he spends the weekends. Even on screen,
he is an imposing presence. His voice booms as he expresses his reluctance to
be profiled. “My biggest issue is that I’m overly exposed,” he says. Still, he
can barely stop himself talking. I am calling him from Los Angeles, the city
where he was born and lived for the first 23 years of his life. Within minutes,
he is telling me in vivid detail about growing up in California “amid orange
groves and tumbleweed”.

Fink was born in 1952 to a Jewish family in Van Nuys, a sprawling suburb.
His parents were Democrats – his father ran a shoe shop and his mother was a
university professor. He went to state schools, which, he says, made him the
person he is. His entrepreneurialism started young. The family would visit the
Mojave desert, where Larry would collect snakes (conventional pets were not
allowed at home because his mother was allergic to animal hair). He
developed a small business dealing in them and would post his haul to
collectors across America – until some slithered out in transit. When he was
12 or 13, the FBI showed up at his parents’ door. Despite the scolding, his
passion for snakes continues. He can still identify a venomous one at a glance.

Fink imbibed the free-spirited atmosphere of the west coast in the 1960s. He
wore his hair long and, he claims, once served George Harrison while
working as a waiter during his teens. At university he developed an interest in
real estate. To this day he can reel off the square footage of the house and
holiday home he grew up in.

But in the 1970s, Wall Street offered more excitement than selling property.
Michael Milken, an earlier graduate of the same secondary school as Fink,
was innovating in risky high-yield bonds. The first private-equity firms were
beginning their corporate raids. Fink abandoned his early passion and joined
First Boston in New York, an investment bank with a WASP-y reputation. “I
was a freak,” he tells me, chuckling at the memory. “I was told I was hired
because I was Jewish and Jews were smart. But it was a meritocracy.”

Fink’s property experience landed him a job as a mortgage trader, a much

lowlier position than the plummy investment bankers doing mergers and
acquisitions. Despite a surge in homeownership during the 1970s, the market
in mortgages barely existed, as they had been considered too fiddly and
opaque for Wall Street to dabble in.

A former employee once sent Fink a text message saying he’d rather be
loved than respected. Fink replied, “We all would”
But in the early 1980s, trading took off. Fink set his sights on toppling Lewis
Ranieri, a bond trader who had worked his way up from the postroom to lead
Salomon Brothers to pre-eminence in the mortgage market. Henry Fernandez,
CEO of MSCI, a provider of investment indices, watched in awe from the
sidelines as Fink single-handedly sought to dethrone Salomon. “Larry was in
his early 30s,” he says. “Imagine a guy of that age joining a genteel firm and
building its mortgage business from scratch. The partners were bankers, not
traders. You can imagine the force of personality he needed.”

As the competition between him and Ranieri brewed, Fink loaded up on

mortgages that led to cratering losses when interest rates unexpectedly fell.
He went from being the wunderkind who had brought in $1bn in the space of a
few years to the pariah blamed for losing $100m in a quarter – a staggering
loss at First Boston. Suddenly he was treated like a “leper”, he recalls. When
we talk, it’s clear he still ruminates on his failure.

The experience gave him a life-long obsession with risk. Stung by the trading
debacle, Fink and seven partners co-founded an asset-management company a
year and a half later in 1988. Its main business was investing money from
pension funds and other long-term asset holders in bonds. From the inception,
Fink put risk management at its core, bringing in mathematical experts and
computer whizzkids to calculate the repayment probabilities of individual
loans in a bond portfolio and assess how their value would be affected by
changes in interest rates. Eventually, the software would be so successful that
BlackRock would license it to 130,000 financial-services firms.

Initially, the firm was called Blackstone Financial Management since

Blackstone, a private-equity firm, took a half-stake in the project. The two
firms were united for seven years until Stephen Schwarzman, Blackstone’s
co-founder, rebelled after finding out that Fink and the other founders were
diluting everyone’s stakes by issuing stock options to new joiners. After a row
with Fink, he agreed to sell his shares. The liberated firm was renamed
BlackRock.

BlackRock’s central nervous system may be attuned to risk mitigation, but its
culture is far from bloodless. Co-founders and former colleagues say that,
from the start, Fink behaved as though the firm were a kibbutz or a family –
clan-like, energised, argumentative. Hugh Frater, one of the co-founders,
concedes that Fink was a “bit of a yeller” in the early days, but also recalls
how he would ask, “Do you want a bagel?” as a peace offering. He can be
solicitous. Ex-colleagues say he has helped to arrange hospital treatment for
their family members, supported their book projects and provided money for
their startups. Barbara Novick, one of two women co-founders, says Fink was
“very supportive and open” about maternity leave before it was customary.
But the informality could also become incestuous. For years, several people
say, the company turned a blind eye to office romances, even those between
bosses and their subordinates. (In 2019 two senior executives were fired for
having affairs.) “It is a very melodramatic firm. It’s like being in an Italian
opera,” says one former executive.
Big fish Fink takes a trip every year to go fishing in remote places, often
accompanied by clients and colleagues

To this day, Fink is the undisputed patriarch, setting long-term strategy. His
own contribution is more charismatic than forensic: he charms clients on
board, immerses himself in leadership development and gossips with
influential contacts about the state of the markets. He leaves the dogsbody
work of running the firm to others. Colleagues recall withering put-downs if
he feels they are being complacent. “You guys have got to stop dragging your
dicks across the floor,” one remembers him shouting at a group of BlackRock
employees, women among them. Yet he has managed to instil loyalty in his
colleagues and cultivate a sense of camaraderie. Many of the co-founders
remained at the firm for years. The old-timers formed a court around King
Larry from which more recent joiners could feel excluded.

Like many heads of family businesses, Fink cares more about the health of the
firm than what he can extract. His stake in BlackRock today is a relatively
modest 0.3%; he has frequently reduced his shareholding as the firm has
grown and is considerably outearned by his fellow plutocrats. According to
Forbes, he’s worth $1bn; Schwarzman’s net worth is about $30bn.
Fink may not measure himself by the billions in his bank account, but he has
other ways of valuing his self-worth. One is BlackRock’s continued growth.
The other is his personal standing. Both were hugely bolstered by the global
financial crisis of 2007-09. Fink had three traits – his understanding of
mortgages, his stomach for big wagers and his clubbable ease with the titans
of Wall Street and Washington – that swiftly catapulted him and his firm to
prominence.

Fink has a passion for fishing in remote places. He takes a trip each year out
west or to Alaska or Mexico. Many members of the party will be clients or
colleagues, but he also takes along Kenny Smith, an instructor who gave Fink
his first fly-fishing lesson 25 years ago. They have been friends since then.
They make a strange pairing: a Coloradan from the boondocks and a
billionaire raised on one coast and made on the other. On the river bank, the
deference towards Fink falls away. One participant says they all “take the piss
out of each other”. Everyone slums it: sleeping in tents, digging latrines and
chowing down on gas-station burritos. Smith notes the patience with which
Fink pursues his catch. He is “analysing all the time he’s out there,” Smith
says.

Fink went from being the wunderkind who had brought in $1bn in the space
of a few years to the pariah blamed for losing $100m in a quarter

Fink has stalked the acquisitions which have turned BlackRock into a
financial leviathan with similar circumspection. He says he backed away once
before buying Merrill Lynch Investment Management, an asset manager that
specialised in global equities, in 2006. The purchase in 2009 of Barclays
Global Investors (BGI), the world’s biggest seller of low-fee passive funds,
was Fink’s second attempt at buying the firm.

Even then, the deal almost fell apart at the last minute, because of Fink’s
concerns about the provenance of some of the finance for the transaction. At
the time, he recalls, one of his grandchildren had just been born. The situation
was so tense that, rather than staying with his family, he returned to the office
and hammered the phones all night trying to raise alternative sources of cash.
Robert Fairbairn, a vice-chairman of BlackRock, remembers how winningly
blunt Fink was about his predicament as he called in favours. “I’m in a bind,”
he confessed to his potential rescuers. “We’ve got this incredible deal. If we
don’t get there, you know, we’re not going to make it happen…I’m going to
work tirelessly to get it back.” With support from sovereign-wealth funds,
including those in Singapore and China, he reeled in the deal the next morning.

The merger transformed BlackRock into the world’s biggest asset manager;
the money it managed more than doubled to $2.7trn. For the first time, Fink
brought two conflicting investment strategies under one roof: active
management, led by specialists charging fat fees for their supposed
clairvoyance in picking stocks; and low-fee passive investing, in which funds
buy the entire index on the assumption that the market always wins in the end.
Today BlackRock manages $6.2trn in index funds and other passive-
investment vehicles – 65% of its portfolio. Fink’s bet on BGI helped slash the
investment costs for millions whose retirement savings are invested via
BlackRock. It also reflected a shrewd insight he developed early in his
career: that as the capital markets became cheaper and easier to access,
people would increasingly save by buying stocks and bonds, rather than by
stuffing money into bank deposits.

The old-timers formed a court around King Larry from which more recent
joiners could feel excluded

The BGI transaction coincided with Fink’s growing stature as a financial Mr

Fix-it. During the financial crisis, he provided vital assistance to America’s
Treasury and the Federal Reserve Bank of New York by selling or rescuing
distressed financial firms such as Bear Stearns and AIG. BlackRock’s risk-
management algorithm allowed him to analyse their exposure as few others
could.

His rescue work spread to Europe, where the banking systems in many
countries were struggling with their own mortgage-related meltdowns. As
markets sank, Fink frequently acted as a conduit of information between
officials and Wall Street’s masters of the universe – eventually he picked up
lots of business for BlackRock selling off troubled assets on behalf of the
government.

Some who know him say that his bolstered stature fed a psychological need to
be the centre of attention. A former employee there at the time says Fink used
to talk in private about his childhood dream of becoming a rock star, though he
confessed to them that he was not good-looking enough. (Talk Talk, a
beguiling British act from the 1980s and 1990s that mysteriously fled from
fame, is his favourite band.)

The acquisition of BGI gave Fink a platform from which to pontificate. If you
owned the index, you owned slivers of every company within it. Fink swiftly
exercised his clout. In 2012 he began a tradition of writing “Dear CEO”
letters to the bosses of the firms in which BlackRock invested. This allowed
him to indulge a streak of sanctimony that, at times, could make him sound like
the Bono of the bond markets.
Political jungle Since buying the farm, Fink has rewilded the land, replacing
invasive species with indigenous ones (top). Fink and Donald Trump,
pictured centre, at the White House in 2017 (bottom)

The man who had once shunned the annual glad-handing of the financial elite
at Davos as “a waste of time”, started to become a regular. Rumour has it that
during President Barack Obama’s second term he was approached to become
America’s treasury secretary, a post that some of his friends say he covets
dearly – though Fink demurs when asked about it.

Instead he became a financial diplomat. BlackRock’s increasing size gave him

access to the world’s financial capitals. He hit the skies in one of the firm’s
two Gulfstream private jets, schmoozing international clients, the bosses of
big companies, presidents, prime ministers and central bankers. Besides
winning new business, he uses his travels to gauge what is on the mind of his
interlocutors and test out ideas. Those around him say these trips are
exhausting, if exhilarating; despite his age, Fink is always pushing for more
meetings. He fancies himself able to get an audience with almost anyone. “It’s
a bit like the Rolling Stones on tour,” says Philipp Hildebrand, another
BlackRock vice-chairman and frequent travel buddy.
His travels also allow Fink to indulge his passion for name-dropping, which
he does more to gossip than brag. You might hear him relate how he has
discussed Brexit with a British prime minister, or struck up a personal
friendship with Andrés Manuel López Obrador, Mexico’s strongly anti-elite
leftist president. Fink is not picky about whom he gets close to. He was one of
the first New York financiers to declare he wasn’t cutting ties with Saudi
Arabia after the murder of Jamal Khashoggi, a columnist for the Washington
Post. “The last thing he will do is stop talking to people, even when it’s
uncomfortable,” says Fairbairn. David Rubenstein, co-chairman of the Carlyle
Group, a private-equity firm, says Fink’s stature in global financial circles is
greater than that of many government ministers. “He’s effectively become
global secretary of the Treasury without the official title,” he quips.

Fink’s farm is in a wealthy part of New York state that is so horsey the local
coffee shop has free carrots as well as dog treats on the counter. In 2003 he
bought the house and outbuildings, which were built in the 18th century, from
the actor and film-maker Stanley Tucci. They were in a dilapidated state and
he has since restored them. He also expanded his domain by buying land from
a neighbour who lost a fortune after investing with Bernie Madoff.

It is a world away from life in the fast lane of global capitalism. Over two
decades, Fink and his landscapers have turned the property into a wildlife
sanctuary. They’ve ripped out invasive species, such as Japanese barberry,
and seeded vast meadows with indigenous flowers – milkweeds, echinacea
and Indian paintbrush – creating a haven for birds and insects. So devoted is
Fink to rewilding that he once harangued a colleague who became a
beekeeper because honey bees are “non-native”. (She eventually convinced
him to keep her bees on his property.)

Fink fancies himself able to get an audience with almost anyone. “It’s a bit
like the Rolling Stones on tour”

From the mid-2010s onwards, Fink started to display some of the same zeal
about environmental matters writ large. Climate change presented a clear
business opportunity for BlackRock. Its clients, especially those in Europe,
were starting to take it seriously. BlackRock held assets on behalf of pension
funds, which wanted stable returns that would accumulate over decades.
Fink’s background selling mortgage bonds disposed him more than other
financiers to worry about the state of the planet in 30 years’ time. He saw that
the push to decarbonise the world’s energy infrastructure would require huge
new investments that his firm could help finance.

Many of Fink’s clients – especially younger ones – welcomed him taking a

stand. Moreover, like the global financial crisis, climate change was a
problem that politicians were failing to solve. Fink felt it posed a risk that
chief executives had a responsibility to tackle.

Climate change wasn’t just a sound financial concern: it gave Fink an

unparalleled opportunity to grandstand from what one former colleague calls
the “bully pulpit” that BlackRock offers. None of his peers had such a cause
to trumpet. His annual letters to CEOs of firms in BlackRock’s portfolios –
which because of their size meant almost all of the big ones – attracted
widespread media attention. The dominant theme was sustainability: how
companies improve their chances of long-term success by considering their
environmental and social impact. The tone increasingly became that of an
advocate as well as of a fiduciary of BlackRock clients’ money. Months after
the Paris agreement in 2015, in which governments committed themselves to
limiting global warming to less than two degrees above pre-industrial times
by 2100, Fink used his annual letter to invoke ESG for the first time, saying
BlackRock expected companies to incorporate environmental and social
considerations into their discussions with boards. (However the
preponderance of index funds in BlackRock’s portfolio reduces its leverage
over the companies it invests in, since the firm is required to own them come
what may.)

Though Fink continues to deny to this day that he was on a crusade, and that he
was simply looking after his clients’ long-term interests, he sounded more
evangelical with each passing year. He began to argue that business must
address the most pressing economic and social issues amid “wrenching
political dysfunction”. His letter in 2020 was pivotal. In it he wrote that
climate change had become “a defining factor in companies’ long-term
prospects”. He announced BlackRock’s aggressive new ESG strategies, such
as divesting the shares of large coal producers from its active funds, as well
as offering funds that screened out fossil-fuel producers altogether.
Although Trump, who took office in 2017, had pulled America out of the Paris
agreement, it was a time of widespread euphoria about ESG investing. From
2018 to 2022, BlackRock’s sustainable assets grew from less than $4bn, or
about 4.4% of similar assets, to almost $60bn, or about a fifth of the market.
ESG products account for only a fraction of BlackRock’s assets under
management, but in America it is the leader in the field by some distance.
Eco worrier In the mid-2010s, Fink started addressing the challenge of
climate change publicly (top). Fink and Lewis Ranieri, pictured left, both
influential mortgage traders at the time, review proposed regulatory changes
to the industry in 1983 (bottom)

Fink, who has a salesman’s knack for seeing which way the wind is blowing –
quite literally, he has a collection of antique weather vanes at his farm – was
quick to spot the potential for growth. During the pandemic, BlackRock’s
assets under management soared to $10trn, partly because the value of many
of the low-carbon firms in its portfolios, especially the tech giants, were
booming. “Larry has an incredible nose for the trends that are coming down in
the industry,” says Robert Kapito, BlackRock’s president and Fink’s partner
for 40 years. Tariq Fancy, former chief investment officer for sustainability at
BlackRock, who, after quitting, wrote a lengthy critique of ESG, says Fink
was quick to seize on the chance to turn BlackRock into a sustainability
champion, though with the bottom line in mind. The view of the firm was,
according to Fancy, “If we could save the world and it doesn’t cost us a cent,
we’ll do it. But if it comes at a cost, that’s another thing.” (Many of
BlackRock’s pension-fund clients are holding money on behalf of left-leaning
public-sector workers who want green investments.)

Regardless of the actual extent of Fink’s fervour for sustainable investment,

there was growing concern within parts of the firm that he risked overstepping
the mark. “Once you opine on these political issues, you expose yourself to
the same campaigns as a politician would,” says one former colleague who
took part in the discussions. Another saw “a lot of people tell Larry we don’t
need to be vocal about this. But Larry was absolutely at the forefront of it.”
Not everyone has toed the party line. According to one senior Republican
official in a red state, “If you talk to his employees, they go: ‘Oh don’t worry
about what Larry says. That’s not what we’re doing.’” He adds, “I cannot tell
you how many conversations we’ve had where [employees] said: ‘We’d get
rid of him too, but, you know, we can’t.’” Some CEOs also began to express
concerns that Fink had grown too big for his boots. “I think the world of Larry
Fink, but I’m not sure I want him to be my emperor,” said Charlie Munger,
Warren Buffett’s business partner.

Fink says he doesn’t recall any colleagues telling him that his letters were too
political. But that suggests another potential problem: those who have worked
at BlackRock describe him as a difficult person to contradict. He still
dominates the firm and has a fearsome temper. More than one person
described him to me as a narcissist. His reputation may explain why a firm
renowned for its risk-management machinery managed to overlook the
political backlash against ESG. “These are very sensitive political topics, and
we ran into stronger and more opposing views than we had talked about,”
admits Mark McCombe, another vice-chairman. The pushback emerged
chiefly from a group of politicians with whom the firm had almost completely
lost touch as Fink swanned around the globe: Republicans in America’s
heartland.

According to Fink, the trouble came to a head in the run-up to Russia’s

invasion of Ukraine in 2022. The rocketing price of oil and gas started to
crimp returns for those who had bought ESG investments in the belief that the
fossil-fuel era was coming to an end. That soured some of the positive
sentiment towards sustainability. Higher oil prices also gave an excuse for
opponents of decarbonisation to counter-attack. Texas senator Ted Cruz
blasted Fink on television, accusing him of contributing directly to petrol-
price rises by allegedly dissuading companies from investing in fossil fuels.
He called it the “Larry Fink surcharge”. Fink was horrified at how quickly the
attacks became personal, especially as he had never insisted on divestment.

His annual letter in 2020 was pivotal. In it he wrote that climate change
had become “a defining factor in companies’ long-term prospects”

BlackRock also felt the heat. In August 2022 it became the first American
company to be put on a blacklist by Republican-led Texas, which barred the
state’s public institutions from investing money with asset managers that
“boycotted” energy companies. That summer 19 Republican attorneys-general
threatened legal action when they wrote to BlackRock and questioned whether
the company was focusing solely on financial returns, as their state laws
require.

In letters to the attorneys-general and in a defence published on its website

called “Setting the record straight”, BlackRock shot back. It insisted that it
was actually one of the world’s biggest investors in fossil-fuel companies and
had put $170bn into American public-energy firms. BlackRock’s participation
in ESG initiatives, it argued, was entirely consistent with its fiduciary duty to
clients, because companies that consider climate risk would make better long-
term investments.

BlackRock’s rebuttal not only failed to satisfy its Republican detractors but
caused further problems at the other end of the political spectrum. Brad
Lander, a Democrat who scrutinises the New York City budget in his role of
comptroller and is a trustee of three public-sector pension funds, fired a letter
off to Fink arguing that BlackRock, in recognising its fossil-fuel investments,
was effectively abdicating responsibility for reducing carbon emissions to net
zero by 2050.

Fink acknowledges that BlackRock’s political antennae malfunctioned during

this saga. It communicated poorly with state governments before the backlash.
“I take that as a responsibility,” he says. “We’re doing quite a bit of
introductions and relationship-building.” The firm has stepped up lobbying
operations in state capitals.
Fink also confesses to having been blindsided by the angry response to his
letters. If they had been more nuanced, he says, he might have had fewer
headaches. He insists his words were taken out of context, though now he
talks more carefully about the concept of ESG. “We don’t use the word ‘ESG’
anymore,” he says. Instead BlackRock uses words like “sustainability” and
“decarbonisation”. “In my last letter I didn’t mention ESG,” he points out. “I
did that [on purpose] because that phrase has been weaponised.” Recently,
BlackRock appointed Amin Nasser, the chief executive of Saudi Aramco, the
Saudi state oil company, to its board.

His regrets may be deeper than he is willing to admit. He says one of his
employees recently exclaimed to him: “God, I don’t even know how I would
ever want to be a CEO watching what’s going on with you and all this.”
Frater, one of his co-founders, told me, “If I faced these deeply personal
attacks the phrase going through my mind would be ‘I don’t need this shit.’”
Between BlackRock and a hard place Fink’s championing of ESG investing
has angered the right (top). BlackRock is also one of the world’s largest
investors in fossil fuel companies, which has drawn criticism from
environmentalists (bottom)

Fink consoles himself with the knowledge that the brouhaha has not stopped
clients from pouring money into the firm. In the first half of this year it
attracted $190bn of net inflows, an improvement on the same period in 2022.
“The numbers speak for themselves,” he says. “It is working out.” But the
experience has caused Fink to rein himself in. The man who aspired to be the
plenipotentiary of American finance has been reminded, for the second time in
his career, that tall poppies risk being scythed down.

These days Fink has worries that are closer to home. Minutes after meeting
me, he reveals that just over a month before, he had suffered a severe illness.
On a work trip to Spain in mid-March, he began to feel stomach pains and
was rushed back on BlackRock’s private jet to NYU Langone, a New York
hospital on whose board he sits. While crossing the Atlantic, he spent the
whole time “throwing up”. In New York, his doctors diagnosed a perforated
appendix. It later burst, giving him peritonitis, a type of blood-poisoning.
After a painful period in hospital, he recovered. Not long afterwards, the Wall
Street Journal published a front-page article on the five people the paper
considered contenders in the “great race” to succeed him.

Fink looked fit when I met him. He was tanned and had a youthful zest that
belied his age. He repeatedly scanned his phone to see if the results of his
latest blood tests had come in – not out of any apparent concern for his health
but because he wanted to get the all-clear to fly the following day to Japan
and Australia (the doctors gave permission). Succession was top of his mind
during his convalescence, though he says he has no imminent plans to step
down. We discussed it as we sat under the trees eating sandwiches. He told
me he was looking forward to retirement so that he could spend more time at
the farm and fishing. “When I leave BlackRock, I’m leaving BlackRock,” he
said, not entirely convincingly. Not long after, he modified his position
slightly, mooting the possibility of staying on for a short while as chairman if
the board and the next generation of leaders ask him to. That may suggest he
feels no one is as yet ready to step into his shoes. An ex-colleague recalls a
time when BlackRock’s management team carried out a survey of their
strengths. Fink was the only one who felt he merited top marks on all counts.
Fink disputes this and leaves little doubt he is taking a thoughtful approach to
succession. He told me he has strived to develop a strong bench of potential
CEOs who will stay even if they are not picked to lead the firm.

“Once you opine on these political issues, you expose yourself to the same
campaigns as a politician would”

Despite his own buffeting, Fink remains optimistic about BlackRock’s future.
“I am more bullish…than I have been in ten years.” The influx of money is
proof that BlackRock is still on the right “mission”. He adds: “Coming with
the mission is the noise. Is that now a permanent feature of running a big,
visible company?”

Fink’s bruising encounter with the ESG vigilantes is unlikely to define his
legacy. From his early days at First Boston, he identified the growing power
of the financial markets to wrestle savings away from the banking system.
More than most firms of its era, BlackRock has contributed to that trend by
making low-cost savings products available to the masses.
But BlackRock’s size makes it an easy target. Its influence – and those of
similar behemoths – over large swathes of corporate America make it simple
to demonise as a throwback to the gilded age of the late 19th century, when
giant monopolies straddled America.

Yet the Rockefellers and other robber barons of that era were purely
exploitative. The leaders of today’s corporate giants live in a time of climate
change. Some of them are trying to do the world a good turn, however
imperfectly and with due concern for the bottom line. This heightened
consciousness might be good for business, if it attracts like-minded customers
and motivates employees. It might be good for the planet if it rouses
companies to consider long-term threats. It may also anger millions of
Americans who think differently.

Fink himself is neither hero nor villain: he is a businessman, by all accounts

an exceptionally intuitive one. After spending time with him and talking to
many of his associates, what is striking is how uncalculating and loyal he is in
his personal life. As a boss he often shoots his mouth off, is irascible and
covets acclaim. But in person he is not boorish. If anything, he is refreshingly
chatty and down to earth. Our last conversation ended with him telling me of
the need to remain true to oneself, however successful you are: “People
thought of me as a turd 30 years ago. I hope they still think of me as a turd
today.”

In a polarised political environment, it is dispiritingly easy for those on the

extremes to traduce financiers, especially Jewish ones, as distant controllers
of global markets, determining people’s financial futures without any
accountability. Fink waded into political territory, despite warnings about the
risks involved. In business terms, ESG was a success for BlackRock and, had
Fink been a politician to his bones, he might have toughed it out as the face of
virtuous investing. But he did not have a thick enough hide to tolerate the
backlash. That is not the worst human failing. ■

Henry Tricks is The Economist’s Schumpeter columnist.

Larry Fink, a Magnum photographer, WAS COMMISSIONED BY 1843

magazine TO PHOTOGRAPH LARRY FINK
ADDITIONAL IMAGES COURTESY OF LARRY FINK, GETTY, REDUX /
EYEVINE
This article was downloaded by zlibrary from
https://www.economist.com/1843/2023/07/27/the-demonisation-of-blackrocks-larry-fink
Myanmar

Rum and coke and automatic rifles: Myanmar’s

Gen Z guerrillas
Young soldiers have buoyed the country’s fight for freedom, but at great
cost. Irena Long meets them in their jungle hideout
Jul 27th 2023
On a sweltering afternoon in March, three recruits to the Albino Tiger
Battalion – a paramilitary group resisting Myanmar’s junta regime – were
studying the rules of war. Resting their dummy rifles made of wood and
bamboo against their legs, they sat on a fallen tree in the shade of a rubber
plantation at the edge of the rainforest. The group was only a few days from
finishing six weeks of basic military training; the notebooks in their laps were
crammed with diagrams of attack formations and rules of engagement.

Their instructor called out: “To win the revolution we have to be good
soldiers, you agree?”

“Yes! Yes!” the group replied.

“Bravery is not about killing people or destroying things or burning down

houses,” he told the students. “Bravery is about sacrifice, about giving
yourself for others, about doing what you have to do under very difficult
circumstances.”

The 99 young soldiers who make up the Albino Tigers – most of whom are
between the ages of 17 and 28 – understand that their circumstances are tough.
The battalion is part of the People’s Defence Force (PDF), a resistance army
formed by the National Unity Government (NUG), a coalition of politicians,
ethnic and civil-society leaders who oppose the coup staged by Myanmar’s
military generals in 2021. For the past two years, the resistance has been
fighting a guerrilla war against the junta. Its goal is to force the army – which
has ruled Myanmar for most of the past 60 years – out of politics permanently.
It also hopes to ensure that the country becomes a federal democracy with
equal rights for all, including women and ethnic minorities, who have long
been brutally repressed.

Generation Z grew up thinking non-violent resistance could bring about

social change

The resistance has been surprisingly successful – it enjoys popular support

and claims that, together with militias established by Myanmar’s ethnic
minorities who have been resisting the central government for decades, it
controls half of the country. But because the PDF does not receive any foreign
aid, its access to weapons and basic resources is limited. The communities
that sustain its needs have been battered and impoverished by the military
regime, and are themselves in desperate need of humanitarian assistance.

Feeling that the rest of the world was forgetting their struggle, resistance
leaders invited me to stay with the Albino Tigers for five days this spring. I
became the first Western journalist to visit this stretch of the front line, near a
vital motorway that connects Myanmar to India and Thailand. The Albino
Tigers and other resistance forces have frequently carried out attacks on the
junta here, even temporarily occupying strategic towns. The army has
retaliated with fighter jets and helicopters provided by Russia and China, and
heavy weaponry. It often commits atrocities, such as raping, dismembering
and disembowelling civilians.

“What will the country be after we have won and bands of these guys are
running around with guns?”

For six hours I travelled with Captain Thu Saw, the gregarious leader of one
of the three Albino Tiger companies, through rugged mountains contested by
the junta and ethnic militias. Despite the dangerous surroundings, I found Thu
Saw’s camp – in territory controlled by the Karen, an ethnic-minority group –
surprisingly peaceful. In the shade of tamarind and mango trees, the afternoon
heat lingered, drawing crickets into song. Tiger-striped dogs lazed around, too
hot to bark. In the valley, cream-coloured cows grazed on the dry stubble of
last year’s rice harvest. A soldier was tending a fire under a bubbling
cauldron of rice while another chopped onions for a pumpkin curry. Off-duty
soldiers washed clothes and oiled guns; some swung in their hammocks
reading novels or watching Korean soaps on their phones. But the imprint of
war was everywhere. The junta’s mortars and airstrikes had snapped mature
trees in half. The soil was pockmarked with craters and the remains of a bomb
lay near the dug-out the fighters used as an air-raid shelter.

Our safe arrival merited celebration. Thu Saw mixed rum with local cola and
fetched his guitar. Under a solar-powered light he started playing “Kabar Ma
Kyay Bu” (“Till the End of the World”) – the anthem of the uprising against a
previous military dictatorship in 1988, which was violently suppressed.
During the subsequent decades, the song was censored, but everyone in the
group knew the words: “Do not waver,” they sang. “Just like our fallen
heroes, who fought for democracy…Let us stand strong in the revolution and
resist…The blood in the streets has not dried.”
War seemed far away: the atmosphere was almost carefree, filled with Thu
Saw’s jokes and his soldiers’ laughter. Cups were topped up and a pack of
cards was produced. Suddenly, Thu Saw jumped up. He had heard a distant
crackling sound – possibly one of the junta’s mortars, which would mean that
we had only about 30 seconds to make it to the shelter. Only two weeks
earlier a bomb had landed 50 metres away from where we were sitting.

Thu Saw grabbed his walkie-talkie in case there was any information, but it
remained silent; I listened carefully but heard only rolling thunder. Then
raindrops started to fall – the first storm of the season. Attacks from the air
are less likely when it’s thundering. “A good omen,” said Thu Saw, chuckling,
as his soldiers sighed in relief.

Myanmar’s youth – particularly students – have a long history of leading

revolutionary movements, both through peaceful protest and military action.
Yet the current generation of young resistance fighters is different. Their
families had suffered for half a century under military rule. But in 2011 a
decade-long experiment in hybrid democracy began and, for a time, Aung San
Suu Kyi, a charismatic democracy activist, led the country. Generation Z grew
up thinking non-violent resistance – promoted by Suu Kyi and other leaders in
a bid to prevent further bloodshed – could bring about social change. Unlike
previous generations, Gen Z also grew up with mobile phones and the
internet. The political situation was far from perfect – especially for members
of the persecuted Rohingya minority – yet many were filled with hope for the
future. Universities flourished again, after years of closure. Those who had
been exiled returned with new ideas and money.

The army has retaliated with fighter jets and helicopters provided by Russia
and China, and heavy weaponry. It often commits atrocities, such as raping,
dismembering and disembowelling civilians

The coup in 2021 ended young people’s dreams of a better life. Gen Z,
especially women, spearheaded the protests. The army’s crackdown forced
those who managed to evade death or jail to flee for the border areas
controlled by ethnic-minority militias allied with the resistance. Tens of
thousands of young people then signed up for the PDF; many of the Albino
Tigers told me they were motivated to fight after seeing their comrades die in
front of them on the streets. Unlike their parents and grandparents when they
were young, Gen Z has actually tasted freedom, and they are determined to get
it back – at any cost.

Thu Saw has found it difficult to rein in his young fighters’ battlefield
ambitions. He is only about a decade older than most of his soldiers, yet has a
markedly different outlook: “The only way to win is in a political way” –
meaning at the negotiating table – “not an army way.”

Although Thu Saw had always opposed the junta – he was once arrested for
taking part in a satirical poetry recital in which he made fun of the generals –
he was wary of fighting. Formerly a labour activist, he quickly organised a
strike in protest at the coup. Forty young resistance activists then came to his
door, begging him to join them, but he hesitated: “I never wanted to be a
soldier, shoot people, kill people. Then I saw a protester shot right beside me
and I felt I had no choice. I have to defend my people.”

“When I arrived, I was amazed. It was so crowded – so many young people.

In the forest, I had got used to keeping my voice down. Here…they were
even playing guitar and singing”

After five months of hiding in the jungle, Thu Saw made his way to the PDF’s
main training camp, disguised as a snack vendor. “When I arrived, I was
amazed. It was so crowded – so many young people. In the forest, I had got
used to keeping my voice down. Here…they were even playing guitar and
singing.” He was put in charge of a company of Albino Tigers, whom he
marched over the mountains and into the river valley (where I later joined
them).

Ko Moustache – a lieutenant nicknamed for his facial hair – remembered that

hazardous trek. “We had to walk day and night with very little food. Just some
rice and fish paste, sometimes mushrooms we found in the forest.” At 25, he
was one of the older recruits; soon he was given charge of a platoon of 14
commandos. On one of their missions, Ko Moustache misjudged an attack on
an army post and was shot and injured. “When I realised that I was hit I ran as
fast as I could down the mountain,” he recalled. “I left everything behind – my
phone, the car, even love letters from my girlfriend.” Afterwards, nearby
villagers bought the resistance new mobile phones. The army also sent the
Albino Tigers some old hunting guns with a sarcastic note thanking them for
the valuable supplies they left behind – making clear that the junta does not
see the resistance as a threat.
Ko Moustache used to work as a barista in a coffee shop; like most of his
fellow soldiers, he is from one of Myanmar’s cities. He dreamed of buying a
house and starting a family. The coup dashed these hopes of a normal life. But
though he had the opportunity to join his sister in England, leaving Myanmar
was not an option: “My parents and grandparents lived many years in
darkness and fear. I don’t want this for myself and our future generations. I
have no choice but to fight.” His commitment is sometimes tempered by
depression – he says he feels “lost” when he thinks about his future – but he is
able to commiserate with his comrades, who “have become my second family.
We can help one another.”

Ko Moustache’s girlfriend is also an Albino Tiger, and they often talk when
they are both at the rear. War has given women a chance to challenge social
expectations; PDF battalions include women not just as medics and admin
staff, but as fighters. Ma Yu, a sniper in her 20s and a member of the Albino
Tigers’ ten-strong women’s squad, told me, “Before they joined, some women
had never worn trousers, only a htamein [a traditional sarong].”
Not all the Albino Tigers I met had wanted to become fighters; some had
joined the PDF primarily for their own safety. At one point a soldier called
“Comrade Federal” gave me a cartoon he had drawn showing demonstrators
in a city holding a flag emblazoned with “Gen Z” and a three-finger salute.
(The symbol comes from the film “The Hunger Games”, in which it is a sign
of solidarity with the rebellion.) A ladder stretched from the city to the
mountains, where soldiers were waving a PDF flag. Yet the ladder was
broken – seemingly showing that, in Comrade Federal’s view, there was no
way for fighters to go back to their urban lives. I could sense that he struggled
to put into words his feeling of being trapped. As a student-union leader at a
major university, he felt he had no choice but to seek refuge with the PDF. All
he really wanted was to finish his studies and return home to take care of his
widowed mother.

“My parents and grandparents lived many years in darkness and fear. I
don’t want this for myself and our future generations. I have no choice but
to fight”

Thu Saw was acutely aware of the stresses that his soldiers were under, and
understood their doubts. He has already lost three Albino Tigers in battle, and
knows that his jokes may not be enough to boost his soldiers’ spirits. “If they
want to go back to their families I will let them,” he told me. “They are young,
they don’t want to kill people. My nightmare is that the PDF fighters are
getting too used to carrying guns, to kill, to wound.” (Indeed, there are cases
of PDF groups going rogue and murdering civilians.) Thu Saw wondered,
“What will the country be after we have won and bands of these guys are
running around with guns?”

One morning I woke up early to soft chatter and strange rasping noises. Thu
Saw was still asleep, rolled up in his hammock with his automatic rifle in his
lap. I sneaked past him to see what the sound was. A family was scraping the
skin off a large pile of sugarcane; one member was dragging a cane press
through the camp’s gate. At noon they offered buckets of sweet, foamy juice to
the soldiers.

Thu Saw later explained that villagers, grateful for the Albino Tigers’
protection, “bring us everything: rice, oil, vegetables, fruit. From the money I
save, I buy weapons.” At the beginning, his troops had only two guns between
them; now they have 27. They often crowd-fund to buy guns on the black
market. For other weaponry, they rely on Gen Z’s ingenuity, adapting drones to
drop bombs, and building mortars and grenade launchers, which, they boast,
have resulted in hundreds of junta casualties.

The resistance wants to ignite a countrywide uprising later this year – “before
everyone gets too tired of the revolution”, as one PDF commander told me.
But no one seemed very optimistic about the resistance’s chances in open
battle, which would probably result in a bloodbath for both fighters and
civilians. Even if the resistance triumphs, it will still face the immense task of
repairing a country devastated by tyranny and war.

Confronted each morning with the possibility of death, many PDF soldiers
seemed truly prepared to sacrifice themselves for their cause. But I thought of
something Ko Moustache had told me: “I live day by day. After some time I
realised that thinking about the future is of no use. The future will bring what
it will bring.” ■

Irena Long is an investigative journalist, broadcaster and photographer

IMAGES: ALVARO YBARRA ZAVALA, GETTY, REUTERS, STR, AFP

This article was downloaded by zlibrary from
https://www.economist.com/1843/2023/07/27/rum-and-coke-and-automatic-rifles-myanmars-
gen-z-guerrillas
Tibet

Who will succeed the Dalai Lama?

As rival candidates are lined up, the Tibetan spiritual leader tells Brook
Larmer what he really thinks of China
Jul 27th 2023
The boy’s existence had been little more than a rumour. When he appeared
during a ceremony in March on a small throne below the Dalai Lama, the
ageing leader of Tibetan Buddhism, the monks and nuns in the audience didn’t
seem to recognise him. The boy, about eight years old with short black hair,
wore a copper-tinted robe with oversized cuffs covering his hands and – as if
to add to the mystery – a white mask over his face.

Midway through the ceremony, held in Dharamsala, the north Indian refuge for
Tibetan exiles, the Dalai Lama paused and gestured nonchalantly toward the
boy: “We have the reincarnation of Khalkha Jetsun Dhampa Rinpoché of
Mongolia with us today.” This was, in the world of Tibetan Buddhism, a mic-
drop moment. The last Jetsun Dhampa – one of the religion’s most important
figures – died in 2012. But the significance of the announcement was not only
religious. The Dalai Lama had managed to outmanoeuvre China in the
geopolitical chess game of reincarnation.

Seven years ago, the Dalai Lama told a press conference in Mongolia that he
was convinced Jetsun Dhampa’s reincarnation had been born in the country.
“However, the boy is very young right now,” he said, “so there is no need for
haste in making an announcement.” The Chinese government, which claims
sole authority over all Tibetan Buddhist reincarnations, was incensed. It
closed its main border crossing with Mongolia and delayed loan negotiations
with the cash-strapped country.

“As far as my own rebirth is concerned, the final authority is myself…

obviously, not Chinese Communists!”

Then there was silence. Under Chinese pressure, Mongolia, which along with
Tibet is a centre of Tibetan Buddhism, banned the Dalai Lama from future
visits. To stiffen the Mongolians’ resolve – and embolden the boy’s reluctant
parents – the Dalai Lama sent in one of his most influential spiritual advisers:
a monk named Thubten Ngodup. Thubten is the medium of the state oracle of
Tibet, whose visions have guided the decisions of the Dalai Lama and his
predecessors since the 16th century. He met in secret with the boy and his
parents, offering reassurances and counselling patience. “The family was a
little nervous, uncomfortable, but slowly, slowly, they came to accept their
fate,” Thubten told me. “We still had to keep it secret because we didn’t want
China coming up with their own fake Jetsun Dhampa.”
When the Dalai Lama introduced the boy in March, Tibetan Buddhists were
thrilled at the audacity: not only had the Dalai Lama found the reincarnate
lama beyond China’s grasp, he had managed to pull it off in secret. What’s
more, the boy had been born in Florida, giving him the added protection of a
passport from a government that has staunchly defended Tibet’s right to
choose its spiritual leaders. With a single revelation, the Dalai Lama had
created a possible template for an even more important reincarnation to come:
his own.

Reincarnation might seem like an esoteric subject for 21st century geopolitics,
especially for a secular state like the People’s Republic of China. But the
Communist Party’s efforts to manage the transmigration of Buddhist souls are
part of a contentious, decades-long campaign to absorb Tibet into China and
control Tibetan Buddhism. In this existential contest, the reincarnations of the
senior monks known as lamas have become a battleground for the future of
Tibet. And no reincarnation is more consequential or volatile than that of the
Dalai Lama himself.

The 150,000-strong Tibetan exile community, scattered across the globe, is

at risk of losing its identity and unity as another generation comes of age
with no memory of the homeland

At 88 years old, the Dalai Lama is frail enough that three monks assist him –
one on each arm, one girding his waist – as he shuffles across the grounds of
his monastery in Dharamsala. For more than six decades, ever since he
escaped across the Himalayas from invading Chinese forces in 1959, the
Dalai Lama has sustained and unified his people, elevating their struggle into
a global cause. China claims sovereignty over Tibet, and insists that its forces
liberated Tibetans from poverty and slavery. In response, the Dalai Lama has
single-handedly spread a counter-narrative of his homeland as non-violent,
noble and unjustly oppressed. It is almost impossible for Tibetans – and the
world – to imagine a Tibet without him.

But the Dalai Lama is approaching his final years at a time when China has
never seemed stronger – or Tibet more vulnerable. The 6m-7m Tibetans still
inside Tibet live under increasingly harsh Chinese rule. Billions of dollars in
Chinese investment have been accompanied by a systematic weakening of
Tibetan religion and culture, along with tight restrictions on movement and
communication. An estimated million Tibetan schoolchildren are now
compelled to attend Chinese-language boarding schools away from their
homes, raising fears that their own language will soon disappear. Meanwhile,
the estimated 150,000 Tibetans in exile, scattered across the globe, are at risk
of losing their identity and unity as another generation comes of age with no
memory of their homeland. “Tibet is dying a slow death,” Penpa Tsering, the
president of the government-in-exile in Dharamsala, told me. “China is
slowly, slowly constricting us like a python.”
Follow the leader The Dalai Lama is keeping the identity of his successor
close to his chest (opening image). From top to bottom Children play
between classes at Namgyal monastery, the personal monastery of the Dalai
Lama. It relocated to Dharamsala, a city in north India, after the Tibetan
uprising in 1959. A young monk memorises scripture at the monastery. A
monk takes a walk in McLeodganj, a suburb of Dharamsala with a large
population of Tibetans

Many Tibetans have tethered their hopes to the Dalai Lama. He is the 14th
human incarnation of the first Dalai Lama, who was born in 1391 and
considered the reincarnation of one of the most enlightened beings in Tibetan
Buddhism, Avalokitesvara, the bodhisattva of compassion. He has led his
people through 15 American presidents and all 74 years of the People’s
Republic. Through his reincarnated lineage, he connects Tibetans to the
bedrock of their history.

But what will happen when the Dalai Lama leaves this world? As a spiritual
adept who wishes to continue helping others achieve enlightenment, the Dalai
Lama is believed by Tibetan Buddhists to have the ability to choose the body
into which his soul transmigrates. The Chinese government, however, has
other ideas. Tibetans are now bracing for the emergence of two Dalai Lamas
– one chosen by China, the other by the Dalai Lama or Tibetans close to him.
Faced with this bizarre scenario, the Dalai Lama has been playful and elusive
about his intentions. He has suggested, at various times, that the next Dalai
Lama could be a girl, an adult or nobody at all. He might opt for an
“emanation” – choosing someone while he is still alive – rather than a
“reincarnation” after his death. The only certainties the Dalai Lama offers are
that his successor will be born in a “free” country – not Tibet – and that he
alone has the power to decide. “This is a religious matter,” he says. “As far as
my own rebirth is concerned, the final authority is myself…obviously, not
Chinese Communists!”

The Chinese media regularly blasts the Dalai Lama as “the source of all
turmoil in Tibetan society”

China’s attempts to justify its role in choosing the next Dalai Lama feel like an
admission that six and a half decades of economic development and harsh
repression have not won the loyalty of all Tibetans or shaken their devotion to
their spiritual leader. For that, China seems to need a Dalai Lama of its own.
And yet, its intervention in that process could produce more chaos than
control. China will cajole other nations – and Tibetans themselves – to
publicly recognise its state-approved selection, seeing this as the ultimate step
in the long march to assimilate Tibet into China. But the Dalai Lama still has a
reserve of moral legitimacy and international influence. America is already
backing the Dalai Lama’s right to choose his own successor, even threatening
to sanction Chinese officials who try to meddle in the process.

In April I travelled to Dharamsala to meet the Dalai Lama and understand

Tibet’s predicament. My first glimpse of him came outside the gates of the
Namgyal monastery shortly before a service of public prayer for his long life.
Helped out of a golf buggy by his attendant monks, the man famous for his
mirthful expressions tightened his face into a rictus of concentration. For an
instant, the Dalai Lama looked, like most people his age, distinctly mortal.

Helped out of a golf buggy by his three attendant monks, the man famous
for his mirthful expressions tightened his face into a rictus of
concentration. At that moment, the Dalai Lama looked, like most people his
age, distinctly mortal
The moment passed, and the Dalai Lama’s face radiated with a childlike grin
as he walked into the enormous crowd of well-wishers. He greeted the
gathered pilgrims – Tibetans in traditional finery, monks in burgundy robes,
foreigners in hiking gear – and made his way to the throne. There, the Dalai
Lama gave his followers the kind of assurance that has nourished them over
the decades. “Please pray from the depths of your hearts that I may have a
long life, and I will pray, too,” he said in his deep baritone. “Apart from the
trouble in my knees, my health is good. I am determined to live to be more
than 100 years old.”

One evening in 1938, a group of monks disguised as servants arrived in a

village in north-eastern Tibet, in what is now the Chinese province of
Qinghai. The visitors were on a clandestine mission to find the reincarnation
of the 13th Dalai Lama. Signs, including visions at a sacred lake and a rare
fungus growing on the departed leader’s shrine, had led them to the home of a
two-year-old boy called Lhamo Dhondup. The boy addressed the group’s
leader by his Buddhist name, even though they had never met, and was fixated
by the prayer beads in the leader’s hand. The rosary had once belonged to the
late Dalai Lama, and the boy claimed it as his own, exclaiming “It’s mine, it’s
mine.”

The boy was taken to the Tibetan capital of Lhasa, where the institution of the
Dalai Lama had ruled politically and spiritually since 1642. When he was
four, the boy – now with his Buddhist name, Tenzin Gyatso – was formally
enthroned as the Dalai Lama. He spent most of his time behind the fortress
walls of Potala Palace, where regents ruled in his stead and monks guided his
studies of Buddhist scriptures.

In late 1950 tens of thousands of Chinese troops swept into Tibet, and the boy,
then 15, was vested with full political authority, a responsibility he was not
expecting to assume for another five years. Over the next decade, he fought to
preserve Tibetan culture and religion within the People’s Republic of China.
In 1954, on an extended visit to Beijing, he met Chairman Mao Zedong, who
told him that “religion is poison”. He also befriended a top official with a
one-year-old son named Xi Jinping.
All that Xi wants Tenzin Tsundue, a poet and activist, at his home in
Dharamsala (top). A Tibetan refugee dons a mask of Xi Jinping, the Chinese
leader, at the office of Students for a Free Tibet (second from top). A
campaign director at Students for a Free Tibet (bottom)

When the Chinese crushed a Tibetan uprising in 1959, killing thousands of

protesters, the 23-year-old Dalai Lama fled on horseback. But the heartbreak
of losing his country was accompanied by a feeling of liberation from his
“golden cage”. No previous Dalai Lama, it is believed, had ever set foot
outside the kingdom. “We in Tibet were isolated,” he told me in April. “They
counted me as a demi-god on the throne. But I came to India and here, as a
refugee, I can interact with people.” As one of his advisers told me: “He lost
a nation and gained a world.”

Tens of thousands of Tibetan refugees followed the Dalai Lama, arriving in

India with no skills and few prospects for employment beyond road
construction and farming. During the Cultural Revolution, rampaging Red
Guards completed the destruction of almost all of Tibet’s 6,000 monasteries,
temples and shrines, sending another wave of refugees across the border.
From exile, the Dalai Lama tried to forge a stronger, more inclusive Tibetan
identity that united what had been a fractious collection of religious sects and
regional loyalties. He set up cultural institutes, libraries, museums and
monasteries. With his sister, he pioneered a network of schools that taught
refugee children their common culture and language.

As a refugee lacking the trappings of state power, the Dalai Lama has still
managed to gain global influence through some alchemy of karma, charisma
and politics. On his first visit to America in 1979, the 44-year-old monk spent
seven weeks charming audiences across the country with his playful sense of
humour and stories of his mystical, troubled homeland. His biggest fans came
from the American counterculture, which identified with his message of love,
meditation and anti-materialism.

Anywhere the Dalai Lama visits becomes the object of speculation: is this
where his reincarnation will be found?

In late 1989, just four months after the massacre around Tiananmen Square
and seven months after Chinese troops violently suppressed protests in Lhasa,
the Dalai Lama was awarded the Nobel peace prize. The Chinese government
was livid. But the West’s fascination with him only deepened, with a spate of
films including “Seven Years in Tibet” (starring Brad Pitt), public
appearances with Richard Gere and Bono, and benefit concerts organised by
the Beastie Boys. Invitations flooded in from presidents and Nobel laureates.
In the wake of Tiananmen, the Dalai Lama emerged as the Chinese regime’s
most identifiable opponent.

He is not, however, a firebrand. Often to the frustration of younger activists

who agitate for full Tibetan independence, the Dalai Lama has long advocated
the “middle way” of greater autonomy under China’s control. On trips abroad,
he has spoken more about humanity’s need for compassion than China’s
deepening repression. “You’ll never find another leader from a country that
was taken, looted, who still pushes for negotiations, reconciliation,” says
Geshe Lhakdor, a senior monk who served as the Dalai Lama’s translator for
16 years. “He is Beijing’s best opportunity. The next Dalai Lama might not be
so forgiving.” The Chinese authorities don’t care. In their eyes, the Dalai
Lama’s popularity at home and abroad has made him an enduring threat.

By the 1990s the Chinese authorities banned prayers to the Dalai Lama, as
well as the display of his image. Tens of thousands of monks and nuns in Tibet
were forced to denounce him in public. The Chinese press regularly blasts
him as a fraud, a traitor, a blasphemer, a separatist, “the source of all turmoil
in Tibetan society”. The most extravagant denunciations label him a “jackal in
monk’s clothing” with the “face of a human and the heart of a beast” – quite a
description for the man who collaborated with Archbishop Desmond Tutu on
a work called “The Book of Joy”.

“Please pray from the depths of your hearts that I may have a long life, and
I will pray, too. Apart from the trouble in my knees, my health is good. I am
determined to live to be more than 100 years old.”

The name-calling has been accompanied by threats against any government

that recognises the Dalai Lama as the representative of Tibet. As China has
grown into a superpower, the state dinners and official receptions for the
Dalai Lama have dwindled – few governments want to torpedo their
economic relationship with China over a single meeting with a stateless monk.
No British prime minister has met the Dalai Lama since 2012, no American
president since 2016.

In the meantime, the Dalai Lama has gradually relinquished his leadership of
the government-in-exile. In 2011 he formally surrendered his political
authority – marking the end of his institution’s 369 years in power – and
pushed the exile community into the world of electoral democracy. The
experiment, inspired by the raucous elections in his adopted land, was both a
reflection of his belief in democratic governance and a shrewd tactical move.
By renouncing his most controversial role as head of the government, he
subverted any future political claim by a Chinese Dalai Lama.
Say a little prayer In the Tibetan tradition, monasteries are traditional centres
of learning and activism (top). Many Tibetans in exile have made Dharamsala
their home (second from top). Young monks after their morning classes at the
monastery (bottom)

The transition to democracy, however, has been a bumpy one. After elections
in 2021, a political stand-off paralysing the parliament was solved only after
lawmakers appealed directly to the Dalai Lama himself. “His Holiness has
pushed us to make Tibet a self-sustaining democracy,” said one Tibetan
official. “He says it’s dangerous to rely on just one person. But the irony is
that we still look to him to solve all our problems.”

In 2007 China’s State Administration for Religious Affairs issued a regulation

called “Measures on the Management of the Reincarnation of Living
Buddhas”. Drawing in part on a Qing dynasty decree of 1793, the document
laid out 14 rules to formalise its control over all future reincarnations,
including the Dalai Lama’s. Order Number Five, as the set of rules is known,
maintains that only the Chinese government can grant the authority to search
for and recognise reincarnate lamas, known as tulkus or living Buddhas. It
also requires state permission for a lama to reincarnate in the first place. Only
when all the conditions of Order Number Five have been met will the
government issue its seal of approval – a living Buddha permit.

Less than a decade after Order Number Five was introduced, the
government’s list of state-approved tulkus had grown to more than 1,300.
These lamas filter into Tibetan monasteries already constrained by Chinese
surveillance and control. In a region where universities didn’t exist before the
1980s, monasteries are the traditional centres of learning and activism. Since
2009 around 160 Tibetans, mostly Buddhist monks and nuns, have set
themselves on fire in protest of Chinese rule. As the flames consumed them,
many called for the Dalai Lama’s return to Tibet. Spooked by the self-
immolations, in 2011 China sent official “work teams” to monitor every
monastery and Tibetan village. They never left. Under their watch, the
monasteries must display photos of Xi Jinping, the Chinese leader, raise the
Chinese flag and subject monks to sessions studying Xi Jinping Thought.

“Tibet is dying a slow death. China is slowly, slowly constricting us like a

python.”

China’s planning for the Dalai Lama’s succession is accelerating. A group of

officials secretly convened in January to begin preparing the selection
process, according to Robert Barnett, a scholar of Tibet. Over the past year,
state media have revived interest in such arcana as the Golden Urn, an 18th-
century relic of the Qing dynasty that China claims has historically been used
to select high lamas. (The Dalai Lama himself says that his predecessors only
pretended to use the golden urn to “humour” the Qing emperor.)

America has responded forcefully. In December 2020 Congress passed the

Tibet Policy and Support Act, which stipulates that the succession of the Dalai
Lama be left to Tibetan Buddhists without interference from the Chinese
government. It is the first American law to address the process of Buddhist
reincarnation. Uzra Zeya, America’s special co-ordinator for Tibetan issues,
is trying to unite like-minded countries and organisations to reject China’s
plan, though it’s not much of a coalition yet. So far, the list of countries
speaking out publicly includes Canada, Britain, the Czech Republic, and
Lithuania, in addition to a slew of non-governmental groups. Even so,
America is turning up the heat. In December 2022 it imposed sanctions on two
Chinese officials for human rights abuses in Tibet.
While China publishes detailed plans, the Dalai Lama remains playfully
elusive. According to tradition, the Dalai Lama has the authority to control his
own reincarnation, but Tibetan methods for identifying a successor have never
been standardised. They have always relied on a multitude of obscure signs –
oracular visions or the orientation of a dead lama’s body. But the Dalai
Lama’s shifting suggestions about who might succeed him seem designed to
keep China off-balance. A few years ago, he even suggested that there might
be no reincarnation at all, making him the last Dalai Lama. (A commission of
Tibetan clerics quickly passed a resolution urging him to recant.)

In 1954, on an extended visit to Beijing, the Dalai Lama met Chairman Mao
Zedong, who told him that “religion is poison.” He also befriended a top
official with a one-year-old son named Xi Jinping

The Dalai Lama has said that when he is around 90 years old, he will write
down details of his reincarnation, which will be shared only with the monks
involved in the search. There’s no telling the exact shape the process will
take, or how long the wait might be. The Dalai Lama says that he had a dream
that predicted he would live until 113. Even if he lives to that ripe age, the
period between his death and the full readiness of his child successor could
be dangerously unstable. In Tibetan Buddhism, reincarnated lamas have
typically been born the year their predecessors die and are identified when
they are toddlers, leaving a 15- to 20-year gap before they reach maturity.
Tibetans worry that China will exploit that interregnum.

To avoid that vulnerability, the Dalai Lama has raised the possibility of
reincarnating as an adult – or of emanating while he is still alive. That
successor would be tutored in secret before emerging after the Dalai Lama’s
death. The fact that the young Jetsun Dhampa was hidden for seven years
before being revealed even raises the tantalising possibility that the next Dalai
Lama may already have been found.
Next in line From top to bottomChildren conduct morning chores at a Tibetan
Children’s Village, a school for Tibetan refugees. The school is in
McLeodganj. Declining numbers of children from Tibet have compelled
schools to start accepting students from the surrounding Himalayan regions. A
girl sits for breakfast at the school

The last time the Dalai Lama identified a reincarnated lama inside Tibet, 28
years ago, the six-year-old Panchen Lama was kidnapped and never heard
from again. China replaced the boy with its own choice, now a 33-year-old
man with all the pomp of a lama but few devoted followers in Tibet. He is
expected to play a central role in finding and promoting China’s state-
approved successor to the Dalai Lama. With the current Dalai Lama ruling out
Tibet as a possible location for reincarnation – thanks, in part, to the Panchen
Lama debacle – pilgrims from all over the world now travel to Dharamsala to
implore him to reincarnate in their countries. “Just one soul, how can I
divide?” he responds.

Anywhere the Dalai Lama visits becomes the object of speculation: is this
where his reincarnation will be found? He has not left India since 2018 owing
to health concerns and the covid-19 pandemic. But this summer, like last year,
he is taking an extended holiday in Ladakh, a region along India’s disputed
northern border with China. Ladakh’s arid climate offers his lungs relief from
the muggy monsoon season in Dharamsala, but it’s also a conflict zone. A
skirmish in 2020 between Indian and Chinese troops left some 20 dead, and
50,000 troops are still massed on either side of the border. If the next Dalai
Lama is discovered there, China would be outraged – and it could signal that
India, which has maintained a studied silence on the question of Tibet, is
ready to take a more confrontational stance.

In late 1989, just four months after the massacre around Tiananmen Square
and seven months after Chinese troops violently suppressed protests in
Lhasa, the Dalai Lama was awarded the Nobel Peace prize

An even more incendiary choice would be the disputed high-altitude town of

Tawang, home to India’s largest Buddhist monastery and the birthplace of the
sixth Dalai Lama in 1683. Indian and Chinese troops clashed near here as
recently as December last year. The Dalai Lama provoked furious protests
from China the last time he visited Tawang in 2017. Tensions will be high if,
as expected, he visits the town later this year.

Only two decades ago, more than 3,000 refugees from Tibet arrived annually
in India. With help from America, the Tibetan government-in-exile built a
large reception centre in Dharamsala to welcome them. By the time the
building was finished, in 2012, only a few hundred Tibetan refugees a year
were making the journey. China had blocked escape routes and confiscated
passports. In the last four years just 33 Tibetans have made it to the reception
centre. Tenzin Wangden, a 25-year-old farmer from eastern Tibet, is one of
them: he trekked across the Himalayas in February. He told me that he was the
first to leave his village in over a decade.

Tibetan families used to regularly send one of their children over the
mountains to go to school in Dharamsala. Nearly all the notable Tibetan exiles
are products of these schools, known as Tibetan Children’s Villages (TCVs).
The TCV in Upper Dharamsala used to admit up to 700 new Tibetan pupils a
year. In the past ten years not a single child has arrived directly from Tibet.

“I feel very much concerned about the Chinese invader. Their mind is very
narrow and much involved with anger, jealousy.” Then, as if to demonstrate
the universality of Buddhist compassion, the Dalai Lama added: “I always
pray for them!”

With so few new arrivals, the exile community has been starved of energy –
and news from their homeland. Schools and monasteries in Dharamsala have
made up some of the shortfall by recruiting students from surrounding
Himalayan regions. At the TCV in Upper Dharamsala, I met kids from Bhutan,
Nepal and Ladakh. One chubby first-grader had just arrived from Maine and
didn’t speak a word of Tibetan. His parents – exiles – had dispatched him
there for a year’s immersion in Tibetan culture.

The exodus of Tibetans from Dharamsala to the West, especially New York, is
a further challenge for the exile community. This “second migration” started
30 years ago when America offered citizenship to 1,000 Tibetans, but has
accelerated over the past decade. Tens of thousands of Tibetan exiles have
now left, lured by greater opportunities. Wangden Kyab, a researcher at Tibet
Watch, an advocacy group, worries that the dispersal is weakening the Tibetan
cause: “If we are scattered across the world, it is like snow on the oceans.”

Before my trip to Dharamsala, I visited the Tibetan community centre in

Queens, New York. A few hundred of the city’s 12,000 Tibetans – mostly
second- or third-generation exiles – had turned out in their finest robes to
celebrate the Tibetan New Year. Presiding over the service was a portrait of
the Dalai Lama, propped up on stage and garlanded with flowers. As I
descended the stairs into the basement, the chanting of monks gave way to the
chatter of children emerging from three hours of Tibetan language classes.
None of these children had ever been to Tibet. Few of their parents had either.
Even so, they were deeply loyal to their spiritual leader. One girl told me that
her family, like most, displayed a photo of the Dalai Lama on an altar in their
living room. Each day, she and her brother refresh the water in seven
traditional offering bowls. “It seems unreal that he would ever leave us,” she
said.
Home from home A women in traditional Tibetan dress dances in
Dharamsala (top). Monks walk around Namgyal monastery (second from
top). Monks are served tea during their morning prayers (bottom)

Every year, on March 10th, Tibetan protesters march in New York, and
elsewhere, to commemorate the Tibetan uprising in 1959. This year more than
a thousand Tibetans congregated in midtown Manhattan, stopping traffic with
a mile-long river of Tibetan flags, anti-Communist placards and posters of the
Dalai Lama. Second-generation activists joined grey-haired former guerrillas
who had been trained by the CIA in the 1960s. Most passionate of all were
the students, primarily groups of young women.

As the demonstrators headed towards the Chinese consulate, a few marchers

hung back, wary of being identified by the building’s cameras and face-
recognition technology. It could hurt their chances of securing a rare visa to
Tibet, or put their relatives there at risk of a visit from police. Any
communication with Tibet is fraught: exiles tend to stick to a few short calls
or texts with family each year, and people often use coded language. “It’s been
stormy lately” could mean “the police have been harassing us”. “Aku Pema”
(Uncle Pema) is code for the Dalai Lama, derived from a popular Tibetan
song about an absent loved-one, but it has become so widely known that few
dare to use it.

The Chinese media regularly blasts the Dalai Lama as a fraud, a traitor, a
blasphemer, a splittist, “the source of all turmoil in Tibetan society”. The
most extravagant denunciations label him “a jackal in monk’s clothing”
with “the face of a human and the heart of a beast”

Across from the consulate there was a makeshift stage. Tsering Yangchen, a
20-year-old Harvard student, stepped up to the microphone, a blue-and-red
Tibetan flag around her neck. Like many young Tibetan activists, she had
disdain for euphemism. “China, you have not liberated us,” she said. “You
have chained us.” Tsering was taking a year off from college to work as an
intern at Students for a Free Tibet, an organisation that campaigns for Tibetan
political independence. Her generation of exiles was born into activism, she
explained. For people like her, “Slogans such as ‘Free Tibet’ and ‘Long live
the Dalai Lama’ were among the first words to escape our mouths.”

On my last day in Dharamsala, I went to meet the Dalai Lama at his residence
on the hill above his monastery. Snow-capped Himalayan peaks shimmered in
the distance and monkeys cavorted in the trees above. As he nears his tenth
decade, the Dalai Lama devotes most of his time to prayer and meditation. His
travel has been slowed down by a series of health scares, and these days his
followers tend to come to him. After early-morning prayers, the Dalai Lama
receives a couple of hundred visitors, or presides over long ceremonies in the
monastery.

My visit happened to coincide with the Dalai Lama’s first public controversy
in years. A few weeks earlier, he had been approached by an eight-year-old
boy at a public prayer service. After the boy asked him for a hug, the Dalai
Lama kissed him lightly on the lips before sticking out his tongue and asking:
“Would you like to suck my tongue?” The video of the incident went viral.
Commenters around the world jumped in with ugly epithets: predator,
paedophile. The Chinese government, eager to humiliate its nemesis, ensured
the film was aired widely, the first time the Dalai Lama had appeared on
Chinese television in decades, though the clip may have reassured those in
Tibet that their absent leader was still alive. Many Tibetans in exile were
outraged at the smearing of their leader’s reputation. The Dalai Lama is well
known for his teasing. Sticking your tongue out is a common greeting in
Tibetan culture. When children have cleared their plates, Tibetan parents and
grandparents often joke: “Want to eat my tongue?”

The last time the Dalai Lama identified a reincarnated lama inside Tibet,
27 years ago, the six-year-old Panchen Lama was kidnapped and never
heard from again

The news, however, had yet to reach either me or the Dalai Lama as we sat
down in his residence. For the duration of our conversation he gripped my
hand, and seemed more sanguine about the future than anybody else I had
spoken to in Dharamsala.

He had no doubt that Tibetans – and the world – will recognise his “true”
reincarnation and reject China’s “fake” selection. When I asked how he could
remain optimistic given the dire state of affairs in Tibet, he raised his finger
for emphasis. “We have truth; Chinese policy is based on lies,” he said. “In
the long run, truth is more powerful than lies.”

The Dalai Lama’s singular achievement has been to hold together a Tibetan
community riven by regional, doctrinal and political differences through force
of personality alone. “When His Holiness passes away, it will create…a
leadership vacuum that no one, no one can replace,” says Tenzin Tsundue, a
poet and activist. The death of the Dalai Lama may empower more radical
voices advocating for Tibetan independence, or even provoke another round
of civil unrest inside Tibet. Though very few Tibetans will accept China’s
reincarnation, a years- or even decades-long battle for legitimacy seems all
but inevitable.

In Dharamsala, the Dalai Lama did not exude bitterness towards the Chinese
government. Indeed, he seemed almost sympathetic. “I feel very much
concerned about the Chinese invader,” he said. “Their mind is very narrow
and much involved with anger, jealousy.” Then, as if to demonstrate the
universality of Buddhist compassion, he added: “I always pray for them!”

That may sound like an empty gesture. But the Dalai Lama is quick to point out
that Buddhism is flourishing inside China, as citizens seek to fill a moral and
spiritual void. There are now more than 250m Buddhists in China, well over
twice the number of Communist Party members. The Dalai Lama takes a long
view not just of history but also of the future. During his lifetime, he may not
be able to bring freedom to the Tibetans living under Chinese rule. But he
believes that Buddhism, in his afterlife at least, will eventually free the minds
of their repressive rulers – a mission that will have to be taken up by his
reincarnations. “Politically, China controls Tibet,” he told me, flashing a
smile, “but one day we will control China spiritually.” ■

Brook Larmer is a freelance journalist and author of “Operation Yao Ming”

PHOTOGRAPHS: Saumya Khandelwal

This article was downloaded by zlibrary from
https://www.economist.com/1843/2023/07/27/who-will-succeed-the-dalai-lama
Business
China hits back against Western sanctions
Next-generation Googles run a tighter ship
The dark and bright sides of power
Can AT&T and Verizon escape managed decline?
Why your new EV is making funny noises
Why Walmart is trouncing Amazon in the grocery wars
The dragon shows its claws

China hits back against Western sanctions

The Communist Party is becoming less timid in its retaliation against
American economic warfare
Jul 23rd 2023 | Shanghai

IN 2019, AS China’s trade war with America was heating up, the People’s
Daily predicted that the Chinese monopoly on rare earths, minerals crucial to
the production of most modern hardware, would become a tool to counter
American pressure. “Don’t say we didn’t warn you,” the Communist Party
mouthpiece thundered. For years the bluster was just that. Between 2009 and
2020 the number of Chinese export controls on the books ballooned nine-fold,
according to the OECD, a club of mostly rich countries. Yet these restrictions
were haphazard, informal and aimed at narrow targets—random warning
shots rather than a strategic offensive.

As America ratchets up its sanctions against China, which among other things
make it impossible for Western chip companies to sell Chinese customers
cutting-edge semiconductors and the machines to make them, new volleys
from Beijing are coming thick and fast. Earlier this month, after China
announced its latest export controls, this time on a pair of metals used in chips
and other advanced tech, a former commerce-ministry official declared that
the measures were “just the beginning” of Chinese retaliation. On July 20th
Xie Feng, China’s new ambassador to America, said that his country “cannot
remain silent” in the escalating war over technology. A response, he hinted,
was coming.

This time it looks much more deliberate. To counter America’s effort to

contain China’s technological ambitions, Xi Jinping, China’s paramount
leader, has called on regulators to fight back against Western coercion in what
he has called an “international legal struggle”. The result is a flurry of
lawmaking that is creating a framework for a more robust Chinese reaction to
America’s commercial warfare.

The list of recent laws is long. An “unreliable entities” list, created in 2020,
punishes any company undermining China’s interests. An export-control law
from the same year created a legal basis for an export-licensing regime. In
2021 an anti-sanctions law enabled retaliation against organisations and
individuals who carried out the sanctions of other countries. A sweeping
foreign-relations law enacted this year, and prompted by Western sanctions
against Russia over its invasion of Ukraine, permits countermeasures against a
wide range of economic and national-security threats facing the country. It
came into effect on July 1st. The same day an anti-espionage statute came into
force, extending the reach of Chinese security agencies. All the while, China
has tightened various data and cyber-security rules.

The new rules are already being deployed, as opposed to merely brandished.
In February Lockheed Martin and a unit of Raytheon, two American
armsmakers with non-defence businesses in China, were placed on the
unreliable-entities list after shipping weapons to Taiwan (which China
regards as part of its territory). The companies are blocked from making new
investments in China and from trade activity, among other restrictions. In
April Micron, an American chipmaker, was hit with an investigation by
China’s cyberspace regulator, based on a new cyber-security law. After
Micron failed a security review, Chinese authorities banned its
semiconductors from critical infrastructure.
The laws’ vague wording makes it hard for Western companies to assess any
potential impact on their business in China. The “mother of all sanctions
laws”, as Henry Gao of Singapore Management University describes the
foreign-relations act, hazily vows to hold accountable anyone acting in a
manner that is deemed “detrimental to China’s national interests…in the
course of engaging in international exchanges”. Several foreign law firms in
China have been asked by their Western clients to evaluate the risks of being
investigated. One lawyer looking into potential Chinese cyber-probes notes
that American tech companies producing commodified hardware components,
such as Micron’s memory chips, should be on guard for sudden investigations.
China’s new laws allowing the government to restrict a broad range of
minerals and components, meanwhile, are injecting similar uncertainty into
the businesses of their foreign buyers. One affected group, notes David Oxley
of Capital Economics, a research firm, is Western manufacturers of green-
energy technologies. Battery-makers, in particular, are highly dependent on
China across the supply chain (see chart). Last year the commerce ministry
proposed a ban on exports of ingot-casting technology used in making solar-
panel wafers. If imposed, such a prohibition could hold back the development
of indigenous solar-power technology in the West, which would hurt Western
manufacturers, simultaneously increasing foreign demand for finished Chinese
solar panels.

Post-silicon volley
The restrictions on the two chip metals, gallium and germanium, could cause a
strategic headache for America. The rules, which come into force on August
1st, require exporters to apply for licences to sell the metals to foreign
customers. China produces 98% of the world’s raw gallium, a key ingredient
in advanced military technology. This includes America’s next-generation
missile-defence and radar systems. A shock to the supply of gallium could
create long-term problems for the American defence industry, reckons CSIS, a
think-tank in Washington. Moreover, a gallium-based compound, gallium
nitride, may one day underpin a new generation of high-performance
semiconductors. Keeping the material out of foreign hands would stymie
Western efforts to develop the technology, while furthering Mr Xi’s goal for
China to control it.

China needs to tread carefully. The country reimports many of the finished
products that are manufactured abroad using rare earths, points out Peter
Arkell of the Global Mining Association of China, a lobby group, so
prohibitions could come back to bite Chinese companies. Outright export bans
would also prompt the West to build its own relevant production capacity and
seek substitutes, observes Ewa Manthey of ING, a Dutch bank. This would in
the longer term weaken China’s hand. And labelling big Western firms with
large Chinese operations as unreliable entities could jeopardise thousands of
Chinese jobs. That may explain why rather than blacklisting all of Raytheon,
whose aviation subsidiary, Pratt & Whitney, employs 2,000 people in China,
the commerce ministry limited its ban to the American company’s defence
unit.

So far the relatively pragmatic ministries of commerce and foreign affairs

have led the implementation of the various laws. One concern among Western
businesses is that more hardline agencies supplant them. If the tech war
escalates further, China’s National Security Commission, chaired by Mr Xi
himself, may take the lead, fears Mr Gao. If that happens, concerns about
potential blowback for Chinese commerce are likely to carry less weight. The
consequences are scary to contemplate—and not just for Chinese and
American CEOs. ■

To stay on top of the biggest stories in business and technology, sign up to

the Bottom Line, our weekly subscriber-only newsletter.
This article was downloaded by zlibrary from
https://www.economist.com/business/2023/07/23/china-hits-back-against-western-sanctions
Lean innovation

Next-generation Googles run a tighter ship

Like their big-tech role models, startups embrace efficiency
Jul 25th 2023

MARK ZUCKERBERG dubbed 2023 Meta’s “year of efficiency”, corporate-

speak for admitting that his social-media empire was bloated. Since
November Meta has cut 21,000 jobs, or about a quarter of its workforce.
Bosses of its fellow tech titans have also embraced the efficiency mantra.
Alphabet, Amazon and Microsoft have collectively shed more than 50,000
jobs since October. Despite an uptick in ad sales, talk of “re-engineering the
cost base” and the like still featured in big tech’s quarterly-earnings calls this
week. The bloodletting (in plain English) is not limited to the giants.
According to layoffs.fyi, a sackings-tracker, nearly 900 tech firms around the
world have announced total job cuts of more than 220,000 in 2023.

The slump has hit younger firms hardest. Rising interest rates make their
promise of rich profits far in the future look less juicy today. As a
consequence, venture capitalists are stinting. Globally, venture-capital
investment in the first half of this year was $144bn, down from $293bn in the
same period in 2022. Those that find investors are seeing their valuations
squeezed. According to Carta, an equity platform for startups, in the first
quarter of 2023 almost a fifth of all venture deals were “down rounds”, where
firms raise money at a lower valuation than before. That of Stripe, a fintech
star, fell from $95bn to $50bn after its latest funding round in March.

This is forcing aspiring Alphabets and Metas to follow their role models and
ditch the habits acquired in the era of easy money. Efficiency is the talk of
Silicon Valley. Firms accustomed to spending with abandon to win market
share find themselves in the unfamiliar position of having to trim fat. And
there is plenty of fat to trim.

A good place to start is payroll. Battle-hardened founders gripe that salaries

are young firms’ biggest expense. In July startup job postings on Hacker
News, a site for coders, were down by 40% compared with a year ago. The
average startup is already looking leaner. Numbers from CB Insights, a data
provider, show that the median number of employees at young firms is
declining. In 2018 the typical firm that raised a round of $10m-25m had some
50 employees. In 2023 a similar one employs 41. It is the same story for
larger startups, all the way to late-stage ones raising up to $500m per round
(see chart).

In the go-go years firms hired lots of people who did not have that much to do.
Not any more. Most startups, points out Tom Tunguz, a venture capitalist, can
run with smaller teams, with a negligible impact on revenues. Tech firms are,
naturally, embracing artificial intelligence (AI). An AI “co-pilot” on GitHub,
a Microsoft-owned platform for open-source programs, improves coders’
productivity by 30%. And it is not just the geeks who benefit. Other
employees use AI-based tools, from chatbots like ChatGPT that churn out
emails for marketers to clever software that improves sales efficiency. One
founder of an early-stage startup with fewer than ten employees estimates that
AI has already boosted his company’s productivity by 30-40%.

The austere spirit is visible even among one of the few categories of startup
that is unaffected by investors’ newfound stinginess: those which develop all
the sought-after AI tools. Anthropic, a firm founded by defectors from
OpenAI, which created ChatGPT, has secured $1.2bn with 160 employees.
Adept, a company started by former employees of DeepMind, an AI lab
owned by Alphabet, has raised $415m with 37 employees. Compare that with
darlings of the previous startup boom. Klarna, a Swedish payments company
that experienced wild growth a few years ago, had 2,700 employees by the
time it notched up $1.2bn. Databricks, a database-maker, had a staff of 1,700
at a similar stage. ■

To stay on top of the biggest stories in business and technology, sign up to

the Bottom Line, our weekly subscriber-only newsletter.
This article was downloaded by zlibrary from
https://www.economist.com/business/2023/07/25/next-generation-googles-run-a-tighter-ship
Bartleby

The dark and bright sides of power

Bosses cannot afford to be oblivious to the effects of authority
Jul 27th 2023

POWER IS A fact of corporate life. It also affects behaviour. Research

suggests power makes people less likely to take the advice of others, even if
those others are experts in their fields. It makes them more likely to gratify
their physical needs. In a test conducted by Ana Guinote of University College
London, powerful people were likelier than less powerful folk to choose
tempting food, like chocolate, and ignore worthier snacks like radishes. In
conversations, the powerful are bewitched by themselves: they rate their own
stories as more inspiring than interlocutors’.

They struggle to see things from the perspective of others. In one famous
experiment, some people were asked to recall a time they held power over
someone else and others a time when another person was in a more powerful
position than them; both groups were then asked to draw a capital “E” on their
own foreheads. Subjects primed to think of themselves as powerful were
three times more likely to draw the “E” as though they were looking at it
themselves, making it appear backwards to anyone else.

Power even makes people think they are taller. In another experiment, those
coaxed to think of themselves as powerful were more likely to overestimate
their own height relative to a pole, and to pick a loftier avatar to represent
them in a game, than less potent counterparts.

Cause and effect are hard to unravel here: the dominant types who snaffle the
chocolate and leave the radishes may also be more likely to climb the ladder.
But possessing power seems itself to put a thumb on the scales, towards more
entitled and self-serving behaviour.

Power also affects those lower down the pecking order. In a study published
in 2016, Christopher Oveis of the University of California, San Diego, and his
co-authors looked at how status affects laughter. The researchers recorded
members of a fraternity house in an American university, some new joiners
and some old hands, teasing each other. Higher-status participants laughed
more loudly and with less inhibition than lower-status ones—primates, not
mates.

Power is out of sync with the times. High-performing teams depend on

collaboration and candour, not cringing and compliance. Humility is
increasingly prized as an attribute of senior executives. In hiring processes
some interviewers will look for use of the word “I” rather than “we” as a
small marker of how egocentric people really are.

Entire industries are feted for the way they try to counteract the effects of
power. The aviation industry is celebrated for a training technique called
“crew resource management” that is designed to encourage a less hierarchical
set of interactions in the cockpit. Similar kinds of thinking are visible in other
workplaces that have especially clear chains of command, from the army to
hospitals.

Still, power can also get a bad press. Hierarchies emerge organically, and
with good reason: precious little gets done when everyone is in charge.
Research published this year by Ozgecan Kocak of Emory University and her
colleagues found that flatter organisations are likelier to spend too much time
exploring options than ones where someone is clearly in charge. It doesn’t
particularly matter if the boss knows what they are talking about; the mere fact
that authority is being wielded means a team converges more quickly on a
decision.

Power is an instrument for achieving noble ends as well as selfish ones: it is

no use having brilliant ideas without the means to put them into practice. One
of the most popular classes at Stanford Graduate School of Business is a
refreshingly functional one called “Paths to Power”. It is taught by Jeffrey
Pfeffer, a charming man who preaches the value of rule-breaking, displays of
anger, “strategic misrepresentation” (ie, lying) and many other countercultural
qualities in order to get to the top.

You don’t have to believe that to appreciate the importance of power.

Companies like the idea of humility and teamwork but they are also feudal
structures that depend on ambition, impatience and gallons of unwarranted
self-confidence. The best managers are well aware of how their own power
sends ripples across the organisation. They take care not to signal their
opinions too early in meetings; they admit when they don’t know the answer to
something. But they also know when to stop consulting and start commanding.
Up to a certain point, saying “I don’t know” sends a signal of low-ego
inclusivity; beyond it, it is just a signal of not knowing. ■

Read more from Bartleby, our columnist on management and work:

Workplace advice from our agony uncle (Jul 20th)
Executive coaching is useful therapy that you can expense (Jul 13th)
How white-collar warriors gear up for the day (Jul 6th)
This article was downloaded by zlibrary from
https://www.economist.com/business/2023/07/27/the-dark-and-bright-sides-of-power
Immobile

Can AT&T and Verizon escape managed decline?

America’s telecoms incumbents are in a funk
Jul 27th 2023

IN THE EARLY 1980s AT&T Corporation, then America’s telecoms

monopoly, was the darling of Wall Street. As big tech of the day, it was the
mightiest company in the S&P 500, accounting for 5.5% of the blue-chip
index’s total market value. Today its largest descendants, AT&T and Verizon,
can only dream of their parent’s former glory. The two companies make up
less than 0.7% of the index—and falling. Their combined market
capitalisation of $250bn is roughly half what it was at the start of 2020; the
S&P 500 is up by more than two-fifths since then (see chart).
Factors beyond the undynamic duo’s control, such as rising interest rates or
the recent discovery of a network of old lead-sheathed telephone cables,
which injected uncertainty over their potential liability for the toxic assets,
are partly to blame. Yet much of AT&T’s and Verizon’s malaise is of their
own making. The two telecoms incumbents are finding just how difficult it is
to be a mature firm in a saturated market, especially if you also have a
mountain of debt to manage.
Their core business of selling mobile and broadband subscriptions is
stagnating. On July 25th Verizon said that these revenues grew by less than 1%
in the second quarter, year on year. The next day AT&T announced that its
equivalent figure rose by just 2.4%. What has long been a cosy industry is
turning more competitive. A merger in 2020 between T-Mobile and Sprint
created a 5G powerhouse that is offering equally fast mobile connections at
lower prices. And on July 26th DISH Network, a satellite-TV firm, unveiled a
partnership with one of today’s tech titans, Amazon, to provide mobile
services for $25 a month to members of Amazon’s Prime loyalty scheme.

Previous big bets have backfired. AT&T’s disastrous $200bn foray into
media, including the purchase of Time Warner and DirecTV, has been
unwound. But its effects on morale and on the balance-sheet, weighed down
by net debt of more than $130bn, continue to be felt. Verizon has been less
spendthrift, though it still splurged $53bn in 2021 on 5G spectrum—an
investment which was deemed necessary at the time to compete with T-
Mobile but which has yet to produce a return, as early hype over 5G has
dissipated. Its effort to build a wholesale business, by allowing cable
providers such as Comcast and Charter to piggyback on its networks, created
new competitors, which are offering bundles of internet and TV at a steep
discount.

That leaves the two incumbents with few options. One is to protect margins.
Both Verizon and AT&T are touting their premium plans. On July 24th Verizon
raised the price of its wireless home broadband by $10, to $35 a month. Both
companies are also cutting costs, including by shutting down retail outlets,
which helped each trim operating expenses by 2.5% in the first half of 2023,
year on year.

A more radical move would be to follow some European peers, such as TIM
in Italy, and spin off their fixed networks. This would raise capital, lower
fixed costs and allow management to focus on faster-growing segments such
as wireless broadband. Such a deal would, though, be at odds with the
industry’s trend towards convergence, whereby cable companies are
becoming more like telecom providers, and vice versa, in a battle for
consumers. Offering both home and mobile connections, especially in a
bundle, makes consumers stickier, reduces churn and increases long-term
profitability. That at least is the thinking. To investors, it seems increasingly
wishful. ■

To stay on top of the biggest stories in business and technology, sign up to

the Bottom Line, our weekly subscriber-only newsletter.
This article was downloaded by zlibrary from
https://www.economist.com/business/2023/07/27/can-at-and-t-and-verizon-escape-managed-
decline
Orchestral manoeuvres

Why your new EV is making funny noises

Car firms offer a new set of sounds to motorists
Jul 27th 2023

MOTORING’S SOUNDTRACK use to be generated by the petrol engine and

car radio. Near-silent battery power and snazzy infotainment systems have
provided an aural void—and a high-tech way to fill it. Carmakers are giving
their electric vehicles’ occupants, and anyone within earshot, an alternative
set of sounds to enliven the journey.

One trend is to replace the roar of a petrol engine with the roar of a petrol
engine. Artificial-noise generation offers a flavour of the past in the cars of
the future. Many EVs can blast passengers with fake engine noises just as the
engine sound of cars has long been tweaked and tuned in sportier models to
sound more raucous in the cabin than on the road. Some new models can now
inflict that cacophony on the outside world.

The Abarth 500e, Fiat’s souped-up electric version of its popular small car,
was launched last year with a speaker in its bumper to mimic the petrol
version. Hyundai’s hot-hatch EV, the Ioniq 5 N, likely to go on sale this year,
goes one better. As well as broadcasting car noises it can also screech like a
fighter jet and, for added driver feedback, will jolt slightly between fake gear
changes.

The future is as important as the past when it comes to filling the empty stave
of electric motoring. EVs usually come with an array of large screens filled
with whizzy graphics that demand tuneful accompaniment and an array of new
functions that gives an opportunity for a fresh chorus of bleeps, trills and
bongs. Meanwhile, regulators in America and Europe insist that EVs emit
noises to let pedestrians know they are approaching (the 500e’s warning is a
strumming guitar).

Some companies, like Mercedes-Benz, leave these acoustic signals to in-

house technicians. Others, like Renault, reckon that their sounds will
“underline its singular identity”, and enlist noted musicians. Videos recently
posted on the French firm’s website highlight its collaboration with Jean-
Michel Jarre, a pioneer of electronic music. It follows a trail blazed by
BMW, which in 2019 engaged Hans Zimmer, better known for his Oscar-
winning film scores, as its resident composer. Fortunately for motorists pining
for the peace and quiet of the EV age, all these options come with an “off”
switch.■

To stay on top of the biggest stories in business and technology, sign up to

the Bottom Line, our weekly subscriber-only newsletter.
This article was downloaded by zlibrary from
https://www.economist.com/business/2023/07/27/why-your-new-ev-is-making-funny-noises
Schumpeter

Why Walmart is trouncing Amazon in the grocery

wars
Walmart is more of a threat to the e-commerce giant than the other way
around
Jul 24th 2023

WHEN AMAZON announced the $13.7bn acquisition of Whole Foods Market

in 2017, it came after some oddball attempts to strengthen its grocery
business, some conceived by Jeff Bezos himself. One was to develop an “ice-
cream truck for adults”, driving into neighbourhoods with lights flashing and
horns honking, to sell porterhouse steaks, Shigoku oysters, Nintendo games
and other goodies. It was quietly shelved. Another was to create a product so
unique that only Amazon could supply it. The answer was the “single-cow
burger”, a Wagyu beef patty made from the meat of one animal. You can still
find them on its website—though they are now permanently out of stock.

Amazon’s purchase of Whole Foods signalled it would take a more

conventional approach to the supermarket business. That is probably why,
when the deal was announced, Amazon’s share price soared and those of its
rivals, such as Walmart, fell. But since then Amazon has treated grocery more
like a science experiment than an exercise in seduction, with weak results at
Whole Foods and in other formats. Its best-known addition to the retail
experience is the “just walk out” technology in physical stores, equivalent to
its one-click shopping online. Yet cashierless supermarkets sound like
something more beloved of geeks than grocers. What may cut down on time-
wasting queues also minimises what some people love about shopping: the
human interaction at the till, the hunter-gatherer instinct as they jostle at the
meat counter, the Columbian exchange between fellow foodies at the spice
rack.

Amazon is trying to refresh the experience. Last year it recruited Tony

Hoggett, a former executive from Tesco, a British supermarket chain, to bring
grocery nous to a business hitherto obsessed with overhead cameras, QR
codes and data collection. The Brit, who started out as a Tesco “trolley boy”
aged 16, has a big job. When Schumpeter visited an Amazon Fresh store in
Los Angeles recently, the fresh-meat and -fish counters were so barren they
looked like part of a going-out-of-business sale. He bought one of the three
rotisserie chickens on display out of sympathy, because he feared they had
been there all day.

Under Mr Hoggett, Amazon is trying to make the Fresh stores less soulless.
Human cashiers and self-checkouts are back for those who prefer them.
Whole Foods’ expertise is being used to rethink store location. It is part of an
effort to make grocery shopping on Amazon as habitual as it is at a Walmart.
Andy Jassy, the CEO, says it is aiming to build a “mass grocery format”
commensurate with Amazon’s size. Yet if anything Walmart looks more likely
to invade Amazon’s territory than the other way around.

Neither firm thinks of itself as competing head-to-head with the other. But they
are, because both have big growth ambitions. For Walmart, that means
expanding its e-business beyond grocery into general merchandise, as well as
attracting higher-income online customers. Both of these are Amazon’s forte.
For Amazon, it means a bigger presence in grocery, both online—where food
shopping still accounts for only about 10% of America’s $800bn supermarket
business—and offline.
In bricks-and-mortar, Walmart’s lead is huge. It has the largest footprint in
America, with about 4,700 outlets, compared with 530 Whole Foods, 44
Amazon Fresh and 22 Amazon Go shops. Grocery accounts for most of its
sales, whereas for Amazon they are a sliver. Its “everyday low prices” work:
a survey by MoffettNathanson, a research firm, found equivalent products at
Amazon Fresh were far pricier. Walmart’s speed of delivery matches
Amazon’s.

What Amazon lacks in stores, it hopes to make up for in membership of its

Prime loyalty programme, which is estimated at 170m in America, compared
with about 22m for Walmart+. Eventually, it hopes that online grocery
shopping, combined with three different formats—Whole Foods for posh
nosh, Fresh for general grub and Go for grab-and-go—will enable customers
to buy everything they need via a single app. Amazon has two other
advantages: a whopping marketplace platform for third-party sellers, which
adds to the range of products available on its website, and an advertising
business with a hefty $38bn of revenues last year, which supplements its
supermarket business.

Yet because shoppers like to see, feel and smell their groceries before buying
them, the scarcity of stores is a problem. Dean Rosenblum of Bernstein, a
broker, calculates that Amazon Fresh is accessible to just over a third of
Americans. In contrast, 90% of them live within ten miles (16km) of a
Walmart. If Amazon opened 50 new Fresh stores a year, in a decade’s time it
would reach only the size of Whole Foods’ current tally. And that would be a
“near criminally irresponsible use of Amazon capital”, Mr Rosenblum says.
That view is spreading. Terry Smith, a British fund manager, recently dumped
his Amazon stock, arguing that its move into grocery retail risked
misallocating capital.

Moreover, Walmart appears to be making more headway with online selling

and advertising than Amazon is with its real-world stores. Walmart’s online
sales were estimated at $82bn last fiscal year, more than four times Amazon’s
physical-store sales. It appears to be borrowing Amazon’s model of attracting
third-party sellers to its site in order to increase the assortment of products,
raise logistics revenue and boost advertising. Last year Walmart’s ad sales
grew by 30%, to $2.7bn. That is still a fraction of Amazon’s total. But there is
no reason why Walmart should not catch up, thinks Simeon Gutman of Morgan
Stanley, an investment bank.

One-click M&A
Amazon could leap up the league table by buying a large supermarket chain.
Given the antitrust pressure on big tech, though, this is probably off the table.
If a build-rather-than-buy approach is its only option, it will have to do a
much better job of explaining how it will make this profitable. As it continues
to waste time experimenting, Walmart is ably copying its best moves. ■

Read more from Schumpeter, our columnist on global business:

Hollywood’s blockbuster strike may become a flop (Jul 19th)
The last, unfulfilled dream of Jamie Dimon, king of Wall Street (Jul 11th)
A Lego-lover’s guide to preparing for the AI age (Jul 6th)

Also: If you want to write directly to Schumpeter, email him at

schumpeter@economist.com. And here is an explanation of how the
Schumpeter column got its name.
This article was downloaded by zlibrary from
https://www.economist.com/business/2023/07/24/why-walmart-is-trouncing-amazon-in-the-
grocery-wars
Finance & economics
Can UBS make the most of finance’s deal of the century?
America’s battle with inflation is about to get trickier
Soaring temperatures and food prices threaten violent unrest
Investors are seized by optimism. Can the bull market last?
Deflation is delaying China’s rise to economic superiority
A big plus

Can UBS make the most of finance’s deal of the

century?
Europe at last has a challenger for America’s behemoths
Jul 26th 2023 | Zurich

“LIMITED BUT intensive”. That is how a regulatory filing described, with

something approaching wry understatement, the few days of due diligence
before UBS announced its deal to rescue Credit Suisse on March 19th. The
dramatic acquisition was the first ever tie-up between two “global
systemically important banks”, a designation introduced after the financial
crisis of 2007-09. Since it was agreed, the pace has barely slowed. In April
Sergio Ermotti, a Swiss cost-cutter who ran UBS between 2011 and 2020,
returned as the firm’s chief executive. The same month Credit Suisse’s results
laid bare the devastating run it had suffered. Combined financial statements
followed in May. The fine print of an agreement with Swiss authorities to
absorb potential losses emerged in June. Scores of Credit Suisse bankers
have rushed for the exit.
UBS finally got the keys to the building on June 12th. The tie-up is the most
watched deal in finance: it creates a giant with $5trn of invested assets and a
balance-sheet twice the size of the Swiss economy. The acquisition’s outcome
will say much about the future of global banking. Regulators are eyeing
proceedings closely on account of the new institution’s size. Bank bosses,
meanwhile, are watching the difficult strategic decisions faced by
management for lessons applicable to their own firms. UBS shareholders,
who did not vote for the deal, have traded a staid investment for something
much riskier.

Despite absorbing its risk-taking rival, its bosses hope that the new UBS will
be able to emerge as an enlarged version of the old UBS. European banks
were slow to recapitalise after the global financial crisis; their profitability
largely reflected ailing domestic economies. Amid this inauspicious crowd,
UBS stood out. After being rescued in 2008, the bank focused on wealth
management. It won enough wallets to be rewarded with one of the highest
price-to-book multiples of any European bank, trading at an average of 1.1
times its book value last year. UBS’s focus on managing money will continue,
but the shape and scale of its other banking businesses is still the subject of
internal debate. Nobody expects a smooth ride in the years ahead.
Since the deal was announced, shares in UBS have risen only a little. Yet the
acquisition ought to be a boon, at least eventually. UBS bought Credit Suisse
at a bargain: it will report an estimated $35bn of “negative goodwill”, the
difference between what it paid and the higher book value of Credit Suisse’s
equity. Turning this scale into profit hinges on the mammoth task of integrating
the two institutions’ operations. All the usual post-merger headaches—
combining technology systems, aligning accounting standards, laying off staff
and resolving culture clashes—are especially difficult at a bank, let alone a
failed one. Compared with UBS, Credit Suisse was appallingly inefficient: it
had a higher ratio of costs to income in every one of its businesses. The
bank’s collapse was preceded by five consecutive quarters of losses and a
brutal evaporation of confidence among clients and counterparties.

When UBS unveils its plans and delayed quarterly results at the end of
August, investors will scrutinise any outflow of assets managed by the bank.
There is little to suggest a large exodus has taken place. Julius Baer, a Swiss
outfit that is likely to benefit from any flight, reported only modest inflows at
its quarterly results on July 24th. But investors should also focus on two
strategic decisions—ones that will ultimately determine the success of the
deal. Both require knife-edge calls and present enormous execution
challenges.

Credit Suisse’s domestic business is the first big question mark. Bosses at
UBS are debating whether to keep none, some or all of Credit Suisse
Schweiz, which was established in 2016 as part of a plan, later shelved, to
spin off the business. The Swiss bank was Credit Suisse’s only profitable
division during the first quarter of 2023. Last year Schweiz’s equity had a
book value of SFr13bn ($14bn). Selling the outfit at a valuation near this
figure might now be impossible given the speed with which clients ran for the
doors before March. A shaky balance-sheet would frustrate efforts to pick off
the most attractive bits of the business, since the rump might struggle to
support itself as a standalone operation.

Swiss knife
With anger over the UBS tie-up still simmering in Switzerland, the fate of
Credit Suisse’s domestic business could emerge as something of a political
lightning rod. Shedding Schweiz might stave off demands for higher capital
requirements in the future by calming worries about the parent bank’s size.
According to data from Switzerland’s central bank, last year UBS and Credit
Suisse had combined domestic market shares of 26% in loans and deposits. In
less hurried circumstances, it would have been possible to imagine the deal
falling foul of competition watchdogs.
Yet whereas gains from spinning off the business are uncertain, those from
keeping it and making cuts are almost guaranteed. Assuming UBS’s shears are
sufficiently sharp, and 70% of Credit Suisse Schweiz’s costs can be chopped,
separating the whole business would mean forgoing nearly a third of the
deal’s total annual cost savings, according to an estimate by Barclays, a bank.
Lay-offs affecting Credit Suisse’s 16,700 employees in Switzerland, such as
from shutting retail branches, would draw particular ire from politicians and
the public. According to Jefferies, an investment bank, around 60% of UBS
and Credit Suisse branches are located within a kilometre of each other.

The second question mark concerns Credit Suisse’s investment bank, which
accounted for a third of the institution’s costs last year, and will bear the brunt
of the cuts. Mr Ermotti, UBS’s returning boss, is no stranger to felling
bankers: the number of people employed in the firm’s investment bank
declined from about 17,000 in 2011 to 5,000 in 2019, leaving behind a leaner
operation to play second fiddle to the bank’s elite wealth-management
division. Credit Suisse failed to accomplish similar manoeuvres of its own.
Last year UBS therefore generated nearly five times as much revenue per
dollar of value at risk.

Winding down these operations will be a slog. Many of Credit Suisse’s

investment-banking operations will be shoved into a “non-core” unit, along
with some small parts of Credit Suisse’s money-managing businesses. Modern
“bad banks” do not contain masses of toxic derivatives, unlike those set up
after the global financial crisis. But they are still hard to shutter without
incurring significant losses.

Protection against losses from selling some of Credit Suisse’s assets is

provided by the Swiss government. As part of the acquisition agreement, the
authorities committed themselves to absorbing up to SFr9bn of losses, so long
as the first SFr5bn are shouldered by UBS. They are unlikely to have to cough
up, however, given the relatively small pool of assets covered by the
agreement. As a result, UBS could move to end the agreement before it has
wound down the portfolio. The guarantee proved reassuring to investors
during in March. Today it carries a lot of political risk for not all that much
financial gain.
Moreover, the loss guarantee fails to insure against the greatest danger when
winding down an investment bank: that revenues plummet faster than costs,
creating painful losses. Even excluding the sizeable cost of employees and
one-off items, outgoings in Credit Suisse’s investment bank last year amounted
to more than 60% of revenue. Many of these costs, such as the technology
systems required to run a trading floor, will remain high even as assets are
sold off. Consider Credit Suisse’s own wind-down unit, which the bank
created as part of its failed restructuring programme. The unit’s assets have
fallen by almost half since 2021, to SFr98bn; its costs, at SFr3bn in 2022,
have hardly changed.

How quickly UBS is able to shutter this unit will be closely watched. So will
what the bank’s bosses do with their remaining investment bank. European
investment banks have retreated since the financial crisis, especially in
America. Both Barclays and Deutsche Bank have struggled to convince
investors their businesses are worth retaining. UBS’s investment bank is
profitable, but would need a mighty boost to woo billionaires with its
dealmaking advice. The prospect of building an elite, capital-light bank might
be appealing in theory, and was the crux of Credit Suisse’s plan to spin out its
own investment bank under the moniker of “First Boston”, a famous old firm
that it acquired in 1990. But in practice this would require significant turnover
among UBS’s own bankers, too.

Mighty money manager

It is not clear that such bloodletting is required. In time, the success of the
merger will be judged by UBS’s price-to-book multiple. Morgan Stanley,
which has ridden its wealth-management success to a multiple of more than
two, is a worthy target. After the deal, UBS will remain a measly competitor
in investment banking, but growth in the money it manages means it will close
the gap in wealth management and overtake its rival in asset management. A
bigger bank means bigger ambitions. ■

For more expert analysis of the biggest stories in economics, finance and
markets, sign up to Money Talks, our weekly subscriber-only newsletter.
This article was downloaded by zlibrary from https://www.economist.com/finance-and-
economics/2023/07/26/can-ubs-make-the-most-of-finances-deal-of-the-century
Of great interest

America’s battle with inflation is about to get

trickier
Cooling price rises will have counterintuitive consequences for the
Federal Reserve
Jul 26th 2023 | Washington, DC

IT WAS NEVER in doubt. In the run-up to the Federal Reserve’s latest

meeting, investors assigned a probability of nearly 99% to the central bank
raising interest rates once again. On July 26th policymakers duly fulfilled
those expectations, with their 11th increase in 12 meetings, together making
for America’s sharpest course of monetary tightening in four decades. The
central bank’s next steps, however, are clouded by uncertainty.

Some economists are convinced that this will be the Fed’s last rate rise in this
cycle. Inflation has come down from its highs in 2022, with consumer prices
rising by just 3% year-on-year in June. Core inflation—which strips out
volatile food and energy costs—has been a little more stubborn, but even it
has started to soften, in a sign that underlying price pressures are easing. This
opens a pathway for the Fed to relent, hopefully guiding America to a much-
discussed soft landing. Ellen Zentner of Morgan Stanley, a bank, expects an
“extended hold” for the Fed, presaging a rate cut at the start of next year.

Others are not so sure. Inflation has consistently wrong-footed optimists over
the past couple of years. Were, for instance, energy prices to rally, consumers
and businesses could quickly revise up their expectations for inflation,
nudging the Fed towards another rate increase. If an incipient rebound in
housing prices gathers pace, that would also fuel concerns. Vigour in the
labour market adds to the worries, because fast-rising wages feed into
inflation. Remarkably, the Fed’s aggressive actions have barely affected
American workers thus far: the unemployment rate today is 3.6%, identical to
its level in March 2022 when the Fed raised rates for the first time in this
cycle (see chart 1). The pace of tightening would normally be expected to
drive up unemployment. Instead, the recovery from the covid-19 pandemic,
including an increase in the number of willing workers, seems to have
cushioned the economy.

Opposing views among economists are mirrored within the Fed itself. For the
past two years America’s central bankers have spoken in similar terms about
the peril of inflation, and have been nearly unanimous when it comes to big
rate moves. In recent months, however, divisions have surfaced. Christopher
Waller, a Fed governor, has come to represent the more hawkish voices. This
month he warned that the central bank could continue raising rates until there
is sustained improvement in inflation, dismissing the over-optimism bred by
the weaker-than-expected price figures for June. “One data point does not
make a trend,” he warned. At the other end of the spectrum is Raphael Bostic,
president of the Fed’s Atlanta branch, who said even before the latest rate
increase that the central bank could stop hiking. “Gradual disinflation will
continue,” he assured listeners in late June.

Even if the latest rate increase does end up marking the peak for the Fed,
Jerome Powell, its chairman, has maintained a hawkish tilt in his
pronouncements. “What our eyes are telling us is that policy has not been
restrictive enough for long enough,” he told a press conference following the
rate rise. Financial conditions have loosened in recent months. The S&P 500,
an index of America’s biggest stocks, is up nearly one-fifth from its lows in
March, when a handful of regional banks collapsed. With his sterner tone, Mr
Powell may want to restrain investors from getting ahead of themselves,
which could add to inflationary momentum.

Central bankers wanting to preserve their reputations as inflation-fighters may

prefer to err towards toughness. Steven Englander of Standard Chartered, a
bank, likens the Fed to a weather forecaster who thinks there is a 30% chance
of rain. It still makes sense to highlight the potential for wet weather, because
predicting sun but getting rain is perceived as worse than predicting rain and
ending up with sun.
In practice, the Fed is sure to be flexible, reacting to economic data. It can
look north of the American border for an example of the impossibility of
maintaining a fixed policy stance. The Bank of Canada had stopped its rate-
rise cycle in January, thinking that inflation had crested. But in June it was
forced to resume tightening because economic growth had remained too hot,
and inflation too sticky, for comfort.
Ultimately, though, there are no risk-free choices for the Fed. What is seen as
the more doveish option—holding rates steady for the rest of this year—will
in fact take on an increasingly hawkish hue if inflation does continue to
recede. Unchanged nominal rates would be ever more restrictive in real terms
(assuming that inflationary expectations diminish alongside waning price
pressures). In such a scenario central bankers wishing to maintain their
current policy stance should therefore think about cutting rates. When inflation
was sky-high, the Fed’s task was tough yet its decisions quite straightforward:
officials did not really have much choice but to raise rates. From here on, its
task looks easier but its decisions more fraught. ■

For more expert analysis of the biggest stories in economics, finance and
markets, sign up to Money Talks, our weekly subscriber-only newsletter.
This article was downloaded by zlibrary from https://www.economist.com/finance-and-
economics/2023/07/26/americas-battle-with-inflation-is-about-to-get-trickier
Turning up the heat

Soaring temperatures and food prices threaten

violent unrest
Expect a long, hot, uncomfortable summer
Jul 27th 2023

PROTESTS HAVE a funny way of kicking off when the mercury soars. The
summer of 1967 is best known as “the summer of love”. It was a time when
hippies flocked to America’s west coast to protest war, take drugs and peace
out. But it was also a time when more than 150 race riots struck everywhere
from Atlanta to Boston amid brutal temperatures, earning the period another
name: “The long, hot summer.”

As the world warms, the link between heat and social disturbance is an
increasingly important one and, this summer, an especially concerning one.
Each upheaval has its own causes, but certain factors make disturbances more
likely everywhere. Surging temperatures, rising food prices and cuts to public
spending—three of the strongest predictors of turmoil—have driven estimates
of the potential for unrest to unprecedented highs in recent months. These
estimates will probably rise higher still this summer. Temperatures are
unlikely to have peaked. Russia’s exit from the Black Sea Grain Initiative to
export supplies from Ukraine and India’s recent ban on rice exports may raise
the price of staples. Social unrest is already bubbling in Kenya, India, Israel
and South Africa.

The summer of our discontent

In the first week of July the mean global temperature crossed the 17°C
threshold for the first time, reaching a steamy 17.08°C. The average global
temperature for the month as a whole is poised to be warmer than the hottest
previous single-day average on record. This sort of weather spells trouble. In
a study published in Science, Marshall Burke of Stanford University and
Solomon Hsiang and Edward Miguel of the University of California,
Berkeley, show that an uptick in temperature of just one standard deviation
above the long-term mean—the kind of deviation a statistician expects to
observe about once every six days—drives an increase in the frequency of
unrest of almost 15%.
In the eight weeks since the start of June, the average global temperature has
simmered at a consistent four to six standard deviations above levels
recorded from 1980 to 2000. Our rough calculations, which extrapolate the
relationship indicated in the Science study, suggest that record temperatures in
June and July could have raised the global risk of violent social unrest by
somewhere in the region of 50%. The effects of El Niño, a weather pattern
that brings warmer temperatures worldwide and recently got under way, are
likely to produce a scorching end to the northern summer and start to the
southern summer. Indeed, the phenomenon has coincided with more than one-
fifth of all civil conflicts that have taken place since 1950.

Verisk Maplecroft, a risk-intelligence company, maintains a civil-unrest index

that forecasts the potential for business disruption caused by social
disturbances, including violent upheaval, on a country-by-country basis.
According to the firm’s estimates, the risk of global social unrest in the third
quarter of 2023 is the highest since the index was created in 2017. That is
because of both heat and the higher cost of living, says Jimena Blanco, the
firm’s lead analyst. “High rates of food price inflation are a particular risk,”
she warns.

Global inflation seems to have passed a peak, and international grain prices
are lower than last year’s high. But that does not mean prices paid by
consumers have stopped rising. In June annual food-price inflation was 17%
in Britain, 14% in the EU and nearing 10% in Canada and Japan. It is higher
still in many developing economies, especially those in Africa. Food-price
inflation is close to 25% in Nigeria, 30% in Ethiopia and 65% in Egypt (the
highest rate in the country’s history).

Bread-and-butter issues
Lower wholesale prices should in time feed through to consumers. But
Russia’s choice to scupper the Black Sea Grain Initiative on July 17th, which
was followed by four nights of attacks on the Ukrainian ports of Chornomorsk
and Odessa in the Black Sea, has disturbed food markets, pushing prices in
the opposite direction. Dry conditions elsewhere are also likely to exacerbate
difficulties. Yields of Australian barley and wheat are forecast to decline by
34% and 30% this harvest. Stocks of American maize, wheat and sorghum are
down by 6%, 17% and 51%. Last year these countries were the world’s two
biggest exporters of the cereals by value.

More concerning still are events in India, which produces roughly 40% of
global rice exports, and has suffered from debilitating rains this year. On July
20th the government responded by banning exports of all non-Basmati rice
from the country. This will reduce global rice exports by about 10%, with
almost immediate effect. The United Nations Food and Agriculture
Organisation estimates that together maize, rice and wheat provide more than
two-fifths of the world’s calorific intake. Among the world’s poorest
populations, the figure may rise to four-fifths. If prices do not start to fall
soon, people will only get hungrier. And hungrier people are more likely to hit
the streets.

Fiscal austerity may further destabilise things. Many governments have

committed to raising taxes or cutting expenditures in order to bring debt under
control after lavish spending during covid-19. Jacopo Ponticelli of
Northwestern University and Hans-Joachim Voth of the University of Zurich
investigated almost a century of data from 25 European economies. They
discovered that each additional 5% cut in government spending increases the
frequency of social unrest by 28%.

Social upheaval can have a scarring effect on economies, too. Metodij Hadzi-
Vaskov, Samuel Pienknagura and Luca Ricci, all of the IMF, recently looked
at 35 years of quarterly data from 130 countries. They found that even 18
months after a moderate episode of social unrest a country’s GDP remains
0.2% lower. By contrast, 18 months after a major episode of unrest a
country’s GDP remains 1% lower.

Countries beyond the rich world have a more concerning outlook. The damage
done by unrest is about twice as large in emerging markets as in advanced
economies, according to the IMF researchers, with lower business and
consumer confidence, and heightened uncertainty, exacerbating the much
greater risk of sudden capital flight. This bodes ill for what is set to be a year
of rising food prices, boiling weather and spending cuts. Expect a long, hot,
uncomfortable summer. ■
For more expert analysis of the biggest stories in economics, finance and
markets, sign up to Money Talks, our weekly subscriber-only newsletter.
This article was downloaded by zlibrary from https://www.economist.com/finance-and-
economics/2023/07/27/soaring-temperatures-and-food-prices-threaten-violent-unrest
Buttonwood

Investors are seized by optimism. Can the bull

market last?
An artificial-intelligence boom has turned into an everything boom
Jul 25th 2023

BULL MARKETS, according to John Templeton, “are born on pessimism,

grow on scepticism, mature on optimism and die of euphoria”. The legendary
Wall Street fund manager put this philosophy into practice in 1939. At a time
when others were panicking about Europe’s descent into war, Templeton
borrowed money to buy 100 of every share trading below $1 on the New York
Stock Exchange. Within a few years he had booked a 400% profit and forged
a template for future investors. Even in the 21st century, Templeton’s favoured
moments of “maximum pessimism” present the very best buying opportunities.
In March 2009 investors despaired over the future of capitalism; in March
2020, over a pandemic and shuttered businesses. Both times, the correct
response was to close your eyes and buy stocks.

It now looks like October 2022 should be added to the list. Pessimism was
certainly rife. Central banks were raising interest rates at their fastest pace in
decades. Inflation was hitting double digits in the euro zone and falling only
slowly in America. Recession seemed just about nailed on. War had returned
to Europe. China appeared trapped between lockdowns and soaring covid-19
deaths. Across the northern hemisphere, a cold winter threatened to send
energy prices soaring again, turning a miserable downturn into a truly
dangerous one. America’s S&P 500 index of leading shares was down by
nearly one-quarter from its peak; Germany’s DAX by more.

True to form, it was an excellent time to buy. The S&P 500 has since risen by
28%. That puts it at its highest level in over a year, and within 5% of the all-
time peak it reached at the start of 2022. Moreover, the rally’s progress has
been positively Templetonian. Born on despair, it then advanced to the
scepticism phase. Investors spent months betting that the Federal Reserve
would not raise rates as high as its governors insisted they were prepared to
lift them, while economists admonished their foolhardiness from the sidelines.
All the time, with frequent reversals, stocks edged nervily upwards.

For a few weeks, as first one then several American regional banks collapsed
in the face of rising rates, it looked like the sceptics had won the day. Instead,
it was time to proceed to the optimism phase. Hope of an AI-fuelled
productivity boom displaced fears about growth and inflation as the main
market narrative. Shares in big tech firms—deemed well-placed to capitalise
on such a boom—duly rocketed.

Now the party has spilled over into the rest of the market. You can see this by
comparing America’s benchmark S&P 500 index (which weights companies
by their market value and so is dominated by the biggest seven tech firms)
with its “equal-weight” cousin (which treats each stock equally). From March
to June, the tech-heavy benchmark index raced ahead while its cousin
stagnated. Since June both have climbed, but the broader equal-weight index
has done better. And they have both been trounced by the KBW index of bank
stocks. What started as a narrowly led climb has broadened into a full-blown
bull market.

It is not just in stockmarket indices that the new mood is apparent. Bloomberg,
a data provider, collects end-of-year forecasts for the S&P 500 from 23 Wall
Street investment firms. Since the start of the year, 14 of these institutions
have raised their forecasts; just one has lowered it. Retail investors, surveyed
every week by the American Association of Individual Investors, are feeling
their most bullish since November 2021. Even the long-moribund market for
initial public offerings may be witnessing green shoots. On July 19th Oddity
Tech, an AI beauty firm, sold $424m-worth of its shares by listing on the
Nasdaq, a tech-focused exchange. Investors had placed orders for more than
$10bn.

If investors are to keep paying more and more for stocks, which they will
have to do to keep the run going, they must believe at least one of three things.
One is that earnings will rise. Another is that the alternatives, especially the
yield on government bonds, will become less attractive. The third is that
earnings are so unlikely to disappoint that it is worth coughing up more for
stocks and accepting a lower return. This final belief is captured by a
squeezed “equity risk premium”, which measures the excess expected return
investors require in order to hold risky shares instead of safer bonds. This
year it has plunged to its lowest since before the global financial crisis of
2007-09. The market, in other words, appears on the verge of euphoria. What
would Templeton think of that?■

Read more from Buttonwood, our columnist on financial markets:

The dollar’s dip will not become a sustained decline (Jul 20th)
The mystery of gold prices (Jul 13th)
Can anything pop the everything bubble? (Jul 4th)

Also: How the Buttonwood column got its name

This article was downloaded by zlibrary from https://www.economist.com/finance-and-
economics/2023/07/25/investors-are-seized-by-optimism-can-the-bull-market-last
Free exchange

Deflation is delaying China’s rise to economic

superiority
The world’s second-biggest economy will become a more distant second
this year
Jul 27th 2023

CHINA HAS a new central-bank boss. Pan Gongsheng, who became governor
of the People’s Bank of China on July 25th, is a technocrat. His career, which
includes a PhD in economics, research at Cambridge University and Harvard,
and a stint as deputy governor, resembles those of central bankers elsewhere.
But he inherits a different problem: too little inflation, not too much.

China’s consumer prices did not rise at all in the year to June. The country’s
GDP deflator, a broad measure of the price of goods and services, fell by
1.4% in the second quarter, compared with a year earlier. That is the biggest
decline since 2009.

Falling prices pose immediate dangers for the country’s policymakers. They
can erode profits, depress confidence and deter borrowing and investment,
which will only add to deflationary pressure. The absence of inflation also
has a less immediate implication—one of particular interest to those keeping
score in the geopolitical race between China and America. Deflation could
delay China’s emergence as the world’s biggest economy.

Despite its difficulties, China’s economy is expected to grow by about 5%

this year. America’s will probably grow by 2% at best. China would then
appear to be gaining ground. But these forecasts exclude inflation and ignore
exchange rates. America’s “nominal” growth, before adjusting for inflation,
could exceed 6%, according to Goldman Sachs, a bank. The country will
produce 2% more stuff, the price of which could rise by about 4%. China’s
nominal growth, on the other hand, is forecast to be only 5.5%.

In theory, high inflation in America should weaken the dollar. This would
make other economies like China loom larger in dollar terms. In practice,
however, America’s currency has been strong. As a result, China’s GDP,
converted into dollars, could fall further behind its rival’s in 2023, for the
second year in a row. The country’s economy will be 67% the size of
America’s in 2023, according to Goldman Sachs, compared with 76% in
2021. Thus the world’s second-biggest economy will be a more distant
second.

This trajectory is unexpected. Upstart economies like China’s are not only
supposed to grow faster than mature economies, their prices are also
supposed to “catch up” with the higher prices that prevail in rich countries.
Emerging economies start out poor and cheap, then grow richer and more
expensive—either because their prices rise quickly, or because their exchange
rates strengthen. In the 1960s, for example, an American visiting Italy or
Japan would have found that the dollar stretched further in these countries than
back home. Lira and yen prices, when converted into dollars at market
exchange rates, were lower than American prices for similar items. Two or
three decades later, both Italy and Japan were just as pricey as the United
States.

The classic explanation for this phenomenon was provided by Bela Balassa
and Paul Samuelson, two economists, in 1964. In catch-up economies,
productivity grows briskly in industries, like manufacturing, that trade goods
across borders. Because output per worker rises quickly, firms can afford to
pay their workers more without raising their prices, which are pinned down
by global competition. Meanwhile, in sectors such as services, which are not
much traded across borders, productivity grows more slowly. Service firms
must nonetheless compete with manufacturing for the country’s workers. That
obliges them to raise their wages to attract recruits. Higher wages, in turn,
force these firms to raise prices. These price hikes are required because
productivity has not kept up, and possible because services are sheltered from
global competition. The hikes also make the country more expensive: the
price of haircuts rises in sympathy with the growing wages of increasingly
productive manufacturing workers.

China’s prices are now on average only 60% of American prices when
comparing like-for-like items, according to the World Bank. Their figure lines
up with this newspaper’s Big Mac index, which compares the price of burgers
around the world. In China a Big Mac costs 24 yuan, the equivalent of $3.35.
That is only 63% of the cost of a similar meaty treat in America.

The long-term forecasters at Goldman Sachs expect China’s price level to

have risen modestly, relative to America’s, by the middle of the next decade.
By that point, China’s GDP will have become the biggest in the world, they
project. If prices instead remain at their present low level, then China’s GDP
may never overtake America’s at all. Capital Economics, a research firm,
cleaves to this gloomier view. It thinks China’s growth per worker will slow
to roughly the same pace as America’s within the next decade. If China is no
longer catching up with America economically, it argues, there is no reason to
expect its prices to catch up either.

Catch-up and fries

That conclusion may be too hasty. History provides plenty of cases in which a
country’s prices rise, relative to America’s, even as its GDP per head grows
no faster. For example, Ireland, Israel and Italy all had spells in the 1980s
when GDP per person grew more slowly than America’s, but they nonetheless
became less cheap, through faster inflation or a strengthened exchange rate.
Figures from the Penn World Table suggest that, all told, 156 countries have
had at least one ten-year period of price convergence without economic
convergence since 1960.
This pattern is ultimately compatible with Balassa’s and Samuelson’s theory.
If a dynamic manufacturing sector was offset by a moribund services sector, a
country could grow modestly overall, but still become more expensive. The
price of services would rise quickly, pulled along by competition for labour
from more productive manufacturing companies.

Will China’s cheapness persist? That will depend not just on how fast it
grows relative to America, but how fast its manufacturing grows relative to
homebound industries. To close the GDP gap with America, China will have
to narrow the price gap, too. ■

Read more from Free exchange, our column on economics:

Why people struggle to understand climate risk (Jul 13th)
Erdoganomics is spreading across the world (Jul 6th)
The working-from-home illusion fades (Jun 28th)
This article was downloaded by zlibrary from https://www.economist.com/finance-and-
economics/2023/07/27/deflation-is-delaying-chinas-rise-to-economic-superiority
Science & technology
How to better forecast the weather
Taming the chaos

How to better forecast the weather

Private companies—and AI—are transforming the weather business
Jul 26th 2023 | Bologna and Hamburg

MATTEO DELL’ACQUA has to shout to make himself heard. Engine Room

Number Five at the European Centre for Medium-Range Weather Forecasts’
data centre in Bologna houses a series of motors, each turning a three-tonne
flywheel. Should the electricity cut out, the flywheels—and those in four other
rooms elsewhere in the building—have enough momentum to keep the
ECMWF’s newest supercomputer running until the back-up diesel generators
fire up.

Those generators have fuel for three days. A longer blackout would spell
disaster. Weather shapes military campaigns and crop harvests, sports
matches and supply chains. Losing access to the world’s most reliable
weather forecast would drastically reduce the prescience and preparedness of
more than 35 countries, NATO, at least one space agency and a great many
research institutions and businesses. The operation must run constantly, says
Mr Dell’Acqua, who is in charge of the whole affair. “It’s really critical.”
Built inside a former tobacco factory, the Bologna data centre is a nerve
centre of ECMWF’s operations. Every day, 800m observations pour in from
satellites, ocean buoys, ground weather stations, balloons and aircraft.
Besides preparations for a power cut, there are contingency plans for floods
and fires. Water from two external towers is circulated constantly, keeping the
electronics cool.

Outside, though, cooling is in short supply. For the past two weeks much of
Europe has been gripped by a punishing heatwave. Bologna was one of 23
Italian cities put on “red alert”. Several countries broke temperature records;
fires have burned across Greece and the Canary Islands. Large swathes of
America and Asia were also beset by sweltering heat. July 6th saw the highest
average global air temperature ever recorded on Earth, according to estimates
published by the University of Maine. Elsewhere, the weather brought a
different kind of misery. Torrential rain in South Korea, India and on
America’s east coast killed scores. Two days after The Economist’s visit to
Bologna, hailstones the size of tennis balls rained down on the nearby city of
Milan.

Climate scientists reckon the heatwaves were made far more likely by climate
change. Weather forecasts gave countries advance warning, a job that will
become even more important as the planet warms further. Governments are
investing in bigger and better forecasting models. They are being joined by
private firms producing smaller-scale, specialised forecasts for businesses—
and by tech firms betting that AI can revolutionise the field.
Modern weather forecasting owes its existence to the advent of digital
computers in the 1960s and 1970s. It has improved steadily ever since (see
chart). The World Meteorological Organisation (WMO), an arm of the United
Nations, reckons that a five-day forecast today is about as accurate as a two-
day forecast was a quarter of a century ago.

Cloud computing
Most of that improvement has been down to more powerful computers, says
Tim Palmer, a meteorologist and physicist at the University of Oxford.
Weather forecasts work by carving the world into a grid of three-dimensional
boxes. Each is populated with temperature, air pressure, wind speed and the
like, and the system’s evolution simulated by grinding through enormous
numbers of calculations.

Better computers allow finer models. In the same way that a high-resolution
digital photo looks more realistic than a coarse-grained one, using a smaller
grid helps match a model more closely to the real world. The ECMWF’s
highest-resolution global model, for instance, chops the globe into boxes that
are 9km square, down from 16km in 2016, and splits the atmosphere
vertically into more than 100 layers.

Smaller grids also allow models to recreate more of what happens in the real
weather. “Deep convective clouds”, for instance, are formed as hot air floats
upwards. They can produce heavy rain, hail and even tornadoes, but typically
cannot be resolved with grids bigger than about 5km. Models have instead
represented them using stopgap code that acts as a simplified substitution.

But smaller grids come at a high price. Halving the horizontal size of a grid
means that four times as many boxes—and four times as many calculations—
are needed to cover a given area. One option is to trade resolution for
locality. The sharpest offering from the National Oceanic and Atmospheric
Administration, in America, for instance, uses grid boxes 3km square, but
covers only North America. Computing, meanwhile, continues to improve.
The world’s fastest computer is Frontier, installed at Oak Ridge National
Laboratory in Tennessee. Using it, ECMWF scientists were able to
experiment with running a worldwide model with a 1km resolution.

But no matter how powerful computers become, there is a limit to how far
ahead a numerical forecast can look. The atmosphere is what mathematicians
call a “chaotic system”—one that is exquisitely sensitive to its starting
conditions. A tiny initial change in temperature or pressure can compound
over days into drastically different sorts of weather. Since no measurement
can be perfectly accurate, this is a problem that no amount of computing
power can solve. In 2019 American and European scientists found that even
the most minor alterations to simulations resulted in highly divergent forecasts
for day-to-day weather after about 15 days. “It seems to be a limit that nature
sets,” explains Falko Judt, a meteorologist at the National Centre for
Atmospheric Research, in America. “It has nothing to do with our
technological capabilities.”

Private prognostications
The WMO reckons numerical forecasting will approach that theoretical limit
sometime around 2050. But that leaves plenty of room for improvement in the
meantime. The ECMWF presently produces accurate forecasts of daily
weather—meaning it can predict things like the temperature and when it will
rain, give or take a couple of degrees or hours—around the globe at least a
week ahead of time. It has, on occasion, successfully predicted certain big
events, like hurricanes, up to ten days ahead.

But big global or regional forecasts are not the only game in town. There is
also a growing demand for faster or more specific forecasts than can be
provided by public institutions (which, being mostly funded by taxpayers, tend
to produce what will be the most helpful to the most people). Private
companies are filling the gaps.

In 2016, for instance, IBM, an American computing firm, bought the Weather
Company, which specialised in combining different governmental models, for
an estimated $2bn. (Sceptics joked that IBM had invested in the wrong type of
cloud.) Within a year the firm began selling “hyper-local” forecasts to
businesses, designed to predict the weather in a small area between two and
12 hours ahead. By 2020, according to Comscore, an American media-
analytics firm, IBM was the biggest provider of weather forecasts in the
world.

The firm’s success stems, in part, from its freedom to pick its own priorities.
Predicting the weather only a few hours ahead drastically reduces the amount
of number-crunching required. That, says Peter Neilley, the Weather
Company’s chief meteorologist, allowed the firm to develop a global model
with a 3km resolution that churns out a new forecast once an hour. (The
ECMWF’s high resolution global model, by contrast, produces a new forecast
every six hours.)

Alongside its own model, the Weather Company still sucks in the output of
publicly funded forecasters around the world. That reveals another private-
sector perk. Some national and international agencies, including both the Met
Office in Britain and the ECMWF, can charge businesses that use their output.
But all are obliged to make them available. The pipeline does not have to
flow in the other direction.

In recent years, private offerings have become even more specific. Companies
are increasingly aware of how the weather affects their work. For instance,
wind and solar energy producers—and the electricity grids to which they are
connected—rely on knowing what the weather will do in the next few hours.
Other applications are less obvious. Deliveroo, a food-delivery firm, knows
that it must account for the effect of rain on traffic when working out the
fastest way to transport a pad Thai from one side of a city to another.

Meteomatics, a Swiss firm founded in 2012, allows its customers to crunch

data from a range of sources in a way that suits their needs—such as
“downscaling” the output of a numerical model by shaping it around the local
topography. Those customers, say Alexander Stauch and Rob Hutchinson, two
of the firm’s senior managers, increasingly want to pipe that data directly into
their own algorithms. Energy traders, for example, predict gas prices based
on how much wind or sunshine is around to generate wind or solar power.

Meteomatics also aims to fill in gaps in observational data for places their
clients are interested in. To that end, it flies its own fleet of sensor-covered
drones. In May Tomorrow.io, an American firm founded in 2015, began
launching satellites that are likewise designed to help plug data holes around
the world. Its main product, though, is “weather intelligence” software that
turns forecasts into instructions. The Bill and Melinda Gates Foundation, one
of the world’s biggest charities, uses the company to send text messages to
farmers in sub-Saharan Africa, advising them on when best to plant their
crops.
Private players insist their participation is beneficial for everyone. There are
far more weather stations in rich countries than poor ones (see map). “Outside
of America, western Europe, Japan and Australia, and a couple of other
countries, national meteorological services are lagging decades behind,” says
Rei Goffer, one of Tomorrow.io’s founders. Some rich-country agencies help
other countries—the Met Office, for example, works with the governments of
India, South Africa and several South-East Asian countries. Even so, Mr
Goffer argues, many countries simply cannot afford the sort of good-quality
forecasting that might help them adapt to a changing climate. Tomorrow.io’s
satellites aim to allow countries access to better weather infrastructure
without having to build it from scratch.

Sunny with a chance of AI

Private companies have also been at the forefront of attempts to find new, less
computationally onerous ways of predicting the weather. Many are focusing
on machine learning, a type of artificial intelligence (AI) that looks for
patterns in big piles of data. Salient, an American startup, uses an AI trained
to recognise patterns in historical data to produce forecasts on a seasonal
scale, rather than over days or weeks. Its customers include Zurich Insurance
Group, which hopes to get early warnings of extreme weather its clients might
face.

AI can spot patterns that human researchers may have missed. Ray Schmitt, a
researcher at the Woods Hole Oceanographic Institution in Massachusetts, is
one of Salient’s founders. He had theorised about a link between ocean
salinity around the east coast of America in spring and rainfall across the
Midwest the following summer. AI analysis of weather data seems to confirm
the connection, though the precise mechanism remains unclear.

That illustrates another intriguing feature of AI-based forecasts. Numerical

simulations rely on their programmers having a good understanding of the
physical processes that drive the weather. But using an AI to spot recurring
patterns can help useful forecasts be produced even before the underlying
science is fully understood.

Machine learning has already proved its worth with precipitation

“nowcasting”—predicting whether it will rain or snow in a given area over
the next few hours. The WMO reckons that, over the past 50 years, 22% of
deaths and 57% of economic losses caused by natural disasters were the
result of “extreme precipitation” events. But predicting them can be tricky for
existing numerical models, partly because, by the time they have finished
running, the moment has often passed. AI pattern recognition requires less
computational grunt, allowing it to make forecasts more quickly.

A 2021 collaboration between DeepMind, a part of Google, and the Met

Office in Britain used AI to forecast precipitation based on observations from
rain-detecting radar. The AI system outperformed existing, numerical
forecasting methods nine times out of ten—though it started to stumble when
asked to forecast beyond about 90 minutes.
Other big firms with AI expertise are getting involved, too. A paper published
in Nature on July 5th described Pangu-Weather, an AI system built by
Huawei, a Chinese firm, and trained on 39 years of weather data. Huawei
claims Pangu-Weather can produce week-ahead predictions comparable in
accuracy to forecasts from outfits like ECMWF, but thousands of times faster.
Last year Nvidia, an American chipmaker, claimed that FourCastNet, its AI
weather program, could generate, in two seconds, a forecast that can predict
hurricanes and heavy rain up to a week in advance.

Forewarned is forearmed

Governmental incumbents are coming around. The ECMWF was surprised by

the results of Pangu-Weather, says Florence Rabier, the organisation’s
director-general. “We did see a lot of potential, and they are not exaggerating
the claims that it is much cheaper [to run],” she says. The ECMWF is now
working with Huawei, as well as with Google and Nvidia.

That does not mean that AI will replace numerical forecasting, though it could
help it become more efficient. AI relies crucially on high-quality data on
which to train models. Since many parts of the world lack reliable data from
weather stations, old-fashioned numerical simulations must be used
retrospectively to fill in the gaps. And just as computational approaches face
fundamental limits to their utility, so too do AI-based ones. History is a less
reliable guide to the future in a world whose weather is being fundamentally
altered by climate change.

More public-private collaboration is on the cards. By 2030, the European

Commission hopes to have finished “Destination Earth”, a simulation that can
handle both short-term weather patterns and longer-term changes in the
climate. It hopes that users, with the help of AI, will be able to visualise how
animal migration patterns might change as temperatures rise, or what might
happen to fish stocks as the oceans warm. Nvidia, whose chips power most of
the world’s biggest AI models, has said it will participate. The firm has also
signed up to an even more ambitious plan for a network of “Earth
Virtualisation Engines” proposed at a meeting this month in Berlin by a group
led by Bjorn Stevens, the director of the Max Planck Institute for Meteorology
in Hamburg.

Dr Stevens sees all this ferment as part of a shift in how information about the
weather is conceived of, produced and used. Turning observations into
something helpful like a forecast used to require a lot of expert knowledge, he
says. That made it the domain of a handful of big institutions. But recent
technological advances, especially AI, have made doing that both easier and
cheaper. “That makes [weather] data valuable,” he says. “And that is
transforming everything.” ■

Curious about the world? To enjoy our mind-expanding science coverage,

sign up to Simply Science, our weekly subscriber-only newsletter.
This article was downloaded by zlibrary from https://www.economist.com/science-and-
technology/2023/07/26/how-to-better-forecast-the-weather
Culture
Critics are getting less cruel. Alas
How Stalin’s scribbling stooges tricked Western readers
Confronting the dangers of ultra-processed food
Christopher Rufo offers a history of the left
The death of the hatchet job

Critics are getting less cruel. Alas

This is good news for writers and bad for readers
Jul 21st 2023

IT IS DELICIOUS to know that one reviewer called John Keats’s poetry

“drivelling idiocy”. It is more pleasing yet that Virginia Woolf considered
James Joyce’s writing to be “tosh”. And surely no one can be uncheered to
hear that when the critic Dorothy Parker read “Winnie the Pooh” she found it
so full of innocent, childish whimsy that she—in her own moment of
whimsical spelling—“fwowed up”.

For the reader, life offers few purer pleasures than a very good, very bad
review. For the writer, life offers few purer pains. After Parker, A.A. Milne
never wrote another “Whimsy” the Pooh again; the mere word “whimsical”
became “loathsome” to him. After the “drivelling idiocy” comment, Keats
obligingly dropped dead. “Snuffed out”, Lord Byron wrote, “by an article”.

Literary life rarely offers such splendid spectacles today. Open book-review
pages, and you are more likely to see writers describing each other and their
work with such words as “lyrical”, “brilliant” and “insightful” rather than, as
they once did, “tiresome“, “an idiot” and a “dunghill”. On literary pages there
is now what one writer called “endemic” grade inflation. An editor for
BuzzFeed, a news site, even announced that its books section would not do
negative book reviews at all. This was wonderful news for writers (and their
mums) everywhere. It was much less good news for readers. The literary
world may no longer need to mourn spurned poets; it does need to mourn the
death of the hatchet job.

Few will lament it loudly. Criticism is not a noble calling: as the old saying
has it, no city has ever erected a statue to a critic. But then few cities have
erected statues to sewage engineers or prostate surgeons either. But they are
useful, just as critics are. A well-read person might read 20 or so books a
year. By contrast, 153,000 books were published last year in Britain alone,
according to Nielsen BookData. That is an average of 420-odd books a day.
Last year’s crop included “Thinking About Tears: Crying and Weeping in
Long-Eighteenth-Century France” and “Is Your Cat a Psychopath?” It might be
that these books all deserve epithets such as “insightful”. It seems unlikely.

It is an open secret in the literary world that most books are very bad indeed.
It is the job of critics to fillet them, first physically (work on a books desk and
your first, deeply dispiriting job will be to go through the sacks of books
delivered each week) then literarily, with reviews. George Orwell, a veteran
critic, knew that reviews should be brutal. He wrote, “In much more than nine
cases out of ten the only objectively truthful criticism would be ‘This book is
worthless,’” while the only truthful review would say, “This book does not
interest me in any way, and I would not write about it unless I were paid to.”

Reviews are rarely so punchy. Some publications keep up the tradition of

forceful criticism, but too often reviews feel like a smug inside job. Literary
newspapers are particularly prone to this. They tend to be rich in reviewers
called “Ferdinand”; in words like “jejune”; and in headlines that read less
like a promise than a threat: “Whither Somalia?”, “Structuralism
Domesticated” or (the question that is on everyone’s lips) “Who’s Afraid of
Close Reading?” Hatchet jobs, by contrast, usually opt for a less elevated
style. In one notorious review the critic Philip Hensher wrote that an author
was so bad “he could not write ‘bum’ on a wall.”
Once, such zingers were common on literary pages. In the Victorian era,
“reviews were seen as a kind of cultural hygiene, so there were high
standards,” says Robert Douglas-Fairhurst, a professor of English at Oxford
University. Reviewers were not merely taking a swipe at an enemy but
cleansing the sacred halls of literature. Not that this stopped them from mild
grubbiness themselves. For example, one reviewer called a fellow writer’s
work “feculent garbage”; the reliably robust Alfred Tennyson called yet
another “a louse upon the locks of literature”; while John Milton (apparently
having momentarily lost paradise again) described another as an “unswill’d
hogshead”.

Brandish your weapons

Fun though such excesses are, the most lethal reviews tend to be more
delicate. The best bad reviews are not hatchet jobs but scalpel jobs, observes
the British critic Adam Mars-Jones, “because if it’s not precise, it’s not going
to work.” The Victorians brandished scalpels too. One of the finest was
wielded by George Eliot on Charlotte Brontë’s “Jane Eyre”. “I wish”, Eliot
wrote, “the characters would talk a little less like the heroes and heroines of
police reports.”

Modern reviewers rarely achieve such lethal beauty. All too often reviews
are replete with filler words: “darkly funny”, “searing”, “profound
meditation”. Many of these—reader, be warned—are euphemisms for the
word “boring”, which is in effect forbidden on literary pages. So there is
“detailed” (“boring”); “exhaustive” (“really boring”); “magisterial” (“boring
but by a professor, and I did not finish it so cannot criticise it”). And so on.

The internet is one reason for this softening. It has altered both the economics
of criticism (shrunken newspapers have fewer books pages, so editors tend to
fill them with the books you should read, not the ones you should not) and the
advisability of it (insults that seemed amusing blurted out in the moment pall
when they echo online for eternity). The tendency to recruit specialist
reviewers has not helped. If you are one of the world’s two experts in early
Sumerian cuneiform and you give a bad review to the other one, it might be
fun for 20 minutes—and regrettable for 20 years.
The internet has also helped decrease anonymity. Once, most reviews were
unbylined, offering reviewers the facelessness of an obscure Twitter troll.
Today, most reviewers are not only named but easily searchable—and
insultable in return. Whereas 30 years ago, critics were “tacitly encouraged to
really have a go at people”, now people are “terrified of giving offence” lest
a Twitter pile-on follow, says D.J. Taylor, a writer and critic.

There have been attempts to revive sharp criticism. In 2012 an award called
the “Hatchet Job of the Year” was launched by two critics (including one who
now works at The Economist) as a “crusade against dullness, deference and
lazy thinking”. It ran for three years. Fleur Macdonald, one of its co-founders,
thinks that “the literary scene probably needs it more than ever now,” but that
it would struggle to revive and get sponsorship since “bad book reviews are
controversial.”

The hatchets do still come out occasionally, not for first books or those by
unknown authors (it is considered pointless and cruel) but for writers famous
enough to attack. Prince Harry’s “Spare” was almost universally panned. This
can be agonising for writers. Anthony Powell, a novelist, believed people
were either “fans” or “shits”, while one of the most famous poems of the
Roman writer Catullus is a riposte to critics who accused him of being
effeminate. “Pedicabo ego vos et irrumabo,” he wrote, which means (broadly
speaking): “I will sodomise and face-fuck you.” Not the sort of thing you see
in the Times Literary Supplement these days.

And so the blades glint less. But they should still glint occasionally. What can
be forgotten is that the real market for reviews is not the critic or the author. It
is the reader. And they still want to know, says Mr Taylor, “whether they
ought to spend £15.99 on a book.” The critic has “a duty” to tell the truth.
Besides, if the writer doesn’t like it, they are, after all, a writer. They can, as
Catullus did, respond. Though they might decide to go light on the profanity if
they want to get published in BuzzFeed. ■

For more on the latest books, films, TV shows, albums and controversies,
sign up to Plot Twist, our weekly subscriber-only newsletter
This article was downloaded by zlibrary from
https://www.economist.com/culture/2023/07/21/critics-are-getting-less-cruel-alas
Rotten reporting on Russia

How Stalin’s scribbling stooges tricked Western

readers
A new book shows how journalists failed to capture Russia’s horrors
Jul 27th 2023

The Red Hotel: The Untold Story of Stalin’s Disinformation War. By Alan
Philps. Pegasus; 451 pages; $29.95. Headline; £22

WHEN GERMANY attacked the Soviet Union in 1941, Winston Churchill

persuaded Josef Stalin to let a posse of British and American journalists come
to reside in Moscow to tell the Western world about the communists’ bravery
in fending off the Nazis. More than a dozen scribes found themselves
corralled within the Metropol Hotel, a huge art-nouveau edifice just off Red
Square in Moscow, which already housed a motley group of Stalinist spies
and prostitutes. (The hotel remains open today but with a different clientele.)

The Western journalists, mostly male, all tightly muzzled by censors and
prevented from travelling freely, soon found themselves in hock to (and
occasionally in bed with) a bevy of women who doubled as translators and
fixers. “The Red Hotel” is a compelling and often horrifying tale of moral
degradation and occasional heroism superbly told by a seasoned reporter,
Alan Philps, who knew Moscow first-hand in the last years of communism.

The shiniest stars in Mr Philps’s book are the female fixers who were
controlled by the secret police but managed against the odds to retain a
modicum of their integrity. Among the most remarkable was Nadya
Ulanovskaya, a Jewish Ukrainian who had been a revolutionary in the 1920s.
Reprieved at the last minute after being sentenced to death by firing squad, she
then became part of a Soviet spy ring in America and elsewhere. Mr Philps,
who has invoked a stunning range of Russian and Western archival sources
and obscure memoirs, draws heavily from Ulanovskaya’s little-known
autobiography, showing how this fervent believer in communism lost all faith
in it.

Even before Churchill’s wartime press deal with Stalin, a reporter previously
based in Russia for the New York Times had written a bitter, unpublished
cable to his editors, lamenting that correspondents in Moscow had been
“reduced to the role of precis-writers of TASS [the Soviet news agency]…
Every correspondent still there knows that his work is entirely valueless.”
Indeed, the correspondents in the hotel, which they called a “gilded cage”,
issued not a peep in their dispatches about the twin horrors of Stalin’s
benighted country: pervasive poverty and the terror imposed by the NKVD,
forerunner of the KGB.

The most shameful nadir of Western coverage was the carefully orchestrated
group visit in 1944 to the grisly site of the Soviet massacre of Polish officers
and gendarmes at Katyn forest, which the press corps dutifully attributed to
the Germans. Altogether some 22,000 Poles are reckoned to have been
murdered there and at other sites by the NKVD.

Some of the correspondents who had submitted to the rigours of censorship

later wrote memoirs that sorrowfully acknowledged how they had been
unable to convey a truthful picture of the Soviet reality. No Western journalist
during the war was able to interview Stalin face-to-face, though one managed
to enrage him at a state banquet by cheekily calling for a free press. (He then
promptly left the country.) Amid the hunger immiserating much of the
population, the correspondents were treated to frequent, gargantuan meals.
Of the correspondents depicted in “The Red Hotel”, probably the one who
wrote most truthfully was Arthur Cholerton of the Daily Telegraph. After a
break in Britain he was refused re-entry; his translator and lover was
sentenced to 15 years in the gulag. The most despicable yet mysterious of the
hotel team was Ralph Parker, who wrote grovelling pro-Soviet dispatches for
both the New York Times and the Times of London. A former senior KGB
official wrote in 2001 that Parker was as valuable as Kim Philby, the
notorious British double-agent. Guy Burgess, another Briton who spied for
Russia and ended up in Moscow, told a visitor, “We all think he’s an agent,
but we can’t make out whose side he’s on.” Parker was the sole Western
reporter to have the honour of receiving from Stalin an answer to a written
question. After the war, would the Soviet Union respect the independence of
Poland? “Unquestionably,” came Stalin’s brazenly mendacious reply.

The worst effect of the correspondents’ varnished reports, which disguised

the horror of the regime, was that many of their readers in the West were
lulled into believing that “Uncle Joe” was a worthy ally with whom cosy
relations could be established after the war. Many readers felt betrayed and
angry when the conditions imposed on their newspapers’ reporters were later
exposed.

The obstacles to free reporting faced by Western correspondents persisted

long after Stalin. But the moral hazard whereby Western journalists and
academics took care not to offend the regime, so as not to lose their visa,
prevailed until the end of communism. Mr Philps makes no bones about
painting Vladimir Putin as a clone of previous dictators: his regime depends
on, among other things, a subservient press at home and the indulgence of
hacks who wish to visit from abroad. But fewer foreign journalists today are
willing to play his game. ■

For more on the latest books, films, TV shows, albums and controversies,
sign up to Plot Twist, our weekly subscriber-only newsletter
This article was downloaded by zlibrary from
https://www.economist.com/culture/2023/07/27/how-stalins-scribbling-stooges-tricked-
western-readers
World in a dish

Confronting the dangers of ultra-processed food

A cocktail of additives and preservatives poses a risk to people’s health
Jul 24th 2023 | New York

WHICH IS HEALTHIER: a bag of crisps or a kale salad? That is easy. Now

which is healthier: a pizza made from scratch or one made from the same
basic ingredients, with the same number of calories, pulled out of a box in the
freezer?

Many people concerned with what they eat would instinctively say the former,
perhaps citing a vague concern with “processed food”. Such food can often be
delicious. (This columnist has a particular weakness for salty potato crisps.)
And there is much to cheer about calories being cheap and abundant, when for
most of human history they were neither. But as Chris van Tulleken’s new
book, “Ultra-Processed People”, explains, that cheapness and abundance
come at a cost.

Mr van Tulleken, a doctor and television presenter, draws a distinction

between “ultra-processed food” (UPF) and “processed food”. Almost
everything people consume is processed in some form: rice is harvested and
hulled, animals are butchered. He uses a definition proposed by Carlos
Monteiro, a food scientist, describing UPF as “formulations of ingredients,
mostly of exclusive industrial use, made by a series of industrial processes,
many requiring sophisticated equipment and technology”. A pizza made from
scratch contains minimally processed food (wheat turned into flour, tomatoes
into sauce, milk into cheese). The one in the freezer, with its thiamine
mononitrate and sodium phosphate, is UPF.

The cocktail of additives and preservatives in UPF harm people in ways both
known and unknown. It seems to affect the gut microbiome, the trillions of
bacteria that contribute to health in a range of ways. Calorie-rich but usually
nutrient-poor, UPF contributes to obesity in part because its palatability and
soft texture foster overconsumption, overriding satiety signals from the brain.

Because this frankenfood is cheap to produce and buy, UPF displaces

healthier alternatives, particularly for poor people. Extra weight was once a
sign of wealth, but among British and American women today, obesity rates
are higher at lower-income levels. (Curiously, rates do not vary for men, even
though a greater share of American men than women are obese.)

The reasons why UPF can be harmful are not always clear, even to scientists.
Additives that may be safe in isolation or small quantities may be harmful in
combination with other chemicals or when consumed regularly. If we are what
we eat, considering the impact of UPF is essential, but too often Mr van
Tulleken’s case for clean food is accompanied by anti-capitalist preening: for
instance, he nonsensically calls corporate-tax minimisation “part of ultra-
processing”.

Environment matters, too. People who live in what the author calls “food
swamps”, where “UPF is everywhere but real food is harder to reach”, could
spend large amounts of time and money seeking out fresh food, but that is not
how most people live. There is nothing wrong with the odd fast-food trip, but
anyone who can afford to eat less UPF probably should. ■

Read more from World in a dish, our column on food:

When it comes to ice cream, the instinct to innovate is misguided (Jul 13th)
The curious, anaesthetising charm of Sichuan peppers (June 29th)
A potato can have no finer fate than ending up as an Irish crisp (June 15th)
This article was downloaded by zlibrary from
https://www.economist.com/culture/2023/07/24/confronting-the-dangers-of-ultra-processed-
food
America’s culture war

Christopher Rufo offers a history of the left

The conservative controversialist will set the tone for the presidential
contest in 2024
Jul 26th 2023

America’s Cultural Revolution: How the Radical Left Conquered

Everything. By Christopher Rufo. Broadside Books; 352 pages; $32. To be
published in Britain in September; £25

THE AMERICAN left’s political philosophy may lack a plain name—what

some call wokeness, others call identity politics, critical race theory (CRT)
or anti-racism—but it does have a chief sceptic. Christopher Rufo, a former
film-maker and conservative writer employed by the Manhattan Institute, a
think-tank, rose to prominence in 2020 by documenting the encroachment of
progressive ideas into American school curriculums.

More than anyone outside elected office except perhaps Tucker Carlson, a
former Fox News anchor, Mr Rufo (pictured right) has served as a
mastermind of the right’s attacks on the left. He brought attention to CRT (the
teaching of systemic racism as a cause of inequality), inspiring Donald Trump
to issue an executive order in 2020 banning it in federal departments and
contracts. Mr Rufo is now zeroing in on other divisive issues, such as gender
and sexuality. Ron DeSantis (pictured left), the governor of Florida and a
close follower of Mr Rufo’s work, hopes to surf the waves of anti-woke
animus to the White House. He may not be name-checked in the presidential
contest of 2024, but Mr Rufo will influence many Republican candidates and
the subjects they rage against.

For obvious reasons Mr Rufo’s new book has been attracting great interest.
But readers may be surprised that it is more of an origin story than a polemic.
“America’s Cultural Revolution” is an intellectual history of the critical
theories, generally Marxist in origin, that emerged decades ago and which, in
Mr Rufo’s persuasive and well-written telling, morphed into today’s theory of
social justice.

The running metaphor throughout the work is Maoist, starting with the title
invoking China’s Cultural Revolution, which began in 1966 (though the reader
might quibble with the sensationalist comparison, given the mostly non-
existent death toll for the American version). Mr Rufo argues that radical
ideas of overthrowing capitalism and deconstructing objectivity that were
discredited by the history of communism’s failings in the East nonetheless
went on a “long march through the institutions” of America, beginning with
universities and ending with the takeover of elite businesses, media firms and
the government. To illustrate this gradual “cultural revolution”, Mr Rufo
chooses four horsemen—the thinkers Herbert Marcuse, Angela Davis, Paolo
Freire and Derrick Bell—and traces the impact of their ideas over time.

The research is meticulous, and the details are forensic. Many previous
intellectual biographies of thinkers like Bell, a Harvard law professor who
fathered the discipline of CRT, and Freire, a Brazilian education scholar who
developed his influential “pedagogy of the oppressed”, are written by smitten
disciples and seemed more like religious apologia than rigorous history. Mr
Rufo’s methodical recounting of their radical ideas—pushing to deconstruct
the concept of merit, abolish prisons, dismantle capitalism and develop
“revolutionary consciousness” in schoolchildren—is refreshingly sceptical. It
is also difficult to dispute, given that the most incendiary points are usually
delivered by quoting the thinkers directly.
The mostly restrained accounting, given Mr Rufo’s reputation for stoking
controversy, gives the entire work a cerebral feel. “The elements of critical
race theory are, in fact, a near-perfect transposition of race onto the basic
structures of Marxist theory,” he writes. Through the recounted history, some
worrying trends in American life make more sense. Universities are hiring
based on applicants proffering the right answers to “diversity statements”, and
Californian pupils will be required from 2025 to take ethnic-studies courses
that will help, in the state’s words, “challenge racist, bigoted, discriminatory,
and imperialist/colonial beliefs” and “connect ourselves to past and
contemporary movements that struggle for social justice”.

However, Mr Rufo’s analysis, for all its merits, falters in two ways. The first
is that it often skips over the most interesting phase of the process—the actual
mutation of these ideas within the academy into something more virulent—in
favour of minute details in the lives of his four appointed prophets. This is not
a critical flaw.

But the second one is more serious. Mr Rufo often cannot help but portray the
left’s revolution as on the cusp of total victory, if not already there. “The
corporation no longer exists to maximise profit, but to manage ‘diversity and
inclusion’. The state no longer exists to secure natural rights, but to achieve
‘social justice’,” he writes.

The takeover is hardly so complete. Companies are still plainly motivated by

profit, and some are laying off the staff they had hired to oversee diversity-
and-inclusion initiatives. Many Republican states are resisting the mandate of
social justice and doing so in consultation with Mr Rufo himself. The
fatalistic accounting of the takeover of the federal government—“the state, it
turned out, was an easy capture…there was barely any resistance at all”—
rests on a few questionable anti-racism trainings. It is hardly compelling.
Much of the zealotry that ran wild after the murder of an unarmed black man,
George Floyd, by police in 2020 has faded. Today Democrats pretend that
some other party called for the defunding of the police.

The counter-revolution to America’s cultural revolution that Mr Rufo

explicitly calls for is already happening—and has been under way for years.
He should know that, because he is, to appropriate the Leninist terminology, in
the vanguard. ■
For more on the latest books, films, TV shows, albums and controversies,
sign up to Plot Twist, our weekly subscriber-only newsletter
This article was downloaded by zlibrary from
https://www.economist.com/culture/2023/07/26/christopher-rufo-offers-a-history-of-the-
left
Economic & financial indicators
Economic data, commodities and markets
Indicators

Economic data, commodities and markets

Jul 27th 2023
This article was downloaded by zlibrary from https://www.economist.com/economic-and-
financial-indicators/2023/07/27/economic-data-commodities-and-markets
Graphic detail
The Economist explains
What will be the impact of India’s rice-export ban?
Can superstars like Beyoncé or Taylor Swift spur inflation?
The Economist explains

What will be the impact of India’s rice-export ban?

Global rice prices will soar, and poor countries will bear the brunt
Jul 26th 2023

FEW THINGS frighten governments as much as hungry voters. In India, after

heavy rains in early July wiped out paddy fields, officials acted to pre-empt
an unpalatable increase in rice prices. On July 20th the government banned the
export of non-basmati white rice to “ensure adequate domestic availability at
reasonable prices”. Last year, for similar reasons, it slapped export duties on
all types of rice and blocked exports of broken rice grains, which are sold
cheaply. Policymakers hope that keeping more of the staple in India will drive
down domestic prices, which have risen by nearly 12% over the past year.
But what about the rest of the world?

India is the world’s biggest rice exporter, accounting for 40% of global trade
by volume. In 2022, it shipped 22m tonnes to more than 140 countries. Around
half of those shipments were of non-basmati rice. Those types, which are
cheaper than the fragrant, long-grained basmati, are especially popular in
poor places such as Bangladesh, Nepal and parts of sub-Saharan Africa. A
reduction in its supply will drive up the prices these countries pay, according
to rice traders.

As a result global rice prices, which were already rising, could reach record
highs. The rice-price index published monthly by the Food and Agriculture
Organisation, a UN agency, rose by 14% in the year to June. It is at its highest
since the food-price crisis of 2008. That is mostly because of climate-related
supply concerns that have also pushed up the prices of other foods. Rice is
especially vulnerable to El Niño, the weather pattern that brings hotter
temperatures and drier conditions to Asia. In China heat and weak rainfall
have reduced soil moisture in rice-growing regions to the lowest level in
more than a decade, according to Gro Intelligence, a research firm. In
anticipation of shortages, even big rice producers are stocking up. Vietnamese
rice exports to China surged by more than 70%, and to Indonesia by almost
2,500% in the first four months of 2023.

Many of the countries that will be worst affected by the ban are already
suffering soaring food costs. According to Gro, food prices in Benin, Africa’s
biggest importer of rice, are 40% higher than in 2020. India insists that it will
accommodate requests from countries to meet their food-security needs with
broken rice. But such support will have to be the result of time-consuming
diplomacy rather than market activity.

India’s export ban could disrupt the market further through contagion. In 2008
Vietnam banned rice exports, prompting India, China and Cambodia to follow
suit. A study by the World Bank estimated that export restrictions in that
period increased global rice prices by 52%. So far, following the
announcement of India’s ban, Vietnam’s government has merely urged traders
to ensure there is enough domestic supply. Should countries go further and
follow India in imposing export restrictions, the effects could push prices
even higher than in 2008.

Climate change will tempt governments to make these choices more often.
Demand for rice is increasing as the global population rises, and as per-
person consumption in Africa expands, spurred by greater urbanisation and
economic growth. But yields are stagnating, in large part because of climate
change, which is causing higher temperatures and more frequent extreme
events, such as floods. Rice is the primary source of sustenance for nearly half
the world. The more its supply is threatened, the stronger the temptation to
restrict exports will become. ■
This article was downloaded by zlibrary from https://www.economist.com/the-economist-
explains/2023/07/26/what-will-be-the-impact-of-indias-rice-export-ban
The Economist explains

Can superstars like Beyoncé or Taylor Swift spur

inflation?
Some economists think that tours by big acts drive up the consumer-price
index
Jul 25th 2023

THE SWORN enemies of Europe’s central bankers include Vladimir Putin,

covid-19 and, apparently, Beyoncé. All three have recently been blamed for
hot inflation, but the American singer seems an unlikely macroeconomic force.
Hotel prices surged in Sweden when 46,000 fans flocked to the capital,
Stockholm, for the pop star’s tour in May. The country’s consumer-price index
hit 9.7% that month, higher than expected. “Beyoncé is responsible,” declared
one local economist, as though he had caught her red-handed. Do superstar
tours really spur inflation?

In most cases, probably not. Inflation is calculated by comparing the prices of

a basket of goods, rather than measuring sudden price rises in one sector, such
as hotels. Britain’s consumer-price index, for example, includes almost 750
goods and services. Concerts, theatre and cinema have a weight of less than
0.8% in the basket. Countrywide inflation therefore rarely jumps as a result of
a single event, unless it is on an enormous scale. Fans of Taylor Swift, another
pop giant, are projected to spend around $600m on tickets for her current tour
of America—but the country’s consumers spent almost $7trn over an
equivalent period last year. Tours are big business, but not that big.

Nor should price rises in entertainment contaminate other goods or services

and make them more expensive. Pricier hotels may even be offset by falling
costs elsewhere. To afford eye-wateringly expensive tickets (up to $899 for
Ms Swift’s American tour), some fans will skimp on other treats, bringing
down demand—and in theory prices—for those goods for a short time.

For small countries, things may be different. They could see a small,
temporary bump in inflation as a result of a huge tour, reckons Tony Yates, an
economist formerly at the Bank of England. In Singapore, a city state of
around 5.6m people, Ms Swift is putting on six shows—her only dates in
South-East Asia. In theory around 6% of the population could attend. (The
country’s education minister recently refused to grant children an ad hoc
school holiday for the tour, in case it “fuelled further inflation”.) In reality,
thousands of Swifties are flying in from across the region, bringing a jolt of
new demand and cash. That could throttle the supply of hotels, pushing up
prices enough to cause a small bump in inflation. Locals may dip into savings,
too, spending money intended for the future. That could also push up prices.

Even then, any effect would be short lived. When die-hard fans depart, prices
will fall; hotels cannot charge Swiftian rates year-round. The inflation rate
may look correspondingly lower the following month. This means tours are
probably not something central bankers should bother responding to, says Mr
Yates.

The price of seeing big acts perform has always been high. Jenny Lind, a
soprano who toured America in the 1850s, flogged tickets at $6 a pop.
Adjusting for inflation, that is around $230 today. The average cost to see Ms
Swift is $254. But today acts visit fewer small venues and play to bigger
crowds. One reason is the competition to stage bigger and better shows.
Perhaps that is why Ms Swift has opted to perform her only South-East Asia
dates in Singapore. Carting sets around is riskier and more expensive than
playing multiple times at the same venue, if the demand is there. Coldplay and
Harry Styles, two other big pop acts, are taking a similar approach. The
economics of touring may be changing—but that need not worry most central
bankers. ■

Correction (July 26th 2023): This article originally said that Ms Swift’s
tour dates in Singapore were her only stop in Asia. In fact, she is also
performing in Tokyo. Singapore is her only stop in South-East Asia. Sorry.
This article was downloaded by zlibrary from https://www.economist.com/the-economist-
explains/2023/07/25/can-superstars-like-beyonce-or-taylor-swift-spur-inflation
Obituary
André Watts took both Liszt and Schubert to his heart
The last Romantic

André Watts took both Liszt and Schubert to his

heart
One of America’s first black stars of classical piano died on July 12th,
aged 77
Jul 26th 2023

THE CONCERT piece, Franz Liszt’s E-flat Concerto, opened with a bracing
call and response: a seven-note motif from the strings, answered by a rousing
clarion from the horns and woodwinds. Then the same again, the strings
pitched a bit lower and the winds higher: a call to action. The pianist took it
up. The orchestra responded, and a chase began: for the next 20 minutes the
pianist played sweeping flights that sounded like improvisations, using almost
the entire keyboard. The orchestra doing the chasing on January 12th 1963
was the New York Philharmonic under Leonard Bernstein, then perhaps the
most celebrated conductor in the world. The pianist was André Watts. Blade-
thin and straight-backed, he played with burning-eyed fluency, every inch the
Romantic hero. He was 16.
The call had come to his parents’ house in Philadelphia only two days before.
The pianist who was billed to play, Glenn Gould, was ill. Could André
replace him? Of course he could. He surmised later that the manager and
conductor had said to each other, “Remember that kid?” The one who had
already won an audition to play for Bernstein’s nationally televised Young
People’s Concerts, even though his practice had been on a rickety old piano
with 26 strings missing.

The effect of that January concert was electric. He went from having no
concerts booked, to 75 in a year. At 17 he won his first Grammy, for most
promising new classical recording artist. Young as he was, he was now firmly
launched on a career largely devoted to the Romantic repertoire. He emerged
onto the world stage as one of the very few African-American classical-music
headliners.

Inevitably his colour was noted. At that famous concert Bernstein told the
audience he looked rather like a young Persian prince, and commented on his
“mixed-up name”. The allusion was to his mixed-race parentage: his father
was an African-American soldier stationed in West Germany after the second
world war, his mother a Hungarian refugee. In 1971 the New York Times
described him as “capable of appearing as variously as an austere mulatto…a
wistful pa’san surveying some Mediterranean terrace, or a bookish adolescent
confronting his bar mitzvah”. People kept asking whether he played jazz.

All this he took in his stride. Colour was just a physical description that could
soon be dismissed. The simple fact was that he was half-black and half-white,
a position he liked: it meant he could take potshots at both sides. His
formative influences, in any case, were European. After his parents divorced
when he was 13, his mother brought him up. His earliest memory was of her
playing Strauss waltzes on the piano in their apartment in Ulm, in Baden
Württemberg. In Philadelphia, his home from the age of eight, she was the one
who insisted that he should learn to play music, just as he should learn to read
and write.

Violin was his first instrument, but whenever he played the family dog would
sit beside him, baying at the moon. So he switched to piano, and for a year did
just what he liked on it. He would hold down the pedal for pages, feeling the
immense sounds mushrooming all round him. Love of that sound lasted. When
he started proper lessons his mother encouraged him to practise, which he
disliked, and she travelled to concerts with him until he was 21. He, in turn,
was solicitous of her: dining out with her when he was 25, he graciously
accepted a bottle of champagne from the restaurant, explaining that she only
drank Taittinger.

He stayed devoted all his life to the drive and showmanship of Liszt, revelling
in the way the great composer wore his virtuosity with a bit of a smile, as if
saying, “Isn’t it interesting to see me on this high wire?” All the same, he
disapproved of the way some pianists played him, slamming their feet down,
clipping the corners. The Hungarian Rhapsodies had to be approached as
respectfully as a Mozart concerto; stripped of cliché and sloppiness, it was
amazing what you could hear in them.

In these explorations, he needed to feel an audience was with him. Though he

made many recordings, playing music without live listeners had a chilly sort
of sterility. He wanted to transmit his personal response to the music readily
and freely, without hiding anything of himself. The composer he felt closest to
was Franz Schubert, because of his clarity and openness. ”Guileless” was the
word that struck him—all feelings exposed in a sacred space.

Before music, he was always humble. He wanted to compose his own, but put
no notes on paper. Perhaps, he thought, he did not really have anything to say.
He found interviews awkward, because he was so intent on his search for the
precise word. And he disliked vaunting himself. Even as a child, when at nine
he performed with the Philadelphia Orchestra, he did not suppose he was
better than any of the other children who played. And, as a perfectionist, he
feared he might get too frustrated with composition. In a musical career, there
was always another level to strive for. But as soon as you reached that, there
was yet another.

Instead he preferred to settle into learning from the masters, especially from
Leon Fleischer, his chief teacher. The hardest part of playing music, he
thought, was to preserve a balance between being the star who strode onstage,
proclaiming to the audience that he would give them something worthwhile,
and the man who felt he was nothing but an idiot who didn’t know what he
was doing. Fleischer taught him how to manage that. He also learned how to
defy the tendonitis that assailed him as he got older. When nerve damage
limited the use of his left hand, he simply transcribed Ravel’s “Concerto for
the Left Hand” for the right one.

That entailed more than just sliding a bit to the left on a piano bench; it
involved re-engineering a hugely challenging piece. But his version worked,
and he was surprised by its power, which seemed to come from learning it so
late in life. When he came to play it, with the Detroit and Atlanta orchestras, it
was an act of daring; and no less so than playing Liszt on national television,
with the world’s most famous conductor, when he was just a boy. ■
This article was downloaded by zlibrary from
https://www.economist.com/obituary/2023/07/26/andre-watts-took-both-liszt-and-schubert-
to-his-heart