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The world this week

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The world this week

Politics
Jul 20th 2023 |

Thailand’s parliament again voted to prevent Pita Limjaroenrat from

becoming prime minister. Coupled with a court ruling that suspended the
opposition leader from the legislature, Mr Pita now has no chance of getting
the job. Although his pro-democracy Move Forward party claimed the most
seats in a general election in May, Mr Pita has been blocked by the upper
house, which is stacked with parties aligned with Thailand’s conservative
military elite. The Constitutional Court is even considering a complaint
against Move Forward over its aim of reforming the country’s draconian
lèse-majesté laws.

A senior leader in Malaysia’s opposition alliance of parties, Perikatan

Nasional, was charged with sedition. Muhammad Sanusi Md Nor is the
chief co-ordinator of PN’s campaign ahead of forthcoming state elections.
He was indicted under colonial-era laws for questioning decisions made by
the king.
In India 26 opposition parties formed an alliance to co-ordinate their
political strategy when they compete against the ruling Bharatiya Janata
Party at next year’s general election. The Indian National Developmental
Inclusive Alliance (INDIA) includes the Congress party, whose leader,
Rahul Gandhi, has been convicted of defamation and barred from
Parliament.

India launched its Chandrayaan-3 spacecraft on a mission to explore the

Moon’s South Pole. If all goes well Chandrayaan-3 is expected to reach its
destination on August 23rd or 24th.

An American soldier was detained in North Korea after he crossed the

border from South Korea. Travis King had been in jail for two months on
assault charges and was due to be flown back to America when he
absconded.

Rumours swirled around China’s foreign minister, Qin Gang, who has not
been seen in public since June 25th. “Health reasons” were cited when the
diplomat did not attend a summit earlier this month. Now, though, the
foreign ministry says it has “no information” on his status.

The Kerch bridge that connects Russia with occupied Crimea was attacked
again, this time by water drones. The bridge carries Russian supplies into
contested areas of Ukraine. It will not be fully operational again until mid-
September. Last October a fuel bomb on the bridge caused extensive
damage. Ukrainian officials say the latest attack will disrupt Russian
logistics.

Russia carried out missile strikes on Odessa and other Ukrainian ports.
Russia earlier pulled out of a deal that had permitted the safe passage of
grain exports from those ports across the Black Sea. As wheat prices rose,
the UN, which helped broker the agreement a year ago, warned that it
would be people in poor countries who pay the price.
Afraid of a little competition

An American who had been selected to be the European Commission’s

senior economist on competition issues declined the job following a
political storm. Opposition to the appointment of Fiona Scott Morton was
led by Emmanuel Macron. The French president said he wanted a “great
European” in the position, though he didn’t name one.

Vladimir Putin pulled out of an economic summit in South Africa in

August, avoiding the possibility of being arrested by his host on a warrant
issued by the International Criminal Court, which South Africa is obliged to
enforce. President Cyril Ramaphosa said in a court filing that Russia had
made clear the arrest “would be a declaration of war”.

Emmerson Mnangagwa, Zimbabwe’s president, signed legislation into law

that could impose the death penalty for the vague offence of “injuring the
sovereignty and national interest of Zimbabwe”.

Isaac Herzog, the Israeli president, visited Joe Biden at the White House.
He also gave a speech to Congress, where he said that criticising Israeli
policy should not cross a line into concluding that Israel does not have the
right to exist. Mr Biden also issued an invitation to Binyamin Netanyahu,
Israel’s prime minister, to visit, and urged caution on the legal reforms that
have provoked huge protests in Israel.

Iran’s morality police will resume patrols to enforce a dress code which
says women must cover their hair. The decision comes ten months after
large demonstrations were held following the death in custody of Mahsa
Amini, who was arrested for not wearing a “proper” headscarf.

Tunisia signed a deal with the European Union to manage “irregular”

migration. Tunisia has become the main point of departure for migrants
crossing the Mediterranean to reach Europe. Under the agreement the EU
will give Tunisia €105m ($118m) for equipment and training to prevent
migrants from embarking. Another €150m was also pledged for a variety of
other things.

A controversial Illegal Migration Bill was approved by the British

Parliament. The government says the bill is essential to stop small boats
carrying migrants across the English Channel. Opponents had hoped that a
series of amendments would ditch bits of the legislation that they claimed
would contravene human rights, but these were all eventually defeated.

England’s court of appeal reduced the sentence of a woman who was found
guilty of taking abortion pills outside legal limits to a 14-month suspended
sentence. The original prison conviction had been widely condemned when
it was imposed in June.
A flair for troublemaking

At a summit of Latin American and European leaders, Luiz Inácio Lula

da Silva, Brazil’s president, said that the world was “tired” of the war in
Ukraine. Lula, who has refused to admonish Vladimir Putin, also criticised
Gabriel Boric, Chile’s president, for condemning Russia.

Tens of thousands of people took to the streets of Peru to protest against the
president, Dina Boluarte, who came to power only in December. She
denounced the demonstrators as a threat to democracy.

A former president of Panama, Ricardo Martinelli, was sentenced to ten

years in prison for money-laundering, which he denies. He had been
considered the front-runner in a presidential election.

Scores of people were killed during severe flooding in South Korea. Many
had become trapped in their cars in a tunnel in the city of Cheongju. It was
one of many extreme weather events. Heat records were broken across
Asia, North America and southern Europe. The temperature in California’s
Death Valley hit 53.3°C (128°F), though that was still short of the 56.67°C
registered in 1913.

This article was downloaded by calibre from https://www.economist.com/the-world-

this-week/2023/07/20/politics

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The world this week

Business
Jul 20th 2023 |

Britain’s annual rate of inflation stood at 7.9% in June, down from 8.7% in
May, a bigger drop than had been expected. Transport costs fell in the
consumer-price index, mostly because of cheaper fuel. Food inflation eased
to 17.3%. Core inflation, which strips out energy and food prices, was
6.9%, down slightly from the previous month’s rate. The news was
welcomed by the government. The Bank of England is still expected to
raise interest rates when it next meets, but markets are now expecting a
smaller rise of a quarter of a percentage point.
A tale of two banks

Goldman Sachs reported net income of $1.1bn for the April to June period,
its lowest quarterly profit in three years. The bank booked charges related to
its property investments and retreat from retail banking. Like some other
big banks it also saw a slowdown in revenues from trading. Higher interest
rates are helping to make up for that shortfall in revenue and boosting profit
at other banks. At JPMorgan Chase profit surged by 67%, year on year, to
$14.5bn.

Tesla reported a strong net profit of $2.7bn for the second quarter, driven by
a big increase in car sales during its price-slashing campaign. Tesla said that
it was still on track to deliver 1.8m vehicles this year, though production
would dip a bit this quarter.

America’s Federal Trade Commission has reportedly opened an

investigation into OpenAI, the artificial- intelligence startup behind
ChatGPT, for potentially violating consumer-protection laws. The regulator
wants OpenAI to explain its policy on data privacy and how it trains the
large language models behind its generative AI.

Sony signed a deal with Microsoft that will continue to make “Call of
Duty” available on Sony’s PlayStation once Microsoft takes over Activision
Blizzard, which owns the video-game series. Sony had been the most vocal
opponent of Microsoft’s acquisition, which a court in America recently
gave the green light to.
China’s GDP grew by just 0.8% in the second quarter compared with the
previous three months. It expanded by 6.3% over the same quarter last year,
when lockdowns were in force, falling short of economists’ estimates for a
stronger rebound. China’s property sector is proving to be one drag on the
economy; investment has plunged and house prices have flatlined. This
week Evergrande, a property developer which sparked a crisis in the
market when it defaulted on its debt, said it lost $81bn in 2021 and 2022.

As much of Europe sweltered under heat domes, the International Energy

Agency warned that “a cold winter, together with a full halt of Russian
piped gas supplies to the European Union” could cause natural-gas prices
to rise again. Prices have fallen sharply this year because a mild winter left
gas stocks in good shape. The IEA thinks that “fierce competition for gas
supplies could also emerge if north-east Asia experiences colder-than-usual
weather.”

Eli Lilly presented the full findings of the phase-three clinical study of its
new drug to treat Alzheimer’s, which showed a significant slowdown in the
progression of the disease in its early stages. Some patients did suffer side-
effects, however, such as swelling and bleeding of the brain. Eli Lilly hopes
that its drug, called donanemab, will be approved by America’s Food and
Drug Administration by the end of the year.

A crackdown on users sharing passwords paid off at Netflix, which saw its
subscriber base increase by 8% in the second quarter, year on year, a faster
rate of growth than in recent quarters. A year earlier it had lost 1m
customers. Netflix now has 238m paid members, far more than the around
160m at Disney+, its closest direct rival.
Quiet on the set

Hollywood stars (well, Susan Sarandon) joined the picket lines, after the
union that represents film and television actors called a strike, joining
screen writers who downed their pens in May. The actors and writers want
the studios to limit the use of artificial intelligence in moviemaking, such as
when it replicates an actor’s image or generates a story, and a bigger cut of
the proceeds from streaming. The studios say the unions are being
unrealistic. Film and TV production has now virtually ground to a halt.

Pret a Manger turned an annual profit last year for the first time since
2018, according to newly released figures from its owner, JAB Holding.
The purveyor of sandwiches, salads and coffee is on track to operate 700
shops worldwide by the end of the year, most of them in Britain, and most
of those in London. Pret has become so synonymous with office workers
that Britain’s national statistics agency keeps a data set of transactions in its
stores, indexed to January 2020, the start of covid-19, to track footfall. The
index has risen faster in the suburbs than it has in the city.
This article was downloaded by calibre from https://www.economist.com/the-world-
this-week/2023/07/20/business

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The world this week

KAL’s cartoon
Jul 20th 2023 |

KAL’s cartoon appears weekly in The Economist. You can see last week’s
here.

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

How MAGA Republicans plan to make Donald Trump’s second term count
The meticulous, ruthless preparations for a second Trump term
Donald Trump is in his most serious legal trouble yet

This article was downloaded by calibre from https://www.economist.com/the-world-

this-week/2023/07/20/kals-cartoon

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The Economist

This week’s cover

How we saw the world

Jul 20th 2023 |

OUR COVER this week is about in vitro fertilisation (IVF). In the 45 years
since Louise Brown, the first “test-tube baby”, was born, IVF has become
the main treatment for infertility around the world. At least 12m people
have been conceived in glassware. An IVF baby takes its first gulp of air
roughly every 45 seconds.

Yet the process remains gruelling. All too often, the pain and the cost come
to nothing. There were 770,000 IVF babies born in 2018, but some 3m
cycles. In America and Britain roughly half of women in treatment go home
with a baby in their arms, even after several years. But, as our Technology
Quarterly reports, recent scientific work offers some hope, holding out more
promise and less heartache for generations of parents to come.
Leader: IVF is failing most women. But new research holds out hope for
the future
Technology Quarterly: In vitro fertilisation is struggling to keep up with
demand
Culture: “The Retrievals”, a tale of agony and addiction, makes listeners
squirm

This article was downloaded by calibre from https://www.economist.com/the-world-

this-week/2023/07/20/this-weeks-cover

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Leaders
Making babymaking better
Fertility technology :: IVF is failing most women. But new research holds out hope for the
future

How cities can respond to extreme heat

Too darn hot :: Officials from Beijing to Phoenix are grappling with unbearable temperatures

The world economy is still in danger

Economic optimism :: Falling inflation is good news. But it is too early to hail a “soft landing”

What the China-India detente means for the West

A Himalayan thaw :: The Asian giants are learning to live with each other

What the world’s budding autocrats are learning from El

Salvador
Chained gangs :: President Nayib Bukele is gutting democracy and being applauded for it

Should Ukraine get Russia’s frozen reserves?

Sanctions and reparations :: How to make Russia pay for the war while upholding international
law

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Fertility technology

Making babymaking better

IVF is failing most women. But new research holds out hope for the future

Jul 20th 2023 |

AFTER LOUISE BROWN was born in Manchester in July 1978, her

parents’ neighbours were surprised to see that the world’s first “test-tube
baby” was “normal”: two eyes, ten fingers, ten toes. In the 45 years since,
in vitro fertilisation has become the main treatment for infertility around the
world. At least 12m people have been conceived in glassware. An IVF baby
takes its first gulp of air roughly every 45 seconds. IVF babies are just as
healthy and unremarkable as any others. Yet to their parents, most of whom
struggle with infertility for months or years, they are nothing short of
miraculous.

In a world where one person in six suffers from infertility, such successes
are rightly celebrated. Less discussed are the problems of IVF. Most
courses of treatment fail. That subjects women and couples to cycles of
dreaming and dejection—and gives the fertility industry an incentive to sell
false hope. The obstacle is a lack of progress in understanding the basic
mechanisms that determine fertility. At last, however, the science is making
headway, holding out more promise and less heartache for generations of
parents to come.

Over the years IVF has become better at making babies and safer for the
women who bear the brunt of the treatment. The rate of twin and triplet
deliveries has plummeted, reducing the number of risky pregnancies.
Hormone treatments are safer. Combined with egg and sperm freezing,
donation and surrogacy, IVF has given many, including same-sex couples
and singletons, a path to parenthood where they had none.

Yet the process remains gruelling and costly. It is physically painful for
women, and emotionally draining for both sexes. For many, fertility
treatment is an unaffordable luxury; in America, for instance, a cycle can
cost $20,000. Some countries ration treatment according to a conservative
moral code. Until 2021 French law permitted IVF only for married
heterosexual couples. Many countries including China forbid egg freezing,
which extends reproductive years.

All too often, the pain and the cost come to nothing. The 770,000 IVF
babies born in 2018 required some 3m cycles. Many women go through
round after round of hormone injections, sometimes moving from one clinic
to the next. In America and Britain roughly half go home with a baby in
their arms, even after several years and as many as eight cycles of
treatment.

This has fostered a fertility industry selling to repeat customers desperate to

conceive. When a cycle fails, many clinics offer poorly regulated menus of
“add-ons” that do not demonstrably raise the chances of success, and may
even reduce them. They can charge hundreds to thousands of dollars for a
treatment.

These problems all share a fundamental cause. Although reproduction is

one of the most basic aspects of human biology, scientists have an
astonishingly poor grasp of how a new life comes about. The essentials are
obvious: a sperm and an egg must meet. But many of the cellular, molecular
and genetic underpinnings of babymaking remain a mystery.

Little is known about how a woman’s stock of eggs is set before she is even
born; or why they fade in number and quality until menopause, which
among mammals is known to occur only in humans and five species of
whale. The intricacies of how an embryo buries into the womb and connects
to the blood supply are also mysterious. Infertility is often classed as
“women’s health”, yet male factors play at least some role in roughly half
of heterosexual infertile couples—though how is often unclear.

In the face of all this, IVF is woefully inadequate. It was devised as a fix for
the blocked Fallopian tubes that prevented Ms Brown’s mother from
conceiving. But today, when more couples try for children later in life, a
woman’s declining stock of eggs is increasingly likely to be the problem.
Here, IVF works by giving people more rolls of the dice, by collecting more
eggs and maximising the odds that they will be fertilised. That will work for
the lucky few, but without an entirely new approach and new treatments,
many aspiring parents will endure one disappointment after another.

As our Technology Quarterly reports, recent scientific work offers some

hope. Researchers in Japan and America are exploiting stem cells, which
have the ability to become any of the body’s many specialised tissues, to
make eggs from skin and blood cells, a process called in vitro
gametogenesis (IVG). In Japan healthy mouse pups have been created from
cells that originated on the tips of their mothers’ tails. Earlier this year
researchers announced that they had delivered mouse pups that shared two
genetic fathers. One had contributed sperm, the other skin, which was first
turned into stem cells and then into eggs.

Some teams are working towards applying these techniques to humans. If

cells safe enough to make healthy babies will ever be available, they are
still far off. But the research is providing new insights into how sperm and
eggs are made. IVG means that researchers may no longer need to rely for
their studies on donated eggs, sperm and embryos, often generously
provided by IVF patients. Other teams are using stem cells to build embryo
models (dubbed “embryoids”). These will never see the inside of a womb
but they can help show what happens to the real embryos that do.
In time, novel treatments may follow. Gay couples could have children that
are as genetically related to them as those of straight ones. Trans people
who are undergoing gender reassignment could possibly do so without
sacrificing their fertility.

All this will take time—which is why IVF will remain important, and why
it needs investment and regulation. A better understanding of fertility
should help raise the success rate of IVF, bringing down its emotional and
financial costs.

New treatments could eventually herald the biggest transformation in

fertility technology since Ms Brown was born. Polling shows that in many
countries people have fewer children than they would like, partly because
they are putting off babymaking until later. Where the sexual revolution of
the 1960s and ’70s gave women the choice not to have babies if they did
not wish to, emerging technology could usher in a new revolution,
empowering women—and men—to have the babies they want, when they
want them. ■

For subscribers only: to see how we design each week’s cover, sign up to
our weekly Cover Story newsletter.

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Too darn hot

How cities can respond to extreme heat

Officials from Beijing to Phoenix are grappling with unbearable
temperatures

Jul 20th 2023 |

THE BEST thing that has happened in Phoenix, Arizona, since the
beginning of July is that the electricity grid has kept functioning. This has
meant that during a record-breaking run of daily maximum temperatures
above 43°C (110°F), still in progress as The Economist went to press, the
houses, indoor workplaces and publicly accessible “cooling stations” in the
city have been air-conditioned. There have been deaths from heat stroke and
there will be more; there has been a lot of suffering; and there will have
been real economic losses. But if Arizona’s grid had gone out, according to
an academic quoted in “The Heat Will Kill You First”, a new book,
America would have seen “the Hurricane Katrina of extreme heat”.
It is not just the United States, where 100m people are under heat-advisory
notices, that is suffering. There is currently a spate of such heatwaves
around the world. Much of the Mediterranean is in similar straits, with
temperatures exceeding 40°C (104°F) from Madrid to Cairo (which is
suffering power cuts). In Beijing July 18th saw a 23-year-old record broken
by a 27th consecutive day with a maximum temperature above 35°C. By
increasing the odds of a wide range of extreme events, global warming also
increases the chances that they will come in waves.

Unbearable heat does damage in various ways, including killing crops and
livestock, but the immediate challenge it poses to human health is greatest
in cities. Less vegetation, more sunlight-absorbing tarmac and more waste
heat produce what is called the urban-heat-island effect, exacerbating
temperatures. Cities also often have poor air quality, particularly in the
places where the poorest people live; extreme heat on top of dirty air can
stretch already hard-pressed lungs and hearts too far.

There are things to do as soon as the mercury rises. Get homeless people to
cooling stations; encourage people to look in on elderly neighbours and
relatives (the old, especially women over 80, dominate the excess deaths
associated with heatwaves); make it possible for those who must work
outside to do so very early in the morning; put hospitals on an emergency
footing. The appointment of chief heat officers empowered to co-ordinate
such things in American cities, and farther afield, is a welcome trend.

There are also things to be done in advance. It is crucial to work out where
the people at greatest risk live. One thing that can help is deciding where to
plant trees, which both provide shade and, as water evaporates through their
leaves, cool the air. (It is probably best to work out how to keep them green
using wastewater, too, especially if, like the people of Phoenix, you live in a
desert.) There are smart choices to be made about the built environment,
from the best sort of pavement and courtyards designed for passive cooling
to the prevalence of white roofs; there are building codes to update so as to
make those choices easier, as well as regulations to change so that workers
are not endangered by midday heat.

All these measures are easier to take when a city has resources to devote to
them. In the developing world, where a lack of air conditioning makes heat
all the more deadly, such resources are scarce. All the more need for leaders
to take the issue seriously and for local politicians to see cooling plans as a
way to compete for votes. Unfortunately, such a strategy works best in
places where voters have already felt the consequences of failing to act.
That makes studies which reveal that many places are at increasing risk of
vicious heatwaves but have yet to experience one particularly troubling.
Phoenix at least knows what to expect—and what it will have to go on
expecting for decades to come.■

For more coverage of climate change, sign up for The Climate Issue, our
fortnightly subscriber-only newsletter, or visit our climate-change hub.

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Economic optimism

The world economy is still in danger

Falling inflation is good news. But it is too early to hail a “soft landing”

Jul 19th 2023 |

ECONOMISTS ARE not known for their optimism, but today their good
cheer is palpable. Not long ago it seemed that an American recession was
inevitable, as the Federal Reserve kept raising interest rates to fight
inflation. Other central banks were following suit, their inflation problems
made worse by a surging dollar—a particular problem for the emerging
markets that borrow and trade using America’s currency. Yet news that
America’s headline rate of annual inflation fell to 3% in June has fed hopes
that the Fed’s next rate rise, which is expected on July 26th, will be its last
and that other central banks might relax, too. Stocks are up, bond yields are
down and the greenback is at close to its weakest since the Fed began
raising rates.
The surge of hope is all the more unusual because the world economy is
slowing down. On July 17th China reported that its economy grew by a
mere 0.8% in the second quarter compared with the prior three months,
even though many had expected a boom after the government abandoned its
“zero-covid” policy in December. Global manufacturing has suffered as
consumers came out of lockdowns and began eating out more and buying
less home-office equipment. And, although America grew strongly in the
first half of the year, most forecasters expect the economy soon to slow.

Increasingly, however, they are not expecting it to shrink. And growth

cooling just enough to bring down inflation without a recession is the best-
case scenario for overheated economies like America’s Even the
disappointing reopening in China, which does not have an inflation problem
of its own, has meant a feared surge in global commodities prices has not
materialised. That has helped Europe, which has replaced piped Russian gas
with shipments of the liquefied sort.
Yet it would be a mistake to assume that the world economy is now on track
for a so-called soft landing, for three reasons. The first is that inflation,
though lower, remains far above central banks’ 2% targets. The fall in
America’s headline rate has been driven by a one-off decline in energy
prices: exclude food and energy, and prices are 4.8% higher than a year ago.
In the euro zone the figure is 5.5%, and in both economies wages are still
growing far in excess of productivity growth.

In other words, the rich world has some way to go before it is fully
disinflated—and many economists expect the last mile to be the hardest.
Though stubborn inflation of, say, 3-4% does not grab headlines as much as
recent alarming price rises, it would still be a problem for central bankers.
They might have to choose between more tightening than is currently
expected and tacitly abandoning their 2% goals. Either would be disruptive
for asset markets and potentially for the real economy, too.
The second risk is that, whereas the world is seeing the benefits of cooling
off now, the costs may not be visible for a while. So far America’s labour
market has rebalanced fairly painlessly by reducing vacancies rather than
jobs. Hiring is still strong and lay-offs are rare. With job openings less
plentiful, wage growth has fallen. Yet nobody knows for how long the jobs
market can shed fat rather than muscle—and in recent months the fall in job
openings has stalled ominously. Across the rich world there is evidence that
firms, scarred by the memory of labour shortages, have been hoarding
workers they don’t need; in several countries average hours worked have
been falling. Should companies decide that it is too costly to cling to
workers who may or may not be needed in the future, then lay-offs could
rise abruptly.

The third danger is that divergence among the world’s big economies means
that even as the pressure on the Fed lifts, policymakers elsewhere remain
worried. Britain is celebrating a larger-than-expected fall in annual inflation
in June, but with underlying price and wage growth of around 7% it
remains a troubling outlier (see Britain section). Japan has barely started its
monetary tightening; with inflation rising, the Bank of Japan may adjust its
cap on long-term bond yields again at the end of July. China could be
contending with a structural growth slowdown in which the economy is
weighed down by bad debts, as Japan’s was in the early 1990s, and in
which inflation is persistently too low.

Wherever you look, in other words, there remains immense uncertainty

about where inflation and interest rates will eventually settle. By all means
celebrate good news. But the world economy has not yet escaped
unscathed. ■

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A Himalayan thaw

What the China-India detente means for the West

The Asian giants are learning to live with each other

Jul 20th 2023 |

THE HOPE that India might act as a pro-Western counterweight to China

has become a cornerstone of American foreign policy. It is a bet on India’s
future capability and geopolitical posture that was clearly articulated after a
visit to Delhi by Bill Clinton in 2000. Every subsequent president, two
Democrats and two Republicans, has doubled down on it. Hence Narendra
Modi’s latest love-fest in Washington last month. Amid bilateral
protestations of undying friendship, the Indian prime minister pocketed the
sort of defence technology deals that America usually reserves for close
allies.

But what if India, which does not enter into formal alliances, is on course to
be a much less committed American partner than many in Washington
assume? As we report this week in our International section, that is a
distinct possibility. It is illustrated by a quiet yet striking recent
improvement in India-China ties.

They deteriorated sharply after a bloody border brawl in 2020 that claimed
the lives of 20 Indian troops and at least four Chinese ones. The violence,
waged with rocks and iron bars along the Asian giants’ frigid Himalayan
frontier, helped spur the recent step-up in Indo-American defence co-
operation. America rushed cold-weather and other gear to India’s border
forces, hatched plans for more joint military exercises between the two
countries, and looked on approvingly as Mr Modi’s government transferred
some 70,000 troops in effect from India’s western frontier with Pakistan to
its northern one with China. India also banned over 300 Chinese apps,
launched tax raids on Chinese companies and introduced curbs on bilateral
trade and investment. Yet much of that India-China iciness has now thawed.

The economic freeze was brief. In 2021 bilateral trade, recovering after the
pandemic, grew by 43%. Last year it increased 8.6%. That put its total
value at $136bn—27 times greater than when Mr Clinton was in Delhi.
Meanwhile, the countries’ frontier remains largely contested and heavily
militarised—but both seem keen to defuse their quarrel over it. After 18
rounds of negotiation between military commanders, they have withdrawn
their troops from five potential flashpoints, in favour of “buffer zones”
which neither side patrols. Only two major frontier hotspots have yet to be
made safe in this way.

A world in which India and China set their territorial dispute aside, as they
did previously for over three decades, following an accommodation to that
end in 1988, could be very different from the one many American
strategists envisage. India is already much less likely to provide support to
American forces in the event of a conflict with China over Taiwan than
many in Washington seem to imagine. A sustained India-China thaw would
make that unimaginable. In such a world, India would also be even less of a
friend to the West on thorny global issues such as climate change, trade and
debt than it is currently.

A continued India-China detente would be in both countries’ interests.

India’s momentary effort to reduce its economic dependence on China
underlined how hard that would be. Two of Mr Modi’s biggest priorities,
infrastructure and manufacturing, are especially reliant on Chinese inputs.
India’s pharmaceutical industry, a big exporter, gets 70% of its active
ingredients from China. And even if the prime minister could bear to curb
such supplies (of which there is little sign) India’s influential business
lobbies would try hard to dissuade him. The brief hiatus also illustrated
their strength of feeling and traction on the issue. This does not allay India’s
security concerns over China. They are long-standing and India will in any
event continue to build up its defences because of them. India sees rapid
economic growth as the essential condition for the build-up, among much
else. And it rightly sees business with China as a necessary means to help it
achieve that growth.

For its part, China has such an obvious interest in keeping India on-side that
its recent pragmatic outreach is easier to understand than its former
aggressiveness. China’s former antagonism on the frontier appeared to
achieve nothing except strengthening Indian security ties with America. At
the same time, China’s slowing economy has underlined the growing
importance of India’s vast domestic market to Chinese exporters. It may be
that, at the time of the border clash, China was already more respectful of
India than the violence made it seem. Recent reporting from India suggests
the frontier brawl, though most obviously instigated by China, was more
down to poor local decision-making than strategy. Either way, China’s
strategic interests and recent outreach suggest a repeat has become less
likely.
Awkward for America

A peaceful and fruitful Indo-Chinese relationship could be hugely

beneficial to their massive populations and the world. It would also
represent a challenge to Western thinking that American and other
strategists need to weigh much more seriously. This does not weaken the
case for close America-India ties. India will continue to want help
protecting itself against China regardless of any improvement in the
relationship; and those ties should yield manifold benefits beyond security.
Yet to the extent that America’s growing belligerence towards China is
intensified by an assumption that India will, if necessary, help fight its
battles, it should knock it off. To be a counterweight to China, India must be
not merely weighty but also willing to counter. That cannot be taken for
granted. ■

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Chained gangs

What the world’s budding autocrats are learning

from El Salvador
President Nayib Bukele is gutting democracy and being applauded for it

Jul 20th 2023 |

IT IS A recipe to make strongmen salivate. Nayib Bukele, El Salvador’s

president, has worked out how to chop away democratic restraints while
keeping an approval rating of 80-90%. One ingredient is his mastery of
social media. The main one is locking up huge numbers of young men.

Since March last year, when Mr Bukele imposed a state of emergency, he

has arrested more than 71,000 people, equivalent to 7% of male
Salvadoreans aged 14-29. Anyone suspected of ties to a criminal gang can
be thrown into a crowded jail—indefinitely. Little evidence is required: a
suspicious tattoo or an anonymous accusation will suffice. Those detained
will eventually have proper trials, the government insists, but so far they
have had only cursory hearings, sometimes with hundreds of suspects
appearing simultaneously before a judge. Mr Bukele glories in brutality,
tweeting photos of suspects cuffed, half-naked and packed tighter than
battery hens.

Outraged liberals must admit that his crackdown has brought benefits. Most
touted is a plunge in the homicide rate, which fell from 51 per 100,000 the
year before Mr Bukele took office in 2019 to 18 in 2021 (before the state of
emergency began) and just eight last year. Analysts dispute how much
credit to give Mr Bukele, but he can surely claim some.

More important, he has changed the balance of fear in El Salvador’s

extortion-plagued neighbourhoods. Before, if a gangster demanded
protection money, civilians paid up or braved a bullet. Few called the
police, since gangsters were seldom convicted without testimony that
hardly anyone was brave enough to offer. Now, it is the gangsters who are
scared. Knowing that an anonymous tip-off can put them behind bars
indefinitely, those still at large are in hiding. Their absence has improved
countless lives. A study in 2016 found that the annual cost of gang violence
in El Salvador was 16% of GDP. Today neighbourhoods are calm and
businessfolk have mustered the optimism to open new shops. Hence Mr
Bukele’s rock-star popularity.

Yet his scrapping of due process carries costs that will outweigh these
benefits. First, untold numbers of innocents have been locked away. Their
families cluster outside prisons, desperate for news of their loved ones. (The
government has released 6,000 so far, but seems in no hurry to admit its
mistakes.)

More insidiously, Mr Bukele has amassed powers to pave the way for his
crackdown and then used it as an excuse to grab even more. He has kept the
country in a state of emergency for over a year. He has purged judges who
resist him. He is shrinking parliament and tweaking election rules to
entrench his party’s majority. He intimidates the press: a new law prescribes
jail terms of 10-15 years for journalists who repeat messages from gangs
and spread “anxiety”. That could mean anyone who reports critically on
crime policy. Next, Mr Bukele vows to crack down on corruption. If he
applies the same rules of evidence to white-collar crimes as he does to
consorting with gangsters, he will have a mighty tool for locking up
opponents. El Salvador increasingly feels like a police state.

Some critics call his crackdown unsustainable. Previous attempts to crush

crime with brute force have failed in El Salvador and elsewhere. Gang
bonds will strengthen behind bars, so the prisoners will cause mayhem
when they are eventually released.

But what if they are not released? Mr Bukele’s crackdown is unlike

previous ones. He has locked up far more people, and apparently plans to
hold them until they are old men. This will be costly, but he scrimps on
prisoners’ food and urges their families to chip in. He is wagering that
voters care more about safe streets than abstract notions like the rule of law.
If his political opponents chide him for trampling over his people’s human
rights, his next electoral slogan writes itself: vote for me or the gangsters
will be freed.

Mr Bukele is nearing the end of his first term as president; his party says he
will run again in February. The constitution bars him from consecutive
terms, but he has cooked up a Putinesque workaround: he will install a
placeholder president for a few months and then return. The constitution
clearly forbids a third term, but that may not stop him either. An official
close to Mr Bukele told The Economist that there was no way for him to run
for a third term—“so far”.

The reputation of the self-styled “world’s coolest dictator” is spreading.

Sticklers for the rule of law decry him; others study his formula. Honduras
has declared a state of emergency to battle crime. The establishment
candidate for Guatemala’s presidential election next month vows to build a
huge prison. A combat-jacket-wearing presidential candidate in Ecuador,
which also votes next month, praises Mr Bukele. So do some Republicans
in the United States. His methods are ripe for copying anywhere with high
crime and weak institutions, from South Africa to Papua New Guinea. They
could tip such places into autocracy.

Democratic politicians everywhere should pay heed. When they fail to

grapple with crime lawfully, with properly funded police and clean,
efficient courts, they invite demagogues to do so lawlessly. As for
Salvadoreans, if they re-elect Mr Bukele in February, as seems likely, he
will have five more years to tear down their country’s democratic
guardrails. And if one day they tire of him, they may struggle to get rid of
him.■

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Sanctions and reparations

Should Ukraine get Russia’s frozen reserves?

How to make Russia pay for the war while upholding international law

Jul 20th 2023 |

EVER SINCE the attack on Ukraine in February 2022 Western

governments have made a show of clamping down on private Russian
assets held abroad, from seizing oligarchs’ yachts to forcing the sale of
Russian-owned football clubs. But there remains a huge question mark over
the really big money. Some $300bn of Russian central-bank assets are
frozen in Western accounts as a result of sanctions. Given the horrors that
Russia has inflicted on its neighbour, the idea of tapping this pot to help
compensate and rebuild Ukraine has naturally arisen.

The moral case to make Russia pay is obvious. It has waged war without
provocation, without regard to civilian lives and in frequent violation of
international law. The damage to Ukraine has been vast: the cost of
reconstruction has hit $411bn, according to the latest estimates from the
World Bank, which were compiled before the destruction of the Kakhovka
dam. These sums are far beyond the capacity of Ukraine, which now has a
GDP of about $150bn. Western taxpayers should not have to foot all the
bill.

Yet it is vital that any measures the West takes comply with international
law. For Ukrainians and their backers, the war is not just about defending
one country against an aggressor but also about upholding the post-1945
global order, which underpins the world’s economy and security. Whatever
the West does with Russia’s frozen assets will set a precedent that will
shape global behaviour for decades to come.

State assets are protected from seizure under international law, and typically
under domestic law, too . There are exceptions to this doctrine of sovereign
immunity, but lawyers have advised America and the European Union that
they may not apply in Russia’s case. A vote in the UN Security Council
could provide a clear legal basis for seizing the assets, but Russia has a veto
there. Reparations can be part of a peace deal, but that requires the
agreement of both sides.

What to do? The best approach involves three steps. The first is to seize the
income that the Russian assets generate and hand it over to Ukraine.
Euroclear, a Belgian clearing house and depository that holds almost
$225bn of frozen Russian assets, makes profits from investing them. Taxing
those at a 100% rate could generate over $3bn per year, and is legal. At a
minimum Ukraine could be assured of a recurring stream of income worth
2% of its present GDP. As a one-off this is peanuts; received each year in
perpetuity it is well worth having.

The second step is to make the payment of reparations by Russia a

condition of any eventual release of its reserves (or easing of sanctions).
The two must go in lockstep. Estimates of Russia’s capacity to pay should
take account of its frozen reserves: think of them as a bit like collateral
being held against a future claim. The G7, a group of rich countries, has
recently adopted this position. The more countries that do so, the better.

Finally, patient, relentless work is needed to expand the legal case against
Russia. It is still possible that a watertight case for immediate seizure can be
built. Further votes at the UN General Assembly in favour of this would
help: although the assembly can only make recommendations, this can
sometimes be deemed a stand-in for the Security Council if the latter fails to
exercise its primary responsibility to maintain international peace and
security.

At the same time, laying the groundwork for a future reparations process is
vital. The arbiter of Ukraine’s claims could be the International Court of
Justice (ICJ) or a UN compensation commission like the one set up by the
Security Council after Iraq’s invasion of Kuwait in 1990. To try to justify its
invasion, Russia has claimed that Ukraine was committing genocide against
Russian-speakers in the east of the country. Ukraine wisely asked the ICJ to
rule on this, and the verdict was clear: there was no such genocide, so
Russia’s pretext is bunk. The West should continue to support the
meticulous recording of war crimes and damage to ensure this evidence is
available for any eventual financial showdown.

It would, of course, be simpler just to grab all Russia’s frozen assets; but
that is what dictatorships do. Far better to take the legal path, which
guarantees Ukraine a stream of income, secures priority for its claim on
Russia’s reserves and enhances its already strong case for reparations. It is
possible to help Ukraine, make Russia pay—and uphold international law. ■

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Letters
Letters to the editor
On deep-sea mining, water regulation in Britain, the Italian left, working from home :: A
selection of correspondence

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On deep-sea mining, water regulation in Britain, the Italian left,

working from home

Letters to the editor

A selection of correspondence

Jul 20th 2023 |

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

Protecting the sea floor

You support deep-sea mining as a means of easing the shortage of battery

metals (“Give nodules the nod”, July 8th). Deep-sea mining would see
industrial extraction on a far greater scale than anything on land. Modelling
suggests that this could affect up to 1.5m square kilometres of the Pacific
Ocean’s Clarion Clipperton Zone alone, the first area targeted for mining. It
would cause irreversible biodiversity loss on the sea floor where the metal
nodules support over 50% of life in the ecosystem. The hydraulic suction
process would obliterate the sea floor and substrate and create sediment
plumes that could travel at least a thousand kilometres.
The green transition does not require minerals from the deep sea. A 2022
report by SINTEF, a Norwegian research organisation, finds that demand
for critical minerals can be reduced by 58% between 2022 and 2050
through a combination of new technology, circular-economy strategies and
recycling. And nickel and cobalt are not needed for electric cars. A recent
World Bank study concluded that with the rapid evolution in the battery
sector, forecasting which technology will be the most used from now until
2050 is nearly impossible. Lithium iron phosphate batteries are already
well-established, leaping from 10% of the global EV market share in 2018
to 34% in 2022.

We do not need, and cannot afford, to mine our way out of the climate
crisis.

SIAN OWEN
Director
Deep Sea Conservation Coalition
Amsterdam

As a veteran deep-sea researcher, I can assure you that warnings that deep-
sea mining will cause irreparable damage to vast areas of the ocean are not
spurious. You urge the International Seabed Authority, the UN agency
tasked with managing mineral resources in international waters, to finalise
rules for mining as soon as possible. As a scientist involved in these policy
discussions, I can tell you that there is not nearly enough evidence to ensure
effective protection of the marine environment.

Last year the World Economic Forum questioned whether the

environmental costs of deep-sea mining can be justified and cautioned that
these minerals may not meet environmental, social, and corporate
governance (ESG) principles. Likewise, given that recent battery chemistry
R&D is disrupting the demand assumptions for battery metals, the demand
for critical minerals from the deep sea may not be as great as you assume.
The need for green technologies is indeed urgent, and the costs of both
climate change and land-based mining operations are very real. However,
assuming that the cost of this destruction in an environment we don’t yet
understand will be small is a mistake with permanent consequences for the
planet.
DR BETH ORCUTT
Vice-president for research
Bigelow Laboratory for Ocean Sciences
East Boothbay, Maine

You focus on the need for a mining code that would respect the
precautionary principle, that mining should not be a severe environmental
threat. As elaborated in my book, “The Blue Commons”, most of the
negotiators of the United Nations Convention of the Law of the Sea
(UNCLOS) were in fact more exercised by the need for a benefit-sharing
mechanism that would respect the notion that sea resources were part of the
common heritage of mankind, that is, part of the global commons.

In 1994, the International Seabed Authority (ISA) was set up with a

mandate to develop such mechanisms. It has had 28 years to do so and has
failed. Moreover, it has moved the proverbial goalposts by now talking of a
sharing mechanism based on economic criteria that would undoubtedly
favour large technologically advanced countries and a few countries with
rich terrestrial mineral resources. That is far from the commons principles
that guided the UNCLOS negotiators.

The trouble is that there is now far less likelihood that a sharing mechanism
could be devised to obtain full agreement. The ISA has a wretchedly small
regular budget, which it has topped up with comparatively large sums from
mining companies that pay it for exploration licences. Perhaps
unsurprisingly, it has never refused an application and has issued 31 such
licences.

The danger today is that countries, such as Nauru, collaborating with

mining companies, apply to the ISA to start mining and it produces an
opportunistic fudge. This should not be allowed to happen. A sharing
mechanism must be established along with a mining code. The scientific
community is rightly worried about the environmental dangers. Perhaps the
new convincing evidence that those nodules mentioned so sanguinely in
your article may be radioactive might tip the balance.

DR GUY STANDING
Professorial research associate
School of Oriental and African Studies
University of London

If we want to survive on an inhabitable planet Earth we have to greatly

reduce our resource use and allow nature to flourish. Your argument for
deep-sea mining rests on the mistaken assumption that we have to replace
internal-combustion engine cars with electric ones. Instead, we need a more
profound transformation of our transport system with a more prominent role
for public transport. This would reduce the use of natural resources and
leave more space for public parks and cycle tracks. We need a true
transformation, not just a little greenwashing of our harmful lifestyle.

DR KATJA RIETZLER
Düsseldorf

Society faces uncomfortable decisions over how and from where we source
metals for the energy transition. The Economist should be commended for
its bravery in coming out in support of collecting deep-sea metal nodules.
The seemingly ironic logic of tapping the oceans to protect them has left
some people anxious. Commitments to delivering a circular economy have
resonated the world over, but we must be honest with ourselves that this
cannot be achieved without using more metals to close the loop. You cannot
recycle what you don’t have.

Climate change is the greatest threat to our oceans and by saying no to

nodules we tacitly accept the alternative: more mines on land. That means
more deforestation and more toxicity flooding our oceans, rivers and
communities. We also should not ignore the human impact of the mining
status quo, which is displacing indigenous peoples and using child slave
labour to extract the very same metals that lie unattached on the sea floor
and require no drilling, blasting or sacrificing of human lives to collect.

There is a better way and the answer is clear. For the energy transition to
succeed with the least impact on the environment and human lives, we need
to source metals from where there is the least life, not the most.

GERARD BARRON
Executive chairman and CEO
The Metals Company
Vancouver

Ofwat responds

Your article on water privatisation in Britain makes a series of assertions

that do not accurately reflect how the sector works (“Circling the drain”,
July 8th). You claim that Thames Water’s financial issues are exacerbated
by high inflation. This, you say, is because customer bills rise in line with
the consumer price index adjusted for housing costs, whereas some of
Thames Water’s debt is linked to the (higher) retail price index. As only
part of the debt is indexed to inflation, higher inflation increases the value
of equity and reduces gearing, easing financing issues, the reverse of what
you claim.

You then attributed the widespread concern about sewage discharges to

Ofwat, Britain’s water-services regulator, blocking investment. In fact,
investment in reducing sewage discharges by English water companies is
determined by the Environment Agency’s water-industry national
environment programme, rather than Ofwat. Capital investment in the
industry since privatisation in the late 1980s has been over £190bn
($249bn), leading to an increase in the sector’s asset base from £9bn at
privatisation to £94bn in 2023. Progress on reducing sewage discharges had
been impeded by the lack of accurate measure of their use. Now this has
been addressed, improved operational performance will drive down future
sewage discharges.

We agree that in some cases companies have been overly reliant on debt
rather than raising equity. Ofwat has identified issues with weak financial
resilience in several companies, including Thames Water. We have taken
targeted action with these companies and secured over £3bn of new equity
since 2020.

Finally, although customer bills have risen by around 40% in real terms
since privatisation, there has been little or no increase in the past decade for
most customers. This has been due to falling returns to investors rather than
reduced investment.

DAVID BLACK
Chief executive
Ofwat
London

Italian peaceniks

“Putin’s useful idiots” (July 8th), a guided tour of European opposition to

the war in Ukraine, didn’t say anything about the left in Italy. The
Democratic Party, heir to the former Communist Party, is engaged in
splitting hairs over supporting Ukraine. The Five Star Movement, Italy’s
shrillest populists, who have perfected the art of pretending to solve
problems by marching in the streets, is against the arming of Ukraine. An
assortment of radical leftists and greens oppose the war in the name of
abstract pacifist principles. Left-leaning Catholics oppose it on the ground
of moral principle. Luckily Giorgia Meloni, the conservative prime
minister, is a steadfast supporter of Ukraine’s cause.

BRUNO GEDDO
Milan

Changing lifestyles

Working from home was bolstered by the first wave of studies indicating it
was more efficient. Now that the evidence is shifting in the opposite
direction (Free exchange, July 1st), it is worth considering why employees
regard remote working as so valuable. As well as a commute-free life, it
relates to how employees measure their own well-being, specifically to how
they understand their personal identities. Few of us see ourselves as just
workers, but define our lives through a constellation of roles; mothers,
fathers, care-providers, citizens and so on. Since these identities are more
closely associated with how we regard our lives than our ability to excel at
our jobs, the new culture of working from home may prove hard to change.

DR MATTHEW DENNIS
Assistant professor in the ethics of technology
Eindhoven University of Technology
Eindhoven, Netherlands

On the same day I read your article I took my children to visit Isaac
Newton’s family home in Woolsthorpe, Lincolnshire. I was reminded that it
was during a plague-induced lockdown that Newton returned home and
came up with the theory of gravity while sitting under the famous apple
tree. This would appear to be evidence that significant accomplishments can
occur while working from home.

JONATHAN RAMSDEN
Columbus, Ohio

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By Invitation
George Clooney and John Prendergast on how the West
can kill the Wagner virus
The Wagner Group :: Without stronger action, state capture in Africa and beyond will spread
as the group mutates

Alberto Núñez Feijóo on why he deserves to lead Spain

Spain’s election :: The country needs a government with more ambition for reform, says the
head of the opposition

As Spain prepares to vote, its Socialist prime minister sets

out the case for continuity
Spain’s election :: Economic resilience is proof of policy success, says Pedro Sánchez

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The Wagner Group

George Clooney and John Prendergast on how the

West can kill the Wagner virus
Without stronger action, state capture in Africa and beyond will spread as
the group mutates

Jul 17th 2023 |

IN THE DAYS since the Wagner Group abandoned its march on Moscow
on June 24th, speculation has grown about what will become of Russia’s
notorious paramilitary company and its leader, Yevgeny Prigozhin. Amid
reports of President Vladimir Putin poking around Wagner’s assets and
troop deployments, and with the status and whereabouts of Mr Prigozhin
himself cloaked in mystery, the future of the group—and its extensive
business empire—is unclear.

What is clear is that Wagner has been one of Russia’s most successful
foreign-policy initiatives during the past decade. The group has allowed
Russia to expand its influence into unstable states, particularly in Africa,
advancing its economic interests, often through violent means. Wagner’s
perceived instability at the moment offers America and the broader
international community an unprecedented opportunity to counter Russia’s
use of this atrocity- and corruption-fuelled force abroad.

The Central African Republic (CAR) is where Wagner’s method can be

seen most comprehensively. In the CAR, Wagner has created a manual for
how to hijack a government, using a brutally simple transaction: protecting
the regime in exchange for mineral concessions. Wagner helped the
country’s president, Faustin-Archange Touadéra, to recruit, train and equip
a parallel army dedicated to protecting a pro-Russian regime, and it used
mass violence to quell opposition and gain control of vast mining
concessions. With the CAR’s leaders providing a licence to loot, Wagner
has used terror to privatise and drain the mineral wealth of the country,
taking payment in conflict gold and blood diamonds. Wagner’s malign
presence has exacerbated successive humanitarian crises in the CAR,
contributing to a mortality rate that is more than double that of any other
country in the world.

Wagner’s strategy in the CAR was to “leave no trace”, killing eyewitnesses

and murdering civilians including women and children, according to a
recent investigation by The Sentry, the organisation we co-founded that
seeks to disable multinational predatory networks. Sentry investigators
interviewed CAR soldiers and militiamen in Wagner’s chain of command
who said they were trained to torture—to cut off hands and legs, remove
fingernails, strangle and burn people alive.

This strategy—used in different forms in Libya, Mali, Sudan and elsewhere

—serves Russia’s interests in several ways. A relatively small number of
mercenaries helps expand the country’s global influence on the cheap,
offering the Russian government implausible deniability as it supports
pariah regimes and warlords with overwhelming force. The approach
simultaneously creates a diverse set of black-market cash cows at a time
when Ukraine-related sanctions have limited Russia’s access to foreign
exchange and global markets. And Wagner serves an overarching Russian
strategic objective: subverting democracy in Africa.
The structure of Wagner’s companies, contracts and mercenaries is likely to
evolve. It all depends on how Mr Putin decides to manage these valuable
assets and the degree to which he can control what will undoubtedly be a
contentious transition period. Whether or not its name is retained or
changed, or it is merged with one or more Russian private military
contractors or folded into state institutions, Wagner remains a cost-effective
way for Russia to expand its influence. The group’s arrangements are too
lucrative for Russia and its authoritarian allies to alter.

In short, in whatever potentially modified form, the Wagner virus will live
on. And the confusion of the current moment provides an ideal opportunity
for America and the international community at large to take action against
both the operation and its originator.

In June America’s Treasury imposed sanctions on Wagner-related

companies trafficking in blood diamonds and conflict gold from the CAR.
But a more robust strategy is needed to counter the threat the Wagner model
poses to global peace, human rights and good governance.

America, the European Union and other allies should focus on holding
Wagner financially and legally accountable. They should create an ad hoc
coalition aimed at dismantling the group’s business empire, building on
lessons from similar efforts focused on Islamic State and al-Qaeda.
Ramping up sanctions on the networks involved in the CAR and other
African countries, including the lawyers and financiers who enable them,
could create a chilling effect on those considering future alliances with
Wagner—or whatever its successor may be called—and make it more
difficult for the system to finance itself.

The international community should also prioritise investigating and

prosecuting those most responsible for war crimes and crimes against
humanity, whether they are Wagner personnel or regime leaders and local
warlords allied with Wagner.

There is great unfulfilled promise in going after those benefiting from

Wagner’s ultra-violent plunder, from the companies owning the mines to
the facilitators in neighbouring states, the Gulf and Russia. Not only would
such an approach weaken a large cog in Russia’ s colonial looting machine,
but it would also disincentivise African kleptocracies and the transnational
networks that support them from entering into or maintaining such
exploitative relationships.

It is time to create a measure of accountability for this brutal model of state

capture, and to actively counter its expansion. No matter how the Wagner
threat mutates, the international community can make its future clear.■

George Clooney is co-president of the Clooney Foundation for Justice and

co-founder of The Sentry. John Prendergast is co-founder of The Sentry.
(The Economist’s editor-in-chief, Zanny Minton Beddoes, is on the board of
the Clooney Foundation for Justice.)

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Spain’s election

Alberto Núñez Feijóo on why he deserves to lead

Spain
The country needs a government with more ambition for reform, says the
head of the opposition

Jul 19th 2023 |

ON JULY 23RD I will have the honour of leading the People’s Party (PP)
in the Spanish general election. If Spaniards give me their confidence, the
mission of my government will be to revive the Spanish economy, restore
faith in our institutions and ensure that our welfare state works well. We
need to rebuild the core pillars of credibility, stability and the rule of law
that the incumbent populist-socialist coalition has compromised.

Worryingly, despite a reform effort after the European debt crisis, the
Spanish economy has been stagnating for well over a decade. Spain’s per-
person GDP today is the same as 15 years ago, compared with a 12%
increase for the EU as a whole. As a result, the gap with the EU average,
which had narrowed sharply in the 45 years before the crisis, has reopened
since. Unemployment in Spain is still the highest in the EU and, at 12.7%,
more than double the average across the bloc.

The succession of crises is not an excuse: crises have affected all European
economies, but Spain has fared worse. Real GDP per person fell by 2.4%
between 2019 and 2022 in Spain, while in the EU as a whole it grew by
2.7%.

My government will recover the reformist ambition that flourished briefly

in Spain after the financial crisis and the economic rigour that characterised
the governments of Mariano Rajoy and José María Aznar (my PP
predecessors), as well as the first socialist governments in the 1980s, and
was lost by the current left-populist government. Only an administration
committed to reforming Spain will return us to growth and to the path of
convergence with the rest of Europe.

Our strategy leverages our strengths. First, the move to clean energy will
significantly favour Spain: we can be in solar and wind energy what Texas
is to oil and gas. Second, regardless of what artificial intelligence does to
jobs, high-value-added tourism (relying on our excellent infrastructure,
food, historical sites and outstanding health care) will flourish in the
coming decades. Spain is, and will remain, a quality-of-life superpower. We
must ensure talent and new ventures flow to where life is more pleasant, as
they now do in America. Third, the time after the euro-zone crisis was not
all wasted: the economy enjoys a robust external surplus, relying on an
outstanding export performance and a solid banking system. And since the
crisis companies and families have reduced their debts significantly.

The present government has squandered these strengths. A coalition

involving populists, communists and socialists, supported by several
separatist parties, it has replaced growth strategies with populist spending.
Between 2019 and 2022 Spain’s public-debt-to-GDP ratio increased by the
most of any EU country despite increased taxation. That is why Spain
urgently needs reforms.

Upon taking office, we will initiate two critical measures that will
immediately yield growth dividends. We will streamline the administration
of NextGenerationEU funds to help small and medium-sized companies,
thereby eliminating reams of red tape, and convert as much money as
possible from subsidies to tax deductions, which will boost manufacturing
investment. We will also overturn the decision to decommission all our
nuclear plants. Leveraging our strategic position as an energy hub, we will
ensure low and stable energy prices, inviting foreign investment.

But long-term growth requires a broad spectrum of reforms. The current

government has undermined the independence and competence of key
institutions, including the judiciary. This is undemocratic and scares off
foreign investment. My party is committed to promoting a true programme
of democratic regeneration to guarantee our institutions serve citizens.

We will also have to remedy Spain’s traditional weakness in human capital

investment. We must invest in first-rate universities, in vocational training
paid for with vouchers for workers (rather than subsidies) and in supporting
families and maternity. We must also become attractive to foreign talent.

Finally, Spain needs in-depth reform of the public administration and

permitting and regulation processes, which are largely responsible for the
small size of Spanish firms and which make it impossible to expand green-
energy investment at the speed required. We need to cut red tape in a variety
of areas, including the process for starting a business.

If Spaniards give us their support, my government will also be presiding

over the Council of the European Union. During Spain’s presidency, some
of our priorities will be supporting Ukraine, agreeing on anti-money-
laundering legislation and deepening our economic and monetary union.
Spain is well positioned to be a bridge between the north and south of
Europe concerning deficit rules: we are responsible, and we believe in both
the need for fiscal discipline and in flexibility within the rules. More
broadly, we believe that Europe needs fewer rules, more innovation and a
strong European single market to compete with China and America.

This election offers Spain the chance to break free from economic
stagnation and return to reform and stability. If elected, my government
pledges competence and rule of law instead of the populism and fantasy
economics of the current coalition.■
Alberto Núñez Feijóo is president of the People’s Party and leader of the
opposition in Spain. You can read an opposing perspective from Pedro
Sánchez, the prime minister of Spain, here.

This article was downloaded by calibre from https://www.economist.com/by-

invitation/2023/07/19/alberto-nunez-feijoo-on-why-he-deserves-to-lead-spain

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Spain’s election

As Spain prepares to vote, its Socialist prime

minister sets out the case for continuity
Economic resilience is proof of policy success, says Pedro Sánchez

Jul 19th 2023 |

WHEN I TOOK office in 2018, we inherited a country wounded by the

previous government’s response to the Great Recession. The Spanish
economy had gone through a rough recovery, based on an unfair austerity
model that left millions behind, particularly young people and low-income
workers. Inequality had reached extreme levels and corruption scandals had
ravaged the outgoing right-wing government.

The challenge was enormous. At the gates of a crucial decade, marked by

major economic transformations, Spain was at risk of being left behind
once again, as in many other moments of our history.
To add even more complexity, in 2020 the pandemic hit us tremendously
hard, especially because of our heavy reliance on tourism, which was
affected by the restrictions on international travel. And right after that, we
witnessed a burst of inflation not seen in four decades, fuelled by Russia’s
war of aggression.

Faced with these challenges, the only certainty we had was that we were not
going to repeat the mistakes of the previous decade. The impact of the
pandemic and of the war had to be dealt with by putting people at the centre
—not just because it was right, but also because it was sound economic
policy. Moreover, we had to ensure our policies were backed by broad
consensus.

Time has proved us right. After five years in government, Spain’s economy
is performing strongly, powerful proof of policy success. Despite the
pandemic’s devastating effects, employment and economic activity
recovered fast. Our social shield proved to be effective.

And while the government was dealing with the urgencies of the moment, it
never lost sight of the longer-term goals—not least the transformation of
our productive fabric to build a more resilient, inclusive and sustainable
economy.

As part of the Recovery and Resilience Plan, one of the biggest financed by
NextGenerationEU, the bloc’s post-pandemic support fund, Spain has
embarked on a broad reform process to address structural deficiencies.
Since the adoption of our reform of the labour market, employment has
increased by 1m, the proportion of workers in temporary jobs has been
halved to 15% and the minimum salary has been raised by 47%.

The pension reform has guaranteed the purchasing power of retired people,
while reinforcing the long-term sustainability of the system. We also
undertook deep reforms in education, vocational training, science,
entrepreneurship and gender equality, among other areas. These will raise
productivity and long-term growth. Most reforms were negotiated with the
European Commission and many were agreed with trade unions and
employers, thus ensuring social peace and stability.
Spain has also dealt with inflation better than most European countries.
From a peak of 10.8% in July 2022, inflation measured by the harmonised
headline CPI went down to 1.6% in June 2023, compared with an EU-wide
average of 6.4%. Key to this success has been our leadership in identifying
innovative solutions to the energy crisis and price shocks, and our long-term
vision for the deployment of renewables and the decarbonisation of the
economy.

The modernisation agenda has been driven by the “twin transition”: the
green and digital transformations. Nearly 70% of the NextGenerationEU
funds are devoted to this. With the highest potential availability and quality
of solar and wind power in Europe, Spain is well placed to become the
continent’s industrial hub, powered by clean and cheap energy.

We will not miss this opportunity. Thanks to our strong green agenda, Spain
ranks second in the EU in reducing greenhouse-gas emissions. It has
quadrupled its installed photovoltaic capacity in four years and ranks
second in the EU in installed renewable-power capacity. And last year
Spain ranked third worldwide in numbers of new greenfield renewable-
energy projects.

In addition, our new Energy and Climate Plan foresees the creation of more
than half a million high-quality jobs, an increase in GDP of 2.5% and a
€90bn ($100bn) reduction in fossil-fuel imports, all by 2030. Moreover,
through our Just Transition Strategy, we want to ensure that the process of
decarbonising the economy is fair and inclusive, one that creates jobs and
opportunities for individuals and communities.

The government has also advanced an inclusive digital transformation,

based on individual rights. Spain’s annual public budget for research,
development, innovation and digitisation has risen from €7bn under the
previous government to €16.3bn in 2023. Rural broadband coverage has
increased from just 28% of households in 2018 to 72% in 2022.

In this context, Spain has taken on the rotating presidency of the Council of
the European Union. We do so in an uncertain geopolitical climate, but with
the ambition of contributing to the EU’s open strategic autonomy and
reinforcing our relations with key trading partners. In particular, we want to
advance a strategic partnership between Europe and Latin America and the
Caribbean. Our two regions have shared interests and strong economic,
social and cultural ties.

Looking ahead, the reforms and investments we are carrying out need to be
consolidated in order to sustain strong economic growth and address the
pending challenges. The goal of achieving full employment in the next four
years is clearly within sight.

Ultimately, what is at stake in the upcoming general election is whether the

country continues to move forward with modernisation or goes backwards,
and whether Spain leads in the great global debates or turns into a self-
absorbed country that accepts becoming irrelevant.

I believe in a Spain that wants to lead and is not willing to back down.■

Pedro Sánchez is the prime minister of Spain and the leader of the Spanish
Socialist Workers’ Party. You can read an opposing perspective from
Alberto Núñez Feijóo, the head of the People’s Party and leader of the
opposition, here.

This article was downloaded by calibre from https://www.economist.com/by-

invitation/2023/07/19/as-spain-prepares-to-vote-its-socialist-prime-minister-sets-
out-the-case-for-continuity

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Briefing
Could America’s economy escape recession?
Turning a corner :: The route to a soft landing is narrow

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Turning a corner

Could America’s economy escape recession?

The route to a soft landing is narrow

Jul 20th 2023 | Washington, DC

AS COVID-19 SPREAD throughout the world three years ago, many pored
over the history of a previous pandemic, the Spanish flu of 1918-19, for
clues about how the disaster would unfold. Now that the plague has abated,
history may also provide a few lessons for the aftermath. As the first world
war and the Spanish flu receded, interest rates were low and government
spending high. Inflation surged. In order to bring prices back under control,
America’s central bankers cranked rates up, triggering a severe recession.
The Federal Reserve described its actions in 1921 as “painful but…
unavoidable” following “an unprecedented orgy of extravagance”.

These days Fed officials tend to avoid the word orgy, but they are wrestling
with similar circumstances. They have been raising rates at the fastest pace
since the early 1980s. Hawkish economists argue that, to quell inflation, the
Fed will have to raise them yet higher, even though that would certainly
raise unemployment and probably induce a recession. Doves counter that
the Fed has already gone too far and that further economic pain is
unnecessary. A third possibility, that the Fed is getting things just right, and
that the economy will slow and inflation dissipate without a recession (a
“soft landing” in the jargon), was until recently seen as nigh on impossible.
An orgy of tightening

The odds are still stacked against it. Since March 2022 the Fed has lifted
short-term interest rates from 0% to 5%. Such rapid jumps tend to go hand-
in-hand with recessions. As higher rates raise the cost of borrowing, they
drag down both spending by consumers and investment by companies. As a
general rule, the bigger the increase in rates, the bigger the drag. Thus, for
much of the past year, the dominant view on Wall Street and in corporate
boardrooms has been that America’s economy would end up in a funk. As
of June, the median forecast of economists surveyed by Bloomberg pegged
the probability of a recession in the next 12 months at about 65%. The
Conference Board, a business group, put the probability at 99% in February.
Stanley Druckenmiller, Silicon Valley’s favourite macroeconomic
prognosticator, recently said that he expects a “hard landing”, involving a
slump in corporate profits and a big rise in unemployment.
The gloomiest portent has been an extreme inversion of yield curves.
Normally, rates on long-term bonds are higher than on those with short
terms because investors expect extra compensation for the risk of holding
securities that mature well into the future. When short-term yields are
higher, the implication is that investors expect the central bank to cut rates,
typically because they think growth is set to weaken. Inversions have a
nearly perfect record in foreshadowing recessions in America over the past
half-century, and they have been screaming trouble for some time now.
Yield curves inverted for the first time in this economic cycle in October
2022, and are now deeply upside-down. The lag from the onset of inversion
to the dawn of recession averages about 350 days, which would put the start
of a potential recession in September. The Fed’s New York branch
calculates the probability of a recession based on the yield curve. In May it
put the odds of one at more than 70%, the highest since 1982 (see chart 1).

Other indicators confirm this bleak outlook. Consumer sentiment, as

measured by a closely watched survey from the University of Michigan,
plunged to an all-time low last year. The collapse of Silicon Valley Bank
and a couple of other financial institutions in March provided evidence that
the rapid rate hikes are harming vulnerable firms, and the ensuing financial
instability added to economic headwinds. Banks have made their lending
standards much stricter, another sign of a looming recession. Smaller
businesses—the lifeblood of America’s economy—remain extremely
pessimistic. Manufacturing is already contracting, with output down since
late in 2022. The debate among economists has been less about whether a
recession is coming and more about whether it will be long or short, deep or
shallow.

In the past couple of weeks, though, the mood has shifted. Despite the many
ill omens, the most important indicator of the economy’s health—the labour
market—has remained amazingly resilient. The unemployment rate sits at
just 3.6%, a smidgen above a five-decade low. A brief rise in claims for
unemployment insurance during the spring has petered out. America has
added new jobs for 30 consecutive months, lifting total employment to
about its pre-pandemic level.

At the same time, inflation is receding. In the year to June 2022 consumer
prices leapt by 9.1%. In the year to this June they rose by just 3%, the
smallest increase in more than two years. Core inflation, which excludes
energy and food, is higher, but after a few months of stasis is moving in the
right direction again. As post-pandemic supply-chain snarls untangle, the
cost of most goods is rising only slowly, and in some cases falling. Rents,
hitherto a big element of inflation, are falling according to private indices,
and are likely to start declining soon in the official data, too. Labour costs
are still rising, but the rate of increase has slowed, which bodes well for the
prices of restaurant meals, car repairs, tax accounting and more.
To say that the combination of ebbing inflation and a robust labour market
is unexpected is an understatement: many economists had assumed it was
impossible. They had believed that there was a short-term trade-off between
jobs and prices: that, all else being equal, a low unemployment rate is
associated with a rising inflation rate, a relationship known as the Phillips
curve. In the decade before the pandemic the Phillips curve had come into
question, because inflation remained quiescent even though the jobless rate
plunged. But the resurgence of inflation last year brought the Phillips curve
back into fashion, in part because the labour market appeared to have
become less efficient after the pandemic. Debate focused not on whether
unemployment would need to go up for inflation to come down, but rather
on just how many people would need to lose their jobs before prices were
brought under control. In one much-discussed speech last year, Larry
Summers, a former Treasury secretary, said the jobless rate might need to
climb as high as 10%.
A bacchanal of employment

America does have an ultra-tight labour market: too many companies

competing to hire too few workers. That would normally lead to sharply
rising wages and thus higher inflation. The obvious way to curb that
inflation, in turn, would be to inflict enough pain on companies through
higher interest rates that they resort to widespread lay-offs. But another way
to bring the labour market into balance is to increase the supply of workers.
That has happened to a certain extent: fully 84% of those of those aged 25-
54 have jobs or are looking for work, the highest share since 2002. It also
helps that immigrants—a vital, if politically contentious, part of the
American labour force—have returned: more than 1m arrived last year, the
highest figure since 2017. Since February 2020 the economy has added
nearly 4m jobs, much faster growth than the long-term trend.
Employers, meanwhile, have been hesitant to fire workers. Some may well
be hoarding them, having found it very difficult to recruit enough over the
past couple of years. Instead of firing staff, they are cutting back on hiring.
The net result of more workers and fewer help-wanted ads is a slightly
calmer labour market, despite the lack of lay-offs. Goldman Sachs
calculates that there are roughly 3.2m more jobs than workers in America at
the moment. That is still above 2m, which it considers the maximum for a
not-too-tight, not-too-loose jobs market, but the overshoot is well down
from its peak of 5.7m early in 2022. As the number of vacancies has
declined, the relentless upward march of wages has eased somewhat (see
chart 2). Economists at the doveish end of the spectrum are beginning to
trumpet these achievements, if not quite declare victory. “The economy is
defying predictions that inflation would not fall absent significant job
destruction,” Lael Brainard, head of the National Economic Council, said
on July 12th.

Two additional things help explain America’s run of good fortune. First, the
looming problems were probably overstated because of pandemic oddities.
Economists’ models of the probability of a recession have for months been
flashing red. But there is reason to think the models may be giving
unreliable signals. They are designed to predict trouble whenever there are
abrupt shifts in the data. Recently, though, such shifts have reflected a
return to normal after the pandemic, rather than incipient economic
weakness. People are buying markedly fewer laptops and exercise bikes
than they did in 2020, for instance, not because they are cutting back
sharply on spending but because they are not working from home as much.
It may be, therefore, that manufacturing’s weak spell is less a harbinger
than a hangover.

The yield-curve inversion could also be misleading. Long-term rates may

have fallen below short-term ones not because a recession is imminent, but
for a far more pleasant reason: that as inflation melts away, the Fed will be
able to lower rates. Provided it can make those cuts before growth gives
out, it will have a good chance of guiding America to a soft landing.

The second factor relates to the economy’s underlying strength. Monetary

policy may be tight, but there are countervailing forces. One is government
spending. America is running a budget deficit worth over 5% of GDP—
unheard of outside recessions and wars. That is putting money in people’s
pockets. There are plenty of reasons to worry about the sustainability of
such fiscal largesse, but, for now, it is a cushion for the economy.

Several big pieces of legislation from the first two years of the presidency
of Joe Biden, enacted before Democrats lost control of the House of
Representatives, are also starting to affect the economy. Spending on
highways, ports, power plants and more, enabled by an infrastructure law
passed in 2021, is worth about 0.25% of GDP a year. Subsidies for electric
vehicles, renewable energy and semiconductors appear to have catalysed a
surge in private-sector investment: spending on manufacturing facilities is
up 70% this year in real terms compared with pre-pandemic levels, hitting a
record high.

Another countervailing force is households, whose spending accounts for

about two-thirds of GDP. They entered the era of high inflation and rising
rates well prepared. During the pandemic they had accumulated “excess
savings” worth about $2trn, a consequence both of having fewer
opportunities to spend their money and of receiving three rounds of
stimulus cheques as well as other forms of government support. Many
people have drawn down these savings as the cost of living has risen.
Nevertheless, researchers with the Fed’s branch in San Francisco estimate
that there is still a residual amount of extra savings—$500bn or so—enough
to last for most of this year. In any case, these savings matter less than they
used to: for the first time in a few years nominal wage growth is eclipsing
the rate of inflation, meaning that most Americans now have rising incomes
in real terms.
What could go wrong? Policy lags are a known unknown that could yet trip
up the economy. Lags refer to the length of time needed for changes in
monetary policy to start affecting business activity. Economists used to
think that it could take more than two years for a rise in interest rates to
ripple through the economy. Stricter credit standards have yet to make their
impact fully felt: for instance, interest rates on credit cards have just started
to shoot up, and it may be another few months before delinquencies follow
them higher.
But cutting against that is evidence that, in some respects, there is much less
of a lag than there used to be, thanks to twitchy financial markets. For
example, mortgage rates rose sharply in early 2022 prompted solely by the
expectation that the Fed would soon begin raising rates, as indeed it did.
The housing industry, arguably the most rate-sensitive part of the economy,
is now in the throes of a mini-rebound, with both sales and construction
beginning to rise (see chart 3). A new financial-conditions index developed
by the Fed suggests that, on balance, the drag on growth arising from higher
interest rates has actually diminished in the past few months, in part
because investors in American stocks have anticipated an end to the cycle
of rising rates.
A debauched degree of listlessness

It is crucial to note that a soft landing does not equate to roaring growth. Far
from it. What is needed to help bring inflation to heel is a period—
potentially a long one—of subdued growth, which would lower the
economic temperature. Such an interlude may, in fact, be well under way.
Although GDP growth has held up well over the past few quarters, its close
relative, gross domestic income (GDI), has been anaemic. In theory the two
ought to be aligned. GDP tracks all final expenditures in the economy,
summing up consumption, investment, government spending and net
exports over a specific period. GDI tracks the earnings associated with that
expenditure, summing up wages, profits and any other income. In reality
the two never match perfectly, since they are derived from different sources.
Recently the gaps have been unusually large—perhaps another consequence
of distortions related to the pandemic. Whereas GDP increased by 2% on an
annualised basis in the first quarter of this year, GDI fell by 1.8%. It is not
clear which number is more accurate, but one common approach to
reconciling the two is to split the difference. That would imply that growth
is already very low which, in turn, may further sap inflation.

There are big risks to this rosy outlook. Inflation could prove stubborn
again, as it has for the past two years. Much of the recent optimism has
been tied to a better-than-expected inflation reading in June. Drawing
sweeping conclusions from a single datum is never a good idea, not least
when underlying trends are so volatile.
Even if inflation falls again in July and August, there are also questions
about how low it will go if the number of vacant jobs continues to outstrip
the number of available workers to such a large extent. Olivier Blanchard, a
former chief economist of the International Monetary Fund, and Ben
Bernanke, a former chairman of the Fed, estimated in a paper in May that,
at the current level of tightness in the labour market, the unemployment rate
would need to rise above 4.3% for some time to bring inflation down to the
Fed’s target. That would imply that roughly 1m people would have to lose
their jobs—no small dislocation.
The resilience of the economy is, in this respect, discomfiting. If the
rebound in housing gains steam, it could easily spur an increase in rents and
goods prices (all those new homes need sofas, fridges, carpets and more). If
wages continue to grow at about 5% annually, they, too, will put a floor
under prices in the service sector. Expectations of inflation, although
declining, do not suggest the Fed has everything under control (see chart 4).
A feedback loop between a strong economy and sticky inflation would pose
a stiff challenge for the Fed, leaving it with little choice but to raise rates to
new heights—at which point fears of a tightening-induced recession might
well come true.

The absence of a downturn to date has allowed the Fed to avoid confronting
any serious trade-off in its tightening. Jerome Powell, the Fed’s chairman,
and his peers deserve high marks for raising rates as quickly, albeit
belatedly, as they have. But it has been easy for them to be resolute given
the health of the jobs market. Were conditions to deteriorate, their resolve
would be sorely tested. Richard Clarida, a former vice-chairman of the Fed,
says the central bank may ratchet down rates next year with inflation
headed to a “two-point-something destination”, instead of actually back to
its target of 2%. That might help to avoid a recession. But it would also
represent a shifting of the goalposts, with the Fed tolerating a higher rate of
inflation because it does not want to inflict wrenching economic pain. That,
in itself, would make it harder to fight inflation in the future.

All these risks notwithstanding, it remains remarkable that America has so

far avoided a hard landing. The economy is winding its way down a
treacherous road from the highest peak in inflation in 40 years. Defying
conventional wisdom, it has managed to add millions of jobs during the
hair-raising ride. Its descent is far from over. But a soft landing, once a faint
hope, is now among the plausible outcomes. ■

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Asia
A battery supply chain that excludes China looks
impossible
Asia’s battery battlefield :: Green industrial policy and hawkish security policies are clashing

Singapore is the world leader in selling cultivated meat

Bloodless revolution :: America is about to challenge the Asian’s country’s early start

An American soldier has deserted to North Korea

Crossing the line :: Travis King, an American soldier and criminal, is now in Kim Jong Un’s
custody

Why are politics in West Bengal so violent?

Banyan :: The political stakes are even higher in the east Indian state than elsewhere in India

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Asia’s battery battlefield

A battery supply chain that excludes China looks

impossible
Green industrial policy and hawkish security policies are clashing

Jul 17th 2023 |

“I’D LIKE TO get all the gas emissions off the highways of the world,”
said John Goodenough, one of the Nobel-prize winning scientists who
developed the lithium-ion battery four decades ago, during an interview in
2018. Goodenough died on June 25th before his dream could become
reality. But governments around the world are scrambling to make it so,
with remarkable results. Global sales of electric cars quintupled between
2019 and 2022, surpassing 10m units last year.

Yet the speed of the transformation is running into supply constraints and
geopolitical headwinds. The supply of the minerals required to make
lithium-ion batteries must grow by a third every year this decade to meet
the estimated global demand. Tens of millions of batteries will be needed in
America alone to meet its ambition to ensure half of all American vehicle
sales involve electric vehicles by 2030. And yet its great rival, China, is by
far the biggest processor of battery metals, producer of battery cells and
manufacturer of finished batteries.

Even where production is done overseas, Chinese firms dominate the

process. American policymakers see that as a threat to the resilience of
America’s supply chains. All of this makes Goodenough’s technology one
of the most important industrial battlefields of the new cold war.

The outcome will be determined in Asia, where most battery supply chains
are based. The first bottlenecks are in materials production and processing
—including two of the most crucial battery materials, lithium and nickel.
Capturing a consistent supply of both metals will be crucial for producers
globally. Almost half of the lithium produced in 2022 came from Australia,
30% came from Chile and 15% from China. In the case of nickel,
Indonesia’s production amounted to 48% of the global total last year, with
the Philippines making up another 10% and Australia 5%.

So far America is pursuing narrow trade agreements with some of those

countries in order to gain access to minerals and production capacity, and it
is offering enormous subsidies to producers through its Inflation Reduction
Act. To benefit from America’s $7,500 credits for new EVs, producers must
meet tightening requirements on the share of minerals processed and
batteries produced in America or in a country with which America has a
free-trade agreement. China is meanwhile building a parallel battery supply
chain.

Indonesia’s dominance in nickel is itself a potential bottleneck. An estimate

last year by PWC, a consultancy, suggests that 2.7m tonnes of the stuff will
be needed annually for EVs by 2035. Indonesia currently produces only
1.6m tonnes, most of which is used for stainless steel. A huge amount of
capacity to mine and process the metal is being planned, or under
construction. The processing may be the most difficult segment of the
supply chain to make China-free. By one estimate, China smelts and
processes about three-quarters of the world’s nickel. It also has about two-
thirds of the capacity for lithium processing. Even those figures
underestimate Chinese heft, because a lot of processing outside China
involves Chinese companies.

The three operational plants in Indonesia use high-pressure acid leaching,

an advanced process that extracts nickel from its ore without melting it. All
are based on Chinese technology, operational prowess, or both. To secure
supplies of nickel, Ford, an American carmaker, formed a venture with a
Chinese mining company, Huayou Cobalt, to invest in an Indonesian
nickel-processing plant. The Chinese firm hailed the partnership for its
contribution to China’s Belt and Road Initiative, a sentiment unlikely to
have been popular in Washington. Ford is already facing political heat at
home over a different venture with a Chinese firm: a new plant in Michigan,
manufacturing both nickel-based and lithium-based batteries, for which it
has joined forces with a Chinese battery giant, Contemporary Amperex
Technology Co. Limited (CATL). The Chinese firm makes more than a
third of the world’s electric-vehicle batteries, measured by their total
capacity.
The overwhelming presence of Chinese firms is not just a result of their
impressive industrial expertise. It also reflects their ability to move quickly
and take risks, according to mining executives and experts. The
comparatively small number of Western companies working in mining and
nickel processing spend more time conducting preparatory studies and
work. Sumitomo Metal Mining, a Japanese minerals firm, withdrew from a
nickel-processing project last year, citing disagreements with its partner, PT
Vale Indonesia, another resources firm. The feasibility study into the project
had been going on since 2012.
Chinese firms also dominate the production of battery parts. Among the
components for battery cells, China accounts for at least half of production
and more than 70% in some categories. The rest of the industry is
concentrated in South Korea and Japan. Between them, the three East Asian
countries make up between 92% and 100% of the mid-stream parts of the
industry. Even if America secures enough processed minerals, meeting its
goals will require a massive deployment of Korean and Japanese battery-
manufacturing know-how into North America.
LG Energy Solution, based in South Korea, is the second-largest battery
manufacturer after CATL. The company is expanding in America, with
joint ventures under way with Hyundai, Honda and General Motors. LG
aims to produce 278 gigawatt-hours (GWh) worth of storage capacity in
North America by 2030, up from just 15GWh in 2022. That may be too
optimistic. Kim Myung Hwan, the company’s chief procurement officer,
notes that the rising cost of construction, shortages of skilled personnel and
volatility in the price of the materials needed for batteries are all barriers to
rapid growth.

Some Asian manufacturers worry that the cost of overseas production could
be prohibitively high for years. “It’s much more important to think of how
we make the business profitable for 10, 15, 20 years,” says Hideo Ouchi,
director of W-Scope, a Japanese company that manufactures separators
used in battery cells. Mr Ouchi estimates that to meet its goals on electric
vehicles by 2030, America alone will need as much battery-separator
material as was manufactured globally in 2021.

Government policy represents another uncertainty—especially as many

Asian battery manufacturers are counting on decades’ worth of financial
support. Last month America’s United Auto Workers union criticised the
Biden administration for failing to attach strict labour-rights conditions to a
loan of up to $9.2bn to Ford and SK ON, a Korean battery-maker, for a new
plant in Michigan. Future Republican administrations might reduce or
simply scrap the current EV targets.

This amounts to a sobering picture. Expanding the battery supply chain to

match the enormous global demand for electric vehicles represents one of
the greatest industrial challenges ever attempted. Even the current order of
bottlenecks in the industry will make it difficult. Pulling it off—for the
good of the climate, human health and much else—without the country that,
by most measures, dominates the battery industry may very well be
impossible.■

Correction (July 18th 2023): A previous version of chart 1 had incorrect

numbers and an earlier version of this article stated LG Energy Solution
produced 13 gigawatt-hours (GWH) worth of storage capacity in North
America in 2022. The correct figure is 15 GWH. Sorry.
For more coverage of climate change, sign up for The Climate Issue, our
fortnightly subscriber-only newsletter, or visit our climate-change hub.

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Bloodless revolution

Singapore is the world leader in selling cultivated

meat
America is about to challenge the Asian’s country’s early start

Jul 20th 2023 | SINGAPORE

THE ISLAND-STATE’S long history as a maritime trading hub, bringing

together Chinese, European, Indian and Malay migrants, has given
Singapore a rich culinary culture. It got even more diverse in December
2020 when the country became the first to grant regulatory approval for the
commercial sale of meat produced in a lab from cultivated animal cells.

Concerns about food security underlie Singapore’s push into alternative

proteins. A country half the size of London, which makes only 1% of its
land available for food production, Singapore imports over 90% of its food.
To protect itself from a volatile food supply chain, disruption by
unpredictable neighbours, inflation, pandemics and war, the government
aims to produce 30% of the country’s food by 2030.
It is encouraging experimentation with cultivated animal cells, meat, dairy
and eggs made from plants, and food made from microbial or gas
fermentation. Annual private funding for Singapore-based alternative-
protein companies doubled to $170m in 2022, according to the Good Food
Institute APAC, an NGO that promotes alternatives to animal products.

A common challenge for alternative-protein startups is that they need to

spend a lot of their initial investment on new equipment. This means they
can struggle to become profitable without heavy capital outlays. The
government has therefore invested in relevant infrastructure such as
innovation centres that help startups develop their products and raise
capital. Nurasa, an alternative protein service provider backed by Temasek,
a Singaporean sovereign wealth fund, helps startups minimise the risk of
buying expensive equipment by renting out labs and kitchens that replicate
a restaurant environment. This allows firms to test their product and
business model before purchasing their own equipment, says Jolene Lum,
its head of business development.

Singapore has also become the global launch-pad for foods made through
precision fermentation, notes Mirte Gosker of the Good Food Institute
APAC. Solar Foods is a Finnish startup that uses gas fermentation to feed
microbes with hydrogen and carbon dioxide. It turns the resultant liquid
into a powder, known as Solein, which is nutritionally similar to dried meat.
In June the firm launched the world’s first Solein chocolate gelato in
Singapore.

Very Dairy, an animal-free milk brand of a firm based in California, first

launched in Singapore in 2022. The milk is biologically identical to
conventional milk proteins but made from microbes instead of cows. That
may be good for the climate, since farmed cattle produce a lot of methane, a
powerful greenhouse gas. Greenhouse-gas emissions from animal-based
foods are estimated to account for around a fifth of man-made climate
change.

Singapore has encouraged the industry by offering a clear regulatory

framework and an efficient approval process. Solar Foods has been waiting
for two years for regulatory approval in the European Union, says the
company’s CEO, Pasi Vainikka. The EU has yet to approve any cultivated
meat products for sale. By contrast, Solein was granted approval in
Singapore within a year. This fast and transparent process means that many
products appear in Singapore first, which is “a huge gift for the whole
world because Singapore shows what is possible”, says Mr Vainikka.

Whether those products can be taken to scale remains unclear. Even in

Singapore the alternative-proteins industry faces high production costs and
other burdens. The only cultivated-meat company to have received approval
in Singapore is Good Meat, an American firm. It sells less than 2,300kg a
year of its cultivated chicken. For context, global meat production is
forecast to grow to over 360m tonnes this year.

Last month America became the second country to approve the production
and sale of cultivated meat. Two companies, Good Meat and Upside Food,
have already got the go-ahead to sell cell-cultivated chicken there.
America’s vast consumer market and cutting-edge technology could be
about to threaten Singapore’s early lead. ■

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Crossing the line

An American soldier has deserted to North Korea

Travis King, an American soldier and criminal, is now in Kim Jong Un’s
custody

Jul 19th 2023 | SEOUL

THE PREVIOUS time someone crossed the border between the two Koreas
at the Joint Security Area (JSA), an enclave along their heavily armed
frontier, he did so through a hail of bullets. Oh Chong-song, a North Korean
soldier, was shot and wounded five times by his comrades in 2017 as he
sprinted into South Korea. A crossing this week was less dramatic but more
surprising. On July 18th Travis King, an American soldier of the 1st
Armoured Division, ran over to the North while on a group tour of the JSA.

Like many defectors to Kim Jong Un’s prison-state, Mr King has a troubled
past. He recently spent almost two months in a South Korean prison for
assault. After his release, he was returned to America’s armed forces in
South Korea to be sent back to America to face possible additional
punishment. He was escorted to Incheon airport, outside Seoul. He then
went missing, appearing next at the JSA, 48km (30 miles) north of South
Korea’s capital.

Also known as Panmunjom, the enclave was carved out of the front line as
part of the armistice that paused the Korean war in 1953—70 years ago next
week. Consisting of a huddle of buildings, the JSA is the only direct point
of contact between the two Koreas along their 240km frontier, and a
popular tourist destination in the South. According to an American official
who spoke to the New York Times and other reports, Mr King was on a
guided tour of the enclave when he gave a sudden hoot of laughter and ran
at top speed towards the border. Tour guides chased after him in vain. He
was last seen being taken into custody by North Korean soldiers.

America’s defence secretary, Lloyd Austin, confirmed that Mr King had

crossed into the North “wilfully and without authorisation”. The soldier’s
reason for doing so is unclear, as are his prospects. North Korea loves
detaining Americans, often on skimpy pretexts. Otto Warmbier, a college
student from Ohio, was arrested in 2016 for allegedly stealing a propaganda
poster. He was sentenced to 15 years in prison with hard labour, suffered a
serious brain injury soon after, and died after he was permitted to return to
America in 2017. Jeffrey Fowle, another Ohioan, was arrested in 2014 and
convicted of proselytising (a crime in North Korea) after he deliberately left
a Bible containing his contact details in a bar toilet. He was imprisoned for
six months before being permitted to leave.

The handful of Americans who have deliberately defected have sometimes

been treated better. Another ne’er-do-well soldier, James “Comrade Joe”
Dresnok, was originally viewed with suspicion in the North after he fled
there across a minefield in 1962, in order to dodge a court martial. Yet he
ended up becoming a minor celebrity by playing evil American imperialists
in propaganda films. He was popularly known as “Arthur” after one of his
most famous characters—an American army officer called “Arthur
Cockstud” in a TV series called “Unknown Heroes”, about the struggles of
a North Korean spy in Seoul.

More recent American defectors have fared less well, however. Matthew
Miller, a 26-year-old Californian visitor to Pyongyang, was arrested in 2014
for espionage and sentenced to six years’ hard labour after he tore up his
tourist visa and declared he wanted to claim political asylum. He was
released, eight months later, after James Clapper, then America’s director of
national intelligence, went to North Korea to spring him and another
American.

Mr King’s best hope may be the treatment meted out to Arturo Martinez, a
mentally ill Texan, who allegedly entered North Korea from China by
swimming the Yalu river in 2014. After declaring his desire to defect, Mr
Martinez was unveiled by the North Koreans at a crowded press conference
in Pyongyang. After making some perfectly reasonable criticisms of the
American justice system, he began spouting deranged conspiracy theories.
He accused America of using UFOs and “weaponised satillital Octocopters”
to carry out mass mind control and drug-running. Mr Martinez was quietly
allowed to leave North Korea shortly afterwards.

Yet Mr King’s status as a serving and apparently sane American soldier

may make him a richer prize. When the North Koreans feel like talking to
America, prisoner releases can help get them face time with senior
Americans. Jimmy Carter and Bill Clinton both flew to Pyongyang after
their presidencies to secure the release of American hostages. Three more
were released to Mike Pompeo, the then secretary of state, in 2018, as part
of negotiations that led to a meeting between Donald Trump and Mr Kim
later that year. Whether Mr King could be another bargaining chip will
depend, however, on whether North Korea is interested in talking to
America.

There is scant sign it is. On July 19th North Korea fired two ballistic
missiles into the sea, apparently to protest against the arrival in South Korea
of an American submarine carrying ballistic missiles. Western officials also
claim to have observed preparations for a possible North Korean nuclear
test, its first since 2017.

On July 17th Mr Kim’s sister, Kim Yo Jong, rejected America’s oft-

repeated offer of a “dialogue without preconditions” towards denuclearising
the Korean peninsula. She compared American officials’ parroting of the
phrase to an “answering machine”. This is bad news for South Korea and
the world. And perhaps also for the sprinting Mr King. ■
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Banyan

Why are politics in West Bengal so violent?

The political stakes are even higher in the east Indian state than elsewhere
in India

Jul 20th 2023 |

LAST MONTH police in the east Indian state of West Bengal took 11,000
people into “preventive detention”. They confiscated more than 20,000
licensed weapons, along with piles of ammunition and explosives. The
election commission asked the central government in Delhi to deploy
80,000 paramilitary troops across India’s fourth-biggest state, home to more
than 100m people.

The purpose was not to fight an insurgency. It was to prepare for local
elections in the sweltering Bengali countryside, which typically see eye-
watering levels of violence. Despite the measures, bloodshed ensued. Some
50 people have been killed in clashes involving rival party activists since
the announcement of the polls in June, with many killed on or after polling
day. The violence was so disruptive the vote had to be re-run in some
places. It eventually produced a landslide victory for the Trinamool
Congress, a regional party led by West Bengal’s charismatic chief minister,
Mamata Banerjee, whose activists accounted for many of the dead.

Even by Indian democracy’s roughhouse standards, West Bengal stands out.

According to the Armed Conflict Location and Event Data Project, an NGO
based in America, the state recorded 3,338 incidents of political violence,
including political murders, between 2016 and July 2023, the highest
number of any state except militancy-riven Jammu and Kashmir. This is
despite the fact that West Bengal’s underlying crime rate is not especially
high. It is much lower than in the vast and lawless nearby states of Bihar
and Uttar Pradesh.

What explains such extreme political violence in one of India’s most

important and culturally rich states? Non-Bengali Indians might attribute it
to Bengalis’ stereotypical penchant for politicking and quarrelling, a
counterpart to their equally fabled love of intellectualising. (The region has
produced many of India’s greatest artists, including Rabindranath Tagore
and Satyajit Ray.) “Two Bengalis is an argument, three is a political party,
four is a riot,” goes an old joke. A look at next-door Bangladesh, whose
mostly-Bengali population was joined to West Bengal’s until 1947, suggests
there might be something to this. It is a similar case. Hundreds of
Bangladeshis are killed and thousands injured in political brawls each year.

This points to a deep historical explanation for the bloodletting. Bengalis

had a reputation for revolutionary agitation dating back at least to armed
resistance against the British Empire, which had its capital in Kolkata (then
known as Calcutta) until 1911. The violence then continued seamlessly into
the post-independence era in the form of peasant uprisings and leftist
insurgencies. Yet even if Bengalis’ history initiated their violent politics, it
is being sustained by contemporary factors.

One is the importance of Bengali politics as a form of social organisation,

says Dwaipayan Bhattacharyya of Jawaharlal Nehru University in Delhi.
The entrenchment of communist rule in the state in the 1970s pushed
alternative forms of sorting, including religion and Hindu caste, to the
margins. The Bengali countryside became so politicised it was as hard to
marry across the political divide there as it was to marry across caste lines
elsewhere in India. In a patronage-based political system, zero-sum politics
of this kind is played for high stakes—often the difference between poverty
and relative prosperity. Local political leaders can thereby summon mobs of
foot-soldiers to fight to the death against their rivals’ goons. And they do.

This murderous system is further enforced by the way political and

economic power is distributed in West Bengal. It is one of only two Indian
states (the other is communist-run Kerala) to have devolved significant
power to the village-level administrative units, or panchayats, that Bengalis
voted in this month. Devolution is supposed to bring decision-making close
to home. In West Bengal it also brought the violence close, creating local
political economies in which access to government jobs and other local
resources are contested both at the ballot and in the streets.

The violence is now starting to erode the democratic system that helped
create it. Gangsterish local satraps increasingly defy their party leaders.
Violence within parties is therefore becoming almost as common as
violence between them. No wonder the bloodletting is impossible to police.
Mitigating it would be hard even if the state’s two main parties, Trinamool
Congress and its communist rival, made a serious commitment to ending
the violence. So far, neither has.■

Read more from Banyan, our columnist on Asia:

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)
Aboriginal Australians may at last be given a say in their own affairs (Jun
29th)

Also: How the Banyan column got its name

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China
Can academic joint ventures between China and the West
survive?
A for effort, Xi for control :: Xi Jinping wants to ensure that they don’t teach liberal thinking

A clue to China’s true covid-19 death toll

Data and the disease :: Some illuminating provincial data has quickly disappeared

Germany’s new strategy for dealings with China

The wind of change :: The plan reflects a hardening of attitudes in Europe

How China trains its journalists to report “correctly”

What would the party say? :: A new app tells them all they need to know

China’s foreign minister goes missing

Chaguan :: Official silence about Qin Gang’s whereabouts speaks volumes about Xi Jinping’s
China

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A for effort, Xi for control

Can academic joint ventures between China and

the West survive?
Xi Jinping wants to ensure that they don’t teach liberal thinking

Jul 20th 2023 |

FILING INTO a graduation ceremony to the strains of Edward Elgar’s

“Pomp and Circumstance March No. 1” is quintessentially American. As
they did so in May, clad in violet-coloured gowns, students at the campus in
Shanghai of New York University (NYU) may have reflected on the oddity
of this cultural transplant: not just the music, but their whole experience as
undergraduates. Relations between China and the West—especially
America—are becoming increasingly tense. China is trying to purge its
universities of liberal thinking. Yet here were nearly 400 students, about
half of them Chinese, getting their bachelor’s certificates from a Chinese
outpost of American academe.
Since Xi Jinping took over as China’s leader in 2012, he has tightened
controls over university education. Several liberal scholars have been
dismissed. Lecturers have been ordered to stop using imported textbooks
that are deemed to promote Western values. Universities have been told to
become “strongholds of the Communist Party’s leadership”. Under Mr Xi,
few students have dared to stage protests. But in November small
demonstrations broke out in several cities, and on many campuses, over
harsh covid-related lockdowns. Pro-government commentators accused
“foreign forces” of stirring the unrest. It has surely made the party even
more wary of Western influences.

But ventures such as NYU’s in Shanghai seem a world apart. Some are
even expanding. This year NYU’s campus in the city’s financial district,
Pudong, moved to a glitzy new nine-storey building designed by Kohn
Pedersen Fox, a New York-based firm that also drew the blueprints for
Pudong’s most iconic skyscraper, the Shanghai World Financial Centre. It
has twice as much classroom space as NYU Shanghai’s previous location.
In August Duke Kunshan University (DKU) in Kunshan, a city near
Shanghai, is also due to move to new premises. The joint-venture campus—
involving Duke University in North Carolina, Wuhan University and
Kunshan’s government—will cover more than 33 hectares, twice as large as
the current one. In Suzhou, a nearby city, Xi’an Jiaotong-Liverpool
University has 23,000 students, making it China’s largest academic joint
venture. Last year it opened an additional campus, with room for 10,000.

NYU Shanghai and DKU were founded around the start of Mr Xi’s rule,
and Liverpool’s venture seven years earlier (following the pioneer in this
field, the University of Nottingham, which launched a campus in the city of
Ningbo in 2004). But even as Mr Xi grew increasingly anti-Western, more
such ventures were introduced, albeit on a smaller scale. In all, well over
half of China’s more than 1,230 universities have co-operative projects with
foreign or Hong Kong counterparts. Over the past decade, the number of
such schemes—most of them involving universities from English-speaking
countries—has increased by a third. They range from ten full-blown
universities to a plethora of smaller ventures such as joint departments or
institutes inside Chinese campuses.
One of China’s aims is to boost the quality of its universities by helping
them learn how foreigners run such institutions. Another is to help local
governments fulfil their economic ambitions. It is no accident that several
of the biggest ventures are located in Shanghai and cities nearby. Shanghai
is the country’s financial centre; its hinterland is a base of high-tech
manufacturing. Officials hope that foreign universities will attract talent for
such industries.

Compared with enrolment in the rest of China’s university system, the

number of students in foreign-run programmes is small: fewer than
600,000, according to state media, or less than 2% of the total number of
students in China. But that does not stop the party from worrying. Even
though most of the joint ventures’ students focus on subjects such as
science and business that are unlikely to touch on politically sensitive
topics, officials are nervous that foreign professors and their textbooks
might spread heretical views.

In 2017 the central authorities issued a classified directive on “party

building” in foreign-run academic programmes. It said the venture’s party
chief (the Chinese partner always has one) should sit on the governing
board. This was often the case already. At DKU, however, the party
secretary did not have a voting right. Allowing her to vote could have
changed the balance between the American and Chinese representatives,
says Denis Simon, who was then DKU’s executive vice-chancellor. It
would have required rewriting the joint-venture agreement, he says. The
Americans were not keen to do so. That issue “was never fully resolved”.

But the party is getting twitchy. In 2020 Chongqing University of Education

(which has numerous foreign partnerships) published its own guidelines for
implementing the central government’s directive. They clearly reflected the
mood in Beijing. The university instructed that Chinese teachers and
students in joint-venture arrangements should “consciously resist corrosion
by all kinds of erroneous Western thoughts and decadent ideas”. Social
media such as WeChat should be used to help “manage” student party
members during their periods of study abroad, it said. Party branches should
“keep abreast of the thinking of students and teachers” and use
“supervisors” to monitor classes.
There have been ominous remarks, too, by Chinese staff in joint ventures.
In 2021 a party official at the University of Liverpool’s wrote that party
committees should make sure no one with “ideological problems” is
appointed to faculty. They should “resolutely stop the spread of erroneous
thinking”. The party chief of Nottingham Ningbo, in an interview that year
with state media, said: “If the school makes mistakes on important issues
such as ideology, then there is no value in the school’s existence, and it
needs to be closed.” In 2018 Stephen Morgan, then a professor at
Nottingham Ningbo (now retired), says he was pressed to step down from
its board. He blames the party: he had written an online article critical of Mr
Xi. “A lot of the party people would not even look at me or say hello to me
for at least a year,” he says.

The vice-chancellor of NYU Shanghai, Jeffrey Lehman, remains stoical.

“Within our academic community, academic freedom has been fully
honoured,” he says. “Academic freedom was the clear understanding from
the very beginning. And if the Chinese government is ever no longer
comfortable with that, we can shut down.” Responding to the party
official’s remarks, the University of Liverpool said it was “absolutely
committed to academic independence” and the joint venture had “freedom
of speech enshrined in its core values”.

For all its fretting, China shows no sign of wanting to chase away
prestigious university brands that have already established a high-profile
presence. But Mr Morgan believes that no new ventures involving
humanities or social sciences are likely to be approved. In March the
government said that on Hainan, an island province, foreign universities
specialising in such areas as engineering and medicine could set up
campuses on their own—unlike existing ventures, which must have a
Chinese partner. A party secretary, however, will still be required on their
boards. ■

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Data and the disease

A clue to China’s true covid-19 death toll

Some illuminating provincial data has quickly disappeared

Jul 20th 2023 |

ON JULY 13TH the authorities in Zhejiang, a rich coastal province,
released what they probably thought was innocuous data about cremations
in the first quarter of 2023. Around 171,000 took place during that time, up
by 73% compared with the same period last year. The jump was
undoubtedly caused by a wave of covid-19; the central government lifted all
covid controls in December 2022. Just under 5% of China’s population
aged 65 or older lives in Zhejiang. If one assumes that its share of covid
deaths is similar (the disease mainly kills the old), a simple extrapolation
suggests that there were 1.6m excess deaths across China in the first
quarter, which is roughly in line with our modelled estimate of the country’s
covid death toll. The central government, though, has acknowledged fewer
than 84,000 deaths from covid on the mainland since early December. The
data from Zhejiang was quickly removed from the internet.■

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The wind of change

Germany’s new strategy for dealings with China

The plan reflects a hardening of attitudes in Europe

Jul 20th 2023 |

THREE YEARS ago, Angela Merkel, then Germany’s chancellor, said it

was important to have a “relationship of trust” with China. On July 13th the
government that succeeded her published a long-awaited paper laying out
how it plans to handle those ties. It did not echo Mrs Merkel’s belief.
“China has changed,” it said, adding: “As a result of this and China’s
political decisions, we need to change our approach to China.”
Governments across Europe have long been saying much the same. But for
Germany to set out a detailed case for China-scepticism was striking.

After Mrs Merkel handed over the chancellery to Olaf Scholz in December
2021, Germany’s new ruling coalition promised a rethink of the country’s
China strategy. Drafting a document setting out the fresh approach—the
first paper of its kind produced by Germany—was a tortuous effort. There
were differences to reconcile between the views of Mr Scholz, whose
instincts on China are redolent of Mrs Merkel’s with their emphasis on
business interests, and those of the foreign and economic ministries, which
are led by more hawkish members of his three-party coalition. There were
also the views of the European Union and America, among others, to take
into account.

During the drafting, many questions were raised about how much of a
change was under way. Last October Mr Scholz pushed through the sale of
a stake in one of Hamburg’s port terminals to a Chinese state-owned firm: a
smaller share than had been proposed, and with no voting rights for the
Chinese side, but still controversial among the hawks. When Mr Scholz
paid a visit to Beijing in November, the first by a Western leader since the
start of the covid-19 pandemic, he took a big delegation of businesspeople,
including 12 CEOs of German blue-chip firms. In June he rolled out the red
carpet for Li Qiang, China’s new prime minister, acquiescing to Chinese
demands that there be no questions at a joint press conference.

But the strategy paper confirmed a shift. It did not talk of hope of “Wandel
durch Handel“ (change through trade), once a motto of the Merkel era. “De-
risking is urgently needed,” the document said, using the now standard
language of EU and American officials when referring to the dangers of
over-reliance on economic ties with China. It echoed the EU’s labelling of
China as a “systemic rival” and said China’s friendly relations with Russia
had “direct security implications for Germany”. It warned that military
escalation by China in the Taiwan Strait would “affect German and
European interests”. The paper promised that Germany would co-ordinate
“more closely” with its partners in the EU on China matters. It did mention
a relationship of trust: with America. Andrew Small of the German
Marshall Fund of the United States, a research centre, calls the language
“markedly different from where we were with Merkel and the way she was
willing to frame things”.
Business decisions

Mr Small says that, though large German firms have expressed support for
the strategy, “they haven’t jumped in to embrace it”. They have much at
stake. According to the Rhodium Group, a research firm, Germany’s three
big carmakers—BMW, Daimler and Volkswagen—plus BASF, a chemicals
giant, accounted for more than one-third of all European direct investment
in China between 2018 and 2021. But the paper is softer than a version that
was leaked in November: no more talk of “stress tests” of German
companies that are heavily involved in China, or making them “specify and
summarise relevant China-related developments”. De-risking, it appears,
will be up to businesses themselves. Some of them may not share the
government’s sense of urgency. ■

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What would the party say?

How China trains its journalists to report

“correctly”
A new app tells them all they need to know

Jul 20th 2023 | BEIJING

SOME YEARS ago China’s leader, Xi Jinping, issued instructions to the

reporters working for state-run newspapers and television stations. He
demanded “critical reports with accurate facts and objective analysis”. But
he also told the journalists that they must “love and protect the Communist
Party”. He did not explain what they should do if one instruction conflicted
with the other.

A new educational app for China’s journalists, introduced on June 30th,

makes it clear that the party comes first. One hour-long tutorial is titled
“Ensure that the politicians run the papers, the magazines, the TV stations
and the news websites”. Another talks about how to “correctly guide public
opinion”. “It’s like a drumbeat,” says David Bandurski of the China Media
Project, a research programme in America. “They want to remind them that
the party is in control.”

China locks up more journalists than any other country. But the training app
is one of many softer forms of coercion. Since 2014 all reporters have had
to pass an exam to get a press card. It tests knowledge of the trade—and of
the party’s ideology. One former journalist failed the exam on her first try
because she forgot the meaning of “the four great things”, one of Mr Xi’s
impenetrable nationalist slogans. She had read his speeches beforehand.
“But he’s made a lot! I just wrote four things at random,” she says. (Two
were right.)

Before Mr Xi took power in 2012, journalists were more probing. Some

investigated corruption, pollution or oppressed groups, such as migrant
workers. In 2008 candid reports about a devastating earthquake in the
south-western province of Sichuan laid bare the failings of local officials.
Some of this spirit lives on in commercially run publications such as
Caixin, a magazine that focuses on business and economics (less politically
sensitive topics).

A journalist for state media insists that he and his colleagues are still
“revealing the truth”. He cites recent reports about a furore involving a
college canteen in southern China that served rat head in a meal (the
authorities had claimed it was duck neck). Also, among the winners of
China’s national journalism awards last year was an investigative piece on
the illegal trade in rich black soil in northern China.

But when the All-China Journalists Association, which is overseen by the

party, handed out that award, it noted that Mr Xi had once expressed great
concern over protecting northern China’s soil. Most of the other winners
were puff pieces about the party. One was titled “Without the Communist
Party there is no happy life for China’s people”.

A number of frustrated reporters have left their jobs. In late June a heated
debate erupted on Chinese social media over whether it was still worth
studying journalism at university. Many argued that it was not. Critics of the
industry lamented state media’s relentless pro-government positivity.
Journalism degrees, said one commenter, “only teach you one thing: to be
obedient.”■

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Chaguan

China’s foreign minister goes missing

Official silence about Qin Gang’s whereabouts speaks volumes about Xi
Jinping’s China

Jul 20th 2023 |

AT SOME POINT the ill-explained, weeks-long disappearance of China’s

foreign minister, Qin Gang, will come to an end. Quite possibly Mr Qin—a
suavely confident diplomat of the iron-fist and velvet-glove type, rocket-
propelled to high office by a spell as an aide to President Xi Jinping—will
quietly resume his duties, just as suddenly as he stopped work after a day of
meetings on June 25th. Perhaps he will explain the undefined health issues
that remain the only official reason for his absence. Still, it cannot be
excluded that Mr Qin’s career path is about to take a grimmer turn. That
would vindicate Beijing’s elite gossip mill, which is currently seething with
ever-wilder theories about Mr Qin, some of them worthy of a bad romantic
novel or spy thriller.
However this episode ends, it is a reminder that China’s capital, for all its
Tesla showrooms and Apple stores and outward marks of globalised
modernity, remains a tough place. It is a city of secrets and rumours.
Grandees do sometimes vanish, before reappearing to face charges of
corruption, immorality or dissent. In an age when other countries’ leaders
drop indiscretions on social media or in interviews, China’s ruling classes
heed codes of silence that would be familiar to Communist Party cadres of
the 1950s. As Beijing is pounded by a heatwave, Chinese elites and foreign
ambassadors huddle in embassy gardens and drawing rooms to exchange
theories about Mr Qin. Diplomats compare notes about when the foreign
minister’s meetings first began to be cancelled, and how far ahead, looking
for evidence of a sudden, severe health crisis. Analysts scour China’s tightly
policed internet for signs of censors deleting comments about Mr Qin, or
about an alleged friend with a boastful, indiscreet presence on social media.
According to the brutal rules of Chinese politics, it would be a bad sign if
Mr Qin were becoming a non-person. But a lack of censorship might also
signal that powerful allies are deserting him.

Even with the mystery unresolved, a few lessons may be drawn about how
power is wielded in China. Some are simple. If Mr Qin really is unwell, a
formal statement about his health would help calm the rumour mills. But
physical infirmity is a political taboo. This goes beyond a preference for
privacy. Leaders are expected to be vigorous. Any sign of frailty is risky:
party gatherings are a sea of dyed black hair. While China’s strict zero-
covid rules were in force, no senior official admitted to catching the virus.

Other lessons about Chinese power are less simple. Take Mr Qin’s job as
foreign minister. That is one reason why his disappearance matters, but not
the most significant. Chinese job titles map poorly onto those used
elsewhere. Foreign ministers are outranked by the head of the party’s
Foreign Affairs Commission: a post held by Wang Yi, who is China’s top
diplomat. More importantly, when Chinese insiders assess an office-
holder’s clout, they look at not just that one individual but all his or her
patrons and allies and even family members, as if connections can be
glimpsed like a spectral halo of influence. In Mr Qin’s case, his absence is a
big deal because he is seen as Mr Xi’s protégé. Provoking envy as he rose,
Mr Qin was fast-tracked to ministerial rank and into the party’s central
committee in 2022, not long after being made a vice-foreign minister and
ambassador to Washington. In Beijing, that ascension is linked to Mr Qin’s
stint as head of diplomatic protocol from 2014 to 2017, which involved lots
of contact with Mr Xi.

As a result, Mr Qin’s rapid rise should offer clues about Mr Xi’s worldview,
or at least about the sort of diplomacy that he values. The foreign minister is
sometimes called a “wolf warrior”, but that is misleading. Some Chinese
diplomats deserve that tag, which comes from a jingoistic Chinese action
film. Truly wolfish envoys are often crudely anti-Western. They repeat
conspiracy theories about alleged American misdeeds, harvested from
shady corners of the internet or from Russian disinformation agencies.
A West-scorning warrior, but not a wolf

Mr Qin is a more sophisticated warrior, capable of charm and pragmatism

when the national interest calls. As the protocol chief charged with
delivering a successful state visit by President Donald Trump to Beijing in
November 2017, Mr Qin cleared away red tape and de-escalated crises,
including, it is said, a brief physical altercation between the White House’s
then chief of staff, John Kelly, and a Chinese security official. Yet Mr Qin
has a talent for menace, too. He showed it in March 2021, when the
European Union’s ambassador was called in for a midnight dressing-down
over EU sanctions relating to repression in Xinjiang. When the EU envoy
resisted that late-night summons to the foreign ministry, he was warned to
think of the consequences for his delegation, and by implication for the
safety of his Chinese staff, diplomats relate. During the meeting, Mr Qin
harked back to China’s last imperial dynasty and specifically 1900, when
eight foreign powers invaded Beijing to crush an uprising by anti-foreign
fanatics, the Boxers. His message was that today’s China would not be
bullied in the same way that a Qing dynasty diplomat, Li Hongzhang, was
by foreign governments seeking reparations. I am not Li Hongzhang and
you are not the eight powers, Mr Qin told the EU ambassador. More
substantively, European governments blame Mr Qin for recommending
sweeping, disproportionate counter-sanctions that continue to blight EU-
China relations.
In encounters with foreigners, Mr Qin shows deep knowledge of the
Western world, gained during several postings abroad. That familiarity
appears to co-exist with disdain for a West seen as declining, arrogant and
hypocritical. Indeed, some claim that Mr Qin reserves a special scorn for
Western reporters, dating back to his first job out of university, as a
government-supplied researcher for an American news agency in Beijing.
Still, his absence is a source of regret on the capital’s diplomatic circuit. In
Mr Xi’s China, the black box of elite politics is only getting more opaque.
When clever, candid officials vanish, they are missed. ■

Read more from Chaguan, our columnist on China:

Rule by law, with Chinese characteristics (Jul 7th)
China’s message to the global south (Jul 6th)
How China sees Yevgeny Prigozhin’s mutiny (Jun 29th)

Also: How the Chaguan column got its name

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United States
Americans are moving to places besieged by extreme heat
The sizzling Sunbelt :: To stay liveable, hot cities are experimenting with ways to keep cool

The FDA approves the first-ever non-prescription birth-

control pill
Reproductive politics :: Progressives hope it will blunt the effect of abortion bans

Ron DeSantis is relying on big donors and his super PAC

Big-donor populism :: The latest campaign-finance disclosures look good for him but disguise
a flaw

What America’s bike-share schemes tell you about venture

capital
Slow puncture :: A highly visible indicator of market conditions

How Mexico has become the “enemy” of America’s

Republicans
A new Mexican-American war :: A growing number of them want to use military force against
drug cartels

The case for a third-party campaign in 2024 is actuarial,

not ideological
Lexington :: No Labels wants to be political insurance for the democracy, yet may doom it

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The sizzling Sunbelt

Americans are moving to places besieged by

extreme heat
To stay liveable, hot cities are experimenting with ways to keep cool

Jul 20th 2023 | Phoenix

AMY SCHWABENLENDER has a front-row seat to suffering. From the

windows of her office in downtown Phoenix, she can see rows and rows of
tents. Their inhabitants keep inside, hiding from the heat that is scorching
the desert city. On July 18th Phoenix experienced its 19th straight day with
temperatures of at least 43°C (110°F), breaking an 18-day record set in
1974. Ms Schwabenlender runs Phoenix’s Human Services Campus, a
consortium of groups that serve almost 2,000 people who are homeless.
“There’s people with burns on various body parts” from the hot pavement,
she says. “Maybe they fall asleep, maybe they’re just laying there waiting
for the next day.” Her voice gets quiet, almost to a whisper. “I don’t know
how more people don’t die,” she adds.
Roughly a third of Americans live in areas where the government has
issued warnings about extreme heat in the past week (see map). These hot
cities are in the Sunbelt, or the southern part of the country, ranging from
Los Angeles to Miami. Tourists flocked sweatily to Death Valley,
California, the hottest place on Earth, to see if it would get warmer than the
previous record of 56.7°C (it didn’t). Researchers in Florida worry that hot
ocean temperatures will bleach coral reefs and worsen hurricane season.

The North American monsoon, which drenches parts of Arizona and New
Mexico over the summer, has come late this year. Michael Crimmins, a
climatologist at the University of Arizona, reckons that the arrival of El
Niño, a warming ocean pattern that affects global weather, may have
delayed the cooling rains. It is too early to know how much more severe the
heatwave was made by climate change. But, explains Mr Crimmins, global
warming “pushes all of the normal local weather extremes just a little bit
higher.” Countries elsewhere can relate. Simultaneous heatwaves have
some academics wondering whether the rate at which the world is warming
is speeding up.

Yet extreme heat in the Sunbelt is not convincing Americans to up sticks.

Census figures suggest that 12 of the 15 fastest-growing cities in America
are in the region. A recent study from Redfin, a property platform, finds
that the 50 counties with the highest share of homes exposed to extreme-
heat risk grew by an average of 4.7% between 2016 and 2020. The five hot
counties that experienced the most growth were in Arizona, Florida and
Texas. Williamson County, Texas, which includes Austin, grew by a
whopping 16.3%. Counties with lots of homes vulnerable to drought, fire
and floods also grew, though less rapidly. Places with relatively low climate
risk experienced population declines. Rather than migrating away from the
areas most affected by climate change, Americans are moving towards
them, lured by the promise of lower taxes and house prices than in costly
coastal metros.

Phoenix residents expect their summers to be sweaty. Their city sprawls

across the Sonoran Desert. Saguaro cacti stand nobly atop mountain ridges
like spiked sentries. Scorpions and rattlesnakes scuttle in the brush. Most
people can abide the desert heat in air-conditioned homes and offices. But
keeping cool is a luxury not everyone can afford.

Heatwaves kill more Americans than any other weather-related disaster.

The number of deaths associated with heat in Maricopa County, which
includes Phoenix, has risen each year since 2014. And at least 42% of the
425 people who died from heat in 2022 were homeless. More than half of
the county’s heat-related deaths last year involved methamphetamine, a
stimulant that can increase body temperature. In Phoenix, heat,
homelessness and drug use have become a lethal combination.
David Hondula, who runs Phoenix’s new Office of Heat Response and
Mitigation, reckons that a hotter city does not have to be more dangerous.
Hot cities around the world—including Los Angeles, Miami and Athens—
are appointing chief heat officers. These officials have two main jobs: to co-
ordinate emergency response to heatwaves, such as opening cooling centres
and distributing water; and to plan how to adapt to a hotter future, largely
by diminishing the urban heat-island effect. City centres can be up to 10-
15°C hotter than surrounding rural areas because buildings and roads
absorb and trap heat.

There are several strategies cities can use to cool down. Some are technical,
such as painting asphalt with a reflective coating to repel, rather than
absorb, sunlight, or using different building materials. Others are
environmental, such as planting more trees for shade. Phoenix likes them
all. Some streets around the city shimmer with their new reflective coatings.
Downtown’s municipal code requires new developments to provide shade.
“There’s no reason we can’t have a Phoenix of the future that’s more
comfortable than the one we have today,” says Mr Hondula.

Officials will face hard choices. Places reckoning with water scarcity must
weigh planting trees for shade against the water needed to irrigate those
trees. Reflective pavement reduces the surface temperatures of streets, but
the coatings seem to increase radiant heat. Sunlight that would have been
absorbed into the asphalt may instead be cast onto nearby people.

Growth and sustainability are sometimes at odds. In June, Arizona’s

governor, Katie Hobbs, decided to limit construction in parts of Phoenix
that depend on limited groundwater supplies. Rising home insurance rates
in Florida and California will make it more expensive to live in areas prone
to floods or fires. Unchecked growth in places prone to extreme heat will
increase heat-related deaths, argues Vivek Shandas, who studies climate
adaptation at Portland State University. “We’re going to see two trains
heading on different tracks right at each other.”

Mr Shandas’s trains may already be in motion. As your correspondent

drove through Buckeye, Arizona, she spotted two billboards representative
of the Sunbelt’s perverse climate-migration paradigm. Along the highway,
one sign warned drivers that it was 11:33am and already 106°F (41°C). On
the next stretch of road was a sign advertising brand new homes.■

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Reproductive politics

The FDA approves the first-ever non-prescription

birth-control pill
Progressives hope it will blunt the effect of abortion bans

Jul 20th 2023 | New Orleans and Washington, DC

IF THE DECISION was sobering, the concurring opinion was chilling.

When the Supreme Court overturned Roe v Wade, making states the new
arbiters of abortion policy, Justice Clarence Thomas laid out a blueprint for
what could come next. Harnessing the same legal logic that the court used
to topple Roe, he called on his colleagues to do away with a trio of other
precedents. Among them was Griswold v Connecticut, a 1965 case that
established a married couple’s right to buy contraceptives without
government restriction. Wide-eyed progressives braced for abortion battles
to morph into a war over birth control.

Pro-lifers have been mulling going after the contraceptive pill, but an
organised offensive to purge pharmacies of it has yet to materialise. Doing
so will soon become harder. On July 13th the Food and Drug
Administration (FDA) approved Opill, the first-ever non-prescription birth-
control pill. Come early 2024, women will be able to order Opill online or
pick it up from drug stores without a doctor’s sign-off.

Liberals see this as an antidote to abortion restrictions. Making

contraceptive pills more readily available should result in fewer unplanned
pregnancies. But for this to be a practical option for women, Opill needs to
be affordable. Perrigo, the company that makes it, has yet to disclose its
price and private health insurers are not required to cover it (though an
executive order issued in June suggests that President Joe Biden may try to
change that).

At the right price, non-prescription pills could increase liberty. Claudia

Goldin of Harvard University found that when contraceptives became
widely available in the 1960s, women stayed in school longer, boosting the
economy. Today, 12% of sexually-active women, and 14% of poor ones, do
not want to get pregnant but do not use contraceptives. Though the impact
will be smaller now, it could still be significant.

Kristan Hawkins, the boss of Students for Life, an anti-abortion outfit,

thinks the pill will give women a false sense of security, leading to more,
not fewer, abortions. She points to a 2014 analysis by the Guttmacher
Institute, a pro-choice research group, that found that 51% of abortion
patients used birth control in the month they got pregnant, as evidence that
women misuse contraceptives. Yet to get FDA approval, Perrigo proved
that consumers use Opill safely and effectively without doctors’ instruction.
Still, Ms Hawkins says the proliferation of the pill will empower rapists to
slip it into their victims’ drinks to cover up their crimes and will lead to
higher rates of sexually transmitted infections and depression among girls.
(There is some evidence for the latter two claims.)

The impact of Opill will be dulled if women are wary of it. In places where
abortion is taboo, conspiracies are particularly potent. The nurse
practitioner at Woman’s New Life Clinic in New Orleans warns patients
that the pill is linked to cancer and says condoms disrupt vaginal pH-levels.
More than three-quarters of American women of reproductive age favour
making birth control available over the counter. But those who need it most
may be least likely to bring it to the till. ■

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Big-donor populism

Ron DeSantis is relying on big donors and his

super PAC
The latest campaign-finance disclosures look good for him but disguise a
flaw

Jul 20th 2023 |

FOR RON DESANTIS, whose presidential campaign began in earnest eight

weeks ago on a glitchy Twitter live-stream, even good news seems to be
bad news. Newly released data from the Federal Election Commission
(FEC) show the Florida governor outraised Donald Trump during the
second quarter and raised some 43% more than his competitors Nikki
Haley, Tim Scott, Chris Christie and Mike Pence combined. But these
splashy fundraising numbers disguise a looming problem for Mr DeSantis:
an overreliance on big-dollar donors.

From May through June Mr DeSantis raised $20.1m and spent $7.9m, a
burn rate of 39%. Compared with the same period during the 2020 election
cycle, this seems modest. During the second quarter of 2019, Mr Trump’s
campaign had a burn rate of 40%, and then-front-runners of the Democratic
primaries Bernie Sanders and Joe Biden both slightly exceeded 50%.

But those fundraising juggernauts, unlike Mr DeSantis, relied heavily on

small-dollar donors—individuals who pledge less than $200 to a campaign.
These contributions matter not only because they help line campaign
coffers, but because smaller donations from more people suggest greater
enthusiasm for the candidate. During the second quarter of 2019, 70% of
Mr Sanders’s fundraising came from small-dollar donors compared with Mr
DeSantis’s 14% during the same period this year.

A reliance on big-dollar donors can be hard to sustain. Fewer people have

lots of money to give and campaign-finance law caps individual
contributions at $3,300 per candidate per election. Nearly 70% of donors to
the DeSantis campaign have already reached this limit for the primaries. Mr
DeSantis can use future donations from these individuals (up to an extra
$3,300) only on his general-election campaign, should he make it that far.
But some of his big-dollar donors have already hit both caps: $3m of his
remaining $12.2m funds are reserved for the general election.

Under his campaign’s current weekly spending rate ($1.5m) Mr DeSantis

will need to raise around $33m during the remainder of 2023 if he hopes to
reach the Iowa caucus with cash in hand. His campaign has already laid off
some staffers in order to rein in spending.

The next few weeks could bring the DeSantis campaign worse news still.
Though Mr Trump’s FEC filings report fundraising of $17.7m, the former
president claims he has raised $35m in the second quarter, 75% more than
Mr DeSantis. Because Mr Trump relies on a fundraising committee with
different reporting deadlines the true number won’t be revealed until the
end of July.

The DeSantis campaign’s financial state will become clearer then, too.
Super PACs—which can take unlimited donations from undisclosed donors
on behalf of campaigns so long as they do not co-ordinate with them—have
the same July 31st filing deadline. “Never Back Down”, a DeSantis-aligned
super PAC, is allegedly flush with cash. But without co-ordination between
the campaign and super PACs, efficient use of these funds is tricky. And
come January, it will be the individual donors, not the super PACs, who
shuffle into ballot boxes to decide their 2024 Republican nominee. Mr
DeSantis would do well to woo them even if their wallets are slimmer. ■

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about the elections of 2024 and follow along as we track shifts in Joe
Biden’s approval rating.

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Slow puncture

What America’s bike-share schemes tell you about

venture capital
A highly visible indicator of market conditions

Jul 20th 2023 | CHICAGO

OVER THE past decade not many cities in America have won as many
plaudits for investing in bike infrastructure as Minneapolis. Thanks to its
extensive network of bike lanes, in 2015 it became the first (and so far only)
place in America to win a place on the Copenhagenize Index, a list of the
world’s 20 most bicycle-friendly cities. Yet that was not enough to save the
city’s 13-year-old docked bike-share system. In March Lyft, the taxi firm
which operated the scheme, known as Nice Ride, announced that because a
sponsor had dropped out, it would close, and that they would begin
removing the equipment.

Cycling is booming across America. Bike-share schemes, too, have been

thriving. According to the Bureau of Transportation Statistics, usage of six
of the largest docked systems nationwide increased by 42% from March
2020 to March 2023. Last year New Yorkers took just under 30m rides on
the Citi Bike scheme there; in Chicago, the Divvy scheme had 6.3m riders,
up nearly 40% on 2021. And yet many schemes, like that in Minneapolis,
are closing. In 2019, 109 cities were served by a docked-bicycle-hire
scheme; that has now fallen to 56. What is going wrong?

The basic problem, says David Spielfogel, the chief business officer of
Lime, which operates dockless bikes and scooters, is that the boom, funded
by venture capital, is deflating like a punctured tyre, and too many
operators “haven’t figured out how to run a profitable business”. Dockless-
bike firms (Lime aside) were the first to go. But docked schemes are now
suffering too, especially outside the biggest cities. In Minneapolis, the fact
that the bikes did not function during winter may have contributed to the
system’s demise. Lime, which is profitable, is one of the firms filling the
void.

Schemes like New York’s or Chicago’s are not at risk of closure. But bike
advocates accuse Lyft, which runs those two systems, of not maintaining
non-electrified bikes in order to push riders onto pricier e-bikes. For non-
members, hiring an e-bike can rival the cost of a taxi (members who pay an
annual fee get cheaper rides). While demand stays high, that might sustain
networks. But it will hardly accelerate the boom.■

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A new Mexican-American war

How Mexico has become the “enemy” of

America’s Republicans
A growing number of them want to use military force against drug cartels

Jul 20th 2023 | WASHINGTON, DC

MORE THAN once, as president, Donald Trump mused about firing

missiles at the drug labs of Mexican cartels. “No one would know it was
us,” he declared, before being talked out of the idea. Mark Esper, the then
defence secretary, recounted the incident in his memoirs published last year,
astonished that bombing a neighbour could be seriously thought of.

Now the extraordinary is becoming more commonplace as Republicans

argue that greater use of military force, or the threat of it, can help control
America’s southern border and curb the smuggling of fentanyl, a synthetic
opioid that is produced illegally in Mexico.
One congressman, Michael McCaul of Texas, has introduced a bill to
classify fentanyl as a “chemical weapon”. Lindsey Graham, a senator from
South Carolina, is pushing one to designate Mexican cartels as “foreign
terrorist organisations”. Dan Crenshaw and Mike Waltz, congressmen from
Texas and Florida respectively, have proposed another that would authorise
“all necessary and appropriate force” against foreign states, organisations or
people linked to trafficking fentanyl.

Republican presidential candidates, too, are talking tough. Ron DeSantis,

the governor of Florida, has suggested a naval blockade of Mexico-bound
shipping to halt the import of fentanyl precursor chemicals from China.
Nikki Haley, a former ambassador to the UN, has proposed sending in
special forces with a warning to Mexico: “Either you do it or we do it.” Tim
Scott, the other senator from South Carolina, declared in May, “I will allow
the world’s greatest military to fight these terrorists.”

Tucker Carlson, a former Fox News host beloved by America’s hard right,
goes further, regarding Mexico as an outright foe. On July 14th, while
interrogating Republican presidential hopefuls (minus Mr Trump) at the
Family Leadership Summit, a gathering of religious conservatives in Iowa,
he grilled Mr Scott about his support for Ukraine: “No Americans killed by
Russia. Hundreds of thousands killed by Mexico. But Mexico is our ally
and Russia is our enemy—how does that work?” Mr Scott did not demur
from the idea that Mexico was an enemy, but said America could deal with
Russia and Mexico simultaneously.

Many Mexicans feel they are again the piñata of America’s election season,
freely beaten by any politician. Earlier this year Mexico’s president, Andrés
Manuel López Obrador, a left-wing populist who got on with Mr Trump,
took issue with the militarist talk, saying: “In addition to being
irresponsible, it is an offence to the people of Mexico, a lack of respect for
our sovereignty.” He warned that he might urge Mexican and Hispanic
voters not to cast their ballots for Republicans.
The anti-Mexican mood on America’s right is hardening, moving beyond
Mr Trump’s cheap shots against migrants in 2015, when he said “they are
bringing drugs, they’re bringing crime, they’re rapists.” According to
tracking polls by YouGov, Republican voters are fast turning against
Mexico. Roughly as many think Mexico is now an “enemy” as consider it
an “ally”, with about 45% supporting each proposition (see chart).
Democrats are largely unchanged, with about 70% regarding their southern
neighbour as an ally. The Republican disenchantment has grown in the past
year.
At least three factors may be at play. The first is frustration over fentanyl-
related deaths, which rose sharply in 2020 and 2021. The drug has become
the biggest killer of Americans aged 18-45, responsible for most of the
70,000 deaths from overdoses of synthetic opioids in 2021. Second,
suggests Mark Jones of Rice University, the defeat of Mr Trump
“unshackled” Republicans, freeing them to denounce President Joe Biden
for his handling of the border. “There is no better issue for Republicans,” he
says. “It mobilises their base. And it splits Democrats: whatever Joe Biden
does will seem too fascist by the left and too permissive by centrists.”

A third factor, adds David Frum, a writer and former speechwriter for
President George W. Bush, is the war in Ukraine. Given the MAGA
movement’s hostility to Ukraine and sympathy for Russia—a position that
runs against many voters’ views—denouncing Mexico allows them to cast
themselves as “guardians of the country”.

Such policies are gaining an intellectual underpinning through a network of

Trump-leaning think-tanks preparing for a future administration. A paper by
the Centre for Renewing America, entitled “It’s time to wage war on
transnational drug cartels”, is reported to have caught the attention of Mr
Trump, among others. Its author, Ken Cuccinelli, argues that America
should be free to take military action in Mexico given that its government
does not fully control its territory. Never mind that it would stir deep anti-
Americanism, or that treating Mexico like a failed state might turn it into
one. “Mexico is not a friend. It is complicit in the drug cartels,” says Mr
Cuccinelli. “It’s time to acknowledge that the relationship has changed.” ■

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Lexington

The case for a third-party campaign in 2024 is

actuarial, not ideological
No Labels wants to be political insurance for the democracy, yet may doom
it

Jul 20th 2023 |

NOTHING IN American politics is more quixotic than a third-party

presidential campaign. Thus, to political insiders, nothing is also more
pathetic or else more cynical: in the best case, the campaign is detached
from reality, and in the worst (and, to insiders, the more probable case,
since this is politics for God’s sake) it is serving some hidden motive, some
interest in the shadows.

Yet, because nothing is more quixotic than a third-party campaign, might it

not actually be the most idealistic expression of American politics?
Americans may have elected only one candidate to the presidency from a
third party, but he was Abraham Lincoln. And good third-party politicians
always seem so pure. They know the odds are stacked against them, but
they also know Americans yearn for something different, for big ideas and
hard truths. It sounds good to anyone who is in fact yearning for something
different, which is pretty much everyone who is not an insider.

Enter Senator Joe Manchin, Democrat of West Virginia, one of the more
cynical American politicians or possibly one of the more principled,
weighing a third-party bid in the latest twist of a presidential melodrama no
strike-breaking screenwriter could pitch with a straight face. Whatever
further criminal indictments, mislaid cocaine, unacknowledged
grandchildren, unvaccinated Kennedys, old-age pratfalls or attempted
Russian coups may yet await, Mr Manchin’s eventual choice could prove
decisive.

Craggy and folksy, Mr Manchin has won in a state Donald Trump carried
twice by about 40 points, but by casting votes that made progressives
despise him. What Mr Manchin has seen as wise positions for an old-school
blue-collar Democrat from coal country, they have seen as evidence of
racism, truckling to special interests and egomania. As the spotlight of
presidential speculation shines upon him, Mr Manchin is doing nothing to
dispel that last suspicion. A fellow Senate Democrat, Dick Durbin of
Illinois, recently called him “America’s biggest political tease”.

If Mr Manchin runs for president, he would do so as the candidate of No

Labels, a centre-left organisation that argues Americans are dissatisfied
with their emerging choice, between President Joe Biden and Mr Trump.
The group intends to raise tens of millions of dollars and petition its way
onto the ballot in every state. On July 17th, in the early primary state of
New Hampshire, Mr Manchin appeared at a town-hall meeting organised by
No Labels alongside a Republican, Jon Huntsman, a former governor of
Utah, ex-ambassador to Moscow and Beijing, and past presidential
candidate.

“I truly believe that all 435 people elected to Washington want to do good,”
Mr Manchin said when asked about a radical House member. But the
“business model” of both parties leads politicians to motivate supporters by
creating or exaggerating division rather than compromising. Through No
Labels, he said, “We can talk about the real problems. We don’t have to
villainise the other side just because they might think different than I do.”

All of this is driving some Democrats crazy. The more sensible a No Labels
candidate sounds, they fear, the more he will undercut Mr Biden’s
advantage among sensible people. They argue that polling shows more
Republicans identify with their party’s extreme than Democrats do with
theirs, meaning a centrist candidate will take fewer votes from Mr Trump.

No Labels insists its polling shows it would hurt Mr Trump at least as

much. It says it will field a candidate only if, after the Super Tuesday
primaries next spring, the choice does come down to Mr Trump and Mr
Biden, and only if the No Labels candidate has a clear shot at winning.
“Those are deeply subjective judgments,” warns Matt Bennett of Third
Way, a centrist Democratic group organising against No Labels, “and so far
at least we have no faith they are making those judgments correctly.” The
day Mr Manchin turned up in New Hampshire, some political luminaries
opposed to Mr Trump launched Citizens to Save Our Republic, a super PAC
dedicated to fighting No Labels. The Arizona Democratic Party is suing to
keep No Labels off the ballot there.

Unfortunately for those opposed to No Labels, such machinations are

classic grist for the third-party idealism mill. In New Hampshire Mr
Huntsman remarked that he had previously heard only Russian and Chinese
officials discourage more political participation. Mr Manchin argued that
fear of No Labels would force the Democratic Party to embrace more
centrist positions. “Why are they scared that they may be threatened to do
the right thing?” he asked. “Why are they scared to say, ‘Hey, you’re too far
to the left and it doesn’t make any sense’?”
Better angles

Yet No Labels is also playing games. As a non-profit organisation, it is not

obliged to disclose its donors and it does not. Struggling to defend that
practice, Mr Manchin fell back on saying that Republicans and Democrats
also benefited from “dark money” and that he would vote, if given the
chance, to do away with it.
There is no reason to doubt the sincerity of Mr Manchin or No Labels in
seeking more public debate about the national debt, the need for national
service or the decline of patriotism. But after the attack on the Capitol, only
cynical political calculation could pinpoint the sensible centre of American
life as equidistant from both parties. A party in thrall to Donald Trump is
dangerous in ways a party resigned to Joe Biden is not.

In fact, some of his Democratic colleagues acknowledge, Mr Manchin

deserves credit for blocking Mr Biden from moving farther left in the heady
years when Democrats had majorities in both chambers, and for helping
achieve landmark bipartisan legislation. Partly thanks to Mr Manchin, Mr
Biden can justly claim to be the centrist’s alternative to Mr Trump. Only
should Mr Biden’s health fail might Americans be lucky to have No Labels
on the ballot (though Mr Manchin is 75). That is the only real argument for
this third party, and it is the most cold-blooded one imaginable. ■

Stay on top of American politics with Checks and Balance, our weekly
subscriber-only newsletter, which examines the state of American
democracy and the issues that matter to voters. You can read other articles
about the elections of 2024 and follow along as we track shifts in Joe
Biden’s approval rating.

Read more from Lexington, our columnist on American politics:

Joe Biden should run against the Ivy League (Jul 12th)
AI is making Washington smarter (Jun 29th)
Why the multiverse is eating popular culture (Jun 22nd)

Also: How the Lexington column got its name

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ideological

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Middle East & Africa

Israel’s constitutional chaos is far from over
Just give me a reason :: It is a tussle over when judges can overrule the government

How well-connected Iranians import their goodies

Tickling smuggled ivories :: Banned pianos still find their way in

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Just give me a reason

Israel’s constitutional chaos is far from over

It is a tussle over when judges can overrule the government

Jul 17th 2023 | JERUSALEM

BY 1989 THE city of Jerusalem had been trying for nearly two decades to
build a new football stadium. Powerful religious groups who saw matches
on the Sabbath as a desecration of Jerusalem’s sanctity had blocked the
project, but at last ground could be broken. One obstacle remained. The
acting interior minister, Arye Deri, an up-and-coming ultra-Orthodox
politician, blocked the land-use change. Teddy Kollek, the city’s mayor,
took him to court. In January 1989 the Supreme Court ruled that Mr Deri
had acted “in an unreasonable way”. Two and a half years later the first
match was played at Teddy Stadium.

Legal experts cite the case as one of the earliest examples of the court’s
nullifying a government decision on the grounds of “reasonableness”. That
principle was introduced in a ruling in 1980 by Aharon Barak, then a new
judge on the Supreme Court. It revolutionised Israeli jurisprudence and is a
principal source of the constitutional chaos engulfing Israel today.

On July 23rd Binyamin Netanyahu’s government is set to pass an

amendment to one of Israel’s quasi-constitutional “basic laws”. It would
give the government immunity from the reasonableness standard. Israelis
have been taking to the streets since the start of this year in protest. Even
Israel’s closest ally is concerned. On July 17th, after meeting the Israeli
president, Isaac Herzog, President Joe Biden applauded the vibrancy of
Israel’s democracy but urged Mr Netanyahu not to rush his reforms and to
seek a consensus for them.

The reasonableness standard has affected decisions in almost every area of

Israeli politics. It was used by the Supreme Court in 1989 to force the army
to put on trial a colonel who ordered his soldiers to beat up Palestinian
detainees. The following year the court invoked it to direct the attorney-
general to charge bankers with share manipulation. In 1993 the court again
took on Mr Deri, ruling that he could not remain interior minister after
being indicted for corruption. He was forced to resign, convicted and sent to
prison. He then returned to politics. In January 2023 the Supreme Court
ruled once again he must resign from cabinet because of a conviction for
tax fraud. Seven of the justices cited the reasonableness standard.

Mr Deri is no longer in the cabinet, but he still leads the second-largest

party in Mr Netanyahu’s coalition and is one of his closest allies. “They are
trying to immunise the government and all the ministers from judicial
review,” says Menachem Mazuz, a former Supreme Court justice and
attorney-general.

Mr Barak was not the first to invoke the reasonableness standard but he
greatly extended its scope. He was admired by many who, like him,
believed that in the absence of a written constitution and bill of rights, it
was up to the Supreme Court to protect individual rights and the public
interest. Others criticised him for extending the court’s powers without
authority. Reasonableness, argues Yoav Dotan, a law professor at the
Hebrew University and a critic of the principle, is not a legal standard: it is
“a linguistic construct invented by the court.”
On March 27th Mr Netanyahu announced the suspension of his proposed
legal reforms in favour of pursuing a broader consensus on constitutional
change. But when talks with the opposition broke down in June, the
government changed tack, focusing on limiting the reasonableness standard
as a first step.

Many legal critics of the standard oppose this amendment. Mr Dotan has
joined street protests against it. “I don’t want to be anyone’s useful idiot,”
he says. Like many, he fears that the government’s reforms, even those he
agrees with in principle, are a prelude to an erosion of democracy.

Mr Dotan and other legal experts have advocated a less sweeping

amendment that would exclude only decisions made by the entire cabinet
(as opposed to individual ministers) from the reasonableness standard. The
opposition parties have agreed to this in principle in exchange for the
suspension of the rest of the constitutional changes for the duration of this
Knesset term. But the coalition is in no mood for compromises. As huge
protests return and thousands of military reservists refuse to “serve a
dictatorship”, Israel is once again on the brink of civil unrest. ■

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Tickling smuggled ivories

How well-connected Iranians import their goodies

Banned pianos still find their way in

Jul 20th 2023 | Beirut

HASSAN IS AN unlikely smuggler. Affable and a bit nerdy, he looks better

suited to his old job as an international public-relations adviser. Now he is
one of the many shadowy operators who send contraband to Iran. Some
reckon goods worth $20bn-25bn evade Iranian border guards each year. His
particular speciality is pianos.

Since Iran’s customs authorities banned the import of musical instruments

in 2021, the upright pianos that Hassan (not his real name) buys for less
than $900 in East Asia go for $6,000 apiece in Tehran, Iran’s capital.
Musical instruments are outlawed, possibly for religious reasons; a member
of the parliamentary economic committee said that those who want to tickle
the ivories “must leave Iran”.
The ban is also part of a strategy to deter imports of items officially deemed
unnecessary, so as to tackle a balance-of-payments crisis that has been
fuelled by Western sanctions on Iran. Foreign-made sunglasses, fancy
smartphones and various fashionable items of clothing are prohibited, too.
This has created a lively illicit market for traders who already benefit from
the authorities’ willingness to overlook their activities in order to help them
to circumvent the American embargo.

On paper the customs authority runs an anti-smuggling programme

whereby millions of dollars’ worth of goods are seized every year. Yet at
the same time an estimated 95% of smuggled goods enter Iran, not in
pickup trucks crossing the border in the dead of night, but under the noses
of customs officers, often with their tacit approval. The scale of activity is
so large that some politicians lament that smuggling has wiped out
hundreds of thousands of jobs for Iranians in homegrown industries.

Hassan’s pianos arrive in large container ships. The shipping company

issues him with bank guarantees for any damage incurred on the short trip
between a warehouse in the United Arab Emirates and the Iranian port of
Bandar Abbas. The company greases palms at the port and the pianos are
unloaded and recorded as parts of musical instruments rather than as single
units, thus evading the ban. They are then put onto lorries and driven to
Tehran.

That 40 containers of illegal pianos can be regularly unloaded at Iran’s

biggest port, which is also the Iranian navy’s main base, suggests that
someone high up is taking a cut. The Iranian Revolutionary Guards Corps,
the regime’s praetorian body, has long been involved in smuggling
networks. When he was the country’s puritanical president, Mahmoud
Ahmadinejad once castigated the corps as “our smuggler brothers”,
accusing it of making money at the expense of the national treasury.

Smuggling—and the bribes that sustain it—is one way that those who call
the tune in Tehran continue to prosper, while ordinary Iranians suffer under
an ailing economy. Annual inflation hit 43% at the last count, in June, yet
those connected to the regime’s rulers still flaunt sports cars and send their
children abroad for private education. ■
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The Americas
Nayib Bukele shows how to dismantle a democracy and
stay popular
Terminator Salvador :: Others will learn from El Salvador’s charismatic president

Young Latin Americans are unusually open to autocrats

What Latin America thinks :: A new poll suggests a worrying regional trend

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Terminator Salvador

Nayib Bukele shows how to dismantle a

democracy and stay popular
Others will learn from El Salvador’s charismatic president

Jul 20th 2023 | Sonsonate

TO UNDERSTAND why El Salvador’s president is so popular—and why

aspiring autocrats elsewhere are likely to copy his ostentatiously brutal
methods—it helps to visit one of the neighbourhoods he has made safer.
Until recently, criminal gangs controlled huge portions of this small Central
American country of 6.3m, terrorising locals. A study by the central bank
and the UN Development Programme in 2016 estimated that extortion
payments added up to 3% of GDP, and the total annual cost of gang
violence, including the lost income of people deterred from working or
investing, was a staggering 16% of GDP.

In 2019 Salvadoreans elected a then 37-year-old president, Nayib Bukele.

Like most candidates, he promised to crack down on gangsters. Unlike his
predecessors, he has done so on such a scale that most are either locked up
or in hiding. He hopes to parlay that success into a constitutionally dubious
second term. On July 9th his party, New Ideas, announced that he would be
their candidate at elections in February 2024. His critics fear he is building
a dictatorship—a notion he does not exactly dispel when he dubs himself
“The World’s Coolest Dictator”.

The gang crackdown began in earnest in March 2022, after 87 people were
murdered in a single weekend, apparently after a deal between gangs and
the government broke down. Mr Bukele declared a “state of exception” (ie,
emergency). He let the police arrest anyone they suspected of gang ties,
even if the only evidence was a tattoo or an anonymous tip-off. More than
71,000 people—a number equivalent to around 7% of male Salvadoreans
aged 14-29—have been rounded up and tossed into overcrowded jails.
Human-rights groups are outraged, but most Salvadoreans are delighted.

“Before, this neighbourhood was ruled by a gang, and you couldn’t leave it
[without their permission],” says Miguel, a shop owner in Sonsonate, a
small town 65km (40 miles) from the capital, San Salvador. Violence was
routine. Three gangsters murdered Miguel’s sister because she broke off a
relationship with one of them. Since Mr Bukele locked up the thugs, life has
grown easier, he says. His murdered sister’s daughter, whom he adopted,
can walk around without worrying.

The state of exception was supposed to last 30 days, but has been extended
15 times. Prisoners will eventually have trials, the government says, but so
far they have had only pre-trial hearings, where dozens or even hundreds
appear simultaneously before a judge, sometimes by video link. Whole
batches are charged with “illicit association”. This need not mean belonging
to a gang. It could mean knowingly receiving a “direct or indirect benefit”
by having relations “of any nature” with one. Mr Bukele has raised the
maximum sentence for “supporting” a gang from nine years to 45. El
Salvador now locks up a higher share of its people than any other country.

Of those arrested so far, 6,000 have been released, says Gustavo Villatoro,
the security minister. Asked if any more of the detainees might be innocent,
he says the police and prosecutors are working hard “every day” to gather
the necessary evidence to determine who is guilty. Trials (which have not
yet started) will be concluded within two years, he says. He adds that the
crackdown will continue until every last gang member is locked up: there
are, he reckons, perhaps 15,000 more to catch, many of whom have fled
from the country.

Tossing aside due process is an essential part of Mr Bukele’s strategy.

Previously, when a gangster swaggered into a shop and demanded
protection money, the owner knew that to refuse was to court death. He
could call the police, but if he testified he would be murdered and if no one
testified there would not be enough evidence to lock the gangster up.

Now, if a gangster swaggers down the street, anyone can get him locked up
with an anonymous phone call. This completely changes the balance of
power in previously gang-dominated neighbourhoods. “Before, the good
people were afraid. Now, the bad people are,” says Miguel. (However, he
asks that The Economist use a pseudonym.)
El Salvador’s homicide rate was already falling: from 106 per 100,000
people in 2015 to 51 in 2018 (the year before Mr Bukele was elected) and
18 in 2021 (before the state of exception began). Nonetheless, it is almost
certain that the crackdown contributed to a further halving (see chart 1). El
Salvador had eight murders per 100,000 people in 2022, a rate only slightly
worse than in the United States.
This is such an improvement that, in a new survey from Latinobarómetro, a
pollster, the share of Salvadoreans who think crime is the country’s biggest
problem is just 2%. This helps explain why most polls put Mr Bukele’s
approval rating above 80% and some put it around 90%. No other leader in
Latin America comes close. Some of those polled in other countries like
him even more than Salvadoreans do. He even beats the pope in much of
the region (see chart 2).

Yet his war on gangs has three enormous downsides. First, many innocent
people have been incarcerated. Second, it has given him an excuse to
accumulate immense powers, and he is not finished yet. Finally, he has
created a formula that political opportunists in other crime-ridden countries
with weak institutions could copy. Call it: how to dismantle a democracy
while remaining popular.

Start with the innocents. Not far from Miguel’s neighbourhood, on a road to
a prison, makeshift stores have popped up selling items for care packages.
Families can buy underwear, soap and other basics to send to loved ones
behind bars. Those captured under the crackdown receive 1,800 calories per
day in prison, the government says—less than the 2,100 doled out to other
prisoners. It suggests that families send $150 worth of supplies every two
weeks. But many cannot afford it. Prisoners are rarely middle-class. Over
half the population earns less than $328 a month.
“Maria”, the mother of a young man who was arrested along with his wife
last year, insists that both were blameless. “Someone denounced him. I
don’t know who,” she says. Cops grabbed the couple, roughed them up and
accused them of associating with MS-13, one of the country’s two main
gangs. Maria learned about it when relatives showed her a picture of the
pair uploaded to Facebook by the police.

She says her son was given two hearings as part of a large group, but
nothing resembling a proper trial. So far, he has been locked up for more
than a year, and she has been given “no information at all” about his case.
Maria’s husband makes $12 a day as a driver; she makes about the same
amount, but only some days, working in a shop. At first they sent him care
packages, but now they can no longer afford to do so.

As she talks, a truck rolls by, packed with young men in white T-shirts and
handcuffs. A few minutes later, another truck passes with a similar load.
Then another. From time to time, ambulances hasten in the other direction.
Weeping, Maria says she has seen her son eight times since his arrest:
usually no more than a glimpse as he is taken to a hearing or some other
destination—she doesn’t know where. Once she visited him in hospital, but
was not allowed to talk to him. He appeared malnourished, and with
injuries that suggested he had been beaten.

Ingrid Escobar, a lawyer who works to release detainees, describes prison

conditions as “inhumane”. Mr Bukele does not try hard to rebut such
allegations. On the contrary, he has posted pictures on social media of
nearly naked inmates packed together like tattooed sardines. For the
families of the disappeared, this adds insult to trauma. But many other
voters are happy to see their former tormentors suffer.

Mr Bukele is a talented showman. His father was a celebrity imam; his

family owns an advertising business. He grew up steeped in the art of lively,
emotive persuasion, not necessarily tethered to facts. On Twitter, Facebook,
TikTok and YouTube he curates his image as the “CEO of El Salvador” and
the “Philosopher King”. Shunning suits, he turns up to meetings in jeans
and a baseball cap. He boasts of sharing a birthday with Simón Bolívar, the
liberator of much of South America from Spanish rule.
Hard cell

When critics accuse Mr Bukele of flouting norms, he revels in his

transgressions. For example, his government invests in cryptocurrency. The
only public guide to how much it has bought is the president’s tweets.
Sticklers for transparency complain. Mr Bukele boasts that he buys Bitcoin
(with public money) on his phone, while in the toilet. He announces new
policies via social media. State outlets amplify his message; paid trolls
deride his critics, according to an investigation by Reuters. Amparo
Marroquín of the University of Central America in San Salvador reckons
that the president needs just 12 hours to have everyone talking about a
topic. By contrast it takes the opposition 500 hours.

While dazzling voters with his charm, Mr Bukele has steadily removed
checks on his own power. He won over the army and police with lavish
benefits. Then he methodically asserted control over all three branches of
government, wagering that the public wouldn’t mind ceding new powers to
a man waging war on crime. In 2020 Congress refused to approve the hefty
sums he wanted for his security plan, so he marched into the chamber with
soldiers and accused lawmakers of thwarting the people’s desire for public
safety. In 2021 his party won a super-majority. In June it passed a law to
reduce the number of seats in the legislature from 84 to 60 and turn the
country’s 262 municipalities into 44 districts. Critics say he has tweaked
rules to benefit his own party.

When El Salvador’s courts tried to restrain Mr Bukele, he first ignored and

then gutted them. In 2020 the constitutional court ruled that emergency
powers he assumed during the pandemic were illegal. He wielded them
anyway. Once he had a majority in Congress, he pushed aside the judges of
the constitutional court and the attorney-general, who was investigating Mr
Bukele’s ministers for embezzling funds, replacing them with yes-men. He
forcibly retired a third of the country’s judges and replaced them with yes-
men, too. The way he did so was unconstitutional, says Antonio Durán, a
judge.

Mr Villatoro says the old legal system gave too much weight to criminals’
rights, and not enough to those of honest people. Another senior official
observes that Mr Bukele’s crackdown would not have been possible without
“many conditions”. Had he not got “rid of these judges...from the
constitutional [court] in the past, all this state of exception would have been
declared unconstitutional”.
Go straight to jail

The war on gangs offers a handy excuse to intimidate journalists, too. A law
passed in 2022 allows ten- to 15-year jail terms for those who transmit or
reproduce messages “created or allegedly created” by gangs that could
foster “anxiety and panic”. Independent media fear this could be used to
lock away anyone whose reports annoy the government. Mr Bukele has
suggested that certain reporters want his crackdown to fail. Those he singles
out for criticism have received torrents of threats. Several reporters have
fled from the country.

The next crackdown, Mr Bukele promised in June, will be on corruption. So

far, not much has happened, besides the confiscation of an allegedly corrupt
former president’s property. But the implication is plain. If people can be
arrested for white-collar crimes as easily as they can be arrested for gang
ties, the middle and upper classes had better watch out. Defying the
government, or even refusing to pay bribes demanded by corrupt officials,
could become dangerous. “There is no rule of law,” says a businessman.
“They can take you for anything.” He says he wants to leave the country,
“even if it means washing plates”.

Celia Medrano, a human-rights activist who plans to run on an opposition

ticket for the elections in February, frets that Mr Bukele is removing
restraints on his power far more quickly than, say, the dictator of nearby
Nicaragua did. “What took 20 years [there] is happening here in two years,”
she laments. “He wants a one-party state,” says Ms Escobar. He also
appears to be cultivating a family firm. Three of his younger brothers are
his closest advisers.

Some critics, from Crisis Group, a think-tank, to Colombia’s left-wing

president, Gustavo Petro, say Mr Bukele’s crackdown is unsustainable.
Previous mano dura (iron fist) campaigns in Latin America have ultimately
failed because they neglected to address the root causes of criminality.
Gangsters grow hardened behind bars and cause mayhem when freed.
This is true, but Mr Bukele’s crackdown is different. He has locked up
much larger numbers of people, on flimsier evidence, and apparently plans
to keep them locked up until they are old men. Mr Bukele has built a prison
designed to hold more inmates than any other in the world, on 23 hectares
of a 140-hectare site in the east of the country. Keeping that many people
behind bars costs a lot—perhaps $1.5bn per year, according to Mr Villatoro.
But Mr Bukele is saving money for the state by leaning on families to pay
for inmates’ upkeep. And in the new mega-prison, inmates will have to
grow their own food.

It is possible that Mr Bukele’s erratic economic management might derail

his project. El Salvador’s government debts are an eye-watering 76% of
GDP. The president often splashes out on popular things, such as a big
pension rise and a hospital for pets. Measures touted as shoring up public
finances have sometimes involved sleight of hand. The government blocked
the IMF from publishing its most recent staff report on El Salvador, making
foreign lenders nervous. But José Luis Magaña, a local economist, says Mr
Bukele has such untrammelled control of the public finances that he can
keep funding his priorities well beyond the next election.
No country has yet adopted the Bukele formula in its entirety, but several
have borrowed parts of it. In November Honduras declared a state of
emergency to tackle gangs, and plans to build a prison on an island off the
coast. Jamaica also declared one to crush gangs in its capital. In Guatemala
a minor presidential candidate, Amílcar Rivera, copied Mr Bukele’s
backwards baseball cap; a major one, Sandra Torres, vowed to build two
mega-prisons. Backed by the Guatemalan establishment, she faces a run-off
against a liberal opponent on August 20th—and the elite may yet block him
from running.

The Bukele formula is especially appealing to political insurgents. In

Ecuador, which holds a snap presidential election on August 20th, one
wildcard candidate is Jan Topic, a self-described former Foreign Legion
sniper who rose from obscurity by promising to get tough on gangs. He
tours the country in a helicopter to the soundtrack of “Top Gun”, wearing a
camouflage jacket. Flying over a notoriously violent prison, he told
inmates: “The party is over.”

He praises Mr Bukele. Asked about allegations of human-rights violations

in El Salvador, he responded: “It is possibly true, but I don’t know for sure.
What I do know is that since Bukele came to power, the number of
homicides per 100,000 inhabitants has dropped from 36 to zero.” Despite
Mr Topic’s hyperbole, this is a message many Ecuadoreans want to hear.
Polls suggest their biggest worry is crime. The homicide rate more than
quadrupled between 2018 and 2022, to 26 per 100,000.
Security without liberty

In Haiti Ariel Henry, the prime minister, signed an agreement in June for El
Salvador to open an office in Port-au-Prince to help the Caribbean country
tackle its gang crisis. One government prosecutor has been filmed shooting
a gang suspect; he is touted as a potential next president.

A few foreign fans have reconsidered. One young Colombian who moved
to El Salvador because he liked the sound of Mr Bukele was arrested on his
first day in the country, with a friend who had been there a couple of
months, after police found their tattoos suspicious. Their heads were shaved
and they were crammed in a cell with 500 other men. Only when the men’s
families kicked up a fuss in the Colombian press did the Salvadorean
authorities let them go. Mr Bukele’s media team took them to a restaurant
and a nightclub, filming them dancing and then persuading them to tell the
camera that they had been held for breaking work-visa rules and it was all
fine. The young men waited till they were home before giving the true
account.

It is hypothetically possible that Mr Bukele is amassing extraordinary

powers only temporarily, and plans to relinquish them when he thinks the
gangs have been crushed. But it is hard to think of a leader anywhere who
has swept aside term limits to keep himself in office—and then given up
power voluntarily.

Asked whether Mr Bukele might run for a (clearly unconstitutional) third

term in 2029, a senior official says: “So far there is no way to have a third
term.” The “world’s coolest dictator” may be planning to stick around. And
he is only 41. ■

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What Latin America thinks

Young Latin Americans are unusually open to

autocrats
A new poll suggests a worrying regional trend

Jul 20th 2023 |

IN THE LATEST edition of Latinobarómetro, an international poll in Latin

America, respondents were asked to rate their approval of 17 named leaders
on a scale of one to ten. In 15 of the 17 countries surveyed, Nayib Bukele,
El Salvador’s populist, autocratic president, got the highest score—on a list
that included Pope Francis and Volodymyr Zelensky, Ukraine’s president.
Such broad international appeal has raised concern about the durability of
liberal democracy in the region. Are Latin Americans outside El Salvador
yearning for their own version of Mr Bukele?

First conducted in 1995, Latinobarómetro is a leading source of region-wide

data on Latin American public opinion. This year’s poll, the first since
2020, was released on July 20th. Perhaps the most heartening result is that
support for outright dictators remains scant. The two least-popular leaders
in the survey were Nicolás Maduro of Venezuela and Daniel Ortega of
Nicaragua, who have both banned political opponents and held power by
force for more than a decade. And just 17% of the 19,000 respondents
agreed with the statement that “an authoritarian government can sometimes
be preferable to a democratic one”, a rate within the historical range of 12-
19%.
However, such questions reveal little about elected autocrats like Mr
Bukele, who maintain the trappings of democracy while hollowing out its
substance. And although this slipperiness makes their political potential
hard to gauge using polls, the overall pattern in the new data is that the
region is indeed becoming increasingly fertile territory for such figures.

Two questions in the survey addressed policies often implemented by

illiberal leaders. Although 61% of respondents disagreed with the statement
that “in case of difficulties, it is good for the president to control the
media”, the 36% who agreed marked a record high. In 2010 just 26% of
participants did so. On the question of whether a “government with an iron
fist”—a term that usually means heavy-handed security policies that lead to
violations of human rights, such as Mr Bukele’s mass-incarceration strategy
—can “solve our problems”, the liberal side were in the majority by an even
slimmer margin. Just 51% agreed with a statement that such a government
could not solve problems, whereas 46% disagreed.

Another set of hypothetical questions suggested that the poor approval

ratings for Mr Maduro and Mr Ortega might have more to do with their
weak performance in areas like the economy and public safety than with
their subversion of democracy. The share of respondents agreeing with the
statement “I wouldn’t mind if a non-democratic government took power, so
long as it solved problems” has been rising steadily during the past 20
years, from 45% in 2003 to 51% in 2020. This year, it reached a new high
of 54%. Another grim record was the 35% of participants agreeing that “I
would support a military government replacing a democratic one if things
got difficult.” The previous maximum, in 2020, was 31%.

These regional averages conceal variation between countries. Support for

democracy and opposition to authoritarianism is highest in Argentina, Chile
and Uruguay, all in southern South America. Conversely, it is lowest in
Honduras and Guatemala, El Salvador’s Central American neighbours. On
a related topic, in Ecuador, Guatemala and Paraguay, outright majorities of
respondents said they could support a military government. These three
countries are also among the five where participants thought a coup was
most likely to occur in the coming years, along with Venezuela, which is
already under dictatorship, and Honduras.

Perhaps the most worrisome finding in the poll is the age breakdown of
views on democracy. Younger Latin Americans, with no memory of the
region’s murderous military dictatorships of the 1970s, are the least likely
to agree that “democracy is preferable to any other form of government”,
whereas support is firmest among the old. Even when comparing people of
the same sex and education level in the same country, the share of
respondents committed to democracy is around 16 percentage points lower
for 20-year-olds than for 75-year-olds. Unless the young of today change
their minds as they age, average support for democracy will continue to
decline as older generations die off. If Latin America’s remaining liberal
leaders fail to improve their citizens’ lives, democratic backsliding is likely
to metastasise into a grim regional trend. ■

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Europe
Post-mutiny Moscow descends into factional murk
Kremlin black box :: Vladimir Putin’s authority has suffered a grave blow

Zaporizhia braces itself for Russian nuclear tricks

Waiting for the afterglow :: The nuclear power plant has been taken hostage to guard against
Ukraine’s counter-offensive

France’s Zeitenwende
France’s Zeitenwende :: A French geopolitical shift on NATO and enlargement could reshape
the future of Europe

Why the EU will not seize Russian state assets to rebuild

Ukraine
Come and take them :: It fears the precedent of undermining state immunity under
international law

How Ukrainians affect Poland

Chebureki beat pierogi :: Ukrainian immigrants are changing Poland’s economy—and its diet

A spat in Brussels pits an open vision of Europe against an

insular one
Charlemagne :: The sorry saga of Fiona Scott Morton

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Kremlin black box

Post-mutiny Moscow descends into factional murk

Vladimir Putin’s authority has suffered a grave blow

Jul 18th 2023 |

TWO DECADES ago Yevgeny Prigozhin, the violent ex-convict and

restaurateur who heads Wagner, a Russian mercenary group, published a
fairy tale he had written with his children. In it, a band of friends rescue a
shrinking king by blowing a magic flute. At first he grows too fast,
smashing a hole in the palace ceiling, before they bring him back down to
size. “A very dangerous toy,” says the king, taking away the flute.

Mr Prigozhin long helped inflate Vladimir Putin, for example by running

pro-Kremlin troll farms. Now he has cut him down to size. Last month his
soldiers seized a military headquarters in the southern city of Rostov-on-
Don and drove towards Moscow, downing several helicopters and a plane
along the way. Mr Prigozhin said his “march of justice” was meant to
remove Sergei Shoigu, the defence minister, and Valery Gerasimov, head of
the army, or to reverse their decision to integrate Wagner into Russia’s
regular forces. But he added populist anti-corruption slogans borrowed
from Alexei Navalny, Russia’s main opposition leader, pledging to purge
Russia of its thieving elite. The failure of security services to prevent the
plot, the army’s lack of resistance and the silence of the regime’s
propagandists exposed Mr Putin’s weakness. His bewildered appearance on
television amplified the humiliation.

Under Russian law Mr Prigozhin should face prison for mutiny, recruiting
mercenaries, arms trading and homicide. According to the unwritten rules
of Mr Putin’s mafia state he should probably be dead. Instead, on June 29th,
five days after Mr Putin vowed to crush the revolt, he met Mr Prigozhin and
his commanders in the Kremlin. He regretted that they had got mixed up in
a mutiny and offered to let them keep serving under a new commander.

Nobody has been charged with the deaths of some 13 pilots downed by
Wagner. Mr Putin recently denied the group existed (having admitted two
weeks earlier that it had been financed by the state). Mr Prigozhin is
thought to be in Belarus with some of his fighters. State TV bashes him, but
many of his channels on Telegram, a message app, still operate. Military
officials close to Mr Prigozhin, including General Sergei Surovikin (once in
charge of the invasion of Ukraine), have reportedly been detained and
questioned. Some of Wagner’s arms have been taken over by the army. But
as Novaya Gazeta, an independent Russian newspaper, writes, it is too early
to write off the “chef”.

Whatever happens to Mr Prigozhin, his mutiny revealed the erosion of the

state and the flimsiness of Mr Putin’s support base. His authority has so far
relied less on mass purges than on a consensus between power groups. His
political opponents have ended up dead, jailed or in exile. Meanwhile he
has sown rivalries between his loyalists, prevented consolidation in the
army and the security services, and created parallel structures such as
Wagner.

This worked in peacetime but faltered under the stress of war. Mr

Prigozhin’s mutiny was not an under-the-carpet factional squabble but a
public split within Mr Putin’s “pro-war” constituency. On one side stands
the conformist elite, trying to keep up a pretence of normal life. On the
other is a group of angry military patriots, most prominently Mr Prigozhin.
Most worryingly for Mr Putin, the army itself seems split.

The Levada Centre, an independent pollster, found that 92% of Russians

followed the coup to some extent. Almost half sympathised with Mr
Prigozhin’s criticisms of corruption, military incompetence and lies about
the war, though only 22% trusted the Wagner boss himself. Many of the
sympathisers did not support either side, said Denis Volkov, a sociologist at
Levada; they tuned in for a fight between “a toad and a viper”.

The mutiny also showed that Telegram, and Mr Prigozhin’s network of

trolls and bloggers on it, have eroded the Kremlin’s monopoly over
information. While television propagandists awaited instructions, the
mutiny unfolded online. Less than a quarter of young Russians trust TV. Mr
Putin staged a parade of uniformed men in the Kremlin, praising them
merely for not joining the mutiny, and flew to Dagestan, a Muslim region
on Russia’s side of the Caucasus, for a show of adoration. An eight-year-old
who supposedly cried because she did not get to see the president was
flown to the Kremlin and presented with 5bn roubles ($55m) for Dagestan’s
needs.

The absence of public retribution against high-ranking military officers who

sided with Mr Prigozhin suggests that Mr Putin is worried that purges could
create rifts in the army. New cracks appeared on July 13th. Major-General
Ivan Popov, commander of the 58th combined-arms army, one of the
country’s largest and most capable units, went public after being fired for
telling his superiors what was happening at the front: huge losses,
inadequate rotation and inferior counter-artillery capabilities. “The forces of
Ukraine could not break through our army from the front, but our senior
commander hit us from the rear,” said Mr Popov in an audio message that
was posted online.

What happens next depends on the battlefield. The bombing of the Kerch
road bridge that connects Russia to Crimea, which Russia attributed to
Ukrainian naval drones, was another blow. Mr Putin maintains that Ukraine
has failed to achieve any progress in its counter-offensive. Russian
commanders have defended against Ukraine’s counter-offensive well ahead
of prepared fortifications, instead of falling back to defensive positions.
This slows the Ukrainians’ progress. As one foreign military official put it:
“It is like hitting a brick wall with a sledgehammer.” But Mr Prigozhin’s
mutiny showed that if the wall crumbles, there may not be much behind it.■

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Waiting for the afterglow

Zaporizhia braces itself for Russian nuclear tricks

The nuclear power plant has been taken hostage to guard against Ukraine’s
counter-offensive

Jul 16th 2023 | Zaporizhia

INITIALLY LIDA POPRUHA, 45, was not sure what to make of claims
that Russia was preparing an attack at the nuclear power plant. She knew
that her flat in Khortytsky, a district of the city of Zaporizhia, sat inside a
potential evacuation zone. But would there really be an explosion? And if
so, would she be evacuated? But then came a moment of clarity. Ms
Popruha recalled the humiliating experience of being caught behind Russian
lines in her family home south of the town of Huliaipole a year ago. That
had required a fraught escape with her two children to Zaporizhia.

This time, she would leave before it was too late. On the morning of July
5th the Popruhas quit the city on one of two rickety third-class evacuation
carriages added to the 9.45am westbound express train, filled to the brim
with anxious humanity. For the second time in less than a year the family
were on the move, with two bags of belongings and no plan for what would
happen next.
Zaporizhia has seen more of this war—its refugees, destruction and missiles
—than almost any other city in Ukraine. Now it must manage its role on the
nuclear front line. The huge Zaporizhia nuclear plant, 50km south-west of
the city, has been turned into a fortified base by the Russian occupiers. For
many of those in Khortytsky, one of two neighbourhoods within the 50km
evacuation zone, that has meant upping sticks and moving on.

But others are determined to stay put, even if ordered to leave. “Where will
I go, me with my walking stick?” complains Yelena Petrova, a 74-year-old
pensioner selling kvass (a fermented rye-based drink) from a keg on
Khortytsky’s now-deserted main strip. Ms Petrova says she has prepared
water and food and sealed her windows, just in case. But her biggest worry
is that she no longer has any customers for her kvass. “It’s really delicious,
everyone says so. Perhaps you’ll take some?”

First responders say they have prepared for the worst. It is not a matter of if,
they repeat mantra-like, but when—and how bad. The local children’s
hospital has prepared a decontamination centre, and supplies of dry food
and water for 14 days. On the first sign of nuclear danger—an intermittent
rather than constant air-raid alarm—the entire hospital will move to the
basement, its chief doctor says. “Each member of staff has their
instructions: stay in the building, stay low, turn off ventilation, water, wash
the incoming with laundry soap.”

On June 29th Zaporizhia’s emergency services ran a dress rehearsal for a

major incident, with approximately 100 local rescue workers who will be
responsible for any evacuation, if it is needed. “The most important thing is
to avoid chaos,” says Kyryko Kuzmenko, a specialist in the local
emergency ministry. “We have new radioactive hazard suits, and we have
drilled for putting out a fire at the plant if it comes to it—and if we get
access.”

The worst case for Ukrainian planners is that Russia limits access to a
nuclear emergency site while military action continues elsewhere. In recent
weeks each side has accused the other of preparing a major incident at the
plant. In early July Ukrainian military intelligence warned that Russia had
mined two of the six reactor blocks and a cooling reservoir, and was
intending to set off an explosion on the night of July 4th-5th. With a
preposterous flourish, Russia responded that Ukraine was preparing to
attack the plant with a Tochka-U ballistic missile containing radioactive
waste.

Many fear a Russian-engineered incident if the Ukrainian counter-offensive

enjoys a breakthrough, either pushing from the north or across the rapidly
drying Dnieper reservoir. A Ukrainian military-intelligence source insists
that Ukraine would never attempt a “crazy” operation to storm the plant
itself.

Earlier this month four inspectors from the International Atomic Energy
Agency (IAEA) based at the plant said they had found no evidence of
Ukrainian claims that Russia had mined the reactor blocks—though added
that they had not been granted full access. A Ukrainian official expresses
anger at the statement. How could the inspectors issue conclusions when
they were not given full access? Their statements were “obviously”
hamstrung by politics, he says. “They are limited in what they can say.”

The Zaporizhia nuclear power plant is the largest of its kind in Europe. At
one point it employed 11,000 people; approximately 3,500 remain. Some
have signed contracts with the Russian occupier, but the vast majority of
top-level staff, including those with responsibility for the reactors, remain
employed by Energoatom, Ukraine’s state-run nuclear firm. In phone
conversations, several report a regime of “terror” and an absence of fire-
and nuclear-safety protocols.

“Maxim”, a technician who has returned to Kyiv after leaving the plant in
early July (a journey that required him to travel thousands of miles through
three countries), says the Russians view the power station as a perfect
fortified military base. “They see the reinforced walls and doors of the
reactor blocks and think, ‘Wow’, what a great place to hunker down in.”
(Maxim asks The Economist not to publish his real name and position, for
fear of inviting retribution on his former colleagues.) The soldiers are in
charge of “everything,” he adds. “If they say they need to pour 100 tonnes
of sand on the reactor roofs, or install machine-gun positions…there is no
one to stop them.”
Petro Kotin, the head of Energoatom, estimates that Russia has stationed
700 soldiers at the plant. “The perimeter has been mined ever since they
took control, and they mine other things when they feel like it,” he says.
“Soldiers, explosives, military armour. None of this should have any place
in a nuclear facility.” In theory, the plant’s design protects against disaster.
All its reactors were shut down in September. Five of the six reactor blocks
are in full shutdown; although contrary to Ukrainian requests, Russia
maintains one in “hot standby shutdown”, meaning the fuel continues to
react, albeit slowly.

The risks of a major incident are low, for now. “If you explode what’s there
now, there will be radioactive emissions,” says Mr Kotin. “But it will be
245 times less than if it were to happen on a working reactor.” The modest
emissions might not even require the evacuation of people living around the
plant.

But there are other scenarios. Russia could manufacture a serious disaster
within less than 24 hours, warns Mr Kotin. “They could power the reactor
up, or reduce the water level in the cooling pools to critically low levels,”
he says, creating the conditions for a new chain reaction, with serious
consequences. It would be difficult to do this without technical assistance.
But Oleh Glinsky, a Ukrainian technician who fled the plant in 2022, says it
is reasonable to assume the worst. “No one thought [the Russians] would
blow up the dam in Nova Kakhovka, but they did.” At a minimum, he
suggests, the Russians could seek to inflict enough damage to make the
plant economically unviable.

Ms Popruha, who reached her destination of Khmelnytsky, in western

Ukraine, on July 5th, says there is no way of knowing what the Russians
have in mind. She is simply pleased to have left Zaporizhia. Nuclear plant
or no nuclear plant, it will be a long time before things get back to normal
there.■

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France’s Zeitenwende

France’s Zeitenwende
A French geopolitical shift on NATO and enlargement could reshape the
future of Europe

Jul 20th 2023 | PARIS

WHEN Olaf Scholz proclaimed a Zeitenwende, or “historic turning point”

for Germany, after Russia invaded Ukraine, it startled Europe. The German
chancellor’s promise to invest heavily in defence, though haltingly
implemented, marked an abrupt change. Far less noticed is an equally
arresting shift taking place in France. The implications of its turning point
for Europe could be just as significant.

France’s tournant historique consists of a double inflection point. Each

touches a fundamental precept. One is Ukraine’s membership of NATO.
The other is the enlargement of the EU’s borders to the east and south.
France, once sceptical about welcoming newcomers to either group, has
quietly become an advocate for both.
It was in the run-up to the NATO summit in July in Vilnius, Lithuania’s
capital, that many of France’s astonished allies first grasped its new
approach. France lined up beside Britain, Poland and the Baltic states,
arguing for a fast track into the alliance for Ukraine after the war. “We need
a path towards membership,” Emmanuel Macron, the French president,
declared in Bratislava, Slovakia’s capital, on May 31st.

This set France apart from not only Germany but America, “to the apparent
surprise of the Biden administration”, noted Daniel Fried, an American ex-
diplomat. In 2008 France and Germany blocked Ukraine from immediate
membership of the alliance. Four years ago Mr Macron told The Economist
that NATO was experiencing “brain death”. Even after Russia sent in the
tanks, Mr Macron at times seemed as worried about its future security as
about Ukraine’s. Yet Europe’s eastern flank has found an unexpected new
champion.

France’s second shift, on EU enlargement, is less visible. A decision on

whether to open membership negotiations with Ukraine (and Moldova) is
not due until December 2023, after an initial discussion in October. But
talks are well under way, not least because such an expansion would require
complex changes to the rules governing the EU’s internal organisation. A
Franco-German working group is looking at the implications. The European
Commission will report back in October on enlargement, including to the
Western Balkans.

France has traditionally been wary of enlargement, regarding expansion as a

threat to its preferred strategy of “deepening” the union and forging a
political project. Britain, when still a member, was an arch-enlarger, and
thus viewed with suspicion in Paris for seeking to turn Europe into a mere
trading zone. In 2019 France vetoed the opening of membership talks with
Albania and North Macedonia.

Russia’s war has transformed Mr Macron’s approach. Last year his

diplomats worked hard to secure support for the EU’s decision to grant
Ukraine candidate status. France lifted its veto on the bids by Albania and
North Macedonia, enabling membership negotiations to begin. The warmth
of Mr Macron’s speech in Bratislava dazed central and eastern Europeans,
long favourable to a broader EU. “The question for us is not whether we
should enlarge,” he declared, “but how we should do it.”

Many observers remain sceptical. “It was a free lunch for Macron to back
Ukraine’s NATO membership,” argues a European diplomat, noting that
France knew full well that the Americans would put on the brakes. The
tactical interest for Mr Macron in standing up for central and eastern
Europe is plain, after the credibility he lost last year over his outreach to
Vladimir Putin. France’s line on NATO was partly tactical too: a robust
message to Russia, it argued, would strengthen Kyiv’s hand in any future
peace negotiations.

Yet there are reasons to think that this double French shift reflects a
geopolitical reassessment. Mr Macron, pro-European to the core, has long
been preoccupied by the need to fortify what he calls “European
sovereignty”: the continent’s capacity to determine its future amidst great-
power rivalry. This concern is accentuated both by the existential threat to
Europe of an expansionist Russia, and by the possibility that an America led
by Donald Trump, should he win next year’s election, would be less
committed to European security.

France’s conclusion is that Europe “can no longer accept ‘grey zones’

between the EU and Russia”, says an official. Unless countries on the
fringes are anchored inside the EU or NATO, they will be vulnerable to
autocratic powers. The last phase of enlargement happened “when we
thought that liberal democracy would spread and become the dominant
model”, says Laurence Boone, France’s Europe minister: “Today that’s not
the case. So we need to move to a geopolitical construction.” Enlargement
becomes a tool for consolidating European sovereignty. And a wider EU is
not an alternative to a deeper political project, but a means of achieving it.
“This really is a structural shift,” argues Benjamin Haddad, one of Mr
Macron’s deputies.

None of this means that enlargement will happen any time soon.
Membership talks are proceeding grindingly slowly with four Western
Balkan countries; Montenegro’s began over a decade ago. Absorbing
Ukraine would be complex, long and fraught. But it is now viewed in Paris
as a geopolitical imperative. Mujtaba Rahman of the Eurasia Group, a
consultancy, expects EU leaders to open membership talks in December.
France alone cannot dictate the choices of the 27-member club. But it
remains a forceful guide to those decisions. Its Zeitenwende could be
crucial to determining the future shape of Europe. ■

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Come and take them

Why the EU will not seize Russian state assets to

rebuild Ukraine
It fears the precedent of undermining state immunity under international
law

Jul 20th 2023 |

“BANK ROBBERS should not expect banks to honour their safe deposit
boxes.” So write Larry Summers, formerly America’s Treasury secretary,
and his co-authors in a recent article arguing in favour of seizing Russian
assets in Western accounts. More than €200bn ($225bn) of Russian central-
bank assets are frozen in the EU alone. Politicians in the bloc’s eastern
states, not to mention in Ukraine, want them used to pay for the damages
caused by Russia’s invasion. The problem is that under international law
there is no clear-cut way to seize those assets without a vote in the UN
Security Council, a judgment by the International Court of Justice (ICJ) or a
post-war settlement. Each of those would require Russia’s agreement.
The latest to learn this was none other than Ursula von der Leyen, president
of the European Commission. During a speech to the annual Ukraine
recovery conference in London on June 21st, she announced that her
commission, the bloc’s executive arm, would come up with a proposal
before the summer to make use of Russia’s frozen assets. At the same time
the ambassadors of the EU’s 27 member states were chewing over a legal
assessment of the issue by the EU’s rotating chair, Sweden. The verdict of
many around the table, according to those present, was that the legal
obstacles would be formidable.

About a week later, the leaders of the EU’s countries told the commission to
restrict any proposal to what was legally plausible: a windfall tax on the
private firms that hold the frozen Russian assets, and thus make profits on
them. Even that plan is so controversial among member states that the
proposal has been postponed until after the summer, according to press
reports. The European Central Bank (ECB), too, has major reservations.

Legally, experts say, the plan is sound. Euroclear, a private clearing-house

and securities depository in Belgium, had to stop all payments to Russia as
a result of sanctions. It is now sitting on almost €200bn-worth of assets and
cash. Smaller amounts are frozen in the accounts of similar firms elsewhere.
These holdings generate gains: in Euroclear’s case, €720m of pre-tax profits
in the first quarter of 2023 alone. That profit could be taxed more heavily—
at a rate approaching 100%—to generate revenues. The clearing house
would keep something to compensate it for the cost of managing the cash
(which Euroclear says amounted to €9m in the first three months of 2023)
and for any higher capital requirements that regulators prescribe.

Yet the ECB and some finance ministers fear for the euro’s reputation. Any
move against Russian central-bank assets could undermine the euro and
European government bonds as a store of value for other central banks
around the world, they say. At the least, the argument goes, Europe should
act in tandem with other states in the G7, the club of the world’s richest
democracies, to make sure the reputational loss is shared.

Critics of the ECB’s position argue that any reputational damage is already
done: the reserves became useless to Russia when they were frozen. The G7
made clear on July 12th that the freeze will remain in place until Russia
pays for the damage it has done in Ukraine, providing an incentive for
Russia to settle. Using revenues from the assets, it is argued, is a small
additional harm. If agreement among the G7 can be found, the commission
will probably present a proposal after the summer.

Other ideas have been mooted. The EU could try to get better returns on the
assets, for example by demanding that the private entities holding the
Russian funds put them into higher-yielding investments, and transfer the
profits to an EU fund. But that option has been taken off the table: the legal
risks are higher, since the EU would take a more active role in managing
Russia’s assets. If losses occurred on the investments, European taxpayers
could, awkwardly, be liable for making whole the Russian central bank.

The EU dismissed more drastic proposals out of hand. It would be a clear

breach of international law to seize Russian assets unilaterally. States are
immune from other countries’ legal jurisdiction and from having their
property expropriated to settle debts. Under international law, sanctions on
Russia are permissible only as a means to induce it to act differently.
Simply confiscating assets would go beyond what global rules allow. “The
rules on countermeasures contain a fine balance between what states need
to be allowed to do to protect themselves and their rights, and the risk of
abuse, especially by powerful states,” says Federica Paddeu of Cambridge
University. Such measures must be temporary, as far as possible reversible
and intended as a means to change behaviour, she adds, not as punishment.

Such scruples matter especially to the EU, a club founded on rules. Amid
the geopolitical contest between America and China, where international
norms seem to matter less and less, the EU is keen to uphold them where it
can. In their latest attempts to becomes less dependent on China, European
policymakers are at pains to find measures that comply with global trade
rules. Less high-mindedly, state immunity protects the EU’s biggest
country, Germany, from claims by victims of Nazi occupation. A decade
ago, the ICJ ruled that Italian and Greek courts cannot award German
government assets to plaintiffs in such cases. There is little chance that
Germany would agree to undermining state immunity. Taxing private
profits on the Kremlin’s assets may seem like too little for Ukrainians and
others outraged by Russia’s atrocities. But it is the most that the EU will be
willing to do. ■

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Chebureki beat pierogi

How Ukrainians affect Poland

Ukrainian immigrants are changing Poland’s economy—and its diet

Jul 20th 2023 | Warsaw

“POLES ARE conservative,” complains Ernest Suleimanov, who in January

opened Warsaw’s first Crimean Tatar restaurant. Customers love his
chebureki (meat pastries) but have trouble with the digital menus that are
ubiquitous in tech-savvy Ukraine. Mr Suleimanov is one of more than a
million Ukrainians living in Poland, many of them refugees from Russia’s
invasion. Now they are reshaping the country’s high street: since the war
started, Ukrainians have opened some 8% of all new sole-proprietor
businesses, and the number keeps rising.
Some Ukrainians are piloting new concepts. Olha Savchenko founded a co-
working space for beauticians and hairdressers in Warsaw, with 55 beauty
stations hired by freelancers. The place has a nightclub vibe, with a barista
and house music, and it is a hit. Others bring Poles a taste of the unfamiliar.
Natalya Gordiyenko created Kapsula, a marketplace for fashion designers.
She says Polish women are less daring than Ukrainians, preferring black
and white clothes over bright colours, and prioritising fabric quality over
tailoring.
Ukrainian companies have followed the émigrés. Nova Post, Ukraine’s
biggest private postal service, has opened branches in 21 Polish cities.
Initially it brought refugees their belongings; its next goal is delivery
services for online shops. In 2022 Poland lowered administrative barriers
for Ukrainians setting up businesses, putting them on the same footing as
locals. That makes the country an easy gateway to European markets.

Polish companies are seeking the newcomers’ business too. Banks run
Ukrainian-language services; one offers Ukrainians free accounts with no
need for a Polish address or phone number. Supermarkets carry Ukrainian
staples like salt-dried fish and crab-flavoured crisps. The word “Russia” has
been exorcised from food labels. The potato-cheese dumplings once known
as pierogi ruskie have been rebranded as pierogi ukrainskie. As for
“Russian” mustard, it is now simply “spicy”.

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Charlemagne

A spat in Brussels pits an open vision of Europe

against an insular one
The sorry saga of Fiona Scott Morton

Jul 19th 2023 |

PARIS, ROME, AMSTERDAM: Americans are everywhere you look in

Europe these days, sweltering as they queue for tourist attractions in the
midst of a heatwave. One place where they are apparently not welcome is
Brussels. A proposal by the European Commission to appoint an American
citizen, Fiona Scott Morton, as chief economist to its competition arm fell
through on July 19th. After a week of French-led protests at the idea of une
Américaine! advising the EU’s executive arm in its trust-busting efforts, the
Yale professor said she was no longer interested. What could have been a
signal of admirable European openness to the world has instead underlined
the growing influence of those who think the continent needs a more
insular, Europe-first approach.
Ms Scott Morton’s appointment on July 11th had been something of a coup
for the commission and its chief competition enforcer, Margrethe Vestager.
Anti-trust regulation is a niche field, and Ms Scott Morton one of its more
recognised wonks, keen to advance the interests of consumers while
preserving open markets and innovation. The hiring of foreign nationals by
governments anywhere is rare, and unthinkable in America. Ms Scott
Morton landing the job as the result of a competitive process made the EU
look quietly confident, a place happy to bring in the best and the brightest
regardless of their passport. In a world dominated by American tech firms,
why not tap one of their compatriots (and a one-time official in the Obama
administration) for insights? The EU is about to get sweeping new policing
powers over digital giants; America in recent years has refreshed its
thinking on regulating antitrust as it too has started taking on Big Tech.

In Paris, however, Ms Scott Morton’s qualities were apparently irrelevant.

Minister after minister clutched their pearls and demanded to know why
Europe needed to look abroad to fill jobs. Emmanuel Macron, France’s
president, waded in by questioning whether the commission would lose its
“autonomy of thought” if it hired one mid-level foreign adviser. A slew of
MEPs and five of Ms Vestager’s fellow commissioners also criticised the
appointment. The French campaign got notably little support in the EU’s 26
other capitals. But though many fellow academics came forward to defend
her, few notable politicians did: her past work as a paid adviser to tech
giants, although a common practice among her breed of economists
(including the current holder of the job she had wanted), made her a
difficult cause to crusade for.

The defenestration of a would-be Eurocrat does not merely make the EU

look provincial. It is indicative of France’s success in its campaign to
change the way the bloc thinks. The view from Paris, traditionally sceptical
of globalisation and unduly free markets, used to be balanced out by more
liberal voices. Bits of the EU apparatus in Brussels acted as a sort of liberal
deep state, backed by small countries in northern and central Europe (not to
mention Britain, once). The French view is now clearly dominant. Its core
argument is that the EU is being naive by sticking to liberal shibboleths,
since the rest of the world stopped playing by such rules a long time ago.
Why, say, should the EU remain open to any and all foreign trade at a time
when America and China have put up self-serving barriers at every turn?
European state-aid rules prohibit subsidising “national champions” even
though policymakers in Beijing and Washington gorge their firms with
handouts. In short: America and China shamelessly put themselves first, so
Europe should too. Liberal rules be damned.

The brief Scott Morton saga shows that the French still know how to get
their way in Brussels. Four years ago Ms Vestager prompted dismay in
Paris by (rightly) blocking a planned merger of the rail bits of Siemens and
Alstom, two large European companies. Though she was decried in Paris as
an “ayatollah” of free markets, the ruling stood, quietly backed by the open
faction. That turned out to be a high point for liberal Europeans. The
pandemic dented the appeal of globalisation and its world-spanning supply
chains. War in Ukraine showed the risk of relying on others for vital inputs
such as gas. The prospect of Trumpism rebooted has also set nerves
jangling. Mr Macron’s calls for “strategic autonomy”—Europe making
plans to cope if it cannot rely on others, on anything from trade to defence
—have become mainstream.
Gosplan’s revenge

The results are starting to add up. Europe’s economy is looking ever-more
statist, ie French. The idea of industrial policy was once taboo in Brussels.
Now the need for one is accepted (the effort is led by Thierry Breton, the
EU commissioner whose remit includes industry; not coincidentally he hails
from France). National governments these days shower favoured firms with
once-banned subsidies: Germany has spent an eye-watering €10bn
($11.2bn) to entice Intel to build a microchip plant there. Increasingly,
foreign firms keen to invest in some sectors now need official approval. At
EU level, central planning-style targets have been proposed for the local
production of everything from heat pumps to minerals.

Thus far, the French campaign has made steady advances against the liberal
bloc rather than routed it entirely. But the momentum may shift further in
France’s favour. In Brussels, rumours abound of two big impending
departures. The most notable is that of Ms Vestager, who has put herself
forward to run the European Investment Bank, the union’s financial arm.
Another pro-globalisation heavyweight, Frans Timmermans, the Dutch
commissioner in charge of the EU’s Green Deal, is said to be mulling a
return to politics in the Netherlands ahead of elections in November. A new
slew of commissioners will be appointed next year, giving Mr Macron an
opportunity to lobby for more influence for dirigistes.

The direction of travel is clear—and worrying. Europe will not soon

descend into a planned economy. But a continent lacking in economic
dynamism needs all the policymaking advice it can afford. That might even
mean importing it, sometimes.■

Read more from Charlemagne, our columnist on European politics:

Farewell, Mark Rutte, the Tiggerish Dutch prime minister (Jul 13th)
The burning of the banlieues (Jul 5th)
European politics has gone from complicated to impenetrable (Jun 29th)

Also: How the Charlemagne column got its name

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Britain
Muddled policies are harming British universities
Universities’ funding :: They are headed towards a crunch

British inflation may not be as sticky as thought

Inflation dips :: Some welcome news for the economy

A big battery investment is good news for British

carmaking
Charge sheet :: But Jaguar Land Rover’s expansion may not stop long-term decline

Sir Tony Blair mesmerises the Labour Party, again

Back to the future :: The former prime minister still puts on the biggest, slickest show in
Westminster

Whoever runs Britain will struggle to get tough on China

Britain and China :: The opposition Labour Party talks of disengaging, but would struggle to
do so

The rise of the self-pitying MP

Bagehot :: Cheer up, Westminster!

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Universities’ funding

Muddled policies are harming British universities

They are headed towards a crunch

Jul 18th 2023 |

SPARE A THOUGHT for students graduating from British universities this

summer, after three grim years. In 2020 the pandemic forced the
cancellation of their school-leaving exams, compelling them to make do
with simulated grades. Lockdowns and remote learning tarnished their first
years at university. Rocketing living costs and strikes by lecturers have been
the latest buzzkill: because of a marking boycott, thousands will graduate
late or without a proper classification. At Cambridge, one of the worst-
affected places, half of final-year undergraduates are in that boat.

Students are not alone in feeling morose. The Office for Students (OfS),
which regulates the sector, is monitoring finances at 31 universities. These
undoubtedly include the University of East Anglia, in Norwich, which is
seeking £30m ($39m) in annual savings by September. Tuition fees paid by
English undergraduates are capped by the government and have barely risen
in ten years. Inflation has eaten away at their value. The maximum charge
was set at £9,000 in 2012; by September the fee will be worth only about
£6,500 at 2012 prices. It is not set to be reviewed until 2025. Universities
are heading towards a crunch.

By most measures they still rank among the best in the world. Britain
produces far more than its share of highly cited research. Only America
(with five times the population) wedges more universities into the top slots
of global league tables. Drop-out rates for English students are among the
lowest anywhere. Britain is in the top three destinations for foreigners
seeking swanky certificates.

On taking office, the Conservatives saw universities as engines of growth.

In 2012 the coalition government gave them a huge boost by agreeing to
triple domestic tuition fees. At a stroke, funding per student rose by around
25%. The idea was in part about fairness, with more of the costs of doing a
degree covered by graduates whose salaries are boosted by it. It was also to
help universities expand faster—while keeping quality high—without being
reliant on government grants. Expand they have: the share of English 18-
year-olds going to university was about 38% last year, up from about 28%
in 2012. For disadvantaged youngsters, it was up to 24% from about 15%.

Today the government has a chillier view of the sector. One reason is
money. Student borrowers in England enter a national repayment system
that collects a share of earned income over a given threshold (graduates this
year will start paying when their earnings hit £27,295). Any debt
outstanding when borrowers approach retirement is forgiven. The designers
of this system have always assumed that sizeable sums will be written-off in
this way, writes Sam Freedman of the Institute for Government, a think-
tank. But recent projections suggest taxpayers will be on the hook for much
more than had been expected—perhaps half of all that students have
recently borrowed.

One reason is that, once the cap on fees was raised, almost all universities
sold degrees at the maximum price permissible (the hope had been that at
least some would try to compete on price). Government tinkering is also to
blame: in 2017 Theresa May, then prime minister, loosened repayment
terms to appeal to young voters. But what has really hurt is a banal but
crucial accounting change. In 2018 the Office for National Statistics forced
the government to start booking expected losses on student loans in the year
they are issued (it could previously boot them far into the future).

Money worries compound other concerns. Education has an intrinsic value,

but the government is struck by research suggesting around one-fifth of
graduates would be better off financially over their lifetimes if they had not
gone to university (that is particularly true among students of creative arts).
It worries that Britons are less keen than other Europeans to do
apprenticeships, or courses that require just one or two years of post-school
study. Those might be as useful as degrees, and be cheaper. Ministers are
also drawn into debates about “Mickey Mouse” degrees and “no-
platforming”, perhaps hoping to please voters irritated by woke lecturers
and students.

Muddled thinking on universities has led to muddled policies. One big

reform was the creation in 2018 of the OfS. The regulator aims to give
youngsters certainty that their degrees are worth paying for. It puts useful
pressure on those universities that have done a poor job of ensuring students
finish their studies and find decent jobs. On July 17th the government
confirmed that the regulator can limit recruitment to courses that fail to get
at least 60% of students across those thresholds. But ministers have, over
the years, also handed the OfS an assortment of tasks, such as monitoring
policies on sexual misconduct and policing free-speech on campus. This
distracts from original priorities, such as a goal of nurturing “challenger”
universities to compete with incumbents. The regulator’s rule-setting may,
instead, be making it trickier to launch new outfits.

The biggest worry among vice-chancellors is the long-standing erosion of

fees. These have been pushed up only once in a decade. Last year analysts
for the Russell Group of universities, which includes many of Britain’s best,
said institutions in England were on average losing £1,750 a year per home
undergraduate—this could become a £4,000 loss by the 2024-25 academic
year.

Lots of universities have tightened their belts. They also seek more foreign
students, who may be charged whatever the market will bear. In 2021-22
foreigners made up 30% of all new undergraduates and postgraduates in
England, up from less than 24% four years before. At the start of this
century fees from non-EU students contributed about 5% of all university
income. Now foreigners hand over more than 20% of their revenues. In
2020 foreign students spent £18bn on fees and living expenses.

One study using data from 2017-18 found that foreigners were on average
paying £5,100 a year more than their courses cost to run. For years
universities used these surpluses to subsidise research. Needs in that sphere
are only growing: for more than two years the government has been failing
to negotiate Britain’s re-entry into Horizon, a European research
collaboration programme that it left because of Brexit and that scientists say
is essential to rejoin. But profits from foreigners are also having to be used
to cover shortfalls in the cost of teaching English students. This year
Vivienne Stern of Universities UK, an industry group, told a House of
Lords committee that international recruitment “should be the cherry on the
cake” for the higher education system, but has become “more like the
flour”.
Educating foreign students brings benefits. Yet relying on them to keep
universities solvent is unwise. Until recently China sent more students than
any country: institutions that take a lot of money from Chinese youngsters
may become less likely to encourage teaching and research on topics that
might displease Chinese officials. In the past few years arrivals from China
have plateaued, as students from India and Nigeria make up the numbers
instead. The newcomers bring less geopolitical baggage—but also less
money. They are likelier than East Asians to fund studies with borrowed
cash and so seek out lower-cost institutions. An average student from India
pays about half as much in fees as a Chinese one, reckons the British
Council, a government body that promotes culture abroad. They are also
likelier to want to bring along a spouse or children.

Even that source of income could be in jeopardy. The government worries

that too many foreign students hurts its efforts to look tough on
immigration. Universities fear it might reverse a policy, from 2019, that lets
foreigners work in Britain for two years after their courses end (this is
especially attractive to Indian students). Britain, meanwhile, may have to
compete harder against rival destinations for foreign students. Australia said
this year it would let some foreigners hang around for up to five years after
graduation.
A muddled income trap

All this is going to get harder to handle if British parents start believing that
foreigners are squeezing their children out of places in their first-choice
universities. Rejection rates at the most prestigious ones have been rising.
That is more to do with the national increase in university-going than with
foreigners. But the crunch will only continue: because of a demographic
boom, the number of 18-year-olds in Britain will be 25% higher in 2030
than it was in 2020. Bigger-spending international students may become the
focus of more gnarly debates.

What comes next? The government has tightened loan-repayment terms for
new borrowers. The new rules will somewhat cut government spending on
higher education, increasing the share of debt that future students will be
asked to repay. In effect this reverses Mrs May’s attempt to please the
crowd six years ago. But there is no stomach to let fees float up. In May
Robert Halfon, the universities minister, said putting up fees was “the last
thing I can do”, given the cost-of-living crisis. Fees are likely to remain
frozen for at least another couple of years. Labour, which may form the next
government, has only just junked its long-held opposition to any tuition
fees, so sudden increases are unlikely.

As money grows shorter, universities may make some efficiencies. But they
will not necessarily shed their least useful activities. Tighter budgets could
mean they promote courses they find cheapest to deliver (generally not the
rigorous technical degrees the government believes will make Britain more
productive). That might end up increasing bills for government, if more
graduates reach their twilight years without paying off their debts.

The decline in real fees feels like “a trap we don’t know how to get out of”,
says Ms Stern of Universities UK. Universities may forgo investments in
equipment and support services that gradually lower the quality of the
degrees on offer. The big risk, she says, is not that a swathe of universities
will go bust. “My worry is that we’re going back to the 1990s, where you
get a system that is slowly run into the sand.”■

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Inflation dips

British inflation may not be as sticky as thought

Some welcome news for the economy

Jul 19th 2023 |

BRITAIN’S SPUTTERING economy was overdue a bit of good news. On

July 19th it arrived, at last: inflation figures covering the year to June
showed that the rate of price growth is not proving as stubborn as it had
previously appeared. A particularly sharp drop in the headline rate of
inflation was accompanied by welcome signs that underlying price
pressures are moderating. Together they grant some relief to workers,
mortgage-holders, the Bank of England and the government.

The headline rate of inflation fell from 8.7% in May to 7.9% in June, a
bigger drop than the fall to 8.2% that economists had been expecting. That
was partly thanks to cheaper petrol: changes in the cost of transport fuel cut
the headline rate by 0.26 percentage points, according to the Office for
National Statistics. The agency, meanwhile, saw no hefty movements the
other way. Most encouraging for the bank’s attempts to tame inflation was a
drop in the core rate, which excludes volatile food and energy prices, from
7.1% to 6.9%. Forecasters had expected the core reading to remain flat.
Services inflation similarly slipped from 7.4% to 7.2%, the first slowing
since January.
Even after the drop—the second-largest month-to-month fall in inflation
this century—Britain remains an outlier. Its 7.9% reading is the highest in
the G7 group of large rich countries. Among members of the OECD, a club
of mostly rich countries, only a handful have a higher rate. Yet at least the
situation is no longer deteriorating: the core measure had risen to 7.1% in
May from 5.8% in January. “After today it merely looks bad rather than a
basket case,” said James Smith of the Resolution Foundation, a think-tank.

Neither was this the first indication that Britain’s inflationary fever may be
breaking. Figures published the previous week suggested the jobs market is
at last starting to cool. The ratio of vacancies to unemployment, a measure
of labour-market tightness, declined sharply thanks to a simultaneous
reduction in labour demand (as measured by vacancies) and an increase in
the number of people looking for jobs.

Traders have consequently scaled back their bets on the central bank putting
up interest rates. Before the publication of June’s inflation data markets had
given its rate-setting committee a roughly even chance of raising its main
policy rate by half a percentage point at its next meeting on August 3rd.
They now expect a quarter-point increase, from 5% to 5.25%. Overall,
markets now expect rates to peak at 5.8% in early 2024, rather than the
6.5% they had been predicting at the start of July.

This offers a measure of relief to mortgage-holders. The cost of five-year

interest-rate swaps, which are used to price fixed-rate mortgages, has fallen
by around half a percentage point from a peak early this month, when it
reached levels that were last seen during the disastrous premiership of Liz
Truss. The share prices of housebuilders rallied in the hours following the
inflation data. Persimmon, one of Britain’s largest property developers,
enjoyed a 8% bump.

The inflation news was a rare source of comfort for the embattled prime
minister, Rishi Sunak, on the eve of three by-elections on July 20th. At the
start of 2023, when inflation was above 10%, Mr Sunak pledged to halve it
by the end of the year. That seemed to be a modest goal to aim for: most
independent forecasters had expected inflation to fall as a collapse in prices
for wholesale energy and for food were fed through. Unusually persistent
core inflation, which seemed immune to previous interest-rate increases,
risked spoiling that. If the latest trend in the data continues, then lower
interest-rate costs will help public finances, too.

According to experimental real-time indicators, pay packets were already

growing faster than prices in the 12 months ending in June. That is likely to
accelerate over the coming months; inflation will drop even more when the
figures are released for July. The energy-price cap, which regulates how
much households pay for gas and electricity, fell by 17% at the start of the
month, providing some disinflationary pressure. Good news is still hard to
find for Britain’s economy—but the outlook is looking a bit brighter.■

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Charge sheet

A big battery investment is good news for British

carmaking
But Jaguar Land Rover’s expansion may not stop long-term decline

Jul 20th 2023 |

A “SHOT IN THE ARM” for the car industry was how the Society of
Motor Manufacturers and Traders, an industry body, described the news on
July 19th that Tata, an Indian conglomerate that owns Jaguar Land Rover
(JLR), would locate a new battery “gigafactory” in Britain. The choice of
Somerset over Spain, also considered by Tata, lifted the mood among
carmakers in a country where the shots have largely been aimed at the foot
of late.

Covid and Brexit made 2022 the worst year for car production since 1956.
In the year to May output from British factories—810,000 vehicles—was
roughly half that achieved five years ago. Any hope of a revival relies on
British-based firms remaining in the driving seat as the industry switches
from internal combustion to electric power. That means attracting more
battery-makers.

Tata chose the West Country for several reasons. One is that Tata is keen to
break the battery stranglehold of firms from other parts of Asia, especially
Chinese ones. That is pressing as rules-of-origin requirements, negotiated as
part of post-Brexit trade agreements, demand that from next year 45% of
the value of an electric vehicle (EV) must originate in Britain or the EU to
qualify for tariff-free trade.

Another is that while carmakers have long relied on complex global supply
chains, they prefer to source as close to production sites as possible. This
makes for easier management and cuts the risk of disruptions such as the
covid-related shutdowns, for example in China. For batteries this is
especially important, as they make up a big chunk of the value of new cars
and are bulky and expensive to shift around.

Perhaps the greatest draw for Tata is that the government has belatedly
concluded it must pay—and heavily—if mass-manufacturing of cars is to
have a future in Britain. No details have been confirmed but it is rumoured
that Tata asked for £500m ($644m) towards an investment of over £4bn for
a factory that should provide 4,000 jobs when it opens in 2026. Grant
Shapps, the energy secretary, would not deny that the eventual cost,
including indirect subsidies such as infrastructure upgrades, might come to
£1bn. Tata may have linked this deal to cash it wants to help its British steel
business go green, which could cost taxpayers another £300m.

The government was desperate for a deal. It had stood on the sidelines as
vast subsidies from America’s Inflation Reduction Act drew battery
investment across the Atlantic, and as European handouts spurred the
building or planning of up to 40 battery plants across the continent. The
bankruptcy in January of BritishVolt, another battery-maker, was a blow
that left Nissan’s plant in Sunderland, due to open in 2025, as the only other
gigafactory in Britain. But as David Bailey of the University of
Birmingham points out, this deal merely gets Britain “off the starting line”.
A big car industry will require many more such gigafactories.
Beyond JLR and Nissan, other carmakers have more concerns. Toyota,
which has a plant in Derbyshire that mostly makes hybrids (which combine
petrol and battery power), wants clarity over Britain’s plans to ban sales of
new fossil-fuel cars by 2030 and to go to zero-emission by 2035. Stellantis,
a European car giant (whose biggest shareholder, Exor, also part-owns The
Economist’s parent company), has threatened to pull out of Britain. It had
planned to make electric vans under its Vauxhall brand, but wants those
rules-of-origin terms renegotiated with the EU. Mini, owned by BMW, in
Germany, said last year that it would shift its EV business to China. It may
be persuaded to build its next generation of EVs in Britain but will now
expect Tata-scale largesse. Pricey shots in the arm will have to keep coming
—or Britain won’t cling on to its dwindling car industry.■

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Back to the future

Sir Tony Blair mesmerises the Labour Party,

again
The former prime minister still puts on the biggest, slickest show in
Westminster

Jul 20th 2023 |

SIR TONY BLAIR is now 70 years old. It is 29 years since he became

Labour leader, and 16 since he left Downing Street. And yet still he puts on
the slickest, most dazzling show in British politics. The Future of Britain
conference, hosted by his Institute for Global Change in London on July
18th, had the aesthetics of an Apple launch and the speaker list of Davos.
The audience mixed ageing New Labour ministers with the cream of
parliamentary candidates for 2024 (the very bright and very loyal) for
whom Sir Tony was their childhood. The event offered a relentlessly
optimistic vision of a modernising Britain, fuelled by hope and technology.
And, after a long froideur, much of his party is mesmerised again. Sir Tony
was repudiated mostly because of the invasion of Iraq and because it grew
unwilling to wear the compromises on high ideals that electoral success
demand. His successors—Gordon Brown, Ed Miliband and Jeremy Corbyn
—defined their own projects against his, to electoral defeat. So did Sir Keir
Starmer, who campaigned to be leader in 2020 on an overtly anti-Blairite
platform of higher taxes on the rich, state ownership and “no more illegal
wars.”

These days Sir Keir dresses in Sir Tony’s clothes. He has adopted the
touchstones of New Labour: public-sector efficiency reforms; an
authoritarian tone on crime and defence; a “prawn cocktail offensive” on
business. He also borrows Sir Tony’s maxims (“the political wing of the
British people”; “tough on crime, tough on the causes of crime”). And his
verbless sentences (“Respect—my guide. Unlocking aspiration—my
cause”).

The two men speak often, but this was their first joint appearance in public.
It amounted to a mutual public blessing. Sir Keir defined his priorities as
“growth, growth, growth”, in a homage to Sir Tony’s “education, education,
education.” Sir Tony, meanwhile, told Sir Keir he had taken the party from
the brink of extinction to the brink of government. “You’ve done an
amazing job,” he said.

Sir Tony has “been on a redemptive arc,” says John McTernan, his former
political secretary. Britain’s current woes have given the party a new
appreciation for his achievements of keeping the economy and hospitals
ticking over. The war in Ukraine has not made the case for Iraq any
stronger, but it has undone the widespread hostility towards America,
interventionism and the arms industry that followed. He remains unmatched
in his skill for succinct diagnosis and prescription. (It’s a risk for the
ambling, dull Sir Keir to appear alongside him, says more than one
delegate). Above all, say Sir Keir’s circle, they like him because Sir Tony is
a winner, who believes in power over protest.

Westminster’s policy shops are often poor and parochial places of instant
coffee in basement rooms. Sir Tony’s outfit has money, connections and
strikingly good grub. President Emmanuel Macron of France sent the
conference a video address; Henry Kissinger, the American diplomat,
recorded an interview on China; a host of bosses of artificial intelligence
firms spoke. Overseas, his institute acts as a consultancy to governments in
Africa and Asia, and draws income from international agencies. It has
expanded rapidly: it has more than 800 staff, and declared revenues in 2021
of $81m. In contrast, Policy Exchange, one of the biggest Tory think-tanks,
declared last year it had 24 staff and an income of just under £4m.

The British arm of Sir Tony’s outfit is ostensibly independent and

bipartisan, but it is evidently in-step with Sir Keir’s agenda. Many of its
staff expect backroom jobs in a future Labour government. Its answers to
Britain’s dire productivity are a mixture of the prosaic (reform planning
rules and hug close to the EU) and the techno-optimistic (bring on mass
digitisation of government services). Sir Tony gets into the weeds of
reports, and sends long memos on “Where Britain’s At,” say staff. The goal
is to stretch the horizons of a cautious Labour Party: to ask why the NHS
shouldn’t have the analytical capacity of Google and the delivery of
Amazon. Round the hall are graphics showing a futuristic Britain of glass-
roofed trains and solar-powered towns.

Sir Keir nods along. But both men acknowledge that a Starmer government
would inherit none of the benign conditions that underpinned big-spending
New Labour. (In December 1997, Jonathan Powell, Sir Tony’s chief of
staff, sent him a memo warning of laughably trivial concerns of the time: a
row over fox hunting; the state of the Millennium dome; a concern that
economic growth could prove too strong.) The sort of constitutional reforms
New Labour embraced—devolution, human-rights legislation—look
scarcer now. The geopolitical backdrop is far more dangerous. And the
public optimism that Sir Tony rode has been replaced by cold cynicism
towards an entire political class. “It’s grim right?,” says Sir Tony. He
smiles. ■

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Britain and China

Whoever runs Britain will struggle to get tough on

China
The opposition Labour Party talks of disengaging, but would struggle to do
so

Jul 20th 2023 |

BRITAIN IS “ROBUST” and “ahead of many of our partners” in

responding to a rising China, Rishi Sunak, the prime minister, said on July
13th. The House of Commons Intelligence and Security Committee (ISC)
disagreed. Its report on China, published the same day, slammed the
government for putting economic concerns ahead of national-security ones
and human rights. In doing so, it said, the government had jeopardised even
the business benefits. It laid out a “nightmare scenario” in which Chinese
entities steal blueprints, win influence and exert “political and economic
influence at every step”.
One problem is that Conservative policy on China has zigzagged for a
decade, veering from David Cameron’s relationship-chilling meeting with
the Dalai Lama in 2012 to a “golden era” when President Xi Jinping clinked
glasses with the Queen at Buckingham Palace in 2015. The government
largely stood by (though it later let in many refugees) as freedoms were
muzzled in Hong Kong. The pandemic sharpened awareness of Britain’s
reliance on China, hardening attitudes.

A “rainforest of initiatives” has followed more recently, says Kevan Jones,

an MP and member of the ISC. A new National Security Law came into
effect on July 11th, updating counter-espionage laws to tackle the theft of
trade secrets. This was partly aimed at subversion by Chinese state entities.
Scrutiny of investments has increased. A regime introduced in 2021 screens
for risks when firms conduct acquisitions or mergers. Over half the
interventions in the first full year involved Chinese ones. The role of
Chinese firms in infrastructure is also being re-examined. Huawei
telecommunications equipment from China will be phased out by 2027.
Chinese investment in Britain’s nuclear programme has been limited but not
halted. The government is to set up a national security unit for procurement.

China matters—it ranks fourth as a trading partner, accounting for nearly

7% of trade—but Britain lacks a co-ordinated policy on how to conduct
relations, notes Mr Jones. A British prime minister last visited China in
2018. That’s partly because the Tories are so divided on how to handle the
relationship, reckons Yu Jie of Chatham House, a think-tank. In contrast
Germany, which is even more reliant on China, published its first China
strategy this month, pledging to reduce dependence on it.

Might policy become clearer under Labour, if it were to win the next
election? Labour is more openly critical of China. In 2021 the party
endorsed a House of Commons motion accusing China of genocide. That
would probably remain the party’s position in government. Sir Keir
Starmer, its leader, who accuses the Conservatives of “cosying up” to the
Chinese Communist Party (CCP), says he wants a “full audit” of relations
with the country.

That chimes with Labour’s wish to demonstrate strong Atlanticist

credentials. Rachel Reeves, the shadow chancellor, is inspired by President
Joe Biden’s industrial policy, which aims to reduce American reliance on
Chinese supply chains. Ms Reeves says Labour would develop “national
economic security”. Sir Keir also wants to show a clean break from the
leadership of Jeremy Corbyn. It emerged last year that Barry Gardiner, Mr
Corbyn’s shadow trade secretary, now nicknamed “Beijing Barry”, had
taken donations from Christine Lee, a solicitor whom Britain’s security
services declared was “involved in political interference activities” on
behalf of China’s Communist Party.

Yet in practice Labour will struggle to be much tougher. Its China strategy
—”compete, challenge and...co-operate”—is as wishy washy as “protect,
align and engage”, the Conservative one. Sir Keir frequently says that
economic growth is “the absolute foundational stone for everything”, and
disengaging from China would be hard to reconcile with that.

Labour would face the same barriers to countering foreign threats. An effort
launched in 2020, for example, to work out how deeply Britain’s supply
chains are entwined into China’s economy, has shown that it would be
extremely hard to disentangle them.

Sir Richard Moore, head of MI6, Britain’s spy agency, said on July 19th
that his service now devotes more resources to China than to any other
country. Yet the security agencies are preoccupied by covert challenges
whereas much of China’s state activity in Britain is overt. The government
has let Chinese investments flow in and thus sensitive data to go freely to
China, says the security report. This has happened in various ways: through
academic funding or collaboration on research; allowing access to
intellectual property via manufacturing agreements; the sale of Huawei
equipment for use in 5G networks; and by welcoming Chinese money in
new nuclear facilities. Individual Whitehall departments are supposed to
scrutinise all of this, but they lack expertise and resources. Often they are
not even looking, the security committee says.

No single agency considers the overall impact of Chinese state actions, and
it is unlikely a Labour government would convene one. Even in America,
which has stricter restrictions on engagement with China, government
agencies tussle over which one drives China strategy. Britain’s advantage
may be that it lacks a large Chinese diaspora, which means that its elections
are less susceptible to Communist Party meddling, reckons Charles Parton
of the Council of Geostrategy, a think-tank. That’s reassuring, but only
marginally. ■

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Bagehot

The rise of the self-pitying MP

Cheer up, Westminster!

Jul 20th 2023 |

THE HOUSE of Commons is designed to create conflict not consensus.

Parliamentarians sit facing each other in the chamber and heckle. Coalitions
are rare. Governments govern and oppositions oppose. Yet practically all
MPs agree on one thing, that being an MP is terrible. Speak to a
parliamentarian for longer than a few minutes and the complaints will come
fast: the pay is woeful, patronage trumps competence, constituency work is
draining, online abuse is rife and MPs are leaving in droves. The most
powerful people in the country are now the most self-pitying.

What is more, pundits agree. “Why We Get The Wrong Politicians” by

Isabel Hardman, a journalist, explains the everyday iniquities of life in
Parliament and has become a set text in SW1. Rory Stewart, a former MP
and now a podcaster, said being a legislator was “bad for my brain, my
body, my soul”. The Sunday Times added to the pile: “All out! Why nobody
wants to be an MP any more”. It is a miserable picture. Thankfully, it is an
inaccurate one. Cheer up, Westminster: things are better than they look.

For starters, talk of an exodus is overdone. Almost 70 MPs have said they
will leave at or before the next election, with Ben Wallace, the outgoing
defence secretary the latest. But this is no more than usual. Between 1979
and 2010, an average of about 90 MPs stood down at each election. At the
last election 74 jumped. Many of those departing prematurely are doing so
because they are likely to lose their seats anyway.

Complaints among MPs that incompetent bootlickers rise faster than their
more talented and more principled peers are overdone. Parliament is,
mostly, meritocratic. Those who are skilled rise quickly. Rishi Sunak
became chancellor five years after entering Parliament; Sir Keir Starmer
became party leader in the same stretch of time. Just because a few duds
also reach the top does not mean that Parliament is stuffed with unused
talent. This is tough to accept for anyone still on the backbenches, who
gripe to journalists about it. Luckily, they have the time to do it.

Working in a swanky palace by the Thames does peculiar things to one’s

perspective. Pay, probably the biggest gripe for malcontent members, is
only low when compared with industries where salaries have exploded,
such as finance and law. At £87,000 ($113,000), it is around double the
London average. Increasing salaries in Westminster may widen the talent
pool, but it would not solve the fundamental problem: that the typical MP
probably earns less than the best mate who went into the private sector.

Telling an MP about to spend another weekend litter-picking in their

constituency that their hours could be worse would win few friends. It is,
however, true. Parliament no longer regularly sits into the early morning.
Recess, which kicks off for six weeks on July 20th, is not technically
holiday even if many parliamentary assistants hear nothing from their
bosses bar the odd call with a foreign dial tone. There are few professions
which allow people the time to write books, practise law and present
television shows on the side. Managing that as a head teacher would be
tricky.
Other problems are self-inflicted. In recent years, MPs have willingly taken
on the role of social workers rather than mere lawmakers. Now a
constituency MP is expected to be able to help with everything from asylum
applications to damp-ridden council flats. It is big-hearted but boneheaded.
Too much focus on individual problems leads to MPs neglecting systemic
ones. Politics is the quickest way to change a country; focus on that and the
constituency mailbag will deal with itself.

Some things have become worse for MPs through no fault of their own.
Abuse of politicians online is rife. Green-ink letters at least took effort; now
nutters can send an insult at 1.13am on Twitter, confident it will be read by
an MP “doomscrolling” in bed. At the same time, mild-mannered critique is
sometimes painted as abuse. During a row over free school meals, Gary
Sambrook, a Conservative MP in Birmingham, complained about graffiti
that read “scum”, which is unkind, and “Gary Sambrook eats big dinners”,
which is merely surreal.

Few people are willing to offer MPs a reality check. Pitying the most
powerful people in the country is common among journalists in
Westminster. During reshuffles, hacks sympathise with the ministers and
their aides who have lost their jobs. The fact that ministers can lose their
livelihood quickly is a feature, not a bug. Moaning about it is akin to
complaining about democracy, and a call for a world in which human
resources trumps politics.
Nobody goes to Westminster any more, it’s too crowded

For a supposedly terrible job, plenty of people still want to do it. Hordes of
ambitious 30-something Labour activists are gouging each other for seats
ahead of the next election. The Conservatives may be set for a hiding, yet
each available seat has triggered a bunfight among wannabe MPs.
Opposition is an opportunity. The Conservatives who ran the country from
2010 were those who signed up for duty in the 1997 and 2001 elections,
when the party received drubbings. Yet a certain type of prospective
politician expects to flounce into government, without muddying their
hands campaigning or enduring a stint in opposition.
Complaining about life as an MP is the apogee of Britain’s shift from
democracy to whingeocracy. Ministers sit atop the most unconstrained
executive in the democratic world and complain about the “blob”, a cabal of
civil servants and judges who supposedly thwart their will. Literal
lawmakers claim that they are powerless to change Britain.

All jobs have some drawbacks. But few come with the opportunity to wield
power. Shaping a G7 country beats collecting a fat salary in the City. Britain
has a centralised and responsive state. A good decision in Westminster can
change the lives of millions for the better. Running a country is a privilege,
not just a burden. There is no finer job.■

Read more from Bagehot, our columnist on British politics:

The strange success of the Tories’ schools policy (Jul 7th)
Britons turn into Borat when it comes to health, housing and avocados (Jul
6th)
Sir Keir Starmer’s magic lamp (Jun 19th)

Also: How the Bagehot column got its name

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International
What if China and India became friends?
Asia’s biggest beasts :: Setting aside their border dispute could transform their relationship—
and geopolitics

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Asia’s biggest beasts

What if China and India became friends?

Setting aside their border dispute could transform their relationship—and
geopolitics

Jul 19th 2023 | Delhi

CHINA’S RULERS like to look down on India. They scorn its turbulent
politics, its creaky infrastructure and its poverty. India has looked across
with a combination of fear and envy, hoping in vain to be treated as an
equal. Now the tectonics of the trans-Himalayan relationship are shifting.
Recent border bloodshed suggests mounting hostility. But blossoming
economic ties tell a different story that could trouble America and its allies.

When India’s most revered poet toured China in April 1924, Chinese
intellectuals were unimpressed. Rabindranath Tagore had been feted
globally as the first non-European Nobel literature laureate. A fierce critic
of British rule in India, he hoped to rebuild an ancient cultural bond
between Asia’s oldest civilisations.
For leading Chinese thinkers, however, his call for a revival of Eastern
values and spirituality rang hollow. The Chinese, they argued, could only
resist the West by learning from it—and rejecting their own traditional
culture. China’s youth should not become “Indianised”, wrote Chen Duxiu,
a co-founder of the Chinese Communist Party. “Unless, that is, they want
their coffins to lie one day in a land under the heel of a colonial power.”

Almost a century later, a sense of disdain still infuses perceptions of India

among Chinese officials and scholars. Just look at the data, they say. At its
independence in 1947, India’s GDP per head was higher than China’s (on a
purchasing-power basis). But by the early 1990s, China had moved ahead
on that and many other measures. By 2022, their populations were roughly
equal but China’s economy was more than three times bigger.

China’s generals tend to dismiss India, too. China’s crushing victory in a

border war in 1962 is recalled with pride. And they contrast China’s current
arsenal of home-grown modern weaponry with India’s continuing reliance
on Russian imports. “There’s no way that India can catch up with China in
the next 20-30 years,” says Senior Colonel Zhao Xiaozhuo of China’s
Academy of Military Science.

Yet the fundamentals of the China-India relationship—military and

economic—are now changing in ways that are forcing the world’s biggest
democracy and its largest autocracy to reassess how they deal with each
other, and with the rest of the world. The hope among American and allied
officials is that India’s continuing frontier friction with China is pushing it
irreversibly into a democratic coalition determined to constrain Chinese
power. The question is: what if they find a way to shelve the border
dispute?
Consider the military equation first. India has been drawing closer to
America since they signed a civil nuclear co-operation pact in 2008. But
their alignment has accelerated since a series of clashes on the Indian
frontier with China, including one in 2020 that killed 20 Indian troops and
at least four Chinese ones. That was the bloodiest skirmish there since 1967
and brought to an end a three-decade period of relative stability on the
border.

India’s armed forces have since undergone a historic shift of focus away
from Pakistan. They have transferred about 70,000 troops as well as fighter
jets and surface-to-air missiles to the frontier with China. They have also
expanded joint exercises with America and its allies, especially Australia
and Japan. America has provided some intelligence and high-altitude
training for Indian border forces too.

The war in Ukraine has provided another spur. Indian commanders fret
about their dependence on Russian arms. India wants to buy advanced
American weaponry and to make more in India. In Washington in June the
prime minister, Narendra Modi, made progress, with deals to buy armed
aerial drones and to jointly manufacture fighter-jet engines in India.
China’s exact motivations on the border are murky. It may have been
responding to recent Indian road-building, which enabled more extensive
patrolling, or to frustration at a lack of progress in negotiations on a
settlement. Or it may have wanted to penalise India for its earlier
rapprochement with America, to expose the relative weakness of Indian
forces and to show that they cannot rely on American help.

China sees itself as in another league from India, competing directly with
America, says Deependra Singh Hooda, a former chief of the Indian Army’s
Northern Command, which oversees part of the Chinese border. China’s
message appears to be: “You’re no match for the PLA (People’s Liberation
Army)…You’re just a sideshow.”
A two-sided triangle

For whatever reason, Xi Jinping, China’s leader, seems to think the fallout
manageable. India’s redeployments mean it can impose greater costs on
China if it tries another border incursion. But China will for years keep
enough military superiority to deter India from trying to recoup any
perceived losses (see chart 1). And though India can help America in some
areas, notably the Indian Ocean, it balks at a formal alliance and is unlikely
to join a conflict over Taiwan or the South China Sea.
Nonetheless, Mr Xi has strong incentives to stabilise the border, as America
steps up efforts to circumscribe Chinese power. So does Mr Modi. He
seems keen to play down the frontier issue, knowing he has few military
options. He is wary of drawing domestic attention to any perceived loss of
territory. And compromise seems possible. After 18 rounds of talks between
military commanders, troops have pulled back from five flashpoints,
establishing “buffer zones” where neither side patrols. Two major
flashpoints remain.
China is pushing for another round of talks and urging India not to let the
border issue define the bilateral relationship. India’s foreign minister,
Subrahmanyam Jaishankar, met his Chinese counterpart in Jakarta on July
14th and discussed the frontier. In recent weeks he has stressed that without
a peaceful and stable border, normal business ties cannot be resumed.

A survey of the economic landscape, however, puts such Indian warnings in

perspective. Commerce between China and India was negligible for most of
their modern history. But by 2020 trade in goods had surged to $88bn, with
China enjoying a surplus of $46bn and ranking as India’s biggest trade
partner (see chart 2). China had also become a big source of investment,
notably in technology, property and infrastructure. Chinese brands are
popular, too. Oppo and Xiaomi are among the bestselling mobile phones.

The border skirmish in 2020 put that all at risk. India banned some 320
Chinese apps, launched tax raids on several Chinese companies and
introduced new rules requiring the Indian government’s approval for
Chinese investments. Indian officials say they since have rejected 157
relevant applications. And yet bilateral goods trade grew by 43% in 2021
and 8.6% last year. Chinese investment is finding ways in too, sometimes
via Singapore. Shein, a Chinese online fashion company whose app was
among those banned by India in 2020, is relaunching there soon in
partnership with Reliance Industries, India’s biggest private company.

Indian officials want to rely less on Chinese imports and to woo more
investment from elsewhere, notably big multinational manufacturers
looking for an alternative to China. “We need to stop looking for a China
fix,” Mr Jaishankar, the Indian foreign minister, said in May. “Indian
growth cannot be built on Chinese efficiency.”

Privately, though, many of India’s business leaders predict that it will

depend on Chinese imports for years to come if the Indian government is to
achieve its goals in developing infrastructure and manufacturing. India’s
pharmaceutical industry, for instance, relies on China for roughly 70% of its
active ingredients.

That does, in theory, make India vulnerable to the kind of economic

coercion that China has inflicted on others. But China’s leverage may be
waning as it faces an economic slowdown, a shrinking population and an
increasingly hostile West. Chinese companies now see India, whose
population overtook China’s this year, as an important source of growth,
with Goldman Sachs predicting that Indian GDP will be second only to
China’s by 2075.

There are economic synergies in other areas too. India is the biggest
borrower from the Beijing-based Asian Infrastructure Investment Bank,
which China set up in 2016 as an alternative to Western-led lending
institutions. India is also a member of the Shanghai-based New
Development Bank, formed by Brazil, Russia, India, China and South
Africa (the BRICS) in 2015.

Hearty economic exchanges are no guarantee against further border

bloodshed—or even war. Both countries are led by men who feed off
nationalism and historical grievances. Other tensions include China’s
growing influence in South Asia, its damming upstream of rivers vital to
India, and the sanctuary that India affords the Dalai Lama, Tibet’s spiritual
leader.

Still, the burgeoning business ties will weigh ever heavier in both sides’
decision-making. And stabilising the border issue, as was achieved for three
decades after Rajiv Gandhi visited China as Indian prime minister in 1988,
would leave ample room for co-operation. Both countries want a bigger role
in global governance, reject Western criticism on human rights and climate
change and share concerns about Islamic extremism. Both refuse to
condemn Russia’s invasion of Ukraine.

Also noteworthy is that before the recent frontier flare-up, Mr Modi seemed
determined to build a close relationship with Mr Xi, taking the unusual step
of hosting him in his home state of Gujarat in 2014. India and China shared
similar aspirations, challenges and opportunities, Mr Modi said in Beijing
the following year. “In the global uncertainties of our times, we can
reinforce each other’s progress.”

Such a prospect may not please Americans and others who see India as a
counterweight to China. Nor is it what Tagore had in mind in 1924, when he
urged China to reject Western materialism and “free the human soul from
the dungeon of the machine”. But it may be the more realistic path towards
a sustainable, mutually beneficial relationship between Asia’s titans. ■

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Technology Quarterly
In vitro fertilisation is struggling to keep up with demand
The most personal technology :: Developing the technology to change that is proving a
difficult task

IVF remains largely a numbers game

If at first you don’t succeed… :: And plenty of clinics are taking advantage of that

The fertility sector is booming

Selling hope :: But many women must go abroad to afford treatment: the third article in our
special series

Not all types of families can access IVF

Our bodies, ourselves :: Some governments are very clear who they want to help

Some women need eggs from others, or from their younger

selves
Eggs from elsewhere :: Donation and preservation are becoming increasingly widespread

New ways of making babies are on the horizon

Eggs from scratch :: But it is likely to be a long time before ordinary people can benefit

Lack of basic research has hampered assisted reproduction

Conception, reconceived :: Finally that may be changing

Video: Why we know so little about human reproduction

Between the lines :: Inside our correspondents’ investigation into the future of fertility

Sources and acknowledgments

In vitro fertilisation ::

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The most personal technology

In vitro fertilisation is struggling to keep up with

demand
Developing the technology to change that is proving a difficult task

Jul 17th 2023 |

WITH THE possible exception of Adam and Eve, all human beings born
before 1978 were conceived inside a woman’s body. Today the world
contains at least 12m people who started off in laboratory glassware. On
average, four more are born every three minutes. That is a worldwide rate
of roughly one newborn in 175.

There are various ways in which technology can assist reproduction, for
example with sperm donation, hormone treatments or turkey-basters. But no
other approach has had as momentous an effect as in vitro fertilisation
(IVF).
Every year over a million women go through the rigours of a hormonally
heightened menstrual cycle that sees their ovaries produce several mature
eggs, rather than the usual monthly singleton. Those eggs are collected with
needles and either fertilised with sperm from a partner or donor, or frozen
for later use. Any fertilised eggs will hopefully divide to form embryos; one
or more are then transferred into the woman’s womb or, again, frozen. The
experience no longer carries the level of physical risk that once it did. It
remains painful, draining and intrusive.
As IVF has become safer and more common, it has also become more
effective, largely thanks to advances in the handling of embryos. In Britain,
25-30% of the embryos transferred to the wombs of women in their mid-
30s now lead to live births. That is about four times better than in the early
1990s (see chart). Trying again does not simply multiply the odds. The
more IVF cycles a woman does, the lower her chances of success with each
new attempt: couples whose biology and personal circumstances mean they
are more likely to conceive thanks to IVF will do so faster, leaving those
with lower odds to try again. For those who do succeed, an IVF birth will
be nothing short of miraculous—leading them finally to have the child they
could only dream of.

As the technology improved and the practice gained acceptance, the eggs
being fertilised started to come from a wider range of sources. Louise
Brown, who in 1978 became the first baby to be born from IVF, was
conceived the year before with the sperm and egg of a married couple. She
was presented both as a miracle of scientific progress but also, to stave off
worries of a “brave new world”, as a baby like any other from a marriage
like any other.

In 1985, though, two women gave birth to IVF babies conceived using their
husbands’ sperm and eggs donated by other women. That opened the way
for women who were unable to conceive with their own eggs to
nevertheless give birth. It also opened up the possibility of a woman
carrying a child and giving birth on behalf of another couple; the first
successful “gestational surrogacy” took place a year later.

Then came the first successful pregnancy to begin with a frozen egg. The
development of vitrification, or flash-freezing, made possible “cryobanks”
which store the potential for future babies—straws containing eggs, sperm
and embryos—in liquid nitrogen.

Infertile heterosexual couples are not the only beneficiaries. Same-sex

couples and single women can make use of IVF (and, in the case of men,
surrogates) to have children that are every bit as longed for. The technology
is also a boon for people at high risk of passing on a genetic disease. Since
the 1990s it has been possible to remove cells from an embryo developing
in a dish and inspect their DNA for a dangerous gene that one or both of the
parents is known to carry. “It is, in some ways, the ultimate manifestation of
preventative medicine,” says Zev Williams, of Columbia University
Fertility Centre: “Helping someone be born without the disease.”

After early concerns about its unnaturalness, often but not always expressed
in the name of religion, IVF has become broadly accepted. In some
countries it has come to be seen as a tool against demographic change; in
China over 1m IVF cycles happen every year, the highest number for any
country. The process is seen as benign by most and as providential by its
beneficiaries. There is, though, a side of the story less often discussed in
public and instead endured in private. Most Petri-dish conceptions end not
in magic but in heartache. Most of the embryos transferred back into
patients do not implant in the womb, or, if they do, “fail” in some other
way. These are not talked about. Indeed, the language for doing so hardly
exists.

There is a word for the loss of a confirmed pregnancy—miscarriage—but

no equivalent for the loss of an embryo that never dug into the lining of the
woman’s uterus and connected to her blood supply. There has never been
need for such a word because, though it happens with embryos conceived
inside a woman, just as for those conceived in glass, in her body the embryo
is never seen, never even known about. In vitro it will have been peered at,
monitored, photographed. A couple leaving a clinic after an embryo transfer
know they are taking a potential life with(in) them; they will have to wait
two agonising weeks to find out if it developed or decayed. The joy of the
births IVF makes possible is much like the ancient joy of any birth, perhaps
sweetened by the overcoming of adversity. The sadnesses it brings are new
and strange.

Records are kept of how many IVF cycles are undergone and how many
births ensue: globally the ratio is about four to one. Little is done to track
how many women go through cycle after cycle fruitlessly and how many
couples end up, not with a child, but with an unusually lonely form of grief:
the baffling experience of losing something that could have been but never
was.
Young dreams

The technology’s failure rate shows how little is really known about how to
make a human life, and how randomly the chance to have children easily is
distributed. Its successes hide that lack of understanding. Indeed they may
perpetuate it. By providing a reasonable rate of success IVF seems to
obviate the need for better understanding. Fertility researchers interviewed
for this report consistently reported that basic questions about human
reproduction remain a surprisingly low research priority.
That said, one piece of basic understanding is clear. An increasingly
common reason for IVF failing is age. The females of almost all other
mammals can continue to bear young more or less until they die. Humans
and five species of whale are the known exceptions; their fertility
diminishes with the years.

In most developed countries and many developing ones women are

postponing reproduction. In England and Wales the average age for a
woman to have her first child (29) is more than five years older than it was
50 years ago. In Shanghai the mean age is one year higher. In America one
in five women now has her first child over 35, which in medical terms sees
her classed as “geriatric”. In Spain, where maternal age shot up in the
aftermath of the financial crisis of 2008, 10% of births are to mothers over
40.

The later people try to conceive, the more they are likely to struggle to do
so. If this is driving much of the increased demand for IVF, it is also
responsible for a disproportionate share of its failures. In Britain, 40- to 42-
year-olds see an embryo transfer lead to a baby only a third as often on
average as under-35s.

It is the age of the ovary from which the egg is taken, rather than the womb
that nurtures the embryo, which matters. That is why an increasing number
of women in their late 20s and early 30s are having some of their eggs
frozen. Should they need IVF in the future, perhaps because they have
delayed trying for children, younger eggs will give them a better chance of
success.

Like delayed fertility itself, this sort of “elective” freezing looks as if it

could increase the size of the IVF market. Currently less than 1% of births,
this could rise to as much as 10% in the places where it can be afforded. In
a few it is already almost there.

Some observers see it going further. They imagine a time when it will be
possible not just to fertilise eggs in the lab, but to make them there, too.
Stem-cell science makes it possible to turn the descendants of one type of
cell into another type. In mice, such techniques have been used to derive
viable egg cells from skin cells.
Sometimes never comes

The same has not yet been achieved for humans. If it were, new possibilities
would open up. Older women who had not previously frozen eggs might be
able to have new ones made. Gay men could combine sperm from one with
an egg grown from the cells of the other to have children biologically
related to both.

An egg grown in the lab could also, in principle, be an egg engineered in

the lab. There are currently gene-editing therapies in clinical trials where
cells are harvested from a sick child’s bone marrow, edited to remove a
harmful mutation, like that behind sickle-cell disease, and reintroduced into
the body. It could be simpler and cheaper to edit the genome before
conception. If eggs were easily mass-produced it might also, in principle, be
possible to fertilise them in large numbers and let couples pick out embryos
with particular genetic traits.

Attempts to gain control over human biology in such ways should set a
whole peal of alarm bells ringing; the technical barriers are immense, those
in the realm of ethics, public morality and safety probably larger still. They
suggest a level of control over human life with which many will be very
uncomfortable—and which might well be illusory. After all, IVF is
commonly understood, and sold, as a way to take control of errant biology,
and for many it proves anything but. Studies have consistently found that a
majority of IVF patients drop out before completing all the cycles which
their insurers or governments will cover. The main reason they cite is
psychological strain. They are experiencing the opposite of the
“empowerment” often advertised. They feel wildly out of control.

The authors of this report can empathise. We have, between us, undertaken
14 cycles of IVF, over 550 hormonal injections and countless scans and
blood tests to collect around 120 eggs. Our partners have made 23 visits to
awkward “sperm sample” rooms. Just 34 of the eggs that were fertilised
made embryos that could be transferred into our wombs. Thirty did not
implant. Three did but failed further down the road (one ectopic pregnancy
and two miscarriages, one referred to by a doctor as “tripping before the
finish line”). After five years each, only one of us is pregnant. ■
This article was downloaded by calibre from https://www.economist.com/technology-
quarterly/2023/07/17/in-vitro-fertilisation-is-struggling-to-keep-up-with-demand

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If at first you don’t succeed…

IVF remains largely a numbers game

And plenty of clinics are taking advantage of that

Jul 17th 2023 |

MOST HEALTHY young couples seeking to get pregnant will try for a few
months before they are successful. Those who are not will try for months
more, or years, before concluding they need help and stepping into the
waiting room of an IVF clinic. They often arrive in a state of acute
emotional vulnerability, clutching at the hope that doctors will help.

For the woman, what follows is uncomfortable at best. There are internal
ultrasounds, dozens of self-administered hormone injections into her
increasingly bruised abdomen, the swelling of her ovaries until two clutches
of hard grapes appear to be knocking about on either side of her pelvis. And
unless she is in the lucky minority who get pregnant the first time, she will
have to do it again. To take home a new life, most women and couples go
through more than one cycle; sometimes, many more. Each brings with it
physical discomfort and pain and intense loneliness, the emotional impact
of being jacked-up on hormones and the fear of doing something that might
impact her chances of having one more egg cell, one more viable embryo,
one healthy pregnancy.

IVF helps overcome some of the challenges of making a baby in two ways:
first, by increasing the number of mature eggs that a woman makes in one
menstrual cycle by means of hormone injections; second, by ensuring that
those eggs have the opportunity to be fertilised by sperm. This overcomes
problems caused by ovaries that do not of themselves give up their eggs, by
blocked Fallopian tubes which form a barrier between the egg and the
sperm swimming to meet it and by sperm that aren’t good swimmers. When
sperm are truly lacklustre, fertilisation can be more or less guaranteed by
squirting one straight into the egg: “intracytoplasmic sperm injection”, or
ICSI (see diagram).
In the case of, say, blocked tubes, the fertilised eggs produced by IVF may
be the first of the woman’s eggs ever to have met any sperm. But that is not
enough to guarantee a pregnancy. Every time a sperm and an egg fuse, the
sum of their parts is a unique genetic package. Much of whether or not the
resulting embryo is viable and able to develop into a healthy neonate is
down to dumb genetic luck. Not every fertilised egg naturally leads to a
pregnancy. This makes IVF a numbers game.

Globally, between six and seven out of every ten IVF cycles will not result
in pregnancies which go to term. As a result, many women will try more
than once. In each cycle, a woman may have one or more embryo transfers.
Each of these can take months, and recovery adds more time. With medical
tests, life, jobs and mental downtime in between, IVF treatments can easily
take a year—for many it will be longer, with no guarantee of success.

The older a woman gets, the steeper the odds. She has all the “oocytes”
which will ever develop into eggs in her ovaries when she is born. After
puberty every menstrual cycle will see a number of them activated, but
normally only one of them matures in a way that leads to ovulation. So
month by month her “ovarian reserve” gets smaller. At the same time the
DNA in the oocytes which remain gradually fragments. By the time she is
45, her odds of a child will be less than 5% with every embryo.
Try, try again

Doctors are used to thinking in terms of probabilities across the population.

Patients are not. Patients know people who got pregnant on their first IVF
attempt; patients have friends whose walking, talking toddler was once a
“low-grade” embryo given tiny odds of leading to a full-term pregnancy.
Above all, patients believe they can and will make a life through IVF,
because not believing is inconceivable and hope is what gets them to the
next appointment, the next throw of the dice. It is possible to sink years and
tens of thousands of dollars into multiple rounds of unsuccessful IVF and
still feel the next one will succeed.

When an IVF cycle fails, especially if it is not the first time, people
naturally seek out ways to change their treatment. “Rather than thinking ‘I
have to keep rolling the dice’ people think ‘Something is wrong’,” says
Sarah Lensen, a research fellow at the University of Melbourne in
Australia. Right on cue, clinics—particularly private ones—step forward
with a menu of “add-ons”. Through the grief of yet another failure to
conceive, these optional, and generally paid-for, treatments offer hope that
the next attempt might just be different.

Price tags range from zero to thousands of dollars, depending on the

treatment, clinic and country. Several can be combined into each round. It is
basic human psychology to think that if you pay more you might get more.
The business model of many clinics trades on such hope.

Unfortunately, the evidence base for these additions is underwhelming. The

draft conclusions of a study of 35 of them by the European Society of
Human Reproduction and Embryology found that there was sufficient
evidence to recommend that just one of the add-ons—the use of hyaluronic
acid to help embryos stick to the uterine wall—be added to IVF treatment
as a matter of routine. Another—choosing the best sperm by running them
through microscopic channels, a procedure held to mimic some aspect of
the environment they would encounter in vivo—did show some promising
signs of increasing the overall chance of a birth, but those signs fell below
the standards required for reliable evidence.

In some other cases there was a possibility that the add-on might, with
further testing, be shown to help a specific subgroup; patients with an
autoimmune disease, for example, might benefit from steroids. For the rest,
though, there was not just an absence of evidence that they worked; there
was sufficient evidence to be reasonably sure they did not. A meta-analysis
that Dr Lensen led was similarly damning. None of the 12 add-ons it looked
at was “supported by high-quality evidence that [it] is effective and safe”.
Three treatments, including hyaluronic acid, seemed to provide a benefit,
but the evidence was judged to be of poor quality.

One problem is that, given scant public funding for research in this area,
randomised and blinded studies with large numbers of patients are
infrequent. This may come as a surprise; patients tend to assume that
medical interventions are required to go through such tests before they are
approved. Often, though, add-ons are IVF-specific applications of
procedures already approved for other purposes. “Endometrial scratching”,
which involves lightly scarring the lining of the uterus with the aim of
stimulating growth factors is exactly the same as an endometrial biopsy,
normally carried out to test for cancer. “It got renamed,” says Dr Lensen.
Evening odds

Private clinics have little incentive to spend investors’ money on trials with
thousands of patients, especially when there is a risk they will show add-ons
that are already being sold to be ineffective. Both authors of this report were
offered a trademarked test, costing roughly $1,000, that supposedly
determines when a woman’s uterus is most likely to welcome an embryo,
by a clinic that later admitted it had not yet been correctly evaluated, and
that subsequent trials showed it did not improve chances of success and
“may even be harmful”.

In September 2022, after a ten-month investigation into mis-selling,

Britain’s Competition and Markets Authority and Advertising Standards
Authority together admonished the sector for the way it uses claims about
success rates and add-ons.

Some add-ons have become almost standard, even when they are only
beneficial to, at best, a subset of patients. In Australia and New Zealand
ICSI, which can cost up to a few thousand dollars a pop, is performed in
56% of IVF cycles. In America the share is 60%. Yet it has been proved to
help only couples whose infertility is due to low sperm quality—around
30%.

More controversially, pre-implantation genetic testing (PGT) is now being

used in roughly half America’s IVF cycles. The most commonly used
version of the test, PGT for aneuploidy (PGT-A), involves counting the
chromosomes in a few embryonic cells that are taken from the part of the
embryo destined to form the placenta. Cells are meant to have an even
number of chromosomes and finding that to be the case is taken as a good
sign.

Its defenders see PGT-A, which typically carries a price tag of about
$5,000, as a better way of telling which embryos will do best than peering
down microscopes in order to assess shape and development, as is the
historical norm. They argue that selection with PGT-A helps women who
are over 35 to get pregnant faster and that it reduces miscarriage rates.
Detractors point out that randomised controlled trials have failed to
demonstrate either of those benefits. And recent studies have shown that
“mosaic” embryos, in which some cells have odd numbers of
chromosomes, can lead to successful pregnancies even though PGT-A may
rule them out. And if they are discarded there is a chance that the woman’s
overall chance of getting pregnant may drop. ■

This article was downloaded by calibre from https://www.economist.com/technology-

quarterly/2023/07/17/ivf-remains-largely-a-numbers-game

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Selling hope

The fertility sector is booming

But many women must go abroad to afford treatment: the third article in
our special series

Jul 17th 2023 |

IVF ACCOUNTS for around 9% of live births in Denmark, the highest

proportion in any country. For average number of cycles undergone per
woman, the winner is Israel. The fundamental reasons for the two countries’
pre-eminence are distinct: Danes are strong supporters of women’s and
family rights and understand fertility as part of the package; Israel is,
culturally and politically, much more pro-baby than other rich countries.
The proximate reason, though, is more or less the same. In both countries
the state makes IVF widely available and (nearly) free. Israel, in this respect
the world’s most generous country, will in most cases pay for as much IVF
as it takes to have two “take-home babies”.
In most of the world most couples cannot afford IVF. A recent study in
lower-income countries found that a single cycle costs between 50% and
200% of people’s average annual income. There is a sad irony in this.
Among the forms of infertility for which IVF is particularly effective is a
blockage in the Fallopian tubes, which often arises as a complication of
infection. Those complications are most commonly suffered by poor
women in poor countries. The population least likely to get access to IVF
thus contains a disproportionate number of those it was originally designed
to help.

Even in countries where IVF accounts for 1% or more of births, prices are
high enough that, unless governments either mandate that they be offered
by health insurers or provide the service themselves, most women cannot
afford it. An American whose insurance, if she or he has any, does not
cover IVF can expect to pay $20,000 a cycle. Unsurprisingly this means a
lot of people who need treatment do not get it. Eduardo Hariton of US
Fertility, a network of clinics, reckons that for every patient who gets IVF in
America as many as four more may go without.

Politicians are paying increasing attention. Five years ago, there were nine
American states where insurers were required to cover some IVF treatment.
Today there are 14. Employers are aware of the value placed on access to
fertility treatments, too. Job packages which included fertility benefits such
as IVF were once just a perk for Silicon Valley. Today, according to Mercer,
a consulting firm, four in ten large employers include them. In online
infertility forums, women exchange tips on where to get jobs with coverage.
Walmart, America’s largest employer, recently started offering fertility
benefits through Kindbody, a chain of clinics. The chain last year built a
clinic near to its new client’s head office. It opened another one near
Lockheed Martin in April.

Potential patients with financial worries increasingly look to travel abroad

as a way to afford what they cannot at home. So do some patients looking
for regulatory regimes more permissive than those they live under. The
barriers that going abroad may circumvent include restrictions on who can
try to conceive (several countries restrict IVF to married couples) and on
how they can become parents (some countries ban surrogacy or the use of
donated eggs). But many destinations, including the Czech Republic,
Mexico and Thailand, are popular at least in part because they are cheaper.

The evidence of price sensitivity provided by such IVF “tourism” is backed

up and quantified by formal research. An international comparison
published in 2014 found that for every percentage point of average
disposable income that the price of IVF drops, demand increases by 3%. It
all suggests that companies which can bring costs down so as to attract
more clients could do very well out of it. And some are trying to do just
that.

Five years ago Joshua Abram, a veteran tech entrepreneur, co-founded

Conceivable Life Sciences, an IVF-automation company with headquarters
in New York City. Neither he nor his business partner knew anything about
reproductive technology at the time, but they could see a market gap.
“Because we know that 10% of kids in a just world will be born through
IVF, versus less than 1% today, solving this is one of the great medical and
ethical opportunities of our lifetime,” says Mr Abram. “And indeed a
mammoth, mammoth business opportunity.”
Hope springs eternal

The sector is certainly soaking up capital. As the entrepreneurial doctors

who set up the first generation of fertility clinics reach retirement, investors
have been buying their businesses on the basis of opportunities for
consolidation and strong growth prospects. “In the past decade, while the
overall birth rate declined, the birth rate resulting from ART [assisted
reproductive technology] grew around 6% annually,” says Jennifer Gregoire
from McKinsey, calling it “a market with strong tailwinds”.

The investments are often from private equity (PE). Today about a third of
IVF cycles in America are done through clinics affiliated with PE funds. In
January KKR, a PE firm, paid €3bn ($3.2bn), a very high multiple of
earnings, for IVIRMA, a large Spanish chain of clinics. Such investment
has driven a new level of consolidation. In Australia three networks now
provide around two-thirds of all cycles.
For the most part, though, these large organisations are not particularly
focused on increasing access. After all, patient numbers are going up even
though prices are not coming down. Though they do not see it this way, the
clinics’ customers are buying hope as much as, or more than, they are
buying healthy pregnancies, and it is easier to upsell hope than increase the
number of pregnancies that go to term. “Bringing hope to life” is the
headline for Columbia Fertility Associates’ sales material. “The best way to
predict your future is to create it,” assures Liv Fertility in Mexico. “Every
two hours an SGF baby is born,” says Shady Grove Fertility.

About a third of IVF cycles in America are done through clinics affiliated
with private-equity funds

Websites juxtapose pictures of smiling babies with figures purporting to

provide a “success rate”. Professional associations caution against choosing
providers on the basis of such numbers. They can be inflated or massaged
through a number of presentational tricks. It is often impossible to tell if
one site’s claimed rate is truly comparable to another’s. Think of the range
of metrics that fund managers use to claim “above-average” returns, and
then remember that fund managers’ claims are much more regulated than
those of fertility clinics. But in the absence of other clear differentiators
they will be the numbers to which most of the hope market’s consumers
latch on.

Other things being equal, buying more tends to bring people more hope and
a greater sense of control. This offers a number of ways to make already
fairly fat margins fatter. Zealously catering to patients’ desperation through
“add-ons” to their IVF despite their lack of proven success is one. A recent
study found that in America PGT-A, a controversial add-on, is significantly
more likely to be part of IVF treatment in a PE-affiliated clinic than
elsewhere.
Profit pushes perpetual

The newest vendors in the hope market are a wave of “reprotech” startups,
some associated with starry names: TMRW, which has an automated
system for freezing and storing sperm, eggs and embryos, boasts investors
including Amy Schumer, a comedian, Peter Thiel, a venture capitalist, and
Susan Wojcicki, the former CEO of YouTube. Legacy, which sells sperm
tests, dietary supplements that claim to improve sperm quality and sperm-
freezing services, is backed by Justin Bieber, a musician.

At the Reproductive Health Innovation Summit held in Boston,

Massachusetts, in February, entrepreneurs from around the world pitched
everything from AI that promises to select the best sperm to needles that
make hormone injections easier. At times, the proceedings felt like a speed-
dating event. The emphasis was largely, though not exclusively, on trying to
improve the process and outcomes for existing patients rather than lowering
prices to improve access. “Almost all of this caters to the women who can
already afford IVF and just digs deeper into their pockets,” grumbled one
veteran fertility doctor.

Some think that technology could do more. David Sable, a reproductive

endocrinologist turned venture capitalist, reckons that the right investments
could raise the worldwide number of IVF babies from 64,000 per month
today to over a million a month. At Conceivable Life Sciences Mr Abram
says he is confident of being able to reduce costs by as much as 70% in
America and 50% in Britain. A large part of the company’s plan rests on
centralised labs with hyper-modern microscopes and lots of automation.
They also think there are savings to be made by using local gynaecologists
rather than higher-paid fertility doctors.

Such investments may pay off in time, especially if insurers get behind
them. But for now the IVF part of the ART sector remains focused largely
on selling more hope to the sort of people who are already in a position to
buy it.

This will not stop the spread of IVF. But the current state of play makes it
likely that investors and entrepreneurs will not be the driving force.
Politicians will be—whether because they just think it is the right thing to
do, as in much of Europe, or because they worry about ageing populations,
as in a lot of Asia, or because their voters are increasingly insistent. ■

This article was downloaded by calibre from https://www.economist.com/technology-

quarterly/2023/07/17/the-fertility-sector-is-booming
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Our bodies, ourselves

Not all types of families can access IVF

Some governments are very clear who they want to help

Jul 17th 2023 |

THE CHARACTERISTICS that can disqualify people from being allowed

to access IVF are, for the most part, relationship status, sexuality and age.

Restrictions on the use of assisted reproduction by same-sex couples and

single women have been loosened across much of the West. But the
liberalising trend is far from universal. A number of European countries,
including the Czech Republic and Italy, still allow access only to
heterosexual couples. A recent survey of changes to regulations concerning
sexuality and IVF in 18 countries by the International Federation of Fertility
Societies (IFFS) found that in 2018-21 five increased access for same-sex
couples and six decreased it.

In Japan, where subsidies for IVF are being enacted as a response to

demographic change, parliament is discussing a law that would determine
who is eligible for treatment. The outcome could limit treatment to married
couples, which would exclude gay couples: an interest in more children
does not necessarily trump concerns about what sort of families there
should be.

Such concerns are clearly seen when it comes to freezing eggs, something
35% of countries surveyed by the IFFS forbid. In China, which is one of
them, eggs are to be used now, in existing relationships. Ruling for a
hospital that refused to freeze a single woman’s eggs in a case last year, a
Beijing judge cited the “psychological and societal problems” a large age
gap between mother and child would bring.

The freezing of Chinese women’s eggs is a growing business for many

clinics elsewhere. Erika Wang, a 33-year-old from Zhejiang province,
recently had her eggs frozen in California at her Singapore-based
employer’s expense. She has posted about her decision on social media.
“Fertility technology is a great invention for feminism, especially Asian
feminism,” she says. “I wanted to show my friends and peers that this is
possible.”

Some countries allow only women with a medical reason for freezing their
eggs to do so; others require that frozen eggs, like fresh eggs, be used only
in the context of a heterosexual marriage, or only in the wombs of women
below a certain age. Malaysia has banned freezing for single Muslim
women while exempting those of other faiths or none, thus preserving the
business of clinics serving patients from China.

Other areas of disagreement include donation and genetic testing. Two

European countries allow neither egg donation nor sperm donation; three
more allow sperm donation but not egg donation. Embryo donation is
banned in 14. Eleven European countries do not allow pre-implantation
genetic testing for any “non-medical” reasons; most of Europe strictly
forbids its use for sex selection. In places where such selection is tolerated,
which include America, Mexico, Northern Cyprus and Ukraine, this ability
to choose constitutes something of a selling-point.■

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Eggs from elsewhere

Some women need eggs from others, or from their

younger selves
Donation and preservation are becoming increasingly widespread

Jul 17th 2023 |

“YOU WILL not have a child with your own eggs,” were the hardest words
to hear. They were delivered late last year to one of your authors and her
partner, after five years of failed IVF, by a doctor who quickly moved on to
the remaining options: adoption or seeking the help of an egg donor.

Coming to terms with the idea that you will not pass on your genes even if
you do still bear a child is another of the strange new forms of loss that IVF
has brought with it. It is possible to know that genes are not the essence of
what it is to be part of a family—that step-children can be loved
unconditionally, that people may bear scant, if any, resemblance to their
genetic forebears—and still struggle to adjust to what can feel like a loss of
parental identity.
The possibility of being an egg donor is also a historical novelty. That men
might have children of whom they are unaware barely needs saying; that
women can do so is new. It is also becoming increasingly frequent, partly
because of growing demand from older would-be mothers. (The use of
donated sperm is also rising in many places, but that is primarily because of
demand from single women and same-sex couples.) Where it was once
necessary for a donor to have her menstrual cycle synced with the recipient
mother’s, and her eggs collected just before use, efficient egg freezing now
means donors can stick to their own schedules and their eggs can be stored
until needed.
That hardly makes the process easy. Egg donation has all the hormonal
helter-skeltering, internal monitoring and needles through the cervix of egg
collection for IVF. Yet a sense that it is a way to make the lives of strangers
better still moves some women to donate. Niamh, from the English city of
Nottingham, donated her eggs for the first time when she was 20 after
hearing an ad on the radio. “I thought ‘I’m not using my eggs, why not?’”
she says, six years on. Learning that the first attempt to make a baby from
them did not work triggered a feeling of disappointment. “I wanted it to
work for someone.” So four years later she donated again.
Affective altruism

One of her biggest complaints is poor information. Although she knows that
her first donation did not make a baby, she does not know the outcome of
her second donation. “That is something I have a fundamental problem
with,” she says.

By unbundling aspects of parenthood that used to be all of a piece, assisted

reproduction brings new types of relationships into the world just as it
brings new babies and new sadnesses. Some donors want to know at least
something about the children they have made possible; some want complete
two-way anonymity. Some children want to know about their donors, or
about the other children who received some of their genes from the same
donor—“diblings”, as they are sometimes called. Others do not.

Some demand for freezing may stem from a belief that the egg in the freezer
might as well already be a baby

Then there is the relationship, or at least the flow of information, between

donors and parents. The amount parents may want to know about donors
will differ from couple to couple, and sometimes between two partners.
Different countries give the different players different rights in all these
regards.

Comparing Britain and Spain brings some of the issues to the fore. IVF
with egg donation is an order of magnitude more common in Spain than any
other country except America, where half as many such cycles are done.
“It’s taken for granted that it’s an option,” says Sara Lafuente-Funes, a
sociologist at Goethe University in Frankfurt who has studied egg donation
in the country. She says the Spanish IVF sector has a particular focus on
delayed reproduction, which economic uncertainty has made common in
Spain: the average age of first-time mothers is 32. If delayed reproduction is
the focus, donation is an obvious area in which to specialise.
Its status as a donation hot-spot leads many British couples to investigate
the possibility of a Spanish donation. To do so, though, means trade-offs,
both for themselves and for their children. Parents choosing a donor in
Britain can search a database like one at the London Egg Bank by eye or
hair colour, height or education. They can even read a handwritten letter
from the donor, if she has supplied one. In Spain they learn nothing about
any distinguishing characteristics: the clinic will attempt to match the
mother’s looks to the egg donor’s, perhaps using biometrics, but will
provide no information about her. That devotion to donor privacy also
means that, whereas a child conceived in the British system has the right to
learn their donor’s identity when they come of age, a child born through the
Spanish process does not.

One thing that British and Spanish donors have in common is that the
system in which they make their donations allows them to be compensated
for doing so. In some countries, such as Italy, no money is allowed to
change hands when eggs are donated. In most of the rest of the world the
donor can be compensated for the travel, time off work, inconvenience and
discomfort that donation involves. In Spain donors receive €800-1,300
($890-1,450) per donation cycle. Britain caps compensation at £750 ($980)
per cycle.

Though in principle such compensation is not meant as an inducement, in

practical terms it can serve as such, at least in part. Dr Lafuente-Funes says
that compensation in Spain is set at a level that will enable clinics to recruit
donors, young women who are normally less wealthy than the recipients.
But that economic motive does not make donation simply a commercial
transaction; the money “does not mean that the donors are not at the same
time altruistic,” she says.

In some regimes commerce has a much fuller role. In America, where

compensation is not capped, online egg-banks can feel eerily like dating
apps, but with far more information: tastes, hobbies, personality profiles,
emotional-intelligence scores and baby pictures. Donor Nexus, an agency
based in California, offers “premier” donors with “specific...desirable traits
such as higher education, rare ethnicities, professional athletes, musicians
or models”.
The prices paid to donors—from a few thousand dollars to $10,000 or even
much more, according to Diane Tober, a researcher at the University of
Alabama—vary by region, agency and donor profile. Some firms pay more
to donors with higher SAT scores. Ads in university newspapers reflect the
fact that students are well suited to the market’s needs: typically young,
presumably smart, relatively rich in free time and often conscious of the
debt they are accruing. The fact that they can donate batches of eggs
directly to the freezer makes the process inherently less personal.

This commodification upsets many ethicists. Its commercial logic may also
expose donors to harm. If the eggs themselves are valued, rather than the
act of donation, the incentives to produce more eggs are increased.
Anecdotally, egg donors report that they are likely to be given levels of
hormones that put them at greater risk of complications than is normal in
IVF. Research by Dr Tober supports some of these concerns.

Increasingly, though, younger women have their eggs collected for another
reason: to make them available to their older selves. Sophie, a 31-year-old
British-born research fellow in Philadelphia, is a case in point. Many of her
American friends were talking about having their eggs frozen; some had
done so. So when a romantic relationship she was in ended abruptly she
decided, “If I’m going to do it, I should do it now.” She flew home, where
freezing was cheaper and her mother could administer the daily jabs, and
was lucky enough to have 31 eggs collected.

After collection, Sophie’s eggs were prepared for storage, something which
involves dehydrating the cells and adding a “cryoprotectant” to them. If this
is not done, ice crystals can grow in the cell’s watery cytoplasm and disrupt
the cell’s internal structure. With ample cryoprotectant and the freezing
done very quickly, the cytoplasm solidifies into a glass rather than an array
of crystals. That preserves its structures far better.

Having been plunged into liquid nitrogen at -196°C (-320°F) Sophie’s

“vitrified” eggs are now safely tucked away in a freezer in Southampton.
Studies suggest that, in a properly proficient lab, nine out of ten frozen eggs
survive thawing. What is more, the length of time the egg remains frozen
seems to have no impact on its future prospects.
The cold never bothered me anyway

Before vitrification, egg-freezing was rare. Efforts to preserve fertility

tended to focus on the freezing of embryos, which was more reliable
because their cells are smaller. That made it mainly an option for women
who already had partners or who used donor sperm. Now, thanks both to the
new technology and the campaigners who have raised awareness of it, in
many places it is routine for women facing, say, chemotherapy, which might
harm their eggs, to have some frozen.

Two other groups have taken an interest in becoming their own future
donors. The first, who tend to be older, would like to have a child right
away, but are not in a position to do so, often due to the lack of a partner.
The second, mostly younger, do not wish to have a child yet but want to
give themselves every possibility of success when they do. The first group
was initially bigger, but several clinics report the average age has been
coming down. FertilityIQ, which provides courses to people considering
assisted reproduction, reports not just that egg freezing is one of the most
popular ones, but that the average age of those taking it has dropped from
38 to 32 in just six years.

There are worries that some of the demand for elective freezing from
younger women stems from a belief that it is fail-safe: that the egg in the
freezer might as well already be a baby. @annelisejr, a TikTok influencer,
reflected what many may feel when, having frozen 13 eggs, she posted:
“It’s a relief knowing once I’m ready many years from now I will be able to
have little Annelises.” She may well have increased the possibilities, but
little ones are never a sure thing. What freezing offers is a slowing down of
the rate at which the odds lengthen against you, should you at some point
need IVF.

In the largest American study so far 70% of a group of women who had
started freezing their eggs before they were 38 and who thawed at least 20
eggs were able to have a baby. Good, but not perfect. Younger women may
do better. That said, clinics without a track record piling into the growing
market may make things worse. “If there’s a potential black eye for the
sector down the road,” says Jake Anderson-Bialis of FertilityIQ, “egg
freezing could be it.”
Sophie, who says she has always wanted a number of children, knows that
freezing does not guarantee that she will get them. But £5,000 and three
weeks over the Christmas holiday have brought her “a huge amount of
peace” along with a new romantic freedom. The control over their fertility
offered by the pill let women enjoy sexual relationships without worrying
about getting pregnant. Egg freezing allows them to explore relationships
into their 30s without worries about a lover’s suitability as a co-parent. “I
just want to be able to date like a man,” says Sophie.

Why would she not? Women are not delaying reproduction simply to
concentrate on their careers. They are doing so because forming a
relationship with someone with whom you want (and can afford) to raise
children takes time, whether you are a woman or not. As Marcia Inhorn, an
anthropologist at Yale, puts it in her recent book “Motherhood on Ice”,
vitrification will not fix the issues driving women to have their children
later. But the technology does offer them the hope of a “reproductive
suspension bridge”.

What women like Sophie are choosing is a personalised version of what Dr

Lafuente-Funes sees writ large in Spanish society: a transfer of reproductive
capacity from younger to older women. Such transfers are often seen as a
way to deal with a crisis in reproduction that does not address its root
causes. But for some women the transfer is an unambiguously empowering
expansion of her future options. And if, as is increasingly the case, women
freezing their own eggs also donate some—perhaps immediately, to defray
the costs, perhaps later when they have used those which they need—the
benefits may be spread further.■

This article was downloaded by calibre from https://www.economist.com/technology-

quarterly/2023/07/17/some-women-need-eggs-from-others-or-from-their-younger-selves

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Eggs from scratch

New ways of making babies are on the horizon

But it is likely to be a long time before ordinary people can benefit

Jul 17th 2023 |

THE HUMAN genome can create cells with a remarkable range of

capabilities and shapes. Looked at under the microscope, the enterocytes
Which line the gut bring to mind the ghosts from a Pac-Man video game.
Neurons look like medieval morningstars, but with long hair. But none is
more special than the big, round egg. It is not just the largest of the cells. It
is also, once fertilised, the cell from which all other sorts of cell are
descended.

The size of the egg allows it to carry the nutrients and chemical building
blocks needed for the first days of an embryo’s development. As those days
tick by, the single large cell of the fertilised egg splits into two, then four,
eight and onwards until they are countless. In the earliest stages, the
divisions produce “stem cells”, from which all sorts of others can be
derived. As time passes, the cells specialise, expressing some genes more
and some genes less, eventually producing all the intricacies of tissue and
organ the newborn needs, right down to its toenails.

In nature, this differentiation is a one-way street. In the laboratory, not so

much. In 2006 Yamanaka Shinya and Takahashi Kazutoshi of Kyoto
University showed how cells which expressed the genes appropriate to
being part of a mouse’s skin could be stripped of their dermatological
determination and reprogrammed to become something very like the stem
cells which are found in embryos. These “induced pluripotent stem cells”
(iPSCs) could, with the right cues, be turned into almost any other sort of
cell. The next year they showed how to create human iPSCs.

In 2016, a team led by Hayashi Katsuhiko, then at Kyushu University,

announced that it had turned iPSCs from a female mouse into egg cells,
fertilised them and implanted the resultant embryos into the uteruses of
other mice. This eventually produced eight healthy pups. In March this year
a team which included several of the same researchers announced that, by
using stem cells that had lost their Y chromosome, they had managed to do
the same thing with eggs made from the skin of a male mouse.

These feats of reproductive wizardry have generated a palpable excitement

about the new field of fertility research called “in vitro gametogenesis”
(IVG). If it proves capable of producing healthy eggs where there were
none before, it could herald the biggest change in reproductive technology
since IVF itself. Henry Greely of Stanford University, a legal scholar who
specialises in the ethics of new biotech, thinks IVG may within a few
decades be widely used even by those who have no fertility problems. The
reasoning is that, if IVG proves capable of producing viable eggs in copious
amounts, it could allow the production of a large enough number of
embryos to allow screening for a wide number of genetic traits, and that
could be something many parents might want.
Of mice and semen

The biologists behind the breakthroughs are far more circumspect. Dr

Hayashi, now at Osaka University, is wary of brash statements about IVG’s
prospects in humans. Amander Clark, a biologist at the University of
California, Los Angeles (UCLA) who has been working on IVG since the
early 2000s, reckons it is “at least a generation, if not two” away from “ever
getting to the clinic”. Nevertheless, patents are being filed, VC wallets are
opening and eager entrepreneurs are poking around academic labs seeking
skilled researchers to poach.

The most obvious beneficiaries of a future in which people can have new
oocytes made from other cells will be women with low ovarian reserves,
either because of age, because cancer treatment has meant their ovaries had
to be removed, or for some other reason. The technique could also offer
eggs, and thus genetic parenthood, to transgender women and gay male
couples. But experts expect that translating what has worked in mice into
something that works for people will be very hard.
To make eggs from mouse cells means coaxing iPSCs into becoming cells
that look like “primordial germ cells”, common ancestors to egg and sperm.
Those cells then have to be convinced to produce primary oocytes which
themselves must then be matured into egg cells that can be fertilised. Early
experiments led by Saitou Mitinori of Kyoto University and Dr Hayashi got
the germ cells to go eggy by transplanting them into the ovaries of infertile
mice. Signals from the tissue around them were clearly key, so the team set
about reproducing them in vitro using cells from mouse ovaries (see
diagram).

The Japanese team also transplanted germ-cell-like cells into mouse testes,
where they developed into cells that produced sperm. They have not done
the same thing entirely in vitro; a claim to have done so by Zhou Qi at the
Chinese Academy of Sciences and others has not been replicated elsewhere.
To make sperm that way would be another step forward, but a less
consequential one. Eggs are in much shorter supply than sperm. And in
nature sperm production requires Y chromosomes. Without further
innovation that would rule it out for a woman in a same-sex partnership, or
a trans man, who wants to fertilise a partner’s egg.

In humans, Dr Clark has got as far as making primordial-germ-cell-like

cells from human skin. Dr Saitou has achieved the same thing using blood
cells and, by incubating the products with reconstituted mouse ovaries, has
nudged them one step further, to become “oogonia”, a closer precursor to
egg cells. Matt Krisiloff, the boss of a Californian startup called
Conception, says his company is further along, and could conceivably
produce the first “proof-of-concept” mature human oocyte “within a year or
maybe two”. In May he showed The Economist pictures of iPSC-derived
cells which the company believes to be relatively advanced precursors to
human oocytes.

When the same pictures were presented at a scientific meeting, though,

some attendees were unconvinced. And even if Mr Krisiloff is right and
IVG eggs are just a couple of years off, he does not expect them to be of the
quality a clinic would require or a regulator insist on. “It’s possible that the
first egg cells could turn out to be totally normal,” he says. “But I will be
really surprised.”

In the Japanese experiments, fewer than 5% of mouse eggs made from

iPSCs produced healthy pups (the success rate with eggs from the ovary is
60-70%). The longer eggs spend in glassware the more development is
thought to be disrupted, and iPSC-derived eggs spend a lot of time in
glassware. On top of that, iPSCS tend to accumulate mutations and
chromosomal abnormalities of the sort which, if seen in an embryo, would
greatly increase the risk of miscarriage and birth defects.

Another advance in reproductive technology, mitochondrial replacement

therapy, offers a cautionary tale. Mitochondria are cellular components that
drive metabolism. Unlike all the other gubbins in animal cells, they have
their own genomes, a handful of genes kept on their own little bits of DNA
rather than on chromosomes in the nucleus with the main genome.

All the mitochondria a human has come from its mother; the egg’s copious
cytoplasm is full of them. So if a woman has a dangerously faulty
mitochondrial gene this can be bad news for her children. One way round
this is to fertilise such a mother’s egg and a donor egg at the same time and
then replace the nucleus in the fertilised donor egg with that from the
mother’s egg. The resulting embryo has a nuclear genome provided by the
mother and father, as usual, and a mitochondrial genome from the donor.
This mitochondrial replacement (sometimes misleadingly seen as producing
“three-parent” children) is also practised, in some clinics, as a possible way
to better the odds for an older woman’s eggs.

Unfortunately, experience and experiments have revealed a problem. Small

amounts of mitochondrial DNA from the mother can get into the embryo
along with the nucleus and gradually push out the mitochondrial DNA from
the donor, a process called “reversion”. First identified as an issue in animal
studies, reversion has now been seen in at least one human case, luckily not
one where the mother was a carrier of mitochondrial disease. It is a sombre
warning shot about experimental reproductive technologies.

Regulators are taking a cautious path with IVG. In Japan researchers are
banned from fertilising any human eggs they produce using the technique.
Elsewhere fertilisation is allowed for research purposes, but not for
reproduction. In Britain the Human Fertilisation and Embryology Act
specifies that only the products of genetically unaltered eggs and sperm
extracted from a man or woman’s reproductive organs may be placed inside
a woman. In America, any human tissue that is more than “minimally
manipulated” becomes a drug or device and this falls into the purview of
the Food and Drug Administration. The FDA has taken a keen interest in
mitochondrial-replacement therapy; if it thinks those manipulations are
more than minimal it seems very likely to feel the same about those
involved in IVG. “They would probably claim that the sperm and eggs were
drugs,” says Mr Greely, “and they certainly would claim the embryo was.”

Regulators and the politicians to whom they answer will weigh questions
beyond patient safety and welfare. As Lucy van de Wiel of King’s College
London, puts it, “There’s a lot of controversy around people using
technologies to have children later in life, particularly if those people are
women.” Adding trans women and gay couples to the mix will hardly
defuse that controversy. The comparative ethical and technical simplicity of
egg donation may see IVG’s role limited to special cases.
Eggs of Eden

If controls were to be very strict, or even prohibitive, they might possibly be

circumvented. Many suggested this would be the fate of the bans on human
cloning enacted after Dolly, a sheep, was cloned in 1996. But there is no
evidence that they have been. Cloning human embryos in the lab is
possible; techniques similar to some of those used in mitochondrial
replacement can place a new nucleus into an egg just after fertilisation. But
despite a copious supply of the rich, the morally challenged and the
megalomaniac, any incipient demand the world may have for mini-mes
seems to have so far gone unfulfilled.

The market for IVG seems likely to be larger than that for cloning. But that
hardly means it will spring up as an undergound offering. As Dr Hayashi
points out, IVF is popular because it is relatively safe, easily performed and
uncontroversial. IVG is none of those things, at least not yet.

“First we have to understand the basic mechanism of how eggs get old,
then we can try to find a way to stop it”

That is one reason why Dr Hayashi’s current research focuses as much on

eggs still in ovaries as on eggs created outside them. A girl hitting puberty
typically has a few hundred thousand primary oocytes; they are the cells
that can become mature eggs. Every month somewhere between a few and a
couple of dozen of them will be activated and begin to mature. Only one or
two will make it to full maturity and head out into the Fallopian tubes. The
rest are, from then on, out of the equation. (The hormonal manipulation
used in IVF cycles is designed to get round this winner-takes-all approach
and let as many as possible of the activated eggs mature.)

Some researchers believe control over the activation and maturation of the
primary oocytes could help women who do not respond to hormonal
stimulation. Dr Hayashi’s team recently identified four of the genes
involved. A better understanding of the process might make it interruptible.
Today’s contraceptive pill is designed to stop ovulation, but not to keep
oocytes from maturing. A pill that stopped oocytes from being activated
might work as a contraceptive while keeping a woman’s stock of eggs from
shrinking month by month.

Quality, though, is as important as quantity. A woman’s oocytes accumulate

chromosomal abnormalities as she ages. Older women who go through
repeated rounds of IVF become painfully aware that they are not only
producing fewer eggs, but also that a growing number of those eggs
generate embryos with genetic defects that prevent them from progressing
to full pregnancies.

Dr Hayashi wonders if this could be changed by identifying the specific

processes that cause eggs to deteriorate. One insight which may help is that
the quality of egg cells, and their ability to generate viable embryos, varies
with their levels of cohesin, a protein which helps hold chromosomes
together and is involved in the repair of DNA.

Do not look for a cohesin booster any time soon. “First we have to
understand the basic mechanism of how [egg cells] get old,” says Dr
Hayashi. “Then we can try to find a way to stop it.” But the new tools he
and others are bringing to that understanding are cause for hope—and make
a strong case for a new commitment to the basic science of fertility. ■

This article was downloaded by calibre from https://www.economist.com/technology-

quarterly/2023/07/17/new-ways-of-making-babies-are-on-the-horizon

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Conception, reconceived

Lack of basic research has hampered assisted

reproduction
Finally that may be changing

Jul 17th 2023 |

ON THE THIRD day after fertilisation a human embryo is made of six to

12 roughly identical cells; on day four its cells appear to fuse into a mostly
uniform blob; and on day five it puffs out to reveal two completely new
groups of cells—an outer layer that will go on to form the placenta, and an
inner clump that will develop into the fetus. How this happens is a mystery.
So is how things happen after day six—a particularly frustrating one, given
that it overlaps with the crucial stage during which the embryo readies itself
for implantation into the wall of the uterus and a pregnancy either begins or
does not.

Many tens of millions of human embryos have been created in laboratories

over the past half century. Yet how they achieve their remarkable
development from a single cell to a human being remains, in substantial
ways, opaque. The fundamental mechanics which govern how a new human
life takes shape—the cellular, molecular and genetic underpinnings of
human fertility and infertility—are, largely, a black box.

There are many reasons for a lack of research into the basic biology of
baby-making. One is that health issues perceived as significant mostly to
women have often been treated as low research priorities. Another is that
such studies have, until now, relied on donations of tissue, eggs, sperm and
embryos. Research which creates human embryos raises issues that some
funders will not countenance. Since 1996 America’s National Institutes of
Health (NIH), the largest funder of biomedical research in the world, have
been forbidden by law from spending money on research in which human
embryos are created for research purposes only, or in which any embryos
are destroyed. It is “difficult for scientists to even engage in new
innovations in IVF and overcoming those really challenging cases of
infertility” under such conditions, says Amander Clark of UCLA.

Then there is the nature of the problem being faced. Unlike cancer, which
attracts a huge amount of research spending, infertility is not a life-
threatening condition and often not really seen as a life-impairing one either
—if it is seen as a medical condition at all. The American Medical
Association did not recognise infertility as a disease until 2017. Nor are
drug companies queuing up to take a crack at the problem. They make little
money out of infertility treatment, and they allocate research money with
the bottom line in mind.
Confusion is nothing new

Finally, research efforts are made in the context of IVF’s success. On

average, IVF has been doing an OK job, working (in the end) for roughly
half of those who try it. That makes alternative approaches less urgent. At
the same time it masks the fact that growing drivers of infertility today—
most notably, people seeking to start their families later—are not the sort of
physical problems that IVF was designed to address. Thus an increasing
number of people find themselves left behind by reproductive medicine,
with all the frustration and heartache that follows.
Added to this, IVF’s technical success is not of the sort of thing basic
scientists are used to building on. The technique did not spring from
insights into how fertility worked or could be improved, but on first
contriving a change of venue that maximised the chances of fertilisation and
then making repeated attempts at implantation and pregnancy. Its success
came from learning how to extract eggs, recognise viable embryos and
transfer them to the womb. Getting better at those things provides babies to
some; it does not explain how they are made.

“We are doing things a little bit backwards because we are missing the
base,” says Rita Vassena, CEO of Fecundis, a Spanish-Argentinian biotech
company. ”We don’t have a clear understanding even of how normal
physiology in detail works...Because we are missing this very substantial
bed of understanding underneath what we do, it is very hard for us to do
something because [for example] we know that if we change this receptor
then this cascade will work differently and the cell will do [something
different]. By and large, we don’t know.” This is very different to many
areas of medical research—most notably, at the moment, cancer—where a
layered understanding of how cells function is used to design treatments
that are meant to correct specific problems.

Rather than being optimised according to an understanding of what happens

naturally, current practices are developed on the basis of what has worked
in the past. Different clinics have different practices for how to store sperm
samples ahead of fertilisation. Embryologists who have analysed the
commercial solutions in which clinics grow embryos have found different
make-ups. That might suggest that the exact nature of the incubation
medium does not matter much; alternatively it might mean that there is a
long way to go to perfect procedures and maximise an embryo’s chance of
survival. Having found evidence that ambient pressure controls whether the
eggs of mice are dormant or not, Hayashi Katsuhiko of Osaka University
suspects pressure and temperature may be vital to the fate of an embryo.
Again, such factors are not standardised across labs.

In her previous role as scientific director of the Eugin Group, which

operates 69 clinics in 11 countries, Dr Vassena noticed that IVF was falling
short of what happens naturally in their donation programme. A woman
who has conceived and given birth naturally after just two or three months
of trying can be taken as having a 30-50% success rate per egg. When such
a woman donated eggs for IVF, Dr Vassena noticed the success rate
frequently fell to 10% or so. “Our goal should be to [get] as close as
possible to natural fertility,” she says. “We are far away from that.”

Help seems to be at hand. Basic research into stem cells has brought forth
the possibility, though still a distant one, of making eggs and possibly
sperm for use in clinics through IVG. The provision of eggs for research is
a nearer-term possibility, freeing researchers from their reliance on
donations. And the insights derived from watching and manipulating the
production of eggs and sperm should prove very useful. Roughly a quarter
of infertility is due to anovulation, a condition where women do not
produce oocytes. This sort of fundamental research might provide a
treatment for that. It is quite plausible that IVG will contribute more to
infertility as a research tool than as a clinical alternative.
Time after time

Research will not be limited to eggs and their development. Work done with
stem cells and their derivatives could make good the current lack of human
tissues that can be used for research. Stem cells that have been nudged into
mimicking early embryonic cells and placed in a dish are able to self-
assemble into three-dimensional structures that resemble those seen within
the first weeks after fertilisation. Fertility researchers in America, Europe
and Israel are using stem cells to create such “embryoids” and study the
processes that go on within them.

Some embryoids are built to mimic the entire embryo, others just one aspect
of its development. Neither sort “will ever be used for reproductive
purposes”, says Dr Clark, adding that the latter type of embryoid lacks any
potential to form a baby. “They are asking very specific questions about
very specific cell types.” Such research should provide answers to questions
about infertility—like what it is about an embryo which leads to a
miscarriage—and also congenital disease—such as how does the heart form
when it forms properly?
As with IVG, the challenges are not purely scientific. Both techniques raise
questions about what science is ethically acceptable. The NIH is negotiating
the federal ban on funding specific types of work with embryos by
allocating grants to embryoid research on a case-by-case basis. The IVG
question has not yet come up.

A steady supply of new ethical questions is an inextricable part of assisted

reproduction. Indeed, those raised in the lab can be comparatively simple
compared with those already faced by judges who have to decide questions
such as whether parents can use frozen cells from deceased children to
create a new generation. As what makes a human becomes better
understood, and as new ways of helping the process along become more
practical, new arguments for legal constraint may arise.

For many, though, they will be a price worth paying if, at the same time, in-
built biological constraints are lowered. Such advances could realise new
possibilities for same-sex and transgender parents and provide women with
new ways to stop and reset—or render irrelevant—their biological clocks.
The joy of parenthood that IVF has brought to millions could be spread yet
further. The heartache of a failed IVF cycle would surely remain, but fewer
would feel it. And if fewer ended up choosing quietly, privately,
inconsolably to stop trying, that would be progress indeed. ■

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Between the lines

Video: Why we know so little about human

reproduction
Inside our correspondents’ investigation into the future of fertility

Jul 17th 2023 |

CATHERINE BRAHIC, The Economist’s environment editor, and Sacha

Nauta, our social affairs editor, have spent months delving into the assisted-
reproduction industry. They examine its flaws and how women’s
experiences differ globally. Here they share some highlights from their
reporting and insights about what the future may hold.

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In vitro fertilisation

Sources and acknowledgments

Jul 18th 2023 |

Many people contributed their time to explaining their work and the field
more broadly. Our heartfelt thanks to everyone who gave their time. In
addition to those quoted in the report, we would particularly like to thank:

David Adamson, Rene Almeling, Sarah Armstrong, Jake Anderson, Gina

Bartasi, Carlos Calhaz-Jorge, Hung-Chi Chang, Tim Child, Barbara
Collura, Tara Comonte, Alan Copperman, Alice Domar, Niamh Dunne-
Mason, Silke Dyer, Eric Forman, Randi Goldman, James Grifo, Lorin Gu,
Eduardo Hariton, Nicky Hudson, Yu-Ling Huang, Sangita Jindal, Kimura
Tadashi, Kishimoto Sachiko, Kuramoto Takeshi, Sebastiaan Mastenbroek,
Heidi Mertes, Morimoto Yoshiharu, Alan Murray, Kyle Orwig, Allan
Pacey, Dina Radenkovic, Alan Penzias, David Sable, Liz Scheier, Leslie
Schrock, Semba Yukari, Amy Speier, Tammy Sun, David Stern, Diane
Tober, Ayo Wahlberg, Jack Wilkinson, Chia-Ling Wu, Alice Zheng, Amy
Zwanziger, and the teams at HFEA, ESHRE, ICMART and SART.

Some suggested further reading on the subject:

Good practice recommendations for add-ons in reproductive medicine

Cochrane Library review: the effectiveness of IVF add-ons
ART in Europe, 2018
Sex Cells by Rene Almeling
The End of Sex by Henry Greely

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Business
Tesla’s surprising new route to EV domination
A new model :: Become more like the industry you disrupted

Workplace advice from our agony uncle

Bartleby :: From hotdesking to nudity, your office questions answered

Can a Czech billionaire rescue Casino?

Last-chance saloon :: The debt-laden French retail chain looks poised to get a foreign owner

The winners and losers from the $69bn Microsoft-

Activision mega-deal
Shooter to win :: What’s next in the Candy Crush saga?

Startups are producing real dairy without a cow in sight

A new big cheese :: Can precision fermentation eat plant-based milk’s lunch?

A battle of rickshaw apps shows the promise of India’s

digital stack
India’s rickshaw wars :: And its challenges

Hollywood’s blockbuster strike may become a flop

Schumpeter :: Stars v suits

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A new model

Tesla’s surprising new route to EV domination

Become more like the industry you disrupted

Jul 18th 2023 |

IN 2011 TESLA stated an aim of becoming “the most compelling car

company of the 21st century, while accelerating the world’s transition to
electric vehicles”. At the time this was easy to dismiss as crackers. In the
eight years since its founding in 2003 the firm had manufactured a piddling
1,650 EVs. Its first big-selling car, the Model S, had yet to hit the road.
Today it is almost as mad to argue that Elon Musk, the carmaker’s boss
since 2008, has not achieved that goal. His company, a rare insurgent in an
industry with formidable barriers to entry, has grown at neck-snapping
speed. In the first quarter of 2023 Tesla’s Model Y mini-SUV was the
world’s bestselling car. In the second quarter it delivered a total of 466,000
cars, beating analysts’ forecasts (see chart 1). Mr Musk’s promise of 2m
sales this year, up from 1.3m in 2022, no longer seems fanciful. On July
15th the first Cybertruck, an angular, retro-futuristic pickup, rolled off the
production line. Tesla has just unveiled an expansion plan for its German
factory, where it wants to double capacity to 1m vehicles per year.

Besides almost single-handedly reimagining the car, Mr Musk has done the
same to the car industry. His focus on streamlined manufacturing of only a
handful of models has kept costs at bay. Last year Tesla boasted operating
margins of 17%; among non-niche carmakers only Porsche, which churns
out fewer than 1m cars annually, matched its performance.

Mr Musk’s ambition to dominate the auto business—by making 20m cars a

year by 2030, double the current output of today’s top manufacturer,
Toyota, and by creating the go-to self-driving system—certainly compels
investors, who value Tesla at around $900bn. That is down from over $1trn
in early 2022 but still more than the next nine most valuable carmakers put
together. Incumbents are scrambling to electrify their product ranges and to
copy Mr Musk’s vertically integrated approach to production, while fending
off a wave of EV newcomers, many of them Chinese, all trying to be the
next Tesla.
The question now is whether Tesla can keep growing as fast and as
profitably as it has for much longer. In its latest quarterly earnings on July
19th, it reported margins of 9.6%, even lower than the 11.4% it eked out in
the three previous months, as it slashed prices in order to compete with
cheaper rivals (see chart 2). Its advantages as a disruptive tech firm with a
Silicon Valley mindset are in danger of being eroded. To make even 5m-6m
cars a year this decade, a more realistic target than Mr Musk’s goal of 20m,
would require “embracing the techniques of legacy auto”, observes Dan
Levy of Barclays, a bank. In order to remain a disruptive force, Tesla may,
paradoxically, need to become a bit more like the stodgy car business it has
shaken up.

Tesla maintains a lead over its more established rivals in batteries, software
and manufacturing productivity, notes Philippe Houchois of Jefferies, an
investment bank. But competitors are catching up. In some areas, like
marketing and product planning, they have overtaken it, notes Mr
Houchois. When it launched the Model S—large and pricey with big
batteries and a long range—it had the EV market largely to itself.
Nowadays motorists can choose between 500 or so EV models from dozens
of marques. Bernstein, a broker, estimates that around 220 new models may
be launched this year and another 180 in 2024 (chart 3). For Tesla to grow
fast in the face of all this competition will be difficult.

Unlike incumbent carmakers’ “something for everybody” approach, Tesla

manufactures just five models (if you count the Cybertruck) and relies
heavily on two of them. The Model 3, a small saloon, and the Model Y
account for 95% of the vehicles Tesla shifts. By comparison, Toyota’s two
bestsellers, Corolla and RAV4, make up just 18% of the vehicles sold by the
Japanese firm. For Tesla to hit its target of selling a combined 3m-4m
Model 3s and Model Ys, each model would need to control 50% of the cars
in its class ($40,000-60,000 mass-market cars and $45,000-65,000 SUVs,
respectively). According to Bernstein, no carmaker has ever had more than
10% in those two segments.
Off the marque

And both models are ageing. The Model Y is three years old and the Model
3 has just turned six, which makes them less desirable in a business where
novelty has historically counted for a lot. Carmaking’s rule of thumb to
keep sales chugging along is to refresh models every 2-4 years and redesign
them completely every 4-7 years. Tesla’s planned “refresh” of the Model 3’s
styling and its tech innards this year looks late by industry standards.

The company will need to go well beyond its current strategy, of offering
software updates that improve some of its cars’ features, or that add new
ones. This may have done the trick for its original customer base of early-
adopter techies but is unlikely to cut it with the average motorist. One
solution is to offer more options for its existing range. Barclays estimates
that the Model 3 comes in 180 configurations, a fraction of the 195,000
trims for a comparable (petrol-powered) BMW 3 Series saloon. But this
would introduce the sort of complexity Mr Musk has hitherto shunned.

Another route to higher sales is to launch new models, like the Cybertruck
or a low-cost mass-market vehicle—unofficially called the “Model 2” and
with prices starting at $25,000—which Mr Musk has promised to start
selling in the next couple of years. New models, though, come with new
challenges. The relevant pickup market, with global sales of 1.3m,
according to Bernstein, is relatively modest—and the Cybertruck’s bold
styling may limit its appeal. And though low-cost Teslas could expand the
company’s market beyond America, China and Europe, they would almost
certainly generate lower margins, further depressing the company’s overall
profitability. Moreover, granting regional ventures greater autonomy to
manage regional differences in taste, as established carmakers have
historically done, again adds complexity and costs.

Mr Musk may no longer be able to avoid other expensive industry practices.

One is marketing. In contrast to all other big carmakers, which spend
princely sums on ads, Tesla has depended on word-of-mouth and Mr
Musk’s own larger-than-life persona to promote its products. Barclays
reckons that eschewing ads and, by selling directly to buyers, bypassing
dealers, currently saves the company $2,500-4,000 for every car it sells. As
it seeks new customers, and as Mr Musk risks affecting Tesla sales with his
polarising stewardship of Twitter, his $44bn side-project, the company is
likely to forgo some of those savings. Mr Musk has conceded as much,
saying that, for the first time, his company might “try a little advertising”.

Another carmaking staple to which Tesla has belatedly come around is price
cuts. Mr Musk had pledged never to offer discounts or allow inventory to
build up. His company has lately done both. Production exceeded sales in
the past five quarters. After growing at an average annual rate of 60% for
years, quarterly sales volumes expanded by an average of 30-40% between
the second quarter of 2022 and the first quarter of 2023. To shift more
vehicles Mr Musk began slashing prices late last year, by up to 25% on
some models. Sales duly ballooned, by more than 80% in the second
quarter, compared with a year ago. The flipside was those duly contracting
margins. Investors have tolerated Mr Musk’s price cuts more than in the
case of his rivals: on July 17th Ford’s share price fell by 6% after it
announced hefty discounts on its F-150 Lightning EV pickup. They may
not stay so forgiving for ever.

As its various costs rise, Tesla will try to keep cutting them elsewhere,
notably in manufacturing. In March it unveiled what it called the “unboxed
process”, designed to make cars “significantly simpler and more affordable”
by streamlining or even eliminating stages of production. It is unclear what
exactly Mr Musk has in mind. Despite his record of engineering ingenuity,
at least one previous attempt to up-end car manufacturing, by replacing
people with robots for the Model 3, led to what Mr Musk himself candidly
described as “production hell” and near-bankruptcy in 2018.
Mr Musk’s last fresh challenge—and another one he shares with incumbent
Western carmakers—is what to do about China. Tesla, which makes more
than half its cars at its giant factory in Shanghai, no longer seems to hold its
privileged position in the country. It was allowed to set up without the
Chinese joint-venture partner required of other foreign carmakers, at a time
when China needed Mr Musk to supply EVs for Chinese motorists and,
importantly, to encourage China’s own budding EV industry to raise its
game.
That has worked too well. Tesla is thought to have sold 155,000 cars in
China in the second quarter, 13% more than in the previous three months.
But China Merchants Bank International Securities, an investment firm,
reckons its market share may have slipped below 14%, from 16% in the
preceding quarter, as buyers switched to fast-improving home-grown
brands. In a sign that Tesla now needs China more than China needs Tesla,
the company was obliged to sign a pledge on July 6th with other car firms
to stop its price war and compete fairly in line with “core socialist values”.
Tu Le of Sino Auto Insights, a consultancy, says rumours are rife that the
Chinese authorities are pushing back against Tesla’s efforts to increase
manufacturing capacity in China. And that is before getting into the
increasingly fraught geopolitics of Sino-American commerce.

If Tesla is to sell 6m cars a year at an operating margin of 14% by 2030,

which Mr Levy of Barclays thinks possible, it probably needs to avoid at
least some of these pitfalls. It would be foolish to dismiss that eventuality,
given Tesla’s knack for confounding sceptics. It could, for example, offset
part of the decline in sales growth with new revenue streams, such as recent
deals to open its charging network to Ford and General Motors customers.
As brands become defined by the digitally mediated experience of driving
rather than the body shell or handling, its superior software—including, one
day, self-driving systems—may allow it to keep offering fewer models than
its rivals. Mr Le thinks Tesla will mitigate the China risk by manufacturing
more of its cars in Germany and other countries, including low-cost ones.
Tesla has been by far the most compelling car company of the early 21st
century. If it is to hold on to that title, it must work for it. ■

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Bartleby

Workplace advice from our agony uncle

From hotdesking to nudity, your office questions answered

Jul 20th 2023 |

DEAR MAX, I am an extremely nervous public speaker and I was told long
ago that it can help to imagine that my audience is naked. I casually
mentioned this piece of advice to another member of staff the other day and
have now been reported to HR for inappropriate behaviour. What should I
do?

Hmmm. I doubt you are in breach of any rules unless you have told specific
individuals that you are thinking about what they look like without clothes
on. But it’s probably wise not to repeat this piece of advice to anyone else.
That’s not just because it sounds so dodgy. In my experience it’s also a
hopeless tip: you will almost certainly end up feeling even more nauseous.
It is better, and safer, to imagine people wearing many more clothes and
ideally a balaclava, too.
My new team-mates try hard to establish an atmosphere of psychological
safety. I genuinely agree with this aim, but one of our rules is that people
can only talk in meetings if they are holding a wooden gourd. Whenever I
am handed this ridiculous thing, I start laughing uncontrollably. Do you
have any advice?

If your team are truly believers in psychological safety, then you should be
able to tell them that gourd-handling is not what you came into the
workplace to do. Perhaps you could suggest another way of giving the floor
to people without interruption? Is there another object that you might find
less absurd? If it is too difficult to have an honest conversation with them,
then say, “Oh gourd, not this again,” when it comes your way and before
you begin sniggering. With luck your colleagues will just think you have a
lame sense of humour.

I am a repressed older man with no real capacity to feel. This barren

emotional landscape has served me well for years. Now everyone around
me keeps talking about the importance of kindness and authenticity, and I
don’t understand what the hell is going on. Please help.

It is true that the workplace has changed in recent years: empathy and
compassion have become part of the lexicon of the modern workplace. But
I want you to know that you are not alone; very many people share your
lack of pain. There is no stigma attached to being unable to interrogate your
own feelings or to trundling along in a state of emotional vacuity; it’s a
condition also known as being male. It’s OK to feel invulnerable.

During the pandemic I decided to move to Montana in order to fulfil my

dreams and work remotely from a ranch I bought on credit. My company is
now requiring people to come into the office two days a week.
Unfortunately, the office is in New York and my commute takes about 12
hours each way if I’m lucky. What should I do?

The obvious answer is that you need to change either your job or your
location. But really you need to re-examine the way you take decisions. You
are terrible at it.
My company has introduced hot-desking at our new post-pandemic office.
This means I have been given a “hotbox” to carry my photos and the team
gourd to whichever desk I will be working at that day. Each morning I take
my hotbox out of my locker and am struck afresh by the futility of life. Can
you help?

This is a surprisingly common complaint from my correspondents.

Hotboxes have to be small enough to carry: that means there is usually
room only for a couple of personal possessions. To be one of a crowd
wandering around in search of a place to settle down, with your existence
distilled down to a handful of mementoes and a cactus, is profoundly
depressing. It’s like an episode of “The Last of Us” with chinos. My advice
would be to ditch the hotbox altogether and sit at a bare desk. You will
work just as well and suffer from much less angst.

Last month I got an unexpected promotion and went out with some friends
to celebrate. The evening got a little out of hand and I woke in the morning
to find that I had got a tattoo of my company logo. I don’t expect you to be
able to help, but I bitterly regret the decision and just wanted to tell
someone.

I followed up with this letter-writer directly to find out a little more. If the
company in question had a fashionable brand, a logo might at least be
passed off as a cool consumer choice. And with luck, the tattoo would be in
a discreet place. No dice. It turns out that my correspondent works for an
auditing firm. He has the letter “E” emblazoned on one eyelid, and the letter
“Y” on the other. You can see how that might have seemed really clever at
the time. I cannot help this poor wretch but I’ll be back with more of your
workplace dilemmas as soon as I have made them up. ■

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

Executive coaching is useful therapy that you can expense (Jul 13th)
How white-collar warriors gear up for the day (Jul 6th)
The potential and the plight of the middle manager (Jun 29th)

Also: How the Bartleby column got its name

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Last-chance saloon

Can a Czech billionaire rescue Casino?

The debt-laden French retail chain looks poised to get a foreign owner

Jul 20th 2023 | BERLIN

IT IS SOMETHING of a revolution in the country which once deemed

yogurt-making to be a strategic industry. For the first time in the history of
the fifth republic one of France’s big retail chains will be in foreign hands.
Daniel Kretinsky, a Czech tycoon who made his fortune investing in coal
and natural gas, is on the verge of taking control of the Casino group, which
includes a chain of hypermarkets, as well as Monoprix and Franprix, two
other retail chains, and convenience stores.

In May Casino, collapsing under a mountain of debt, entered talks with

creditors, shareholders and the French state to shore up its balance-sheet.
Mr Kretinsky, whose existing 10% stake makes him the firm’s second-
biggest shareholder, joined forces with Marc Ladreit de Lacharrière, a
fellow billionaire whose holding company, Fimalac, is the third-biggest, to
present a rescue plan. A trio of French tycoons, Xavier Niel, Matthieu
Pigasse and Moez-Alexandre Zouari, came out with a rival offer, with the
backing of Attestor, a hedge fund that owns a big slug of Casino’s debt.

On July 15th Mr Kretinsky submitted a revised plan, this time with the
backing of Attestor, which defected from its erstwhile partners. He and his
collaborators are proposing to inject €925m ($1bn) into the ailing business
in return for a 53% stake. A further €275m is likely to be provided by other
creditors, but backstopped by Mr Kretinsky, Mr Ladreit de Lacharrière and
Attestor. They will also convert €4.7bn of Casino’s debt into equity.

Unable to match this proposal, Messrs Niel, Pigasse and Zouari withdrew
their bid the following day. They blamed, among other things, unwarranted
scepticism towards their offer from Casino’s management. In fact, says
Clément Genelot of Bryan, Garnier & Company, an investment bank, the
trio put forth a less attractive proposition, with a more meagre capital
injection and without explaining where some of the money would come
from.

With his competitors out of the picture, Mr Kretinsky looks poised to

prevail. He wants to put Philippe Palazzi, a former executive at Metro, a big
German retailer of which the Czech mogul owns more than 40%, and Jean-
Paul Mochet, who used to run Monoprix and Franprix, in charge of the
turnaround.

The new bosses will have their work cut out. Mr Genelot thinks that
reviving Casino will require a bigger cash injection than the €1.2bn
proposed in Mr Kretinsky’s plan. The cost could be nearer €3bn, he
reckons. To make its shops more attractive the company needs not just to
remodel them but also lower its prices, which are 40% higher than in rival
supermarkets as a result of Casino’s desperate effort to boost margins. It
must also win back suppliers put off by late payments. Within a year the
future owners may either need to cough up more cash or sell off a valuable
asset such as Monoprix, a fixture of French city centres, where shoppers
can stock up on quality garb and grub.

One problem Casino may be able to avoid is meddling by the French

government. In early 2021 Bruno Le Maire, the finance minister, balked at
the proposed $20bn acquisition of Carrefour, another one-time French
supermarket star, by Alimentation Couche-Tard of Canada. At the time he
argued that the government wanted to preserve France’s food security and
sovereignty. This time Mr Le Maire has stressed the need to be “vigilant”
about Casino’s 53,000 jobs in France—which, together with Casino’s
headquarters in the backwater city of Saint-Etienne, Mr Kretinsky has
promised to preserve. But the state has so far mostly stayed out of it,
possibly because it is keenly aware that the only remaining alternative to
Mr Kretinsky’s bid is liquidation.

“For shareholders this is a huge destruction of value,” says Tomás Mannion

of Sarria, a research firm. They will be left with 1.8% of equity and a tiny
fraction of their original investment. That includes Jean-Charles Naouri,
Casino’s chairman, chief executive and majority shareholder, who will lose
control of the group after 30 years. Despite a doctorate in mathematics, Mr
Naouri, considered one of France SA’s most formidable intellects, was
unable to make Casino’s sums add up. Mr Kretinsky is wagering that he can
do better. ■

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Shooter to win

The winners and losers from the $69bn Microsoft-

Activision mega-deal
What’s next in the Candy Crush saga?

Jul 20th 2023 |

THE GAME is on. Or so ruled an American appeals court on July 14th

when it threw out another effort by the Federal Trade Commission to block
Microsoft’s $69bn acquisition of Activision Blizzard, a games developer,
which a federal judge had cleared three days earlier. A few days later Sony
and Microsoft agreed to keep “Call of Duty”, Activision’s hit first-person
shooter, on Sony’s PlayStation console, increasing the pressure on Britain’s
trustbuster, the last holdout, to approve the merger.

Microsoft’s truce with Sony follows similar agreements with Nintendo,

another Japanese gaming company, and Nvidia, an American chipmaker
which also owns a cloud-based gaming service. It allays Sony’s fear that it
would be cut off from “Call of Duty”, which reportedly generated $1.5bn in
revenues for Sony in 2021. However, it is not a clear-cut victory for the
PlayStation-maker. Its arrangement with Microsoft is limited to “Call of
Duty”, and does not extend to Activision’s other blockbusters, such as
World of Warcraft.

For its part, Microsoft hopes the deal will help it Candy Crush it in mobile
gaming. In 2023 global spending on mobile games is forecast to hit $125bn,
around two-thirds of the industry’s overall revenues, according to Omdia, a
research firm. Activision’s popular mobile apps, including Candy Crush and
a smartphone version of “Call of Duty”, may enable Microsoft to conquer
Asia, Sony’s historic stronghold. It had better, for the company is losing the
console wars. Its Xboxes have consistently been outsold by PlayStations.
This year Sony is expected to sell 22m PlayStation 5s, twice the forecast for
the Xbox. Whether mobile supremacy is worth the $69bn price tag is
another matter. Giant deals often destroy value in a way that puts the most
trigger-happy “Call of Duty” pros to shame.

The biggest winners from the deal, besides Activision shareholders, may be
other game developers, such as Take Two and Electronic Arts. Their
popular franchises, Grand Theft Auto and FIFA, respectively, make the
companies ripe targets for acquisition, which Microsoft’s regulatory success
makes less likely to be challenged. Share prices across the industry have
been rising since the American ruling, possibly in anticipation of a takeover
spree. ■

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A new big cheese

Startups are producing real dairy without a cow

in sight
Can precision fermentation eat plant-based milk’s lunch?

Jul 20th 2023 |

IT LOOKS LIKE cheese. It smells like cheese. It tastes like cheese

(specifically mature cheddar). And it is cheese—at least under the
microscope. “Synthetic dairy” is made with the same ingredients as the
conventional sort. But instead of getting the main ingredient from a live
ruminant, Better Dairy, a three-year-old British cheesemaker, derives some
of it from yeast. These microbes are fed sugar, which they then convert into
milk proteins in a process which is similar to brewing.

Plenty of milk alternatives have hit café counters and supermarket shelves
in recent years. Plant-based beverages made from things like soyabeans,
almonds and oats make up 15% of all milk sales by value in America and
11% in western Europe, reckons the Good Food Institute (GFI), a think-
tank. Yet lovers of real dairy, which plant-derived products cannot quite
mimic, still need cows, goats and ewes. “Precision fermentation”
companies like Better Dairy hope to change that—and take a fat slice of the
$900bn global dairy market.

Remilk, an Israeli startup, has recently received approval to sell its fare in
America, Israel and Singapore. Perfect Day, a Californian one, already sells
synthetic milk, ice cream and cream cheese. It recently signed contracts to
sell its proteins to Nestlé, a food giant, and to Starbucks. In its latest
funding round two years ago it raised $350m, valuing it at $1.6bn. All told,
precision fermenters have raised nearly $3bn from investors since the start
of 2021.

Synthetic dairy dispenses with certain undesirable aspects of milk and milk-
making. Lactose, to which some people are allergic, and hormones, which
have been linked to some adult diseases, can be stripped out. Fermentation
tanks do not need to be pumped full of antibiotics and can be set up
anywhere—handy at a time of rising worries about food security and
climate change. The process uses less water and, because it requires less
energy and less land, emits fewer greenhouse gases than conventional dairy
production, which is responsible for more than 3% of annual planet-
warming emissions, almost twice as much as aviation (and a lot of it from
belchy cows).

One challenge for the innovators is winning consumers’ trust. Steel tanks
lack the familiarity of cows. A quarter of respondents to a survey in
America aren’t keen to try “precision-fermented” fare (which may explain
why producers prefer to call it “animal-free”). Regulators create hurdles,
too. Although the startups are confident they will get the green light—the
technique is already used for flavourings and insulin—they worry about the
time this will take and about labelling disputes. According to GFI, even in
America, the land of free enterprise, it takes about nine months. It Europe it
takes twice as long; the first products will not reach European supermarkets
until 2024.

The technology is also a work in progress. For now Better Dairy’s cheddar
still uses bovine casein, one of the proteins in milk; the firm is working on a
synthetic version that would make its cheese properly vegan. And the
process remains costly. A fermenter that can hold about 30 litres of milk
can cost £150,000 ($190,000). Buying a cow, which can produce about as
much in a day, will set you back £1,600. ■

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India’s rickshaw wars

A battle of rickshaw apps shows the promise of

India’s digital stack
And its challenges

Jul 20th 2023 |

IN INDIA’S STARTUP capital of Bangalore, auto-rickshaw drivers are no

less prized than software engineers. Given the city’s chaotic traffic,
rickshaws are sometimes the fastest way to get around. But finding one isn’t
easy. Threats, pleas and moral appeals are necessary before a driver accepts
a ride. The experience is no better with Ola and Uber, two ride-hailing firms
which offer rickshaw services for a commission.

Help is at hand. An app called Namma Yatri, launched in November by the

rickshaw drivers’ union, directly connects riders to drivers, with no
commission for digital middlemen. It averages around 68,000 trips a day,
from only 2,000 at the start of the year, and boasts more than 78,000 drivers
and 1.4m customers on its platform.
Namma Yatri is built on a new open network that represents the next phase
of the “India stack”—a set of digital services created by the state. With a
national biometric system and a hugely successful payments network in
place, the government has now set its sights on reshaping India’s e-
commerce market. The Open Network for Digital Commerce (ONDC)
allows smaller retailers to reach buyers, bypassing private marketplaces like
Amazon. In theory, it unbundles every part of the shopping process,
allowing shoppers to choose from thousands of sellers and select delivery
options by different providers rather than rely on overweening incumbents.

ONDC is still new. Besides the ride-sharing app, early pilots have focused
on food and local grocery deliveries. Questions abound about who bears
responsibility when things go wrong, from fake products to payment
disputes. No app has so far reached the scale to match the incumbents,
which are also toying with the platform. In February Amazon announced
that it would integrate its logistics services with ONDC. In April PhonePe,
a Walmart-backed payments system, launched a local delivery app on the
open network. Still, the Indian government’s aim seems clear: it desires a
noisy digital bazaar instead of one with a few big monopolies.

Or does it? Piyush Goyal, the commerce minister, wants big e-commerce
firms to use ONDC for all their operations. Fence-sitters risk being banned
from the platform. He has also vowed to use the “full force of the
government” to promote it, putting Amazon and Flipkart on notice. So
much for openness and competition. ■

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Schumpeter

Hollywood’s blockbuster strike may become a flop

Stars v suits

Jul 19th 2023 |

MUNCHING POPCORN, a crowd of glamorous movie people and

somewhat less glamorous journalists gathered in a London cinema on July
13th for the premiere of “Oppenheimer”, a new film from Universal
Pictures. As the audience waited for the entrance of the movie’s stars—
Cillian Murphy, Emily Blunt, Matt Damon and others—they were greeted
instead by an apologetic Christopher Nolan, the film’s director. His cast had
just gone home, he announced. “They’re off writing their signs, to join the
picket lines.”

The strike called moments earlier by America’s Screen Actors Guild, which
coincides with one by the Writers Guild of America that began in May, has
detonated a bomb under America’s entertainment industry. The
reverberations will travel much farther: nine of the ten biggest box-office
hits worldwide last year were American-made, and American streaming
services now reach into living rooms everywhere. As the stars face off
against the studios, the world’s great entertainment machine has ground to a
halt.

The last time writers and actors went on strike together Ronald Reagan was
president—not yet of the United States, but of its actors’ union. The
argument then, in 1960, was about television, and how big-screen actors
should be compensated when their work was replayed on the small screen.
Today’s confrontation is also about new technology.

One concern is artificial intelligence. Writers and actors want guarantees

that it won’t be used to churn out scripts or clone performers. The bigger
argument is over streaming. The “streaming wars” have seen a surge in
content spending, as century-old studios compete for subscribers with deep-
pocketed new rivals like Apple and Amazon. Worldwide, TV and film
companies spent more than $230bn on programming last year, nearly
double their expenditure a decade earlier, estimates Ampere Analysis, a
research firm. Jobs in American show business are growing about twice as
fast as employment overall.

Some “talent” still feel short-changed. Streamers make generous upfront

payments, but they offer a smaller share in their projects’ future success. So
whereas an appearance in a flop is much better paid than it was a decade
ago, being part of a smash hit no longer means being set up for life. And
although the streamers’ output tends to be creatively fulfilling, with more
potential for awards than broadcast TV, their shorter seasons make work
precarious. Actors and writers want higher minimum wages and a success-
based payment when shows are released.

On the face of it they are in a strong position. Without writers, the creative
pipeline is empty. Without actors, works-in-progress like Ridley Scott’s
“Gladiator” sequel have been shut down. Even completed films will
struggle without stars to promote them. Disney had to rustle up entertainers
in Mickey and Minnie costumes to walk the red carpet at the premiere of
“Haunted Mansion” on July 15th. The Venice film festival next month will
be a lonely affair. The Emmy awards, in September, could be derailed;
some wonder if the strike might even last until the Oscars, next March.
Unsurprisingly, the striking stars are also proving better at communicating
their concerns than the suits in the studios. Fran Drescher, current president
of the actors’ union, drew on her years starring as “The Nanny” to scold
“disgusting” studio chiefs for their fat salaries. Bob Iger, Disney’s boss,
responded with an interview from a Sun Valley getaway known as
“billionaires’ summer camp”; around the same time news leaked that he
recently commissioned a new yacht.

Yet the stars will struggle more than they did when Reagan was in charge.
Strikes are less disruptive to TV schedules now that there is no longer a
schedule to disrupt. The on-demand era means viewers face a sea of choice
on opening their apps; any gaps are less obvious. Streaming has also made
Hollywood less reliant on America, both in terms of its audience and in
terms of production. Netflix is the most extreme example: more than two-
thirds of its 238m subscribers live overseas, and nearly two-thirds of the
shows it commissioned in the past 12 months are being made abroad,
according to Ampere Analysis. (It may even be happy to shift its viewers’
consumption away from expensive American productions and towards to
these lower-cost shows, speculates one sometime rival.)

In a world dominated by franchises, actors also wield less economic clout

than they used to. Last month Warner Bros replaced its Superman; Sony has
fielded multiple Spider-Men (the most recent is animated). As Anthony
Mackie, who plays Captain America, has put it: “The evolution of the
superhero has meant the death of the movie star.” And as audiences tire of
superheroes, studios are finding new franchises. This year’s highest-earning
movie so far is Universal’s animated reboot of “Super Mario Bros”.
Cut! Cut costs!

Above all, the distressed state of the entertainment business means studios
are in no shape to increase their outgoings. Big titles like “Indiana Jones”
continue to fizzle at the box office, which this year is expected still to be a
quarter lower than before the pandemic. The broadcast and cable-TV
businesses are in terminal decline. In his Sun Valley interview Mr Iger was
frank about their future: “The business model that forms the underpinning
of that business, and that has delivered great profits over the years, is
definitely broken,” he said. Wall Street has begun to demand that streamers
deliver not just growth but profit, causing an almighty rush to trim costs.
Even before the strike, projects were being cancelled. Last year Warner
Bros canned a completed “Batgirl” film. The industrial action provides
helpful cover for more cost-slashing: “A lot of shareholders and executives
are happy to clean up their balance-sheets,” says one former streaming
executive. The actors are delivering Oscar-worthy performances at the
picket lines. This time, they face a tough crowd. ■

Read more from Schumpeter, our columnist on global business:

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)
Meet the world’s most flirtatious sovereign-wealth fund (Jun 29th)

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

schumpeter@economist.com. And here is an explanation of how the
Schumpeter column got its name.

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Finance & economics

Your employer is (probably) unprepared for artificial
intelligence
Machine dreams :: That is bad news for your earnings—and the broader economy

How much trouble is China’s economy in?

A feel-bad recovery :: Growth is faltering and the country is flirting with deflation

The dollar’s dip will not become a sustained decline

Buttonwood :: Two pillars of strength hold up the greenback

Big tech’s dominance is straining the logic of passive

investing
Balancing act :: Both index providers and fund managers must adjust to the dominance of a
few firms

America’s big banks are in rude health—with one

exception
What crisis? :: Results highlight difficulties at the country’s most famous financial institution

Instant payments finally reach America with FedNow

FedLate :: The country’s banks are not entirely on board

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Machine dreams

Your employer is (probably) unprepared for

artificial intelligence
That is bad news for your earnings—and the broader economy

Jul 16th 2023 | Boston and Tokyo

TO UNDERSTAND THE impact that artificial intelligence may have on

the economy, consider the tractor. Historians disagree about who invented
the humble machine. Some say it was Richard Trevithick, a British
engineer, in 1812. Others argue that John Froelich, working in South
Dakota in the early 1890s, has a better claim. Still others point out that few
people used the word “tractor” until the start of the 20th century. All agree,
though, that the tractor took a long time to make a mark. In 1920 just 4% of
American farms had one. Even by the 1950s less than half had tractors.

Speculation about the consequences of AI—for jobs, productivity and

quality of life—is at fever pitch. The technology is awe-inspiring. And yet
AI’s economic impact will be muted unless millions of firms beyond tech
centres like Silicon Valley adopt it. That would mean far more than using
the occasional chatbot. Instead, it would involve the full-scale
reorganisation of businesses, as well as their in-house data. “The diffusion
of technological improvements”, argues Nancy Stokey of the University of
Chicago, “is arguably as critical as innovation for long-run growth.”

The importance of diffusion is illustrated by Japan and France. Japan is

unusually innovative, producing on a per-person basis more patents a year
than any country bar South Korea. Japanese researchers can take credit for
the invention of the QR code, the lithium-ion battery and 3D printing. But
the country does a poor job of spreading new tech across its economy.
Tokyo is far more productive than the rest of the country. Cash still
dominates. In the late 2010s only 47% of large firms used computers to
manage supply chains, compared with 95% in New Zealand. According to
our analysis, Japan is roughly 40% poorer than would be expected based on
its innovation.

France is the opposite. Although its record on innovation is average, it is

excellent at spreading knowledge. In the 18th century French spies stole
engineering secrets from Britain’s navy. In the early 20th century Louis
Renault visited Henry Ford in America, learning the secrets of the car
industry. More recently, former AI experts at Google and Meta founded
Mistral AI in Paris. France also tends to do a good job of spreading new
tech from the capital to its periphery. Today the productivity gap in France
between a top and a middling firm is less than half as big as in Britain.

During the 19th and 20th centuries businesses around the world became
more French, with new technologies diffusing ever faster. Diego Comin and
Martí Mestieri, two economists, find evidence that “cross-country
differences in adoption lags have narrowed over the last 200 years.”
Electricity swept across the economy faster than tractors. It took just a
couple of decades for personal computing in the office to cross the 50%
adoption threshold. The internet spread even faster. Overall, the diffusion of
technology helped propel productivity growth during the 20th century.
Since the mid-2000s, however, the world has been turning Japanese. True,
consumers adopt tech faster than ever. According to one estimate TikTok, a
social-media app, went from zero to 100m users in a year. ChatGPT was the
fastest-growing app in history until Threads, a rival to Twitter, launched this
month. But firms are increasingly cautious. In the past two decades all sorts
of mind-blowing innovations have come to market. Even so, according to
the latest official estimates, in 2020 just 1.6% of American firms employed
machine learning. In America’s manufacturing sector just 6.7% of
companies use 3D printing. Only 25% of business workflows are on the
cloud, a number that has not budged in half a decade.

Horror stories abound. In 2017 a third of Japanese regional banks still used
COBOL, a programming language invented a decade before man landed on
the moon. Last year Britain imported more than £20m-($24m-) worth of
floppy disks, MiniDiscs and cassettes. A fifth of rich-world firms do not
even have a website. Governments are often the worst offenders—insisting,
for instance, on paper forms. We estimate that bureaucracies across the
world spend $6bn a year on paper and printing, about as much in real terms
as in the mid-1990s.
Best and the rest

The result is a two-tier economy. Firms that embrace tech are pulling away
from the competition. In 2010 the average worker at Britain’s most
productive firms produced goods and services worth £98,000 (in today’s
money), which had risen to £108,500 by 2019. Those at the worst firms saw
no rise. In Canada in the 1990s frontier firms’ productivity growth was
about 40% higher than non-frontier firms. From 2000 to 2015 it was three
times as high. A book by Tim Koller of McKinsey, a consultancy, and
colleagues finds that, after ranking American firms according to their return
on invested capital, the 75th percentile had a return 20 percentage points
higher than the median in 2017—double the gap in 2000. Some companies
see huge gains from buying new tech; many see none at all.
Although the economics can sound abstract, the real-world consequences
are familiar. People stuck using old technologies suffer, along with their
salaries. In Britain, average wages at the least productive 10% of firms have
fallen slightly since the 1990s when adjusted for inflation—even as average
wages at the best firms have risen strongly. According to Jan De Loecker of
KU Leuven and colleagues, “the majority of inequality growth across
workers is due to increasing average wage differences between firms”.
What, then, has gone wrong?
Three possibilities explain lower diffusion: the nature of new technology,
sluggish competition, and growing regulation. Robert Gordon of
Northwestern University has argued that the “great inventions” of the 19th
and 20th centuries had a far bigger impact on productivity than more recent
ones. The problem is that as technological progress becomes more
incremental, diffusion also slows, since companies have less incentive and
face less competitive pressure to upgrade. Electricity provided light and
energy to power machines. Cloud computing, by contrast, is needed only
for the most intensive operations. Newer innovations, like machine
learning, may be trickier to use, requiring more skilled workers and better
management.

Business dynamism fell across the rich world in the first decades of the 21st
century. Populations aged. Fewer new firms were set up. Workers moved
companies less frequently. All this reduced diffusion, since workers spread
tech and business practices as they move across the economy.
In industries run or heavily managed by the government, technological
change happens slowly. As Jeffrey Ding of George Washington University
notes, in the centrally planned Soviet Union innovation was world-beating
—think of Sputnik—but diffusion was non-existent. The absence of
competitive pressure blunted incentives to improve. Politicians often have
public-policy goals, such as maximising employment, that are inconsistent
with efficiency. Heavily regulated industries make up a big chunk of
Western economies today: such sectors, including construction, education,
health care and utilities, account for a quarter of American GDP.
Could AI break the mould, diffusing across the economy faster than other
recent technologies? Perhaps. For almost any firm it is easy to dream up a
use-case. No more administration! A tool to file my taxes! Covid-19 may
have also injected a dose of dynamism into Western economies. New firms
are being set up at the fastest pace in a decade, and workers are swapping
jobs more often. Tyler Cowen of George Mason University adds that
weaker firms may have a particular incentive to adopt AI, because they
have more to gain.

AI can also be incorporated into existing tools. Many coders—maybe most

—already use the technology on a daily basis owing to its integration in
everyday coding instruments through Github’s Copilot. Word processors,
including Google Docs and Microsoft Word, will soon roll out dozens of AI
features.
Not a dinner party

On the other hand, the most significant benefits from new forms of AI will
come when firms entirely reorganise themselves around the new
technology; by adapting AI models for in-house data, for example. That
will take time, money and, crucially, a competitive drive. Gathering data is
tiresome and running the best models expensive—a single complex query
on the latest version of ChatGPT can cost $1-2. Run 20 in an hour and you
have passed the median hourly American wage.

These costs will fall, but it could take years for the technology to become
sufficiently cheap for mass deployment. Bosses, worried about privacy and
security, regularly tell The Economist that they are unwilling to send their
data to modify models that live elsewhere. Surveys of small businesses are
not encouraging. One, by GoDaddy, a web-hosting company, suggests that
around 40% of those in America are uninterested in AI tools. The
technology is undoubtedly revolutionary. But are businesses ready for a
revolution? ■

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markets, sign up to Money Talks, our weekly subscriber-only newsletter.
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A feel-bad recovery

How much trouble is China’s economy in?

Growth is faltering and the country is flirting with deflation

Jul 17th 2023 |

WHEN JANET YELLEN visited Beijing this month she did her bit for the
local restaurant trade. America’s treasury secretary dined with her team at
an establishment known for Yunnanese dishes, which subsequently unveiled
a “God of Wealth” menu in her honour. She also hosted a lunch with female
entrepreneurs and economists (including a representative of The Economist
Group). Although restaurants have prospered since China dropped its covid
controls at the end of last year, the gods of wealth have been less kind to the
rest of the country’s economy—as GDP figures released on July 17th
revealed.

They showed that the economy grew by 6.3% in the second quarter
compared with a year earlier. That looks impressive. But it was slower than
expected. And the figure was flattered by a low base in 2022, when
Shanghai and other cities were locked down. The economy grew by only
0.8% in the second quarter compared with the first three months of the year,
an annualised rate of merely 3.2% (see chart 1).
Obstacles to growth were both foreign and domestic. The dollar value of
China’s exports, for example, shrank by more than 12% in June, compared
with a year earlier—the sharpest drop since the height of the pandemic in
February 2020. “The recovery of the world economy has been sluggish,”
said Fu Linghui of the National Bureau of Statistics, by way of explanation.
Meanwhile, the recovery of China’s property market is lost in the cabbage
patch. Sales of flats fell by 27% in June compared with a year earlier. They
are now running well below the pace economists think would be justified
by underlying demand, given China’s urbanisation and the widespread
desire for better accommodation.

China’s “nominal” growth, before adjusting for inflation, was also weaker
than the inflation-adjusted figure; something that has happened only four
times in the past 40 quarters. It suggests that the price of Chinese goods and
services is falling. Indeed, it implies they fell by 1.4% in the year to the
second quarter, which would be the sharpest drop since the global financial
crisis (see chart 2).

Consumer prices did not rise at all in June compared with a year earlier, and
producer prices—charged at the factory gate—fell by 5.4%. China’s
statisticians have blamed this weakness on changes in global commodity
prices, such as the falling cost of oil. That is an unconvincing explanation
for the weakness of China’s nominal growth, because GDP should count
only the value added to a good in China itself, thus excluding the value of
imported commodities. Perhaps deflationary pressures are spreading. Or
perhaps China’s statisticians have got their sums wrong.
Mulish response

Some members of the public feel the economy is doing even worse than the
official figures suggest. There is a “temperature difference” between the
macroeconomic data and “micro feelings”, as one commentator put it. In
response, Mr Fu of the National Bureau of Statistics pointed out that
macroeconomic data are more comprehensive and reliable than “micro
feelings”—prompting a netizen to joke that if state statisticians say you are
okay, you should adjust your feelings accordingly.
The government’s own feelings towards the economy are hard to read.
During the global financial crisis, when world trade fell off a cliff, China’s
authorities swooped in with vast stimulus, which propelled economic
growth and spilled over to the rest of the world. Today they seem in no such
rush. The country’s central bank has cut interest rates a little. Tax breaks on
electric vehicles have been extended. The state’s planning agency has held
pep talks this month with firms ranging from Baidu, an internet giant, to
Spring Tour, a tourism agency, and Donkey Meat Cao Catering, a firm
serving donkey burgers. Leaders have released 31 guidelines exhorting
officials to promote the private sector. But no detailed fiscal-stimulus plan
has emerged.

This lack of urgency may reflect the government’s enduring confidence in

the recovery. Officials may believe that the economy still has enough
momentum to meet their targets for the year, including for GDP growth of
around 5%. The government’s restraint may also betray its misgivings about
additional stimulus. Policymakers do not want a lending and spending spree
to erode the profitability of state-owned banks or undermine financial
discipline among local governments.

The government can draw some comfort from the job market. China’s
economic reopening so far has been led by services industries, such as
restaurants, that tend to be labour-intensive. China’s cities have added 6.8m
jobs in the first six months of the year, more than half of the government’s
12m target for the year. Although unemployment among urban youth
increased to 21.3%, the overall jobless rate remained steady at 5.2% in
June, below the target of 5.5%.

But the labour market can be a lagging indicator of economic momentum. If

growth remains weak, unemployment will eventually edge up. By that
point, the government will be forced to do more to revive the economy.
Options include further cuts to interest rates, a weaker currency and extra
support for property developers.

The problem is that such “quick and easy” measures might not be enough,
argue Yu Xiangrong and his colleagues at Citigroup, a bank. Slower, more
difficult options include cash handouts to poor families, as well as
additional investment in green infrastructure, financed by state-guided
policy banks or even—heaven forfend—central-government bonds. Chinese
policymakers are willing to tolerate a temperature difference between
official data and public feelings. They will be unwilling to tolerate a glaring
gap between the economy and their targets. ■

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Buttonwood

The dollar’s dip will not become a sustained

decline
Two pillars of strength hold up the greenback

Jul 20th 2023 |

THE ENDLESS queues, filled with American accents, outside Dishoom, a

chain of upmarket British curry houses that has gained international fame
thanks to TikTok, tell a story which anyone who has recently visited Paris,
Rome or Tokyo can confirm: the dollar is mighty. American tourists are
rushing to take advantage of bargain sterling-, euro- and yen-denominated
holidays.

Those who booked early will have scored the biggest bargains, however.
The dollar is still strong by the standards of the past two decades. But since
its peak in September, it has dropped by 13% against a basket of currencies.
The sell-off accelerated last week, when the dollar fell by 3%—a big move
for a currency. The DXY index, which measures the currency against six
others, is at its lowest since April 2022, just after the Federal Reserve
started to raise interest rates.

The recent weakening is welcome news for those parts of the world,
particularly developing countries, which rely on financing in foreign
currencies. Emerging-market issuance of dollar bonds hit an 11-year low in
2022. Frontier markets—the smallest, least liquid and often poorest such
markets—issued less than $10bn of dollar bonds last year, down from
$30bn in 2021.

Sadly for these countries, there is reason to doubt the dollar’s dip is the start
of a new phase. To understand why, consider what caused the fall. The
recent sell-off was prompted by American inflation data, released on July
12th, which showed consumer prices rose by just 3% year-on-year in June
—still above the Fed’s 2% target, but the lowest rate in over two years, and
below analysts’ expectations. Investors now wonder if the Fed is about to
declare victory in its fight against inflation.

Another reason for the recent decline is that inflation is falling more slowly
outside America, particularly in Britain and the euro zone. Even in the land
of low inflation, Japan, consumer prices rose by 3.2% year-on-year in May
—higher than America’s figures a month later. Central bankers in such
countries may have more fighting ahead. Higher rates would drag
investment from dollar-denominated assets into higher-yielding currencies.

The third reason for the decline is middling American growth. The
country’s GDP is expected to increase by a modest 1.3% this year. Stephen
Jen, now of Eurizon Capital, an asset-management firm, first posited the
idea of a “dollar smile” a couple of decades ago. The theory suggests that
when America is powering ahead of the world, the dollar strengthens as
investors pour in. But the currency can also strengthen when the world’s
largest economy is in the doldrums, since a depressed American economy is
a threat to global financial stability. That paradoxically adds to demand for
the country’s safe Treasury bonds. Mr Jen today sees the American
economy’s lukewarm growth, which puts it in the middle of the smile, as a
sign of dollar weakness to come.
Yet these driving forces are hardly guaranteed to continue. Each could
suddenly reverse, causing the dollar to strengthen once more. If inflation
proves to be stickier than expected in America, for instance, and stops
dropping quite so rapidly, Fed policymakers have made clear that they
would be willing to keep raising interest rates aggressively. Moreover, it is
still possible that America’s economy will slow under the weight of higher
interest rates, despite the remarkable resilience it has so far displayed.

Indeed, it may transpire that other rich economies are simply running a few
months behind America. American prices rose more rapidly than those
elsewhere in 2021, and the Fed began raising interest rates earlier than most
central banks the next year. Britain’s latest inflation figures, released on
July 19th, showed prices rising by 7.9% year-on-year in June, below the
8.2% forecast. Whether an investor believes the surge in inflation was
caused by a transitory burst of supply-side factors, or is the result of
monetary and fiscal largesse, they will think there is a good chance inflation
elsewhere will follow America’s downwards trend. If this does happen,
monetary policy in America and the rest of the world would look more
similar.

The global situation would also look similar to that found—with the
exception of recent years—since the dollar’s sharp rally in late 2014 and
throughout 2015. Now, as then, the American economy is stronger than its
competitors and American stocks are more favoured than those elsewhere.
With these two pillars of strength in place, it is difficult to imagine a
markedly weaker dollar.■

Read more from Buttonwood, our columnist on financial markets:

The mystery of gold prices (Jul 13th)
Can anything pop the everything bubble? (Jul 4th)
Americans love American stocks. They should look overseas (Jun 26th)

Also: How the Buttonwood column got its name

This article was downloaded by calibre from https://www.economist.com/finance-and-

economics/2023/07/20/the-dollars-dip-will-not-become-a-sustained-decline
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Balancing act

Big tech’s dominance is straining the logic of

passive investing
Both index providers and fund managers must adjust to the dominance of a
few firms

Jul 20th 2023 |

“DON’T LOOK for the needle in the haystack. Just buy the haystack!” So
wrote Jack Bogle, who founded Vanguard Asset Management in 1975 and
brought index investment to a mass market. Subsequent decades proved
him right. “Passive” strategies that track market indices, rather than trying
to beat them, now govern nearly a third of the assets managed by global
mutual funds. Since a stockmarket index weighted by company size is just
the average of underlying share owners’ performance, it is impossible for
investors, in aggregate, to beat it. In the long run, even professional fund
managers do not.
Yet today’s haystack has grown unusually top-heavy. Since the start of the
year, America’s seven biggest corporate behemoths—Alphabet, Amazon,
Apple, Meta, Microsoft, Nvidia, and Tesla—have left the rest of the
stockmarket in the dust. Giddy on AI optimism, investors have raised these
firms’ combined value by 69%, a much larger increase than that seen in
broader indices. The “magnificent seven” now account for 29% of the
market value of the S&P 500, and a whopping 61% of the NASDAQ 100,
up from 20% and 53%, respectively, at the start of the year.

That leaves index investors in a tight spot. On the one hand, owning shares
that have done so blisteringly well that they dominate your portfolio is a
nice problem to have. On the other, it is somewhat awkward. After all, part
of the buy-the-haystack logic’s appeal lies in the risk-lowering benefits of
diversification. Now, buying the NASDAQ 100 appears less like spreading
your bets and more like placing them on a few hot companies whose prices
have already soared. A supposedly passive investment strategy has come to
feel uncomfortably similar to stock-picking.

Nasdaq is therefore stepping in to alleviate the discomfort. As Cameron

Lilja, who runs its indexing operations, notes, the NASDAQ 100 is a
“modified market-capitalisation weighted” measure. This means the
weights assigned to firms’ shares are usually in proportion to each
company’s total market value, but that those of the biggest firms can be
scaled back if they come to represent too much of the index.

In particular, if the combined weight of shares that each account for more
than 4.5% of the index exceeds 48%, as is now the case, Nasdaq’s
methodology prescribes a “special rebalance” to cut this to 40%. This is
designed, says Mr Lilja, to ensure funds tracking the index comply with
regulatory diversification rules. And so on July 24th Nasdaq will reduce the
sway of its seven biggest firms (and, conversely, increase that of the other
93 constituents).
The result will be a more balanced index, but also some difficult questions
about just how passive “passive investing” really is. The biggest fund
tracking the NASDAQ 100, Invesco’s “QQQ Trust”, invests more than
$200bn (roughly the value of Netflix, the index’s 14th-largest firm).
Following the rebalancing, it will need to quickly sell large volumes of
shares in its biggest holdings and buy more in its smaller ones. It is hard to
argue that such a move simply tracks the market rather than—at the
margins, at least—influencing it.
The need for rebalancing also highlights a criticism of index investing: that
it is really a form of momentum play. Putting money into a fund that
allocates it according to firms’ market value necessarily means buying more
of the shares that have done well. Conversely, keeping money in such a
fund means not taking profits from the outperformers, but continuing to
hold them as they grow bigger. Even if chasing winners is often a lucrative
strategy, it is not an entirely passive one.

Meanwhile, as America’s stockmarket grows ever more concentrated, some

spy an opportunity. On July 13th Invesco announced an “equal-weight”
NASDAQ 100 fund, investing 1% of its assets in each of the index’s
constituents. This sort of strategy will mainly appeal to private investors,
who, unlike professional fund managers, can afford to be “index agnostic”,
says Chris Mellor, one of those overseeing the launch. This year, the
outperformance of the biggest companies would have left investors lagging
behind. But trends like this periodically reverse—as in 2022, when the
giants plunged (see chart). Mr Mellor guesses that the new fund could
garner perhaps a tenth of the assets of its mainstream counterpart. Its
administrators, at least, will still be making hay. ■

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What crisis?

America’s big banks are in rude health—with one

exception
Results highlight difficulties at the country’s most famous financial
institution

Jul 19th 2023 | Washington, DC

FROM ONE perspective, it seems like a torrid time to be a banker. A

handful of financial institutions failed in the first quarter of the year after
their depositors fled, spooked by the impact of higher interest rates. After
these failures, smaller banks struggled to keep hold of deposits, pushing up
their interest costs. At the same time, the economy is cooling, owing to
higher rates, raising the prospect of job losses and defaults. Higher rates
have almost entirely shut down activity in capital markets, too. The
climbing cost of debt has put off would-be acquirers in the business world,
prompted firms to delay issuing bonds and encouraged startups to postpone
initial public offerings.
The misery is particularly obvious at the most famous of all Wall Street
institutions: Goldman Sachs. The firm is also the most exposed to ups and
downs in dealmaking and most reliant on trading revenues, meaning it has
struggled over the past year or so. Goldman hit another low on July 19th,
when it reported its worst quarterly profits in three years. Cyclical woes
have been compounded by an ill-fated push into consumer lending, which
now looks like a serious error. In the second quarter the firm wrote off
$500m of its investment in GreenSky, an online lender acquired by David
Solomon, Goldman’s boss, in 2021. The poor results will only add to the
pressure Mr Solomon is under.
Things are much sunnier for the rest of America’s big lenders, however.
Despite the recent turmoil, between July 14th and July 18th they reported
strong quarterly results. Their seemingly perverse success is explained by
the fundamentals of banking. When a financier provides a loan he must
consider two things above all else. The first is the interest he can expect to
receive. By handing over $100 he might hope to earn, say, $5 a year for the
life of the loan, before the $100 is paid back. The other is the risk that the
borrower will default, failing to repay the principal. These risks and rewards
must be balanced such that, even if some borrowers default, the income is
sufficient to compensate. In other words, the juice must be worth the
squeeze.

For most institutions, the juice has never been more worth it. Thanks to the
highest interest rates in 15 years, net interest income at Bank of America,
Citigroup, JPMorgan Chase and Wells Fargo hit a record $63bn in the
second quarter (see chart). All that extra juice does not seem to have come
with much additional squeeze. Provisions for loan losses—the money banks
must set aside to protect against defaults, based on their assessments of the
economic outlook—have risen only modestly, to around $7.5bn. True, that
level is higher than in recent quarters. But it is hardly alarming. Aggregate
provisions were far higher in 2020 and, indeed, in almost every quarter
from 2007 to 2012.

All told, quarterly net interest income, minus provisions for loan losses, has
hovered at around 1.4% of the banks’ total loan books a quarter, or about
6% annualised, throughout 2023. This is higher than at any time since 2005.
Forget the turmoil: so long as you do not work at Goldman, there has rarely
been a better time to be a commercial banker. JPMorgan even posted its
best ever quarterly profits.

There are flickers of life in capital markets, too. Debt and equity-issuance
numbers surpassed expectations. Bank bosses sound increasingly
optimistic. “We’re seeing less anxiety around funding, as most large corps
are biting the bullet and paying higher rates to take advantage of issuance
windows,” reported Jane Fraser of Citi.

These results support the conclusion, which is gradually becoming the

consensus on Wall Street, that the American economy has taken the most
extreme dose of monetary tightening in 40 years on the chin. The housing
market appears to have bottomed out, as does the stockmarket. Meanwhile,
the labour market remains robust. The hope is that financial markets really
have adjusted to sky-high rates more smoothly than expected. For once,
bankers will not be the only ones celebrating their bumper profits. ■

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FedLate

Instant payments finally reach America with

FedNow
The country’s banks are not entirely on board

Jul 20th 2023 |

AMERICA’S FINANCIAL plumbing is overdue a spot of maintenance.

The current payment “rails” on which it is based—built by a group of the
country’s biggest banks to replace paper cheques—are more than half a
century old and run on antiquated code. Although robust, the system is
painfully slow. American payments are less sophisticated than those in the
rest of the rich world, and indeed those in much of the poor world, too.

It is a problem the Federal Reserve is trying to fix with a centralised instant-

payments system, which it launched on July 20th. Aptly called FedNow,
this will allow Americans to ping money to their compatriots, via their
existing financial institutions, and for payments to settle straight away. All
told, 35 banks and 16 payment providers have signed up to use the service.
Most American bank transfers are cheap but processed in batches, often
taking days to settle. Peer-to-peer networks, like Cash App, appear much
quicker to customers but, beneath the surface, rely on the old system.
Regulators have warned that funds held on such apps might not qualify for
deposit insurance in the event of a failure. Credit cards, which offer juicy
rewards at the cost of even juicier fees, also use existing rails. According to
the San Francisco Fed, nearly a third of payments last year were made using
plastic.

Typically, Americans use different methods for different types of payment:

a water bill is paid via bank transfer; $100 owed to a friend is sent through a
payment app; a purchase on Amazon is made with a credit card. A single,
real-time payments solution should improve the quality of all.

JPMorgan Chase and Wells Fargo, two heavyweight banks, have signed up
to FedNow. But Wall Street is not entirely on board: a longer list of
institutions, including Bank of America, Citigroup and Goldman Sachs, is
absent. Although the older system is slow, it is also profitable for those
involved. Financial institutions can take advantage of slow settlements to
park cash in interest-bearing short-term securities overnight, or merely keep
the money at the Fed to accrue interest. They also pocket late-payment fees
and some make money from their own instant-payment systems, such as
The Clearing House, which is run by a group of banks.

Some observers, recalling the banking turmoil this spring, worry that
FedNow might destabilise the financial system. A report by Moody’s, a
credit-ratings agency, warns that the new scheme could make bank runs
more likely by making it easier for depositors to flee. Such worries are
likely to prove overblown, however. The current system, where weekends
are closed for business, provided little relief to Silicon Valley Bank and
others a few months ago. Moreover, since FedNow is a back-end system,
participating institutions are able to set limits in line with their risk appetite.
They can, for instance, cap payments or limit transactions.
Other countries are also light years ahead of America—and do not appear
more vulnerable to bank runs. In India, for example, instant payments are
the norm, accounting for 81% of domestic electronic transactions last year
(see chart). In Thailand and Brazil they accounted for 64% and 37%
respectively. Emerging markets have embraced instant payments in part
because of demography (consumers are younger and more open to change),
in part because of a crackdown on cash (policymakers are keen to shrink the
size of grey markets, and increase tax takes) and in part because, unlike in
America, new payment systems did not have to push aside existing ones,
and those who benefited from them.

FedNow is unlikely to transform payments immediately. The scheme will

only support “push” transfers—ones that consumers initiate themselves. By
contrast, FedNow’s counterparts in Europe and India also have “pull”
capabilities that businesses may use when given permission (which enable,
say, regular payments for electricity). Fed officials claim to have no plans to
extend the system for such uses, but bankers suspect it is the next step.

Mass adoption will face one more hurdle: the American consumer, over
whom paper-based payments retain a particular hold. According to ACI
Worldwide, a payments firm, around a fifth of all cash transfers in the
country happen via cheque. Still, it will be nice for them to have the option,
just like the rest of the world. ■

Editor’s note: This piece has been updated to incorporate news of

FedNow’s launch.

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Science & technology

Are the current heatwaves evidence that climate change is
speeding up?
Turning up the heat :: All sorts of records are being broken in all sorts of places

Scrapyards adopt new high-tech ways to dismantle cars

The Scrap Kings :: Advanced “deproduction” lines are turning the car business into a circular
industry

A spectacular new fossil shows a mammal making a meal

of a dinosaur
When mammals attack :: The two animals were interrupted during a fight to the death

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Turning up the heat

Are the current heatwaves evidence that climate

change is speeding up?
All sorts of records are being broken in all sorts of places

Jul 19th 2023 |

ESTIMATES OF Earth’s average temperature, having set a new record on

July 3rd, have yet to fall back below the previous record, which was set just
last year. That a run of very hot days should happen in July is, by itself,
perhaps unsurprising. Two-thirds of the Earth’s land is in the northern
hemisphere, and land warms up faster than water does, so northern
summers are the hottest times of year for the planet as a whole. But the
highest temperatures tend to come later in the season. That this year’s
should start so early, rise so high and run so long is unprecedented.

So is what is happening in the oceans (see chart). Since March 13th the sea-
surface temperature in low- and mid-latitudes has been higher than on the
same day in any year since 1979. Normally highest in the southern summer
(most of Earth’s water is in the south), temperatures are at record levels in
the southern winter.

Within the rising global averages lie savage peaks in particular places. On
July 16th a site in the Turpan Depression in Xinjiang, sometimes called
China’s Death Valley, reported a high of 52.2°C. In America, in Death
Valley proper, the same day saw a peak of 53.9°C. Of more immediate
concern than isolated spikes in deserts, temperatures have been dangerously
high in places where hundreds of millions of people live, too. On July 6th,
after the city measured its highest July temperature ever, authorities in
Beijing announced their second red alert for heat in two weeks. July 19th
marked the 19th day in a row that the temperature in Phoenix, Arizona, has
exceeded 43°C. Things are similarly sweltering in Italy and many nearby
countries (see map).
Life in the greenhouse

Asked how such a thing might be, one climate scientist replies drily “I
suspect it might have something to do with accumulation of greenhouse
gases in the atmosphere.” More greenhouse gas in the atmosphere results in
more of the warmth from the sun being trapped near the surface and
absorbed by the oceans. The level of carbon dioxide, the most important
long-lived greenhouse gas, as measured at Mauna Loa, a mountain peak in
Hawaii, reached 424 parts per million in May, the highest it has been for
over 3m years. Methane and nitrous oxide, two other long-lived greenhouse
gases, have also reached levels never before experienced by humans. The
world is now, on average, around 1.2°C warmer than it was before humans
started thickening the glass in the greenhouse.
The climate has natural variations, too, and the most famous of them, the El
Niño Southern Oscillation (ENSO), is adding to the warmth. ENSO is a
sloshing back and forth in the winds and currents of the tropical Pacific
ocean which sometimes sees the waters suck up more heat, and sometimes
sees them give more heat out. In June the world entered an “El Niño”
phase, in which heat is released. The greatest effect of an El Niño on global
temperatures tends to be seen after it has been in place for a year or so. But
today’s ocean temperatures look like evidence of this one getting off to a
flying start.
On top of these global effects, there is the fact that moving the top of a bell
curve even a touch to the right can change the values in the tail a lot.
According to James Hansen, a climate scientist at Columbia University, the
sort of summer which would have been a once-in-a-century event between
the 1950s and 1980s has become a once-every-five years event now. If
sweltering summers are more likely everywhere, the chances of more than
one region being affected at a time go up, too.

So are the thickening of the atmospheric blanket, an outpouring of heat

from the Pacific and the random effects of year-on-year variation enough to
explain this summer’s freakish temperatures? Or is there something more
going on?

Dr Hansen thinks there is. He argues that the rate at which the world is
warming seems to have gone through a step change in the 2010s, though he
has not yet convinced his peers. This summer’s surprises, especially a run
of record temperatures in the North Atlantic, might help change that. “I
wouldn’t be surprised if we see papers appearing over the next few years
saying [the Atlantic anomaly is] more than just another extreme,” says
Myles Allen, a climate modeller at Oxford University.

Several things could be speeding up warming. One is the change to the

stratosphere brought about by the eruption of Hunga Tonga–Hunga Ha’apai,
a submarine Pacific volcano, in January 2022. This was the largest eruption
on Earth since Mount Pinatubo, in the Philippines. In 1991 Pinatubo
injected tens of millions of tonnes of sulphur-dioxide gas into the
stratosphere, where it reflected some of the sun’s light. The result was a
worldwide cooling of about 0.5°C that lasted about a year.

The Hunga eruption did not throw anything like that much sulphur into the
stratosphere. But it did pump in a great deal of water vapour; between 70m
and 150m tonnes. Water vapour is a powerful greenhouse gas. In the lower
atmosphere it condenses out into rain or snow fairly quickly. In the
stratosphere, though, it lingers for longer. The Hunga eruption is thought to
have increased the amount of water vapour in the stratosphere by 13%. That
would have warmed the planet—though if Hunga is playing a role, it is one
that is already waning.
Other possible influences are waxing. When ice ages end, methane levels in
the atmosphere shoot up, ushering in the warmer climate of the
“interglacial” to come. Some scientists cite recent increases in methane
levels as evidence that something similar may be afoot today. Methane
levels rose throughout the 20th century, mainly because of the rising use of
fossil fuels and agriculture. They flattened off at the beginning of the 21st
century, but are now growing faster than ever.

Some of this is doubtless still because of farming and fossil fuels. But a
paper by Euan Nisbet, an Earth scientist at Royal Holloway, and his
colleagues, and recently accepted for publication in Global Biogeochemical
Cycles, argues that not all the extra methane can be explained that way.

The researchers think that the surplus may be coming from the growth of
tropical wetlands, whose plants produce the gas when they rot. This is one
candidate for the mechanism that drives the methane spikes seen at the end
of ice ages. If true, it opens up the possibility of a feedback loop starting
today similar to the ones that seem to have operated in the past. More
methane means more warming, which means more wetlands, and therefore
more methane.

That idea is speculative, for now. Perhaps a more plausible culprit is falling
emissions of sulphur. The burning of coal and heavy fuel oil produces a lot
of sulphur dioxide. Once in the atmosphere that gas forms sulphate
particles. These particles cause air pollution leading to hundreds of
thousands of deaths every year. Environmental regulators have been trying
to reduce sulphur emissions for decades.

But sulphate particles in the lower atmosphere reflect sunlight, just like
those created in the stratosphere after volcanic eruptions. And, unlike those
in the normally bone-dry stratosphere, particles lower down can help create
clouds which reflect away more sunshine still. Controls on pollution mean
that this climate-cooling side effect has been weakening.

Of particular relevance are new regulations on the sulphur content in

shipping fuel that came into force in 2020. The regulations were brought in
by the International Maritime Organisation on the basis of estimates that
they would save around 40,000 lives a year. They are thought to have
reduced sulphur emissions from shipping by more than 80%. The evidence
is visible as a worldwide decline in “ship tracks”, long, thin clouds created
when sulphate particles in a ship’s exhaust provide nuclei around which
water droplets can form. Fewer, fainter ship tracks and other clouds mean
less sunlight is bouncing back out to space, and is instead being absorbed
by the oceans below.
The indirect effects that aerosol particles have on cloud cover are
notoriously hard to capture in climate models. Estimates of how much
cooling shipping pollution might have caused vary by a factor of ten. But
Dr Hansen thinks the changes could plausibly explain most of the quicker
warming that he sees in the data. From 1970 to 2010 the warming trend was
0.18°C a decade. Since around 2015, Dr Hansen thinks it has been between
0.27°C and 0.36°C per decade—between half as high again and twice as
high. A study by Dr Allen and his colleagues published last year sees a
similar increase in the trend, but warns that it may be strongly influenced by
natural variability, with aerosol effects playing a much smaller role than that
which Dr Hansen would assign them. “Quantifying the role of human
influence in these apparently unprecedented events is hard,” Dr Allen
cautions.

A sweltering world might try to find a way to keep the cooling properties of
sulphates without the drawbacks for air quality and health. In 2006 Paul
Crutzen, an atmospheric scientist, suggested this might be done by
continuously injecting small amounts of sulphur directly into the
stratosphere. Since there is no rain to flush them out, high-flying
stratospheric particles last much longer than those in the lower atmosphere.

That means that a few million tonnes of sulphur dioxide added to the
stratosphere—technically quite plausible—could provide as much cooling
as the 100m tonnes or so that humans dump into the lower atmosphere each
year. And as with warming itself, its effect on extremes would be greater
than its effect on averages. Unwelcome things in the tail of the distribution
could be made a lot less likely.
Sunscreen for the planet

This idea, a form of “solar geoengineering”, is controversial, and with good

reason. Its effects on stratospheric chemistry cannot yet be predicted
accurately. Of particular concern are what it might do to the ozone layer,
which screens out a good deal of the sun’s harmful ultraviolet radiation
before it reaches the ground.

Because solar geoengineering’s effects on rainfall, as well as temperature,

would differ from place to place, a cooling tailored to the needs of one
country might not be to the taste of others. Settling such disputes is beyond
any current system of global governance. Above all, a technology that could
cool the planet without ending fossil-fuel use might well slow or even
scupper that phase-out.
So far these worries have carried the day. Research on solar geoengineering
has been side-lined, and its possible role in climate policy has gone largely
undiscussed. All those who take part in such discussions as there are stress
that solar geoengineering should at best be seen as a complement to
decarbonisation, shaving off extreme risks while the world moves towards a
fossil-free economy. But the fear that it would instead be treated as an
alternative is sufficiently persuasive as to be pervasive.

If 2023 is not an aberration, though, and the world really is moving into an
accelerated phase of warming, that reluctance might be reassessed.
Emissions reduction should be able to slow the warming of the Earth within
a few decades. Pursued with real zeal, it might bring it to an end this
century. But it provides no cooling in the meantime. If that proves to be
what the world wants, solar geoengineering is the only thing which looks
able to provide it. ■

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speeding-up

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The Scrap Kings

Scrapyards adopt new high-tech ways to

dismantle cars
Advanced “deproduction” lines are turning the car business into a circular
industry

Jul 19th 2023 | Poole

HANGING ON THE wall in the offices of Charles Trent, a vehicle-

recycling company based in Poole on Britain’s south coast, is a black-and-
white photograph from the 1920s. It shows rows of old jalopies piled high
in the scrapyard. Marc Trent, Charles’s great-grandson and the firm’s
current boss, smiles at the photo and remarks: “those days have long gone.”

He is referring to a time when motorists usually had a bit of mechanical

nous and used scrapyards as repositories of spare parts when their cars
broke down. Customers, spanners in hand, would search for a donor car,
negotiate a price, then remove the required component themselves.
Nowadays the customers are more likely to be professional mechanics and
garages buying online. The parts they find will have already been removed,
cleaned, tested and often guaranteed. As often as not they are dispatched
overnight. It is all part of the transformation of what was once a murky and
informal business. Stricter rules, supply-chain snarls and higher prices for
both cars and components mean that firms like Charles Trent—and even
some big carmakers—are turning into sophisticated recycling operations.

At its Poole facility, for instance, Charles Trent has invested around £10m
($13m) to set up a “deproduction” process for “end-of-life vehicles”
(ELVs), as scrap cars are now called. When it is fully operational, the plant
should be able to render more than 100 ELVs a day into their constituent
parts. With plans for five more plants, the firm aims eventually to
disassemble 300,000 vehicles a year, around a fifth of the total number
scrapped in Britain. In total, just over 96% by weight of an ELV can be
either reused or recycled, says Mr Trent.

To do that, the firm will build something that looks much like a modern car-
assembly line, but which runs backwards. When an ELV arrives, it is
assessed for parts that could be reused or refurbished, the details of which
go into an elaborate computer system which oversees the entire process.
The car is then “depolluted”, which involves removing the wheels and
decanting fuel, oil and air-conditioning gases.

The vehicle is then loaded onto the line. Technicians, using much the same
equipment found in modern car plants, systematically remove the panels,
interiors, engines, gearboxes, and everything else that a different set of
technicians had carefully screwed into place years before. Some are sent for
recycling. Others are cleaned, tested and put up for resale. The bare shell of
the vehicle is fed into a crusher, before going off to be melted down and
used again.

Worn parts, such as engines and gearboxes, can be refurbished or even

“remanufactured”, a more involved process designed to return them to the
condition they were in when new. LKQ is a Chicago-based firm that
operates 170 dismantling plants in North America that process 700,000
ELVs a year. It reckons remanufacturing uses about 15% as much energy,
and produces about 30% as much carbon emissions, as making a new part
from scratch.

A number of factors are driving the transformation. Carmakers are having

to take greater responsibility for what happens to their products. (The
European Union, for instance, is considering tighter recycling targets.)
Reusing parts helps cut manufacturing emissions.

Other pressures come from the market rather than the statute book. Rising
prices for raw materials and parts make the cost savings from second-hand
components more attractive. According to eBay, an online marketplace,
used car parts are up to 70% cheaper than new ones. (eBay uses a
certification scheme, with approved sellers and money-back guarantees to
reassure buyers.) Second-hand parts are often faster to get hold of as well as
cheaper, thanks to the supply-chain problems that have dogged the car
industry since the covid-19 pandemic. Many insurance companies, which
once eschewed their use, now allow some recycled components, such as
body panels, in repairs.

Carmakers are getting in on the act, too. The Stellantis group (whose
biggest shareholder, Exor, also part-owns The Economist’s parent company)
this year converted a factory at its Mirafiori complex in Turin, Italy, into a
centre for reconditioning components and cars. The company’s brands
include Chrysler, Peugeot and Fiat.

While an ordinary production line builds a single type of car, a

deproduction line must deal with all sorts, says Loïc Bey-Rozet. Mr Bey-
Rozet runs Indra Automobile Recycling, a French firm jointly owned by
Suez, an environmental-services group, and Renault, a carmaker. It
manages 380 independent recyclers in France, which between them dealt
with 600,000 ELVs last year. It also runs a demonstration plant in
Romorantin, in central France, which develops dismantling techniques for
all manner of vehicles. The firm supplies “deproduction” systems to
recyclers around the world, including Charles Trent.
Going electric
One of the things the firm is working on is how to deal with electric
vehicles (EVs). These already require special handling. Dangerous voltages
can linger in the vehicles’ electronics, for instance, even when their
batteries are flat. If those batteries are damaged, they can catch fire or
explode.

At the same time, the mechanical simplicity of electric cars, at least

compared with internal-combustion ones, means that the batteries are by
some distance their most valuable parts. Good batteries are resold; damaged
ones are sent to specialists that are setting up operations to recover the
useful materials which they contain. Once the batteries are gone, though,
there are comparatively few juicy pickings left for the recyclers.

So, to try to capture more value from dismantling EVs, Indra is hoping to
find ways to refurbish damaged batteries instead. This is possible because
often it is not the entire battery that fails, but just one of the many smaller
modules from which they are made up. Replacing the damaged part could
give the rest of an old battery many more years of useful life. Doing that,
though, will demand even greater technical skills and yet more specialised
technology. But if there’s money in it, the scrap kings will do it. ■

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When mammals attack

A spectacular new fossil shows a mammal making

a meal of a dinosaur
The two animals were interrupted during a fight to the death

Jul 19th 2023 |

THAT DINOSAURS ate the mammals that scurried beneath their feet is not
in doubt. Now an extraordinary fossil newly described in Scientific Reports,
unearthed by a team led by Gang Han at Hainan Vocational University of
Science and Technology in China, shows that sometimes the tables were
turned.

The fossil—dated to about 125m years ago, during the Cretaceous period—
was formed when a flow of boiling volcanic mud engulfed two animals
seemingly locked in mortal combat. The one on top is a ferret-like mammal
known as Repenomamus robustus. The animal below is a herbivorous
relative of Triceratops known as Psittacosaurus lujiatunensis. Animal
interactions such as this are exceptionally rare in the fossil record.
One possibility is that the mammal was scavenging something already dead,
rather than hunting live prey. These days it is uncommon for small
mammals to attack much larger animals. But it is not unheard of.
Wolverines, for instance, occasionally take caribou. And Dr Han and his
colleagues point out that scavengers typically leave tooth marks all over the
bones of the animals. The dinosaur’s remains show no such marks. There is
also a chance the fossil could be a fake. Many of the most convincing
forgeries have come, as this one did, from China—though Dr Han and his
colleagues argue that the complex and entwined nature of the skeletons
makes that unlikely, too.

Assuming it is genuine, the discovery serves as a reminder that not all

dinosaurs were enormous during the Cretaceous and not all mammals were
tiny. From nose to tail, the dinosaur is just 1.2 metres long. The mammal is
a bit under half a metre in length. Despite being half the size, the mammal
has one paw firmly wrapped around one of its prey’s limbs, and another
pulling on its jaw. It is biting down on the dinosaur’s chest, and has
dislodged two of its ribs. Before they were interrupted, it seems that the
mammal was winning.■

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Culture
Realism with “Oppenheimer”, or escapism with “Barbie”?
Bombs and a bombshell :: What the fortunes of this summer’s blockbusters will reveal about
our times

Extreme temperatures separate “the cool and the damned”

The heat also rises :: A new book on heatwaves reads like a horror story

A new novel imagines life in Andy Warhol’s studio

Opposites that never meet :: Nicole Flattery’s “Nothing Special” depicts the art world’s
inequities

Calder Walton’s “Spies” is a riveting history of espionage

Hi, spy :: A new book looks at the men who knew too much—and too little

“The Retrievals”, a tale of agony and addiction, makes

listeners squirm
At the sharp end :: A new podcast explores how an American fertility clinic ignored women’s
pain

AI is making it possible to clone voices

Johnson :: That could help fraudsters and disrupt creative industries

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Bombs and a bombshell

Realism with “Oppenheimer”, or escapism with

“Barbie”?
What the fortunes of this summer’s blockbusters will reveal about our times

Jul 14th 2023 |

THEY MAKE an intriguing pair of rivals: he in a dark suit and porkpie hat,
she in a gingham dress and matching hair bow. His domain is a vast
scientific-research facility in New Mexico; hers is a fluorescent-pink party
house with a slide. J. Robert Oppenheimer (played by Cillian Murphy, an
Irish actor) spends his days corralling the finest scientific minds in America
to create a nuclear bomb—work a colleague calls “the most important
fucking thing to ever happen in the history of the world”. Barbie (played by
Margot Robbie, an Australian actress) may seem like she has the perfect
life, but she has existential worries too. Do her friends and fellow dolls, she
wonders, “ever think about dying?”
No recent movie matchup has been as eagerly awaited as “Barbie” and
“Oppenheimer”. Released on July 21st in America and Britain, the two
films will serve as a test of whether viewers can be coaxed off their couches
to return to cinemas. The incongruity in the films’ subject and tone has
delighted the internet. People have created memes, remixed the trailers into
jarring “Barbenheimer” hybrids and debated whether to see the biographical
drama or the fantasy comedy first.

The brouhaha is partly a result of the film-makers. Christopher Nolan, the

writer-director of “Oppenheimer”, is the closest thing Hollywood has to a
mad scientist. He shoots on film and mostly eschews computer-generated
imagery, blowing up an actual Boeing 747 for a previous film. The nuclear
reactions in “Oppenheimer” were also created by producing actual
explosions (albeit not nuclear ones), brightened by aluminium and
magnesium powder. His films toy with narrative conventions and tricksy
subjects, such as the unconscious mind and theoretical astrophysics. They
have earned a combined total of around $5bn in ticket sales; “Dunkirk”,
released in 2017, is one of the highest-grossing films ever made about the
second world war.

Greta Gerwig, the director and co-writer of “Barbie”, has her own large fan
club. She started out in the “mumblecore” genre of independent film (so
named for its focus on dialogue) but has since had hits with “Lady Bird”
(2017) and an adaptation of “Little Women” (2019). Her work claims
humbler gross ticket sales of $300m. For “Barbie”, she has cited old
Hollywood musicals and films about the afterlife, such as “Heaven Can
Wait” (1943), as inspiration.

The two films encapsulate some of the caprices of the modern movie
industry. “Barbie” is one of many productions to exploit decades-old
intellectual property. Mattel, a toymaker, has sold roughly a billion dolls
since it first introduced Barbara Millicent Roberts (call her “Barbie”) to
consumers in 1959. Ms Robbie, who is also a producer of the film, has said
she was drawn to the project because the Barbie name is “more globally
recognised than practically everything else other than Coca-Cola”. It is easy
to imagine that a sequel is already in the works.
“Oppenheimer”, by contrast, holds no such franchise potential. The scientist
may be “one of history’s most essential and paradoxical” figures, as Mr
Nolan has put it, but he is not likely to return for “Oppenheimer 2: Learning
to Love the Bomb”. It is a serious, standalone drama—the kind of film
made less frequently as studios focus on sequels and spin-offs. Its opening
weekend is predicted to fetch $40m-50m in ticket sales, compared with
around $80m for “Barbie”.

Though “Oppenheimer” features stars such as Emily Blunt and Matt

Damon, the sombre story is not obviously a crowd-pleaser. That it has also
been made with a large budget of $100m reflects the faith that studios have
in certain film-makers and the risks they allow them to take. “There have
been films previously about the development of the atomic bomb in the
1940s and 1950s, and they haven’t been box-office successes,” says
Sheldon Hall, a film historian and co-author of the book “Epics, Spectacles
and Blockbusters: A Hollywood History”. “This film is being hinged on
Nolan’s reputation,” he adds.

The “Barbenheimer” rivalry brings a more serious question for the public:
whether to favour realism or escapism. As war rages on in Europe, and
countries including China and North Korea continue to develop their
nuclear arsenals, the origin story of these weapons of mass destruction may
feel too real and raw. “Oppenheimer” is not a film that will ease viewers’
anxieties. It explores the physicist’s concerns about the horrifying power of
his weapon and other bombs; it also shows how the American government
attempted to silence him when those opinions became politically unpopular.
Oppenheimer has disturbing visions of the bomb’s victims in excruciating
pain, their skin peeling. “Some people leave the movie absolutely
devastated,” Mr Nolan has said. “They can’t speak.”
From Hiroshima to Barbie Land

Ms Gerwig’s production is much more playful. She has described the set—
which contributed to a global shortage of pink paint—as “a dopamine
generator”. The film’s tone is witty and slyly self-referential: it pokes fun at
Mattel, here run by a team of men, and the vexed history of the toys. (The
Barbies mistakenly assume that all women revere them as role models.) It
has the kind of plot that only makes sense if a viewer does not think about it
deeply.

“Barbie” recognises the alluring comfort of dream worlds. At one point

Weird Barbie, a doll that has been handed around and mistreated, offers
Barbie a choice, symbolised by a high heel and a clunky Birkenstock
sandal: “You can go back to your regular life, or you can know the truth
about the universe.” Barbie chooses the stiletto and is quickly chastised.
“You have to want to know, OK? Do it again.”

“Barbie” and “Oppenheimer” offer another version of the Birkenstock-

stiletto dilemma. History suggests more viewers will opt for escapism.
During the Great Depression, many of the highest-grossing films were
musicals or historical epics. The same was true during the second world
war. Movies that did broach the subject of conflict, including “Gone with
the Wind” and “Sergeant York”, were often set in the past; those that were
contemporaneous, such as “Casablanca”, tended to tell love stories rather
than tales of grisly combat. In 1968, at the height of the Vietnam war, the
biggest movie in America was “Funny Girl”. In 2007, during the financial
crisis, it was a film from the “Pirates of the Caribbean” franchise.

David Thomson, another film historian and author, reckons that, at a time of
economic strain, war and populism, viewers will not want to see a serious
film as much as they will want to see a frivolous one. “Comedies have
always done well at the movies,” he says, because they do “something that
the movies were made for, which is to reassure people and give them a
couple of hours of escape from pretty big problems.” Who wants reality
when life in plastic is so fantastic? ■

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Correction (July 15th 2023): An earlier version of this article had an

incorrect figure for the budget for the film “Oppenheimer”. This has been
fixed.

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The heat also rises

Extreme temperatures separate “the cool and the

damned”
A new book on heatwaves reads like a horror story

Jul 17th 2023 |

The Heat Will Kill You First. By Jeff Goodell. Little, Brown and
Company; 400 pages; $29 and £25

IT MAY BEGIN with a cracked throat, lips that stay dry no matter how
many times they are licked. As the heat overwhelms the body, the head
throbs and vision goes blurry, before the world turns black. This is probably
how Sebastian Perez felt on the day he died.

In late June in Willamette Valley, Oregon, where oak and Douglas fir trees
dot the state’s lush wine country, top temperatures usually hover around
25°C (77°F). On the morning of June 26th 2021 it hit 38°C, but Mr Perez
still went to work as usual, to try to ensure that the young trees at the
nursery where he was employed had enough water to withstand the searing
heat. By 3pm the temperature had risen to 41°C, and Mr Perez had
collapsed. A migrant farmworker, he had journeyed to Oregon to make
enough money to build his wife Maria a house back in Guatemala. “I
promised I would wait for him,” she says, “and now he’s coming home in a
box.”

“The Heat Will Kill You First”, a new book by Jeff Goodell, a longtime
climate journalist, reads like an anthology of horror stories. A couple and
their one-year-old daughter die of overheating on a hike in northern
California. A Parisian woman returns to her flat after a heatwave in 2003 to
find her home caked with blood and urine. Her upstairs neighbour had died,
and no one found the body for more than a week.

The book is a remarkable exploration of the deadly consequences of rising

temperatures wrought by humans pumping greenhouse gases into the
atmosphere. Unlike wildfires and hurricanes—which create whirls of flame,
paint skies an apocalyptic orange and drown cities—heatwaves cannot
easily be captured on film. Heat slaughters silently, snuffing out more
American lives each year than any other type of weather. “How do you
make visible the story of an invisible killer?” asks Mr Goodell. Some
policymakers are trying, by creating new heat-warning systems and naming
heatwaves as they do hurricanes.

The book’s biggest takeaway is that the harm from heat falls unfairly on
those least able to protect themselves. “A heatwave is a predatory event,”
writes Mr Goodell, “one that culls out the most vulnerable people.” Rich
places and people can plant trees for shade, paint heat-absorbing asphalt to
reflect more sunlight, retile zinc roofs, make their cities oases of air-
conditioning or move to colder places. But adaptation is much harder for
poor people and places. At the end of a chapter devoted to “cheap cold air”,
Mr Goodell concludes that “the most enduring legacy of air-conditioning
may be the divide it has created between the cool and the damned.”

The book isn’t all fire and brimstone. Unlike some climate-science writers
who drown readers in data and seem to write only for other activists, Mr
Goodell tells his story colourfully. Readers meet many memorable people
working to raise awareness of climate change by figuring out which
extreme weather events can be attributed to it, and helping its victims by
leaving water for migrants crossing the Arizona desert or campaigning for
safer conditions for farmworkers.

The author’s intrepid reporting will make some readers feel lazy. To
illustrate the effects of melting sea ice, Mr Goodell faces down polar bears
in the Canadian Arctic and crosses a treacherous passage on the way from
Chile to Antarctica by boat. In West Texas he scales a rock formation made
of the skeletons of ancient sea creatures, which 260m years ago was under
water.

Other readers may feel frightened after reading this book. In July the
average global air temperature broke records three times in a week. A third
of Americans live in areas where the government is currently issuing
warnings about extreme heat, and Europe looks poised to break previous
temperature records. “The Heat Will Kill You First” could not be more
timely. ■

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Opposites that never meet

A new novel imagines life in Andy Warhol’s studio

Nicole Flattery’s “Nothing Special” depicts the art world’s inequities

Jul 20th 2023 |

Nothing Special. By Nicole Flattery. Bloomsbury; 240 pages; $26.99 and

£16.99

WHEN MAE, 17 years old and adrift, is offered a job as a typist for Andy
Warhol, she is given instructions. “Don’t become invested in how good you
are at this,” says Anita, the head secretary. Her role is to listen to tapes and
transcribe them, no more. In “Nothing Special”, Nicole Flattery, a raucously
talented young Irish writer, takes inspiration from the imagined lives of the
young women who were never credited but worked on “a, A Novel” (1968),
an experimental book the Pop Art supremo compiled from unedited
conversations with his stable of muses, whom he called his “superstars”.

Betrayed by her best friend, ostracised by her peers and ignored by most
around her, Mae is a lifelong outsider who takes more comfort in objects
than people. The Factory, Warhol’s studio, reminds her of a doll’s house,
“with girls arranged everywhere, spread on every surface, lying across the
couch, the faded carpets”. Her father is absent, and she lives with her
mother, a charming but self-centred waitress with a fondness for booze. A
“moody, prickly girl”, she persistently mistakes cruelty for care and tells a
doctor, “I keep doing things that are nothing like the way I want to behave.”
Ms Flattery took dead-end jobs, female friendship and power imbalances as
themes in “Show Them A Good Time”, her acclaimed short-story collection
from 2019, and “Nothing Special” ventures into that familiar terrain.

Warhol plays the role of an extra, rather than a lead, in the novel. As is true
of many of today’s “superartists”, such as Jeff Koons (who once had 120
artists working in his studio), Warhol’s work, brilliant as it was, did not
emerge from his singular talent. He relied heavily on others’ toil. He
appears to Mae in dreams, but she is never introduced to him. When he
enters the room, everything brightens as if “suddenly everybody knew
exactly where to direct the beam of their attention-seeking”. A spectral
figure, he is “vast and untouchable”, but when he speaks to people, they
become “more alive, more human, in that moment”. “Nothing Special”
expertly captures the hold celebrity artists exert over peons and patrons
alike.

Through Mae, Ms Flattery also limns the “internal disorder” and “gloomy
impatience” of adolescence and early adulthood vividly. Like J.D.
Salinger’s Holden Caulfield and Sylvia Plath’s Esther Greenwood, Mae is a
lonely but memorable character. Friends disappoint her, school is dull, boys
are unreachable. Puberty seems “both boring and disgusting”. Attention is
intoxicating but elusive. “It was so beautiful to be filmed by someone who
had loved you,” she says twice in the book, once of her mother, and later, of
Edie Sedgwick, Warhol’s tragic addict-muse. With a style like Lorrie
Moore’s, Ms Flattery is witty, propulsive and darkly delightful to read. ■

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Hi, spy

Calder Walton’s “Spies” is a riveting history of

espionage
A new book looks at the men who knew too much—and too little

Jul 20th 2023 |

Spies: The Epic Intelligence War Between East and West. By Calder
Walton. Simon & Schuster; 688 pages; $34.99. Abacus; £25

IN JUNE 1941 Josef Stalin received a warning from the NKVD, the
forerunner of the KGB, that a Nazi attack on the Soviet Union was
imminent. “You can tell your ‘source’ in German air force headquarters to
go fuck himself,” was the Soviet leader’s response. “He’s not a ‘source’,
he’s a disinformer.” The invasion came a week later. The anecdote is one of
many gems unearthed from the archives in “Spies”, a lucid history of the
intelligence contest between America, Britain and Russia.
The author, Calder Walton, is an accomplished historian, having contributed
to the authorised history of MI5, Britain’s domestic security service. He is
also the assistant director of an intelligence programme at Harvard
University that attracts current and retired spooks, lending his book both
scholarly clout and an insider feel. “Spies” explains how espionage and
covert action shaped the cold war, but its enduring message is the folly of
failing to realise you are in an intelligence war in the first place.

In December 1917 Vladimir Lenin founded the Cheka, the secret police, to
terrorise the enemies of the Bolshevik revolution and steal secrets abroad. It
quickly grew to be 100,000-people strong and used news agencies, trade
missions and companies to spy across Europe. In the early 1930s Russian
spies burrowed deep into Western governments. The most notorious moles
were the Cambridge Five, who rose high in MI6. (One of them, Kim Philby,
briefly wrote for The Economist.)

Western democracies were often oblivious. In 1929 Henry Stimson,

America’s secretary of state, shut down the country’s codebreaking agency
on the basis that “gentlemen do not read each other’s mail”. In 1936
Britain’s ambassador in Moscow refused to allow MI6 to open a station in
the embassy because “it was liable to cause embarrassment”. On the eve of
the second world war, notes Mr Walton, “Soviet intelligence perversely had
more graduates of British universities than Britain’s own intelligence
services, MI5 and MI6.”

During the second world war, Britain’s Foreign Office went so far as to ban
espionage against its new Soviet ally. British codebreakers at Bletchley
Park were not permitted to monitor, let alone decrypt, Soviet
communications. When America bought a Soviet code-book from Finnish
officers in 1944, the president ordered his spooks to return it to the Soviets.

Stalin, meanwhile, intensified his efforts, placing a higher priority on

espionage against his allies than against Nazi Germany. When Stalin met
Churchill and Roosevelt at Yalta in 1945 to hash out the post-war European
order, his intelligence on them “probably surpassed that of any leader in
history”, writes Mr Walton. Remarkably, Stalin knew about both Bletchley
Park’s successes and the American atomic-bomb project years before Harry
Truman, who learnt of those momentous secrets only on becoming
president.

It is hardly news that the Soviet Union spied a lot. But there are few
accounts as comprehensive as this one, spanning the Bolshevik revolution
to the present day, while weaving in new archival material, some
declassified as recently as 2022.

There are also lessons for the present. The final chapter of “Spies”
persuasively draws a comparison between the West’s previous contest and
its new one. Mark Kelton, a former head of counter-intelligence at the CIA,
suggests that the scale of current Chinese espionage against America’s
government at least matches Soviet activity in the 1930s. It may even
exceed it. A report published on July 13th by the British Parliament’s
intelligence committee said China “almost certainly maintains the largest
state intelligence apparatus in the world—dwarfing the UK’s Intelligence
Community”.

Much as in the 1930s, America and its allies were lamentably slow to
recognise and then blunt the threat. As late as 2017, counter-terrorism, not
the risks posed by China or Russia, received the most funds among
American intelligence priorities. All that has changed. In 2020 the FBI said
it was opening a new China-related counter-intelligence case every ten
hours. In a speech on July 1st, Bill Burns, the director of the CIA, said that
he had doubled the share of the budget devoted to China-related activity in
the previous two years. But recognising a challenge is different from
containing it. Mr Walton reckons that American intelligence agencies are
unlikely to have penetrated the Chinese leadership as they did that of
Vladimir Putin prior to the invasion of Ukraine. More worryingly, some
intelligence insiders believe that a Chinese mole might have sabotaged the
CIA’s operations in China a decade ago.

America and its European allies insist they do not want a cold war with
China. “That, of course, overlooks one of this book’s central conclusions,”
argues Mr Walton: “Western powers can be in a cold war irrespective of
whether they seek one and before they recognise it.”■
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At the sharp end

“The Retrievals”, a tale of agony and addiction,

makes listeners squirm
A new podcast explores how an American fertility clinic ignored women’s
pain

Jul 18th 2023 |

THE WOMEN remember pain ripping through the most intimate parts of
their bodies. “It felt like someone had…gutted me,” says one. Another
recalls bucking her hips wildly on the operating table. These harrowing
experiences at Yale Fertility Centre are the subject of “The Retrievals”, a
gripping new podcast from Serial Productions and the New York Times.

Donna Monticone, a nurse, withheld fentanyl, a painkiller, from an

estimated 200 women over five months in 2020. (She later admitted to
stealing the drug.) Patients undergoing in vitro fertilisation (IVF) were
forced to endure egg retrievals, during which a doctor pierced their vaginal
wall with a needle, “stone-cold sober”. These women were betrayed twice:
by the medics who, the patients say, ignored their pain and by Ms
Monticone, a mother who had undergone IVF treatment herself.

The tale of agony and addiction has mesmerised people across the English-
speaking world and topped Apple’s podcast chart in North America. Two
factors explain its success. The first concerns plot: stories about nefarious
caregivers are chilling, and the podcast has a true-crime quality that is
spellbinding.

The second reason relates to the storytelling. The taut, five-part series
probes personal themes of motherhood, betrayal and loss, which suit the
intimacy of the format. Earbud-wearers will wince at the personal,
excruciating details. This is how Serial Productions has mastered long-form
audio: by presenting astounding stories that people want to hear. The same
producers were behind “Serial” in 2014, a true-crime series that re-
examined a murder case. Until then podcasting was a nascent industry. The
show’s success—it became the first podcast to win a Peabody journalism
award—helped launch the format and fuelled a boom in richly detailed,
investigative productions. In 2020 the New York Times snapped up the
company for a reported $25m.

“The Retrievals”, which releases its episodes over five weeks, will soon be
over, but the real-life drama will not. Sixty-eight women are suing the Yale
clinic for medical malpractice and medical battery, among other allegations.
Yale says it has changed some of its practices. Listeners, however, have
already chosen a side. ■

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Johnson

AI is making it possible to clone voices

That could help fraudsters and disrupt creative industries

Jul 20th 2023 |

JENNIFER DESTEFANO answered a call from a number she did not

recognise. “Mom, I messed up,” her daughter’s voice told her, sobbing.
“These bad men have me.” A man proceeded to demand money, or he
would drug her daughter and leave her in Mexico. But while she kept him
on the phone, friends managed to reach her daughter, only to discover that
she was, in fact, free and well on a skiing trip in Arizona. The voice used on
the phone was a fake.

Ms DeStefano, still shaken, told this story to a US Senate subcommittee

hearing on artificial intelligence in June. The dangers that voice-cloning
technology pose are only now starting to be uttered aloud. In recent months,
most of the attention paid to artificial intelligence (AI) has gone to so-called
“large-language models” like ChatGPT, which churn out text. But voice
cloning’s implications will also be profound.

A brief sample of a voice can be used to train an AI model, which can then
speak any given text sounding like that person. Apple is expected to include
the feature for iPhones in its new operating system, iOS 17, due to be
released in September. It is advertised as helping people who may be in
danger of losing their voice, for example to a degenerative disease such as
ALS.

For those eager to try voice cloning now, ElevenLabs, an AI startup, offers
users the chance to create their own clones in minutes. The results are
disturbingly accurate. When generating a playback, the system offers a
slider that allows users to choose between variability and stability. Select
more variability, and the audio will have a lifelike intonation, including
pauses and stumbles like “er…” Choose “stability”, and it will come across
more like a calm and dispassionate newsreader.

Taylor Jones, a linguist and consultant, took a careful look at the quality of
ElevenLabs’s clone of his voice in a YouTube video. Using statistical tests
he showed that there were a few things off in “his” pronunciation of certain
vowels. But a lower-tech test, a “conversation” with his own mother, fooled
the woman who raised him. (“Don’t you ever do that again,” she warned.)
Johnson repeated the experiment with his own mother, who did not miss a
beat in replying to clone-Johnson.

For several years, customers have been able to identify themselves over the
phone to their bank and other companies using their voice. This was a
security upgrade, not a danger. Not even a gifted mimic could fool the
detection system. But the advent of cloning will force adaptation, for
example by including voice as only one of several identification factors
(and thus undercutting the convenience), in order to prevent fraud.

Creative industries could face disruption too. Voice actors’ skills, trained
over a lifetime, can be ripped off in a matter of seconds. The Telegraph, a
British broadsheet, recently reported on actors who had mistakenly signed
away rights to their voices, making it possible to clone them for nothing.
New contracts will be needed in future. But some actors may, in fact, find
cloning congenial. Val Kilmer, who has lost much of his voice to throat
cancer, was delighted to have his voice restored for “Top Gun: Maverick”.
Others may be spared heading to the studio for retakes. It is the middling
professional, not the superstar, who is most threatened.

Another industry that will have to come to grips with the rise of clones is
journalism. On-the-sly recordings—such as Donald Trump’s boast of
grabbing women by a certain private body part—have long been the stuff of
blockbuster scoops. Now who will trust a story based on an audio clip?

Slightly easier to manage might be the false positives: recordings

purporting to be someone but which are fakes. Sophisticated forensic
techniques could be of use here, proving a clip to be AI, say, in a
courtroom. The opposite problem—the false negatives—will arise when
public figures deny authentic recordings. Proving that a clip is genuine is
hard, perhaps even impossible. Journalists will need to show how they
obtained and stored audio files—unless, as so often, they have promised a
source anonymity.

During his first presidential run, Mr Trump did more than anyone to
popularise the term “fake news”—and that was well before voice cloning,
deepfake videos, artificially generated images and the like were widespread.
Now, ever more people caught up in wrongdoing will be tempted by the
defence, “It wasn’t me.” Many people will have even more reason to
believe them.■

Read more from Johnson, our columnist on language:

Talking about AI in human terms is natural—but wrong (Jun 22nd)
Gestures are a subtle and vital form of communication (Jun 8th)
As it spreads across the world, who owns English? (May 25th)

For more on the latest books, films, TV shows, albums and controversies,
sign up to Plot Twist, our weekly subscriber-only newsletter

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voices
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Economic & financial indicators

Economic data, commodities and markets
Indicators ::

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Indicators

Economic data, commodities and markets

Jul 20th 2023 |
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financial-indicators/2023/07/20/economic-data-commodities-and-markets

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Graphic detail
Data from satellites suggest violence has surged in much of
Sudan
Crescent of fire :: Throughout the south and in the capital, the number of fires detected from
space is abnormally high

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Crescent of fire

Data from satellites suggest violence has surged in

much of Sudan
Throughout the south and in the capital, the number of fires detected from
space is abnormally high

Jul 20th 2023 |

SUDAN’S CIVIL war is thought to have uprooted at least 3m people. Such
estimates are highly imprecise, because so little information is available.
Local journalists and activists have been besieged—literally, in some cities
—and foreign reporters cannot get close to the fighting. Soldiers have
attacked telecoms infrastructure, stopping news from getting out.

Yet some witnesses are beyond the reach of Sudan’s warring factions:
satellites flying over the country. Data from their instruments can provide
evidence of war crimes, such as the burning of villages. They can also
reveal how the current carnage compares with that of the recent past.

NASA, America’s space agency, runs a satellite-based system called

FIRMS, which detects places with unusually high temperatures. It was
designed to track forest fires, but logs natural and man-made conflagrations
alike. Fire rates in Sudan vary by month, peaking during the dry season
from September to March. But many more fires have been recorded in this
year’s wet season than in those of the past decade.

To isolate fires plausibly tied to fighting, we filtered out hot spots near
cement factories, power stations and oil facilities, as well as areas marked
as unpopulated in maps by GRID3, a non-profit. Since the war began in
April, FIRMS has recorded five times as many fires in the remaining areas
as the average for these months in 2013-22.
The spread of recent fires is as striking as their scale. When the civil war
started, it pitted Sudan’s regular army against the Rapid Support Forces, a
paramilitary group. At first, much of the destruction was confined to the
capital, Khartoum, where belligerents were fighting for control of the
government. Yet by the end of April, abnormally numerous fires had
erupted across most of southern and western Sudan.

Satellite images confirm that fires detected in both Darfur, the site of the
21st century’s first genocide, and Khartoum stem from violence. High-
resolution photos of areas where FIRMS detected lots of fires show
buildings burned to the ground. According to the Sudan Conflict
Observatory, a research outfit at Yale University commissioned by
America’s State Department to monitor a series of partially observed
ceasefires, at least 0.7 square kilometres of el-Geneina in West Darfur had
been affected by fire by late June. In nearby Murnei, at least two square
kilometres were torched in just two days last month.

The increase in fires also aligns with reports trickling out from the country.
The Armed Conflict Location and Event Data Project (ACLED), a non-
profit, finds that the current rate of violent events reported in Sudan is twice
as high as the previous maximum since its records began in 1997 (though
such data may be more complete in recent years). Just like the fire maps,
ACLED’s log shows fighting across the south, a region previously spared
from mass violence—though the rise in fires seen from space greatly
exceeds the number of violent events tracked by ACLED.
Estimating the death toll is a far harder task. Fire counts reveal nothing
about victims, and of the 1,150 violent events logged by ACLED since
April 15th, 388 are listed with “casualties unknown”. When news does
emerge, it is likely to be grim. On July 13th the UN said it had discovered
87 bodies in a mass grave outside el-Geneina.■

Inspect all our code, data and models on GitHub

Chart sources: NASA; ACLED; GRID3; Google Earth; The Economist

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The Economist explains

What happens when extreme weather hits several places at
once?
The effects of concurrent disasters can be greater than the sum of their parts

Why developing the world’s first malaria vaccine has taken

so long
The jab is expected to save tens of thousands of children’s lives each year

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The Economist explains

What happens when extreme weather hits several

places at once?
The effects of concurrent disasters can be greater than the sum of their
parts

Jul 19th 2023 |

BETWEEN JULY 10th and July 16th, more than 100m Americans were
warned by their government of “potentially deadly” temperatures. Swathes
of Asia and Europe are broiling. China’s temperature record was shattered;
people sought relief from the heat in bomb shelters. Authorities in Athens
shut the Acropolis after overheated tourists were taken to hospital; wildfires
raged south of the city. Elsewhere, the heavens opened. Exceptional
monsoon rains washed away cars, bridges and homes in northern India,
shortly after Delhi recorded its heaviest day of rainfall in more than 40
years. South Korea scrambled to rescue people trapped by floods and
landslides. Back in America Vermont was battered by storms, and roads in
New Hampshire collapsed after torrential rain.
Taken individually, such events would usually be notable in the regions
where they occurred but largely ignored elsewhere unless they inspired
particularly dramatic pictures. But seeing them all happen at once raises a
global question. What happens when the world faces multiple climate-
related disasters, in multiple places, at the same time?

In its most recent assessment of climate science the Intergovernmental

Panel on Climate Change, a UN-backed body, noted that “compound
events”—two or more climate-related events that occur simultaneously or
in quick succession, including in different regions—can “lead to extreme
impacts that are much larger than the sum” of their individual parts. The
more disasters occur, it said, the harder it becomes to handle any of them.

When extreme events occur in different places that are connected in some
way—via agricultural supply chains, for example—the risks are particularly
acute. In normal times damage to production in one agricultural area can
often be made up elsewhere. Since early 2022, for example, Russia’s war
has severely restricted exports of grain from Ukraine, one of the world’s
largest producers. But bumper harvests in Australia, Brazil and Canada
ensured the ensuing shortages and price rises were not as severe as they
might have been.

That becomes harder when yields falter in several places at once. Long-
running drought threatens yields in the American Midwest and Argentina.
Thanks to too much heat in some areas and too much rain in others, China’s
summer grain production has fallen for the first time in five years and its
autumn harvest looks precarious. Rain has ravaged vegetables in India.
Freakishly warm water in many parts of the ocean is likely to damage fish
stocks. Benjamin Koetz, a scientist who leads a project monitoring land
temperatures at the European Space Agency, has warned that this year’s
heat is “severely” affecting food production.

There is little precedent for this scenario. But the consequences of these
concurrent events may be severe. A paper published in Nature
Communications, a journal, earlier this month argues that most climate
models underestimate the risks to global food security posed by
simultaneous harvest failures.
Sequential disasters can also reinforce each other. Heat, droughts and
flooding are often connected: hot air picks up more moisture; dry out soil
enough and water will run off it like concrete. The southern European
countries now sweltering may be confronting such a scenario. Italy, where
high-temperature warnings now cover 23 cities, suffered its worst flooding
in a century in May—directly after the worst drought in 70 years. In spring
2021 Pakistan baked under a heatwave. By the end of the summer, after two
months of record rainfall, one-third of the country was submerged by the
worst floods in memory.

It is too soon to identify the mechanism behind this summer’s strange run of
disasters. It could simply be a statistical inevitability: as climate change
intensifies the frequency of extreme weather events, it becomes more likely
that some will happen at the same time. Or there may be deeper chains of
causation at work. What is certain is that by pumping greenhouse gases into
the atmosphere, humans are warping the system in which weather operates.
There will be more weirdness to come. ■

For more coverage of climate change, sign up for The Climate Issue, our
fortnightly subscriber-only newsletter, or visit our climate-change hub.

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The Economist explains

Why developing the world’s first malaria vaccine

has taken so long
The jab is expected to save tens of thousands of children’s lives each year

Jul 18th 2023 |

ON JULY 5TH the World Health Organisation, UNICEF and Gavi, an

organisation promoting vaccination, announced that 12 African countries
would receive 18m doses of the world’s first malaria vaccine. Mosquirix,
developed by GSK, a British pharma firm, will be deployed over two years
with deliveries starting at the end of 2023. It is expected to save tens of
thousands of lives each year, mostly of very young children. Around 95%
of malaria cases and deaths are in Africa, and at least 28 countries there
have expressed an interest in the new jab; by 2026 demand is expected to
reach 40m-60m doses. Why has it taken so long to develop a malaria
vaccine?
Malaria, a parasitic infection transmitted by mosquitoes, is one of Africa’s
deadliest diseases. Although it is treatable, the infection must be identified
and the patient attended to quickly. That is difficult in the continent’s many
remote rural areas. As a result malaria kills nearly 500,000 children under
the age of five every year. Hitherto the best option has been to try to prevent
malaria with insecticide-treated nets and antimalarial drugs. But these
efforts have been insufficient. Scientists have been trying to develop a
vaccine for decades. Mosquirix had been in the works since the 1980s.

The development of an effective malaria vaccine has been a formidable

scientific challenge. Normally, vaccines work by training the immune
system to recognise antigens—typically proteins—that are found on the
surface of the infectious agent. But targeting such proteins on the
Plasmodium parasite that causes malaria has proven difficult. The parasite
has a multi-stage life cycle, which presents different antigens at different
stages, making it harder to pick the best target. It has also evolved ways of
avoiding detection by the human immune system. For example, the parasite
can turn off a protein on its surface, which allows it to travel undetected
between blood cells. Once it has infected a new cell it switches the protein
back on. All this means it has been hard to find the right antigen to flag to
the immune system. But Mosquirix has managed to find a point in the
parasite’s life cycle that is possible to target: the stage before it infects liver
cells.
Between 2019 and 2021 trials in 800,000 children in Ghana, Kenya, and
Malawi found that inoculation led to a 30% reduction in severe malaria
infections, and a 10% decline in mortality. Shortages of supply mean that
the vaccine is for now being allocated to countries where the burden of
malaria is heaviest (see map).

Although the vaccine is a milestone in malaria treatment, more work is

needed. Mosquirix’s efficacy is relatively low—particularly when compared
with the 95% achieved by covid-19 vaccines. But a more effective jab,
R21/Matrix-M, is in sight. Small-scale trials suggest it could have an 77%
efficacy rate. Adrian Hill, director of Oxford University’s Jenner Institute,
which developed R21, told the Lancet, a medical journal, that he hoped it
would be possible to bring annual malaria deaths down to fewer than
50,000 globally by the end of the decade. Slightly behind R21 is an early-
stage mRNA malaria vaccine developed by BioNtech, a German pharma
firm. This innovation points to a future where malaria is preventable, and
much less deadly than it is today. Some even hope that the disease will be
completely eradicated. ■

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Obituary
Milan Kundera believed that truth lay in endless
questioning
When angels laugh :: The Czech novelist, author of “The Unbearable Lightness of Being”,
died on July 11th, aged 94

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When angels laugh

Milan Kundera believed that truth lay in endless

questioning
The Czech novelist, author of “The Unbearable Lightness of Being”, died
on July 11th, aged 94

Jul 19th 2023 |

JUST BEFORE the Prague Spring in 1968, when the Communist regime in
Czechoslovakia seemed briefly to relax, Milan Kundera managed to publish
a novel about a joke. The joke, sent by a young man to a girlfriend on a
postcard, read: “Optimism is the opium of the people! A ‘healthy’
atmosphere stinks of stupidity! Long live Trotsky!” It landed the young
man in a lot of trouble.

The novel, his first, sold well. But when later that year Soviet tanks rolled
in, forcing his country back into line, “The Joke” disappeared from
bookshops. He himself was kicked out of the Communist Party (he had
been expelled before, in 1950, for being critical, but had reapplied) and was
fired from his lecturer’s job at the Academy of Fine Arts. Since no one was
now allowed to employ him, he played dance gigs in the taverns of mining
towns. Eventually, though, there was nothing doing in Czechoslovakia, so
he and his wife Vera left for France, and stayed.

In retrospect, writing “The Joke” had been a bad decision. But it was good
at the time. That was life. You had only one, with no second or third
chances to take a different course. His novels were full of characters
struggling, like him, to unpick the past, predict the future and, on the basis
of that, jump the right way. In the most famous of them, “The Unbearable
Lightness of Being”, the protagonist Tomas first appeared standing at a
window, ruminating. Should he invite the lovely bartender Tereza to his
room, or not? Would he get too involved? If so, how would he get out of it?
After spending the night with her, the questions only multiplied.

Tomas, like his creator, made a bad (or good) decision to defy the party. He
lost his post as a surgeon and became a window cleaner. He also decided,
for good or bad, to stay with Tereza. But all through the novel he had
wrestled with his creator’s favourite theme, the weighing of opposites. The
Greek philosopher Parmenides had stated, in particular, that lightness was
positive and heaviness negative. Lightness was the realm of the soul, space,
separateness and freedom; heaviness was to be earth-and-body-bound, rule-
bound and constricted. Clear enough.

But not so fast. Lightness also made both history and life insubstantial, airy
as a feather, the happenings of a day. It justified betrayal, irresponsibility
and breaking ranks (as he from the party), where heaviness stressed duty
and obedience. Most important, lightness was about forgetting, and
heaviness insisted on remembrance. What was the self, but the sum of
memories? In “The Book of Laughter and Forgetting” the heroine, Tamina,
clung constantly to the memory of her dead husband even when making
love with other men. Was that a good or a bad thing?

The question applied especially to Czechoslovakia, in its highly vulnerable

position on the map. How could it survive without remembering its past
great men, Hus, Comenius, Janacek, Kafka, or without the language they
had spoken? Memory gave it identity, and gave Czechs themselves the only
power they had against the states that oppressed them. In 1967 Mr Kundera
appealed to fellow-writers to seize the moment with their pens. But he still
resisted the thought of enclosing cultures within borders. Borders between
ideas were there to be crossed.

In Paris after 1975, living in an attic flat on the rue Récamier, feasting on
frogs’ legs and eventually writing a trio of novels in French, it seemed to
him that notions of “home” and “roots” might be as illusory as the rest of
life. His Czech citizenship had been revoked and, though he still mostly
spoke Czech, he was almost indifferent when, in 2019, he got it back. Like
Goethe, he saw literature becoming global and himself as a citizen of the
world.

He had been one for a long time. His youthful reading was mostly French:
Baudelaire and Rimbaud, but especially Rabelais and Diderot. French wit
and experiment wonderfully foiled the socialist realism imposed on art and
literature by the post-war Soviet regime. He fed it into his writing to defy
the kitsch all around him. Sadly, it was kitsch he had fallen for himself
when, at 18, he eagerly joined the party: all those heavy, emotional images
of wheatsheaves, mothers and babes, hero-workers brandishing spanners,
the glowing brotherhood of man. He saw himself as a knife-blade, cutting
through the sweetish rose-tinted lies to show the shit—and the mystery—
beneath.

Because truth was mysterious. And novels were a wide-open territory of

play and hypotheses where he could question the world as a whole:
digressively like Sterne in “Tristram Shandy”, or adventurously, like
Cervantes’s Don Quixote. No answers, questions only; answers (in
advance) were what kitsch provided. He played with philosophical musings,
psychological analysis, investigations of misunderstood words, irony,
eroticism and dreams. It could make a mish-mash for readers, especially
Anglophone ones, and no other novel did as well as “Unbearable
Lightness”, though “Laughter and Forgetting” and “Immortality” sold
respectably. The Nobel talk came to nothing, and he was glad, because he
preferred reclusive delving to any sort of fame.

He liked to call his novels “polyphonic”: a word learned from his father, a
concert pianist and musicologist. The many voices, parts and motifs in his
work were united by “novelistic counterpoint” into a single music. His chief
hero in the enterprise was Janacek, whose photo hung beside his father’s in
the Paris flat: a composer who had refused to write by the rules but made
directly for the heart of things. He doubted he himself had got anywhere
close. Since the world couldn’t be stopped in its headlong rush, it was best
just to laugh at it. The devil laughed, because he knew life had no meaning;
the angels, as they flew over, laughed too, knowing what the meaning was.

As a child he often sat at the piano playing two chords fortissimo, C minor
to F minor, until his father furiously removed him. But as those chords
became heavier he felt himself grow lighter until, in a moment of ecstasy,
he seemed to float free of time. If that was unbearable lightness, he—and
many others—spent an awful lot of their brief, insignificant lives trying to
find it again. ■

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